Asian Market Update: Strong Samsung and Kia results, signs of recovery in Japan inflation and employment cannot revive equity rally; EUR/USD makes new lows; India raises Cash Reserve by 75bps above 50bps estimate


ECONOMIC DATA

- (NZ) NEW ZEALAND DEC TRADE BALANCE (NZ$): 2M V -100ME

- (NZ) NEW ZEALAND DEC BUILDING PERMITS M/M: -2.4% V 3.0%E (first decrease in 6 months)

- (AU) Australia Nov Conference Board Leading Index: -0.3% v -0.3% prior

- (JP) Japan Jan Nomura/JMMA Manufacturing PMI: 52.5 v 53.8 prior

- (JP) JAPAN DEC JOBLESS RATE: 5.1% V 5.3%E (8-month low); JOB-TO-APPLICANT RATIO: 0.46 V 0.46E

- (JP) JAPAN DEC HOUSEHOLD SPENDING Y/Y: 2.1% V 1.6%E

- (JP) JAPAN DEC CPI Y/Y: -1.7% V -1.7%E; CORE Y/Y: -1.3% V -1.3%E (7-month high for both measures)

- (JP) Japan Dec Prelim Industrial Production m/m: 2.2% v 2.5%e, y/y: 5.3% v 5.7%e

- (UK) UK Jan GfK Consumer Confidence: -17 v -18e

- (AU) AUSTRALIA DEC PRIVATE SECTOR CREDIT M/M: 0.3% V 0.1%E (11-month high); Y/Y: 1.5% V 1.1%E (3-month high)

- (SI) Singapore Q4 Unemployment Rate: 2.1% v 3.4%e (7-month low)

- (SI) Singapore M1 Money Supply y/y: 23.5% v 25.4% prior; M2 y/y: 11.3% v 10.1% prior; Bank Loans y/y: 3.4% v 1.8% prior; Credit Card Billings: 2.7B v 2.4B prior; Credit Card Bad Debts: 16.3M v 15.2M prior

- (JP) Japan Dec Vehicle Production y/y: 8.6% v 0.5% prior (highest since Jul 2008)

- (KS) South Korea Dec Leading Index y/y: 12.8% v 12.6% prior (multi-year high)

- (KS) South Korea Dec Industrial Production m/m: 3.5% v 1.5%e; Y/Y: 33.9% v 30.8%e

- (JP) JAPAN DEC HOUSING STARTS Y/Y: -15.7% V -18.8E; ANNUALIZED HOUSING STARTS: 0.819M V 0.812ME; CONSTRUCTION ORDERS Y/Y: 0.6% V -11.6% PRIOR

- Signs of recovery in several economic data points in Japan and strong earnings results from some of the biggest Korean names could not shrug the bearish investor sentiment permeating global equity markets. In the final hour of Tokyo trading, Nikkei225 is at session lows down 1.9%, Sydney's S&P/ASX and Korea's Kospi are off by over 2%, while Taiwan and Hang Seng are down 0.7%. Ahead of the first GDP print for Q4, front-month S&Ps are also down 0.4%, extending Thursday decline after a busy afterhours Thursday session that included strong Microsoft and Amazon results.


SPEAKERS/PRESS

India:

- India central bank joined the frey of monetary tightening, raising its cash rate by 75bps - a wider than expected margin of 50bps - to 5.75%. The bank forecasted 7.5%+GDP growth may be sustained for a year from April and that rapid rise in food inflation is undesirable. Going forward, RBI said it will focus on inflation and monitor conditions for full recovery to take further tightening measures.

Japan:

- In Tokyo, central bank governor Shirakawa responded to expectations for more easing by noting that the current level of monthly JGB buying is appropriate. Moreover, Shirakawa saw stable FX levels as critical, pledging to act quickly to ensure market stability - all comments referring to the most recent period of Yen strength. BOJ gov also said the central bank will support efforts to overcome deflation, even as the pace of downward pricing pressures eased for second month, rising to the highest level in 7 months. Also on the upside, Japan jobless rate fell to 8-month low of 5.1% and household spending improved, but industrial production eased from its recent torrid pace of growth. Minutes of the December Bank of Japan meeting were still dovish, wish one member dissenting against status quo to implement additional easing policy and all agreeing that more easing steps may be needed.

