Asian Market Update: Another report of Russian-Saudi meeting on oil and record high China loans data spark relief rally
***Economic Data***
- (CN) CHINA JAN NEW YUAN LOANS (CNY) 2.51B V 1.90TE; record high
- (CN) CHINA JAN AGGREGATE FINANCING (CNY): 3.42T V 2.20TE
- (CN) CHINA JAN M2 MONEY SUPPLY Y/Y: 14.0% (19-month high) V 13.5%E; M1 MONEY SUPPLY Y/Y: 18.6% V 14.7%E
- (NZ) NEW ZEALAND Q1 2-YR INFLATION EXPECTATION Q/Q: 1.63% V 1.85% PRIOR; 22-year low
- (NZ) NEW ZEALAND Q4 RETAIL SALES (EX-INFLATION) Q/Q: 1.2% V 1.5%E
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 113.6 v 111.4 prior
***Index Snapshot (as of 05:00 GMT)***
- Nikkei225 +0.8%, S&P/ASX +1.0%, Kospi +1.5%, Shanghai Composite +3.0%, Hang Seng +1.7%, Mar S&P500 +0.6% at 1,892
***Commodities/Fixed Income***
- Apr gold -3.6% at $1,194/oz, Mar crude oil +4.5% at $30.77/brl, Mar copper +1.3% at $2.08/lb
- JGB: (JP) Japan's MoF sells ¥1.09T in 1.0% (1.0% prior) 20-year JGBs; Avg yield: 0.786% (record low) v 0.924% prior; bid-to-cover: 3.50x v 3.49x prior
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5130 V 6.5118 PRIOR; First weaker setting relative to close after 21 firmer fixes
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- (NZ) New Zealand sells NZ$100M in 98-day bills, yield 2.395%
***Market Focal Points/FX***
- Asian equity markets are sharply higher, bolstered by positive developments regionally as well as in the Middle East. China mainland indices are outperform on the 2nd trading session after the holiday break, cheering strong New Loans and Money Supply figures for January. Overall sentiment is also very upbeat, as more reports surfaced that Russia Oil Min Novak will meet his Saudi, Venezuela and Qatar ministers in Qatar on Tuesday to discuss the state of the oil markets. March WTI is up over 4% near $31/brl mark, US S&P500 futures are up 7pts at 1,892, and USD/JPY spiked up to near 114.90, up about 50pips from the lows. In other USD majors, AUD/USD is up 50pips near 0.7180 at the high, while NZD is reeling from soft inflation expectations with an 80pip decline below 0.6590 at the lows.
- After yesterday's disappointing release of trade data, today China New Yuan loans and M2 money supply are hardly indicative of a slowing economy, hitting record high and 19-month highs respectively. Local economist notes this could be a reflection of higher borrowing costs offshore but could also flow in the direction of recovering property market. Economists added this probably will not diminish the chance of another RRR cut in Q1. Also on a related note, China 2015 commercial banks average bad loans ratio has risen to 1.67% from 1.25% at 2014-end and NPLs reached a 10-year high of CNY1.27T (10-year high), +51% y/y. Notable reports in Chinese press saw speculation of a new package of policies from Beijing containing monetary, fiscal, tax and M&A policies to ensure economic growth in reasonable range in 2016. China researcher Long said it was normal to see some capital outflows from China, while an official with PBoC said Yuan could start to appreciate since growth is stable. On that point, PBoC actually broke a string of 21 straight firmer Yuan fixes relative to close with a slightly weaker setting.
- New Zealand currency was beaten down by a trifecta of negative developments. First retail sales for Q4 came in below expectations. Next, New Zealand PM Key said he was surprised NZD has not declined in line with 10-20% drop in dairy prices in recent weeks, adding that farms carrying debt will be challenged to stay profitable with prices below NZ$5/kg. Note those comments come ahead of the next GDT auction on Tuesday. Lastly, RBNZ's forecast for 2-year inflation hit a 22-year low, 1-year hourly wage growth expectations are at a 6-year low, and 90-day bill rate projections hit record low, boosting speculation that the central bank will be prepared to resume cutting rates in short manner. RBA meeting minutes from this month were largely a reiteration of the statement that low inflation may provide room for more easing if necessary, even though recent economic data have been positive.
- Elsewhere, Bank of Korea left its 7-day repo rate at 1.50% as widely expected, but the decision was not unanimous with one member calling for a cut. BOK also unveiled a KRW9.0T special lending facility to deal with slowing growth, weaker domestic consumption, slumping exports, and expectations of inflation remaining below 2% target. BOK said it was monitoring household debt, China, geopolitical risks and capital flows.
- In Japan, Fin Min Aso said he was prepared to seek coordination with G7 leaders to respond to recent market volatility. Aso also said negative rates would be positive for consumption and investment, but a local press survey said just over 60% of respondents do not believe that negative BOJ interest rates will lead to economic recovery. PM Abe's advisor Hamada also spoke again, stating his personal belief is that MOF should intervene in FX since recent JPY rises are abnormal.
***Equities***
US equities / ADRs:
- ADT: Apollo Global Management said to be near deal to take the company private - financial press
- CYH: Reports Q4 -$0.28 adj v $1.12 y/y; R $4.79B v $4.99Be - update
- VOD.UK: Liberty Global and Vodafone to Merge Their Dutch Operations in 50/50 JV; JV expected to issue debt
- BHP: Brazil govt said to be near agreement with BHP and Vale on Samarco incident; Deal expected within days - financial press
Notable movers by sector:
- Consumer discretionary: Kirin Holdings Co 2503.JP -8.2% (FY15 result); Dentsu Inc 4324.JP -1.6% (9-month result); Pacific Brands PBG.AU +9.6% (H1 result)
- Financials: Challenger Financial Services Group CGF.AU +4.8% (H1 result); National Australia Bank NAB.AU +0.2% (Q1 result)
- Industrials: Mitsubishi Heavy Industries 7011.JP +5.0% (speculation for new order); Great Wall Motor 2333.HK +2.0% (Jan result)
- Technology: Toshiba Corporation 6502.JP +8.4% (not consider withdrawing from PC market)
- Materials: Iluka Resources ILU.AU +0.6% (suspends certain operations ); Zijin Mining 2899.HK -2.2% (prelim FY15 result)
- Energy: CNOOC 883.HK +3.9%, Sinopec 386.HK +3.5%, PetroChina 857.HK +7.1% (higher oil prices)
- Healthcare: CSL CSL.AU +1.2% (H1 result)
- Telecom: Softbank Corp 9984.JP +15.9% (share buyback)