Market Commentary – August 17, 2020

Kevin Jock

17th August 2020

    Global indices off to a soft start, whilst Hong Kong outperforms in Asia session. Hang Seng opened higher fueled by news the central bank of China will inject 700bn yuan in lending facility loans to financial institutions. A further 50bn yuan was also injected in reverse repos. Last Friday close, European indices slid lower and Wall Street remained mute with the S&P500 reluctant in attempting to break record highs.

HK50 Intraday

Figure 1 (Source: ISPrime): HK50 Intraday Chart – HK50 received an early boost higher on news of continual quantitative easing by the PBOC 

    Relations between US – China continue to sour over the weekends as provocations mount. The administration eyes a tough position on China as a key element in potentially winning November elections. On Friday, the White House approved sales of 66 fighter jets to Taiwan. On Saturday, Trump reveled in his success at curtailing Huawei and the adoption of their 5G technology. On Sunday, Trump announced potentially taking action against other Chinese tech firms such as Alibaba, a NYSE listed stock.

    Amid the Administrations mounting pressure, the trade deal thus far has become the lone source of stability among both nations. Last Friday, the US Department of Agriculture reported China’s purchase of 126,000 tonnes of Soybeans. Oil firms also noted China booking tankers carrying 20 million barrels of US Crude.

    For the week ahead, Australian, European and US central bank meetings minutes to be released and scrutinized over. Elsewhere central banks of Indonesia, Norway, Philippines and Turkey will deliberate on upcoming policies. Considering recent rate cuts and easing, all banks are expected to stay put and observe how recent policy changes will reverberate throughout their respective economies.

Headliner to Review

  • Japan suffered its biggest economic contraction on record due to the coronavirus pandemic. The figures in Japan are worse than expectation. Prelim GDP Price Index y/y increased from 0.9% to 1.5%.Prelim GDP q/q decreased from -0.6% to -7.8%. Much of the decline can be largely attributed to decrease in consumption and exports. Nonetheless, investors expect Q3 figures to turn positive but uncertain of the degree.
  • American consumer sentiment edged higher from 72.5 to 72.8, beating expectations of 72.0. In turn US sales benefited with three consecutive months of growth, though evidence suggest sales weakening. US Core Retail Sales m/m dropped from 8.3% to 1.9% and US Retail Sales m/m dropped from 8.4% to 1.2%. Gains were largely seen in electronic and appliances stores.
  • GDP figures of Eurozone narrow massively in second quarter, with the economy contracting by 12.1% in the 2nd quarter. The economy contracted by 15% on an annualized basis. These figures are as expected.

Headliner to Watch

  • RBA set to release monetary policy meeting minutes on Tuesday. No surprises expected as recently Governor Philip Lowe speaking before a parliamentary committee had already stated ‘there are limits to what monetary policy could do’. With cash rate already at record low 0.25% and quantitative easing since mid-march until employment and inflation goals are reached. The Reserve Bank firmly states, the remainder of the recovery is up to further fiscal stimulus by the government.


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Antony Tan
Ben Li
Kevin Jock