Jan 16 ,2025
Synopsis:
Asia equities ended higher almost everywhere Thursday. Highest gains in tech-orientated boards including Taiwan, Australia and South Korea; Japan's Nikkei ended modestly higher but the Topix was a few points down. Greater China boards all higher but well off their peaks by the close. Southeast Asia turned mixed, India with small gains. US futures flat for now, Europe with a strong open. Dollar flat, yen stronger again, AUD weak post employment data. Crude oil higher, precious metals continued recent positive momentum, industrial metals also higher again.
Asia equities well bid Thursday with most indexes posting gains albeit off their highs. Wall Street's rally on softer-than-feared CPI the immediate cause, pushing tech-leaning bourses higher while sovereign yields and the US dollar also declined to give an extra tailwind for the region's equities. Currency selloff also seeing some reversal with the won stabilizing following President Yoon's arrest yesterday and the Bank of Korea's decision today to keep rates on hold against market expectations of a 25 bp cut. The yen also strengthened for a second straight day following Governor Ueda comments that the policy board will discuss a rate increase next week.
Elsewhere, Australian employment data showed another strong monthly increase in headline jobs while unemployment rate rose in-line with forecasts. Japan wholesale inflation was unchanged at an elevated 3.8% amid growth in raw material costs. The Washington Post reported Trump considering executive order suspending enforcement of TikTok ban-or-sale law.
Tokyo Gas (9531.JP) president said the company has identified asset including from its real estate portfolio that will be sold to fund growth investments. TSMC's (2330.TT) posted a record quarterly profit and forecast strong Q1 revenue growth as demand for AI-related chips remained high. China Vanke (2202.HK) told investors that it had no plans to extend its bonds amid the property market selloff, pushing back on online speculation. Xiaomi (1810.HK), Shein and TikTok among six China-based companies names in a privacy complaint by an EU advocacy group that said they were unlawfully sending user data to China.
Digest:
Bank of Korea keeps base interest rate on hold defying forecasts of a cut:
Bank of Korea kept base policy interest rate on hold at 3.0% against majority expectations of 25 bp trim amid concerns over won weakness, uncertainties pertaining to Trump's trade tariffs, domestic political turmoil. Analysts had widely expected rate trim to counter slowing economic growth exacerbated by recent political turmoil to follow two consecutive rate cuts in fall (Yonhap). In its accompanying statement, BOK acknowledged consumption had weakened and could fall below current estimates, reiterated expectations for export growth to slow. Overall GDP growth could also fall below earlier forecasts and stressed solution to political crisis needed now more than rate cut Added bank will be cautious about forex volatility, said won weakness and higher oil prices could impact prices but overall inflation to remain stable as upward pressure offset by subdued demand. Early analysis indicated bank's MPC probably also mindful government considering fiscal package to support consumer, bank may have adopted 'wait-and-see' approach (Bloomberg).
TSMC Q4 results beat while guidance shows sign of resilient AI spending:
TSMC (2330.TT) Q4 headline metrics beat FactSet consensus. Attention was on a 57% jump in net income amid surge in demand for advanced chips used in AI processing. Bloomberg added company projected revenue of $25B to $25.8B for Q1-2025, surpassing consensus of $24.4B. It also foresees $38B to $42B expenditure on technology and capacity upgrades this year, exceeding $35.2B estimate. Strong numbers likely to further fuel optimism that AI spending cycle will continue in 2025. Meanwhile the chipmaker is facing uncertainties from US-China tensions while its new overseas plants weighing on margins. Nikkei noted revenue from China-based clients dipped from peak of 20% in 2019 to about 11% in Q3-2024. Recall Biden administration tightened measures that further restrict TSMC, Samsung (005930.KS) and Intel (INTC) from providing advanced manufacturing services to Chinese chip developers in its final days in office. In addition its cutting-edge plant in Arizona is "mass production ready" but cost to operate manufacturing in US is still much higher than that of Taiwan, which analysts said investors should be mindful of margin pressure.
Talk of BOJ rate hike next week gaining traction:
BOJ Governor Ueda reiterated to the Second Association of Regional Banks that a rate hike will be up for debate at next week's MPM based on analysis in the Outlook Report (Reuters). Also reaffirmed the key factors will be Trump policies and domestic wage negotiations. Bloomberg sources said BOJ officials see a good chance of a rate hike next week as long as Trump's return to the White House doesn't bring too many negative surprises. Noted a string of developments keeping a January move in play -- recent rhetoric from Ueda, Himino, prospects for upgrades to BOJ inflation forecasts. Nikkei discussed latest market price action reflecting elevated expectations of a rate hike next week. BOJ rhetoric has led to notable yen strength, supported further by headline effects from softer than expected US CPI. OIS now implying a ~77% chance of a January rate hike, up more than 20 ppt from December, and a 93% probability by March. Noted perceptions the wage hike factor seems to have cleared the bar based on actual data and bullish indications in the BOJ regional economic report. Attention shifts to Trump's inauguration on 20-Jan, preceding the MPM on Jan 23-24. In the first consensus updates since the December meeting, Reuters poll showed 20 out of 32 economists forecasting January with the remainder in March.