China

- In China, reports of the repercussions of aggressive lending continued to feed through official comments and press reports. Commerce Ministry said that 2010 double-digit auto sales growth is possible - sentiment reflected by growth projections in the country by Kia Motor. China Securities Times said the banks that lent aggressively in the earlier part of Jan are transferring loans to non-bank financial institutions - practices that Chinese banks have implemented to offload questionable loans in the past.


EQUITIES

- Among the more notable companies reporting earnings in Asia, Samsung Electronics posted Net Op Profit KRW3.7T v KRW2.4Te on Rev KRW39.2T v KRW24Te. On a segment basis, Samsung saw Q4 chip sales KRW8T v KRW8.1Te with profit KRW1.7T v KRW1.8Te and Q4 LCD sales KRW6.3T v KRW6Te with profit KRW530B v KRW550Be, noting that Q4 LCD shipments are similar to Q3. In a potentially troubling sign going forward, the company noted the possibility of LCD oversupply in H2, with supply growth beginning to exceed demand by Q3. Also in Korea, Kia Motor reported KRW604B v KRW285Be, Op Profit KRW412B v KRW327Be, Rev KRW5.7T v KRW5.2Te, guiding 2010 Rev KRW30.6T v KRW18.4Te amid 37% y/y growth in Sales target from China.

- In Tokyo, shippers' 9-month results were much worse on comparable y/y basis, with downbeat tone reaffirmed for FY guidance across the board. Mitsui OSK reported 9-month Net ¥2.2B v ¥138B y/y on Rev ¥985.4B v ¥1.6T y/y, Kawasaki reported 9-month Net loss ¥62.0B v profit ¥40.7B y/y, Op loss ¥52.9B v profit ¥98.7B y/y, Rev ¥613B v ¥1.05T y/y, and Nippon Yusen saw 9-month Net loss ¥27B v profit ¥110B y/y, Op loss ¥32B v profit ¥171B y/y, Rev ¥1.2T v ¥2.0T y/y.
Steelmaker JFE Holdings reported 9-month Net loss ¥1.4B v profit ¥169.4B y/y, Op Profit ¥15.3B v ¥376.1B y/y, Rev ¥2.03T v ¥3.07T y/y and reaffirmed FY guidance, while Sumitomo posted 9-month Op Profit ¥83B v ¥257B y/y, Rev ¥5.6T v ¥8.7T y/y. In healthcare, Daiichi Sankyo reported 9-month Net profit ¥39B v loss ¥298B y/y, Op Profit ¥90B v ¥98B y/y, Rev ¥726B v ¥628B y/y.


CURRENCIES/FIXED INCOME/COMMODITIES

- In forex, the EUR has moved to its lowest level against the US dollar since July 2009 below 1.3930, after EUR/USD moved below 1.400 on yesterday's session for the first time since mid 2009. The Euro continues to be weighed down by the rise in risk aversion related to Greece's debt situation and India's higher than expected increase to its cash reserve rate. In terms of the commodity currencies, the AUD, NZD, CAD are all weaker against the greenback on the decline in Asia equities. The Japanese yen, like the US dollar, is benefitting from the increase in risk aversion. In terms of the yen pairs, EUR/JPY was in focus as it moved below 125.00 for the first time since April of 2009.

- Crude oil prices have moved off of the session's best levels on the weakness in EUR/USD and declines in most Asian equities. Spot Gold is lower and trading below $1,085/oz on the stronger dollar. Shanghai Copper prices are declining on continued concerns that China will tighten its policies toward bank lending. In copper related news, on yesterday's session Chile, the world's largest copper producer, said its Dec copper output rose to 502K tons from 477K tons prior. Later today, the Shanghai Futures Exchange will disclose its weekly copper inventories data. Overall, commodity prices may receive further direction from the later today release of US Q4 advance GDP.