Article / 12 April 2017 at 2:21 GMT

Morning Report APAC: Geopolitical risk weighs on Asian markets

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Geopolitical tensions are high over Syria and North Korea
  • USD is well offered amid investor caution and Treasury yields move lower 
  • US equities retreat marginally on risk-off sentiment
  • Gold surges to its highest in five months

By Saxo APAC Sales Trading

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

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Speeches
 

2200: US Federal Reserve's Robert Kaplan speaks in Fort Worth

Overnight news

Geopolitical risks: The Trump administration said evidence clearly showed Syria was behind a chemical attack on civilians this month and accused Russia of trying to cover up for its ally, Bashar al-Assad, by spreading disinformation. As Secretary of State Rex Tillerson headed for Moscow, the US laid out its case in a document relying on declassified intelligence and open-source material such as commercial satellite images and contemporaneous reports from the scene, as well as evidence of sarin exposure gathered from the victims. 

Donald Trump said on North Korea, “I explained to the president of China that a trade deal with the US will be far better for them if they solve the North Korean problem!” and tweeted “North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! USA.”
 
France: Marine Le Pen and Emmanuel Macron are tied in the latest Ipsos poll ahead of this month's first round vote, at 24%, with François Fillon just 0.5 points behind Jean-Luc Melechon's 18.5%. Independent Macron would defeat the National Front’s Le Pen in the second round, the poll shows.

 

Foreign exchange

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USD was well offered on the back of geopolitical risks with Treasury yields moving lower and USDJPY breaking a big support. The US 10-year yield is attempting to break a big support at 2%. With the yen appreciating, Haruhiko Kuroda said that it will be harder to reach 2% inflation. 

Emerging Markets: USD was slightly bid against EM currencies and USDZAR remains well support above the 200-day moving average.


Foreign exchange movements


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Liquidity in the first round of French elections becomes very bad and the risk premium has increased significantly in EURJPY.

The market is struggling to buy back gamma in USDJPY after the break of 110 on the downside. 

With VIX supported, gamma will remain bid in JPY crosses.


Rates

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US Treasuries surged and the curve flattened even further, while the spread between 10-year French and German debt was at its widest since February as polls indicate it may be a four-way race in the French presidential election.


Commodities 

 

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Risk-off sentiment yesterday saw equities retreat marginally on geopolitical risks and tensions. The Dow was the best performer, with minimal losses of 0.03%; Nasdaq was the biggest loser with a loss of 0.24%.

European markets closed mixed. The FTSE 100 gained 0.23%, while the DAX led the CAC 40 lower for falls of 0.50% and 0.11% respectively. 

Qualcomm, a chip maker to Apple's flagship iPhone, is countersuing that Apple knowingly made false statements to government agencies and breached the "Cooperation Agreement" made between the two companies. Apple said that Qualcomm uses its market dominance to illegally overcharge for its wireless technology while Qualcomm argues the iPhone maker is just trying to pay less. Qualcomm was down $1.17 and closed at $55.35 yesterday while Apple closed 1.08% lower to $141.63. 

United Airlines was trending yesterday on social media after a commuter was dragged off his seat due to overbooking from the airline. The stock traded initially lower, down more than 3%, but managed to recover and close at $70.71, down 1.13%. United Airlines' bad public relations meant gains to Delta and American Airlines of 0.7% and 3.8% respectively.


Asian equities preview

Hong Kong

Analyst Ratings: 

