Asian equities follow US Fri higher

 Asia market update: Asian equities follow US Fri higher; Quiet day / week for data likely to be made up for by new US Pres Trump’s first-day / first week Exec Actions; Focus to be on Inauguration and as many as 100 Exec Orders during Asian session on Tuesday (Mon US time).

General trend

- Nikkei +1.4% on the back of Friday’s US tech rally, with banks also up on hopes of a BOJ rate hike on Jan 24th (OIS reached 80% likelihood of 25bps hike). Topix biggest gains since December.

- Hang Seng outperformed +2.4%, for its fifth straight gain and breaking 20K again. Has risen nearly 6% in 5 days.

- Japan BOJ will be further encouraged by yet another large Japanese company, Japan’s largest house builder Daiwa House, increasing wages by ~10% from April. Further, Japan’s largest convenience store chain (7/11) will raise prices of some rice products and other ingredients at its stores in Japan.

- Pres-elect Trump spoke at an evening rally in Washington DC, the evening prior his inauguration tomorrow. Confirmed several policy goals and promises up to 100 Executive Orders / Actions – including declaring National Emergencies on the border with Mexico and energy in order to take quick actions.

- In the Middle East the first tentative steps of the three-stage ceasefire-for-hostages deal got underway with three female Israeli hostages freed by Hamas in Gaza, reported to be “alive and in good health”.

- Overall stronger tone in currencies, led by commodity currencies Kiwi +0.5%, Aussie, +0.3% and Loonie +0.3%. CNH/USD also higher to two week highs at 7.32 handle amid talk of amicable phone call between Trump and China's Pres Xi. Bitcoin’s recent price advance continued through to $106K in early Asia morning, before collapsing 5% to $100K handle in just a couple of hours.

- Late Friday Pres-elect Trump confirmed a phone call with China President Xi, noting it was very good for both China and the US and it is his expectation that they will solve many problems together, and starting immediately. Said discussed “balancing Trade, Fentanyl, TikTok, and many other subjects”.

- China 2024 Foreign Direct Investment (FDI) continued to plummet to levels not seen since the early 1990’s, when records began.

- China PBOC today left its monthly Loan Prime Rates unchanged, with the PBCO caught between protecting the Yuan and wanting to cut rates to stimulate the economy.

- South Korea's constitutional crisis deepened over the weekend as suspended Pres Yoon was formally arrested, triggering riots by his supporters at the courthouse. Tensions flare between Yoon's pro-US supporters and the pro-Beijing main opposition party and its supporters.

- Bank of Korea lowered GDP expectations for both 2024 and 2025 citing “political concerns” as well as the Jeju Air crash.

- The situation concerning TikTok got more urgent as the app went dark on Sunday in the US, in accordance with Jan 19th ban and being upheld by the US Supreme Court in a 9-0 ruling. However, the app began to come back online in the US as TikTok itself and Pres-elect Trump intimated that a temporary stay of execution may be put in place by Trump from Jan 20th, giving time for a more permanent solution to be worked out.

- *NB: Overnight (Asia time) Trump will be inaugurated as US President (Mon 20th US time). Investors will be watching very closely for subsequent executive actions that could start hitting as soon as later that day, during the Asian trading session on Tuesday. Particular interest pertaining to tariffs, trade, crypto as well as deregulation and immigration. There may be further EO’s for energy, finance and hiring, including diversity (DEI). Media reports suggest a “shock and awe” campaign of 100+ EOs could be issued in the hours and days following inauguration.

- US equity FUTs -0.1% during Asian trading.

Looking ahead (Asian time zone)

- Fed blackout period this week ahead of Jan 29th FOMC policy decision.

- Davos WEF (World Economic Forum) annual meeting will run Jan 20-24.

- Mon Jan 20th (Mon night US Pres Trump Inauguration, followed by up to ~100 Exec Orders).

- Tue Jan 21st (Tue eve DE ZEW Jan Econ Sentiment).

- Wed Jan 22nd KR Jan Consumer Confidence, NZ Q4 CPI.

- Thu Jan 23rd JP Dec Trade Balance, KR Adv Q4 GDP.

- Fri Jan 24th JP & AU & IN Jan Flash PMI, JP Dec CPI, BOJ Rate Decision, (Fri eve DE & UK Jan Flash PMIs, Fri night US Jan Flash PMIs, US Dec Home Sales).

Holidays in Asia this week

- Mon Jan 20th US markets (Monday US time).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,319.

- Australia govt to invest A$2B in aluminum industry through 10-year production credits (update).

- Australia sells A$300M vs. A$300M indicated in 4.25% Jun 2034 bonds; Avg Yield: 4.4693% v 4.2766% prior; bid-to-cover: 5.18x v 4.27x prior.

China/Hong Kong

- Hang Seng opens 1.1% at 19,804; Shanghai Composite opens +0.4% at 3,256.

- China PBOC monthly loan prime rate setting (LPR); Leaves key rates unchanged; as expected.

