Thursday, 11 December 2008 Asian Markets

News Highlights

– Asian currencies rose against the USD on Wed boosted by stock gains. The KRW closed 3.8% higher at 1,393.95/USD while TWD ended up 0.3% at 33.449/USD on Wed. The HKD continued to move within a narrow range of 7.7503-7.7507/USD during the Asian session but hit the higher limit of the trading band at 7.7500/USD overnight. In the regional markets, PHP rose 0.6% to 48.250/USD as remittances continued to flow in and amid position adjustments by the banks. The MYR ended a tad firmer at 3.6150/USD during thin trading on Wed. The IDR rose to its 1-mth high of 10,800/USD before ending steady at 11,050/USD. Foreigners’ USD sales ahead of the SBI notes auction were met by importers’ USD demand. Both the CBC and BoK are expected to cut
rates by 50bps at their respective monetary policy meeting today. Thai market reopens from holiday today. Data-wise, the focus is on Malaysia’s Oct industrial production and China’s Nov CPI due today.
– USD/SGD hit a low of 1.4965 during the Ldn/NY session on Wed compared with Tue’s low of 1.5020. This was within our expected range but bias for the pair could be slightly lower today with downside capped at 1.4890 which corresponds to 0.5% above the mid-point in our SGD NEER model. SGD NEER is currently trading at around 0.2% above the mid-point.
– The RMB ended up 0.15% at 6.8633/USD in the spot market on Wed as market pared back its depreciation expectation for the currency. The PBoC set the central parity steady yesterday morning and there was no further indication that the central bank will begin to engineer a
depreciation of the currency despite the slew of weak economic data yesterday. In the NDF market, 1Y was pricing in 3.7% depreciation in the RMB against USD vs the central parity yesterday. This was relatively steady from the last two sessions. This morning, the PBoC set the RMB central parity relatively steady at 6.8471/USD.
– Asian equity indexes were broadly higher on Wed, fueled by an improvement in risk appetite. Nikkei 225 continued to build on gains as it rose 3.2% and Hang Seng Index added 5.6% on Wed. Chinese stock markets ended higher despite the dismal data releases on hopes of further government stimulus measures as China Communist Party’s leaders wrapped up their annual meeting yesterday. The Shanghai CI and Shenzhen CI rose by at least 2% on Wed. In the region, STI and Jakarta CI rose by more than 3% yesterday. For today, the Nikkei 225 opened lower despite the positive cue from the rise in US stocks overnight.
– China’s Nov data released yesterday surprised on the downside. Nov exports dropped 2.2%y/y, sharply lower than market’s forecast of 15.0% rise and 19.2% expansion in Oct. Imports plunged 17.9%y/y against expectation of 12% increase and 15.6% rise in Oct. As a result of the sharp
drop in imports, China’s trade surplus surged to a record US$40.09 bn in Nov vs previous record of US$35.2bn in Oct. China’s Nov PPI was up 2.0%y/y (mkt: 4.5%), its slowest pace in more than two years and was significantly lower than 6.6% in Oct. This suggests that the Nov CPI due
today will also come in below expectation. China’s urban property prices rose at a slower pace for the 10th consecutive month in Nov. Prices in 70 of China’s large and medium-sized cities was up just 0.2%y/y in Nov compared with 1.6% rise in Oct despite the series of property market boosting measures to help first-time buyers. China’s actual FDI fell 36.5%y/y in Nov to US$5.32bn.
– China Communist Party’s leaders ended its three-day annual work conference on Wed. The leadership reaffirmed its commitment towards the stability of the RMB and said that maintaining steady economic growth will be the key task next year, using fiscal policy and a moderately loose
monetary policy.
– US Treasury Department’s semi-annual report did not single out any country for manipulating their currencies but highlighted the need for China to move more quickly towards a market-determined RMB.
– Philippines’ exports fell 14.9%y/y in Oct, the sharpest pace of fall in seven years.
– MAS’ 4Q Survey of Professional Forecasters showed that economists expect the Singapore economy to grow by 2.2% this year and contract by 1% in 2009. CPI inflation is expected to ease to 1.7% in 2009 from an estimated 6.5% this year.

Key Data/Events Ahead in Asia

Thur 11 Dec
Malaysia Oct Industrial Production (Sep : -1.7%y/y; -2.3%m/m)
China Nov CPI (Mkt: 3.3%y/y ; Oct: 4.0%y/y)
7th Anniversary of China becoming a full member of the WTO
BoK Monetary Policy Committee meeting
CBC Quarterly Monetary Policy Committee meeting

Fri 12 Dec
China Nov Retail Sales (Mkt: 20.8%y/y ; Oct: 22.0%y/y)
China Nov M2 (Mkt: 15.0%y/y ; Oct: 15.01%y/y)
South Korea’s 2009 Economic Outlook Report