Jan 30 ,2025
Synopsis:
Asia equities ended mixed amid thin volumes as the LNY holiday continued: Among the gainers were the main benchmarks in Japan, Australia's ASX, while India's main boards are also higher. New Zealand stocks were lower alongside those in Southeast Asia. Greater China, Taiwan and South Korea among the exchanges still closed. US futures higher, Europe opened higher once again with the DAX at another record high. US dollar a smidge weaker, yen strengthening on BOJ comments. Treasury bonds mixed, JGB yields higher. Crude oil, industrial and precious metals mostly unchanged.
Asia equities saw a directionless day today as the main markets in emerging Asia remained closed, and amid a dearth of catalysts. Japan saw an across-the-board gain while Australia saw strength in its consumer names following yesterday's benign inflation data, while India is seeing strength in its oil & gas names as crude prices continue to tumble.
US futures higher with several large-cap names including Microsoft, Meta, Tesla and IBM moving higher after hours on either earnings-beats, positive outlook statements or both. DeepSeek still headlining although now more country regulators have asked the company for data protection procedures, and just as Microsoft and OpenAI question how OpenAI data was obtained. Elsewhere, New Zealand business morale fell to a five-month low as economic weakness continued. Philippines Q4 GDP growth disappointed amid a series of 'weather-related challenges'. Thailand's car sales fell for the 19th consecutive month in December reflecting ballooning household debt and tighter loan conditions.
Nissan Motor (7201.JP) announced it is planning job cuts at several US plants as demand had faltered; Renault said to be looking to maximize the value of its Nissan holding during merger talks with Honda. Rakuten (4755.JP) has scrapped plans to list its securities unit on the Tokyo bourse. Toyota Motor (7203.JP) is said to raise total Feb-Apr production to 2.5M units, a more than 10% increase y/y. Softbank (9984.JP) is reported to be in talks with OpenAI over plans to invest $15-20B in the company. NEC (6701.JP) is considering an offer for software provider CSG Systems. Adani Power (533096.IN) joined other power companies in posting lower Q3 profits because of a sharp drop in demand, said it would raise INR50B ($578M) through a share sale to institutional investors.
Digest:
SoftBank said to be in talks to expand investment in OpenAI:
FT, citing multiple sources, reported SoftBank (9984.JP) in talks to invest $15B-$25B in OpenAI. Deal would elevate SoftBank to its biggest financial backer, surpassing Microsoft (MSFT). Total spending on the partnership could ultimately top $40B. Talks follow last week's Stargate announcement in which the two firms committed $100B. SoftBank's investment in OpenAI said to be on top of the $15B pledged to Stargate. SoftBank's equity investment in OpenAI could cover latter's own $15B commitment to Stargate. Several sources indicated CEO Son's commitments to both OpenAI and Stargate have been vetted by OpenAI management. Discussions said to have been in the works for months. Article noted OpenAI CEO Altman has been exploring ways to reduce dependence on Microsoft for computing resources, including in-house chip development and diversifying cloud partnerships such as with Oracle (ORCL). In the Stargate plan, Microsoft agreed to give up its position as Open AI's exclusive cloud service provider. Around a fifth of total Stargate funding expected to comprise equity with the JV needing to borrow hundreds of billions of dollars secured against its assets and cash flow in a financial structure modeled on large infrastructure projects. Story added backdrop of OpenAI's complex negotiations to convert into a for-profit company, enabling it to raise tens of billions more from investors.
Trump officials said to be discussing tighter Nvidia chip curbs on China:
Bloomberg sources said Trump administration officials exploring additional restrictions on sales of Nvidia (NVDA) chips to China, though stressed discussions in very early stages and any decision likely to be a long way off. Officials looking at expanding curbs to cover H20 chips, which is a scaled-down product designed to meet existing rules and can be used for AI applications. As the Trump administration only starting to staff up relevant departments, Commerce Secretary nominee Howard Lutnick, Trump's nominee to lead the agency that oversees chip trade curbs, said during a confirmation hearing Wednesday that he would be "very strong" on semiconductor controls, without elaborating. Nvidia statement they are "ready to work with the administration as it pursues its own approach to AI." Article recalled Nvidia has argued US restrictions would strengthen incentive for China to attain self-sufficiency and weaken US companies. H20 said to have been in the Biden administration's crosshairs, though officials ultimately did not pursue measures before leaving office.
Economists align on February RBA rate cut following softer Australia CPI data:
Broadly dovish takeaways from cooler-than-expected Australia Q4 CPI with economists pulling forward rate cut expectations. UBS, Capital Economics, Morgan Stanley and Westpac all brought forward rate cut expectations to February from May. Most see 75 bp of easing through 2025, though Goldman Sachs among more dovish, predicting RBA following up with April rate cut in addition to reductions in August and November. CBA also penciling 100 bp of easing in 2025. Key observations included trimmed mean inflation undershooting RBA's forecasts while on an annualized basis trimmed mean inflation is now comfortably withing 2-3% target, which is expected to see central bank make downward revisions to CPI forecasts in February. Disinflation also becoming more broad-based with previously sticky components such rents and construction cost inflation moderating (albeit still at elevated levels). Softer CPI, GDP and retail sales data appear to have firmed expectations of February rate cut, though at same time tight labor market seen as a counterpoint to disinflation narrative while pre-election spending promises also viewed as an upside inflation risk.
