Eco Analysis - Asia Round-up: Property market tightening in China sours the mood (K. Baader, W. Yao)

ECONOMICS
ECO ANALYSIS
March 4, 2013

Eco Analysis - Asia Round-up: Property market tightening in China sours the mood (K. Baader, W. Yao)

Asian stock markets started the week on a sour note, reacting to news of additional measures in mainland China to restrain real estate prices. This was arguably also the main factor driving down the Australian dollar, although the economic news reports this morning were also weak. The main exception to stock market weakness was Japan, where stocks are trading firmer despite a fractionally stronger yen. The relative stability of the yen is noteworthy, given that the proposed new BoJ governor, Mr Kuroda, reiterated in his confirmation hearing his strongly dovish bias, arguing for accelerated and broadened asset purchases. Lastly, an unexpectedly weak inflation reading in South Korea in our view boosted the chances of a rate cut by the Bank of Korea, a view that appears to be shared by the market, given the sharp decline in two-year government bond yields this morning.

Eco Analysis - China National People\'s Congress meeting preview (W. Yao)

ECONOMICS
ECO ANALYSIS
March 4, 2013

Eco Analysis - China National People\'s Congress meeting preview (W. Yao)

The annual plenary session of the National People's Congress (NPC) will convene on 5 March and close on 17 March. There is more to watch than just the routine Government Work Report and fiscal budget. New government leaders - including the President, Premier and top Ministers - will be appointed and formally take the helm. On the reform front, aside from affirmative rhetoric, we expect two concrete steps.

Eco Analysis - China's stubborn housing inflation risks further policy tightening (W. Yao)

Eco Analysis - China's stubborn housing inflation risks further policy tightening (W. Yao)

China January housing inflation accelerated to the fastest pace since early 2011. This report justifies Beijing's renewed hawkishness on the housing market. Further acceleration of housing inflation will most likely trigger more policy tightening. Meanwhile, RBA Governor Stevens sounded rather upbeat on the economy in testimony to Parliament, and rather disinclined to cut rates in the short term. Key points were that there is a good deal of stimulus in the pipeline from previous easing, and that the high A$ has been a key factor in the current low rate setting. In response, the A$ strengthened nearly 1c and short-term rates rose.

Eco Analysis - More evidence of China in early-cycle expansion

Eco Analysis - More evidence of China in early-cycle expansion ■ Strong fiscal revenue growth China's fiscal revenue growth rebounded further to 21.9%yoy in November from 13.7%yoy in October, the fastest pace since August 2011. More importantly, tax revenues grew 21.1%yoy, compared with 12.5%yoy in the previous month and 9%yoy during the first ten months. Value-added tax, which contributes one-quarter of total tax revenues, recovered quite strongly and grew 16.2%yoy in November (vs. 9.2%yoy in October), consistent with the improving trend in industrial and retail sales. The strength of fiscal revenue is another piece of evidence that the Chinese economy is recovering.

Eco Analysis - The Chinese economy is undoubtedly heating up (W. Yao)

Eco Analysis - The Chinese economy is undoubtedly heating up (W. Yao) ■ Inflation advanced but less than expected China's consumer price inflation came in slightly below expectations at 2.0%yoy in November (Cons. & SG 2.1%), up from 1.7%yoy in October. The 0.4ppt increase was a result of a 1.2pp increase in food inflation to 3.0%yoy. Within the non-food components, housing inflation moved up marginally to 2.6%yoy from 2.5%yoy, while other categories unexpectedly softened to 1.2%yoy from 1.4%yoy, according to our calculation.