14 Mar 2014
Asia EM Express: Central bank decisions and Chinese data in focus
FXStreet (Łódź) - Growing Chinese woes over recent weak economic data and Premier Li Keqiang's comments suggesting that Beijing would tolerate a slowdown this year in order to concentrate more on reforms to support longer-term growth, continued dominating the market sentiment on Thursday, weighing on iron ore, copper and coal prices.
Annette Beacher & Prash Newnaha TD Securities point out that “the copper story has received a lot of attention, not only due to the weakness in China but also due to its inclusiveness in collateral financing deals that appear to be in jeopardy and adding pressure to the price decline."
“A weakening CNY has had a negative effect on profitability of these deals and the prospect of copper re-entering the market has increased potential supply worries to the already concerning demand picture.”
Also MNI reported overnight that a senior Chinese official admitted that there was a possibility that Chinese growth might come in below target in the first quarter of the year, but that "there's no need to panic" and that a 7% annual expansion would be sufficient for the government to boost the labor market as planned. He also rejected the possibility of the PBOC lowering the reserve-requirement ratio anytime soon.
Furthermore, on Friday Chinese bank stocks felt pressure after another company, a private steel mill, Haixin Steel, defaulted on its debt payments.
Economic data
On Friday Singapore released it's fourth quarter unemployment rate data which remained at 1.8%, against forecasts of climbing to 2%. Singapore's Retail Sales rose by 0.6% month-on-month in January, down from the 1.5% increase the previous month.
Indian Wholesale Price Index, published by the Indian Ministry of Commerce & Industry, grew 4.68% in February, following a 5.05% rise in January and below consensus of 4.99%.
Technicals
Sean Callow from Westpac Institutional Bank comments that Asian currency moves during the US session were choppy “including some short-covering on USD/CNY NDFs and USD/CNH, the latter rising from 6.1340 to 6.1460. One month USD/KRW NDFs traded 1069-73. The 10 year T-note rallied from 2.75% to 2.645%."
Another Westpac Institutional Bank analys Jonathan Cavenagh added that “TWD enjoys the second strongest correlation with CNH movements in EM Asia (SGD has the strongest) and there is of course potential spill over effects from weaker Chinese data into Taiwan (although this isn't evident at this stage).”
“At this stage China fears are dominating sentiment and if USD/CNY/CNH continues to press higher then there is a risk USD/TWD can push back towards 30.40 in terms of the 1 month NDF and potentially higher. Hence we felt it was prudent to exit the trade at these levels. We still like selling rallies in USD/TWD but suspect better levels to sell will present themselves over the coming few weeks.”
Annette Beacher & Prash Newnaha TD Securities point out that “the copper story has received a lot of attention, not only due to the weakness in China but also due to its inclusiveness in collateral financing deals that appear to be in jeopardy and adding pressure to the price decline."
“A weakening CNY has had a negative effect on profitability of these deals and the prospect of copper re-entering the market has increased potential supply worries to the already concerning demand picture.”
Also MNI reported overnight that a senior Chinese official admitted that there was a possibility that Chinese growth might come in below target in the first quarter of the year, but that "there's no need to panic" and that a 7% annual expansion would be sufficient for the government to boost the labor market as planned. He also rejected the possibility of the PBOC lowering the reserve-requirement ratio anytime soon.
Furthermore, on Friday Chinese bank stocks felt pressure after another company, a private steel mill, Haixin Steel, defaulted on its debt payments.
Economic data
On Friday Singapore released it's fourth quarter unemployment rate data which remained at 1.8%, against forecasts of climbing to 2%. Singapore's Retail Sales rose by 0.6% month-on-month in January, down from the 1.5% increase the previous month.
Indian Wholesale Price Index, published by the Indian Ministry of Commerce & Industry, grew 4.68% in February, following a 5.05% rise in January and below consensus of 4.99%.
Technicals
Sean Callow from Westpac Institutional Bank comments that Asian currency moves during the US session were choppy “including some short-covering on USD/CNY NDFs and USD/CNH, the latter rising from 6.1340 to 6.1460. One month USD/KRW NDFs traded 1069-73. The 10 year T-note rallied from 2.75% to 2.645%."
Another Westpac Institutional Bank analys Jonathan Cavenagh added that “TWD enjoys the second strongest correlation with CNH movements in EM Asia (SGD has the strongest) and there is of course potential spill over effects from weaker Chinese data into Taiwan (although this isn't evident at this stage).”
“At this stage China fears are dominating sentiment and if USD/CNY/CNH continues to press higher then there is a risk USD/TWD can push back towards 30.40 in terms of the 1 month NDF and potentially higher. Hence we felt it was prudent to exit the trade at these levels. We still like selling rallies in USD/TWD but suspect better levels to sell will present themselves over the coming few weeks.”