>>> Asian Update

Asian Market Update: South Korea GDP slows; Volatility still compressed ahead of BOJ


***Economic Data***
- (KR) SOUTH KOREA Q1 PRELIMINARY GDP Q/Q: 0.4% V 0.4%E; Y/Y: 2.7% V 2.7%E
- (PH) Philippines Feb Trade Balance: -$1.1B v -$1.5Be; Imports $5.4B v $6.8B prior; Y/Y: 1.2% v 12.0%e

***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -1.1%, S&P/ASX -0.2%, Kospi flat, Shanghai Composite -0.3%, Hang Seng -0.8%, Jun S&P500 flat at 2,083

***Commodities/Fixed Income***
- June gold -0.2% at $1,237/oz, June crude oil +0.3% at $42.77/brl, May copper -0.7% at $2.24/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 2.3 tonnes to 802.7 tonnes; lowest since Mar 16th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.4880 V 6.5120 PRIOR; strongest setting since Apr 21st; biggest margin of increase since Mar 18th
- (CN) PBOC to inject CNY140B in 7-day reverse repos
- (JP) BOJ offers to buy ¥450B in 5-10yr JGBs, ¥220B in 10-25yr JGBs, and ¥180B in JGBs with maturity over 25-yr

***Market Focal Points/FX***
- Asian equity markets are down slightly for the 3rd straight session, however declines stayed fairly modest as the 2-month uptrend in emerging markets remains intact. Investors are staying on the sidelines going into Wednesday's FOMC/BOJ double-header, and the dearth of economic data is also keeping sentiment balanced. S&P futures are flat, while oil and copper are retreating from recent highs. In FX, USD/JPY is trading sideways around 111 handle, AUD/USD is in a 20-pip range above 0.77, while NZD/USD is up some 30pips on speculation of a neutral policy statement and a rate hold by the RBNZ. China yuan fix was much firmer, reflecting the uptick in repo rates on Monday.

- China's former PBoC adviser Li Daokui reiterated his cautious outlook that the economic downturn has yet to find its bottom, echoing some of the more cautious rhetoric on growing credit risks overnight. Report from IIF also forecast continued outflows from China economy in 2016, albeit the $538B figure was less than $674B withdrawn in 2015.

- In Japan, there was more speculation over the extent of govt cushioning of the impact of last week's earthquake. A local press report that supplementary budget intended to aid in recovery could reach as high as ¥600B was once again rebuffed by Fin Min Aso, who said the extent of the amount of relief has yet to be determined. Later, Aso clarified that Japan is not considering compiling economic stimulus package right now apart from earthquake relief, reiterating that economic fundamentals are solid. Meanwhile, a Nikkei report noted that Japan's primary pension fund GPIF is looking to tackle appreciating Yen expectations with more hedging programs, while a research note by Morgan Stanley forecast this week's BOJ easing expanded by ¥10-20T and a rate cut deeper into negative territory by at least 10bps.

- South Korea put out its prelim Q1 GDP that slowed to 2.7% y/y and 0.4% q/q from 3.1% and 0.7% respectively in line with expectations. Construction investment growth of 5.9% was overshadowed by the same margin of decline in capital investment and a 0.3% q/q drop in consumption. Korean finance ministry said that 2016 forecasts are facing downside risks after the latest data. Among notable Korean earnings results, chip giant SK Hynix results were largely in line with estimates and outlook for DRAM and NAND shipments was fairly benign, sending shares higher by over 5%. In the final hour, Hyundai Motor Q1 results beat on top and bottom line - Net profit came in at KRW1.69T v KRW1.5Te on Rev KRW22.4T v KRW21.3Te.

***Equities***
US equities / ADRs:
- TCS: Reports Q4 $0.20 v $0.20e, R$232.1M v $228Me; +21.3% afterhours
- SANM: Reports Q2 $0.63 v $0.54e, R$1.61B v $1.58Be (1 est); +8.3% afterhours
- PXD: Reports Q1 -$0.64 v -$0.73e, R$685M v $699Me; +3.2% afterhours
- UTX: *RAISES DIVIDEND 3.1% TO $0.66; implied yield 2.5%; -0.2% afterhours
- ESRX: Reports Q1 $1.22 v $1.23e, R$24.8B v $25.5Be; current CEO Paz to retire, effective May 4th; -2.4% afterhours
- NBR: Reports Q1 -$1.41 v -$0.33e, R$597.6M v $633Me; -5.0% afterhours
- CNI: Reports Q1 C$1.00 v C$0.86 y/y, Rev C$2.96B v C$3.1B y/y; -5.3% afterhours