Japan FY24 dividends set for fourth straight record:
Nikkei reported Japan's publicly traded companies expected to pay JPY18.3T ($118B) in dividends in FY24, the fourth straight record, amid growing calls for capital efficiency enhancements. Translates to 11% growth over prior year and up 50% from pre-pandemic level of FY18. Data based on guidance from 2,330 firms with a March fiscal year-end. Aggregate projections have increased about JPY400B from the start of the period with upgrades from 353 firms. Highlighted dividend hikes from Disco (6146.JP), Obic (4684.JP) and UBE (4208.JP). Trend partly a response to TSE calls to improve capital efficiency. Prioritization of shareholder returns also compelled by limited ROE growth currently tracking about 9%. Companies looking to attract individual investors through NISA, where high-div stocks are highly ranked, as they unwind cross shareholdings. Dividend hikes combining with surging buybacks. This sample set a combined buyback quota of around JPY15T in Apr-Dec, up some 70% y/y. Total payout ratio seen around 60%, marking a post-Covid high.
Philippine Q4 GDP growth unchanged y/y but accelerates on sequential basis:
Philippines GDP grew 5.2% y/y in Q4, unchanged from Q3 and versus expectations of 5.4%, as higher government spending, weaker external drags offset by inventory drawdown, slower consumption (PhilippinesStatsAgency). Government said agriculture sector faced 'significant setbacks' because of typhoons, droughts, other climate-related disruptions to lead to farm output falling 2.2% y/y. On q/q basis, GDP grew 1.8%; for FY24, analysts said this implies 5.6% growth versus 5.5% in 2023. On positive side, faster-than-expected export growth accompanied by slower import growth, joined with 9.7% y/y increase in government spending. However, as well as agriculture contraction, private consumption slowed to 4.7% y/y as food consumption decreased despite lower inflation (Reuters). In December, Manila lowered its FY25 GDP growth target range to 6.0-8.0% to account for 'global uncertainties'. Slowdown in growth likely to be precursor to central bank rate cuts despite caution over Trump's trade policies (Bloomberg).
Notable Gainers:
+20% 543187.IN (Hitachi Energy India): reports Q3 earnings with revenue ahead of FactSet estimates
+4.9% 4751.JP (CyberAgent): reports Q1 ahead of FactSet estimates; confirms FY guidance
+3.2% 6857.JP (Advantest): reports Q3 earnings ahead of StreetAccount estimates; raises FY guidance
+1.4% 7201.JP (Nissan Motor): Renault reportedly pushing Nissan to negotiate higher premium from Honda
+0.6% 7203.JP (Toyota Motor): reportedly plans to raise Feb-Apr global production to 2.5M units, +10.4% y/y
Notable Decliners:
-20% 500238.IN (Whirlpool of India): Whirlpool Corp. intends to reduce ownership stake in to 20% in 2025
-17% ATG.AU (Articore Group): issues H1 trading update, expect trading conditions to continue to be soft in key markets
-6.7% 500570.IN (Tata Motors): reports Q3 earnings below StreetAccount estimates
-3.5% 6807.JP (Japan Aviation Electronics Industry): reports 9M earnings with year-on-year decline in revenue and operating income
-1.1% 9984.JP (SoftBank Group): reportedly looking to invest up to $25B in OpenAI
-0.9% MIN.AU (Mineral Resources): reports Q2 iron ore shipments (attributable) 5.2Mwmt vs StreetAccount 6.5Mwmt
Data:
Economic:
Australia
Q4 export price index +3.6% q/q vs (4.3%) in Q3
Import price index +0.2% q/q vs (1.4%) in Q3
New Zealand
January ANZ Business Confidence +54.4 vs +62.3 in December
December trade balance NZ$291M vs revised (NZ$435M) in November
Exports +17.0% y/y vs +9.1% in November
Imports +6.5% y/y vs (3.9%) in November
Markets:
Nikkei: 99.19 or +0.25% to 39513.97
Hang Seng: Closed
Shanghai Composite: Closed
Shenzhen Composite: Closed
ASX200: 46.70 or +0.55% to 8493.70
KOSPI: Closed
SENSEX: 220.74 or +0.29% to 76753.70
Currencies:
$-¥: (0.69) or (0.45%) to 154.5450
$-KRW: (4.80) or (0.33%) to 1438.8800
A$-$: (0.00) or (0.04%) to 0.6229
$-INR: (0.02) or (0.03%) to 86.5862
$-CNY: +0.00 or +0.01% to 7.1679
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