China s reserve ratio easing boosts Asian markets

Asian stocks took China’s cut in reserve ratio requirements as a positive and went to trade higher across most major regional indices.

The MSCI Asia Pacific index was 1.1% higher in early afternoon Tokyo trading. S&P500 index futures were last pointing to a rise of around 0.6%, compounding the good news.

Whether or not this is the beginning of a coordinated and aggressive monetary easing campaign is still too early to tell, but many across the region are now speculating that with inflation closer to target levels, there might be room for more moves in the coming months.

Copper added 1.45 after last weeks’ losses while gold maintained its recent levels to last trade at US$1736/oz.

In other regional economic news, Thailand’s economy – obviously devastated by several flooding late last year – shrunk by 9%, after rising by a revised 3.7% in the prior quarter. The floods were the worst in almost 70% and hit production at many Japanese and South Korean owned manufacturing plants. The fall was much larger than market expectations of 5%.

The Thai economy grew by only the slimmest margin – 0.1% – in 2011. Thailand is noteworthy because it is Southeast Asia’s second largest economy and the numbers could translate into softer earnings for regional multinationals exposed to manufacturing disruptions.

In Australia’s corporate reporting season, Bendigo & Adelaide bank reported cash earnings of $163m, slightly above market expectations of $160.7m. Unlike its larger peers, several capital raisings in recent years has increased the capital base and sees returns on equity at a still sluggish 8.5%.

Steel manufacturer BlueScope reported a net underlying loss of $76m and with not much good news in site, sending shares lower.

Amcor, one of the largest pure-play listed global packaging exposures, reported that sales are in excess of $12bn annually. It has operations in over 40 countries and operates out of around 300 sites. Its numbers are a good read into global consumption patterns and trends in commodity prices which impact its margins and cash flow. Underlying earnings of $305m are 14% higher than last year, thanks to benefits from recent acquisitions and a focus on more profitable operations, moving out of loss making areas.