Asian Market Update: Equities, FX brace for Non-farm payrolls; Chinese press speculates on reserve breakdown; Japan MoF far from intervention

As of 1:00amET:

- Nikkei225 +0.2%

- S&P/ASX flat

- Kospi +0.2%

- Taiex +1.3%

- Shanghai Composite -0.5%

- Sept S&P Futures -0.2% at 1,087

- Oct Gold +0.1% $1,252/oz

- Oct Crude oil -0.5% $74.67/brl

- Dec Wheat +0.8% at $7.19


Economic Data

- (JP) JAPAN Q2 CAPITAL SPENDING: -1.7% V -6.5%E (smallest decline since Q3 of 2007); EX-SOFTWARE: -1.5% V -5.9%E

- (KS) SOUTH KOREA Q2 FINAL GDP Q/Q: 1.4% V 1.5% PRELIM; Y/Y: 7.2% V 7.2% PRELIM

- (AU) AUSTRALIA AUG AIG PERFORMANCE OF SERVICE INDEX: 47.5 V 46.6 PRIOR (4th consecutive month of sub-50 contraction)

- (CH) CHINA AUG NON-MANUFACTURING PMI: 60.1 V 60.1 PRIOR

- (HK) HONG KONG AUG PURCHASING MANAGERS INDEX: 52.3 V 51.3 PRIOR

- (CH) CHINA AUG HSBC SERVICES PMI: 57.6 V 56.3 PRIOR (4-month high)

- (RU) RUSSIA AUG SERVICES PMI: 47.0 V 54.2 PRIOR (15-month low, first reading below 50 since Aug 2009)


Overview/Top headlines

- Asian equity markets are seeing little follow-through from late session strength coming into US indices, where S&P500 ended the day up 1% with subsequent strength aftherhours. Short-covering ahead of non-farm payrolls may have contributed to the strength, even though consensus estimates are pointing to a 3rd consecutive month of triple-digit job loss.

- Nikkei225 is back around unchanged levels after rising about 0.5% at the open. A report citing sources in Japan's Ministry of Finance said intervention in currencies is not likely unless the Yen moves are particularly severe, sending USD/JPY and Nikkei225 lower. Those comments also negated earlier sentiment from DPJ Party leadership contender Ozawa, reiterating his support for more drastic measures.

- A report out of China Securities Journal assuaged some of the concerns about Chinese diversification away from USD, with 65% USD-denominated assets in the $2.45T fund said to be around average global levels. Taiwan's Taiex was a notable outperformer on renewed strength in tech names Hon Hai and Asustek. Some of the strength was attributed to the demand for components of the new Apple TV product announced at the recent media-day this week.


Macro/FX

China

- (CH) China's $2.45T reserves' allocation has 65% of USD-denominated and 26% of EUR-denominated assets - China Securities Journal

- (CH) Japan Foreign Minister urges China to push for more transparency and consistency in business rules, as well as a legal framework to deal with labor issues - WSJ

- USD/CNY: US National Economic Council Dir Summers heads to China: Expected to urge efforts to allow the yuan to rise against the USD in accordance with China's growing strength in the global economy - Nikkei

- (CH) Reportedly China to reduce weighting of food in CPI next year;

- Currently food accounts for up to 33% of CPI calculation; - To increase weighting of housing related items in CPI, currently accounts for approx 14% of CPI.

Australia/New Zealand

- (AU) Australia Independent MP Windsor: Would be better for Independents to work together; 3 Independents have not made up mind on who to support

- (AU) According to research out of Credit Suisse, top Australian banks may have to generate more business from fees and trading rather than lending to maintain performance - Sydney Morning Herald

Japan

- (JP) Reportedly Japan's MoF is unlikely to intervene if USD/JPY decline is gradual; Ready to act against sudden forex moves if needed;- Any Japan intervention would not aim to turn market trend around.

