Korean industrial output decline worsens

Asian Mid-session Update: Korean industrial output decline worsens; Noble Group plunges on Moody's cut to junk

Economic Data

- (CN) China Nov Services Trade Deficit: $15.6B v $14.1B prior; YTD $187.9B - SAFE

- (CN) China SAFE (FX Regulator): Revises Q3 current account surplus to $60.3B from $63.4B prelim; Q3 Capital and financial account surplus of $11.4B

- (KR) SOUTH KOREA NOV INDUSTRIAL PRODUCTION M/M: -2.1% (biggest decline in 10-months) V -0.7%E; Y/Y: -0.3% V 1.6%E

- (KR) SOUTH KOREA JAN MANUFACTURING BUSINESS OUTLOOK INDEX SEASONALLY ADJ: 68 V 69 PRIOR; NON-MANUFACTURING 69 V 71 PRIOR

Index Snapshot (as of 04:30 GMT)

- Nikkei225 +0.3%, S&P/ASX +1.1%, Kospi -0.3%; Shanghai Composite -0.1%, Hang Seng -0.2%, Feb S&P500 flat at 2,072

Commodities/Fixed Income

- Feb gold +0.2% at $1,070/oz, Feb crude oil -1.8% at $37.20/brl, Mar copper -0.2% at $2.13/lb

- (CN) China reportedly to not approve any new coal mines over next 3 years - Chinese press

- (US) API Petroleum Inventories: Crude: +2.9M v -3.6M prior; largest build in 7 weeks

- USD/CNY: (CN) PBoC sets yuan mid point at 6.4895 v 6.4864 prior; weakest Yuan setting since June 2011

- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥350B in 3-5yr JGBs, ¥400B in 5-10yr JGBs

Market Focal Points/FX

- Asia indices are mixed despite the broad gains on Wall St, with Australia and Japan rising while China trades lower. Rebound in oil prices was attributed to US stocks recovery, though those gains were cut in half after the API inventories showed the biggest build in 7 weeks. FX majors remain contained to narrow ranges on dearth of economic releases and low holiday week trading volumes. USD/JPY advanced above 120.50 but then retreated to 120.35, EUR/USD traded in 1.0915-35 range, AUD/USD traded down about 20pips from the highs to 0.7270, and NZD/USD consolidated overnight gains with a 30pip move lower below 0.6850. PBoC's Yuan fix saw fresh 4 1/2 year lows approaching 6.50, while offshore Yuan is eyeing 6.60 lows.

- In China, Fin Min Lou extoled the virtues of austerity as the best way to deal with slower govt revenues, just as local press speculated that China budget deficit would rise to 3% of GDP or more in 2016 vs 2.3% 2015 target. Separately, one survey forecast China FX reserves to fall another $305B next year after record outflows in 2015. PBoC chief economist also noted that RRR changes should be wary of short-term interest rate stability. Regulators also reportedly suspended FX business of certain overseas banks until March amid continued CNY decline.

- Australia Treasurer Morrison remarked that it was now pointless to forecast when Australia budget returns to surplus as long as the govt is making efforts to get there. Morrison was optimistic about next year, but also cautious in terms of higher spending to compensation for slow growth. Recall the latest MYEFO pushed back expectations for Australia to return to surplus by 1 year to FY20/21.

- In Korea, Fin Min Choi reiterated that the key risks to economy are the Fed rate hike and China slowdown. Remarks were intended to bolster sentiment after the biggest decline in Korea's industrial output in 10 months boosted speculation of more BOK easing early next year. Separately, Financial Supervisory Service (FSS) reported that creditors requested that as many as 19 large companies restructure their debt in 2016. Regulators continue to curb crossholdings, with request for Hyundai Motors to cut their holding of Hyundai Steel, whose shares then fell nearly 5%.

- Singapore-listed Noble Corp trading house was back in the spotlight after hiring advisors regarding strategic alternatives just a few months ago. Shares were down 8% after Moody's cut company rating to junk, citing concerns over the company's liquidity amid prolonged commodity downcycle. In response, management said the rating agency failed to differentiate between challenging market for upstream firms and opportunities for commodity traders.

Equities

US equities/ADRs:

- BLDP: Subsidiary Protonex secures follow-on power manager product order for $2.8M from U.S. Army; +13.3% afterhours

- NERV: Updates MIN-101 clinical development program; European Phase IIb trial enrollment completed and FDA accepts Investigational New Drug (IND) application; +4.0% afterhours

- PBY: Bridgestone will not counter latest bid for Pep Boys; -3.3% afterhours

Asia by sector:

- Technology: LG Electronics 066570.KR +2.1% (positive broker commentary) - Materials: China Sandi Holdings Ltd 910.HK +8% (update on acquisition); Hyundai Steel Co 004020.KR -4.6% (Hyundai Motor ordered to sell stake)

- Financials: Noble Grop NOBL.SG -8.0% (Moody's cuts rating to junk)

- Technology: Otsuka Corp 4768.JP -1.3% (FY results speculation); Toshiba 6502.JP +5.5% (may sell medical devices unit)

- Industrials: Nippon Paper 3863.JP +1.8% (9-mo results speculation); Nidec 6594.JP +1.3% (CEO sees more acquisition opportunities)