Please note and carefully read the Important Disclosure on the last page Daily FX & Market Commentary Nov 21, 2014 Market Recap Published from Tuesday to Friday • U.S. stocks rose slightly: S&P 500 Index Table: Daily Market Movement (Nov 20, 2014) rose 0.2% to 2,053, led by energy and small- Equity Market Indices Close Change % Commodity Futures cap shares, as Best Buy (BBY) jumped 7% U.S. Energy & Metals 2,052.75 +4.0 +0.2% WTI Crude Oil (USD/bbl) after reporting better-than-expected earnings S&P 500 Index Dow Jones Industrial Average 17,719.00 +33.3 +0.2% Brent Crude (USD/bbl) results on strong sales for televisions and NASDAQ Composite Index 4,701.87 +26.2 +0.6% Natural Gas (USD/MMBtu) tablets. COMEX Gold (USD/oz) Europe Stoxx Europe 600 Index 338.28 -0.9 -0.3% LME Copper (USD/MT) • Oil prices rose : WTI and Brent Crude DAX Index 9,483.97 +11.2 +0.1% Bond Yields & CNY Futures rose 1.3% and 1.6% to $75.6 and Japan U.S. Treasuries - Yields $79.3 respectively, as market weighs TOPIX Index 1,397.64 +1.1 +0.1% 3-Month - Yield (%) possibility of OPEC cutting crude production Nikkei 225 Stock Average 17,300.86 +12.1 +0.1% 5-Year - Yield (%) 10-Year - Yield (%) China / Hong Kong at the next meeting on Nov 27. Hang Seng Index 23,349.64 -23.7 -0.1% 30-Year - Yield (%) • Hong Kong/ China stocks fell Hang Seng China Enterprises 10,379.43 -1.1 0.0% USD/CNY slightly: Hang Seng Index fell 0.1% and CSI Shanghai SE Composite 2,452.66 +1.7 +0.1% China Renminbi Spot 300 Index closed flat as China’s November Data Source: Bloomberg L.P. HSBC flash manufacturing PMI edged down to a six-month low of 50.0 (lower than market expectation of 50.2). Close % 75.58 79.33 4.49 1,190.9 +1.3% +1.6% +2.7% -0.3% 6,685.0 0.0% Close Change 0.00 0.00 1.63 -0.01 -0.02 2.34 3.05 -0.02 Close % 6.13 +0.1% Hot News: New hotel supply may be next catalyst for Macau gaming Chart: Composition of China visitation Year-to-date Source: Citi Research, as of November 14, 2014 Macau extends operating hours at two borders • Macau government announced yesterday the extension of the operating hours at both the Lotus Bridge border and the Gongbei border, according to media reports. • Beginning on December 18, the Lotus Bridge will open 24 hours a day (currently 9am to 8pm) while the Gongbei border will operate from 6am to 1am (currently 7am to midnight). Citi analysts’ view: • The extension in operating hours may be positive in bringing more Guangdong visitors to Macau as it sources around 40% of visitors from China. (Chart) • Moreover, the new operating hours could lead to more rapid infrastructure development in Hengqin. • On Macau gaming sector, October gross gambling revenue (GGR) had fallen 23% year-on-year to MOP28bn as VIP revenue fell 31% from last year. • Citi analysts believe GGR growth in Macau may remain sluggish for 2014 and for most of 1H 2015 due to contracting VIP business and hotel shortage. • Mainland visitation growth this year had been driven by the accelerating non-hotel guest growth as many visitors could not find a room to stay. • Indeed, Macau casino operator had confirmed that there is still demand as reflected by the 98-100% occupancies at major properties. • The next catalyst for Macau stocks may come with new hotel supply in April or May next year. Citi analysts maintain their positive stance on the Macau gaming sector. © 2014 Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 1 Please note and carefully read the Important Disclosure on the last page Daily FX & Market Commentary FX & Commodity Technical Corner YESTERDAY PERFORMANCE FX TREND TECHNICAL CCY USD EUR/USD USD/JPY GBP/USD USD/CAD AUD/USD NZD/USD USD/CHF USD/SGD GOLD Close Price Day High Day Low 87.65 1.2539 118.21 1.5692 1.1305 0.8620 0.7869 0.9584 1.3003 1193.88 87.78 1.2575 118.98 1.5737 1.1369 0.8641 0.7882 0.9606 1.3099 1197.18 87.35 1.2504 117.74 1.5632 1.1293 0.8567 0.7807 0.9553 1.2992 1176.93 Short Term Comment Bullish Bearish Bullish Neutral Bullish Neutral Neutral Neutral Neutral Neutral Support Resistance 84.75 1.2223 115.84 