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Asia Market Update

Japan officials downplay signs of recovery

Mon, Feb 8 2010, 06:50 GMT
by Trade The News Staff

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Asian Market Update: Equity markets remain cautious on further speculation over liquidity drain in China; Japan officials downplay signs of recovery

ECONOMIC DATA

- (NZ) New Zealand JAN QV House Prices y/y: 4.4% v 2.8% prior

- (JP) JAPAN DEC CURRENT ACCOUNT TOTAL: ¥901B V ¥1.0TE (8-month low); ADJ: ¥1.1T V ¥1.3TE (7-month low); TRADE BALANCE: ¥631B V ¥669BE

- (JP) Japan DEC Jan Bank Lending y/y: -1.5% v -1.0% prior; Bank Lending Banks y/y: -1.7% v -1.2% prior; Money Stock M2 y/y: 2.9% v 3.0%e; M3 y/y: 2.1% v 2.2%e

- (JP) Japan JAN Bankruptcies y/y: -21.8% v -16.6% prior (lowest since Apr 2005)

- (JP) Japan JAN Eco Watchers Survey: 38.8 v 35.4 prior; Outlook: 41.9 v 36.3 prior (3-month high for both measures)

- Despite the last-hour rally in the US on Friday and a significant decline in US jobless rate, Asian bourses opened the new week with a softer tone, trading in the red nearly across the board. With just over an hour left in TOkyo trading, Nikkei225 is leading the slump with a 0.9% decline, while Shanghai and Korea markets are off by about 0.5%. Sydney's S&P/ASX is the only winner with a modest 0.2% gain, as energy sector recovered some of its extreme losses on higher oil prices. Taiwan and Hong Kong, as well as S&P futures traded near unchanged.

SPEAKERS/PRESS

- Worries regarding lending conditions stifling growth in China once again permeated sentiment, adding to the sovereign debt clouds gathering around Europe. Shanghai Securities News cited the Chief Economist of China's National Bureau of Statistics Yao who said that the PBoC may further raise the required reserve ratio because of surging inflationary pressures. Note the CPI and PPI data for China in the month of February are expected to be released this Wednesday. Chinese press also cited opinions from the China Academy of Macroeconomic Research, who suggest that fiscal stimulus measures could dissipate by Q2. Separately, Xinhua reported on Chinese Academy of Sciences forecasting 11% Q1 GDP and 10% for 2010 overall. In the real-estate sector, one of China's biggest lenders Industrial and Commercial Bank of China was said to threaten suspending loans to property developers who hoard land.

- Second-tier economic data supported the modest recovery story in Japan. Corporate bankruptcies fell at the quickest pace in nearly 5 years, while Eco Watchers Survey and Outlook figures rose to 3-month highs. Despite the data improvement, Bank of Japan Dep Gov Yamaguchi noted the domestic economy may hit "soft patch" until summer before more sustainable growth returned. Japan's Finance Minister also warned about the spillover effect in from excess global liquidity.

- Elsewhere in Asia, with the Aussie jobs report expected on Wednesday following the controversial hold by the RBA, Prime Minister Rudd reiterated that domestic unemployment appears to have peaked. Over in New Zealand, central bank governor Bollard said that despite the 10-yr high in NZ unemployment reported last week, the data has not changed the central bank's policy bias and tightening plans.

- On geopolitical front, nuclear ambitions of Iranian regime hit new highs this weekend, with Pres Ahmadinejad ordering his atomic agency to start production of 20% higher enriched uranium despite the global opposition. National elections in Ukraine appear to have the opposition leader and former foe of the Orange Revolution preparing to take the helm, however the current Prime Minister Tymoshenko is refusing to concede, prompting speculation of a legal challenge. According to most recent figures, with 84% of Ukraine's election votes counted by Central Election Commission, Yanukovich leads Tymoshenko 48.5% to 45.9%.

EQUITIES

- In individual equities, Toyota recall may extend to greater number of the popular Prius models that initially expected at 311K, and possibly spill over to include Sai and Lexus HS250h models. In Japan, Kirin HOldings was said to have ended talks with Suntory failing to reach a terms agreement after months of discussions. One of Sydney's larger retail names JB Hi-Fi missed H1 estimates with Net A$76M v A$78Me, Rev A$1.6B v A$1.6Be, and also announced the resignation of its CEO. In Taiwan tech, HTC traded lower after press reports the company would reduce prices for its smartphones by as much as 40%.

CURRENCIES/FIXED INCOME/COMMODITIES

- Volatility in FX was marginal at best despite the more prevalent risk aversion seen in equities. EUR/USD and GBP/USD traded around 1.3650 and 1.56. In commodity FX, AUD/USD and NZD/USD were also narrow around 0.8660 and 0.6870. Likewise, trading in the Yen was thin in a 20-pip range on either side of 0.8930.

- Crude oil prices opened higher by more than 1% and above $72/bbl. Factors supporting oil prices include the cold weather conditions in the US' Mid-Atlantic region, a militant attack on some of Royal Dutch Shell's facilities in Nigeria and renewed concerns about Iran's nuclear program. In terms of Nigeria, rebel group MEND noted that it attacked one of Shell's pipelines, which transports oil from various flow stations and feeds into the Bonny export terminal. According to reports the attack, caused supply reductions from oil fields in Nembe Creek, Soku, Ekulama and Belema. Spot Gold is little changed and trading below $1070/oz. For most of today's session, gold prices have consolidated the sharp losses which were seen on Friday's session. With respect to physical demand for gold, on Friday the SPDR Gold Trust , world's largest gold ETF, noted that its daily holdings rose by 1.8 metric tons, which was the first increase since late Dec. Shanghai Copper prices have gained more than 0.50%, tracking the advance in the LME metals. In commodities-related press news, Australia's Resourcehouse Ltd entered into a 20-yr $60B agreement to provide 33M tons of coal per year to China Power International Development. The transaction is seen as the largest ever non-syndicated export contract for an Australian company.

Published on  Mon, Feb 8 2010, 06:56 GMT

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