My Diary 533 --- To See the Answers

Trading Diary (March 17, 2009) --- To See the Answers

Overnight, economic data was light. Good news of IMF getting more money to help EMs and Fed Chairman cheerleading his forecasts for a recovery by 2009 year-end did not pushed S&P through 767-768, the key technical levels. It seems to me that negative headlines hold the balance with AMEX Feb charge-off rate rose to 8.7% from 8.3% in Jan and WTE Feb IP (-11.2% yoy) and capU (70.9%), suggesting weak demand that will ultimately drag on GDP. Indeed, other asset markets were also mixed -- the strength in copper, tightening of TED spread and weakness in the US$ are +VE, but the blow out in HY spreads is –VE.

In addition, the monthly TICS data showed appalling foreign demand for USTs which, if continued, hints at pressure on USD and/or pressure on Fed to start buying Long-end. I think UST market is starting to doubt the Fed’s commitment to buying Long. If so, huge upcoming supply could mean a blow-out in UST yields into April, the typical seasonal weakness.

Back to home market, HK has gone up 5 days in a row, pushing towards 13K and sitting above 12845 FIB resistance and only tad away from 50DMAV of 13186. I think this rally is too-much overdone, but I guess market always acts in an euphoria on the upside…I would think of PROFIT TAKING or SHORTING as it will retest Oct lows and the worst is not even here yet….One interesting observation is that many high-beta sectors with growth prospects (i.e. cement and insurance) have run to all-time relative highs in the past week, but my question is who is behind the break-out in these sectors?...If it is SPECs, then HK market is fragile. If it is LOs, then I should see these sectors hold-on or maybe sector rotation into HK/CN property, instead of defensives like HK utilities, F&B and consumer staples, when US markets get sell-off…At this stage, I think I will know the answers very soon in the coming days …

Overseas Market Reviews

Global equities moved up +1.2% overnight mainly sue to +3.3% in EU and +1.6% in Japan, while US stocks down 0.4%.. Elsewhere, 2yr UST risen 5bp to 1.00% while 10yr up 6bp 2.95%. 1MWTI oil jumped $0.90 to $47.15/bbl. USD closed at EUR1.2981 (+0.3% this week) and YEN98.27 (down 0.6%).