Asian Mid-session Update: China PMIs remain in contraction; Lower Australia inflation and house prices bolster the case for RBA easing tomorrow
***Economic Data***
- (CN) CHINA SEPT FINAL CAIXIN PMI MANUFACTURING: 48.3 V 47.6E (8th straight conctraction; 4-month high)
- (CN) CHINA OCT MANUFACTURING PMI (OFFICIAL): 49.8 (3rd straight contraction) V 50.0E; NON-MANUFACTURING PMI (SERVICES): 53.1 (3-year low) V 53.4 PRIOR
- (CN) China Index Academy: Avg price of new residential properties in 100 major cities in Oct m/m: +0.30% v +0.28% prior, y/y: +2.07% v +1.36% prior (6th straight rise)
- (JP) JAPAN SEPT FINAL PMI MANUFACTURING: 52.4 V 52.5 PRELIM
- (AU) AUSTRALIA OCT AIG MANUFACTURING INDEX: 50.2 V 52.1 PRIOR; 4th straight expansion
- (AU) AUSTRALIA SEPT BUILDING APPROVALS M/M: 2.2% V 1.0%E; Y/Y: 21.4% V 24.1%E
- (AU) AUSTRALIA OCT TD SECURITIES INFLATION M/M: 0.0% (8-month low) V 0.3% PRIOR; Y/Y: 1.8% V 1.9% PRIOR
- (AU) AUSTRALIA OCT CORELOGIC RPDATA HOUSE PRICES M/M: 0.2% V 0.9% PRIOR
- (KR) SOUTH KOREA SEPT CURRENT ACCOUNT BALANCE: $10.6B V $8.4B PRIOR
- (KR) SOUTH KOREA OCT TRADE BALANCE: $6.7B V $7.1BE
- (KR) SOUTH KOREA OCT PMI MANUFACTURING: 49.1 V 49.2 PRIOR
- (HK) Macau Oct casino revenue -28.4% y/y v -28%e; Smallest monthly y/y decline since Jan
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -2.1%, S&P/ASX -1.2%, Kospi +0.2%, Shanghai Composite flat, Hang Seng -0.6%, Dec S&P500 -0.4% at 2,065
***Commodities/Fixed Income***
- Dec gold -0.1% at $1,139/oz, Dec crude oil -0.5% at $46.38/brl, Dec copper -0.2% at $2.31/lb
- USD/CNY: (CN) PBoC sets yuan mid point at 6.3154 v 6.3495 prior setting; strongest Yuan setting since Aug 10th; Largest Yuan strengthening since 2005
- GLD: SPDR Gold Trust ETF daily holdings fall 2.0 tonnes to 692.3 tonnes
***Market Focal Points/FX***
- Asian markets are lower to start the new week, with the latest round of PMIs out of China showing no improvement. The official manufacturing PMI missed expectations for breakeven, remaining on par with last month at 49.8, while the official Services PMI hit a 3-year low of 53.1. Stats Bureau economist said imports and exports will continue to face challenges due to sluggish global economic recovery and downward pressure for the domestic economy. SME-oriented Caixin manufacturing PMI also remained in contraction for 8th straight month, but beat estimates and hit a 4-month high, with resident economist stating the manufacturing industry's overall weakening has slowed down. Earlier, China Premier Li also added that the economy has a lot of room to grow but also took another step further from 7% GDP target, noting 6.5% growth helps China accomplish its targets.
- Japan final PMI slowed slightly relative to prelim figure but still hit a 1-year high at 52.4. Markit economist said pperating conditions at Japanese manufacturers improved substantially at the start of the final quarter of 2015, and growth in production accelerated to the fastest since February. Markit added that cost pressures were evident as purchasing prices rose, albeit at a weak rate. The findings would support the decision by the BOJ late last week to hold off on further policy easing, even with local press surveys showing companies are increasingly convinced that Japan will return to a technical recession with another contraction in GDP.
- Ahead of tomorrow's RBA policy decision, the latest set of data could tip the scale in favor of an easing. Manufacturing PMI remained in expansion but just barely, falling to 50.2 from 52.1. TD Securities Inflation and house prices also slowed markedly. Note that majority of analysts are still in the Hold camp, but fixed income markets have been tilted toward a rate cut since the soft CPI figures last week.
- In FX, AUD/USD opened down 20pips below 0.7115, but rose toward 0.7150 later in the day. USD/JPY was down another 40pips as low as 120.25, while NZD/USD reversed its initial 40pip drop to 0.6730 to rise as high as 0.6780s. EUR/USD opened up about 40pips above 1.1030 and held those gains on comments from ECB's Draghi that further ECB stimulus is still an "open question" rather than the preferred outcome toward the end of the year.
***Equities***
Notable movers by sector:
- Consumer discretionary: Samsonite 1910.HK +2.6% (Q3 result); China Southern Airlines Co 1055.HK -2.0% (9-month result); Kirin Holdings Co 2503.JP -5.4% (H1 result); Chongqing Changan Automobile Co 000625.CN -1.0% (9-month result); Ricoh Co 7752.JP -3.3% (H1 result); Galaxy Entertainment Group 27.HK +1.1%, Sands China 1928.HK -0.4%, Wynn Macau 1128.HK +3.7% (Macau Oct casino revenue declines slowest since Jan)
- Financials: China Pacific Insurance Group Co 2601.HK +1.1% (9-month result); Bank of Communications 3328.HK -1.4% (9-month result); Industrial and Commercial Bank of China Ltd (ICBC) 601398.CN -0.4% (9-month result); Sumitomo Corp 8053.JP -3.9% (H1 result); Macquarie Group MQG.AU -4.9% (share buyback plan); Westpac Banking Corp WBC.AU -2.1% (FY15 result)
- Industrials: CRRC Corp 1766.HK -0.6% (9-month result)China Railway Construction Corp 601186.CN -0.9% (9-month result); China Railway Group 601390.CN +0.3% (9-month result); Mitsubishi Heavy Industries 7011.JP -3.0% (H1 result); Toyota Tsusho Corp 8015.JP -3.1% (H1 result)
- Technology: BesTV New Media Co 600637.CN +2.7% (9-month result); Samsung SDI Co 006400.KR +4.2% (Q3 result); iProperty Group IPP.AU +9.7% (acquisition proposal); Sharp Corp 6753.JP -4.5% (H1 result)
- Materials: China National Building Material Co 3323.HK -2.7% (9-month result); Angang Steel 000898.CN -0.4% (9-month result); Zhejiang Longsheng Group Co 600352.CN +2.1% (9-month result)
- Healthcare: Takeda Pharmaceutical Co 4502.JP -1.4% (H1 result)
- Telecom: SK Telecom 017670.KR -1.7% (Q3 result); NTT DoCoMo 9437.JP +1.7% (H1 result)
- Utilities: China Electric Power Construction 601669.CN -0.2%(9-month result); Beijing Jingneng Power Co 600578.CN +2.3% (9-month result); Kyushu Electric Power Co. 9508.JP -1.1%(H1 result)