Reports » Asia

Asian stock market, economy and companies update (May 12, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are mixed, tracking the seesaw of the US session that saw both the S&P500 and the Dow close down 0.3% after rising to positive territory in midday trade. Despite the strong set of earnings overnight from Tokyo - most notably an unexpected operating profit for the FY from Toyota - Nikkei225 is down 0.2% entering the final hour. Taiwan and Sydney bourses are up about 0.3%, the Kospi is flat, while Shanghai remains weighed down by property market concerns. With US trade data on tap for the Wednesday US session, front-month S&Ps are weaker by 0.9% at 1,142.

SPEAKERS/PRESS

KOREA:
- Bank of Korea interest rate decision marked the key economic event of the session. As widely expected, the BOK left rates unchanged at 2.00%, but also notably removed the reference to easy policy "for time being" clause, leaving accommodative stance timing undefined. Speaking after the decision, BOK Gov said the passage was dropped to reflect a change in underlying conditions, also pledging not to yield to external pressure for higher rates. Despite the unemployment rate falling to 4-month low earlier, BOK also said a considerable degree of uncertainty over the economy is still present, specifically pointing to fiscal constraints in Europe and monetary risks in China. On the upside, BOK did acknowledge a more potent domestic recovery, also suggesting inflation pressures would remain limited.
- On the geopolitical front, North Korea officials confirmed Chinese press report of a successful nuclear fusion reaction.

CHINA
- In the latest installment of the Beijing property bubble battle, Shanghai Securities News reported the govt may impose the dreaded residential property taxes as early as this month. A separate report from China Securities Journal offered the extent of the run-up in prices and activity, with nation's biggest developer China State Construction Engineering Co noting Jan-Apr up 29% y/y at CNY18B and contracts signed up 59% y/y at CNY132B. In speakers, PBOC advisor Li Daokui said lending rates should stay unchanged, but deposit rates need to be raised because of mounting inflation. NBS Chief economist Yao suggested the economy would struggle containing inflation below 3%, with CPI to continue rising because of high food costs.

EQUITIES
- In notable individual names, two biggest Nikkei names reporting solid results overnight - Toyota and Hitachi - were initially both higher, before the latter turned south with the rest of the index. Separately, Japanese press rumored Toyota would reduce annual domestic production capacity by 20% to 3.2 units by 2015, anticipating declining sales volume after recent recalls. Other names reporting FY results included Yamaha, posting Q1 Net ?7.5B v ?0.3Be, Op Profit ?9.6B v ?0.5Be, Rev ?310B v ?299Be, rising 3% after the results. In financials, Sumitomo Realty reported FY09/10 in line at Net ?53B v ?53Be, Op Profit ?134B v ?138Be, Rev ?720B v ?717Be. In the retail space, Fast Retailing was reported to consider an increase in overseas openings of the Uniqlo stores in Germany and Spain. Outside Tokyo, Commonwealth Bank of Australia reported Q3 Net A$1.5B v A$1.2B y/y, with Tier 1 ratio: 9.2% v 9.1% q/q. CBA also said credit growth is still muted and short term risks remain, but did acknowledge gradual improvement in credit quality. Despite the higher open, shares of CBA fell 1.5% going into market close.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, USD strength against EUR persisted as unprecedented QE steps by the ECB weighed on the single currency. EUR/USD briefly tested 1.2620 - some 30 pips from 1-yr low seen in the panic selloff last Thursday. Sterling was a notable gainer, approaching 1.50 late in the US session after confirmed Conservative/LibDem coalition opened 10 Downing St to a new resident - Conservative Leader Cameron. LibDems leader Clegg was named as Dep PM, with the party also receiving 5 seats in the cabinet overall. In commodity FX, AUD/USD and NZD/USD initially strengthened before falling late in the day to respective 0.8890 and 0.7105 session lows. Japanese Yen was also firmer yet again, tracking equity weakness, as USD/JPY retreated below 92.50.

- In commodities, outflow from the Euro continued to boost gold, with rumors of central banks diversifying their reserves away from the damaged single currency into precious metals, as spot prices bounced to record high above $1,230 in electronic trading. Despite the lower than expected API inventory build - CRUDE: +360K V +1.2ME - front-month crude also declined in step with equities, falling 0.8% to $75.70.

ECONOMIC DATA
- (KS) South Korea APR Unemployment Rate: 3.7% v 3.8% prior (4-month low)
- (JP) Japan APR Official Reserve Assets: $1.05T v $1.04T prior
- (KS) BANK OF KOREA (BOK) LEAVES RATES UNCHANGED AT 2.00% AS EXPECTED
- (PH) Philippines MAR Total Exports y/y: 43.7% v 39.5%e; Total Monthly Exports: $4.2B v $3.6B prior
- (AU) AUSTRALIA MAR HOME LOANS M/M: -3.4% V -3.0%E; INVESTMENT LENDING M/M: 3.0% V -1.1% PRIOR (7-month high); VALUE OF LOANS M/M: % V -4.4% PRIOR
- (AU) Australia May Leading Employment Indicator: -1.029 v -1.129 m/m (first improvement in 5 months)
- (JP) JAPAN MAR PRELIM LEADING INDEX: 102.8 V 102.8E; COINCIDENT INDEX: 101.1 V 101.6E