Asian Market Update: Drought hurts Aussie exports as trade deficit widens more than expected - Australia December's trade deficit widened more than expected (Dec Trade Balance: -1.34B v -1.0Be) and the November trade deficit was revised lower (-897M from -843M prior) as declines in commodities prices hurt exports. Aussie grain exports fell to a 15mnth low as the drought continues to weigh on the Aussie economy. The Reserve Bank of Australia currently projects that the drought will shave off 0.75 percentage points from GDP in the year ending June 30. The strengthening in the Aussie dollar is also undermining export competitiveness. - Major currencies: The JPY is stronger across the board on short covering ahead of the weekend, as the JPY is set for its first weekly gain against the USD in a month. The Financial Times reported that dissension between the US and Europe with respect to the JPY's weakness will most likely protect Japan from any effort out of the Euro Zone to make the JPY weakness the main issue at upcoming G7 meetings. The USD is trading narrowly mixed ahead of tomorrow's payrolls report in which the market is expecting an increase of 150K jobs in January v a 167K gain in December. - Asian currencies: The Korean Won is weaker against the JPY and USD after last session's CPI release came in softer than expected. The Korean Finance Minister hinted that February exports may slow from 2yr highs. In Taiwan, USD sales by exporters were roughly offset by importers deals, as the TWD traded flat despite strong equity gains. Traders expect the TWD to gain in the next few sessions as exporters sell the USD ahead of Lunar New Year break. After much better than expected retail sales data out of Hong Kong, the HKD moved into positive territory as the CNY was set at a new post revaluation high against the USD. - Equities: The Nikkei 225 is trading near six and a half year highs at the 17600 level as semiconductor shares are gaining. Traders are buying companies reporting good earnings and offering attractive dividend yields. Japanese real estate companies also gained on optimism with respect to upcoming profit reports. The KOSPI is higher by close to 2% and at a one-month high. Korean banking shares are trading in positive territory after better than expected profits from Korean Exchange Bank. The ASX 200 continue to trade near all-time highs as shares of BHP lead the charge. Taiwanese equities are higher as exporters are being helped by the weaker Taiwan dollar. In China, traders noted liquidity concerns ahead of the A-share subscription for Ping An Insurance next week. - Fears of equity price bubble in China may spread to India: Chinese equities are declining for the 3rd consecutive session as markets fear that China will look to curb speculation in equity markets. On Wednesday, Chinese shares tumbled nearly 5% in their biggest one-day loss in eight months amid mounting worries that the bubble was about to pop. In India, price/earnings ratios are now high relative to other countries and India's recent past, leading to some mumbling the "bubble" word. Indian equities are being boosted by expectations that there will be no more rate hikes from the Indian Central Bank after Indian manufacturing grew at a 10mnth low. - Commodities: Crude oil prices are little changed in Asian trading on few catalysts. Most analysts expect oil prices to stabilize in the next few sessions. Gold traded higher in US trading after breaking a key resistance level, but succumbed to profit taking during the Asian session, holding above $661. Some technical analysts believe that gold would have to rise above $670 in order to sustain momentum. Shanghai Copper fell on rises in globally inventories. --------------------------------------------- Copyright 2007 © Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a FREE TRIAL
Fears of equity price bubble in China may spread to India: Chinese equities are declining for the 3rd consecutive session as markets fear that China will look to curb speculation in equity markets. On Wednesday, Chinese shares tumbled nearly 5% in their biggest one-day loss in eight months amid mounting worries that the bubble was about to pop. In India, price/earnings ratios are now high relative to other countries and India's recent past, leading to some mumbling the "bubble" word. Indian equities are being boosted by expectations that there will be no more rate hikes from the Indian Central Bank after Indian manufacturing grew at a 10mnth low. Oh there is an equity price bubble. Hmmm. Wasnt aware of that.