Asia Market Update: China trading session lasts just 30 minutes before another 7% CSI 300 decline triggers circuit breakers
***Economic Data***
- (AU) AUSTRALIA NOV TRADE BALANCE (A$): -2.9B V -3.0BE (19th straight month of deficit)
- (AU) AUSTRALIA NOV BUILDING APPROVALS M/M: -12.7% (biggest decline in 3 years) V -3.0%E; Y/Y: -8.4% V 3.9%E
- (JP) Japan Dec Tokyo Avg Office Vacancies 4.0% v 4.2% prior; lowest since Aug 2008
- (JP) Japan investors buy net ¥85.9B in foreign bonds v net buy ¥147B in prior week; Foreign investors net buy ¥136B in Japan stocks v sale ¥226B in Japan stocks in prior week
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -1.8%, S&P/ASX -2.1%, Kospi -0.7%, Shanghai Composite -7.2% (closed early), Hang Seng -2.4%, Mar S&P500 -1.2% at 1,962
***Commodities/Fixed Income***
- Feb gold +0.6% at $1,099/oz, Feb crude oil -2.4% at $33.16/brl, Mar copper -1.0% at $2.07/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 1.4 tonnes to 641.0 tonnes
- (US) T Boone Pickens: Still believes oil could reach $70-75/bbl by end of the year - CNBC
- FCG.NZ: Announces record volume for Dec of over 300K MT
- USD/CNY: (CN) PBoC sets yuan mid point at 6.5646 v 6.5314 prior; Biggest cut in Yuan fix since August devaluation; 8th straight day of lower Yuan fix
- (CN) PBoC to inject CNY70B in 7-day reverse repos; Injects net CNY190B this week vs drain of CNY60B in prior week
- JGB: (JP) Japan's MOF sells ¥737B in 1.40% 30-year bonds; Avg yield: 1.224% v 1.397% prior; Bid to cover: 3.73x v 3.93x prior
***Market Focal Points/FX***
- Asian equity markets are down sharply as China's key indices are unable to complete the full trading session for the 2nd time in the week. Unlike Monday however, when the circuit breakers were set off in the afternoon hours, CSI 300 index reached the 7% threshold in the first 30 minutes of trade. US equity futures are down over 1%, crude oil is down another 2%, while safehaven Gold, US Treasuries, and JPY are bid firmly. USD/JPY fell over 100pips below 117.70, S&P 500 futures fell below 1,960, Shanghai Composite 7% drop took the index below 3,290 - a 3-month low also seen in US markets. AUD/USD fell 60pips below 0.7030 and NZD/USD was down 40pips at the lows near 0.6610.
- The circuit breaker trigger on Monday was in part attributed to disappointing PMIs, but today it was the currency factors that sent investors to the sidelines. PBoC's daily Yuan fix - down for the 8th straight day - was also set significantly weaker by -0.5% today. This was the biggest margin of decline since the August devaluation and, much like in August, prompted concerns that the central bank's continued efforts to weaken the Yuan will spur massive investment outflows from the mainland. In addition, China traders noted today's World Bank report which cut 2016 global growth target to 2.9% from 3.3% in June and also cut China target to 6.7% from 7.0%. Later in thd day, China's CFETS blamed the speculators for the attack on the Yuan, calling the currency stable and China's reserves as ample. CFETS noted "recent FX trading has nothing to do with real economic demand doesn't represent true market demand and supply. They only cause abnormal volatility in the yuan exchange rate and send the wrong price signal to the market." Offshore Yuan did move higher on those comments and also on some stabilizing measures, rallying some 600pip off the lows.
- Outside of the risk-off move from the FX volatility, China's CSRC unveiled the widely anticipated rules on large shareholders' share reduction. Effective Jan 9th, CSRC will cap the reduction to 1% of total outstanding over the next 3-month period. Large shareholders will also be forced to declare their stake sale intentions 15 days in advance.
- In notable economic data, Australia housing inflation should become less of a concern for the RBA going into their next month's meeting as building approvals saw their biggest sequential decline in about 3 years. Australia Trade data were less disappointing on the surface - deficit was slightly lower than expected, and export rose to +1.0% v -3% prior. However, closer look at key Australian export components saw iron ore and crude oil shipments falling to 7-month lows.
- South Korea has taken more response measures after the alleged nuclear test by the North overnight, limiting the entry to jointly operated industrial park and also threatening propaganda broadcasts on the border. There were also reports that US may deploy "strategic" military assets to South Korea.
***Equities***
US equities / ADRs:
- ZUMZ: Reports Dec SSS -8.9% v -13.8% m/m; raises Q4 $0.45-0.47 v $0.43e, R$237-239M v $229Me ($0.40-0.46, R$226-231M prior); +15.4% afterhours
- MG: Reports Q2 $0.39 v $0.28e, R$194.8M v $186Me; +7.2% afterhours
- M: Reports Nov/Dec SSS owned plus licensed basis -4.7% y/y; owned basis SSS -5.2% y/y; Cuts FY15 and Q4 guidance; to close stores and cut jobs; +4.0% afterhours
- ATML: Microchip said to be reconsidering offer to acquire the company - press; -3.7% afterhours
- TLOG: Birinapant shows no activity in randomized Phase 2 MDS Study; birinapant did not demonstrate any clinical benefit over placebo; -72% afterhours
Notables Post-afterhours
- YHOO: Planning at least 10% workforce reduction (~1.0K employees) - financial press
- COST: Reports Dec SSS (ex-gas) +5% y/y; US SSS (ex-gas) +4%