Harris Fraser |
금융 시장 리포트
14 November, 2022
Weekly Insight 11/11

Weekly Insight 11/11

usa ​US

Markets quickly returned to optimism this week on hopes that a Fed pivot could be round the corner, fueled by the lower than expected inflation figure, the 3 major indices surged a whopping 5.36-7.46% over the past 5 days ending Thursday. The October headline inflation came in at 7.7% YoY, lower than both the market expected 8.0% and September’s 8.2%. In response, Fed officials expressed their views that rate hikes could slow down, but members still reiterated that slowing down on hikes does not imply a shift from the current tightening policy. Nevertheless, markets have reacted to the news with force, 10 year treasury yields fell to the 3.8% level, the Dollar Index fell below 108, and Bloomberg interest rate futures suggest Fed interest rates would peak at around 4.9% next year.

The US midterms were held on Tuesday, but full results have yet to be confirmed. Republicans will likely regain control over the House of Representatives, but the Senate race will likely depend on the key seat in Georgia, which entered a runoff scheduled for early December. In the crypto space, meltdown took place over the week as the second largest crypto exchange FTX is on the verge of bankruptcy, citing cash shortfalls of 8 billion USD. On the economic front, other than the softer than expected inflation data, labour markets have also showed signs of easing, as initial and continuing jobless claims came in higher than both market expectations and previous readings. Next week, US will be releasing October data on retail sales and industrial production, as well as the housing starts and existing home sales. The latest labour market data on initial and continuing jobless claims will also be released.

 

euro ​Europe

European markets steadied over the week, the UK, French, and German indices gained 0.55-5.10% over the past 5 days ending Thursday. The Bank of England announced that it will start selling off the assets purchased during the emergency earlier from 29th Nov onwards, marking the start of the end of the fiasco that took place during the Premiership of Liz Truss. On the monetary side, ECB officials continued to express their concerns over inflation in the region, Bundesbank President Joachim Nagel mentioned that the Bank has to act ‘decisively’ to bring down inflation, and reiterated his call for a reduction in ECB’s balance sheet. On the economic front, German industrial production was 0.6% MoM in September, which was better than the expected 0.2% expansion, and better than the previous month contraction of 1.2%. The UK also published their preliminary GDP for Q3, contracting 0.2% QoQ, which was better than the market expected 0.5% contraction. Next week, Europe will publish the industrial production figures for September, Germany will release the ZEW current conditions and economic sentiment for November, and the UK will release CPI figures for October.

 

china​China

China markets had a flat week, while Hong Kong equities were lifted by the positive surprise on the US inflation data, as well as encouraging signs from China. Over the week, the CSI 300 index edged 0.56% higher, while the Hang Seng index surged on Friday, gaining 7.21% over the week. China announced changes to quarantine rules for inbound travelers, and flight bans will no longer be enforced, investors saw this as a sign that there could be a pivot in the Zero COVID policy soon, market sentiment was lifted. It was reported that a few entities including National Association of Financial Market Institutional Investors, China Real Estate Association, and China Bond Insurance Co. met up with several property developers in discussions to help raise finances via bond issues. However, the overall situation of the sector remains severe. Economic fundamentals were disappointing, with total social financing and loan growth below market expectations. Exports in October also fell 0.7% YoY, CPI in October was 2.1% YoY. Both are lower than expectations and the previous month figures. Next week, China will release more October data on industrial production, fixed asset investment, and retail sales.

 

 

금융 시장 리포트
7 November, 2022
Weekly Insight 04/11

Weekly Insight 04/11

usa ​US

The much anticipated Fed decision met market expectations. However, the guidance remained relatively hawkish, derailing fed pivot hopes. Markets came under pressure, with the 3 major indices losing 0.10-4.17% over the past 5 days ending Thursday. Earnings season continued, with earnings beats from Pfizer, Starbucks, and ConocoPhillips, while AMD and Moderna missed. The US Fed held its interest rate meeting during the week, and the hike of 75 bps was in line with market expectations. However, Fed President Jerome Powell dashed market hopes for a pivot in the monetary policy. Although he suggested that the Fed could slow the pace of hikes, he warned markets that it would be ‘premature to think about pausing’, and the terminal rate would likely be higher than the consensus. At the time of writing, Bloomberg interest rate futures imply a likely 50 bps hike in December, and expect the rates to surpass 5% in 2023.