  • BEA (23 HK): Rated new fully valued at DBS Vickers 
  •  BOC Hong Kong (2388 HK): Rated new buy at DBS Vickers 
  •  CEC CoreCast (600764 CH): Rated new add at GF Secs 
  •  China Coal (1898 HK): Raised to Buy at UBS 
  •  China Power (2380 HK): Raised to Buy at UBS 
  •  China Resources Gas (1193 HK): Cut to neutral at Goldman 
  •  China Shenhua (1088 HK): Cut to neutral at UBS 
  •  China Suntien (956 HK): Raised to buy at Goldman 
  •  Comba Telecom (2342 HK): Raised to neutral at Macquarie 
  •  Dah Sing Bank (2356 HK): Rated new buy at DBS Vickers 
  •  Datang Power (991 HK): Raised to buy at UBS 
  •  Dongfang Electric (1072 HK): Cut to reduce at Guotai JunAn 
  •  Gigadevice (603986 CH): Rated new buy at GF Secs 
  •  Hang Seng Bank (11 HK): Rated new hold at DBS vickers 
  •  Huaneng Power (902 HK): Raised to buy at UBS 
  •  L’Occitane (973 HK): Cut to neutral at KGI Securities 
  •  Sino Land (83 HK): Rated new buy at Haitong Intl 
  •  Yanzhou Coal (1171 HK): Raised to buy at UBS 

Preview:

  •  BBMG (2009 HK): Sees 1Q net of 380m-450m yuan vs 150.7m yuan year earlier 
  •  Bocom (3328 HK): Bocom Intl said to seek H.K. listing approval this week: IFR 
  •  China Finance Investment (875 HK): Chairman Lin Yuhao says he has never pledged company shares or used them for financing purposes, Netease reports 
  •  China Suntien (956 HK): H shares raised to Buy at Goldman, PT HK$2.13 
  •  China United Network (600050 CH): May introduce strategic investors 
  •  CK Property (1113 HK): Bought back 1.53m shares for HK$82.2m April 11 
  •  Fushun Special Steel (600399 CH): Dominant shareholder may introduce investor for restructuring 
  •  HSBC (5 HK): Says no enforcement actions taken on Huishan Dairy loan; bought back 3.50m shares at Avg 659.87 pence each April 11 
  •  Shanshui Cement (691 HK): Says certain assets frozen by courts in China 
  •  Sino Land (83 HK): new Buy at Haitong Intl, PT HK$18.10 
  •  Sunshine 100 (2608 HK): notes downgraded to CCC by Fitch on higher debt 
  •  Tencent (700 HK): WeChat Payment Gets Chow Tai Fook (1929 HK), others as merchants 
  •  Tonghua Dongbao (600867 CH): FY net 640.9m yuan vs 493m yuan year ago 
  •  Tongling Metals (000630 CH): FY net income beats est. 
  •  Xinhuanet (603888 CH): plans JV with Hangzhou Alibaba venture investment 

Japan

Analyst Ratings: 

  •  Askul (2678): Raised to neutral at Haitong, PT ¥3,100 
  •  Daido Steel (5471): Cut to neutral at Haitong, PT ¥510 

Preview:

  •  ABC-Mart (2670): Forecasts full-year operating profit +1.5% to ¥42.5bn 
  •  Arcs (9948): Forecasts full-year operating profit +1.7% to ¥15.1bn 
  •  Belc (9974): Forecasts full-year operating profit +1% to ¥9.26bn 
  •  Bic Camera (3048): 1H operating profit ¥9.35bn vs co. forecast ¥10.4bn 
  •  Chiyoda Co. (8185): Forecasts full-year operating profit +8.7% to ¥8.4bn  
  •  Clarion (6796): Operating profit seen climbing 5% this fiscal year: Nikkei newspaper 
  •  DCM Holdings (3050): Forecasts full-year operating profit +5% to ¥20.6bn 
  •  Disco (6146): Co. likely carved out third year of record profit, Nikkei reports, without citing anyone 
  •  FamilyMart UNY (8028): Forecasts operating profit -27% to ¥41.2bn; analyst est. ¥68.9bn 
  •  Izumi (8273): Forecasts full-year operating profit +9.3% to ¥39bn; to retire 9.1% of shares on April 28 
  •  Kawasaki (3045): Reports half-year consolidated earnings results for the period ended Feb. 28 
  •  Machinery: March machine tool orders up 22.6%, biggest increase since Feb. 2015 
  •  Mitani (8066): To buy back up to 1.16% of shares for ¥1bn 
  •  Nippon Telegraph & Telephone (9432): Remgro of South Africa is in talks to sell broadband provider Dark Fibre Africa to a company owned by NTT, according to two people familiar with the matter 
  •  Ricoh (7752): Prelim. full-year operating profit ¥30bn vs co. forecast ¥40bn; cites ¥10bn impairment charge in digital camera business; Co. to shrink camera business, Nikkei reports 
  • Sekisui Chemical (4204): To discontinue poison pill 
  •  Sugi Holdings (7649): Forecasts full-year operating profit +5.1% to ¥24bn 
  •  Sumitomo Mitsui Trust (8309): Co. to invest in new BNP Paribas unit, Nikkei reports 
  •  Takeuchi Manufacturing (6432): Forecasts full-year operating profit -13% to ¥11.7bn 
  •  Tokyo Gas (9531): Co. to team up with Kyushu Electric (9508) on LNG, Yomiuri reports 
  •  Toshiba (6502): Reports results without auditor approval; 9-month operating loss ¥576.3bn; sees doubts over going concern; CEO says any decision on delisting is up to Tokyo bourse; Auditors emphasize going concern risk in review 
  • Toyota Motor (7203): An executive says US auto market has peaked and will shrink this year 
  •  Yoshinoya (9861): Forecasts full-year operating profit to more than double to ¥4.4bn 


