Asian Market Update: Japan's trade surplus rises to 15-month high; Asia Development Bank upbeat on China, East Asia on stimulus impact; Hyundai Motor Q2 net profit rises record 48% y/y

- Asian equity markets are trading firmer in the latter part of the Asian session in a repeat of prior day's action, with the tech sector leading the way across regional bourses following more strong results out of US tech firms. Qualcomm and Sandisk both joined the Q2 earnings fray that has been underscored by outstanding tech names, topping estimates on both the bottom and the top line, even as those shares dropped afterhours on cautious Q3 guidance. June Merchandise Trade Balance from Japan and bullish outlook from Asia Development Bank on the region were also helpful in supporting the buying late in the day, as Nikkei and Hang Seng led the way with 1% and 2% respective rallies. Korea's Kospi lagged the leaders with a 0.5% rise, while S&P/ASX was right around unchanged levels with just about 90 minutes left in trading.
Ahead of the US session, front-month S&Ps are at session highs above $953, up 0.4%, and benchmark yields remained underpinned above 3.50%.

- Japan's June merchandise trade balance was the centerpiece of an otherwise bare economic calendar for the day. Even though, ¥508B surplus missed ¥610B estimate, the figure marked its highest level since March 2008 and a sharp improvement from upwardly revised ¥309.5B. Y/Y declines in exports and imports were roughly in line with estimates at -35.7% and -41.9% respectively, as the exports decline slowed from prior month's -40.9%. Both crude and coal imports also implied expanding industrial capacity with slowing contraction relative to prior month's declines. In second tier data out of Singapore, June CPI fell 0.5% on both M/M and Y/Y basis, roughly in line with both estimates.

- Semi-annual economic review from Asia Development Bank offered a rosier view for China and East Asia countries for the second half of 2009, citing the notable impact of stimulus measures possibly leading to a V-shaped rebound. ADB said China's GDP was likely to top its former 7% target, while East Asia could grow faster than 3% earlier forecast in 2009 and as much as 6% in 2010. In some of the notable regional economies, ADB saw Hong Kong fall below -2%, Singapore fall below -5%, South Korea fall about -3% and Taiwan fall below -4% in 2009.

- In equity news, Hyundai Motor reported late in the session, shocking the market with a record net profit increase of 48% y/y in Q2. Net profit came in at KRW811.9B v KRW446Be, Op Profit rose to KRW657.3B v KRW465.9Be, and sales topped estimates at KRW8.08T v KRW7.77Te. The company also noted it boosted its overall market share in the first half to 5% from 4.3% y/y. In other notable equity developments, Elpida rallied 2% after Taiwan's public-private joint venture was rumored to invest 9.5% in the company, and NEC Crop gained 4% on press report of a point of sale system offer in Europe as part of a JV with Dutch telecom Centric. Elsewhere on the Nikkei, KDDI fell 2% after cut to neutral at Goldman Sachs and Takeda was unaffected by FDA extending its review of fixed-dose diabetes treatment alogliptin and ACTOS to Sept 4.
In Sydney, NAB lost 5% following A$2.2B equity placement in the prior session, and Santos fell slightly after its Q2 Rev of A$484M fell well short of y/y A$749M sales levels.

- In the latest installment of the China - Rio Tinto espionage dispute, Australian press reported that China's Vice Foreign Minister He Yafei said there is sufficient evidence to charge imprisoned Rio Tinto executive Stern Hu with illegally obtaining state secrets, even though investigations were ongoing. In response, Australia's Foreign Minister planned to hold more talks with Chinese authorities, also noting that no timetable was currently seen for charges against the detained Rio executive.
On a related note, negotiations between miners and Chinese steelmakers on price contracts remained tense, with Hunan Valin Chairman reiterating that China will not accept 33% iron ore price cut.

- In currencies, European and commodity majors retained their bullish bias against the greenback, approaching intraday highs seen earlier in the US session. EUR/USD rose to 1.4250, GBP/USD extended the post-BOE minutes advance to 1.65, and USD/CHF traded below 1.0650. In commodity FX, AUD/USD approached 0.82 and NZD/USD rose above 0.66, while Japanese Yen was sharply lower across the board as USD/JPY rose nearly one big figure to 94.30, EUR/JPY tested 134, and GBP/JPY nearly broke 155.50.

- Crude oil prices have moved into positive territory after opening lower. Oil prices have been supported on the session by the gains in Japanese equities and the weaker dollar. During the US session, the US Department of Energy disclosed that weekly oil inventories declined less than expected, while gasoline inventories rose more than expected (DOE CRUDE: -1.8M V -2ME; GASOLINE: +813K V +750KE). In Japan, weekly oil product inventories rose to 12.5M kiloliters from 12.4M prior, while gasoline stocks declined to 2.24M kiloliters from 2.27M. In other Japanese news, the country's June crude oil imports declined by 19.1% y/y against a prior drop of 63%. In terms of OPEC news, Kuwait's Oil Minister was quoted as saying that he believed $65/bbl is a reasonable price for oil, after he noted in late June that $75-$80/bbl was a fair price level. At the time of writing, spot gold is gaining and trading above $950/oz, after rising more than $6 during the NY session. For the week, gold prices have risen 3 out of 4 sessions as the Euro rose to a 6-week high against the dollar earlier this week. With respect to physical demand for gold, the SPDR Gold Trust ETF disclosed that it holdings declined by 5.8 tons to 1,086.6 metric tons as of July 22, after paring its holdings by 2.1 tons on July 21. In other metals news, Shanghai copper prices have risen more than 1%, after it was reported during the prior session that China's refined copper imports rose to a record 378,900 tons in June. Additionally, copper prices have been supported by a recent power malfunction at the Chilean Collahuasi copper mine, which had 2008 production equal to 415,000 tons. According to reports, the power problem will cause output at the mine to be reduced.