Asian Market Update: Improving China trade and continued pause in Yuan devaluation help equities recover
***Economic Data***
- (CN) CHINA DEC TRADE BALANCE (IN CNY): 382B V 339BE; USD terms: $60.1B v $51.3BE
- (AU) AUSTRALIA SEPT-NOV JOB VACANCIES Q/Q: 3.5% V 3.5% PRIOR
- (JP) JAPAN DEC M2 MONEY STOCK Y/Y: 3.0% V 3.3%E; M3 MONEY STOCK Y/Y: 2.5% V 2.7%E
- (NZ) NEW ZEALAND DEC QV HOUSE PRICES Y/Y: 14.2% V 15.0% PRIOR
- (KR) SOUTH KOREA DEC UNEMPLOYMENT RATE: 3.4% V 3.5%E
- (KR) SOUTH KOREA DEC IMPORT PRICE INDEX M/M: -1.0% V -1.7% PRIOR; Y/Y: -11.9% V -15.6% PRIOR
- (KR) South Korea NOV Money Supply L: 0.4% v 0.7% prior; M2: 0.4% v 0.1% prior
***Index Snapshot (as of 05:00 GMT)***
- Nikkei225 +2.7%, S&P/ASX +1.3%, Kospi +1.3%, Shanghai Composite -0.9%, Hang Seng +2.1%, Mar S&P500 +0.9% at 1,942
***Commodities/Fixed Income***
- Feb gold -0.2% at $1,084/oz, Feb crude oil +1.1% at $30.79/brl, Mar copper +0.6% at $1.97/lb
- (US) API Petroleum Inventories: Crude: -3.9M v -5.6M prior; 2nd straight draw
- (HK) Offshore overnight yuan HIBOR 8.3% v 66.8% yesterday
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5630 V 6.5628 PRIOR; 4th straight firmer setting relative to Close
- (JP) Japan MoF sells ¥500B in 0.1% 10-year CPI-linked Bonds; Bid-to-cover ratio: 2.47x v 2.21x prior
- (AU) Australia MoF (AOFM) sells A$900M in 4.25% 2026 Bonds; avg yield: 2.755%; bid-to-cover: 2.82x
***Market Focal Points/FX***
- Asian equities are tracking the gains on Wall St, with more positive regional developments helping in broad-based market recovery. Continued pause on currency devaluation by the PBoC along with stronger than expected China trade data have lifted risk-on sentiment across the asset classes. Nikkei225 is in the lead among the indices, boosted by weaker JPY, as USD/JPY rose some 70pips above 118.30. AUD/USD and NZD/USD are both up 70pip with respective highs of 0.7050 and 0.6590. Even crude oil has joined the rebound with 1.3% rise in electronic trade above $30.80, while copper is up 0.7% at $1.97.
- PBoC has strengthened Yuan relative to prior close for the 4th straight session, easing investors' concerns over potential outflows from China. After yesterday's record high HIBOR setting, demand for ammunition to short the currency in Hong Kong has also retreated, as today's HIBOR rate plunged back to 8.3% from 66.8%. Note this is still significantly higher than the long-term average below 4%. Finally, efforts to weaken the Chinese currency over the past few months have finally paid off in the trade data. December surplus in both CNY and USD terms was much higher than expected, as exporters benefited. In Yuan terms, outbound shipments rose +2.3% v -4.1%e, and in USD, decline was just -1.4% v -8.0%e. Imports declines were also not as severe as expected - in CNY -4.0% v -7.9%e and in USD -7.6% v -11.0%e. Shipments to Europe resumed growth, decline in Japan exports was cut in half below 5%, and US exports improved to -3.7% v -5.3% prior. Customs Office did acknowledge that challenges remain in China trade development, and that authorities will monitor exchange rate changes.
- President Obama's last State of the Union address brushed in broad strokes on achievements of his administration and largely reinforced the policy objectives of his cabinet. POTUS called US economy the most durable in the world, called for more affordable education, cheered accomplishments of ACA in insuring 18M Americans, and continued to push for greater use of clean energy. The speech was missing any reference to the 10 US Navy personnel held by Iranian officials after two of their vessels floated into Iranian waters. Secretary of State Kerry in contact with Iran authorities and have received assurances the sailors are safe and will be promptly released.
***Equities***
US equities / ADRs:
- CYBR: Check Point reportedly in talks to acquire CyberArk - Haaretz; +13.2% afterhours
- MET: Approves plan to pursue separation of U.S. Retail Business (about 20% of op earnings); +6.0% afterhours
- TREE: Raises FY15 guidance for adj EBITDA $38.8-39.8M, R$252.5-253.5M v $247Me (adj EBITDA $38.3-38.8M, R$244-247M prior); +4.5% afterhours
- YUM: Reports prelim China Dec SSS y/y: +1% vs -3% in Nov; Reports prelim China Q4 SSS +2% y/y (guided 0-4% on Dec 10th); +2.5% afterhours
- TSCO: Reports prelim Q4 $0.81-0.82 v $0.90e, R$1.65B v $1.73Be, SSS -1.4%; -1.0% afterhours
- WBMD: Guides Q4 Rev slightly above prior guidance range (implies above $191M v $188Me) - filing; -1.5% afterhours
- F: Guides 2016 pre tax profit equal to or higher y/y; approves $0.25 special dividend (1.9% yield); -1.8% afterhours
- CSX: Reports Q4 $0.48 v $0.46e, R$2.78B v $2.92Be; Guides FY16 EPS down y/y and below consensus; -1.9% afterhours
Key movers in Asia:
- Vanke 2202.HK +1.6% (said to request largest shareholder to cut holding)
- Wanda Cinema 002739.CN -2.2% (acquisition)
- TCL Multimedia Technology 1070.HK +1.6% (profit alert)
- Shanghai Jinjiang International Hotels Development Co Ltd 600754.CN +7.3% (Shanghai Disney Park sets opening date)
- China Unicom 762.HK +4.7%, China Telecom 728.HK +5.1% (resource share agreement)