Week In FX Asia – PBoC Sets Yuan Fix Higher

via MarketPulse:

S&P did not limit its focus to Russia on Friday. The rating agency noted that China shipbuilding, metal, mining and building material companies are vulnerable to defaults.

“A slowing economy and tough operating conditions in some leveraged industries facing cyclical downturns and overcapacity will lead to more missed payments” noted the agency.

However on the positive side, S&P does not see a “Lehman moment” because banks are predominately funded with retail and business deposits. However, it cannot rule out distress and credit losses over the next couple of years. Markets can expect Beijing to continue to support the financial system (especially banks) at least until authorities can administer orderly closings of troubled entities.

Last week’s Q1 GDP report from China was significant, it not only revealed a slowdown in GDP growth to +7.4%, but also indicated that economy wide inflation slumped further towards outright “deflation.” There is a fear that deterioration in Chinese economic data will lead to exporting deflation via unavoidable Chinese currency devaluation.

The RMB is ending the week on a sour note, extending losses despite the PBoC setting the yuan fix stronger for the third consecutive session. At one point during Friday’s intraday session the yuan happened to fall to its lowest level in 16-months. The central parity is set at 6.1576 vs. Thursdays 6.1589 (offshore NDF’s 6.2669). It seems that the PBoC is deliberately setting the rate higher to perhaps give the perception that they are not intently weakening the yuan. Dealers still expect the Yuan to remain weak in Q2 on concerns of China’s slowing economy.

• China’s Big Banks Using use their own Capital Ratios Models


• Japan Leads Asian Equities Lower


• China Watches Obama Japan Visit Closely


• China May Still Lag Japan


• RBNZ Signals More Tightening


• NZD/USD at 0.8630 on hawkish RBNZ


• USD/JPY around 102.50 Before Tokyo CPI


• Obama Reaffirms Japan Commitment During Visit


• BOJ Governor Says Inflation Might Beat Expectations


• BOJ Says 90% of Japanese Banks Increased Risky Assets After QE


• China Opens 80 Projects to Private Investment


• Asian Equities Mixed after China PMI


• Signs China is Stabilizing after PMI Data


• Asian Equities Mixed after China Data


• China PMI Contracts for Fourth Month


• Yen’s Safe Haven Status Under Threat


• Asian Equities Weaker following China’s Lead


• Japan Open for Business


• Japan Could Ask US To Increase Shale Gas Export


• Japan-US To Resume TPP Talks Tuesday


• Japan Trade Deficit Balloons Due to Energy Imports

WEEK AHEAD

* GBP Gross Domestic Product

* EUR German Consumer Price Index

* USD Consumer Confidence

* EUR German Unemployment Rate

* EUR Euro-Zone Consumer Price Index

* CAD Gross Domestic Product

* USD Gross Domestic Product

* USD Federal Open Market Committee Rate Decision

* USD ISM Manufacturing

* USD Change in Non-farm Payrolls

* USD Unemployment Rate

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Asian Stocks Mostly Higher Ahead Of HSBC Chinese PMI

via MarketPulse:

Asian stocks rose, with the regional benchmark index paring last week’s losses, as Japanese markets reopened ahead of a private gauge of factory production in China.

Japan’s Topix (TPX) index gained 1.2 percent after a three-day weekend. Macquarie Group Ltd. gained 3.6 percent as Australia’s biggest investment bank said it expects full-year earnings to rise as much as 45 percent. Yamato Holdings Co., a parcel delivery company, surged 4.9 percent in Tokyo on a report it will form a tie with China Post Group.

The MSCI Asia Pacific Index rose 0.5 percent to 133.43 as of 9:22 a.m. in Tokyo after declining 1.2 percent last week. The MSCI Asia Pacific excluding Japan Index gained 0.1 percent.

A China purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics is projected to signal a third straight month of contraction in the manufacturing sector.

Bloomberg

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Week in FX Asia – Asian Currencies Feel Yellen Effect

via MarketPulse:

The Janet Yellen era at the United States Federal Reserve has officially begun. Her first Federal Open Market Committee was memorable. The actual FOMC statement was what the market has come to expect from central bank communication: Optimistic, but cautious. The expected $10 billion added taper continues the trend set by Bernanke in the December FOMC. What took markets by surprise was Mrs Yellen first post FOMC press conference.

