Market Commentary – January 19, 2021

Kevin Jock

19th January 2021

    Despite a bank holiday, futures on Wall Street managed to etch out gains ahead of Janet Yellen’s confirmation hearing for Treasury Secretary in front of the Senate Finance Committee. Though Yellen will touch on topics of foreign exchange and taxes, the hearing is anticipated to act as a proxy forum for lawmakers to grill incoming President Joe Biden’s 1.9tn stimulus package.

    European benchmarks regained momentum cheered on by better than expected GDP figures out of China. The quarterly rebound saw luxury goods stocks outperform as much of industry is dependent upon Chinese consumption.

    With social restrictions to extend past January amid triple digit infection rates stifling Hong Kong’s economic recovery, the Hang Seng surged among Asia-Pacific indices posting 860 index point. Much of the move can be seen driven by inflows from Mainland China seeking value via the Stock Connect program. Thus far, Hong Kong stocks have boasted one of the lowest price-earning multiples across Asia, with Mainland counterparts 35% more expensive. Elsewhere, the S&P200 and Nikkei climb 49 and 315 points respectively. The state of Queensland in Australia is expected to lift restrictions, whilst miners led the board on increased electricity consumption in China, indicative of improving industrial activity.

    The U.S. dollar index reaches a 1 month high amid a quiet market yesterday with the Turkey lira in focus. President Erdogan reiterated previous comments suggesting higher inflation accompanies higher interest rates. His comments put the newly placed central bank chief in a tough spot, of whom since taking the position, has raised benchmark rates to 17% from 8.25%. Meanwhile, crude fluctuates above $52, gold closes yesterday at 1,837 and bitcoin remains at 36,000.

Hang Seng

Figure 1 (Source: IS Prime): Hang Send Weekly : Just shy of 30,000 the Hang Seng has enjoyed a recent spout of popularity from value seekers.

Headliner to Review

  • The number of new housing starts in Canada stopped rising for two consecutive months and fell by 12.6% month-on-month (the previous month rose to 13.9%), and the annual rate was only down from 261,152 to 228,279, slightly exceeding market expectations of 227,000.
  • Japan’s seasonally adjusted industrial production index unexpectedly dropped by 0.5% month-on-month (previous figure increased by 4%) to 94.7. After five consecutive months of rising, the market originally expected to confirm zero growth.
  • Japan’s seasonally adjusted production capacity utilization index fell by 2.9% month-on-month (the previous figure rose by 6%) to 92.6; the unadjusted year-on-year decline expanded to 3.1 (the previous figure fell by 2.5%), to 93.1, and It fell for 13 months in a row.

Headliner to Watch

  • Economic sentiment across Europe expected to edge lower from 54.4 to 54.1 amid continent-wide social restrictions.
  • Australia consumer confidence set to slow but remain in positive territory for it’s 5th consecutive month. As oppose to strict restrictions imposed by Europe, Australia has taken a more piecemeal approach, for e.g. requiring mask when outdoors.

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Antony Tan
Ben Li
Kevin Jock