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Asian Market Update: Additional $6B in TARP Funds Extended to GMAC, Korea's Industrial Output Falls to 21-year Lows as Business Outlook Slumps, Japan Rumored to Announce Own Version of TARP
www.investing.com/analysis/fundamental/asian-market-update%253A-additional-%25246b-in-tarp-funds-extended-to-gmac-korea%2527s-industrial-output-falls-to-21-year-lows-as-business-outlook-slumps-japan-rumored-to-announce-own-version-of-tarp--15497
Asian Market Update: Additional $6B in TARP Funds Extended to GMAC, Korea's Industrial Output Falls to 21-year Lows as Business Outlook Slumps, Japan Rumored to Announce Own Version of TARP
By Trade The News | Dec 30, 2008 07:00PM ET
- The troubled US auto industry received another infusion of liquidity from the TARP program - this time to support GM's financing arm GMAC. The US Treasury announced a plan to sink an additional $6B, with $5B allocated to preferred 8% dividend paying shares and $1B in direct loan to GM for investment in GMAC. The action is perceived as a much needed boost for GM effort to convert GMAC to a bank holding status, transition that had to this point been delayed past the deadline for debt-to-equity exchange late last Friday. This development has also lifted investor sentiment in the US, with front month S&P futures rising briskly following the announcement.
- In Tokyo, a half-session ahead of tomorrow's holiday has closed the book on a record-breaking year. Although the Nikkei ended abbreviated trading up 1.3%, overall the index fell 42% in 2008 - the worst year ever. Predictably in contrast, government fixed income benefited from safe haven flows, registering the best performance in 2008 since the last period of global economic weakness in 2002. The yields in 10-yr JGB's have also hit a 5-year low in today's trading, briefly falling below 1.165. Meanwhile, Sankei press reported on rumors of Japan government considering its own version of TARP - a $110B public fund directed to buy bad loans from banks' balance sheets hoped to be implemented by the end of March. Among the Nikkei's bigger movers of the session, oil producer Inpex rallied over 5% on sharp gains in crude prices as Israel bombing in Gaza City and protests in the Arab world intensified. Insurers Aioi, Nissay, and Mitsui Sumitomo rumored to be considering a 3- way merger pared their double-digit gains of the prior session, selling off by 5%, 4.8% and 3.5%. Nikkei media further speculated that Aioi and Nissay may join together first before integration with Mitsui. In spite of the auto industry woes, world's tire-producing giant Bridgestone was raised at Mizuho, prompting a 3.7% rally in its shares, while a report of cost reduction in manufacture of Sony's PS3 console by iSupply boosted the stock by 1.2%. Separatey, Sony, Canon, and other major exporters in Japan were reported to begin raising shipment prices for its products in order to offset the impact of the rising Yen and contraction of global demand for discretionary electronics. Sharp was also initially weaker after announcing that it will book a 50B yen fiscal year loss due to impairment charge related to its stake in Pioneer. Sharp had taken on 14% of Pioneer shares at 1,385 yen just over a year ago, only to see that price slump to just above 150 yen.
- In Sydney, S&P/ASX material names had another strong session amid a geopolitically-oriented rally in crude tracked by other commodities. Woodside Petroleum was up 3.5% in late session, resuming production in certain locations after a regional tropical storm. BHP and Rio Tinto were also up 3.4% and 2.3% respectively, while gold miners Newcrest and Sino Gold were up 1.6% and 5.9%. Oz Minerals was halted, having secured a 2-month extension of debt refinancing as it looks to make progress in asset sales while also suspending its dividend payment. Qantas Air fell 1.5%, announcing removal of a domestic fuel surcharge tax starting in January. The broader index spent most of the session in the positive, ending up 0.9%.
- In Korea, oil names have staged a crude-driven rally of their own, with SK energy and GS Holding gaining 12% and 6%. The broader Kospi was up over 2%, but retreated to a 0.6% finish on poor economic data. South Korea's November industrial production came in at -10.7% on a monthly basis, the biggest decline since mid-1987, while the outlook for Business in January was also at a record low, coming in at 44 vs prior month's 52 level.
- In currencies, the sharp reversal in favor of the USD seen earlier was once again scaled back. EUR/USD sold down to week-long support around 1.39 in US hours but gained sharply above 1.41 in Asian markets. Similarly, USD sold off to 1.05 against CHF and up to 1.4540 against GBP, even though a considerable portion of that decline has been retraced. Japanese Yen volatility remains more muted - USD/JPY is trading within 90-91 range, EUR/JPY December rally is stalled at 130, and GBP/JPY continues to consolidate its sterling- weakness driven decline just above 130. USD/CAD is contained by 1.2230 resistance, while AUD/USD oscillates around 0.69. Korean Won has been notably strong, trading near two month highs against USD just above 1,250.