As for the economic fundamentals, ISM manufacturing PMI came in better than expected, the October figure of 50.2 beat market expectations of 50.0, though it was still slightly lower than the September figure of 50.9, and the falling trend has not changed since the start of the year. ISM non-manufacturing PMI on the other hand was 54.4, missing both market expectations and came in lower than the previous month figure. As for the labour market, data remains mixed, with initial jobless claims remaining in a down trend, lower than both market expectations and previous values, while continuing jobless claims are higher than market estimates for the last 3 readings and stayed in an uptrend. Next week, the US will be releasing the CPI data for October, the University of Michigan Sentiment for November, and more data on initial and continuing jobless claims.

 

euro ​Europe

European markets had a divergent week, the French and German indices were down 0.01% and 0.61% over the past 5 days ending Thursday, while the UK FTSE gained 1.62%. The Bank of England hiked interest rates by 75 bps on Thursday as markets expected, which was the largest hike in 33 years. However, the Bank was surprising dovish, although they admitted that more rate hikes might be needed to bring inflation in line, BOE Governor Andrew Bailey suggested that the terminal rates will be lower than what is ‘priced into financial markets’. In response to the comment, the Pound fell over 2% against the Dollar on Thursday. As for economic fundamentals, the Eurozone CPI in October came in at a record high of 10.7% YoY, which beat market expectations of 10.2% and was higher than the September figure, the same was observed for the Core CPI, which was 5.0% YoY in October. Markets will be paying attention to when will the trend start to show signs of easing.  Next week, the EU Commission will be publishing their quarterly Economic Forecasts, the UK will release their preliminary Q3 GDP, and Germany will release the industrial production figures for September.

 

china​China

Investment sentiment has turned more positive with various positive rumours in the market. Over the week, the CSI 300 index rose 6.40%, while the Hang Seng Index surged 10.04%, which was one of highest weekly gains in the last decade. It was reported that the US audit inspection was completed earlier than expected, driving speculation that the risks of delisting from US could fade. The new lifted related sectors, and the Hang Seng Tech index in particular surged 7.54% on Friday alone. There was also reports that China is looking to scrap the current system of flight suspensions, which could be a hint of the country shifting away from its tight pandemic restrictions. German Chancellor Olaf Scholz visited China on Friday, which was the first major European leader to do so since the COVID pandemic started. As for fundamentals, China data remains weaker. Caixin Manufacturing PMI was the only PMI that surpassed market expectations at 49.2 in October, other PMIs including NBS manufacturing and non-manufacturing PMIs, as well as Caixin services PMI all fell short of expectations, and all 4 above data points remained in the contraction zone. Next week, China will be releasing the latest 1 year Medium-Term Lending Facility Rate (MLF), exports for October, as well as CPI and PPI data in October.

 

 

금융 시장 리포트
31 October, 2022
Weekly Insight October 28

Weekly Insight October 28

usa ​US

Markets remain optimistic over potential easing in the fed monetary tightening, global markets continued to rebound, with the 3 major indices in the US gaining 1.68-5.60% over the past 5 days ending Thursday. Earnings season continued with 227 of S&P 500 constituents reported Q3 earnings, where 74% of the companies have managed to beat market estimates. However, the much anticipated Big Tech had a poor showing. Apple was the only one which met market expectations and continued to offer a positive guidance. Microsoft indicated slowing earnings growth and decreasing margins, Google’s parent company Alphabet reported a 27% fall in earnings, Amazon earnings fell and offered weaker than expected Q4 guidance. Meta’s net income fell 52% and the stock fell nearly 25% after the announcement. The gloomy data weighted on the tech sector, markets will be paying attention to whether the disappointing figures were indicative of further economic weakness.

Apart from the earnings, markets were optimistic over a possible slowdown in the rate hikes from fed, as it was reported that some Fed members were concerned over a possible sharp slowdown in the economy. According to Bloomberg Fed fund futures data, markets have fully priced in a 75 bps hike for the November meeting next week, and a high probability of a 50 bps hike in December. For fundamentals, PMI data in October were disappointing, with Markit data on manufacturing and services both in the contraction zone, missing expectations and the previous month figure. The Consumer Board Consumer Confidence came in at 102.5, which was also lower than market consensus of 106.5 and the September figure of 107.8. The much anticipated Q3 GDP came at a surprise of 2.6% QoQ, which was higher than the expected 2.4%. Next week, US will be releasing the October data on ISM PMIs, non-farm payrolls, and unemployment, the US Fed will also hold their November interest rate meeting.

