New Zealand Business Confidence Surges As Trade Deficit Narrows

Daily Forex Fundamentals | Written by ecPulse.com | Apr 29 09 07:05 GMT |

Another bright day for the Pacific Rim with not many fundamentals from the region as the main focus in markets and across the globe remain the Swine Flu where it has recently claimed more than 100 victims in New York. However today, our main focus will be on New Zealand as business confidence surged the most since 1993 whereas the annual trade deficit narrowed. Kicking off with confidence, the biggest gain witnessed in 16 years in April was due to the aggressive round of rate cuts to help salvage the economy as it seems now businesses are finding hope in a possible recovery which may recover previous losses and encourage more spending and hence employment to rise to normal levels. Companies are now becoming more pessimistic about the outlook of the economy over the upcoming year as 3.8 percent of all companies surveyed expected a drop in sales and profits over the next 12 months leaving 96.2 percent with an optimistic vision. This was compared to March's 21.2 percent who felt the economy was to deteriorate further. As the survey is conducted by the Australia and New Zealand national Bank Ltd., it is important to note that the bank said profits during the first half slumped 28 percent on bad debts which had doubled the amount. Net income fell to A$1.42 billion from a previous A$1.96 billion a year earlier during the six months ending March 31. The bank's weakening financing resulted in credit impairment to surge 98 percent during the period to reach A$1.44 billion. Due to that, the bank was forced to lower its dividends for the first time since the last recession that has hit Australia 18 years ago taking total dividends to 46 cents per share. After the confidence data, the bank also revised growth rates higher to show that the economy is forecasted to contract 2 percent over the year compared to the previous forecast in March of a 3 percent contraction. Regarding the trade balance, New Zealand's trade deficit narrowed in March to reach NZ$4.8 billion from NZ$5.16 billion as commodity prices eased and as exports were supported by aircraft sales. By the end of 2008, the trade deficit was 8.9 percent of GDP yet ANZ currently forecasts the gap to narrow to 5.8 percent by the end of 2009. Exports inclined more than imports this month which helped narrow the gap with overseas shipments surging 18 percent to NZ$4.04 billion whereas imports were up 6.9 percent to NZ$3.72 percent. Elsewhere in the region, South Korea also released its current account balance indicating that the surplus widened during March to reach $6.65 billion from a previous $3.56 billion as imports slumped further and the collapse in the export sector had slowed. The Bank of Korea said that this has helped stabilize the national currency as the surplus widened alongside cash flowing into their equity market. Although the nation was impacted by the global recession, its forecast for the surplus shows that it may witness an $18 billion surplus by the end of 2009 as they believe that the contraction in the economy is gradually slowing. Overseas shipments were up 10.5 percent in March while industrial output rose 6.8 percent. The outlook for the economy is shaping up to be quite positive as recovery may be witnessed soon. The Kospi Index rose 2.9 percent during the session snapping a three day loss as it trailed the MSCI Asia Pacific excluding Japan index which advanced 1.9 percent to reach 267.75 points as of 2:20 p.m. in Hong Kong after signs that earnings may be better than expected and the ease in commodity prices. The Taiex index in Taiwan was up 0.3 percent while Hang Seng Index of Hong Kong advanced 1.8 percent. The Nikkei Index was out today on holiday. Despite the Japanese markets are out for holiday, the BoJ rate decision is on queue where expectations are for steady rates at 0.10 percent. Let's not forget that the Fed's precede them today as the FOMC rate decision is to be released later toady with market expectations to witness a cut to 0.13 percent taking the benchmark close to Japan. With the ongoing weakness in the Japanese economy, the BoJ and the government are hoping that the record stimulus plan by Prime Minister Taro Aso is to help the economy limit the levels of deterioration as it is to shave of 1.9 percentage points to take forecasts to a 3.3 percent contraction Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. 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