Notable movers by sector:
- Consumer discretionary: Hisense Kelon Electrical Holdings Co 000921.CN -0.5% (Q1 result)
- Consumer staples: Tsingtao Brewery Co 600600.CN +0.8% (Q1 result)
- Financials: Everbright Securities Co 601788.CN -0.3% (Q1 result); REA Group REA.AU +3.7% (acquisition)
- Industrials: Hitachi Chemical Co 4217.JP +8.2% (FY15/16 result); Nidec Corp 6594.JP +3.6% (FY15/16 result)
- Technology: Hynix Semiconductor 000660.KR +5.3% (Q1 result)
- Materials: Yunnan Copper Co 000878.CN -2.8% (Q1 result); Newcrest Mining NCM.AU +0.2% (Q3 result)
- Energy: China Shenhua Energy Co 1088.HK -0.8% (Mar result)

>>> After Hours Summary: KN +23%, TCS +20.6%, SANM +5.7% higher an


After Hours Summary: KN +23%, TCS +20.6%, SANM +5.7% higher and CNI -4.9%, NBR -4.9% lower on earnings/guidance, PETX +17.4% on license deal

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AMID +26.8% (ticking higher; announced the acquisition of interests in Gulf of Mexico midstream infrastructure and incremental ownership in Delta House for ~$225 mln; revised 2016 guidance and reduced distribution), KN +23%, TCS +20.6%, SANM +5.7%, PXD +2.9%

Companies trading higher in after hours in reaction to news: PETX +17.4% (Aratana Therapeutics announces that Elanco Animal Health, a division of Eli Lilly, has licensed animal health rights to Aratana's Galliprant), BLDP +15.1% (Ballard Power Protonex subsidiary demonstrates UAV propulsion system with Boeing (BA) Insitu; flight demonstrations planned for the second half of 2016), SEED +12.3% (names Dr. William S. Niebur as President and CEO), REXX +4.5% (very light volume; provides update on balance sheet initiatives, closes 2 privately negotiated exchange transactions with certain holders of securities)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CNI -4.9%, NBR -4.9%, CDNS -3.7% (also CFO Geoff Ribar to retire effective March 31), ESRX -2% (also announced Paz will retire as CEO on May 4 and stay on as Chairman of the Company; Tim Wentworth will assume the role of CEO on May 4)

Companies trading lower in after hours in reaction to news: DRRX -8.5% (commences common stock offering)

>>> US Close Dow-0.15% S&P-0.18% Nasdaq-0.21% Russell-0.75%

Closing Market Summary: Energy Weighs Ahead of Fed Meeting

The stock market ended a quiet session on a lower note as investors maintained a risk-off posture ahead of a busy week. Today's decline can be attributed to a downturn in crude oil, presumed profit-taking, and the underperformance of the heavily weighted industrial sector (-0.6%). The Dow Jones Industrial Average (-0.2%) finished in-line with the S&P 500 (-0.2%) and the Nasdaq Composite (-0.2%).

The equity market opened under selling pressure as investors set their sights on this week's Fed meeting. The FOMC will begin its two-day policy meeting tomorrow, and is largely expected to leave interest rates unchanged. However, participants will be looking for clues regarding the central bank's assessment of the economy and any possible changes to the Fed's path towards interest rate normalization. As a result, today's session saw limited interest in risk assets as investors looked to lock in gains after the broader market's recent run.

The key indices hit their lows in the late morning and briefly bounced off those levels through the early morning. The averages would trim their losses further in the final hour of trade. By the end of the session, six sectors remained in negative territory while countercyclical consumer staples (+0.7%) and telecom services (+0.3%) ended with the largest gains.

The commodity-sensitive energy (-1.1%) and materials (-0.6%) spaces rounded out the leaderboard while industrials (-0.6%), health care (-0.4%), and financials (-0.3%) followed.

The energy space (-1.1%) experienced broad-based weakness as the broader sector pulled back along with crude oil. On that note, WTI crude ended its day lower by 2.4% at $42.72/bbl. Meanwhile, Halliburton (HAL 40.04, -0.80) declined 2.0% after announcing its first-quarter revenue ahead of schedule and postponing its conference call until May 3. The company cited an April 30 deadline for its proposed merger with Baker Hughes (BHI 45.04, -1.39) as reason for its delayed call. 

