Morning Wrap by Decoder – 26 Dec 13

• MSCI rebalancing @ close today.

• HK/CN – Financial reforms signal rise of private banks. Private investors will be allowed to increase their stakes in certain rural banks and agricultural cooperatives, Yan Qingmin, vice chairman of the China Banking Regulatory Commission, said Monday. In addition, they are being encouraged to establish privately owned banks. As present, private capital owns about 42% of Chinese shareholding banks and 54% of urban commercial banks compared with 11% and 19% in 2002 respectively. The banking regulator will continue to encourage private capital to take part in financial reform while allowing private banks, he said. The move is in line with reforms announced by the Communist Party central committee at the end of its recent plenum. The banking regulator is likely to announce a deposit protection scheme in the first quarter of next year before launching the concrete regulatory rules for private investors to set up their own banks, observers said. – http://www.ejinsight.com

• Markets were treading above the unchanged level for most of the session till the final hour’s sell down. Macros were disappointing as pending home sales (MoM/YoY) fell 0.6%/2.2% Vs cons of +1.0%/-1.0% respectively. Dallas Fed Mfg activities also came in lower @ 1.9% Vs 5% estimated. On the flip side, Iran has agreed to curb some of its nuclear activities in return for about $7bil in sanction relief, after days of intense talks in Geneva. The deal was said to last for 6 months till the next agreement. Sweet crude dipped 1.8% on the news before recovering to close just 0.8% lower. As a result, airlines stocks were mostly higher as investors participate in the weakness of crude oil. The Dollar however, continue to buck its uptrend, hitting a 6 months high Vs the Jap Yen while US treasuries posted modest gains.

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