From the Floor: 'It could happen again' to Samsung — #SaxoStrats
- Samsung 'not a buying opportunity' as it faces brand reputation damage — Garnry
- 'If it happened once, it could happen again' — Garnry
- Alibaba emerging as potential buy opportunity as Singles' Day looms — Garnry
- GBPUSD vols yet to fall despite relative calm in spot market — Bechmann
- Time to switch from GBPUSD to EURUSD options could be ripe — Bechmann
- Thai stocks, baht soar as king's death ends uncertainty — Liu
By Martin O'Rourke
There's nothing of course that a trader likes better than a good bargain and a sharp plunge in a former market darling of the type that is hitting Samsung now, is just the thing to perk the interest of the odd contrarian or two.
Such temptation should be resisted, insists Saxo Bank's head of equities strategy Peter Garnry.
"There has been a lot of talk about Samsung and we had a long trade in the summer which we got out of just as the controversy regarding the batteries on the Galaxy Note 7 model first broke," says Garnry, speaking on the daily global morning call. "My current view on Samsung is that there is serious brand reputation damage and quality issues enveloping the South Korean giant."
"Institutional investors are quite wary about Samsung," he says. "If it happened once, it could happen again."
"I don't think this is a buying opportunity," the equities chief adds. "If the share price goes below 650, then there is a football field of space to the downside."
Apple conversely, says Garnry, can continue to profit from its rival's woes as the Galaxy Note 7 fiasco puts into perspective the sharp criticism that came its way after the September 7 launch of its iPhone 7 left the market a little underwhelmed.
"A football field" of space to the downside below 650
Garnry's focus Friday is on the three big financials — JP Morgan Chase, Wells Fargo and Citi Group — which deliver their Q3 earnings results this afternoon.
"We have a long position on JP Morgan Chase as it is the best of the financials and will benefit from increasing rates in the US because of their very large commercial operation," says Garnry. "Earning expectations are 8% up for JP Morgan Chase."
Wells Fargo and Citi Group are slated for respective year-on-year falls of 4% and 12% respectively, but Garnry has polar views on the pair.
"Wells Fargo is one to stay away from but Citi Group from a trading perspective could surprise to the upside as sentiment has been so negative for the last year, but there has been a reversal in emerging markets with the higher oil price."
"Citi Group could be in for a well-timed surprise."
Another Garnry likes is Gilead Sciences. "This stock has become too cheap and we'll be buying when the New York Stock Exchange opens."
Finally, the equities head has Chinese e-commerce giant Alibaba under the microscope and with the run in to Singles' Day on November 11 beginning to develop momentum, this is a time of year when Alibaba often prospers as anyone who remembers its huge IPO in September 2014 will testify to.
"There's been a setback over recent weeks but I'm going long Alibaba when New York opens today," says Garnry.
Alibaba shares could be set for an upside push
ahead of the Singles' Day bonanza on November 11
The relative stability in GBPUSD spot after the flash-crash mayhem of last Friday might have been expected to induce some lowering in volatility, but not a bit of it, it seems, according to Kresten Bechmann from the FX Options desk in Copenhagen.
"We're very surprised volatility on one-month GBPUSD has not traded lower as spot has been relatively stable since the flash crash," says Bechmann. "The implied volatility has been going higher and the realised volatility has been going lower and that gap should narrow with an opportunity to go short."
Bechmann sees an opportunity to shift focus to one-month EURUSD options. "If you think the focus is turning away from the UK to more global issues, then selling GBPUSD volatility is an option which can be financed by buying EURUSD."
Bechmann in particular anticipates a lot of volatility in and around the next and final presidential debate between Donald Trump and Hillary Clinton on October 19.
Implied volatility (the yellow line) on 1-month GBPUSD significantly north of realised volatility
Another currency that has had its fair share of drama these last two weeks is Thailand's baht which, in perfect synchronicity with the local stock market and the state of the nation's emotions, has been on a steady downward descent throughout the recent illness of the 88-year old king, Bhumibol Aulyadej.
The king's death Thursday, while a source of great angst for the nation, has conversely helped both the Thai stock market and the baht recover some of their losses as a perhaps the ultimate kind of certainty replaces the doubt. USDTHB was down approximately 2% at the end of the Asian session and is currently at around 35.30 from a high of just beneath 36.00 Thursday.
We reported those dismal trade figures out of China yesterday that sent USDCNH to a six-year high as China's yuan struggled in vain to staunch the wound.
It's better news Friday morning after China's PPI turned positive for the first time since 2012 helping ease some of the pressure even if USDCNH at 6.7347 at 0655 GMT, was still some way off Beijing's line-in-the-sand 6.70 mark. This is one to be watched very closely over the coming months.
Martin O'Rourke is managing editor at Saxo Bank
Editor’s note: From the Floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.