Article / 24 August 2016 at 2:01 GMT

Morning Report APAC: USDZAR higher as SA finance minister summoned

APAC Sales Trading Desk / Saxo Capital Markets


  • USDZAR 4% higher after South Africa's finance minister summoned by police
  • Investors await Fed Chair Janet Yellen’s Friday speech for clues on US rates
  • US 10-year notes in tightest monthly trading range in a decade ahead of speech


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)





Overnight news

US:  Purchases of new single-family homes jumped 12.4% month-on-month (Market estimate: -2.4%) to a seasonally adjusted annual rate of 654,000 (Mkt est: 580,000), the highest level since October 2007.

Year-on-year sales spiked 31.3%. Inventory of new homes on the market fell to an eight-month low. There was a 4.3 month supply of newly built homes available at the end of July, the smallest supply in three years.

The median sale price of a new home sold dipped 0.5% YoY to $294,600. Sales soared 40% in the Northeast, increased 1.2% in the Midwest and jumped 18.1% in the South. Sales were flat in the West. 

The Markit US Manufacturing PMI dropped to 52.1 from 52.9 in August. A further solid increase in output was the most positive influence. In contrast, slower growth in total new work and employment, alongside further cuts to inventories, dampened the overall headline figure.

The Congressional Budget Office said the US budget deficit is forecast to expand to $590bn in fiscal year 2016 (prev: deficit-$534bn) due to slower than expected growth in revenues and higher spending for programs including Social Security and Medicare.

The estimate points to the deficit increasing in relation to economic output for the first time since 2009. CBO said the deficit is expected to be $152bn higher than in 2015 and will equate to 3.2% of economic output.

The CBO said public debt will amount to nearly 77% of GDP by the end of 2016, three percentage points higher than 2015 and its highest ratio since 1950.

South Africa: South African Finance Minister Pravin Gordhan received “correspondence” from a special police unit. Johannesburg-based Daily Maverick reported that the Hawks asked Gordhan and four other former tax agency officials to report to their office on Thursday.

Gordhan may face dismissal and arrest on espionage charges for setting up the South African Revenue Service’s National Research Group to spy on politicians including President Jacob Zuma, 74. 

Reserve Bank Governor Lesetja Kganyago said in an interview that South Africa still has “relatively low” interest rates. As long as inflation is high, interest rates will be high; can’t have interest rates below inflation.

Opec:  Reuters reports that Iran is sending "positive signals" about supporting joint action to bolster the oil market .


Turkey: Turkey's central bank cut the overnight lending rate 25 basis points to 8.5% while holding the benchmark repo and overnight borrowing rates unchanged. The finance minister said that there was room for more easing.

Foreign exchange



Very quiet market in the G10 space with decent bids in GBP, holding quite well at the moment above 1.3000 after two attempts since Brexit vote.

We have been hearing about a German chemical company looking to purchase a company in the US that could bring some selling interests in EURUSD but unfortunately not much more info than that .

In emerging markets, the main mover was USDZAR, which moved 4% higher to reach a high of 14.0000 after the arrest of the finance minister.

There were some very volatile moves in the rest of the emerging market currencies as well with strong bidding interest, and USDKRW moved back above 1120 after reaching a low of 1115 yesterday, maybe due to North Korea launch of a ballistic missile from a submarine.

Foreign exchange movements


USDZAR volatilities were obviously marked higher following the move higher in spot .

The market is short Vega in USDJPY, preventing the vols to move lower .

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



The Financial Times is reporting that China is close to launching a credit default swap market. FT mentioned that 41 companies defaulted as of mid-August on RMB 25.4 bn worth of bonds since the beginning of the year. Many more are being downgraded. There have been more than 1,000 ratings downgrades in the past two months.

Treasury 10-year notes are stuck in their tightest monthly trading range in a decade as investors await US Federal Reserve Chair Janet Yellen’s speech on Friday for clues to the path of interest rates. The 10-year bond yield was flat at 1.542%. 

