Reports » Asia

Asian stock market, economy and companies update (June 22, 2010)

Contributed by Trade The News

By Trade The News

- Asian equity markets are modestly lower following a steady slide in the US indices which had been disappointed by the PBoC parity setting on hold on Monday. And while Chinese central bank this time delivered on its Saturday promise to move away from the Yuan dollar peg by lifting CNY to 6.7980 - record high setting for Chinese currency - concerns over the marginal pace of currency reform have translated into some further caution. In the final hour of Tokyo trading, Nikkei225 and S&P/ASX are down about 1%, Korea's Kospi off by 0.5%, and the Taiex is lower by 0.1%, with Asian bourses returning to levels seen before to Yuan move. Shanghai Composite is up a marginal 0.3%, while S&P futures are unchanged around 1,111 after rising to 1,116 in the wake of PBoC move.

SPEAKERS/PRESS
- CHINA: Local press added to yesterday's set of commentary on the currency move, mainly corroborating market caution of incremental pace of reform. CASS Deputy Chief researcher Zhang Ming siad Yuan would only rise about 3-5% this year, while an academic at Tsinghua Univ said revaluation would account for about 3% and only in the event of continued strength of external demand - well short of the double-digit undervaluation estimate shared by a number of analysts. PBoC Adviser Li Daokui also noted yuan appreciation would merely be helpful in relieving some of the built up inflationary pressures. In notable China press reports, 21st Century Business Herald cited CASS estimating Q2 GDP at 10.6% y/y, down from 11.9% growth in Q1. In the property space, China Business News said housing prices in Shenzhen dropped over 30% in the past 4 weeks amid govt efforts to prevent a housing bubble, while China State Information Center recommended the cabinet to proceed with a property tax.

- AUSTRALIA: Australian Bureau of Agricultural & Resource Economics (ABARE) raised its 2010-11 outlook for GDP to 3.25% from 3.0% and inflation to 3.0% from 2.3%. ABARE also noted iron ore price would rise in FY11, but may be more volatile, while estimating global steel consumption at 1.3B metric tons on production of about 1.4B tons. ABARE's global outlook for growth saw 2010-11 GDP around 3.9%. In other commodities, oil production is estimated to rise 6.8% and aluminum production to fall 3%. Notably, gold output was seen rising 10% in 2010 and 13% in 2011.

- JAPAN: As speculated in the media over the prior session, Japan Cabinet Office raised its FY10/11 GDP forecast to 2.6% from 1.4%. Cabinet also called for GDP at 2.0% in FY11/12, along with CPI returning to flat-positive territory next year. As previously stated by PM Kan, govt will attempt to keep JGB issuance in FY11/12 at or below ?44T. Elsewhere in Japan, the tax panel said tax reform should be implemented to see a significant rise in revenues, voicing support for progressive tax structure for income and a rise in sales tax. Japanese press has conducted polls on the possibility of doubling of consumption tax, noting support for reform just below 50%.

EQUITIES
- In individual Tokyo names, labor disputes in China spread from automakers to tech, as Denso plant saw a halt in production. Elsewhere, Japanese press said Teijin may post Q1 Net profit ?3-4B v loss ?18B y/y. In Sydney, a press report cited Macquarie analyst suggesting South Africa's Aspen Pharmacare may drop its A$700M bid for Sigma Pharmaceuticals, while company directors for Gloucester Coal were said to recommend to shareholders to approve the A$1B offer by Noble Group. In Korea, Kia Motors said it may enter India markets and Posco was rumored to raise steel prices by about 6% in Q3.

CURRENCIES/FIXED INCOME/COMMODITIES
- European and commodity majors tracked risk flows seen across the equity markets, briefly rising on PBoC currency announcement before renewed retreat. EUR/USD fell below 1.23, GBP/USD tested 1.4730, while AUD/USD fell below 0.8750. Swiss franc was also firm on signs of more hands off SNB approach - EUR/CHF hit fresh record low after SNB's Jordan noted risk of deflation largely disappeared and SNB intervention was not required at this time. Japanese Yen was also higher, as USD/JPY fell below 90.80 and AUD/JPY tested the downside of 79.50. In commodities, crude was off nearly 1% toward the end of Asian session below $78/brl, while spot gold pared some of the US session retreat to $1,238.

ECONOMIC DATA
- (NZ) NEW ZEALAND MAY CREDIT CARD SPENDING M/M: 1.9% V -1.2% PRIOR; Y/Y: 3.4% V 1.9% PRIOR
- (JP) JAPAN MAY SUPERMARKET SALES Y/Y: -5.3% V -4.9% PRIOR