- (US) China's Vice Premier Han Zheng [in Washington DC for Trump inauguration]; Economic relations are common concerns to China, US - China state media.

- Follow up: Local governments in China continue to issue 2025 GDP growth targets - press.

- China Local Governments to boost domestic demand in 2025 - paper quoted by Shanghai Securities News.

- Late Friday Pres-elect Trump confirmed a phone call with China President Xi, noting it was very good for both China and the US and it is his expectation that they will solve many problems together, and starting immediately. We discussed balancing Trade, Fentanyl, TikTok, and many other subjects [weekend update].

- China 2024 Foreign Direct Investment (FDI) (CNY-denominated) Y/Y: -27.1% v -29.8% prior (4th straight bounce in annual drop pace) [weekend update].

- China Securities Regulator (CSRC): Sees to tighten oversight of listed firms' fund raising [weekend update].

- China cabinet holds meeting on measures to drive employment – press [weekend update].

- IMF raises China GDP growth forecast from 4.5% to 4.6% [weekend update].

- EU said to consider dropping investigation against China over alleged coercive activity targeting Lithuania – press [weekend update].

- China PBOC sets Yuan reference rate 7.1886 v 7.1889 prior.

- China PBOC Open Market Operation (OMO): Injects CNY123B in 7-day reverse repos; Net injects CNY98B v injects CNY101B prior.

Japan

- Nikkei 225 opens +0.6% at 38,671.

- Japan Nov Core Machine Orders M/M: +3.4% v -0.8%e; Y/Y: 10.3% v 4.2%e.

- Japan Nov Final Industrial Production M/M: -2.2% v -2.3% prelim; Y/Y: -2.7% v -2.8% prelim.

- Japan Nov Tertiary Industry Index M/M: -0.3% v 0.1%e.

- BOJ Board majority said to likely to favor a 25bps rate hike to 0.50% at the upcoming meeting next week - Nikkei [**Note: would be the first since July 2024 and biggest rate hike by BOJ so far in current tightening cycle] [weekend update].

- Follow up: Japan govt said to delay its projection of a primary budget surplus by one year until FY26 - financial press [weekend update].

Korea

- Kospi opens +0.4% at 2,533.

- Bank of Korea (BOK) Cuts 2025 GDP growth to 1.6-1.7% (vs 1.9% prior); Sees 2024 GDP likely to be 2.0-2.1% (vs 2.2% prior).

- South Korea's suspended Pres Yoon formally arrested, triggering riots by his supporters at the courthouse: Tensions flare between Yoon's supporters, police and protesters against Yoon; South Korea's constitutional crisis deepens - Korea press [weekend update].

Other Asia

- Malaysia Dec Trade Balance (MYR): 19.2B v 16.6Be (exports rose most since Sept 2022).

North America

- (US) Follow up: Pres-elect Trump to also declare a National Emergency for energy, to unlock new powers - financial press.

- (US) Pres-elect Trump speaks at Rally in Washington DC the evening before his inauguration as President; Confirms several previously indicated policy goals and promises up to 100 Executive Orders / Actions - financial press.

- (US) Pres-elect Trump team reportedly planning "national emergency" on US-Mexico border - WSJ.

- (US) JD Vance met with China's Vice Premier Han Zheng in Washington DC, pre-Trump inauguration; Discussed Fentanyl, trade, regional stability - financial press (update).

- Bytedance: Confirms to work with Trump to keep Tiktok in the US - financial press.

- Bytedance Follow up: TikTok app goes offline on Sunday in the US, in accordance with US ban starting today (Jan 19th) and having been upheld by the US Supreme Court in a 9-0 ruling; App says Pres-elect Trump may "save" the platform when he takes office on Mon, Jan 20th - financial press [weekend update].

- (US) Nov total net tic flows: $159.9BV $203.6B Prior; net long term TIC flows: $79.0B V $152.3B PRIOR [weekend update].

- (US) Trump team plans to initiate large scale deportations on Tuesday – WSJ – [weekend update].

- (US) Treasury Sec Yellen: Treasury expects to begin extraordinary measures to avert debt limit on Jan 21st [weekend update].

Europe

- (UK) Jan Rightmove House Prices M/M: +1.7% v -1.7% prior; Y/Y: 1.8% v 1.4% prior.

- (IL) Israeli Official: First three Israeli hostages freed by Hamas in Gaza ceasefire-for-hostages deal are “alive and in good health” – US press.

- (IL) Israel Cabinet has given final approval to the Gaza ceasefire deal [weekend update].

Levels as of 00:20 ET

- Nikkei 225 +1.3%, ASX 200 +0.4%, Hang Seng +2.4%; Shanghai Composite +0.5%; Kospi -0.3%.

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

- EUR 1.0267-1.0307; JPY 155.71-156.58; AUD 0.6190-0.6219; NZD 0.5579-0.5615.

- Gold -0.1% at $2,747/oz; Crude Oil flat at $78.38/brl; Copper -0.3% at $4.3435/lb.