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StreetAccount Summary - Asian Market Recap: Nikkei +0.38%, Hang Seng +2.98%, Shanghai Composite +0.82% as of 04:10 ET

May 12 ,2025

• Synopsis:

  • Asian equities advanced Monday as markets reacted positively to de-escalation in US-China trade tensions. Hang Seng surged in the last hour as US and China announced details of the weekend talks that saw both sides reduce tariffs substantially for 90 days. Mainland stocks, closed just before the trade talk announcements, also rose with defense stocks big gainers after China-made fighter jets used in India-Pakistan conflict. Semis/tech notable gainers in Korea and Taiwan. Australia was flat while Japan saw choppy trading to close mildly higher. India trading sharply higher after ceasefire with Pakistan appeared to hold through the weekend. S&P and Nasdaq futures jumping on tariff relief announcement. Treasury yield curve bear flattening and JGB yields higher along the curve. Dollar gaining against majors, yuan also strengthening after the announcement. Crude lifting alongside equities while gold is sharply lower. Bitcoin hovering near early February highs.

  • Details of US-China talks in Geneva over the weekend were announced at 3AM ET which saw both sides agree on 90-day tariff cuts. US is cutting levies on Chinese goods to 30% from 145% for 90 days (as US keeps in place 20% fentanyl tariff) while China is slashing levies on US goods to 10% from 125% for the same period. Came after Treasury Secretary Bessent hailed substantial progress and Vice Premier He said consensus reached on series of issues. Bessent added at press conference on Monday morning that both sides do not want a decoupling and they held productive discussions on fentanyl and talks might lead to some purchasing agreements by China. Both sides agreed to establish mechanism to continue discussions about economic and trade relations.

  • In other macro news, China deflation pressures persisted in April with consumer prices shrinking at similar pace to March. However, core inflation remained positive when stripping out food and fuel prices. Factory-gate prices contracted at quickest pace in six months amid downward pressure from upstream and downstream prices. In Japan, PM Ishiba repeated call for Trump administration to drop all tariffs, vowing not to sign trade deal that doesn't include removal of auto tariffs. On geopolitical front, India and Pakistan reached tentative truce brokered by US.

  • Asian pharma stocks under pressure after Trump flagged executive order cutting US drugs prices to match other countries. Mitsubishi Motors (7211.JP) is considering price hikes on vehicles sold in the US, the first such move by a Japanese automaker in response to the Trump administration's tariffs. CATL (300750.CH) said it would raise at least $4B through secondary offering that would be Hong Kong's biggest listing this year. Company plans to limit US investors to only those with offshore accounts. METiS Pharmaceuticals mulling Hong Kong IPO to raise as much as $200M.

• Digest:

  • US and China announce significant tariff cuts for 90 days:

    • In a significant de-escalation of the US-China trade war, both countries announced early Monday they will significantly reduce tariffs on the other (statement, Bloomberg, FT, Reuters). US will reduce tariffs on Chinese goods to 30% from 145%, for 90 days China will reduce tariffs on US goods to 10% from 125%, also for 90 days. New duties reverse reciprocal and subsequent retaliatory tariffs imposed from 2-Apr, while US keeps in place 20% fentanyl tariff. In press conference, Treasury Secretary Bessent said US tariff relief does not extend to sector-specific tariffs applied to all trading partners. Extent of tariff reprieve was larger than reported last week after press sources mentioned tariff reductions to below 60%. Earlier, US and China hailed "substantial progress" in weekend talks in Geneva with Trump adding that a "total reset" was negotiated (Bloomberg, FT, Reuters). China Vice Premier He Lifeng also said two sides reached consensus on a series of issues. In joint statement, both sides agreed to establish mechanism to continue discussions about economic and trade relations. Bessent stressed intent is not to decouple, but rather to promote more balanced trade.

  • Japan PM Ishiba still wants full US tariff exemptions, pushes back on consumption tax cut:

    • On latest Japan policy rhetoric, Reuters cited Prime Minister Ishiba on Fuji TV Sunday, reiterating aims to negotiate full tariff exemptions with the US. Referred to the US-UK agreement which left a 10% baseline tariff on UK, describing it as "one model" for trade deals though endorsed a 0% rate for Japan. President Trump said on Friday that a 10% rate would be the floor even after trade deals are made, though added there could be exemptions when countries offer significant trade terms (and no proposal from Japan reported so far thought to be of that order). Regarding tax policy, Chief Cabinet Secretary conveyed to reporters Friday the administration's stance that it is not appropriate to lower the consumption tax, citing the importance to funding social security (Nikkei). Yet debate set to continue with the LDP tax commission to commence study sessions on the consumption tax this week to examine the role in funding for the social safety net in a move aimed at stifling tax cut calls from within the party. One party group last Thursday submitted a proposal to permanently scrap the tax for daily necessities. Opposition parties also support a consumption tax cut ahead of the upper house elections this summer. Finance Minister Kato also reiterated opposition to the idea, arguing that cost of living relief policies coming in the form of gasoline and utilities subsidies as well as the release of rice reserves.

