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Asian stock market, economy and companies update (May 31, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are modestly higher despite the latter session sell-off on Wall St on Friday, as European jitters resurfaced in a Fitch downgrade of Spain. With just about 90 minutes to go in Tokyo trade, Nikkei and the Kospi are up 0.3, Taiex is gaining 0.6%, while Shanghai Composite and S&P/ASX are marginally lower. Trading volumes remain notably light, as both US and UK markets are closed for the session. In electronic markets, front-month S&Ps are up 0.6% just below 1,095.

SPEAKERS/PRESS

- JAPAN: Reeling reputation of Japan's administration, fresh from a failed campaign promise to relocate a US military base away from the Okinawa prefecture was jolted by the pullout of the smallest member of the three-party coalition. PM Hatoyama called the withdrawal of the Social Democratic Party (SDP) "regrettable", just as his approval rating continued to slide another 2pts to 22%. Also in Japan, BOJ Gov Shirakawa affirmed the outlook for extremely accommodative policy but set out to cap the new lending facility to private lenders, noting that excessive public support may hurt productivity. In defense of additional liquidity offered to banks in the last BOJ decision, Shirakawa said European turmoil could become a fiscal threat for Japan if situation worsens.

- CHINA: Premier Wen retained a cautious tone, warning that second downturn in global economy is still a possibility as sovereign debt risks remain. Wen said stimulus policies were successful, but also said global demand may not return to pre-crisis levels for some time, justifying continued fiscal stimulus. In terms of currency, Wen said Yuan would be kept at rational levels, while in banking, China Premier the financial system is still healthy. Outside the comments by Wen, Chinese press said property tax proposal for Shanghai has been submitted to the central govt, just as a separate report saw some lenders also starting to limit loans for property developments.

- TAIWAN: Taiwan press speculated the next round of Taiwan-China trade talks was tentatively scheduled for June 15-20. Also helping the island's markets outperform in the region was Friday's decision by lawmakers to lower business income tax from 20% to 17%.

- US: Speaking at a Bank of Korea conference, Fed Chairman Bernanke suggested a coordinated exit from stimulus policies is unlikely, noting that central bank actions should reflect conditions in each economy. In other Fed speakers, Chicago Fed Pres Evans said the European fiscal crisis may impact demand for US goods, delaying policy tightening. Evans also noted employment picture remains challenging, with little change expected toward Fed's outlook on the economy. Speaking after Evans, Plosser was more upbeat, forecasting further job growth and calling US economy's prospects relatively strong. Plosser also contradicted his colleagues on the impact of Europe's crisis, suggesting that its fiscal problems are unlikely to affect the timing of US stimulus exit.

EQUITIES
- In individual names, Japanese press said domestic production by Toyota could fall 14% m/m in October to about 12K vehicles on end of govt subsidies for auto sector. A separate report from European press citing Honda CEO saw the company focusing more on hybrids. Also in Japan, Hitachi's 3-yr business plan saw the company looking to become more aggressive in M&A, while also shifting a greater part of its revenue overseas. Moreover, Hitachi said there would be little impact on operations from recent EUR weakness. Outside Japan, Korea's Hynix raised its 2010 CAPEX by over 30% from initial estimates to KRW3.05T. In Sydney, HealthScope traded sharply higher after confirming two improved takeover offers of A$5.80/shr from unnamed bidders. Qantas CEO said the company has a "diverse portfolio" which helps with earnings stability after falling last week when Virgin Blue drastically cut its earnings guidance.

CURRENCIES/FIXED INCOME/COMMODITIES
- European majors were helped by further short-covering dominating throughout the session. EUR/USD rose 70 pips to 1.2330 after initial weakness, while GBP/USD found buying interest at 1.44 toward 1.4490 session high. In commodity FX, AUD/USD tested the upside of 0.85 and USD/CAD was back below 1.0480 after an initial spike to 1.0550. Risk appetite was also evident in weaker Yen. USD/JPY hit the highest figure since May 20th above 91.50 and EUR/JPY rose over a big figure above 112.80.

- In commodities, FT reported the top three biggest miners - BHP, Rio Tinto, and Vale - would move ahead with price hikes as part of the new quarterly schemes. Iron ore prices were said to go up 30-35% and coking coal to rise 10-15%. A separate story from Estado also said VAle would increase iron ore prices by about 35% beginning in July. In electronic trading, spot gold was initially weak as EUR strengthened before rising back to $1,214. Front month crude was also higher, gaining 0.7% on risk appetite. Late in the day, crude was also bid up by reports of an altercation between Israeli Navy and a convoy ship for a flotilla headed to Gaza.

ECONOMIC DATA
- (KS) SOUTH KOREA APR INDUSTRIAL PRODUCTION M/M: 0.2% V 0.6%E (3-month low); Y/Y: 19.9% V 19.7%E; INDUSTRIAL PRODUCTION MFG Y/Y: 20.5% V 23.2% PRIOR
- (UK) UK MAY HOMETRACK SURVEY M/M: 0.2% V 0.2% PRIOR; Y/Y: 2.0% V 1.8% PRIOR (highest since Jan 2008)
- (KS) South Korea APR Leading Index y/y: 8.5% v 9.6% prior
- (JP) JAPAN MAY NOMURA/JMMA MANUFACTURING PMI: 54.7 V 53.8 PRIOR (highest since Sept 2006)
- (JP) JAPAN APR PRELIM INDUSTRIAL PRODUCTION M/M: 1.3% V 2.5%E (3-month high); Y/Y: 25.9% V 27.4%E (3-month low)
- (AU) AUSTRALIA MAY TD SECURITIES INFLATION M/M: 0.5% V 0.4% PRIOR; Y/Y: 3.7% V 2.9% PRIOR (19-month high)
- (AU) AUSTRALIA APR HIA NEW HOME SALES M/M: 6.2% V 0.9% PRIOR (3-month high)
- (AU) AUSTRALIA APR PRIVATE SECTOR CREDIT M/M: 0.2% V 0.5%E (5-month low); Y/Y: 2.1% V 2.4%E (matches 8-month high)
- (JP) JAPAN APR LABOR CASH EARNINGS Y/Y: 1.5% V 0.8%E (highest since Dec 2005)
- (AU) AUSTRALIA Q1 CURRENT ACCOUNT BALANCE (A$): -16.6B -16.4Be; Net Exports of GDP: -0.5% v -0.2%e
- (AU) AUSTRALIA Q1 COMPANY OPERATING PROFIT Q/Q: 3.9% V 3.0%E (highest since Q3 of 2008); INVENTORIES: 0.5% V 0.5%E
- (SI) Singapore APR M1 Money Supply y/y: 17.3% v 13.9% prior; M2 y/y: 9.0% v 8.8% prior
- (SI) Singapore APR Bank Loans & Advances y/y: 6.7% v 5.8% prior; Credit Card Bad Debts: 16.4M v 13.9M prior
- (NZ) NEW ZEALAND MAY NBNZ BUSINESS CONFIDENCE: 48.2 V 49.5 PRIOR
- (JP) JAPAN APR VEHICLE PRODUCTION Y/Y: 50.8% V 71.2% PRIOR