[B]- [/B][B]Chinese Officials Will Fight Until The End, Trade War Speculation Emerges[/B]
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[B]Straits Times Index Declines On Higher Crude Oil, CapitaLand Shaes Gain[/B]
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[B]Hong Kong And China[/B]
Further suppression of Chinese yuan strength continued during the session as Wu Yi, Chinas most senior trade official, pledged to fight current WTO sanction submissions by the US. Stating that officials will be fighting until the end, Wu accused US policymakers as ignoring recent efforts by the Chinese government to crack down on piracy and trademark infringements. As late as last month, Chinas government has instituted increased pressure on copyright infringement, which costs the US entertainment industry billions of dollars in revenue. Currently, the State Intellectual Property Office is revising current laws, hoping to create stricter standards throughout the country in the near term. Chinas government is strongly dissatisfied with the move, but we have decided to play by the WTO rules and respond actively on this issue. We will fight to the end. Incidentally, the most recent comments underscore the potential for a trade war as Chinese officials have been rather quiet until now. The stricter stance is boosting speculation that revaluation is an unlikely scenario, helping to weaken the underlying currency. Now trading at 7.7269, the currency may be under further pressure heading into the London session.
With a dearth of data, the Hong Kong dollar was under pressure despite an advancing stock market. The USDHKD currency pair rose as high as 7.8174 in New York, breaking through key resistance at the 7.8150 figure. Hong Kong shares rose, led by major oil producers after crude oil contracts tested the $66 a barrel price. Companies like Cnooc Ltd. gained, with shares adding 2 cents to close at HK$6.82. PetroChina shares also gained on the day, rising 0.1 percent to HK$9.02. Countering overall market optimism, however, were exporters. With oil prices higher, concerns emerged over the likelihood that US consumption would deteriorate. As a result, Li & Fung, which sells goods directly to Wal-Mart stores, dipped 45 cents to close at HK$25.00. Notably, China Life stock resumed trading after yesterdays suspension. Shares were halted yesterday after it was revealed that the company plans to sell 19.9 percent of itself to Citigroup, according to the Hong Kong Economic Journal. Ultimately, the Hang Seng was able to add 16.23 points to close higher at 20,572.80.
[B]USDHKD Rises Further[/B]
Breaking through topside barriers in the overnight, the USDHKD is looking top heavy, with momentum indicators backing the notion. Stochastic is showing a death cross as MACD continues on a divergent histogram. As a result, barriers up top at the 7.8185 resistance trendline are likely to cap gains in the near term with a break below the 7.8150 (50 hMA) maintaining the sell bias. Further downside momentum will be dependant on the strength of levels at the 7.8141 (100 hMA) and 7.8136 (200 hMA).
[B]Singapore[/B][B] Dollar[/B]
The Singapore dollar was also under pressure in the overnight. However, rebounded during the New York session to trade higher at 1.5138 against the US dollar. Although economic data was absent to push the currency higher, markets continue to speculate on a modest and gradual appreciation in the underlying currency without much opposition from the Monetary Authority of Singapore. The price action was, surprisingly, counter the stock market. In the overnight, Singapore stocks declined, breaking a three day streak as transportation and exporting stocks suffered on higher oil prices. However, the losses were limited as traders picked up developer stocks, still the favored investment in the regional market. Singapore Airlines led decliners as higher crude prices are likely to erode the companys bottom line as costs continue to climb. Incidentally, fuel costs contribute to 37 percent of the companys spending in the fourth quarter last year. Shares of the worlds largest carrier by market value, declined by 20 cents to S$18.60. Neptune Orient Lines shares were also in the red as the largest container shipping company is likely to be negatively effected by rising fuel costs. Stock in the company fell 6 cents to S$3.50. Notably, CapitaLand and Keppel Land Ltd. shares were picked up, minimizing any losses in the overall benchmark index. Both companies were higher by 1.2 and 1.8 percent respectively. Ultimately, the stock market was only able to lose 13.96 points to close at 3,374.52, down by just less than half a percent on the day.
[B]Singapore[/B][B] Dollar Weakness Tops Out In London[/B]
Advancing above the 1.5150 figure in the overnight, the USDSGD currency pair has pulled back on profit taking in the New York session. Currently trading at 1.5140, the pair is looking ripe for bidding with momentum indicators confirming the move. Stochastic is beginning to turn in overbought realm with the MACD histogram showing an incremental convergence. Additionally, plenty of support is coming in at the 1.5130 (50/200 hMA) figure. Upside targets remain at the 1.5164 session high and above at the 1.5175 with downside sights at the 1.5100 psychological figure.