140509 Asia Morning Wrap

Good Morning everyone,

Looks like the sluggish "growth" may have some bumpy ride ahead, given US retail sales unexpectedly lowered in April. This may produce signs with regards to the consumer credit problem that I have mentioned about last week, that gives me the idea that banks may have a good down trend given their rising bad debt issues.

Further, rumours leaking out that US may lose its AAA rating is hitting the market, as concerns rises over the inability for the US Govt to finance themselves out of the big spending in the past 6 months.

These news tanked the market, and as copper and crude both fell to month lows amid china fuels some sense of growth for the economy. Gold also slid from high as dollar rose against the major currencies, where AUD was 0.765 last night, and now opens to 0.7527, while the Euro was at 1.36, now at 1.35. However, the sterling moved little.

Overnight, DJ down 2.18%, S&P down 2.69%, while Nasdaq down 3.01%. This confirms with my previous expectation that market is now currently taking profits, and prepare for upcoming news over problems with bad debt and a sluggish consumption demand. We may also see some steam coming off as stimulus packages might have ran its way to the end. However, given China investment seems to be bullish at the moment, we may see this as a pull back rather than another freefall coming ahead, as the market may start to price in the fact that it has ran much ahead of the recovery.

Hence, given my expectation, I continue to expect general market over Asia to lower for another 1- 1.5%, though ASX may suffer harder as it is mostly commodities related.

I see there will be continue pullbacks from crude, hence this may pull back for CNOOC and Sinopec, and will start lower today for HK. As for ASX, I do see OSH, AED and Santos to lower from both profit taking and lowering oil prices.

For the materials, I think it will be slightly more resilient than the crude. Coal and steel play may not suffer as hard from the market, despite industrial metals took a rather big hit last night. I expect it will start lower, but the movement may taper off this afternoon, and I would see this as buying opportunity on the dip, if it hits certain technical levels. Hence, I would put my radar on long into angang (347), magang (323) and China Coal Energy (1081).

I also remain bullish over this notion on precious metal play, and would like to be expose myself into names like zijin mining (1899), despite I expect it to lower this morning, after the 5% run yesterday.

However, I remain buyer of defensive names today, and would like to buy on the dip for the power plays, on names such as Huadian (1071) and Huanen Power (902), and would continue to be buyer for gas plays names such as Towngas (1083) and HK & China Gas (3). As per ASX, I would remain to remain a bit bullish over the telco names for resilience against the market. I see some buy opportunity on Telstra (TLS.ax).

I remain a seller of financials, and would like to be a seller of HSBC (5) and Standard Chartered (2888), given the overseas market continue to profit take. The red financials may also continue to have profit taking, though afternoon session may be pulled up. This also applies in ASX, and I remain a seller of NAB, ANZ and MQG.

In terms of the insurance, again, I think a flat day will go ahead.

I see seller in auto given the I believe the market is overbought, and there will be some bounces back. I will be a seller of Geely Auto (157).

I also see selling in ports play over the poor US retails.

Thats about it today.

Happy trading!

ongy out.