Asian Market Update: BOJ adds Negative Interest Rates to policy stimulus measures; PBoC adds incremental liquidity in OMO ahead of holiday cash crunch
***Economic Data***
- (JP) JAPAN JAN TOKYO CPI Y/Y: -0.3% V 0.0%E; CPI EX-FRESH FOOD Y/Y: -0.1% V 0.1%E
- (JP) JAPAN DEC NATIONAL CPI Y/Y: 0.2% V 0.2%E; CPI EX-FRESH FOOD (CORE) Y/Y: 0.1% V 0.1%E
- (JP) JAPAN DEC JOBLESS RATE: 3.3% V 3.3%E
- (JP) JAPAN DEC PRELIMINARY INDUSTRIAL PRODUCTION M/M: -1.4% V -0.3%E; Y/Y:-1.6% V -0.6%E
- (JP) JAPAN DEC OVERALL HOUSEHOLD SPENDING Y/Y: -4.4% V -2.5%E
- (JP) JAPAN DEC VEHICLE PRODUCTION Y/Y: -2.3% V +6.1% PRIOR
- (AU) AUSTRALIA Q4 PPI Q/Q: 0.3% V 0.9% PRIOR; Y/Y: 1.9% V 1.7% PRIOR
- (AU) AUSTRALIA DEC PRIVATE SECTOR CREDIT M/M: 0.5% V 0.6%E; Y/Y: 6.6% V 6.7%E
- (NZ) New Zealand Dec Building Permits M/M: 2.3% v 2.4% prior
- (TW) TAIWAN Q4 PRELIMINARY GDP Y/Y: -0.3% V -0.6%E (enters technical recession with 2nd straight quarter of contraction)
- (KR) SOUTH KOREA DEC INDUSTRIAL PRODUCTION M/M: +1.3% V -0.3%E; Y/Y: -1.9% V -3.3%E
- (KR) SOUTH KOREA FEB BUSINESS MANUFACTURING SURVEY: 66 V 68 PRIOR; NON-MANUFACTURING SURVEY: 68 V 69 PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -0.2%, S&P/ASX -0.1%, Kospi -0.5%, Shanghai Composite +2.0%, Hang Seng +1.8%, Mar S&P500 +0.1% at 1,883
***Commodities/Fixed Income***
- Apr gold flat at $1,116/oz, Mar crude oil +1.0% at $33.55/brl, Mar copper -0.1% at $2.05/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 9,626 tonnes from 9,662 tonnes; multi-year low
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5516 V 6.5528 PRIOR; strongest Yuan setting since Jan 6th, 15th straight firmer setting relative to Close
- (CN) PBOC to inject CNY20B in 7-day reverse repos and CNY80B in 28-day reverse repos
- (AU) Australia MoF (AOFM) sells A$900M in 2025 Bonds; avg yield: 2.6128%; bid-to-cover: 2.39x
***Market Focal Points/FX***
- After the recent easing rhetoric from ECB's Draghi and carefully phrased backing away from steady tightening commitment by the Fed, the Bank of Japan was on deck today and seemingly lived up to its "arch-dove among peers" credentials. Expectations by cabinet advisors and analysts have been piling up for the BOJ to respond to recent spate of softer metrics. Today's slowing CPI prints - particularly in the forward looking Tokyo region - along with bigger than expected declines in household spending and industrial output may have convinced policymakers to take bolder action. After last month's innocuous increase in JGB buying, the BOJ scaled up its stimulative activity, announcing negative interest rates on current accounts that financial institutions hold with BOJ and added it was prepared to adjust negative rates even deeper. USD/JPY spiked up some 300pips from session lows to as high as 121.50, Nikkei225 rallied strongly, and the S&P500 futures traded up by nearly 1% in electronic trade.
