Asia today - the norm in Japan, China prepares for CNY & the Aussie $ falls

So Japan is back after a holiday...and look what is happening, a weak yen below 120 again against the US dollar...

...and a strong equity market (Nikkei in this case): 

The similarity of the above two charts is very striking (of course the former is geared).  A really interesting link on Japan today was this one which noted hopes for a recovery based on: 

Japanese bonds are the worst-performing government securities in the past month except for Greek debt, and benchmark 10-year yields have doubled from their January lows.

We will see about this...I note the continued weak producer price data and continued failure to fiscally consolidate ("Japanese Cabinet: Unlikely To Achieve Primary Balance Surplus By FY2020"). 

Whilst in China there were some notable headlines on further state owned organisation reform (link here) and pre Chinese New Year monetary manipulations ("PBoC injects $CNY 160bln via 14-day & 28-day reverse repos"), Australia is probably the second most interesting source of stories in the region today as the Aussie dollar continued to move weaker...

(nice chart above via @johnnyshap who noted 'at 76.50 the AUD is now trading around the long term average of US 76.41c since it floated in Dec 1983)

...as unemployment rose (according to Bloomberg TV to the highest since 2002).  Ex specific mining names exhibiting self-help (BHP Billiton) I remain short Australian assets on the basis that at an economy-wide level there are still issues.

Asia today - Chinese confidence/cult of personality, Australian charts, Japanese bearishness

A relatively quiet day considering everything in the Asian markets.  A well-respected Chinese confidence measure showed generally good progression...

...although I note that at a reading of 112.5 this is a few points below the recent multi-year average.  

Staying in China I noted in my 15 Macro Thoughts for 2015 (link here) that thinking about the cult of President Xi was important (and more important than the obsession with Chinese growth rates).  To this end I thought this was a fascinating graphic:

A bunch of Australian charts were released earlier today by the RBA.  A great selection of these charts can be found here.  My favourite one is below - relative prudence by government...but as for individuals...

Stat of the day in Asia surely has to be this one via Bloomberg on Japan:

Short-selling on the Tokyo Stock Exchange reached 37.8% total trading value yesterday, the highest since at least October 2008

Cannot think what they might be selling for in anticipation of a loss of confidence from...

Asia today - China, Japan, South Korea, Australia

One of those pre Christmas Monday's in Asia with most markets up and even the yen not falling that much...

China is at a new four year high...

...and I note via this excellent Bloomberg chart of the day that such performance has helped boost the value of the country's leading brokerage business materially versus global peers.  

Of course China does not remain flawless at all and themes to watch in 2015 will include the evolution of the foreign reserves (which remain high but with fading surpluses potentially prone to contraction with big possible implications for global capital flows)...

...and adjusted high fiscal deficits due to those tricky local government debts.  Not new but still lingering...and potentially trickier due to the property slowdown / fewer related receipts.  

At least China has proper growth.  Japan remains between a rock and a hard place and the announcement of an eighth month of declines in supermarket sales in November can hardly help. Still the monthly economic report from the Bank of Japan maintains an upbeat stance: 

'...continue its moderate recovery trend, and the effects such as those of the decline in demand following the front-loaded increase prior to the consumption tax hike are expected to dissipate.'

Good luck with that.  More QE speaks volumes.  

They are not the only Asian country feeling some growth related issues. South Korea downgraded their growth hopes for 2014 and 2015 to 3.4% and 3.8% respectively.  No disaster in absolute terms but the trend is clear...the high won against the weak Japanese yen doesn't help.  

Finally, Australia and an excellent link here with a bunch of useful looking charts centred on issues pertinent to the local economy.  'Lower for longer' here too would be one conclusion...

Asia today - Japanese election, Australian budget, Indonesian rupiah

So Asia is all about Mr Abe's (not unexpected) victory in the Japanese election today...

 ...a victory which was achieved with a broadly unchanged underlying Parliamentary position: 

 

And the impact of another 5 years of a huge economic experiment?  A lacklustre reaction from both the Japanese FX and equity markets.  

My personal view remains that Japan is somewhere between a rock and a hard place with the likely end scenarios some combination of a much weaker yen, a highly volatile stock market (not totally unopportunistic especially amongst the larger exporters) and ultimately some form of debt consolidation (on a ten year view). The only hope remains radical supply side reform but so far don't hold your breath...

Reflecting continued challenges in the Japanese economy, today's Tankan’s big manufacturer index slipped to 12 in December from 13 in September, As Fast FT noted 'the overall assessment of business conditions improved since September by a single point to 5, where a positive number denotes a "favourable" environment. But companies' forecasts for conditions in three months' time produced an average score of 1, with a particularly gloomy outlook among smaller companies'.

