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Will be posting all of China and Japanese session weaps

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China & Japan Session Wrap - 23/11/16

Chinese Markets
Peoples Bank of China (PBOC) sets USD/CNY at 6.8904. Tuesday at 6.8779. Yuan set weaker today by China's central bank.

• MNI China Business Sentiment Indicator Nov - 53.1. Previous 52.2
  • There were higher new orders and output on the month
  • Recent fall in the Yuan underpinned sentiment
  • MNI Comments;
    • Business conditions will likely continue to hold up
    • Key activity inducators had directed to a significant improvement during the month
    • Production indicator is rising to a thirteen-month high of 58.0
    • Companies are set to increase activity in the upcoming 3 months

• MNI further continued with a front page piece in China's Economic information Daily that as the USD appreciates, there is capital outflow from countries
  • The strong dollar should be watched closely
  • U.S. dollar will appreciate once the FED hikes interest rates
  • Once interest rates are hiked, there will be capital outflows from many countries causing political and economic crisis
  • In effect, commodity prices will decrease thus meaning that countries wll focus on resource exports meaning there will be challanges ahead

PBOC's deputy head Zhang Xin in Shanghai has more to comment. He says that China's central bank will crack down on capital flows. They will closely monitor abnormal capital flows and push towards financial reforms in Shanghai's free trade zone. PBOC are to increase on anti-money laundering and "under the current circumstances, will strengthen crackdowns on foregin currency flight and step up monitoring abnormal capital flows".

• PBOC continues to inject;
  • 100B Yuan in 7-day reverse repos
  • 80B Yuan in 14-day revere repos
  • 10B Yuan in 28-day reverse repos

Japanese Markets

• Labour Thanksgiving Day

Japanese markets are closed today for a labour thanksgiving holiday.

A Bank of Japan (BOJ) case study called 'Central Banks and Stock Markets', a piece from Franklin Templeton Investments looks at how "banks appear to be influencing the movement of not only bond markets but also equity markets". With its key point on the BOJ, "it seems that now the emphasis will be the weakening yen as well as propping up stock prices". For the full article, click here

Regional Equities

• ASX 200 – 5,484.40 up +1.31%
• HK – 22,676.69 down -0.01%
• Nikkei 225 – 18,162.94 up +0.31%
• Shanghai – 3,241.14 down -0.22%

 

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China & Japan Session Wrap – 24th November 2016

Chinese Markets
Peoples Bank of China (PBOC) sets USD/CNY at 6.8905. Tuesday at 6.8904. Yuan set much weaker today by China’s central bank.

• China’s commerce ministry spokesman, Shen Danyang commenting on the Trans-Pacific Partnership (TPP)
  • China will push for the China-backed Regional Comprehensive Economic Partnership (RCEP) negotiations to be sped up with full respect for the Association of Southeast Asian Nations (ASEA)’s core status in the deal
  • TPP was “more a political weapon than a real business deal”
  • China will continue to open its markets irrespective of the TPP
  • China will continue to closely cooperate with the WTO members. We look to go forward and strengthen multilateral trade systems to create a more free environment for international trade
  • “So long as it is meant to be genuine real trade, China is happy to write the rules with all its partners,” it said
  • With regards to the Yuan, “There is no necessary link between a depreciating yuan and exports. As the yuan depreciates there are advantages and disadvantages for exports”

• PBOC continues to inject;
  • 60B Yuan in 7-day reverse repos
  • 45B Yuan in 14-day revere repos
  • 10B Yuan in 28-day reverse repos

Japanese Markets

• Manufacturing PMI Nov – +51.1% vs. +51.7% exp. Previous +51.4%
• Leading Index – +103 vs. +100.5 exp. Previous +100.5

The manufacturing conditions have continued to improve mid way through the Q3 of 2016. We see that output has increased for the 4th month, due to a boost in new orders. The data suggests that foreign demand was the key driver in the expansion of total sales. IHS Markit economist Andy Bronbill says “Since December 2015, inflation cost has linked to firms increase in raw material prices, primarily by fuel related items.”

• Bloomberg’s article from Société Générale
  • CNY will weaken against the USD so long as dollar stays strong
  • To keep order in the CNY so that it doesn’t appreciate against its basket of goods
  • Forecast USD/CNY to be 7.20 year end 2017
• Japanese Ministry of Finance, Masatsugu Asakawa on Japan’s FX policy
  • Japan’s FX Policy will not change in regards to newly presidential-elect Donald Trump

Regional Equities

• ASX 200 – 5,485.10 up +0.01%
• HK – 22,608.49 down -0.30%
• Nikkei 225 – 18,333.41 up +0.94%
• Shanghai – 3,241.74 down +0.02%

 

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China & Japan Session Wrap – 28th November 2016

Chinese Markets

Peoples Bank of China (PBOC) sets USD/CNY at 6.9042. Friday at 6.9168.

