Asian Market Update: Weak China exports and concerns over more tightening weigh on Shanghai and Hong Kong

As of 12:00amET:

- Nikkei225 +1.4%

- S&P/ASX -0.3%

- Kospi +1.0%

- Taiex +0.5%

- Shanghai Composite -0.6%

- Sept S&P Futures -0.1% at 1,101

- Oct Gold -0.3% $1,246/oz

- Oct Crude oil +0.7% $74.75/brl

- Dec Wheat -0.3% at $7.36


Economic Data

- (CH) CHINA AUG TRADE BALANCE: $20B V $27BE (matches 3-month low)

- (JP) JAPAN Q2 FINAL GDP Q/Q: 0.4% V 0.4%E; ANNUALIZED: 1.5% V 1.5%E; NOMINAL GDP Q/Q: -0.6% V -0.6%E; GDP DEFLATOR Y/Y: % V -1.8%E

- (JP) BANK OF JAPAN RELEASES MINUTES FOR AUGUST 9TH/10TH MEETING: MUST WATCH LONG TERM RATE MOVEMENTS WITHOUT PRECONCEPTION

- (JP) JAPAN AUG DOMESTIC CGPI M/M: 0.0% V -0.1%E; Y/Y: 0.0% V -0.2%E

- (NZ) NEW ZEALAND Q2 TERMS OF TRADE INDEX Q/Q: 2.1% V 6.1% PRIOR

- (CH) China AUG property prices flat v +10.3% in July; Sales volume -10.1 y/y - Statistics Office

- (PE) PERU CENTRAL BANK RAISES REFERENCE RATE BY 50BPS TO 3.00%; AS EXPECTED

- (CH) China August CPI, industrial production, and other monthly economic data to be released on Saturday (Friday 10pmET); May signal benchmark rate tightening ahead of Monday open


Overview/Top headlines

- Asian equity markets traded in a mixed fashion going into the weekend despite modest gains and positive economic data in the US on Thursday. A strong export component in US July trade data, coupled with a weak 30-yr auction, saw the yields on US Treasury benchmark rise to 2.76% - the highest close in a month. Rising US yields translated into USD strength against JPY, with USD/JPY finally breaching ¥84 for the first time in 3 sessions, helping Nikkei225 regain more ground. Bullish sentiment on Japan was further bolstered by upward revisions to Q2 GDP as well as renewed price pressure on corporate goods.

- China/Hong Kong markets are trading to the downside on mainly negative developments.
Press speculation that People's Bank of China is considering a benchmark rate tightening as rationale for Stats Bureau pushing the release of monthly August metrics to Saturday from Monday rattled bullish sentiment from the get go. Tightening measures for China were largely attributed to inflation scare amid rising food prices and wage hikes, as well as improved industrial output. August trade data from China also gave investors little to cheer, as export growth slumped while imports rose, resulting in a 3-month low surplus.


Macro/FX

China

- USD/CNY: (CH) PBoC sets yuan mid point at 6.7625 v 6.7832 prior close (Strongest yuan setting since 2005 revaluation)

- (CH) China has decided to allow foreign firms to sell products over the internet - Nikkei

- (CH) United Steelworkers have filed a complaint with US trade officials accusing China of unfairly subsidizing its clean energy sector; Violating WTO rules by discriminating against US companies operating in China by restricting their access to needed raw materials - WSJ

Australia/New Zealand

- (NZ) RBNZ should hold policy unchanged until 2012; New Zealand earthquake is another reason to extend interest rate pause - ASB Research

Japan

- (JP) Japan Govt unveils new ¥915B stimulus: Including ¥175B in employment measures and ¥450B for consumer spending; Expected to boost GDP by 0.3%

- (JP) Incubator Bank of Japan to invoke deposit protection cap as it is expected to announce FY results are a loss of ¥150B; Financial Services Agency to declare bank as bankrupt - Nikkei News

- (JP) Japan Shirakawa: Financial system remains stable despite Incubator Bank failure, it will not affect the financial markets; BoJ to take all measures to ensure stability

- (JP) Japan effective corporate tax rate stands at 40% v 23% avg for the member nations of the Organization for Economic Cooperation and Development; Cutting tax rate by 5% as proposed would result in a loss of ¥1T in revenue for the Gov't - Nikkei


Equities

Australia/New Zealand

- FGL.AU: CEO Ian Johnston: The unsolicited bid for its wine business was not designed to boost the beverage company's share price before a demerger of its beer and wine divisions - Australian Financial Review

- ACL.SA: Merger discussions between BHP and Arcelormittal have been unable to come to an agreement over combining West African operations in Liberia and Guinea; Both companies will continue independently - The Australian

- AXA.AU: Analysts expect a bid by AMP to be imminent - The Australian - VBA.AU: Australia CCC proposes to deny authorization to Virgin Blue and Air New Zealand tie up because it would reduce competition

Japan

- Kobe Steel and Nippon Steel increasing the use of cheaper raw materials to help cope with rising prices - Nikkei

- Sumitomo Corp: Bought out Presperse and turned into a wholly owned subsidiary for an estimated ¥2B-3B

- Mitsubishi Corp: Preparing to offer $500M 5-year dollar bonds; The first dollar bonds since 1985

- Mitsubishi Chemical: To invest ¥1B to boost production capacity for lithium anode material used in lithium ion batteries - Nikkei News

China

- SNP: Company reportedly to make a bid for 42 oil exploration blocks off the coast of Gabon

- China Huiyuan Juice Group: Report out that says China Huiyuan has breached their loan covenants

Korea

- (KS) Korea's top conglomerates - including Samsung, Hyundai Motor and LG - to invest 33% more than expected and hire 18% more workers than planned - Korean press

- Hyundai Steel Co: Looking to save KRW350B in costs because of slowing steel demand and higher input costs - Korean press

- Samsung Heavy Industries: Awarded a $630M order for 5 tankers and oil platform

Other

- TSMC: TSMC and UMC Q4 sales may fall on q/q basis - Taiwan press

- CASY: Confirms Discussions with 7-Eleven, part of Japan Seven & I Holdings, regarding a potential transaction at $40/shr

- NPD: August video game industry sales: -10% y/y to $818.9M (4-year low)


Commodities

- GLD: SPDR Gold Trust ETF holdings fall by 1.4 metric tons to 1,293.5 metric tons as of Sept 9th

- XAU/USD: IMF sells 10 metric tons of gold to central bank of Bangladesh (first sale to a central bank since Nov 2009)

- (JP) Japan manufacturers have developed technology to make automotive and home appliance motors without rare earth metals; A move designed to reduce independence on China who controls 90% of the world's supply of rare earth - Nikkei

- (CH) Grain prices in China not likely to see substantial increase - Chinese press