Asian Mid-session Update: China extends recovery on upbeat PBoC comments,
***Economic Data***
- (NZ) New Zealand REINZ SEPT House Sales Y/Y: 38.3% v 41.7% prior
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 closed, S&P/ASX -0.7%, Kospi +0.4%, Shanghai Composite +3.4%, Hang Seng +1.3%, Dec S&P500 -0.1% at 2,005
***Commodities/Fixed Income***
- Dec gold +0.2% at $1,158/oz, Nov crude oil +0.7% at $50.0/brl, Dec copper flat at $2.41/lb
- OPEC chief al-Badri: OPEC countries will not be affected if US decides to eliminate its oil export bank - financial press
- Qatar Oil Min Al Sada: Oil prices have bottomed; Sees signs of recovery to take place in 2016 - financial press
- (KR) South Korea sells 5-yr govt bond, avg yield at 1.820%
- USD/CNY: (CN) PBoC sets yuan mid point at 6.3406 v 6.3493 prior setting; strongest Yuan setting since Aug 12th
***Market Focal Points/FX***
- Asian markets are mixed, with China markets broadly outperforming and Australia trading softer despite the strength in basic materials. Energy markets are more volatile than typical in early electronic trade - Nov WTI crude is up about 1% on bullish remarks by OPEC chief and also Qatar Oil Min. In FX, USD/JPY is little changed above ¥120 with Tokyo closed for holiday, AUD/USD trading in a 40pip range finding support at the $0.73 handle, and NZD/USD initially falling to 0.6670 before bouncing above 0.67. EM FX is also mixed and volatile - USD/SGD was up about 80pips above 1.4020, KRW gained over 1% against USD, and offshore Yuan is at its strongest level since devaluation around 6.3250 after another stronger fix by the PBoC.
- Markets in China are helped by upbeat comments from PBoC Dep Gov Yi Gang, who said the equity correction is almost over and the stock turbulence would have limited impact on economy. NDRC State planning agency official offered similar remarks, noting the economy is basically stable. Finally, there were local press reports that PBoC has expanded a relending credit program to 9 provinces and cities, resulting in more credit capacity for local banks.
- BOJ Gov Kuroda spoke at the IMF meeting in Lima, downplaying expectations for further BOJ easing. Kuroda said inflation is gradually rising, and the price dynamics are as anticipated. IMF Managing Director Furusawa was of similar opinion, noting CPI rise is gradual in Japan when excluding the effect of low energy prices. On the fiscal side, Furusawa recommended that Japan govt proceeds with the 2nd sales tax hike to maintain its credibility, while a separate Nikkei report stated Tokyo is preparing to cut effective corporate tax rate to less than 30% in FY17/18 from 32.1% current average.
- Australia materials names, especially gold miners, are higher on rallies in metals and 6-week highs in gold seen on Friday. Financials are underperforming, in part weighed down by an AFR report speculating that major banks may have to cut dividends since they lag their overseas peers based on their non-risk- weighted "leverage ratios".
- There was more notable Fed speak over the weekend, with high profile comments coming out of Fed vice chair Fischer diminishing the perceived by traders link between rate liftoff and global economic weakness. Fischer said the Fed will be "cognizant" of overseas risks, but does not "anticipate" the global economic weakness to delay interest rate liftoff. ECB's Coeure also spoke, stating Eurozone inflation will move back to 2% "very slowly".
***Equities***
US equities / ADRs:
- EMC: Said to look for other potential suitor after an offer from Dell; Asked for a "go-shop" provision as part of Dell agreement - financial press
Notable movers by sector:
- Consumer discretionary: SA SA International Holdings 178.HK -0.3% (golden week sales); Cabcharge Australia Ltd CAB.AU -2.3% (ACCC proposes to deny ihail app); China Eastern Airlines 600115.CN +5.0% (Sept result)
- Financials: Poly Property Group Co Ltd 119.HK +3.4% (Sept result); China State Construction Holdings 3311.HK +3.1% (Sept result); Poly Real Estate Group Co 600048.CN +2.9% (Sept result); China Overseas Land 688.HK +3.6% (spin-off proposal); Country Garden 2007.HK +2.4% (YTD result)
- Industrials: Cardno Ltd CDD.AU -0.7% (divestment); Guangzhou Automobile Group 2238.HK +0.9% (Sept result); China Railway Construction Corp 1186.HK +1.0% (approval to unit's Hong Kong IPO); Daewoo Shipbuilding & Marine 042660.KR +2.4% (additional loss speculation)
- Technology: Hon Hai Precision Industries 2317.TW +1.7% (cooperation with Alibaba)
- Materials: Doray Minerals Ltd DRM.AU +5.3% (Q3 result); Independence Group IGO.AU +8.9% (gold prices rise); Evolution Mining EVN.AU +8.7% (new discoveries)
- Energy: Santos Ltd STO.AU -2.4% (equity issue and job cuts speculation)
-Telecom: China Mobile941.HK +2.3%, China Telecom 728.HK +6.3% (investment in China Tower)
- Utilities: Transurban TCL.AU -0.5% (Q1 result)