Solid China, Australia Data Ease Recovery Worries
This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.
Hello to our viewers all over China.
You're watching "Asia Market Daily", co-produced by CCTV Business Channel and CNBC, first in business worldwide.
I'm Saijal Patel and here's what we're watching in Asia this Wednesday. Markets in Asia are mostly higher, shrugging off a directionless lead from Wall Street overnight. U.S. stocks logged an ugly month, registering the worst August performance since 2001.
Overall, some analysts say this scenario may still play out for some time.
(SOT) Annette Beacher, Head of Asia-Pacific Currency and Fixed Income Research, TD Securities:
"I just think we are going to see more of the same. It just boils down to risk. Investor confidence is very fragile. They will be upbeat one day or reverse the next day. But I think the overall trend for the moment is data from the US has been unambiguously weak. For one good better-than-expected day, we get two worse-than-expected days. And I think that the data from the US has really got the whole world talking about - do we have a double-dip, do we have deflation fears - and all that is just making all investors very nervous. What do you do? You take risk off the table which in this case is the stock market throughout the world and you put your money into bonds.
That's exactly what we saw in August and exactly the same in September."
Overnight, U.S. President Barack Obama also attempting to refocus attention from America's involvement in Iraq to the U.S. economy.
(SOT) Barack Obama, U.S. President:
"The American combat mission in Iraq has ended. Operation Iraqi Freedom is over, and the Iraqi people now have lead responsibility for the security of their country."
Obama's words come as the U.S. formally withdraws all combat troops from Iraq.
Moving on - let's take a look at Asia market action today.
Solid economic data from China and Australia helping investors overcome some worries about the health of the global economic recovery.
Japan's Nikkei 225 rebounded after touching a new 16-month low earlier. The benchmark index finished higher by 1.2-percent.
South Korea's KOSPI closed up 1.3-percent, boosted by auto stocks and shares focused on domestic-consumption.
Australia's S&P/ASX 200 saw its biggest one-day advance in almost two months. Stocks rose 2.1-percent at the close.
And shares in the Greater China region of course benefited from manufacturing data from the mainland. But at the end of trade, the Shanghai Composite showed a bit of profit-taking.
Meantime Hong Kong may see another IPO in the form of coking-coal firm Mongolian Mining Corporation. Media reports say the company plans to raise about 700-million dollars.
China's August manufacturing numbers driving optimism in the markets today. The official purchasing managers' index saw its first rise in four months. It climbed to 51.7 versus 51.2 in July.
Meantime a separate PMI survey from HSBC showed the index rising to a three-month high of 51.9 in August, from 49.9 the previous month. HSBC says this reconfirmed its long-held view that China is moderating rather than melting down.
(SOT) Qu Hongbin, Senior Economist, HSBC:
"What that really means is that china's economy is just moderating to a less inflationary growth rate of around 9 percent in the second half of this year. So there's no need to worry about a double dip of risk. In terms of policy implications what this really means is that there's no need for china to make any meaningful change in the current status quo of the policy. In other words there's no need for them to either introduce further tightening or loosen the policy stance."
Morgan Stanley says China's rebalancing its economy actively. It's staying positive on sectors like properties, banks, steel and energy stocks.
China Strategist Jerry Lou explains why he is bullish on mainland plays.
(SOT) Jerry Lou, MD & China Strategist, Morgan Stanley:
"Most people that you talk to who are bullish on China are actually parking most of their money into the consumer space. In my opinion, it's an overly crowded trade. This space, average p/e is about 20 times. I don't see 20-times stocks going to 30-times very easily but if you look at the deep cyclical sectors, you got stuff like, chemicals, and steel, who also benefit from the internal demand but they're trading at single digits. So the choice is very obvious for me. So we are bullish, but we're not conventionally
bullish. We're bullish because we like the valuation and we think that we're gonna stay here in china as normalizing to a more sustainable speed. It's reason to be bullish rather than to be scared."
Meantime, Australia's economy showed its fastest quarterly performance in three years. Households spent far more than expected, while exports were helped by an
Asia-driven boom. Gross domestic product climbed 1.2 percent in the second quarter, compared with 0.7 percent last quarter. And it easily beat a Reuters forecast for a 0.9 percent expansion. This marks Australia's 19th consecutive year without a recession, taking growth for the year to 3.3 percent.
(SOT) John Peters, Senior Economist, Commonwealth Bank of Australia:
"So that's certainly fits the story that after a modest failing in the economy last year growth has continued to accelerate into 2010. What we're seeing also is household consumption is a little stronger than expected and what it's telling us is the fiscal policy or stimulus begins to fade increasingly the private sector demand is taking over and the economy is rebalancing. And increasingly, the private sector is expected to contribute to growth as the public sector stimulus fades further over the next year."
That's helped the Aussie dollar to power to almost 90 cents against the dollar in trade today. Analysts say the latest numbers validate what the Reserve Bank has done up to now. And that it certainly rules-out any chance of a rate cut. The RBA had led the developed world by lifting interest rates 150 basis points between October last year and May this year. Rates have been on hold at 4.5 percent since, as inflation moderated.
And on the economic front in South Korea, trade data released today pointing to a weakening exports outlook. And with inflationary concerns also on the rise, markets are now forecasting another rate hike from the central bank as early as next week. For the month of August, exports rose 29.6 percent from a year ago. That's almost 5 percentage points below market consensus. Core inflation currently stands at a six month high.
With the economy and employment on the mend, the central bank says it expects a further pick-up in inflation but will aim to maintain price stability while ensuring growth.
The Bank of Korea's move to hike rates earlier in July had surprised the markets. It will meet for a review next Thursday.
Well, that wraps up today's business highlights.
I'm Saijal Patel from CNBC.
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