14 December 2018
ASEAN morning bytes 14 December 2018

General market tone: Risk off.

Investors likely to book gains and keep to the sidelines digesting the developments on US-China trade and the ECB decision.

International theme: Markets to stay cautious with ECB ending its bond-buying program and ahead of the China data dump

  • Directional trading was muted on Thursday with market players digesting developments on US-China while the ECB prepared to end its bond-buying program this month.  Crude oil prices rose in reaction to supply data while market players will look to Chinese data for direction.
Japan: Tankan survey - not bad!

Floods and Typhoons hit 3QGDP hard, but the latest Tankan survey shows that Japan's underlying economy remains in decent shape. 

Headline large manufacturing index steady at 19

Most of the knee-jerk response to any Tankan release is the large manufacturing firm index. Although manufacturing accounts for only 21% of total Japanese GDP, and large firms probably only about 50% of that, the link between the manufacturing cycle and overall economic business cycle in Japan is tighter than in many more service driven economies (the US, or the UK for example). 

The 4Q18 Tankan shows the rate of activity remaining strong, in contrast to the very weak 3Q GDP results, with the index steady at 19. This, in our view, is a better indication of the underlying strength of the Japanese economy than the prior GDP figures.

The same message played out in other parts of the survey, where overall index levels remain consistent with ongoing, and in some cases, slightly improved growth from 3Q18. As such, we feel that there is a good chance that the 4Q18 GDP figures, when released next year, will show a strong bounceback from the apparent weakness of the preceding quarter, leaving overall GDP growth only a little shy of 2.0% - a very creditable performance for Japan. 

Reading time around about 2 minutes

Good MornING Asia - 14 December, 2018

Investors likely to book gains and keep to the sidelines digesting the developments on US-China trade and the ECB decision.

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