Article / 27 March 2017 at 2:06 GMT

Morning Report APAC: Wall St, commodities weigh on sentiment in Asia

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Crude prices made minor gains on Friday, but posted a weekly drop
  • The realisation that Trump's tax cuts are off the table indefinitely hit USD
  • Gold headed higher as USD continued to weaken
  • Workers at a top Chilean copper mine are returning to work after a long strike

 

By Saxo APAC Sales Trading
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Speeches


Overnight news, US

  • Durable Gods Orders rose 1.7% month on month (Exp. 1.4%) from an upward revision 2.3% (Prev. 2.0%). Orders for civilian aircraft and parts jumped 47.6% following an 83.3% spike in January. Ex-transport orders grew just 0.4% (Exp. 0.6%) and 0.2% in January. Orders for machinery inched up 0.1% while shipments rose 0.9%. Orders for electrical equipment, appliances and components jumped 2.2%, the largest rise in seven months, and shipments rose 1.5%.
  • The closely watched proxy for business spending on new equipment, new orders for non-defence capital goods ex-aircraft, inched down 0.1% MoM (Market est: +0.5%) after tickling up a revised 0.1% in January (Previous: -0.1). Shipments of core capital goods rose 1% after declining 0.3% in January. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. Last month's jump reflected increases in orders at the end of 2016.
  • Markit US Manufacturing PMI printed 53.4 (Exp. 54.8) and Services PMI was also weaker than expected at 52.9 (Exp. 54.0). Pre-production stocks were accumulated at the weakest pace since last September, while finished goods inventories dropped for the first time in six months. Input cost inflation picked up which survey respondents attributed to rising commodity prices (particularly metals). The overall rate of input price inflation was the fastest for two-and-a-half years. Efforts to pass on higher costs contributed to an upturn in factory gate price inflation to its strongest since November 2014.
  • The seasonally adjusted Markit Flash US Composite PMI Output Index printed at 53.2 in March down from 54.1 in February and the slowest expansion of private sector output since September 2016. Softer business activity growth was driven by a loss of momentum in the service economy (the ‘flash’ index was 52.9, down from 53.8 in February). Manufacturing production also expanded at a weaker pace in March (‘flash’ output index: 54.4, down from 55.6).

 










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  • USD has been offered overnight once the market realised tax reform has been postponed indefinitely. DXY touched the year low and is trading on the long term support. If we managed to break the year low, the next support is at 98.660.
  • USDJPY continues to be offered. The very short term support is at the current level ¥110.45 and a break will trigger more stops and we will test the 200 day moving average at ¥108.25.
  • GBPUSD remains above the 100 day moving average few days before the Article 50 is about to be triggered. We should be trading in the same range until further news comes out.
  • Emerging Markets: The first to benefit of uncertainties in US policies are EM currencies and USDBRL dropped 1% USD. USDMXN is testing new lows at 18.80 and there is no clear support before the 18.000 level.


Foreign exchange volatilities

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  • The market is short USDJPY vols for at least the next 1 or 2 weeks and is buying the back end of the curve to finance it.
  • There are decent large flows in EURUSD from Funds buying downside and Put Spreads to cover the French elections.
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  • US yields retreated further as republicans scrapped the vote to repeal & replace Obamacare, raising concerns on difficulties of Trump’s fiscal agenda, including tax cuts.
  • European bonds especially peripherals were lifted by LTRO-II funds driving carry flows into longer maturities, even after PMIs are reported better than expected in Germany and France.
 


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  • US equities were mixed as the Republicans pulled their American Health Care Act bill. Trump and his team wasn't able to pull garner enough votes and that will impact the equity market negative in the short term.
  • European markets finished mixed too; the Dax gained 0.20%, while the CAC 40 and FTSE 100 lower and fell 0.24% and 0.05% respectively.
  • Micron broke out from its rising channel after a stellar results in its latest earnings.  Micron expects an even better quarter earnings and was followed up a slew of analysts upgrades on their target price. Micron closed $1.96 higher or 7.4% to end the session at $28.43.
  • Tesla rose $8.38 or 3.29% after Elon Musk tweeted that Tesla will start taking orders for its solar roof tiles in April. While there is no clarifications on the price, it was revealed last year that the cost of solar roof tiles will be lesser than the conventional roof plus solar.

