Asian Market Update

(AU) AUSTRALIA Q3 DWELLING STARTS Q/Q: -6.8% V -1.0%E (1-year low)

(AU) AUSTRALIA NOV NAB BUSINESS CONFIDENCE: 2 V 2 PRIOR; BUSINESS CONDITIONS: +1 V -1 PRIOR

(UK) UK NOV RICS HOUSE PRICE BALANCE: -17% V -25%E (16-month high)

(JP) JAPAN OCT TERTIARY INDUSTRY INDEX M/M: 0.6% V 0.4%E (4-month high)

(KS) SOUTH KOREA NOV EXPORT PRICE INDEX M/M: -2.3% V +1.4% PRIOR; Y/Y: 5.4% V 9.2% PRIOR; IMPORT PRICE INDEX M/M: -1.6% V +0.9% PRIOR; Y/Y: 11.8% V 16.0% PRIOR

(NZ) NEW ZEALAND NOV FOOD PRICES M/M: +0.2% V -1.3% PRIOR (4-month high)

(PH) PHILIPPINES OCT TOTAL EXPORTS Y/Y: -14.6% V -16.5%E; Total Exports $4.1B v $3.9B prior

Markets Snapshot (as of 05:00GMT)

Nikkei225 -1.0%

S&P/ASX -1.4%

Kospi -1.3%

Taiwan Taiex -0.5%

Singapore Straits Times -0.5%

Shanghai Composite -1.4%

Hang Seng -0.9%

S&P Futures +0.2% at 1,231

Feb Gold -0.6% at $1,658/oz

Jan Crude +0.1% at $97.86

Overview/Top Headlines

Markets tracked New York losses as worries that the latest EU agreement would not be enough to contain the debt crisis that continues to plague the region. The threat of a downgrade hanging over the banks and EU member nations also is weighing on sentiment. Moody's Investors Service commented that the debt crunch was in a "critical and volatile stage." Japan's finance minister Azumi called the tighter fiscal discipline agreement a "big step forward", but added there remained a lack of clarity around tackling the crisis and what role would be played by the IMF and how it would be funded. Azumi also said he instructed MoF to keep ¥44T JGB cap in the initial budget for FY12/13.

China State Researcher Yao Yang reiterated the popular view that China will only help EU if it meets certain preconditions including giving China a "market-economy status." However he warns that if the euro fails it will negatively impact China's export sector.

Currencies were muted in the session with limited movement, EUR/USD had a 40 pip range and was 10 pips ahead of New York roll at $1.3191 late in the Asian session. AUD/USD extended its decline to a fresh 2-week low below $1.0030 before testing above the $1.0080 level at the ASX close. Emerging market currencies were mixed with the Korean Won gaining 0.4% against the USD testing KRW1160 level. SGD/USD traded in a 40 pip range testing above the SGD1.3030 level.

Analyst continue to debate China's next steps in policy around housing. UBS analyst Eva Lee thinks that property prices in 1st tier cities may fall 10-15% in 2012 if government property controls are not eased until mid-2012. Standard Chartered regional head of research Stephen Green agrees about the timing of housing policy changes saying China will not ease its housing restrictions before Q2 of 2012 to bring prices back to more reasonable levels. PBoC Advisor Li Daokui said that China needs to fine tune its home purchase restrictions in some areas and should offer some support to first time home buyers. "China must ensure a soft landing of its housing sector... A too-harsh tightening would have an overwhelming impact on China's overall economic development."

Speakers/Geopolitical/In the press

(CH) According to China banking official, Chinese banks continue to lend as much as they can, raising the potential amount for non-performing loans in the future - China Daily

(KS) Short-term overseas borrowing by South Korea's banks fell slightly in Nov - Korean press

(US) Fed's Bernanke recently urged ECB's Draghi to respond aggressively to EU crisis; Has reviewed 2008 Fed program with ECB in case the EU crisis gets worse - US financial press

(US) House Speaker Boehner: House of Reps to vote tomorrow on extension of payroll tax cuts; Expects bill to pass in the House vote

(JP) Approval rating for Japan PM Noda fell to 42% - Japanese press

(SP) Moody's to review ratings for 8 Spanish banks and 2 holding companies for a downgrade; Removes systemic support for subordinated debt

Equities

2353.TT: Acer has been aggressive in reducing inventory expected to reach 20-25 days by the end of 2011; Should become profitable in Q4 - DigiTimes

Samsung Card, 029780.KS: Will sell 17% stake of Samsung Everland for KRW774B to KCC Corp - Korean press

CHA: China National Development and Reform Commission (NDRC): Has requested more details of its pricing policies for home internet plans - Chinese press

Korea Gas, 036460.KS: Reports NOV domestic gas sales -8.9% y/y - Korean press