CN bonds end 2024 hitting fresh record lows

Asia market update: CN PMI barely stays expansionary, despite persistent stimulus; CN bonds end 2024 hitting fresh record lows.

General trend

- China's official factory activity growth missed expectations and barely stayed in expansionary territory. Some analysts considered the result as a symptom of insufficient stimulus measures to date from the Chinese govt. Trade risks in 2025 may also be weighing on sentiment and demand.

- CN 1-day repo rate +10bps to 1.4695% [despite fresh record lows for China govt bond yields; 30-yrs [-2.3bps to 1.9175%], and CN 10-yrs [-3bps at 1.6850%].

- Quiet day for Asian equities with Japan and Korea already closed, and early closes for Hang Seng and ASX. Hang Seng outperformed as the only major index to stay positive today. [Hang Seng overall +17.9% in 2024, ending four years of losses]. ASX underperformed -0.9% to end the year.

- South Korea Dec CPI pushed up, but still slightly below target 2.0%. South Korean Finance Ministry commented that 2025 CPI to slow compared to this year's overall 2.3%.

- China offshore Yuan weakness continued, 7.31 threatening this year’s low of 7.32, and beyond that 2023’s low of 7.37 coming into view.

- Aussie and Kiwi dollars gave back most of yesterday’s gains in quiet trading to close out the year.

- US equity FUTs flat to slightly down during Asian trading [Nasdaq earlier -1.4% in US trading hours. S&P 500 closes out second year in a row with a 20% gain].

Looking ahead (Asian time zone)

- Thu Jan 2nd AU Dec Final Manufacturing PMI, SG Adv Q4, GDP, Various Asia Dec Manufacturing PMIs, CN Dec Caixin Manufacturing PMI.

- Fri Jan 3rd KR Q4 Adv GPD, (Fri night US Dec ISM Manufacturing PMI).

Holidays in Asia this week

- Mon Dec 30th Philippines

- Tue Dec 31st Australia, Japan, New Zealand, Philippines, Singapore, South Korea, Thailand (China markets will be open, HK to close early).

- Wed Jan 1st Global markets holiday.

- Thu Jan 2nd Japan, New Zealand.

- Fri Jan 3rd Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 8,235 [early close at 14:10; Reopens Jan 2nd].

China/Hong Kong

- Hang Seng opens -0.2% at 20,003 [To close early at 12pm; Reopens Jan 2nd].

- Shanghai Composite opens flat at 3,406 [Closed tomorrow Jan 1st, reopens Jan 2nd].

- China Dec manufacturing PMI (Govt official): 50.1 V 50.2E (3rd month of expansion).

- Fresh record lows for China govt bond yields; 30-yrs [-2.3bps to 1.9175%], and CN 10-yrs [-3bps at 1.686%].

- China establishes technical committee to further AI standardization - Ministry of Industry and Information Technology.

- Beijing passes local autonomous driving regulations, effective Apr 1st, 2025 - China state media.

- China pushing to have China-made chips in Chinese EVs - WSJ.

- China PBOC: Will conduct another round of equity swaps [SFISF] to support market development in the near future.

- US Treasury: Notified on Dec 8th that workstations were hacked in cyberattack by China - press.

- China Interbank Market Regulator: Large influx into bond market this year led to rapid decline in interest rates, which exposed interest-rate risks.

- China State Council (NDRC): Panel held meeting on combating grain wastage.

- China PBOC sets Yuan reference rate 7.1884 v 7.1889 prior.

- China PBOC Open Market Operation (OMO): Injects CNY158B in 7-day reverse repos; Net injects CNY94B v drains CNY21B prior.

Japan

- Nikkei 225 closed for New Year [Reopens Monday 6th].

Korea

- Kospi closed for New Year [Reopens Jan 2nd].

- South Korea Dec CPI M/M: 0.4% V 0.2%E; Y/Y: 1.9% V 1.7%E.

- Bank of Korea (BOK): Inflation to be higher next month (Jan) due to weak won (KRW) - statement following Dec CPI release.

- Follow up: South Korea Constitutional Court formally issues arrest warrant against former Pres Yoon - South Korea press.

- South Korea Acting Pres Choi may today veto Special Counsel bills against former Pres Yoon - South Korea press.

Other Asia

- Singapore Nov M2 Money Supply Y/Y: 5.5% v 4.6% prior.

- Hong Kong Nov Trade Balance (HK$): -43.4B v -31.5Be [overnight update].

North America

- (US) Dec Dallas Fed manufacturing activity: 3.4 V -3.0E.

- (US) Nov pending Home Sales M/M: 2.2% V 0.8%E; Y/Y: 5.6% v 7.9%E.

- (US) Dec Chicago purchase manager’s index (PMI): 36.9 V 43.0E.

- Citi End-Dec Economic Surprise Index drops to 3.2 v 30.0 m/m (lowest since Sept and down from 43.3 just five weeks ago).

- (US) Truflation proxy of US aggregated Inflation Index at 3.1% v 2.9% w/w (near highs of autumn 2023); Cleveland Fed’s Inflation Nowcast forecasting Dec US CPI Y/Y to accelerate again to 2.9% from 2.7% and Dec US CPI M/M to come at 0.4%.

- US credit card lenders wrote off $46B in seriously delinquent loan balances in the first nine months of 2024, +50% y/y and the highest level in 14 years – FT.

- (US) GOP fiscal conservatives are already voicing opposition to handling the debt limit through that party-line process; One path requires full buy-in from Republican lawmakers to address the issue via budget reconciliation, a huge challenge thanks to the party’s fierce fiscal hawks; The other entails winning over Democrats, who for the most part rejected Trump’s initial debt-limit gambit last week - Politico.

- (US) Pres-elect Trump: House Speaker Johnson has my complete and total endorsement; in recent days, some Republican figures urged Trump to explicitly endorse Johnson ahead of upcoming Speaker vote.

- Nasdaq, NYSE and CBOE confirm closure of U.S. Markets in honor of a National Day of Mourning for former President Jimmy Carter on Jan 9th.

Europe

- (CN) China Pres Xi and Russia Pres Putin exchange New Year greetings; To continue along right path of non-alliance and non-confrontation; Strategic coordination to "march to higher level" - China state media.

- (EU) ECB Stournaras (Greece): Reiterates pace of rate cuts should be gradual but should not rule out larger cuts.

- (EU) ECB's Knot (Netherlands): See serious chance of a trade war; China could export its deflation to Europe.

Levels as of 00:20 ET

- Nikkei 225 closed, ASX 200 -0.9%, Hang Seng +0.1%; Shanghai Composite -0.6%; Kospi closed.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.1%; Dax -0.6%; FTSE100 -0.2%.

- EUR 1.0397-1.0415; JPY 156.14-157.07; AUD 0.6210-0.6231; NZD 0.5627-0.5646.

- Gold +0.1% at $2,620/oz; Crude Oil +0.9% at $71.64/brl; Copper +0.1% at $4.0913/lb.