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StreetAccount Summary - Asian Market Recap: Nikkei (2.66%), Hang Seng (0.04%), Kospi (2.52%) as of 03:10 ET

Feb 03 ,2025

• Synopsis:

  • Asia equities ended lower Monday although many closed away from their troughs: Taiwan stocks underperformed as they partly caught up with the technology-related selloff last week. Hang Seng crawled back to the flatline held up by strong gains for SMIC, Alibaba and Lenovo. Japan's Nikkei lower to trade at the bottom of its four-month trading range. South Korea down to one-month low; India lower, Southeast Asia tilted lower. US futures sharply down but also off their lows, Europe opened with steep declines but has stabilized. US dollar higher with DXY nearing 110; AUD, NZD worst off in Asia, yen and yuan also weaker. Treasury yields mixed. WTI crude futures sharply up, Brent prices also rising but by less. Precious metals lower, copper leading base metals down. Several cryptocurrencies under severe pressure, bitcoin outperforming but still down.

  • Asia stocks reeling from President Trump's decision to impose 25% tariffs on Canadian and Mexican-made goods, and a 10% tariff on Chinese goods from Tuesday. The decision sparked risk-off moves and rush to some safe-havens and, while emerging market assets were lower, the sharpest falls are currently in cryptocurrencies. In Asia, Taiwan's AI-related stocks underperformed as they partly marked-to-market the DeepSeek news from last week. The Hang Seng was broadly lower with only a narrow rally from Alibaba (9988.HK) and Lenovo (992.HK) on the positive China-based AI news from last week, and from SMIC (981.HK) on hopes the tariffs would spur more stimulus for China's IT sector, preventing the broader index from steeper losses. India stocks giving up gains from Saturday's special session when markets remained open during presentation of next fiscal year's budget.

  • By sector, Japan and, to a lesser extent South Korean, automakers underperformed as Mexico-based supply chains to US plants come under question. Semiconductor names in South Korea and Taiwan under pressure as Trump said he was considering a separate set of chip tariffs. Exporters throughout the region underperformed, mining stocks in Australia also steeply lower.

  • In other developments, China Caixin manufacturing PMI for January unexpectedly declined, and a private survey showed new home sales fell again last month. China cinema receipts from the LNY holiday showed record attendance but probably reflected subsidizes. Japan PMI shrank at quickest pace in 10 months with autos and manufacturing notably weak. South Korean manufacturing returned to modest expansion amid improvement in external demand. Monthly South Korea Industrial production also rebounded though consumption was soft. Australia December retail sales decline much narrower than forecast.

  • Softbank Group (9984.JP) to spend $3B annually to deploy OpenAI's solutions in Japan, will market Crystal Intelligence to integrate enterprise systems and data for corporates. Alibaba (9988.HK) may be liable for dangerous or illegal products sold on their platforms in EU; stock rises on follow through from last week's announcement on LLM platform development.

• Digest:

  • Export names lead broad-based Asia selloff on tariff reverberations:

    • Asia equities lower Monday, led by Taiwan, South Korea and Japan. Almost all sectors in Topix, KOSPI and ASX 200 fell. Bloomberg noted pressure concentrated in exporters. Cited analyst views that high US exposure will hit earnings. Nomura suggested dollar strength as the primary transmission mechanism. Auto sector underperformed (Reuters) with Japan's three majors selling off more than 5%. Nissan Motor (7201.JP) in particular highly exposed to Mexico. Similar losses for Kia (000270.KS), Li Auto (2015.HK). EV battery related names down steeply. China E-commerce names mixed but JD.com (9618.HK) fell sharply after President Trump scrapped de-minimis tariff exemptions. Low-price angle hitting Li Ning (2331.HK), Haier Smart Home (6690.HK). Regional semiconductor names also under pressure after Trump's threat of chip tariffs; TSMC (2330.TT), Tokyo Electron (8035.JP), Advantest (6857.JP) mentioned as notable decliners. In contrast, SMIC (981.HK) surged, attributed to expectations Trump tariffs will bolster China's efforts towards self-sufficiency. Australian iron ore majors BHP (BHP.AU), Rio Tinto (RIO.AU), Fortescue (FMG.AU) also fell sharply.

