Asian Mid-session Update: US elicits China protest over naval ship approaching Beijing-claimed waters; New Zealand trade deficit widens
***Economic Data***
- (CN) CHINA SEPT INDUSTRIAL PROFITS Y/Y: -0.1% (4th straight decline) V -8.8% PRIOR; YTD: -1.7% V -1.9% PRIOR
- (JP) JAPAN SEPT PPI SERVICES M/M: -0.1% v 00.1% PRIOR; Y/Y: 0.6% V 0.6%E
- (NZ) NEW ZEALAND SEPT TRADE BALANCE (NZD): -1.2B V -0.9BE (4th straight deficit)
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 113.4 v 113.3 prior
- (KR) SOUTH KOREA OCT CONSUMER CONFIDENCE: 105 V 103 PRIOR; 4th straight increase and a 5-month high
- (SG) Singapore Central Bank (MAS) semi-annual Macro review: Forecasts 2016 GDP between 2.0-2.5% range with risks tilted towards the downside
- (PH) Philippines Aug Trade Balance: -$1.0B v -$0.8Be; Imports Y/Y: 4.1% v 10.4%e
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.7%, S&P/ASX -0.1%, Kospi -0.3%, Shanghai Composite -1.8%, Hang Seng -0.9%, Dec S&P500 -0.1% at 2,059
***Commodities/Fixed Income***
- Dec gold -0.2% at $1,164/oz, Dec crude oil -1.0% at $43.52/brl, Dec copper +0.1% at $2.36/lb
- (CN) PBoC to inject CNY10B in 7-day reverse repos (33rd consecutive injection, smallest injection since Apr); Offer yield at 2.25% v 2.35% on Oct 22nd (9th yield cut this year)
- JGB: (JP) Japan MoF sells ¥399.3B in 40-year bonds, bid to cover: 2.89x v 2.60x prior
***Market Focal Points/FX***
- Asian equity markets are decidedly negative, with regional risk-off flows in part driven by tensions in the South China Sea. Against a warning by the Chinese foreign ministry, US guided missile destroyer USS Lassen has reportedly approached the 12-mile territorial limit around Subi Reef in the Spratly Islands archipelago that Beijing contends to control. Obama administration however considers Beijing's "excessive claim" of sovereignty in those waters, and the US naval officials noted that it would one of several passages. China Foreign Ministry has since declared that "US warship has illegally entered waters near China island." Shanghai Composite and Hang Seng are the biggest regional decliners, while S&P emini futures were under pressure with a 0.2% slide. AUD/USD and NZD/USD are also down 0.2% below 0.7230 and 0.6770 at their lows, while USD/JPY fell over 50pips below 120.50 on heightened risk aversion.
- Investors await the findings of China's 13th plenum that could contain an update on growth projections for 2016-2020 five year plan. NDRC researcher called for China to set an average GDP target of 6.5%, with 7% prior forecast seen as increasingly challenging. Another NDRC report did speculate that a hard landing in China economy is not likely. Meanwhile, Sept industrial profits declined for the 4th straight month but at a much slower pace, and NBS cited weak external demand restricting output.
- Ahead of Friday's BOJ policy statement and economic outlook projections for GDP and CPI, a financial press report citing sources stated the BOJ is open to possibilities but more QE is not a given. Officials cited risks of corporates being less inclined to pass on higher profits through wages due to possibility of emerging market slowdown. Discussions at the BOJ indicated the risks are no smaller than last year - recall last October the BOJ decided to expand its QE accompanying the same semi-annual report.
- New Zealand posted its 4th straight trade deficit that was significantly wider than expected. Exports component of NZD3.7B was worse than NZD3.9Be and an 8-month low, while imports came in at a 12-month high of NZD4.9B. Shipments to Australia were especially soft, falling 8.7%, while exports to China were up a modest 1.3%. Dairy shipment decline was also telling at -21.9%, much higher than -7.5% in the prior month.
***Equities***
US equities / ADRs:
- IDTI: Reports Q2 $0.35 v $0.31e, R$169M v $166Me; Boosts share buyback program by $300M (8.5% of shares outstanding); +12.6% afterhours
- EW: Reports Q3 $1.07 v $0.98e, R$615.5M v $598Me; +5.6% afterhours
- CDNS: Reports Q3 $0.28 v $0.26e, R$434M v $430Me; +0.4% afterhours
- SWFT: Reports Q3 $0.31 v $0.31e, R$1.07B v $1.08Be; Adds $100M to buyback plan (4.7% of market cap); -1.5% afterhours
- HIG: Reports Q3 $0.90 (adj) v $0.98e, total consolidated Rev $4.56B v $4.77B y/y; -4.7% afterhours
- CAKE: Reports Q3 $0.59 v $0.56e, R$527M v $536Me; -5.8% afterhours
- MSTR: Reports Q3 $2.06 v $1.96e, R$129.5M v $141Me; -13.3% afterhours
- RCII: Reports Q3 $0.47 v $0.45e, R$791.6M v $803Me; -19.6% afterhours
Notable movers by sector:
- Consumer discretionary: Belle International Holdings 1880.HK +6.2% (H1 result)
Esprit Holdings 330.HK +12.1% (Q1 result); Jiangling Motors Corp 000550.CN +1.0% (9M result); Harvey Norman HVN.AU +3.4%(Q1 result)
- Financials: China Overseas Land 688.HK -2.1% (Q3 result); Seven & I Holdings 3382.JP +3.4% (Third Point's investment); FlexiGroup FXL.AU -0.8% (acquisition); ALE Property Group LEP.AU -0.5% (raises distribution guidance)
- Industrials: Zhengzhou Yutong Bus Co 600066.CN +1.2% (9M result); Zhengzhou Coal Mining Machinery Group Co 601717.CN -4.5% (9M result); Worley Parsons WOR.AU -5.1% (guidance); Samsung Heavy Industries 010140.KR +3.8% (Q3 result); Hyundai Heavy 009540.KR +6.0% (Q3 result)
- Technology: Leshi Internet Info & Tech Co Beijing 300104.CN -1.9% (Q3 result); LG Display Co 034220.KR -1.4% (likely to lower LCD panel production); Sharp Corp 6753.JP -0.7% (cuts guidance)
- Materials: Anhui Conch Cement 914.HK -1.2% (Q3 result); Yunnan Aluminum Co 000807.CN -3.4%(Q3 result, to issue bonds)
- Energy: Xinyi Solar 968.HK -7.4% (placement); China Longyuan Power Group 916.HK -5.3% (9M result); Yanzhou Coal Mining Co. 600188.CN -4.6% (9M result); Beach Energy BPT.AU -5.6% (Q1 result); Shaanxi Coal and Chemical Industry Group Co 601225.CN -4.9% (9M result)
- Healthcare: Shenzhen Neptunus Bioengineering Co 000078.CN +1.5% (9M result)