Reports » Asia

Asian stock market, economy and companies update (June 03, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are in the green by a wide margin, tracking the outsized gains in the US indices that followed much improved Pending Home Sales as well as speculation of a strong non-farm payrolls report on Friday. Nikkei225 is leading the way with a 3% jump above 9,900, with export sector supported by the weaker Yen following yesterday's resignation of PM Hatoyama. Finance Minister/Dep PM Naoto Kan - front-runner ahead of tomorrow's DPJ general assembly election - is said to be a supporter of weaker Yen and more activist measures by the BOJ to rescue the economy from deflation. Elsewhere, Taiwan's Taiex and the S&P/ASX are up over 2%, Korea's Kospi is back from yesterday's break with a 1.5% advance, and Shanghai Composite is up over 0.5%. Ahead of Thursday's private sector ADP jobs tally - front-month S&Ps have tested 1,100 with a 0.3% rally.

- In the region's most notable economic data, Australia posted its first trade surplus in a year against expectations of another deficit, driven by a sharp pick-up in m/m exports growth of 11%. By contrast, imports component - responsible for prior month's 2-yr high trade deficit - was flat. Exports to China grew over 20% m/m, while shipments of coal and iron ore also registered multi-month high levels of growth.

SPEAKERS/PRESS
- JAPAN: Ahead of Friday's Prime Minister elections by the DPJ general assembly, local press said Fin Min/Dep PM Kan is still the front-runner, but Transport Min Maehara was tagged as the preferred leader in the press polls by 27-22% margin. Later in the day however, Maehara - the youngest among the leading candidates - said he would support Fin Min Kan. With the govt in transition, a poll from Japan's corporate sector has requested that the new cabinet also considers a reduction of corporate taxes as part of its economic policies. Moreover, Fin Min Kan's support of more aggressive central bank measures to tackle deflation was echoed by a BoJ member Suda, who said policymakers are growing more focused with downside risks for economy, as uncertainty in economy rises. Suda further stated that the debt problems in Europe are affecting Japan's economy, the instability in equity and FX markets are playing out in corporate CAPEX, and the sluggish economic growth is the reason for depressed prices.

- AUSTRALIA: The fallout from Australia's mining tax proposal moved beyond the recent rhetoric of criticism by BHP and Rio Tinto CEOs as UK-based Xstrata suspended some A$586M of projects in Australia upon review of the tax impact. Separately, Head of Infrastructure Australia Sir Rod Eddington - said to be PM Rudd's key advisor on building projects and also a Rio Tinto Board member - urged lawmakers to redraw the provisions of the super-profits tax from scratch. Elsewhere, one of Australia's most prominent business groups Business Council of Australia (BCA) expressed further opposition to the proposed mining tax, while another report from Minerals Council of Australia cited by The Australian projected about A$2B in planned gold and copper projects "financially unviable" as a result of the tax. Despite the wide criticism, PM Rudd reiterated his intention to move forward with the mining tax and its focal 40% provision on super-profits.

- CHINA: Chief economist at State Information Center Zhu Baoliang forecasted May CPI in line with forecasts at 3%, but warned that overheating economy may result in 2010 CPI above the 3% target. China Central planning official also expressed support for the trials of property taxes in Beijing as proposed in recent weeks. In terms of China govt bond auctions, cost of capital continued to rise for third consecutive week, with PBOC 3-month bills at 1.53% v 1.49% prior.

EQUITIES
- In notable Nikkei225 shares, Itochu rose sharply after securing a renewable energy operations partnership with GE, while Fast Retailing traded up after Uniqlo May SSS rose 3.1% - biggest increase in 6 months. In the press, Komatsu was reported to have boosted its equipment sales to Russia by 70% in FY10 to ?55B and PC raised its LCD panel capacity by 140% through the end of FY10/11. In the regional auto sector developments, carmakers posted the following May US sales numbers: Hyundai Motor +33% v +28%e to 49K units, Nissan +24.1% v +11%e; to 83.7K units, Honda +19% v +22%e, to 117K units, and Toyota +6.7% v +8%e, to 163K units. On a related note, Nippon Steel's negotiations with Toyota was reported to target a 25% steel price increase for the April-September period.

- Outside Japan, Australian Financial Review reported BHP and Rio Tinto could be awarded 20% q/q price increase for Q3 iron ore contracts starting Jul 1st under the new quarterly pricing scheme, boosting metric ton price to $143. Virgin Blue, still reeling from cutting its FY earnings forecast, said it would reduce the number of routes and brands in order to save costs.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, European and commodity majors extended their US session gains to new heights amid renewed risk appetite in Asia markets. EUR/USD tested 1.23, GBP/USD approached 1.47, while AUD/USD rose above 0.8480 - also outperforming across the board on strong trade data. Weak Yen also reflected risk-related flows as USD/JPY approached US session high around 92.30 and AUD/JPY took out the pivotal former support turned resistance at 78.00.

- In commodities, front-month crude was up 1.3% just below $74/brl on risk appetite as well as a very bullish API inventories report that saw substantial draw of CRUDE: -1.42M V -250KE; GASOLINE: -960K V -500KE. Spot Gold was a touch weaker, trading down to $1,221 on reallocation out of safe-haven despite the SPDR Gold Trust ETF holdings rising by 0.3 metric tons to a new record of 1,268.5 metric tons. PIMCO's El-Erian, commenting on gold, said his fund has recently cut its gold position in half and warned that prices are vulnerable to financial de-levering.

ECONOMIC DATA
- (KS) South Korea May foreign reserves: $270.2B v $278.9B prior
- (AU) AUSTRALIA MAY AIG PERFORMANCE OF SERVICE INDEX: 47.5 V 52.3 PRIOR (4-month low)
- (JP) JAPAN Q1 CAPITAL SPENDING Y/Y: -11.5% V -9.6%E; EXCL SOFTWARE: -12.9% V -2.7%E (smallest decline since Q2 2008 for both figures)
- (AU) AUSTRALIA APR TRADE BALANCE (A$): +134M V -800ME (first surplus since Apr 2009)
- (HK) Hong Kong MAY PMI: 53.2 v 55.3 prior