My Diary 543 --- The April Fool Note

Trading Diary (April 01, 2009) --- The April Fool Note

It is the April Fool Day, but don’t be silly.

It is all abut M-end or Q-end effect yesterday. Markets were higher even though US home prices fall 19% (largest ever drop), consumer confidence come in WTE, Japan TANKAN numbers showed the shocks and President Obama saying bankruptcy is the best way for US autos. In other part of markets, I saw that S&P futures (after hours) basically gave back all the gains, along with the looked-tired rally in Asia. In addition, with equity rallying 1.5% and UST up modestly, it usually means weaker USD, but now JPY is testing 100 and JPY-cross up +2%. FX market gives me another sign of an unusual month/quarter-end as FX market move yesterday was consistent with EM rallying and USD selling off vs everything except JPY. 

Having said so, S&P 18% rally since 09Mar was the largest since 2002. Financial were up 17.6%, contributing 8.5% advance to S&P 500 during the month. However, S&P 500 concluded 1Q09 with -11.7% losses. In China, A shares lost 65% last year but up +30% in 1Q09 as the best performing market in the world. HSI -5.6% in 1Q and down 5 quarters in a row which is unprecedented since 1969. HK ranks the top 3 worst performing market in Asia together with Japan and Vietnam in 1Q09.

Economy wise, March Chicago PMI fell to 31.4 (vs cons34.2), hitting the lowest level since July 1980. It is still 10pts above the all-time low of 21.4 in June 1980. US Mar consumer confidence was disappointing at 26 (consensus 28), up only 0.7pts from Feb's all-time low reading of 25.3.Tonight's ISM manufacturing (from 35.8 in Feb) is key to watch. In the rest of world, Germany's UNE rate rose to 8.1% in Mar (from 8.0% in Feb). In Asia, Korea's Feb IP fell 10.6% yoy (vs -25.5% in Jan). Thai Feb exports -11.1% (vs -25.3% in Jan). Japan Feb housing starts -24.9% yoy (-18.7 in Jan)…That seems a long list of negatives and Just hit the tape this morning that Obama has concluded that bankruptcy is the best option for GM & Chrysler

To our HK market, I think HengSeng is on its own move today with Obama Auto woes neutralizing positive EU and US o/n move. I think after the Q-end window-dressing by Los. my question is will this continue or will they switch? But one thing for sure today is that, given the expected 50mn travelers from Shenzhen, HK retailers are on positive mood. In addition, I think it is not too late to sell HK Property as HSP has moved up +33% from lows. The street expects residential prices will drop at least 34% from its peak, on the back of higher UNE rate, limited downside on HKD prime rate but more upside on mortgage rate…SELL Sino Land &SHKP on their high leverage in HK residential ppty market… Other headline worth a note is BOC (3988HK) plans to lift stake in BOCHK (2388HK) over next 12 months…Looking forward, the most expected is PMI on April 4th, and below 50 will be a –VE shock to the markets…

Overseas Market Reviews

Global equities finished March higher 6.4% with O/N Equity prices rose +4.3% in UK, +3.2% in EU, +1.4% in US, and +0.9% in EM. But Nikkei dipped 1.5%. Elsewhere, UST decreased with 2yr and 10yr both by 5bp to 0.80% and 2.66%. 2yr yield is lower 23bp compared to two weeks ago (the day before the Fed’s buying announcement) and 10yr is down 34bp. US mtg rates have fallen by a similar amount: the 30yr conforming FRM rate is down 25bp versus 10 days ago to 4.91% according to Bankrate. USD rose 1.8% to YEN 99.0, while it weakened 0.4% to EUR1.325. 1MWTI oil rose $1.25 to $49.66/bbl—down $4.68 from last week’s 4-month high but up $4.90 from February’s close. Industrial metals also rose in March, climbing 11%.