Harris Fraser |
금융 시장 리포트
11 June, 2021
Weekly Insight June 4

Weekly Insight June 4

 usaUS

The latest economic data were very encouraging, but talks of inflation weighed down on markets, as fears of monetary tightening led to the continued downward pressure on the tech sector. Over the past 5 days ending Thursday, only the cyclical heavy Dow Jones managed to post a gain of 0.74%, while the S&P 500 and NASDAQ fell 0.07% and 0.90% respectively. The US released a number of important data over the week, headline figures for sentiment indicators and employment data were all positive, services PMI in particular hit a new record high of 70.4, initial jobless claims also dropped below the 400k level for the first time since the epidemic has started. All the positive economic indicators point to a strong recovery in the economy, reports that President Biden is considering shelfing tax hike plans further supported equity performance. 

However, worries over inflation rose, the possible tightening up on liquidity in the future put more pressure on the growth heavy tech sector. Philadelphia Fed chair Patrick Harker recently mentioned that it is about time to think about tapering talks, echoing the two Fed vice chairpersons’ view, implying that the current easy monetary policy could possibly see an earlier than expected adjustment. In other news, the gold rally hit the brakes, seeing a 1.45% drop on Thursday. Next week, more data will be released, NFIB Small Business Optimism and University of Michigan Sentiment could further reaffirm the current business conditions, while any surprises in the CPI data for May could have implications for the monetary direction.

euroEurope

European market sentiment stays positive with its favourable economic outlook, and the supportive central bank policy tone buoyed European markets. Over the past 5 days ending Thursday, the UK, French, and German equity indexes were up by 0.53 – 1.47%. Data wise, Europe is still doing great, PMI figures across European countries were great, employment data was also positive. More importantly, while inflation jumped to 2.0% in the region, the figure remains roughly in line with central bank targets, fears of liquidity tightening or even rate hikes were still mostly out of the picture. ECB chairperson Christian Lagarde said that the Bank will keep policy support in place ‘well into the recovery’, market expects that the ongoing Pandemic emergency purchase programme (PEPP) will be kept in place well into next year. Next week, Germany will release its latest ZEW survey expectations, while the ECB will hold its June interest rate meeting, expect to hear more on the PEPP plans for the remaining half of the year.

chinaChina

Chinese equity markets were relatively muted over the week, as the latest economic data coming out of the country were mixed, tight liquidity conditions in the onshore markets also limited valuation expansions. The CSI300 and Shanghai composite were both down over the week, while the HSI was also dragged by the volatile markets and was down by 0.71%. It was reported that China is considering a cut in stamp duties, the equity market rebounded on Friday upon the news. However, this is still not enough to reverse the recent falling trend. Economic data this week had one surprise, as the official manufacturing PMI fell short of expectations, coming in at 51.1, whilst other figures remained in the expansionary zone. Next week, China will release figures on CPI, PPI, and exports.

Weekly Insight June 4

Weekly Insight June 4

회사 관련 뉴스
11 June, 2021
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금융 시장 리포트
28 May, 2021
Weekly Insight May 28

Weekly Insight May 28

 usaUS

The revised US GDP growth for 2021 Q1 was unchanged from the earlier initial value, and the recovery trade continued to support the market. The Russell 2000 small cap index in particular benefitted from the strong domestic economy and outperformed other major equity indices, the index was up 2.96% over the past 5 days ending Thursday, while the S&P 500, Dow and NASDAQ were up 1.00%, 1.12%, and 1.48% respectively over the same period.  Although US Federal Reserve officials have repeatedly downplayed the risk of inflation, two Fed vice chairmen have also expressed interest in future tapering discussion. In the face of accelerating inflation, US President Joe Biden said that measures would be taken in the coming weeks to ease the supply pressure, including construction materials among other things. US Treasury Secretary Yellen gave a timeline for the inflation outlook, predicting a higher-than-normal rate for the year.

