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Asia Market Update

Korea Q2 GDP leaps to 5−year high

Fri, Jul 24 2009, 06:27 GMT
by Trade The News Staff

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Asian Market Update: Korea Q2 GDP leaps to 5-year high, Samsung and Hynix earnings top forecasts; Asia equities shrug weak Microsoft, Amazon top line

- Asian equity markets are looking to cap a strong week of gains with a final Friday rally, as bullish bias overcame soft revenue reports from Microsoft, Amazon and American Express. All three US giants shed over 5% after reporting afterhours, while front-month S&Ps traded about 0.5% lower below $965 on expectations of profit-taking. Asian bourses are undeterred however, with basic materials and tech leading the chase of the strong market hours session on Wall St. With just 90 minutes to go, Nikkei225 and S&P/ASX are both up about 1% and Korea's Kospi is up 0.4% above 1,500 despite solid economic and corporate results.

- South Korea's Q2 Preliminary GDP offered more evidence of the economy on the mend, coming in at 2.3% on q/q basis - the highest rate of growth since Q4 of 2003. The figure also topped 2.2% consensus estimates, marking the primary economic event in an otherwise data-light session. Recall Korea has narrowly dodged a recession in Q1 with a final 0.1% print, helped by one of the most generous stimulus packages as measured on a relative to historic GDP levels basis. Once again however, local officials remained remarkably cautious following the strong Q2 growth data. Bank of Korea's Kim warned that domestic demand could still slow because of ongoing challenges presented by the slumping jobs market. In turn, the local finance ministry suggested that despite the data, it was not yet appropriate to consider an exit strategy from the fiscal stimulus.

- In Korea's corporate sector, chipmakers Samsung and Hynix bolstered the case for tech leading the regional export economies out of recession. Hynix reported Q2 net loss of KRW50.7B - more than half below the loss of KRW108.8B expected - while sales topped estimates of KRWT1.54e at KRW1.7T. Hynix saw its NAND memory prices rise 23% q/q and shipments improve 40% for the reporting quarter. Looking forward, Hynix saw more favorable business conditions in the second half with a 20% DRAM price increase even as shipments were only forecasted to rise in the single digits. Samsung Q2 results appeared even more impressive, with net profit rising to KRW2.3T v KRW1.7T expected and sales coming in at KRW21T v KRW20T expected. Recall Q1 Net profit was KRW619B and Sales were seen at KRW18.6T. Specifically, Q2 chip sales were KRW5.05T v KRW4.5T expected and LCD sales came in at KRW4.6T v KRW4.5T expected. Looking to Q3, Samsung expected DRAM prices to continue rising in low teens, TV panel prices to rise mid-single digits, and NAND prices to remain flat. Despite the results, the company did say it would stay cautious on the remainder of 2009 amid potential headwinds from rising won and competition.

- Outside Korea, Japan's finance minister Yosano cheered strong exports figures released in the prior session. Among notable Nikkei names, Fujitsu picked up 6% after a 1-yr price target upgrade from Goldman Sachs, and Advantest rallied 5% after Japanese press speculated the company's chip-testing equipment topped ¥10B in the current quarter. In Sydney, Australia's trade minister warned that trade relations with China were threatened by ongoing detainment of Rio Tinto workers. Separately, a US think tank speculated that Rio Tinto's Hu is most likely to be deported as persona non grata rather than stand trial. Other regional officials continued to down play Australia's rift with China however. According to local press, West Australian Premier Colin Barnett assured Chinalco president Xiong Weiping of special attention extended to Chinese investors, with the feature also noting that despite its failed bid for Rio Tinto, Chinalco is still looking to invest in Australia's mining resources. In Aussie equities, Woodside Petroleum rallied 1.5% on more crude strength even though Q2 sales came in at A$938M, shy of A$1.09B in the prior quarter.

- In currencies, USD consolidated the sharp gains seen against European and commodity majors in late US hours. EUR/USD traded between 1.4140-80, down from 1.4280 intraday peak. GBP/USD remained just below 1.65 and USD/CHD traded around 1.0740, while in commodity FX, USD/CAD pared some of the post-BOC outlook drop, retesting the upside of 1.09.
AUD/USD bounced higher from 0.8110 to 0.8150, and NZD/USD was in a thin 0.6520-60 range. Japanese Yen traded slightly firmer, with uSD/JPY falling to 94.60 from 95.20 session high.

- Crude oil prices are lower, but have moved off of their worst levels. Oil prices are tracking the weakness in S&P 500 Futures, following the results from technology heavyweight Microsoft. Spot gold prices are little changed and trading around $950/oz, as the EUR/USD currency pair has been range bound for most of the session.

Published on  Fri, Jul 24 2009, 06:30 GMT

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