Asian Market Update: Moody's raises China, Hong Kong outlook to Positive; Australia markets rally on strong housing data; USD plummets after IMF report brands it as "funding currency" that is still overvalued


ECONOMIC DATA

- (NZ) New Zealand Oct QV House Prices Y/Y: 0.2% v -1.1% prior (first increase in 16 months)

- (JP) Japan Oct Official Reserve Assets: $1.06T v $1.05T expected

- (AU) Australia Oct ANZ Job Advertisements M/M: -1.7% v 4.4% prior (First decline since July)

- (AU) Australia Sept Home Loans: 5.1% v 3.0%e (6-month high); Investment Lending: -0.1% v 8.3% prior; Value of loans: 6.7% v -2.7% prior

- (KS) South Korea Oct PPI Y/Y: -3.1% v -2.6% prior (3-month low and 6th consecutive decline)


SPEAKERS/PRESS

- Asian equity markets are shrugging the new multi-year high US unemployment rate reported on Friday, tracking the gains in the US indices with a broad-based rally. Aussie equities are leading the charge with a 1.8% gain, accelerating the advance after reported 6-month high in Australia home loans. Note, the 5.1% home loans increase was for the month of September, ahead of the October start of the RBA tightening cycle. Entering the final hour in Tokyo/Korea trading, Nikkei225 is up 0.3% and the Kospi is up 0.6%. In other regional bourses, Taiex and Hang Seng are both up about 1%, while Shanghai Composite is the single decliner by 0.5%. Ahead of the week's first trading session in the US, front-month S&Ps point to another higher open with a 0.3% rally to 1,070.

- G20 summit over the weekend took a rather small step toward the eventual coordinated global fiscal stimulus exit. The communique said the economic recovery remains uneven and over-dependent on stimulus. Furthermore, global finance ministers remained concerned with high unemployment, pledging to maintain stimulus until economic recovery is assured.
Policymakers did put into place a rough timeline for stimulus exit process. According to the preliminary plan, G20 would set out the national and regional policy frameworks by the end of Jan 2010 before an assessment stage set for April 2010 and recommendations for individual policy options by June 2010. Among regional Asian speakers at the G20 summit, Japan's Deputy Fin Min Noda said the local economy is recovering but still lacks sustainability, while his Chinese counterpart urged for stability of global reserve currencies with greater attention paid to securing a more lasting economic growth via fiscal policy. The IMF prepared its own downbeat assessment of conditions for G20 consideration, urging policymakers to maintain accommodative stance on monetary and fiscal fronts amid an overall sluggish recovery and prospects of a low inflation rate.

- In notable Monday speakers in Asia, China's Stats Bureau said the Y/Y CPI was expected to keep declining, with M/M CPI increases to continue slowing. Later in the session, Moody's raised China's sovereign rating outlook to "Positive" from "Stable", citing the success of the government in steering the country through the global economic crisis. In regional press, Singapore PM Lee was said to target 2010 GDP growth at 3%, while Taiwan govt was said to have allocated NT$50B to support the local equity market ahead of next month's elections.


EQUITIES

- In individual names reporting 1H earning in Japan, both Nippon Telegraph and Isuzu Motors posted disappointing results. The former missed with Op Profit ¥646.8B v ¥684Be, while the latter saw losses wider than expected, with H1 Net loss ¥27.8B v loss ¥26Be, Op loss ¥20B v loss ¥20Be, Rev ¥442.8B v ¥460Be. In other Nikkei auto names, Nissan CEO Ghosn said the global market has likely bottomed, forecasting 60M units sold worldwide in 2009 and 2010. In Tokyo telecom, NTT Docomo added 55K net mobile phone users in Oct v 66K added in Sept, while KDDI added 27.5K net mobile subscriber adds v 102K in Sept.

- Over in Sydney, Commonwealth Bank of Australia ended the day over 4% higher, helping Aussie equities outperform in the region. Posting a Q1 profit of A$1.4B, CBA saw its capital ratio rise to 8.7% v 8.07% in Aug, noting that economic outlook has improved and the top of the bad-debt cycle had been reached. Elsewhere in Sydney, Orica missed FY09 estimates but said earnings would grow in 2010, gaining 5% on the day. Boral said Sept earnings are expected to come in above expectations, and Seven Network noted the economic stability is returning despite the anticipated 1H decline in ad revenues.


CURRENCIES/FIXED INCOME/COMMODITIES

- Although the G20 neglected to make any specific references to FX, the IMF helped to sink the US currency as part of its assessment report, most notably calling USD the new "funding currency" that may still be overvalued despite its recent decline. EUR/USD rose to 2-week high of 1.4940, GBP/USD approached 2-month high near 1.6740, and USD/CHF fell to 1.0110. In commodity FX, NZD was particularly strong on New Zealand milk industry developments, rising about 140 pips to 0.7380, and AUD/USD rose within 60 pips of new multi-month highs of 0.9330. Japanese Yen mainly traded sideways against the greenback, hugging the 90.00 handle.

- Crude oil prices have gained more than 0.80% and are trading above $78/bbl. Oil prices are being supported by the weaker dollar and gains in Asian equities. Additionally, the US National Hurricane upgraded hurricane Ida to a category 2 storm as it approaches the US Gulf Coast, which holds more than 15% of US crude oil and natural gas production. In preparation for Ida, Chevron began evacuating its rigs in the region and shut in some of its production in the Gulf of Mexico. Additionally, it was reported that the Louisiana Offshore Oil Port has stopped allowing tankers to offload. According to the most recent National Hurricane center update, Ida had maximum sustained winds of approximately 105 mph and it was located about 400 miles south-southeast of the mouth of the Mississippi River. Ida was moving north-northwest at 14 mph. The National Hurricane center said Idea could turn towards the North and its forward speed may increase in the next 24 hours. Ida may cross the Gulf of Mexico tonight and approach the northern Gulf Coast on Monday night or early Tuesday.

-Spot Gold has moved to a fresh record high above $1,105/oz. Gold is benefiting from the weakness in the USD and gains in equities. Shanghai Copper prices are marginally higher, tracking the weaker dollar. On Friday, it was disclosed that Shanghai Futures Exchange copper inventories for the week ended Nov 6 rose by 1.4K tons to 104.3K tons. In agricultural commodities, New Zealand's largest dairy exporter Fonterra raised its expected FY10 payout for domestic farmers to NZ$6.05/kg from NZ$5.10/kg. The increased payout came as Fonterra raised its New Zealand milk price forecast by over 18%.