Article / 22 June 2016 at 2:39 GMT

Morning Report APAC: Asia sentiment fragile, FX choppy

APAC Sales Trading Desk / Saxo Capital Markets
  • MSCI's broadest index of Asia-Pacific edged up 0.1% in morning trade
  • GBPUSD at $1.4788 but edged back to $1.4667 by early Asian trade
  • Fed's Yellen says pace of improvement in the labor market has slowed
  • ECB's Draghi says uncertainty remains high and downside risks 'still significant' 

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time - GMT plus 8 hours)

1530: THB –BOT Benchmark Interest Rate (Exp. 1.50%, Prev. 1.50%)
2030: CAD – Retail Sales MoM (Exp. 0.8%, Prev. -1.0%), Ex Autos MoM (Exp. 0.7%, Prev. -0.3%)
2200: USD – Existing Home Sales MoM (Exp. 1.8%, Prev.  1.7%)


2200: EUR – Janet Yellen testifies on monetary policy to Senate Banking Panel

Overnight news

Fed Speech: Federal Reserve chair Janet Yellen delivered her semi-annual Monetary Policy Report to Congress. She said the pace of improvement in the labor market appears to have slowed more recently, suggesting that our cautious approach to adjusting monetary policy remains appropriate.

• There was considerable uncertainty about the economic outlook remains” and that “a UK vote to exit the European Union could have significant economic repercussions”.

• For those reasons among others, including “the possibility expressed by some prominent economists that slow productivity growth seen in recent years will continue into the future” , the Federal Open Market Committee continues to closely monitor global economic and financial developments and their implications for domestic economic activity, labor markets, and inflation.

• Proceeding cautiously in raising the federal funds rate will allow us to keep the monetary support to economic growth in place while the Fed assesses whether growth is returning to a moderate pace, whether the labor market will strengthen further, and whether inflation will continue to make progress.

ECB Speech: European Central Bank president Mario Draghi told the European Parliament's economy committee that:
• Uncertainty remains high and downside risks are still significant due to the continued fragile state of the global economy and geopolitical developments.
• He would closely monitor the evolution of the outlook for price stability and stands ready to act by using all the instruments available within our mandate, if necessary, to achieve our objective. In particular, the ECB is ready for all contingencies following the UK’s EU referendum.
• Further stimulus is in the pipeline
• TLTRO-II should further reduce borrowing costs
• Germany's ZEW came in better than expected at 54.5 (Exp. 53.0)

Foreign exchange


The resistance in EURUSD at 1.14/1.15 range is still holding and Draghi’s comments (see above) pushed EUR further lower from 1.1300 to 1.1244.

USD seems to have found some support just below 104 at the moment with profit takers before the Brexit vote but the main resistance is still at 105.5.

The USD was also slightly bid against EM currencies like BRL but struggled to rally against Asia currencies.

Foreign exchange movements
The market is just clearing all the strikes ahead of the Brexit vote so all the volatilities are marked higher in the G10 space with no major funds flows. In USDJPY though, we still see some buyers of downside strikes 1M to 3M area.



Capitol Hill testimony from Fed Chair Yellen did nothing to excite traders and provided little new insight on the monetary policy.

Treasuries lost ground late in the day having spent much of the session consolidating Monday’s largest one-day selloff in a month. 

The two-year note yield tacked on 0.6 basis points to 0.761%. The 10-year bond yield is adding 1.9bps to 1.708%.






European stocks extended their recovery as the European Central Bank reaffirmed its commitment to act if “Brexit” does eventuate.

US stocks closed cautiously higher after zigzagging throughout the day as the imminent UK vote on European Union membership continued to steer financial markets.

The S&P 500 climbed 0.3% to 2,088.90. Microsoft rallied 2.2% and Apple added 0.9% to lead technology shares higher.

Rio Tinto shed 0.4% following news that the group’s new CEO had restructured the management team, a change that will see the current head of iron ore operations exit stage left.

After the close, Adobe reported an earnings beat but cloud growth was modest and Q3 guidance was muted, sending shares down post-market. FedEx posted results above expectations on both the top and bottom line, noting improvement in its FedEx Express operating margin.



Very quiet day ahead of the Brexit vote in the credit space.

