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StreetAccount Summary - Asian Market Recap: Nikkei +0.32%, Hang Seng +0.91%, Shanghai Composite (0.05%) as of 03:10 ET

Jan 21 ,2025

  • Synopsis:

    • Asia markets ended mixed Tuesday in bumpy trade. Modest gains for Japan's Nikkei and Topix, Hong Kong, Australia and several Southeast Asia benchmarks. But mainland China boards mixed, Singapore lower and India seeing more losses. US futures higher, Europe opened with small gains. US dollar lower but now off its base, yen flat after overnight gains; yuan and AUD giving back gains from overnight. Treasury yields higher at the short end, lower at the long; CGB yields at three-week highs. WTI and Brent futures lower. Precious metals mixed; iron ore retreating from month-long highs, copper resuming its slide.

    • Asia markets reacted positively on balance to the wave of executive orders from President Trump following his inauguration but stocks fluctuated with many markets failing to establish a firm direction all day. The sharp weakening of the US dollar overnight proved a strong tailwind for many stocks at first as local currencies strengthened across the region. Forex outperformers included the won, and the Singapore, Australian and New Zealand dollars. These partially reversed during the Asia trading day following order of 25% tariffs to be imposed on Canadian and Mexican imports, signaling the start of what may be a volatile period in forex markets.

    • Pivotal to the market Tuesday was a memo from Trump to initiate a probe into unfair trade practices and investigate China's compliance with his 2020 trade deal, postponing tariff increases for up to three months. This sent the dollar DXY index sharply lower together with Treasury and other sovereign yields, boosting Asia's currencies at the same time. Despite the sometime hesitant gains, the Hang Seng ended at month-long highs, rising for a sixth consecutive session.

    • In corporate news, Country Garden (2007.HK) said it had fulfilled the resumption-of-trading guidance and shares resumed trading in Hong Kong, ending substantially higher. Officials in Shenzhen said they will work to stabilize operations at China Vanke (2202.HK) and will bring in new auditors to assess the company's financial position. Mitsubishi Chemical (4188.JP) has chosen Bain Capital as the preferred bidder for its Tanabe pharmaceutical unit. TSMC (230.TT) said it was checking several of its factories in southern Taiwan after a 6.4 magnitude earthquake struck. BHP (BHP.AU) said it will boost copper production and expects FY iron ore production to be at the top end of its range.

  • Digest:

    • Trump calls for China trade investigation instead of immediate tariffs:

      • Bloomberg cited an undisclosed document indicating President Trump refrained from implementing China-specific tariffs on his first day in office, instead calling for his administration to address unfair trade practices and investigate China's compliance with the Phase One deal signed during his first term. Story recalled that few of China's promised purchases of US goods materialized. However, Trump did indicate plans to enact tariffs of up to 25% on Mexico and Canada by 1-Feb (Bloomberg). A source said decision to hold off on immediate trade actions against Beijing reflects shift to negotiating mode and eagerness to cut another deal with China President Xi. While trade duties could be imposed in time, Trump's tack shift would be a relief for industries bracing for tariffs from Day One. Sources cautioned Trump often quickly changes his mind on strategy and could revert to his original stance. Still, current trajectory suggestive of a measured approach in contrast to his rhetoric. Article noted dollar sold off on the news -- DXY dropped 1.2% for the biggest decline since Nov-23. Document also called for key federal agencies to address currency manipulation by other countries.

    • Trump inaugurated as US president, moves quickly on executive action:

      • Donald Trump inaugurated as 47th US president on Monday, vowing a 'golden age' for America and outlining policy actions he intended to take immediately (Bloomberg, NY Times, FT). Lot of attention was on tariffs with Trump flagging 25% levies on Canada and Mexico from 1-Feb. Trump left open possibility of universal tariff but said not ready for that yet. Trump also repeated threat of tariffs on Europe unless it ramped up purchases of American oil. Trump was expected to soon sign memo ordering federal agencies to probe US trade deficits and unfair trade practises (Reuters, Bloomberg). Trump did not commit to tariffs on China, saying he would having meetings and calls with China President Xi. Trump signed several other executive orders, including declaring national emergency at southern border, forcing federal workers back to office, rescinding AI regulations, withdrawing from Paris Climate Accord and WHO, rolling back efforts to promote EV take-up, and removing restrictions on oil and gas drilling. Trump also ordered Attorney General to delay TikTok ban or sale deadline by 75 days, adding he could impose tariffs on China if it doesn't agree to a deal (Bloomberg).

