RBA acknowledges housing pickup and cautious investment sentiment

Asian Market Update: China PMIs diverge again with official rebounding and HSBC declining; RBA acknowledges housing pickup and cautious investment sentiment

Economic Data

- (CN) CHINA MAR MANUFACTURING PMI: 50.3 V 50.1E (1st rise in four months)

- (CN) CHINA MAR FINAL HSBC MANUFACTURING PMI: 48.0 V 48.1E (3rd contraction and 8-month low)

- (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 2.50% (AS EXPECTED)

- (AU) AUSTRALIA MAR AIG PERFORMANCE OF MANUFACTURING INDEX: 47.9 V 48.6 PRIOR (5th consecutive month of contraction)

- (JP) JAPAN Q1 TANKAN LARGE MANUFACTURING INDEX: 17 V 19E; LARGE ALL INDUSTRIAL CAPEX: 0.1% V 0.0%E; LARGE MANUFACTURING OUTLOOK: 8 V 13E

- (JP) JAPAN FEB LABOR CASH EARNINGS Y/Y: 0.0% V -0.1%E

- (JP) JAPAN FEB LOANS & DISCOUNTS CORP: 2.2% V 2.3% PRIOR

- (KR) SOUTH KOREA MAR TRADE BALANCE: $4.2B V $3.9BE

- (KR) SOUTH KOREA MAR HSBC MANUFACTURING PMI: 50.4 V 49.8 PRIOR

- (KR) SOUTH KOREA MAR CPI M/M: 0.2% V 0.3%E; Y/Y: 1.3% V 1.4%E (17th month below 2.5-3.5% target band); CORE CPI Y/Y: 2.1% V 1.7% PRIOR

Market Snapshot (as of 03:30 GMT):

- Nikkei225 -0.3%, S&P/ASX -0.2%, Kospi flat, Shanghai Composite +0.3%, Hang Seng +0.9%, Jun S&P500 +0.1% at 1,865, Jun gold flat at $1,284, May crude oil -0.3% at $101.32/brl

Highlights/Observations/Insights

- China twin manufacturing PMIs once again revealed a divergence - the official figure suggesting a modest rebound in the performance of the larger state-owned enterprises, while the HSBC final print sank to a new 8-month low, presumably reflecting softer performance by the smaller firms. Analysts appear to be siding with the more cautious view, which is actually boosting local equity markets on rising expectation of a more proactive fiscal response by the State Council. HSBC chief economist reiterated that view, noting the latest figure "implies that 1Q GDP growth is likely to have fallen below the annual growth target of 7.5%. We expect Beijing to fine-tune policy sooner rather than later to stabilise growth."

- Separately in China, 21st Century Business Herald reported construction firm Xuzhou Zhongsen Tonghao has defaulted on about CNY180M in interest payments, which is the first private equity debt default in China.

- Bank of Japan released its quarterly Tankan survey results for Q1. While the current quarter conditions improved from Q4, the outlook for the next quarter suggests a notable slowdown. Japan Fin Min Aso remarked after the data that the Tankan shows economy benefiting from Abenomics, but still requiring a steady implementation of short-term support measures.

- Reserve Bank of Australia held policy rates at 2.50% as expected, and also offered a mixed/neutral accompanying statement. RBA acknowledged the pickup in housing, adding "recent information foreshadows a solid expansion in housing construction", but also noted firms wait for more evidence of improved conditions before committing to expansion plans. RBA also reiterated that FX rate remains high by historical standards and added early signs point to a China slowdown thus far in 2014. AUD/USD spiked to fresh 4-month highs after the decision above $0.93 but quickly reversed those gains to fall below $0.9260.

Fixed Income/Commodities/Currencies

- JGB: (JP) Japan MoF sells ¥2.18T in 0.6% (0.6% prior) 10-yr notes; Avg yield: 0.634% v 0.597% prior; Bid to cover: 4.76x (highest since Feb 2005) v 3.52x prior

- (CN) PBoC to drain CNY50B in 14-day repos, CNY22B in 28-day repos (12th consective drain)

- SLV: iShares Silver Trust ETF daily holdings rise to 10,212 tonnes from 10,164 tonnes prior (highest since Dec 2013)

- GLD: SPDR Gold Trust ETF daily holdings fall 3.9 tonnes to 813.1 tonnes (lowest since Mar 20th)

- USD/CNY: (CN) PBoC sets yuan mid point at 6.1503 v 6.1521 prior setting (first stronger CNY setting in 5 sessions)

Equities

US markets:

- BAC: US Judge said to have recommended SEC lawsuit over $855M mortgage securities to go forward - financial press; +0.1% afterhours

- YHOO: Reportedly could pay up to $300M for acquisition of online video service News Distribution Network Inc as Yahoo works to build YouTube competitor - financial press; flat afterhours

- GM: Recalls over 1.3M cars in US due to power steering issues; recalls to cost up to $750M in Q1 - financial press; -0.3% afterhours

- ARTX: Reports Q4 -$0.03 v $0.02e, R$20.9M v $21.7Me (only 1 est.); -15.6% afterhours

Notable movers by sector:

- Consumer Discretionary: Bright Dairy & Food 600597.CN -2.2% (FY13 results); Capcom Co 9697.JP -7.8% (revises FY13/14 outlook); Seven West Media SVW.AU -5.0% (analyst action)

- Financials: Evergrande Real Estate Group 3333.HK +5.7% (FY13 results); Haitong Securities 6837.HK +1.6% (in talks with Alibaba and Jingdong.com on cooperation); Industrial Bank 601166.CN -2.0% (FY13 results)

- Energy: Shanxi Xishan Coal & Electricity Power 000983.CN +0.8% (FY13 results)

- Industrials: Xiamen Savings Environmental 300056.CN +2.3% (FY13 results); Virgin Australia VAH.AU +2.7% (Feb operating results); Guangxi Liugong Machinery 000528.CN +2.9% (FY13 results)

- Utilities: Hokkaido Electric Power 9509.JP -8.6% (govt to make cash infusion)