Article / 01 September 2016 at 2:03 GMT

Morning Report APAC: Asian markets lower on oil selloff

APAC Sales Trading Desk / Saxo Capital Markets


  • Markets in Asia opened mostly lower, as sentiment weighed on declines in oil prices
  • India GDP came in lower than expected at 7.1% YoY in Q2 
  • USDJPY remains very bid since the strong bounce out of the 100 level
  • Brazil confirmed the impeachment of Dilma Rousseff
  • Oil and gas sector fell by the most as oil futures veered toward three-week lows

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT +8)

Overnight news

United States

  • ADP Employment numbers rose 177,000 in August (Exp. 175,000) and July was revised up from 179,000 to 194,000.
  • The Chicago Purchasing Manager dropped from 55.8 to 51.5 (Exp. 54.0) due to a drop in new orders. Employment in the area was the only positive and increased to a 16-month high.


  • Brazil confirmed the impeachment of Dilma Rousseff. Vice President Michel Temer, who has been serving as acting leader, was sworn in and is heading to China for the G-20 summit.


  • India GDP came in lower than expected at 7.1% YoY in Q2  from 7.9% in Q1 (Exp. 7.6%) due to a weaker private consumption. The government has given stimulus in the economy by increasing the pay of civil service employees and a unified sales tax but this will need to be matched by more investments to prevent Inflation from accelerating too fast. 

Foreign exchange



  • It was a very quiet day overall with still a slightly biddish tone to the USD. DXY is trading back close to the 200d MA at 96.26, which should be a resistance before the nonfarm payrolls tomorrow. A strong report tomorrow could push it back above like in July for a 97.50 target initially.  
  • USDJPY remains very bid since the strong bounce out of the 100 level. With the Bank of Japan meeting date approaching fast, we should see more interest in buying USD calls in the pair. The main resistance at the moment is the 100d MA at 105.44 which was also the start of the break lower on July 29.
  • AUDUSD now trades close to the 100d MA which should be a small support. The main support being the 200d MA at 0.7384. AUDNZD broke the 1.0400 support and is on its way to the lows of the year at 1.0313. The main interest we had seen in the pair was on the long side so this move lower is potentially triggered by stops from funds.  
  • In Emerging Markets, the choppiness continues in USDKRW which trades again below the 1120 level. USDCNH seems to have found a good resistance at 6.7000. It will be interesting to see how China will respond to the rhetoric of a too weak currency by the Americans at the G20 meeting.  

Foreign exchange volatilities


Volatilities in USDJPY have traded lower in the last 24 hours as the market is already long ahead of NFP and BoJ. More interest might emerge after the NFP numbers.

We have seen interest from funds and banks in Risk Reversal in EURUSD for USD calls.


  • US government bonds continued to trade in a narrow range Wednesday as investors eyes are on Friday’s NFP.
  • Short-term treasury yields logged their largest three-day decline this month, but overall yields rose in August on increasing rate-hike expectations. The yield on the 2-year Treasury note, which is the most sensitive to rate-hike expectations, lost 1.2 basis points on the day but gained 12.6 over the month at 0.793%.






  •  DJIA snapped a six-month winning streak on Wednesday as weak energy shares weighed on the broader market. The S&P 500 slipped 0.25%, to 2,170.95 as energy (-1.4%) and materials (-0.9%) led the way lower, while uilities (+0.3%), staples (+0.1%) and financials (+0.1%) were the only winners.
  • Cisco Systems fell 0.3% after the tech giant late Tuesday said it would buy ContainerX, an 18-month-old startup that manages software containers for corporate customers.
  • The Stoxx 600 fell 0.4% to 343.53 in a choppy session, but wrapped up the month with a gain of 0.5%, a second consecutive monthly rise.
  • The financial sector rose as Commerzbank jumped 3.4% and Deutsche Bank rose 2.5%, after a German magazine reported the two held early talks about a potential merger.
  • Oil and gas sector fell by the most as oil futures veered toward three-week lows. Tullow Oil fell 3.7%, Finland’s Neste slid 2.4% and Portugal’s Galp Energia lost 1.3%.

