Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 21 August 2017 at 1:28 GMT

Morning Report APAC: Asian markets cautious as military drills begin

APAC Sales Trading Desk / Saxo Capital Markets


  • Asian markets were down in early trade on US political developments
  • The military drills between the US and South Korea are also causing caution
  • US indices closed lower on news of Steve Bannon leaving the Trump administration
  • EURUSD should remain sideways until the Jackson Hole meeting

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)



Overnight news


  • Stephen Bannon is the last "name" to leave the White House. "No administration in history has been so divided among itself about the direction about where it should go," Bannon told The Washington Post.
  • Steve Bannon will be a “loyal soldier” for Donald Trump from outside the White House, a former deputy campaign manager for the President has said, with Trump taking more criticism over the “chaos” in his administration following his chief strategist’s ousting.
  • Billionaire Carl Icahn resigned as a Trump adviser just three days before The New Yorker magazine published a critical article that detailed his potential conflict of interest and questioned whether he had acted illegally. The New Yorker reported Sunday that Icahn had been pushing to overturn an environmental regulation the investor considered onerous and one that had been costing him hundreds of millions of dollars a year.
North Korea

  • The military drills by South Korea and the US will start today and last 10 days with Pyongyang's official media calling them "reckless behaviour" that would lead to a nuclear war, and threatening a retaliatory missile strike. The North also blamed American hostility for the situation on the peninsula, and said Washington must take the first steps to ease tensions.


Foreign exchange


  • USD: The market took a breather on Friday after a volatile week. The USD resumed its selling bias against G10 except for the CHF. The DXY continues to consolidate just below 94.00 which becomes an important level to watch.
  • EURUSD should remain sideways until Jackson Hole. We saw fast money selling EUR at 1.1800 but the support seems very strong below.
  • USDJPY: as mentioned last week, we will touch a new low in the pair before seeing higher again on stops. The first level to watch was the “North Korea” low at 108.70 and then 108 could be the next target.
  • Emerging Markets: USDEM was fairly offered overnight. USDBRL remains offered below 3.2000 and it targeting again the lows of the year at 3.1000. The pair to watch in the next 10 days will be USDKRW around the military drills. The big resistance will be around the zone of 1147 to 1155. 

Foreign exchange movements

  • There is interest to buy gamma in EURUSD for the Jackson Hole meeting next week but no specific side to the options.
  • The market is buying Risk reversal in USDJPY (long USD puts) as the market is probably still long. Below 109, many more stops will be triggered.



  • UST ended the day lower across the curve on Friday, but closed the week nearly where they started in a volatile week of trade that included political turmoil in President Donald Trump’s administration, diverging economic data, dovish Federal Reserve minutes and a terrorist attack in Spain.





  • US stock indices closed firmly lower to log another week of losses on low volumes and news of Steve Bannon, one of Trump's top advisers, leaving the administration.
  • Foot Locker plummeted 28% after the sports-apparel company significantly missed profit forecasts. Also dragging, Nike and Under Armour dropped 4.4% and 3.9% respectively.
  • Calpine surged nearly 10.5% after a WSJ report late Thursday said Energy Capital Partners is closing in on a $17 billion deal to acquire the power company.
  • Shares of airlines slumped in Europe, following news of the Barcelona attack. Air France-KLM SA dropped 1.6%, Ryanair Holdings gave up 2%, International Consolidated Airlines Group, which runs British Airways, fell 2%, and easyJet lost 0.9%.
  • Stada Arzneimittel soared 13% after news that Bain Capital and Cinven Group had won over enough shareholders to proceed with their takeover of the German drugmaker.

Asian equities preview

Hong Kong

Analyst ratings 

- Bank of Ningbo (002142 CH): New Outperform at SWS

- China Jinmao (817 HK): Cut to Outperform at Daiwa, PT HK$3.57

- China Resource and Environment (600217 CH): New Outperform at SWS

- Guangzhou R&F (2777 HK): H Shares Cut to Outperform at Daiwa, PT HK$16.90

- Wharf (4 HK): New Buy at Haitong Intl, PT HK$87.20


- Aier Eye Hospital Group (300015 CH): Aier Eye’s EU174m Loan For Clinica Baviera

- Aisino (600271 CH): Aisino Corp 1H Net 581.2m Yuan vs 617.3m Yuan Year Ago

- Alpha Group (002292 CH): Alpha Group 1H Net 135.1m Yuan vs 292.5m Yuan Year Ago

- Baiyunshan Pharma (874 HK): Guangzhou Baiyunshan 1H Net 1.16b Yuan vs 831.8m Yuan Year Ago

- Bank of Ningbo (002142 CH): Bank of Ningbo, OCBC to Partner on Private Banking, Other Areas

- Beijing Dabeinong Tech (002385 CH): Beijing Dabeinong 1H Net 524.7m Yuan vs 368m Yuan Year Ago

- China Merchants Bank (600036 CH): China Merchants Bank First Half Net Interest Margin 2.43%

- China’s New Hope (000876 CH): Said to Bid on Poultry Co. Moy Park: Telegraph

- China Resources Gas (1193 HK): 1H Net Gains 8% Y/y to HK$2.11B

- China Resources Sanjiu (000999 CH): China Resources Sanjiu 1H Net 741m Yuan vs 636m Yuan Year Ago

- CRRC Times (3898 HK): CRRC Times First Half Net Income 1.12 Bln Yuan

- Dongxing Securities (601198 CH): Dongxing Securities 1H Net 564.6m Yuan vs 760.4m Yuan Year Ago

- Future Land (601155 CH): Future Land Holdings 1H Net 1.14b Yuan vs 852.4m Yuan Year Ago

