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StreetAccount Summary - Asian Market Recap: Hang Seng (0.58%), Shanghai Composite (0.18%), Kospi (0.35%) as of 03:10 ET

Feb 24 ,2025

• Synopsis:

  • Asian equities ended mostly lower Monday. Greater China benchmarks fell in choppy trading. Losses in South Korea and Taiwan, while India equities trading sharply lower again. Southeast Asia mostly down but Singapore outperformed on plans to reinvigorate its stock market. New Zealand's main benchmark fell sharply lower to Oct-24 lows but Australia's ASX ended a few points higher. Japan closed for a holiday. US futures higher, Europe opened higher with gains in Germany following yesterday's election. US dollar lower again, strength in AUD, NZD and yuan but quiet elsewhere. Crude oil, precious metals lower, iron ore lower on reports tariffs on Chinese steel are set to increase.

  • Asia markets mainly followed the losses on Wall Street Friday, caused by concerns over weakness in economic leading indicators and rising inflation expectations. However, most indexes off their lows as US futures turned higher and on a decisive election outcome in Germany that saw the conservatives fend off a challenge from the far right. Hong Kong gave up some of its recent gains with Alibaba weighing somewhat after attaching a dollar amount to its AI and cloud investment program, offset by strong gains in its property sector after a debt breakthrough at China Vanke.

  • Elsewhere, President Trump signed memorandum Friday directing CFIUS to restrict Chinese investment in strategic US areas and tightened curbs on US investment in sensitive China technology. New Zealand retail sales rebounded by more than expected as rate cuts worked their way through economy. Singapore inflation fell to near four-year lows as food price increases slowed sharply while plans announced on Friday by MAS to reinvigorate the country's stock market failed to spark a significant equity rally.

  • Alibaba (9988.HK) said it will invest at least CNY 380B ($53B) over the next three years in cloud and AI infrastructure, exceeding the amount it has spent in the past ten years. Berkshire Hathaway is to gradually increase its stake in Japanese trading houses such as Mitsubishi Corp (8058.JP), Mitsui & Co (8031.JP) and Sumitomo Corp (8053.JP). Perpetual (PPT.AU) has ended talks over a $1.4B sale of its wealth and trust units to private equity group KKR. Hon Hai (2317.TT) has proposed a partnership with Honda Motor (7267.JP) to create a four-party cooperation framework with Nissan Motor (7201.JP) and Mitsubishi Motors (7211.JP). Coal India (533278.IN) and France's EDF are to form a joint venture to build several renewable energy projects in India and neighboring countries. Singapore Stock Exchange (S68.SP) seen as a beneficiary of MAS reforms to strengthen domestic stock market.

• Digest:

  • Alibaba's AI capex plans fuel optimism around cloud revenue growth:

    • Alibaba's (9988.HK) Q3 results reinforced AI-driven growth expectations that have propelled Hang Seng tech index to three-year highs. On Monday group said it will invest at least CNY380B ($53B) in cloud computing and AI infrastructure over next three years as it makes AI its main objective (Bloomberg). Company had earlier foreshadowed capex over next three years would exceed total over prior decade, corresponding with continued cloud acceleration after segment revenue climbed to 13% y/y in Q3. Several sell-side firms maintained their bullish calls on the stock with Morgan Stanley upgrading to overweight and raising price target. Stepped up capex plans seen translating to further acceleration in revenue growth through FY28 amid surging demand for AI computing and Alibaba leveraging its position as China's largest hyperscaler. Firms did flag potential drags on FCF and margins amid the high capex and ongoing competitive pressures between China's tech platforms. Geopolitical risks also lurk in background amid potential for Trump administration to tighten export controls.

  • More developments on US-China tensions:

    • US Treasury Secretary Bessent spoke with China Vice Premier He Lifeng Friday and traded complaints (Reuters). Bessent called for more action on fentanyl trafficking and economic rebalancing, while He expressed concerns about Trump tariffs. Readouts from both sides concurred they will maintain communication. Talks coincided with more developments in the background. Reuters cited a White House official saying Trump signed a national security memorandum Friday directing CFIUS to restrict Chinese investments in strategic areas. Under the directive, US will establish new rules "to curb the exploitation of its capital, technology, and knowledge by foreign adversaries such as China to ensure that only those investments that serve American interests are allowed." Trump administration said to consider new or expanded restrictions on US outbound investment to China in sensitive technologies, including semiconductors, artificial intelligence, quantum, biotechnology, aerospace and more. Bloomberg sources said Trump administration told Mexican officials in a meeting on Thursday they should impose their own tariffs on China as part of efforts to avoid US duties on Mexico. No commitment from Mexico yet though agreed to establish a working group to continue exploring trading and tariff issues.

  • PBOC's shifting of priorities to defend yuan leaves monetary easing a guessing game:

    • Bloomberg discussed PBOC's policy shift has created confusion among analysts about future direction. Recall Governor Pan hinted at cutting RRR by end-2024 that did not materialize while PBOC hasn't cut interest rates since September despite most pro-easing stance since 2011 as stated in December's Politburo meeting and CEWC. Central bank also suspended bond-buying experience in January (Bloomberg) that tightened interbank liquidity sharply. Some economists noted PBOC now prioritizing yuan stability over monetary easing while blurring economic and currency objectives. Also some thoughts that policymakers tightening liquidity to warn bond bulls that drove CGB yields to record lows. Fed's move also closely watched for a policy reaction. Article noted Pan's recent comments on importance of stable yuan, signaling its policy priority. Also evidenced by PBOC's consistency in keeping daily fixing above 7.2 per dollar threshold and its verbal warnings of large currency moves. Noted yuan already much weaker from Trump's first term and room to cut rates and RRR also limited considering already low levels, prompting some economists to call for fiscal policy to play more dominant role.

