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Asian stock market, economy and companies update (June 18, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are mixed going into the weekend, tracking further short-covering in the US session where the early weakness from a trifecta of poor inflation, weekly jobless claims, and Philly Fed data on Thursday was shrugged in the final hour of trading. Entering the final hour in Tokyo, Nikkei225 and Taiwan's Taiex are down slightly, while Korea's Kospi is flat. Sydney shares are trading higher on renewed expectations for the govt to modify its mining tax proposal. In China, Shanghai Composite losses were more pronounced on cautious comments regarding nation's growth going forward from the World Bank as well as a PBoC adviser. S&P futures are trading near flat levels at 1,111, with little on the docket to tilt sentiment from two consecutive sessions of near-equilibrium.

SPEAKERS/PRESS
- CHINA: PBoC adviser Xia Bin warned that the economy is likely to slow in the second half of the year but urged further measures to discourage speculation in the property sector such as a home transaction tax. Regarding inflation, Xia Bin said price pressures may rise in June/July, but overall will not be substantial for the year. On a related note, another short/medium term PBoC auction saw rates rise on expectations of higher inflation - PBoC sold 3-yr bonds at 2.77% v 2.68% prior and 5-yr bonds at 2.9% v 2.53% prior. Elsewhere, Foreign Trade Center Director Wang Zhiping reflected on the impact of the fiscal crisis in Europe, pointing to May export growth to the region below 20% - much worse than expected.

- JAPAN: Bank of Japan May meeting minutes most notably warned that the strength of the Yen due to the European fiscal crisis bears close monitoring. Recall that meeting laid out preliminary plans for the fixed-rate lending scheme to stimulate "growth industries", with subsequent details released earlier this week. BOJ also said that both the upside of economic recovery as well as downside risks from Europe have increased, as debt turmoil will likely take a long time to settle. Elsewhere in Japan, both PM Kan and Fin Min Noda said the cabinet will seriously consider revising the tax code with a higher consumption levy - 10% v current 5% - and lower corporate tax rates. Japan govt also laid out its mid and long-term growth strategy draft, aiming for CPI in positive territory by FY11/12, a sequence of lowering corporate tax rates, and calling for more investment in overseas infrastructure projects. Moreover, the cabinet aimed for 5M new jobs created as a result of the BOJ lending scheme and unemployment falling below 4%.

- AUSTRALIA: Mining shares rose over 1% late in the day after another press report noted the govt is closer to altering its mining tax proposal - namely, raising "significantly" the 6% threshold before tax is applied, mineral-based treatment, and permitting companies to write off some capital expenditures before applying tax to profits. In turn, mining industry continued to broaden its options as BHP signed a 25-yr deal in Liberia with a more moderate 30% corporate tax and 3-5% royalty rate. Separately, BHP closed part of the iron ore rail line in Pilbara after an overnight accident between a train and a vehicle, with investigations on one fatality to continue into the weekend.

EQUITIES
- In individual names, Toyota was hit with another labor strike in the China for the second consecutive session - this time in Tianjin plant of company's interior parts maker Toyoda Gosei. In Hong Kong, Asia's biggest bank ICBC was rumored to delay its capital raise through A-share convertible bonds until next year on concerns about demand - speculation subsequently denied by the company. In Sydney, retailer David Jones traded sharply lower following an abrupt resignation of its CEO related to inappropriate behavior toward a female staff member. Also in Australia, NAB said it would keep its UK operations despite walking away from the RBS retail branches.

CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, lack of direction in risk bias translated into narrow ranges across European and commodity majors - EUR/USD hugged the 1.24 handle, GBP/USD remained supported above 1.48, and AUD/USD - outperforming after mining tax speculation - briefly rose above 0.87. Also helping the Aussie was the report from The Australian citing Russia Dep Central Bank Gov Ulyukayev suggesting the bank may add AUD to its reserves. Japanese Yen retained a firm tone after USD/JPY fell below 91.00 - a 3-week low - in US session. In commodities, spot gold retreated from new record highs above $1,250/oz, while crude futures traded around $76.50.

ECONOMIC DATA
- (KS) SOUTH KOREA MAY DEPARTMENT STORE SALES Y/Y: 8.0% V 8.8% PRIOR; DISCOUNT STORE SALES Y/Y: 2.3% V 0.3% PRIOR
- (TH) Thailand May Customs Trade Balance: $2.2B v $660Me