Asia Morning Analytic: 190210: Greater Caution!

Morning readers,

Overnight had mixed signals, as Walmart and Daimler under performed its reporting, sending the futures dipping early in the session, however, ended the day up with commodities rising and strong manufacturing data pointing to restocking and capital purchases from business themes that leads US recovery, as per our GFA thematics - A shifting engine has closely discussed on. Though the strength looks uneven, as initial jobless claims rose, whilst some corporates and sectors look as though tough conditions remains ahead.

Despite such positiveness sentiment coming across from overseas, would remain to issue greater caution as current break from selloff may merely be a bear rally, given macro uncertainty level is, again, rising. This is caused by:

1. Greece may be increasing finding difficulty to finance its 53 billion euro raising for its budget needs, whilst facing 16 billion euro bond redemption in May. Further, Merkel, Germany's PM, has claimed that "not a single euro" should go to help Greece, which points, again, to the credibility of a Greece bailout, as no concrete measures have been implemented since the Euro summit. Further the problem, the exact number may possibly be enlarged given GS's involvement with the swap arrangements. Notably, CDS spread has also increased last night by 10.5 bps, which points to increasing jittery woeing in the Euro region, waiting to be unleashed, unless contained.

2. UK has also reported its first deficit since 1993. This demonstrates a deteriorating fiscal position that may translate to further difficulty in the Euro region, and points to a slower recovery.

3. Dodd will be unveiling the financial overhaul plan next week - the Vockler rule to break up 'too big to fail' financial institutions. This may also weigh on the market, if the plan obtains approval from the senate.

On this note, we expect HSI, again, to trade relatively flat to negative cue today, beginning with a slight positive cue due to US optimism, ranging between 20,400 to 20,600. Would remain to see HSI to have a solid break up from 20,500 to continue its positive momentum, though a break down to 20,400 may demonstrate further weakness. Though may also expect continual profit taking these few days, as market uncertainty may cause investors to leave the table, which could be led by dollar strength, shown on the FX market as I currently write.

Continue to see consumer sector to be the outperformer, though heavily beaten down commodities, banks and properties may poise for further rebounds. Though expect such rebound to be capped by macro uncertainty.
GFA top pick for the day is NWDS (825.HK) on relative value and CNY sales play.

ongy out.