1.5590 1.1180 0.8541 0.7661 0.9156 1.2868 $1,032 88.70 1.2679 120.00 1.5858 1.1446 0.8911 0.8052 0.9839 1.3138 $1,200 Citi Foreign Exchange Forecast: 0-3 Months 87.59 1.23 109.00 1.60 1.15 0.86 0.77 0.98 1.28 1200 6-12 Months 92.65 1.15 115.00 1.51 1.18 0.80 0.72 1.05 1.30 1240 FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm) • USD rose: U.S. CPI stayed flat in Oct and Core figure rose 0.2%, both topped market estimates. • GBP climbed: U.K. Retail Sales rose strongly from -0.4% to +0.8% in Oct, topped market expectations. • EUR weakened: Eurozone Manufacturing PMI fell from 50.6 to 50.4, trailed market estimates. Daily FX Focus EUR/USD may fall further to 1.2223: 1.2679 (55MA) 1.2223 (200month MA) EUR Outlook: • The flash composite PMI fell by 0.7pt to a 16-month low of 51.4, below its long-term average. The flash manufacturing PMI fell to 50.4 and services PMI fell by 1.0pt to a 12-month low of 51.3. • Economic activity expanded at a slower pace in Nov. All estimates were below the consensus, confirming that GDP growth is likely to have slowed further in the fourth quarter, with the absence of inflation. • Likely lower fresh staff projections for inflation/GDP at Dec 4 meeting is lowering the bar for further easing and introducing greater potential for renewed EUR downside. Source: Bloomberg L.P., data as of Nov 21, 2014 Technical Analysis: • The 200 month moving average has held all major corrections lower in EURUSD since 2005. • For now we think there is the potential for one more low on EURUSD this year close to that moving average at 1.2223, with next support at 1.2043. NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD. © 2014 Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 2 Please note and carefully read the Important Disclosure on the last page Daily FX & Market Commentary GBP/USD may trade inside 1.5590-1.5858: 1.5858 (20MA) 1.5590 (Wed low) Source: Bloomberg L.P., data as of Nov 21, 2014 Technical Analysis: • 1)Stay below 20MA; 2)RSI: turning up from oversold region; 3)Stochastic oscillator: oversold condition. • Technical signals suggest GBP/USD may hold above Wed low at 1.5590 and trade inside the range 1.5590-1.5858. Recap: • GBP was supported yesterday as U.K. retail sales in Oct came in at 0.8% MoM and 4.3% YoY, much better than -0.4% and 2.3% in Sep. GBP Outlook: • The data suggests the U.K. economy remains robust despite the slowdown in global economy. • The recent falling commodity prices may lower the price level in U.K., which may support the domestic demand in U.K. • The strong economic outlook may raise the expectation of early rate hike by the BoE. • Citi analysts believe the BoE may start rate hike in Q2 2015, which may support the GBP. EUR/GBP may hold below 0.8053 and drop to 0.7767 : 0.8053 (200MA) 0.7767 (Sep low) Source: Bloomberg L.P., data as of Nov 21, 2014 Recap: • EUR/GBP fell yesterday on weakness PMIs from Eurozone. EUR/GBP Outlook: • GBP may outperform due to the strong U.K. retail sales data and also the balanced BoE minutes. • The weak PMIs data, together with the low inflation risk, may fuel expectation that the ECB may need to add further QE measures. • Citi analysts expect the additional QE by the ECB may be announced in Q1 2015, which may pressure the EUR further lower. Technical Analysis: • 1) RSI: turning down from overbought region; 2) Being capped below 200 MA • Technical signals show EUR/GBP may hold below 200MA at 0.8053 and the pair may drop toward Sep low at 0.7767. NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD. © 2014 Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 3 Daily FX & Market Commentary Important Economic Data (Nov 17, 2014 – Nov 21, 2014) Time Importance Event NZ !! Retail Sales Ex Inflation QoQ 11/17/2014 07:50 JN !!! 11/17/2014 21:30 CA ! 