Asian Market Update: Nikkei at 2-month lows after in-line Q3 Tankan, weak CAPEX; Russia, India PMI top estimates, but China disappoints


ECONOMIC DATA

- (AU) Australia Sept AIG Performance of Manuf Index: 52.0 v 51.7 prior

- (JP) Japan Q3 Tankan Large Manuf Index: -33 v -33e; Non Manuf Index: -24 v -26e

- (JP) Japan Q3 Tankan Large Manuf Outlook: -21 v -26e; Non Manuf Outlook: -17 v -22e

- (JP) Japan Q3 Tankan Large All Industry CAPEX: -10.8% v -9.0%e

- (JP) Japan Aug Retail Trade M/M: 1.0% v 0.3%e ; Y/Y: -1.8% v -2.4%e; Large Retailers Sales: -6.8% v -7.2%e

- (KS) S Korea Sept Ext Trade Exports: -6.6% v -10.5%e; Exports Total: $35.0B v $29.0B prior

- (KS) S Korea Sept Ext Trade Imports: -25.1% v -26.6%e; Imports Total: $29.6B v $27.3B prior

- (KS) S Korea Sept Ext Trade Balance: $5.4B v $1.7B prior

- (KS) S Korea Sept HSBC Manuf PMI: 54.9 v 55.6 prior

- (CH) China Sept PMI Manufacturing: 54.3 v 55.0e

- (RU) Russia Sept Manuf PMI: 52.0 v 49.6 prior

- (KS) South Korea Sept CPI M/M: 0.1% v 0.3%e; Y/Y: 2.2% v 2.4%e

- (JP) Japan Sept Vehicle Sales: 3.5% v 2.3% prior

- (IN) India Sept Manuf PMI: 55.0 v 53.2 prior


SPEAKERS

- Major Asian equity markets are trading to the downside, as disappointment from US ADP jobs report spread overseas, infusing with a set of mixed to negative fundamentals in the region. In Japan, Q3 Manuf Tankan was in line with estimated at -33, but industry capital expenditures fell more than expected, sparking concerns over corporate expansion plans in the "post-stimulus" era. China September PMI was also perceived as ultimately disappointing, coming in at expansionary 54.3 but missing estimates of 55.0 and accelerating equity market selling. In the final hour of trading in Tokyo, Nikkei225 is hovering at 2-month lows around 9,970, down 1.6%. Both S&P/ASX and Korea's Kospi have reversed initial rallies as well. S&P/ASX is down 0.7%, while the Kospi is leading the region lower with a 1.7% drop after another currency market intervention against excessive KRW strength. China's markets are closed for holiday, and front-month S&Ps point to a moderately lower open, trading down 0.8%.

- Among notable speakers, Asia Development Bank's Kuroda pointed out that Asia is likely to recover faster than the G-3 economies. Over in Japan, Government spokesman Hirano remained cautious after the mixed Tankan results, noting the data shows slight improvement for businesses, but conditions remain severe. Specifically, Hirano said he was most concerned about further deterioration in the labor market after poor CAPEX levels. In South Korea, trade ministry reflected on the better than expected balance of trade data, forecasting similar export levels of low declines in September and sharply higher levels of growth over 10% in November and December. With currency movements driving much of the decline on the Kospi, trade official said FX fluctuations should be left for the markets to determine. In Philippines, Treasurer Tan said he would consider a variety of financing options for the budget deficit, including tapping of USD reserves. Tan noted that initially the plan was to sell samurai bonds, but other financing options were also possible. Philippine Economic Development official Arroyo saw the economy's GDP expanding on strong manufacturing, agriculture, and remittances.
Yesterday, Philippine officials were also optimistic the economy will be able to meet objectives for 2009 to grow 0.8-1.8%.


EQUITIES

- In equity specific news, Japanese and Korean automakers reported their monthly sales that were widely improved on y/y basis. Toyota domestic Sept vehicle sales grew 9% to 139.8K, Honda domestic sales grew 15% to 48K, and Nissan Toyota domestic Sept vehicle sales grew 4% to 55K. In Korea, Hyundai Sept sales rose to 307.2K units v 190.5K units y/y and Kia Motors sales rose 163.2K units v 96.7K units y/y. Outside the auto sector on the Nikkei, Japanese press saw Japan Airlines posting a record operating loss in 1H, and Seven & I was said to consider closing 16% of Ito-Yokado supermarket chain by early 2013.

- In Sydney, OneSteel CEO said prices for steel have likely bottomed, but may continue to be volatile for some time. Merrill Lynch was also negative on Woolworth's move into hardware retailing sector, noting it would cost the company A$623M in losses over the next five years and face delays in regulations and approvals beyond estimates. In the commodities space, Australian press said Yanzhou Coal filed documents regarding its proposed A$3.5B takeover of Felix Resources that may improve the company's chances of approval from Foreign Investment Review Board.


CURRENCIES/COMMODITIES

- In currencies, USD strengthened against European majors after EU's Almunia said the Eurogroup will discuss appreciation of EUR, looking to prepare a position ahead of this Saturday's G7 meeting. EUR/USD approached 2-week lows trading down toward 1.4550, and USD/CHF rose above 1.07. USD also strengthened against the Yen, rising above 90.00 after BOJ's Noda said the recent commentary from Finance Minister Fujii did not imply support of stronger yen. Commodity currencies were moderately lower, as AUD/USD fell below 0.88 amid the overall USD strength. Earlier in the session, Australian Financial Review commented on the prospects of RBA rate tightening being lifted by stronger than expected retail sales and house prices data reported yesterday. In commodities, front month crude pared its intraday advance, retreating back below $70.00 level amid overall risk aversion across the markets.