Issue#: 411/2017

Weekly Macro:

The US dollar remains capped at the key 94 handle, while US 10yr Treasuries continue to languish below the 2.40% resistance. Gold continued to edge higher, but continues to struggle to break above $1,300/Oz. Crude oil snapped a 5-week winning streak, although there continues to be significant buying around the $55/bbl support.

 

US Dollar:

  • The Dollar Index declined for the second consecutive week last Friday, descending below the 94 handle. As shown in the weekly chart below, DXY has pared losses Monday with the index benefiting from support above its 200-week moving average of 93.35.
  • Despite its recent retreat, the bias remains to the upside for DXY from a technical perspective following its breakout of its downtrend channel last month.
  • More moves for the DXY may be in store this week, ahead the release of the Fed’s latest meeting minutes this Wednesday. Investors will be aiming to gauge Fed officials’ eagerness to hike rates further next month, which is widely anticipated by the market.
  • A Thanksgiving holiday-shortened week in the US may limit market moves later this week.

Treasuries:

  • In the Treasury market, the gap between 2- and 10-year Treasury yields again hit the tightest level in a decade, adding to concern about the pace of future economic growth. The persistent flattening of the curve saw the spread narrow by more than 12 basis points last week, the most since 2012.
  • According to a Bloomberg analytical piece, the simplest reason for the flattening comes from looking separately at what’s going on with short rates, the most sensitive to Fed policy expectations, and longer-term yields, which take their cues from the outlook for inflation and economic growth.
  • The benchmark 10yr Treasury yield continues to languish below the 2.40% resistance mark and is quite some way off its 2017-high of 2.628%. Instead, it is lingering above its 200-day moving average of 2.305%. The 2yr yield, however has risen to its highest since 2008.

 

Gold:

  • Spot gold ended higher for the second week in a row last Friday, but fell short of closing above the key resistance around $1,296Oz. Risk-off sentiment has gradually crept in amongst investors, as such safe haven inflows has helped prop up the price of bullion.
  • The uncertainties of a tax reform in the US, as well as the investigation into Russia’s probe in last year’s elections should continue to buoy demand for the precious metal. However, a stronger US dollar and an impending US rate hike in December is likely to cap any large moves to the upside.
  • A solid break above $1,300/Oz is likely to result in a renewed push towards the 2017 high of $1,357.61/Oz. On the contrary, a failure to hold above the 200-day moving average of $1,265/Oz could lead to a triggering of stops and a swift decline back towards the $1,200/Oz handle.

 

Oil:

  • Crude oil futures pushed higher rebounded sharply last Friday to pare most of its losses for the week. Nonetheless, it still wasn’t enough to prevent crude futures’ first weekly loss in 6 weeks.
  • Futures surged back above $56/bbl after Saudi Arabia’s energy minister said OPEC should announce an extension to supply cuts when it meets at the end of the month.
  • The US drill rig count was unchanged at 738 at the end of last week, data Friday from Baker Hughes showed.
  • WTI futures continue to remain in an upward trend after rebounding off the $55/bbl mark last week. The key $58/bbl handle is likely to be tested again over the near-to-medium term.

 

Upcoming Key Events:

  • Market participants get their chance to study the minutes of the US Federal Reserve’s Oct. 31-Nov. 1 policy meeting and gauge Fed officials’ eagerness to boost the benchmark interest rate in December, which is widely expected by the market.
  • Investors will also be keeping an ear out when Fed Chair Janet Yellen gives a talk at New York University mid-week.
  • In the UK, Chancellor of the Exchequer Philip Hammond makes his Budget statement, presenting new economic forecasts and fiscal plans as Brexit looms.
  • A Thanksgiving holiday-shortened week in the US will include reports on sales of previously owned homes and durable goods orders for October. Home purchases are projected to show a modest improvement, while data on bookings for big-ticket goods will probably indicate steady business investment in equipment.
  • Minutes from the Reserve Bank of Australia’s November meeting are due Tuesday, while those from the European Central Bank’s October meeting due out on Thursday could show dissent in the discussion about tapering.

 

Weekly Thematic News:

Solar Energy:

According to a Bloomberg New Energy Finance report, China, the world’s biggest carbon emitter, is poised to install a record amount of solar-power capacity this year, prompting researchers to boost forecasts as much as 80%. About 54 gigawatts will be put in place this year, Bloomberg New Energy Finance said Monday, raising a forecast of more than 30 gigawatts made in July. That amount of additional capacity would likely surpass all the solar energy generated in Japan in 2017.

The growth of the market has benefited top panel producers, including JinkoSolar Holding Co. and Trina Solar Ltd. China installed 43 gigawatts of solar power in the first nine months of 2017, already above the 34.5 gigawatts for all of last year. China has been the world’s biggest solar market since 2013. It surpassed Germany as the country with the most installed photovoltaic power capacity two years ago.

With the move to clean energy increasingly becoming heavily-emphasized, the multi-year growth of the solar energy industry is expected to continue its exponential growth. Investors can purchase the Solar Energy US portfolio on iAdvisor, which has outperformed every other portfolio over the last 30 days, returning 8.4% as of last Friday.

 

Smart Real Estate Singapore:

According to a Bloomberg report last week, a series of blockbuster land deals in Singapore this year signal the city-state’s property market is set to break out of its prolonged slump in 2018. A Chinese group lobbed a winning record bid for a residential plot, while Guocoland Ltd. paid a record per-square foot price for an office development site in the central business district. Office rents last quarter rose for the first time in 2-1/2 years and home prices ended a 4-year slide. The spending spree may not be over, with more than S$3.3 billion of land deals set to be completed by the end of the year, pushing the annual total to S$14 billion, the highest since 2011, according to Cushman & Wakefield Inc.

The resurgence in deals suggests Singapore is on course to emulate Hong Kong’s red-hot property market, where home values have surged to record highs, following a jump in land prices last year, and office towers have fetched eye-popping prices. With housing-affordability much better in Singapore, there may be a surge in demand next year, according to BNP Paribas.

Investors looking to invest in the local real estate sector can buy into the Smart Real Estate Singapore portfolio on iAdvisor, which has returned a healthy 28.7% from a year ago and provides a dividend yield of 4.8%.

 

China Online US:

Alibaba Group Holding Ltd.’s Singles’ Day generated a record 168.2 billion yuan (or $25.3 billion) in sales, as the e-commerce giant worked with more traditional retailers to market discounted lobster, iPhones and refrigerators to shoppers from at least 225 countries and regions. The annual frenzy posted a 39% increase in sales, exceeding Citigroup Inc. estimates and defying concerns of an economic slowdown. About 90% of transactions were done via mobile. At its peak, the company’s processors handled 256,000 transactions per second.

According to an S&P report, this weekend’s record online spending puts the industry on course for a 20%-25% annual growth over the next 12-24 months, as online shopping becomes increasingly popular in lower-tier cities and rural areas.

Investors who wishes to capitalize on this trend can buy into the China Online US portfolio on iAdvisor, which consists US-listed e-commerce stocks domiciled in China, and has returned a stellar 67.3% year-on-year.

© Jachin Capital Pte Ltd

UEN: 201419754M


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