Reports » Asia

Asian stock market, economy and companies update (June 11, 2010)

Contributed by Trade The News

By Trade The News

- Risk appetite sentiment has circled the globe in a 24-hour cycle as the rally sparked by China's strong trade data swept into US markets with a near-3% gain. After opening higher and making further upside inroads in the first half of the day, Asian equity markets have since pared some of those gains in the wake of - yet again - Chinese economic data that painted a less rosy picture. Nikkei225, S&P/ASX, Korea's Kospi, and Taiwan's Taiex are still up over 1% but well off session's best levels, just as front-month S&Ps point to a lower Friday open at -0.2%.

- Among the monthly metrics, the most notable industrial production and consumer price index figures suggested a "stagflation light" environment, with a 17-month high pace of y/y inflation and a 6-month low in the rate of industrial production. Retail sales and fixed asset investment figures were likewise mixed with respective 15-month highs and 2-yr lows.

SPEAKERS/PRESS

- CHINA: China Stats Bureau entered damage control following the announcement of figures, stating the high inflation is due to low base year effect while anticipating time lag for overcapacity-driven drop in commodity prices weighing on inflation in months to come. The bond market remained hardly convinced by the NBS attempt to talk down inflation - both 3-month and 9-month bond auctions failed to sell in entirety as investors demanded higher yield to meet the rising inflationary expectations. Govt measures in the property sector continued to show signs of impact however, with local press reporting steel prices in 30 of China's major provinces declined for 7 straight weeks on lower construction demand.

- JAPAN: Local press said the govt is considering boosting its FY10/11 GDP forecast to 2% from 1.4% following yesterday's upward revision in final y/y GDP for Q1. A separate report noted the economists' average forecast of 2.6% in an overall range of 2.0%-3.1%. Early discord in the new cabinet surfaced as Trade Min Naoshima proposed a 5% reduction of corporate tax rate in Japan to stimulate growth, just as PM Kan addressing lawmakers stressed fiscal discipline. On the political front, Banking Min Kamei said he would resign as a result of disagreement on postal reform, to be replaced by Cabinet Sec Sengoku adding Kamei's post to his responsibilities. Fin Min Noda, holding talks with Treasury's Geithner, said European market developments are being monitored. Noda also said he would present a growth strategy and fiscal reform summit by the time of G20 summit in Toronto at the end of June.

- AUSTRALIA: PM Rudd downplayed press speculation the administration may be considering revision to the unpopular mining tax proposal. A separate report in The Australian however cited BHP Chairman calling for complete overhaul of the tax, with new levy to be based on mineral resource and applied based on value of materials alone rather than profits. A separate press report also pointed to a politically motivated row, with Trade Min Crean said to be more loyal to Labor party's Dep PM Gillard becoming more critical of the insufficient talks with the mining industry.

EQUITIES

- In individual names, Toshiba said no decision has been made regarding the phone operations units merger with Fujitsu. Isuzu was reported to open a parts-buying facility in China. Elsewhere in Sydney, Santos was reported to be in talks with Sinopec regarding sale of 9% stake in Queensland's Gladstone LNG project valued around A$400M. In materials, to Credit Suisse said BlueScope Steel would have to raise prices by as much as $100/ton from current $625 in response to higher input costs just to reach breakeven point.

CURRENCIES/FIXED INCOME/COMMODITIES

- In currencies, European majors consolidated US gains with in rangebound trading, while commodity pair saw more pronounced weakness on less upbeat China data. EUR/USD and GBP/USD traded within 40 pips of 1.21 and 1.47. AUD/USD backed away from 0.85 down to 0.8440, USD/CAD rose 30 pips to 1.0330, and NZD/USD fell as much as 70 pips from session high to 0.6800. USD/JPY remained unimpressed by risk appetite trade, backing away from 100-day MA at 91.70.

- In commodities, spot gold saw some buy-on-dip interest, rising above 1,220 after SPDR Gold Trust ETF holdings rose by 7.6 metric tons to a new record 1,306.1 metric tons. Front-month crude traded mainly lower throughout the day, down 0.3% at $75.29/brl.

ECONOMIC DATA
- (NZ) NEW ZEALAND MAY FOOD PRICES M/M: -0.7% V -0.5% PRIOR
- (CH) CHINA MAY M2 MONEY SUPPLY Y/Y: 21.0% V 21.0%E; M1 Money Supply Y/Y: 29.9% v 29.5%e; M0 Money Supply Y/Y: 15.2% v 15.8% prior
- (CH) CHINA MAY NEW YUAN LOANS (CNY) Y/Y: 639.4B V 600.0BE (-17.4% m/m)
- (CH) CHINA MAY FIXED ASSETS INV URBAN YTD Y/Y: 25.9% V 25.7%E (2-yr low)
- (CH) CHINA MAY PPI Y/Y: 7.1% V 6.8%E; PURCHASING PRICE INDEX Y/Y: 12.2% V 11.5%E
- (CH) CHINA MAY RETAIL SALES Y/Y: 18.7% V 18.5%E (15-month high)
- (CH) CHINA MAY INDUSTRIAL PRODUCTION Y/Y: 16.5% V 17.0%E (6-month low)
- (CH) CHINA MAY CPI Y/Y: 3.1% V 3.0%E (highest since Oct 2008)