BL: Asia Weathers Europe Crisis as China Exports, Korean Jobs Exceed Forecasts
By Jacob Greber
June 10 (Bloomberg) -- Asia’s economies signaled they are best placed to weather Europe’s debt crisis this week as data from China’s exports to job growth in South Korea and Australia surpassed analysts’ forecasts.
Regional stocks rose after Chinese shipments abroad climbed 48.5 percent in May from a year earlier, the customs bureau said today, and separate figures showed a jump in property prices. Unemployment rates in South Korea and Australia fell last month, according to government figures, and Japan reported its economy expanded more than previously estimated in the first quarter.
The resilience may amplify American calls for Asian nations to reduce reliance on exports and increase their contribution to a world recovery clouded by Europe’s fiscal woes. China has so far resisted letting its yuan rise against the dollar, seeking to shield exporters, while Japan’s central bank has flagged the recovery in refraining from stepping up injections of cash.
“These numbers are very positive,” said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. “Asian countries have pretty strong fiscal positions and they’ve got growing domestic demand which will help insulate against any shocks out of Europe.”
Also, the “sharp pick-up in China’s trade surplus will not go unnoticed in Washington, where there will be more pressure on the U.S. administration out of Congress to take a tougher line with China” on its currency, Jackson said.
Stocks Surge
The economic reports helped stoke a surge in stock markets around Asia. The MSCI Asia Pacific Index rose 0.8 percent to 110.68 as of 1:54 p.m. in Tokyo, and S&P/ASX 200 Index in Sydney advanced 1.1 percent at 3:40 p.m. in Sydney. In contrast the Standard & Poor’s 500 Index lost 0.6 percent to 1,055.69 as of 4 p.m. in New York yesterday.
Asia’s growth contrasts with several European nations that may see their gross domestic product shrink, with the risk of a “double dip” recession, Andrew Burns, lead writer of the World Bank’s Global Economic Prospects 2010 report, said in a telecast from Washington late June 9. Burns didn’t single out European countries by name.
Eastern Europe, Central Asia and Latin America are the developing regions most in danger of an impact from the crisis that started in Greece, he said.
East Asia wouldn’t be unscathed by a return to recession in the advanced economies, Burns said. “That’s going to have important knock-on effects in East Asia, particularly because it is a very heavy trading region.”
The Bank of Korea cited the European situation in keeping its benchmark interest rate at a record-low 2 percent today.
Considerable Uncertainty
“There is a considerable degree of uncertainty over the actual growth path, caused by the fiscal problems of European countries,” Governor Kim Choong Soo and his policy board said in a statement today.
At the same time, Asia will continue to lead the global rebound, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said June 9. That brings its own challenges, with increasing capital inflows and the risk of overheating if policy makers fail to take “appropriate” action, he said in a speech in Singapore.
China’s property prices rose at the second-fastest pace on record in May, jumping 12.4 percent from a year earlier, a sign that the government crackdown on speculation has yet to avert the threat of an asset-price bubble.
“The Chinese property market is still growing at an unsustainable rate,” said David Taylor, a market analyst at CMC Markets in Sydney. “There’s also evidence that the sovereign debt woes of Europe are yet to have a material impact on China’s trade balance.”
Economic Growth
Signs of economic strength in Asia are prompting leaders and policy makers to boost economic forecasts for their economies. Malaysian Prime Minister Najib Razak said today that economic growth will average 4.2 percent in the 2006-2010 period, and Sri Lankan central bank Governor Nivard Cabraal said his nation’s economy may expand faster than earlier forecast in 2010.
Japan’s economy expanded at an annualized 5 percent rate in the three months ended March 31, quicker than the 4.9 percent reported last month, driven by exports and an upward revision to consumer spending.
China’s customs bureau said today the nation posted a trade surplus in May of $19.53 billion.
By contrast, the U.S. trade deficit probably widened to $41 billion in April from $40.4 billion, according to the median estimate of 75 economists surveyed ahead of a report due to be published at 8:30 a.m. in Washington.
‘Too Good’
“Unfortunately for Chinese policymakers the latest trade figures are probably ‘too good’,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “The lift in the trade surplus will again get politicians in Washington rattling sabers about the value of the yuan.”
Some economies in the region are growing fast enough for policy makers to begin raising borrowing costs. New Zealand central bank Governor Alan Bollard today increased the official cash rate to 2.75 percent from a record-low 2.5 percent, the first boost in three years.
India’s central bank has raised rates twice since mid-March by a quarter-percentage point each time, taking the reverse- repurchase rate to 3.75 percent.
In Australia, where central bank Governor Glenn Stevens has led Group of 20 policy makers with the most aggressive round of interest rate increases, a mining investment boom continues to stoke demand for workers.
Australian employers added 26,900 payrolls in May, more than the 20,000 forecast by analysts, pushing down the jobless rate to 5.2 percent from 5.4 percent, almost half the level of the U.S. and Europe.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Last Updated: June 10, 2010 03:10 EDT
