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Asian stock market, economy and companies update (June 14, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are starting the new week on a firm footing, as risk appetite is looking increasingly less fragile following the last-hour Friday rally in the US as well as some more benign economic data from Japan. Entering the final hour of Tokyo trading, Nikkei225 is leading the region with a 1.6% advance after Japan's Finance Ministry's Q2 BSI figures saw near-3-yr high. BSI also revised ts CAPEX outlook for FY10/11 sharply higher to +9.2% from -5.5% estimate in the prior survey. Elsewhere, Korea's Kospi was up over 1% on upbeat comments from local officials, and Taiwan's Taiex celebrated progress on China trade pact with a 0.9% rally. Shanghai Composite is closed for the first 3 days of the week, while S&P/ASX was also on Queen's Birthday holiday break. Going into the new week on Wall St, front-month S&Ps point to a higher open with a 0.4% boost to 1,089.

SPEAKERS/PRESS

- JAPAN: PM Kan affirmed speculation that he will look to cap JGB issuance at ?44.3T starting next fiscal year FY10/11, pledging to balance the budget within 10 years time. As part of the necessary cost-cutting, Kan sacrificed political capital by backing away from yet another DPJ campaign promise to double per child subsidies to ?26K/month, opting to use funds to expand number of child care centers. PM Kan's approval rating meanwhile saw a 5pt slide to 59% after his first full week on the job.

- AUSTRALIA: Political fallout is similarly experienced by PM Rudd in Australia in the wake of the controversial mining tax proposal. The Australian noted Rudd leadership may not be in serious danger as long as Dep PM Gillard stands behind Rudd, but will fall precipitously if that changes given the 62-32 preference for Opposition in the mining hub of Western Australia. Meanwhile, BHP continued to develop contingency plans, accelerating its intentions to develop A$6B iron ore hub in West Africa, also holding talks with ArcelorMittal about a prospective JV in the region.

- TAIWAN: Third round of trade-related talks between China and Taiwan produced the most significant progress yet, with agreement on content and structure of the trade discussions estimated to ultimately see Taiwan GDP rise by 1.7% and create over 250K new jobs on the island. Under the premises of the deal, China would offer tariff exemptions or reductions on about 500 items imported from Taiwan, while Taiwan side of the bargain will see reduction on about 200 Chinese items.

- SOUTH KOREA: President Lee said Korean economy is improving amid higher job growth investment, and consumption, even as Fin Min Yoon warned exports could be hurt by debt problems in EU. On the monetary front, Korean press said the local central bank (BOK) may lower the threshold on loans to commercial banks starting in the 2H of the year amid evidence of economic recovery in a decision expected later this month. At the last meeting, BOK vowed to keep loan ceiling unchanged at KRW10T through Q2.

- EUROPE: ECB's Orphanides was upbeat on the progress of austerity measures in Greece, pointing to "concrete" signs that the program is on track. A pair of ECB member - Noyer and Nowotny - both said EUR levels are in a normal range supportive of export sector. Nowotny also noted ECB will continue govt bond purchases as long as credit markets remain volatile. In the UK, Confederation of British Industry (CBI) raised 2010 growth forecast to 1.3% from 1.0%, also forecasting the BOE may start raising rates by the end of the year. On the opposite end, newly formed UK Office of Budget Responsibility was expected to downgrade UK GDP forecasts because of reductions in public spending and corporate investment.

EQUITIES
- Honda remains confounded by labor dispute in China, where a strike of 1,500 workers in Guangdong halted production for 5 days. In a move surely to exacerbate relations with the unions, management was reported to consider recruitment of replacements. Also in the tech sector, Nissan was said to boost SUV output in UK by 30% with a third-shift production line, aiming to produce about 24K units per month. In materials, Tokyo Steel said it may cut prices for July H-beam shipments by ?7K/ton just as Korea's Posco looked to raise steel product prices as early as next month. In Sydney financials, ANZ said it is looking to double its Northeast Asia revenue from current $687M over next 5 years, while the competing bids for Axa Asia unit by NAB and AMP saw the latter set back by NZ regulators delaying their decision by 2 weeks. In Taiwan tech, HTC traded sharply higher after US ITC agreed to review company petition to block Apple imports of iPhone, iPod, and iPad products on alleged patent infringement. TSM said global market for semiconductors may rise 6-7% per year over next 5 years on rising demand for electronics from China - up from prior expectations of a 5% increase.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, risk appetite lifted European and commodity majors, with the recent underperformers EUR and AUD seeing most pronounced short covering. EUR/USD was up nearly 100 pips from Friday close, testing 1.22 level, while AUD/USD gained 70 pips to 0.8570. Sterling advanced 80 pips to 1.4640, and NZD/USD gained 40 pips to 0.6940. Japanese Yen was also weak across the board, with notable declines against the greenback as USD/JPY approached 10-day high of 92.00. In commodities, front-month crude advanced 1.3% to $74.80 and gold pared initial rally above 1,232 to $1,230, still up from $1,227 Friday close.

ECONOMIC DATA
- (NZ) NEW ZEALAND APR RETAIL SALES M/M: -0.3% V -0.2%E; EX-AUTO M/M: -0.2% V -0.4%E
- (JP) JAPAN Q2 BSI LARGE ALL INDUSTRY INDEX Q/Q: 4.0 V -2.4 PRIOR (highest since Q3 of 2007); LARGE MANUFACTURING Q/Q: 10.0 V 4.3 PRIOR; Companies see FY10/11 CAPEX at +9.2% y/y vs -5.5% in Q1
- (KS) South Korea MAY Export Price Index m/m: 2.8% v -0.2% prior; y/y: 0.4% v -6.7% prior; Import Price Index m/m: 2.7% v 1.2% prior; y/y: 11.3% v 5.1% prior
- (JP) JAPAN APR FINAL INDUSTRIAL PRODUCTION M/M: 1.3% V 1.3% PRIOR; Y/Y: 25.9% V 25.9% PRIOR; CAPACITY UTILIZATION M/M: 0.0% V 0.6% PRIOR
- (NZ) NEW ZEALAND MAY PERFORMANCE SERVICES INDEX: 53.3 V 53.9 PRIOR