Asian Market Update – 3/5/10
Friday, March 5th, 2010Asian Market Update: China Premier Wen outlines 2010 targets, banking regulator more at ease on lending activity; JPY weaker on press speculation the BOJ may consider additional liquidity steps, USD eyes NFP
ECONOMIC DATA
- (AU) Australia FEB AiG Perf of Construction Index: 52.8 v 57.7 prior
- (JP) Japan FEB Official Reserve Assets: $1.05T v $1.05T prior
- (PH) Philippines FEB CPI m/m: 0.4% v 0.5%e, y/y: 4.2% v 4.3%e
- (AU) Australia FEB Foreign Reserves: A$44.3B v A$46.6B prior
- After yesterday’s hiccup, Asian equity markets are looking to finish the week on a positive note, benefiting from renewed investor optimism that saw the Dow Jones Industrial Avg claw its way back into positive territory for 2010. In the final hour of Tokyo trading, Nikkei225 is up 1.9% at 10,340 after rising as high as 10,370. A report from Nikkei News suggesting that the central bank may consider expanded easing supported exporters while punishing the Yen. S&P/ASX finished the day up 0.3%, Taiwan is up over 1.2%, and Korea’s Kospi advanced by over 0.5%. Shanghai Composite traded near par for most of the session, reopening after midday break up 0.1%. Ahead of the non-farm payrolls Friday trading in the US, front-month S&Ps are up 0.1%.
SPEAKERS/PRESS
- In notable Far East speakers, Japan’s Finance Minister Kan welcomed speculation of expanded liquidity measures by the central bank, but conceded he has not heard anything specific from the BOJ. Kan also commented on the recent Yen trends, suggesting the gains since mid-February could be attributed to turmoil stemming from Greece and may subside going forward. In other regional speakers, China’s top Taiwan negotiator said a free-trade agreement between China and Taiwan may be signed in May or June. Recall in the prior session, Taiwan press speculated the second round of free trade talks between Taiwan and China would take place this month. In South Korea, Finance Minister Yoon warned the labor sector remains fragile, and a full recovery is yet to be secured. On the upside, Yoon noted that 2009 growth could top preliminary forecast of 0.2%, and unemployment rate for the month of February is likely to have fallen further.
- In the equivalent of China’s State of the Union address, Premier Wen outlined performance target for the economy in 2010, aiming for GDP growth of 8% and CPI of 3%. Additionally, targets for industrial production and M2 money supply growth were at 11% and 17% respectively, with new loans expected to contract to CNY7.5T from CNY9.6T in 2009. Jobless rate in 2010 was expected at 4.6%, with fixed asset investment growth of 20% and property development increase of 18%. Regarding currencies, Premier Wen said exchange rate reform would continue to be improved, and basic stability of Yuan exchange rate retained. On the fiscal front, China’s Ministry of Finance said the budget deficit was expected at 2.8% of GDP and remain below 3% in coming years. In terms of the overheated housing sector, Wen noted the cabinet would “resolutely” curb housing price gains and speculative house purchases, promising to increase land supply for low and medium-cost housing. Banking regulator Liu also chimed in on the speculative housing bubble, stating that the pace of bank lending is more stable, and loan books of banks appear to be more safe. Regarding lending, Liu noted that Feb new yuan loan levels were stable relative to January.
- Stateside, two Fed speakers suggested the US monetary authorities may be considering further steps to exit stimulus measures. Fed’s Evans said that no additional purchases of MBS are planned as policymakers debate the order of exit mechanisms. More notable, Fed’s Bullard said a change in Fed’s statements accompanying interest rate decisions may be on the horizon, eyeing the “extended period” for “exceptionally low level” of Fed funds rate passage. On the jobs front, Bullard said that February weather could weigh on today’s non-farm payrolls, and also expressed concern regarding the recent drift in weekly jobless claims.
EQUITIES
- In individual shares, press reports emerged that the US National Highway Traffic Safety Administration received new complaints regarding Toyota of vehicles experiencing unintended acceleration even after undergoing repairs. Company officials said those complaints would be reviewed. Separately, Toyota said it plans to launch a new sales campaign in China, reaffirming its commitment to the market where it remains an underperformer. Also in Japan auto space, Mitsubishi Motors said it may repurchase some of its preferred stock by end of FY09/10. Elsewhere on the Nikkei, telecom names reported strong Feb metrics: KDDI posted net of 121.4K mobile phone users v 52.9K m/m and NTT DoCoMo reported net of 148.3K v 108.2K m/m.
- Outside Japan, Taiwan’s TSM and UMC were said to take about 3-5 days to resume full capacity production after yesterday’s earthquake. In tech, MediaTek raised its Q1 Rev growth est to 5-10% q/q from 0-5%. In Australia materials names, gold producer Lihir said it entered into a sale agreement related to its Ballarat gold mine with Castlemine Goldfields. BHP was also said to have its Pilbara JV with Rio Tinto decided on by the Austalian regulatory body.
CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, Japanese Yen reversed its gains from 3-month high levels against the greenback on further BOJ easing speculation. USD/JPY rose to 89.30, while EUR/JPY and GBP/JPY reached respective highs of 121.40 and 134.40. European majors were contained ahead of US jobs data, as EUR/USD traded range-bound around 1.3570-1.36 and GBP/USD seen around 1.5020-60. Commodity FX trading was thin as well, with AUD/USD and USD/CAD in 20 pip ranges of 0.8990-0.9010 and 1.0300-20 respectively.
- Spot Gold prices are higher and trading near $1,133/oz on the weaker dollar. During yesterday’s US session, gold prices eased tracking the weakness in EUR/USD. Overall, there are expectations that gold could remain range bound ahead of the later today release of the US nonfarm payrolls report. Additionally, the Friday meeting between Germany’s Chancellor Merkel and Greece’s PM Papandreou could be a point of interest. In terms of the technical outlook for gold, one market players has noted near-term resistance in the $1,140 area.
- Crude oil is gaining and trading above $80.50/bbl. Earlier during today’s session, Iran’s OPEC Governor said that he saw no need to raise oil production in H1 of this year. Back in Nov, the Iranian official noted that the oil market would face an oversupply if OPEC raised production.
- Copper prices are higher on the session, tracking the gains in equities. One of China’s largest copper producers, Jiangxi Copper, said it expects to produce 900K tons of copper this year. Also, Jiangxi said it was positive on the first half outlook for copper prices, although demand is tepid. Overall, the copper producer sees the copper concentrate market in balance for 2010. In Chile, a magnitude 6.3 earthquake was reported in the northern part of the country, but the government said there were no reports of damage nor injuries. In comments out of China’s National People’s Congress, the government announced that in 2010 it planned to increase its commodities reserves, with a focus on grains, oilseeds, crude and base metals. In 2009, China’s nonferrous metals and special steel product reserves rose by 2.5M tons.
- China’s NDRC guided the country’s 2010 crude oil production +0.5% y/y (to 190M tons), natural gas output +8% y/y (to 95BCM), power output +6.6% y/y (to 4B kwh) and raw coal output +3.3% y/y (to 3.2B tons). The China Daily reported that Baosteel, which is leading the country’s iron ore price negotiations, may delay in committing to annual iron ore price contracts in order to observe the outcome of the price talks occurring between steelmakers in Japan and the global iron ore miners. The article added that there are expectations that FY10/11 iron ore contract prices may rise by as much as 90% y/y from the FY09/10 price of $60/metric ton. Prior reports from early Feb had suggested that Chinese steel mills may only agree to accept price increases of 30% y/y.
Written by Trade the News
