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Moody's: China State Council Multi-pronged Guidelines Indicate Credit Positive Willingness to Address the Risks posed by High Corporate Debt
Moody's Investors Service says that guidelines issued by China's State Council earlier this month indicate a credit-positive willingness to address the risks posed by high corporate leverage. How the guidelines are implemented will determine their credit implications across sectors.
Moody's conclusions were contained in a just-released report, "China credit - State Council Guidelines Indicate Credit-Positive Willingness to Address Risks Posed by High Corporate Debt".
China's State Council published two guidelines on 10 October. The measures outlined in the guidelines include mergers and acquisitions, revitalization of stock assets, securitization of performing and nonperforming assets, optimization of debt structures, debt-equity swaps, developments of equity financing, regulation of the bankruptcy process, and strengthening of corporate governance.
Moody's sees two potential challenges to their implementation. First, in the near term, the deleveraging that these measures seek could lower GDP growth. However, Moody's expects that the current context of proactive fiscal policy and prudent monetary policy, which the guidelines re-assert, will mitigate this near-term effect.
The second set of challenges is related to the absence of a deep and liquid equity market, a pricing framework for equity in the debt swaps, or relevant legal framework (including a transparent and predictable bankruptcy process).
The market-oriented principles emphasized in the guidelines, if thoroughly implemented, will introduce safeguards to reduce the risk of banks swapping non-viable companies' debt for equity at a price that would leave them exposed to sharp falls in valuations. Meanwhile, the asset management companies may need new equity injections, particularly if book values are broadly retained.
The report says that it is likely that, through some of the measures envisaged, some of the leverage currently on corporate balance sheets is shifted to other parts of the economy, including the banks and asset management companies. Moreover, the government and the public sector in general would also take some of the costs, either directly or indirectly through the provision of policy support.
The credit implications for the sovereign will depend on whether the measures effectively reduce the economy-wide contingent liability risks for the government posed by state-owned enterprises, banks and asset management companies.
News are provided byInstaForex.
Gold Prices Supported by the Weaker Dollar
Gold prices climbed to a two-week high which was bolstered by a weaker dollar. Gold for December delivery was up 0.6 percent at $1,269.90 per troy ounce on the Comex division of the New York Mercantile Exchange.
The precious metal has also increased due to stable U.S. inflation figures for September, which has reduced predictions of an interest-rate hike from the Federal Reserve by year-end, according to the Commerzbank. Expectations of an interest-rate hike are likely bearish for the precious metal, since it does not pay interest and also competes with other investments when rates are higher.
The World Gold Council claims that the demand for physical gold in China was spurred by the recent decline in prices, and has also estimated that it will reach between 900 and 1,000 tons of gold in 2016.
News are provided byInstaForex.
Fxwirepro: Usd/twd Rejects Key Support at 31.45, Good to Buy on Dips
USD/TWD is currently trading around 31.65 marks.
It made intraday high at 31.70 and low at 31.49 marks.
Intraday bias remains bullish till the time pair holds key support at 31.45 marks.
A daily close above 31.84 will drag the parity up towards key resistances around 31.98, 32.12, 32.25, 32.43 and 32.63 marks respectively.
On the other side, key support levels are seen at 31.45, 31.26, 31.18, 30.99, 30.85 and 30.39 marks respectively.
Important to note here that 20D, 30D and 55D EMA heads down and confirms the bearish trend in a daily chart. Current upside movement is short term trend correction only.
Taiwan stocks open up 0.1 pct at 9,322.55 points. We prefer to go long on USD/TWD around 31.55, stop loss 31.45 and target of 31.84/31.98.
News are provided byInstaForex.
Dollar Strengthens with Traders Focus on Bank Action
The dollar strengthened while investors have been more optimistic regarding the possibility of a U.S. interest rate hike. The WSJ Dollar Index increased by 0.5 percent to 88.36.
Analysts associated the dollar climbing to firm data and comments from Federal Reserve Bank of New York President William Dudley. Mr. Dudley says that he expects that the bank would be able to lift rates in December. Fed-funds futures have shown that investors implied a 74 percent chance of a rate hike in December, according to CME Group data.
The euro declined 0.4 percent to $1.0929 following the European Central Bank's decision to keep interest-rates unchanged.
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Americas Roundup: Dollar Gains Vs Euro As December fED Rate Hike Seen Likely, Oil up on Russia-Opec Hopes; U.s. Rig Count Jump Limits Gains-October 22nd, 2016
Market Roundup
? Fed?s Williams: Makes sense to raise rates gradually, ?sooner than later?,essentially at full employment.
