Reports » Asia

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

Contributed by Trade The News

By Trade The News

- Asian equity markets are in rally mode late in the day after a weak start which tracked last-hour selloff on Wall St. An FT report stating that China's FX regulator SAFE is reviewing its EuroZone bond holdings weighed on markets and also translated into initial selling in both S&P futures and Asian bourses. With just over an hour to go in Tokyo trading however, Nikkei225, the Kospi, and the Taiex are up 0.9%, while S&P/ASX is up 1.9%, boosted by another day of gains in commodities. With the long holiday weekend on the horizon, US equity futures are up 1.2%.

- Economic data was mixed on the session, with a strong Kiwi trade balance helping NZD outperform AUD and USD in early trade. Japan's Merchandise trade also topped expectations with both above-estimate import and export components. Australia's Q1 CAPEX was a big disappointment however, registering an unexpected contraction in the wake of the recent string of RBA tightening moves. Philippines GDP exceeded forecast and also prompted govt officials to consider review of monetary policy.

SPEAKERS/PRESS

- CHINA: Late session FT report stating that FX regulator SAFE is reviewing EuroZone bond holdings turned the markets south in the US, with the Dow ending below 10,000 for the first time since early February. However a Xinhua press citing sovereign wealth fund appears to have eased the damage. CIC noted that the European debt crisis will not have a big impact on investment decisions, and that the Greek debt crisis not to negatively affect China's overseas investments. Furthermore, China govt official suggested that FX reserve diversification will not change. Separately in China, tax officials were rumored to consider tightening collection of value-added taxes related to property. Also, a second consecutive weekly rise in 3-month bond auction yield to 1.49% from 1.4492% prior could lead to speculation of whether the PBoC is mulling tightening measures.

- AUSTRALIA: Shares of commodity names traded higher across the board after a report from The Australian suggested the govt may adjust the threshold of a super profit from 6% to 11-12% in exchange for pulling govt liability to failed projects. However, speaking to the Australian lawmakers, Treasury Sec Henry said he is not aware of any plans to change the structure of the proposed tax. Furthermore, Henry said the economy has done better than expected and that stimulus has been more effective than predicted. Henry further rejected claims by Rio Tinto CEO that the mining tax presents a key sovereign risk and also noted the levy will neither have impact on economic activity or affect prices.

EQUITIES
- In notable individual names, Samsung saw little impact from European debt crisis on chip demand, forecasting the market to remain tight through 2010 and semiconductor results during Q2 to top Q1. Sony also said it may seek closer ties with Samsung on a LCD panel-related JV. Separately in Japan, Honda closed all four assembly plants in China due to workers strike at the parts factory in south China, while the nation's top 3 shippers - Kawasaki Kisen, Nippon Yusen, and Mitsui OSK - were said to expect improved earnings amid rising shipping demand.

- In Sydney, ANZ was reported to have become the first among Australia's main banks to reduce a number of longer-dated fixed mortgage rates. Fosters, rising earlier this week from anticipated split of its spirits businesses, was rumored as a takeover target by SABMiller. James Hardie posted FY10 op profit $133M v $200Me on Rev of $1.13B v $1.0Be. The Australian said FIRB would delay the decision on whether to permit Bright Food Group to proceed with its bid for sugar division of CSR Corp.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, European majors were bid higher after CIC engaged in damage control from the FT report on SAFE outlook on Eurobonds, as EUR/USD and GBP/USD rose to 1.2280 and 1.4470 respectively. Commodity FX also benefited from late-day risk appetite, as AUD/USD rose 1% above 0.8320, USD/CAD fell to 1.0620, and NZD/USD tested the upside of 0.67. Japanese Yen was weaker across the board - USD/JPY was back above 90.30, EUR/JPY reached 111.00 and AUD/JPY - the biggest gainer - picked up over 170 pips from session lows to 75.20.

- In commodities, despite the EUR recovery, spot gold remained firm, reaching 1-week high of $1,218. PDR Gold Trust ETF holdings also rose by 0.3 metric tons to a new record of 1,267 metric tons. Front-month crude opened weaker, but finished the Asian session at its best levels above $72/brl, gaining nearly 1%.

ECONOMIC DATA
- (NZ) NEW ZEALAND APR TRADE BALANCE (NZ$): 656M V 455ME (4th consecutive monthly surplus, 11-month high); IMPORTS: 3.3B V 3.4BE; EXPORTS: 4.0B V 3.9BE
- (KS) SOUTH KOREA APR CURRENT ACCOUNT: $1.5B V $1.8B PRIOR; GOODS BALANCE: $5.2B V $4.5B PRIOR (5-month high)
- (JP) JAPAN APR MERCHANDISE TRADE BALANCE TOTAL: ?742B V ?701BE; ADJUSTED: ?729B V ?688BE
- (AU) AUSTRALIA MAR CONFERENCE BOARD LEADING INDEX: +0.3% V -0.1% PRIOR
- (AU) Australia Q1 Private Capital Expenditure q/q: -0.2% v 2.5%e
- (PH) PHILIPPINES Q1 GDP Q/Q: 3.0% V 1.0%E, Y/Y: 7.3% V 4.4%E