For internal circulation only
CIMB-Principal Weekly Updates
22 – 28 Aug 2016
Market Snapshot
Global markets were cautious ahead of a speech at the Jackson Hole meeting by Federal Reserve Chairwoman,
Janet Yellen, last week. Speaking at Jackson Hole, Janet Yellen sounded more bullish on the economy than
previously, suggesting the case for raising US interest rates has "strengthened" in recent months. This was
expected following a strong set of economic data (initial jobless claims fell to 261,000; July durable goods orders
rose 4.4% month-on-month). New home sales in July also rose by 31% on a year-on-year comparison, the fastest
rate in nearly nine years. However, Janet Yellen did not comment on when rates would rise. The Fed still has 3
more meetings this year in September, November and December.
European stocks rebounded for the first time in three weeks on Wednesday, helped by a weak euro as investors
moved to price in a U.S. interest rate rise, boosting the dollar. Investors bought into export counters amid the
weak currency.
Topix closed 1.3% lower, led by insurance and transport equipment groups while Nikkei dropped 1.2%. Consumer
prices in Japan fell by 0.5% year-on-year, dropping for a fifth-straight month and underscoring the Central Bank's
struggle to spur inflation to its 2% target. Friday's inflation figures are the last reading on this key measure for
Bank of Japan to consider a possible policy review at their next meeting on 20-21 September. The Japanese Yen
fell versus the US Dollar for the first week in five on the back of a US Federal Reserve-led Dollar surge.
Chinese markets ended lower on a combination of profit-taking, market jitters ahead of the Fed's monetary policy
symposium in Jackson Hole and news that Shanghai could possibly plan more curbs to cool surging property
prices, leading to a tightening of regulation on P2P loan, with property names leading decliners. China also
announced it will use 2 years to cut overcapacity at central-government controlled companies and open up certain
sectors including oil and gas drilling to private capital. Meanwhile, Hang Seng index retested 23,000 level, though
turnover faded by fears over Chinese bank earnings. Taiwan’s benchmark stock index rose 1.1% on bargain
hunting as financials recovered. KOSPI declined 0.9% as foreign investors took profit on Samsung Electronics
Co.
Nifty hovered around 8600 level, as investors maintained caution ahead of speech by the Federal Reserve Chief
Janet Yellen at Jackson Hole this week. India announced that the current RBI Deputy Governor Urjit Patel would
be replacing the outgoing Governor Raghuram Rajan, to ensure continuity of the inflation targeting policy.
In ASEAN, Thailand’s SET index rose by 0.7% last week despite July exports falling by 4.4% on year-on-year
basis. Indonesia’s government expects economic growth to improve to reach 6%. Despite that, JCI index
struggled to deal with the 5523 resistance level (current record high mark) and saw some consolidation.
Singapore’s STI climbed 0.5% despite a slew of weak macro data (July CPI: -0.7% year-on-year, July Industrial
Production: -3.6% year-on-year). In Philippines, exports slowed significantly but remained robust at 15.4% yearon-year in June. KLCI index was trapped in recent trading range but remained supported above 1,680 level.
Investors are generally focused on upcoming earnings release and so far companies that have reported mostly
missed expectations especially in banks and telecommunications.
WTI Crude prices fell 3.0% to USD46.8 per barrel after an unexpected large build up in US crude stockpiles.
According to Baker Hughes, the U.S. oil rig count remains unchanged at 406 following eight consecutive weekly
gains. Traders viewed higher oil prices as unsustainable because of the ongoing production and storage
overhang in fuel markets. There were also doubts of any possible production freeze at the upcoming OPEC
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information contained herein has been derived from sources believed to be reliable and is current as at the date of publication. No
representation or warranty is made nor is there acceptance of any responsibility or liability made as to the accuracy, completeness or
correctness of the information contained herein. Expressions of opinion contained herein are subject to change without notice. Persons
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meeting next month as Iran has yet to reach its pre-sanctions production level above 4M bbl/day (currently stuck
at 3.8M bbl/day). Iraq’s oil production also rose sharply in July to hit 3.71M barrels a day and reports indicated
Iraq was preparing to ramp up its export levels. Strong oil output out of China and a new ceasefire with militants in
Nigeria are also on the eyes of traders.
Disclaimer: This document is provided to you for information purposes only and it may not be reproduced, distributed or published by
any recipient for any other purpose. It should not be construed as an offer or a solicitation of an offer to purchase or subscribe. The
information contained herein has been derived from sources believed to be reliable and is current as at the date of publication. No
representation or warranty is made nor is there acceptance of any responsibility or liability made as to the accuracy, completeness or
correctness of the information contained herein. Expressions of opinion contained herein are subject to change without notice. Persons
wishing to rely upon this information should consult directly with the source of information or obtain professional advice.