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StreetAccount Summary - Asian Market Recap: Nikkei +0.47%, Hang Seng +0.24%, Shanghai Composite (0.94%) as of 04:10 ET

May 23 ,2025

• Synopsis:

  • Asian equities mixed Friday. Japan outperformed with Australia seeing milder gains. Mainland China was lower while Hong Kong was slightly higher. Taiwan and Korea were also marginally lower. India is trading higher. US futures edging up. Treasury yields were lower across tenors. Dollar weaker against other major currencies. Crude extending losses following latest report of another ramp in OPEC+ production in July. Gold was higher. Bitcoin was weaker after hitting record high.

  • In Asia, JGB yields retreated following recent volatility at the long end that has driven 20Y yield to record high. Japan April CPI showed core inflation rose by more than expected to highest since Jan-2023. Influenced in part by surging food costs (rice inflation at 98%) and waning effects of energy subsidies. Elevated inflation backdrop seen backing case for BOJ tightening though Ueda on Thursday reiterated extent to which tariffs clouding outlook and central bank will keep close eye on market.

  • In other developments, PBOC ramped up liquidity with CNY500B MLF injection. New Zealand Q1 retail sales unexpectedly experienced another quarter of growth, though market remains priced for another 25 bp rate cut next Wednesday. Singapore headline inflation in April came slightly above consensus. RBI Governor Malhotra said tariffs will have short-term drag on Indian GDP growth.

  • A group led by Toyota Motor (7203.JP) plans to launch a takeover of Toyota Industries (6201.JP) valued at more than ¥6T ($41.8B) as early as November. Jiangsu Hengrui Pharmaceuticals (1276.HK) surged in Hong Kong trading debut after raising HK$9.9B, adding to big listings in the city. Mirxes Holding (2629.HK), another new listing, rose 28.8%.

• Digest:

  • PBOC shores up liquidity with CNY500B MLF injection:

    • PBOC announced late Thursday that it will conduct a CNY500B ($69.5B) one-year MLF operation Friday to maintain ample liquidity in the banking system (Xinhua). Latest move adds to a suite of easing measures announced by Governor Pan earlier this month. Most of the attention was on the 10 bp cut to the 7-day reverse repo policy rate and the 25 bp RRR cut expected to release about CNY1T in broad liquidity. Repo rate replaced the MLF rate as the basis for LPRs, which were lowered 10 bp accordingly. Overall, this generally satisfied easing expectations for Q2, though market discussions continued to look for more down the line. Recall that LPR fixings were preceded by deposit rate cuts among major banks, alleviating some NIM pressures. Talk of FX headwinds have receded as USD/CNY has moved away from post-2007 highs. Main dynamic now seen to be policy responses to US tariffs as broad calls for stimulus intensified after 'Liberation Day' announcements, though subsequently calmed after the US-China 90-day tariff truce. Meanwhile, better than expected Q1 GDP data prompted some thoughts the result will reduce policymaker urgency for fresh stimulus in the near term. Economists anticipate tailwinds for Q2 growth as the tariff reprieve triggers another export front-loading phase, though likelihood of payback thereafter adds to uncertainties in H2.

  • BOJ Governor Ueda says outlook remains extremely uncertain:

    • At a press conference following the conclusion of the Banff G7, Nikkei reported BOJ Governor Ueda said the outlook remains extremely uncertain in relation to Trump tariff policy, requiring further monitoring of data for economic impacts. While acknowledging recent US trade agreements with UK and China as positive steps, stressed that uncertainties regarding where tariffs settle and economic effects are still extremely high. Asked about instability in superlong JGBs, refrained from commenting on near term developments and only said they would keep a close eye on the market. Recent attention has skewed toward BOJ rhetoric on bond yields ahead of the June interim assessment for its JGB purchase reduction plan while rate hike expectations have been pushed back to later in the year. Bond market hearings were held this week, where bulk of participants generally supported tapering at the current pace of about JPY400B per quarter. However, there was a mix of views with city banks said to have supported more aggressive tapering, while regional banks and insurers advocated for more gradualism. Follows yesterday's speech by board member Noguchi, suggesting he sees no need for major changes to the strategy on the basis that recent bond yield moves could not be construed as disruptive for the market. Affirmed prior press discussions indicating a high bar for BOJ intervention.

  • Japan core inflation strengthens to two-year high, more cost of living relief policies in the pipeline:

    • Core CPI rose 3.5% y/y in April, compared to consensus 3.4%. Follows 3.2% in the previous month, marking the strongest since Jan-23. Ex-fresh food & energy inflation was 3.0%, matching expectations, following 2.9%, highest since Feb-24. Energy contributions increased 0.21 ppt as electricity & gas subsidy effects continued to wane. Elsewhere, non-fresh food was the key driver as a wave of price hikes are typically implemented at the start of the fiscal year. This outweighed a big lower reset (down 94.1%) in public high school tuition after government abolished fees. In broader dissection, goods prices rose a steady 3.6% as marginal pickup in durables were negated by slowdown in semi-durables. Non-durables continue to make up the bulk of this segment. Services inflation edged lower to 1.3% from 1.4% as public sector (school tuition) weakness outweighed slight firming in the private sector. Going forward, government set to implement another round of electricity & gas subsidies as part of the next cost of living relief package. Prime Minister Ishiba on Wednesday vowed to lower rice prices as soon as possible to below JPY4,000 per 5 kg compared to the May average of JPY4,268, while rejecting opposition calls for a consumption tax cut (Nikkei).