Australia

Analyst Ratings: 

  •  Regis Resources (RRL): Cut to sell at UBS, PT A$3.13 
  •  Rio Tinto (RIO): Raised to neutral at Redburn; London annual meeting scheduled after market closes; Hermes plans to vote against Rio chair on diversity failings 
  •  Sandfire Resources (SFR): Cut to neutral at UBS, PT A$6.81 
  •  Telstra (TLS): Raised to overweight at JPMorgan, PT A$5.35 
  •  Westpac (WBC): Cut to hold at Bell Potter, PT A$36.50 

Preview:

  •  Canada, Australia ‘sweet spots’ for ETF growth: Mirae’s Lee 
  •  Alumina (AWC): Stronger aluminum pricing will likely propel Alcoa: BI 1Q preview 
  •  ANZ Bank (ANZ), Commonwealth Bank (CBA), IOOF (IFL): Australia’s IOOF targets ANZ’s wealth business 
  •  BHP Billiton (BHP): Elliott surprised by BHP’s dismissive response to overhaul plan; Said to work with Goldman Sachs on Elliott defense; Raised to neutral at Redburn 
  •  CSL (CSL): Shire sues CSL to block competing treatment of HAE blood ailment 
  •  Downer EDI (DOW): Retail offer to hep fund Spotless bid may have fallen short: Australian 
  •  Newcrest (NCM), Northern Star (NST), Evolution (EVN), Saracen (SAR), Regis Resources (RRL), Resolute Mining (RSG), OZ Minerals (OZL): Gold options signal more gains as ETFs rebound amid tensions 
  •  Perseus Mining (PRU): Edikan March qtr output 48,655 ozs gold; On track to meet June-half production target 90k-110k ozs 
  •  Qantas (QAN): Stops selling tickets in Zimbabwe due to cash shortage 
  •  Toro Energy (TOE), Vimy Resources (VMY): W.A. to allow coalition-approved uranium mines be constructed: AFR 
  •  Bank of New York Australia ADR Index up 0.7% 
  •  BHP Billiton ADR up 0.3% to A$25.59 equivalent, 0.7% premium to last Sydney close 
  •  Rio Tinto ADR up 1.4% to A$55.25 equivalent, ~11% discount to last Sydney close 
  •  Companies trading above 20/50/200 DMAs, Bollinger upper band with RSI above 70: WPL, AGL, NCM, ALL, WOR, BTT, GMG, SGP, CGC, SKC 
  •  Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: VOC


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United Airlines closed down 1.13% after it was trending on social media after a commuter was dragged off his seat. Photo: Shutterstock

 

– Edited by Susan McDonald



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