Asia still in the red amidst European uncertainties

Asian stocks were lower on weak offshore leads. The MSCI Asia Pacific index was off by 0.7% in early afternoon Tokyo trading. Volumes were soft across the region.

In regional economic news, Indonesia managed to sell $1bn in Islamic bonds at attractive rates. The 2018 dollar dominated securities were auctioned at 4% compared to a $650m similar issue at 8.8% in April 2009.

The difference in borrowing rates shows the global appetite for Indonesian exposure as the economy grows and investors shift funds outside of Europe. The market for Islamic compliance securities has also been relatively quiet over the past year so the size of this deal would have attracted investors otherwise idled by a lack of opportunities.

In Australian corporate news, the largest of the nation’s big four banks – Commonwealth Bank of Australia (CBA) – reported its first quarter trading results for 2012. CBA’s first quarter cash earnings of $1.75bn are slightly ahead of last year’s $1.6bn during the same period.

The number is broadly in line with market expectations but doesn’t really exceed like last year. Overall we don’t think there will be too much excitement around this trading result. Shares were down around 1.3%, in line with our morning comments.

It seems like net interest margins will be key in delivering 2012 banking earnings, particularly in Australia, given the lackluster rate of volume growth. CBA says net interest margins declined marginally due to liquid asset holdings – an area to watch for other Australian banks as they report early next year.