Asian Market Update by TradeTheNews staff

Discussion in 'Trading' started by TradeTheNews, Mar 4, 2007.

  1. TradeTheNews

    TradeTheNews ET Sponsor

    Asian Market Update: Asian equities continue to search for a bottom

    - Asian equities continue to search for a bottom: The Nikkei fell below 17,000 for the first time in nearly two months, as traders continued to sell exporters on JPY strength. Traders continue to look for a bottom in the Nikkei. In today's pre-market trading, foreign brokers placed net sell orders on 13.9M Japan stocks (4th straight session of net sell orders from foreigners), but some say that the selling pressures are unlikely to grow stronger (foreign net selling continues, but that's because buying orders are falling, and not because selling orders are increasing). The Nikkei should be well supported at current levels (Note that 26-week moving average of Nikkei is at 16749.64 vs. current level of 16,774.50). The KOSPI is trading near first support at 1400 as unwinding carry trades are causing liquidity concerns. Hyundai Heavy is providing support to the KOPSI on National Pension Fund buying of its shares. The ASX 200 index is lower by more than 1.35% and is currently testing the 5,700 level. Declines on the ASX 200 index are being driven by shares of BHP on concerns that slowing US and Chinese growth will hurt copper demand.

    - Chinese premier Wen projects 2007 GDP at 8.0% v 10.7% in 2006: Markets should be careful not to overreact to China NDRC's GDP projections. Most of the figures are targets, not forecasts. (Last year, the NDRC aimed for around 8% GDP growth but actual was 10.7%). Comments from Chinese officials were seen as equity supportive and led to gains in Chinese equity markets during the morning session. Chinese equities nosedived at the start of the afternoon on news that Chinese authorities have evidence of relatively serious misuse of bank loans for stock market speculation.

    - Japanese capex spending hint at inventory adjustment: Q4 Japanese capex spending came in much better than expected (Q4 CAPITAL SPENDING: 16.8% V 13.7% expected). Analysts were skeptical about the strength of the reading because the growth pace was inflated by the surprisingly weak result in the July-September quarter. Given recent data out of Japan, many say that it's becoming evident that there could be inventory adjustments in the auto sector and the high-tech sector.

    - Carry trade continues to be the dominating theme in forex markets: Japan's top currency official Watanabe said that he is not really worried of carry trade unwinding. BNP Paribas told their clients that serious carry trade liquidation is yet to set in. Analysts cite the "March effect", as the Japanese fiscal year ends and domestic companies bring funds back home, pushing up the JPY, undermining equity and other risky assets.

    - PBoC governor Zhou comments on CNY: Zhou said that China will consider widening the CNY band, taking the CNY to a new post revaluation high against the USD. Zhou added that a rate hike or increase in reserve ratios are options to deal with Chinese CPI.

    - Tensions between Taiwan and China weigh on Taiwanese equities: Taiwan president Chen Shui-bian made unusually strong pro-independence remarks Sunday in a message apparently aimed at provoking rival China and shoring up his base. After his comments, the Chinese announced an 18% yr/yr increase in military spending, the largest increase in recent years. (Chinese military budget is largely oriented toward any possible conflicts with Taiwan). Declines on the Taiex are being driven by tourism related shares on the risk that Taiwan's ties with China may worsen.

    - Oil continues to trade lower, currently below $61, on expectations of slowing world growth. An OPEC official said that "prices are expected to stabilize between $50 and $60'' a barrel.

    - Asian forex: Despite the JPY rally, Asian currencies are trading lower on the back of weak regional equities. The South Korean Won hit the lowest level against the USD since late October.

    - Gold expected to remain under selling pressure: Funds expected to continue to liquidate heavily long positions to cover losses elsewhere. Gold and silver is likely to remain soft despite solid physical demand and slowing central bank sales.