  • Uncertainty surrounds economic impact of Trump's tariffs:

    • Lot of discussion around economic impact of Trump's tariffs. From macro level, tariffs seen raising US inflation and imposing drag on GDP though estimates vary with Goldman Sachs predicting US core PCE impact of 0.7% and GDP impact of 0.4%. US auto industry expected to see sizable impact given US is a major importer of cars and car parts from Mexico and Canada. Tariffs seen adding some $60B to auto costs with analysts estimating new car prices rising ~$3K (Bloomberg, Reuters). Fruit and vegetables, oil, tequila, PCs and electronics also among major US imports from Mexico and Canada likely to be affected. Of the tariff targets, UBS estimates 0.3-0.4% drag on China GDP with ~0.2% deflationary impact. Economists more downbeat on prospects for Canada with country facing recession (Bloomberg). Still, economic estimates subject to considerable uncertainty, including how long tariffs remain in place, and whether Trump extends or ratchets them higher and invites further retaliation. On Friday Trump promised to broaden trade war by putting EU in his sights (Politico), prompting warning from bloc that it will respond firmly (Bloomberg). Trump also flagged product-specific tariffs on computer chips, industrial metals and energy imports (CNN).

  • Canada, Mexico and China vow retaliation after Trump imposes tariffs:

    • On Saturday, President Trump signed executive order imposing 25% tariffs on Canda (oil imports subject to 10%) and Mexico, and 10% tariffs on China, from Tuesday under International Emergency Economic Powers Act (Bloomberg, Politico, Reuters). Order will also increase or expand scope of tariffs should those countries retaliate. Targeted countries vowed to respond with Canada PM Trudeau announcing 25% tariffs on C$155B of US goods in two phases (Bloomberg). Mexico President Sheinbaum ordered tariff and non-tariff measures but offered no further details (Reuters). China more muted in vowing unspecified countermeasures and mostly symbolic WTO lawsuit (Reuters). Trump's benchmarks remain unclear, stating only tariffs will remain in place until flow of illegal immigration and fentanyl is halted. However, Trump also based tariffs on longstanding grievances over US trade imbalances with those countries, playing into view of tariffs being levied first in order to provide better leverage in trade negotiations (link). Improved market access for US exporters was hinted at by Commerce Secretary nominee Howard Lutnick at his confirmation hearing (Reuters).

  • China Caixin manufacturing PMI softer than expected:

    • Caixin manufacturing PMI was 50.1 in January, below consensus and previous month's 50.5. Tone of the report was upbeat on the back of stronger growth in output and new orders, while exports edged lower. Some impetus also came from proactive finished goods inventory accumulation among some downstream sectors, also reflected in higher working capital. Outlook sentiment improved on the back of demand growth, though remains below average amid overhang from looming US tariffs. Still, concerns led to the fastest decline in employment since Feb-20, reflecting prioritization of cost control, translating to growing backlogs. Inflation metrics were on the soft side -- input prices stabilized as supplier discounts offset increasing raw materials prices. Alleviated pressure on output prices, which fell at the fastest in one-and-a-half years. Recall the direction was consistent with the official manufacturing PMI, though latter edged into contraction. Decline was attributed largely to LNY holiday effects, prompting some debate among economists over the magnitude of underlying softness. Main issue is that Q1 is generally seen as the high point for this year after which, stimulus and export front-loading tailwinds are anticipated to wane. Outlook beyond Q1 depends on future stimulus. Some expectations that Beijing awaiting US tariffs before announcing more meaningful measures.