The Fed chair said that the quantitative easing program would could end by fall if the current pace continues to be constant and rates could be higher six months after that. Nowhere in the FOMC statement did that timeline appear. In fact the actual release foresaw low rates for “considerable time”. Yellen surprised by giving a closer date that most analyst expected given other Fed members previous statements.

What begun last summer with another apparent off script comment from Ben Bernanke regarding tapering seems to be moving forward. The era of record low rates around the world seems to be over. Emerging markets were particularly hard-hit by the tapering announcement. This time around the USD has made big gains against all currencies across the board.

The Japanese yen was feeling the pressure of higher demand for the currency which made it strengthen against the USD. This is not beneficial for Prime Minister Abe’s plans to stimulate Japan’s economic growth. A strong yen would make it harder to turn around an export led economy. Following Yellen’s comments the JPY broke through the 102 line which should give a breather to the Bank of Japan. Governor Kuroda is set to speak in London on Saturday and some of his comments will probably discuss the current state of the currency.

The CNY is under pressure from global growth expectations. Major investment banks have downgraded their forecasts of Chinese GDP. Rumours that have started to solidify around a real estate developer bankruptcy has capped the stock markets. The extra 1% added to the CNY trading band to expand it to 2% has helped the currency have extra flexibility that traders have used to reduced their holdings.

The INR dropped a two month low after the Fed hinted rates could go higher as soon as next spring but quickly recovered and is now trading above the week’s open. Global macroeconomic trends have put pressure on the Indian economy as there are still question marks around the political landscape as the country gears up for elections. The INR has showed resilience after last summer’s tapering announcement and has managed to reassure investors as one of the more solid markets in the BRIC and other emerging markets.

• China’s 2014 7.5 Percent GDP Target In Jeopady


• Thai Court Ruled February Elections Unconstitutional


• China Close To Fresh Stimulus if Slowdown Continues


• Asian Stocks Higher But Currencies Remain Bearish


• Declines In China ADRs Send Hong Kong Stocks Into Bear Market


• Japanese Parliament Enacts 2014 Record Budget


• Corporate Japan Wants Better Diplomatic Relationship With China


• CNY Continues Downward Trend


• Yuan Forwards Hit Critical Levels – Risk Major Sell Off


• China’s Debt Issue Unlikely To Hit Lehman Contagion Levels


• Asian Stocks Lower On Yellen’s Rate Hike Guidance


• BoJ Could Increase Stimulus After Sales Tax Rise


• BoJ Governor Kuroda Stays Confident on Reaching 2 Percent Inflation Target


• Japan’s PM Hopes Wage Increases Trickle Down To Smaller Businesses


• Land Prices Rise in Japan’s Major Metropolitan Areas


• CNY Falls to Year Low After Trading Band Extension


• Japanese Deficit Shrinks in February


• Singapore’s 2014 Growth Forecast Cut To 3.8%


• PBOC Not Part Of “Emergency Meeting” On Chinese Developer Collapse


• Chinese Housing Prices Slow Down in February


• Chinese Real Estate Stocks Hit By Developer Default Rumors


• Stagnating Chinese Property Market Increases Default Risks


• Analysts Opinions On Japanese Sales Tax Mixed


• Japanese Government Maintains Upbeat View of Economy

WEEK AHEAD

* GBP Consumer Price Index

* USD Durable Goods Orders

* JPY National Consumer Price Index

* EUR German Consumer Price Index

* GBP UK Gross Domestic Product

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China Puts Priority On Jobs Not Growth

via MarketPulse:

China’s finance minister said Thursday that creating jobs is the government’s priority this year and economic growth below the official target of 7.5 percent might be acceptable.

The economic target announced this week is “about 7.5 percent,” which could mean growth might be lower than that, Lou Jiwei said at a news conference during the annual meeting of China’s legislature.

Wednesday’s announcement that the growth target would be kept at last year’s level raised questions about whether Beijing can achieve it while also carrying out ambitious economic reforms. Some analysts suggested the government might have to cut interest rates or take other steps to shore up growth, temporarily setting back efforts to make the economy more market-oriented.