- At the time of writing, crude oil is lower after gaining earlier during the Asian session. During the NY session, oil prices closed higher by more than 6% and above $40/bbl on concerns related to the conflict on the Gaza Strip and bargain hunting. According to one analyst, any signs that Iran is seeking to join the conflict with Israel could add further upside to oil prices. In terms of oil demand, South Korea's 21-year low in industrial production appears to have had an impact on an intraday basis, sending crude prices under $40 following the data release as the country is the world's 5th largest oil importer. Spot Gold is declining after opening the Asian session higher. Of note, gold is lower despite the gains being seen by the euro and Swiss franc against the USD. Traders could be taking profits in gold as the metal has risen by close to 4% in the past two sessions on the geopolitical tensions in the Middle East. With trading in Tokyo closed until 2009, Tokyo Gold finished 2008 16% lower, which was the largest annual decline in 25 yrs, as the gains in the yen weighed on the metal.
- In Tokyo, a half-session ahead of tomorrow's holiday has closed the book on a record-breaking year. Although the Nikkei ended abbreviated trading up 1.3%, overall the index fell 42% in 2008 - the worst year ever. Predictably in contrast, government fixed income benefited from safe haven flows, registering the best performance in 2008 since the last period of global economic weakness in 2002. The yields in 10-yr JGB's have also hit a 5-year low in today's trading, briefly falling below 1.165. Meanwhile, Sankei press reported on rumors of Japan government considering its own version of TARP - a $110B public fund directed to buy bad loans from banks' balance sheets hoped to be implemented by the end of March. Among the Nikkei's bigger movers of the session, oil producer Inpex rallied over 5% on sharp gains in crude prices as Israel bombing in Gaza City and protests in the Arab world intensified. Insurers Aioi, Nissay, and Mitsui Sumitomo rumored to be considering a 3- way merger pared their double-digit gains of the prior session, selling off by 5%, 4.8% and 3.5%. Nikkei media further speculated that Aioi and Nissay may join together first before integration with Mitsui. In spite of the auto industry woes, world's tire-producing giant Bridgestone was raised at Mizuho, prompting a 3.7% rally in its shares, while a report of cost reduction in manufacture of Sony's PS3 console by iSupply boosted the stock by 1.2%. Separatey, Sony, Canon, and other major exporters in Japan were reported to begin raising shipment prices for its products in order to offset the impact of the rising Yen and contraction of global demand for discretionary electronics. Sharp was also initially weaker after announcing that it will book a 50B yen fiscal year loss due to impairment charge related to its stake in Pioneer. Sharp had taken on 14% of Pioneer shares at 1,385 yen just over a year ago, only to see that price slump to just above 150 yen.
- In Sydney, S&P/ASX material names had another strong session amid a geopolitically-oriented rally in crude tracked by other commodities. Woodside Petroleum was up 3.5% in late session, resuming production in certain locations after a regional tropical storm. BHP and Rio Tinto were also up 3.4% and 2.3% respectively, while gold miners Newcrest and Sino Gold were up 1.6% and 5.9%. Oz Minerals was halted, having secured a 2-month extension of debt refinancing as it looks to make progress in asset sales while also suspending its dividend payment. Qantas Air fell 1.5%, announcing removal of a domestic fuel surcharge tax starting in January. The broader index spent most of the session in the positive, ending up 0.9%.
- In Korea, oil names have staged a crude-driven rally of their own, with SK energy and GS Holding gaining 12% and 6%. The broader Kospi was up over 2%, but retreated to a 0.6% finish on poor economic data. South Korea's November industrial production came in at -10.7% on a monthly basis, the biggest decline since mid-1987, while the outlook for Business in January was also at a record low, coming in at 44 vs prior month's 52 level.
- In currencies, the sharp reversal in favor of the USD seen earlier was once again scaled back. EUR/USD sold down to week-long support around 1.39 in US hours but gained sharply above 1.41 in Asian markets. Similarly, USD sold off to 1.05 against CHF and up to 1.4540 against GBP, even though a considerable portion of that decline has been retraced. Japanese Yen volatility remains more muted - USD/JPY is trading within 90-91 range, EUR/JPY December rally is stalled at 130, and GBP/JPY continues to consolidate its sterling- weakness driven decline just above 130. USD/CAD is contained by 1.2230 resistance, while AUD/USD oscillates around 0.69. Korean Won has been notably strong, trading near two month highs against USD just above 1,250.
- At the time of writing, crude oil is lower after gaining earlier during the Asian session. During the NY session, oil prices closed higher by more than 6% and above $40/bbl on concerns related to the conflict on the Gaza Strip and bargain hunting. According to one analyst, any signs that Iran is seeking to join the conflict with Israel could add further upside to oil prices. In terms of oil demand, South Korea's 21-year low in industrial production appears to have had an impact on an intraday basis, sending crude prices under $40 following the data release as the country is the world's 5th largest oil importer. Spot Gold is declining after opening the Asian session higher. Of note, gold is lower despite the gains being seen by the euro and Swiss franc against the USD. Traders could be taking profits in gold as the metal has risen by close to 4% in the past two sessions on the geopolitical tensions in the Middle East. With trading in Tokyo closed until 2009, Tokyo Gold finished 2008 16% lower, which was the largest annual decline in 25 yrs, as the gains in the yen weighed on the metal.
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Asian Market Update: Additional $6B in TARP Funds Extended to GMAC, Korea's Industrial Output Falls to 21-year Lows as Business Outlook Slumps, Japan Rumored to Announce Own Version of TARP
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