Asian Market Update: China markets extend gains on more upbeat govt rhetoric; Australia PM pushes forward Budget to secure labor reform
***Economic Data***
- (NZ) NEW ZEALAND Q1 WESTPAC CONSUMER CONFIDENCE: 109.6 V 110.7 PRIOR
- (NZ) NEW ZEALAND FEB RETAIL CREDIT CARD SPENDING M/M: -0.4% v +1.9% PRIOR; Y/Y: 7.3% v 8.3% PRIOR
- (NZ) New Zealand Feb Net Migration: 6.1K v 6.1K prior
- (UK) UK MAR RIGHTMOVE HOUSE PRICES M/M: 1.3% V 2.9% PRIOR; Y/Y: 7.6% V 7.3% PRIOR
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 closed, S&P/ASX -0.5%, Kospi -0.3%, Shanghai Composite +1.9%, Hang Seng +0.3%, Jun S&P500 -0.2% at 2,034
***Commodities/Fixed Income***
- Apr gold flat at $1,253/oz, May crude oil -0.8% at $40.83/brl, May copper +0.2% at $2.29/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 11.9 tonnes to 819.0 tonnes; 4th straight increase; highest since Mar 2014
- SLV: iShares Silver Trust ETF daily holdings rise to 10,218 tonnes from 10,135 tonnes; highest since July 2015
- Saudi Aramco CEO: Expect oil prices to begin adjusting higher by 2016-end; Prices may not rise to 2013-14 levels - financial press
- (CN) PBOC SETS YUAN MID POINT AT 6.4824 V 6.4628 PRIOR
- (CN) PBOC to inject CNY130B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$500M in 2.75% 2035 Bonds; avg yield: 3.14%; bid-to-cover: 2.89x
- (NZ) Auckland said to aim for NZ$150M retail bond issue with as much as NZ$100M in oversubscription
- (BR) Brazil to offer up to 20K FX reverse swap contracts on Monday as rising speculation of impeachment proceedings against President Rousseff boost demand for BRL; First such auction since Mar 2013
- (US) Goldman Sachs: Weakness of USD will not last; The Fed was too dovish - financial press
***Market Focal Points/FX***
- Asian equity markets are mixed with most pronounced gains on the mainland. Investors are cheering more upbeat commentary from Commerce Minister Gao and Vice premier Zhang while shrugging off the warning from PBoC gov Zhou about rising debt levels. Shanghai Composite has hit a 2-month high above 3,000, even as oil and US equity futures point to a slightly lower open. Markets in Japan were closed for holiday. In FX, USD/JPY traded in a 40pip range above 111.20, AUD/USD in a 30pip range below $0.76, and NZD/USD in a 40pip range above 0.6750. With major macro risk events - ECB, BOJ, FOMC decisions - out of the way, traders will now look for hints on whether the dovish bias of the three will be justified.
- In China, Commerce Min Gao said March trade data are expected to show a significant recovery after soft Jan-Feb figures that "matched global trends". Vice Premier Zhang was also cautiously optimistic, stating that while there is downward pressure on the economy, it is largely stable with some improvement in the most recent data. On the flip side, PBoC Gov Zhou warned that corporate debt levels relative to GDP is becoming too high, while a state researcher Wang estimated 2016 GDP at the bottom of the target range of 6.5%, calling for a 3-year period of recovery after this year's bottom.
- Japan was closed, though the focus remained on the progress of the high-profile Hon Hai-Sharp deal. Over the weekend, one local press report indicated Hon Hai had reached a tentative agreement for a ¥300B credit line from Sharp's banks, though another report suggested that Hon Hai has already lowered its bidding price from initial plan of ¥489B due to potential risks of financial liabilities without disclosing the new amount. A notable Nikkei report commented on distortions in Japan's fixed income markets, with investors more concerned with BOJ appetite for considered bonds rather than their actual credit worthiness.
- Australia govt is in flux after PM Turnbull - despite recent commentary from govt officials to the contrary - pushed forward the Budget release by a week to May 3rd and also recalled Parliament for Apr 18th to consider legislation of key labor reform legislation including re-establishment of the Australian Building and Construction Commission and Registered Organisations Bill. While Australians were already expected to go to the polls later this year, if those bills do not pass, PM Turnbull said he would dissolve both houses of parliament and call an early election for July 2. On the corporate side, Virgin Australia was sharply higher after securing a A$425M credit facility from major shareholders.
***Equities***
US equities / ADRs:
- VAL: Sherwin-Williams to acquire Valspar for $113/shr in cash; $11.3B deal
Notable movers by sector:
- Consumer discretionary: Uni-President China 220.HK +5.4% (FY15 result); China Yongda Automoviles Services Holdings 3669.HK +4.6% (FY15 result)
- Consumer staples: Aeon Stores Hong Kong Co L984.HK -1.1% (FY15 result)
- Financials: Sinotex Investment & Development 600061.CN +10.0%, China Merchants Securities Co 600999.CN +8.6%, Everbright Securities 601788.CN +10.0% (China said to resume certain margin funding)
- Industrials: Sinopec Engineering Group Co 2386.HK +3.9% (FY15 result); Jiangling Motors Corp 000550.CN +1.5% (FY15 result); China Cosco Holdings Co 601919.CN +2.4% (contract with Vale); Qingdao Port International 6198.HK +3.9% (FY15 result); Virgin Australia VAH.AU +9.1% (new loan facility)
- Technology: East Money Information Co 300059.CN +7.0% (FY15 result); Hon Hai Precision Industries 2317.TW +0.2% (Hon Hai said to lower offer for Sharp)
- Materials: Fuyao Glass Industry Group Co 600660.CN +0.8% (FY15 result); Asia Cement China Holdings Corp 743.HK -0.6% (FY15 result)
- Healthcare: Shanghai Pharmaceuticals Holding Co 601607.CN +0.9% (FY15 result)