CLSA: Greed & Fear : Modi and Banking Amendments [NP]
Chris Wood of CLSA is one of the most revered Equity Strategist. He periodically writes 'GREED & FEAR' series explaining his views and strategies. He usually meets the policymakers, CEOs and sector experts before forming his opinions on each country and the market. This is a txt copy of the latest edition. CLSA: GREED & FEAR : MODI AND BANKING AMENDMENTS - 11th May 2017 GREED & fear’s base case for 2017, namely for global equity investors to be overweight global emerging markets and the Eurozone, has been strengthened by Emmanuel Macron’s victory. Macron’s victory will have further encouraged hopes of a re-energised Franco-German alliance at the heart of the Eurozone and related hopes of a renewed drive towards integration. Whether such hopes prove to be a reality is quite another matter. But for the moment they can propel European equities higher in the run up to the German election where GREED & fear’s base case remains a Merkel victory. GREED & fear also remains constructive on the euro since the base case must be that Derivative Draghi will signal some increase in token tapering at the next ECB monetary policy meeting on 8 June. As for the US, renewed hopes that the Trump administration will be able to pass reform of Obamacare are again encouraging expectations that tax reform can be passed more quickly than previously anticipated. This remains extremely optimistic from GREED & fear’s standpoint, with the major uncertainty whether Republicans in Congress will insist on the package being revenue neutral. But for now such hopes may keep the 10-year Treasury bond yield above 2.3% and therefore equities reasonably constructive. Yet if such hopes of near-term tax cuts are dashed, GREED & fear’s view remains that the yield curve is vulnerable to renewed flattening given that the evidence remains that the downside risk to economic growth in America are rising not falling. More tightening by the Fed, let alone the commencement of balance sheet contraction, increases the risk for US equities and strengthens the case to be long Treasury bonds absent aggressive tax cuts. It also increases the argument to be underweight American equities in a global portfolio. It is a reality of market sentiment that the China reflation trade is currently being questioned. GREED & fear’s base case is that the bulk of the correction in commodities is over, be it in copper, iron ore and other China reflation trade proxies. Still GREED & fear is much less sanguine on oil where hopes of keeping oil above US$50 rest on OPEC being able to agree on an extension of the current production agreement at its forthcoming meeting scheduled for 25 May. In the absence of such a deal, oil looks vulnerable.There is now a following wind in Europe until the German federal election in September where investors currently anticipate a positive result. The issue will then become whether a Eurozone with a Merkel-Macron leadership or, less likely, a Macron-Schulz leadership, will really push for renewed integration on a presumed path to fiscal union. For that is what will be required in GREED & fear’s view to keep Italy in the Eurozone. If Asia and emerging markets remain an overweight forGREED & fear, India also remains the most preferred equity story in the emerging market universe on a ten-year view. This long-term constructive view has been strengthened by evidence that the Modi government is showing a renewed focus to address the asset quality problem in the banking sector. The key development on the bad loan problem was the publication late last week of an ordinance amending the Banking Regulation Act. The key purpose of this amendment is to empower the Reserve Bank of India to intervene in specific cases of default as well as to give the central bank the authority to require specific defaults to be sent to the insolvency court if lenders and borrowers cannot reach resolution.The other aim of this amendment is to remove a concern shared by all bankers that, if they agree to a haircut on a specific loan, they will be at risk of future investigation by the judiciary or an investigative agency. It is the reluctance of the banks to take haircuts which has been the key cause of India’s long festering banking problem.The lack of progress addressing this legacy problem in the banking sector is the main reason why India is still seeing no evidence of a renewed private sector-driven investment cycle. While there have, in GREED & fear’s view, been enormous achievements in other areas of policy, the missing link is the banking sector with the bulk of the problem lying in the state-owned banks.The new approach requires the RBI to execute proactively on its new powers. The good news is that the RBI’s technocratic approach means that its management of the NPA problem will be less politicised than if handled by other government agencies. The word in Delhi is that the RBI will come out with clear guidelines in the near future on how this process will work.There is naturally much scepticism as to whether resolutions of bad debt cases will happen given the previous failure to address the NPA problem. Still, in GREED & fear’s view it is wrong to be too sceptical since, if the RBI is prepared to be tough, it has the leverage to apply, since it now has the power to invoke the insolvency code against defaulters. Once the NPA issue is resolved, the way will be clear for the public sector banks to raise capital, a process which should also lead, with the encouragement of both the RBI and the government, to the consolidation of the public sector banks. The rest of the Indian story under the extraordinary Modi remains as vibrant as ever. While it is true that the Aadhaar programme was launched under the previous government, the real roll out and practical application of the programme has been massively leveraged since Modi assumed