Asian Market Update: Vietnam Central Bank unexpectedly raises rates, devalues VND; AUD outperforms on strong economic data, hawkish central banker comments; Gold spikes to new record on rumors of further India central bank interest


ECONOMIC DATA

- (JP) Japan Oct Trade Balance Total: 808B v 466Be (19-month high); Adjusted Trade Balance: 419B v 300Be (4-month high)

- (JP) Japan Oct Corp Service Price Y/Y: -2.2% V -2.6% (6-month high)

- (AU) Australia Nov DEWR Skilled Vacancies: 2.4% v 1.9% prior (multi-year high)

- (AU) Australia Q3 Construction Work Done: 2.2% 0.0%e

- (PH) Philippines Sept Total Imports: -25.0% v -28.3% prior; Total imports: $3.7B v $3.6B prior; Trade Balance: -$34M v -$144M prior

- (VN) Vietnam Nov CPI M/M: 0.55% v 0.37% prior; Y/Y: 4.4% v 3% prior (highest level since May)

- (JP) Japan Nov Small Business Confidence: 43.0 v 43.4 prior


SPEAKERS/PRESS

- Asian equity markets traded in choppy ranges, tracking the mixed GDP/FOMC minutes story in the US, before choosing the upside in the final hour of Tokyo trading. Nikkei225 bounced off the 200-day moving average just below 9,370 after the initial 0.3% decline to trade higher by the same margin late in the day. Korea's Kospi returned to unchanged after marginal foray in both directions from prior close. In Sydney, S&P/ASX outperformed on strong economic data and hawkish central bank comments as well as USD weakness, with commodity space leading the gainers. With the first US GDP revision in rearview mirror, front-month S&Ps are up by 0.2%, although pre-holiday Wednesday trading is expected to be thin.

- Vietnam was in the regional spotlight after its central Bank unexpectedly raised benchmark interest rates to 8% from 7% and narrowed the Dong trading band to 3% from 5%. More notably, the central bank governor called for exporters to sell their foreign currencies in a move to devalue the currency. Fitch was the first credit agency to chime in on the potentially destabilizing developments, welcoming the devaluation decision as a positive that would not have any immediate ratings implications.

- A pair of central bankers from Australia and Japan reflected on regional Asia recovery, with commentary underscoring the different set of current conditions in their respective economies. RBA's Battellino said Australia has the capacity to sustain relatively high housing prices fuelled by insufficient supply, also forecasting a rise in mining investment. In Tokyo, BOJ Deputy Gov Yamaguchi also saw improvement in global economy, but saw more fragility in the financial system and lingering severity in credit available to smaller firms.

- In other regional speakers, Finance ministers from Japan and Korea commented on implications of the falling greenback. Japan's Fujii said the Yen strength is largely the function of the weak USD, and Korea's Yoon warned that the rising Won is likely to weigh on corporate profits. IMF and World Bank chiefs were also rather dovish in their outlook, cautioning about premature exit from monetary accommodation. In an interview with Le Figaro, IMF's Strauss-Kahn said the Euro is "surely a bit too strong" but supported the ultralow Fed rates, stating that the #1 priority for today is returning to economic growth. World Bank President Zoellick warned about developing asset bubbles balanced by the risk that tightening interest rates too quickly could result in a double-dip recession in the developed world.


EQUITIES 

- In individual equities, South Korea press speculated that Hynix may find its way back to the selling block, with creditors potentially looking to sell the company once again. Elsewhere in tech, Taiwan press said Compal Electronics raised its Q4 laptop shipments view to +20% q/q from +10%, and Panasonic bid for Sanyo was said to be extended to December 9th. In other Nikkei news, Japan Airlines received a Y100B rescue loan from Development Bank of Japan as speculated in the prior session.

- In Sydney, Woodside Petroleum CEO further downplayed press rumors of a BHP bid. Elsewhere in materials, The Australian said Rio Tinto agreed with Iron Ore Holdings (IOH.AU) to examine its Iron Valley deposit in Pilbara region and pledged to purchase up to 1.5M tons of ore from the company each year. Aussie press also commented on the outcry from coal mining industry representatives regarding the carbon scheme deal made this week, estimating sector liability from new regulations around A$12.5B. GrainCorp reported FY09 results in line, with profit of A$63M v A$61Me on Rev A$1.7B v A$1.7Be.


CURRENCIES/FIXED INCOME/COMMODITIES 

- Risk appetite in currency markets was most evident in the strength of Australian dollar, as traders took the upbeat RBA member comments and strong employment and construction data to imply greater prospects for an RBA move in early December. Those prospects were once again above 75%, as AUD/USD bounced 70 pips above 0.9260 and EUR/AUD fell one big figure to 1.6170. Regional strength was also felt in the Kiwi, with NZD/USD gaining 40 pips to 0.7290. In European majors, EUR/USD was up 40 pips but continued to struggle around 1.50, and GBP/USD gained 50 pips above 1.6630. JPY was firmer despite the regional equity gains, as USD/JPY traded down to 88.20.

- Spot Gold prices have moved to fresh record highs above $1,177/oz, while Shanghai and Indian gold hit all-time highs on the weakness in the US dollar. In press news, a report in the Financial Chronicle suggested that India could consider buying more gold from the IMF, after India said in early Nov that it could mull additional gold purchases if the IMF were to sell. India's Central Bank Gov Subbarao declined to comment on any further gold purchases. In terms of physical demand for gold, the SPDR Gold Trust ETF increased its holdings by 0.9 metric tons to a total of 1,122 metric tons as of Nov 24. During the prior session, the ETF's holdings rose by 4 tons. Additionally, the iShares Silver ETF disclosed that its holdings increased by 1.5% to a new record 9,252 tons. Crude oil prices have moved off of the session's worst levels and is trading near $76/bbl. During the yesterday's NYMEX session oil prices declined by more than 1.5% as US Q3 GDP was revised lower. In fundamental news, API disclosed that weekly US crude and gasoline inventories rose more than expected (API PETROLEUM INVENTORIES: CRUDE: +3.35M V +1.5ME; GASOLINE: +1.7M V +500KE). The API data comes ahead of the later today release of US Department of Energy weekly inventories report. On yesterday's session, Nigeria's Oil Minister said yesterday that the country could increase its production by approximately 500K bpd in 2010. In other oil market news, some attention has been paid to the situation between Saudi Arabia and Yemen. It was reported earlier today that Saudi Arabia denied that its military entered into Yemen's territory to attack Shiite rebels.