Asian Market Update

Asian equity markets traded to the downside after the S&P cut several EU sovereign ratings on Friday. On renewed risk aversion saw the the dollar gain against all the majors, seeing the biggest gains against the A$. Euro held steady down 0.3% to the $1.2640 level. EUR/JPY declined below ¥97.15 a fresh 11-year low with the yen taking on its safe haven status. An un-named senior EU official said that S&P downgrade of France and Austria means the EFSF could lose €180B of lending capacity. The S&P AAA rating for the EFSF can be retained if the 4 remaining AAA rated EU countries raise their guarantees.

Former MoF official Sakakibara (aka Mr. Yen) expects that Japan could be downgraded soon; Strong Yen likely to continue and only an intervention with the help of the US would be successful. Also sees the US at risk for another recession in 2-3 years. Japan DPJ Tax Policy Chief Fuji also said Japan faces a sovereign rating downgrade without a tax hike. Taiwan's newly re-elected (with 51.6% of the vote) pro-unification President Ma has indicated there is no clear timetable for political talks with China during his new term and has no plans to visit mainland China in any capacity.

China Stats Bureau's Ma said that downward pressure is on the rise and domestic demand continues to increase. There is additional room to implement prudent monetary policy, macro policy fine tuning should balance inflation and growth. A China Govt Advisor said that Asian countries should cooperate to pursue a free trade agreement and should increase local currency swaps and bond issues. PBoC Dep Gov Yi said that 2012 foreign capital inflows to show net increase but come below the average of recent years, this decline of inflows will help to ease inflation.

Speakers/Geopolitical/In the press

IMF's Lipton: To cut 2012 global growth outlook; Pause in monetary tightening is needed wherever inflation has eased

(CN) According to China Real Estate Information Corp (CRIC), over half of China's top 20 property developers did not meet sales targets in 2011 - China Daily

(CN) PBoC will conduct reverse repos on Jan 17th and 19th - US Financial press

(JP) Bank of Japan (BoJ) Gov Shirakawa: EU debt remains the primary risk to Japan's economy; Japan banks are not having any trouble with funding

Equities

FMG.AU: North Star has in increased magnetite deposit of 880M tons to 12,188M tons; Will look for partners on the project

NOBL.SG: Chairman: Company is doing extremely well; Will have difficult trading conditions in 2012

KDDI, 9433.JP: To lower charges on smartphone plans for those who also subscribe to TV packages by up to 30% starting in March - Nikkei News

Baoshan Iron & Steel, 600019.CN: Reports FY11 Net profit CNY7.3B, -43% y/y

(CN) China top 4 banks total yuan loans target for 2012 seen at CNY2.85T - Chinese press

LNC.AU: In talks with a potential cornerstone investor, may move forward with plans for operations in China - filing

LEI.AU: Guides H1 Net profit A$340M v A$335Me; Affirms FY12 Underlying profit A$600-650M v A$606Me