Asia Market Update: US Senate passes tax reform in late night session, China economic work conference expected to ease deleveraging efforts in 2018
***Headlines/Economic Data***
General Trend: Asian indices trade mixed ahead of US Senate tax vote; vote passed sending dollar slightly stronger. Japan quiet ahead of Thursday’s BoJ policy statement.
Japan
-Nikkei 225 opened -0.1%; closed +0.1%
-Japanese megabanks trade generally higher: Mitsubishi UFJ +1.8%: MUFJ and Mizuho expected to raise certain fees in 2018 – Japanese Press
- Japan Display: +5% (capital injection speculation)
-TOPIX Construction Index -1%; Taisei -3.5% (lingering bid rigging concerns related to the Maglev project)
-Telecom names continue to underperform following recent plan by Rakuten to enter the mobile business: KDDI -0.8%(down for 5th straight session)
-Subaru Corp -6%: The company may have falsified certain mileage data, said a Japanese press report.
-Japan 2018 budget draft: Budget seen at ¥97.7T (in line with press speculation)
-Japan End Sept Household Assets: ¥1,845T, +4.7% y/y - BoJ Q3 Flow of Funds Report
-Japan Oct All Industry Activity Index M/M: 0.3% v 0.3%e
Looking Ahead: BoJ policy statement due on Thursday
Korea
-Kospi opened -0.2%
-Cosmetics firms trade lower for 2nd straight session, Amorepacific -2%; China said to be again banning tours to South Korea
- Hyundai Motor -0.3% (Reached tentative wage agreement with union –US financial press)
- Cheil Worldwide +4.5% (raised 2017 dividend payout ratio to 60%)
- Hynix Semi +0.7% (To create foundry with a Chinese company - Korean press)
-Samsung Electronics -1.1%: May quadruple OLED supplies to Apple in 2018 - Korean press
-South Korea to announce 2018 economic policy direction next week
-Bank of Korea (BOK) sells KRW2.41T in 2-yr monetary stabilization bonds at 2.08%
-North Korea begins tests to load anthrax onto ICBMs - Japan press; US and China talk about possible North Korea regime collapse
-US said to have given China a draft on new North Korea sanctions
-South Korea President Moon: US-South Korea joint military drills may be delayed as a step to ease tensions on Korean peninsula - NBC
-US Sec of State Tillerson: Pressure campaign on North Korea will intensify, they haven't shown willingness to talk
-One of South Korea cryptocurrency markets, YouBit, was forced to shut down on Tuesday after a hacking attack
-South Korea markets to be closed for trade on Dec 29th; to delay market opening by 1 hour on Jan 2nd
China/Hong Kong
-Hang Seng opened -0.2%, Shanghai Composite flat
Hang Seng Information Technology Index -0.4%; Services Index +1.2% (gaming names trade generally higher on broker outlooks)
China Mobile: +1.1% (Reported Nov net adds 3.0M to 883.9M total mobile subscribers)
-(CN) Former PBoC advisor Li Yang: China economy is in long process of gradual slowdown; views that China economy 'bottomed out are suspect'; China needs to stay vigilant to US economic conditions
-(CN) China Researcher: China should seek responding plans to US tax cut
-(CN) China Academy of Social Sciences (CASS): sees 2017 GDP at 6.8% and 2018 GDP at 6.7%; Sees Shanghai Composite trading between 3,200 and 3,700 in 2018
-(CN) PBoC sets yuan reference rate at 6.6066 v 6.6098 prior
-(CN) PBoC OMO: Injects CNY80B in 7,14 and 28-day reverse repos v CNY100B prior; Net injected CNY10B v CNY20B prior
-(CN) China MoF sells 3-yr bonds at 3.7348% v 3.73%e, bid to cover 1.62x; 7-yr bonds at 3.9% v 3.92%e, bid to cover 2.4x
-(CN) According to economists tighter monetary conditions with slower credit growth are possible in China next year - Chinese press
-(CN) China updates regulation on economic crime investigation, effective Jan 1st; Clarifications and guidance were given on topics such as police jurisdiction, registration of cases, use of compulsory measures, obtaining evidence and the disposal of relevant assets.
