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StreetAccount Summary - Asian Market Recap: Nikkei +0.25%, Hang Seng +1.59%, Shanghai Composite (0.93%) as of 03:10 ET

Feb 18 ,2025

• Synopsis:

  • Asian equities mostly higher Tuesday. Hang Seng rally continued though off intraday highs led by tech gains. However mainland stocks selloff. Taiwan, Korea and Japan all ended higher while ASX fell amid banks' earnings fallout. India trading lower. US futures edging up. Treasury yield curve bear steepening, JGB yields rose to highest levels in more than a decade. Dollar stronger against yen, Kiwi, flat against Aussie. Crude and gold advancing while bitcoin lower.

  • RBA cut cash rate by 25 bp to 4.10% as expected, first time since 2020. Central bank noted signs of disinflation occurring quicker than expected but warned progress may stall if policy is eased too much too soon. Acknowledged inflation progress but is cautious about outlook and prospects for further easing. RBNZ expected to lower OCR by 50 bp to 3.75% on Wednesday. Thailand PM Paetongtarn says her government will push for 3.5% growth in 2025 and will seek to work closer with central bank to support small businesses. Singapore unveiled expansionary budget ramping up spending to address cost-of-living issues amid looming election.

  • Greater China stocks mixed Tuesday with Hang Seng Tech hitting new three-year high and mainland indexes ending lower, probably due to profit-booking of "sell the news" after President Xi's high-profile meeting with private sector leaders. Xi's expressions of support dovetailed with China's lawmakers moving to review laws aimed at promoting private sector development. Beijing's embrace private sector is seen putting traction behind China's investability narrative with strategists turning more optimistic on equities. Meanwhile China sovereign bond yields higher amid cash squeeze and investors shifting funds from bonds to stocks.

  • In corporate developments, Honda (7267.JP) said to be willing to resume takeover talks if Nissan (7201.JP) CEO Makoto Uchida steps down. News lifted Mitsubishi Motors (7211.JP) higher by as much as 8.6%, most in two months. Sany Heavy Industry (600031.CH) plans secondary listing in Hong Kong that could raise up to $1.5B. LG Electronics (066570.KS) has started roadshows for IPO of its Indian unit which could raise $1.5B. BHP (BHP.AU) posted 23% drop in interim profit, lowest since 2019.

• Digest:

  • RBA cuts cash rate as expected, cautious about prospects for further easing:

    • RBA lowered cash rate by 25 bp to 4.10% as expected. Assessed policy as restrictive and will remain so following today's rate cut. Noted signs disinflation occurring quicker than expected, giving board more confidence inflation is moving sustainably to 2-3% target midpoint. However, warned inflation progress may stall if policy is eased too much too soon, adding that it remains cautious about outlook and prospects for further easing. At her press conference, RBA Governor Bullock said rate cut was a difficult decision with arguments on both sides, adding she believes market is too confident in its rate cut pricing. Could not say when next rate cut occurs, needs to see upside inflation risks receding with further easing of wage growth and continued disinflation in services. While near-term trimmed mean inflation forecasts werelowered, RBA revised up 2026 trimmed mean CPI projections to above 2.5% midpoint. Noted unexpectedly strong jobs data suggests labor market conditions may be tighter than thought, translating to downward revisions to unemployment rate forecasts. Projects consumption to increase alongside public demand, aiding GDP growth and contributing to some upward pressure on inflation. Noted geopolitical and policy uncertainties pronounced, but tariff impact highly uncertain.

  • Honda said to be open to reviving talks if Nissan CEO departs:

    • FT sources said Honda (7267.JP) is willing to resume takeover talks if Nissan (7201.JP) CEO Makoto Uchida steps down. Uchida has indicated desire to stay on until 2026 though faces pressure to leave over the next few months from board members and Renault (RNO.FP) after merger talks failed. Nissan board also said to have begun informal discussions over the exit timing. Uchida said at last week's press conference that he was open to resigning once Nissan was back on the recovery path but would go sooner if asked. Article recalled Foxconn's (2317.TT) interest as Nissan searches for a new partner, but the Japanese establishment seeking to ward off approaches from the company, seen as too close to China. Echoed earlier reports that global private equity firms including KKR as well as US tech firms have been asked to consider an investment in Nissan. Some advisers said to be trying to gather consortiums for a proposal, one of which involves US automakers to help navigate Trump tariffs. Renault has established they want to sell a portion of their Nissan stake at a premium. Immediate attention on Nissan cash flow, requiring a buffer to fund restructuring costs and head off a potential credit downgrade, already at junk status according to S&P.

