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Citibank Wealth Management
Weekly Investment Insight
January 19, 2015
with data as of January 16
Weekly Market Review
Market Insight
• Market Overview
02
• Weekly Commentary
• Equity
03
• Hong Kong Stocks
• Bond & Commodities
04
Update & Sector Outlook
Please note and carefully read the Important Disclosure on the last page
Citi analysts’ forecasts
05
06
• Equity Index
07
• Commodities
08
• Foreign Exchange
09
Citibank Wealth Management
Market Review
Weekly Investment Insight
Europe:
Market Overview
S&P 500 Index
Switzerland ends the CHF/Euro peg: The Swiss franc
surged as the Swiss National Bank (SNB) said the 1.20-pereuro limit that was in force since Sep 2011 was no longer
justified. The Swiss Market Index (SMI) of equities slid
13.3% during the week
•
OMT won a legal endorsement: European Central Bank
won a legal endorsement for the bond-buying plan after the
Outright Monetary Transactions program won the
conditional backing of Advocate General Pedro Cruz
Villalon of the EU Court of Justice in Luxembourg.
-1.2%
STOXX Europe 600
4.3%
-1.9%
Hang Seng Index
HSCEI
0.8%
0.0%
Shanghai Comp.
2.8%
US Gov't Bond Index ^
0.8%
World IG Corp Bond Index ^
US HY Bond Index ^
US Dollar Index
WTI Crude Oil Futures
U.S.:
0.4%
• Retail sales fell: U.S. retail sales fell 0.9% in December, the
most in 11 months, following a 0.4% advance in November.
-0.4%
0.6%
COMEX Gold Futures
Source: Bloomberg L.P., as of January 16, 2015
^Reference Indices: Citigroup Bond Indices Series
5.0%
0.7%
Market Overview
•
Forecasts
•
Chart 1: Weekly Market Performance
Nikkei 225
Market Insight
Key Economic Releases / Events over the Week
Weekly Market Review
•
The Stoxx Europe 600 Index climbed 4.3% amid
speculation the Swiss National Bank to end a cap on
the franc strengthens the case for quantitative easing
by the European Central Bank this week.
Gold gained 5% as the weakness in European
currency markets spurred demand for the metal as
safe haven.
Asia
• India: Following the benign December inflation prints, the
RBI commenced its easing cycle, cutting the repo rate by
25bps to 7.75%.
• Korea: The Bank of Korea held the seven-day repurchase
rate at 2%, a record low, as it assesses the impact of
slumping oil prices and currency volatility.
• China: In USD terms, China’s exports and imports in last
month grew 9.7%yoy and -2.4%yoy, sizably better than the
consensus forecasts of 6%yoy and - 6.2%yoy, respectively.
Please note and carefully read the Important Disclosure on the last page
2015-01-19
2
Citibank Wealth Management
Forecasts
Market Insight
Market Review
Weekly Investment Insight
Market Insight
Outlook for Asia remains positive
on strong fundamentals
China and India may lead Asian markets higher
•
•
Key Points
•
Some investors’ concerns remain on potential tighter
funding conditions in Asia when U.S. raise rates.
•
While fundamental improvements are observed in the
current account deficit Asian countries, flexibility in
monetary policies may also help act as buffer for
future higher funding costs.
•
India and China have acted decisively in policy easing,
which along with continual structural improvements
may lead Asian markets higher this year.
Policy flexibility to further buffer against stronger USD
• Investors’ concerns remain on potential tighter funding
conditions in Asia when U.S. raise rates especially for
current account deficit countries.
•
•
•
•
In China, as inflation had stayed low, Citi analysts believe following
the first rate cut in two years last Nov, we may soon the next one,
possibly following another weak inflation reading in January.
The recent run-up in A-shares (CSI 300) may imply the market has
already priced in a good extent of the expected high single-digit
growth in earnings plus the re-rating positives coming from the
policy loosening and reforms progress side.
Good opportunities still exist in H-shares given the current valuation
discount against A-shares.
Last Thursday, Reserve Bank of India also announced a cut in its
Repo rate by 25bps to 7.75%, officially kick-starting its easing cycle.
Macro fundamentals have been turning more positive in India as
lower oil prices have enabled it to achieve an improvement in its
current account deficit, fiscal balances and bring about more
meaningful reforms (eg. fuel price reform).
Both China and India are expected to benefit from cyclical policy
easing and structural improvements and may lead Asian equities
higher this year.
