Morgan Stanley Japan and Asia/Pacific Morning Meeting Notes 09/06/10 $EWJ

 

Apple, Inc. U.S. Consumer iPad Survey Signals Strong Demand $AAPL

Investment Thesis
•The market underestimates the earnings power of Apple’s mobile internet devices.
We view the combination of new product launches, broader distribution and more attractive

pricing as demand drivers over the next two years. Additionally, we believe iPhone, Touch and iPad
margins will remain above the corporate average, driving EPS upside as mix improves.

Potential Catalysts
• iPhone exclusivity expiration announcements in the US, Germany, Spain and Japan
• iPad shipment ramp as 3G version is launched and distribution expands in U.S. and internationally
• Further reductions in iPhone total cost of ownership (hardware or service plan cost)
Potential new content revenue streams, including books, magazines, video

Investment Risks
• Pricing and gross margin pressure if carriers push back on high iPhone subsidies in the face of exclusivity
expirations, competition, and network congestion
• Increased competition in the Smartphone market from Android-based devices, RIMM, Palm, etc

(IGM)[JAPAN FIN MIN KAN] is over the wires, saying that the likelihood of Japan escaping a double dip recession has increased,... $EWJ

 

JAPAN FIN MIN KAN] is over the wires, saying that the likelihood of Japan escaping a double dip recession has increased, with economic indicators having improved a lot. That said, he still wants more efforts to end deflation; and confirms earlier press rpts that BOJ Gov Shirakawa is meeting today with Prime Minister Hatoyama for the first of what will be periodic meetings, likely to be every three months between the government and the central bank. Otherwise on the Yen, he notes its recent weakening has been good for Japanese businesses. Even though BOJ sat pat on policy this week; pressure from the Govt on the BOJ to adopt further QE measures looks set to continue, especially heading into the July elections and or if the Yen strengthens

International Interest Rate Strategist Fiscal Pressures and Swap Spreads

• Concrete financial support is yet to materialize for Greece. We expect the
market’s focus to shift to issuance and implementation risks.
• Our analysis of swap spreads suggests scope for 10yr Bunds to trade flat and 10yr gilts to trade north of 30bp over swaps.
• The upcoming supply profile clearly supports 30yr Bunds over 30yr gilts.
• The 30yr TIPS auction on 22 February is likely to be a success. We see scope for the 10s20s TIPS real yield curve to flatten. Euro BEs wideners look
interesting.
• We include our end-February index projections for the EGBI, the UK, US,
Canada, Australia and Japan.
• The week beginning 22 February sees $126bn of UST issuance in the 2-, 5-
and 7-year sectors (equivalent to 815k DV01 10-year futures). The net cash
requirement in Euro continues to remain non-supportive until the week
commencing 1 March.

report here ------>>> CLick

Japan: 4Q real GDP jumped 4.6%, but details are not so encouraging

Japan: 4Q real GDP jumped 4.6%, but details are not so encouraging


Fourth quarter real GDP was stronger than expected, jumping 4.6%q/q, saar. However, details were not so encouraging; inventories continued to increase through last year when the inventory to final sales ratio elevated, and public consumption rose more than our expectation, which is basically irrelevant to economic cycle. While the strong growth in 4Q GDP validated our relatively bullish view that Japan's export-driven recovery continued, the details were not so positive in terms of near-term outlook. We maintain our forecast on 1H10, which looks for a slowdown to 1.5-1.8%ar growth from an average of 3.3% growth between 2Q09 and 4Q09.

Other details were not so far away from our expectation, but they were slightly softer. Indeed, despite a 1.7%ar fall in real labor income, private consumption was firm (+2.7%) as expected, rising at a close pace to in 3Q (2.4%). Net trade contribution to GDP growth (2.2%pt) was stronger than our expectation (1.1%pt), but that was mainly due to the softer than expected imports (+5.3%, instead of +15.0%) that probably portrayed the weakness of domestic demand. The capex eventually turned to grow (+4.0%), but the pace was much less than expectation (+12.0%). The decline in housing and public investment was larger than anticipated.

Worth noting is that the firmness of private consumption was mainly driven by the durable goods consumption, which has been supported by government incentives to purchases the enviroment-frendly goods. Service consumption fell again in 4Q. This skewed strength suggest that underlying trend of consumption remains weak when labor income continues to decline.

The revision of past data was significant, especially in 2Q (from 2.7% to 5.2%), mainly due to the change of export series, which reflected the revision of seasonal adjustment. According to the Cabinet Office, the motivation for the revision was that seasonal factors of the trade series were distorted by the extraordinary plunges in 4Q08 and 1Q09. The Office decided to effectively exclude these periods to avoid the distortion in the estimation of seasonal factors. On the other hand, the 3Q growth was revised down to 0.0% from 1.3% with a large downward revision in private consumption (from 3.8% to 2.4%) and upward revision in imports (from 13.9% to 23.3%). The large swing in growth rate after the 12.3% plunge in 1Q09 (5.2% in 2Q, 0.0% in 3Q, 4.6% in 4Q) made difficult to judge the trend, but the average of these three quarters (3.3%) looks reasonable rate of growth, which is decisively higher than the 0.5% potential growth rate, but definitely soft recovery after the record downturn in 4Q08 and 1Q09

JPMorgan Securities Japan Co., Ltd