Asia Morning Analytic: Asia 210110 Morning Wrap

Morning readers,

Must make a remark over the speed of stimulus withdrawl in China is amazing - a result of fearing inflation climbing at record highs. However, as, per earlier discussed in GFA 2010 Outlook, we do anticipate a volatile year. Given the pre-emptive moves the Chinese are doing, this may provide some strong indications that the Chinese believes the growth is becoming more sustainable, amid skyrocketing credit growth which poses risks of increasing bad loans.

On a general outlook, we may welcome such measures, but in the short term, we may anticipate increasing volatility as both fundamentals and technical buyers may see value in the market, however, the data and news stream is pointing to the downside. We continue to expect the market to end between 21300-21800 prior to CNY, but a big level to look out for is a break on 21000.

Overnight cues were taken from Asia, as China's increasing likelihood of a early withdrawl may hint a global slowdown on its recovery. Therefore, this morning, we may look for extended falls from stimulus worries. I believe upcoming reporting seasons in Asia may provide support for the market, though we may be treadding waters over the next few sessions.

However, with the dollar gaining strongly overnight, we may see further falls on commodities, though, may also pose chances to enter on such dips.

Again, we maintain our view to favour utilities and consumer stocks as oppose to the interest-rate sensitive, and high beta stocks. We also maintain a short term negative view on H-share banks, but regard this as stocking up opportunity over earnings report.

ongy out.