Article / 14 September 2016 at 2:55 GMT

Morning Report APAC: Global risk-off as oil slides, lifting USD

APAC Sales Trading Desk / Saxo Capital Markets

  • Oil price falls on IEA report of glut persisting into 2017 
  • Global risk-off pushes USD higher
  • Commodities currencies fall following USD rally
  • USD strength and oil weakness push US equities down 1.4%

 By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)



1445 – AUD: RBA's Tony Richards speaks on Gold Coast

1750 – AUD: RBA's Guy Debelle speaks in London

Overnight news

Oil:  The International Energy Agency changed its view on global oversupply of crude oil, seeing a glut persisting into 2017. The IEA is forecasting demand of 1.3m barrels a day, down from 1.4m, and 1.2m in 2017: "Recent pillars of demand growth –  China and India are wobbling. 

As a result, supply will continue to outpace demand at least through the first half of next year,” the IEA said. “As for the market’s return to balance – it looks like we may have to wait a while longer.” 

US:  The budget deficit expanded to $107.1bn (exp. $108bn) due to weak revenue growth and a steady increase in government spending. 

Bank of Japan:  Nikkei has reported that the BoJ could move interest rates further into negative territory.

Foreign exchange



The global risk-off which started with the Asia currencies continued overnight following the IEA report on oil and pushing the USD much higher against all the currencies. DXY rallied 0.57% on its way to the next resistance at the 200-day moving average (96.108).

Commodities currencies dropped following the USD rally and the drop in metals. AUD dropped three big figure in the span of four days to trade close to support at the 200-day MA. AUDJPY is very close to the support of 75 after failing to break the 100-day MA at the beginning of the month. 

NZDUSD is following the rest of the market after 1.5 months of rally to drop to support at 0.7200. The other watched pair, AUDNZD, continues to test new lows on stops after breaking the 1.0400 support at the start of the month.

UK inflation came in weaker than expected at 0.6% YoY and 0.3% MoM (exp. 1.4% and 0.4%) pushing GBP 1% lower to 1.3200. However, we still trade in the same wide range of 1.30/1.35.

In emerging markets, USDKRW had a strong rally ahead of the three-day holiday, literally exploding the past four sessions from 1092 to 1128 at the close of NY. The rest of the EM currencies had similar moves, USDBRL up 2%, USDSGD long positions finally performing and the pair trading closer to the 200-day MA at 1.3744.

Foreign exchange movements



AUD volatilities got paid all day by hedge funds for downside strikes and risk reversals.

USDCNH risk reversals are finding good bidding interest from real money investors between 3M and 1 year. The forward points remain well supported.




Source: Bloomberg


German Bunds continue to sell off and are at levels pre-Brexit following the move in the US Treasury market and the global Treasury markets. 

Gilt yields are also rallying hard after the strong sell-off following the Brexit vote. The 10-year UK yields have rallied from 0.51% to 0.91% since the beginning of the month. 

The US 10-year yield trades at its highest level in three months. A $12bn 30-year bond auction had a 2.13 bid-to cover ratio, down from an average of 2.33 the previous 10 auctions. 

The JGB are also selling off, with the yields moving from -0.10% to touch 0.00% in the span of one month. 


Asian sovereign CDS are finding good bidding interest following the USD rally and the sell-off in the global Treasury markets. There is still good value at this level to go long and buy protections.






The USD strength and the weakness in oil pushed US equities lower by 1.4%. The S&P500 is trading at its lowest level since the beginning of July and a break of the 2100 level would be significant.

The only good story of the night in the equity market was Apple (up 2.4%) after two carriers reported strong demand for its Iphone 7.

