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StreetAccount Summary - Asian Market Recap: Nikkei (2.77%), Hang Seng (1.52%), Shanghai Composite (0.24%) as of 04:10 ET

Apr 03 ,2025

• Synopsis:

  • Asia equities ended sharply lower Thursday as markets reacted negatively to Trump's reciprocal tariffs. Japan's Nikkei and Topix fell to eight-month lows, the Hang Seng and Kospi underperformed while Vietnam's HNX saw the worst of the region's declines with a 7% fall. Australia was lower but ended off its trough, India and Singapore outperformed with small declines. Other Southeast Asia benchmarks also fell. Indonesia and Taiwan were closed for a holiday. For the week, the Hang Seng fell 2.5% and the Shanghai Composite 0.4% in USD terms. US futures currently sharply lower but off their troughs, Europe opened lower but ticking slightly higher. US dollar DXY index falling to below 103 for the first time since October, yen strengthening to 147 per dollar - an eight-month low; yuan under pressure. Treasury 10Y yield at six-month low, JGB yields down. Sharp declines in crude futures, iron ore also steeply lower. Precious metals turning lower. Cryptocurrencies higher.

  • Investors viewed Trump's long-awaited tariffs into the US as more aggressive than expected, hitting Asia exporters hard despite the carve out for pharmaceuticals and semiconductors. China is facing a 34% tariff, Japan 24%, India 26%, South Korea 25%, Thailand 36%, Indonesia 32%, Malaysia 24%, Vietnam 46%, and Cambodia 49%. Australia and New Zealand were hit with 10% tariffs. China's de minimis exemption was also rescinded. Asia governments responded in measured fashion with only China vowing countermeasures, and most others expressing some form of disappointment with pledges to continue negotiations with Washington.

  • Other regional financial assets volatile. Yen strengthened notably and the AUD also traded after a wobbly start. But the yuan weakened after the PBOC set a notably weaker mid-point, albeit one still below its 7.20 per dollar peak last November, signaling the bank will pause in responding to the tariff news. JGB yields sank while CGB, Australia and South Korean sovereign yields fell to around one-month lows. On the positive side, pharmaceutical producers in India and South Korea rallied as the sector was unexpectedly exempted; South Korea defense stocks also rallied on prospects for increased geopolitical tensions; and a handful of Malaysia rubber stocks advanced as tariffs were increased on Chinese rivals.

  • In other developments, China Caixin services PMI rose to three-month high amid pickup in new orders and business activity. Singapore's manufacturing PMI showed expansion for a second consecutive month, defying other regional index readings. Japan's composite PMI was revised slightly higher. Australia February imports reached a record high and exports a four-month low to give a multi-year low in the trade surplus.

  • Mitsubishi Corp (8058.JP) said it is considering whether to invest in the proposed Alaska LNG pipeline. Nintendo (7974.JP) announced its Switch 2 console is to be released in June with Mario Kart World launch title. Suntory Beverage & Food (2587.JP) said it would shift products to its home market and other Asia countries if new US tariffs made its whiskeys prohibitively expensive. Hyundai Motor (005380.KS) said it had no plans to raise prices in the US for now.

• Digest:

  • Asia nations face highest rates under Trump's reciprocal tariffs regime:

    • Asia nations facing highest tariff rates under Trump's reciprocal tariff regime with 34% rate on China (taking total tariff rate to 54%), 24% on Japan, 32% on Taiwan, 26% on India, 25% on South Korea, and 46% on Vietnam (Reuters, Bloomberg, Washington Post). Baseline 10% tariff rate takes effect 5-Apr and higher reciprocal tariffs effective from 9-Apr. Additionally, Trump signed executive order revoking tariff exemptions for de minimis China goods valued at $800 or less. Goods will be subject to 30% tariffs or $25 per item. EO exempts steel, aluminum and autos (these already subject to 25% tariffs). Copper, pharmaceuticals, chips and lumber also excluded, though subject to future tariffs as already flagged by Trump. Tariffs seen permeating through Asia supply chains with input costs set to rise. Retailers such as Nike (NKE) and Adidas (ADS.GR) affected with Vietnam their largest supplier of footwear (Bloomberg). Vietnam, India and China major manufacturing hubs for Apple (AAPL) with analysts projecting hit to profits (NY Times, Bloomberg). Attention turns to whether and how other countries retaliate, tying into debate around tariffs as a negotiating tactic. Trump demanded nations seeking exemptions first drop their tariffs and non-tariff barriers. Treasury Secretary Bessent also didn't rule out negotiations, saying reciprocal tariff rates are at the "high end" (Bloomberg).

