Market Snapshot Thursday, 12 September 2013
Markets Up On Reduced Syria Risk; Apple Bites into Tech Global Equities
Key Global Indices Index US DJIA US S&P 500 US NASDAQ UK FTSE 100 Nikkei 225 Europe DJ STOXX 600
Last
Change (%)
YTD (%)
15326.60 1689.13 3725.01 6588.43 14425.07 310.88
0.89 0.31 -0.11 0.07 0.01 0.35
16.96 18.44 23.36 11.71 38.77 11.16
Asia & Emerging Markets Index Singapore STI Hong Kong Hang Seng Shanghai SE Composite India Sensex Taiwan TWSE Malaysia KLCI Korea KOSPI Indonesia JCI Thailand SET Brazil BOVESPA Russia RTS
Last
Change (%)
3108.19 22937.14 2241.27 19997.45 8208.99 1768.48 2003.85 4349.42 1411.18 53570.46 1394.03
-0.50 -0.17 0.15 0.00 0.00 0.20 0.49 -0.20 1.29 -0.76 0.25
YTD (%) -1.86 1.24 -1.23 2.94 6.62 4.71 0.34 0.76 1.38 -12.11 -8.71
Fixed Income Last 2-yr US Treasury 5-yr US Treasury 10-yr US Treasury 3M Sibor 3M Libor
0.44 1.70 2.91 0.37 0.25
Previous Day Close 0.47 1.77 2.96 0.37 0.26
US equities closed broadly higher as investors decided the risk of military strikes in Syria was shrinking. The S&P 500 registered its seventh straight day of gains but the rise was pared by a drop in Apple Inc. stock, which fell nearly 5% on disappointment surrounding the new launch of its latest iPhone, with the “wow” factor gone, and investors feeling it was a minor upgrade from the previous iPhone5. The Dow closed 0.9% higher, while the S&P500 was up 0.3%. Apple bit off gains on the tech-heavy Nasdaq, with the index falling 0.1%. Wall Street has risen most of this week, buoyed by the change in White House tack over Syria, accused of a chemical weapons attack on its own citizens. From being imminent, a US-led military strike has become an option, and investors are cheering the prospects of the Pentagon not dragging a recovering economy back into an out-of-control, protracted war. Russia and the US remain in diplomatic negotiations over Syria. Elsewhere, the Republican party have pulled a vote on temporary spending bill to keep the government functioning after several staunch opponents of US President Barack Obama said Congressional leaders were not doing enough to rein in healthcare spending. The plan by Rep. Eric Cantor, majority House leader, is designed to prevent a government shutdown through December 15. Any impasse will be on investor radars, already on watch for any reduction in the Federal Reserve’s easy money programme when they meet next week. Europe shares closed higher as the delay over a Syria military action sent
Change (bps) the DJ Stoxx 600 to a five-year high. UK’s FTSE 100 edged up, helped by a
iBoxx US Treasuries TR Index (USD) 214
-2.78 -6.29 -5.21 0.00 -0.15
surprising fall in the May-July unemployment rate to 7.7%.
Southeast Asia Southeast Asia stocks were mixed on a lack of leads despite the diminishing threat of risk surrounding Syria. Singapore's STI however sank 0.5% as regulators announced tougher rules for credit card issuance and unsecured debt. Malaysia's KLCI gained 0.2% while Indonesia’s JCI fell by the same amount.
212
North Asia
210
China stocks rose for the fourth straight day as investors bought into cyclical stocks, like rails and shipping, on increased optimism over a turnaround in China’s economic fortunes following recent macro data. Premier Li Keqiang said the economic turnaround was at a “crucial stage”, according to a report by The Associated Press. Li told an audience at the World Economic Forum in Dalian that Beijing was set on stimulating domestic demand and spending. “We want to improve our investment structure and make it more efficient,” he said, according to The AP. Li also said local government debt was a source of concern, but it was “manageable” at the moment.
208
206 204 202 200 198 196
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
194
Source: Bloomberg, iBoxx Limited. Data stated in local currency terms and is as of the last business day.
