Asian Market Update by TradeTheNews staff

Discussion in 'Trading' started by TradeTheNews, Mar 5, 2007.

  1. TradeTheNews

    TradeTheNews ET Sponsor

    Asian Market Update: Asia shows renewed appetite for risk as yen is sold

    - Asian equities finally rebound after recent losses: The Nikkei 225 is higher by more than 1.3% after falling by more than 3.0% during the prior session, driven by gains in exporters and steel related shares. Gains in exporters were driven by yen weakness, while steel-related shares gained on consolidation speculation. The Nikkei 225 is currently holding above the 16,800 level. South Korea's Kospi is higher by more than 1.2%, led by shares of Posco Steel, along with financials and exporters. The ASX 200 index is higher by more than 1.3% and gains are being driven by metals related shares. Taiwan's Taiex index is higher by more than 0.55%, as gains are being driven by shares of Taiwan Semiconductor. The Hang Seng is higher by more than 1.0%, following last session's more than 3.5% decline (the biggest drop in 5yrs). Gains on the Hang Seng are being driven by property related shares and financial shares.

    - Outlook for the Nikkei: The Nikkei may see some recovery in the near term as the 8.6% retreat in last five sessions is close to correction levels commonly seen every year. A further rebound in the Nikkei may further improve if TSE data due tomorrow show that high level of long arbitrage positions have significantly declined.

    - Foreign exchange and fixed income: The rise in the Nikkei is leading to aggressive yen selling, and high yielding currencies are gaining sharply as investors renew their appetite for risk. The yen had been bought as declines in global stocks suggested investors were wary of riskier assets. This logic is now working in reverse. Treasuries have benefited from the flight to quality, so a reversal is now expected over the coming sessions. The AUD/USD longer-term bullish outcome is still possible after 0.7698 held as a support level. The CAD rallied against the USD as oil prices edged higher (oil has been trading down on the recent equity weakness, and the expected equity rebound is likely to push oil higher as fundamentals support oil prices at current levels, boosting CAD)

    - China's top banking regulator has denied his agency had launched special investigations of possible illegal bank loans flowing into the Chinese stock market (Chinese state press)

    - US treasury secretary Paulson visits Japan, does not discuss the yen: Japanese economics minister Ota said that he did not discuss the yen or stocks with Paulson, and Japanese finance minister Omi said that all parties agree that the US and Japanese economies are moving smoothly.

    - Asian forex: The Korean Won climbed to a two week high against the USD on demand for Korean equities and technical rebound. The Thai baht showed little reaction to press speculation that the pro-growth candidate Chalongphob Sussangkarn has accepted the position as new Thai Finance Minister. It seems likely that a Thai rate cut will materialized after the central bank lowered its CPI forecast (2007 inflation projected at 2.5%-3.0% v prior forecast of 3.0%-3.5%).

    - Some suggest JPY rally may already be running out of steam: Traders note that despite the JPY rally over the last two weeks, Japanese margin traders have mostly held onto their long positions in cross/yen or bought on dips. In addition, one of Japan's top online brokers (Gaitame.com) data shows that its traders have been steady cross/yen during the JPY rally over the past two weeks

    - Commodities: Crude oil rebounded in Asian trading to above the $60 level, tracking the rebound in other asset classes, while spot gold is higher by more than 0.80% and above the $644 level. Shanghai copper rebounded to trade higher by more than 1%, tracking earlier gains in the LME copper contract.