10 May 2010
Asia Mid-Day Highlights
- China: Xinhua: Apr exports rose 30.5% y/y (mkt: 28.9% y/y); imports up 49.7% y/y (mkt: 53.8 y/y); trade balance bounced to surplus $1.68 bln vs $7.24 bln deficit in Mar.
- China: Ba Shusong, deputy director-general of the Financial Research Institute at the State Council's Development Research Center, said that China has little room to hike rates due to concerns that hot money will flow into the country. Growth may slow in Q2 and Q3; govt to focus on growth after inflation peaks.
- China: Cheng Siwei, former vice chairman of the standing committee of the National People's Congress, said that an interest rate increase will provide risk-free arbitrage opportunities for speculators on yuan revaluatio n.
- China: China Securities Journal reported that China may allow a "slight" appreciation of the yuan in Q2, ending the yuan's peg to the dollar.
- Korea: Apr PPI jumped to 3.2% y/y up from 2.6% y/y in Mar; Commodities +3.8% y/y (Mar: 2.9% y/y); Mfg component of PPI accelerated to 3.6% y/y (Mar: 2.5% y/y); Services dipped a tad to 1.6% y/y (Mar: 1.8% y/y) but rose 0.4% m/m.
- S Korea: Vice FinMin Lim Jong-ryong said in an address of senior government officials that S Korea will suffer only "limited impact" from the European sovereign debt crisis as; 1) S Korea only had limited debt exposure to the like of Greece, Portugal, Italy, Spain and that ; 2) exports to these nations is only 3% of total exports. He added however that foreign currency liquidity is being closely monitored.
- S Korea: The financial regulatory body FSC warned however that the openness of the economy could see short-term fall out in domestic financial markets but stressed that overall European sovereign debt crisis will be limited.
- S Korea: MoF auctioned the 5-yr T-bonds at avg yield of 4.43% (lower than previous 4.50% on 12 April); strong 2.92 bid-offer ratio. KRW1.924 trln, higher than KRW1.65 trln on offer was awarded.
- Hong Kong: Russia's Petropavlovsk is reportedly planning for an IPO in HK for its iron-ore business worth estimated $1.5 bln, according to the FT.
- Indonesia: Q1 GDP rose 5.7% y/y, 1.9% q/q.
- Thailand: PM Abhisit demanded for a response from red-shirts' leaders latest by Mon to the revised election plans, as the self-chosen Sunday deadline passed triggering speculation over disunity amongst the UDD leadership. Co-leader Nattawut assured over the weekend that the anti-govt protestors would announce a reconciliation plan in "1-2 days", whilst another leader Jatuporn insisted that the protests would continue until legal cases against the government are kick-started.
- The EU agreed on an audacious EUR 750bn ($955bn) bailout plan in an effort to stanch a burgeoning sovereign debt crisis that began in Greece but now threatens the stability of financial markets world-wide. The money would be available to rescue euro-zone economies that get into financial troubles. The plan would consist of EUR440bn of loans from euro-zone govts, EUR60bn from an EU emergency fund, and EUR 250bn from the IMF. Immediately after the announcement, the ECB said it is ready to buy euro-zone government and private bonds "to ensure depth and liquidity" in markets, and Fed announced it would reopen swap lines with other central banks to make sure they had ample access to dollars - WSJ.
- Japan: BoJ will re-establish USD swap facility; keeps overnight call rate target at 0.10%. USD swap deal aimed at facilitating money market operations, in view of liquidity pressure in global markets and possible impact on JPY money market. Duration will not exceed 3 months. BoJ decision on Call rate unanimous. Will introduce USD fund supply operations against pooled collateral.
- G7 Statement says G7 finmins and central bank governors welcome new European Stabilisation Mechanism, support measures by ECB and stresses important role of G7 coordination amongst G7 central banks to redeploy bilateral swap arrangements. IMF Chief Dominique Strauss-Kahn strongly welcomes far-reaching steps by EUR and ECB for Eurozone. IMF stands ready to support aid programs for European countries when requested. G20 remains strongly committed to working together to maintain global financial stability - statement.
- Australia April business conditions index falls to 8 vs 13 in March, while business confidence falls to 13 from 16.
- ECB says it will conduct interventions in euro area public and private debt securities markets. Scope of intervention to be determined by governing councils. Will conduct operations to re-absorb liquidity, sterilise purchases. Conduct fixed rate 3-m liquidity operations with full allotment in May, June, And 6-m operation with full allotment in May at rate linked to main refi rate. To re-activate swap lines with Fed, start USD lending at full allotment. SNB, BoE, BoC, Fed announce re-establishment of USD liquidity facilities. Measures aim to address severe market tensions, will not affect stance of monetary policies.
