ADB sees continued China slowdown

Asian Mid-session Update: China PMI returns to contraction; ADB sees continued China slowdown

Economic Data

- (CN) CHINA MAR HSBC FLASH MANUFACTURING PMI: 49.2 V 50.5E (11-month low)

- (CN) CHINA FEB CONFERENCE BOARD LEADING ECONOMIC INDEX M/M: 1.5% V 0.5% PRIOR; 2-year high and 11th consecutive increase

- (JP) JAPAN MAR PRELIM MARKIT/JMMA MANUFACTURING PMI: 50.4 V 52.0E (10-month low)

- (AU) Australia Jan Conference Board Leading index m/m: 0.4% v 0.3% prior (3rd consecutive increase)

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 111.4 v 110.8 prior

Index Snapshot (as of 02:30 GMT)

- Nikkei225 -0.2%, S&P/ASX +0.2%, Kospi -0.1%, Shanghai Composite -1.2%, Hang Seng -0.4%, Jun S&P500 flat at 2,095

Commodities/Fixed Income

- Apr gold -0.2% at $1,186/oz, May crude oil -1.0% at $46.99/brl, May copper -3.0% at $2.79/lb

- SLV: iShares Silver Trust ETF daily holdings fall to 10,118 tonnes from 10,163 tonnes prior; lowest since Feb 22nd

- (CN) PBoC to inject CNY20B in 7-day reverse repos (8th consecutive injection); Offers yield at 3.55% v 3.65% prior on Mar 18th (3rd straight week of 10bp decline)

- USD/CNY: PBoC sets yuan mid point at 6.1398 v 6.1448 prior setting (strongest yuan setting since Feb 26th)

- (AU) Australia MoF (AOFM) sells A$200M in 1.25% bonds due 2022; Avg yield: 0.0542%; Bid-to-cover: 4.36x

Market Focal Points/FX

- Shanghai Composite is headed for its first losing session in 10 days after a surprisingly disappointing HSBC flash PMI. Manufacturing was expected to expand for the 2nd consecutive month but instead plunged into contraction, falling to its lowest level in 11 months. HSBC economist cited a renewed fall in total new business and workforce reduction, along with falling import prices as a result of oil-driven disinflation. AUD/USD hit its lows below 0.7840 on the release, down about 60pips from early highs, while NZD/USD was down over 40pips below 0.7630. Separately, the stronger rise in Jan China Conference Board leading index was attributed to the Lunar New Year demand. Local press also speculated Shanghai would allow home buyers using Housing Provident Fund to borrow up to 50% more than under previous quota in a bid to prop up prices after a disappointing property sector report last week.

- Asia Development Bank 2015 Outlook raised developing Asia GDP to 6.3% from 6.2% and also forecast 2016 at 6.3%. ADB also affirmed China at 7.2% - down from 7.4% last year - with 2016 estimated to fall further to 7.0%. South Korea was cut by 0.3pts to 3.5%, but India projections were lifted all the way to 7.8% from 6.3%. ADB pointed to strengthening recovery in the major industrial economies and soft global commodity prices contributing to steady regional growth expectations, but also warned policymakers to be vigilant of potential risks.

- Comments from Fed Vice Chair Fischer in today's US session reinforced last week's message that any monetary policy adjustment would be gradual, if not distant. Unlike the past tightening campaign when the Fed raised rates at every meeting, Fischer said this time rates could move up and down. Fed-speak during the Asian hours has been considerably less dovish. Fed's Bullard spoke to FT, reiterating that rates need to start rising as soon as possible to prevent the risk of "asset price bubbles with devastating consequences". Fed's Williams, who previously tilted toward the more dovish side, noted the economy is looking much better and that the Fed should be forward looking on policy without waiting for inflation to hit 2%. Similar to Fed Chair Yellen last week, Williams added the recent rally in USD had a large impact on economic forecasts, but that rates should rise despite the green back strength.

Equities

US equities/ADRs:

- DGLY: Reports Q4 -$0.30 v -$0.74 y/y, R$5.42M v $3.5M y/y; +14.6% afterhours

- CHK: Updates Its 2015 Operating Plan in Response to Low Commodity Price Environment; Lowers capital budget forecast to $3.5-4.0B from $4.0-4.5B; +2.4% afterhours

- PBR: S&P revises outlook to Negative from Stable; Affirms CCR at BBB-; -1.4% afterhours

- LQ: Announces Secondary Offering of 17.5M Shares of Common Stock for Blackstone affiliates (13% of shares outstanding); -2.4% afterhours

Notable movers by sector:

- Consumer Discretionary: Kathmandu Holdings KMD.AU -11.8% (H1 results); Qantas Airways QAN.AU -2.3% (ACCC to deny Qantas, China Eastern coordination)

- Materials: New Hope Corporation NHC.AU +1.6% (H1 results); Fortescue Metals Group FMG.AU +1.8% (said to sell asset); Anhui Conch Cement 914.HK -1.3% (FY14 results)

- Industrials: Worley Parsons WOR.AU +2.2% (shareholder raises stake); Mazda Motor Corp 7261.JP +1.9% (comments on diesel vehicles); Qinhuangdao Port 3369.HK +7.8% (FY14 results)

- Technology: Sharp Corp 6753.JP +2.0% (extended investment talk with Hon Hai); GS Yuasa Corp 6674.JP -3.2% (cuts FY14/15 guidance); Leshi Internet Info & Tech 300104.CN +3.5% (enters strategic cooperation with BAIC on internet cars); Coolpad Group 2369.HK -3.4% (FY14 results)

- Utilities: Oki Electric Industry 6703.JP +2.7% (speculation over FY14/15 results)