Yuanta Regional Strategy Monthly — September
24/09/2019 - 18:03
Yuanta_Regional_Monthly_-_September 24, 2019
Macro: The US economy has been relatively stable, while demand in the Eurozone has remained weak. China’s growth momentum remains unstable. For Taiwan, the TAIEX has continued to consolidate, as rising impact of US-China tariffs has offset positives from strong seasonality in the tech sector. Additionally, the global oil price consolidation range has risen, as two major Saudi Arabian oil facilities were attacked by drones, leading to an oil supply cut.
Taiwan: As global economic momentum is slowing, we suggest investors beware of potential pullbacks should any pressure emerge. That said, even if the TAIEX does pull back, given a more promising outlook for the Sino-US trade war, we believe the market will enter ranged-consolidation, and stocks with secular themes should take quick turns rallying in the next month.
Hong Kong: The Hong Kong stock market has risen 3.1% MTD in September. Following the widely expected US interest rate cuts on September 19, the market focus is rest on the Chinese economic performance and social demonstrations in Hong Kong. The China economic data for September will be released in mid-October.
Shanghai: Recently, sentiment on the A-share market has been improving, with rising trade volume boosted by more liquidity injection. As of September 20, northbound capital inflow totaled RMB60.8 bn in September, while daily northbound capital inflow on Sept 20 reached RMB14.862 bn, marking a new high since November 2018.
Korea: Overall, uncertainties have eased. In addition, stock market fundamentals are likely to bottom-out in Sept-Oct. The value of Korea’s exports, which is closely correlated with the stock market, likely bottomed-out in Sept-Oct 2018. Although economic cycle indicators recovered, investors should keep in mind that the KOSPI has risen by over 100bp in less than a month since end-August. Moreover, as expectations for a rate cut and a small deal between the US and China have been largely priced in, the index may show signs of fatigue in the short term given the lack of catalysts.
Indonesia: The market closed at a stagnant 6,206.20 points (+0.3%) on Sept 23 with the Rupiah relatively unchanged despite the Bank of Indonesia easing its benchmark rate by 25 bps, following the Fed rate reduction, also by 25bps. Despite concerns over economic growth, Bank Indonesia has indicated that 3Q19 GDP growth could reach 5.1%. However, we are skeptical that these numbers will be achieved, especially as seasonality shows declining growth from 2Q to 3Q. The global outlook remains bleak with uncertainty from geopolitics in the Middle East and the US-China trade war, which created more negative sentiment towards emerging markets. With a relative lack of positive catalysts, equity markets are tending to move sideways.
Thailand: The SET Index rose 1.03% from August 19 to September 18 and is now up 5.77% YTD. The index responded positively during September due to the easing tensions between parties in the Sino-US trade war. We expect the market to move sideways up next month due to the inflow of funds into EM after the reduction in the US and EU interest rates and QE measures announced by the European Central Bank.
Vietnam: Holding the range. The VNI fell by 0.6% MoM to close at 985 on September 23 after yet another month of tightly range bound (969-997) trading. Average daily turnover in VNI components reached just USD 127m, about 4% below the YTD average of 132m. Thus, what appeared to be a slight uptick in volumes in August has failed to carry through in September. Overall the index’s performance has been reasonably strong considering that foreign institutions remained net sellers most of the 21 trading days over the past month.