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Asia-Pacific Stocks Trade Higher, BOJ Makes No Change in Yield Range

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Bank of Japan Kuroda: No need to further expand bond target band

Bank of Japan Governor Haruhiko Kuroda said at an afternoon news conference on Wednesday that there is no further need to expand his yield curve control band, according to a Reuters translation.

“We don’t need to further expand the band around our yield target,” Kuroda said.

“It wasn’t long ago that we decided on our measures in December. It will probably take some more time for the measures to start to have an effect in fixing the functioning of the market,” he said.

The Bank of Japan kept its interest rates at a dovish -0.1% rate and made no changes to its yield curve control band.

– Jihye Lee

China’s stock market will be the best performer in 2023, estimates Morgan Stanley

We're getting even more bullish on Chinese equities, says Morgan Stanley

Morgan Stanley estimates that the Chinese stock market will emerge as the best performer in 2023.

The MSCI China index will reach 80 and the Hang Seng index will rise to 24,500 by the end of the year, Morgan Stanley’s chief China equity strategist Laura Wang said. This would represent an increase of about 15% compared to the current market.

“It actually implies that the Chinese stock market will outperform the global stock market in 2023, so it’s time to go back to China,” she noted.

Wang’s recommendation is to buy shares of large capitalization and highly liquid companies on the Internet.

The internet sector has “very high correlation with the overall momentum for consumer resumption in China”, especially in the country’s post-Covid recovery journey, she said.

Wang added that many global institutional investors are still significantly underweight these large-cap liquid names.

—Lee Ying Shan

Oil prices rise on more optimism of China’s reopening and demand recovery

Oil prices are supported by more optimism of China’s reopening and demand for fuel, with OPEC predicting that Chinese oil demand is on track to jump.

Brent crude futures gained 0.85% to settle at $86.65 a barrel, while US West Texas Intermediate futures gained 0.91% to settle at $80.91 a barrel.

“Chinese demand for oil is on track to rebound due to the recent relaxation of the country’s zero Covid measures,” OPEC’s monthly oil report said.

It added that China’s oil demand in the first quarter will rebound from a year-on-year decline of 0.3 million barrels per day in the fourth quarter of 2022 to an annualized growth of 0.2 million barrels per day.

-Lee Ying Shan

Japanese yen weakens after BoJ announces no change in yield curve range

The Japanese yen weakened against the dollar after the Bank of Japan surprised markets by keeping its yield curve tolerance band unchanged.

The Japanese Yen weakened 2.04% against the US Dollar after the announcement and settled at 130.94.

“Japan’s economy is expected to continue growing at a pace above its potential growth rate,” the central bank said in a statement.

The Bank of Japan also left its interest rate unchanged at ultra-dovish -0.1% – in line with expectations and maintaining the same rate it has maintained since 2016.

—Jihye Lee, Lee Ying Shan

Gaming shares jump after China grants license approvals

Hong Kong-listed gaming stocks rose after China granted license approvals for 88 games, including NetEase, Tencent Holdings and miHoYo, marking a further easing of Beijing’s gaming crackdown.

shares of NetEase it jumped to 6.81% in early trading, reaching its highest level in more than four months. tencent shares were up 0.11%.

–Lee Ying Shan

Bank of Japan likely to tighten yield curve control by another 50 basis points: UBS

Japan’s central bank is likely to widen its 10-year Treasury yield curve control band by another 50 basis points to a 1% band below and above its 0% target, UBS Global’s chief executive said. Wealth Management, Tan Teck Leng.

“The YCC abandonment scenario is unlikely,” he said on CNBC’s “Squawk Box Asia,” adding that a move would be “uncharacteristic” of the central bank.

“I think the easiest thing for them is to remove the cap, let it find the fair value – but again, very large uncertainties arise, which is why we think that as a middle ground they should at least raise it to a cap of 1.0%,” he said.

The yield on the 10-Japanese government bond year broke through the upper ceiling of its band for the 5th consecutive session on Wednesday morning ahead of the BOJ monetary policy announcement.

Japan’s Core Manufacturing Orders for November Fall More Than Expected

Japan’s private sector manufacturing orders for November fell 8.3% compared with the previous month, according to official data.

The drop was significantly larger than Reuters expectations for a 0.9% decline. On an annualized basis, manufacturing orders were down 3.7%.

Private sector machinery numbers exclude volatile orders for ships and electric utilities.

—Lee Ying Shan

CNBC Pro: Thinking about going back to Big Tech? This investor is wary of 2 stocks in particular

CNBC Pro: Morgan Stanley says cheaper EVs are coming – and names global stocks set to benefit

As electric cars become increasingly popular, a new manufacturing technique that could make them more affordable is attracting interest, according to Morgan Stanley.

Some automakers are outsourcing the process, which could benefit three major parts suppliers in Asia, the Wall Street bank said.

CNBC Pro subscribers can read more here.

—Ganesh Rao

Stocks close the day mixed, Dow drops nearly 400 points

The Dow Jones Industrial Average fell later in the day, with shares of Goldman Sachs weighing on the stock index.

The Dow Jones lost 391.76 points, or 1.14%, to close at 33,910.85. The S&P 500 fell 0.2% to 3,990.97 points. The Nasdaq Composite gained 0.14% to end the day at 11,095.11.

— Tanaya Machel

Bank of America sees late onset of recession

A recession likely won’t start now until the end of 2023, as consumer spending has been stronger than expected and the Federal Reserve has eased as it intensifies its interest rate hikes, according to Bank of America.

“We postponed our outlook for a mild recession in the US economy by about a quarter, given the durability of consumer spending due to strong job markets, excess savings, falling energy prices and easier financial conditions,” said the company in a customer note. “That said, we believe the headwinds will drive consumers to reduce spending and increase the savings rate as the year progresses.”

That puts the recession in the second quarter, driven by an investment-led slowdown leaking into consumer spending.

After raising its benchmark interest rate by 4.25 percentage points in 2022, the Fed is set to pull back, with a 25 percentage point hike in February. This is expected to be followed by additional quarter-point increases in March and May.

The rate cuts likely won’t come until 2024, the company said.

—Jeff Cox

Goldman Sachs shares tumble on profit loss

Goldman Sachs shares fell 2.4% after the Wall Street investment bank reported fourth-quarter results that fell short of analysts’ earnings expectations.

The bank reported earnings of $3.32 per share on $10.59 billion in revenue. Consensus estimates called for earnings of $5.48 a share on revenue of $10.83 billion, according to analysts polled by Refinitiv.

Provisions for loan losses were also slightly above expectations.

—Hugh Son, Samantha Subin