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12 Mar 2014
Asia EM Express: China slowdown woes continue weighing on sentiment
FXStreet (Łódź) - Worries about China's growth slowdown mounted in the Asian session as prices of copper dropped again and possibilities of more Chinese corporate debt defaults remained on the table, after a small solar company reported a default on its bond interest payment last week. On the other hand prices of iron ore stabilized.
Sean Callow from Westpac institutional Bank notes: “There was a lot of focus in NY on a story about the losses at a Chinese electrical equipment maker, whose bonds and shares have been hammered.”
Furthermore, many market experts project that thee People's Bank of China will cut
the banks‟ reserve requirement ratio (RRR) if growth slows towards 7%, which could destabilize monetary policy.
“A monetary easing would risk undoing the progress, evident in the February money and credit data, toward stabilizing monetary policy,” Tim Condon from ING suggets. “Given the success of last year’s stealth fiscal easing our baseline scenario is that the authorities would resort to it again.”
Economic data
On Wednesday the Ministry of Commerce and Industry informed that Indian trade deficit narrowed to $-8.13B in February from $-9.92B in January and against forecasts of widening to $-11.05B. Exports slid to $25.69B from $26.75B, while Imports fell to $33.82B from $36.67B.
On Tuesday the the Bank of Korea released year-on-year export price growth data which revealed a 3.6% drop in February down from the 1.9% fall the previous month. Import price growth declined 4.8% in February., following -3% in January.
The Korean Unemployment Rate ticked up to 3.9% in February from 3.2% in January. On the other hand the labor participation rose to a record high of 63.0%, mostly due to an increase in female workers.
Young Sun Kwon from Nomura comments: “Although the average earnings of female workers in Korea are less than that of male workers, the higher labour participation rate should help release pent-up demand. We maintain our above-consensus 4.0% GDP growth forecast for 2014.”
The ING team of analysts point to China's induatrial production data, to be released tomorrow, as an important risk event.
“The trade report and the February money and credit data sparked hard-landing worries and we think the consensus is braced for a downside surprise in industrial production growth, though we do not think 'braced' means 'priced in.'” they suggests.
Technicals
Chinese growth slowdown woes resulted in a drop in Emerging Asian Currencies against the dollar. The Indonesian rupiah, South Korean won and the Philippine peso suffered the biggest losses.
Meanwhile USD/CNH rose about 0.2% from late Asia to NY.
The USD/CNY daily FXStreet Trend Index is slightly bullish, with the OB/OS Index neutral. RSI was neutral at 72.0351 at the last close. Daily 2-StDev Volatility Bandwidth shrunk at 310 pips, with ATR (14) expanding at 133 pips. The 1D 200 SMA was at 6.1033, with the 1D 20 EMA at 6.1125.
Sean Callow from Westpac institutional Bank notes: “There was a lot of focus in NY on a story about the losses at a Chinese electrical equipment maker, whose bonds and shares have been hammered.”
Furthermore, many market experts project that thee People's Bank of China will cut
the banks‟ reserve requirement ratio (RRR) if growth slows towards 7%, which could destabilize monetary policy.
“A monetary easing would risk undoing the progress, evident in the February money and credit data, toward stabilizing monetary policy,” Tim Condon from ING suggets. “Given the success of last year’s stealth fiscal easing our baseline scenario is that the authorities would resort to it again.”
Economic data
On Wednesday the Ministry of Commerce and Industry informed that Indian trade deficit narrowed to $-8.13B in February from $-9.92B in January and against forecasts of widening to $-11.05B. Exports slid to $25.69B from $26.75B, while Imports fell to $33.82B from $36.67B.
On Tuesday the the Bank of Korea released year-on-year export price growth data which revealed a 3.6% drop in February down from the 1.9% fall the previous month. Import price growth declined 4.8% in February., following -3% in January.
The Korean Unemployment Rate ticked up to 3.9% in February from 3.2% in January. On the other hand the labor participation rose to a record high of 63.0%, mostly due to an increase in female workers.
Young Sun Kwon from Nomura comments: “Although the average earnings of female workers in Korea are less than that of male workers, the higher labour participation rate should help release pent-up demand. We maintain our above-consensus 4.0% GDP growth forecast for 2014.”
The ING team of analysts point to China's induatrial production data, to be released tomorrow, as an important risk event.
“The trade report and the February money and credit data sparked hard-landing worries and we think the consensus is braced for a downside surprise in industrial production growth, though we do not think 'braced' means 'priced in.'” they suggests.
Technicals
Chinese growth slowdown woes resulted in a drop in Emerging Asian Currencies against the dollar. The Indonesian rupiah, South Korean won and the Philippine peso suffered the biggest losses.
Meanwhile USD/CNH rose about 0.2% from late Asia to NY.
The USD/CNY daily FXStreet Trend Index is slightly bullish, with the OB/OS Index neutral. RSI was neutral at 72.0351 at the last close. Daily 2-StDev Volatility Bandwidth shrunk at 310 pips, with ATR (14) expanding at 133 pips. The 1D 200 SMA was at 6.1033, with the 1D 20 EMA at 6.1125.