Asian Market Update: Asia Development Bank raises China, India GDP forecast; New Zealand Dollar rises to 13-month highs vs USD on Current Account surplus, positive Fonterra payout announcement


ECONOMIC DATA

- (NZ) New Zealand Q2 Current Account Balance (NZ$): +124M V -1.98BE (First surplus since Q1 of 2003); Account Deficit/GDP Ratio: -5.9% v -7.4%e; Exports: NZ$10.9B v NZ$10.8B q/q; Imports: NZ$9.2B v NZ$9.5B


SPEAKERS/FIXED INCOME/FX

- Asian equity markets are trading mixed for the second consecutive session, with volatility once again subdued by a bank holiday in Tokyo. With just over two hours to go in Sydney, S&P/ASX is marginally down by 0.1%, as gains in the Tech sector are counterbalanced by the slide in energy. Both Taiwan's Taiex and Shanghai Composite are also weaker just slightly. Korea's Kospi and the Hang Seng are both in the green by 1% and 0.5% respectively, with technology and consumer goods sectors leading the way to the upside in both markets.

- Asia Development Bank helped reignite risk appetite in the region, raising its 2009 GDP forecast for China to 8.2% from 7.0% and also upping its India estimate to 6% from 5%. Overall, ADB saw Asian growth at 3.9%, up from 3.4% view offered in the past. ADB was just as upbeat on the nature of recovery, calling for a V-shaped bounce even as external demand remained uncertain. On the downside, ADB saw non-performing loans and overinflated asset bubbles for China as some its downside risks.

- In Australia, the Bureau of Agricultural and Resource Economics (ABARE) saw 2009-10 commodity exports earnings forecast at A$158.3B. That level is down from prior year's A$197B and June forecast of A$160B. However, ABARE's iron ore export forecast was raised by 12.6% to 381M tons, helping the agency justify increasing its AUD/USD forecast to $0.83 from $0.77. ABARE also said the global economy may have stabilized.

- In other regional markets, South Korea Vice Minister of Knowledge Economy Ministry reiterated yesterday's Customs Agency view that September export levels would improve. Recall yesterday, the agency saw Sept export levels declining -10.4% v -20.6% prior. Going forward, Knowledge Economy Minister saw November as the most likely month when exports would start declining on y/y basis. Elsewhere, Bank of Korea Report said the central bank may use monetary policy to calm the property market. In Vietnam, local press cited Planning and Investment Ministry forecasting 2009 GDP growing 5.0-5.2% and 2010 GDP seen at 6.5%. In terms of Taiwan-China investment partnership, China's Taiwan Affairs Office said it would push for normalization of ties with Taiwan, confirming plans to sign both the financial memorandum of understanding (MOU) and a bilateral trade agreement.


EQUITIES

- New Zealand's Fonterra contributed to the local bullish sentiment from strong current account data, raising its milk payout forecast for 2009/10 to NZ$5.10/kg from NZ$4.55 on the back of broad strength in demand and higher dairy prices. A separate survey of New Zealand farmers echoed that sentiment, with 22% calling for improvement in conditions from 12% prior. In Korea, Hynix Semiconductors rallied 2% after the company noted that the rising trend for DRAM prices would continue for "a while". Samsung Electronics was also 3% higher after Citi maintained a Buy recommendation and upped its price target to KRW1.03M. In Australia, Newcrest said its O'Callaghans deposit located near the Telfer gold mine in Western Australia could become the world's biggest tungsten mine by 2013, estimating total deposits contains copper, zinc, copper, lead and tungsten to be valued around $4B. OneSteel reflected on consistent increase in domestic demand, while CSL said it was selected to provide flu vaccines in Australia amid medical official speculation over the possibility of a second pandemic flu wave. In Taiwan, MediaTek was said to be looking into acquiring an office building in Shanghai and recruiting Chinese R&D workers to take advantage of growth of the mainland mobile 3G market. Separately, a WSJ report suggested Taiwanese flat-panel companies could face competitive threats from firms in South Korea and Japan, as firms of those countries begin to set up advanced manufacturing plants in mainland China. The report names companies such as Sharp, LG Display and Samsung Electronics benefiting by Chinese government incentives.


CURRENCIES

- In currencies, Kiwi Dollar was the strongest performer among the majors after the first current account surplus in New Zealand in 6 years, with gains accelerated by the announcement out of Fonterra. NZD/USD picked up 120 pips, rising to 13-month highs above 0.7150. Kiwi crosses were also extremely firm, with NZD/JPY rising toward 2009 highs around 66.00 and AUD/NZD falling to 5-month lows below 1.2120. Other commodity majors gained as well: AUD/USD rose nearly one big figure to 0.87, and USD/CAD sold down over 40 pips below 1.0750. In European majors, the recent greenback rally took a backseat to resurging risk appetite. EUR/USD recouped 1.47 handle, GBP/USD advanced above 1.6250, and USD/CHF dropped below 1.03. In emerging Asian currencies, South Korea FX authorities were said to have intervened in the markets for the second consecutive session, buying dollars to curb the KRW rally. An FT editorial by UBS FX strategist urged coordinated G-7 intervention to slow the dollar slide, suggesting that the collapse of the greenback would have "grave consequences" for the rest of the world.


COMMODITIES

- Crude oil prices are currently trading above $70/bbl. Oil prices are benefitting from the weaker dollar and the Asian Development Bank's decision to raise China 2009 and 2010 growth forecasts. During the NY session, oil prices declined sharply and closed below $70/bbl on the firmer dollar. Looking ahead, oil prices may receive some direction from the later today release of US weekly API inventories data. Spot Gold prices are higher and trading comfortably above $1,000/oz, supported by the weaker dollar. In terms of physical demand for gold, the SPDR Gold Trust ETF increased its holdings by 15.3 metric tons to a total of 1,102 metric tons.