Despite Yuan’s decline against the US dollar, it has appreciated against some major currencies including USD/CNY. The economy is growing steadily with its fiscal and monetary policies. However, China looks to open the door to more fiscal stimulus. The front page of the China Securities journal said that the fiscal debt is to rise from 3.0% to 3.5% of GDP.

Chinese industrial profits in October rose 9.8 percent to 616.1 billion yuan ($89.1 billion), the National Bureau of Statistics (NBS) said in a statement on Sunday. Profits in September rose 7.7 percent.

Industrial profits rose 8.6 percent in the first 10 months from the same period a year earlier, similar to an 8.4 percent growth rate in the first nine months of the year.

Japanese Markets

Japans PM Abe has said he wants to keep pushing for TPP (Trans-Pacific Partnership) during a scheduled speech in parliament on the TPP. Free trade stands at a crossroads.

USD/JPY seems to be the weakest pair in the trading day. However the JPY still yet to remains to be the strongest currency. Helping the dollar fall was, Gold lower by -$9.00 (down to -$14.00 at the low). Spot prices are ending unchanged (down at -$1.00 on the low) whilst US 10 year bond yields had a day range of 2.3106 – 2.3482, currently at 2.3374.

Regional Equities

• ASX 200 – 5,464.40 down -0.79%
• HK – 22,883.20 up +0.70%
• Nikkei 225 – 18,356.89 down -0.13%
• Shanghai – 3,277.00 up +0.46%

 

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China & Japan Session Wrap – 28th November 2016

Chinese Markets
Peoples Bank of China (PBOC) sets USD/CNY at 6.8889. Monday at 6.9042.

• China forex regulators are to tighten controls in order to step on capital outflows, full report by Reuters
  • State Administration of Foreign Exchange (SAFE) has begun vetting transfers abroad worth $5 million or more
  • Step up forces for outbound deals from capital outflows through both legal and illegal channels has added pressure on the Yuan
  • New rules would apply to transfers abroad under the capital account for transactions such as portfolio or foreign direct investment
  • Chinese outbound investment deals have totalled $530.9B in the first nine months of 2016, surpassing 2015's record
  • Forex transfers worth $50 million or more needed to be reported to SAFE. Now down to $5 million, which covers both foreign currency and yuan.
  • Zhong Lun Law Firm's Luke Zhang commented that "The new rules will have a very big impact on outbound deals", who expects the number of deals to go down "quite a lot"

• Official Chinese official: China's 'green' sector seen growing to 3 percent of GDP by 2020
  • China expects value of its energy saving and environmental industry to rise from 4.5 trillion yuan ($653B) last year to more than 10 trillion yuan by 2020
  • Chinese government approved a "five-year plan" for the environment earlier this month, vowing to make significant cuts in total emissions and 'bring environmental risks under effective control' by 2020
  • If so, GDP will be lifted from 2.1% to 3%
  • Analysts at Everbright Securities (one of the largest securities brokerage companies in China), total investment in pollution prevention is expected to reach 8-10 trillion yuan over the 2016-2020 period. Spending standing at 4.3 trillion yuan over the previous five years amounting to 1.45 percent of GDP

• PBOC continues to inject;
  • 90B Yuan in 7-day reverse repos
  • 70B Yuan in 14-day revere repos
  • 30B Yuan in 28-day reverse repos

Japanese Markets

• Household Spending (MoM) Oct - -1.0% vs. +0.1% exp. Previous +2.8%
• Household Spending (YoY) Oct - -0.4% vs. -0.6% exp. Previous -2.1%
• Jobs/Applications Ratio Oct - +1.40 vs. 1.39 exp. Previous 1.38
• Unemployment Rate Oct - +3.0% vs. +3.0% exp. Previous +3.0%
• Retail Sales (YoY) Oct - -0.1% vs. -1.2% exp. Previous -1.9%

Japan retail sales were very good. Retail sales (MoM) recorded the highest gain since May 2014. Data showed a declined in household spending and retail sales have restricted slightly since August. However, August data was impacted by poor weather conditions. The tight job market has not resulted in significant wage gains. Earlier the unemployment rate stayed steady at +3% while job/applications ratio increased to +1.40% to the highest level recorded since August 1991.

Labor force participation rate has slightly decreased by -0.1% from last month. Change in unemployed at -50K, change in employed at +60K, Change in labour force +40K, Change not in labour force at -20K. Overall the data is in line with the expectations.

Regional Equities

• ASX 200 – 5,457.50 down -0.13%
• HK – 22,737.07 down -0.41%
• Nikkei 225 – 18,307.04 down -0.27%
• Shanghai – 3,282.92 up +0.18%

 

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China & Japan Session Wrap – 28th November 2016

Chinese Markets
Peoples Bank of China (PBOC) sets USD/CNY at 6.8865. Monday at 6.8889.

