China Imports Slow in July; BOJ Holds Rates

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

Hello and good evening.

You're watching “Asia Market Daily”, co-produced by CCTV Business Channel and CNBC, first in business worldwide.

I'm Saijal Patel and here are the top stories across Asia this Tuesday.

The latest trade data from China has raised concerns about the country's latest economic outlook for the rest of the year.

Exports grew 38.1-percent year-on-year, versus a forecast for 35.5-percent.

That's down from June's reading of 43.9-percent.

Imports fell short of expectations.

It was up 22.7-percent year-on-year, versus a 30-percent forecast.

This left the trade surplus at an 18-month high, at 28.7-billion dollars.

Some say this could revive pressure for a faster rise in the yuan.

And some analysts say this means the economy slowed down just a touch, but that it's still much stronger than global trade growth.

(SOT) Jonathan Slone, Chairman and CEO, CLSA:

“What is happening is things are slowing down A BIT in some sectors and some areas of the economy. If you go to the southern coastal areas things are definitely slowing down and that's a result of slowdown in western economies. If you go to some of the interior sections - you go to Chengdu, if you go to Wuhan, things are picking up.”

Let's now turn to the market action.

The weaker-than-expected import data from China definitely weighing on the markets now.

The Shanghai Composite down 2.9-percent.

Hong Kong shares also under pressure because of the Chinese data.

Japan's benchmark Nikkei 225 closed down 0.2 percent.

In South Korea, the KOSPI closed down half a percent.

And in Australia, shares lost 1.2-percent.

A cautious outlook form National Bank of Australia also cast a shadow over prospects for the corporate earnings season there.

Meantime, the Bank of Japan has done as expected.

It kept the overnight call rate unchanged at 0.1 percent, as it waits to assess.

the impact of the yen's recent strength on the country's fragile economic recovery.

It also repeated its commitment to preventing prolonged price-declines from damaging economic conditions.

The BoJ's move to keep the target unchanged was expected.

However some camps say the unchanged view of a moderate economic recovery is a surprise.

But one analyst says he thinks the BoJ has made the right assessment.

(SOT) Tey Tze Ming, Market Strategist, Saxo Capital Markets:

“I think it's interesting that since last Friday till now, the 85-level kind of held pretty well, and if you look at where dollar-yen was at the lowest last November, there was a lot more BOJ rhetoric then, and i think the economy is in a much better shape now, and on that hand, we do expect less intervention, if you like, from the BOJ.”

Focus is now on the U.S. Federal Reserve, which concludes its monetary policy meeting later today.

It's expected to renew its vow to keep rates near-zero for an extended period.

Markets will be watching closely for signs that officials are growing more concerned that the economic recovery is at risk.

With evidence pointing to lost recovery-momentum, there has been talk that the Fed may do more to back the economy.

This would likely come in the form of buying more longer-term assets.

Let's turn now to Singapore.

The country's economy grew at a slightly less-than-expected 18.8% in the second quarter of from a year ago.

That was slower than the initial reading of 19.3% and comes after the government warned growth momentum would slow in the second half due to uncertainty surrounding the global economy.

The government kept its projection of 13%-15% growth for 2010.

One economist discusses how he thinks the economy is holding up for the rest of the year.

(SOT) PK Basu, Managing Director & Chief Economist, Daiwa Capital Markets:

“We did see a little bit of a slightly slower manufacturing number in June, that was expected in the advanced GDP estimate, so the slightly slower GDP growth number for the 2nd quarter than originally expected. It was already flagged by the manufacturing numbers, it would be a little bit below 19%. But 18.8% growth is very strong, and what is driving it is a powerful productivity recovery, driven by strong rebound in machinery and equipment investment spending.”

Meantime CNBC's Sri Jegarajah went for a walk in the local markets of Singapore with CIMB's Song Seng Wun, to get the take of people-on-the-ground, on the rising cost of food in the country.

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Jegarajah: Most people will just suck it up and pay higher prices, won't they?

Song: Well, because you go to regular places, you just say, auntie can you give me more. It costs more, ok, give you 5 cents discount, that kind of thing.

Jegarajah: You haggle

(VOXPOP) Chua:

“Because all we sell is the regular customers here. That’s why we cannot push the price going up.”

(VOXPOP) Victor:

“Right now, there is little change. I guess our government has done a part in helping to control the prices a little bit.”

Song: We have certainly seen, you know, food prices in China, for instance, going up, pork, sugar, etc. And in Singapore itself, even the men on the street are starting to feel the effect of higher food prices, weather supply disruption in key countries like Thailand, in Malaysia, have seen their supply of vegetables for instance, costing a little bit more.

Jegarajah: Talk to us about the monetary policy levers that are available to the Singapore authorities, to the de facto central bank - the MAS, because it doesn't use interest rate as the typical lever, does it? it uses the currency, explain to us how that works.

Song: So one way to contain imported inflation, if the economy can take it, it's obviously to allow the currency to appreciate, and if the economy can take that appreciation, then i will say it will go someway towards containing higher food prices coming from supply disruptions abroad, but that will only take you somewhere, in terms of allowing the exchange rate to appreciate.

Jegarajah: So overall, you are quite confident that the Singapore authorities are ahead of the curve in containing the inflationary pressure that could be building further down the line?

Song: I think, this is one country that looks very far forward, so if you are so dependent on food from abroad, what you do is make sure that you have more supplies of food from more places. So say twenty years ago, you may see food from nearer countries - Australia being the furthest, or Thailand, or Malaysia, or Indonesia - you are seeing Singapore basically reaching out. You see pig from Argentina, you get chicken wings from Brazil, and other stuffs from nearer as well. More food coming from Europe as well.

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And that wraps up today's business highlights.

I'm Saijal Patel from CNBC.

See you again tomorrow.

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