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StreetAccount Summary - Asian Market Recap: Nikkei +0.72%, Hang Seng +2.83%, Kospi +1.13% as of 03:10 ET

Feb 04 ,2025

  • Synopsis:

    • Asian equities traded mostly higher Tuesday in a volatile session. Hong Kong traded in a wide range but finished 2.8% higher with its IT and consumer stocks again leading. Other benchmarks including in Japan and South Korea also higher, India surging. Southeast Asia mostly higher and Australia closed a few points down as it dipped on China retaliatory tariff news. Mainland China markets remained closed for an extended holiday. US futures down a little but volatile, Europe tentatively higher in early trades. US dollar lower after Trump postponed Canada, Mexico tariffs; yen, AUD, NZD all weaker, yuan offshore also losing ground again. Treasury yields higher across tenors, CGBs steady. Crude oil futures sharply lower, precious metals down, industrial metals higher for now. Cryptocurrencies sharply lower again.

    • Asia markets seeing a volatility spike in the face of tariff announcements with few other catalysts to balance the newsflow. Markets opened higher across the region after the White House postponed tariffs on Mexico and Canada for a month, and, although there was no reprieve for China, there was talk of a phone call between Trump and Xi. Later, China announced a set of tariffs aimed at US energy products and opened an anti-trust probe into Google, sending most benchmarks steeply lower for a time but analysts soon reacted, saying they amounted to a 'restrained response', sparking a rally into the close in Hong Kong.

    • Mitsubishi Corp (8058.JP) said it is reviewing how to proceed with offshore wind projects given a 'significantly changed' business environment. Kyocera (6971.JP) missed on Q3 earnings but announced a revised capital strategy and share buyback. Nintendo (7974.JP) lowered its full-year outlook after profit and revenue fell sharply ahead of the launch of Switch 2. China Evergrande New Energy (708.HK) revealed it is struggling to attract fresh investors amid a liquidity crisis. A London court approved the $6B debt restructure plan for Sino-Ocean Group (73377.HK) despite an ad hoc group of creditors objecting to the deal. Kakao (035720.KS) has entered into a strategic partnership with OpenAI to use ChatGPT on its new AI service. Grab (GRAB) is considering a full takeover of rival GoTo Group (GOTO.IJ) according to press reports.

  • Digest:

    • China announces retaliatory tariffs on US as Trump eyes phone call with Xi:

      • China's Ministry of Finance on Tuesday announced retaliatory 15% tariffs US coal and LNG, as well as 10% tariffs on crude, agricultural machinery, cars and pickup trucks (Bloomberg). Additionally, China launched anti-trust probe into GOOGL, imposed export controls on Tungsten-related materials, and added PVH and ILMN to its unreliable entity list. President Trump left China out of his decision to pause tariffs on Canada and Mexico, telling reporters Monday he would be having phone call with President Xi over next 24 hours (Reuters, Bloomberg). However, Trump also warned tariffs on China would substantially increase if a deal could not be reached. Trump's weekend tariff order drew measured response from China's Commerce Ministry, which issued standard warning of unspecified countermeasures while announced mostly symbolic WTO lawsuit. Press sources familiar with Beijing's thinking said China viewed 10% tariffs falling short of maximum pressure campaign Trump had previously threatened. This encouraged thoughts Beijing saw an opening to negotiate on trade purchase commitments, investing in US, or striking commercial deal on TikTok.

    • Economists expect any tariff reprieve for China may prove short-lived:

      • While Trump left China out of his tariff pause decision, there is some hope his upcoming call with Xi will also lead to concessions that provide an off-ramp. However, there remains significant uncertainty surrounding timing and scope of future tariffs after Trump threatened 60% tariffs on China during campaign trail. Trump is surrounded by China hawks including WH Trade Adviser Navarro, Commerce Secretary nominee Lutnick and Secretary of State Rubio, who have all advocated tougher stance on Beijing. UBS among those expecting more tariffs on China, maintaining baseline forecast for GDP growth to slow to 4% in 2025 with 60% tariff hike on 25% of China exports in Q3. Morgan Stanley similarly noted risk of further escalation is high with US likely imposing more tariffs on China later in 2025 as part of broader trade policy goals. Also maintained its forecast for nominal GDP growth slowing to below 4% in Q3. Both firms maintained forecast year-end USDCNY target of 7.60 (implying 6% further depreciation). Goldman Sachs also flagged sustained yuan depreciation pressure as market prices in risk premium of future tariffs from here.

    • Looking to head off tariffs, Indian PM Modi invited to meet with Trump at White House:

      • Bloomberg source noted India PM Modi invited for meeting with President Trump at White House next week. Trump said last week Modi would be coming to White House, noting that during their call he pressed Modi to address trade imbalance and boost purchases of US-made military equipment (Bloomberg). India is more vulnerable to a trade fight with Trump, running $35.3B surplus with US. Trump has also accused India of being a trade abuser and last week signaled potential action against India for causing economic "harm" to US (Indian Express). However, recent actions by India being seen as attempt to placate Trump in a bid to avoid tariffs (Bloomberg). Indian budget on Saturday included cuts to import duties covering several products, including motorcycles, which follows previous Trump complaints about tariffs being levied on Harley-Davidson bikes (Economic Times). India has also signaled cooperation on illegal migration with Bloomberg sources noting Indian government is prepared to accept all of its citizens illegally in US.