  • Trump's tariff announcement fuels risk off move on markets, flight to safety:

    • Trump's tariff announcement driving risk-off move in Asian trade. US index futures down 2-3% afterhours, led by falls in retailers and multinationals with production facilities in Asia. May VIX futures up 9%. China markets outperforming amid long-held view tariffs to increase prospect of stimulus. Japan seeing heaviest losses with yen strength compounding weakness in exporters. Banks the main drag on TOPIX amid slide in JGB yields and fall in BOJ September rate hike odds. While chips not subject to reciprocal tariffs, Asian semis still seeing large declines after White House confirmed tariffs coming. Dollar weakening against majors with yen the best performer among G10s amid haven demand. Offshore yuan fell to two-month low before recovering following stronger-than-expected PBOC midpoint fix. EM Asia currencies also seeing relatively mild losses. Flight to safety fueling bond rally with yields seeing large declines in a bull flattening move. Treasury 2Y and 10Y yields lowest since Oct-2024 with futures pricing in next Fed rate cut in June and almost 80 bp of cuts through year-end, up from ~65 bp at end of last week. Demand concerns weighing on industrial metals. Oil pulling back, erasing an early week rally attributed to Trump's sanctions rhetoric. Gold steady at fresh record high.

  • Reciprocal tariffs pose downside risk to Asian economies:

    • Early economist reactions note reciprocal tariffs aimed at Asia nations were harsher than feared. Along with direct hit to exports, depressed business confidence seen translating to pullback in investment, particularly if followed by tit-for-tat retaliation. Expected global trade slowdown seen impairing ability of exporters to find alternative destinations, affecting nations such as Australia that escaped with base tariff of 10%. Among major countries, Japan tariffs seen as further drag on GDP with Morgan Stanley anticipating greater impact than likely 0.2-0.3% hit from auto tariffs alone. Also flagged significant impact on Korea and Taiwan with US-bound exports contributing 30% and 40% respectively to their marginal export growth over recent years. Tariffs reinforcing China policy support expectations with economists eyeing quicker NPC stimulus rollout. However, also view stimulus may not be enough to fully offset magnitude of latest tariff hike, posing downside risks to GDP without further measures. Anticipated drag on growth seen having dovish implications for policy with PBOC seen resuming rate cuts in April (Bloomberg). Morgan Stanley also noted risk of BOJ pausing rate hikes with swaps also paring September odds (Bloomberg). Futures pricing in 100% chance of RBA rate cut in May and up to three more rate cuts by year-end (Financial Review). JP Morgan also expects RBNZ terminal rate to ratchet lower.

  • Asia governments give mixed responses to US tariffs:

    • China's Commerce Ministry criticized 34% tariff to be imposed on top of 20% already in place. Urged Washington to immediately scrap 'unilateral' tariffs, vowed to 'resolutely' take countermeasures to safeguard rights and interests. Australia PM Albanese said 10% tariff 'not an act of a friend' but again ruled out reciprocal move (TheAustralian). Japan's trade minister said Tokyo would continue to ask Washington for exemptions from 24% tariff, was leaving all options open (Reuters). South Korea's acting president Han Duck-soo ordered government to ready emergency support measures for companies, sectors affected by 25% tariff including autos (KoreaHerald). Analysts said 'significant blow 'on domestic South Korea economy inevitable (Reuters). Thailand PM Shinawatra said country has "strong plan" to handle 36% tariff, hopes to negotiate a reduction, would move to mitigate impact (Bloomberg). Taiwan called 32% tariff, which excludes semiconductors, "unreasonable", partly blamed Trump's tech curbs on China for driving trade imbalance (Reuters). India's commerce ministry called 26% tariff "mixed bag but not a setback"; said it would continue to negotiate with Washington over broader trade deal (EconomicTimes). Malaysia said it would seek talks over tariffs but ruled out retaliation (BusinessTimes).