With the Biden administration set to announce its budget soon, it was reported that US federal spending will rise sharply to US$6 trillion in the next fiscal year, and that the US federal debt will reach 117% of GDP over the next decade. So far, members of both parties have expressed reservations over Biden's budget proposal. Incidentally, there are reports that the Bank of Japan will consider extending its epidemic relief measures for another six months, which are originally due to expire in September, while the IOC has said that both the EU and Japan have reiterated their support for a safe Tokyo Olympics. Next week, the US will release CPI and employment data for May.

euroEurope

European shares followed global markets higher on the back of positive economic data, with the UK, French and German equity indices gaining between 0.02% and 0.77% over the past 5 days ending Thursday. The Eurozone economy continued to improve, with the preliminary consumer confidence index rising from -8.1 in April to -5.1 in May, and the improving economic data also cooled expectations of further monetary easing from the European Central Bank, a Bank of England official even hinted at the possibility of an earlier rate hike. However, ECB President Christine Lagarde said that it was still too early for the central bank to consider scaling back its €1.85 trillion pandemic emergency purchase programme (PEPP). She noted that the ECB is committed to using the PEPP to maintain favourable financing conditions until at least March 2022. Next week, the Eurozone will release unemployment rate for April and CPI data for May.

chinaChina

Hong Kong stocks benefited from the expectations of the southbound fund flows, driving the Hang Seng Index up by 2.34% over the week, while the CSI 300 Index rose 3.64%. On the Hong Kong side, the MSCI index changes took effect after Thursday's market close, where about HK$90 billion of transactions were recorded during the closing auction, pushing the market turnover up to HK$250.5 billion. On the other hand, the RMB continued to appreciate in tandem with rising raw material prices, reaching its highest level against the US dollar since 2018. However, the People's Bank of China said that the RMB exchange rate is not a tool to offset the rise in commodity prices. Next week, China will release data such as the official manufacturing PMI and the Caixin China Manufacturing PMI.

Weekly Insight May 28

Weekly Insight May 28

 

 

금융 시장 리포트
26 May, 2021
Fixed income – A Temporary Shift

Fixed income markets went up across the board as yield pressure was temporarily off the table. Long end yields retreated, investment grades were able to recoup some of the earlier losses, global high yields continued to post positive returns. Over the month, Bloomberg Barclays Global Aggregate, US Investment Grades, Global High Yields, and Emerging Markets US Dollar Bonds gained 1.26%, 1.11%, 1.90%, and 1.33% respectively.

Markets have shifted their views as it seemed that the inflationary pressure was not as serious as thought, driving the shift in yield curve this month, which differed from the recent trend, propping investment grades up. We see this shift only as a temporary change, as commodities prices remain at an all-time high, and the supply gap will not likely be closed in the short term, this would likely translate to more inflation pressures over the short to mid-term, putting downward pressure on bond prices, especially for investment grades.

In fact, Treasury Secretary Janet Yellen was caught talking about a possible rise in interest rate top prevent the economy from overheating. That could had been a slip of the tongue as she downplayed the comments, claiming that she sees no inflation pressure, but this underpins the reality that inflation risk is too in the minds of the Fed, and a rate hike in the midterm is certainly not out of question. Henceforth, we are keeping our views on the fixed income market unchanged, high yields all the way, as their risk to return profile is better suited to the current market condition and outlook. 
 

금융 시장 리포트
26 May, 2021
Japan – Expect a Slower Return to Normal

The Japanese equity market was one of the few major markets that ended the month in red. Driven by the weak fundamentals and steadily worsening pandemic situation, market sentiment deteriorated and the indices faltered at the latter half of the month. Nikkei 225 was down 1.25% (-0.07% in US$ terms), while the TOPIX index lost -1.69% (-2.85% in US$ terms).

Economic data was mixed. While household spending and machinery orders were lacking, PMIs, retail sales, and industrial production posted positive numbers, although services PMI remained in the contractionary zone. In our view, the economy should continue to recover, but the recovery will likely be lagging behind other developed markets due to the government’s incoherent pandemic strategy, and the slow vaccine rollout means any full reopening will likely take time.

According to the latest public opinion, nearly 60% of responding Japanese wants the Olympics to be cancelled on public health grounds. With no foreign visitors allowed at the Olympics, all sunk costs of hosting the Olympics will be largely unsalvageable. As the state of emergency has been extended once again, citizens have vented their frustrations with the government in form of disapproval against Prime Minister Suga, whose support recently hit a new low. The outlook of the Japanese market remains muted as a result of the government’s mishandling, and the long term growth profile is unfavourable, we would avoid overweighing in the market.
 

금융 시장 리포트
22 May, 2021
Europe – Cyclicals Still in Play

European equities logged another month of positive equity returns. Stronger economic data and anticipation of epidemic effects wearing off supported local equity performance. While returns in the local currency were rather tame, the surge of the Euro against the greenback was north of 2%, the European STOXX 600 index gained 1.81% (4.21% in US$ terms) over the month. 