- BOJ's negative -0.1% interest rate was voted on by a narrow 5-4 margin. Accompanying the decision, the BOJ also cuts its FY16/17 CPI projection to 0.8% v 1.4% prior forecast and maintained FY17/18 at 1.8%, adding the assumptions were based on oil price rising to over $40/brl over projected period. Tokyo's penchant for trifurcated policy approach - comparable to Abenomics' "three arrows" - is now being deployed in monetary policy. 1st dimension - "interest rate policy" - is the -0.1% interest rate, 2nd dimension - "quantitative" - is the maintained annual monetary base expansion target of ¥80T, and the 3rd dimension - "qualitative" - is the makeup of that asset buying scheme which remains primarily JGB purchases with annual maturity of 7-12 yrs. Going forward, BOJ is assumed to be willing to alter any or all of these to achieve 2% inflation target, expected date for which has also been pushed back by another 6 months to H1 of FY17/18.
- Outside of Japan policy decision, PBoC injected additional CNY100B in repos to supply more liquidity going into the Lunar New Year holidays in China next month. A researcher with PBoC warned the central bank is in for a "tough battle" against speculators in CNY, but was confident that Chinese currency can be kept stable. Another PBoC academic said RRR cut can still happen but its impact is limited by factors such as Fed tightening. In Australia, Treasury Sec Fraser warned PM Turnbull that AAA credit rating is in jeopardy unless the gvot cuts spending.
***Equities***
US equities / ADRs:
- FTNT: Reports Q4 $0.18 v $0.18e, R$297M v $296Me; +8.1% afterhours
- MSFT: Reports Q2 $0.78 v $0.69e, R$25.7B v $25.1Be; +4.2% afterhours
- FLEX: Reports Q3 $0.35 v $0.30e, R$6.76B v $6.49Be; +3.5% afterhours
- WRK: Reports Q1 $0.59 v $0.58e, R$3.68B v $3.71Be; +2.7% afterhours
- WDC: Reports Q2 $1.60 v $1.53e, R$3.33B v $3.35Be; +0.9% afterhours
- AMGN: Reports Q4 $2.37 v $2.27e, R$5.54B v $5.53Be; -0.3% afterhours
- V: Reports Q1 $0.69 v $0.68e, R$3.57B v $3.56Be; -0.3% afterhours
- SYNA: Reports Q2 $1.60 v $1.56e, R$470.5M v $476Me -3.5% afterhours
- EA: Reports Q3 $1.83 v $1.81e, R$1.80B v $1.80Be; -7.9% afterhours
- AMZN: Reports Q4 $1.00 v $1.61e (unclear if comp), R$35.7B v $35.9Be; -13.4% afterhours
- AZPN: Reports Q2 $0.47 v $0.39e, R$119.2M v $112Me; -18.2% afterhours
Notable movers by sector:
- Financials: CITIC Securities 6030.HK +4.8% (FY15 result); Haitong Securities 6837.HK +4.2% (prelim FY15 result)
- Industrials: China First Heavy Industries 601106.CN +2.9% (prelim FY15 result); Guangshen Railway Co 601333.CN' +3.7% (profit alert); Great Wall Motor 2333.HK -13.9% (prelim FY15 result); Nippon Express 9062.JP -1.5% (9-month result); Mitsui Osk Lines 9104.JP -1.3% (9-month result)
- Technology: Alibaba Health Information Technology 241.HK +7.2% (clarification); AU Optronics Corp 2409.TW -2.5% (Q4 result); NEC Corp 6701.JP -10.3% (9-month result)
- Materials: Aluminum Corporation of China 2600.HK +3.6% (guidance); Posco 005490.KR +0.9% (FY15 result)
- Energy: AWE AWE.AU +1.0% (Q2 result); Origin Energy ORG.AU +5.4% (Q2 result); Tohoku Electric 9506.JP +3.8% (9-month result); Osaka Gas Co. 9532.JP +1.1% (9-month result)
- Healthcare: Astellas Pharma Inc 4503.JP -1.2 % (9-month reuslt)