Asian Market Update: China services PMI tracks the slowdown in the manufacturing sector; Risk aversion hits yen pairs
***Observations/Insights*** - China services PMI for December slipped to 4 month lows, giving the bears even more fodder after the overnight slide in twin manufacturing PMIs as well as the tough start for 2014 evident in the US session. Analysts have attributed the apparent malaise to the fading impact from the fiscal mini-stimulus on the mainland, while others will undoubtedly point to the start of the Fed taper this month. Incidentally, the latest Fed balance sheet data saw the first sequential decline in reserve bank credit in 4 months. Shanghai Composite and Hong Kong Hang Seng are leading the regional sell-off, down well over 1% in the morning session. Korea's Kospi is down by just over 1%, while the Nikkei is still closed for holiday.
***Economic Data*** - (CN) CHINA DEC NON-MANUFACTURING PMI: 54.6 V 56.0 PRIOR (2nd consecutive decline, 4-month low)
***Fixed Income/Commodities/Currencies*** - (CN) Daily Shibor fixings: O/N: 3.0060% v 3.1310% prior (8th consecutive decline, lowest since Sep 12th ); 1-week: 4.7110% v 4.9810% prior (2nd consecutive decline) - GLD: SPDR Gold Trust ETF daily holdings fall 3.6 tonnes to 794.6 tonnes (lowest since Jan 2009) - (US) Weekly Fed Balance Sheet Total Assets Week ending Jan 1st: $4.02T v $4.03T prior; Reserve Bank Credit: $3.980T (first decline since late August) v $3.989T prior; M1 y/y change: 8.6% v 8.6% w/w; M2 y/y change: 6.3% v 6.3% w/w - USD/CNY: (CN) PBoC sets yuan mid point at 6.1039 v 6.0990 prior setting (weakest Yuan setting since Dec 26th)
- Short squeeze in the Aussie and Yen pairs tested the patience of the momentum traders, with rare outsized rallies in those seemingly oversold currencies coming in the absence of meaningful regional news. AUD/USD hit 3-week highs above $0.8970, up over 80 pips on the day, despite the initial decline following China Services PMI data. USD/JPY fell some 70pips below ¥104.20, a 1-week low, also weighing on the yen crosses - EUR/JPY fell over 100pips below ¥142.30, CHF/JPY down 90pips below ¥115.80, and GBP/JPY saw the biggest drop of over 140pips toward ¥171 handle. NZD was also up on the greenback, rising over 50pips above $0.8230. EUR/USD and GBP/USD traded in relatively narrow 30pip ranges around $1.3660 and $1.6440 respectively.
***Speakers/Political/In the Papers*** - (CN) According to PricewaterhouseCoopers (PwC), China may see a record number of IPOs in 2014 after regulators allowed listings to resume - China Daily - (CN) Thailand imposes 0-33.32% dumping duties on China stainless steel - financial press - (CN) China issues additional IPO approvals for 5 companies - Chinese press - (CN) China State Council approves to form rare earth groups - Chinese press - (JP) According to a Kyodo survey, only 17% of major Japanese companies will authorize wage hikes in FY14/15 - (JP) Japan IPO activity expected to increase in 2014 for the 5th consecutive year - Nikkei - (IN) India Central Bank (RBI) Dep Gov Chakrabarty: India interest rates to remain elevated on inflation risk - (AU) According to UBS, Australia's latest monthly credit data showing banks lent A$6.4B to property investors in Nov vs A$6.2B for owner-occupiers; Concerned over fuelling a property bubble - Australian press - (KR) South Korea Pres Park's chief of staff: Pres Park is not considering reshuffling cabinet - Korean press - (KR) South Korea Finance Ministry: South Korea to allocate 65% of 2014 budget to H1 - (KR) South Korea Fin Min Hyun: closely monitoring KRW exchange rate movements; Need to monitor JPY rates
***Equities*** Market Snapshot - Nikkei225 closed, S&P/ASX -0.4%, Kospi -1.1%, Shanghai Composite -1.4%, Hang Seng -1.93%, Mar S&P500 flat at 1,826, Feb gold +0.4% at $1,230, Feb crude oil -0.5% at $95.42/brl
US markets: - FEYE: Announces Acquisition of Mandiant; To issue to 21.5M shares and options to purchase shares of FireEye stock and pay ~$106.5M in cash; Raises Q4 Rev guidance to $55-57M v $54Me (guided $52-54M prior); Guides FY14 Rev $400-410M following Mandiant acquisition; +22.7% afterhours - GGS: Announces the Sale of a 20,000 Channel Recording System for $9.5M; +14.9% afterhours - RECN: Reports Q2 $0.18 v $0.15e, R$146M v $142Me; +5.3% afterhours
Notable movers by sector: - Consumer discretionary: Jiangling Motors 000550.CN -1.3% (Dec sales result); Chongqing Changan Automobile 000625.CN +2.6% (FY13 guidance) - Industrials: Hyundai Mipo Dockyard 010620.KR -4.5% (sets targets for 2014) - Financials: Kowloon Development 34.HK -3.8% (issues profit warning) - Materials: Inner Mongolia Baotou Steel Rare Earth 600111.CN +3.1%, Rising Nonferrous Metals Share 600259.CN +1.0%, China Minmetals Rare Earth 000831.CN +1.9% (China approves to form rare earth groups) - Healthcare: North China Pharmaceutical 600812.CN +4.6%, North China Pharmaceutical 002007.CN +1.4% (top 3 Hepatitis B vaccine producers confirm to halt production) - Energy: China Oil HBP Science & Technology 002554.CN +4.1% (awarded orders) - Technology: Eternal Asia Supply Chain Management 002183.CN +4.0% (to further invest in supply chain management); Guangzhou KingTeller Technology 002177.CN +10.0% (named as ICBC supplier); Shanghai Kingstar Winning Software 300253.CN +4.5% (plans acquisition)