Asia Market update : China equities on a random walk

China risk 

China equity markets continue their random walk in very unsettled fashion since Monday’s intervention. After falling .7 % in early trade, markets entered the midday break, up 1.5 % as local investors continue to hope the Pboc and mainland regulators will provide a more convincing backstop given that they have only tapped into a tiny part of their monetary and fiscal war chest. But with China-US trade negotiation hopes are fading, there will likely be more questions than answers offered up on the trade front in coming weeks. But given the confluence of risk in global markets, China economic slowdown notwithstanding; we continue to see better sellers of risk in Asia, so rallies will most likely be sold as US-China trade tension remain front and centre in the region.

China-US trade negotiation hopes are fading, with both sides now looking set to dig in for the long haul. Asian investors should anchor themselves to the nearest gold bar and hold on until these blustery market conditions abate.

USDCNY fixed at 6.9357 today, +19 pips from last fixing and -17 pips from the previous closing at 6.9374 on 16:30 Beijing time. A touch higher than market expectations, but fixing has been unable to rouse CNH bears that are suffering a severe case of fatigue. But the market remains firmly on buy the dip mode

But the elusive silver lining is hard to come by given the confluence of negative global drivers, as  sell on rally continues to permeate every pocket of global equity markets

Oil update

Oil bulls are not letting go of a possible Saudi retaliation after oil prices have caught an early bid in Asia as President Trump vows ‘some retribution’ for Jamal Khashoggi’s death. Suggesting to the degree that escalating middle east geopolitical risk is playing a part in the oil price equation.

Indeed, with middle east geopolitical embers glowing, there could be an impact on oil supplies if neighbouring sparring partners start to compete for the regional influence which could ignite the always fragile political balance in the middle east.

Oil markets remain extremely noisy in the run-up to the US Iran sanctions day of reckoning.

Ultimately, however, given that Saudi Arabia is looking to diffuse political tension, the recent rhetoric from Saudi Energy Minister Khalid Al-Falih does suggest the Kingdom may be willing to oversupply markets short-term needs not just adding barrels to meet Iran and Venezuela shortfall, and supporting the markets shift to a bearish oil market view.

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