In the industrial space (-0.6%) transport names displayed relative weakness, evidenced by the 1.2% decline in the Dow Jones Transportation Average. American Airlines (AAL 37.00, -1.21) underperformed among major airlines as investors continued to focus on below-consensus second quarter unit revenue figures and competition among value airlines. Separately, Union Pacific (UNP 87.61, -2.02) declined by 2.3% as the name pulled back from its recent post-earnings gain. The stock has gained 4.5% since reporting on April 21.

Generic drug names displayed relative weakness in the health care space (-0.4%). The sub-group traded lower in sympathy with Perrigo (PRGO 99.40, -21.95), which lowered its first quarter and full-year earnings estimates below consensus. Furthermore, Perrigo also moved lower after reports indicated that CEO Joseph Papa was departing the company to head up Valeant Pharmaceuticals (VRX 35.16, -0.82).

In the consumer discretionary space (+0.2%), media names outperformed after the Justice Department and the FCC approved Charter Communication's (CHTR 207.01, +9.10) proposed acquisition of Time Warner Cable (TWC 209.63, +8.18).

The U.S. Dollar Index (94.83, -0.29) ended off its session low as the yen and the euro gained against the greenback. The dollar/yen pair finished at 111.22 (-0.5%) while the euro gained 0.3% against the dollar (1.1261).

The Treasury complex finished its day moderately lower as the yield on the 10-yr note rose to 1.90% (+1 bps).

Today's participation fell in-line with the recent average as more than 861 million shares changed hands on the NYSE floor.

Today's economic data was limited to March New Home Sales:

  • New home sales in March ran at a seasonally adjusted annual rate of 511,000 (consensus 521,000).
    • That was down 1.5% from February, which saw an upward revision to 519,000 from a previously reported 512,000
    • Taking into account the February revision, the March result was pretty much in-line with economists' expectations, so the headline disappointment isn't as big as it might appear at first blush.
    • Moreover, new home sales in March were up 5.4% versus the same period a year ago.
    • The latter point notwithstanding, sales activity moderated in March, evidenced by a sales pace that was below the prior 3-month average of 526,000.
    • Interestingly, the moderation in sales occurred with a 1.8% year-over-year decline in the median sales price to $288,000.
    • At the current sales pace, the inventory of unsold new homes stands at a 5.8 months' supply, which is closing in on the 6.0-months' supply that is typically associated with normal periods of buying and selling.
    • In March 2015, there was a 5.1 months' supply of unsold homes.

Tomorrow's economic data will include Durable Goods Orders for March (consensus +1.7%) and February Case-Schiller 20-city Index (consensus +5.6%), which will be released at 8:30 ET and 9:00 ET, respectively. Finally, April Consumer Confidence (consensus 96.7) will cross the wires at 10:00 ET. 

  • Dow Jones +3.2% YTD
  • S&P 500 +2.2% YTD
  • Russell 2000 +0.1% YTD
  • Nasdaq Composite -2.2% YTD

>>> Japan pension fund GPIF President: Planning to embrace currency hedging to b

Japan pension fund GPIF President: Planning to embrace currency hedging to balance an appreciating yen - Nikkei 
- Says: "If our internal analyses were to show that U.S. or Japanese equities remain undervalued, we could gradually increase our holdings.... Our target of a 1.7% real return over the long term is at a level that is sufficiently achievable. To this end, I want us to become an organization capable of top-class data and economic analysis. We intend to double the size of our analytical team, which now has about 20 members.", GPIF has $1.25T in assets.

Reuters - Airbus A320neo has hydraulic noise, temp problems -sources - Reuters N

Airbus A320neo has hydraulic noise, temp problems -sources - Reuters News

25-APR-2016 15:14:38
PARIS, April 25 (Reuters) - Airbus AIR.PA is facing a second category of technical problems with some of its family of A320neo aircraft on top of previously reported engine glitches that have delayed deliveries of its latest medium-haul jet, industry sources said on Monday.

The problems are related to the hydraulic systems and particularly an increased noise created by a hydraulic pump when taxiing on one engine, they said.

Some planes are also affected by excess temperature in the hydraulic system, which can be a nuisance in hot climates, they added.