power. The benefits of direct electronic payments are hard to exaggerate in terms of reduced leakages and the like. There is also the approaching launch of the Goods and Services Tax (GST). While this will not be as clean as originally hoped, the arrival of GST is a big deal. The fundamental point to focus on is that GST will end inter-state barriers to trade. The result should be increased tax revenues.GREED & fear remains constructive even if the Indian stock market is certainly expensive on a forward earnings basis. The continuing rise in the stock market year to date, and the resulting re-rating, has been triggered primarily by ongoing strong inflows into domestic equity mutual funds.These inflows into the mutual funds have been a feature ever since Modi was elected and reflect a growing preference for financial assets over traditional assets not traditionally visible to the taxman in India, namely property and gold. The investment in Naver in the Asia ex-Japan long-only portfolio will be removed. An investment in Indian state-owned bank State Bank of India will be initiated with a 3% weighting, while a further 1ppt will be added to the existing investment in HDFC.China’s foreign exchange reserves increased by US$20.4bn in April. This marks the first time China’s forex reserves have increased for three consecutive months since June 2014. CLSA’s economics team estimates a mark-to-market gain of US$25bn in April, which implies a balance of payments deficit of only US$5bn in April. This further reinforces the view here that capital flight in China is not out of control.The latest Chinese inflation data provides further evidence that China PPI inflation has already peaked. PPI inflation slowed for the second consecutive month, down from 7.6% YoY in March to 6.4% YoY in April. The slowdown can be partly explained by the base effect. But China PPI also declined on a month on month basis for the first time since June 2016.
USD/CHF Weekly Outlook, (after a massively successful trendline bounce)
Last week I posted a potential trendline bounce setup on USD/CHF. You could say it worked out rather well. It took a couple of days to hit my target of 0.94, but I'm actually still in this trade, sort of. I've taken most off my position, and then added again when we returned to 0.952 briefly. Having said that, I was probably caught up in the heat of the moment, and 0.95 would have been a better re-entry point. There's also a case for the bears here, so let's look at the set ups for USD/CHF. 8Hr Chart: http://i.imgur.com/bZCNoTM.png That last 8Hr candle is a bull's worst nightmare, so why am I still in this trade? The break of the wedge is encouraging, sure, but the larger wedge top has halted advances for now. We could easily see 0.9500 or even 0.9420/00 early in the week if the dollar rally loses steam. But here's why it might not. That means it's time to... Talk About Fundamentals! Why did the US Dollar rally so much? There are a lot of ideas floating around. It wasn't broad-based risk aversion, although it looked like it if you were watching the Aussie and the Pound. What most likely caused it was the search for yield, as investors lost confidence in Japanese government bonds, and the US economy started to look even healthier. Good jobs numbers mean a chance of tapering QE sooner than expected, which is one of the only things propping up the riskier assets. Stocks didn't follow through, which leaves me suspicious. The Yen crosses were actually up (although in a much more muted fashion than USD/JPY). But the most telling sign comes from EUUSD. I'm gonna get a little ahead of myself here and take a page from Jamie Saettele's book (DailyFX). EUUSD and USD/CHF have always been highly negatively correlated. That correlation breaks down sometimes, but it's usually there. When we have highly correlated assets, we can look to the correlated asset for confirmation of a big move in the first asset. A good example is gold and silver. If gold makes a new high but silver does not confirm that new high with its own, then chances are the next move in gold is down. So if we get a night high in USD/CHF, we're looking for a new low in EUUSD. And we got it. Price went briefly down to 1.2950. Here's the 8hr chart of EUUSD showing USD/CHF in white: http://i.imgur.com/Xmcn3Bq.png So the next move for both of these, in the medium term, is probably a continuation of Friday's moves. However, as you can see EUUSD looks to be bouncing off its trendline, and USD/CHF failed to break close above the larger wedge top. This leaves some doubt as to this week's likely moves. USD/CHF Trade Set Ups There's a case for both bulls and bears. If you believe that this dollar move was impulsive and likely to retrace, there are sell signals aplenty. Trade would be simple: Sell at market, with a stop above 0.963, targeting 0.945 initially (former wedge top which could act as interim support) and then 0.9300 (ascending wedge bottom). However, I believe that what is happening is something of a paradigm shift, as investors finally start to click that their best chance of reliable yield is in US Treasuries. I would like to see the move confirmed by a EUUSD trendline break, and a similar move from the S&P500. If we do get that, expect the larger wedge to break, and for this pair to enjoy a lot more upside. I am currently long from 0.9271. I took a third off at 0.94, another third off at 0.9550, my final target is open, and I am so fucking smug right now. I added at 0.9520, and will add a final third (bringing me back to the original position size) if we see the 0.9500/0.9460 area again. I intend to hold this trade until I am stopped out, either by a full retracement, or because my trailing stop was hit. I will trail the stop manually whenever new lows are formed. This means I will be trailed out by the creation of a lower low - an indication that party time is over. Happy trading!