  • Asia pharma stocks under pressure as Trump eyes executive order cutting drug prices:

    • President Trump posted that he will be signing executive order Monday 9:00 ET to reduce pharmaceutical drug prices by 30-80% (Bloomberg, Reuters). As foreshadowed in press leaks (Reuters, Politico), Trump to institute 'most favored nation' policy, whereby US will pay same price for drugs as the nation that pays the lowest. Prominent Asia drugmakers saw big falls Monday, including Beigene (6160.HK) (-9%), Takeda Pharmaceutical (4502.JP) (-5%), Astellas Pharma (4503.JP) (-4%), Samsung Biologics (207940.KS) (-4%), and Celltrion (068270.KS) (4%), Weakness attributed to concerns about hit to profitability from being forced to reduce prices, particularly those that derive significant portion of revenue from US. Trump's post left out many details with press noting questions around how order will work, whether it applies only to Medicare and Medicaid programs, or is limited certain categories of drugs. Trump tried similar policy in his first term before it was struck down in court, and there are thoughts Monday's order may face similar pushback by drug companies or encounter resistance from Republicans.

  • Haven demand drives record foreign inflows into Japanese stocks and bonds:

    • Nikkei discussed Monday's MOF portfolio flows data for April, highlighting foreign net purchases of Japanese equities and bonds totaling JPY8.213T ($56.3B), marking the highest on record going back to 2005. The inflow trounced the prior high in the JPY6T range logged in Apr-23. Article attributed the surge to foreign haven demand as Trump policies eroded the credibility of US assets. Inflows were broadly based with bonds posting the second highest tally on record while equities were the third highest. This underpinned support for the stock market as Nikkei 225 recovered to the 36K level by April-end, while also suppressing upward pressure on JGB yields. The sheer size prompted speculation that some countries increased Japan allocations as part of FX reserves. Yet, the article noted yen's underperformance vs dollar among major currencies suggests other economies saw bigger inflows. This element played into skepticism toward yen strength with BOJ rate hike expectations fading. Story follows an earlier discussion noting foreign investor share of superlong JGB trading volumes escalated to about 50% recently, though bearish trades based on prospects for deterioration in Japan fiscal discipline rather than monetary policy.

  • China inflation remains negative as expected:

    • Headline CPI fell 0.1% y/y in April, matching expectations, maintaining a 0.1% decline in the previous month. Core inflation was also steady at 0.5%. Agriculture remained the main drag with food prices down 0.2% (led by fresh vegetables) while non-food prices were unchanged, and rural prices fell 0.3% versus steady urban prices. Further bifurcation between weaker goods prices negated by higher services. Biggest single drag was fuel (10.2%) as a reflection of international oil prices, while apparel and daily necessities were higher. PPI downtrend continued, down 2.7% vs consensus 2.8% following 2.7% in March. Momentum was negative for both upstream and downstream prices, though primary sector posing the bulk of the drag on the headline. NBS highlighted positive developments in some areas leading to narrower declines. Government trade-in subsidies remain the most impactful policy support measure alongside secular tech strength. Also mentioned trade diversification leading to some payoffs. Still, press takeaways said the data reinforces the deflation theme and underscores the need for fresh stimulus especially amid the tariff overhang (Bloomberg, Reuters).

  • Notable Gainers:

    • +10.3% 069960.KS (Hyundai Department Store): reports Q1 operating profit KRW112.50B vs FactSet KRW97.03B; launches 339K-share buyback to run from 12-May through 11-Aug

    • +3.5% 300750.CH (Contemporary Amperex Technology Co.): launches 117.9M-shares Hong Kong IPO maximum price at HK$263/sh through BofA, CICC, CSC, J.P. Morgan

    • +1.6% 7211.JP (Mitsubishi Motors): to consider raising prices on cars sold in US to offset the expected $344M rise in costs from US tariffs

    • +0.9% 8591.JP (ORIX): enters into nonbinding LoI to acquire majority stake in Hilco

    • +0.9% 8316.JP (Sumitomo Mitsui Financial): Its subsidiary Sumitomo Mitsui Banking Corp to purchase 20% stake in Yes Bank

    • +0.8% 2330.TT (TSMC): reports April revenue NT$349.57B, +48.1% y/y

    • +0.7% 7201.JP (Nissan Motor): to consider offering early retirement as early as fiscal 2025 to trim its Japanese workforce by several hundred jobs; part of the efforts to turn around troubled operations through restructuring

    • +0.1% 2502.JP (Asahi Group Holdings): reports Q1 net income attributable ¥21.52B vs FactSet ¥22.30B

  • Notable Decliners:

    • -1.9% 6752.JP (Panasonic): to cut 10K jobs; expects $900M in restructuring costs

    • -0.3% 2229.JP (CALBEE): reports FY net income attributable ¥20.87B vs FactSet ¥20.18B

• Data:

  • Economic:

    • China

      • April CPI (0.1%) y/y vs consensus (0.1%) and (0.1%) in prior month

        • PPI (2.7%) y/y vs consensus (2.8%) and (2.5%) in prior month

    • Japan

      • April bank lending +2.4% y/y vs +2.8% in prior month

        • March current account balance ¥3,678.1B vs consensus ¥3,790.8B and revised ¥4,060.7B in prior month

  • Markets:

    • Nikkei: 140.93 or +0.38% to 37644.26

    • Hang Seng: 681.72 or +2.98% to 23549.46

    • Shanghai Composite: 27.25 or +0.82% to 3369.24

    • Shenzhen Composite: 33.44 or +1.70% to 2004.13

    • ASX200: 2.30 or +0.03% to 8233.50

    • KOSPI: 30.06 or +1.17% to 2607.33

    • SENSEX: 2,600.86 or +3.27% to 82055.33

  • Currencies:

    • $-¥: +2.60 or +1.79% to 147.9810

    • $-KRW: +20.36 or +1.46% to 1416.5100

    • A$-$: (0.00) or (0.15%) to 0.6407

    • $-INR: (0.49) or (0.58%) to 84.9162

    • $-CNY: (0.02) or (0.33%) to 7.2133