China Trade Surplus Widens, Producer Prices Increase

- Chinese Yuan Gains On Speculation of Higher Interest Rates

  • [B]China[/B][B] Trade Surplus Widens, Producer  Prices Increase[/B]

- Biggest Debt Offering, DBS Raises $2 Billion

  • [B]Asian Markets Lower Heading Into  Weekend[/B]

Chinese Yuan Gains On Speculation of Higher Interest Rates
The Chinese yuan gained against the dollar, rising to record levels of 7.6766 as speculation increased over the imminent decision to raise interest rates yet again. Central bankers will likely be forced to lift benchmark lending rates in the world?s fastest economy after reports that the trade surplus had widened again, and an upcoming consumer prices report that is expected to show looming inflationary pressures. According to the current consensus, consumer prices are estimated to remain above 3 percent, accelerating to 3.3 percent for the month of March. And the situation may become worse. Although monetary authorities have raised both interest rates and reserve requirements, consumers seem to be widely disregarding the decisions, boosting spending on excess cash liquidity in the economy. The notion has fueled the growth of investors as a recent survey purported 30.3 percent of 20,000 households are expected to invest in stock and stock related funds. As a result, the only panacea remains a flexible currency regime, clearly not an option at this point.

China Trade Surplus Widens, Producer Prices Increase
One the economic front, China?s trade surplus widened by an incredible 63 percent in the month of April, widening to $16.9 billion. The figure toppled analysts? esimates of $15 billion and adds to an already outstanding surplus for the first four months of the year. Currently the surplus stands $63.3 billion wide, 88 percent higher than a year ago. Unfortuantely, as good as the data is, the report will likely stand as a considerable weight on Chinese officials, in particular ahead of the strategic summit at the end of this month. Recent cases of jawboning and complaints have been mounting on the side of US congressmen lately, making the situation worse off. Subsequently, producer prices in the economy rose at a 2.9 percent annualized rate. The figure is of concern to central bankers as fears loom the effects may trickle down to the consumer.

Singapore?s DBS Pulls Off Biggest Debt Offering
A signal of times to come, Southeast Asia?s largest bank, DBS Group Holding Ltd., raised $2 billion in its biggest sale of bonds in the market today. With development peaking in the region, the major lender is hoping to capture further potential for the future as development and construction companies continue to require lending for major projects in Singapore. The fourth largest economy in Asia, Singapore has become a major market with bank lending rising a healthy 10.3 percent to S$201.4 billion this time a year ago.

Straits and Hang Seng Head Lower Ahead of the Weekend
Singapore?s stock market headed lower ahead of the weekend as DBS Group Holdings pared back on concern of overbought conditions. Losses remained limited overall, however, as Singapore Airlines looked to report higher earnings, boosting the company?s stock. When it was all said and done, the Straits Times index lost 22.34 points to close at 3,446.92. Subsequently, property developers helped to lead stocks in Hong Kong lower. Blue chip developers like New World Development and Sung Hung Kai Properties helped to lead decliners, with both declining 1.2 and 0.8 percent respectively. The Hang Seng ended the day losing 98.51 points at 20,746.27. Separately, next week?s economic schedule holds a handful of figures that may boost underlying currencies. In Singapore traders will be reviewing retail sales figures, which are expected to rise by only 2.5 percent and remain a far cry from the 18.1 percent in the previous month. Hong Kong enthusiasts will be looking at GDP survey results for the first quarter.