Hong Kong equities fell for the first time in five sessions. Still, the HSI is up around 1,200 points since the beginning of September. Japan equities closed flat as a stronger dollar and better expectations for China countered profit-taking traders. The Nikkei hit a seven-week high and has risen for three straight days. Exporters like Olympus (+2.1%) and Fuji Heavy Industries (+2.6%) led.
Market Snapshot 12 September 2013
Commodities
South Asia Last
Gold Crude oil Wheat Corn Soybean Sugar Coffee
1365.31 107.56 635.00 479.75 1405.25 491.90 120.80
O/N Change (%) 0.10 0.16 0.20 1.05 0.11 0.20 3.56
52-week High 1796.08 112.24 926.50 800.00 1760.25 582.50 200.00
52-week Low 1180.57 84.05 623.00 453.75 1271.00 456.70 115.25
Commodities Research Bureau (CRB) Index
India markets closed flat as state-owned lenders outperformed the market as the rupee rose. The State Bank of India, the country’s largest lender, gained 3.5%.
Fixed Income Investors were lured back into the bond market with the highest interest rate paid by the US government at an auction in over two years. The USD21 billion, 10-year note auction attracted the highest demand in six months at a yield of 2.95%. Elsewhere, Verizon Communications priced their USD49 billion, the largest corporate debt offering in history. Verizon’s 30-year bond yield was at 6.56% while a 10-year offer was at 5.2%. Verizon sold USD15 billion of the 30-year and USD11 billion of the 10-year bond. Verizon is using the proceeds to fund its USD130 billion buy of Vodafone’s 45% stake in its own wireless unit.
490
480
Commodities Crude oil closed higher for the first time in three days on diminishing supplies at the West Texas Intermediate delivery point in Oklahoma, despite the reduced threat of war over Syria.
470
460
Gold settled flat in floor trade, but remains near three-week lows as demand ebbed following a reduced threat of risk over Syria. Traders also chose to stay put ahead of the US Federal Reserve policymaking body’s meeting next week, where they could decide on a reduction in the size of its monetary stimulus.
Aug-13
Jul-13
Jun-13
May-13
Mar-13
Apr-13
450
Sources: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Newswires, Reuters
Source: Bloomberg, iBoxx Limited Data stated in local currency terms and is as of the last business day where applicable. O/N represents overnight.
ASIAN INSIGHTS Malaysia: DBS Revises Downward FY13 GDP Growth Forecast to 4.3% Malaysia’s GDP Growth forecast for 2013 has been lowered to 4.3%, from 5.0% previously. The downward revision was made partly from the slower-than-expected growth in the first half of the year. This has essentially lowered the growth trajectory for the entire year, as well as weaker growth prospects in the coming two quarters.
GDP on-year % growth 8 7
Strong imports and a cutback in investment have also curtailed overall growth performance for the first two quarters. As it is, GDP growth for 1H-13 registered a mere 4.2% on-year, compared to 5.6% in 2012.
6 5
Going forward, the recently announced fiscal consolidation to shove up investors’ confidence and fiscal health will surely dent domestic growth. Fuel subsidies have been shaved while developmental projects will be re-calibrated.
4
3
The inflationary impact of higher energy prices will weigh down on consumer spending. A slowdown in the disbursement of state expenditure will also affect private consumption and investment adversely. In other words, the domestic engines that have been instrumental in past years, keeping the economy afloat amid external headwinds, will slow significantly in the coming quarters.
2 1
0 2010
2011
2012
2013f
2014f
With external demand unlikely to pick up significantly in the near term, full year GDP growth will most definitely undershoot. Indeed, the recovery in the US is far from being assured. Europe is still struggling with structural issues despite being technically out of recession. And Asia is due for slower growth, driven much by the policy driven consolidation within China. Source: DBS Group Research
Further taking into account the downside risks from the conflict in Syria and the potential drag from quantitative easing tapering, full year GDP growth for the year is now projected to average 4.3%, down from 5.0% previously. While GDP growth forecast for 2014 is maintained at 5.2%, it would have been lower if not for the low base this year. Policymakers have also lowered their GDP growth forecast for 2013 drastically. Bank Negara is projecting growth to average 4.5%-5.0%. This is down from their earlier forecast of 5.0%-6.0%. Yet, even the lower end of this revised forecast range appears optimistic considering the downside risks ahead from the global environment, the impact of capital outflows from the economy and the drag from fiscal consolidation. For example, at 4.5%, policymakers probably assume a sequential growth momentum of about 7% on-quarter, seasonally adjusted annual rate (saar) per quarter in 3Q and 4Q. This appears ambitious compared to a mere 2.1% on-quarter, saar growth on average in the past two quarters, and more so when juxtaposed against the downside risks mentioned. Source report: DBS Group Research. Daily Breakfast Spread. 10 September 2013. (Summarised by DBS Group Wealth Management /CIO Office.)
