Focus on US Dec ISM Manufacturing PMI

Asia market update: Muted market response to China's affirmation of stimulus pledges (NDRC, PBOC); KR political drama continues, also shrugged off by markets; Focus on US Dec ISM Manufacturing PMI.

General trend

- Hang Seng rebounded somewhat +0.8% amid various China officials saying more support would be forthcoming in 2025, including fiscal support as well as for institutional buying. However, the news did not help the Shanghai Composite, -0.5%.

- FT said it was informed by the China PBOC itself that it planned a "policy overhaul" amid economic pressure, potentially cutting the key 7-day reverse repo rate (currently 1.5%) at some time in 2025. Comments were in-line, though significant coming directly from the China PBOC.

- China bond yields continued their relentless fall. 10-year bond yields are now down 100+ basis points over the last year.

- South Korean political drama continued as reports of up to 2,700 police faced-off against military forces inside the Presidential compound, refusing the arresting team access to arrest suspended Pres Yoon. Later in the day the anti-corruption team said it had stopped execution of the arrest warrant, calling the situation 'impossible’. Kospi index shrugged off the developments, +2.4% at its best to lead Asia even as the tense events unfolded.

- Helped by a weekly draw reported by the US DOE, WTI touched $73 for the first time since October.- US equity FUTs +0.2% to +0.3% during Asian trading.

Looking ahead (Asian time zone)

- 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 flat at 8,200.

- New Zealand Dec CoreLogic Home Prices M/M: -0.2% v -0.2% prior.

China/Hong Kong

- Hang Seng opens +0.4% at 19,708; Shanghai Composite opens +0.1% at 3,267.

- China PBOC said to plan "policy overhaul" as pressure mounts on economy – FT.

- China 10-year bond yields -3bps to hit fresh record low below 1.600%; 30-year yields -3bps to 1.8050%, also a fresh record low.

- China NDRC Sec Gen: China to "sharply" increase funding via ultra-long special Treasury Bonds in 2025 in order to support "two new programmes" - financial press.

- China PBOC Dir of Research Bureau Wang Xin said the central bank may consider increasing support for consumer finance in the future - Economic Information Daily.

- Follow Up: China PBOC extends support following stock market decline [reminder Jan 2nd: China reportedly lowers bar for relending encouraging share buybacks].

- China reportedly lowers bar for relending encouraging share buybacks - State TV.

- In 2024, stock buyback plans of certain China companies and major shareholders exceeded CNY250B – PBOC-backed Financial News.

- TSLA Dec China-made EV sales: 83.0K, +12.8% m/m.

- China Securities Regulator (CSRC) denies earlier rumors and vows to fight against stock market rumors – press (Press is referring to rumors that regulators are guiding listed companies to release all negative news by Jan 15th, along with large-scale redemptions of public funds by insurance companies).

- China Premier Li Qiang: To continue to implement trade-in policy this year.

- China adds 28 US firms (including Boeing Defense Space and Security) to export control list, banning dual-use items exports to these firms; Also imposes unreliable entity list measures to 10 US firms for arms sales, including Lockheed Martin, L3Harris, Raytheon and General Dynamics - press [**Note: China has already sanctioned and fined many US firms for Taiwan arms sales several times earlier; China added Lockheed Martin and Raytheon to Unreliable Entity list in Feb 2023].

- Hong Kong Nov Retail Sales Volume Y/Y: -8.3% v -5.4%e; Retail Sales Value Y/Y: -7.3% v -3.4%e.

- China PBOC sets Yuan reference rate 7.1878 v 7.1879 prior.

- China PBOC Open Market Operation (OMO): Injects CNY19B in 7-day reverse repos; Net drains CN89B v drains CNY274B prior.

Japan

- Nikkei 225 remains closed; Reopens Monday 6th.

- US State Dept approves potential sale of advanced medium-range air-to-air missiles to Japan for estimated $3.64B.

Korea

- Kospi opens +0.2% at 2,402.

- South Korea probe team stops execution of arrest warrant [related to Yoon] as the team believes the execution of the warrant is 'impossible' - Yonhap.

- Korea military said to block Korea investigators entry; At 'stand-off' with South Korean investigating authorities attempting to arrest former Pres Yoon at his house) - Korean press.

- Reportedly Investigating South Korean authorities are at Pres Yoon's residence in their attempt to carry out his arrest warrant - press.

- South Korea Acting Pres Choi: Have ordered swift and bold use of market stabilizing measures if volatility heightens.

Other Asia

- Singapore Nov Retail Sales M/M: -2.8% v +0.3% prior (revised higher from +0.1%); Y/Y: -0.7% v 1.5%e.

- Singapore Dec Purchasing Managers Index (PMI): 51.1 v 51.0 prior.

North America

- (US) MBA Mortgage Applications w/e Dec 27th: -12.6% v -10.7% prior.

- (BR) Brazil Dec Manufacturing PMI: 50.4 v 52.3 prior (12th month of expansion).

- (US) INITIAL JOBLESS CLAIMS: 211K V 221KE (8-month low); CONTINUING CLAIMS: 1.844M V 1.89ME.

- (US) DEC FINAL S&P MANUFACTURING PMI: 49.4 V 48.3E.

- (US) NOV CONSTRUCTION SPENDING M/M: 0.0% V 0.3%E.

- (MX) Mexico Dec Manufacturing PMI: 49.8 v 49.9 prior (6th month of contraction).

- (CO) Colombia Dec PMI Manufacturing: 49.9 v 53.4 prior (1st month of contraction since Sept 2024).

- (MX) Mexico Dec IMEF Manufacturing Index: 47.7 v 48.3 prior.

- (US) Reportedly net neutrality rules struck down by Fed Appeals Court - press.

- (US) DOE CRUDE: -1.18M V -2.4ME; GASOLINE: +7.72M V -0.3ME; DISTILLATE: +6.41M V +0.1ME.

- (US) Atlanta Fed GDPNow: Raises Q4 GDP forecast from 2.5% to 2.6%.

- (US) US Pres Biden discussed plans to strike Iran nuclear sites if Tehran sped nuclear goals to develop bomb - press.

Europe

- (UK) Chancellor Reeves reportedly warned ministers to consider cuts to frontline services in order to fund the above-inflation pay raise proposal for public sector workers - press.

Levels as of 00:20 ET

- Nikkei 225 closed, ASX 200 +0.7%, Hang Seng +0.6%; Shanghai Composite -0.7%; Kospi +2.0%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.3%; Dax +0.1%%; FTSE100 +0.8%.

- EUR 1.0258-1.0286; JPY 157.18-157.57; AUD 0.6197-0.6218; NZD 0.5591-0.5608.

- Gold +0.3% at $2,676/oz; Crude Oil +0.3% at $73.31/brl; Copper -0.3% at $4.0248/lb.