Fundamentals wise, Europe continues to post positive figures. Data ranging from various PMIs to consumer confidence all showed continued positive developments, these data further supplement the rhetoric of recovery in the physical economy. With the gradual reopening under way, consumption is expected to recover to pre-pandemic levels. Cyclicals such as materials, industrials, and consumer discretionary, key heavyweights in the European market, would likely benefit more from the consumption boom.

However, we can expect a cap on the further upside in the European equity market due to their heavier cyclical weighing. As we have mentioned previously, overweighting in European markets is intended as a short term tactical allocation. Henceforth, we remain positive on Europe for 2021 Q2, as authorities expect to achieve a 70% vaccination ratio by the end of Q2, which is the ‘herd immunity level’, the positive sentiment arising from the recovery would likely drive the stock market. We expect there to be limited further upside once the recovery is completely priced in, by then we might review the overweight suggestion.

Europe sees Further Improvement in Economic Fundamentals
 

금융 시장 리포트
21 May, 2021
Weekly Insight May 21

Weekly Insight May 21

 usaUS

As inflation fears lightened, commodities retreated and yields stabilised, high growth sectors such as tech stocks bounced back. The NASDAQ gained 3.13% over the past 5 days ending Thursday, while the Dow & S&P 500 Index gained 0.18-1.13% over the same period. The Fed released their April meeting minutes, officials were quoted saying tapering will be considered if the economy shows rapid progress. More importantly, they acknowledged the current inflation, but dismissed it as a transitory phenomenon, expecting it to ease eventually. The reduced inflationary expectations further supported high growth stocks, as valuations stabilise under less rate hike pressures. In other news, the wide Crypto market crashed during the week in a spectacular fashion, losing more than 40% in value at one point. While there doesn’t seem to be a sole reason to blame behind the crash, a slew of negative factors, including Elon Musk’s twitter, all which contributed to the sustained selloff.  Next week, the US will release several key economic data, including consumer confidence, University of Michigan Sentiment, durable goods orders, and PCE core deflator. The revised 2021 Q1 GDP will also be released, where the market expects the figure to stay unchanged from the previous reading.

euroEurope

Europe equities followed global markets higher, equity indices in the UK, France, and Germany gained 0.81-1.12% over the week. On the epidemic front, Europe continues to do a good job on controlling the viral spread, and vaccinations continued its rollout on schedule, major economies have hit the 30% population mark as of date. With the situation under relative control, the European leaders have announced to reopen the region to travellers from third countries, if the travellers are vaccinated and coming from epidemiologically safe third countries, this sparks optimism that businesses could see a further boost with the influx of tourist money. The ECB on the other hand voiced concerns over the increasing debt load in the European service sectors, which could possibly pose as a problem if governments lift their stimulus in the future. The bank is also monitoring the bond market closely as the recent climb in sovereign debt yields have raised eyebrows. Next week, Germany will announce figures for IFO Business Climate and Gfk consumer confidence.

chinaChina

Chinese equities stabilised over the week, the CSI 300 Index gained 0.46%. Whereas for Hong Kong, despite Tencent’s subpar earnings report, the Hang Seng Index rose 2.64%, led by the rebound in new economy sectors,. The Chinese banking regulator announced penalties on 5 financial institutions over improper business practices, which shows the Chinese determination on reforming the financial sector. In other news, it was reported that the Chinese authorities will not provide full-fledged support to the troubled Huarong, sending the bond prices of longer dated bonds down for both the onshore and offshore markets. Next week, China will announce the latest figures on industrial profits.

 

 

WEEKLY INSIGHT

WEEKLY INSIGHT

금융 시장 리포트
21 May, 2021
Weekly Insight May 14

Weekly Insight May 14

 usaUS

Rising global demand but a supply shortage has led to a surge in commodity prices, and data suggesting an acceleration in inflation has sparked fears of interest rate hikes. The US CPI rose by 4.2% YoY in April, well above market expectations of 3.6% and the previous value of 2.6%, which was also the largest increase in more than a decade; the US PPI also rose more than expected in April; coupled with the projected inflation in the next five years at its highest level since 2006, the headline figures triggered fears of inflation and interest rate hikes, leading to a sharp fall in technology stocks and a shift from growth to value stocks. Over the five past days ending Thursday, the NASDAQ was the worst performer, falling 3.73%, while the Dow and S&P 500 also fell 1.53% and 2.12% respectively over the same period. On the other hand, the latest initial jobless claims in the US hit a record low since the epidemic, several Fed officials believe the economic outlook is bright but risks remain, and are currently discussing whether it is too early to cut back on accommodative measures. Next week, the US will release the Markit Manufacturing PMI data for May and the Fed will also release the minutes of its April meeting.

