Asian Market Update: Soft China trade components weigh on mainland markets
***Economic Data***
- (CN) CHINA APR TRADE BALANCE (CNY TERMS): 298B V 255.0BE; 3-month high
- (CN) CHINA APR FOREIGN (FX) RESERVES: $3.22T V $3.20TE; 2nd straight increase
- (AU) AUSTRALIA APR ANZ JOB ADVERTISEMENTS M/M: -0.8% V +0.1% PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +0.5%, S&P/ASX -0.3%, Kospi -0.6%, Shanghai Composite -2.2%, Hang Seng +0.3%, Jun S&P500 +0.1% at 2,054
***Commodities/Fixed Income***
- June gold -0.6% at $1,286/oz, June crude oil +1.7% at $45.36/brl, Jul copper -1.4% at $2.12/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 4.8 tonnes to 834.9 tonnes; highest since Dec 2013
- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥240B in 10-25yr JGBs and ¥160B in JGBs with maturity over 25-yr
- (CN) PBOC to inject CNY20B in 7-day reverse repos
- (CN) PBOC SETS YUAN MID POINT AT 6.5105 V 6.5202 PRIOR; first firmer setting in 4 days
***Market Focal Points/FX***
- Asian equity markets are mixed though there's little doubt about the worst performer, as Shanghai Composite tumbled over 2%. China trade data are seen as the culprit - even though the terms of trade hit 3-month highs in CNY and USD terms, declines in Imports and Exports paint a dim view of the economy. Improved China FX reserves softened the blow somewhat, keeping sentiment more neutral in other assets. A spike in oil prices on the news of shake-up in the Energy regime in Saudi Arabia also helped matters. S&P futures are little changed, WTI crude was up over 2.5% as high as $45.90, and commodity majors were tracking firmer - AUD/USD rose over 30pips from opening lows in 0.7350, NZD/USD traded up some 30pips toward $0.6850, and USD/JPY was in a 50pip range above 107.
- China trade balance in USD and CNY hit 3-month highs, but closely watched Imports component fell for the 18th straight month, suggesting falling domestic demand for materials - imports came in at -5.7% v +0.3%e and exports also below forecasts at +4.1% v +4.3%e. Shipments to US and Japan were especially soft: -9.3% y/y v +9.0% prior and -11.8% v 9.3% prior respectively, even as EU exports increased 3.2%. CICC said the trade figures showed that exports data weakened significantly, imports drop reflected weak domestic demand, and the weakness may extend in the near future. Separately, China state researcher estimated Q2 GDP to remain at 7-year lows of 6.7%, while a People's Daily feature called for govt to maintain prudent monetary policy and proactive fiscal policy.
- In Japan, both Fin Min Aso and BOJ Dep Gov Iwata shrugged off latest US Treasury report that flagged 5 counties - China, Japan, Korea, Taiwan, and Germany - for its monitoring list. Aso said he does not think US Treasury believes that Japan's FX policy is inappropriate, adding that negative rate policy is not hurting the public. Aso also stated that USD/JPY at ¥107 will not prompt govt to take action. Iwata also state that the US report won't constrain BOJ monetary policy, with negative rates policy designed to achieve 2% inflation target.
- After last week's surprise RBA rate cut and subsequent slashing of inflation projections in the central bank currency report, Westpac and JPMorgan research notes were confident that there will be more easing down the pike. Australia job advertisements softened, and ANZ economist said the level of jobs ads has been flat for 6 months now after a period of substantial growth. Australia banking was also in focus today, with a report by AFR uncovering hundreds of mortgage loans with fraudulent Chinese income documents, even though the estimated total of the loans was less than A$1B, or 0.12% of their combined $837B of residential mortgages. Report does warn that these mortgage deceptions may not be isolated to those banks, and smaller institutions could also be at risk. CBA also reported Q3 results that saw higher loan impairment provisions and flat net interest margins, while CET1 metric fell 20bps to 10%.
***Equities***
Notable movers by sector:
- Consumer discretionary: Skyworth Digital 751.HK -2.8% (Apr result, FY16/17 target); MGM China 2282.HK +0.4% (Q1 result); Fairfax Media FXJ.AU +3.% (spinoff speculation)
- Financials: Haitong Securities 6837.HK -1.6% (Apr result); CITIC Securities 6030.HK -1.9% (Apr result); Commonwealth Bank of Australia CBA.AU +0.5% (Q3 result)
- Industrials: Fuji Heavy Industries 7270.JP +0.8% (result speculation); Orica ORI.AU -11.7% (H1 result)
- Materials: Beadell Resources BDR.AU +3.1% (guidance)