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Investors in Asia brace for a jam-packed week

An investor speaks on her mobile phone as she walks in front of an electronic board showing stock information at a brokerage house in Hangzhou, Zhejiang province, China, October 8, 2015. China stocks posted their biggest rise in two trading weeks on Thursd
Reuters

Traders in Asia are gearing up for an eventful week – with a slew of key economic data slated for release by the region's three largest economies – China, Japan and India - on top of central bank decisions in South Korea and Indonesia.

The focus will no doubt be on China – which is due to publish September trade numbers on Tuesday, foreign direct investment figures on Wednesday as well as consumer and producer inflation data on Thursday.

"Chinese imports and exports likely fell in September despite the lower yuan. Foreign direct investment in China is also slowing, as overcapacity in housing‐related sectors drags on growth," said Alastair Chan, economist at Moody's Analytics.

The raft of data comes ahead of China's highly-anticipated third quarter gross domestic product (GDP) report on October 19, which is expected to show a further loss of growth momentum in the world's second largest economy in the second half of the year.

Investors will also get a health check on India's economy, with September trade, consumer inflation and August industrial production data due on Monday and September wholesale inflation on Wednesday.

While India is largely a domestic demand driven economy, the country has been feeling the pinch from China's slowdown via slackening exports.

In late-September, the Reserve Bank of India (RBI) surprised markets by slashing its key interest rate by 0.50 percentage points to 6.75 percent in a bid to boost economic activity.

Elsewhere in the region, Japan will publish consumer confidence data for September, which are expected to show sentiment waning amid mounting concerns around the country's economic outlook.

Economists warn that the risk of a technical recession in Asia's second largest economy is growing due to weakness in recent data.

Data on August machinery orders published last week missed forecasts by a wide margin. Machinery orders - a leading indicator of capital expenditure - fell 5.7 percent on month, versus expectations for a 3.2 percent increase, and followed a 3.6 percent decline in the previous month.

Central bank watch

On the central bank front, the Bank of Korea and Bank Indonesia are holding monetary policy meetings.

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Korea's central bank, which will deliver its decision on Thursday, is expected to keep interest rates on hold at 1.5 percent.

"Admittedly, Korea's economy continues to face headwinds, particularly on the external front, and low inflation suggests the central bank has scope to cut interest rates further," said Krystal Tan, Asia economist at Capital Economics.

"However, given concerns about high household debt and our anticipation of a continued recovery in the domestic economy, we expect the BoK to keep rates on hold not just at its next meeting on 15th October, but also for the rest of 2015 and 2016," she added.

Bank Indonesia is also projected to stand pat on Thursday, maintaining its policy rate at 7.5 percent.

"The currency remains under pressure after a strong selloff on fears of U.S. monetary policy normalization," said Faraz Syed, associate economist at Moody's Analytics.

"Low foreign exchange reserves make Indonesia susceptible to capital flight, so we are unlikely to see the central bank cut rates soon. We see an outside chance of a rate hike later in the year if there's an increase in volatility and the rupiah falls further."