China Caixin PMI hits 4-year high as strength in SMEs diverges from slower SOEs

Key economic data

- (CN) CHINA DEC CAIXIN MANUFACTURING PMI: 51.9 V 50.9E; 6th consecutive expansion; highest print since Jan 2013

- (AU) AUSTRALIA DEC CORELOGIC RPDATA HOUSE PRICES M/M: 1.4% V 0.2% PRIOR (7-month high)

- (AU) AUSTRALIA DEC AIG MANUFACTURING INDEX: 55.4 V 54.2 PRIOR (3rd straight expansion, 5-month high)

- (SG) SINGAPORE Q4 ADVANCED GDP Q/Q: 9.1% V 4.0%E; Y/Y: 1.8% V 0.3%E

- (ID) INDONESIA DEC CPI M/M: 0.4% V 0.5%E; Y/Y: 3.0% V 3.1%E; CPI CORE Y/Y: 3.1% V 3.1%E

Politics

- (US) President Elect Trump said to choose Robert Lighthizer for US Trade Representative

- (US) Sonny Perdue III (former governor of Georgia) speculated as Donald Trump's pick to be US Sec of Agriculture - press

Asia Session Notable Observations, Speakers and Press

- Asian equity markets have returned on a strong note, with S&P/ASX200 leading the charge to a 17-month high above 5,700; Nikkei225 remains on holiday.

- Among USD majors, high-beta/commodity FX are seeing the strongest gains; NZD is preferred with a rise of over 50pips, as some analysts still anticipate headwinds for AUD from further RBA rate cuts.

- China Caixin Dec Manufacturing PMI tops consensus by a full point, rising to a 4-year high with its 6th straight expansion. Production grew at the fastest rate in nearly 6 years, output growth accelerate to a 71-month high, and input price inflation picked up to its sharpest since early 2011, while Employment continued to decline amid corporate cost reduction. Caixin economist concludes it remains to be seen if the stabilization of the economy is consolidated due to uncertainties in whether restocking and consumer price rises can be sustainable. Impressive Caixin PMI that tracks smaller Chinese institutions follows the official govt PMI focused on SOEs out this weekend, which showed a retreat in both manufacturing and services.

- PBoC's yuan fix was set at the weakest point in 2 weeks, while a state researcher is calling for a large one-off devaluation to keep the currency at equilibrium.

- Another China state researcher forecast 2017 GDP around 6.5% - the bottom end of the 6.5-7.0% official target range for 2016; Exports were estimated to fall 3%. Report out of IMF notes "China urgently needs to tackle its corporate-debt problem before it becomes a major drag on growth", adding current focus on addressing the overcapacity problem does not tackle its financial implications.

- Far east PMI's were mixed; Malaysia and Indonesia remained in contraction; Taiwan and Vietnam in respectively 7th and 13th consecutive months of expansion.

China:

- (CN) China trade official: China economy is invulnerable to trade war - China Daily

- (CN) China state researcher Zhu Baoliang: 2017 GDP estimated to be around 6.5% vs official 2016 target range of 6.5-7.0% - Chinese press

- (CN) IMF: China credit risks appear high but manageable if problems are addressed promptly

Japan:

- (JP) Japan Chief Cabinet Sec Suga: Policy focus this year will be on managing risks around foreign exchange

- (JP) BOJ may extend its no-interest lending facility to financial institutions by another year to help stimulate lending and defeat deflation - Nikkei

- (JP) Japan PM Abe reiterates view of no plans to dissolve Lower House - financial press

Australia:

- (AU) JPMorgan chief Australia economist Auld: RBA may get nervous and ease policy again in 2017 if there are "wobbles" in strength of economy - press

Asian Equity Indices/Futures (23:30ET)

- Nikkei225 closed, Hang Seng +0.5%, Shanghai Composite +0.7%, ASX200 +1.2%, Kospi +0.7%

- Equity Futures: S&P500 +0.4%, Nasdaq +0.6%, Dax +0.2%, FTSE100 +0.6%

FX ranges/Commodities/Fixed Income (23:30ET)

- EUR 1.0455-1.0485; JPY 117.20-117.5; AUD 0.7190-0.7230; NZD 0.6915-0.6970

- Feb Gold +0.5% at 1,158/oz; Feb Crude Oil +0.6% at $54.05/brl; Mar Copper +1.4% at $2.54/lb

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9498 V 6.9370 PRIOR; Weakest Yuan setting since Dec 16th

- (CN) PBOC to inject combined CNY40B in 7-day and 14-day reverse repos v CNY250B prior

- (CN) Trading in China govt bond holdings maturing in 2065 halted due to abnormal fluctuations - press

- (KR) South Korea sells 30-yr govt bond, avg yield 2.19%

Asia equities/Notables/movers by sector

- Consumer discretionary: MGM China 2282.HK -6.6%, Galaxy Entertainment Group 27.HK -2.4%, Sands China 1928.HK -1.5% (Macau gaming Dec revenue data)

- Financials: China Aoyuan Property Group 3883.HK -2.3% (Dec result); Evergrande Real Estate Group 3333.HK +3.5% (asset sales plan); ANZ Bank ANZ.AU +1.7% (agrees to sell stake in Shanghai Rural Commercial Bank); Wharf Holdings 4.HK +4.0% (Citi raised to buy)

- Industrials: Hyundai Heavy 009540.KR -1.7% (guidance); Korean Air Lines Co 003490.KR -0.2% (Samsung Securities cuts to Hold); Daelim Industrial Co 000210.KR +0.9% (Dongbu Securities raised to buy); Hyundai Motor Co 005380.KR +1.0% (Dec result)

- Technology: NCsoft Corp 036570.KR +4.4% (Eugene raises earnings forecasts)

- Materials: Kingsgate KCN.AU -3.5% (closure of Chatree gold mine in Thailand); Galaxy Resources GXY.AU +4.8% (may sell stake in project)