Reports » Asia

Asian stock market, economy and companies update (April 27, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are near unchanged levels despite starting lower, as strong Korea GDP and solid guidance from Japan's shipping names helped counter more property-sector related bearishness seen out of China. Entering the final hour of Tokyo trading, Nikkei225, Taiwan's Taiex, the Kospi, and S&P/ASX are all near unchanged levels. Shanghai Composite is underperforming significantly however, falling over 2.1% as fears of property taxes and tighter monetary policy linger on sentiment. Ahead of the busy pre-market US earnings session that will include names like ADP, Ford, 3M, Tyco, UPS, and US Steel, front month S&Ps are up a marginal 0.1% at 1,209.

SPEAKERS/PRESS
- Economic performance in Korea was in the spotlight, with Q1 GDP topping estimates q/q at 1.8% V 1.5%E and registering the highest rate of growth y/y since late 2002 at 7.8% V 7.5%E. Bank of Korea said the results demonstrate that domestic economy is showing steady growth across a number of sectors, however it was the government consumption component that saw the most notable q/q increase of 5.7% v -2.4% prior - a multi-year high. Terms of trade was also fairly strong at +2.5% v -1.0% prior. Also speaking after the Q1 GDP data, Korean Finance Minister reaffirmed 5% GDP growth in 2010 and 2011, but also cautioned risks of policy changes overseas impacting external demand, concluding it was too early for a fiscal exit strategy. Late in the session, comments from Korea Finance Ministry about the "excessive" rise in KRW saw Korean currency retreat from post-GDP data highs.

- In China, the PBOC Development Research Center Deputy Director Ba Shusong was cited in Chinese press reiterating that capital requirements for real estate developers may be raised to 35% from 20%, suggesting the State Cabinet would consider both ratio and tax measures. On a related note, Securities Daily noted several prominent economists anticipating the central bank to implement additional reserve requirement ratio, rather than interest rate, tightening as a further means of policy adjustment. In other China speakers discussing trade, PBOC Gov Zhou said additional data is needed to assess whether the trade deficit in March was an anomaly. Recall two weeks ago, the Commerce Ministry said China may see frequent monthly trade deficits in H1 2010. Cited today in Xinhua press, China's Vice Commerce Min Zhong Shan noted the outlook for the international economy is "cloudy" and may hurt export growth later in 2010.

- Over in Japan, local press saw Finance Minister Kan voicing support for higher sales tax to address rising social security spending, meeting with Fiscal System Council to discuss policy outlook. Japanese press also forecasted the BOJ will upgrade FY10/11 CPI forecast to 0.0-0.2% from -0.2%, higher than the 0% target rumored in the press two weeks ago. In Taiwan, President Ma continued to defend the unpopular free trade agreement with China, suggesting the deal will not lead to unification but rather present a beneficial economic arrangement.

EQUITIES
- In individual names, shipping companies out of Japan posted mixed FY results but unanimously topped estimates in next year's guidance. Mitsui OSK reported Net ?13B v ?11Be, Op Profit ?21B v ?19Be, Rev ?1.35T v ?1.4Te and guided FY10/11 Net ?60B v ?50Be, Op Profit ?100B v ?85Be, Rev ?1.55T v ?1.5Te, while Kawasaki Kisen posted Net loss ?69B v loss ?62Be, Op loss ?52B v loss ?52Be, Rev ?838B v ?833Be, forecasting FY10/11 Net ?18B v ?3Be, Op Profit ?32B v ?15Be, Rev ?950B v ?888Be. On a related note, Japanese press reported that steelmakers Nippon Steel, JFE are expanding their export facilities. Also reporting results, Mitsubishi Motor posted FY09/10 Net ?4.8B v ?6Be, Op Profit ?13.9B v ?24Be, Rev ?1.44T v ?1.5Te, and likewise guided FY10/11 higher at Net ?15B v ?13Be, Op Profit ?45B v ?32Be, Rev ?1.9T v ?1.6Te. Results from Sharp, Komatsu, and Mazda were expected after the close of Nikkei225 trading.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, European and commodity majors traded with little direction, tracking sideways movement in equities. EUR/USD ranged between 1.3360-1.3410, Sterling bounced in a wider 1.5420-80 band, while USD/CHF was contained by 1.0740. In commodity FX, AUD/USD was a touch lower, testing the downside of 0.9250 and the Kiwi was supported above 0.72 ahead of RBNZ decision on Wednesday. Japanese Yen consolidated the gains made in the US session, with USD/JPY rising back above 94.00.

- Crude oil prices are declining by more than 0.2% and trading below $84/bbl, tracking the declines in equities and the commodity currencies. Spot Gold prices are marginally higher, as prices continue to be supported by gains in XAU/EUR. In terms of event risks for the gold market, all eyes are on Wednesday's FOMC interest rate decision, amid speculation that the Fed might debate a plan to sell assets from its balance sheet. In gold market news, it was reported on yesterday's session that the IMF sold 5.6 metric tons of gold in Feb as part of its previously disclosed plan to sell 191 tons. In other commodities, Shanghai Copper prices are lower tracking the declines in Chinese equities. In press news, Australian steel producer Bluescope filed an objection to the proposed iron ore joint venture with Rio Tinto and BHP, amid concerns that the venture may limit competition. Prior reports have suggested that Australia's competition regulator (ACCC) might make a decision on the joint venture by the end of May.

ECONOMIC DATA
- (KS) SOUTH KOREA APR CONSUMER CONFIDENCE: 110 V 110 PRIOR
- (KS) SOUTH KOREA Q1 GDP PRELIM Q/Q: 1.8% V 1.5%E; Y/Y: 7.8% V 7.5%E (highest since Q4 of 2002)
- (PH) Philippines FEB Trade Balance: -$333M v -$682M prior; Imports y/y: 27.6% v 30.3% prior
- (AU) AUSTRALIA Q1 PPI Q/Q: 1.0% V 0.6%E (highest since Q4 of 2008); Y/Y: -0.1% V -0.6%E
- (AU) AUSTRALIA Q1 NAB BUSINESS CONFIDENCE: 17 V 18 PRIOR (first decline in 2 years)
- (JP) JAPAN APR SMALL BUSINESS CONFIDENCE: 46.8 V 45.8 PRIOR