Hong Kong equities preview

Analyst views

•    Hutchison Telecom (215 HK): Raised to outperform at Credit Suisse
•    Wynn Macau (1128 HK): Raised to buy at Guotai Junan

Company news

•    Tencent (700) to buy around 84.3% of Supercell stake for $8.6b, and get its hands on some of the industry’s most popular mobile titles.
•    Shenzhen Invest (604) sold SZ UpperHills office property to CPIC (2601) at RMB2.35b…co has achieved 69% of the contracted sales target of RMB18.5b for 2016.
•    Goldwind (2208) entered into 15 power generator procurement contracts with a subsidiary of CRRC (1766)  totaling about RMB8.3b.
•    Citic (267) to continue to buy Citic Bank (998)’s shares until Jan. 21, 2017 when appropriate. Co has bought 155.6m H-shares between May 19 and June 15, bringing its stake to 64.94% of bank’s total shares.
•    CRRC(1766) signed major contracts at RMB32.1b in 1H, ~ 13.3% of co.’s 2015 sales.
•    BYD (1211) signs pact to develop lithium resource in Qinghai.
•    Weichai Power(2338) board approves unit Kion Group’s acquisition plan for $2.1b, A shares to resume trading on June 22.
•    Tsui Wah (1314) issues profit warning, records more than 50% profit decrease YoY.
•    SH Electric (2727) expects to complete assets swap by Q3 16.
•    Xiamen Port (3378)'s subsidiary Xiamen Port Dev (000905.SZ) announced that Xiamen Port Holding Grp has promised to transfer to it operational assets of several companies.
•    SHK PPT (16)to launch additional 91 more flats of "Park Yoho Venezia" in Yuen Long and reinstated that co has no intention to change the payment method of offering a maximum 120% mortgage plan.

Japan equities preview

Analyst views
•    Asahi Intecc (7747 JP): Rated new neutral at SMBC Nikko
•    Hitachi Metals (5486 JP): Cut to equalweight at Morgan Stanley
•    Hogy Medical (3593 JP): Rated new neutral at SMBC Nikko
•    Itochu (8001 JP): Raised to overweight at Mitsubishi UFJ Morgan Stanley
•    Mitsubishi Materials (5711 JP): Cut to neutral from overweight at JPMorgan
•    Suzuki Motor (7269 JP): Raised to buy at Goldman

Company news

•    Arcland Sakamoto (9842 JP): Oper. profit for 1Q ended May 20 climbed 7.7% y/y to 2.49b yen
•    Gungho Online Entertainment (3765 JP): To release its “Puzzle & Dragons” game in China on July 19, 21.
•    J-Lease (7187 JP): Begins trading on Mothers after IPO priced at 3,100 yen.
•    Japan Post Bank (7182 JP): President Ikeda tells shareholders negative-rate world is “severe”.
•    Mitsubishi Motors (7211 JP): Co. subject to stricter type certification, Transport Minister Ishii says; FY loss to exceed 100b yen, Nikkei reports.
•    Ricoh (7752 JP): Effissimo Capital Management increased its stake in co. to 11.54% from 10.84%.
•    Tokyo Electric Power (9501 JP): To implement more than a dozen new safety measures, President Hirose says.
•    Tokyo Gas (9531 JP): Acquires 25% interest in Eagle Ford; shale project to cost up to 8b yen.

Australia equities preview

Company news

•    Wesfarmers (WES AU) strategy briefing
•    Rio Tinto (RIO AU) iron ore chief Andrew Harding to leave, co. appoints new executives to lead iron ore, copper; Revamp hints at possible $9 bln spinoff
•    AFT Pharmaceuticals (AFT NZ) Says Drug Delay May Impact FY2017 Revenue
•    Spark NZ (SPK NZ) sees full-yr mobile revenue above NZ$1.1 bln
•    Victoria govt. says 3 groups shortlisted for Western Distributor
•    Eclipx (ECX AU) to replace Pacific Brands (PBG AU) in ASX 2000, S&P Global Says
•    Pulse Health (PHG AU) raised to buy from hold at Bell Potter

The Fed's Janet Yellen is not exactly giving out tips, but don't expect a hike soon. Photo: iStock

– Edited by Adam Courtenay

This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Follow us on @SaxoStrats on Twitter

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