Market Wrap by Decoder – 19 Dec 13

• HK/CN – Central Bank nipping at digital currency bit by bit. China’s bitcoin exchange, the world largest market for the digital currency, has stopped accepting customer deposits after the PBoC ordered third-party payment providers to halt services to related websites. Zhou Jinhuang, director of PBoC payment dept gave the word to a group of third party payment providers @ a closed door meeting on Monday. In the wake of the government curbs, bitcoin has fallen 61% to about US$334 from US$863 on Monday. It was priced @ US$1142 on 5th Dec before the CB’s action. Market observers said bitcoin’s value will continue to fall as the PBoC steps up the measures until bitcoin disappear from the mainland. –

• Markets settled @ their highs after dovish forward guidance from the Federal Reserve offset the immediate impact of a tapering announcement. FOMC reduced its 85bn monthly asset purchases to 75bn, reducing by 10bn – an amount that was below what the streets are expecting. The Fed also pledged to keep the Fed Fund Rate near 0% ‘well past’ the time that the unemployment rate decline below 6.5%. Investors interpreted that the Fed is confident in the underlying strength of the US economy. 10 years treasuries yield ended with a tiny gain @ 2.89%. T/O was robust, +20% vs 2 weeks average and highest since Sept. Asian markets gapped up on the back of the overnight tapering news (overhang removed on tapering/debt ceiling in Jan) but we should see some pullback as investors would want to lock in some profit before Christmas (sell on news).


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