Asia close: China may cap loans to local governments SIVs

Date: Friday 22 Jun 2012

Nikkei-225: 0.29%
Hong Kong: -1.40%
Shanghai: -1.40%
Taiwan: -0.78%
South Korea: -2.21%
New Zealand: -0.30%
Philippines: -0.21%
Thailand: -0.13%

The majority of the main Asian equity benchmarks finished the week close to 1 week lows following the sharp sell-off seen overnight on Wall Street. That following the release of a barrage of relatively weak economic data. Yet what most seems to be unnerving some investors is the possibility that on this occasion central banks may be somewhat more wary of acting forcefully.

Hence the large drop seen in commodity prices yesterday, with the S&P GSCI falling into bear-market territory.

Perhaps the most important news item on the economic front regionally is that the China Banking Regulatory Commission suggested limiting loans to local government financing vehicles to levels reached at the end of 2011, according to a person with knowledge of the matter cited by Bloomberg.

Also of interest, the Japanese Cabinet Office today upgraded its view on capital spending for the first time in three months on the back of a pick up in corporate profits and support from reconstruction, adding that the economy is recovering moderately.

As an aside, foreign investors purchased Japanese equities last week for the first time in nine, although bond purchases fell.

Meantime, and in the equity space in Tokyo, Sony rose sharply on news that it may invest in scandal-ravaged Olympus. It may also form an alliance with Panasonic to manufacture next generation TVs.

Bridgestone dropped 1.2%; the tire-maker may extend output cuts due to the weakness in European and Chinese demand.

Nissan Motor, Japan’s third-largest carmaker, retreated on news that chief executive officer Carlos Ghosn is considering stepping down before the company’s next mid-term business plan begins in about five years.

AB

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