 

euro ​Europe

European equities continued the rebound as sentiment remains positive. The UK, French, and German indices were up 1.87-3.48% over the past 5 days ending Thursday. The UK political fiasco have seemingly ended, as the former Chancellor Rishi Sunak has secured the top position in UK politics, markets expect more tax raises and spending cuts down the line. Over in the EU, the ECB raised interest rates by 75 bps as expected. The bank admits that inflation remains too high and the interest rate normalisation will continue. However, the bank refused to offer guidance on the next steps, stating that it will be ‘data-dependent’, there is also no concrete timetable for quantitative tightening. On the economic front, the Eurozone manufacturing and services PMIs for October came in at 46.6 and 48.2, with the former missing market expectations, and both were lower than the September figure. Next week, the Eurozone will release the October CPI, Germany will release the September factory orders, and the Bank of England will hold their interest rate meeting.

 

china​China

Market sentiment remained weaker, the CSI 300 index was down 5.39% over the week. The Hang Seng Index on the other hand was down by 8.51%, closing below the 15,000 mark for the first time this year, which was a new low since April 2009. China released slew of economic data this week, the Q3 GDP grew 3.9% QoQ, which was higher than the expected 3.5%, and a big rebound from Q2’s 2.7% contraction. Exports in September grew 5.7% YoY, better than expected, industrial production also recorded a 6.3% growth YoY beating. However, retail sales disappointed, growing 2.5% YoY in September, which was lower than both market estimates of 3.3% and the August figure of 5.4%. Fixed asset investment was lower than expected. Premier Li Keqiang instructed further deployment of supportive policies to stabilise the economy. Next week, China will release October figures for Manufacturing and Non-manufacturing PMIs, as well as Caixin PMIs.

 

 

금융 시장 리포트
24 October, 2022
Weekly Insight October 21

Weekly Insight October 21

usa ​US

Markets showed some resilience, US equities mounted a rebound late in the week, with the 3 major indices gaining 4.74-5.22% over the week. The earnings season has started, with notable companies reporting mixed figures. Netflix posted a positive surprise on revenue, profits, and subscriptions, sending the stock higher; whereas Tesla beat EPS estimates but missed on revenue. At the time of writing, 75% of the 88 reporting S&P 500 constituents have reported earnings beats, although the ex-energy earnings growth is -3.4%. IMF released revised forecasts for the global economy, expecting further slowdown in the coming year, cutting expectations by 0.2% to 2.7%. The US Fed also released the Beige Book over the week, the report suggests that prices remain elevated, but sees demand softening.

On the monetary front, Fed members continued to convey the hawkish message. Philadelphia Fed President Patrick Harker suggests that inflation remains out of control, and more hikes will be needed. St. Louis Fed President James Bullard suggests that the terminal rates should still be around 4.5-4.75%, and rate hikes should continue to be front loaded. As for fundamentals, industrial production saw a 0.4% MoM growth in September, which surpassed expectations of a 0.1% increase, and it was also better than August’s 0.1% contraction. Housing data on the other hand was mixed, building permits was 1.564M in September, which was higher than market forecasts and the previous month figure, while housing starts fell to 1.439M in September, which was a notch lower than market expectations and the August figure. Next week, more Big Tech are going to report earnings, including Alphabet, Microsoft, Meta, Amazon, and Apple. The US will also be releasing manufacturing and services PMIs for October, Q3 GDP, as well as PCE data.

 

euro ​Europe

Europe equities went higher over slightly improving investment sentiment, the UK, French, and German indices were 1.62-2.36% higher over the week. The messy political situation in the UK continued, and the UK Prime Minister Liz Truss have resigned on Thursday, making her the shortest-serving PM ever in UK history, markets will be paying attention to the upcoming developments in the UK politics scene. As for the economic side, the German ZEW Sentiment Index for October was better than expected at -59.2, although it is still very close to the historic low in September. UK CPI in September returned to the historic high of 10.1% YoY, and retail sales for September fell 1.4% MoM, which was worse than market expectations of a 0.5% drop. Next week, the Eurozone will be releasing the latest PMIs for October, the ECB will hold their interest rate meeting, and Germany will release the IFO business climate index and CPI data for October, as well as the Q3 GDP.