  • South Korea PMI signals return to growth, rest of Asia-ex sees slower growth:

    • South Korea manufacturing output expanded for first time in five months last month, January PMIs showed, joining government data out today that indicated industrial sector returned to modest growth last month (S&PGlobal). PMI survey showed production, new orders expanded, backlogs spiked while input inflation reached 2.5-year high. Survey showed improvement largely came from stronger sales to export markets while domestic environment remained weak; overall PMI at 50.3 from 49.0 in December. Elsewhere, Taiwan manufacturing growth slowed as output, new orders showed weaker gains; employment declined to indicate firms unwilling to replace leavers but output increased, hinting at improved productivity. Overall PMI at 51.1 from 50.0. ASEAN manufacturing PMI slipped to 11-month low but still at expansive 50.4. S&P said new orders and output growth also declined in region. Indonesia, Philippines still expansive; Thailand, Vietnam, Malaysia all saw contracting PMI reading of below 50.0.

  • Notable Gainers:

    • +16.4% 4506.JP (Sumitomo Pharma): reports Q3 earnings ahead of FactSet estimates; raises FY guidance

    • +14.1% 9766.JP (KONAMI): reports 9M results; raises FY guidance

    • +10.3% 981.HK (SMIC): reaction to last week's DeepSeek news

    • +9.0% 035720.KS (Kakao): reportedly to hold collaboration talks with OpenAI

    • +6.3% 036460.KS (Korea Gas): reportedly on growing likelihood of 5.17B barrels of oil and gas located in East Sea basin

    • +5.9% 992.HK (Lenovo Group): reaction to last week's DeepSeek news

    • +0.5% 9984.JP (SoftBank Group): enters partnership with OpenAI to develop and market Cristal intelligence

  • Notable Decliners:

    • -11% 2282.JP (NH Foods): reports Q3 earnings with operating profit below FactSet estimates

    • -9.7% 003670.KS (POSCO Future M Co.): reports Q4 operating profit (KRW41.28B) vs StreetAccount KRW(KRW4.29B)

    • -5.8% 000270.KS (Kia Corp.): president Trump orders tariffs on goods from Mexico, Canada and China; Asia automakers with exposure to Mexico trading lower

    • -5.4% 6861.JP (KEYENCE): reports 9M results

    • -5.0% 7203.JP (Toyota Motor): president Trump orders tariffs on goods from Mexico, Canada and China

    • -0.4% 8309.JP (Sumitomo Mitsui Trust Group): reports 9M earnings; raises FY guidance

• Data:

  • Economic:

    • China January

      • Caixin manufacturing PMI 50.1 vs consensus 50.5 and 50.5 in prior month

    • Japan January

      • Final manufacturing PMI 48.7 vs preliminary 48.8 and 49.6 in prior month

    • Australia

      • December building approvals +0.7% m/m vs consensus +1.0% and (3.6%) in November

      • December retail sales (0.1%)% m/m vs consensus (0.7%) and +0.8% in November

      • January ANZ-Indeed job advertisements +0.2% m/m vs +0.3% in December

    • South Korea December

      • Industrial production +4.6% m/m vs FactSet consensus +3.0% and revised (0.3%) in prior month

        • Industrial production +5.3% y/y vs FactSet consensus +3.3% and +0.1% in prior month

  • Markets:

    • Nikkei: (1,052.40) or (2.66%) to 38520.09

    • Hang Seng: (7.85) or (0.04%) to 20217.26

    • Shanghai Composite: Closed

    • Shenzhen Composite: Closed

    • ASX200: (152.90) or (1.79%) to 8379.40

    • KOSPI: (63.42) or (2.52%) to 2453.95

    • SENSEX: (326.51) or (0.42%) to 77174.06

  • Currencies:

    • $-¥: +0.45 or +0.29% to 155.6590

    • $-KRW: +9.16 or +0.63% to 1466.6600

    • A$-$: (0.01) or (1.22%) to 0.6136

    • $-INR: +0.45 or +0.52% to 87.1442

    • $-CNY: +0.01 or +0.15% to 7.1976