Market Wrap by Decoder – 06 Nov 13

• TW – Index continue to be under pressure as FINIs’ positions in local TAIFEX and options are hinting on the downside. Retail short margin units and FINIs TSE borrowed shares were both hitting record high levels, signaling that the investors are bearish of the market. (From KGI) TIER revised down TW’s 2014 GDP # to 1.93% from the previous 2% estimated in May.

• HK/CN – Central bank warns of long deleveraging period. China’s economy is set for a long period of deleveraging and eliminating excess capacity and the key will be to ensure a stable monetary and financial environment, the PBoC said Tuesday in its quarterly monetary report. China’s previous economic development model, which relies heavily on external demand and local government investment, is no longer adequate, the central bank said. As a new growth engine has yet to be seen, the country’s economy will continue to face various challenges. Companies that borrowed a lot of debt over the past years will have to go through a deleveraging period and remove excess capacity. Such trend will inevitably affect economic growth, said PBoC. Banking regulators will urge lenders to tighten credit to cement, iron and steel and other sectors suffering from overcapacity problems and grant more loans to small firms. This is inline with Premier Li’s call to boost the quality of the economy. –

• Markets started on lows and recovered after the streets saw the ISM non mfg #s. Unfortunately, that single piece of news wasn’t enough for the indices to close in the green. Sectorwise, telco/utilities lagged while consumer staples/tech outperformed. Crude saw another 1.3% decline to 5 months low on rising domestic supplies. For the treasuries, 10 yrs bonds traded lower as tapering concerns creep back (yield hit 2.67%). Sentiment was negative in the eurozone as EU cuts the growth forecast in 2014 from 1.2% to 1.1% and raises jobless rate forecast.