Asian Market Update: Services PMIs retreat; Australia exports showcase transition away from mining
***Economic Data***
- (CN) CHINA FEB CAIXIN PMI SERVICES: 51.2 V 52.4 PRIOR
- (HK) HONG KONG FEB PMI Services: 46.4 V 46.1 PRIOR (12th straight contraction)
- (JP) JAPAN FEB SERVICES PMI: 51.2 V 52.4 PRIOR; COMPOSITE PMI: 51.0 V 52.6 PRIOR
- (KR) SOUTH KOREA FEB CPI M/M: 0.5% V 0.1%E; Y/Y:1.3% V 0.9%E; CPI CORE Y/Y: 1.8% V 1.8%E
- (AU) AUSTRALIA JAN TRADE BALANCE (A$): -2.9B V -3.2BE; 21st consecutive month of deficit
- (AU) AUSTRALIA FEB AIG PERF OF SERVICES INDEX: 51.8 V 48.4 PRIOR; first expansion in 5 months
- (NZ) NEW ZEALAND Q4 VALUE OF ALL BUILDINGS Q/Q: 2.5% V 2.0%E; 4th straight quarter of increase
- (BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC TARGET RATE UNCHANGED AT 14.25%; AS EXPECTED; Decision again was not unanimous (6-2)
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +1.0%, S&P/ASX +1.1%, Kospi +0.2%, Shanghai Composite +0.2%, Hang Seng -0.5%, Mar S&P500 +0.1% at 1,985
***Commodities/Fixed Income***
- Apr gold -0.2% at $1,240/oz, Apr crude oil +0.4% at $34.80/brl, May copper -0.5% at $2.18/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 2.4 tonnes to 788.6 tonnes; Highest since Sept 2014
- SLV: iShares Silver Trust ETF daily holdings rise to 9,777 tonnes from 9,692 tonnes ; highest since Jan 15th
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5412 V 6.5490 PRIOR
- (CN) PBOC to inject CNY40B in 7-day reverse repos
- (JP) Japan investors net buy ¥934B in foreign bonds v net buy ¥1.97T in prior week; Foreign investors net sell ¥1.01T in Japan stocks v net sell ¥441B in Japan stocks in prior week
***Market Focal Points/FX***
- Asian equity markets are modestly higher despite the generally soft services PMI numbers, as continued rebound in oil prices sustain risk-on flows. Despite the build in API and DOE inventories this week, reports of Saudi Arabia considering a $10B international loan - implying kingdom's fiscal strains from low prices - sent WTI crude and Brent toward their highs. Nikkei225 is among the leading indices tracking losses in JPY, as USD/JPY pair rose 80pips from the lows above 114.20. AUD/USD is near its highs late in the day with a 40pip rise to 0.7320, while NZD/USD is in the middle of its 40-pip session range below 0.67.
- China's 12th National Committee of the Chinese People's Political Consultative Conference (CPPCC) has started to convene in Beijing, culminating in the guidelines for 2016 economic growth targets. Speaking at the opening conference, committee's spokesperson said China economy is expanding with "good quality", fundamentals "remain sound", January data showed positive signs, and overall China is seeing "good momentum in its structural reform." Remarks come the day after Moody's cut its China sovereign outlook to negative, but local economists panned the revision. BoCom said the rating agency misjudged the economy since its overall risks are still positive, while UBS economist actually questioned the credibility and authority of the western credit agencies.
- February services PMIs for China, Hong Kong, and Japan came in mixed/lower. China's print slowed to 51.2 from 52.4 and composite PMI returned to contraction of 49.4 v 50.1 prior. Markit economist said economy is still weak and unstable, though the relative outperformance in services is indicative of continued improvement in the economic structure. Hong Kong PMI was a touch firmer but has now been in contraction for a full year. Here, Markit noted the impact from global slowdown, lower tourist activity, and the decline in "stocks of inputs". Japan PMIs also retreated amid slowdown in new order growth, decline in hiring, and weaker forecasts towards activity over the 12-month outlook. Note that ahead of the PMI release, BOJ Gov Nakaso also spoke in favor of the anticipated impact of negative rates on tackling deflation, but added there would a limit on how much further central banks can push rates into negative territory.
- Australia's January trade balance was in deficit for the 21st straight month though not as deep as anticipated, as exports rose 1% m/m v 5% decline in December. A closer look at the export components reveals the extent to which Australian economy is transitioning away from mining industry dependence - exports of iron ore fell about 10% to a 5-year low while crude oil shipments fell 11% to a 9-year low - even though a 2-day closure of Port Hedland due to Cyclone Stan was mentioned as a factor. Exports in "other manufactures" category made up for the decline in metals, rising some 15% on the month. Australian index also outperformed on the session, in part helped by the rally in BHP after confirmed Samarco disaster settlement in Brazil.
***Equities***
US equities / ADRs:
- SMTC: Reports Q4 $0.17 v $0.15e, R$118.6M v $116Me; +13.8% afterhours
- WB: Reports Q4 $0.15 adj v $0.12e (2 est), R$149M v $105M y/y; +1.2% afterhours
- AEO: Reports Q4 $0.42 v $0.41e, R$1.11B v $1.12Be; +0.7% afterhours
- SINA: Reports Q4 $0.35 v $0.37e, R$253.6M v $243Me; -3.6% afterhours
- HABT: Reports Q4 $0.05 adj v $0.04e, R$60.6M v $60.5Me; -11.0% afterhours
Notable movers by sector:
- Consumer discretionary: Fast Retailing Co 9983.JP +3.5% (Feb result)
- Consumer staples: Woolworths WOW.AU +0.3% (approached for real estate assets)
- Financials: Evergrande Real Estate Group 3333.HK -1.4% (Feb result); Jinmao Investments 6139.HK +4.5% (guidance)
- Industrials: Fantasia Holdings Group Co 1777.HK +5.8% (FY15 result); Cleanaway Waste Management CWY.AU -1.2% (restructuring); Posco 005490.KR +1.0% (raising prices); Japan shippers Kawasaki Kisen +7.8%, Nippon Yusen +5.4%, Mitsui OSK +8.0% (press speculation on rising profitability)
- Technology: Toshiba Corporation 6502.JP +7.1% (seeks loans for restructuring); Sharp 6753.JP +6.1% (Hon Hai deal speculation)
- Materials: BHP +3.7% (settles Samarco)
- Utilities: CT Environmental Group 1363.HK +4.8% (guidance)