euroEurope

European shares followed global equities lower, with the UK, French, and German equity indexes falling by 2.33%, 1.52%, and 1.30% respectively over the past five days ending Thursday, mainly due to the unexpectedly sharp rise in US inflation data. On the data front, Germany's ZEW Economic Sentiment Index surged to 84.4 in May, the highest level since records began in 2004. The European Union said it expected the epidemic to subside amid the encouraging progress of the COVID vaccination programme, and therefore revised its economic growth forecast higher to 4.2% and 4.4% respectively for 2021 and 2022. As for the central bank policy, an ECB official said that the suggestions that the central bank should withdraw its special bond buying programme early was "pure speculation". Next week, the Eurozone will announce the GDP growth 2021 Q1 and the final CPI for April.

chinaChina

China equities improved this week, with the CSI 300 Index rising by 2.36% on Friday, tallying a 2.29% rise for the week, while Hong Kong stocks were bogged down by the weakness in external markets, sending the HSI down 2.04% over the week. China's regulation of platform businesses continued as 10 transportation platforms, including Didi and Meituan, were summoned by authorities, resulting in pressure on the relevant sectors. In addition, inflation concerns in the US also weighed on the performance of the Chinese technology sector and the MSCI China Index. Next week, China is expected to release the April fixed investment, industrial production, and retail sales data, the latest LPR will also be announced.

Weekly insight

Weekly insight

금융 시장 리포트
21 May, 2021
China – Weaker Direct Fiscal and Monetary Support

While Chinese equity markets still managed to end in the green for the month, it lagged slightly behind global markets. The economy was steady and remained in strong form since the trough in Feb 2020, but the continued reduction in market liquidity had likely put a cap on the market upside. Over the month of April, CSI 300 was up 1.49% (2.71% in US$ terms), while the Shanghai Composite gained 0.14% (1.35% in US$ terms), the Hong Kong Hang Seng Index also rose 1.22% (1.32% in US$ terms).

A point of concern, especially in the Hong Kong market, was the Chinese authorities taking action against the tech companies in China, ordering them to rectify their ill practices in their businesses over antitrust matters and certain business segments going out of line. The announcements have sparked market concerns over these heavyweights, dragging down the market despite the overall strong economy and corporate earnings backdrop.

More importantly, expect both the Chinese fiscal and monetary policies to tighten this year. As a result, market liquidity have been limited recently, which ended in valuation compression for the high growth stocks. Henceforth, investors would need to look elsewhere to find sources of growth, surplus household savings built up over the course of the pandemic is potentially an untapped opportunity, where the catch-up in consumption spending could be a worthwhile investment idea. Overall, while valuations should stay low, we still expect positive returns for the Chinese market over the year on the grounds of continued recovery in the economy and corporation earnings.

China – Weaker Direct Fiscal and Monetary Support

금융 시장 리포트
20 May, 2021
US - Will Inflation Stay?

The recovery story continues, the US market maintained its upward momentum and returned positive for the month. Big Tech bounced back further after the dip at last month end, outperforming cyclicals as represented by the Dow, strong corporate earnings for 2021 Q1 further boosted the performances of the biggest pandemic winners. Over the month, S&P 500, Dow, and the NASDAQ gained 5.24%, 2.71%, and 5.40% respectively.

The US economic fundamentals remained strong ever since the pandemic low, which is further boosted by the robust vaccine deployment. Currently, with the pandemic past its peak in the US, local governments have relaxed restrictions accordingly, business environment is returning back to normal in a majority of States. Under the overall economic recovery, we keep our views on US equities unchanged, with the emphasis on small caps for the recovery play.

Looking forward, risks in the market could have a negative drag on market performance. As the supply gap will likely persist in the short term, inflation is likely here to stay. This could have impact on the future fiscal and monetary policy, where the current easy monetary policy could possibly end earlier in order to limit the inflationary impact. Another thing to look out for is the pending tax reform that could impact the market in 2 major ways, the raise in capital gains tax could trigger a selloff to reduce the taxes payable, while the raise in corporate taxes and implementing minimum tax could impair corporate earnings. While we stay positive on the US market, there could still be more volatility to come depending how these turn out. 

US - Will Inflation Stay?
 

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