ASIA STOCKS: Another Brutal Day for Asian Bourses (amended)

JGB futures are weaker, -17 compared to settlement levels, but off session cheaps.

• “The Bank of Japan continues to look for opportunities to raise interest rates further, but is unlikely to rush into doing so, as underlying inflation has yet to reach the central bank's target of 2%, according to one of its two deputy governors.” (per DJ via BBG)
• “Bank of Japan Governor Kazuo Ueda called for global cooperation on Wednesday, saying geopolitical tension could impact financial stability such as by causing sudden reversals of cross-border capital flows. "Looking ahead, the resilience of Asian emerging market economies will be tested by rising geopolitical tension in several ways," Ueda told a seminar hosted by the International Monetary Fund in Tokyo.” (per RTRS)
• Cash US tsys have twist-steepened, with yields 4bps lower to 1bp higher, in today’s Asia-Pac session after yesterday’s heavy session.
• The cash JGB curve has bear-steepened, with benchmark yields flat to 4bps cheaper. The benchmark 10-year yield is 2.1bps higher at 1.445 % versus the cycle high of 1.466%.
• The swaps curve has also bear-steepened, with rates flat to 4bps higher. Swap spreads are mostly wider.
• Tomorrow, the local calendar will see International Investment Flow and Tokyo Avg Office Vacancies data alongside 30-year supply.

Q4 GDP rose 0.6% q/q to be up 1.3% y/y, in line with consensus. It showed a tentative recovery in growth but it remains soft. While Westpac expects monetary easing to provide some support to the consumer this year, its limited nature is likely to result in “muted” consumption. In addition, heightened uncertainty from US trade policy and Australia’s upcoming federal election could weigh on growth. 

• Westpac said that “the main takeaway from the December update is that the expected tentative recovery in private demand is underway but unfolding slowly. The pick-up in household consumption, supported by tax cuts is flowing through, but growth is still weak. Income growth has lifted, wage income picking up 2.0%qtr, the six-month annualised pace has also risen for the first time since December quarter 2023 to 4.3%yr.”
• “However, private investment remains mixed, dwelling investment still softening and only modest, unconvincing gains in business investment.”
• “Private demand on a per capita basis continues to decline.”
• “Total new government spending came in as expected and continues to rise strongly, reaching a record share of the economy at 27.7% of GDP, up from the previous peak of 27.6% last quarter.”
• “The household savings ratio nudged up from 3.6% to 3.8% – consistent with households continuing to put income gains towards rebuilding financial buffers rather than spending.”
• “Labour productivity continued to fall in annual terms, GDP per hour worked down -1.2%yr. Looking beyond the headline, underlying trends still suggest that aggregate productivity is being skewed by the expansion of the non-market sector and a trend decline in mining productivity.”
• “Nominal ULCs are now running at 4.7%yr, a touch above the outcomes recorded over 2019 when underlying inflation was below the target band.”

Asian equities broadly rose on Wednesday, buoyed by optimism over China’s economic policy direction and signs of potential tariff relief from the U.S. administration. The MSCI Asia Pacific Index climbed 0.7%, with major gains in Hong Kong, Taiwan, and South Korea. Chinese markets rallied as the government reaffirmed its 5% growth target and announced increased fiscal spending, raising hopes for more stimulus. India rebounded after a historic 10-day losing streak, while Japan and South Korea gained on optimism surrounding trade. Australia was a notable laggard, with its market declining.

• Chinese stocks rose as Beijing maintained its 5% GDP growth target for 2025 and set its highest fiscal deficit in over three decades, signaling increased government support. Investors welcomed pledges to boost AI, 6G, and quantum computing, leading to strong gains in technology and semiconductor stocks. The Hang Seng Index jumped 1.7%, with the technology sector leading gains, while the CSI 300 index edged up 0.3%.
• Japan’s Nikkei Index rose 0.7%, while the broader Topix Index gained 0.6%. The market benefited from improving global sentiment following the Trump administration’s indication of potential tariff rollbacks. The weaker yen supported exporters, while investors also rotated into stocks that had underperformed in recent sessions.
• South Korea's KOSPI Index added 1%, driven by gains in semiconductors and heavy industries. SK hynix rose 1.34%, while steel giant POSCO Holdings gained 2.24%. However, defense stocks declined, with Hanwha Aerospace down 3.57% and Hanwha Ocean tumbling 7.17% after a prior-day surge. Investors responded positively to hopes that U.S. tariffs on Canada and Mexico might be reversed. The Korean won appreciated slightly against the dollar.
• Taiwan’s Taiex Index jumped 1.5%, bolstered by strong performance in semiconductor stocks, particularly TSMC. The global AI boom and expectations of more tech-friendly policies from China lifted sentiment.
• Australia's ASX 200 is 0.90% lower as Q4 GDP grew 0.6%, in line with expectations, reinforcing the RBA’s cautious stance on rate cuts. Weak risk sentiment and global trade concerns weighed on the market. The NZX 50 index fell 0.45% erasing early gains following RBNZ Governor Adrian Orr’s surprise resignation. Investors are now watching for signals on future monetary policy direction.
• The NSE Nifty 50 Index rose 0.6%, breaking a 10-day losing streak, as technology and consumer discretionary stocks rebounded. Infosys led gains with a 1.9% rise, while the Nifty India Consumption Index climbed 0.9%. The recovery comes after heavy foreign outflows of $14 billion year-to-date amid concerns over slowing economic growth and corporate earnings.
• Southeast Asian markets saw broad gains, with Indonesia’s Jakarta Composite Index surging 2.5% amid continued volatility, while Thailand’s SET Index rose 1.4% on improved risk sentiment. Vietnam’s VN Index edged up 0.1%, supported by S&P’s positive outlook on loan growth in the banking sector. Malaysia’s KLCI Index and Singapore’s Straits Times Index posted moderate gains of 0.6% and 0.3%, respectively, while the Philippines’ PSEi Index climbed 0.7% as investor sentiment improved.