每日市場點評 --- March 19, 2008

The market gave back a good portion of yesterday’s historical gain. All three major indices closed the day lower by around 2.5%. Concerns of more de-leveraging activities in the commodity market outweighed positive news from the financial sector.

We started the day in a positive tone following Morgan’s better-than-expected earnings result and report that regulator was relaxing its surplus capital requirement on Fannie Mae and Freddie Mac from 30% to 20%. The latter was certainly good news for the ailing housing sector as it should allow the two companies to buy or guarantee as much as $2 trillion in mortgages this year. However, the early gains quickly disappeared following a sharp sell-off in the commodity sector. Gold price, for example, dropped $59 per ounce, the biggest single-day decline in history. And the sell-off was not just limited to one or two commodities. Almost every category of commodity was under selling pressure. The CRB commodity index dropped another 16 points today after dropping 20 points on Monday. So what’s really going on?

It appeared the sharp sell-off in commodities was more than just plain profit-taking. There was rumour on Street that several hedge funds were forced to liquidize their commodity holdings to meet margin calls. As more uncertainties emerged, investors were rushing into the treasury market for the so-called flight-to-quality trade, pushing the 3-month bill rates to the lowest level in almost 50 years. The drop in commodity price also triggered a broad sell-off in the currencies of those commodity rich countries. For example, both Canadian dollar and South Africa’s rand fell more than 2% against the US dollar today. As for tomorrow, we are going to have the quadruple witching option expiry day, so more volatilities should be expected before the upcoming long weekend.