Market Snapshot
Monday, 14 October 2013
Markets on Edge as US Creeps Closer to Debt Cliff
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 (%)
15237.11
1703.20
3791.87
6487.19
14404.74
311.61
0.73
0.63
0.83
0.88
1.48
0.43
16.28
19.42
25.58
9.99
38.57
11.42
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 (%)
3179.71
23218.32
2228.15
20528.59
8349.37
1785.75
2024.90
4519.91
1457.78
53149.62
1477.00
0.31
1.16
1.70
1.26
0.06
0.55
1.17
0.74
0.40
0.29
-0.53
YTD (%)
0.40
2.48
-1.81
5.67
8.44
5.73
1.39
4.71
4.73
-12.80
-3.27
Fixed Income
Last
2-yr US Treasury
5-yr US Treasury
10-yr US Treasury
3M Sibor
3M Libor
0.35
1.42
2.69
0.39
0.24
Previous Day
Close
0.34
1.42
2.68
0.39
0.24
Change (bps)
0.85
-0.65
0.57
0.00
0.05
Negotiations in Washington over the US government’s borrowing authority
and how it spends its money hit a roadblock over the weekend, with
neither side making concessions that would allow Washington to meet its
debt commitments on time. There are only four days left before US
President Barack Obama’s borrowing authority hits its USD16.7 trillion
limit. By then, the White House would have to rely on cash in hand
(around USD30 billion) and whatever tax revenue it receives. On Friday,
with negotiations ongoing, stocks crept up in the hope of a resolution. The
DJIA closed 0.7% while the S&P 500 ended the trading day 0.6% in the
green. US Treasuries were slightly higher while crude oil lost ground.
But over the weekend, the blame game continued. House Republicans
opposed to Mr. Obama’s healthcare laws said the president rejected the
six-week proposal to raise the debt limit and discuss the budget at the
same time. The White House is seeking a “clean” debt clearance to its
borrowing authority, and the ball is now in the Senate court to see if they
can get the 60 votes out of 100 required to pass legislation. Mr. Obama,
the House of Representatives controlled by the Republicans and the Senate
need to agree to move forward. Failure to service US sovereign debt could
have severe ramifications globally, with markets around the world relying
on the safety of US debt. JPMorgan CEO Jamie Dimon and Deutsche Bank
co-chief executive Anshu Jain both appear to signal that a no-deal scenario
could be apocalyptic for financial markets. Top officials at the annual
World Bank/International Monetary Fund meetings also urged US
legislators to get past ideological differences and compromise.
In corporate news, earnings reports from Alcoa, JPMorgan Chase and
Wells Fargo all beat analysts’ expectations, according to Bloomberg News.
US markets are closed today for the Columbus Day holiday.
Europe equities rallied on Friday as investors were comforted that US
politicians continued to talk. The DJ Stoxx posted a 0.6% weekly gain.
Southeast Asia
iBoxx US Treasuries TR Index (USD)
206
Southeast Asia bourses edged up in hope of a resolution from
Washington. Early Monday, Singapore’s central bank said it was
maintaining its existing pace of currency appreciation. The government
said separately that 3Q GDP fell 1% on-quarter compared to the revised
16.9% jump the previous quarter. This beat consensus estimates for a
much larger fall, Dow Jones Newswires reported.
204
North Asia
202
Most North Asian bourses were higher, as optimism over China’s reform
and trade measures helped stocks higher, while Japan got its boost from
ongoing US budget and debt talks. The SHCOMP was up 1.6% to end the
week 3.2% higher. But on Saturday, the government said exports fell
0.3% on-year in September, signalling how dependent it remains on
global demand. Imports meanwhile, rose 7.4% for the same period.
Inflation data will be released later today.
214
212
210
208
200
198
196
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
194
Source: Bloomberg, iBoxx Limited.
Data stated in local currency terms and is as of the last business day.
Tokyo’s Nikkei 225 leapt on optimism of a US debt deal last week. The
benchmark index closed higher for a fourth straight day, and was 2.7% up
the week. Japan markets are closed for a holiday today.
Market Snapshot 14 October 2013
Commodities
South Asia
Last
Gold
Crude oil
Wheat
Corn
Soybean
Sugar
Coffee
1272.20
102.02
692.25
433.25
1266.75
506.70
116.70
O/N Change
(%)
-1.20
-0.96
0.98
-1.14
-1.65
0.22
2.01
52-week
High
1773.39
112.24
916.50
800.00
1630.00
570.30
181.55
52-week
Low
1180.57
84.05
623.00
433.00
1263.50
456.70
113.20
Commodities Research Bureau (CRB) Index
490
480
India’s Sensex closed higher on Friday as tech company Infosys raised the
lower end of its revenue outlook while Tata’s international auto unit Jaguar
Land Rover reported strong September sales. The Sensex closed 3.1% higher
last week, its second straight week of gains.