Market Snapshot 12 September 2013
FX Pulse Currencies
FX Round-up O/N Change (%) 0.32 -0.50 0.18 0.16 0.53 -0.19 -0.02 0.15 -0.03 0.00 0.35 -0.02 0.12 -0.21
Last EUR/USD USD/JPY AUD/USD NZD/USD GBP/USD USD/SGD USD/CNY EUR/AUD AUD/SGD NZD/SGD GBP/SGD AUD/NZD EUR/SGD EUR/GBP
1.3311 99.89 0.9329 0.8081 1.5818 1.2662 6.1190 1.4269 1.1811 1.0234 2.0027 1.1540 1.6853 0.8416
O/N High 1.3325 100.61 0.9338 0.8091 1.5829 1.2708 6.1203 1.4302 1.1824 1.0246 2.0082 1.1560 1.6876 0.8439
O/N Low 1.3244 99.80 0.9277 0.8038 1.5719 1.2653 6.1183 1.4241 1.1772 1.0197 1.9914 1.1518 1.6795 0.8383
SGD VERSUS MAJOR CURRENCIES 107
USDSGD
AUDSGD
GBPSGD
CNYSGD
NZDSGD
The GBP rose to a seven-month high against the USD after the government said unemployment for the May-July quarter had fallen to 7.7% from 7.8% the previous quarter, adding to signs that the economy is staging a turnaround. The number of jobseekers in the UK was at its lowest since February 2009. Bank of England Governor Mark Carney said he would not revise interest rates upward until the unemployment rate dips to 7%. Mr. Carney testifies at the House of Commons later today. The USD traded lower against most of its peers as traders speculated whether the US economy was strong enough for the Fed to begin reducing its assetpurchase programme when it meets next week. Dollar demand as a safe-haven asset also receded on a reduced threat of military action over Syria’s alleged use of chemical weapons. US President Barack Obama said he was still hoping for a diplomatic solution to the crisis. The kiwi rose for a fifth straight day, hitting its highest level in over three weeks against a basket of 16 major currencies, Bloomberg News reported. The NZD was buoyed after the Reserve Bank of New Zealand indicated it may raise its key interest rate earlier than expected, possibly by 2014. RBNZ left the cash rate at 2.5% early Thursday in Asian trading hours. Sources: Bloomberg News, Dow Jones Newswires, Reuters.
102
97
92
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
87
Source: Bloomberg Data stated in local currency terms and is as of the last business day where applicable. O/N represents overnight.
TECHNICAL SUMMARY Currency
Short term Direction
Support 1
Support 2
Resistance 1
Resistance 2
EUR/USD
Range
1.3242
1.3103
1.3343
1.3452
GBP/USD
Bullish
1.5716
1.5562
1.5878
1.6000
USD/JPY
Bullish
98.53
96.83
100.86
101.53
AUD/USD
Bullish
0.9214
0.9110
0.9460
0.9510
NZD/USD
Bullish
0.8034
0.7927
0.8175
0.8295
USD/CAD
Bearish
1.0272
1.0170
1.0379
1.0469
USD/SGD
Bearish
1.2614
1.2555
1.2709
1.2757
AUD/SGD
Bullish
1.1648
1.1548
1.1880
1.1950
NZD/SGD
Bullish
1.0139
1.0090
1.0400
1.0524
GBP/SGD
Bullish
1.9867
1.9702
2.0111
2.0275
EUR/SGD
Bearish
1.6720
1.6640
1.6884
1.7046
EUR/AUD
Bearish
1.4159
1.3859
1.4437
1.4697
AUD/NZD
Range
1.1436
1.1260
1.1553
1.1657
XAU/USD
Range
1352
1315
1392
1416
Source: DBS CIO Office Note: These are short-term technical readings with a two-week horizon. All figures are as of last business day.
