Categorized | Market Update

Market update 26/02/2013

Asia Market outlook
China — Headwinds from property curbs and gasoline price increase

The recent two announcements by the Chinese government had a
negative impact to the equity market last week.
First, the premier Wen reiterated 5 general guidance at a state
council meeting to curb China’s property market: 1) Further
strengthen average selling price (ASP) stabilization and require
local governments to set price targets; 2) Strictly curb the
investment/speculation housing demand and strictly implement
Home Purchase Restrictions (HPR) and differentiated mortgage
treatments; Expand property tax pilot program; 3) Increase property
housing supply and land supply and in principal, land supply in
2013 for commodity property should not be less than the average
land supply in the past 5 years; 4) Accelerate Social Welfare
Housing construction and set 2013 completion target at 4.7m units
and start target at 6.3m units; 5) Strengthen market supervision and
strengthen pre-sale system for commodity property.
The second headwind came from the National Development and
Reform Commission (NDRC) announcing that the government will
raise the retail prices of gasoline by 300 yuan per tonne and diesel
by 290 yuan per tonne starting from February 25th. The benchmark
retail price of gasoline will be lifted by 0.22 yuan per liter and diesel
by 0.25 yuan per liter, making it the first oil price adjustment in

Asian Equities
ASEAN vs North Asia
Based on economics, there is no evidence that ASEAN has
witnessed greater change than North Asia. GDP growth, workingage demographics, productivity, reserve coverage ratio, local
interest rates and sovereign ratings all rank higher in North Asia.
Current account surpluses are equally good. ASEAN ranks higher
in a smaller share of exports going to the rest of the world and in a
higher weight of domestic consumption in GDP. North Asia is at the
same levels if excluding China.
ASEAN does better on profitability ratios such as higher ROEs,
ROA & EBIT margin. ASEAN enjoys higher margins than North
Asia and its global peers. With the exception of HK, North Asian
margins are inferior to their global peers. Higher margins in ASEAN
have been somewhat attributed to a lower democracy index and
higher corruption perceptions.
Meanwhile North Asia is less geared, has higher asset turn, has
grown sales and, more importantly, shown higher EPS growth.
Factor analysis shows North Asia could likely outperform along with
global economy growth, a return of risk appetite and a value
investing style.

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GBPUSD 1.39690 1.39720 3
USDCAD 1.26430 1.26460 3
USDJPY 106.850 106.870 2
USDCHF 0.93590 0.93620 3
AUDUSD 0.78360 0.78390 3
NZDUSD 0.72910 0.72960 5
EURGBP 0.88000 0.88030 3
EURCHF 1.15090 1.15120 3
EURJPY 131.380 131.410 3
AUDJPY 83.730 83.780 5
GBPJPY 149.260 149.320 6
XAUUSD 1328.76 1329.16 40
XAGUSD 16.516 16.566 5