China FX reserves fall to 3-year lows

Asian Market Update: China FX reserves fall to 3-year lows, though decline is less than feared; North Korea irks western world with the launch of long-range rocket

Economic Data

- (CN) CHINA JAN FOREIGN RESERVES: $3.23 V $3.21TE; 3rd month of decline; Lowest in over 3 years

- (JP) JAPAN DEC LABOR CASH EARNINGS Y/Y: 0.1% V 0.7%E; REAL EARNINGS (EX-INFLATION) Y/Y: -0.1% V -0.4% PRIOR

- (JP) JAPAN JAN BANK LENDING (INCL TRUSTS) Y/Y: 2.3% V 2.2% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.4% V 2.2%E

- (JP) JAPAN DEC CURRENT ACCOUNT BALANCE: ¥961B V ¥1.05TE; ADJUSTED CURRENT ACCOUNT: ¥1.64T V ¥1.59TE; TRADE BALANCE: ¥188.7B V +¥305BE

- (AU) AUSTRALIA JAN ANZ JOB ADVERTISEMENTS M/M: +1.0% V -0.1% PRIOR

- (HK) Macau China visitors 58.8K, +2.6% y/y, Hong Kong China visitor 62.8K on Feb 7th

Index Snapshot (as of 03:30 GMT)

- Nikkei225 -0.2%, S&P/ASX -0.2%, Kospi closed, Shanghai Composite closed, Hang Seng closed, Mar S&P500 +0.2% at 1,878

Commodities/Fixed Income

- Apr gold -0.2% at $1,166/oz, Mar crude oil flat at $30.98/brl, Mar copper -0.4% at $2.09/lb

- (CN) China Dec oil demand fell 0.8% y/y to 11.35M bpd; 2015 oil demand in the country expanded by 5.8% - Platts

- (SA) Saudi Oil Minister al-Naimi met with Venezuela minister on Sunday; No announcement of plans of any production cuts - financial press

- GLD: SPDR Gold Trust ETF daily holdings rise 4.9 tonnes to 698.5 tonnes; highest since Oct 15th; 5th straight increase

- (CN) PBoC injected CNY110B in 14-day reverse repos; Offer yield at 2.40%, unchanged from prior

- (AU) Australia MoF (AOFM) sells A$500M in 2029 Bonds; avg yield: 2.829%; bid-to-cover: 2.95x

Market Focal Points/FX

- Asia is treading water and volatility is lukewarm as China and other regional indices begin a week-long celebration of the Lunar New Year. Nikkei225 was down marginally early on even though USD/JPY was up some 60pips from opening lows above 117.30, testing the highs seen after the sound non-farm payrolls data out of the US on Friday. Toyota shares are weighing on the market after unimpressive results post-close on Friday. In other USD majors, AUD/USD rose about 40pips above 0.71 and NZD/USD also up about 40pips above 0.6640, reversing some of the broader USD strength on Friday's jobs numbers.

- Although China is closed, the release of January foreign reserves data was closely watched by investors to gauge the extent to which PBoC was forced to prop up the Yuan. Although reserves fell for the 3rd straight month to a 3-year low, the decline of $99.5B was less than the record high $107.9B in Dec and should ease some worries. Mizuho economists said the smaller decline suggests that some capital outflow restrictions imposed in January worked while anticipating another benign figure in Feb, while IHS said "the rapid pace of depletion in recent months is simply unsustainable" forcing PBoC to eventually capitulate. Note that late last week, Premier Li reiterated that China will not boost its economy via Yuan devaluation and is not at risk of a hard landing as long as it maintains its reform goals.

- North Korea was also in the headlines over the weekend after snubbing international calls for restraint with a launch of a long-range rocket claimed to take a satellite into orbit. Initial reports over success of the launch were mixed, however South Korea military subsequently acknowledged that North Korea has probably put an object in orbit. UN Security Council convened a meeting about the launch on Sunday in New York condemning the move and may now seek to expand its sanctions on Pyongyang. South Korea and US defense officials also announced they would meet to discuss deploying a US missile defense system on Korean peninsula amid growing threat from the North, which has already been opposed by China foreign ministry. Saber-rattling on the peninsula continued on Monday when a North Korea patrol boat has intruded on the border with the South and retreated after warning shots were fired by the South.

- Japan economic data were largely mixed, with better than expected bank credit in January and soft headline wage inflation growth. Current account data for January were largely in line, though balance of payments trade was a bit soft. BOJ posted its January board meeting opinion summary when it introduced negative rates, noting the need to reinforce QQE objectives and also disclose its available options for further easing in the future while implementing additional measures so as to sustain credibility. The central bank maintains there is plenty of room for pursuing additional easing, even though analysts question its impact on the health of the JGB market. A report in The Economist this weekened also reflected on the issue, profiling the limits of negative rates as consumers find ways to keep cash out of the banks, thereby damaging the overall financial sector.

Equities

US equities/ADRs:

- NFLX: Media insider speculating Kevin Spacey may leave "House of Cards" as his character may be killed off in Season 4 - NY Post

- CVC: NYC and New York State have continud to object to Altice's $10B takeover plan of Cablevision - financial press

- F: Said to plan to build a new assembly plant in Mexico; Expansion cost estimated at over $1B - financial press

Asia movers on news:

- ANN.AU: Reports H1 Net $69.6M v $87.7M y/y; Rev $784.8M v $847.3M y/y; +6.4%

- BRS.AU: Guides FY16 underlying EBITDA $280-300M; Guides initial FY17 underlying EBITDA excess of A$300M; +3.7%

- JBH.AU: Reports H1 Net A$95.2M v A$88.5M y/y; Rev A$2.12B v $1.97B y/y; -0.2%

- ANZ.AU: ASIC said to be preparing a rate-rigging case against ANZ - Australian press; -2.0%

- TM: Reports Q3 Net ¥628B v ¥615.5Be, Op Profit ¥722.3B v ¥780Be, Rev ¥7.34T v ¥7.27Te; Announces share buyback of 0.74%; -2.5%

- Olympus 7733.JP: Reports 9-month Net ¥42.85B v ¥31.93B y/y, Op Profit ¥73.67B v ¥62.07B y/y, Rev ¥592.94B v ¥550.02B y/y; -6.0%

- RWH.AU: Reports H1 Net A$4.7M, -26% y/y; Names Neil Littlewood as CEO, Effective July 1st; -6.7%

- OFX.AU: Terminates talks with Western Union; Cuts FY16 underlying EBITDA A$35-37M (prior A$38.5-40.5M); -39.8%