Market Mantra: 13/10/2017 (09:00)
SGX-NF: 10130 (+13)
For the Day: updated at 11:25
Key support for NF: 10085-10035
Key resistance for NF: 10165-10205/10225
Key support for BNF: 24300-24000
Key resistance for BNF: 24600-24800
Hints for positional trading:
Technicals indicate that, NF has to sustain over 10205-225 area for
further rally towards 10275-10325 & 10380-10455 area in the short term
(under bullish case scenario).
On the flip side, sustaining below 10185 area, NF may fall
towards 10085-10035 & 9990-9950 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24600 area for further rally
towards 24800-25050 & 25250-25500 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24550 area, BNF may fall
towards 24300-24200 & 24000-23750 area in the near term (under bear case
scenario).
As par early SGX indication, Nifty Fut (Oct) may open around 10130, edged up by 0.13% tracking
mixed global cues & upbeat Indian macro data and hopes for a decent Q2
earnings.
Overnight US market edged down on muted guidance from some big banks like JPM &
City, despite upbeat results coupled with AT&T for terrible subscriber
addition figures in Q3. Overall market was cautious ahead of Q3 earning season
coupled with ongoing NK “nuke earthquake” tensions. USD dropped further yesterday late NY session on some USGS report
about a mild NK earthquake in the vicinity of earlier Nuke test, although it
may be natural and not manmade (nuke).
DJ-30 fell around 0.14%, S&P-500 closed around 2551, down by
almost 0.14%, while NQ-100 dropped by around 0.18% after hitting another
trifecta of record highs intraday as usual!! Media stocks were also under
pressure whereas E-Automakers (Tesla) helped the market to some extent.
Healthcare stocks were mixed after Trump signed another
executive order for some modifications of health insurance coverage in the
Obamacare, which may not be good for the average Americans because it could
cost them higher for insurance premium.
Also, the original tax reform plan of Trump may not be good for
ordinary (lower/middle) income American people and also for the US/state
treasuries; this tax plan may not help the US consumer spending and growth.
Thus, market response so far is quite muted after initial euphoria. Market will
focus on fresh “adjustments” by Trump in his tax reform plan.
Overall, market may be expecting around 4.5% EPS growth in Q3
against double digit growths for the previous two quarters to justify the
premium valuations of S&P-500, now trading around almost 25 TTM PE. So far,
on YTD basis, DJ-30 has gained around 16%, S&P-500 is up by almost 14%,
while NQ-100 rallied by around 23%. Trump is also very proud and has given all
the credit to himself for the “phenomenal” 25% rise in DJ-30 since 6th
Nov’16, his Election Day win.
Apart from hopes of Trumponomics, overall upbeat PMI data from
China, Japan, EZ to US and solid earnings has boosted the overall global market
sentiment, which is at now record high. Also upbeat PPI data from China has
boosted the global reflation narrative because ultimately, China is the global
growth engine and manufacturing power house of the world.
Today China’s trade data
for Sep flashed as mixed; although export came little below expectation at 8.1%
vs 8.8% eyed (prior: 5.5%), there is visible improvement from Aug after PBOC
refrained from further Yuan strengthening. China import for Sep surged by 18.7%
vs estimate of 13.5% (prior: 13.3%); today’s trade figures may be also
distorted by the golden week holiday, but overall it removes the concern of
China slow-down.
USDJPY is now trading around 112.15, down by almost 0.15% and so far
made a low of 112.09 from yesterday’s NY session high of 112.50 mapped after an
upbeat US PPI data, distorted by the dual hurricanes. Overall, Fed’s inflation dilemma,
leadership (policy continuity) uncertainty and NK rhetoric is affecting the USD
sentiment despite mixed economic data and an assured Dec’17 rate hike.
All eyes will be now on the US CPI, retail sales today as inflation
& consumer spending/wage growth is now Fed’s prime concern for further
policy tightening (normalization). But today’s data may be also affected by
Harvey & Irma hurricanes.
EURUSD is now trading around 1.1845, up by almost 0.12% on a trail balloon
by ECB that they may go for gradual QE tapering from Jan’18 with bond purchase
of EUR 30 bln/pm till Sep’18 in lieu of present EUR 60 bln/pm. Although the
figure may be little disappointing for the hardcore EUR bull, still it’s a
decent start.
Overall, it now seems that Draghi & Co is gathering enough
courage to announce a formal QE tapering on 26th Oct, considering the
ongoing Catalonian political crisis, sufficient for keeping EUR under some
stress. Thus, ECB may go on for their gradual QE tapering without worrying too
much for the EUR strength!!
GBPUSD is now trading around 1.3276, up by almost 0.11% on prospect of
a “soft Brexit” after reports that EU may offer 2 yrs transitional period to UK
as par Theresa’s desire; but all these may be also subjected to payment of the
divorce bill, although the whole story is still not confirmed by the EU
authorities officially.
Earlier, there was news that UK may go for the “hard Brexit”
without any deal at all as the whole negotiation process is practically stand
stilled for the last few months on certain core issues. Also, UK may go for
another 2nd (confirmatory) Brexit referendum, considering the
overall mess.
If such Brexit squabbling will continue and EU does not confirm
the “Soft Brexit” narrative, then it may be very tough for Carney to go for the
Nov’17 rate hike also, despite it can erode the BOE credibility completely.
Even if BOE goes for the Nov rate hike with demonstrable courage amid such
Brexit & UK political uncertainty, it may be “one & off” until March’19
(dovish hike).
Back to home, Indian
market (Nifty/India-50) after opening edged up, is now racing towards the
life time high of 10195 on upbeat macro data (IIP/CPI) and hopes for a decent
Q2 earnings growth. As par some estimates, Q2 earnings is set to grow around
14% (YOY) vs -11% and overall FY-18 EPS may grow around 16%; i.e. to 458. But
considering the previous trends, DeMo & GST disruptions, tepid private
capex & credit growth, overall slowdown in the economy, the projection may
be on the higher side.
As par previous trends, FY-18 Nifty EPS may come around 418 and
in that scenario, current valuations may be looked extremely stretched at TTM
PE of over 26 against average PE of 15-20; actual EPS CAGR may be around 7.5%
for the last few years. Domestic MF liquidity may be the sole driver of the
Indian stock market right now, which is at around $25 bln against FIIs figure
of $6 bln for the last one year.
Nifty EPS should justify the premium Nifty valuation despite
power of liquidity. Now India’s NPA issues should be resolved fast as muted EPS
from PSBS is the main headwinds for the overall earnings trajectory apart from
certain other sectors like Pharma.
NCLT/insolvency process may work well for the corporate stressed
assets, having some residual value with “wealthy” promoters if implemented
effectively. But in most of the NPA cases, these combination may be rare and
thus overall chances of liquidation is more than resolution, which banks does
not want at all.
SGX-NF-WK
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