Moody’s have some comments on China’s property market. Saying that China property sales to slow, price growth to decelerate in 2017. “The latest round of measures will likely also moderate property price growth in major cities where prices have been growing particularly fast”. “However, policies targeted at clearing inventory in lower-tier cities with high inventory levels will remain supportive of property prices. Spillover demand from tier 1 and 2 cities with purchase restrictions to nearby satellite cities will also benefit developers operating in those cities”

Also, it was apparent that CNY was stronger than the USD for the third day in a row. Chinese state banks seem to be selling USD/CNY for the third day in a row.

• PBOC continues to inject;
  • 140B Yuan in 7-day reverse repos
  • 80B Yuan in 14-day revere repos
  • 10B Yuan in 28-day reverse repos

Japanese Markets

• Industrial Production (MoM) Oct – +0.1% vs. -0.1% exp. Previous +0.6%
• Industrial Production forecast 1m ahead (MoM) Oct – 4.5%. Previous +1.1%
• Industrial Production 2m ahead (MoM) Oct – -0.6%. Previous +2.1%
• Construction Orders – +15.2%. Previous 16.3%
• Housing Starts – +13.7% vs. +11.2% exp. Previous +10.0%

Little response from the Yen on the data. With USD/JPY trading at 112.97.

Regional Equities

• ASX 200 – 5,440.50 down -0.31%
• HK – 22,879.77 up +0.23%
• Nikkei 225 – 18,308.48 up +0.01%
• Shanghai – 3,250.03 down -1.00%

 

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China & Japan Session Wrap – 1st December 2016

Chinese Markets
Peoples Bank of China (PBOC) sets USD/CNY at 6.8958. Tuesday at 6.8865. Monday, Tuesday and Wednesday meant the PBOC revalued the CBY against the USD and follows a further devaluation.

• Manufacturing PMI Nov – +51.7 vs. +51.0 exp. Previous 51.2%
• Non-Manufacturing PMI Nov – +54.7. Previous +54.0
• Caixin Manufacturing PMI Nov – +50.9 vs. +50.8 exp. Previous +51.2

Manufacturing PMI looking good, higher than the median expectation which was at 51.0. Also beating October’s 51.2 result. There was also some strengthening on the satellite manufacturing index and the market news international survey raising the probability of an upside rise.

The Caixin Manufacturing PMI survey was just +0.1 points better than expected, with a slight miss of 0.3 points from October. Output and new orders both expanded at weaker rates than in October with firms cutting their workforce numbers at a much slower pace in the recent 18 months. Input costs and output charges have both risen at the fastest rates since early 2011.

• China tightening controls on gold imports
  • Importing gold into China has become more difficult. China is looking to trying to crack down on capital outflows within the country as we spoke a couple weeks ago with the new limits in FX
  • Parts of the government are attempting to stop capital leaving the country
  • Banks have also dollar quotes, which some is used for buying gold

PBOC vs. FX.
Further to capital outflow controls. PBOC guidelines will require Chinese firms lending yuan overseas to register with the FX regulator, State Administration of Foreign Exchange (SAFE). The guidelines will only allow Chinese firms who have been established for at least one year to make overseas yuan loans.

• PBOC continues to inject;
  • 100B Yuan in 7-day reverse repos
  • 50B Yuan in 14-day revere repos
  • 20B Yuan in 28-day reverse repos

Japanese Markets

• Capital Spending (YoY) Q3 – -1.3% vs. -0.4% exp. Previous 3.1%
• Foreign Bonds Buying – +112.3B. Previous -260.4B
• Foreign Investments in Japanese Stocks – +330.5B. Previous +461.5B
• Manufacturing PMI Nov – +51.3 vs. +51.1. Previous +51.1
• 10-Year JGB Auction – +0.032%. Previous -0.056%

Japans manufacturing PMI was 0.2 points higher than expected, good results with just a 0.1 point miss on October. New orders increased at an accelerated rate since January and production expanding for the fourth consecutive month with input prices broadly stable.

Japans capital spending had decreased, with it declining for the first time since Q1 of 2013. USDJPY had been moving higher, currently at 114.26

Regional Equities

• ASX 200 – 5,500.20 up +1.10%
• HK – 22,878.23 up +0.23%
• Nikkei 225 – 18,513.12 up +1.12%
• Shanghai – 3,273.31 up +0.72%

 

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China & Japan Session Wrap – 5th December 2016

Chinese Markets
Peoples Bank of China (PBOC) sets USD/CNY at 6.8870. Friday at 6.8794.

• China Caixin Services PMI - +53.1. Previous +52.4
  • Services PMI are higher on the month whilst the composite PMI stands at 52.9 (previous +52.9, unchanged at a 43-month high)
  • There was stronger services activity growth which contrasts slowdown in the manufacturing output expansion
  • Composite employment is looking stable
  • There was a significant increase in total input costs and output charges since start of 2011

Meanwhile an interesting one, Trump attacking China on Twitter on Sunday saying that, "Did China ask us if it was OK to devalue their currency (making it hard for out companies to compete), heavily tax our products going into their country (the U.S. doesn't tax them) or to build a massive military complex in the middle of the South China Sea? I don't think so!". He doesn't seem to really care about China at the moment.