Chart 2: Asia’s Economic Fundamentals VS Emerging Market Peers
• Asia has stronger fundamentals versus its emerging
market peers (see Chart 2), including a current account
surplus of 2.7% of GDP. Deficit countries like India and
Indonesia are also seeing fundamental improvements
(especially in India) which may act as buffer.
• Like China, India has the ability to limit the degree of FX
volatility is relatively high given ample foreign reserves and
improving current account flows.
• Moreover, the two has demonstrated the flexibility to ease
monetary policy to offset the further higher USD pressure.
Source: Bloomberg data, as of January 16, 2015
Please note and carefully read the Important Disclosure on the last page
2015-01-19
3
Citibank Wealth Management
Market Insight
Market Review
Weekly Investment Insight
Weekly Market Review
Equity
•
U.S. stocks: The S&P 500 Index fell 1.2% as
corporate earnings disappointed.
•
During the week, Bank of America tumbled to the
lowest level since August after the second-largest U.S.
lender said fourth-quarter profit fell 11%. Best Buy
Inc., the largest U.S. electronics retail chain, slid
8.1% after saying price pressure and sluggish
demand will lead to a sales slump in the first half of
the year.
•
According to Bloomberg, profit for companies in S&P
500 index may expand 0.8% in the fourth quarter.
•
Indian stocks: The BSE Sensex climbed 2.4% last
week after Reserve Bank of India unexpectedly cut
interest rates to help revive economic growth.
Forecasts
Week Ahead: ECB meeting & U.S. earnings
•
•
ECB meeting - Jan 22: Citi analysts anticipate the
ECB to widen the scope of its purchase program by
EUR600bn, and this may include government bonds.
U.S. stocks’ earnings – Jan 20: Morgan Stanley,
Johnson & Johnson, IBM. Jan 21: eBay Inc. Jan 23:
McDonald's Corp
Chart 3: Equity Market Performance
Equity
Global / US
MSCI AC World Index
S&P 500 Index
Dow Jones Industrial Average
Russell 2000 Index
Europe
STOXX 600
FTSE 100 Index
DAX Index
CAC 40 Index
Japan
Nikkei 225
Asia
MSCI Asia ex Japan
Shanghai Composite
Hang Seng Index
Hang Seng China Enterprise Index
Taiwan TAIEX Index
Kospi Index
BSE Sensex 30 Index
Jakarta Composite Index
Straits Times Index
FTSE Bursa Malaysia KLCI
SET Index
Latin America
Brazil Ibovespa Index
Mexico IPC Index
Emerging Europe
Russia RTS Index $
Weekly
Change
Change (%)
1-Week 3-Month
YTD
409.6
2,019.4
17,511.6
1,176.7
-2.1
-25.4
-225.8
-9.0
-0.5%
-1.2%
-1.3%
-0.8%
4.5%
8.4%
8.7%
8.4%
-1.8%
-1.9%
-1.7%
-2.3%
352.4
6,550.3
10,167.8
4,379.6
+14.5
+49.1
+519.3
+200.6
4.3%
0.8%
5.4%
4.8%
13.7%
5.7%
18.5%
11.8%
2.9%
-0.2%
3.7%
2.5%
16,864.2
-333.6
-1.9%
14.4%
-3.4%
569.1
3,376.5
24,103.5
12,076.7
9,138.3
1,888.1
28,121.9
5,148.4
3,300.7
1,743.6
1,517.7
+2.6
+91.1
+183.6
-4.5
-77.3
-36.6
+663.5
-68.3
-37.8
+11.1
-11.7
0.5%
2.8%
0.8%
0.0%
-0.8%
-1.9%
2.4%
-1.3%
-1.1%
0.6%
-0.8%
3.6%
43.3%
5.3%
18.6%
5.8%
-1.6%
8.2%
4.0%
4.6%
-1.4%
-0.6%
0.9%
4.4%
2.1%
0.8%
-1.8%
-1.4%
2.3%
-1.5%
-1.9%
-1.0%
1.3%
49,016.5
41,402.0
+176.3
-980.4
0.4%
-2.3%
-9.7%
-3.5%
-2.0%
-4.0%
769.8
-12.8
-1.6%
-26.4%
-2.6%
Source: Bloomberg L.P., as of January 16, 2015
Please note and carefully read the Important Disclosure on the last page
2015-01-19
Market
Close
4
Citibank Wealth Management
Market Insight
Market Review
Weekly Investment Insight
Weekly Market Review
Bond & Commodities
•
5.3% to $48.7 a barrel, its first weekly gain (+0.7%)
since November. Non-OPEC oil producers will boost
output this year at a slower rate than previously
forecast, aiding a recovery in crude prices, the
International Energy Agency said in its monthly
market report.