Maybe the Japanese economy should more fully embrace its tourism scope via the weak yen

What else in Asia? In a mid-year budget update, the Australian Treasury predicted deeper budget deficits in the coming years, as falling commodity prices result in slashed revenues and lower tax receipts. The Treasury said it is now projecting a deficit of A$40.4bn in the 2014-15 year, versus an earlier estimate of $A29.7bn. The mid-year budget update doesn't foresee a budget surplus until 2019-20.  Not the greatest signal for Australian assets...especially as the Governor of the RBA was on the wires late last week suggesting a weaker Australian dollar was optimal...

Meanwhile did you see that the Indonesian rupiah fell to a multi-year low too?  Currency wars are building sourced from Asia...

(chart sourced from Fast FT)

Asia today and charts today

A relatively quiet day in Asia with the Chinese data not really surprising either way.  I thought the two most interesting stories were first the conclusions (link here) from the Central Economic Work Conference meeting where:

The government will strive to keep economic growth and policies steady and adapt to the "new normal" of slower speed but higher quality.

No surprises there.  

Otherwise I thought that the interview in The Australian Financial Review with RBA Governor Glenn Stevens  who said that the price of money is not the issue and what matters is the exchange rate which he would prefer to see at 75 US cents was interesting...as the Australian dollar is currently trading at 82.71.  Currency wars! 

A few charts which caught my eye.  

Bond market divergences: 

Based on a more dove-ish FOMC composition I am still not convinced that we see rate rises in the US in 2015...

Huge political scepticism despite budget deals in the US:

GaveKal Capital highlight that in today's P/E ratios in Europe...

...and globally are not exactly cheap.  Certainly bond yields and inflation are ultra-low...but at such absolute levels you need earnings to come through otherwise you get volatility. 

So oil sub US$60.  Another great winners/losers chart...

...but I really liked this divergence chart versus previous history.  The impact of efficiency drives due to the previously high >$100/barrel price?

Asia today - FX, Nov performance, China frenzy & Black Friday

I could muse on the latest Japanese inflation data (core) falling back again...and hence the challenges to Abenomics...but this chart below nicely captures the de facto breakdown in normal policy evolution in the country.  Classic regional competitors like Korea and Taiwan will be looking to weaken their currency too...and that is how we slide into a currency war.  China's relative revaluation also shown below - of course they have underlying structural positives and are coming from a fundamentally weaker position nevertheless the Chinese authorities will not want their currency to only go up.

(h/t @TomOrlik)

Turning to Asian markets today, well Australia unsurprisingly had a shocker...

(h/t @DavidStutt)

...and a poor November too.  I remain short the ASX as a hedge for some of my recently established long mining positions in companies like BHP Billiton.  

Now linking the first chart above and this general market shift is that the Chinese move has been without a big downward FX stimulus.  Perhaps not surprising to read this great comment via @RANsquawk: "Employees from #Chinese brokerages complain they have to work overnight to process applications for new trading acc's!"

I smiled at this via @EKaiserReuters about an alternative description about the derivations of 'Black Friday' via a Singaporean retail publication! 

Despite the above I think 'global Black Friday' is here to stay.  It is not only going to be the US figures (below) that will be showing an upward trend...

Asia today and charts today - internet economy, China, India, M&A, European bonds, Australia & iron ore

A few charts and related which interested me so far today.

Obligatory Apple relative market cap chart.  Even adjusting for the growth and growth of the internet and related economy does homing in on Singapore seem right?!

(h/t @ianbremmer)

As many tweeters so far today have noted, despite the rise of the internet economy, this was the view many of them were getting at the China World Internet Conference

(h/t @PaulCarsten)

Disinflation continues...and when combined with European malaise this graphic from today's Financial Times is unfortunately not surprising.  Still...a 1.01% yield is not a lot.  

In related news Japan's 2 year bond yield turns negative after an auction today.  The malaise continues and to square the circle of the Japanese economy is going to be difficult snap election/sales tax hike postponement or not...  The yen-dollar rate is down to the 117s (and I believe 120+ is the next step).  

Other falling prices include the iron ore commodity price 

(h/t @gregorymckenna)

The potential impact of this across the Australian mining sector nicely captured by @linzcom

Don't forget how important iron is to the Australian economy:

A few final charts.  Will 2014 beat 2007 for M&A magnitude?

The OECD issued a quite positive report about the Indian economy (link here)

Will India grow faster than China by 2016?

Perhaps such fading momentum is why the really big recent central bank balance sheet expander are...the Chinese?

Asia today - Japanese equities, the yen and the Australian dollar

So many interesting stories in Asia today.

