HK/CN equities lead falls amid further poor China data

Asia market update: HK/CN equities lead falls amid further poor China data; Currency volatility - No specific drivers seen, potentially New year/New quarter / New month flows.

General trend

- Hang Seng under-performed equities in the first trading day of 2025, -2.7% at one point - though later paring worst of the losses. An overall negative day in Asia, with Japan closed through Monday Jan 6th. ASX outperformed +0.5%.

- International news on New Years’ day dominated by two terror incidents in the US, both involving vehicles hired via the Turo app. A Tesla Cybertruck exploded outside a Trump hotel in Las Vegas and prior to that a pick-up truck was driven through a crowd of people in New Orleans. Officials investigating whether the incidents are related. US equity FUTs positive despite the incidents, though Turo and potentially Tesla may see some affect when US markets reopen.

- Some currency volatility first day back, with overall strength against USD led by commodity currencies Kiwi and Aussie. AUD bounced off its more than 2 year low set in the previous trading session, +0.5%. JPY down and up. No specific driver seen for FX moves other than potentially New year/New month/New quarter flows. BTC retook $96K handle.

- Korean Won (KRW) recovered a further +0.7%, amid BOK comments on reduced rate cut pace and expected instability.

- Prior, on the final day of the trading year (Dec 31st), offshore Yuan (CNH) collapsed in a brief spike of as much as 6 Big Figures, touching the prior life-of-instrument lows (since 2012) of 1.37/38, reached in both 2022 and 2023. China PBOC Gov stated he would “keep enhancing FX reserve management”. Late on the 31st prices recovered to 7.33 handle and further strengthened back to 1.31 handle today.

- A big miss in China’s Dec Caixin PMI Manufacturing; Still expansionary, but a full Big Figure below expectations. Cries for more govt aid from various analysts and economists, while official comments stated that exports dragged on demand amid mounting uncertainties stemming from the overseas economic environment and global trade.

- China local govt revenues from land sales in 2024 reported to have fallen 70% y/y.

- Also back on Dec 31st China Pres Xi warned that the economy is “facing new situations and challenges”, even while committing to another year of ~5% GDP growth in 2025, as well as "more proactive macroeconomic policies".

- China bond yields continued their record-setting plunge.

- China PBOC seen potentially delaying RRR cut due to (falling) currency and bond yield concerns.

- BYD vehicles sales surged ~41% to a new record high in 2024. Even so stock price down as much as -3.8% today.

- Continued political volatility out of Korea, even during the official mourning period for the Jeju Air crash, which will end on Jan 4th.

- Asia PMI day (ex-Japan) again a mixture of expansion and contraction.

- US equity FUTs +0.3% to +0.5% 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 reopens +0.1% at 8,162.

- Australia Dec Final Manufacturing PMI: 47.8 v 48.2 prelim (confirms 11th month of contraction).

- Australia Dec CoreLogic Home Value M/M: -0.2% v +0.1% prior (update).

China/Hong Kong

- Hang Seng reopens -0.6% at 19,932; Shanghai Composite reopens -0.1% at 3,347.

- China Dec CAIXIN PMI Manufacturing: 50.5 V 51.7E (3rd month of expansion).

- China 30-yr bond yields -4bps fall to 1.87%; 10-yrs also hit fresh record low, -6bps to 1.64%.

- China local govt revenues from land sales in 2024 reported to have fallen 70% y/y - financial press, citing sources.

- China PBOC seen potentially delaying RRR cut due to (falling) currency and bond yield concerns - financial press, citing analysts comments.

- China to adjust currency weighting in CFETS RMB Index: to cut the weightings of the US dollar, euro and yen in 2025; effective from Jan 1st - update.

- China 2024 Box Office at CNY42.5B, -23% y/y - Press.

- BYD (1211.HK) Reports Dec NEV sales 514.8K v 341.0K y/y; 2024 Total Vehicle Sales 4.27M, +41.3% y/y (update).

- China PBOC Gov Pan Gongsheng: To closely monitor global economy and keep enhancing FX reserve management [offshore Yuan collapsed in a brief spike of as much as 6 Big Figures] [update from late Dec 31st].

- China Pres Xi: 2024 GDP is expected to exceed CNY130T; Economy is facing new situations and challenges [update from late Dec 31st].

- China Pres Xi: GDP growth in 2024 estimated to be ~5%; reiterates govt stance to implement more proactive macroeconomic policies in 2025 [update from late Dec 31st].

- China PBoC Dec Operations (CNY): Sold 1.4T in outright reverse repo; 700B in 3-month and 700B in 6-month [update from late Dec 31st].

- Alibaba Cloud cuts LLM prices by >80% to ¥0.0015 per 1,000 tokens (lowest rate in industry) [update from Jan 1st].

- (HK) Macau Dec (MOP) Casino Rev Y/Y: 18.2B, -2.0% v +2.0%e [update from Jan 1st].

- China PBOC sets Yuan reference rate 7.1879 v 7.1884 prior.