•
U.S. 10 year Treasury yield fell: 10-year Treasury
yield dropped 11bps to 1.84% as a report showed
consumer-price inflation eased in December by the
most in six years.
•
Forecasts
Oil prices rose: On Friday, WTI crude futures rose
Gold futures rose: Gold prices posted the biggest
weekly gain in 18 months (+5%) on speculation of
further ECB easing while muted inflation and stagnant
foreign economies may prompt the Federal Reserve
to delay an increases in interest rates.
Chart 4: Bond and Commodities Performance
Fixed income
Bond Indices
Citigroup US Gov't Bond Index
Citigroup WBIG - Corporate Index
Citigroup Global EM Sovereign USD
Citigroup High Yield Market Index
JACI Non-Investmenty Grade Corp.
800.8
250.5
682.1
832.0
Weekly
Change
+6.0
+0.9
-0.6
-3.5
n/a
Change (%)
1-Week 3-Month
0.8%
0.4%
-0.1%
-0.4%
n/a
YTD
2.0%
1.8%
-1.5%
-0.6%
n/a
1.8%
1.2%
-0.3%
-0.2%
n/a
Change in Yield (in bps)
US Treasury Yields
3-Month - Yield (%)
2-Year - Yield (%)
5-Year - Yield (%)
10-Year - Yield (%)
30-Year - Yield (%)
Commodity
Energy
WTI Crude Futures ($/barrel)
Brent Crude Futures ($/barrel)
Natural Gas Futures (MMBtu)
Base Metals
LME Aluminum Futures ($/MT)
LME Copper Futures ($/MT)
Precious Metals
Comex Gold Futures ($/oz.)
Comex Silver Futures ($/oz.)
0.02
0.48
1.30
1.84
2.45
Market
Close
0
-8
-12
-11
-8
Weekly
Change
-1
+14
-8
-32
-48
-2
-18
-35
-33
-30
Price Change (%)
1-Week 3-Month
YTD
48.7
50.2
3.1
+0.3
+0.1
+0.2
0.7%
0.1%
6.1%
-41.1%
-40.6%
-17.6%
-8.6%
-12.5%
8.2%
1,845.0
5,715.0
+35.0
-375.0
1.9%
-6.2%
-3.6%
-12.8%
-0.4%
-9.3%
1,276.9
17.8
+60.8
+1.3
5.0%
8.1%
2.9%
1.8%
7.8%
14.0%
Source: Bloomberg L.P., as of January 16, 2015
Please note and carefully read the Important Disclosure on the last page
2015-01-19
Market
Close
5
Citibank Wealth Management
Market Insight
Market Review
Weekly Investment Insight
Market Insight
Sector Update: China Property
Hong Kong Stocks Update
Shares in China property developers had a volatile week. China
Overseas Land & Investment (688) led property stocks lower on
Friday after authorities in Shenzhen blocked unit sales by the
company and other developers.
Chart 5: Weekly Top 10 Turnover HSI constituents
Close
Name
Ticker 1/16/2015
HANG SENG INDEX
24,103.52
PING AN INSURANCE GROUP CO-H
2318
88.30
TENCENT HOLDINGS LTD
700
121.90
CHINA MOBILE LTD
941
97.85
HUTCHISON WHAMPOA LTD
13
97.15
CHEUNG KONG HOLDINGS LTD
1
141.10
CHINA LIFE INSURANCE CO-H
2628
31.75
CHINA CONSTRUCTION BANK-H
939
6.38
BANK OF CHINA LTD-H
3988
4.44
HSBC HOLDINGS PLC
5
70.20
AIA GROUP LTD
1299
44.65
Source: Bloomberg L.P., as of January 16, 2015
•
•
Forecasts
Weekly 52-Week 52-Week
Return
High
Low
0.8% 25,362.98 21,137.61
6.2%
88.70
55.60
-4.2%
134.90
93.00
2.9%
102.20
63.65
11.2%
108.50
85.90
13.1%
152.00
105.95
4.3%
32.00
19.72
-1.1%
6.62
4.89
0.0%
4.52
3.03
-1.3%
86.25
69.80
4.0%
45.65
34.65
•
The Hang Seng Index rose 0.8% to 24,103, while
the Hang Seng China Enterprises Index were little
changed at 12,076.
Cheung Kong Holdings (1) and Hutchison
Whampoa (13) surged more than 11% last week
after billionaire Li Ka-shing announced a US$24
billion restructuring of his two main companies.
