Market Wrap by Decoder – 17 Dec 13

  • HK/CN – Huijin digs into big 4 banks in vote of confidence. Central Huijin Investment Ltd, an arm of China’s sovereign wealth fund has raised its stakes in the nation’s big 4 state-owned banks over the past six months, according to filings by the lenders to the HK stock exchange. Between June 13 and Dec 12, Huijin bought over 100mil A shares in the 4 big banks each, through on market purchases. Huijin’s share acquisition pushed up SHComp by 0.6% during the period and helped prevented a collapse in the A-share market after a credit crunch in June plunged investor confidence to its lowest in many months, said observers.


  • Market surged @ open and then range traded for the remaining of the session as investors weighed the odds of any Fed QE withdrawal during mid week. Macros attributed to the surge are: US total Nov Industrial O/P rose 1.1%, most in a year (est 0.6%)/Capacity utilization 79% Vs 78.4%/Nonfarm production 3% Vs est 2.7%/EU Dec PMI came in @ 52.1 Vs 51.9%.The rally was broad based, with industrial/energy/tech outperforming while consumer staples and healthcare lagged. T/O was considered robust during this time of the year and it increased 6% Vs the recent 2 weeks average. SHComp traded lower throughout yesterday’s session as HSBC Flash manufacturing PMI eased to 50.5, falling below expectation and slightly below 50.8/50.9 measured in Nov/Oct. The slowdown in the expansion of output and a faster than expected drop in employment were named as the causes of the fall in the index (which dragged the rest of the region into the red as well).

Market Wrap by Decoder – 16 Dec 13

• HK/CN – Party leaders take residency reform to next level. China will begin a much-awaited reform of the residency system or hukou next year as part of efforts to ramp up urbanization. The aim is to stimulate growth in smaller cities while easing pressure on major urban centers, the official Xinhua news agency reports. The central government will cancel hukou restrictions for small towns and cities, easing those for mid-sized cities and review the system in large urban centers with growing populations. Market observers said small and mid-sized cities will be front and center of urbanization in the coming decade while the hukou restrictions in top-tier cities like Beijing/SH/GZ will remain tight. The central government wants to increase the pace of urbanization in small cities by directing investment from developed regions while slowing population growth in key cities. –

• US Markets ended a choppy session near unchanged level as investors remained cautious ahead of this week FOMC meeting. Consensus were mixed, with FX traders expecting a “dovish tapering” – announce tapering in Dec/Jan and keeping the amount below 20bil while the economists are more hawkish – tapering to start in Dec/Jan and QE3 will end by Q3 2014. This well expresses the dividing line between hawks and doves with respect to Wed’s FOMC (from Citi). Treasuries and gold ended higher with crude trading lower. Sector wise, material/industrial/financial outperformed and offset losses in tech/energy/telco. Bonds ended up firmer, snapping a 2 day decline with yield standing @ 2.86% (10 yrs). Over in Europe, retail investors continued to favor European equities as mutual funds have now received 24 consecutive weeks of inflows, aggregating to around 6% of the total AUM. This also marks the longest series of inflow since 2001. Although the outlook may seem positive with the strings of inflow, do take note that it all started with a low base as European mutual funds have suffered a net outflow of ~19% of their AUM since 2007 after the financial crisis.

Market Wrap by Decoder – 9 Dec 13

• KR- Foreigners net sold W300bn in Nov, turning net seller for the first time in 5 months. Saudi Arabia funds sold W500bn/Luxembourg W400bn/UK W340bn while US net bought W500bn/Ireland and Canada W300bn each.

• HK/CN – Setting the agenda for the economic year ahead. The Central Economic Work Conference, an annual meeting convened by the Communist Party’s Central Committee and the State Council, is expected to be held this week to decide the nation’s economic direction for next year, reported by China Securities Journal report yesterday. The main theme of Beijing’s 2014 economic policies is to roll out reforms in the administrative and fiscal systems, financial sector and SOE, according to the Economic Information Daily. The biggest move should be price reform of public goods, as well as expansion of the resource tax and taxation reform in the coal industry. It will also allow lenders to start a deposit protection scheme and resume the launch of negotiable certificates of deposit. In addition, Beijing is expected to lower the GDP target for 2014 to 7% from 7.5% this year. –

• SG – A rare episode in Singapore for more than 4 decades – Riot @ Little India last night, sparked by a fatal accident with a bus running over an Indian foreign worker. Ambulance and police car were torched as the angry mob grieve over the loss of their country mate.