Fixed Income
US Treasuries were little changed despite investors switching out to stocks in
the hope of a debt deal from Washington. Traders appeared optimistic there
would be no default and that lawmakers would compromise in order for the
US government to meet its sovereign debt obligations once its borrowing
authority has been granted. The global market for US Treasury-backed loans is
valued at around USD5 trillion. A default would cause a spike in borrowing
costs and put the US dollar role as the world’s default safe-haven currency in
doubt. On Friday, the 10-year Treasury yield rose a tick to 2.69%.
Commodities
Crude oil on the New York Mercantile Exchange closed 1% in floor trade after
the Paris-based International Energy Agency warned the US fiscal battles could
crimp demand, and said supplies are rising faster than expected. The monthly
IEA report said the debt ceiling breakdown had potentially more impact than
the partial government shutdown.
470
460
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
450
Source: Bloomberg, iBoxx Limited
Data stated in local currency terms and is as of the last business day where
applicable. O/N represents overnight.
Gold meanwhile, fell to a three-month low in the belief that US legislators
would reach a compromise to raise the government’s borrowing limit and
authority. A deal would reduce the lustre of gold as a safety play.
Sources: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones
Newswires, Reuters
INSIGHTS
Indonesia: BI and the New Normal
Inflation and Loan Growth
Bank Indonesia held rates steady in its latest meeting last week and appeared to be in no
rush to make any further changes. This is not a surprise as we expect the central bank to
keep the benchmark rate steady at 7.25%. However, we would not rule out another 25-50
basis points rise in the deposit facility rate, or FASBI, at a future date.
Understanding the two factors underlying the recent hikes is key to where Indonesia’s
monetary policy is heading to.
On the inflation front, risk of a double-digit numbers is low. Food and transport inflation
have come off in September, suggesting the impact from June’s fuel price increase has
been mostly frontloaded.
Imported inflation may continue to filter into the country in the next couple of months as
local businesses continued to adjust to recent IDR depreciation. Yet, the latest BI survey also
showed the 3-month price expectations index has been moderating since the spike in MayJune. This should lead to inflation stabilising from December onwards.
Source: DBS Group Research
Most market participants are likely to remain concerned on the current account deficit.
Downbeat sentiment toward the IDR also seems unlikely to change soon. Fundamentally,
we are not too worried on the present scenario. For starters, external liquidity risk still looks
manageable.
We are also of the view a current account deficit of about 1.5%-2.5% of GDP is probably in Indonesia’s and foreign investors’ interests. The strong
import growth data is an indication of GDP growth potential in the medium-term. Recent news China has committed to invest USD28.2 billion is a
timely reminder of this potential. That said, the greater the portion of current account deficit that can be financed by foreign investment, the better.
With all these, we believe the central bank is likely to maintain its wait-and-see approach for now. BI has responded swiftly to market pressures since
May/June by tightening its monetary policy. It has also been more tolerant of the recent IDR weakness by signalling it will let the IDR to trade alongside
other fundamentals.
Maintaining stability in the USD/IDR rate is still important. Further narrowing between the FASBI and BI rates may still be on the cards if there is an
additional need to absorb additional liquidity. While we would not rule a rise in the FASBI rate by another 25-50 bps, we expect the benchmark rate to
stay steady at 7.25% for the foreseeable future.
Source report: DBS Group Research. Economics. ID: BI and the new normal. 9 October 2013.
(Summarised by DBS Group Wealth Management /CIO Office.)
Market Snapshot 14 October 2013
FX Pulse
Currencies
FX Round-up
O/N Change
(%)
0.18
0.43
0.17
0.47
-0.07
-0.18
0.04
0.01
-0.03
0.28
-0.28
-0.29
-0.01
0.27
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
1.3544
98.58
0.9468
0.8322
1.5957
1.2458
6.1185
1.4305
1.1794
1.0367
1.9875
1.1377
1.6873
0.8490
O/N
High
1.3582
98.60
0.9485
0.8355
1.6002
1.2497
6.1203
1.4355
1.1838
1.0415
1.9974
1.1433
1.6937
0.8510
O/N
Low
1.3518
97.92
0.9434
0.8267
1.5924
1.2450
6.1125
1.4274
1.1781
1.0317
1.9855
1.1348
1.6861
0.8462
The yen crept up in early Asian trade Monday with news filtering into markets
that US President Barack Obama and his opponents in Congress had failed to
reach a deal over despite protracted negotiations over the weekend.
