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StreetAccount Summary - Asian Market Recap: Nikkei (1.39%), Hang Seng (1.32%), Shanghai Composite (0.80%) as of 03:10 ET

Feb 25 ,2025

• Synopsis:

  • Asia equities firmly lower Tuesday. Another sharp decline for New Zealand stocks with Australia also down this time. Heavy declines on the Nikkei to send it to the bottom of its five-month trading band, Topix a relative outperformer. Greater China lower but Hong Kong tech stocks rallying mid-morning on dip buying. South Korea and Taiwan lower, Southeast Asia all lower while India is a few points higher in early trades. Europe opened near the flatline, US futures trading higher for now. US dollar flat, Asia currencies modestly stronger. Treasury yields mixed, JGB yields lower on safe-haven buying, CGB yields also under pressure on fresh trade tensions. Crude contracts higher, precious metals down, iron ore under pressure on more China tariff talk. Cryptocurrencies resuming their slide, bitcoin back below $90K.

  • Asia markets under pressure for a second day Tuesday following another largely negative session on Wall Street overnight, especially in China-based ADRs. China technology stocks initially sold off sharply in tandem with the Hang Seng Tech index down almost 4% at one stage and the broader Hang Seng 2.0% lower. However southbound Stock Connect data revealed a surge of mainland funds directed toward Hang Seng-listed internet & IT stocks, providing both indices with support over the day.

  • China markets also brushing off, for now, the latest threat from Trump on technology exports, this time with White House officials pressuring overseas chip manufacturers from sending maintenance engineers to China. Meanwhile, the PBOC kept its MLF rate steady at 2.0% and net withdrew CNY200B in liquidity despite growing concerns over tight liquidity in the inter-bank lending and repo markets.

  • Elsewhere, the Bank of Korea trimmed its benchmark interest rate by 25 bps to 2.75% as expected by a majority of analysts, and lowered its FY25 GDP growth forecast to 1.5% from 1.9%, a little lower than forecasts. Thailand export growth surged to post a seventh consecutive month of expansion. Japan markets reopened after a break Monday with trading houses surging on reports over the weekend Warren Buffet had pledged to increase his holding in several major names. On the negative side, Elon Musk denied reports of a potential investment into Nissan Motor (~7201.JP~); shares declined.

  • China Evergrande New Energy (708.HK) is to sell its 20% stake in a Sweden-based real estate property lessor to meet imminent tax payment requirements. US officials are said to have ramped up pressure on overseas chip makers such as Tokyo Electron (8035.JP) to restrict engineers from maintaining equipment sold to China. Taiwan's economy minister said his ministry has received no information about TSMC's (2330.TT) investment into Intel.

• Digest:

  • White House looks to tighten restrictions on chip exports to China, pressures allies to replicate:

    • Bloomberg reported White House officials considering tougher versions of US semiconductor sales restrictions to China, may pressure key allies to escalate own curbs in sweeping expansion of President Biden's program. Article cited people familiar with the matter, said White House officials met with Japan and Netherlands counterparts over applying restrictions on engineers from Tokyo Electron (8035.JP) and ASML (ASML.NA) from maintaining semiconductor equipment in China, to equal those restrictions already in place at Lam Research (LRCX), KLA (KLAC) and Applied Materials (AMAT). Officials also mulling expanded restrictions on Nvidia (NVDA) chips that can be exported without license while shipment restrictions to SMIC (981.HK) may be widened. US and Dutch officials had come to agreement prior to US presidential election but Hague officials demurred after Trump victory, while Biden's AI 'diffusion rule' that set AI computing power export restrictions on different countries may now also be strengthened.

  • BOK cuts by 25 bp as expected, keeps dovish guidance:

    • Bank of Korea cut the policy rate 25 bp to 2.75% as widely expected. Follows unexpected decision to stay on hold last month. Policy statement noted that while concerns about FX remain, inflation stabilization continues alongside slowing household debt while economic growth momentum expected to decline significantly. Specifically cited downside risks to global growth and inflation uncertainties posed by US tariff impacts. 2025 GDP growth forecast was shaved to 1.5%, lower than expectations of 1.6%, shifting further away from an initial 1.9% projected in November, while maintaining the CPI estimate of 1.9%. Noted soft demand likely to be offset by positive FX pressures. Forward guidance maintained a dovish stance, indicating board members will decide on the timing and pace of additional rate cuts. At a press conference, Governor Rhee said vote was unanimous while two of six board members were open to further easing in the next three months (Yonhap). Reaffirmed calls for monetary/fiscal policy coordination to ensure growth target is met. Called for a supplementary budget of less than KRW20T ($14B) to shore up growth, estimated to contribute 0.2 ppt to GDP growth.

  • Surging Nvidia H20 orders in China may help offset concerns about higher end demand:

    • Reuters cited multiple sources indicating Chinese companies are ramping up orders for Nvidia (NVDA) H20 AI chips due to booming demand for DeepSeek low-cost models. Article suggested Nvidia's dominance in this market could help alleviate concerns that DeepSeek poses a risk to demand for higher priced AI chips. Tencent (700.HK), Alibaba (9988.HK) and ByteDance said to have significantly increased H20 orders since the emergence of DeepSeek. Elsewhere, smaller companies in sectors like healthcare and education are also purchasing AI servers equipped with DeepSeek models and Nvidia H20 chips, marking a sea-change from demand previously confined to deep-pocketed financial and telecom firms. Article recalled Trump administration mulling restrictions on H20 sales to China, which could be factor, though sources cited DeepSeek as the reason. Cited analyst estimates that Nvidia shipped about 1M H20 units in 2024, equating to more than $12B in revenue. Story fits with an earlier Xinhua piece highlighting notable progress in DeepSeek adoption across multiple sectors for AI applications in China, starting with Tencent and Baidu (9888.HK), as well as major cloud service providers and other non-tech clients including office software, automotive, healthcare, and finance.