• US markets soared with the 3 major indices adding ~1% after the stronger than expected monthly job report. NFP increased by 203K Vs 188K and jobless rate dropped to 7% from 7.3% previously (a big improvement!). As US inched closer to the 6.5% targeted unemployment rate before the tapering of QE kicks in, investors are speculating on the exact time line once again. However, most of them seems to believe that it will definitely not happen in Dec and it will most likely happen in 2Q 2014, hence the rally. Consumer staples/industrials/financial/material/healthcare led the winners. Retailers were hit after disappointing guidance by Big Lots and a few others.

Market Wrap by Decorder – 5 Dec 13

• TH – Market is closed for the King’s Birthday.

• HK/CN – China Mobile top winner as 4G licenses issued. The Ministry of Industry and Information Tech (MIIT) has issued 4G wireless communication licenses for the homegrown TD_LTE tech to mobile carriers China Mobile/China Unicom and China Telecom, the ministry said yesterday. China Mobile – the nation’s largest mobile carrier, has been awarded a total of 130 MHz of paired spectrum for the network while the remaining 2 got 40MHz each. The 4G tech, which is 10x faster than the existing 3G services, will help mobile carriers slash operating costs and improve the performance of cheaper handsets priced around 1000 Yuan, making them mainstream, observers said. China Mobile is expected to benefit the most from the government’s decision as it can easily upgrade its 3G base stations into 4G base stations, said observers. China Unicom and China Telecom, which prefer the FDD-LTE standard, will have to rent China Mobile’s network over the next one to two years until the MIIT issues 4G licenses in the FD-LTE standard. The carriers are expected to invest a combined 500bil yuan to kick off their 4G services. –

• US stocks extended their losing streak to 4 straight sessions and the early weakness coincides with heavy selling in Europe. Quite a number of macro data for investors to digest: BTE ADP employment report (215K in Nov Vs 160K est)/Oct new home sales 444K Vs 420K/Nov ISM Service 53.9 Vs 55 est. The BTE employment report also increased the expectation of a strong NFP this coming Friday. With the mixed macro data, many are questioning on the timeline of the QE tapering while some of them locked in profit before the festive season. Treasuries were sold off after the release of the data, sending 10 yrs yield to 2.83%. Rumors on the Democrats and the Republicans reaching a budget agreement well ahead of the planned deadline of Jan 15 helped lifted the markets in the afternoon.

Morning Wrap by Decoder – 4 Dec 13

• Msia – Central Bank governor stated that the inflation rate could increase 0.4% to above 3% due to the recent hike in electricity tariffs.

• TW – Most brokers are bullish on Taiex towards to 2014 with CLSA targeting 9,600 lvl in the year of the horse due to improve market liquidity and stronger GDP growth. This is inline with what the stock exchange is expecting in 2014 as well – daily market turnover to hit US$3.8bn Vs US$2.7bn YTD on the back of new initiatives like intra-day trading/shortening of the matching time/relaxing margin trading quota for retailers.

• HK/CN – Renminbi beats euro as no.2 trade finance currency. The renminbi has overtaken the euro as the 2nd most used currency in trade finance, accounting for 8.66% of the activity in Oct, said financial cooperative SWIFT in a statement on Tuesday. The Chinese currency ranked 4th in Jan 2012 with a 1.89% share. According to the statement, the top 5 countries using renminbi for trade finance are China/HK/Singapore/Germany/Australia. As a payment currency, the renminbi was stable on the 12th spot, trailing the US$/Euro/Yen/Kiwi/Canadian/HK/SG dollars. However, it will take some time before the renminbi becomes the 2nd largest payment currency, experts said. They noted that not many foreign companies are willing to keep the currency in their bank accounts due to the lack of investment tools in the global market. –

• S&P 500/Dow fell for the 3rd session as uncertainties start to resurface as tapering concerns hit the headlines. Investors are worried that the extended rally may have stretched a little too long and an imminent correction may be long overdue. Separately, a decision by a Michigan judge to allow Detroit’s bankruptcy to proceed over the objections of union and retirees help trigger added selling pressure on concerns of setting precedent cases for other states. Apple continued its uptrend, adding 2.7% following news that China Mobile began accepting iPhone pre-orders. In the Energy space, crude oil inched up on news that OPEC might curb output in 2014 to ensure oil price to stay near US$100/bbl. Over to fixed income, treasuries ended modestly higher with 10 yrs yield down 2 bp to 2.78%.

