Asian Mid-session Update: China think tank sees 2016 GDP above 6.5%; Japan Econ Min forecasts upward revision to reverse technical recession
***Economic Data***
- (JP) JAPAN OCT PRELIMINARY LEADING INDEX CI: 102.9 V 102.9E; COINCIDENT INDEX: 114.3 V 114.1E
- (JP) JAPAN NOV OFFICIAL RESERVE ASSETS: $1.23T V $1.24T PRIOR
- (AU) AUSTRALIA NOV AIG PERFORMANCE OF CONSTRUCTION INDEX: 50.7 V 52.1 PRIOR; 4th month of expansion
- (AU) AUSTRALIA NOV ANZ JOB ADVERTISEMENTS M/M: 1.3% V 0.3% PRIOR; 4th straight increase
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +1.2%, S&P/ASX +0.2%, Kospi flat, Shanghai Composite +0.4%, Hang Seng +0.4%, Dec S&P500 -0.1% at 2,086
***Commodities/Fixed Income***
- Feb gold flat at $1,084/oz, Jan crude oil -1.1% at $39.54/brl, Mar copper +0.4% at $2.08/lb
- (KR) South Korea sells 5-yr govt bonds at 2.035%
- USD/CNY: (CN) PBoC sets yuan mid point at 6.3985 v 6.3851 prior; weakest Yuan setting since Aug 28th
- (AU) Australia MoF (AOFM) sells A$300M in 4.5% 2033 Bonds; avg yield: 3.3864%; bid-to-cover: 2.53x
***Market Focal Points/FX***
- Investors appear to be at peace with full-blown expectations of this month's liftoff by the FOMC after the latest robust non-farm payrolls report data. US equities were broadly higher and treasuries sold off, even as the US dollar did not get a pronounced lift. Markets in Asia are also modestly higher in afternoon trade, led by Nikkei225 which is supported by lower JPY. Kospi is a laggard, while US equity futures are down marginally ahead of Monday open.
- In China, govt think tank State Information Center forecast 2016 GDP of at least 6.5%, CPI around 1.5%, fixed asset investment at 9%, and exports up about 1.5%. This is lower from 2015 targets of 7.0% GDP, 3% inflation, 15% investment and 6% exports, though much closer to trend of incoming data in the past few months and somewhat in line with expectations from the latest Plenum. Note that initial November data out of China will be released as soon as tomorrow starting with trade figures. Also of note out of China, the state council will reportedly allow local govt to include their property tax intake in revenue calculations so as to prop up their balance sheets.
- BOJ Gov Kuroda remained upbeat on the economy and the impact of monetary policy thus far, noting QQE is producing intended effects without financial imbalances. Kuroda also ruled out negative short-term rates. Earlier, econ min Amari said he believes Q3 final GDP - on tap for tomorrow - will be around zero. Recall last month the preliminary negative print marked the 2nd straight quarter of contraction, thereby plunging Japan into a technical recession. CAPEX component was particularly weak, and to that end, local press reported the govt is considering giving small-midsize businesses a 50% tax break for 3 years for buying production equipment so as help stimulate CAPEX investment.
- In the currency market, NZD/USD was particularly soft among USD majors, sliding some 50pips to 0.6690. Analysts noted rising expectations of a rate cut by the RBNZ as soon as in this week's decision. ASB said RBNZ should cut rates by 25bps this week and another 50bps by Aug 2016, while the NZ Treasury warned that economic growth is weaker than expected. In other majors, USD/JPY is up about 20pips around 123.30, AUD/USD down about 15pips below 0.7330, and EUR/USD down about 20pips at a low of 1.0855.
- For the first time in 5 years, US President Obama delivered a national security update from the Oval Office in the wake of the mass shootings in San Bernardino. Obama called the attack an act of terror and also took up a more stringent position against ISIL and their sympathizers, but also reaffirmed that US will not be drawn into another costly ground war in Iraq and Syria. Obama continued to pledge that US will provide training to Syrian and Iraqi forces who fight ISIL while also adding it should be more difficult for people to buy assault weapons. On a related note, France regional elections produced a surge for the Marine Le Pens far-right Front National party in the wake of the Paris shootings. In the Middle East, Iraq Defense Ministry voiced concern that Turkey troops deployed inside Iraq without coordinating with its govt, to which the Turkish counterpart replied that it was to protect the deployed trainers in the country.
***Equities***
Notable movers by sector:
- Consumer discretionary: Fairfax Media FXJ.AU +1.3% (acquisition)
- Financials: CITIC Securities 600030.CN -1.3% (Nov result, exec under probe speculation); Haitong Securities 6837.HK +0.6% (Nov result); Sunac China Holdings 1918.HK +0.9% (Nov result); Bank of Jinzhou 416.HK -3.9% (IPO debut); Dexus Property Group DXS.AU +1.4% (reaches agreement of merger terms), China Vanke 2202.HK -4.4% (largest shareholder changes)
- Industrials: CRRC Corp 601766.CN +1.4% (Nov contracts awarded); China Merchants Energy Shipping Co 601872.CN +0.6% (order speculation); Great Wall Motor 2333.HK +1.8% (Nov result)
- Technology: GCL New Energy Holdings 451.HK +2.0% (profit warning, acquisitions); HTC Corp 2498.TW +0.7% (Nov result); Toshiba Corporation 6502.JP +0.4 % (considers options for white goods business); Sharp Corp 6753.JP +0.8% (in talks to sell part of a plant); MediaTek Inc 2454.TW +2.0% (Nov result)
- Materials: Citic Resources 1205.HK -3.5% (profit warning); Iluka Resources ILU.AU +1.5% (terminates talks on acquisition)