Market Daily
Macro Update:
US stocks see record gains in 2024
The last trading day of 2024 saw US equities close lower, as a typical Santa rally failed to materialize. Nonetheless, 2024 still saw record gains with the S&P 500 up 24%, Nasdaq 30%, and Dow 13%, driven by AI optimism and megacap tech gains. Fed rate cuts of 100 bps since September spurred hopes for growth, albeit lesser cuts are being priced in for 2025. Meanwhile, Trump’s re-election boosted sentiment with promises of deregulation and tax cuts. We continue to remain positive on US equities, with a preference for small/mid cap going forward.
Main Upcoming Macro Indicators
Equity Market Updates
US EQUITIES
US stocks retreated on Tuesday as higher yields continue to put pressure on equities.
Nevertheless, the market still closed the book on a remarkable year. The positive mood is likely to continue into 2025 fuelled by further rate cuts and the continuation of the AI boom.
EUROPE EQUITIES
European shares also pulled back on Tuesday as uncertainties surrounding interest rates subdued sentiment.
HK EQUITIES
Hong Kong stocks closed marginally higher on Tuesday, paring earlier gains on continued manufacturing expansion in China.
The market ended 2024 on a high note, being up more than 17%, after four straight years of losses.
Ford (U US)
The US National Highway Traffic Safety Administration stated on Tuesday that Ford is to recall almost 400,000 of its vehicles over various issues, mostly due to defective fuel pumps, where a failure can cause a loss of drive power and increase the risk of a crash.
These recalls could potentially hurt Ford’s reputation in the US and thus put downward pressure to share price going forward.
MARKET CONSENSUS: 7 BUYS, 13 HOLDS, 6 SELLS, AVERAGE TP USD11.81
United States Steel (X US)
Shares of US Steel surged more than 9% on Tuesday after Nippon Steel forwarded a new proposal for the acquisition of the company to the Biden administration, reviving hopes for a deal after it was blocked recently due to national security concerns.
In its new proposal, Nippon Steel would grant the US government power to veto any trimming of US Steel's "production capacity.“
Biden reportedly has until 7 January to make a final call, but officials are considering an approach that would leave the decision to the incoming Trump administration..
MARKET CONSENSUS: 7 BUYS, 3 HOLDS, AVERAGE TP USD42
Citigroup (C US)
Citigroup, along with US banking peer Bank of America, said on Tuesday that they are exiting the Net-Zero Banking Alliance (NZBA), a group of global banks that have pledged to curb greenhouse gas emissions.
The move follows Wells Fargo and Goldman Sachs, which both left the alliance earlier this month.
The US’ largest financial institutions are under increasing pressure from Republican lawmakers to distance themselves from industry groups that reducing greenhouse gas emissions.
MARKET CONSENSUS: 16 BUYS, 7 HOLDS, AVERAGE TP USD78.99
BYD (1211 HK)
BYD in December 2024 ejoyed a year-end surge to push total sales to around 4.25M passenger cars last year, up 41.26% YoY, narrowing its gap with Tesla as the two vie for the top-selling vehicle maker.
In December alone, the carmaker's NEV sales stood at 514,809 units, hitting a new monthly sales record spurred on by subsidies and incentives.
BYD’s latest figures provide further evidence of its rapid expansion. This is likely supportive to its share price going forward..
MARKET CONSENSUS: 36 BUYS, 3 HOLDS, AVERAGE TP HKD348.87
Alibaba (9988 HK)
Alibaba’s cloud unit announced on Tuesday that it decided to lower prices on its large language models by up to 85%, signaling an aggressive push to dominate China’s red-hot AI market. Despite potentially causing a revenue hit in the short term, this could be supportive to Alibaba’s share price in the long term, if the resulting market share gains are significant enough.
The company’s latest price cuts came after earlier reductions, some as high as 97%, and reinforce its strategy to lock in enterprise customers by making cutting-edge AI solutions more accessible.
MARKET CONSENSUS: 39 BUYS, 3 HOLDS, AVERAGE TP HKD119.06
Earnings Announcements
US Market
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European Market
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HK - China Market
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Global Indices Changes (%)
Fixed Income Market Updates
We expect more uncertainties this year with Trump back as U.S President and rates volatility to remain high as Federal Reserve remains data-dependent. We prefer staying invested in IG names with solid fundamentals.
EUROPEAN BANK COCO (AT1)
Activity in the European AT1 space was largely due to year-end rebalancing by asset managers. While valuations do not look cheap, we think all-in yields are still decent for some of the bonds in the USD AT1 space. As issuances pick up in the primary market in the new year, we expect more favourable entry points.
ASIA INVESTMENT GRADE (IG)
Trading activity was muted in the Asia IG space. With Japan out and no US Treasury quotes until London comes in, liquidity is expected to be poorer compared to usual. We continue to like this space and will stay invested in IG names with solid fundamentals. However, given expected rates volatility, we prefer 5-10 year tenors.
ASIA HIGH YIELD (HY)
New World Development was relatively active, with the bonds up 0.25-0.75point. The 6.15% perpetual ( callable in March 2025) was the outperformer and was up around 2 points. Trading was muted in the rest of the Asia HY space. We expect idiosyncratic risks in this space and will be highly selective. We prefer to be more conservative as we start the year and see more favourable opportunities in the IG space.
Forex Market Updates
The US Dollar strengthened on Tuesday to end the year at 25-month highs against a basket of other major currencies.
USD
The US Dollar rounded off the year on a strong note, closing at highs not seen since November 2022 against a basket of other major currencies in Tuesday’s holiday-shortened session. The Dollar Index's YoY gains of 7% represent its best calendar year performance since 2016, with a vast proportion of those gains coming in 4Q2024 after Trump’s election victory. Looking ahead, markets have adjusted for the Fed to take a slow and cautious approach to further rate cuts in 2025 in light of the likely inflationary effects of Trump’s proposed policies.
The Dollar Index is likely to remain well supported above 107.50 for the time being.
CNY
The Chinese Yuan briefly weakened to 26-month lows on Tuesday before recovering slightly to post a calendar year performance of -3.0% against the USD. The intraday bounce was mainly due to encouraging data out of China, with factory activity expanding for the third consecutive month in December and the Non-Manufacturing PMI coming in at its highest since March. The latter in particular can be viewed as a positive omen for China’s annual growth target of around 5% after Beijing’s much publicized stimulus.
The Renminbi could see more near term weakness against the USD, although strong resistance is expected around the 7.4000 handle.
GBP
The British Pound was little changed on the final trading day of the year before closing as the best performing major currency against the USD in 2024. Sterling weakened 1.5% across the year as expectations for UK and US interest rates moved broadly in line with each other, while the British economy also held up better than expected. Markets currently expect the BoE to cut rates two times in 2025 after two cuts in 2024, with central bank officials recently reiterating their concern that inflation in services and wages remains too high for their liking.
Sterling looks poised for a period of consolidation between 1.2450 and 1.2600 moving forward.
XAU
Gold prices signed off on Tuesday with yearly gains of 27%, marking the precious metal’s best calendar year performance since 2010. Strong central bank purchases, widespread monetary policy easing and geopolitical uncertainties powered bullion’s record-breaking rally in 2024, driving it to an ATH of 2790 at the end of October. Analysts mostly expect the factors that supported gold to persist into 2025, although the policies of the incoming Trump 2.0 administration could provide strong headwinds.
The precious metal could see some near term consolidation above 2560.
