Fundamentals to drive the ’risk-on’ theme

The markets celebrated the US political aftermath that cost the economy $24 billion (according to the S&P 500), with tech stocks making headlines, including Google which breached $1000 per share and the S&P500 reaching an all-time high.

The bet on tech companies is also evident in emerging markets, where the MSCI Emerging Markets Information Technology Index is at a peak, gaining 18% in the last three months.
The inflows into equities are likely to continue due to the dollar weakness, as investors flock towards risky assets with the backdrop that tapering will be pushed back to next year.

Fundamentals both in economic and corporate earnings will be the drivers of the markets this week. A deluge of data with information on labour, housing and retail sales will be released, playing catch-up after the government shutdown. Company earnings which will be one of the drivers in the market this quarter show that 100 companies in the S&P 500 have reported so far, and sales surprises have been lacklustre, with most sectors disappointing expectations.

The sectors that have done slightly better are: oil and gas, basic materials and telecommunications, by just meeting expectations by less than a per cent. Earnings surprises are better, with the basic materials sector faring the strongest, followed by financials; however, the price reaction indicates the willingness in investors to overlook bad news and focus on the good news.

In Asia today, Taiwan exports orders are likely to stabilise, with September data of 0.4% compared to 0.5% prior according to the Bloomberg survey. Nevertheless, the worst is over for this island’s exports after the dip into negative territory in February this year to -14.5. The country’s close economic ties with China and the reluctance to be accepted by China as ’One China‘ place it in a complicated situation.  Its reliance on China for exports puts pressure on Taiwan’s President Ma Ying-jeou to soften policy stance and increase trade relations.

Calls from China’s President Xi Jinping to put their differences aside and forge closer ties during the APEC meeting was not welcomed by all in the country, yet foreign investors take the development of a closer relationship between the two countries as a positive step forward. This was seen with fund flows into equities for the week reaching $875 million and net purchases at $7.6 billion for the year according to the exchange.

The new Taiwan dollar continues to appreciate against the dollar on the Fed’s delay in tapering, since then the currency is trading below NT$29.5, the level in January. This might not fare well with exporters as it makes up the main proportion of the economy. GDP growth has been declining; its historical average from 1962 to 2013 was 7.2%, and the latest downgrade from CIER to 2% from 2.28% reflects the country’s sensitivity towards global growth.


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CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.