Is Canada Set To Join WTO Complaints Against China?

- Chinese Yuan Advances To Record Exchange Rate

  • [B]Is Canada Set To Join WTO Complaints Against  China?[/B]

  • [B]Mutual Fund Assets In China  Surge 33 Percent[/B]

  • [B]Singapore[/B][B] Stocks Lose For Second Straight  Day[/B]

The Chinese Yuan accelerated on the session, setting its highest close since the abolishment of the fixed peg system back in 2005. Rising to trade at 7.7100 against the US dollar, the yuan’s gains were a simple reflection of the weighted average of regional currencies that the country’s central bank refers to. The fact that the currency continues to trade at such record levels further bolsters recommendations by banks and global financial institutions that the underlying spot be allowed to freely float. In the least bit, at least a heavy weighted consideration by policy makers of a widened band should be tested. Incidentally, the appreciation in the yuan would help to increase the price of exports and decrease the price of import. Both notions would help in reducing the current trade surplus and potentially the rampant 3.3 percent inflation currently plaguing the country.

Canada is surprisingly set to join recent WTO complaints posted by the US on China’s lax piracy laws. Also arguing that policy officials remain soft against violators of trademark infringement, Canadian Trade Minister David Emerson has decided to join “as a third party so we can learn a little bit more about what the Chinese are doing.” Emerson additionally told reporters that Japan may be ready to “join the fray” as concerns over intellectual property rights will more than likely place increased pressure on the Chinese government to further revise legislation.

Mutual Fund Assets In China jumped 33 percent to more than $130 billion in the first quarter. Sparked by an accelerating stock market, investors shifted capital to higher risk investments, shying away from the more orthodox savings account. The move boosted fund assets, which incidentally have grown to 1.14 trillion yuan in the first quarter compared with 856.45 billion yuan in the previous quarter with a majority allotted to equity related funds. Subsequently, China’s benchmark stock market is the world’s best performer more than doubling in the past twelve months. The increase in funds is a true sign that investors are clamoring for higher rates of return as the current interest rate offered by savings accounts remain next to nothing, even as central bankers mull another round of tightening.

Singapore Stock Markets were down for the second day as land transport companies led decliners. Sparking the bearish tone of the day was an announcement that SMRT Corp. saw a potential merger with rival ComfortDelgro Corp. as “not relevant”. Investors banking on a plausible merger of the two in recent days pared back positioning as it is unlikely that the two will combine forces. However, losses were once again limited as crude oil producers continued to move higher with Keppel Corp. leading advancers. The Straits Times index slipped 11.84 points to close at 3,362.68. Hong Kong stocks were also lower on concerns that growth in the US may be losing steam. Shares of HSBC led decliners, dropping 10 cents to HK$144.40 as the company holds a considerable loan interest in the US. The Hang Seng index, subsequently dropped 36.02 to 20,536.78.

Technically Speaking

Singapore Dollar Fails To Break Resistance - Consolidating in the London session, the USDSGD currency pair failed to break lower through support at the 1.5100 psychological level. Already higher in the New York session by a whopping 40 basis points, further upside is probable on profit taking, coupled with rumors of some central bank buying. Currently trading at 1.5144, the currency’s upside is being confirmed by both momentum indicators, forcing a test of the 1.5160 resistance trendline. Near term targets are set higher at the 1.5200 figure.

Resistance, Not A Problem For USDHKD - The USDHKD broke through intraday resistance and sailed higher in the overnight session. Approaching the 7.8200 figure, the currency pair now seems overbought, supporting at least an incremental pullback on profit taking. Momentum indicators are supportive of the notion, with both MACD and stochastic showing overextended signals. As a result, sellers will mount on a break of the 7.8180 New York support figure with initial downside targets set at the 7.8167 (50 hMA) and 7.8155 (100 hMA) figures. Capping will likely take place at the 7.8140 (200 hMA) where bidders will likely emerge.