Candle magick and color magick are two simple, powerful forms of magic used by beginners and experts alike. (We once published a list of color meanings in a product description, and it quickly became the most viewed page on the website.) Each color carries a different energy frequency. In spellwork, the energy of colors is used to generate a specific response in the magick worker, and to ... Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not ... Russia Discusses Option of Delaying OPEC+ Cuts Taper by 3 Months. Breaking News . Quotes. All Instrument Types. All Instrument Types; Indices; Equities; ETFs; Funds; Commodities; Currencies; Crypto; Bonds; Certificates; No results matched your search. Search website for: Popular News. More. Election Day, Futures Surge on Sweep Hopes, API Due - What's up in Markets . Factbox: A Biden presidency ... Forex Tools; Tips for Forex Traders; Basics; Forex Conventions; News. Forex News; Opinions; Forex Industry; Forex Bits; Daily; Weekly Forecasts. Major Events Outlook; EUR/USD forecast; GBP/USD Forecast; USD/JPY Forecast; AUD/USD Forecast; USD/CAD Forecast; Live Calendar; Subscribe; You are at: Home » Opinions » The Taper Caper. The Taper Caper 6. By Yohay Elam Published: Jul 14, 2013 13:08 ... The basics of tape reading can be learned in a few minutes, but the practice takes a lifetime to master, for three reasons. First, the market is enormously complex, requiring many years of ... Glossary > Accounting > taper relief. taper relief. noun. the relief for capital gains on assets sold after being held for some period of time. The longer the assets have been held, the more relief is given against capital gains. Browse by Subjects. MORE Taxes Mutual Funds Accounting Investor Resources Forex Popular Terms In Accounting. Puttable. Deferred option month. defalcation. Official ... Category: Best Forex Blog on The Planet; No Comments . Candlestick patterns – 21 easy patterns ( and what they mean ) A monster Guide you will ever need! Here’s the deal learning just a few key candlestick patterns WILL improve your ability to recognize trading opportunities and, enter better trades! The Japanese have been using these patterns for centuries, to trade rice of all things! so ... I think Adam has nailed it on the proverbial button with his post but while bonds and stocks seem to have made their minds up the Forex market is still running around with it’s arse on fire. The allure of forex day trading is that you can trade 24-hours a day. Unfortunately, that doesn't mean you should. Day traders should only trade a forex pair when it's active and there's lots of volume and transactions occurring. The EUR/USD has certain hours which are acceptable for day trading because there is enough volatility to generate profits, which are likely higher than the cost of ... Forex Update: As of 20:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.49% 🇯🇵JPY: 0.42% 🇬🇧GBP: 0.39% 🇦🇺AUD: 0.07% 🇨🇭CHF: 0 ...
Price Action: How to trade the exhaustion candlestick on binary options w/ candlestick psychology
Bullish reversal pattern mean a stock can convert into downtrend zone from uptrend zone in future. One of the most popular candlestick patterns for trading forex is the doji candlestick (doji ... Bullish reversal pattern mean a stock can convert into downtrend zone from uptrend zone in future. One of the most popular candlestick patterns for trading forex is the doji candlestick (doji ... Bullish reversal pattern mean a stock can convert into downtrend zone from uptrend zone in future. One of the most popular candlestick patterns for trading forex is the doji candlestick (doji ... Bullish reversal pattern mean a stock can convert into downtrend zone from uptrend zone in future. One of the most popular candlestick patterns for trading forex is the doji candlestick (doji ... Bullish reversal pattern mean a stock can convert into downtrend zone from uptrend zone in future. One of the most popular candlestick patterns for trading forex is the doji candlestick (doji ... Bullish reversal pattern mean a stock can convert into downtrend zone from uptrend zone in future. One of the most popular candlestick patterns for trading forex is the doji candlestick (doji ... Bullish reversal pattern mean a stock can convert into downtrend zone from uptrend zone in future. One of the most popular candlestick patterns for trading forex is the doji candlestick (doji ...