Mixed performance in Asia

Asian markets had a mixed performance last week; China and Hong Kong stocks led gains with close to 3% return for the week, while Japan, India, Indonesia and Thailand stocks declined.

The Chinese Premier Li Keqiang’s promise that growth won’t fall below 7% kept markets buoyant, but the question remains whether there is enough momentum for Chinese stocks this week. 

This is a heavy data week with releases from G10, FOMC, US (home sales, manufacturing, consumer confidence, jobless claims and change in nonfarm) and Europe. While we don’t expect major changes to the FOMC policy statement, investors should expect volatility given the many factors in play.

Following our posting on Monday July 22, the Nikkei looks tired and ended the week on a negative note despite the CPI number supporting Abenomics is on track. There are expectations from the market which Abe needs to deliver before we can see the Nikkei move up towards the 15,000 mark.  Given that these reforms might take time, it has consolidated below 14,500, as we expected from the start of the week; the Nikkei could drift lower to test the 14,000 before finding more buyers.

Singapore is making headlines as a precious metal hub, a reflection of strong investor demand for physical gold and silver. Since the government removed the 7 per cent GST tax in 2012, there’s been a surge in physical bullion companies, and most recently, vaults to store them.  Companies I have spoken to said they saw up to a 300% surge in sales after the sales tax was removed. Despite the competition of new companies popping up, the overall market is growing which shows investors’ appetite. Buyers of physical gold and silver react differently to investors on the exchange, the main difference points towards the mentality of owing physical as an investment and store of value. 

Comex gold had a good week, this week we are watching whether the support of $1310 will hold and if it can breach $1340 convincingly. We continue to hold a bullish view on gold.

WTI breached our support level of $105; touching $104 as slower global growth continues to put pressure on prices while tensions in the middle-east and inventories level act as support. Today’s price action will be important; whether it will trade lower than last week’s low of $104 or if it can hover above this level. The busy data week will definitely see movements in the oil market. The gap between WTI and Brent widened as WTI retraced 3% for the week while Brent held up its prices with a decline of 0.7%.

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