- Hainan Rubber (601118 CH): Hainan Rubber 1H Net Loss 123.8m Yuan

- HSBC (5 HK): SABB to Buy HSBC Stake in SABB Takaful for 117.8m riyals

- HSBC (5 HK): HSBC Bought Back 3.48m Shares at Avg 732.47 Pence Each Aug. 18

- Hualan Biological (002007 CH): Hualan Biological 1H Net 431.1m Yuan vs 410.3m Yuan Year Ago

- Tibet Water (1115 HK): Tibet Water Resources Names Wang Dong CEO

- New World Dev (17 HK): New World Dev To Acquire All Shrs Issued By New World Dept Store China

- Ningbo Joyson Electronic (600699 CH): Joyson Electronic 1H Net 615.6m Yuan vs 245m Yuan Year Ago

- Ping An Insurance (2318 HK): Ping An’s Tech Investments May Lift Company Valuation, CFO Says

- Ping An(2318 HK): Ping An to Remain Prudent in Overseas Investments, Chairman Says

- Shenzhou Int’l (2313 HK): Shenzhou Intl First Half Net Income Rises 24% Y/y to 1.8b Yuan

- Sinopec Engineering (2386 HK): Sinopec Engineering Proposes to Buy 100% Sinopec Energy-Saving

- Wangfujing Group (600859 CH): Wangfujing Group to Acquire Wangfujing Int’l for 4.29b Yuan

- Wanxiang Qianchao (000559 CH): Wanxiang Qianchao 1H Net 443.9m Yuan vs 484m Yuan Year Ago

- Zhejiang Zheneng Electric (600023 CH): Zheneng Electric 1H Net 2.38b Yuan vs 4.16b Yuan Year Ago

- Zijin Mining (2899 HK): Zijin Mining 1H Net Income 1.51 Bln Yuan, Saw 1.5 Bln Yuan


Analyst ratings

- Dai-ichi Seiko (6640): Rated new buy at Toyo Securities

- Fuji Electric (6504): Raised to outperform from neutral plus at Mito Securities

- Kanamoto (9678 JP): Rated neutral after review at UBS; previously rated buy

- Kanto Denka (4047): Cut to neutral plus from outperform at Iwai Cosmo

- Mitsubishi Chemical (4188): Raised to overweight from neutral at JPMorgan

- Mitsubishi Estate (8802): Upgraded to buy from hold at Morningstar

- NGK Insulators (5333): Raised to outperform from neutral at Daiwa

- Tosoh (4042): Downgraded to neutral from overweight at JPMorgan


- Ai Holdings (3076): Full-year operating profit +4.4% y/y to 8.5b yen, trailing company’s forecast by 6.6%

- Japan Tobacco (2914): July domestic cigarette sales volume falls 12.4% y/y

- Justplanning (4287): To cancel 31.5% of shares on Sept. 1

- Kyoei Steel (5440): To spend about $200m in Vietnam and start production line in 2019

- Lacto Japan (3139): To move listing to TSE1 from TSE2 on Sept. 8

- NS Tool (6157): To move listing to TSE1 from TSE2 on Sept. 8


Analyst ratings

- CSL (CSL): Raised to buy at Wilsons, PT A$137

- QBE Insurance Group (QBE): Cut to hold at Shaw and Partners, PT A$11.78


- APN Outdoor (APO): 1H results expected

- Beach Energy (BPT): FY results expected; NOTE: FY17 adj. net income est. A$144.2m (13 analysts)

- BHP Billiton (BHP): Funds to go for jugular if miner doesn’t deliver the goods; Poised to post div. $0.84/share: Telegraph

- Bluescope (BSL): FY results expected; NOTE: FY17 adj. net income est. A$674.7m (10 analysts)

- Brambles (BXB): FY results expected; NOTE: FY17 adj. net income est. $608.6m (8 analysts)

- Fortescue (FMG): FY results expected; NOTE: FY17 adj. net income est. $2.28b (15 analysts)

- G8 Education (GEM): 1H results expected; NOTE: 2-analyst rev. est. A$379m

- Goodman Group (GMG): FY results expected; NOTE: FY17 FFO/shr est. A$0.433 (8 analysts)

- Growthpoint (GOZ): FY results expected; NOTE: FY17 rev. est. A$238.3m (4 analysts)

- GWA Group (GWA): FY results expected; NOTE: FY17 adj. net income est. A$52.6m (8 analysts)

- Kingsgate Consolidated (KCN): Surges as Thailand lifts gold mine’s suspension

- Mirvac Group (MGR): Increases ownership in two Sydney retail assets; Cut to hold at Shaw and Partners, PT A$2.38

- Rio Tinto (RIO): Iron ore rises 3.4% to highest since Apr. 6, according to a price index compiled by Metals BUlletin

- Seven Group (SVW): Caterpillar Asia Pacific July rolling 3- month retail machine sales +45% after rising 40% in June; NOTE: is authorized dealer in West Australia, NSW, North China

- Seymour Whyte (SWL): New underperform at APP Securities, PT A$1.12

- Sims Metal Management (SGM): Raised to neutral at Credit Suisse, PT A$13.50

- Westpac (WBC): Halts plan to sell A$10b car loans portfolio: Australian

- Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Brent oil rises to 12-week high as physical market seen tighter

- Bank of New York Australia ADR Index +0.1%

- BHP Billiton ADR -0.2% to A$25.48 equivalent, 0.4% premium to last Sydney close

- Rio Tinto ADR +0.7% to A$56.30 equivalent, ~11% discount to last Sydney close

- Companies trading above 20/50/200 DMAs, Bollinger upper band with RSI above 70: ARB, GMG, ABC, CHC

- Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: QBE, PGH


 The US and South Korea are holding joint military drills until August 21. Photo: Shutterstock

– Edited by Gayle Bryant

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. 

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