• PBOC continues to inject;
  • 70B Yuan in 7-day reverse repos
  • 20B Yuan in 14-day revere repos
  • 10B Yuan in 28-day reverse repos

Japanese Markets

• BOJ Governor Kuroda Speaks
• Household Confidence (Nov) - +40.9 vs. +43.8 exp. Previous +42.3
• Nikkei Services PMI - +51.8. Previous +50.5
  • Composite - +52.0. Previous +51.3

Japanese PMI looking extremely positive. Output from Japanese services showed a significant increase since January. New orders at service based companies have risen from October's eight-month high. Whilst input price inflation in the services sector has accelerated to a near two-year high


Regional Equities

• ASX 200 – 5,400.40 down -0.80%
• HK – 22,505.55 down -0.26%
• Nikkei 225 – 18,274.99 down -0.82%
• Shanghai – 3,204.71 down +1.21%

All down on the trading session.

 

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China Wrap – 9th December 2016

Peoples Bank of China (PBOC) sets USD/CNY at 6.8972. Thursday at 6.8731.

Chinese inflation data very positive

• CPI (YoY) Nov: 2.3% vs. 2.2% exp. Previous 2.1%
• CPI (MoM) Nov: 0.1% vs. 0.1% exp. Previous -0.1%
• PPI (YoY) Nov: 3.3% vs. 2.2% exp. Previous 1.2%

CPI was a good beat, up 0.1 percent and the main winner is PPI up 1.1 percent. PPI measures business inflation, and this number is the highest it has been since November 2011. The reflection of this high percentage increase will be from the impact of higher commodity prices and also from the increasing demand from the Chinese economy. Overall very good.

Chief economist at Australia and New Zealand banking group Raymond Yeung had some say on the result, “China has entered a new inflationary cycle”… “The next move of the PBOC should be an interest rate hike, not a cut”

• Meanwhile PBOC continues to inject;
  • 50B Yuan in 7-day reverse repos
  • 20B Yuan in 14-day revere repos
  • 30B Yuan in 28-day reverse repos

Japan Wrap – 9th December 2016
Positive Manufacturing Index

• BSI Large Manufacturing Conditions Q4: 7.5 vs. 3.4. Previous 2.9 (July)

The Business Sentiment Index (BSI) survey is conducted quarterly by the Ministry of Finance and the Economic and Social Research Institute (by Japan’s cabinet office). The survey measures the percentage of firms that expect business environment to improve from the previous quarter minus the percentage that it is expected to worsen.

January to March the BSI index seen +4.6 (seen +5.3 for the previous survey).

Not generally a market mover, but a good sentiment to see business confidence.

3rd Supplemental Budget
Japans finance minister Aso is to go to the cabinet to approve the 3rd supplemental budget on the 22nd December 2016. By doing so, the spousal tax deduction income limit will be raised to 1.5mln yen as well as women can work without a limit on their hours.

What is the spousal tax?

• More than 75 percent of part-time workers are women, and married part-time workers are eligible for tax, social welfare and pension benefits if their annual salary is under certain limits. When an increase in hourly pay risk pushing people over the threshold, a logical response is to cut work hours.
• Full-time workers don’t have the same disincentives to keep their salaries low, and they’ve been increasing the amount they work

Further Indicators

• M2 Money Stock (YoY): 4.0% vs. 3.7%. Previous 3.7%

Meanwhile USDJPY has been keeping steady. Currently trading at 114.45

 

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ASIAN SESSION WRAP CHINA – 19TH DECEMBER 2016


Peoples Bank of China (PBOC) sets USD/CNY at 6.9312. Friday at 6.9508.



HOME PRICES INCREASE
Chinese homes in November increased by 12.6% y/y, up 0.3% from October (12.3%).

• All China November new home prices: +12.6 % y/y (Oct +12.3 %). Reuters calculation
• Beijing November new home prices: +26.4 % y/y (Oct +27.5 %)
• Shanghai new home prices: +29.0 % y/y (Oct +31.1 %)
• Shenzhen new home prices: +27.9 % y/y (Oct +31.7 %)
• Shenzhen new home prices: -0.3 pct m/m (Oct -0.5 %)
• Shanghai new home prices: -0.1 pct m/m (Oct +0.5 %)
• Beijing new home prices: unchanged m/m (Oct +0.5 %)

CHINA ACCUSES US OF “HYPING UP” THE RETURN OF THE US DRONE INCIDENT
China had captured a US underwater drone in international waters on Thursday. US President-elect Donald Trump accused the Chinese of “stealing”. A quote from twitter from the President-elect, “We should tell China that we don’t want the drone they stole back – let them keep it!”. Latest developments show that China is to return the drone back to the US.


