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Asia Closes Up, BOJ Easing Hopes Boost Nikkei

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 am Saijal Patel.

Regional markets mainly on the up tick today.

The Australia market had reversed early losses to trade flat.

But BHP Billiton's decision to go hostile with its bid for Canada's Potash continues to weigh on the market.

On the earnings front, AMP and Wesfarmers are down after turning in disappointing results while QBE and Brambles gain after issuing upbeat outlooks.

In Seoul, techs help the KOSPI to log its third day of gains.

An upbeat forecast from US's Applied Materials overnight helping to lift sentiment for the sector.

(SOT), George Davis, CFO, Applied Material:

“Much of our Q4 is fully booked and we have lots of biz over next 3 months demand is pretty broad over 80% of our biz now directly is in Asia. On top of that, Asian consumers, more broadly BRIC consumers are playing a much bigger role are driving business, I would say, 2010 has really been the year of the Asian consumer and BRIC consumers.”

Investors also snapped up oversold stocks like world number 2 memory chipmaker - Hynix.

In Japan, Nikkei closed 1.3 percent higher but gains were limited by yen strength.

Earlier, market talk that the Bank of Japan will hold an emergency policy meeting but that's since dissipated.

The BOJ was expected to come up with additional monetary easing steps in-line with the government's efforts to support the economy.

Sources now say the central bank is unlikely to act before its September policy meeting, unless the yen surges to 80 against the dollar by 2 to 3 yen in a day.

Any such move though, will not be a first for the BOJ.

(SOT) Dariusz Kowalczyk, Senior Economist & Strategist, Credit Agricole:

“They tried before. They did it a couple of years ago. They pushed the yen down by successfully buying a lot of dollar. They could and should do the same. But because of the reluctance of the US and Europe to come on board, I think BOJ will be more interested in increasing the supply of yen through either open market operations or buying back bonds.”

The Sankei newspaper reports that the most-likely option under consideration is expanding the BoJ's fund-supply tool that was put in-place in December.

(SOT) Dariusz Kowalczyk, Senior Economist & Strategist, Credit Agricole:

“They should do something because the yen is too strong for Japan's export growth and for Japan to beat deflation unless to push the exchange rate higher. I think they will do something to accomplish those objectives.”

Checking on Greater China, the Hang Seng is leading gains there.

But Lenovo slumps even after returning to profitability as investors worry about margin pressures.

Second quarter results from China Mobile also stronger than expected, but the telco warned of new challenges and intensifying competition going forward.

What's of interest to the markets today - China's diversification moves.

According to the South Korean Financial Supervisory Service, China has more-than-doubled its direct holdings of South Korean Treasury bonds in recent months, China's small expansion into Korean government debt — worth about $3.4-billion as of the end of June — coincides with its purchase of a record $20.3-billion of Japanese bonds in the first half of the year.

Beijing is seen turning to the regional markets to invest some of its $2.4-trillion in foreign-exchange reserves in currencies other than the U.S. dollar and the euro.

Meantime, China also begun trading the yuan against the Malaysian ringgit today.

The introduction of a sixth currency to trade against the yuan comes after the Chinese central bank earlier this week said it would open the yuan bond-market to funds accumulated overseas. This will be done though trade-settlement or central-bank swaps.

(SOT) Michael Chiu, Senior Investment Manager, ING Investment Management Asia:

“First of all the capital account in china is still a very difficult topic to touch. At ING, our view is it's unlikely for china to open up its whole capital account in the near future. But on the other hand, with the introduction of offshore renminbi it can serve the purpose of make the renminbi one of the reserve currencies. For example as the announcement made yesterday for trade related transactions, it can already be used as a source to buy one of the domestic bonds in China.”

Based on the trading action this morning -analysts say markets are clearly excited over this latest move.

(SOT) Olivier Desbarres, Director, FX Strategy, Credit Suisse:

“I would add that Q2 GDP came out better than expected and ultimately bank of Negara Malaysia is turning the markets to get comfortable with the currency appreciation and further tightening of monetary conditions if need be in the year. So the announcement that they are going to further liberalize capital controls and I think you really get a sense that this is the central bank that get comfortable with its economic outlook which is comfortable with trend appreciation of the ringgit. The final point I would make is that the PBOC has been fixing dollar-reminbi a little bit lower in recent days and I think this is another fact that would just help the ringgit appreciation.

The initiative is part of Beijing's broader effort to carve-out a greater role for the yuan regionally, including stepping up its use in Hong Kong, leading to controlled, small openings of the capital account.

Michael Chiu of ING Investment Management says Hong Kong's banking sector will profit from the move.

(SOT) Michael Chiu, Senior Investment Manager, ING Investment Management Asia:

“One of the major beneficiaries will be the anks in Hong Kong. If you look at the onshore renminbi lending market. Just look at the banking sector for example, it is a 40 trillion renminbi market. If we make some assumption, the offshore RMB is 10% of onshore, that means 4 trillion. That is already bigger than the totally loan outstanding here in Hong Kong. Or in simple words, the total lending in Hong Kong can double going forward.”

Well, that's a wrap of Asia's market and economic highlights today.

I'm Saijal Patel from CNBC.

Have a good evening.

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