- EU Olli Rehn says ECB has taken decision to intervene in secondary markets - as in buying eurozone bonds.
- Sunday Times: He swore he would never sell - but he did. This weekend, Mohamed al-Fayed, who pledged to stay at Harrods until he died, agreed to sell the Knightsbridge department store to the royal family of Qatar for more than EUR 1.5 billion. Fayed, 81, sold the company to the rulers of Qatar, the tiny Gulf emirate, after months of discussions. The deal was sealed at a meeting in Amsterdam between the two sides' advisers on Friday night.
- German Chancellor Angela Merkel's CDU/CSU coalition looks to have lost in Sunday's NRW state poll (official results not yet out) and which would mean the coalition has lost its majority in the German Bundesrat (Upper Houses).
USD/Majors: There was a bit of flip-flopping by early Far East session EUR buyers who were initially charged up by talks of a EUR600 bln stability fund to get a grip on Eurozone debt issues. The response to need for the fund to be ratified, initial thoughts of ECB bond buying to be mis-perceived as QE-type of response only to be clarified as an emergency measures that will include sterilization operations knocked the EUR around in the 1.2810-1.2970 range before prices were underpinned on the stronger side of that range as developments were perceived to be EUR-positive on balance. The lift in the EUR spilling over into the JPY crosses sent the Antipodeans as well as the Sterling higher into the Asian session with positive equity market moves. USD index buckled on this broad-based EUR short squeeze, risk-on move to fall from Fri highs of 85-ish levels to 83.50-ish levels at last indication.
Cross/JPY: JPY crosses were supported in Asian morning as markets found hope and fresh risk appetites in the news on EU aid package. However, price action on the crosses was less than stale given the volatile moves in the euro this morning. Some focus on the emergency BoJ meeting which re-established the USD swap facility.
USD/Asians: Announcement of the eye-popping EU/IMF bailout package was the highlight of the Asian AM session, with the intended uplift to the EUR provided for albeit bulls appeared tad exhausted after the steep run-up in wake of the announcements - which included re-establishment of swap lines, liquidity-enhancing measures amongst others. Asian markets took heart from the rescue measures with bourses holding firmly in positive territory, up in the range of flat to +2.0%. SSEA was down on profit-taking trades, while Philippines was closed for Presidential Elections on Monday. USD/AXJ likewise drifting lower as dollar strength fizzled out, though caution reigned as the pairs found support on extended pullbacks.
Oil held below $77 as EU measures were mulled over and USD strength faded slightly. Nymex crude oil last traded at $ 76.76/bbl.
Gold slipped on easing Greece sovereign worries. Spot gold trading at $1198.90-1199.80/oz at last indication.
NORTH ASIA
USD/KRW: With the equity market surging some1.5+% and the USD slumping broadly the fast money selling KRW bought back and prices tested below 1130; cautious of intervention on sustained dips after the sharp move though.
USD/CNY: 1-year NDFs were soggy in the 6.67-ish regions in Asian morning trades as the dollar slipped. Some support seen above the 6.67-handle as Shanghai bourses reversed gains and more.
USD/HKD: Choppy dollar index moves saw prices hover within 7.7760-7.7800 range in AM Asian session; positive Hang Seng underpins.
USD/TWD: Prices slipped below the 31.700-mark this morning as sentiments were lifted on the back of the EU aid package.
SOUTH ASIA
USD/SGD: Bears were all charged up on the EUR moves and prices plummeted to sub-1.3770 lows though intervention risks checked downside; this saw SGD/MYR slip alongside risk-on dynamics.
USD/MYR: Sustained EUR upside after the initial choppy moves saw USD/MYR breaking below 3.2400 before crashing below 3.2100-figure.
USD/IDR: The pairing slid towards the 9100-figure in am trades as Asian stocks found something positive to grasp on. BI heard capping at 9190 in initial trades.
USD/PHP: Markets closed for Presidential Elections.
USD/THB: Prices declined to sub-32.30, 32.23 lows seen at last indication as Europe crisis plans improved risk-appetite albeit local politics hampered further easing in the pair. SETI up 0.4%
USD/INR: Pairing gapped lower at open, seen easing from 45.10+ levels to sub-45.00 (44.95 lows at last look), with SENSEX >+1.0% and firmer EUR keeping a lid on upside momentum.