MEANWHILE PBOC CONTINUES TO INJECT;

• 95B Yuan in 7-day reverse repos
• 30B Yuan in 14-day revere repos
• 55B Yuan in 28-day reverse repos

ASIAN SESSION WRAP Japan – 19TH DECEMBER 2016


TRADE BALANCE

• Trade Balance Nov: 153B vs. 227B exp. Previous 496B
• Exports: (YoY) Nov: -0.4% vs. -2.0% exp. Previous -10.3%
• Imports (YoY) Nov: -8.8% vs. -12.6% exp. Previous -16.5%
• Adjusted Trade Balance: 0.54T vs. 0.59T exp. Previous 0.47T

Exports shows negative, but a beat on expectations. However, this is the 14th consecutive y/y drop since Sep 2015. Exports to China (November) was +4.4% y/y, Asia at +3.4% and US -1.8%. With exports the China the first rise since February.

Imports is negative also, with a beat on expectations. Also the 23rd consecutive y/y fall.

“Exports show signs of recovery”

Reuters with the headline that “Japan November exports show signs of recovery as yen tumbles”

Japanese exports in November fell at a slower pace. There showed a rapid decline in the yen and a recovery overseas had boosted shipment demand. Data is likely to offer encouragement to the Bank of Japan (BOJ) of which is looking like it upgrade its economic outlook at the December 20 meeting. Officials are becoming more confident that global trade is emerging.

Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc. in Tokyo says had some comments before the report was released, “Overseas demand has been rebounding, along with a pick-up in the manufacturing sector globally. The prospects for exports look good as the weakening yen will help.”


USDJPY had slid back, hitting a US session low at 117.40. Currently rebounding at 117.50

 

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ASIAN SESSION WRAP CHINA – 20TH DECEMBER 2016
Peoples Bank of China (PBOC) sets USD/CNY at 6.9468. Monday at 6.9312.

Not much important news from China today other than a much weaker Yuan.

MEANWHILE PBOC CONTINUES TO INJECT

• 155B Yuan in 7-day reverse repos
• 65B Yuan in 14-day revere repos
• 30B Yuan in 28-day reverse repos

ASIAN EQUITIES TODAY – 19TH DECEMBER 2016

• ASX 200 – 5,591.10 up +0.52%
• HK – 21,729.06 down -0.47%
• Nikkei 225 – 19,494.53 up +0.53%
• Shanghai – 3,102.88 down -0.49%

 

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ASIAN SESSION WRAP CHINA – 21st DECEMBER 2016
Peoples Bank of China (PBOC) sets USD/CNY at 6.9489. Tuesday at 6.9468.

Yuan continues to depreciate.

PBOC CONTINUES TO INJECT

• 110B Yuan in 7-day reverse repos
• 70B Yuan in 14-day revere repos
• 30B Yuan in 28-day reverse repos

PBOC has been trying to sort out the Yuan depreciation and capital outflows in China. While injecting funds into the offshore money market, there has been a tightness of yuan funding offshore – i.e. borrowing costs for CNH (offshore Yuan) have been higher than usual with yesterday;s overnight CNH trading at 10.8%. Making it expensive to short the CNH.

You can see the CNH rate through Bloomberg here

CHINA TO RELAX RESTRICTIONS ON EQUITY INDEX

• Restrictions will not be relaxed at the beginning
• Step by step as market conditions allow
• Higher positions and lower margin requirement will be allowed
• Lack of liquidity is the biggest problem in the stock-index futures market – blaming tightening measures that have been implemented by authorities after the stock market rage last year

ASIAN EQUITIES TODAY

• ASX 200 – 5,613.50 up +0.40%
• HK – 21,809.80 up =0.37%
• Nikkei 225 – 19,444.49 down -0.26%
• Shanghai – 3,137.43 up +1.11%

 

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ASIAN SESSION WRAP CHINA – 26th DECEMBER 2016

Peoples Bank of China (PBOC) sets USD/CNY at 6.9459. Friday at 6.9463.

CHINA NEEDS TO REGULATE ‘MONEY GATES’ BUT GUARD AGAINST FINANCIAL STRESS: STATE MEDIA
Article from Reuters

China needs to keep financial market liquidity stable and regulate its “money gates” to prevent asset bubbles, but it also needs to ensure a lack of liquidity doesn’t cause financial stress, according to a commentary in a newspaper owned by the People’s Bank of China.

Chinese policymakers face a dilemma as they need to tighten credit to contain debt and speculative investment without triggering a wave of defaults that could destabilize the financial system.

The country’s leaders have called for a “prudent and neutral” monetary policy in 2017 and for prevention of financial risk, while keeping the economy on a path of stable and healthy growth, according to statements following a key economic meeting this month.

Monetary policy needs to support economic growth and ensure enough liquidity in the interbank market, but also needs to target price stability and pay attention to asset bubbles, Financial News said in the commentary on Saturday.

Policies should also be more targeted, the commentary said.

“Maintain macroeconomic stabilization policies, strengthen fine-tuning (of policies), but do not implement big stimulus,” the commentary said, but “explore more targeted ways to solve structural problems.”

The People’s Bank of China has not cut interest rates in 14 months, and as the economy has proved relatively resilient, the central bank has been guiding money market rates steadily higher in an effort to root out speculators.