  • G7 communique light on tariff mentions as US-Japan talks set to resume:

    • Thursday's G7 communique made scant mention of tariffs with finance ministers instead stressing need to address excess imbalances (Bloomberg, Reuters). China not named in communique, which made only vague reference to potential for cheap imports to overwhelm and take advantage of customs controls. Focus set to turn back to bilateral trade negotiations with Japan's negotiator, Ryosei Akazawa arriving in Washington Friday for third round of talks (Bloomberg). Reuters sources noted Treasury Secretary Bessent won't attend meeting, which will instead involve Akazawa, Commerce Secretary Lutnick and USTR Greer. As a result, Akazawa intending to visit US around 30-May for fourth round of talks. Reuters sources this week noted Japan mulling offer of increased corn and soybean purchases, cooperation on shipbuilding and revising imported vehicle inspection standards. However, Japan maintaining its position for US to drop tariffs and is in no rush to a strike deal. Ishiba told reporters Friday he and Trump spoke by phone with tariffs discussed only in general terms (Bloomberg).

  • RBI Governor Malhotra says tariffs to impose short-term drag on Indian growth:

    • In an interview with Economic Times, RBI Governor Malhotra said tariffs to have short-term drag on Indian GDP growth but voiced hope impact will be moderate with economy supported by stable policy environment, healthy corporate balance sheets, and strong macro fundamentals. When asked whether India's 4% inflation rate made case for quicker rate cuts, Malhotra pointed out policy stance changed to accommodative in April, but that pace of future rate cuts to be determined by MPC and he won't preempt June's decision. Speaking on FX, Malhotrasaid RBI doesn't target specific level and its stance is to allow market forces to determine rupee price. However, RBI will continue to undertake two-sided interventions to curb abnormal volatility. In April RBI forecast GDP growth of 6.5% for current FY, a 20 bp downgrade from prior forecast. RBI has delivered consecutive 25 bp reductions in 2025, taking repo rate to 6.00%. Slower economic growth outlook and an inflation rate aligning with RBI target of 4% has prompted expectations of continued easing in near-term, with Morgan Stanley and others eyeing total 100 bp of cuts this cycle (Economic Times).

  • Notable Gainers:

    • +25.2% 1276.HK (Jiangsu Hengrui Pharmaceuticals): H-shares open +29.4% in Hong Kong debut

    • +6.8% 17.HK (New World Development): around 10 banks reportedly have committed more than HK$20B to New World Development's HK$87.5B loan refinancing

    • +4.1% 9468.JP (Kadokawa): BANDAI NAMCO subsidiary From Software launches movie adaptation for Elden Ring

  • Notable Decliners:

    • -11.4% 009830.KS (HANWHA SOLUTIONS): US House passes budget bill advancing early end to clean energy tax credits

    • -0.3% 443060.KS (HD Hyundai Marine Solution Co.): KKR reportedly to sell 9% stake in HD Hyundai Marine Solution via block deal

• Data:

  • Economic:

    • Japan

      • April CPI Core National y/y +3.5% versus +3.2% in prior month

      • April CPI ex-Fresh Food and Energy +3% versus consensus +3.2% and +2.9% in prior month

      • April CPI National y/y +3.6% versus consensus +3.7% and +3.6% in prior month

    • New Zealand

      • Q1 Retail Sales q/q +0.8% versus +1% in prior quarter

    • Singapore

      • April CPI NSA Y/Y +0.9% versus consensus +0.8% and +0.9% in prior month

  • Markets:

    • Nikkei: 174.60 or +0.47% to 37160.47

    • Hang Seng: 56.95 or +0.24% to 23601.26

    • Shanghai Composite: (31.82) or (0.94%) to 3348.37

    • Shenzhen Composite: (17.74) or (0.89%) to 1973.28

    • ASX200: 12.20 or +0.15% to 8360.90

    • KOSPI: (1.58) or (0.06%) to 2592.09

    • SENSEX: 880.60 or +1.09% to 81832.59

  • Currencies:

    • $-¥: (0.67) or (0.47%) to 143.3370

    • $-KRW: (13.98) or (1.01%) to 1368.2500

    • A$-$: +0.00 or +0.67% to 0.6453

    • $-INR: (0.66) or (0.77%) to 85.3422

    • $-CNY: (0.02) or (0.25%) to 7.1865