Reports » Asia

Asian stock market, economy and companies update (May 04, 2010)

Contributed by Trade The News

By Trade the News

- Asian equity markets are shrugging the broad-based rally seen in the US session, as worries about miners' ability to cope with higher taxes and higher rates in Sydney as well as higher capital reserve requirements in China weighed on sentiment. S&P/ASX traded down to session lows after RBA decision to tighten interest rates, falling 0.6%. In China, Shanghai Composite reopened lower by over 2% at worst levels since September of 2009 following the weekend reserve requirement ratio tightening by the PBOC, before paring those losses to trade down about 1%. Note the China equities were closed in the prior session. Elsewhere, Korea's Kospi and Taiwan's Taiex were down marginally, while Nikkei225 index remained closed. Ahead of Tuesday US session, front-month S&Ps are trading near unchanged levels at 1,198.

SPEAKERS/PRESS
- Australia: Reserve Bank of Australia raised its cash rate by 25bps for the 6th time in 7 meeting as expected. RBA noted that demand and inflation will remain under focus, with terms of trade rising above estimates and inflation pressures remaining stronger than expected. Australian dollar did see some marginal weakness following the decision, as traders noted RBA comments that rates for borrowers were now "around average" following this decision. Speaking after the rate decision, Treasurer Swan said the tightening reflects economic recovery in Australia, with rates being lifted back to normal range. Elsewhere in Australia, the opposition party was rumored to have overtaken the ruling Labor party as preferred governing party.

- China: In China housing related press reports, China Securities Journal said the daily average of home sale agreements fell to 221 on May 1st and - an 82% decline from April average - but does suggest softer activity is attributed in part to China's Labor Day. A separate editorial in the China Daily call for further state measures beyond the most recent RRR hike to restrain credit growth in order to prevent deflation. In trade related developments, Commerce Secretary Locke is expected to lead a delegation to China on May 15-21st to look into ways to raise export levels from the US.

- Japan: Moody's was upbeat on nation's corporates, calling for significant improvement in stability of credit ratings. Meanwhile, S&P shifted its focus on the sovereign debt from Europe to the Far East, noting there is a growing urgency for Japan to cut its budget deficit. S&P also said the fiscal plans in Japan would become more important.

EQUITIES
- In individual names, Japan's big three reported US sales, with Toyota posting y/y +24.4% v +34%e, Honda also below March levels at +12.5-13%, and Nissan/Infinity at +35% v +55%e y/y. Also in Japan, local press said net profits at Japan's publicly traded banks may reach about ?500B this FY vs prior year's loss of about ?465B. In energy space, Mitsui was said to invest up to ?1.2T over next 2 years on international energy and infrastructure projects.

- In commodity names, Australia's second largest gold miner Lihir Gold agreed to a revised A$9.5B bid from the country's largest gold producer Newcrest [NCM.AU]. The revised offer from Newcrest was a +6.4% improvement from the originally proposed A$9.2B transaction. Also in Australia, Macarthur was lower after potential suitor Peabody Energy expressed some uncertainty over new tax liabilities in the mining space, calling for further data. Also in Sydney, Australian Financial Review said Virgin Blue expects weak bookings and higher volatility to pressure FY earnings to lower end of its prior guidance. In Korea, Samsung Heavy reported Q1 Net KRW200B v KRW184Be, Op Profit KRW216B v KRW237Be, Rev KRW3.3T v KRW3.2Te.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, European and commodity majors sold off late in the day, with Aussie rate tightening failing to support the currency. AUD/USD was off by about 30 pips below 92.20 on comments the rate may be close to average. EUR/USD also fell below 1.3180 after ECB's Liikanen said that if Greece does not live up to commitments, payments can be stopped. Earlier, PIMCO's El-Erian told FT that Greece may need further funds beyond the bailout, with latest package meeting liquidity but not solvency needs. Sterling was also lower about 40 pips, trading down to 1.5220. Japanese Yen remained weak despite the modest risk aversion, as USD/JPY breached stops above 98.80 to highest levels since last August.

- Commodity prices are declining on the session, driven by the weakness in Asian equities. Additionally, China's April PMI manufacturing data declined for the first time. Shanghai Copper prices are declining by more than 0.20% due to China's recent move to increase the raise requirement ratio. Crude oil prices are lower and trading below $86/bbl. During yesterday's US session, oil prices oil traded marginally higher after the US ISM manufacturing index rose in April to its best levels since the middle of 2004. Additionally, in NY trading oil prices received some support from concerns that the escalating oil spill in the Gulf of Mexico could eventually lead to supply shortages. In oil market data, API will release its weekly inventories report later delay. As of 23:37 EST, Spot Gold prices are lower by more than 0.10% and trading near $1180/bbl, after the metal approached a 5-month high in NY trading. During the US session, spot gold received support from the moves in XAU/GBP and XAU/EUR to fresh record highs.

ECONOMIC DATA
- (KS) South Korea Apr foreign reserves: $278.9B v $272.3B prior
- (NZ) NEW ZEALAND Q1 PRIVATE WAGES WITH OVERTIME Q/Q: 0.3% V 0.4%E; EX OVERTIME Q/Q: 0.3% V 0.4%E; AVERAGE HOURLY EARNINGS Q/Q: -0.4% V 0.3%E (matches 5-yr low seen in Q4)
- (CH) CHINA APR HSBC MANUFACTURING PMI: 55.4 V 57.0 PRIOR (7-month low)
- (RU) RUSSIA APR MANUFACTURING PMI: 52.1 V 50.2 PRIOR
- (AU) RESERVE BANK OF AUSTRALIA (RBA) RAISES CASH RATE BY 25BPS TO 4.50% (AS EXPECTED)