Issue#: 378/2017

Spot values at a glance:







Daily Observations:

Asian equities pared earlier losses heading into midday SGT, as financial markets showed signs of stabilizing after a fresh trigger last night from North Korea had sent money into haven assets, with focus returning to comments from central bank policy makers. Safe haven assets such as the yen and gold maintained overnight gains. Crude oil neared a 4-momth high.


  • North Korean Foreign Minister Ri Yong Ho said US President Donald Trump’s tweet this weekend amounted to a declaration of war – far from the first time the rogue state has made such a claim, and what White House press secretary Sarah Sanders termed as “absurd”. More disconcertingly, North Korea also claimed the right to shoot down US bombers even outside its airspace.
  • The US has gamed out 4 or 5 different scenarios for how the crisis with North Korea will be resolved, and “some are uglier than others,” National Security Adviser H.R. McMaster said. While McMaster said the threat from Pyongyang is “much further advanced” than anticipated and the Pentagon said the president has a “deep arsenal” to draw upon if needed, US officials dismissed Ri Yong Ho’s comment that Trump’s warnings to Pyongyang amounted to a declaration of war.
  • Chinese Ambassador to the UN Liu Jieyi told Reuters News tensions between the US and North Korea have become “too dangerous”.


  • Maine Republican Susan Collins punctured any remaining GOP hopes of repealing Obamacare anytime soon, dealing a fatal blow by rejecting a last-gasp Republican health-care bill. The senator became the third GOP senator to oppose the measure, issuing a blistering statement signaling she had never been close to backing it.
  • 2 Federal Reserve officials offered different views on the inflation outlook on Monday, as the central bank begins to debate whether to raise interest rates again this year or wait for price pressures to pick up.
  • New York Fed President Bill Dudley expressed confidence that fading one-off effects and a weaker dollar would help inflation trend back to 2%, and warrants the gradual withdrawal of monetary stimulus. That echoed remarks last week by Chair Janet Yellen after officials voted to gradually start shrinking the Fed’s balance sheet in October. Yellen speaks again Tuesday in Cleveland.
  • Chicago Fed President Charles Evans, who has repeatedly spoken out in favor of slowing rate hikes to make sure that inflation reaches its target in a lasting manner, offered a more cautious perspective on Monday and said that he needs to “see clear signs of building wage and price pressures before taking the next step in removing accommodation”, indicating that the shortfall in price pressures may be more structural than temporary.
  • US tech stocks came under acute pressure Monday, with the Nasdaq Composite sliding 0.88%. The Dow Jones Industrial Average (-0.24%) and the S&P 500 Index (-0.22%) slipped as well.
  • According to a Bloomberg report, Monday became the 11th day in 12 that value stocks outpaced their growth counterparts, the longest stretch of outperformance since 2006.
  • One possible explanation for the latest selloff in growth stocks, which have largely outperformed for most of this year, could be that that North Korea’s latest belligerence led bulls to raise cash in stocks that are up more than 30% in 2017 amid end-of-month rebalancing.
  • The Dollar Index rose 0.5% overnight to 92.648, with the euro weakening against the US dollar following Merkel’s less-than-convincing election victory over the weekend.
  • US Treasuries rallied following risk-off sentiment fuelled by North Korea’s comments. The 10yr Treasury yield fell 3bps to 2.22%.


  • China’s $1.3 trillion Belt and Road Initiative will help support steel output and export growth in the world’s largest producer for the next 10 years, according to BHP Billiton Ltd. BRI projects could result in as much as 150 million metric tons of incremental steel demand, with 80% used in structures and reinforced concrete, and the rest going into machinery and other equipment. Chinese suppliers are in prime position to provide steel input for developmental projects across the 68 BRI countries, the report said.


  • Japanese Prime Minister Shinzo Abe announced on Monday that he would seek to implement a 2 trillion yen ($18 billion) spending package to expand access to education and cut waiting times at child-care centers. He made the comments shortly before his coalition partner said an election would be held, likely on Oct. 22. Abe said he would make use of revenue from a planned consumption-tax hike set to take effect in October 2019.


  • Inflation in August slowed to match the weakest pace year-to-date. CPI rose 0.4% year-on-year, down from July’s gain of 0.6% and missing economists’ estimates of 0.6% as well. Core inflation advanced 1.4% over the same period, slowing from the prior month’s rise of 1.6%.
  • Housing and utilities, which make up a quarter of consumer price basket as the heaviest-weighted category, fell 2.3% in year ended in August
  • Education and health care showed the fastest rates of inflation, at 2.7% and 2.5%, respectively

Precious Metals:

  • Spot gold regained back above the $1,300/Oz level, rallying 1.5% to $1,313.30/Oz earlier today following heightened geopolitical concerns and risk-off sentiment overnight. The short-term resistance point at $1,325/Oz is next in line to be tested, though a more significant level lies at the recent high of $1,357.61/Oz.
  • Failure to hold above the $1,300/Oz level could lead to another leg down $1,265/Oz – the 50% retracement level of gold’s rally from mid-July to mid-September.
  • Silver for immediate delivery regained above the $17/Oz level. Spot price for silver was 1.6% higher at $17.2092/Oz earlier today.


