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Marketmind: Risk on Monday, China 'data dump' looms

A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.

Asia is poised to start this week as it finished last week, with risk assets and investor sentiment buoyed by growing confidence in the U.S. economic ‘soft landing’, and easing financial conditions from the slide in the dollar and U.S. bond yields.

The regional economic and policy events calendar this week is jammed with top-tier releases which are sure to give local assets strong steers, especially from China.

October’s import and export figures are released on Tuesday, and Thursday sees the release of bank lending and credit, money supply, producer price inflation and consumer price inflation, all for October also.

China’s economic surprises index turned positive three weeks ago but despite stronger-than-expected third quarter GDP growth, that momentum has faded. This week’s ‘data dump’ will give a clearer picture of how the economy started the fourth quarter.

Elsewhere in Asia, the main economic indicators this week will be the latest consumer inflation readings from Thailand, the Philippines and Taiwan, and third quarter GDP from the Philippines, Hong Kong and Indonesia.

Indonesian GDP figures and Thai inflation figures are out on Monday.

Indonesia’s quarter-on-quarter growth rate is expected to more than halve to 1.71 per cent from 3.86 per cent, according to a Reuters poll, and annual growth is expected to essentially hold steady just above 5 per cent.

The rupiah last week snapped an eight-week losing streak, picking itself up from a three and a half year low of almost 16,000 per dollar.

The Thai baht, meanwhile, climbed 1.5 per cent on Friday for one of its strongest rallies this year. Further progress on inflation could pave the way for it to move further away from last month’s one-year low around 37.20 per dollar.

On the policy front, the Reserve Bank of Australia’s rate decision on Tuesday is the regional highlight of the week. Economists polled by Reuters expect the benchmark cash rate to be raised by 25 basis points to 4.35 per cent, breaking a run of four meetings on hold as inflation proves surprisingly strong.

Also on Tuesday the Bank of Korea publishes the minutes from its last policy meeting and on Thursday the Bank of Japan releases a summary of board members’ opinions from its Oct. 30 to 31 policy meeting.

Japanese corporate earnings are in full flow this week, with banks and financial firms likely to come under particular scrutiny in light of the policy shift the BOJ is currently undertaking. With the yen still weak around 150 per dollar, could the Nikkei soon retest its recent 33-year high?

While Asian and emerging stocks last week had their best weeks since July, gaining around 3 per cent, they underperformed their U.S. and global peers, which gained 5 per cent or more.

Given the scale of the dollar’s and Treasury yields’ decline on Friday, there may be room for emerging and Asian markets to catch up and maybe even outperform this week.

Here are key developments that could provide more direction to markets on Monday:

– Indonesia GDP (Q3)

– Thailand CPI inflation (October)

– Japan services, composite PMIs (October)

(By Jamie McGeever; Editing by Josie Kao)

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