 

china​China

China has announced a delay in the release of the latest economic data, sentiment was hit and both Hong Kong and China A-shares fell. The CSI 300 was down 2.69% over the week, while the Hang Seng Index in particular hit a new low since 2008 Financial Crisis on Thursday intraday, and the index is down 2.42% for the week. The 20th National Congress continued over the week, and the absence of further economic stimulus, as well as the mentions of stability and pandemic have dampened expectations of a policy pivot in the short term. Agile Group has redeemed a 1.5 billion Yuan onshore bond issuance, but the balance sheet health of the property sector remains under close monitoring. The Loan Prime Rate is kept unchanged, markets will still be on lookout for a more supportive policies for the sector. Other than the delayed economic data, China is also expected to release its industrial profits data for September next week.

 

 

금융 시장 리포트
20 October, 2022
Japan – Supported by Reopening Hopes

Despite a decent outlook on the economy thanks to the changes made to border rules, Japanese equity indices still logged in a large correction in September, the Japanese Yen also fell 3.99% further against the dollar. Over the month of September, the Nikkei 225 lost 7.67% (11.50% in US$ terms), while the TOPIX was 6.48% lower (10.36% in US$ terms).

The current accommodative monetary policy weakened the Yen, resulting in soaring imported prices. The latest inflation figure remains elevated at 3.00%, which is the 5th month in a row above the central bank target. However, we still don’t expect the Bank of Japan to alter its course, as the dovish policy was fully backed by the government. Instead, the Bank had opted to intervene in the FX market, briefly pushing back the strong Dollar, but the Yen resumed the slide later on. We expect the existing trend to continue in the near future.

In response to the difficulties caused by inflation, Prime Minister Fumio Kishida has ordered his cabinet to draw up a fiscal package, including electric bill subsidies to alleviate household inflationary pressures, its effectiveness will be closely watched. Other than domestic consumption, border controls are set to further ease for inbound travellers in early October, which could rejuvenate the hospitality sector in Japan, although the absence of Chinese tourists likely puts a cap to the upside. At the moment, inflation and currency depreciation risks likely cancel out the potential in reopening, we are staying neutral on the Japanese equity market in the short term.

 

금융 시장 리포트
20 October, 2022
Fixed income – Opportunities in High Quality Bonds

Concerns over inflation, as well as the resultant monetary policy tightening continued to mount over the month. Market sentiment was further hit as hopes over a potential monetary policy pivot were dashed. Over September, fixed income indices continued the slide, with the Bloomberg Global Aggregate, US Investment Grades, US High Yields, and Emerging Markets US Dollar Bonds losing 5.14%, 5.26%, 3.97%, and 5.53% respectively.

Global inflation remain elevated, although energy prices have slightly eased, core inflation across major economies barring China remained on the rise. Labour markets were tight and wage pressures are high, the economy risks entering a wage-price spiral. In response to the situation at hand, global central banks have tightened monetary policies at the fastest pace in recent decades. Furthermore, central bank officials have repeatedly emphasised that tightening will continue until inflation returns to the target level. With elevated interest rate risks in the short term, our neutral view on duration remains unchanged.

Other than interest rates, the economy itself is also worrying. As a result of the high inflation and rapidly tightening monetary policy, major economies are expected to enter recession as early as Q4 this year. Credit quality is the priority in this environment, minimise exposure to high yield bonds, and replacing them with investment grade ones. Consider pockets of opportunities in high quality bond issuers such as the heavily regulated financials, particularly the ones with both lower duration and lower seniority, which can offer attractive yields in excess of 6% annualised.

 

금융 시장 리포트
19 October, 2022
EM – Elevated Risks in Certain Markets

staying risk adverse puts a cap on EM valuations. The MSCI EM index was down by a whopping 11.90% over the month of September.

In the month, we observed no change to the macro backdrop. As global inflation stays elevated, central bank monetary policy tightening remains in place, further amplifying the economic slowdown. To add on, the Dollar remains in a very strong form due to its status as a safe haven and the interest rate differential, EM foreign reserves contract, local currencies weaken, EM equity outlook will likely be less positive. The high volatility in global markets and the anticipation of a global recession resulted in markets turning risk adverse, safety seeking puts a cap on the upside potential in EM.