Australian labor market remains tight:
Australian employment rose 56.3K in December, much higher than consensus for 15.0K gain and November's revised 28.2K increase (from 35.6K). Unemployment rose to in-line 4.0% from 3.9%, ending year well below RBA's end-2024 forecast of 4.3%. Rise in unemployment driven by uptick in participation rate to 67.1% from 67.0%. Composition was weaker with full-time positions declining 23.7K and part-time roles rising by 80.0K. Other measures indicative of reduced labor market slack with underemployment rate falling to lowest since Feb-2023. Monthly hours worked rose 0.5%, higher than average monthly increase of 0.3% over 2024. Data indicative of continued tightness in labor market though futures have recently moved to price in more than 70% probability of February rate cut following soft readings on monthly CPI and retail sales. In December RBA signaled importance of upcoming employment, spending and inflation data in guiding February's rate decision. Attention now turns to Q4 CPI data on 29-Jan.
US-China sanctions activity continues:
Reuters reported Biden administration added 25 Chinese entities to the Commerce Department Entity List Wednesday with most of the attention on Sophgo and others linked to the illegal incorporation of a TSMC-made (2330.TT) chip into a Huawei AI processor. Companies on the list cannot receive goods or technology exports without a license, which is generally denied. Follows Commerce Department's actions late last year to add other companies viewed as part of Huawei's shadow network and ordered TSMC to halt shipments of certain advanced chips used in AI applications. Noted a Sophgo statement denied any engagement with Huawei. Developments coincide with confirmation of tighter US regulations on advanced chips (defined as those up to 14-16 nm nodes). New rules also impose restrictions on DRAM, which chip experts see likely impacting CXMT. Earlier Bloomberg leak focused on details of the new regulations. Usual names stand to be impacted -- TSMC, Samsung Electronics (005930.KS), Intel (INTC), Nvidia (NVDA). Separately, China's commerce ministry added another four US companies to its Unreliable Entity List for alleged involvement in arms sales to Taiwan (Reuters).
Notable Gainers:
+9.5% 7205.JP (Hino Motors): reaches settlement with US Government Authorities regarding legacy engine certification issue for total of $1.20B (¥187.73B)
+3.5% 4751.JP (CyberAgent): UBS upgrades to buy from neutral
+2.6% 7649.JP (Sugi Holdings): reports December Sugi Pharmacy Co. total store sales +21.6% y/y
+2.5% 034020.KS (Doosan Enerbility): Doosan Škoda Power intends to list on Prague Stock Exchange
+0.7% 5269.TT (Asmedia Technology): to acquire 100% equity of Techpoint Inc at $20.00/share for a total consideration of $390M in cash
+0.0% C6L.SP (Singapore Airlines): reports December traffic +6.0% y/y
Notable Decliners:
-4.5% 6981.JP (Murata Manufacturing): to conduct 61.3M-share secondary in overseas markets; offering priced at ¥2,309/share
-1.2% 034220.KS (LG Display): reports FY operating profit (KRW560.60B) vs StreetAccount (KRW372.97B)
Data:
Economic:
Japan
December CGPI +3.8% y/y vs consensus +3.8% and revised +3.8% in prior month
Australia
December employment +56.3K m/m vs consensus +15.0K and revised +28.2K in November
Unemployment rate 4.0% vs consensus 4.0% and 3.9% in November
Participation rate 67.1% vs consensus 67.0% and 67.0% in November
Markets:
Nikkei: 128.02 or +0.33% to 38572.60
Hang Seng: 236.82 or +1.23% to 19522.89
Shanghai Composite: 8.92 or +0.28% to 3236.03
Shenzhen Composite: 8.31 or +0.44% to 1909.45
ASX200: 113.70 or +1.38% to 8327.00
KOSPI: 30.68 or +1.23% to 2527.49
SENSEX: 329.40 or +0.43% to 77053.48
Currencies:
$-¥: (0.46) or (0.29%) to 156.0100
$-KRW: (1.75) or (0.12%) to 1454.7900
A$-$: (0.00) or (0.18%) to 0.6217
$-INR: +0.06 or +0.07% to 86.4933
$-CNY: (0.00) or (0.01%) to 7.3307
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