Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 11 August 2016 at 2:31 GMT

Morning Report APAC: RBNZ cuts by 25 bps but disappoints market

APAC Sales Trading Desk / Saxo Capital Markets


  • RBNZ drops official cash rate by 25 basis points to 2.00%
  • NZDUSD rallies before coming back below 0.7300
  • UK 10-year bond yields fall as much as 0.51%
  • USD selling in search of yield
  • US stocks ease broadly lower as crude oil slides 3%
  • European stocks edge lower for the first session in six


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)




0910 NZD – RBNZ’s Graeme Wheeler speaks at Parliament Select Committee

Overnight news

New Zealand

RBNZ dropped the official cash rate, as expected, by 25 bps to 2.00%. Reserve Bank Governor Graeme Wheeler said :

  • “Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.” 
  • The high exchange rate is adding further pressure to the export and import-competing sectors and, together with low global inflation, is causing negative inflation in the tradeables sector. 
  • This makes it difficult for the bank to meet its inflation objective. A decline in the exchange rate is needed.


The budget deficit was little changed in July at $115bn. In the 12 months through July, the deficit equated to 2.6% of GDP, down from the 2.8% rate through June.


Foreign exchange



The market was obviously disappointed with the RBNZ decision to lower rates by only 25 bps and NZDUSD rallied 140 pips before coming back below the 0.7300 level. AUDNZD collapsed on that triggering a lot of stops to reach the 50-day moving average at 1.0564 .

One of the biggest movers yesterday was NOK, following the much stronger than expected CPI numbers (up 0.6% month-on-month after expectation of 0.1% fall, and up 4.4% YoY vs expectation of 3.8% rise). USDNOK collapsed on the news from the 200-day moving average at 8.4895 to 8.2733. There is no close support in USDNOK before 8.1150. EURNOK had a similar move and is trading at lows of the year close to 9.2000 which should be the initial support.

USDJPY pressure lower continued all day yesterday with the market having in sight the 100 level.

In emerging markets, it was a fight to get yield and a proper risk-on, with all the Asian currencies rallying and breaking major USD support. USDKRW traded below 1100, USDTWD one-month broke the 31.00 level. USDMYR traded briefly below 4.000.

Foreign exchange volatilities


The market seems short downside strikes in USDJPY and we are seeing some buyers on downside now but the flows remain quite light. 

There is some natural interest to buy some protection in lower USDCNH. Few funds have been buying downside USDCNH and the overall level of volatilities is extremely low. One-year ATM trades at 6.6.



Bond yields fell broadly and the US 10-year was down four basis points to 1.507%. The 1.50% level remains an important psychological level and a break below that could see it retest the June low at 1.35%. 

UK 10-year bond yields also fell as much as 0.51% to an all time low after the Bank of England failed to find enough sellers of long-dated gilts to match its bond-buying effort.

RBNZ disappointed dovish expectations this morning with a 25bp cut to 2.0%. As this cut is fully expected, investors had priced in a 20% chance of a 50bp cut prior. The RBNZ governor commented that they would want to take pressure off the Kiwi with lower rates. The market is pricing a 34% chance of cut in the September meeting after the announcement.






US stocks eased broadly lower as crude oil slid 3% post inventory and production data. The Dow Jones Industrial Average dipped 0.2% to 18,495.66. The S&P 500 dropped 0.3%, to 2,175.49, with most contribution from losses in energy (down 1.4%). The Nasdaq fell 0.4% to 5,204.59.

Ralph Lauren Corp. leapt 8.5% after reporting adjusted first-quarter EPS of $1.06 overwhelmed the market estimate of $0.89. Revenue spiked 10% internationally but was offset by a slump of 11% in the Americas.  

Chinese e-commerce company was up 4.7% as it reported a much lower second-quarter loss from a year ago. The adjusted EPS profit was higher than estimation, sales surged 42%, annual active customer accounts spiked 65%, and online direct sales soared 40%. 

European stocks edged lower for the first session in six, weighed by a weaker energy sector and following several underwhelming corporate results. The FTSEurofirst 300 index shed 0.3% to 1,354.10. In London the FTSE 100 tickled up or 0.2% to 6,866.42. 