Across the global EM spectrum, we see certain markets with elevated risks. The Indian equity market is one of them, given the downward revision in the economic growth forecast, but inflation remains stubbornly high, driven by food as well as shelter prices. The Reserve Bank of India have responded with more hikes since the start of the year, but valuations remain on the expensive end, exposing the market to more downside risk if rerating takes place in the future. Overall, EM equities should continue to face more headwinds, we would suggest investors to stay conservative and underweight EM equities.


 

금융 시장 리포트
19 October, 2022
Europe – Energy Crisis Worsens

As risks of economic slowdown and monetary tightening persist, market sentiment continued to deteriorate over the month, European equities extended losses over recessionary fears. Over the month of September, the European STOXX 600 index lost 6.57% (9.02% in US$ terms).

The concerning issue of energy crisis in Europe continued to worsen. Gas deliveries via Nord Stream have not resumed since late August, the leakage found in both Nord Stream 1 and 2 late in the month further complicates the situation. Repairs to the pipeline will be a complex task, gas deliveries through the pipes will likely remain suspended at least over winter. Although Europe is not at immediate danger of a complete shutdown given the high levels of gas storage, a complete shutdown of all gas supplies from Russia is still in the cards. Europe may still experience energy shortage, and the economy is expected to take a hit from the situation.

Economic fundamentals continue to disappoint, issues largely stem from the energy uncertainty, as well as the stubbornly high inflation, with the latter hitting a new record high of 10% YoY in September. In response, the European Central Bank have raised rates by 75 bps in September, and reiterated their resolve in reigning in inflation, ECB President Christine Lagarde explicitly told markets to expect the Bank to continue raising rates in the coming few meetings. With the economy on the cusp of recession, and facing more monetary tightening ahead, we maintain our underweight view on European equities in the short term.


 

금융 시장 리포트
19 October, 2022
China – Looking Out for More Policy Guidance

Chinese markets remain under pressure due to weakness in market sentiment. Economic fundamentals are soft, confidence weak, uncertainties over the policy direction and COVID restrictions casted a shadow over the market outlook. Over the month of September, the CSI 300 Index slumped 6.72% (9.67% in US$ terms), while the Hang Seng Index crashed 13.85% (13.86% in US$ terms) over the same period.

Economic fundamentals have yet to recover, with most PMIs close to or staying in the contraction zone, sector indicators also show muted consumption, investment, and industrial activity. The overarching backdrop has not changed, with the property sector in China remaining in deep trouble. Local authorities have been active in attempting to support the sector via policy initiatives. However, the effectiveness of the policies are yet to be seen given the dismal property sales in the country.

With the issue in the property market unsolved, economic effects rippled through the economy. The property sector has a large direct and indirect impact on the GDP itself, and the reverse wealth effect will impact the consumption power of the middle class. Moreover, the ongoing COVID outbreak also dampens consumer sentiment. With the 20th National Congress of the Chinese Communist Party coming up, we hope for more clarity on the policy direction, and will suggest investors to hold off from building Chinese equity exposure before we see further guidance.


 

금융 시장 리포트
19 October, 2022
US – Expect Further Correction

The bear market continued in September, equities saw large corrections as market sentiment deteriorated significantly on the back of aggressive monetary policy expectations, as well as fears of economic recession. Over the month of September, all 3 major indices saw large crashes, the Dow, S&P 500, and the NASDAQ lost 8.84, 9.34, and 10.50% respectively.

The problem of high inflation remains in place. Although energy related items have slightly eased, other sections of the inflation basket have picked up the slack, with wages and shelter costs contributing more to the CPI. In response to the situation, the US Fed will likely continue to tighten their monetary policy, with Fed Funds rate expected to peak around 4.5% to 5.0% in 2023. The macro backdrop remains largely unchanged, monetary tightness will exert pressure onto investment market valuations, business and consumer sentiment will also be hit, driving recessionary risks higher.

Economic indicators showed mixed signals, though the key labour market remains red hot, with initial and continuing jobless claims still lower than pre-pandemic levels. Although job vacancies have slightly come down from their earlier peak, it remains significantly higher than pre-2020, suggesting that the labour market remains very tight. We think that Fed pivots are unlikely in the short term, not before we see significant improvement in the labour market. Given the unchanged backdrop, although short term rebounds are possible, expect further correction before the market hits the trough. We shall refrain from building additional equity exposure in the US equity market in the short to medium term.


 

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