Categorized | Market Update

Market Update 19 February 2013

China’s January monetary data indicate a strong start
The much stronger-than-expected monetary data in January have
indicated a renewed momentum of investment after the leadership
reshuffle. The seasonal effect (the Chinese New Year started on 23
Jan last year vs 10 Feb this year) had distorted the Jan growth
rates to the upside, but the substantial expansion of the non-bank
loan components in total social financial (TSF) signals a strong
demand for funding. Given the capped loan growth, the pace of
investment growth this year will be dependent on how much more
funding can be raised outside of the banking sector. The funding
pattern suggests that investments in infrastructure and real estate
may continue to be drivers of on-going economic recovery.
The economy has likely gained support from probably better-thanexpected
investment in infrastructure and property sectors in the
near term. This is again an old model recovery and it may be limited
by the growth of the TSF. Analysts believe that the accelerating
M1 growth and thus improved economic activity measured by
M1/M2 ratio since 4Q last year may likely be positive for a further
economic and equity market rebound in the near term. But the old
model recovery could come at a cost of rising inflation going

Equities in Asia
Corrections happen often and recover quickly in up markets.
Analysts looked at how many 5%+ corrections have occurred in
Asia ex Japan since 1978. They have only taken up markets into
account as they believe that Asian equities are in a new up-cycle
with the market low in late 2008. During all the up periods, there
have been 82 corrections of 5% plus. This amounts to one
correction every five months.
Selling the day prior and buying the correction at the low would
have made an annualized return of 77% or excess return of 29%.
Calling for a correction may not be hard as it happens quite often or
rather regularly. The difficult part is to get the selling and entry point
right. Four days of delayed selling and buying has led to 7%
underperformance. And with one more day’s dithering the
underperformance jumps to 21%.
For most corrections in Asia ex, it takes 38 trading days to return to
pre-correction levels. In the technology sector it takes 24 days,
while in Singapore it takes 26.5 days. The longest is in the real estate sector at 46 days.

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Symbol Bid Ask Spread
EURUSD 1.22950 1.22970 2
GBPUSD 1.39690 1.39720 3
USDCAD 1.26430 1.26460 3
USDJPY 106.850 106.870 2
USDCHF 0.93590 0.93620 3
AUDUSD 0.78360 0.78390 3
NZDUSD 0.72910 0.72960 5
EURGBP 0.88000 0.88030 3
EURCHF 1.15090 1.15120 3
EURJPY 131.380 131.410 3
AUDJPY 83.730 83.780 5
GBPJPY 149.260 149.320 6
XAUUSD 1328.76 1329.16 40
XAGUSD 16.516 16.566 5