OANDA Trading Asia market closing note: HKMA in focus

EM sentiment continues to improve, and regional equities all in the green and USD broadly weaker. China complex in focus today following headlines that PBOC will issue bills via HKMA.

Hong Kong Dollar

The PBoC will via HKMA issue notes ( bills) Hong Kong. The market has interpreted this as one more tool to control liquidity in the offshore market, hence capping offshore spot upside.

Massive liquidation in long USDHKD positions sent liquidity tighter this morning as a pass-through from elevated funding rates following Pboc announcement to issue bills in Hong Kong, and the  CNH curve gapped much higher.

I guess are we going to see more Pboc presence in HK money markets after the memorandum of cooperation was signed between HKMA and the Pboc and will probably continue taping and draining the HK money markets and pushing rates?? Which is an ominous sign for property markets

While this takes a tremendous amount of pressure off the peg, but none the less a worrisome sign for property investors who given soaring real estate prices in Hong Kong are highly leveraged and remain at the mercy of floating HIBOR rates.

I suspect funding will remain tight for the foreseeable future until the Pboc intentions are fully vetted.

The other big discussion in Asia is  China reducing Import Tax

Reuters

Two significant takeaways, there could be a more bilateral trade with the rest of the world to compensate for increase tariff is one theory. However, if you look across Asia at the new iPhone release, I wonder just how much mainland consumer preference will change from what will amount to a 10 % increase on selected US products.

The other takeaway which is more significant in my view is that this tax break accelerates Mainland’s push to increase domestic demand and move off the reliance on traditional brick and mortars to stimulate the economy.

Finally, I think this a brilliant and measured response from Chinese authorities to not fight fire with more fire.

Abe re-election 

A good write up from our  local Singapore Senior Markets Analyst Andy Robinson

Yen at two-month low versus the dollar on Wall Street surge

OANDA Trading Podcast discussing Prime Minister Shinzo Abe’s third term win   on Singpore Money FM

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes