Asia Morning Analytic: 180210: The Calm Before The Storm II?

Mornining readers,

Overnight news was great, with all indices across the market edging up, however, the dollar also went up as the Fed minute revealed a continual expectation on a gradual recovery for the US. Dollar index went up 1%, weighing down all other currencies. Should be noted this is merely a mild sign of risk aversion, and as oppose, it is demonstrating strength in the US economy. This is also evident as commodities platform did not weigh down much after such a dollar rally, with crude and gold at little change. News stream continues to be relatively strong, with HP raising outlooks and beat estimates, whilst strong housing data, import data and IP data points to suppor the recovery. However, renewed concerns over start of US tightening cycle and Greece turmoil is still effecting the market, weighing on sentiments.

GFA remains to issue caution over the recent rally, though it is very likely a play over corporate reporting will generally be supportive on the market in the near term. Weighing both side of macro news and reporting, we expect market to continue trading sideways in the 20,000-20,800 range possibly for the remainder of this month, and the next. We may see more consolidation on the market, whilst riding out the negative macro situation to find new motion upwards. However, caution is issued based on macro situation may turn sour very quickly, given the sovereign and credit risk in EMEA looks relatively unstable at the moment. This is evident with Moody downgrading the 4 billion Euro hybrid securities from Greek banks that helps turn for safety flights.

We expect HSI today to trade relatively flat to a slight skew to the negative, as investors may continue to lock in profit after the past 4 session rallies that took the index up 6.5%. HSI may also continue to consolidate on sector rotations as investors may seek further safe haven to ride through this uncertainty time. Expecting commodity space to see clear profit taking, whilst a broad base slowdown and slow trade today is anticipated. We target HSI to finish nearing -0.3% - 0%.

ongy out.