Chinese Premier Supportive of Yuan Flexibility

Premier Wen Jiabao Supportive of Yuan Flexibility

A week before Chinese officials are set to visit Washington over trade disagreements, Premier Wen Jiabao said that China will move towards a gradual increase in the yuan’s flexibility.  The headline official additionally noted work towards a more balanced trade flow, improving the country’s balance of payments which has remained a hot topic with global counterparts.  Incidentally, the comments rattled the underlying pair, helping it to trade back once again, rising to 7.6843 in the New York afternoon.  Although surprising the market overall today, the comments ring very similar to previously released statements by other policy officials.  The absence of any real action has prompted US Treasury Secretary Paulson to call for something tangible from Chinese officials last week.  

China’s Industrial Output Advances On Rising Exports

It seems like the same old story, positive economic data was released once again from the world’s fastest growing economy.  For the month of April, output in China accelerated at a 17.4 percent pace, holding above 17 percent for the second straight month.  Boosting the higher figure were gains in exports, as was visibly evident during the trade surplus report.  According to the April report, exports vaulted higher by an impressive 26.8 percent and helped the overall surplus to swell 63 percent from a year ago.  The positive report, although optimistic for the Chinese economy, does come laden with some concerns that interest rates will be aggressively tightened in order to control excessive liquidity in the economy.  As a result, traders are expected closer to 50 basis points on the next increase, in line with the aggressive stance that the People’s Bank of China has taken on since the beginning of last year.  Central bankers have used both methods of reserve requirements and interest rates in order to curb inflationary pressures and domestic spending.

Singapore Stocks Advance To Record

After plummeting yesterday, the Singapore stock market rebounded to a record in the overnight session, supported by real estate stocks and higher earnings.  Higher earnings in both Olam International and Jardine Cycle & Carriage, helped to lift the benchmark index higher till the close.  As a result, the Straits Times index gained 26 points to close 0.8 percent higher at 3,501.17.  CapitaLand, the region’s biggest property company rose 20 cents to close at S$8.40 while SC Global jumped 7.9 percent to S$5.45 on a positive earnings report.  For the quarter, the luxury residence developer reported net income that was higher by ninefold compared to year ago numbers.  Ultimately, however, the market’s good fortune was unable to help the underlying currency out as the overall trend was slightly higher for the USDSGD.  At the close in New York, the SGD was trading at 1.5204 compared to the 1.5162 close last night.   

Hang Seng Recovers From Yesterday’s Losses

The Hang Seng Index rebounded from yesterday’s losses as well, with major losers offering some comforting support in today’s session.  China Mobile helped to lead gains with HSBC still holding the negative selling tone, falling HK$1.30 to HK$139.00.  The day’s reversal was sparked on comments by Premier Wen Jiabao, as the policy maker noted that the nation will gradually increase the yuan’s flexibility.  Subsequently, the Hang Seng was able to add 69.11 points to 20,937.26 at the end of the day.  Weakness, however, was visible in the underlying currency.  But the bearish undertones will be put to the test as the market expects tomorrow’s employment data.  Expected by the consensus is the low rate of 4.3 percent, which will boost the underlying Hong Kong dollar as it reflects continued growth in the economy for the near term. Â