“If this year’s economic growth isn’t 7.5 percent – it is 7.3 percent or 7.2 percent – does that count as about 7.5 percent? It can count,” Lou said. “Employment is our most important goal.”

The employment target, also announced Wednesday, calls for 10 million new urban jobs this year, and Lou said the economy might be able to create as many as 13 million.

China’s economic growth tumbled to a two-decade low of 7.7 percent last year. The International Monetary Fund and private sector forecasters expect growth of about 7.5 percent this year.

via Mainichi

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China Data Makes Assessment Difficult

via MarketPulse:

China’s services sector regained some momentum in February but its manufacturing sector struggled, separate surveys showed on Monday, with the divergence adding to the difficulty in assessing the strength of the economy at the start of 2014.

Data for the world’s second-largest economy has been mixed, and the Lunar New Year holidays have made it harder to assess momentum. Weak investment and declining manufacturing PMI readings have been countered by surprisingly buoyant exports and bank lending.

The official non-manufacturing Purchasing Managers’ Index (PMI) rose to a three-month high of 55.0 in February, while the final Markit/HSBC manufacturing Purchasing Managers’ Index fell to 48.5, its third straight decline.

Reuters

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Week In FX Asia – Chinese Fortunes Tough to Pin Down

via MarketPulse:

Should we be concerned about the rumors of a pending credit crunch in China? The beauty of a one-party system is its political flexibility. With authorities having the power and ability to strike a balance quickly between reforms to its financial sector and economic expansion, it should allow China to achieve its growth target of +7.6% this year. But the reality is that issues surrounding China’s shadow banking system are not going away any time soon — their growing domestic U.S. debt levels are making the global markets a tad nervous. Analysts are worried about investment dominating gross domestic product growth.

Whenever discussing China, it’s not too much of a surprise to see the nation’s data defy even the most bullish of market expectations. Earlier this week, Chinese imports were up +10% year-over-year against +4% expected, while exports rose +11% against a flat forecast. If anything, numbers like these lead to more questions. How accurate are they and is the market comfortable with them? Only a few should be able to answer that in the affirmative, especially with such a big miss. It seems rather convenient that when the market ever doubts the global economy, Chinese data comes up trumps. Despite this, China’s widened trade surplus and continued capital inflows should show that the yuan remains under pressure to appreciate. Analysts are expecting the RMB to finally break that psychological 6.0 handle later this year. But one must consider the interfering People’s Bank of China (PBoC) before jumping to conclusions.

The yuan closes out the week falling against the dollar after further PBoC intervention. Authorities set the dollar/yuan at 6.1070. Lately, the PBoC has been actively slowing its rising pace especially after the massive dollar sell-off that was initiated at the beginning of the year. It’s noteworthy to mention the yuan has fallen -0.2% since the start of 2014 after gaining +2.9% last year.

• China’s Producer Prices Fall Again


• Asian Equities Mixed after China Inflation Data


• Chinese Inflation Remained Stable in January


• China’s Inflation Remains Benign


• Asian Stocks Recovering Yesterday’s Losses


• Japan’s Q4 Growth Boosted By Pre-Tax-Hike Shopping


• China Limits Bank’s Off Balance Sheet Investments


• Japan Machine Orders Fall 15.7 Percent in December


• Australian Unemployment Soars to 6%


• Malaysia Budget Deficit Narrowing


• Singapore Aiming To Position Itself as Region’s Legal Hub


• Thailand To End Rice Scheme


• BoJ Kuroda Says He is Ready to Adjust Policy if Needed


• IMF Official Says BoJ Does Not Need to Ease Further


• Singapore Faces Real Estate Bubble Challenge


• China’s Trade Data Eases Concerns


• Chinese Banks Face Competitions From Private Funds


• Yellen Agrees BoJ Stimulus Needed


• Japan’s Current Account Surplus Decline Could Signal Trouble


• China Missing out on Billions in Lost Taxes


• Abenomics Should be Widely Accepted

WEEK AHEAD

* JPY Gross Domestic Product

* GBP Consumer Price Index

* EUR German ZEW Survey Economic Sentiment

* USD Consumer Price Index

* CAD Consumer Price Index

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