Asian equities mostly lower amid geopolitical volatility in SY/KR + CN deflation concerns

Asia market update: Asian equities mostly lower amid geopolitical volatility in SY/KR + CN deflation concerns; RBA rate decision tomorrow.

General trend

- Asian stocks mostly lower after continued South Korea political uncertainty and China’s Nov CPI deflation m/m (-0.6%, worst since Mar). Kospi [-2.3%] hit its lowest point in over 1 year (Nov, 2023). Tech-index Kasdaq hit 2020 lows. Nikkei the only marginally positive major index today. Korean won (KRW) under-performed currencies again, -0.8%.

- The Assad family’s long reign of iron-clad control in Syria came to an abrupt end with rebel groups seizing control of the capital Damascus. Some reports suggest Assad has fled to Russia, while US Pres-elect Trump stated that “Syria is not the US’ fight, the US should have nothing to do with it. Let it play out.”

- Reverberations from the failed Korean martial law episode last week involving Pres Yoon will rumble on for a while longer, and likely to get deeper, with South Korea's National Assembly failing to pass the opposition-led impeachment motion against Pres Yoon. A motion to establish an investigation into the first lady, Kim Keon-hee, for alleged corruption also failed in the National Assembly. Deeper issues may be at play than last week’s much-regurgitated 2-year-old story that Yoon’s wife received an expensive Dior handbag. Potential links to China-backed influence to surface in South Korea? Opposition vows to “vote for impeachment every Saturday”, while Yoon’s ruling party says it wants to find “more orderly” resolution. Things look set for a fierce battle between the opposition and ruling parties.

- Bond yields generally lower, notably China 10-yr yields fell to fresh record lows of 1.9450%. Yet still no word of warning from authorities on the latest bond rally, unlike during the past summer when yield levels were significantly higher than now.

- China showed a slight tick up in November’s Foreign Reserves, more significantly China resumed purchasing gold for the first time in 7 months.

- Reports from Nikkei over the weekend that next BOJ hike may take place in Jan, 2025 rather than Dec (next week). Ahead of the BOJ decision on Dec 19th, a private research institute in Japan estimated total company bankruptcy figures for 2024 likely >10K for the first time since 2013.

- US equity FUTs -0.1% during the Asia session.

Looking ahead (Asian time zone)

- Tue Dec 10th AU NAB Nov Biz Confidence, CN Nov Trade Bal, AU RBA Rate Decision.

- Wed Dec 11th CN CEWF starts (Wed night US Nov CPI, BOC Rate Decision).

- Thu Dec 12th AU Nov jobs, IN Nov CPI, (Thu eve ECB Rate Decision, US Nov PPI).

- Fri Dec 13th NZ Nov Biz PMI, AU Westpac Consumer Confidence, JP Tankan.

- Sat Dec 14th CN Nov New Yuan Loans, FDI.

Holidays in Asia this week

- Tue Dec 10th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.3% at 8,400.

- Australia sells A$1.0B vs. A$1.0B indicated in 2.75% Nov 2029 bonds; Avg Yield: 3.8409% v 3.6368% prior; bid-to-cover: 3.79x v 3.66x prior.

- Reserve Bank of New Zealand (RBNZ): Board has engaged with NZ Fin Min Willis over its new Financial Policy remit.

China/Hong Kong

- Hang Seng opens -0.7% at 19,732; Shanghai Composite opens flat at 3,402.

- China Nov CPI Y/Y: 0.2% V 0.4%E.

- Fitch: Cuts China 2025 GDP from 4.5% to 4.3% on increased US tariffs; Cuts 2026 GDP from 4.3% to 4.0% (prior figures from Sept).

- China Nov Foreign reserves: $3.266T V $3.233TE; Resumes gold buying for the first time in 7 months [weekend update].

- China financial regulator: Issues action plan for property and casualty insurance; To tighten oversight of property insurers and prevent risks [weekend update].

- China Premier Li: China seeks to meet annual economic targets for 2024; China stresses solving problems found as soon as possible - local radio [weekend update].

- China may allow provinces to approve special bond projects – China press [weekend update].

- China PBOC sets Yuan reference rate: 7.1870 v 7.1848 prior.

- China PBOC Open Market Operation (OMO): Injects CNY47B in 7-day reverse repos; Net injects CNY14B v net drains CNY288B prior.

Japan

- Nikkei opens +0.6% at 39,332.

- Japan Q3 final GDP Q/Q: 0.3% V 0.3%E; annualized GDP Q/Q: 1.2% V 1.0%E.

