Asian Markets, Fundamentals

Stocks in Asia/Pacific Slump as Earnings Disappoints, Australia CPI Grows At Slowest Pace Since 1999

Asia Session Key Developments

• Japan Retail Sales Advance 0.9% in September
• Australian Consumer Prices Rose 1.0% in Third Quarter

Stocks in Asia/Pacific traded lower on Wednesday led by a glut of lower-than-expected earnings reports, and fears of a protracted recovery may continue to weigh on the market as the outlook for global growth remains uncertain. Nevertheless, consumer prices in Australia rose 1.0% amid expectations for a 0.9% advance, with the annualized rate growing 1.3% from the previous year, and the stickiness in prices may lead the Reserve Bank of Australia to tighten policy further as the $1T economy skirts the global recession. Meanwhile, retail spending in Japan increased 0.9% in September, led by a 2.0% rise in supermarket sales, while small business confidence weakened for the first time in nine-months as the index slipped to 43.4 from 43.5, and the marked appreciation may continue to weigh on firms as global trade conditions remain weak.

Nikkei 225                          10,075.05

The Japanese equities market traded lower for a second day, with the Nikkei 225 shedding 137.41 points (1.35%) to end the day at 1,075.05, led by a 3.07% decline in technology. Shares of Canon Inc slipped 3.35% as net income weakened 56% during the three-months through September to mark the seventh consecutive quarterly decline, while Advantest Corp, the world’s biggest maker of memory-chip testers plunged 5.15% after the company posted a second-quarter loss. At the same time, Yamaha Corp slid 4.30% after announcing that the company was sued in the U.S. by three individuals and Lil Walt Production, while CSK Holdings pushed 3.51% lower after the preliminary earnings statement showed first-half net loss was JPY 59B amid expectations of a JPY 57B loss.

Hang Seng                        21,761.58

Hong Kong shares weakened for a second day, leading the Hang Seng to slide 408.01 points (1.84%) to close at 21,761.58, with all 9 components trading lower on the day. Technology tumbled 3.09% to lead the decline, with oil & gas declining 2.93%, while financials weakened 1.93% following a rise in credit-card defaults. Shares of HSBC fell 1.19% after the bank said defaults in the U.S. jumped 48% in September, while Sino Land, the world’s biggest developer by value, plunged 4.64% as company, along with many large developers, are pushing the government to lower the cost of land as policy makers look to increase supply in an effort to temper the rise in home values. At the same time, Petrochina and Aluminum Corp of China fell 3.02% and 2.66% respectively on the back of weaker commodity prices, while Wharf Holdings advanced 1.06% after Goldman Sachs raise its share-price estimate by 28%.

S&P/ASX 200 Index           4,685.10

Stocks in Australia traded lower for the third successive day on Wednesday on the back of earnings concern, causing the S&P/ASX 200 to fall 68.40 points (1.44%) to end at 4,685.10, with financials shedding 2.27%, while telecommunications gained 1.62% to taper the decline. Shares of Bradken LTD plummeted 7.76% subsequent to Goldman Sachs slicing the firm’s price target from A$9.54 to A$9.20, while Goodman Group added 0.84% after Goldman raised the rating on the stock to “buy” from “hold.” At the same time, National Australia Bank, the country’s biggest corporate lender, slipped 2.86%, as the firm posted a second-half loss, while Babcock & Brown Infrastructure Group climbed 2.86% on speculation the Australian Foreign Investment Review Board will approval Brookfield Asset Management’s investment in the firm.

Notable Asian Session Event Risk / Economic Releases