Asian Market Update: Asian equities, commodity currencies plummet after China Q3 GDP undershoots consensus target, industrial production falls short of whisper numbers


ECONOMIC DATA

- (JP) Japan Sept Merchandise Trade Balance Total: ¥520.6Bv ¥620.Be (largest since Mar 2008); Adj Trade Balance ¥58.6B v ¥375.0Be (six-month low); Exports: -30.7% v -29.7%e (smallest decline since Nov 2008); Imports: -36.9% v -a38.0%e (5-month low)

- (AU) Australia Q3 CBAHIA House Affordability: 147.9 v 152.5 prior (1-yr low)

- (CH) China Q3 Real GDP Y/Y: 8.9% v 9.0%e; YTD: 7.7% v 7.1% prior (1-yr high)

- (CH) China Sept PPI Y/Y: -7.0% v -7.4%e (5-month high); Purchasing Price Index Y/Y: -10.1% v -10.7%e (4-month high)

- (CH) China Sept CPI Y/Y: -0.8% v -0.8%e (Highest level since Jan 2009)

- (CH) China Sept Retail Sales Y/Y: 15.5% v 15.5%e (Highest level since Jan 2009); YTD: 15.1% v 15.1%e

- (CH) China Sept Industrial Production Y/Y: 13.9% v 13.2%e (Highest level since Jul 2008); YTD: 8.7% v 8.6%e

- (CH) China Sept Fixed Assets Inv Urban YTD: 33.3% v 33.1%e

- (JP) Japan Aug All-Industry Index: 0.9% 0.4%e

- 01:00 (JP) Japan Sept Supermarket Sales Y/Y: % v -3.4% prior


SPEAKERS/PRESS

- Asian equity markets opened slightly lower and sold off further following a barrage of data from China that saw a somewhat disappointing Q3 GDP and September Industrial Production figures. With just about 90 minutes to go in Tokyo, Nikkei225, Taiex, and the Kospi are down by 1.5%. In Sydney, S&P/ASX is off by 0.5%, while Shanghai Composite entered midday break marginally lower. Financials, materials, and tech sectors led regional bourses to the downside across the board, while the defensive industrial names lagged the selloff with a more mild decline. Ahead of the Thursday US session, front-month S&Ps are tracking the Asia weakness with a 0.25% drop. Investors will tune in for the pre-open earnings out of Bristol Meyers, Delta, Dow Chemical, Novartis, and AT&T.

- Despite the multi-month highs across the Chinese data front, markets were generally disappointed by 8.9% Q3 GDP coming just short of the expected 9.0%. Industrial production was a 14-month high 13.9% and topped estimates of 13.2%. However, the figure fell short of the prior session's press whisper 14.1%. Rates of inflation decline continued to slow, albeit at a more moderate pace than in the prior months, and retail sales data came in line with estimates. Accompanying economic data, rhetoric from the Chinese govt was also just barely optimistic. Specifically, Chinese officials saw the economy still facing severely insufficient external demand amid an economic recovery requiring "consolidation". The government further noted that although momentum of the recovery has been building, expanding domestic demand is still challenging, and signs of inflation were not particularly evident. China's Stats Bureau also stated that the govt needed to create jobs and boost internal incomes. In terms of 2009 GDP, the 8% target was reaffirmed as attainable, while the prospects for a "W" shaped recovery were seen as increasingly less likely.

- Outside Chinese economic data, Japan's Reform Minister Sengoku warned that FY09/10 Tax revenue may actually underperform forecasts even further, coming in well below ¥40T. Over in South Korea, BOK confirmed press speculation that it would end its 1-yr bank bond purchasing program, becoming the next in line monetary body to begin draining liquidity from the financial system. Additionally, South Korean press reported the administration may prepare measures to curb currency volatility, potentially capping foreign currency loans by local banks from parent institutions. However, South Korea's Fin Min Yoon denied that speculation, noting that he still respects market-driven KRW movements. In US speakers, Fed's Lacker comments after market close targeted 2.5-3.0% GDP growth in 2010 amid broader stabilization of consumer demand.


EQUITIES

- In individual equities, Hyundai Motor smashed estimates on the top and bottom line, reporting Q3 Net KRW979B v KRW471Be on sales of KRW8.1T v KRW7.4Te. However, the company also noted that Q4 profitability may be hurt by stronger KRW, higher oil prices, and higher interest rates. In Japan, local press said Japan Airlines may report a FY loss of ¥500B, Toshiba may report a 1H operating profit of ¥1-2B, and Honda may post an operating profit of ¥60B in 1H. All of the named companies said they were not the source of those reports. In Sydney, Newcrest reported Q1 gold production falling 5% q/q and copper production falling 10% q/q. The company did however reaffirm its FY output forecast, and company CEO noted continued improvement in all segments of production. Elsewhere, Santo posted Q3 Rev of A$557M, a decline of 24% y/y despite a 5% increase in output.


CURRENCIES/FIXED INCOME/COMMODITIES

- In FX, the greenback strengthened across the board after the mixed China data and commentary, registering its biggest gains against commodity-related currencies. AUD/USD fell from near 0.93 session high below 0.9230, USD/CAD rose from 1.0420 to 1.0480, and NZD/USD shed a big figure to 0.7504 session low. In European majors, USD gains were more subdued but did see EUR/USD and GBP/USD break below 1.50 and 1.66 respectively. Japanese Yen was marginally weaker, with USD/JPY rising to 91.20 session high late in the day.

- Crude oil prices have moved lower and are trading below $81/bbl, following China's Q3 GDP and monthly industrial production data. During the earlier US session, oil prices rose by more than 2% to the highest settlement price since early Oct 2008 ($81.37). The US session gains were driven by the weaker dollar and the Department of Energy's weekly inventories data (DOE CRUDE: +1.3M V +1.5ME; GASOLINE: -2.2M V -1.2ME). Spot Gold prices are lower on the firmer dollar. In terms of physical demand for gold, the Indian Bullion Market Associated noted that domestic demand for gold has been low due to the high price levels and that India's holiday gold sales were disappointing. Additionally, the SPDR Gold Trust ETF pared its holdings by 1.2 metric tons and for the first time since late Sept. As of the time of writing, Shanghai Copper prices are higher, after COMEX copper rose above $3.00/contract during the US session for the first time since late Sept 2008. In other copper news, an unconfirmed report disclosed that workers at the Chilean Spence copper mine (annual production of 200K tons), are planning resume their talks with management, as the strike at the mine has now lasted for 10 days.

- In terms of the components of China's Sept industrial production, the country's steel production rose by 32% y/y (vs. +22% prior) to 61.1M tons. The increase in steel output comes amid the Chinese government's concerns related to industrial overcapacity in sectors, including steel and cement. China's Sept electricity output rose by 9.5% v 9.3% prior, natural gas production increased by 8% v 7.8% prior and coal output rose by 13% v 15% prior.