26 Mar 2014
Asia EM Express: Asian stocks rise on hopes of fresh ECB and PboC stimulus
FXStreet (Łódź) - Asian stocks performed well on Wednesday despite the continuing woes over China's economic slowdown, as hope for new stimulus measures in China and the Eurozone surged.
Hong Kong's Hang Seng was up 1%, Singapore's Straits Times Index grew 1.4 %, South Korea's KOSPI Composite climbed 0.75% and Taiwan's Weighted Index added 0.6%
On Tuesday there were reports of a small bank run in China's eastern Sheyang county, as depositors rushed to pull their money out of Jiangsu Sheyang Rural Commercial Bank, which was rumored to be on the brink of collapse. This is another sign of increasing tensions in the sector but, as Simon Rabinovitch points out in FT, it has been “a localised event, contained to one farming county where a series of lightly regulated credit co-operatives and loan guarantee companies failed earlier this year after mismanaging funds.”
Local authorities stepped in on Wednesday with declarations that the depositor's savings would be safe and protected by the PboC.
As Michael Every from Rabobank remarks, the recent news from China including “ex-PBOC official saying that there would be a 'mini crisis' in China this year as defaults occurred (while assuring that all was well and the economy would rebound in H2); and a World Bank report on China’s urbanization suggesting that it would not necessarily be as big a growth driver ahead as some have presumed, further volatility in both CNY (and AUD) looks likely.”
Economic data
Hong Kong's trade balance declined more than expected in February, the Census and Statistics Department informed on Tuesday. The trade deficit widened to HKD -53.7B, from HKD -20.0B, considerably further than the projected HKD -39.0B.
On Wednesday the Singapore Department of Statistics released Industrial Production data for February. On a monthly basis industrial output jumped 6.2%, compared with the 7.8% fall in January and above forecasts of +4%. Year-on-year industrial production increased 12.8%, the most since December 2011 and up from 4.4%, almost in line with projections of 12.9%.
Tim Condon, Head of Research-Asia at ING comments: “Our view that IP claws back to its 4Q13 average level in March implies 1Q14 growth of 5.9%, down from 7.0% in 4Q13. GDP growth is highly correlated with IP growth so slower IP growth means a slowdown in GDP growth from 4Q13’s 5.5%. We revise our forecast for 1Q13 GDP growth to 5.3% from 6.8%.”
Technicals
The Chinese yuan climbed as high as 6.17 intra-day in very choppy trade, before falling back to the 6.20 level again.
The daily USD/CNY FXStreet Trend Index was strongly bullish, and the OB/OS Index neutral. RSI was neutral at 68.9352 at the last close. Daily 2-StDev Volatility Bandwidth was expanding at 338 pips, with ATR (14) expanding at 190 pips. The 1D 200 SMA was at 6.1058, while the 1D 20 EMA at 6.1624.
The Thai baht dropped slightly to 32.55. The daily USD/THB FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was neutral at 57.0687 at the last close.
Hong Kong's Hang Seng was up 1%, Singapore's Straits Times Index grew 1.4 %, South Korea's KOSPI Composite climbed 0.75% and Taiwan's Weighted Index added 0.6%
On Tuesday there were reports of a small bank run in China's eastern Sheyang county, as depositors rushed to pull their money out of Jiangsu Sheyang Rural Commercial Bank, which was rumored to be on the brink of collapse. This is another sign of increasing tensions in the sector but, as Simon Rabinovitch points out in FT, it has been “a localised event, contained to one farming county where a series of lightly regulated credit co-operatives and loan guarantee companies failed earlier this year after mismanaging funds.”
Local authorities stepped in on Wednesday with declarations that the depositor's savings would be safe and protected by the PboC.
As Michael Every from Rabobank remarks, the recent news from China including “ex-PBOC official saying that there would be a 'mini crisis' in China this year as defaults occurred (while assuring that all was well and the economy would rebound in H2); and a World Bank report on China’s urbanization suggesting that it would not necessarily be as big a growth driver ahead as some have presumed, further volatility in both CNY (and AUD) looks likely.”
Economic data
Hong Kong's trade balance declined more than expected in February, the Census and Statistics Department informed on Tuesday. The trade deficit widened to HKD -53.7B, from HKD -20.0B, considerably further than the projected HKD -39.0B.
On Wednesday the Singapore Department of Statistics released Industrial Production data for February. On a monthly basis industrial output jumped 6.2%, compared with the 7.8% fall in January and above forecasts of +4%. Year-on-year industrial production increased 12.8%, the most since December 2011 and up from 4.4%, almost in line with projections of 12.9%.
Tim Condon, Head of Research-Asia at ING comments: “Our view that IP claws back to its 4Q13 average level in March implies 1Q14 growth of 5.9%, down from 7.0% in 4Q13. GDP growth is highly correlated with IP growth so slower IP growth means a slowdown in GDP growth from 4Q13’s 5.5%. We revise our forecast for 1Q13 GDP growth to 5.3% from 6.8%.”
Technicals
The Chinese yuan climbed as high as 6.17 intra-day in very choppy trade, before falling back to the 6.20 level again.
The daily USD/CNY FXStreet Trend Index was strongly bullish, and the OB/OS Index neutral. RSI was neutral at 68.9352 at the last close. Daily 2-StDev Volatility Bandwidth was expanding at 338 pips, with ATR (14) expanding at 190 pips. The 1D 200 SMA was at 6.1058, while the 1D 20 EMA at 6.1624.
The Thai baht dropped slightly to 32.55. The daily USD/THB FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was neutral at 57.0687 at the last close.