EM ASIA CREDIT: Q4 Results: SK Innovation (SKBTAM, Aa3/NR/NR) - Miss

NZ CoreLogic home values fell 0.2% m/m in December to be down 3.9% y/y after -3.2% y/y. They have not posted a monthly increase since February but the 2024 average level was still 1.3% above 2023’s. There are signs that house prices may begin to rise again in 2025 as mortgage rates fall, new supply remains weak and affordability improves.

NZ home prices y/y%

• Q3 housing affordability recorded the third consecutive quarterly improvement to be up 3.2% y/y, the first annual rise since Q1 2021, but still 30% below trend. While incomes remain weak, the average mortgage rate was down around 90bp on the year in Q4 and house prices fell 3.1% y/y – helping to support a turn in affordability.
• This shift appears already to be supporting a recovery in demand with the REINZ reporting a 10.8% y/y rise in transactions in November and a drop in the number of days to sell to 42 from the 2024 peak of around 50. The median selling price is now up 0.6% y/y.
• Supply also remains constrained with October building consents for new dwellings still soft declining 3.5% y/y 3-month average but not as weak as they have been.
• Housing became more undervalued over the last year with it 12% below trend in Q3 compared with 6% below in Q3 2023, as measured by the ratio of house prices to CPI rents. Valuations should also encourage buyers into the market.
• While more respondents in the Q4 RBNZ household survey continued to expect lower house prices, the share is shifting back towards the neutral 50% level after almost 75% believed they would fall in Q3.

NZ affordability vs valuation % deviation from trend

TYH5 is 108-15, -0-02 from NY closing levels. 

• Cash bonds have opened little changed in today’s Asia-Pac session after finishing Monday’s session with a bear-steepener. US yields were flat to 4bps higher across benchmarks.
• Early market swings were tied to a Washington Post article reporting that the Trump administration was "exploring plans" to apply tariffs to every country “but only cover critical imports.” The report suggests that Trump’s initial tariff plan may track relatively closely with the Biden administration’s targeted tariffs.
• Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.

European natural gas prices fell sharply on Monday likely because of technical selling. They trended lower through the session to finish down 4.9% at EUR 47.21, the lowest since before Christmas, and down 3.4% this month. This is despite drawing from inventories at the fastest pace in seven years. The weather is forecast to stay cold across north-western Europe for now increasing heating demand.  

• European storage is around 70% full compared to 86% this time last year, according to Bloomberg. Energy provision through winter is unlikely to be disrupted but low inventories may make refilling during spring/summer more challenging.
• US gas rose 10.7% to $3.71 to be up 2.2% in January to date as severe wintery weather boosted heating demand and impacted some gas output and pipelines. Forecasts are signalling that temperatures are likely to remain below average to January 21 and frozen gas infrastructure is expected to increase.
• Global demand for US LNG has been strong and Reuters is reporting that some traders believe prices rose sharply due to close to record flows to LNG export facilities.
• After the pipeline to Europe through Ukraine was shut on January 1, Russia is looking at other buyers for its gas. It is planning to increase its LNG exports, which Europe has bought a record amount of, and pipeline flows to China.