The aussie was off lows early Monday as China trade data on the weekend
showed an increase in September imports. China is Australia’s biggest export
market.
The US dollar continued to lose pace against its peers as Washington’s fiscal
crisis dragged on. The national Columbus Day holiday could also mean a lack of
trading cues to push the USD higher.
Sources: Bloomberg News, Dow Jones Newswires, Reuters.
SGD VERSUS MAJOR CURRENCIES
USDSGD
AUDSGD
GBPSGD
CNYSGD
NZDSGD
104
99
94
89
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
84
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
Bullish
1.3460
1.3365
1.3645
1.3711
GBP/USD
Bullish
1.5845
1.5716
1.6121
1.6260
USD/JPY
Range
97.30
95.79
99.67
100.60
AUD/USD
Bullish
0.9387
0.9278
0.9528
0.9664
NZD/USD
Bullish
0.8215
0.8136
0.8350
0.8435
USD/CAD
Range
1.0272
1.0179
1.0419
1.0559
USD/SGD
Bearish
1.2416
1.2370
1.2540
1.2581
AUD/SGD
Range
1.1654
1.1416
1.1880
1.1950
NZD/SGD
Bullish
1.0232
1.0072
1.0452
1.0503
GBP/SGD
Range
1.9702
1.9470
2.0131
2.0284
EUR/SGD
Range
1.6750
1.6645
1.7041
1.7205
EUR/AUD
Range
1.4186
1.3950
1.4414
1.4558
AUD/NZD
Range
1.1315
1.1185
1.1437
1.1553
XAU/USD
Range
1235
1181
1293
1330
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 14 October 2013
Economic Calendar – 14 October 2013
Country
Event
Period
Survey
Actual
Prior
SI
Retail Sales (YoY)
Aug
-5.10%
--
-7.80%
CH
CPI (YoY)
Sep
2.80%
--
2.60%
CH
PPI (YoY)
Sep
-1.40%
--
-1.60%
IN
Wholesale Inflation (YoY)
Sep
6.00%
--
6.10%
Focus
China and India will release their
inflation data for September today.
Source: Bloomberg
Bond risk rating changes
Effective
Bond Name
Issuer
Risk rating
New
Existing
04/10/2013
BANBRA 8 1/2 10/29/49
BANCO DO BRASIL (CAYMAN)
5
4
04/10/2013
PHILIP 8 1/4 01/15/14
REPUBLIC OF PHILIPPINES
3
4
04/10/2013
PHILIP 6 3/8 10/23/34
REPUBLIC OF PHILIPPINES
4
5
04/10/2013
PHILIP 7 3/4 01/14/31
REPUBLIC OF PHILIPPINES
4
5
04/10/2013
PHILIP 8 01/15/16
REPUBLIC OF PHILIPPINES
3
4
04/10/2013
PHILIP 6 3/8 01/15/32
REPUBLIC OF PHILIPPINES
4
5
04/10/2013
PHILIP 6 1/4 03/15/16
REPUBLIC OF PHILIPPINES
3
4
04/10/2013
PHILIP 5 01/13/37
REPUBLIC OF PHILIPPINES
4
5
07/10/2013
BANBRA 9 1/4 10/31/49
BANCO DO BRASIL (CAYMAN)
5
4
09/10/2013
TITIM 7 3/4 01/24/33
TELECOM ITALIA FIN SA
5
4
09/10/2013
TITIM 5 1/8 01/25/16
TELECOM ITALIA SPA
4
3
Reason
Moody's downgraded the paper credit rating
from Baa2 to Ba1
Moody's upgraded the paper credit rating
from Ba1 to Baa3
Moody's upgraded the paper credit rating
from Ba1 to Baa3
Moody's upgraded the paper credit rating
from Ba1 to Baa3
Moody's upgraded the paper credit rating
from Ba1 to Baa3
Moody's upgraded the paper credit rating
from Ba1 to Baa3
Moody's upgraded the paper credit rating
from Ba1 to Baa3
Moody's upgraded the paper credit rating
from Ba1 to Baa3
Moody's downgraded the Junior Subordinated
rating from Baa2 to Ba1
Moody's downgraded the paper credit rating
from Baa3 to Ba1
Moody's downgraded the paper credit rating
from Baa3 to Ba1
Information updated as of 09 October 2013.
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