China Overseas Land & Investment (688) tumbled
as much as 7% before closing down 2.8% on Friday,
while China Resources Land (1109) ended the
week 6.1% lower following reports that authorities in
Shenzhen blocked unit sales by developers.
Citi analysts’ view:
• According to the media, several social welfare housing projects
run by private developers and state-owned developers (i.e.,
COLI, China Merchant Land, COFCO Land, AVIC Real Estate,
etc) in Shenzhen Longgang district are in 'locked' status in the
housing bureau system.
• Citi analysts believe the blockage likely relates to Shenzhen
government’s investigation into the allocation of housing
units, rather than the developers.
• Citi analysts agree that recent incidents relating to the property
market have hurt sentiment toward the sector, especially for
private developers focusing on Guangdong. However, Citi
analysts do not believe it will spill over to SOEs.
• Stability is a top priority now. Any excessive probe into the sector
could lead to panic among developers, halt further investments
and put pressure on GDP growth.
• As such, concerns about a hostile government probe into
the sector are overdone and highly unlikely.
Please note and carefully read the Important Disclosure on the last page
2015-01-19
6
Citibank Wealth Management
Weekly Investment Insight
Forecasts
Market Insight
Market Review
Citi analysts’ Forecasts: Global Equity Index Forecasts
(Remarks: Forecasts as of January 6, 2015)
Region / Index
Global
Global
EM
Past Performance
1-Week 3-Month
YTD
MSCI AC World Local Index
MSCI EM
Developed Countries
U.S.
S&P 500 Index
Dow Jones Ind. Avg.
Europe
Stoxx Europe 600
FTSE 100
Japan
TOPIX Index
Australia
S&P / ASX 200
Asia
Asia ex Japan
China
Hong Kong
Market
Close
Citi analysts' forecasts
Expected
End-2015
Change
Valuation
Forecast P/E ratio
Forecast P/B ratio
2014
2015
2014
2015
-0.8%
-0.4%
7.7%
-1.4%
-1.5%
0.1%
464.8
957.5
525
1,100
13.0%
14.9%
15.0
10.8
13.4
9.6
1.9
1.3
1.8
1.5
-1.2%
-1.3%
4.3%
0.8%
-1.2%
-3.0%
8.4%
8.7%
13.7%
5.7%
14.1%
0.8%
-1.9%
-1.7%
2.9%
-0.2%
-3.1%
-2.1%
2,019.4
17,511.6
352.4
6,550.3
1,363.7
5,299.2
2,200
19,000
400
7,700
1,650
6,000
8.9%
8.5%
13.5%
17.6%
21.0%
13.2%
16.5
15.6
14.5
14.1
14.9
15.1
14.7
14.1
13.0
12.6
13.2
13.8
2.5
2.8
1.7
1.7
1.3
1.8
2.3
2.6
1.5
1.5
1.2
1.8
0.5%
2.5%
0.8%
0.0%
-0.8%
-1.9%
2.4%
3.6%
48.7%
5.3%
18.6%
5.8%
-1.6%
8.2%
0.9%
2.9%
2.1%
0.8%
-1.8%
-1.4%
2.3%
569.1
3,635.1
24,103.5
12,076.7
9,138.3
1,888.1
630
3,700
25,000
12.0
13.3
11.0
8.0
12.8
10.6
17.8
10.8
11.6
9.9
7.2
12.0
9.4
15.1
1.4
2.0
1.2
1.1
1.7
1.0
2.8
1.3
1.7
1.2
1.0
1.6
0.9
2.5
-1.3%
-1.1%
0.6%
-0.8%
4.0%
4.6%
-1.4%
-0.6%
-1.5%
-1.9%
-1.0%
1.3%
28,121.9
5,148.4
3,300.7
1,743.6
1,517.7
10,000
2,150
33,000
10.7%
1.8%
3.7%
9.4%
13.9%
17.3%
5,925
3,416
1,940
1,730
15.1%
3.5%
11.3%
14.0%
14.8
13.5
15.5
14.2
12.7
12.3
14.2
12.4
2.6
1.2
1.9
2.0
2.2
1.2
1.8
1.8
60,000
50,300
22.4%
21.5%
10.6
17.5
8.9
15.1
1.1
2.3
1.1
2.1
-
3.0
2.7
0.3
#N/A N/A
Taiwan
South Korea
MSCI Asia ex Japan
CSI 300 Index