Bund put skew has been strengthening, indicating higher expectation on German 10-year rates, ahead of Yellen’s speech on Friday and resumption of European government bonds supply into September. Bund put/call one-month vol ratio has extended to new highs for the year at 1.33. 

Italy’s 10-year government bonds trailed behind their German peers by the most in two weeks as the political turmoil surrounding Prime Minister Matteo Renzi weighs on the nation’s sovereign securities. 

UK government bonds advanced as the Bank of England paid a premium to secure the purchase of longer-dated bonds in its expanded quantitative-easing program. The benchmark 10-year gilt yield fell one basis point to 0.55%. 

Japanese government bond's 10-year yield fell two bps to -0.090%, the 20-year yield declined three bps to 0.260% and 30-year yield slid 3.5 bps to 0.315%, and yield curve bull-flattens after 20-year bond auction drew stronger-than-expected demand. 





US stocks were boosted by upbeat data on US new-home sales and a stronger-than-expected gauge of European private-sector activity.

The S&P 500 index finished up 0.2%, with eight out of 10 sectors posting gains, led by a 0.8% climb in materials shares, while the Nasdaq Composite briefly hit an all-time intraday high. 

Best Buy surged 19.6% after the consumer-electronics retailer posted earnings ahead of forecasts. Shares rallied for their biggest daily rise in 15 years, when they jumped 23% on Jan. 3, 2001, 

Mobileye NV rose 6.7% and Delphi Automotive PLC gained 4.3% after news the two are joining forces to develop self-driving technology for car makers. 

European stocks finished higher, lifted by the mining and financial sectors pushing the market to a second day of gains. 

BHP Billiton PLC jumped 4.4% after a ratings upgrade to buy from hold at Jefferies, further noting the improving fundamentals in the metals and mining industry. 

UniCredit SpA surged 6.6% after a Reuters report that PZU (down 3.37%) Poland’s largest insurer, is talking to the bank about buying Poland’s second-largest bank, Bank Pekao SA (down 2.19%) from UniCredit.

Asia Pacific Stocks

Hong Kong

Analyst ratings: 

  • ZhengTong (1728 HK): Cut to neutral at Goldman 
  • Everbright Bank (6818 HK): Rated new sell at Haitong 
  • Sinopec Engineering (2386 HK): Cut to hold at HSBC 
  • Zhuzhou CRRC (3898 HK): Cut to accumulate at Everbright 


  • Henderson Land (12) first half underlying profit HK$4.78bn, down 12.1% YoY. Property-sales PBT HK$1.19bn. Rent PBT HK$3.26bn. 
  • Henderson Inv (97) first half net profit HK$58m, down 86% YoY. The drop was due to the one-off revenue from terminated infra. businesses in 2015. Rev HK$443m, down 1.34% YoY. 
  • Hopewell (54) FY net profit HK$2.76b, down 2.6%. Rev HK$1.85bn, down 0.8% YoY. The company said it had sold 99% of its The Avenue 1st & 2nd phases. 
  • Hopewell Highway (737) FY net profit RMB510m, down 1.6% YoY. 
  • Wanda (3699) to buy two US film cos. for more than US$2bn. 
  • Agile (3383) expects gross profit margin to recover to ~28% in FY17-18 as selling prices increase. The co. also seeks to buy land parcel in CH cities with “competitive advantage” such as Guangzhou, Zhongshan, Nanjing, Zhengzhou and Xi’An. 
  • ENN Energy (2688) 1H net profit RMB1.59b, up 29% YoY. Rev RMB15.6b, down 1.6% YoY. 
  • Jiangxi Copper (358) 1H net profit RMB473.4m, down 47% YoY. Sales RMB90.2b, up 19% YoY. 
  • Chinalco (3668) 1H net loss US$46m. Rev US$242m. 
  • CH Foods (506) is considering to sell its stakes in 10 Coca-Cola bottling cos. in CH. The co may sell anywhere from 7.15%-100% according to its disclosure. 
  • Fosun (2196) 1H net profit RMB1.5b, up 15% YoY. Sales RMB6.94b, up 17% YoY. 
  • CH Traditional CH Medicine (570) net profit RMB491m. Rev RMB3.2bn. 
  • Universal Medical (2666) 1H net profit RMB390m, up 44.32% YoY. Rev RMB1.25b, up 27.39% YoY. 
  • Daphne (210) 1H net loss HK$163.6m vs profit of HK$2.53m yr ago. Sales HK$3.4b, down 22% YoY. Total number points of sales at 5,464, down 7.9%. 
  • CAR Inc (699) 1H net profit RMB1.06bn, up160.7% YoY. Rev RMB2.97bn, up 28.67% YoY 
  • Anbang said it has asked banks to pitch on a planned HK IPO in 2017. 
  • Postal Savings BK of CH is said to raise US$8bn in HK IPO 
  • Bright Smart Sec (1428) is said to be in talk with a Chinese insurance co. on takeover deal. 
  • CC Sec (1375) said the co’s A-shr listing plan will enter preliminary approval by end of this yr to early next yr. 
  • Chinasoft (354) 1H net income RMB236.2m, up 69% YoY. Rev RMB2.88b, up 20.5% YoY. 


