Good morning,
Singapore winter is finally here, with temperatures dropping to 24deg, and with its arrival, I sit here with a stinking flu. Not helped by a monster storm last night, where the lightning resembled Pasha nightclub in Ibiza... loud with non-stop flashing lights.
It certainly feels like a Monday.
Whilst starting this note, I have just seen a huge APL container ship which was not only sitting heavy, they couldnt fit another container on there if the tried. OOCL ships are also looking close to max capacity, although not to the same leave as APL. Mearsk seem to have less ships coming through Singapore but whn they do, the are large and look to be running near max capacity.
The press over the weekend was directed mostly as the US election, with the race looking extremely tight between both Obama and Romney.
Other articles I noticed over the weekend, saw increased noise on Greece. With their election due, leaked tax evasion documents and a population that is increasing worried about the crippling effects on austerity, there are some fears that this could cause the Euro to come under pressure.
Spain is going through a similar position, where elections are due and new consumption taxes such as VAT, could see further uprising not just in Madrid, but other cities also. Consumption taxes will help support the shortfall caused by reduced taxes on property transactions, but unless these are reallocated to the correct areas, inflation in a flat/negative growth environment will not help.
Markets.
With the ban on naked Credit Default Swap's, bond markets should benefit greatly from reduced volatility and speculation. The downside being, volumes may drop on Italian and Spanish debt, as investors look at less risky assets.
In equity markets, with the S&P down 1% on Friday, and defensive sectors such as consumer services and healthcare outperforming, Asian markets should follow in a similar trend.
Despite my earlier note on container ships, this sector has had a strong fortnight, and with new capacity coming online in early 2013 I suspect we see freight rates continue to flatten off.
Financials again, are having a good run, however, inflows look set to ease as stocks start to look rich on current valuations. Liquidity in the credit market still remains an issue, which despite supporting margins will reduce overall sales.
With the JPY continuing to weaken, I turn my attention to Yedo, where we have seen some shockingly weak earnings. This said, looking at panasonic(6752), sales missed estimates by 6%. Now despite closing a number of business's down, the biggest impact to net income was the currency weakness. Given recent comments about Japan looking to increase growth, the first thing they need to target is increasing exports/weakening the JPY. At these levels, surely the Jap consumer electronics industry is starting to look attractive. I would be interested to play around with a forward earnings model, where the JPY is at 85, the level I see it at by Jan 31st.
Asian indices should open lower and trend sideways. I still little conviction going into the US election, as investors take a more "wait and see" attitude. Watch for possible short covering, equity markets should get a boost regardless of the outcome, as talks of growth, improved jobs and trade help lift sentiment.
China, despite the recent headlines causing concerns of an uprising, looks bloody cheap here. With a Government looking to encourage growth through cap ex, whilst many companies overseas presence increases, I would be looking to buy SHCOMP here/be overweight the country.
Data.
08:30 Australia trade balance
09:45 China HSBC PMI
13:00 India PMI
16:00 Spain unemployment
16:00 Turkey CPI/PPI
17:30 UK PMI/official reserves
17:30 EU Sentix investor confidence
23:00 US ISM
Events.
21:00 Nato monthly conference
World bank and IZA employment and development conference
G20 finance ministers and central bank meeting
Bonds.
09:30 S.Korea 6 month, 3 and 30 year auction
11:00 Thailand 6 month auction
18:00 Netherlands 3 and 6 month auction
19:00 Turkey 5, 10 year auction
22:00 France 3, 6 and 12 month auction
Earnings.
Time Warner Cable(US), Tesla(US), Rockwell Auto(US), The Southern(US), EOG resources(US), CF Industries(US), Wamaco(US), weight watches(US), Express scripts(US), Pharmacyclics(US), Leapfrog(US), Enco health(US), Dufry(SW), Fuchs(GR), PostNL(NL), HSBC(UK), Transocean(UK), Banco Comercial Portugues(PT), Imerys(FP), Ryan Air(IR), XL Group(UK), Fujito(JP), Nippon Suisan Kaisha(JP), Ajinomoto(JP), Asahi Glass(JP), Toyota(JP), Dianippon Screen(JP), Sembcorp Marine(SG), Au ops(TT), Fubon Fin(TT), C.Longyuan(CH)
Stoddart
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