Asia-Pacific stocks

Hong Kong

Analyst ratings

- BYD (1211 HK): Reinstated at Goldman

- China Railway Group (390 HK): Cut to hold at China Securities

- China Unicom (762 HK): Cut to accumulate at Guotai Junan

- Dongfeng Motor (489 HK): Rated new accumulate at GuoTai JunAn

- Everbright Securities (601788 CH): Rated new buy at Haitong Intl

- Guangzhou R&F (2777 HK): Cut to hold at Capital Securities

- Hengan Intl (1044 HK): Raised to hold at Maybank Kim Eng

- ICBC (349 HK): Cut to neutral at Haitong Intl

- Poly Real Estate (600048 CH): Cut to hold at Yuanta

- Sino Biopharma (1177 HK): Rated new hold at UOB Kay Hian

- Southwest Securities (600369 CH): Rated new add at Northeast Securities

- Sunac China (1918 HK): Cut to neutral at Goldman

- Tianjin Port (600717 CH): Rated new buy at Haitong Intl

- Want Want China (151 HK): Cut to sell at Maybank Kim Eng

- Zijin Mining (2899 HK): Cut to reduce at Guotai Junan


- GGR likely to be released today. Mkt GGR est -1.5% yoy to ~MOP18.34bn. Est range -3.3% to +2%.

- Sinopec (386)’s Unit’s Argentina investment had US$2.5b loss

- China Comm Cons(1800)'s senior management is confident that co can reach annual new contract target of RMB700b

- Insurance: China to support investment in insurance cos. by qualified govt, private and foreign capital, and target RMB25t total asset in insurance sector by 2020

- NDRC says China will start power transmission and distribution price reforms for 14 provincial power grids in September

- Melco (200) interim net profit up 93x YoY to HK$10.1b, driven by a special gain related to co becoming the largest holding of Melco Crown Entertainment.

- Beijing Ent (392) interim net profit +10.3% YoY to HK$3.4b; an interim dividend of HK30 cents was declared.

- China Everbright (165) interim net profit -56.24% YoY to HK$1.411b; interim dividend of $0.25 was declared…co says not in talks to buy Liverpool stake

- Shanghai Ind (363) interim net profit +14.92% YoY to HK$1.51b; an interim dividend of HK36 cents was declared.

- SMIC (981) interim net profit +20.34% YoY to US$159m

- Netdragon (777) interim loss expanded to RMB42.89m, against a loss of RMB18.37m yr ago; an interim dividend of HK$0.10 was declared.

- Sound Global (967) delays publication of 1H 2016 results


 Analyst ratings

 - Aderans (8170 JP): Cut to reduce from buy at BNP Paribas

- Asahi Intecc (7747 JP): Raised to outperform from neutral plus at Mito Securities

- Clarion (6796 JP): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley

- Digital Garage (4819 JP): Raised to buy from neutral at Ichiyoshi Research

- Makita (6586 JP): Cut to neutral from overweight at JPMorgan

- Pioneer (6773 JP): Raised to neutral from underweight at Mitsubishi UFJ Morgan Stanley

- Yokogawa Electric (6841 JP): Cut to neutral at Macquarie


- Access (4813 JP): 1H oper. profit 26m yen vs 135m yen loss year ago

- Hitachi Metals (5486 JP): To dissolve venture with Baosteel

- Makita (6586 JP): Downgraded to neutral from overweight at JPMorgan

- Nishimatsuya Chain (7545 JP): Prelim. 1H parent oper. profit 4.18b yen vs co. forecast 3.65b yen; lifts full-year target 13% to 8.52b yen

- Park24 (4666 JP): 9-month oper. profit +20% to 14.9b yen

- Sumitomo Chemical (4005 JP): To raise stake in Tanaka Chemical (4080 JP) to 50.1% from 14.8%

- Tomoe Engineering (6309 JP): 9-month oper. profit +60% to 14.9b yen

- Torikizoku (3193 JP): Prelim. full-year parent oper. profit 1.6b yen vs co. forecast 1.38b yen


Analyst ratings

 - Adelaide Brighton (ABC@AU) raised to outperform vs hold at Taylor Collison

- Aurizon (AZJ@AU) raised to buy vs hold at Shaw & Partners

- Harvey Norman (HVN@AU) cut to underperform from neutral at Credit Suisse

- Independence Group (IGO@AU) raised to neutral from underperform at Credit Suisse


- Virgin Australia (VAH@AU) CEO John Borghetti speech at Etihad event

- Sandfire Resources (SFR@AU) MD Karl Simich speech at Sydney Mining Club

- Kingsgate Consolidated (KCN@AU) posts full-year net loss of A$229.4m

Source: CIMB / Bloomberg


 Oil prices fell 3% on Wednesday, paring their big gains for August. Photo: iStock

– Edited by Gayle Bryant

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