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Asia Market Update

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RBA tightens rates for record third consecutive month

Tue, Dec 1 2009, 07:10 GMT
by Trade The News Staff

TradeTheNews.com

Asian Market Update: RBA tightens rates for record third consecutive month; Japanese Yen plummets after surprise Bank of Japan emergency policy meeting announcement

ECONOMIC DATA

- (AU) Australia Nov AiG Performance of Manuf Index: 51.2 v last 51.7 (second consecutive monthly decline, 4-month low)

- (KS) South Korea Nov Exports: 18.8% v 22.8%e; Total Imports: 4.7% v 8.6%e; Trade Balance: $4.1B v $3.63B prior

- (AU) Australia Oct Building Approvals m/m: -0.6% v 2.0%e; Y/Y: 11.7% v 9.6%e

- (CH) China Nov PMI Manuf: 55.2 v 55.7e

- (KS) South Korea Nov Manufacturing PMI: 52.6 v 52.5 m/m - HSBC

- (TA) Taiwan Nov HSBC Manuf PMI: 58.4 v 59.8 prior

- (CH) China Nov HSBC Manuf PMI: 55.7 v 55.4 prior (record high)

- (TH) Thailand Nov CPI m/m: 0.3% v 0.2%e; y/y: 1.9% v 1.8%e

- (AU) RESERVE BANK OF AUSTRALIA (RBA) RAISES CASH RATE BY 25BPS TO 3.75% (AS EXPECTED)

- (KS) South Korea Nov CPI m/m: 0.2% v 0.0%e; y/y: 2.4% v 2.2%e

- (IN) India Nov PMI: 53.0 v 54.5 prior

- (JP) Japan Nov Vehicle Sales: 36.0% v 12.6% prior (multi-year high)

- (AU) Australia Nov RBA Commodity Index: -25.3% v -30.3% prior

SPEAKERS/PRESS

- Asian equity markets are in the green across the board, tracking the last hour rally on Wall Street while shrugging the disappointing China manufacturing PMI. Nikkei225 is leading the way just ahead of session close with a 2.3% rally, cheering the surprise Bank of Japan announcement of an extraordinary policy meeting said to consider additional monetary easing measures. In Sydney, S&P/ASX is lagging the regional rally with a 0.4% session gain on further liquidity drained by the central bank 25bp tightening. Elsewhere, the Kospi, Hang Seng, and Shanghai Composite are all up just over 0.5%, while the Taiex is up 0.9%. Ahead of the Tuesday US session, front-month S&Ps are at session highs, up 0.2%.

- Reserve Bank of Australia extended its rate tightening cycle for the record third straight month, raising cash rate by 25bps to 3.75% as widely expected. The central bank mainly reiterated its prior month's language, citing improvement in global economy and aiming to keep inflation rate close to target. The RBA did note that the impact of early fiscal stimulus is fading and that unemployment may continue rising, defusing speculation of a more aggressive tightening going forward.
Some analysts have also suggested that a month between the RBA's next meeting may have helped the policy board ignore some of the weak economic data in recent weeks, as in-line commentary and profit-taking failed to give AUD a bid following the decision. Speaking after the decision, Treasurer Swan - a more dovish policymaker - conceded that the economy is recovering but that unemployment is likely to continue to rise, noting that some spare capacity in the economy still exists even as monetary and fiscal stimulus condtions are being withdrawn.

- The muted market response to the tightly contested Aussie central bank decision was further overshadowed by the fireworks at the Bank of Japan, where anticipation of augmented quantitative easing sparked the selloff in the Yen as well as a spike in JGB and Tokyo equity markets. Ahead of the central bank announcement, Japanese policymakers kept up their pressure on the BOJ. Banking minister Kamei said the BOJ must consider if there are additional ways to ease policy further, Deputy PM Kan noted that the central bank should support the economy considering expectations of larger than expected fiscal spending plan, and Fin Min Fujii suggested that more quantitative easing would have material impact on the economy. Former Japan MoF official Sakakibara was less optimistic, stating that the impact of QE would be limited while forecasting double-dip recession to hit Japan in 2010 as USD/JPY falls to 80.00 by March.

- In China, November manufacturing PMI was somewhat disappointing at 55.2 v 55.7e, in line with prior levels. Notably, new orders component saw its first decline in 4 months at 58.4 v 58.5 prior, and new export orders fell markedly to 53.6 v 54.5. Meanwhile, local press reflected on Premier Wen comments suggesting that the govt may undertake measures to curb speculative asset price appreciation in real estate to avoid Dubai-like debt levels, just as China's FX regulator noted that inflow of funds into China has risen.

EQUITIES 

- In individual equities, capital raise developments from by Tokyo financials failed to quell risk appetite in Japan. Mitsubishi UFJ underwriters were said to be offering the previously announced 1T in shares at a 3-5% discount, while Sumitomo Mitsui announced it would sell 2018 bonds through its banking unit, with sum of the capital raise to be decided on Dec 4th.
Elsewhere on the Nikkei, Japanese press said Sony would acquire a 7% stake in Sharp TV panel plant.

- Over in Sydney, Westpac raised its mortgage rate by 45bps, exceeding RBA 25bp tightening, noting that home loan rate increase reflects funding pressures. Metcash reported H1 earnings in line with net A$109.2M v A$110Me on sales of A$5.7B v A$5.5Be, also reaffirming its FY10 EPS guidance. Woodside Petroleum confirmed press speculation that some of its Pluto LNG location workers are on strike, and Qantas reported a 3.4% m/m increase on Oct load factor. In Korea, Hyundai Motor reported a 33% y/y increase in Nov auto sales to 309K units.

CURRENCIES/FIXED INCOME/COMMODITIES 

- In currencies, European majors traded lower against the greenback despite the equity market gains. EUR/USD fell below intraday low near 1.4980 before bouncing higher, GBP/USD retested the downside of 1.64, and USD/CHF briefly rose above 1.0070. In commodity majors, the Aussie fell about 50pips in the aftermath of the RBA decision, with rate hike largely priced in and the absence of more hawkish language justifying profit-taking. Japanese Yen fell over a big figure across the board after the BOJ plans for an unscheduled meeting, with USD/JPY reaching 87.40 and EUR/JPY rising to 131.20.

- Spot Gold prices are lower and trading near $1,176/oz. In terms of physical demand for gold, India's gold imports in November declined to 16 tons vs. 34 tons y/y. Looking ahead, India's Dec gold imports are seen at 8-10 tons. As of Nov 30, the SPDR Gold Trust ETF disclosed that its holdings rose by 2 metric tons to 1,130 tons. Additionally, the iShares Silver ETF disclosed that it holdings rose by 1.5% to a record 9,252 tons. Crude oil prices are marginally lower, and trading near $77/bbl. During yesterday's NYMEX session, oil prices gained by more than 1.5% on US manufacturing data and the easing of concerns related to Dubai World. Upcoming event risks for oil prices include the later today releases of US Nov ISM manufacturing data and weekly API inventories data.

Published on  Tue, Dec 1 2009, 07:14 GMT