WEEKAHEAD - the view from Reuters Asia news editors

SINGAPORE, Feb 1 (Reuters) - Following is the view from
Reuters Asia editors on the news that is likely to matter most
this week:

* TOYOTA: No.1 carmaker struggles after giant recall

* TIGHTENING: China doing too little, not too much?

* TAIWAN: US-China tensions high over arms sales

* SOY: Will China back out of US deals, hit Chicago prices?

TOYOTA RECALL

Toyota Motor's (7203.T) struggles to deal with its biggest
recall and worst crisis since it almost went bankrupt in 1950s.
What started in the United States, the recall has now spread to
Europe and China, and the No.1 carmaker is paying the price of
expanding too quickly and letting quality slip. Toyota's appeal
has always been not the prettiest or the cheapest, but the most
reliable car out there. Sooner it can convince the world it can
get the problem fixed the better, but the reputational damage
will linger. Consumers are beginning to doubt Toyota, a
sentiment that never existed before. What will this mean in the
long run for Toyota and its rivals? U.S. regulators have not
objected to Toyota's proposed fix, putting the automaker one
step closer to a resolution. Toyota's management is also facing
criticism for not publicly seen to be dealing with the issue.
Toyota's chief finally apologized through NHK over the weekend
in Davos, but the company is under pressure to publicly address
the issue in a more concerted manner. Toyota should get credit
for halting production of eight models that is clearly
unprecedented. But its global corporate communications seem to
be just keeping fingers crossed. At least there's no recall in
Japan, and the Japanese media are relatively quiet. But Toyota
is making a big mistake in not seen actively dealing with the
problem. External communication plays a critical role at a time
of a corporate crisis, and successful communication can even
turn a crisis into an opportunity. Just look at the massive
Tylenol recall by Johnson and Johnson in 1982, which has made a
hero of J&J (JNJ.N), and Air France's (AIRF.PA) handling of the
Concorde crash and compare that with Bridgestone's (5108.T)
recall in 2000. Studies show their share prices reflected the
companies' external communication skills and engagement with
consumers. Toyota is due to announce financial results on Feb.
4 but may hold a news conference before then to explain its
plans to deal with the issue.[ID:nN27231388]
(jean.yoon@thomsonreuters.com)
>Company news diary [GLO/EQUITY] >Asia earnings [ASIA/EQTY]

CHINA TIGHTENING

Is it really a tightening? Beijing's reaction to an
explosion of credit growth does appear to be rather modest. If
anything, too modest, given that banks managed to lend a fifth
of the 2010 loan target in the first three weeks of the year.
Let's also be cautious about placing too much blame for
negative global market reaction at Beijing's door. There's a
lot going on in markets these days -- correlations breaking
down, a genuine reappraisal of the stocks rally, to name a few.
Still, investors appear transfixed by Beijing's every move and
we'll continue to hit this story hard. Set-piece opportunities
include the official PMI and HSBC's gauge of manufacturing
activity and central bank adviser Fan Gang's speech on Monday
and the OECD survey on China on Tuesday. Plan an ANALYSIS on
what China is looking to achieve, another on the risk of
inflation, and a SCENARIOS on how the policy tightening might
play out. Also plan MARKET SIGNALS on the investment
opportunities opened up by policy tightening in Asia. For all
the fuss, no one expects any aggressive action before the
Chinese New Year. While the odds on a PBOC rate rise have
shortened, it does appear the greater risk for markets is that
China is doing too little, not too much. [ID:nASIAINT]
(dayan.candappa@thomsonreuters.com)
> Reuters polls and surveys [ID:nL10903477]
> Top economic events [M/DIARY]

