Asian Market Update: Singapore officials see 3-5% GDP recovery in 2010, higher inflation; Korea outperforms again as Fin Min sees upside in growth; AUD falls to 2-week lows on risk aversion, RBA uncertainty


ECONOMIC DATA

- (SI) Singapore Q3 Final GDP q/q: 14.2% v 14.0%e; Y/Y: 0.6% v 0.5%e

- (AU) RBA FX Transactions: A$307B v A$830M prior

- (AU) Australia Aug Average weekly wages q/q: 0.9% v 1.2% prior; Y/Y: 5.2% v 6.1% prior

- (JP) Japan Sept All Industry activity index: -0.6% v 0.0%e (first decline in 6 months)

- (JP) Japan Sept Final Leading Index: 86.4 v 86.4 prior; Coincident Index: 92.7 v 92.5 prior


SPEAKERS/PRESS

- Asian equity markets are choppy and mixed yet again, trading lower after a positive open for the second consecutive session. Nikkei225 led the decline with a 1.3% slump, with financials sending the index to a 4-month low on equity raise at Mitsubishi UFJ and cautious comments from rating agencies. Shanghai Composite and S&P/ASX are both up marginally, but well off session's best levels. Korea's Kospi is the outperformer for the second straight day on upbeat comments from the Finance Minister and trade cooperation promise from the visiting US president Obama. Ahead of the Thursday open, front-month S&Ps are down 0.3% at 1,105.

- Singapore final Q3 GDP topped estimates but came in slightly below the preliminary levels. Govt officials reiterated 2009 GDP forecast range of -2.5% to -2.0% that was previously raised from -6% to -4%, but pointed to 2010 expected GDP recovery of 3-5%. 2010 inflation forecast was also lifted to 2.5-3.5% from 1.2%, with rising housing and fuel prices attributed to upgrade. Despite the revisions, policymakers were cautious, noting sluggish external demand and the possibility that US may see a double-dip recession, in which case "all bets" were said to be off for those forecasts. Sentiment from the monetary authorities in Singapore was likewise mixed, pledging to keep interest rates low for now while also monitoring asset prices for bubble formation.

- In other regional speakers, South Korea's finance minister Yoon said domestic economy may grow faster in 2010 than the previous 4% forecast. Korea's Kospi was also supported by the arrival of the US president who promised continued cooperation on North Korea issues as well as progress toward free trade with the South. Over in Taiwan, Premier Wu called for 2010 economy expanding by least 3.9%, and said the administration was willing to commit additional budget funds toward meeting that goal. Japan's Fin Min Fujii reiterated he never expressed support in the yen strength, and in New Zealand, regional trends survey by the banking sector pointed to signs that the economy has exited recession. In Sydney, RBA's Debelle spoke for second straight day, noting that business lending points to returning confidence in the economy.


EQUITIES 

- In individual equities, weakness in Japanese financials was punctuated by a 5% slide in Mitsubishi UFJ, who confirmed the ¥1T equity raise in the prior session. Separately, Fitch said the outlook for Japan's banks remains bleak, noting that asset quality deterioration continued to weigh on the balance sheets. Moreover, Fitch saw large scale consolidation as the only path to improvement in profitability, but said that was unlikely because of structural constraints to M&A in Japan. Also on the Nikkei, Mitsubishi Chemical responded to Mitsubishi Rayon merger rumors, noting it may partner with company and acknowledging acquisition talks taking place. On the Taiex, China Airlines executive saw the company returning to profit in Q4 on returning demand in freight industry. On the mainland, the CEO of Soho China commented on the large bubble inflated by the fiscal stimulus in the property sector.


CURRENCIES/FIXED INCOME/COMMODITIES 

- In FX, AUD continued to underperform relative to the dollar and European majors. AUD/USD tested 2-week lows near 0.9220, while EUR/AUD made a 1-week high above 1.6160 as markets continued to recalibrate RBA tightening probabilities next month. Risk aversion in Tokyo also benefited the dollar and the Yen against European majors. EUR/USD and GBP/USD fell about 50 pips to 1.4410 and 1.6690's respectively, while EUR/JPY and GBP/JPY were down about 100 pips from peak to trough at 132.80 and 148.60s lows.

- Crude oil prices are lower and trading below $80/bbl on the weaker dollar and decline in Japanese equities. During yesterday's US session, oil prices hit a 1-week high above $80.30/bbl on bullish weekly Department of Energy crude oil inventories data (DOE CRUDE: -880K V +1.1ME; GASOLINE: -1.75M V +850KE). In Chinese energy market news, one of China's largest refiners PetroChina said it is supplying natural gas at a record level of 200M cubic meters per day, to help China deal with shortages. The natural gas shortages in China are being driven by unusually cold weather in central and eastern China. Earlier this week, the Chinese government ordered local oil companies to increase their production of certain fuels due to the cold weather conditions. As the US holiday driving season approaches, AAA noted it sees Thanksgiving holiday road travel rising by 2.1% y/y.

- Spot Gold prices are lower by over 0.10% and trading above $1,140/oz, while Shanghai Gold has moved to a fresh record high above CNY249/gram. In terms of physical demand for gold, today's Wall Street Journal reported the US Mint is planning to resume sales of certain types of gold coins in early Dec, in order to meet strong demand. In 2008, the US Mint halted sales of various types of gold coins due to shortages. A separate report, disclosed that in Q3 the UK Mint's gold output rose to 33K ounces from 7.5K a year ago. As gold prices have moved to record levels, this has led to increased investor demand for other metals such as copper and silver. Earlier today, the iShares Silver ETF disclosed that its daily holdings rose by 67 tons to a total of 9,021 tons (record).