China industrial profits fall again

Asian Mid-session Update: China industrial profits fall again; Japan jobless rate 20-year low, but CPI still well shy of target

Economic Data

- (CN) CHINA OCT INDUSTRIAL PROFITS Y/Y: -4.6% (5th straight decline) V -0.1% PRIOR; YTD: -2.0% V -1.7% PRIOR

- (JP) JAPAN OCT OVERALL HOUSEHOLD SPENDING Y/Y: -2.4% V 0.0%E; biggest decline in 7 months

- (JP) JAPAN OCT JOBLESS RATE: 3.1% V 3.4%E; 20-year low

- (JP) JAPAN NOV TOKYO CPI Y/Y: 0.2% (4-month high) V 0.2%E; CPI EX FRESH FOOD Y/Y: 0.0% (5-month high) V -0.1%E

- (JP) JAPAN OCT NATIONAL CPI Y/Y: 0.3% (4-month high) V 0.2%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.1% V -0.1%E

- (JP) Japan BOJ Oct National core-core (ex-fresh food/energy) CPI Y/Y: 1.2% v 1.2% prior

Index Snapshot (as of 04:30 GMT)

- Nikkei225 -0.3%, S&P/ASX -0.2%, Kospi flat, Shanghai Composite -1.5%, Hang Seng -1.2%, Dec S&P500 +0.2% at 2,092

Commodities/Fixed Income

- Feb gold -0.3% at $1,066/oz, Jan crude oil -1.3% at $42.49/brl, Mar copper +2.0% at $2.09/lb

- JGB: (JP) Japan MoF sells ¥2.28T in 2-yr JGBs; Avg yield: -0.004% v 0.011% prior; bid to cover: 5.18x (highest since December) v 4.20x prior

- (JP) Japan investors bought net ¥411B in foreign bonds v bought ¥871B in prior week; Foreign investors bought net ¥179B in Japan stocks v bought ¥327B in Japan stocks in prior week

- USD/CNY: (CN) PBoC sets yuan mid point at 6.3915 v 6.3896 prior; weakest Yuan setting since Aug 28th

- (AU) Australia MoF (AOFM) sells A$800M in 1.75% 2020 Bonds; avg yield: 2.286%; bid-to-cover: 3.3x

- (NZ) RBNZ sold net NZ$17M in Sept v bought NZ$138M in Aug

Market Focal Points/FX

- Asia markets are reversing the gains made in yesterday's session, with regulatory financial oversight in China and otherwise disappointing economic numbers weighing on sentiment. Recovery in base metals have put a floor under the ASX for the time being, with decline in Sydney more marginal than for other indices. With US markets on holiday, volatility in FX has been compressed - EUR/USD in a 15pip range above 1.06, USD/JPY in a 20pip range above 122.50, and AUD/USD in a 20pip range above 0.7210.

- Regulators in China are taking a closer look at the securities industry, with CSRC announcing it is conducting a probe into practice of top names CITIC and Guosen Securities for violations. Recall earlier this week, CITIC had indicated it inflated equity swap data by CNY1.06T during Apr-Sept period, but attributed the mistake to a technical glitch. China industrial profits also remained under pressure, falling for the 5th straight month by an even wider margin. China stats bureau did note that Fx and lower investment income affect corporates' profits less severely than in the past.

- Set of economic data out of Japan was mixed. Unemployment fell to a 20-year low, but that has not translated into more consumption as household spending fell by the biggest margin in 7 months. CPI numbers were slightly more rosy, but still nowhere near the 2% inflation target set out for H2 of next year. PM Abe is increasingly more cognizant of the slowdown that produced the 2nd Japan recession in 2 years, ordering compilation of extra budget for FY15 and also reduction of corporate tax rates to stimulate spending. However, Fin Min Aso said he would not go along with the plan without securing new revenue sources. Econ Min Amari reflected on the Abe decision, stating the cabinet still wants to meet target to halve primary budget deficit for FY15.

- Elsewhere, Korea's Fin Min pointed to weakness in exports weighing on other sectors of the economy such as production. In Australia, a survey sees unanimous analysts view of RBA remaining on hold next week. Economists with Citi still see a rate cut sometime over next 6 months as their baseline scenario however, suggesting the property price growth will slow down sufficiently on more housing construction in the pipeline.

Equities

Notable movers by sector:

- Consumer discretionary: Luk Fook Holdings 590.HK -3.3% (H1 result); Qantas Airways QANDA.AU +3.2% (Oct result, ACCC proposes to reauthorize alliance); OrotonGroup ORL.AU+6.5% (YTD result)

- Financials: Scentre Group SCG.AU +0.8% (reaffirms guidance); CITIC Securities 600030.CN -6.5%, Guosen Securities 002736.CN -6.0% (CSRC to probe for violations); Haitong Securities 6837.HK -3.8% (said to be probed as well)

- Industrials: Fuji Heavy Industries 7270.JP -0.8% (Oct result); Suzuki Motor Corp 7269.JP -0.5% (Oct result)

- Technology: Ourgame International Holdings 6899.HK -2.0% (shareholders' proposed sale); Hynix Semiconductor 000660.KR -1.7%; Tsinghua Unisplendour 000938.CN -0.8% (Hynix rejects Tsinghua's proposed collaboration)