But tighter liquidity has led to stress in money markets in recent weeks as bonds fell and interbank rates spiked, with markets not calmed until the central bank made a significant liquidity injection.

PBOC CONTINUES TO INJECT

• 40B Yuan in 7-day reverse repos
• 20B Yuan in 14-day revere repos
• 10B Yuan in 28-day reverse repos

 

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ASIAN SESSION WRAP JAPAN – 26TH DECEMBER 2016

MONETARY POLICY MEETING MINUTES

• Most members shared recognition that momentum toward achieving the price target was maintained and that achieving price target was somewhat weaker than July
• Members shared that the view that the JGB’s curve was smooth in line with guidelines for market operations
• Minority of members said deleting reference of buying 80 Trln Yen of JGB’s per year from the BOJ’s policy statement may send a wrong indication to the market
• One member mentioned that BOJ should attach less important to JGB purchase amount in due course
• One member said the Bank of Japan should allow interest rates to decline below zero percent in response to negative shocks
• One member said if such negative shocks were large and persistent, it was reasonable to change the BOJ’s guideline for market operations

The official full minutes of the meeting are here


BANK OF JAPAN GOVERNOR KURODA SPEAKS
Bank of Japan (BOJ) Governor Kuroda speaks at the meeting of councillors of Nippon Keidanren. Nippon Keidanren is the Japan Business Federation in Tokyo.

Key points in his speech;

• Exports and output was increasing as emerging market demand recovers
• Japans economy is now able to move forward, due to the support of the global economic recovery
• It’s extremely important that Japanese companies be innovative, create demand, products and services
• 10-Year JGB yields have been stable at around 0 percent even as long-term rates in many other countries rise, showing that the BOJ’s yield control curve
• If new policy framework is implemented appropriately, BOJ can take advantage of global recovery momentum to produce benefits to Japanese economy
• Japan’s economy no longer deflation
• Japan still would like to achieve its 2 percent inflation target, a global standard ***MAIN POINT***
• Long-term perspective, the global economy seems to have moved out of it’s adjustment phase after the global financial crisis
• The deceleration in global trade volume was largely driven by sluggish demand in business fixed investment, mainly in emerging economies

The official press release are here

Heres Kuroda looking for that 2 percent target

OTHER RELEASES

• Corporate Services Price Index (CSPI) (YoY): 0.3% vs. 0.5% exp. Previous 0.5%
• Leading Index: 100.8 vs. 101.0 exp. Previous 101.0

USDJPY is seeing movement today, has been ranging for some time now, with a session low of 117.00. Currently trading at 117.09

 

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ASIAN SESSION WRAP CHINA – 27TH DECEMBER 2016

Peoples Bank of China (PBOC) sets USD/CNY at 6.9462. Monday at 6.9459.

INDUSTRIAL PROFITS

• Industrial Profits (YoY) Nov : 14.5%. Previous 9.8% Oct

This was the highest reading since August. The November surge was due to the increase in prices in oil products, steel and iron.

PBOC CONTINUES TO INJECT

• 40B Yuan in 7-day reverse repos
• 30B Yuan in 14-day revere repos
• 10B Yuan in 28-day reverse repos

Otherwise no data releases or important news at this current time


ASIAN SESSION WRAP JAPAN – 27TH DECEMBER 2016
DATA RELEASE

• Consumer Confidence: 94. Previous 96
• Household Spending (MoM) Nov: -0.6% vs. 0.4% exp. Previous -1.0%
• Household Spending (YoY) Nov: -1.5% vs. 0.2% exp. Previous -0.4%
• Jobs/Applications ratio: 1.41 vs. 1.41 exp. Previous 1.40
• National Core CPI (YoY) Nov: -0.4% vs. -0.3% exp. Previous -0.4%
• National CPI (YoY) Nov: 0.5%. Previous 0.1%
• Tokyo Core CPI (YoY) Dec: -0.6% vs. -0.4% exp. Previous -0.4%
• Tokyo CPI (YoY) Dec: 0.0%. Previous 0.5%
• Unemployment Rate Nov: 3.1% vs. 3.0% exp. Previous 3.0%
• Construction Orders (YoY) Nov: -6.0%. Previous 15.2%
• Housing Starts (YoY) Nov: 6.7% vs. 10.2% exp. Previous 13.1%

Data from Japan really was not too good...

With this being the ninth consecutive month of annual declines, household spending slumped in November. A leading indicator of national price trends, the Core consumer prices in Tokyo had fell at the fastest rate in almost 4 years. Analysts expect inflation to accelerate at a fast rate next year reflecting a recent rebound in oil costs and yen declines that will push up import prices.

Chief economist at Dai-ichi Life Research Institute said that "It's a clear trend that inflation was weak until December because prices were falling for many non-energy items.... Inflation will turn positive and may accelerate to around 1 percent in summer or autumn next year. That's bad news for consumers but good news for the BOJ as it tries to achieve its price targets.