Asia Pacific stocks

Hong Kong

Analyst ratings: 

  • AgBank (601288 CH): Cut to neutral at Credit Suisse 
  • China Everbright Bank (601818 CH): Cut to neutral at Credit Suisse 
  • China Telecom (728 HK): Raised to buy at Morningstar 
  • CIFI (884 HK): Cut to neutral at Credit Suisse 
  • Hotai Motor (2207 HK): Cut to equal weight at Morgan Stanley 
  • Huadian Power (1071 HK): Cut to neutral at Goldman 
  • Lenovo (992 HK): Cut to reduce at Guotai Junan 
  • Sino-Ocean Group (3377 HK): Cut to underperform at Credit Suisse 


  • HK PPT: YTD new property transaction values total HK$101bn, whole year may reach HK$150bn, third highest annual total since 1996 (SCMP) 
  • Country Garden(2007) bought back 14.1m shares for HK$57.8m on Tuesday 
  • Sands(1928) CEO said he believed the GGR has bottomed out and gradually increasing, but the VIP business can hardly restore to original level 
  • China Life(2628) Jan-Aug premium income was RMB341.8bn, up 23% YoY 
  • Parkson(3368) to sell China subsidiary and shareholder’s loan. The payment will be RMB1.67bn plus some additional amounts 
  • Skyworth Digital(751) unit Coocaca Network Tech to get RMB150m investment from iQiyi 
  • Hi Sun Tech(818) may sell some credit-card settlement service unit 
  • China Eastern Airlines(670) carried 9.2m passengers in Aug, up 5.5% YoY; Jan-Aug carried 62.2m passengers, up 8% YoY 年增10.5% 
  • Air China(753) carried 8.8m passengers in Aug, up 5.2% YoY; Jan-Aug carried 64.2m passengers, up 6.9% YoY 
  • Yuexiu PPT(123) win bid for land in Shangdong, China for RMB183m 
  • Rusal(486) to invest about 3.1bn Rubles in Komi production in 2016-17 
  • MCC(1618) Jan-Aug new contract sales was RMB287bn, up 23.4% YoY; among which overseas new contract sales was RMB31.6bn 
  • Nexteer(1316) names Michael Paul Richardson president 


Analyst ratings: 

  • Honda (7267 JP): Raised to outperform at Tokai Tokyo 
  • Isuzu (7202 JP): Cut to neutral at Tokai Tokyo 
  • Line (3938 JP): Rated new sell at Cantor Fitzgerald 
  • Resona (8308 JP): Raised to outperform at Daiwa 
  • Tokyo Electron (8035 JP): Rated new outperform at Bernstein 


  • CyberAgent (4751 JP), Line (3938 JP): Begin reservations for first co-developed game 
  • Gene Techno Science (4584 JP): To split shares 2-for-1 on October 1 
  • Kobe Bussan (3038 JP): 9-month operating profit up 68% to 8.22bn yen 
  • Seiko (8050 JP): Cuts first-half, full-year operating profit forecasts 
  • Teijin (3401 JP): To acquire Continental Structural Plastics for $825m 
  • Tsuruha (3391 JP): 1Q oper. profit up 13% to 9.72bn yen 


Analyst ratings: 

  • Oil Search (OSH AU) raised to hold vs sell at Morningstar 
  • Brambles (BXB AU) raised to hold vs sell at Shaw & Partners 
  • JB Hi-Fi (JBH AU) raised to buy vs neutral at UBS; raised to overweight vs neutral at JPMorgan; raised to hold from sell at Bell Potter 
  • Macquarie Atlas (MQA AU) raised to outperform vs neutral at Credit Suisse 
  • Platinum Asset Management (PTM AU) raised to neutral from underperform at Credit Suisse 
  • Regis Resources (RRL AU) raised to buy from hold at Argonaut 


  • Fortescue (FMG AU): Vale says talks on iron ore joint venture with Fortescue stall on price 
  • Woodside (WPL AU) exploring gas options for Pluto, NWS plants 
  • CYBG (CYB AU): shares fall in UK after it lowered loan growth prospects 
  • Superloop (SLC AU) in pact to acquire BigAir (BGL AU); to raise AUD65m in placement 
  • Platinum Asset Management (PTM AU) plans on-market buy-back of up to 10% of shares on issue over next 12 months 
  • Alacer Gold (AQG AU) reports new reserve for Gediktepe project 
  • New Talisman Gold Mines (NTL NZ) annual meeting 
  • Kingrose Mining (KRM AU) annual meeting 

information sources: CIMB / Bloomberg

 Oil speculators reduced their net long position significantly. Photo: iStock


– Edited by Susan McDonald

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