- Japan Oct Current Account: ¥2.457T v ¥2.347Te.

- Japan Oct trade balance (BOP BASIS): -¥155.7B V -¥295.0BE.

- Japan Nov Bank Lending Y/Y: 3.0% v 2.6% prior; Bank Lending (ex-trusts) Y/Y: 3.3% v 2.9% prior (revised lower).

- Japan Nov Eco Watchers Current Survey: 49.4 v 47.5 prior (highest since Mar).

- Japan 2024 company bankruptcy figures likely >10K for the first time since 2013 - Tokyo Shoko Research Institute.

- Japan outright JGB bond buying operations: For 1-3 Years, 5-10 Years and >25 Years (Inline with prior purchases).

- Japan sells ¥3.5T vs. ¥3.5T indicated in 6-Month Bills; Avg Yield: Avg Yield: 0.2952% v 0.1886% prior, bid-to-cover: 3.01x v 2.40x prior.

- Japan CDPJ's Leader (opposition) Noda: BOJ must raise rates gradually; BOJ should normalize monetary policy and stop persisting on reaching 2% inflation target [weekend update].

Korea

- Kospi opens -1.5% at 2,398.

- Kospi [-1.8%] hits lowest point in over 1 year (Nov, 3, 2023); later extends to -2.3%.

- South Korea Fin Ministry: Making all-out efforts to stabilize markets and deploying contingency plans - financial press.

- (KR) TTN Research Alert: Martial law aborted in South Korea, yet NO impeachment of Pres Yoon. There is more than meets the eye here than just handbags; The end-story may fundamentally alter the trajectory of China-South Korea relations.

- South Korea's National Assembly did not pass opposition-led impeachment motion against Pres Yoon; The motion received 195 votes in favor v at least 200 votes to impeach Pres – press [weekend update].

Other Asia

- India Foreign Min Jaishankar: BRICS countries have no interest in weakening the US dollar (update).

North America

- (US) Trump said he has no plans to remove Powell as Fed Chair – financial press [update].

- (SY) US Pres Biden warns of "risk and uncertainty" after the fall of Assad's regime in Syria - financial press (update).

- (US) Pres-elect Trump: Assad is gone. He has fled his country. His protector, Russia, Russia, Russia, led by Vladimir Putin, was not interested in protecting him any longer.

- (US) Pres-elect Trump: "In any event, Syria is a mess, but is not our friend, & the United States should have nothing to do with it. this is not our fight. Let it play out. do not get involved!" [weekend update].

- (US) Nov change in Nonfarm Payrolls: +227K V +220KE; Oct revised slightly higher [weekend update].

- (US) Nov unemployment rate: 4.2% V 4.1%E (1st increase in 3 months); Labor Force Participation Rate: 62.5% v 62.7%e; Underemployment Rate: 7.8% v 7.7% prior ; long term; 1.661M v 1.608M prior [weekend update].

- (US) Nov average hourly earnings M/M: 0.4% V 0.3%E; Y/Y: 4.0% V 3.9%E [weekend update].

- (US) Fed's Bowman (voter): Doesn't take a dissenting vote on policy lightly; Wants to proceed cautiously and gradually with rate cuts [weekend update].

- (US) Dec preliminary university of Michigan confidence: 74.0 V 73.3E; 1-year inflation expectations 2.9% v 2.7%e [weekend update].

Europe

- (IE) Ireland Nov Construction PMI: 47.5 v 49.4 prior (third month of contraction).

- (SY) Turkish Foreign Min: Syria has reached a stage where Syrian people will shape future of their own country; Syrian people can't do this alone and Turkey attaches importance to Syrian territorial integrity [weekend update].

- (SY) Syrian revel groups seized control of Damascus; Syria's army command notified officers that Assad's regime has ended [weekend update].

- (EU) EU Commission Pres Von Der Leyen: Parties agree to Mercosur deal; Partnership sends powerful message to the world [weekend update].

- (SA) Saudi Energy Min: OPEC+ demonstrated flexibility yesterday; We honestly believe the market next year will be better than projections – CNBC [weekend update].

Levels as of 00:20 ET

- Nikkei 225 +0.1%, ASX 200 -0.1%, Hang Seng -0.4%; Shanghai Composite -0.3%; Kospi -2.1%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.1%; Dax flat; FTSE100 flat.

- EUR 1.0532-1.0572; JPY 149.69-150.09; AUD 0.6380-0.6403; NZD 0.5808-0.5890.

- Gold -0.1% at $2,658/oz; Crude Oil +0.5% at $67.55/brl; Copper -0.2% at $4.1910/lb.