  • Warren Buffet flags likely increase in Japan trading house stakes:

    • Nikkei, citing an annual letter to shareholders Saturday, reported Warren Buffett plans to increase Berkshire Hathaway's holdings in Japan's five largest trading houses. Indicated that companies will moderately relax a 10% stake ceiling stipulated an initial agreement and Berkshire will likely build positions in all five names somewhat over time. Story recalled Berkshire started investing in Itochu (8001.JP), Mitsubishi Corp (8058.JP), Mitsui & Co (8031.JP), Sumitomo (8053.JP) and Marubeni (8002.JP) in 2019. Aggregate holdings had market cap of $23.5B as of 2024-end. Buffett reaffirmed a "very long term" investment strategy and commitment to support their board of directors. Latest Buffett commentary follows an earlier Nikkei discussion about the higher bar for added investments in trading houses, which are no longer undervalued, Berkshire's significant stake to date, while core business is vulnerable to Trump tariffs as well as China's property crisis. Trading house shares were down 13% to 31% as of early February since peaking last year while remaining about three times higher than before Berkshire's disclosure. Debt financing activity in Japan last year raised hopes that Berkshire was preparing more investments, though many speculated targets would likely be sectors other than trading houses.

  • Hon Hai proposes four-party collaboration with Honda, Nissan, Mitsubishi:

    • A Nikkei source indicated Hon Hai (2317.TT) proposed a partnership with Honda (7267.JP) with a view to creating a four-party cooperation framework including Nissan (7201.JP) and Mitsubishi (7211.JP). Article recalled Hon Hai's interest in a partnership with Nissan to strengthen its EV business before Honda-Nissan merger talks began. Although merger negotiations were terminated last week, companies stated they will continue to collaborate in EV and software development. Follow-up piece suggested a broader partnership presents opportunity for all parties to compete better in the EV market. Noted Nissan has limited time to implement a turnaround after Moody's on Friday cut Nissan's credit rating to "Ba1" from "Baa3" -- dropping to speculative-grade -- and maintained a negative outlook which stands to increase refinancing costs. Separately, FT, citing three people with direct knowledge, reported a high-level group including former Prime Minister Yoshihide Suga has drawn up plans to court Tesla (TSLA) to invest in Nissan. Hopes for Tesla to become a strategic investor amid expectations they would be keen to acquire Nissan's US plants to help boost domestic production in response to Trump tariff threats. However, Musk appeared to downplay interest in a response on X.

  • Notable Gainers:

    • +9.5% 1698.HK (Tencent Music Entertainment Group): included in Hang Seng Tech Index

    • +7.1% 011200.KS (HMM): US planning to impose fees and restrictions on Chinese ship operators and Chinese-built ships

    • +5.3% 8454.TT (momo.com): reports FY earnings with EPS ahead of FactSet estimates

    • +5.3% VC2.SP (Olam Group): to sell remaining 64.57% stake in Olam Agri to SALIC; estimated gross cash proceeds $2.58B (SG$3.41B)

    • +3.7% S68.SP (Singapore Exchange): Monetary Authority of Singapore announced comprehensive set of measures to strengthen Singapore's equities market

    • +3.6% 2202.HK (China Vanke): state shareholder provides loan of up to CNY4.2B

  • Notable Decliners:

    • -13.9% 6060.HK (ZhongAn Online P&C Insurance): removed from Hang Seng Tech Index

    • -7.2% 8.HK (PCCW Ltd): reports FY results; revenue and EBITDA below FactSet estimates

    • -2.8% 011790.KS (SKC Co.): China reportedly surpassing Korea in semiconductor technology

• Data:

  • Economic:

    • Singapore January

      • CPI +1.2% y/y versus consensus +2.4% and 1.5% in prior month

        • CPI (0.7%) m/m versus 0.3% in prior month

        • Core CPI +0.8% y/y vs consensus +1.5% and +1.7% in prior month

    • New Zealand

      • Q4 retail sales +0.9% q/q vs consensus +0.5% and revised 0.0% in Q3

        • Core retail sales +1.4% q/q vs consensus +0.2% and revised (0.6%) in Q3

  • Markets:

    • Nikkei: Closed

    • Hang Seng: (136.31) or (0.58%) to 23341.61

    • Shanghai Composite: (6.09) or (0.18%) to 3373.03

    • Shenzhen Composite: 2.65 or +0.13% to 2091.46

    • ASX200: 12.00 or +0.14% to 8308.20

    • KOSPI: (9.31) or (0.35%) to 2645.27

    • SENSEX: (855.74) or (1.14%) to 74455.32

  • Currencies:

    • $-¥: +0.13 or +0.09% to 149.4110

    • $-KRW: (9.71) or (0.68%) to 1427.1300

    • A$-$: +0.00 or +0.10% to 0.6364

    • $-INR: +0.06 or +0.07% to 86.7197

    • $-CNY: (0.00) or (0.06%) to 7.2464