The Bank of Japan is changing capital markets. Its plan to buy 1.6 times net
issuance of JGBs is flattening yield curves. The search for yield has
significantly more fuel. Further QE is also possible from the Fed and the
ECB just cut rates. Yield search was the catalyst to upgrade Australia in
February. We should have closed all underweights in high-yield sectors
then. The action points are upgrading Singapore from UW to OW.
Most countries in Asia Pacific benefit from cheaper oil, with Thailand,
Korea and India the biggest beneficiaries. Oil imports in Thailand are 11%
of GDP. A 20% decline in oil price improves current account balance by
2.2% of GDP. Malaysia is a marginal net oil exporter and would lose out
from oil price declines. Indonesia is a refined oil importer, but an exporter
of gas, palm oil and crude (see page 5).
The concentration of dividends pushes forward levels lower, resulting in
cheaper call premiums but higher put premiums. The impact can be
magnified for short-dated options when the dividend period falls before
expiry. On page 15, we present option strategies for upcoming dividend
season in HK.
All EM ASEAN markets are outperforming Asia-ex Japan YTD, albeit to
differing degrees, ranging from 22% (Philippines) to 3% (Malaysia). From
mid-month, all ASEAN markets started to underperform the region. See
page 21for more on ASEAN strategy.
MXAPJ and MXASJ have struggled to establish clear direction YTD and we
would need a clear breakout in order to recommend broad-based positions.
Resistance zone at 480-487 and support at 460 are key levels to watch. See
page 19 for more on Asia technicals strategy.
Key asset allocation calls:
OW: Japan, Singapore, India, Thailand, Malaysia, Indonesia, the
Philippines, financials and industrials
UW: China, Korea, Taiwan, materials and energy
The key risks to our strategy are return of the high beta/low P/B rally and
improvement in Chinese economic data.
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issuance of JGBs is flattening yield curves. The search for yield has
significantly more fuel. Further QE is also possible from the Fed and the
ECB just cut rates. Yield search was the catalyst to upgrade Australia in
February. We should have closed all underweights in high-yield sectors
then. The action points are upgrading Singapore from UW to OW.
Most countries in Asia Pacific benefit from cheaper oil, with Thailand,
Korea and India the biggest beneficiaries. Oil imports in Thailand are 11%
of GDP. A 20% decline in oil price improves current account balance by
2.2% of GDP. Malaysia is a marginal net oil exporter and would lose out
from oil price declines. Indonesia is a refined oil importer, but an exporter
of gas, palm oil and crude (see page 5).
The concentration of dividends pushes forward levels lower, resulting in
cheaper call premiums but higher put premiums. The impact can be
magnified for short-dated options when the dividend period falls before
expiry. On page 15, we present option strategies for upcoming dividend
season in HK.
All EM ASEAN markets are outperforming Asia-ex Japan YTD, albeit to
differing degrees, ranging from 22% (Philippines) to 3% (Malaysia). From
mid-month, all ASEAN markets started to underperform the region. See
page 21for more on ASEAN strategy.
MXAPJ and MXASJ have struggled to establish clear direction YTD and we
would need a clear breakout in order to recommend broad-based positions.
Resistance zone at 480-487 and support at 460 are key levels to watch. See
page 19 for more on Asia technicals strategy.
Key asset allocation calls:
OW: Japan, Singapore, India, Thailand, Malaysia, Indonesia, the
Philippines, financials and industrials
UW: China, Korea, Taiwan, materials and energy
The key risks to our strategy are return of the high beta/low P/B rally and
improvement in Chinese economic data.
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