    • South Korea export growth slides again as producer prices rise for second month:

      • South Korea's work-day adjusted exports grew just 1.4% y/y in first 20 days of January, continuing trend of slowing growth amid domestic political turmoil, weak won, uncertain outlook for trade under Trump. On unadjusted basis, exports fell 5.1% y/y, reflecting fewer working days, imports fell 1.7% to give a trade deficit of $3.8B. Slower growth fits with BOK narrative after it lowered FY growth forecasts Monday, citing weakening overseas chip demand, global trade outlook as well as poor domestic consumer and business sentiment. December semiconductor sales rose 19.2% y/y but shipments of autos slipped, petroleum products fell nearly 30%. Exports to US slipped 9.6% y/y (Yonhap). Separate data Tuesday showed producer prices rose for second consecutive month in December amid weak won, rising oil prices. PPI rose 0.3% m/m, sharpest such price rise since July (Yonhap).

    • Questions surround USD/JPY outlook:

      • Dollar strength remains in the driver's seat for now, though Reuters discussed an emerging debate over whether this would continue. Noted backdrop of net long positions worth over $35B based on CFTC data, the largest since Jan-16 while dollar index highest in more than two years. Societe Generale suggested dollar may be overbought with DXY some 20% higher than average over the past 25 years at levels rarely seen since the 1980s. Morgan Stanley turned bearish on dollar, arguing support factors have been fully priced in and leaning towards over-priced. Despite considerable uncertainty, sees risks for dollar and US yields skewed to downside. In contrast, Goldman Sachs upgraded their bullish dollar outlook on the basis that dollar support from Trump tariffs has more room to run. In the meantime, Nikkei cited latest CFTC data showing short yen positions grew last week to a two-month high, driven by stronger than expected employment data. Broader US macro strength overshadowing elevated BOJ rate hike expectations. Prompted some bearish yen views amid ongoing Trump effects. Yet, Nikkei QUICK monthly FX survey (n=70) found biggest cohort 35% anticipate January to be the low point for yen this year while 40% project yen to end the year at their highs (albeit the Jan-24 poll conveyed similar views). Easing US yields, FX intervention risk cited as justifications.

    • JGB demand gap contributing to higher yields:

      • Nikkei discussed JGB market dynamics with private institutions slow to take up the slack left by waning BOJ purchases. Japan Securities Dealers Association figures showed city banks bought net JPY1.58T ($10.15B) in 2024, down about 20% from their recent peak in 2022 and a fraction of the JPY40T annual reduction in BOJ purchases. Demand gap adding to upward pressure on yields from BOJ rate hike expectations and broader global concerns about upside US inflation risks. Pertinent to banking sector preferential habitat, BOJ purchases in 5~10y zone totaled about JPY20T in 2024, down JPY15T from the prior year. BOJ void has been widely discussed and there were hopes for increased buying from banks, though current stance has been cautious. Similar developments in superlongs with life insurer purchases limited to JPY2.8T in 2024, falling below JPY3T for the first time in 17 years. Cited industry thoughts that combination of BOJ tapering and expansionary fiscal policy leading to dwindling buyers and rising yields creating a vicious cycle.

    • Notable Gainers:

      • +17.5% 2007.HK (Country Garden Holdings): fulfills resumption guidance; resumes trading

      • +1.9% 4188.JP (Mitsubishi Chemical): reportedly grants first refusal right for Mitsubishi Tanabe Pharma to Bain Capital

      • +1.3% 267.HK (CITIC Ltd): guides FY net profit attributable to rise +1% y/y

      • +0.9% BHP.AU (BHP Group): reports Q2 production; iron ore production 66.2Mt vs StreetAccount 65.7Mt

      • +0.6% 1336.HK (New China Life Insurance): guides FY net income attributable CNY23.96-25.70B vs FactSet CNY22.99B

    • Notable Decliners:

      • -8.6% 010130.KS (Korea Zinc Co.): court reportedly grants injunction banning proposals at Korea Zinc's EGM

      • -4.8% 051910.KS (LG Chem): reports FY results with operating profit and revenue below StreetAccount estimates

      • -3.4% 032640.KS (LG Uplus): reports FY results with operating profit and revenue below StreetAccount estimates

  • Data:

    • Economic:

      • No economic data today

    • Markets:

      • Nikkei: 125.48 or +0.32% to 39027.98

      • Hang Seng: 180.74 or +0.91% to 20106.55

      • Shanghai Composite: (1.76) or (0.05%) to 3242.62

      • Shenzhen Composite: 4.91 or +0.25% to 1939.70

      • ASX200: 55.00 or +0.66% to 8402.40

      • KOSPI: (2.02) or (0.08%) to 2518.03

      • SENSEX: (584.52) or (0.76%) to 76488.92

    • Currencies:

      • $-¥: (0.56) or (0.36%) to 155.7410

      • $-KRW: (18.17) or (1.25%) to 1440.3900

      • A$-$: +0.00 or +0.61% to 0.6230

      • $-INR: (0.05) or (0.06%) to 86.5251

      • $-CNY: (0.01) or (0.16%) to 7.3133

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