SHARE CORRECTION

The drop in Asian shares to three-month lows has clearly
taken some investors by surprise and has been spurred by
foreign investors, including macro hedge funds, closing out
positions and yanking funds out. China starting its
semi-tightening of policy and the uncertain macro outlook as
the recovery matures have clearly had an impact. There are
plenty of cross currents at play: mixed (but mostly good)
economic figures, the soaring dollar, Greece's woes and the
broadening pressures bearing on the euro zone, and the
escalating spat between China and the United States. Another
factor is the breakdown in the strong and steady correlations
driving risky assets in 2009, which would be enough for any
leveraged funds to pull back and wait for the dust to settle.
The slide in shares, led still by Taiwan and tech, appears to
be a healthy one at this point and not a wholesale reassessment
of the economic and profit outlook. Earnings and outlooks have
been upbeat for the most part, both in Asia and the United
States. Indeed, the latest update from StarMine shows that Asia
ex-Japan tech is the sector seeing the fastest pace of upward
revisions to estimates on a 30-day basis, even as tech
valuations have taken a hit. The two markets leading the
correction, Taiwan's TAIEX .TWII and the Hang Seng .HSI,
outperformed in Friday's drop from oversold levels. Foreign
selling in South Korean shares slowed last week to a net $70
million from $426 million the previous week, despite North
Korea's volley of artillery. The Hong Kong dollar HKD= edged
up last week despite the dollar's broader gains, suggesting
inflows returning to China-related shares. Risky assets are
showing signs of bottoming out in this correction. Keep an eye
on the TAIEX (chart support around 7,400 -- 2007 and early 2008
lows -- and also 23.6 percent retracement) and the Hang Seng
(still holding its 200-day moving average now at 20,043).
(eric.burroughs@thomsonreuters.com)
> Five world markets themes this week [MKT/THEMES]
> MARKETS WEEKAHEAD-Just blowing the froth off?
[ID:nLDE60S0FQ]

CHINA-TAIWAN-US

The U.S. plan to sell more arms to Taiwan is a fresh and
very serious source of tension in a relationship already
strained by trade and currency disputes, human rights issues,
and Google's (GOOG.O) threat to leave China over hacking and
censorship concerns. The main fear for markets is that
disagreements escalate into a trade war or a protracted
economic conflict. Analysts say both sides have too much to
lose from this scenario to allow disputes to get out of
control. Still, Beijing's response could be skewed by
nationalist sentiment at home -- already Chinese Internet users
are venting anger with calls to boycott Boeing and other firms
involved in the sales, and there is a risk that other U.S.
consumer products could be affected (though boycotts against
multinational brands like Carrefour in the past tended to
fizzle out quickly). There are broader risks here. We will need
to watch for fallout on a range of knotty diplomatic issues:
North Korea, Iran, climate change and nuclear arms control, to
name but four. Plan an ANALYSIS explaining the dynamics behind
China's hardening foreign stance, reflected on issues from Iran
to currency and climate, and especially how increasingly
assertive constituencies in China, including the military and
state industry, may be shaping this stance and China's policy
options. [ID:nCHINA]
>How China's anger could hurt ties with the US
[ID:nTOE60U00D]
>Five key Asia political risk themes to watch [ID:nSGE60S0BU]
(john.chalmers@thomsonreuters.com)

CHINA SOY

There is growing market talk that China is either
cancelling purchases of U.S. soybeans or switching origin to
South America, where prices are lower ahead of the harvest.
Traders say there have been some requests by private Chinese
crushers to roll some U.S. cargoes forward or switch shipment
from the U.S. Gulf to the Pacific Northwest -- a shorter and
cheaper route to Asia -- or switch origin to Brazil. This is
coming at a time when Chinese banks are tightening lending, for
January at least, and crush margins there weakening amid large
imports and the spread of pig disease. Expectations of record
harvests in Brazil and Argentina, the world's second- and
third-largest exporters, drove down Chicago Board of Trade soy
prices to 3-½ month lows last week. Before the price fall,
Chinese buyers had booked nearly 21 million tonnes from the
United States, the largest exporter, to take advantage of good
crushing margins earlier, which have now dropped to break even
or even negative. A key question now is how much of those
outstanding contracts have not yet been shipped.
(sambit.mohanty@thomsonreuters.com)
> Weekahead Americas [WKAHEAD/AM] Europe [WKAHEAD/EM]
(Editing by Mathew Veedon)