? Fed?s Tarullo: greatest risk to financial stability relates to funding runs, asset sales.
? ECB's Nowotny thinks QE decision will be discussed in Dec, monetary policy not enough need fiscal policies.
? Italy PM Renzi says won't change 2017 budget plan even if Brussels objects, Italy referendum Dec 4.
? USD heads for 3rd weekly gain as US rate rise bets firm; Offshore yuan hits 6-year low (above 6.76).
? GBP weaker as UK PM May attends EU summit; Euro at 7-month lows after Draghi quashes tapering talk.
? CAD weakens to 7-month low as weak inflation/RS fuels rate cut bets; CA-US 2-yr spread hits widest in 4-months.
? Brazil inflation eases to lowest in 7 years for mid-October, may pave way for further rate cuts.
Looking Ahead - Economic Data (GMT)
? No Significant Data
Looking Ahead - Events, Other Releases (GMT)
? No Significant Events Currency Summaries
Currency Summaries
EUR/USD is likely to find support at 1.0858 levels and currently trading at 1.0880 levels. The pair has made session high at 1.0889 and hit lows at 1.0858 levels. The euro declined against the dollar on Friday as investors increased bets that Federal Reserve would raise interest rates by this year end. Recent hawkish comments from Fed officials have increased bets that the U.S. central bank will raise rates in December. New York Fed President William Dudley said on Wednesday the Fed will likely increase interest rates later this year if the U.S. economy remains on track. Greenback was also boosted by dovish European Central Bank meeting on Thursday. ECB President Mario Draghi left a wide range of options on the table and emphasized that a long-awaited rise in inflation is predicated on "very substantial" monetary accommodation. The dollar index rose as high as 98.813, the highest since Feb 3. The euro fell as low as $1.0859, the lowest since March 10.
GBP/USD is supported in the range of 1.2140 and currently trading at 1.2227 levels. It reached session high at 1.2238 and hit low at 1.2165 levels. British pound initially declined against the greenback on Friday but rebounded in the late US session erasing early losses as some investors took profit following recent dollar rally that received a boost on recent solid U.S. data. The pound has fallen nearly 18 percent since the June vote with losses accelerating in October after May raised the spectre of a "hard" Brexit, where the government will negotiate for an exit that favours tighter immigration controls over free trade, likely curbing foreign investment needed to fund Britain's huge current account deficit. Sterling's slide has sent inflation expectations soaring, driving investors to reassess chances of further easing by the Bank of England this year. Sterling hit low at $1.2270 in the mid-morning US session, but rebounded back erasing early losses to trade at $1.2227.
USD/CAD is supported at 1.3217 levels and is trading at 1.3332 levels. It has made session high at 1.3354 and lows at 1.3298 levels. The Canadian dollar declined sharply against U.S. dollar on Friday as weaker-than-expected domestic data fueled interest rate cut bets weighing on risk-sensitive Canadian dollar. Canada's annual inflation rate rose less than expected in September as the cost of gasoline fell, while food prices saw their smallest gain since 2000, data from Statistics Canada showed on Friday. The annual inflation rate rose to 1.3 percent, though that was shy of forecasts for an increase of 1.5 percent. Annual core inflation, which strips out some volatile items and is watched by the Bank of Canada, held steady at 1.8 percent, as expected. The Canadian dollar last traded at C$1.3332 to the greenback, or 75.04 U.S. cents, weaker than Thursday's close of C$1.3222, or 75.63 U.S. cents.
AUD/USD is supported around 0.7580 levels and currently trading at 0.7604 levels. It hit session high at 0.7615 and made session lows at 0.7586 levels. The Australian dollar edged lower against US dollar on Friday as recent poor employment report fuelled the risk of further rate cuts by Reserve Bank of Australia. The Aussie has been resilient in recent weeks against a resurgent U.S. dollar but recent dovish comments by the Reserve Bank of Australia in the minutes of its October policy meeting and the latest jobs data tamed its rise. Thursday's data showed a drop of 53,000 full-time jobs and a decline in the number of people looking for work. The Australian dollar was trading at $0.7604, having slid 1.3 percent on Thursday, the most since Sept. 13. Despite the decline, the Aussie is still set to end the week mostly unchanged.