- USD/JPY: (JP) Japan former Sec-Gen Ozawa: Rapid gains in Yen undesirable; Reiterates intervention in FX still possible

- (JP) Japan Econ Min Arai: Govt spending capacity is not unlimited, but budget saving from cutting wasteful spending is limited

- (JP) According to Japan Labor Ministry, only about 44% of people in 15-34 age range subsist on personal income; About 47% rely on income from other sources - Nikkei News

Korea

- (KS) South Korea Central Bank Gov Kim Choong-soo: Global financial regulatory reform needed to strengthen the role of central banks in preventing the repeat of a financial crisis - Speaking at conference

- USD/KRW: South Korea FX authorities reportedly intervene to prevent excessive KRW strength

Other

- (ID) Indonesia Trade Min: Non-oil and gas exports are seen at 16%-18% this year v 10%-11% prior target

- (ID) Indonesia Trade Min Pangestu: Confident that Indonesia can maintain inflation target

- (SI) Singapore Monetary Authority Heng: Emerging markets projected to grow faster - Speaking at Seoul Conference


Equities

Australia/New Zealand

- STO.AU: Meeting next week with European investors to explore interest in a hybrid issue composing of up to A$2B rights issue to fund Gladstone LNG project - Australian press

- POT: Credit Suisse said BHP may have to raise its bid to about $155/share from $130; any deal could face regulatory delays in the US

- SIP.AU: Has been advised of class action over 2009 capital raising; Claim amount has not been quantified

- FMG.AU: Acting in accordance with agreement with Leucadia; Denies all allegations by Leucadia

- TLS.AU: Subsidiary SouFun Holdings files with SEC for a limited IPO; Valued at $40.50-$42.50/share which would raise $810M-850M

Japan

- Sony Corp: Plans to expand worldwide its Qriocity service to take on Apple in online multimedia - Nikkei

- Tokyo Gas and JR West are joining the growing number of companies issuing their first 30 year straight bonds and taking advantage of raising funds at a low cost - Nikkei

- Nippon Life Insurance: Starting to offer Prudential foreign currency denominated whole life insurance policies and annuities; First time to offer a competitor's product through their own sales reps - Nikkei

China

- PTR: Given approval from National Development and Reform Commission to double refining capacity to 200K bpd; Expected to complete in Oct. 2012; Rosneft and China National Petroleum Corp (CNPC) move forward in a JV where Rosneft will supply 70% of oil at market prices in a joint refinery project - China Daily

- HBC: Reiterates intention to move headquarters away from London if UK 's Commission on Banking rules in favor of break-up for big financial groups - FT

Korea

- Samsung Electronics: Unveils Galaxy Tab; Expected to compete with the iPad and retail for about $200-300 - WSJ

- Kia Motors Corporation: Started to recall 35K vehicles in US and 21K in South Korea for the Sorento and Soul models due to a fire hazard caused from wiring problems

Other

- LUK: Filed a writ of summons against Fortescue Metals and CEO Forrest; Accusing of "misleading and deceptive conduct" in relation to raising funds for expansion - Australian Financial Review

- Intel, Acer and Asustek as well as other electronic distributors have jointly lowered their prices on some PCs to help reduce inventory and boost back to school sales


Commodities

- (RU) Russia extends the ban on wheat into late 2011 - WSJ

- (SA) South Africa miners reported Q2 gold production to 49 444,5 kg a decline 2% y/y v +14.5% q/q - Chamber of Mines

- (AU) Australia New South Wales Primary Industries Minister Steve Whan: Wheat crop is expected to grow +50% this year with an estimated value of A$1.8B - The Australian

- WLT: Lowers Full-Year 2010 Coking Coal Sales Expectations to 7.2M-7.5M v 7.7M-7.9M previously guided

- GLD: SPDR Gold Trust ETF holdings fall by 9.1 metric tons to 1,294.9 metric tons as of Sept 2nd

- (NZ) Dominion Post citing economists note that despite the strong Fonterra online auction on Sept 1st, dairy prices are still "wobbly"