WEEK 49 1 DECEMBER 2019: MACRO, DEUTSCHE, USD INDEX, GOLD & INTEREST

Disclaimer: All information shared is solely for learning purpose and it does not constitute to a buy/sell call.

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As mentioned in the earlier post, we are currently in the season of financial reporting where most of the listed companies would be announcing their quarterly results along with the guidance on what is the outlook by the end of the year. To leverage on resources, below are some of the links which you may find the consolidated list of companies releasing results (you may also set email alerts on the same).

  1. Seeking Alpha
  2. Market Chameleon
  3. Zacks Investment Research

 

Macro round up: – Tension on the rise

  1. Trump have signed 2 bills on Hong Kong last week –
    1. The first bill authorizes sanctions on Chinese and Hong Kong officials responsible for human rights abuses,
    2. The second bans the export to Hong Kong police of US-made crowd control munitions such as tear gas, stun guns and rubber bullets.
  2. Trade war between China & US. The signing of the bills on Hong Kong may have a negative impact on the prospect of Phase 1 trade deal where the same would be monitored closely
  3. Hong Kong – companies showing more signs of financial impact due to the prolong protests. i.e. LCC in Hong Kong have delayed salary payments warning its business has been “severely affected” by the political unrest in the city. This is not a good sign as economy works as in a cycle where a disruption in the financial market would have a domino effect. With the district election over, protesters are back on the streets.
  4. North Korea fired two projectiles towards the direction of Japan last Thursday. It is presumed to be fired from a super-large caliber multiple rocket launcher.
  5. News of Fed pumping $108.9 Bn into the market

 

Research on the news of Fed pumping $108.9 Bn shared by KC from InvestWhizz Telegram group:

Background: The big banks need a lot cash reserves to place as reserves on balance sheet, especially during quarter end to meet some ratios satisfy the new regulations after financial crisis. Hence, they will need to borrow these $ by collaterising the Treasuries.

The Sep situation is due to a combination of factors that deplete the liquidity in the market: withdrawal of cash to pay taxes, quarter end to shore up balance sheet, payment due date for the UST auctions and it also coincided with the Fed meeting so Fed can’t really react in time. Before this situation, the markets also faced short term $ liquidity crunch during quarter end but not to this kind of extent. If you guys recalled, the Saudi oil field was bombed the weekend before the shoot up in the repos. It also created chaos in the funding market right after that weekend. Can’t really confirm whether they are related incidents but it may have certain impact. Everyone was hoarding over cash. Some market rumors said that Saudis withdrew a lot cash that week to prepare for repairs for the oil facility.

Ever since, Fed has feeding the short term $ markets with ample liquidity to stabilize the system. Can’t rule out that this level of disruption will not happen again but the Fed is more prepared to act anytime. Regulators are requiring big banks to keep such high cash reserves when these cash can be lent to the markets. Unless there is a relaxation of the required capital ratios, it may be a vicious cycle again.

 

Deutsche bank (DB):

  1. There have been some rumors on DB recently where it interest us to take a look at their share price.
  2. We can see that DB has went from a peak share price of $140 to current $7.2 (12 years period).
  3. DB have posted a loss of ~832M Euros in latest Financials due to restructuring of business.
  4. From the latest Technical charts, we can see that the share price of DB remained very weak on the downtrend.
  5. Conclusion: Both Fundamental & Technical analysis are pointing towards a weakness in DB’s share price. Having said that, we have noted that the said Rumors have not been validated till date.

 

USD Index:

  1. With the recent run up of USD, we can see that it has now reached the resistance and would expect some retracement next week
  2. Stoch,RSI indicator – Bearish
  3. MACD – Bullish turning Neutral

 

Gold:

  1. As mentioned in the Telegram group, Gold is currently in the Bullish the corrective wave where support seems to be holding up in the region of 1,445. It would be important for us to monitor the price action next week where impulsive wave 5 would be around the corner.
  2. Demand of Gold remains positive due to the uncertainty of Trade war between US & China.

 

 

Interest Yield

  1. Interest Yield remained flattened where market are currently not expecting any further rate cuts in Dec.

 

Stay safe, stay alert and NEVER over trade in any circumstances. Lets learn and enjoy the journey together!

 

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Ernest Koh

InvestWhizz Founder