Spot values at a glance:
US markets were closed Thursday for the Thanksgiving holiday. Asian indices were mixed Friday morning after yesterday’s rout in the Chinese equity and bond markets. The US dollar remained weak while gold maintained gains. Crude oil futures climbed to its highest since 2015.
Europe Growth Accelerates:
The euro-area economy gathered pace in November to stay on track for its best annual performance since the financial crisis. PMI for manufacturing and sevices in the euro area rose to a 79-month high of 57.5 in November, from 56 in October, according to HIS Markit. Companies in the 19-nation region boosted hiring at the fastest pace in 17 years to work through their backlog of orders. A survey showed business confidence in France surged to the highest in almost a decade, while a gauge for manufacturing in Germany surged to its best reading since early 2011.
UK Growth Downgraded:
In delivering his annual budget on Wednesday, Chancellor of the Exchequer Philip Hammond acknowledged official forecasts which showed Brexit already inflicting an economic cost. The Office for Budget Responsibility predicted growth will now undershoot 2% every year through 2021 and it halved its estimate for productivity gains over the next 5 years.
OPEC and Shale:
OPEC will have to decide whether to extend global oil cuts without knowing whether they’re triggering a new flood of rival supply from US shale producers. Analysts gave differing outlooks for US shale output in a briefing to officials from OPEC, stoking concern ahead of OPEC’s planned meeting on Nov. 30, according to people with knowledge of the discussions. The duration of any extension in output limits will depend partly on estimates of future supplies of US shale and other competing crudes. According to a Bloomberg report, forecasts of 2018 growth in shale output range from 500,000 to as much as 1.7 million barrels a day, complicating any forecasts.
Canadian Retail Sales Slow:
Sales for Canadian retailers continued to disappoint in September, adding to evidence consumers are paring back in the second half of this year. Retail sales rose 0.1% during the month, versus forecasts for a 1.0% gain, after dropping 0.1% in August.
It’s a slowdown that suggests the tailwinds spurring growth earlier this year are waning. That includes the effects of a ramp up in child benefits by the federal government last year that had a clear impact on consumption, but are now no longer adding to growth. Thursday’s release is the last major piece of output data ahead of third quarter gross domestic product numbers next week.
Chinese Bond Worries:
China’s deleveraging campaign is starting to bite in the nation’s corporate-bond market. Yields on 5yr top-rated local corporate notes have risen about 33 basis points since the start of November, hitting a three-year high of 5.3%. With more than $1 trillion of local bonds maturing in 2018-19, it’s going to become increasingly expensive for these firms to roll over financing, and all the tougher for those in industries like coal that the nation’s leadership wants to shrink.
Australian Real Estate:
After 5 years of surging prices, the market value of Australia’s homes has ballooned to A$7.3 trillion, more than 4 times gross domestic product. Not even the US and UK markets achieved such heights at their peaks a decade ago before prices spiralled lower and dragged their economies with them. But prices in major cities like Sydney are finally levelling off and a wave of new apartments are about to hit markets in Brisbane and Melbourne. As the party finally winds down for the housing market, the question now turns to how severe the hangover will be. According to a Morgan Stanley economist, the risk is that a minor shock to the housing market may become far more significant and leave the Australian economy extremely exposed.
October CPI gained 0.4% from a year ago, maintaining pace from the prior month but falling short of the median estimate of 0.5%.
Most analysts expect the MAS to exit from its neutral policy stance only in Oct. 2019, given the fact that it may take a while before stronger economic growth feeds through into inflation given the current slack in the labour market. The inflations risk remains to the upside though, with factors such as oil prices and potential tax changes that may induce a faster tightening cycle.
Most Valuable Company in S.E.A:
Reaping the rewards of going big on tech, DBS Group Holdings Ltd. has pushed past Singapore Telecommunications Ltd. to become Southeast Asia’s biggest company by market capitalization. Adopting a “digital to the core” strategy, Singapore’s largest bank has signalled that it will focus on customers who have generated a consistently higher return on equity.
DBS Chief Executive Officer Piyush Gupta delivered his digital strategy to investors and analysts last week, seeking to lower costs and boost returns. The bank has rallied 42% this year, twice the increase on the Bloomberg Asia Pacific Banks Index.
Weekly Thematic News:
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.
USDSGD remained at 2-month lows Friday after a dovish slant to the Fed’s latest meeting minutes resulted in recent USD weakness. The currency pair was also dragged lower due to better-than-expected Singapore GDP numbers on Thursday, thus strengthening the Singapore dollar.
With the key 200-week moving average breached, the next bastion of support lies at the 1-year low of 1.3346.
AUDUSD recovered back above 0.7600 Thursday, driven by commodity gains led by iron ore.. The medium-term bias remains to the downside though, with downward channel since September continuing to hold.
According to Bloomberg news, the selloff in the Australian dollar over the past 3 months could be just the start of a great unwind as the currency’s much-lauded carry trade morphs into a cost for the first time in 16 years, following the inversion of the spread between the 2yr Aussie and US swap rates. Morgan Stanley sees AUDUSD slumping to 0.6500 in 2019 with the Australian benchmark rate forecasted to eventually go below that of the Fed’s.
USDCAD pared Thursday’s decline from a 1-week low as an overnight gain in crude oil to its highest since 2015 buoyed the Canadian dollar. The 1-month low of 1.2666 continues to act as a key support. To the upside, the 200-day moving average of 1.2976 remains a possible target over the medium term.
Recent USD weakness has driven USDCNH to 5-week low. The pair is threatening to break to the downside of its medium-term sideways range, since the middle of September. According to a Bloomberg report, China’s banks are continuing to stock up on foreign currency in a sign that they are preparing for greater swings in the exchange rate. A decline below 6.5500 may pave the way for more downside towards the 2017-low of 6.4436.
USDJPY retreated below the key 112 handle Thursday, which should now act a resistance point, as momentum for the currency pair took a turn towards the downside. With many traders harbouring short yen and long dollar positions, Thursday’s plunge in USDJPY could have more room to run. The 108 handle is next in line to be tested.
GBPUSD recovered above its 50-day moving average Wednesday on the back of a USD selloff. The 2-month high of 1.3338 is in danger of being breached soon; a break above that may lead to a charge towards 1.3500.