  • US lawmakers prepare further legislation aimed at China trade practices:

    • Reuters reported bipartisan group of US lawmakers introducing legislation to toughen US trade enforcement laws and address impact of China-supported companies rerouting parts of their production to other countries to circumvent US tariffs. Bill seeks to grant Commerce Department new tools to address concerns about China's trade practices and its Belt and Road Initiative. This would authorize the department to apply the countervailing duty (anti-subsidy) law. Legislation would also toughen antidumping rules, sets specific deadlines for anti-circumvention inquiries, ensures the law can be applied to currency manipulation and aims to address imports of goods like kitchen cabinets from China. Follows yesterday's report indicating President Trump signed a memorandum Friday directing CFIUS to restrict Chinese investments in strategic areas (Reuters). Bloomberg discussed market reverberations overnight, highlighting ADR losses of at least 10% in Alibaba (BABA), Bilibili (BILI) and Kingsoft Cloud Holdings (KC). Nasdaq Golden Dragon China index dropped 5.24%. Latest price action marks a notable setback after recent strength in China tech stocks amid AI optimism in the wake of DeepSeek.

  • Japan inflation pressures building for now, but renewed energy subsidies poised to suppress CPI:

    • Services PPI rose 3.1% y/y in January, matching expectations, following revised 3.0% in the prior month. Headline has topped 3% in three of the past four months. Sequential decline points to favorable base effects. However, trend showing indications of broad-based cost passthrough. In particular, new segmentation of sectors with high vs low labor cost ratio showed high labor series tracking clearly above 3% for the fourth straight month, while low labor sectors also reached 3% for the first time since July. Recall that recent strength in macro data have fueled further BOJ rate hike speculation. In particular, GDP figures drew hawkish takeaways in terms of nominal growth, pickup in the GDP deflator and positive surprise in capex. Latest nationwide core CPI posted the fastest increase since Jun-23, driven by surging rice and other non-fresh foods. However, Reuters consensus looks for Friday's Tokyo core CPI inflation to moderate to 2.3% y/y in February from 2.5% as the reinstatement of government energy subsidies likely outweighed ongoing pressures from food prices. As Diet members continue to discuss tax policy, latest reports indicated the ruling coalition is proposing a delay to scrapping a special gasoline levy as they try to accommodate DPP's demand to raise the income tax-free threshold while balancing revenue sources.

  • Notable Gainers:

    • +12.1% 2015.HK (Li Auto): reveals first electric SUV Li i8

    • +9.5% 6185.HK (CanSino Biologics): NMPA approves trial of DTcP-Hib-MCV4 combination vaccine

    • +8.8% 8058.JP (Mitsubishi): Warren Buffett plans to increase Berkshire Hathaway's holdings in Japan's five largest trading houses

    • +8.0% 192820.KS (COSMAX): reports FY results with operating profit ahead of FactSet estimates

    • +6.7% 8001.JP (ITOCHU): Warren Buffett plans to increase Berkshire Hathaway's holdings in Japan's five largest trading houses

    • +0.8% 3382.JP (Seven & i): reportedly taps Bain as preferred buyer for asset sale

    • +0.6% 7267.JP (Honda Motor): Foxconn reportedly has proposed partnership with Honda Motor

  • Notable Decliners:

    • -8.0% 7201.JP (Nissan Motor): Elon Musk denies reports about potential Tesla investment

    • -4.9% 8035.JP (Tokyo Electron): White House reportedly considering tightening chip controls on China, restricting engineers from companies like Tokyo Electron from maintaining semiconductor equipment in the country

    • -2.6% 3231.TT (Wistron): reportedly guides FY capex NT$35.5B vs year-ago NT$19.4B, +83% y/y; proposes to place up to 250.0M common shares or overseas depository receipts

• Data:

  • Economic:

    • Japan

      • January services PPI +3.1% y/y vs consensus +3.1% and revised +3.0% in prior month

  • Markets:

    • Nikkei: (539.15) or (1.39%) to 38237.79

    • Hang Seng: (307.59) or (1.32%) to 23034.02

    • Shanghai Composite: (26.99) or (0.80%) to 3346.04

    • Shenzhen Composite: (17.15) or (0.82%) to 2074.31

    • ASX200: (56.30) or (0.68%) to 8251.90

    • KOSPI: (14.98) or (0.57%) to 2630.29

    • SENSEX: 219.07 or +0.29% to 74673.48

  • Currencies:

    • $-¥: (0.37) or (0.24%) to 149.3460

    • $-KRW: +1.33 or +0.09% to 1430.9700

    • A$-$: (0.00) or (0.15%) to 0.6341

    • $-INR: +0.44 or +0.51% to 87.1365

    • $-CNY: +0.02 or +0.21% to 7.2632