- China PBOC Open Market Operation (OMO): Injects CNY25B in 7-day reverse repos; Net drains CNY274B v injects CNY94B prior.

Japan

- Nikkei 225 remains closed; Reopens Monday 6th.

- ANA airlines 9202.JP Reportedly plans first flying taxi service in Japan, beginning in Tokyo in FY27 - Nikkei.

- Japan PM Ishiba said to plan to meet with US Pres-elect Trump as soon as Feb – Nikkei [update from late Dec 31st].

- Reportedly Nippon Steel offered new proposal to White House on US Steel deal; To give US veto over US steel capacity cuts, in last ditch attempt to have deal approved – press [update from Jan 1st].

Korea

- Kospi reopens flat at 2,400 (delayed start due to irregular New Year hours).

- South Korea Dec PMI Manufacturing: 49.0 v 50.6 prior (moves back into contraction after 1 month expansion).

- South Korea Finance Ministry: Denies media reports; Says govt is Not considering supplementary budget for 2025 - financial press.

- South Korea Finance Ministry: Expects 2025 GDP growth of 1.8% vs 2.2% prior forecast; 2025 CPI to average 1.8% vs 2.1% prior forecast (below BOK target of 2.0%).

- Bank of Korea (BOK) Gov Rhee: Economy faces new difficulties in growth and heightened FX volatility; Continued rate cuts may become a 'source of anxiety' - press.

- South Korea Presidential Aides reported to have offered to resign after acting Pres Choi appointed two new judges to the Constitutional Court set to decide impeached Pres Yoon's fate - South Korea govt emailed statement (update).

- Follow up: South Korea anti-corruption agency now likely to execute arrest warrant for former Pres Yoon as early as today (Jan 2nd).

- South Korea anti-corruption agency intends to execute arrest warrant for impeached Pres Yoon by Jan 6th - Nikkei Asia (update).

- South Korea Dec Trade Balance: $6.5B v $4.3Be [update from Jan 1st].

- Bank of Korea (BOK) Quarterly Intervention Data: Bought net $192M to curb FX volatility [update from late Dec 31st].

Other Asia

- Singapore Q4 advance GDP Q/Q: +0.1% V -0.8%E; Y/Y: 4.3% V 3.8%E.

- India Dec Final PMI Manufacturing: 56.4 v 57.4 prelim (confirms 42nd month of expansion; Lowest since Dec 2023).

- Taiwan Dec PMI Manufacturing: 52.7 v 51.5 prior (9th month of expansion).

- Indonesia Dec PMI Manufacturing: 51.2 v 49.6 prior (moves back into expansion for first time in 6 months).

- Malaysia Dec PMI Manufacturing: 48.6 v 49.2 prior (7th month of contraction).

- Philippines Dec PMI Manufacturing: 54.3 v 53.8 prior (16 month of expansion).

- Thailand Dec PMI Manufacturing: 51.4 v 50.2 prior (8th month of expansion).

- Vietnam Dec PMI Manufacturing: 49.8 v 50.8 prior (moves back into contraction for first time in three months).

- (TW) Taiwan Pres Lai: 2024 GDP expected to grow 4.2%; Must increase defense budget, strengthen capabilities - New Year's speech (update).

- Singapore PM Wong: 2024 GDP was 4.0% (prior 3.5% estimate) - New Year's address [update from Jan 1st].

- Macau Dec (MOP) Casino Rev Y/Y: 18.2B, -2.0% v +2.0%e [update from Jan 1st].

North America

- (US) Follow up: US Treasury Sanctions Office also reportedly hacked by China [timing of the hack is not certain] - Washington Post.

- *(US) New Orleans' terror suspect Shamsud-Din Jabbar may not have acted alone - FBI hunts four people seen 'laying explosives' in the vicinity earlier - US press.

- *(US) Tesla Cybertruck explodes outside Trump International hotel in Las Vegas; At least 1 dead and 7 injured in 'potential act of terror' according to early press reports (update).

- Boeing (BA) Follow up: South Korea authorities to send flight data recorder from Jeju air crash to the US - financial press.

Europe

- (IE) Ireland Dec PMI Manufacturing: 49.1 v 49.9 prior (2nd month of contraction).

- (EU) ECB Lagarde said hopes to hit 2.0% inflation target in 2025, affirms made significant progress in 2024 in bringing down inflation; cites X post Jan 1st – update.

- (RU) Pres Putin orders Russian govt and Co to develop AI cooperation with China - Russia state media.

Levels as of 00:20 ET

- Nikkei 225 closed, ASX 200 +0.5%, Hang Seng -1.8%; Shanghai Composite -1.8%; Kospi -0.4%.

- Equity S&P500 Futures +0.3%; Nasdaq100 +0.5%; Dax -0.1%; FTSE100 flat.

- EUR 1.0346-1.0375; JPY 156.98-157.78; AUD 0.6183-0.6223; NZD 0.5593-0.5622.

- Gold +0.2% at $2,645/oz; Crude Oil +0.3% at $71.93/brl; Copper +0.6% at $4.0492/lb.