Analyst ratings: 

  • Disco (6146 JP): Raised to neutral plus at Iwai Cosmo 
  • FP Corp. (7947 JP): Upgraded to buy from neutral at Mizuho 
  • Hitachi Construction (6305 JP): Raised to neutral at Nomura 
  • Pegasus Sewing Machine (6262 JP): Cut to neutral plus at Iwai Cosmo 
  • Kuraray (3405 JP): Outlook to positive at JCR 
  • Line (3938 JP): Rated new neutral at JPMorgan 
  • Showa Shell (5002 JP): Cut to neutral at Okasan 
  • SoftBank (9984 JP): Raised to overweight at JPMorgan 


  • Showa Denko (4004 JP), JX (5020 JP): To buy out LyondellBasell’s 50% stake in SunAllomer polypropylene JV 
  • Tosoh (4042 JP): Tosoh Bioscience gets FDA warning letter over device testing 
  • Toyota (7203 JP): Police report explosion at Ontario plant 
  • Yondoshi (8008 JP): To buy back up to 1.49% of shrs for 1bn yen 



Analyst ratings: 

  • Abacus Property (ABP@AU) raised to buy vs hold at Morningstar 
  • BHP Billiton (BHP@AU) raised to buy vs hold at Jefferies 
  • Mesoblast (MSB@AU) raised to buy vs hold at Morningstar 
  • Monadelphous (MND@AU) raised to hold vs reduce at Morgans; cut to sell vs neutral at UBS 
  • Virtus Health (VRT@AU) cut to neutral vs buy at UBS 
  • Caltex Australia (CTX@AU) raised to overweight vs neutral at JPMorgan 
  • Aconex (ACX@AU) cut to neutral from outperform at Credit Suisse 
  • Fortescue Metals (FMG@AU) raised to hold from underperform at Jefferies 


  • Meridian (MEL@NZ) full-year net income falls 25% 
  • Genesis (GNE@NZ) full-year net profit rises as revenue falls 
  • Metlifecare (MET@NZ) full-year net profit surges 86% 
  • A2 Milk (ATM@NZ) reports full-year profit as revenue surges 
  • Vector (VCT@NZ) full-year profit boosted by sale of gas unit 
  • Cabcharge (CAB@AU) expects to book A$27.7m impairment charge in FY16 
  • St Barbara (SBM@AU) expects FY17 production to drop, costs to rise 

Source: CIMB / Bloomberg

 USDZAR moved 4% higher to after police summoned the finance minister. 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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