WEEKAHEAD - the view from Reuters Asia news editors

EM ASIA

The divergence between Asia's China-led stock rise at the
end of last week with the drop on Wall Street .DJI, and the
Nikkei's .N225 struggles shows very clearly how much
portfolio managers and hedge funds around the world are still
pouring funds into emerging markets, and Asia in particular. As
EPFR Global noted, in the week through last Wednesday, EM
equity funds took in the biggest weekly inflows since December
2007 and have now received more than $50 billion this year. How
sustainable is this? Is it just laggard funds playing catch-up,
or a vote of confidence in the earnings results pouring in? But
as noted on Friday, the six-month change in 12-month forward
earnings in the MSCI APXJ .MIAPJ0000PUS is running at a
record high -- analysts and investors are both still playing
catch-up to the surprisingly strong rebound in 2009. By
contrast, Japanese equities tracked by EPFR have seen five
straight weeks of outflows. Perhaps that is one reason why
dollar/yen JPY= has suddenly rebounded even as the dollar
remains mired near lows. Clearly the hopes surrounding the
DPJ's resounding electoral victory have turned into something
of dismay. Outflows from money market funds now total more than
$525 billion, on track for a yearly record and an important
factor in the dollar's woes.
(eric.burroughs@thomsonreuters.com)
>Five world markets themes this week [MKT/THEMES]
>MARKETS WEEKAHEAD-Signs of a bumpier road ahead
[ID:nLN198637]

CHINA DEMAND (Data Oct 26)

Strong domestic commodity output data plus strong imports
in September look almost certain to add up to some of the best
implied metal and oil demand growth we've seen this year once
detailed trade figures are released on Monday. While BarCap and
others remain firmly in the bullish camp that see these figures
being driven by real underlying consumption, there remains a
degree of anxiety over how much of the copper, iron ore,
gasoline or even soybeans is being absorbed by stockpiling
speculators rather than real consumers. We'll be looking past
the headline figures to less publicised data on air, rail and
road freight in an effort to put some fact behind the oil
demand side of things, and take a closer look at the
construction, auto and ship sectors to see whether they appear
likely to justify the levels of apparent steel, copper and
aluminium consumption we're seeing. Key unknowns in the trade
data are refined copper (just to confirm that it's as strong as
the overall copper figure suggested), coking coal (likely still
smokin' hot, maybe 4 mln tonnes?, thanks to steel), and perhaps
corn (did China finally rack up any meaningful imports?).
(sambit.mohanty@thomsonreuters.com)

INDIA CROPS

Looking backward and looking ahead, the government will
release its first formal estimate of the drought-ravaged
summer-sown crop, likely to confirm the market's worst fears
about the cane harvest and put some harder data behind earlier
estimates on soybean, corn and rice. We'll look to PREVIEW this
in order to provide some basis of comparison for the government
figures. Delhi is also due to begin releasing its crop sowing
data for the winter season, particularly wheat, a market that
is hotting up in Chicago after a late-summer slump, so there
will be more interest than usual on the pace of planting in the
world's No. 2 producer. While the outlook was initially pretty
grim given the worst monsoon in 37 years and the depletion of
reservoirs needed for irrigation, the tide has turned
recently.
(sambit.mohanty@thomsonreuters.com)
AFGHAN RUNOFF

Tensions in Kabul have eased with President Hamid Karzai's
agreement to face his main challenger, Abdullah Abdullah, in a
Nov. 7 run-off. Campaigning kicked off on Saturday but already
the Taliban have called on Afghans to boycott the run-off and
have vowed to disrupt it. The main worry is that there won't be
enough time to secure polling stations before the vote so the
bureau is on high alert for any attacks or signs of
deteriorating security. There is also some lingering
speculation about a power-sharing deal between Karzai and
Abdullah but diplomats suggest talks on a unity government are
more likely to take place after the vote, which still looks
likely to result in a Karzai win. Wraps this week will focus on
the security situation, any signs of major swings in voting
sentiment and what is being done to avoid charges of corruption
and fraud that might mar the credibility of the winner. Expect
analysis, including in scenarios and Q&As, as to how the
different outcomes (including a narrow winning margin for
Karzai versus a massive one) could affect the shape and
policies of the post-election government. Meanwhile, there
are hints from Washington now that a conclusion to the White
House deliberations on strategy and additional troops for
Afghanistan could come sooner rather than later, even ahead of
the Nov. 7 presidential run-off. News on developments is most
likely to break in Washington but we will continue to chase
officials, the military and high-level visitors in Afghanistan
as well as updating what is happening in the field with the
troops already on hand. At the moment that doesn't appear to be
showing a major trend one way or the other.
>Five key Asia political risk themes to watch
[ID:nSP413461]
(dean.yates@thomsonreuters.com)
>Reuters polls and surveys [ID:nL10903477]
>Index of Reuters diaries [IND/DIARY]