Reports » Asia

Asian stock market, economy and companies update (May 28, 2010)

Contributed by Trade The News

- Asian equity markets traded higher in the wake of a roaring rally on Wall St that saw the Dow finish up 2.9% and S&P500 gain 3.3% after Chinese FX authorities as well as the sovereign wealth fund rejected prior session's FT speculation of EuroBond holding review. Entering the final 90 minutes of Tokyo trading, Nikkei225 and Taiwan's Taiex were up just over 1%, off their session lows, Sydney market led the way with a 1.5% gain, while Shanghai Composite and Korean Kospi gains were somewhat more moderate with an over 0.5% advance. All Asian bourses are paring their opening gaps higher on waning optimism, just as front-month S&Ps fall to session lows by 0.4% to 1,097.

- In economic data, Japan took another step back from clawing its way out of deflationary spiral. Headline CPI fell for the first time since last October, while core CPI saw its first decline since August of 2009. Household spending was also weak, falling y/y instead of the expected increase, and unemployment rate ticked higher to 5.1% - also worse than expected. New Zealand data was a brighter spot, with m/m building permits rising at the highest pace in 6 months.

SPEAKERS/PRESS
- JAPAN: Finance Minister Kan spoke following the release of the disappointing inflation data, stating that CPI number still suggest mild deflation conditions and calling for further cooperation by the central and the govt to tackle the pricing pressure. Earlier, Nikkei News reported that Bank of Japan still considers pricing developments to be transient, resisting government pressure for a specific inflation target. In other notable Kan comments, Japan's fin min said G20 will discuss how European fiscal situation impacts FX markets.

- CHINA: Several press reports indicated that govt policies to address the budding property bubble have been effective. June placement of new homes for sale in Shanghai fell 70% m/m, while China Vanke - one of the nation's biggest property lenders - was said to be considering a 10-30% cut in property prices. In a Caijing editorial, PBOC Development Research Center Dep Director Ba Shusong said China property prices may fall as much as 20% within a year. Outside property-related news, Chinese press speculated that May Yuan loans may also decline to CNY600B, down from the higher than expected CNY774B in April.

- KOREA: Geopolitical worries rattling the Korean peninsula appear to have subsided. Japanese press reported that Tokyo policymakers would implement additional sanctions on North Korea, such as tightening reporting requirements for North Korea remittances. Meanwhile, Seoul continued to defend its markets, stating that aggressive steps will be taken to stabilize financial environment.

- EUROPE: Telegraph's Ambrose Evans-Pritchard added to skepticism over today's relief rally with commentary on Bank of Spain order for lenders to set aside 30% of reserves. AEP said the new requirements would "force lenders to write down bad debts within a year instead of stretching out the pain for up to six years" as expected, potentially exposing just how many lenders may be insolvent based on marked-to-market loan accounting. Earlier, IMF's Strauss-Kahn was notably more upbeat than in recent weeks, anticipating Europe's woes to be resolved quicker. Meanwhile, FT cited French State Minister questioning Franco-German unity and also noting that the bailout rewrites the rules of the charter. Also in FT, French govt's proposed austerity plans of higher retirement were met with demonstrations and work stoppages of as many as 1M people - up 30% from prior participation levels.

EQUITIES
- In individual names, Tokyo big 3 automakers posted April monthly production metrics: Toyota global vehicle production +62% y/y (591K), Honda +27% y/y (294K units), and Nissan +57% y/y (319K). Separately in the sector, Toyota president was reported to have affirmed annual domestic production capacity of at least 3M units in the current year, and Honda continued to struggle with wage related labor strikes in China, extending plant shutdown for another 2 days. In Taiwan tech, Hon Hai received approval from the govt for 2 projects in China valued around $330M and also suggested it may raise wages by as much as 20% to reflect improving economy.

- In Sydney, Virgin Atlantic and Qantas traded lower after the former cut its FY10 op profit forecast to A$20-40M from A$80M. In the materials space, smaller miner Iluka and conglomerate Wesfarmers called for the govt to raise the threshold of its mining super-profits tax from the proposed 6% level.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, European and commodity majors consolidated the short-covering rallies seen in the US hours. EUR/USD and GBP/USD fell to 1.2280 and 1.4520 session lows - down 100 and 60 pips respectively from Asia session's best levels. AUD/USD and USD/CAD traded sideways in 0.8460-0.8530 and 1.0480-0520 range. Japanese Yen remained a touch weaker despite the late session retreat in risk trade, rising above 91.20 - a 1-week high.

ECONOMIC DATA
- (KS) SOUTH KOREA JUN BUSINESS SURVEY MANUFACTURING: 104 V 107 PRIOR; NON-MANUF: 90 V 94 PRIOR
- (NZ) NEW ZEALAND APR BUILDING PERMITS M/M: 8.5% V -0.4% PRIOR (6-month high)
- (UK) UK MAY GFK CONSUMER CONFIDENCE: -18 V -16E (5-month low)
- (JP) JAPAN APR JOBLESS RATE: 5.1% V 5.0%E (4-month high); JOB-TO-APPLICANT RATIO: 0.48 V 0.50E
- (JP) JAPAN APR NATIONAL CPI Y/Y: -1.2% V -1.1%E (first decline since Oct 2009); CORE Y/Y: -1.5% V -1.4%E (first decline since Aug 2009); MAY TOKYO CORE CPI Y/Y: -1.6% V -1.5%E (11-month high)
- (JP) JAPAN APR OVERALL HOUSEHOLD SPENDING Y/Y: -0.7% V 2.5%E (9-month low)
- (JP) JAPAN APR RETAIL TRADE M/M: +0.5% V -1.0%E (4-month low); Y/Y: 4.9% V 3.6% (multi-year high); LARGE RETAILERS' SALES: -3.6% v -5.3%E (17-month high)
- (NZ) New Zealand APR Money Supply M3 y/y: -3.6% v -3.5% prior