Asian Market Update: Asian equities stabilize after sell-off, but bargain hunters not willing to push stocks higher - Asian equity markets stabilize after initial selling: A wave of panic-selling produced a sea of red for Japanese equities, forcing the Tokyo Stock Exchange to briefly suspend trading in Topix Index futures. Most equity index declines we saw in Asia today mirrored the decline we saw in the US session, suggesting that we have seen the worse of the equity sell-off. The Chinese state-run Shanghai Securities News cited ministry officials denying that China is to impose further capital gains on stocks, easing concerns in Shanghai. Many traders expected further selling on Chinese equities on Wednesday, because scores of investors were not able to sell off stocks in the Shanghai market on Tuesday. Since many A-shares dropped over 10% yesterday (the daily limit), many analysts believed that large groups of investors were unable to sell down their holdings and that they will likely do so today. We have NOT seen this scenario materialize, hinting that we have seen the worse of the Chinese sell-off. Several analysts suggested that the Chinese government is unlikely to try and kill a 1.5yr bull run ahead of the 2008 Olympics. Asian traders said that many long-term players are keeping their long Asian exposures despite the sharp sell-off. - Bargain hunters remain cautious, unwilling to push indices higher: Asian equity bargain hunters remained on the sidelines during today's session. It looks unlikely that the Nikkei will push much higher from these levels, as some traders may wait until March 9 special quotation for Nikkei futures and options before considering whether to push market higher. Declines on the Nikkei 225 were led by oil and auto shares, with shares of Toyota lower by more than 3.5%. The ASX is lower by more than 2.4% and declines are being driven my metals shares on fears of a global slowdown. Hong Kong equities received support from news that the Hong Kong Monetary Authority announced tax cuts and that 2006 Hong Kong GDP rose by a better than expected 6.8% y/y (market expected a rise of 6.7%). - Foreign exchange: After some carry trades unwound over the last 24hrs, the JPY is softer across the board. Foreign players (outside Japan) may act to sell USD/JPY, but also buy USD or EUR against JPY to repatriate funds depending on how far the Nikkei falls. USD gains were limited by expectations of further soft U.S. data. - Japanese data points to continuing export momentum: February Nomura/JMMA Manufacturing PMI came in slightly softer than a prior reading (53.0 v 53.4 prior, a 13mnth low) but export orders climbed to the highest in 6mnths. In other data, yr/yr Japanese retail sales for January came in worse than expected, as the warmer winter led to fewer consumers buying winter clothing and kerosene. - Japanese bond prices extend their gains: The yield on the key 10yr issue hit a two-month intraday low on sharp falls on the Japanese equity market and safe-haven flows. - Oil moved above $60.40 and gold recovered but stayed below $677 support-turned-resistance as traders questioned the idea of a significant global slowdown. Many analysts suggest that the Chinese economy will have to slow much more to lead to turmoil.