News Headline Summary

ASIA-PACIFIC MID SESSION UPDATE - 05/11/12

A relatively subdued session for Asian asset classes as apprehension grows over the upcoming hand over of power in China and the conclusion to the US presidential election where a recent poll shows Obama leading in the swing states of Ohio, Pennsylvania, Virginia, Colorado and Wisconsin.

Asian equity markets got off to a weak start as they reacted to heavy losses seen on Wall Street on Friday and as participants become cautious ahead of large political risk events. Uncertainty has been a theme when looking forward to the Chinese leadership change; with the Telegraph writing the new crop of politburo leaders is full of conservatives who will stand in the way of much needed economic and social reforms. Adding to the negative tone in China has been commentary from a state researcher who said the country’s economic situation is not too optimistic as they face large pressure on exports and that government-led investment is unsustainable.

Stand out losers in the equity space have been Kia Motors and Hyundai Motors, accounting for 6% of the Kospi Index; who have both seen considerable losses after jointly launching a potentially costly programme to reimburse customers in the US and Canada after overstating the mileage per gallon on more than 1mln cars.

Over the weekend we had the release of the official Chinese non manufacturing PMI which came in better than previous, seeing the services sector rebound from a two year low in September with strength being attributed to activity in the construction and retail sectors. However, the Chinese HSBC services PMI for October disappointed printing a lower than previous number at 53.5 vs. Prev. 54.3; consequently seeing the Heng Seng pare an earlier aggressive move higher that was seen before the actual release of the data.

Elsewhere, Australian Retail Sales came in better than expected at 0.5% vs. Exp. 0.4%; this saw an immediate strengthening in AUD and the ASX 200 has been one of the few indices trading in the green.

Looking forward participants will be managing expectations ahead of tomorrows Reserve Bank of Australia cash rate decision where the expectation is for a 25bps cut from 3.25% to 3.00%.

05 Nov 2012 - 04:28 - Fixed Income Data - Source: RANsquawk

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