Asia 150509 Morning Wrap

Morning all,

First of all, apologies over the lack of afternoon wrap last night, as it was a big day with HSI tanking up to 3%, while in general, the Asia region lowered by 2%, led by continue bank sell-offs, while materials and energy also lowered from commodities plunging. Defensives took a firmer hold, but also turned lower as investors profit takes and repositions for the upcoming data overnight.

However, overnight had an interesting play, which snapped off the week's bear run, with DJ up 0.56%, while S&P up 1.04%. The tech's led the way, with NADSDAQ up 1.50%. Though it should be noted that a lot of swipsaw move occured in the morning, before the afternoon took its hold to end higher up. One issue is, jobless claims did climb, though suggested its coming mostly out of the bankrupt auto sectors. Market shrugged off the news, and took the lead from a lowering libor that, again, hints towards the worst of the credit crisis is over. Amid of such notion, though, I do remain to see a bit more sell off in financials given this real economy has not settled down, while unemployment continues to rise, as implied by the rising jobless claims, and also the foreseeable problems from GM collapse. This seeks questions over whether the consumer credit issue is still at hand, since retail sales are down, while producer priced increased as the raw materials has jumped between 30-50% over the past two months. Given that private consumption is not exactly recovering, while mounting credit card bills and piling up, I do question whether a second wave over consumer credit will surface soon through increasing bad debts.

On a technical level, given the four days of bear run, we may also consider there will be some need to cover some levels for consolidation. Given that DJ's did the consolidation yesterday, amid of rising jobless claims, we may possibly see Asia to end near flat today since Asia remains to do a bit of catch up from the bear run, whilst there will be some technical buys this morning to cover up those levels. Though, this afternoon session may taper off due to positioning of the European data, and continue towards bearish stances to go through the weekend. However, KOSPI and TSEC may outperform given the lead from NASDAQ last night.

I would expect to see some financials to jump start this morning from technical buying, but would remain to see them to taper off by midday and in the afternoon. I would like to see them end near flat today, and would remain a bearish stance over HSBC (5). Similarly, I believe red financials will have some technical entry this morning, though possibly, it will taper off in the morning. However, CCB has been quite hard beaten, thus, it should end up 1.5-2% today.
For the insurance, I would also remain to believe it would travel more flattish.

As per the materials, CNOOC and Sinopec would also start up higher as crude rebounded from its low last night. Angang and magang will probably take another technical buys to end up higher this morning, though, would more be expecting 1-2% gains.

I remain a buyer of defensive names, as I still remain to believe the sector rotation theme. I would remain to buy Huadian and Huaneng, while for Gas play, I prefer Towngas and HK& China Gas.

I would start to be conservative over precious metal play as the bears and bulls are fighting over grounds on that, while this pullback may possibly hint towards a setback on gold and silver for the near term.

Thats about it today!

Happy trading!

ongy out.