Asia Morning Analytics: 140110 Asia Morning Wrap

Morning all,

Overnight bodes well with earnings beating estimates for several companies, with S&P 500 ending +0.83%, Nasdaq up +1.12%. Crude tanked over report showing inventory increase, whilst gold recovered some loss, ending back at 1138. Dollar showed signs of weakness, as UK hints to raise rates before the Feds.

Interesting to note overnight, S&P lowered California debt raing to A-, again, revealing our earlier predictions over sovereign credit problems. With now the globe funding its stimulus on building on more debt, especially for the US, sovereign credit, therefore, clearly presents problems. If this situation worsens, especially in the US, we may see a new round of the dollar crashing due to sovereign problems, and less severely, because fed hiking rates may be out of the question for a while. Such play turns out true, commodities, again, will be in the lights for hedge buys. However, as noted from GFA outlook 2010 part 2, China's suprise stimulus exit may become a great risk for such a commodity story.

As for the Asia side, we may see some broad base recovery today from yesterday's over reacted move, however, would maintain to be a seller on banks, insurance and property plays due to overhang of policy measures in the near term. We also see sector rotation coming into play from our seller list into interest rate non-sensitive sectors, namely, the defensives such as utility, consumer staples and the gambling stocks. Would also anticipate HSI to trade range bound until CNY between 22000 - 22300.

GFA maintains to be a buyer of consumer names on dips.

ongy out.