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 / 25 August 2016 at 2:04 GMT

Morning Report APAC: Shine off precious metals ahead of Yellen speech

APAC Sales Trading Desk / Saxo Capital Markets

  • A very volatile day in emerging markets, USDZAR continuing to be very bid
  • South Africa's finance minister said that he had done nothing wrong
  • Precious mining stocks tumbled ahead of Fed Chair Janet Yellen's speech
  • US stocks finished at lowest level since early August on selling in healthcare

By Saxo APAC Sales Trading

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





Overnight news

US:  Existing homes sales dropped 3.2% MoM to 5.39m. The National Association of Realtors is blaming the shortage of supply for the drop. And US house prices rose 1.2% QoQ and 5.6% YoY. 

South Africa:  South African Finance Minister Pravin Gordhan said that he had done nothing wrong by authorising the establishment of a special investigative unit when he headed the national tax agency, and he wouldn’t obey a police instruction to present himself for questioning. The same Gordhan said that growth will be close to zero this year and not the 0.9% forecast in the February budget.


Foreign exchange



Very quiet market in the G10 space with decent bids in GBP rising to a three-week high on positive UK consumer credit data.

In emerging markets, it was a very volatile day with USDZAR continuing to be very bid and confirming the break above 14.0000 to trade close to the strong resistance of 14.20. USDRUB found good bidding interest following the drop in oil to trade at the 100-day moving average at 65.23. The rest of Asian currencies were also bid (USD) following USDRUB and USDZAR.  

Foreign exchange movements


USDZAR volatilities squeezed higher with the continuation of the rally in spot. There were no specific flows in the market, just reaction to the news. Expect another squeeze higher as spot breaks 14.2000. 

We still see decent interest from funds to buy USD calls, mainly against EUR and JPY short-dated around the next non-farm payroll and FOMC dates.




China Developers cut foreign debt as the local currency depreciated too much. Companies have made early repayments of international bonds of $7.4bn so far in 2016, more than triple the amount for the same period last year. 

Soho China Ltd. said it slashed foreign borrowings to just 6% of total debt as of June 30, from 56% six months earlier. The commercial property developer made early repayments on $1.2 bn of syndicated loans and redeemed $253 m of senior notes. Its net foreign-exchange losses for the half-year dropped to 2.2 m yuan from 10 m yuan 12 months earlier.

Sunac China Holdings Ltd. said on August 5 it had redeemed $300 m of notes that had been due to mature in 2018. The Tianjin-based company subsequently said it would sell 4 bn yuan of bonds onshore. Sunac this month said first-half earnings could plunge 90%, partly due to foreign-exchange losses. (Bloomberg) 

US Treasuries held in their recent narrow range even as the government auctioned $34bn of five-year notes at 1.125%, the lowest stop-out yield since May 2013. The two-year note yield gained 0.7bps to 0.762%. The 10-year bond yield is adding 1.4bps to 1.559%.

Germany’s latest five-year note auction showed little sign of shaking the nation’s government bonds from their slumber, or raising yields that are firmly entrenched below zero. Benchmark 10-year bund yields, which were little changed at minus 0.085% on Wednesday, are in a 10 basis-point, or 0.10 percentage point, range this month.

Analysts reported that China’s bond rally may be ending, as the PBOC’s use of 14-day reverse repos suggests it’s averse to cutting rates. 







US stocks finished at their lowest levels since early August as selling in healthcare shares, sparked by intensifying controversy surrounding Mylan, put pressure on the broader market.

Mylan Inc. (down 5.41%) has been in focus for the past several sessions as lawmakers have criticised the drugmaker’s decision to raise the price of its EpiPens, widely used to treat anaphylactic shock.

Pfizer Inc. (down 0.8%) agreed to buy part of AstraZeneca PLC’s antibiotics business for up to $1.575bn plus royalties.

Express Inc. tumbled about 26% after the clothing and accessories retailer’s second-quarter results and third-quarter forecast fell short of expectations.

Banks helped drive European stocks higher, Commerzbank AG climbed 3.2%, UBS Group AG gained 2.9% and Banco Santander SA rose 2.4%. UniCredit SpA rose 8%, extending its 6.6% climb from Tuesday, after reports that Poland’s largest insurer, PZU (up 1.10%) is talking to the bank about buying Poland’s second-largest bank, Bank Pekao SA from UniCredit.

Glencore PLC gave up 3.1% after posting a loss for the first half of the year, but signaled that it’s on track to significantly reduce its net debt by selling unwanted assets to weather the recent commodities turmoil.

