Asia Market Update: Low China inflation data keep equities, commodity FX under pressure
Mon, 11 Jan 2016 1:07 AM EST
***Economic Data***
- (CN) CHINA DEC CPI Y/Y: 1.6% V 1.6%E, 3-month high; 2015 CPI 1.4% (6-year low), below 2.0% in 2014 and 3.0% official target
- (CN) CHINA DEC PPI Y/Y: -5.9% V -5.8%E; 46th consecutive month of decline
- (AU) AUSTRALIA DEC ANZ JOB ADVERTISEMENTS M/M: -0.1% V 1.1% PRIOR (1st decline in 5 months)
- (NZ) NEW ZEALAND NOV BUILDING PERMITS M/M: 1.8% (adj) v 5.4% PRIOR
- (MY) Malaysia Nov Industrial Production Y/Y: 1.8% v 4.0%e
***Index Snapshot (as of 05:00 GMT)***
- Nikkei225 closed, S&P/ASX -1.2%, Kospi -0.7%, Shanghai Composite -2.5%, Hang Seng -2.4%, Mar S&P500 flat at 1,912
***Commodities/Fixed Income***
- Feb gold +0.5% at $1,103/oz, Feb crude oil -2.0% at $32.48/brl, Mar copper -0.9% at $2.00/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 4.5 tonnes to 649.6 tonnes; 1-month high
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5626 V 6.5636 PRIOR; 2nd straight day of firmer setting
- USD/ZAR: Rand currency (ZAR) falls over 10% in early Asia trade through 17.80; record low
- USD/MXN: Mexican Peso (MXN) weakens through MXN18.00; record low
- (KR) South Korea Sells 5-yr Pre-Issuance Government bond at 1.805%
***Market Focal Points/FX***
- Selling pressure has returned to the Asian equity markets after Friday's bounce, even though the PBoC has set Yuan firmer for the 2nd straight day. Instead, investors appear to be unimpressed by the latest inflation data from China released over the weekend and also the neglect by the authorities to inject any additional liquidity. December CPI met expectations, but it was mainly the food component - 2.7% v 2.3% prior - that saw some growth, while the non-food CPI remained at 1.1%. ANZ economist noted the modest uptrend of the past two months would likely be transitory "given the intensifying drop of oil prices in January." Indeed, the wholesale inflation also fell for the 46th straight month, and the overall 2015 CPI came in at just 1.4%, a 6-year low.
- Rising threat of China deflation has translated into record lows for some key commodity currencies. MXN and ZAR were particularly hard-hit above 18 and 17.80 respectively. USD/CAD added 30pips close to 1.4190, and AUD/USD traded down nearly 50pips from opening levels below 0.6930. US equity futures were down as much as 0.75% but bounced back in afternoon trade. Likewise, USD/JPY initially cratered 60pips toward 116.60 before a mid-session recovery.
- In notable Chinese press reports, CASS researcher said expectations of yuan's depreciation and capital outflows have been behind the drop in China's foreign exchange reserves. Recall the latest data for December showed reserves post their biggest decline on record of over $100B to $3.33T. NDRC official also offered downbeat forecasts, noting it would be difficult for China to maintain GDP average of above 6.5% in 2016-20 period, which is required for China to meet its objective of doubling GDP in 2020 relative to 2010 levels.
- Outside of China, Australia's job ads data printed their first sequential decline in 5 months, though resident economist said the figures remain solid enough to keep the unemployment rate below 6.0%. Korea govt noted 2015 home transactions rose 18.8% y/y to 1.19M, and a survey saw some 15 out of 17 analysts expect BOK to leave rates on hold this Thursday.
***Equities***
US equities / ADRs:
- BONT: Sycamore Partners said to have approached company to combine with Belk - financial press
- MDXG: To Acquire Stability Biologics for $10M 60%/40% cash and stock; Raises guidance for FY16 $0.33-0.37 v $0.26e; Rev $260-270M v $251Me (prior $0.31-0.35; R $245-255M)
- KSS: Said to consider break-up of the company and taking itself private - financial press
- DIS: 'Star Wars: The Force Awakens' opening weekend box office in China seen at $53M - financial press
- DIS: "Star Wars" remained the top earning film in weekend box office with $41.6M in N America sales
Key movers in Asia
- ISU.AU: Lowers FY15/16 EBIT A$15-18M from A$26-28M amid strategic and operational issues; -39.0%.
- ASB.AU: Announces CEO transition; names David Singleton new CEO; -17.4%.
- FMG.AU, BHP.AU -4.9% on lower commodity prices.
- WPL.AU, STO.AU -2% and -5% respectively as oil declines further.