Asian Market Update: China trade surplus falls as decline in imports contraction outpaces exports; BOJ raises economic assessment with no mention of asset buying expiry plans


ECONOMIC DATA

- (NZ) New Zealand Sept REINZ House Sales: 43.7% v 39.0% prior (4-month high)

- (AU) Australia Oct Westpac Consumer Confidence: 1.7% v 5.2% prior (5-month low)

- (JP) Japan Sept Domestic CGPI M/M: 0.1% v 0.1%e; Y/Y: -7.9% v -7.9%e

- (CH) China Sept Trade Balance (timing uncertain): $12.9B v $17Be; Exports: -15.2% v -21.0%e (Lowest decline since Dec 2008); Imports: -3.5% v -15.0%e (Lowest decline since Oct 2008)

- (JP) Japan Sept Tokyo Condo Sales: 26.2% v -6.2% prior (first increase in 2 years)

- (JP) Bank of Japan interest rate decision: On hold at 0.10%; Raises economic assessment for 2nd consecutive month; No mention corporate bond buying

- (KS) South Korea Sept Unemployment Rate: 3.6% v 3.8% prior

- (JP) Japan Sept Consumer Confidence: 40.7 v 41.3e; Confidence Households: 40.5 v 40.1 prior


SPEAKERS/PRESS

- Asian equity markets continue to trade moderately higher, gaining on blowout Q3 results from Intel as well as fresh signs of economic recovery in China, courtesy of its strong September trade report. While the overall trade balance came in below estimates at $12.9B, both exports and imports components saw their relative rates of decline falling off to multi-month lows. Imports were particularly striking, with those contractions falling to 12-month lows, portending a more sustainable internally-driven bounce. Shanghai Composite accelerated its gains after the release of the trade data, leading the way in Asia with a 2.4% rally to trade above 3,000. In other major Asian bourses, Korea, Australia, Taiwan and Hong Kong are all up about 1%. Nikkei225 is the laggard, entering the final hour of trading flat due to US carryover weakness in the financials sector. Ahead of the Wednesday open, front-month S&Ps are up 0.8% at 1,077, with Wednesday pre-market highlighted by retail sales data and earnings out of JP Morgan.

- Bank of Japan left overnight call rates unchanged at 0.10% minimum as expected but raised its economic assessment for the second consecutive month. In a unanimous decision, BOJ saw financial conditions showing signs of improvement on rising exports and production. Moreover, policymakers saw better corporate environment for large manufacturers, along with moderation in CAPEX rates of contraction. Japan central bank did note that downside risks to economy remained high, potentially leading to further contraction in inflation. Conspicuously absent from the Bank of Japan decision was any mention of the timeline for corporate bond / commercial paper buying set to expire at the end of December. Going into the decision, sources noted that BOJ may commit to ending those monthly quantitative easing measures as scheduled, while Deputy Finance Minister Minezaki noted the administration will not request for Bank of Japan to delay vote on corporate bond buying. Instead, Bank of Japan statement vaguely suggested that future policy would be determined by the economy in an apparent move to extend its decision on QE to November/December decisions.

- In other notable speakers, Treasurer Swan said the decline in consumer confidence data demonstrates that preserving stimulus measures are vital to keep Australians employed. Over in Hong Kong, Financial Secretary Tsang expressed confidence the economy would extend its recovery in the 2nd half. In Malaysia, MIER agency was more cautious, warning the economy may need another stimulus package while urging central bank not to raise interest rates because of the "slow and fragile" recovery conditions. South Korea saw continued improvement in its labor sector, with jobless rates falling to 7-month lows of 3.6% from 3.8% prior.

- Earlier in the session, Reserve Bank of New Zealand published a report suggesting it would look to end its crisis liquidity facilities, removing its term-auction facility and weekly RBNZ bill tender. Subsequently, September REINZ House sales registered a 4-month high of 43.7% y/y growth coupled with multi-month high median price of units sold. NZD firmed up substantially on both the evidence of a liquidity drain by the central bank and signs of returning stability and growth in the housing market, as traders interpreted the events as potentially forcing RBNZ to tighten interest rates sooner.


EQUITIES 

- In its Q3 market update, Australian miner Rio Tinto noted raised its 2009 iron ore production target to 210-215M tons from 200M tons prior. The higher iron ore output forecasts comes as Rio Tinto's CEO noted that the company is seeing signs of a recovery in some of its key markets and that its shipments to China have remained at a "high level" For Q3, Rio Tinto's iron ore production rose by 12% y/y to a new quarterly record of 47.5M tons, while refined copper output rose by 46% y/y. In other Aussie materials names, Lihir Gold said it may bring back a dividend payment for the first time since 2003, and Iluka guided Q3 revenue up 30% y/y, with higher sales across all product sectors.

- Over in Japan, Hino Motors was reported to have posted a narrower than expected H1 loss. On the Taiex, Taiwan Semi may see its 2010 revenue rising by at least 20%, and Asustek saw 2010 notebook shipments rising 20% as well. In South Korea shares, WSJ saw Samsung Q3 profits benefiting from strength in its chip and display divisions.


CURRENCIES/FIXED INCOME/COMMODITIES 

- In currencies, US dollar continued to fall against European and commodity majors on broad risk appetite. EUR/USD rose to 14-month highs above 1.4880, GBP/USD advanced to 1.5980, and USD/CHF traded below 1.02. In commodity FX, AUD/USD rose to multimonth highs above 0.9140, and USD/CAD fell to 1.0260's. NZD/USD also traded higher after housing data and RBNZ report, retesting 0.74. Japanese Yen rallied across the board, benefiting from Deputy Fin Min Minezaki calling for non-intervention in FX markets. USD/JPY fell below 0.89 and EUR/JPY traded down 100 pips to 132.30 despite EUR strength.

- Crude prices have gained more than 1% and have moved above $75/bbl for the first time since Aug 25. Oil prices continue to benefit from the weaker dollar, along the rise in risk appetite following the better than expected financial results from Intel. In terms of oil demand, during yesterday's European session OPEC, in its Oct report, raised its 2010 oil demand forecast by 700K bpd to 84.9M bpd. Looking ahead, corporate earnings and the later today release of the weekly API US oil inventories data could give some more direction to oil prices. Spot Gold prices rose to a fresh record high above $1,069.70/oz earlier during session, as the US dollar index moved to a multi-month low. As the theme of central bank diversification from the US dollar continues to gain momentum in the press, on today's session, Taiwan's Central Bank Gov Perng was quoted as saying that the central bank may increase the portion of its foreign exchange reserves that are held in gold. As of the end of Sept, Taiwan's fx reserves totaled $332B.

- In China, the customs department disclosed that iron ore imports in Sept rose to a new record of 64.6M tons v 49.7M in Aug. On a related note, China's Wuhan Steel said the country faces a "severe" steel oversupply. China's Sept copper imports rose to 399K tons from 325K tons m/m, while oil imports fell to 17.2M tons from 18.5M tons in Aug.