Asia-Pacific equities

Hong Kong analyst views

  • China Life (2628 HK): Raised to neutral at Citi.
  • China Railway Group (390 HK): Cut to neutral at Nomura.
  • China Resources Beer (291 HK): Raised to accumulate at Guotai Junan.
  • China Resources Power (836 HK): Raised to buy at HSBC.
  • Cnooc (883 HK): Raised to hold from reduce at HSBC.
  • Country Garden (2007 HK): Cut to hold at CMB Intl.
  • ENN Energy (2688 HK): Raised to buy from add at GF Securities.
  • Geely Auto (175 HK): Raised to buy at Guangfa.
  • Haier Electronics (1169 HK): Raised to outperform at Macquarie.
  • MGM China (2282 HK): Downgraded to neutral at Guotai Junan.
  • Sands China (1928 HK): Raised to accumulate at Guotai Junan.

Hong Kong stocks

  • CSRC’s Fang says he’s optimistic A-shares will be in MSCI this year.
  • Agriculture: China among countries lifting Brazilian meat ban.
  • Developers: Beijing bans buying of new quasi-residential homes.
  • Refiners: Chinese state refinery run rates fall to 71.46%: SCI99.
  • Anhui Expressway (995 HK): 2016 net profit 925mln yuan vs 929mln yuan.
  • Beijing Shunxin (000860 CH): FY net 412 mln yuan vs 376.3mln yuan.
  • Brilliance China (1114 HK): FY net income beats est.
  • BYD (1211 HK): To invest 10mln euro in electric bus plant in France.
  • Chalco (2600 HK): 2016 net 402.5mln yuan vs restated 148.6mln yuan.
  • Chaowei Power (951 HK): 2016 net profit 504mln yuan vs 332mln yuan.
  • China Coal (1898 HK): Expects coal price to be 500-600 yuan/ton this year.
  • China Life (2628 HK): 2016 net income 19.1b yuan vs 34.7b yuan.
  • China Postal Bank (1658 HK): To raise up to 50b yuan from preference shares.
  • China Southern (1055 HK): Says in strategic talks with American Airlines.
  • China Vanke (2202 HK): Net income rises 16% to 21b yuan.
  • Cnooc (883 HK): Chairman says has been looking at overseas M&A opportunities.
  • Fuyao Glass (3606 HK): Appoints Ye Shu as president.
  • Great Wall Motor (2333 HK): FY net 10.55bn yuan vs 8.06bn yuan.
  • HSBC (5 HK): Plans to add up to 1,000 new employees in China: Reuters.
  • Huaxin Cement (600801 CH): FY net 451.9mln yuan vs 102.8mln yuan.
  • Huishan Dairy (6863 HK): Huishan Dairy to issue statement after share price plunge, trading halt; Caixin reports chairman said co. needs to raise 15bn yuan; Champ Harvest pledged 3.434bn shares as collateral: Ping An; given 4-week liquidity timeline by local governmentt: 21st; PingAn Bank plans action on China Huishan Dairy loan.
  • Jiangling Motors (000550 CH): FY net 1.32b yuan vs 2.22b yuan; targets 30% increase in vehicle sales in 2017.
  • Jiangsu Expressway (177 HK): To invest 3b yuan in Wufengshan.
  • Kaisa Group (1638 HK): Posts earnings, applies to resume trading in HK.
  • Merchants Bank (600036 CH): FY net 62.1b yuan vs 57.7b yuan.
  • PetroChina (857 HK): To shut Fushun refinery for maintenance June 1: SCI99.
  • PICC P&C (2328 HK): FY net income beats est.
  • PingAn Bank (000001 CH): Plans action on China Huishan Dairy loan.
  • Ping An (2318 HK): Targets Japan in bid to diversify outside of China.
  • Qinhuangdao Port (3369 HK): Expects Jan-March net income up at least 200%.
  • Sinopec (386 HK): Sees profit jump as spending to rise first time since 2013.
  • Sinopharm (1099 HK): FY net income misses est.
  • Shandong Weigao (1066 HK): surges as earnings prompt price-target upgrades.
  • XJ Electric (000400 CH): FY net 868.9mln yuan vs 720.6mln yuan.Japan analyst views

Japan analyst views

  • Fujifilm (4901): Raised to buy at Deutsche Bank.
  • Mebuki FG (7167): Rated new neutral at Daiwa Securities.
  • OPT Holding (2389): Rated new positive at Storm Research.

