Asian Market Update: CSRC, PBOC cushion China slowdown after more disappointing economic data; BOJ decision on tap tomorrow
***Economic Data***
- (CN) CHINA JAN-FEB INDUSTRIAL PRODUCTION: 5.4% V 5.6%E; 7-YEAR LOW
- (CN) CHINA JAN-FEB RETAIL SALES: 10.2% V 11.0%E; 8-MONTH LOW
- (CN) CHINA JAN-FEB FIXED URBAN ASSETS Y/Y: 10.2% V 9.3%E
- (JP) JAPAN JAN MACHINE ORDERS M/M: 15.0% (record high) V 1.9%E; Y/Y: +8.4% (3-month high) V -3.8%E
- (AU) AUSTRALIA JAN CREDIT CARD BALANCES: A$50.9B v A$52.1B PRIOR; CREDIT CARD PURCHASES: A$21.9B v A$27.6B PRIOR
- (NZ) NEW ZEALAND FEB PERFORMANCE OF SERVICES INDEX: 56.9 V 55.4 PRIOR; first rise in 3 months
- (KR) SOUTH KOREA FEB EXPORT PRICE INDEX M/M: 0.8% v 1.0% PRIOR; Y/Y: -2.0% v -1.5% PRIOR
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +2.0%, S&P/ASX +0.6%, Kospi +0.1%, Shanghai Composite +2.6%, Hang Seng +1.3%, Jun S&P500 -0.1% at 2,009
***Commodities/Fixed Income***
- Apr gold -0.4% at $1,254/oz, Apr crude oil -0.3% at $38.39/brl, May copper +1.3% at $2.27/lb
- SLV: iShares Silver Trust ETF daily holdings rise to 10,135 tonnes from 10,076 tonnes; highest since Aug 2015
- (IR) Iran Oil Min Zanganeh: Iran will raise daily output to 4M barrels; Until then, "they (other major producers) should leave us alone" - ISNA (update)
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.4913 V 6.4905 PRIOR
- (CN) PBOC to inject CNY10B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equity markets, particularly those of Shanghai and Japan, are firmly in the green as more disappointing economic data from China hardly dislodged the "short-covering" rally that is now more than a month old. Instead, investors appear to be encouraged by rhetoric from the PBOC maintaining the "easing bias" component of its prudent monetary policy and the new head of CSRS promising to support equities. Further strength in energy is also helping matters, though WTI took a bit of a stumble in electronic trade after Iranian oil minister stubbornly maintained that Iran remains on course to ramping up post-sanctions daily output to 4M bpd. In FX, USD/JPY traded in a 40pip range just shy of 114, AUD/USD opened in 0.7540s and rallied to 0.7580s, while NZD/USD has now erased most of the losses seen after the RBNZ rate cut to trade above 0.6750.
- China economic data out over the weekend was largely disappointing. Industrial output growth was the most underwhelming, falling to its lowest levels since 2009, even as the key power generation component returned to positive of +0.3% v -3.7% prior. Retail sales were also soft at an 8-month low, and while fixed urban asset investment topped consensus, the growth came from fiscal policy infused public sector. Property market recovery was steadfast, with property investment growth rising to 3% from 1% and construction up a healthy 13.7%. Stats Bureau attempted to write off the decline in output to seasonal factors and weak global demand along with reduced activity in sectors with overcapacity - namely steel and coal.
- Commentary from PBoC Gov Zhou and new securities bureau (CSRC) chief Liu supported sentiment. Zhou said the latest economic targets are in line with potential growth rate and also promised not to rely on exports - and implicitly weaker Yuan - for GDP growth. Zhou reiterated China monetary policy will remain prudent with a "slight easing bias". CSRC's Liu said it was too early to consider pulling state funds out of stock market, promising to act decisively against abnormal market volatility.
- Ahead of tomorrow's BOJ decision, Japanese press noted the central bank is considering whether to exempt $90B in short-term funds from negative interest rates due to concerns that investment funds are being funneled from "money reserve funds" (MRFs) to bank deposits. Recall Kuroda shocked global markets in late January with a -0.1% setting on excess reserves in a narrow 5-4 decision. While few expect the BOJ to take those rates deeper into the red, latest contraction in GDP and worries about another sales tax hike on the long-term horizon should keep Kuroda's finger on the trigger and the markets tuned in to every BOJ policy statement. Note that Abenomics support has also turned increasingly less popular since those negative rates were imposed by the central bank.
***Equities***
US equities / ADRs:
- TFM: Reportedly Apollo Global is finalizing deal to acquire The Fresh Market for $28.50/shr in cash or $1.3B - press
- ETE: Energy Transfer Equity had talks on potential sale of its Sunoco assets; talks didn't move forward because of disagreement on valuation - press
Notable movers by sector:
- Consumer discretionary: Car Inc 699.HK +5.8% (transfer share to Hertz)
- Financials: China Galaxy Securities Co 6881.HK +3.7% (Feb result); China Vanke 2202.HK +13.3% (acquisition, FY15 result); China Overseas Land 688.HK +2.9% (acquisition); China Resources Land 1109.HK +3.6% (Feb result)
- Industrials: China Resource Cement 1313.HK +7.5% (FY15 result)
- Technology: GCL New Energy Holdings 451.HK +3.7% (guidance); Sharp Corp 6753.JP -1.3% (expects to reach agreement with Hon Hai tomorrow)