11/17/2014 22:15 US ! Industrial Production MoM 11/18/2014 08:30 AU !! RBA Minutes of Nov. Meeting 11/18/2014 17:30 UK !!! CPI YoY 11/18/2014 18:00 GE !! ZEW Survey Expectations Period Actual Survey Prior 1.10% Monday 11/17/2014 05:45 3Q 1.50% 0.80% GDP Annualized SA QoQ 3Q -1.60% 2.20% -7.30% Int'l Securities Transactions Sep 4.37B 7.00B 10.29B Oct -0.10% 0.20% 0.80% Oct 1.30% 1.20% 1.20% Nov 11.5 0.5 -3.6 Tuesday Nov Wednesday 11/19/2014 05:00 US ! Total Net TIC Flows Sep -$55.6B -- $44.8B 11/19/2014 07:30 AU ! Westpac Leading Index MoM Oct 0.03% -- -0.05% 11/19/2014 17:00 EC !! ECB Current Account SA Sep 30.0B -- 22.8B 11/19/2014 17:30 UK !! Bank of England Minutes Nov 11/19/2014 21:30 US !! Housing Starts MoM Oct -2.80% 0.80% 7.80% 11/19/2014 21:30 US !! Building Permits MoM Oct 4.80% 0.90% 2.80% Thursday 11/20/2014 07:50 JN !! Trade Balance Adjusted Oct -¥977.5B -¥1100B -¥1067.7B 11/20/2014 09:45 CH !! HSBC China Manufacturing PMI Nov 50.0 50.2 50.4 11/20/2014 17:00 EC !! Markit Eurozone Manufacturing PMI Nov 50.4 50.8 50.6 11/20/2014 17:30 UK !! Retail Sales Ex Auto YoY Oct 4.60% 4.20% 2.80% 11/20/2014 17:30 UK !! Retail Sales Incl. Auto YoY Oct 4.30% 3.80% 2.30% 11/20/2014 21:30 US !!! CPI YoY Oct 1.70% 1.60% 1.70% 11/20/2014 21:30 US !! Initial Jobless Claims Nov 291K 284K 293K 11/20/2014 23:00 US !! Existing Home Sales MoM Oct 1.50% -0.40% 2.60% 11/21/2014 21:30 CA !! CPI YoY Oct -- 2.00% 2.00% 11/21/2014 21:30 CA !! CPI Core YoY Oct -- 2.20% 2.10% Friday For any enquiries, please call (852) 2860-0333. Source: Source: Bloomberg L.P. (K = Thousand, M = Million, B = Billion) This document is based on information provided by Citigroup Investment Research, Citigroup Global Markets, Citigroup Global Wealth Management and Citigroup Alternative Investments. It is provided for your information only. It is not intended as an offer or solicitation for the purchase or sale of any security. Information in this document has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any decision to purchase securities mentioned herein should be made based on a review of your particular circumstances with your financial adviser. Investments referred to in this document are not recommendations of Citibank (Hong Kong) Limited (“Citibank”) or its affiliates. Although information has been obtained from and is based upon sources that Citibank believes to be reliable, Citi analysts do not guarantee its accuracy and it may be incomplete and condensed. All opinions, projections and estimates constitute the judgment of the author as of the date of publication and are subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. Past performance is no guarantee of future results. The document is not to be construed as a solicitation or recommendation of investment advice. Subject to the nature and contents of the document, the investments described herein are subject to fluctuations in price and/or value and investors may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal the amount invested. Certain investments contained in the document may have tax implications for private customers whereby levels and basis of taxation may be subject to change. Citibank does not provide tax advice and investors should seek advice from a tax adviser. Investment products: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested. Citi Foreign Exchange: Forecasts are a joint venture between Citi’s foreign exchange, global macro and technical strategy groups and our developed and emerging markets economists. Under normal circumstances, we expect to present Forecasts on a monthly schedule although we may offer intra month updates if circumstances dictate. Technical Trend: All views, opinions and estimates derived from CitiFX Technicals (i) may change without notice and (ii) may differ from those views;, opinions and estimates held or expressed by Citi or other Citi personnel, including Citi Foreign Exchange: Forecast. Should CitiFX Technicals not cover any major currency pairs, the indication of short-term technical "bullish", "bearish", or "neutral" trends will be based on the result of analysis with various widely known short-term technical analysis tools, namely RSI, MACD, fibonacci, stochastics, bollinger bands, and simple moving averages. 4