Speaking separately in Dubai, Qatar Airways Chief Executive Akbar Al Baker said the aircraft had issues "with the hydraulic system and the software".

Airbus reiterated any glitches would be resolved by the summer.

FT : Too much company information makes finance hard to grasp

Too much company information makes finance hard to grasp

Accountants and banks should not be shy about binning useless stuff, writes Simon Samuels

As all good golfers know, less is often more. Might the same be true when it comes to financial reporting? The page count inflation of company reporting over the past two decades has been staggering. Back in the mid-1990s the typical report and account was fewer than 100 pages; this spring’s annual report season saw most major companies publish weighty tomes, often more than 250 pages.
Putting aside the environmental damage from tree felling or the resulting back conditions afflicting an army of postal workers, has all this extra disclosure actually helped stakeholders better understand the businesses? Does more disclosure reflect a genuinely more complicated world, does it merely reveal the complexities that were always there, or is it simply the regulatory and accounting world gone mad?

Perhaps the greatest champion of this “disclosure explosion” are banks. For example, 25 years ago Deutsche Bank’s annual report was under 100 pages (including two pages dedicated to their art collection). Of course banks today are big and complicated, and so one might expect their disclosure to also be big and complicated. Yet with Deutsche’s 2015 annual report running to more than 600 pages, it is right to ask whether such volume is helping or hindering stakeholders to understand what’s going on. And not only are there lots of words; any reader not familiar with AFS, CDR, CPR, CVA, DRE, DVA, EAD, FVA, IMM, LCR, LGD, MREL, NQH, NSFR, SFT, SNLP or TLAC (just to choose a few examples) will struggle to comprehend many of the issues.
This matters. With the regulatory rules for banks in an endless state of flux and lurking fears of massive litigation, shareholders already have enough excuses to consider banks “uninvestable”. If attending a speed reading course and acquiring a degree in acronyms are also required to understand what they report, then many investors may conclude that their time is better spent assessing companies in more comprehensible industries. That makes it harder and more expensive for banks to raise capital, which for Europe — with its heavy reliance on bank lending — is bad news.
So what to do? The most obvious thing is to cut down disclosure. Regulators, accountants and banks should not be shy about binning useless stuff. Prioritising what matters is equally important, as advocated by the Financial Stability Board’s enhanced disclosure task force and by the recent banking futures report.

More radical, yet more relevant, disclosures would help, such as details of what topics were discussed and when by the board over the year or comparisons of the performance against budget.
While insiders may protest that the complexity and opacity of the reporting simply mirrors the real world of banking, such thinking lacks imagination. With most banks’ stock market valuations below their book value, the industry needs to embrace, not resist, radical ideas that might help investors understand what they are being asked to invest in.
When I started working in the City 25 years ago as an analyst, before emails and before the internet, a key part of the job on the day a bank reported its results was calling its shareholders and telling them the actual numbers, since the sole electronic delivery mechanism was an expensive stock exchange news feed that only the investment banks could afford. Today, while all 600 pages of Deutsche Bank’s results are disclosed instantaneously to everyone, the volume, complexity and lazy reliance on jargon and acronyms means that the analyst job has once again become one of simply communicating the numbers to the owners. As a result many are left asking the same question as their predecessors did a quarter of a century ago: “How much money did the bank actually make?”
Surely we can do better than that.

FT : Saudi Aramco IPO set for $2tn valuation

Saudi deputy crown prince Mohammed Bin Salman confirmed the Kingdom is looking at a listing of less than 5 per cent of the state oil company, which will value it at more than $2tn, he said on Monday.

In an announcement made as the kingdom’s rulers make public its economic “vision”, Prince Mohammed who is the son of King Salman, said all financial information related to Saudi Aramco will be disclosed, writes Anjli Raval.

In a television interview with Al Arabiya, he said he wants to convert Saudi Aramco into a holding company. Subsidiaries of the entity will also be listed and its board will be elected.

The economic plan for the period to 2030 has been developed by the Council of Economic and Developmental Affairs of which Prince Mohammed is in charge. The country’s oil industry, which is the main driver of government revenues, is also under his aegis.

The prince claimed the Kingdom will be able to live without oil in 2020, and added that the economic vision would not be linked with the oil price.

“We have an addiction to oil,” he said. “This is dangerous … it has delayed the development of other sectors.”