USD/JPY had jumped up 30 pips on the news. Currently trading near 117.33

 

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ASIAN SESSION WRAP CHINA – 3rd January 2017

Peoples Bank of China (PBOC) sets USD/CNY at 6.9498. Friday at 6.9370

DECEMBER CAIXIN MANUFACTURING PMI

• Caixin Manufacturing PMI Dec: 51.9 vs. 50.7 exp. Previous 50.9

Caixin manufacturing PMI is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as an leading indicator for the whole economy. The Chinese HSBC Manufacturing PMI is concluded from a monthly survey of about 430 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Figures are looking good for December’s Chinese Caixin manufacturing index. With the figures above 50 for six consecutive months. Output has even rose at 53.7, the fastest pace since January 2011.

The report suggests that there was stronger domestic demand. On the flip side export orders remained slow.

Director of macroeconomic analysis, Zhengsheng Zhong at CEBM Group said that; “The Chinese manufacturing economy continued to improve in December…However, it is still to be seen if the stabilization of the economy is consolidated due to uncertainties in whether restocking and consumer price rises can be sustainable”.


CHINA SECURITIES NEWS
A piece that is published by the China press this morning shows that researchers at the state information centre expect the economy to grow around 6.5%, with exports to go down to 3%. Lastly they expect inflation to be around 2% (CPI)


PBOC CONTINUES TO INJECT

• 20B Yuan in 7-day reverse repos
• 20B Yuan in 14-day revere repos

 

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ASIAN SESSION WRAP CHINA – 9TH JANUARY 2017
Peoples Bank of China (PBOC) sets USD/CNY at 6.9262. Friday at 6.8668

CAPITAL OUTFLOW CONTROLS
Capital Outflows had started to become a big problem for China. However, over the past week the Chinese goverment and China have been working to reduce capital outflows in the country.

Fan Gang adviser for PBOC had some comments on the current situation;

• China's intervention to FX is not great
• China's declining forex reserves is good news for the long term
• PBOC wants to see FX reserves reduce smoothly, yet gradually
• Capital outflow curbs have been effective, with the market responding
• Chinese policy makers are not likely to go further on the capital outflow controls

A good read by Bloomberg, if you want to know more about China's currency reserves click here.

YUAN
Capital outflows is not just the problem that faces the country, the Yuan faces it's own problems

Yu Yongding a former member of the central bank's Monetary policy committee said that China could not let the Yuan currency depreciate more than 25 percent against the dollar in 2017. Furthermore, China will continue to face pressures capital outflows and currency depreciation in 2017.

PBOC CONTINUES TO INJECT

• 10B Yuan in 7-day reverse repos
• 100B Yuan in 28-day reverse repos

HOLIDAY FOR JAPAN - MARKETS CLOSED
DETAILS
The Coming of Age festival (Seijin no Hi) is celebrated on the second Monday in January. Until 1999, it used to be celebrated on 15 January.

The day honors young Japanese who will reach the age of 20 at any point during the year. Twenty is the age of majority in Japan, and people who have reached this age gain the right to vote in elections as well as to drink.

Local governments usually have a ceremony known as a seijin shiki (adult ceremony) to honor the "new adults". The ceremony is held in the morning and all of the young people who live in the area are invited to attend. Government officials give speeches, and small gifts are handed out to the new adults.

Coming of Age day remains a popular holiday, but Japan's reduction in population growth in recent years means that fewer people are turning 20 - only 1.2 million in 2016 compared to almost double that at the start of the 1970's.

 

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ASIAN SESSION WRAP CHINA – 10TH JANUARY 2017
Peoples Bank of China (PBOC) sets USD/CNY at 6.9234. Monday at 6.9262

There is little change for the CNY against the USD today, with a slight increase on yesterday.

CPI AND PPI

• CPI (MoM) Dec: 0.2% vs. 0.3% exp. Previous 0.1%
• CPI (YoY) Dec: 2.1% vs. 2.3% exp. Previous 0.1%
• PPI (YoY) Dec: 5.5% vs. 4.5% exp. Previous 3.3%

Really strong PPI (Producer Price Index) result, with this being the strongest since September 2011. The commodity price surge is the main driver of the strong PPI, and the softer Yuan pushing up the price of imports.


China PPI Dec 16
CHINA GROWTH
Xu Shaoshi, the head of NDRC (National Development and Reform Commission of the People's Republic of China had some comments on this year's growth on China

He said that China's GDP is to grow at 6.7% in 2016 and the reasonable range in 2017.

PBOC CONTINUES TO INJECT

• 10B Yuan in 7-day reverse repos
• 110B Yuan in 28-day reverse repos

 

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ASIAN SESSION WRAP CHINA – 11TH JANUARY 2017
Peoples Bank of China (PBOC) sets USD/CNY at 6.9235. Tuesday at 6.9234.