Morning Wrap by Decoder – 3 Dec 13

• SG – Government to start taper “massive construction” program from 2014 as supply/demand for public housing returns to balance. This will be done in a measured way to allow market to gradually adjust. Over the past year, the government has delivered more than 25K BTO flats and it has offered more than 77K BTO flats in the last 3 years. Balance between demand and supply has been restored as the COV for Oct is S$12K down from $35K in Jan.

• HK/CN – Shanghai FTZ eyed as offshore renminbi center. Residents in the Shanghai FTZ will be allowed to open special bank accounts, which they can use for cross border financing and guarantee businesses, said PBoC on its website yesterday. They can transfer their money from these bank accounts to other places in China, and such transactions will be treated as cross-border capital flows. Individuals in the zone who fulfill certain requirements can buy over overseas investment products including stocks while foreigners can buy Chinese investment tools including stocks, said the Central Bank. Market observers said that such arrangements will be just like setting up an offshore renminbi center inside the zone by creating a firewall between the area and the rest of China and this will boost cross-border trade. Still, the road to opening the nation’s capital accounts will remain bumpy as the central bank needs more time to make sure the latest arrangements will not cause such problems as money laundering and tax evasion, or wreak havoc on the capital market. –

• US stocks ended lower, with Dow flirting with the 16K level as investors digest the headline news. National Retail Federation said that Thanksgiving weekend sales were down 3% YoY and retail/momentum stocks got hit as a result. Macro data like Nov ISM Index (57.3 Vs 55.5 est)/Oct construction spending (+0.8% Vs +0.3% est) failed to impress the markets. Overall, 8/10 sectors on the S&P declined with Telco falling the most while Healthcare and Energy were the only ones seeing gains.

Market Wrap by Decoder – 28 Nov 13

• TH – PM Yingluck is expected to survive No-confidence vote scheduled today, said Bangkok Post. Leaders from both sides called for the government and protesters to start talking. Situation on the ground will remain tense even if the no-confidence vote pass through and there is no indication when both sides will sit down peacefully to talk.

• HK/CN – HK property firms shy away from Qianhai land sales. 2 commercial plots in the Qianhai special economic zone have been sold for a combined 4.06bil yuan, said Shenzhen Land and Real Estate Exchange Center yesterday on its website. Priority would be given to HK firms in the upcoming rounds of land auctions by Qianhai authorities in Shenzhen, said the authority as they previously sold 3 commercial plots to mainland Chinese firms. However, HK based property giants remain inactive in bidding for the Qianhai sites. The seller may also be disappointed as one of the winners are of the 2 sites is a supply chain management firm instead of a property or financial firm. HK property firms are put off by a 10 yrs lock up period and the prospect of slow returns, some observers said. If there is anything that leads to a suspension or slowdown of the construction of public facilities in the zone, the owners of the sites will suffer financial losses. –

• Markets ended a choppy session on record high once again as investors welcome a series of BTE macro data. The initial jobless claim was down 316K Vs 330K cons/Chicago purchasing manager came in @ 63 Vs 60 cons/Uni. of Michigan confidence @ 75.1 Vs 73.1 est. However, T/O for the session was light ahead of the Thanks Giving Holiday (down 17% Vs 2 weeks average). Gainers were led by Tech/Industrials/Financials/Cons Dis while Utilities and Energy lagged due to WTE DoE inventory data that showed an outstanding 2.95mil barrels Vs 423K estimated. As a result, crude fell 1.5% to its 6 months low. Treasuries didn’t really perform overnight as the 29bn, 7 yrs auction bids disappoint with a coverage ratio of only 2.36x (lowest in 4 yrs).