    • Asia EMs vulnerable to outflows from strong dollar, semis also at risk from chip tariffs:

      • This week's tariff developments underlining trade-related risks to Asian equities. Morgan Stanley looked at headwinds to Asian semis from Trump's threat to impose tariffs on chip imports, arguing they would drive up component costs and reduce demand as global tech supply chain is fragmented further (Bloomberg). Warned of ~20% near-term downside if tariffs materialize with Taiwan and South Korea most at risk. Valuations already elevated with year-to-date rally driven largely by multiple expansion and no meaningful improvements in EPS earnings revisions. Persistent threat of tariffs also seen sustaining dollar strength with potential implications for Asian EM capital flows. Bloomberg-compiled data showed $12.3B outflow from Asia ex-China EMs in January with global funds having withdrawn $54B over past seven months, longest stretch on record going back to 2009. With 90-day correlation between dollar index and MSCI Asia Pacific near its most negative since Mar-2023, regional equities have declined 4.4% since November US election compared more than 4% gains for MSCI Europe and S&P 500.

    • Trump tariff effects encourage selective rotation in Japan stocks:

      • Nikkei discussed Japan stocks that defied the broad-based selloff Monday were those that upgraded FY guidance, providing investors with a rotation avenue to avoid systematic weakness. Key outperformers were Sumitomo Pharma (4506.JP) which surged 16.4% and Konami (9766.JP) with a 14.1% gain. Sumitomo Pharma guidance swung to the black and stock was the top performer in the Nikkei index. Konami upgraded FY net profit guidance to a record while also increasing dividends. In a similar rotation theme, Nikkei also discussed prospects for gains among China competitors in tech components that stand to benefit from US tariff hikes on Chinese goods, particularly those with lagging valuations relative to market leader TDK (6762.JP). Noted Alps Alpine (6770.JP) rallied as much as 7% Monday after earnings beat. Cited Goldman Sachs simulation of potential growth in Japan MLCC exports to US assuming a midpoint tariff rate of 47.5% on China (based on expected range of 35-60%). Results pointed to notable growth in storage batteries and capacitors. As China's market share declines, tight supply-demand conditions in Japanese goods would support prices and elevate nominal export values offering a theoretical tailwind. Murata Manufacturing (6981.JP) and Taiyo Yuden (6976.JP) mentioned as potential targets.

    • Notable Gainers:

      • +18.2% 3377.HK (Sino-Ocean Group Holdings): secures English Court approval for offshore debt restructuring

      • +8.6% 079550.KS (LIG Nex1): reports FY results with operating profit and revenue ahead of FactSet estimates

      • +7.4% 6971.JP (Kyocera): reports Q3 earning below StreetAccount estimates and lowers FY guidance; revises capital strategy and announces buyback plans

      • +5.8% 377300.KS (kakaopay): reports FY results with revenue ahead of FactSet estimates

      • +5.6% 6981.JP (Murata Manufacturing): reports Q3 earnings with operating profit below StreetAccount estimates impacted by one-offs; some analysts note that underlying operating profit came in largely in line

      • +3.3% 005930.KS (Samsung Electronics): chairman Lee Jae-yong found not guilty in 2015 merger case

      • +0.6% 000270.KS (Kia Corp.): reports January global sales 239,571 units vs year-ago 245,586 units

    • Notable Decliners:

      • -14.7% 7211.JP (Mitsubishi Motors): reports Q3 operating profit missing consensus and lowers FY guidance across the board; analysts broadly negative on results, particularly on sharp deterioration in the NA business driven mainly by rising incentives and other cost increases

      • -4.1% 051910.KS (LG Chem): confirms Q4 results; guides FY25 revenue below FactSet estimates; declares year-end dividend KRW1,000/share vs year-ago KRW3,500/share

      • -1.4% 4676.JP (Fuji Media Holdings): Dalton Investments reportedly calls for resignation of director Hisashi Hieda

      • -1.3% 9202.JP (ANA HOLDINGS): reports 9M results with year-on-year decline in operating income; analysts broadly note that the print met or came in slightly lower than expected

  • Data:

    • Economic:

      • Australia December

        • Household spending +0.4% m/m vs consensus +0.3% and +0.4% in November

          • Household spending +4.3% y/y vs consensus +3.4% and +2.4% in November

    • Markets:

      • Nikkei: 278.28 or +0.72% to 38798.37

      • Hang Seng: 572.70 or +2.83% to 20789.96

      • Shanghai Composite: Closed

      • Shenzhen Composite: Closed

      • ASX200: (5.40) or (0.06%) to 8374.00

      • KOSPI: 27.74 or +1.13% to 2481.69

      • SENSEX: 987.05 or +1.28% to 78173.79

    • Currencies:

      • $-¥: +0.65 or +0.42% to 155.4110

      • $-KRW: +0.62 or +0.04% to 1458.8900

      • A$-$: (0.00) or (0.29%) to 0.6201

      • $-INR: +0.19 or +0.21% to 87.0973

      • $-CNY: (0.01) or (0.10%) to 7.1895

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