Spot values at a glance:
Asian stocks were mixed Wednesday in trading thinned by a holiday-shortened week. Oil prices breached $60/bbl for the first time since 2015 after a pipeline blast in Libya. The US dollar was steady while gold held above $1,280/Oz. The 10yr US Treasury yield was little changed at 2.48%.
China Set to Overtake US Economy by 2030:
According to a report by the Centre for Economics and Business Research in London, three of the four largest economies in 2032 will be Asian, with China predicted to have overtaken the US to hold the top spot. India, meanwhile, is slated to overtake the UK and France next year to become the world’s fifth-biggest economy in dollar terms. It will advance to third place by 2027, moving ahead of Germany.
Oil Soars to 2yr High:
Oil traded near the highest close in more than 2 years after an explosion at a pipeline carrying crude to Libya’s biggest export terminal curbed the OPEC nation’s production. WTI futures surged 2.5% in New York on Tuesday to reach its highest level since June 2015, briefly breaching the $60/bbl level in the process.
A pipeline run by Waha Oil Company that carries oil to Libya’s Es Sider terminal exploded Tuesday, reducing the country’s output by 70,000 to 100,000 barrels a day. Meanwhile, Saudi Arabia is said to expect oil revenue to jump about 80% by 2023.
Slower China Growth Expected:
Recent economic data offer a “warning for 2018” now that Chinese leaders are less motivated to prop up growth in the wake of their Congress in October, according to the China Beige Book. “Incentives to ensure the economy was growing smartly at the time of the Communist Party Congress do not apply as next year wears on,” the report released on Wednesday stated.
Fourth-quarter results already show some signs of a transition to slower growth, according to a private survey by CBB International, which collects anecdotal accounts similar to those in the Federal Reserve’s Beige Book.
In a separate report, the Chinese statistics bureau reported industrial profits rose 14.9% last month from a year earlier, slowing from the previously reported 25.1% gain in October.
Crude Oil Rally Falters:
An OPEC monthly report raised its outlook for non-OPEC supply in 2018 by 300,000 a barrels a day, as its projections for American output caught up with those of the US government. As a result, an initiative by OPEC and Russia to clear a global oil glut by cutting output, previously seen succeeding in the third quarter of 2018, will take effect more slowly, according to Bloomberg News.
American shale explorers, who grew more efficient during the industry’s 3-year downturn, are locking in future revenues as US prices near $60/bbl, potentially readying for a new surge in drilling. OPEC increased estimates of its competitors’ output in 2018 for the first time since the forecast was introduced last summer. It expects rival supplies will increase by about 1 million barrels a day, or about 1.7 percent, in 2018.
Volatility in 2017:
According to a Bloomberg analysis report, a deep-dive examination of global financial markets shows that only 7 of about 250 assets across classes including equity indexes, sovereign bonds, currencies and commodities were high-volatility outliers based on their price swings this year. That’s the lowest annual level since 2014, and follows 2 straight years where there were at least 10 outliers. All but one of the seven outliers were currencies, if bitcoin is classed as such. An almost 70% surge in Argentina’s Merval Index helped it join the group.
Weekly Thematic News:
Smart Real Estate Singapore:
Singapore’s home sales rose in November, extending gains for a year that is already the best since 2013, as developers marketed more projects. Developers sold 785 units last month, up from a revised 760 in October, according to Urban Redevelopment Authority data released earlier this month. They also launched more units, 450 versus 242, the data showed.
Singapore’s property market is turning around, with home prices climbing again after a record run of declines and developers aggressively bidding for land. Still, the country’s central bank last month flagged the risk that rising vacancies amid slowing population growth may undermine a residential property recovery. The regulator “will continue to monitor market developments and where necessary, take appropriate actions to maintain a stable and sustainable property market,” the Monetary Authority of Singapore said in its annual financial stability report.
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 32.4% from a year ago and provides a dividend yield of 5.0% as of Wednesday.
With a flurry of policy announcements expected out of Washington in 2018, and their potentially conflicting effects on the auto industry, overall industry sales are expected to remain flat in the coming year according to most analysts surveyed by Bloomberg. Technology for self-driven cars and electric vehicles will continue to dominate the headlines for automakers and suppliers, as industry players strive to stake their claims on the fast-changing landscape.
The general consensus amongst analysts is that 2018 will bring in lower auto sales, a cooling China market, and a “narrative shift” in the industry to “technology enablers versus traditional industrials”.
The Self-Driving Car US portfolio on iAdvisor has been one of the top 10 performers over the past year, returning a decent 33.1% from a year ago as of Wednesday.
China Online US:
According to a Fortune news report, in less than a decade, China has emerged as the world leader in e-commerce and claims more online shoppers than any other nation. China is home to 730 million Internet users, it accounts for 40% of global retail e-commerce, and its mobile payment market is a whopping 11 times the size of the US market.
And this is only the beginning for China’s astronomical growth in the e-commerce space, McKinsey senior partner Jonathan Woetzel said. For one, China is still in the early days of the country’s middle-class boom. In other words, more than 300 million middle-class consumers with rising disposable incomes are propelling the consumption of China.
Investors who wish to capitalize on this trend can buy into the China Online US portfolio on iAdvisor, which consists of US-listed e-commerce stocks domiciled in China. The portfolio is currently the top-performing one out of all 28 portfolios on iAdvisor, gaining an impressive 73.4% year-on-year as of Wednesday.
USDSGD continued to hold above the key 1.3350 support, after Tuesday’s CPI data showed that prices in November rose 0.6% year-on-year, accelerating from the prior gain of 0.4% and in line with expectations.
The currency pair has held above 1.3350 comfortably over the past 2 years, rebounding off the support sharply each time it’s been tested. A break below could trigger a swift decline for the pair back to the 1.3000 level.
AUDUSD rose to its highest in 2 months on Wednesday; with the withdraw of liquidity being the main driver behind its slow upward trajectory. The Aussie found support in rising equities, as gold and oil outperformed other assets in thin trading. Australian market will open back after a long weekend, but the macroeconomic calendar will remain empty this Wednesday. The 0.7800 handle is poised to be tested next over the medium term.
USDCAD is currently trading sideways, largely between the range of 1.2650 and 1.2900. Sideways action is expected to persist to at least year end.
Tuesday’s explosion at a Libyan oil pipeline has however pushed the currency pair towards the bottom end of its range. Further oil disruptions could pressure the currency pair further.
USDCNH gained for the first time in 3 sessions on Wednesday, after an advisor of the PBOC signalled the currency will stabilize following its rapid gains of late. USDCNH reached a 3-month low on Monday, breaking below the 6.5500 support in the process.
The bias has now shifted to the downside, with the psychological 6.5000 the next key level to be tested.
USDJPY was little changed amid low volumes in a shortened trading week. Economic data released on Tuesdays were somewhat encouraging; November’s CPI, jobless rate and household spending measures all came in more positive than expected.
The key resistance lies at 114.50, though the currency pair seems to have lost some of its upward momentum as of late.
GBPUSD continues to struggle to hold above 1.3400. Last week’s better-than-expected GDP data seems to have been offset by continuing Brexit jitters, limiting the pound’s moves. Moving ahead, GBPUSD is expected to be supported at 1.3300; although should said support be breached, it could trigger a sharp selloff in the pound, driving the currency pair down to 1.3000.