ASIA STOCKS: HK & China Equities Lower, Following 10% Trump Tariff Talk
Chinese & Hong Kong equities are lower today after Trump reiterated his consideration of a 10% tariff on Chinese goods, citing concerns over fentanyl shipments. While the 10% level is less aggressive than the previously threatened 60% tariffs, the remarks reignited concerns about potential trade tensions. The CSI 300 Index slipped 1%, ending a four-day rally, while the Hang Seng China Enterprises Index declined 1.55% and the HSI is 1.25% lower.
- China's luxury market sales fell by up to 20% in 2024, the steepest decline since 2011, as an economic slowdown weakened consumer confidence and spending. Watches, jewelry, and leather goods saw the sharpest declines, while even high-spending customers reduced purchases. Hainan's duty-free sales dropped 29%, with more Chinese shoppers opting for overseas purchases, particularly in Japan.
- Real estate stocks dragged the market further as Citi lowered earnings estimates and price targets for key players like China Overseas Land & Investment (-1.6%), Longfor Group (-2.6%), and Shenzhen Investment (-3.7%), citing soft market conditions and persistent sector-wide losses. Benchmark indices are also lower, with the Mainland Property Index down 1.75%, HS Property Index -1%, while the BBG China Property Developer Gauge is 2.45% lower
- The Harvest CSI 500 ETF reported a significant 4Q purchase of 1.39b shares, likely by China’s sovereign wealth fund, Central Huijin Investment. The fund now owns 44.2% of the ETF, worth an estimated 3.37bi yuan. Despite this, the ETF experienced outflows of 1.58b yuan during the quarter.
While optimism over U.S. trade policy has cooled, gradual tariff measures could ease the market's adjustment, though volatility remains high. The property sector’s challenges and a cautious outlook on stimulus add further headwinds to the Chinese market.
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JGBS: Futures Track Recent Ranges, 10yr Yield Up From Post BoJ Lows
JGB futures rest at 142.45, -.02 versus settlement levels at the Monday lunchtime break. Ranges have been fairly narrow in the first part of Monday trade (142.41-142.63). US TSY futures are also close to unchanged in the first part of Monday trade.
- Broadly we sit within Dec ranges to date. Post BoJ highs for the March future rest 142.72. Recent lows were at 141.87, post the hawkish Fed cut earlier last week.
- Technicals for JGB futures still point south for JGB futures, with eyes on a break sub last week's lows.
- In the cash JGB space, yields are little changed in the first part of Monday dealing. The 10yr is up around 1.07% levels, off post BoJ lows (near 1.04%), but still seeing upside resistance above 1.10%. Swap yields are a touch higher.
- The data calendar is largely empty until the services PPI prints on Christmas day. BoJ Governor Ueda also delivers a speech that day.
CHINA: CGB Bond Yields Continue to Fall
- Despite efforts last week to halt the move lower in yields, China’ s bond yields dropped in this morning’s trading.
- CGB 10YR has fallen 3bps in early trading to be at 1.689%.
- The 10YR breached the 2.00% in early trading December and has progressively moved lower since.
- There are expectations that in the new year the authorities will reduced monetary policy and make RRR cuts to support the economy.
ASIA STOCKS: Asian Equities Higher, Tech Stocks Lead the Way
Asian equities are higher this morning, buoyed by a lower-than-expected US core PCE inflation reading, which increased hopes for more Fed rate cut in 2025. The MSCI Asia Pacific Index snapped a six-day losing streak as US equity futures pointed higher. Despite today’s gains, markets remain cautious. Focus this week will be on upcoming inflation data in Tokyo, Singapore, and minutes from the Reserve Bank of Australia's dovish policy meeting.
- Japanese equities are higher across the board with the Topix is up 0.75% while the Nikkei 225 advanced 0.95%. Recruit holdings is up 3.65% while Tokyo Electron is benefitting from a 1.50% jump higher in the SOX on Friday, with the stock last up 1.46%.
- China & Hong Kong equities are all higher, with HSI up 0.85%, banking stocks are the top performers with the HS Banking Index 1.20% higher, followed by HS Property Index which trades up 1.15%. In China mainland equities consumers discretionary is the top performing sector, the CSI 300 was last up 0.50%.
- The tech heavy markets in Taiwan and South Korea have surged higher today, after seeing heavy selling on Friday. The TAIEX is 2% higher with TSMC up 2.90% & Hon Hai up 2.50%, while in South Korea the KOSPI is 1.30% higher after Samsung jumped 1.70%.
- Australian equities are trading 1% higher, although still trades 4% lower for the month. Financials are the top performing sector today, followed by Real Estate stocks. New Zealand, NZX50 is trading 0.10% lower after Fisher & Paykel dropped 1.15%.