  • China government bond yields rise on tight liquidity conditions, stock rally:

    • China government bond yields rose as ten-year yield rose four bp to 1.73% Tuesday, highest since December and one-year yield jumped eight bp to hit 1.50%, highest since August. Bloomberg noted selloff in CGBs attributed to tight cash conditions and local stock rally that weakened demand for debt. Noted sovereign yields dropped to record lows earlier this month amid a myriad of factors including sluggish growth, lack of attractive alternatives and concern over trade tensions. However recent rally in Chinese stocks driven by enthusiasm over tech sector has sapped demand for haven assets. Monday's meeting between President Xi and private sector leaders further raised expectations of more government support for private businesses. PBOC's delay in monetary easing also pushes up borrowing costs and makes it less attractive to pile into bonds. Bigger rise in short-dated yields also shows tightness in liquidity conditions as PBOC has been draining cash via OMOs in recent days to support yuan. Noted measured rise in yields is welcome sign for authorities while easing pressure on yuan amid trade uncertainties.

  • Europe defense sector strength spills over to Japan peers:

    • Nikkei discussed notable strength in major Japan defense stocks reflecting spillover support from expectations that European countries will expand defense spending amid US pressure for more active support for Ukraine. Notable mentions were Mitsubishi Heavy (7011.JP) and Kawasaki Heavy (7012.JP). Speculation said to be stoked by the recent Munich Security Conference (Reuters) and subsequent Paris meeting of European leaders. Implications extending to Japan, recalling US defense undersecretary Elbridge Colby's calls for Tokyo to increase defense spending to at least 3% of GDP, arguing current efforts (targeting 2% of GDP) are inadequate. Still, article noted Japan market upside seemingly facing fatigue, judging by the lack of momentum in spite of what is shaping up to be a strong earnings season. Cited Nomura's suggestion that corporate guidance upgrades were largely factored in among institutional investors, while BOJ rate hikes pose a headwind in contrast to easing cycles in US and Europe. Story noted the contrast between rangebound Japan stocks against strength in DAX, FTSE and US markets and suggested the domestic market is apt to remain driven by micro factors rather than macro.

  • Japan economists positive on GDP data, though no impact on BOJ policy forecasts:

    • Economist takeaways from the GDP data were broadly upbeat. Headline Q4 growth was well above expectations. Some discounting of the details given lower imports provided the largest contribution. While private consumption growth slowed, marginal growth was still viewed as positive against projections of a decline. Private demand was supported further by a rebound in capex. Also some positive discussions of the broad pickup in nominal GDP, deflator, employee compensation and ULC. However, forward-looking implications were limited with no notable GDP forecast revisions. Some expectations of softer 1Q25 to presage a rebound thereafter on the back of anticipated notable wage hikes. Concurred GDP adds to recent data in support of the BOJ rate hike trajectory, though the next move is still anticipated to come mid-year, remaining consistent with preceding consensus polls. There was also a notable absence of views on the risk of a higher terminal rate currently emerging in the press. Nikkei QUICK monthly FX survey (n=67) conducted Feb 10-12 showed half the respondents projected a terminal rate of 1%, unchanged from recent narrative.

  • Notable Gainers:

    • +63.3% 2217.HK (Tam Jai International Co.): Toridoll offers to privatize at HK$1.58/share

    • +11.6% 1070.HK (TCL Electronics Holdings): guides FY adjusted net income attributable HK$1.3-1.7B vs FactSet HK$1.35B

    • +7.4% 034020.KS (Doosan Enerbility): guides FY25 revenue KRW6.477T (excluding units such as Doosan Bobcat, Doosan Fuel Cell)

    • +3.7% 7201.JP (Nissan Motor): Honda reportedly willing to resume takeover talks with Nissan Motor if CEO Makoto Uchida steps down

    • +1.6% 005930.KS (Samsung Electronics): to launch 48.1M-share buyback, to run from 19-Feb through 16-May

    • +0.4% BHP.AU (BHP Group): reports H1 underlying EPS $1.002 vs FactSet $1.00

    • +0% 670.HK (China Eastern Airlines): reports January traffic +19.71% y/y

  • Notable Decliners:

    • -8.1% 2980.JP (SRE Holdings): Sony to sell 2.1M shares

    • -4.4% 19.HK (Swire Pacific): UBS initiates sell; firm says company is trading at 19% discount to stub value because of ongoing buyback

    • -0.6% 3382.JP (Seven & i): reports January 7-Eleven, Inc. same-store merchandise sales (1.0%) y/y

• Data:

  • Markets:

    • Nikkei: 96.15 or +0.25% to 39270.40

    • Hang Seng: 360.58 or +1.59% to 22976.81

    • Shanghai Composite: (31.34) or (0.93%) to 3324.49

    • Shenzhen Composite: (41.30) or (2.02%) to 2007.34

    • ASX200: (56.10) or (0.66%) to 8481.00

    • KOSPI: 16.39 or +0.63% to 2626.81

    • SENSEX: (159.45) or (0.21%) to 75837.41

  • Currencies:

    • $-¥: (0.30) or (0.20%) to 152.0060

    • $-KRW: +0.96 or +0.07% to 1442.4100

    • A$-$: +0.00 or +0.06% to 0.6356

    • $-INR: +0.23 or +0.26% to 86.9565

    • $-CNY: +0.03 or +0.36% to 7.2803