-(CN) China Researcher: China should seek responding plans to US tax cut
-(HK) Hong Kong SFC said to plan to strengthen law enforcement in 2018 – Chinese Press
Australia/New Zealand
-ASX 200 opened -0.1%; closed +0.2%
-ASX 20 Utilities Index -0.7%
-(AU) Western Australia sees iron ore price at $59.70 from 2020-2021; China steel demand slowdown risk to price over next year
-(AU) Australia Nov Skilled Vacancies m/m: 0.3% v 0.7% prior
-(AU) Financial press discusses when RBA could raise rates and how data is conflicting - financial press
-(NZ) NEW ZEALAND Q3 CURRENT ACCOUNT BALANCE (NZ$): -4.7B V -4.2BE
-(NZ) NEW ZEALAND NOV TRADE BALANCE (NZD): -1.19B V -550ME; YTD -3.44B V -2.71BE
-(NZ) New Zealand Nov Net Migration: 5.6K v 5.6K prior (12-month low)
-(NZ) New Zealand Nov Credit Card Spending m/m: 0.8% v 1.0% prior; y/y: 9.1% v 3.0% prior
-(NZ) New Zealand Fin Min: Named 10 members to tax working group
- AAD.AU Enters agreement to sell Bowling & Entertainment unit for A$160M on a debt and cash free basis to The Entertainment and Education Group; +12%
Looking Ahead: New Zealand Q3 GDP data due for release on Thursday.
Other Asia
-(MY) Malaysia Nov CPI Y/Y: 3.4% v 3.4%e (**Note: 11th straight month above target. Malaysia Central Bank has CPI range between 2.0-3.0%)
-(MY) Malaysia Finance Ministry: To leave stamp duty for property above MYR1.0B at 3%
Looking Ahead: Taiwan Nov Export orders and Bank of Thailand rate decision due later today
North America
-US equities closed lower ahead of Senate vote on tax reform: Dow -0.2%, S&P500 -0.3%, Nasdaq -0.4%, Russell 2000 -0.8%
-S&P 500 Real Estate Sector -1.9%, Utilities -1.8%
-FedEx +1.4% in afterhours (Q2 results and FY18 guidance above ests)
-Micron +5.4% in afterhours (Q1 results, Q2 guidance above ests)
-(US) Fed's Kashkari (dovish dissenter; non-voter in 2018): reiterates there is still slack in the labor market; Fed should not raise interest rates right now
-Tax Reform: (US) US House passed the tax reform bill (as expected) by a 227 to 203 vote (all Democrats opposed the measure)
-(US) SENATE HAS ENOUGH VOTES TO PASS REPUBLICAN TAX LEGISLATION; final vote 51 to 48
-Following the US House vote, the Senate parliamentarian ordered the House to re-vote on the tax bill because three provisions of the House-passed bill violated Senate rules, according to a press report; Senate said to aim to vote on bill stripped of problematic provisions tonight; House will have to re-vote on edited bill tomorrow (Wednesday)
-(US) Sen Maj Leader McConnell: expects to finish tax bill sometime tonight (Tuesday); Have held talks with Dem Leader Schumer on govt spending
-Energy: (US) Weekly API Oil Inventories: Crude: -5.2M v -7.4M prior
Looking Ahead: US Nov Existing Home Sales and DoE Weekly Crude Oil Inventories due on Wednesday
Europe
-(UK) Prime Min May spokesperson: May and Trump agreed in phone call on importance of swift post-Brexit bilateral trade agreement
-(UK) Bank of England (BoE) expected to say EU banks to be allowed to operate in the UK ‘as normal’ following Brexit – BBC
-(EU) EU reportedly pushing for ECB to take supervision over large investment banks - press
Looking Ahead: BoE Gov Carney due to speak during the NY Morning
***Levels as of 01:00ET***
- Nikkei225 %, Hang Seng -0.1%; Shanghai Composite -0.3%; ASX200 +0.1%, Kospi -0.3%
- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.1%
- EUR 1.1847-1.1836; JPY 113.08-112.85; AUD 0.7665-0.7651;NZD 0.6986-0.6954
- Feb Gold +0.1% at $1,266/oz; Feb Crude Oil +0.3% at $57.74/brl; Mar Copper +0.1% at $3.15/lb