The end of a week full of fundamentals showed signs of recovery in the Asian region

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Sat, Mar 13 2010, 11:02 GMT
by ecPulse.com analysis team

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Last week witnessed a number of major fundamentals from the Asian region which helped provide a clearer picture for the current situation across Asian economies. Asian stocks consolidated this week and gained slightly, but the sure thing is that shares moved according to investors’ confidence not on fundamentals.

Major fundamentals started with Japan; January’s current account surplus shrunk to 899.8 billion from the previous reported 900.8 billion yen. The trade surplus was also down to 197.2 billion yen from 631.2 billion yen.

Japan’s overseas shipments rose 8.8% in January to 5,835.0 billion yen from 4,925.2 billion yen in December. On a yearly basis, export climbed 40.2%, the highest since 1986, as demand from China, Japan’s main trade partner, rose to the highest since 1985, while shipments to the U.S inclined for the first time in two years.

On the other hand, machine orders in Japan declined 3.7% in February, and slipped 1.1% on the year; worth mentioning that machine orders is one of the main indices that measures capital spending. Analysts expect capital spending to take sometime to recover, while they explained the decline in machine orders as a correction after orders incline by the end of last year.

The Japanese economy ended this week’s fundamentals with the final GDP reading for the fourth quarter of 2009 showing the world’s second largest economy grew 0.9% easing from the preliminary reading of 1.1%. On the year, the economy expanded 3.8% revised lower from the preliminary 4.6%.

Moreover, companies are still concerned about the recovery, especially after global stimulus measures waned and some major economies began to exit the nonstandard measures to avoid bubbles formation and inflationary pressures. Adding to that, the surging yen is affecting Japanese exports harshly as they lose their competitive advantage. Companies are still cautious about capital spending amid unstable and uncertain outlook which affected economic growth.

As for central banks, they had their share last week starting with the Reserve Bank of New Zealand (RBNZ) which kept interest rates steady at 2.5% meeting market forecasts. Governor Allan Bollard said the bank will maintain its policy till mid-2010, before it starts raising interest rates.

Weak capital spending alongside declining house prices, might affect recovery in New Zealand; forcing the RBNZ to keep rates steady at their lowest to support the economy, in addition to encouraging households to increase spending.

The Bank of Korea also kept the overnight cash target steady at 2.00%, ensuring that the bank will focus on supporting economic growth and stimulating internal investments to guarantee a solid recovery.

The Korean economy provided mixed data, growth slowed in the fourth quarter of last year, while unemployment rose in January. Exports are still recovering as they gained for the fourth straight month, and business confidence rose to a seven-year high. All this pressured the central bank to maintain its monetary policy till the economy determines its direction.

Ending our tour with China, retail sales rose 22.1% in February, while manufacturing output gained 12.8%, and consumer prices climbed 2.7% from 1.5%. Accelerating inflation may pressure monetary policy makers to withdraw stimulus measures to support recovery in the world’s third largest economy and pursue further monetary tightening.

The MSCI Asia Pacific Index ended Friday’s trading by rising 0.3%. Nikkei 225 ended Friday’s trading by rising 0.81% to close at 10751.26 points. The S&P/ASX 200 closed on Friday at 4818.10 after rising 0.08%. Hang Seng ended Friday’s trading down 0.09% to close at 21209.74 points.

Published on Sat, Mar 13 2010, 11:02 GMT