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Asia Market Update

Taiwan Equities Sink as Economic Cooperation with China is Said to be Delayed

Mon, Jul 13 2009, 12:24 GMT
by Trade The News Staff

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Asian Market Update: Taiwan Equities Sink as Economic Cooperation with China is Said to be Delayed; Japan's Aso Announces Election Date; Kiwi Shrugs Improved Retail Sales as Risk Related FX, Energy Slump Again

- Asian equity markets mimicked the pattern set in on Friday, opening slightly higher before plunging into the red across the board. With about 2 hours in Tokyo trading, Nikkei225is at its lowest level since May 22nd below 9,200, S&P/ASX is off by over 1%, and Korea's Kospi - a recent outperformer more prone to profit-taking - is down over 2%. The biggest regional decliner for the session however is Taiwan's Taiex, losing over 3% after trading down by as much as 3.6%. Earlier in the session, Taiwan's Minister of Mainland Affairs Council tempered expectations of a speedy investment tie-up with China, stating that cross-strait economic cooperation agreement talks will not start until next year because Taiwan's economic ministry has yet to complete an evaluation of the pros and cons of an economic cooperation pact. Back on July 6th, Taiwan's Economic Minister said talks with China on the technical issues relating to this politically highly contentious economic agreement were planned for October. Ahead of the US open, front month S&Ps are also around session lows down 0.6% at $869, and benchmark yields are back below 3.30%.

- In notable economic data, New Zealand May Retail Sales figure registered its biggest monthly gain since June 2008 at 0.8% v 0.2% expected but could not pull the Kiwi out of the overall session weakness, as kneejerk NZD bounce was quickly extinguished. In second tier economic data from Japan, May Final industrial production was revised to 5.7% from 5.9% and capacity utilization was lower at +8% v the previously reported 10.2%. Additionally, Japan's June Consumer Confidence was 38.1 v 39.5 expected and Households confidence was 37.6 v 38.5 consensus.

- The session also saw a fair amount of politically oriented twists. In Japan, PM Aso, whose LDP coalition was poised to lose the majority vote in the Tokyo metropolitan assembly following Sunday's elections, resolved to finally call a general election on August 30th. Ahead of that vote, the Diet would be dissolved on July 21st. Over on the Korean peninsula, CIA intelligence revealed that North Korean leader Kim Jong-il may be suffering from pancreatic cancer, estimating that his chances of surviving another 5 years were not probable.

- In equity news, spirits maker Kirin Holdings traded higher after press speculation the company was in merger talks with Kirin, even though the company denied that rumor. In the tech sector, Toshiba's operating loss was estimated at ¥50B vs loss ¥74B y/y, and in notable auto names, Mitsubishi said it planned to lower its production capacity in Russia. Outside Japan, the Rio Tinto - China espionage conflict entered a new phase when China's president Hu personally endorsed the Ministry of State Security's probe of company executive Stern Hu and 3 other workers. In response, Australia's foreign minister warned that China should consider the impact on trade and business in light of the recent escalation. In the mean time, Rio Tinto continued to decline despite a slight bounce in Shanghai metal prices. On the positive end of Aussie mining sector, Fortescue metals traded up about 5% after posting a solid Q4 production and shipments. Moreover, company CEO forecasted production would rise further while costs continue to decline, and noted that order bookings were solid over near term. Elsewhere in Sydney, Virgin Blue was halted after Aussie press speculated the company may seek to raise A$400M through a share sale.

- In currencies, risk aversion continued to benefit the greenback against European and commodity majors even as Japanese Yen traded around unchanged in a narrow 92.40-90 range. EUR/USD fell below 1.3920 while Sterling was notably more weaker on rumored 13B pound writedown at Lloyds, shedding nearly one big figure from 1.62 to 1.61. In commodity FX, AUD/USD traded down to Friday lows around 77.50, USD/CAD rose to 1.1650, and NZD/USD pared post-retail sales bounce to decline to 0.6230's.

- Crude oil prices have moved into negative territory and are trading below $60/bbl. Oil prices are being weighed down by the declines being seen in most Asian equities indices and the firmer dollar. So far, energy markets have failed to react to a report which noted that Nigerian rebel group MEND attacked the Atlas Cove oil jetty in the Lagos state, in addition to a nearby depot and loading tankers. The Atlas Cove jetty is used to off-load tankers and pump petroleum products to the Atlas Cove depot for storage. In terms of US oil demand, in the most recent Lundberg survey, the average price of regular gasoline at US filling stations declined by 3.9% to $2.56/gallon in the two weeks ended July 10. According to Lundberg, the lower gasoline prices were due to the drop in crude oil prices and lower demand. Spot Gold has moved off of its best levels, as the USD has rebounded against the European major and commodities currencies.

Published on  Mon, Jul 13 2009, 12:27 GMT

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