Market Snapshot 12 September 2013
Economic Calendar – 12 September 2013 Country
Event
Period
Survey
Actual
Prior
SK
BoK 7-Day Repo Rate
Sep-12
2.50%
--
2.50%
Focus
JP
Machine Orders (MoM, sa)
Jul
2.40%
--
-2.70%
IN
Industrial Production (YoY)
Jul
-1.00%
--
-2.20%
EZ
Industrial Production (MoM, sa)
Jul
0.30%
--
0.70%
India’s industrial production is expected to contract 1.0% on-year in July, slightly slower than the 2.2% decline a month ago.
US
Initial Jobless Claims
Aug-30
330K
--
323K
ID
Bank Indonesia Reference Rate
Sep-12
7.00%
--
7.00%
The Bank of Korea and Bank Indonesia will conduct their monthly policy meetings today.
Source: Bloomberg
Bond risk rating changes Effective
Bond Name
Issuer
03/09/2013
VZW 6 1/2 11/01/13
04/09/2013
Risk rating
Reason
New
Existing
ALLTEL CORP
3
2
S&P downgraded paper rating from A- to BBB+
YZCOAL 4.461 05/16/17
YANCOAL INTL RES DEV
4
3
Moody's downgraded the paper rating from Baa3 to Ba1
04/09/2013
CHINAM 3 1/2 11/07/22
4
3
04/09/2013
VZ 8 3/4 11/01/18
WING LUNG BANK LTD VERIZON COMMUNICATIONS
4
3
Moody's downgraded the paper rating from A3 to Baa1 Moody's downgraded the paper rating from A3 to Baa1. S&P downgraded the paper rating from A- to BBB+
05/09/2013
BNKEA 6 1/8 07/16/20
BANK OF EAST ASIA LTD
4
3
Moody's downgraded the paper credit rating from A3 to Baa3
05/09/2013
ICBCAS 5 1/8 11/30/20
ICBC ASIA LTD
4
3
Moody's downgraded the paper credit rating from A3 to Baa1
05/09/2013
BNKEA 6 3/8 05/04/22
BANK OF EAST ASIA LTD
4
3
Moody's downgraded the paper credit rating from A3 to Baa3
05/09/2013
BNKEA 4 1/4 09/13/22
BANK OF EAST ASIA LTD
4
3
05/09/2013
YZCOAL 4.461 05/16/17
YANCOAL INTL RES DEV
4
3
Moody's downgraded the paper credit rating from A3 to Baa3 Moody's downgraded the paper credit rating from Baa3 to Ba1
06/09/2013
ICBCAS 6 11/04/21
ICBC ASIA LTD
4
3
Moody's downgraded the issuer credit rating from A3 to Baa1
09/09/2013
F 4 7/8 03/26/15
FORD MOTOR COMPANY
3
4
S&P upgraded the paper credit rating from BB+ to BBB-
Information updated as of 9 September 2013. Disclaimers and Important Notice The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only. This publication is intended for DBS Bank and its clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of DBS Bank. This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into, for cash or other consideration, any transaction, and should not be viewed as such. This publication is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations and is not to be taken in substitution for the exercise of judgment by the reader, who should obtain separate legal or financial advice. DBS Bank does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences financial or otherwise. The information and opinions contained in this publication has been obtained from sources believed to be reliable but neither DBS Bank nor any of its related companies or affiliates (collectively “DBS”) makes any representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to change without notice. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. DBS accepts no liability whatsoever for any direct indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission. If verification is required, please request for a hardcopy version. Country Specific Disclaimer China: This report is distributed in China by DBS Bank (China) Ltd. Indonesia: This report is made available in Indonesia through PT DBS Indonesia. PT DBS Indonesia Branch is regulated by Bank Indonesia. Singapore: This report is distributed in Singapore by DBS Bank Ltd. DBS Bank Ltd Co. Reg. No.: 196800306