The headlines out of Japan are kind of fascinating.  Here are a few of the headlines I have picked up:

BoJ headlines rolling out now...revises down assessment of industrial output

ABE: WEAK YEN HURTING SMALL COMPANIES, HOUSEHOLDS

Bank of Japan more downbeat than last month. Says consumption recovering "unevenly." Cites "inventory adjustments" as damping production.

BoJ: Sees Japan CPI At About 1.25% For Some Time

Looking at these headlines in aggregate it would be easy to conclude that more stimulus is the likely and preferred step...but look at that second headline again.  Apparently, as per reports, there were some efforts to try and change the 2% inflation target focus into a more medium-term target...but this was rejected.  My conclusion from all of this is that the risk of malaise in Japanese policy-making is increasing as a weakening of the yen and more stimulus is the only real option (along with medium-term supply side reform) but now there is not unanimous support behind such a policy.  The yen's increase today (albeit partially influenced by a slight weakening of the US dollar) is indicative of this.  For me, it feels good to have taken some profits in my Nikkei futures as I think Japanese equities get more volatile from here.  Double top around 16,000?

Australia also had an announcement which saw flat interest rates a comment about a rebalancing towards non-mining private demand (net good...unless you are invested in the resource sector: no wonder you are seeing spin-offs/consolidation potential in the industry) and the usual comment about the Australian dollar:

"remains high by historical standards, particularly given the further declines in key commodity prices in recent months."

As we approach a 5 year low in the AUDUSD exchange rate my improving optimism towards the commodity sector also suggests now could be the time to start lightening up in the short on the Australian dollar.  Been a great trade since 0.95.  

Asia today - today's Chinese economic statistics and diverging Japan/Australia market performance

Asia today starts on today's Chinese economic statistics.  I liked the way that Zero Hedge summarised it:

'SocGen: "More evidence of waning growth momentum in China"

BofA: "A nice rebound of August money and credit data in China" '

So what is the reality?  Well money supply (M2) looks muted versus recent history...but let's face it 12%+ growth is not typically apocalyptic...

...whilst credit bounced back from those ultra-low numbers last week as FastFT put it:

'Aggregate financing, a broad measure of credit in China that includes bank loans as well as the lightly regulated trust products funded by retail investors, was Rmb957.4bn in August

This was below analysts' expectations, but also much higher than the Rmb273bn figure recorded in July, which was the lowest since October 2008.

Signalling Chinese banks are lending more freely to support the economy amid a property market downturn, formal bank lending rose to Rmb702.5bn in August, from 385.2bn in July. Corporate bond issuance and company-to-company lending also picked up'

Conclusion?  Stimulus and economic momentum continue at a certain level...but some regions are better than others.  I would agree with the thrust of this report headline:

In other news, continued weakness in the Japanese yen and Australian dollar continues.  Here's an interesting chart looking at the two local markets in local currency.  

A pleasing chart given I remain long the Japanese index and short the Australian one...

Asia today - Chinese inflation statistics, Australian jobs and various Japanese economic excitements...including a new burger!

Asia today starts with some Chinese inflation statistics...which remain muted as shown below:

A 2% headline rise inevitably raises talk of more stimulus - certainly I would perceive there is scope to do something.  Factory gate prices were also down and producer prices fell for the 30th consecutive month.

Still, at least, certain important input prices are going down.  Interesting to remember where the commodity traded before the consolidation of the supply side.  I don't think we are going there but I remain short the iron ore producers as sentiment negativity is still yet to peak in my view.  The publication of charts like this however show we are getting there.

 

I have noted the link between the Australian index/Australian dollar and the iron ore price before. Some better news today on the jobs side from the Australian economy...except that it was very part-time job centric as per this excellent chart from Fast FT:

Some jobs better than no jobs?  Probably...but I expect real wages to remain negative and that overhangs GDP...

Yesterday there was broad observation on the juxtaposition of a 5 year high in Japanese stocks and a 5 year low in the yen (versus the US dollar).  Plenty of articles out today indicating the current strange situation of the Japanese economy.  For example a 'search for yield' in this article from the Financial Times...

...but then, in a quote from this excellent article highlighted to me, by @MarkBrant1KM: 

'The Bank of Japan drove a short-term interest rate below zero, a dramatic step in its already unprecedented effort to stoke inflation and a likely sign it will continue its aggressive asset purchases'

This article on Bloomberg also indicated another 'debate' that is controversial for a moribund economy:

'Japan should proceed with another increase in the sales tax as planned to signal it’s serious about reining in the world’s biggest debt burden, an adviser to central bank governor Haruhiko Kuroda said'.

Finally a new offering from Burger King Japan.  It looks almost as appetising as the...Japanese economy!

As per this link: 

'It's made smoking it using bamboo charcoal...The buns are also smoked with bamboo charcoal and...the sauce is made with onion, garlic, and squid ink...The beef patties made also contain black pepper'