Hang Seng Index
Hang Seng China Ent Index
Taiwan TWSE Index
KOSPI Index
India
Indonesia
Singapore
Malaysia
Thailand
SENSEX 30 Index
Jakarta Composite Index
Straits Times Index
FTSE Bursa Malaysia KLCI
SET Index
Latin America
Brazil
Mexico
Ibovespa Index
BOLSA IPC Index
0.4%
-2.3%
-9.7%
-3.5%
-2.0%
-4.0%
49,016.5
41,402.0
Eastern Europe
Russia
RTS Index $
-1.6%
-26.4%
-2.6%
769.8
-
-
Source: Bloomberg L.P. and Citi Forecasts, performance and market data as of January 16, 2015
Please note and carefully read the Important Disclosure on the last page
2015-01-19
7
Citibank Wealth Management
Weekly Investment Insight
(Remarks: Forecasts as of January 6, 2015)
Forecasts
Market Insight
Market Review
Citi analysts’ Forecasts: Commodity Future Price Forecasts
Please note and carefully read the Important Disclosure on the last page
2015-01-19
8
Citibank Wealth Management
Weekly Investment Insight
Forecasts
Market Insight
Market Review
Citi analysts’ Forecasts: Foreign Exchange Forecasts
(Remarks: Forecasts as of January 16, 2015)
Past Performance (vs. USD)
1-Week
3-Month
YTD
Major Pairs
Euro
Japanese Yen
British Pound
Swiss Franc
Australian Dollar
New Zealand Dollar
Canadian Dollar
Dollar Index
Asia
Chinese Renminbi
Indonesian Rupiah
Indian Rupee
Korean Won
Malaysian Ringgit
Philippine Peso
Singapore Dollar
Thai Baht
Taiwan Dollar
EMEA
Czech Koruna
Hungarian Forint
Polish Zloty
Israeli Shekel
Russian Ruble
Turkish Lira
South African Rand
Latin America
Brazilian Real
Chilean Peso
Mexico Peso
Colombian Peso
Market
Close
Citi analysts' forecasts
Expected Change
0-3 Months 6-12 Months
(6-12 Months)
-2.3%
0.8%
-0.1%
18.1%
0.2%
-0.6%
-1.0%
0.6%
-9.7%
-9.5%
-5.8%
9.8%
-6.1%
-2.1%
-6.1%
8.9%
-4.4%
1.9%
-2.7%
15.8%
0.6%
-0.1%
-3.0%
2.5%
1.1567
117.51
1.5150
0.8587
0.8223
0.7790
1.1984
92.52
1.15
116
1.53
0.83
0.82
0.77
1.19
92.54
1.10
130
1.47
0.95
0.72
0.67
1.25
97.95
-4.9%
-9.6%
-3.0%
-9.6%
-12.4%
-14.0%
-4.1%
5.9%
0.0%
0.5%
0.7%
1.2%
0.1%
0.6%
0.5%
0.9%
1.2%
-1.4%
-2.6%
0.0%
-1.5%
-7.7%
0.7%
-4.0%
-0.4%
-3.7%
0.0%
-1.6%
1.9%
1.3%
-1.7%
0.1%
-0.1%
1.1%
0.3%
6.2078
12590
61.87
1077
3.56
44.68
1.33
32.54
31.55
6.22
12750
62.5
1100
3.65
45.2
1.35
33.2
31.9
6.30
13200
64.0
1140
3.67
46.0
1.37
33.6
32.2
-1.5%
-4.6%
-3.3%
-5.5%
-3.0%
-2.9%
-3.1%
-3.1%
-2.0%
-1.4%
-2.8%
-3.3%
-0.1%
-5.0%
-1.3%
-0.5%
-10.9%
-12.8%
-11.4%
-6.2%
-37.4%
-2.7%
-3.7%
-5.1%
-4.9%
-4.9%
-1.1%
-7.0%
0.4%
0.2%
24.09
275.22
3.73
3.94
65.31
2.33
11.55
3.95
64.2
2.35
11.60
4.10
63.2
2.50
12.10
-3.8%
3.3%
-7.0%
-4.5%
0.4%
-2.1%
0.3%
2.1%
-5.7%
-6.0%
-6.9%
-12.6%
1.3%
-3.4%
1.3%
0.4%
2.62
628.10
14.56
2,368.00
2.75
630
14.8
2450
2.90
630
14.2
2500
-9.6%
-0.3%
2.5%
-5.3%
Source: Bloomberg L.P. and Citi Forecasts, performance and market data as of January 16, 2015
Please note and carefully read the Important Disclosure on the last page
2015-01-19
9
Citibank Wealth Management
Weekly Investment Insight
Important Disclaimer
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.
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