  • Caixin PMI shows China services activity rises to three-month high:

    • Caixin services PMI was 51.9 in March, above consensus 51.6 and prior month's 51.4, marking 27th consecutive month of services activity expansion and hitting highest since December. New orders rose to highest level in three months amid supportive policies, stemming from mainly firmer domestic demand while volume of export business unchanged in March. Improved efficiency supported third monthly reduction in backlogged work while there was renewed drop in employment. Input costs rose in March, largely attributed to higher staff expenses and greater supplier charges. Output charges dropped for second straight month amid intense market competition. Business confidence moderated from February while still upbeat, meanwhile some expressed concerns over geopolitical outlooks. Caixin Composite PMI rose to 51.8 from February's 51.5 and hit highest since November, driven by expansion in both manufacturing and services sectors. Caixin economists noted increasingly complex external environment and said China's macroeconomic policies need to be more proactive and decisive.

  • Notable Gainers:

    • +6.0% 2685.JP (Adastria): reports March same stores sales +4.1% y/y

    • +6.0% 207940.KS (Samsung Biologics): pharmaceutical products are not subject to US reciprocal tariffs at this stage

    • +5.4% 9468.JP (Kadokawa): games from subsidiary From Software unveiled at Nintendo Direct: Nintendo Switch 2 event

    • +2.2% 068270.KS (Celltrion): to launch 589K-share buyback, to run from 4-Apr through 3-Jul; pharmaceutical products are not subject to US reciprocal tariffs at this stage

    • +1.3% 600519.CH (Kweichow Moutai): reports FY results with net income attributable CNY86.23B vs guidance CNY85.70B and FactSet CNY85.85B

    • +0.2% 1310.HK (HKBN Ltd.): I Squared completes due diligence on HKBN Ltd and is finalising terms of possible pre-conditional offer

  • Notable Decliners:

    • -10.8% 285A.JP (Kioxia Holdings): US unveils list of reciprocal tariffs with 24% rate on Japan

    • -10.0% 002475.CH (Luxshare Precision Industry): China hit by 34% US tariff (taking total tariff rate to 54%)

    • -8.5% 009150.KS (Samsung Electro-Mechanics Co.): US unveils list of reciprocal tariffs with 25% rate on South Korea

• Data:

  • Economic:

    • China March

      • Caixin services PMI 51.9 vs consensus 51.6 and 51.4 in prior month

        • Caixin Composite PMI 51.8 vs 51.5 in prior month

    • Japan March

      • Final services PMI 50.0 vs preliminary 49.5 and 53.7 in prior month

        • Composite PMI 48.9 vs preliminary 48.5 and 52.0 in prior month

    • Australia March

      • March trade balance A$2.97B vs consensus A$5.40B and revised A$5.16B in February

        • Exports (3.6%) y/y vs +1.3% in February

        • Imports +1.6% y/y vs (0.3%) in February

  • Markets:

    • Nikkei: (989.94) or (2.77%) to 34735.93

    • Hang Seng: (352.72) or (1.52%) to 22849.81

    • Shanghai Composite: (8.12) or (0.24%) to 3342.01

    • Shenzhen Composite: (22.20) or (1.10%) to 1992.39

    • ASX200: (74.80) or (0.94%) to 7859.70

    • KOSPI: (19.16) or (0.76%) to 2486.70

    • SENSEX: (312.55) or (0.41%) to 76304.88

  • Currencies:

    • $-¥: (1.95) or (1.31%) to 147.3310

    • $-KRW: (5.17) or (0.35%) to 1461.6500

    • A$-$: +0.00 or +0.10% to 0.6307

    • $-INR: (0.02) or (0.02%) to 85.5064

    • $-CNY: +0.03 or +0.46% to 7.3013