A pip in difference today in the USDCNY, cant get any littler change than that…

YESTERDAYS PPI

• PPI (YoY) Dec: 5.5% vs. 4.5% exp. Previous 3.3%

Chinese PPI saw the biggest jump in the past 5 years. Having risen to a seven-month high in November, Chinese consumer inflation in December came in slightly weaker than expected. The decline on the month was due to a drop in vegetable inflation, whilst non-food inflation rose 0.2 percent (2.0% y/y).

Core inflation, excluding food and energy prices remained unchanged at 1.9% y/y. Was was interesting to see was that the factory price data showed a noticeable difference in potential pipeline pressures.

Prices of raw materials were up 10 percent y/y. Producer prices of manufactured items up a little more than 5 percent y/y, but producer prices of consumer goods were up slightly at 0.8% y/y.

PBOC CONTINUES TO INJECT

• 10B Yuan in 7-day reverse repos

110B Yuan in 28-day reverse repos



ASIAN SESSION WRAP JAPAN – 11TH JANUARY 2017
YIELD CURVE CONTROL
Executive Director of the Monetary Affair’s department at the BOJ, Amamiya had some comments on the yield curve control;

• Central banks can affect long-term interest rates to a significant extent
• There is still uncertainty on how much central banks can control yields, respond to shocks
• View that a central bank can directly control long term interest rates has been seen repeatedly in history
• Considering desirable yield curve is very complicated process that warrants comprehensive review of various factors
• BOJ’s yield curve control aimed at beating deflation, not at minimising cost of fiscal policy by supporting bond prices
• Markets seem to have responded smoothly to BOJ’s new policy framework
• Yield curve control policy exerting big effect on economy as global market conditions turn positive for Japan
• BOJ’s policy, which explicitly aims to control long and short-term rates as a whole, is unprecedented globally
• Further considerations, both theoretically and empirically, are essential in guiding yield curve control

For the full keynote speech, where it was presented at the Financial Markets Panel Conference to Commemorate the 40th Meeting, click here

OTHER ECONOMIC DATA

• Foreign Reserves USD Dec: 1,216.9B. Previous 1,219.3B
• 30-Year JGB Auction: 0.745%. Previous 0.617%
• Coincident Indicator (MoM) Nov: 1.6%. Previous 1.0%
• Leading Index (MoM) Nov: 102.7 vs. 102.6 exp. Previous 100.8

 

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ASIAN SESSION WRAP CHINA – 12TH JANUARY 2017
Peoples Bank of China (PBOC) sets USD/CNY at 6.9141. Wednesday at 6.9235.

CHINA TO MERGE 5 STATE MEDIA GROUPS
China is looking to merge 5 state media groups in order to increase the state voice in economical and financial news.

They look to consolidate;

• China Securities Journal
• Economic Information Daily
• Shanghai Securities News
• Xinhua Publishing House

to the state-run Xinhua news agency. They look to launch the company under the name of the China Fortune Media Corporation Group.

Xinhua said in a notice that the move aims at "deepening the central authority's reforms of the cultural system" and "increasing mainstream media's influence in the area of financial information," Xinhua said in a notice".

BITCOIN AND CHINA
Bloomberg reported that PBOC is looking for 'evidence of violations, such as market manipulation or money laundering, and assessing the safety of customer funds".

The tightening of oversight put a lid on local consumer demand, whilst the digital currency Bitcoin was seen as haven from restrictions placed on the Yuan.

• The inspection is raising concern that China may tighten its supervision and control over the country’s bitcoin exchanges, which were instrumental in driving up the digital currency in recent weeks.
• Increased regulatory scrutiny may damp demand for bitcoin, which had risen as people sought to circumvent government controls on the Chinese yuan that have made it more difficult to move and use the domestic currency overseas. Consumers had rushed into bitcoin, which isn’t controlled by any government or central bank.

Bitcoin saw its price drop on Thursday to the lowest it has ever seen since December 7th. A price decrease of over 16 percent to just over $770. Recently this cryptocurrency was at an all time high of $770.

PBOC CONTINUES TO INJECT

• 10B Yuan in 7-day reverse repos
• 100B Yuan in 28-day reverse repos

ASIAN SESSION WRAP JAPAN – 12TH JANUARY 2017
TRADE AND ECONOMY
Japan's top government spokesman, Yoshihide Suga said on Thursday that it's active trade investment in the United States was a source of "vitality" in the economic relationship between the two nations.

In yesterday's news conference, U.S. President-elect Donald Trump mentioned Japan and other countries as having large trade imbalances with the United States.

Suga said that the government was analyzing Trump's comments and that it wanted to develop Japan's economic relationship with the United States further.

Meanwhile the Bank of Japan's (BOJ) Governor Koroda told PM Abe U.S. economy is growing steadily

ECONOMIC DATA

• Adjusted Current Account: 1.80T vs. 1.48T exp. Previous 1.93T
• Bank Lending (YoY) Dec: 2.6% vs. 2.4% exp. Previous 2.4%
• Current Account n.s.a Nov: 1.416T vs. 1.500T exp. Previous 1.720T
• Economy Watchers Current Index Dec: 51.4 vs. 50.0 exp. Previous 51.4