Asia Pacific Stocks

Hong Kong

Analyst ratings: 

  • Guangzhou R&F (2777 HK): Cut to neutral at Credit Suisse 
  • Sinopec Shanghai (600688 CH): Cut to neutral at Nomura 


  • A site in Tun Mun sold for HK$1.4bn or HK$6,800psf. That's 70% higher than consensus or 66% higher in the same area. 
  • PetroChina (857) 1H profit RMB531m, down 97.9% YoY. 1H crude output at 470.6m barrels, down 1.4% YoY. 
  • CNOOC (883) 1H net loss RMB7.74bn vs RMB14.7bn profit last yr. Rev RMB66.8bn. The co. said they will try to control capex within RMB60bn in 2016. 
  • Sino Land (83) underlying profit HK$5.35bn. Rev HK$10.8bn. 
  • CH Coal (1898) 1H net income RMB225.1m vs net loss RMB1.07 yr ago. Sales RMB26.3bn, down 11.7% YoY. 
  • Allied PPTY (56) 1H net profit HK$753m, rev HK$1.95bn. 
  • Shui On (272) 1H net income RMB768m, down 36% YoY. General and admin expenditure -RMB467m. 
  • Joy City PPTY (207) said they target at 30% gross profit margin on new land reserve. They said the land for the new SZ project in 1H is obtained from merger. 1H financing cost at 6.57% as the overall financing cost of the industry decreases. 
  • Citic Sec (6030) first-half net income RMB5.24bn, down 58% YoY. Sales RMB18.2bn. 
  • Dah Sing (440) said first-half bad loan provisions were mainly for China-related SMEs. They expect the situation will improve in the second half with lower bad loan provisions. They also said the HK$4bn obtained after the sale of Dah Sing Life will be used for inv projects, special div and general operations. 
  • Lufax CFO James Zheng said its IPO is likely to be in HK rather than SH. 
  • Television Broadcasts (511) 1H net profit HK$301.7m, down 73.8% YoY. 
  • BAIC Motor (1958) 1H net income RMB2.41bn, up 11% YoY. Rev RMB49bn, up 34% YoY. 
  • Mengniu (2319) 1H net income RMB1.08bn, sales RMB27.3bn. 
  • Modern Dental (3600) 1H net profit HK$40.4m, rev HK$774.4m. 
  • CGN Power (1816) 1H net income RMB3.6bn, up 3.45% YoY. Rev RMB13.1bn, up36% YoY. 
  • GCL-Poly (3800) 1H net income RMB1.39bn vs restated RMB652.6m a year ago. 


Analyst ratings: 

  • JFE Holdings (5411 JP): Raised to overweight from neutral at JPMorgan 
  • Kobe Steel (5406 JP): Raised to neutral from underweight at JPMorgan 
  • Senko (9069 JP): Rated new outperform at Cosmo 
  • Stella Chemifa (4109 JP): Raised to outperform at Iwai Cosmo 


  • Calbee (2229 JP): Assessing typhoon damage to Hokkaido potato harvest 
  • Creek & River (4763 JP): To move listing to TSE1 from TSE2 on Aug. 31 
  • GungHo Online (3765 JP): To retire 10% of shares on Sept. 2 
  • Happinet (7552 JP): Cuts 1H operating profit forecast 47% to 800m yen; to buy back up to 4.41% of shares for as much as 1.5bn yen 
  • Mizuho Financial (8411 JP): SoftBank to pay ~10b yen fee for ARM acquisition bridge loan 
  • Recruit (6098 JP): To offer 61.1m shares held by Dentsu, Dai Nippon Printing, NTT Data in secondary sale; shares worth ~252b yen at Wed. close, or ~10% of mkt cap; plans to buy back up to 8.5m shares for 30bn yen 
  • SJI (2315 JP): Placed on TSE watchlist for possible delisting 
  • Tepco (9501 JP): Regulator denies report reactor in priority status 


Analyst ratings: 

  • Link Administration (LNK@AU) raised to hold vs sell at Morningstar 
  • Bega Cheese (BGA@AU) raised to buy vs hold at Baillieu Holst; cut to hold from buy at Bell Potter 
  • Ardent Leisure (AAD@AU) cut to neutral vs buy at UBS; cut to neutral vs buy at Goldman Sachs 
  • Metcash (MTS@AU) raised to overweight from neutral at JPMorgan 
  • Boral (BLD@AU) cut to neutral from outperform at Credit Suisse; raised to sector perform from underperform at RBC Capital 
  • Blackmores (BKL@AU) cut to neutral from overweight at JPMorgan 
  • iSentia (ISD@AU) raised to buy from hold at Moelis & Co 
  • Qantas (QAN@AU) raised to buy from underperform at APP Securities 
  • APA Group (APA@AU) raised to overweight from neutral at JPMorgan 


  • EBOS Group (EBO@NZ) full-year net profit rises 20% 
  • Hellaby (HBY@NZ) full-year net profit drops 28% 
  • Woolworths (WOW@AU) full-year earnings; co. announced Wednesday it would exit its home improvement business for A$1.5bn 
  • Paladin Energy (PDN@AU) sees FY17 Langer Heinrich production at 3.8m-4m lbs 

Source: CIMB / Bloomberg

 Gold futures headed for their biggest drop in two weeks. Photo: iStock


– Edited by Susan McDonald

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