Japan stocks

  • Asahi Kasei (3407): Said it’s immediately suspending its Ziploc advertisements on YouTube.
  • Chugai Pharmaceutical (4519): Wins Japan supreme court decision on Oxarol Ointment.
  • Daiwa Securities Group (8601): To cancel 2.86% of its own shares on March 31.
  • Dentsu (4324): To submit internal control report for year ended December.
  • Hitachi (6501): To book a writedown of about ¥65bn on R&D and commercialization of laser enrichment of uranium at its US affiliate.
  • Kawasaki Heavy Industries (7012): Bajaj Auto and India Kawasaki Motors agreed amicably to end alliance in India from April 1, Bajaj Auto said in March 25 statement.
  • Komatsu (6301): Japan to support co.’s entry into the agriculture market, Yomiuri reports
  • Kyowa Hakko Kirin (4151): To receive $15mln up-front from AstraZeneca.
  • Kyushu Electric Power (9508): Sendai No. 2 reactor restored to full operation.
  • Nippon Express (9062): To retire 3.85% of shares on March 31.
  • Nippon Yusen (9101): Unit Nippon Cargo Airlines cancels 2 Boeing 747-8F freight aircraft.
  • Nissan (7201): Recalls 56,766 Murano SUVs for power-steering hose clamp, NHTSA says in an advisory.
  • NTN (6472): To book charge in Q4 on legal settlement with some customers.
  • NTT Docomo (9437): To retire 1.49% of shares on March 31.
  • Ono Pharmaceutical (4528): Gets Japan approval for Opdivo use in head & neck cancer.
  • Panasonic (6752): Co. to restructure six unprofitable businesses, Nikkei reported. Measures include halting one of two LCD panel production lines at its Himeji plant and selling off equipment from the line, report said.
  • Pasona Group (2168): Acquires NTT Group’s HR services for ¥5.5bn.
  • San-In Godo Bank (8381): To retire 1.41% of shares March 31.
  • SoftBank Group (9984): Pledges about $1bn in latest round for Grab, people familiar with the matter tell Bloomberg.
  • Sumitomo Electric (5802): Co. to team up with Siemens on power transmission, Nikkei reports. The cos will win order for India power lines, report says.
  • Taisei (1801): Consolidated net profit seen at ~¥100bn, Nikkei reported. Net profit seen up ~30% in year ending March 31 on improved margins in Tokyo area, report said.
  • Tasaki (7968): Offers 42% premium in tender to take company private.
  • Tepco (9501): to promote Tomoaki Kobayakawa to president, Nikkei reports. Kobayakawa, a Tepco director, will replace President Naoki Hirose, who will become vice chairman: Nikkei. Co. may finalize new management lineup on March 31, NHK says.

Australia analyst views

  • Dexus (DXS): Cut to sell at Shaw and Partners, PT $A9.12.
  • Regis Resources (RRL): Raised to hold at Morningstar.
  • Metals X (MLX): Rated new outperform at Macquarie, PT $A1.

Australia stocks

  • Alumina (AWC) Arconic says Elliott view of co. is ‘fundamentally flawed’.
  • Aurizon (AZJ): Queensland braces for worst cyclone in 6 years as Debbie nears.
  • BHP Billiton (BHP),Newcrest Mining (NCM), Rio Tinto (RIO): Miners regain mojo to spark $18 billion in exploration hunt.
  • Fairfax Media (FXJ): TPG Capital may make approach for co. as early as this week, even though there has been no contact between the two parties: Australian.
  • Fortescue (FMG): Iron ore falls 1.5% Friday, declining for a 5th time in sex sessions, according to a price index compiled by Metals Bulletin.
  • Graincorp (GNC): World awash in grain compounds bearish fund bets as wheat slumps.
  • Origin Energy (ORG), Santos (STO): Everyone’s a loser in Australia’s natural-gas boom: Gadfly.
  • OZ Minerals (OZL): Copper’s soft underbelly exposed as biggest mine to restart.
  • Westpac (WBC): BT Financial confirms CIO Martyn Wild left co.
  • Bank of New York Australia ADR Index +0.3%.
  • BHP Billiton ADR -0.8% to A$23.95 equivalent, 1.3% discount to last Sydney close.
  • Rio Tinto ADR -1.2% to A$53.58 equivalent, ~11% discount to last Sydney close.
  • Companies trading above 20/50/200 day moving averages, Bollinger upper band with RSI above 70: NUF, MTS, NEC.
  • Companies trading below 20/50/200 day moving averages, Bollinger lower band with RSI below 30: None among screened stocks.

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 The end of a long-running strike at a leading copper mine in Chile should ease supply concerns for the red metal. Photo: Shutterstock

 

– Edited by Robert Ryan


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