  • Crude oil futures jumped 3.1% to $52.22/bbl overnight as Turkey threatened to shut down Kurdish crude shipments through its territory.
  • Turkish President Recep Tayyip Erdogan said the nation can choose to “close the valves” on oil exports from Kurdistan, as the region in Northern Iraq voted in a referendum on independence that’s expected to show a landslide in favor of secession.
  • Analysts at Citigroup also warned that there’s a risk of a crude shortage emerging as early as next year, which would further buoy prices.
  • According to a BP Plc executive, the OPEC-led supply cuts need to be extended beyond Match to rebalance the market.


Weekly Thematic News:

China Online:

  • Baidu Inc.’s iQiyi is targeting a U.S. initial public offering as soon as in 2018 that could value China’s most popular Netflix-style streaming video service at more than $8 billion, two people familiar with the matter say. IQiyi, the only Chinese service that licenses shows from Netflix Inc., needs to build up its war chest as it battles rival platforms run by Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Baidu, which is also investing heavily in artificial intelligence and autonomous vehicles, needs to buy and create more content to sustain its lead among online video platforms, based on time spent.


  • About 68% of global investors intend to increase green investments and one-in-two companies has a strategy to reduce their environmental impact, according to a survey commissioned by HSBC Plc published Sept. 12. Most companies said they lack any clear competitive advantage to be more transparent, particularly regarding cost of funding. Only 66% of the investors surveyed hold green bonds, which isn’t surprising given that total outstanding issuance is relatively small at $232.2 billion in July, according to the report.
  • The report estimates that about $90 trillion of investment is needed in new green infrastructure over the next 15 years. In 2016, $22.9 trillion of assets were managed under responsible investment strategies, a 25 percent increase from 2014.
  • In separate news, Morgan Stanley and Citigroup Inc. announced they will get all of their energy from renewables in a few years. The banks are aiming for their operations to be carbon-neutral, Morgan Stanley by 2022 and Citi by the end of the decade. Both plan to buy power from clean energy projects.

Solar Energy:

  • Solar installers are looking to partner with companies, as they wrestle with a market that is shrinking after 16 years of rapid growth. Their long-time sales model of knocking on doors, cold calling at home and setting up mall kiosks has proven to be costly. Some have realised it might be more effective to use the umbrella of bigger established companies to find customers, according to a Bloomberg report.
  • Sunrun Inc., for example, will try to sell panels through Comcast Corp., the biggest cable-TV company in the U.S. Last month, the two agreed to a deal in which Comcast will use its vast marketing arm to tap some of its 27 million customers for solar. Vivint Solar Inc. is now bundling its panels with an energy management system offered by Vivint Smart Home, a sister company.
  • Solar companies hope the alliances will solve a problem of high customer-acquisition costs that often run 20% of expenses, sometimes exceeding the panels themselves. They also address another issue: Some potential customers are reluctant to sign on to decades-long contracts with relatively small, little-known companies. That could change by associating with brand names.
  • Through early 2016, installers had an almost singular focus on growth, using no-money-down leases to pump up sales. The industry grew a staggering 48% in 2015, but slowed last year to 20%, and seems to be coming to halt this year with new residential installations expected to drop by 2.4% over 2016, according to Bloomberg New Energy Finance. Shifts in government policies have played a big role in diminishing some of the financial incentives for homeowners to install a solar system. The decline has been most evident in California, the biggest US solar market.


  • The vulnerability of governments and businesses to cyberattacks was exposed again last week when a top US financial regulator said hackers had breached its electronic database of market-moving corporate announcements in 2016, and may have profited from the information they stole through the use of illicit trades.
  • Singapore has overtaken nations including the US, Russia and China as the country launching the most cyber-attacks globally, according to Israeli data security firm Check Point Software Technologies Ltd. A key Southeast Asian technology hub, much of the internet traffic flowing through Singapore originates in other countries. That means a cyber-attack recorded as coming from Singapore may have been launched outside the country.


  • Spot 1.3509
  • USDSGD was little changed on the day following yesterday’s recover back above the 1.3500 handle.
  • The main trend since the start of the year remains to the downside, although a break above the key resistance around the 1.3600 could indicate a reversal is on the cards.
  • The immediate resistance remains around the recent high of 1.3539, while the key support below lies at 1.3350.



  • Spot 0.7944
  • AUDUSD continues to remain pressured below the 0.8000 handle, as it continues to track its 50-day moving average.
  • Strength in the Australian dollar may be limited, with iron ore futures nearing 3-month lows. A retreat back to 0.7800 is possible.



  • Spot 1.2368
  • USDCAD retested a 3-week high earlier today, rising 0.4% to 1.2388.
  • The key resistance remains along the 1.2400 handle. A breakout above it could lead to the next resistance level of 1.2778 – a 9-week high.



  • Spot 6.6107
  • The PBOC weakened its reference rate by 0.20% earlier today, to 6.6076 per US dollar – the weakest level since August.
  • USDCNH held above the 6.6000 handle, following a weaker yuan fixing earlier today.



  • Spot 111.62
  • USDJPY retreated 0.6% to 111.48, following comments from North Korea overnight.
  • Despite its latest pullback, USDJPY is expected to be supported above the 111 handle, while the main resistance lies at the 6-month high of 114.48.



  • Spot 1.3483
  • GBPUSD was little changed on the day, with the pair slipping below the 1.3500 handle overnight amid a lack of Brexit clarity.
  • On the monetary policy front, the BOE is still widely expected to raise rates in the coming months, and increasing rate hike expectation should push to currency pair toward the 1.4000 handle.
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UEN: 201419754M

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