Danish biotechnology company Novozymes tumbled 11.8% after it reported weaker-than-expected second-quarter earnings and downgraded full-year revenue guidance due to declining sales of its ethanol enzymes and in its agriculture product alliance with Monsanto. 

Rolls-Royce jumped 4.4% after MS lifted its recommendation on the aircraft engine maker to equal weight from underweight.  


 Asia-Pacific stocks

Hong Kong

Analyst ratings: 

  • Samsonite (1910 HK) raised to ’outperform’ at Credit Suisse 
  • HKT Trust (6823 HK) cut to ’neutral’ at Credit Suisse 
  • Tencent (700 HK) removed from Asia Pacific conviction buy list: Goldman 


  • Sinopec (386) said they are aware of the report on BP planning to sell its stake in the Secco JV and will disclose necessary information according to regulations. 
  • Longyuan (916) first-half wind power production scale was 0.78m kW, and the scale is expected to reach 0.8-1m kW by the second half. They said with government policy backing, the electricity fee level is expected to be stable in 2H. 
  • HKT (6823) first-half net profit HK$2.32bn, up30.3% YoY. Sales HK$16.3bn, up2.59% YoY. Avg. revenue per user at HK$228, up0.89% YoY. Mobile users at 4.45m, down 2.5% YoY. 
  • ZTE (763) said PBOC has approved its exit from 90% equity stake in e-payment platform Xunlian Zhifu. 
  • CH State Constr. Intl. (3311) Jan-Jul contracted sales RMB49.2bn, fulfilling 63.1% of its RMB78bn full-year target. 
  • Prudential (2378) first-half operating profit GBP2.06bn, up9% YoY. New business profit GBP1.26bn, up 8% YoY, of which Asia new business profit GBP824m, up20% YoY. 
  • CH Galaxy (6881) July revenue RMB1.11bn, down 57.7% YoY. Net profit RMB447m, down 54.7% YoY. Assets as of July 31 at RMB54.6bn. 
  • CH Pacific Insurance (2601)’s life and P&C subsidiaries Jan-Jul premium inc. at RMB95bn and RMB56.4bn, up 29.3% YoY and up 1.3% YoY respectively. 
  • Fosun Intl. (656) and related companies raised New CH Life H-share stake to 5.01%. 
  • Differ Grp. (6878) first-half net profit RMB71.2m, up 20.08% YoY. 
  • * (JD US) second-quarter net revenue RMB65.2m, up 42% YoY. Revenue from services & others, mainly from the e-commerce business, were RMB5.5bn, up 67% YoY. 
  • Li Ning (2331) first-half net income RMB113m vs RMB29.4m loss a year ago. Average inventory turnover days 94 vs 112 a year ago. 
  • Wharf (4) first-half mainland PPTY sales RMB16.3bn, already fulfilled 2/3 of the FY target of RMB24bn. 
  • Greenland HK (337) Jan-Jul contracted sales RMB10.4bn, up 36% YoY. Sales area 801.3k sqm, down 15% YoY. 
  • Pacific Century (432) first-half net loss HK$184m. 
  • Central China Securities (1375) expects 70% decline in first-half profit 
  • Evergrande (3333) to continue increasing stake in Langfang Development 
  • SMIC (981) Net Income $97.6m, up 27% YoY vs estimate $66.6m 
  • Sunart (6808) first-half net profit drops to 1.43bn yuan from 1.47bn a year ago 


- closed


Analyst ratings: 

  • Goodman Group (GMG@AU) cut to neutral from outperform at Credit Suisse 
  • IOOF (IFL@AU) cut to hold vs buy at Shaw & Partners 
  • SkyCity Entertainment (SKC@NZ) cut to equalweight vs overweight at Morgan Stanley 


  • Telstra (TLS@AU) full-year results 
  • Goodman Group (GMG@AU) full-year results 
  • Magellan Financial (MFG@AU) full-year results 

Source: CIMB / Bloomberg


After the rate cut NZDUSD rallied 140 pips before coming back below the 0.7300 level. Photo: iStock


– Edited by Susan McDonald

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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