Equities Recap
European stock markets posted a weekly gain on Friday, as a rebound in bank shares and some well-received company results lent markets support in spite of uncertainty over future monetary policy.
UK's benchmark FTSE 100 closed down by 0.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.01 percent, Germany's Dax ended flat, France?s CAC finished the day down by 0.1 percent.
The S&P 500 and the Dow were little changed and the Nasdaq advanced on Friday as a record day for Microsoft and earnings from McDonald's helped offset a fall in energy and healthcare shares.
Dow Jones closed down by 0.10 percent, S&P 500 ended up by 0.02 percent, Nasdaq finished the day up by 0.23 percent.
Treasuries Recap
U.S. Treasury yields were little changed on Friday as expectations the Federal Reserve would raise U.S. interest rates by year-end offset demand for bonds following comments by European Central Bank President Mario Draghi on bond purchases.
Benchmark 10-year Treasury notes were up 2/32 in price to yield 1.738percent, down less than 1 basis point from late Thursday. It reached a four-month peak at 1.841 percent on Monday.
The spread between U.S. five-year and 30-year yields earlier narrowed by 2 basis points before ending little changed on the day at 125 basis points.
Shorter-dated yields were marginally higher on expectations the Fed would raise interest rates at its Dec. 13-14 meeting.
Commodities Recap
Gold prices were little changed on Friday as a strong dollar limited gains, but the precious metal notched its first weekly rise in four as seasonal demand from Asia kicked in.
Spot gold was up 0.1 percent at $1,267.23 an ounce by 2:57 p.m. EDT (1857 GMT). For the week, prices rose 1.4 percent, clawing back part of the 6.6 percent shed over the last three weeks.
U.S. gold futures ended the session up 0.02 percent at $1,267.70.
Oil settled up on Friday on hopes Russia and OPEC will reach agreement at the weekend on market support initiatives to keep crude above $50 a barrel, although traders cautioned about pressure from a double-digit rise in the U.S. oil rig count.
Brent settled up 40 cents, or 0.8 percent, at $51.78. For the week, it ended flat. U.S. West Texas Intermediate crude settled up 22 cents, or 0.4 percent, at $50.85 a barrel.
News are provided byInstaForex.
South Korea GDP Climbs 2.7% In Q3
South Korea's gross domestic product expanded 2.7 percent on year in the third quarter of 2016, the Bank of Korea said in Tuesday's preliminary reading.
That beat forecasts for an increase of 2.4 percent, although it slowed from 3.3 percent in the previous three months.
On a seasonally adjusted annualized basis, GDP gained 0.7 percent - also exceeding forecasts for 0.5 percent but down from 0.8 percent in the three months prior.
Real gross domestic income slipped 0.3 percent on quarter.
News are provided byInstaForex.
Gold Prices Lower Amid Strong U.S. Economic Data
Gold prices were lower as the solid U.S. economic data boosted the chances for the Federal Reserve to increase interest rates in the following months. Gold for December delivery was down 0.3 percent at $1,263.90 per troy ounce on the Comex division of the New York Mercantile Exchange.
U.S. manufacturers began the final quarter of 2016 on a positive note, with output and new order growth reaching one-year highs, according to Markit data. The firm figures helped strengthen the outlook that the Fed could increase interest rates in December. In the first eight months of this year, Hong Kong's net gold exports to mainland China add up to 555,300 kilograms, according to HSBC.
Silver for December delivery was up 0.6 percent to $17.60 per troy ounce, January platinum climbed 0.7 percent to $939.10 per troy ounce, while December palladium increased 1.6 percent to $630.74 per troy ounce.
News are provided byInstaForex.
Australia Inflation Gains 1.3% On Year In Q3
Consumer prices in Australia were up 1.3 percent on year in the third quarter of 2016, the Australian Bureau of Statistics said on Wednesday.
That exceeded forecasts for 1.1 percent following the 1.0 percent increase in the previous three months.
On a quarterly basis, inflation jumped 0.7 percent versus forecasts for 0.5 percent and up from 0.4 percent in the three months prior.
The Reserve Bank of Australia's trimmed mean was up 0.4 percent on quarter and 1.7 percent on year, while the weighted median added 0.3 percent on quarter and 1.3 percent on year.
News are provided byInstaForex.
Fxwirepro: South Korean Won Opens Onshore Trade at 1,139.0 Per Dollar; Stay Bullish
USD/KRW is currently trading around 1,138 levels.
It made intraday high at 1,139 and low at 1,136 marks.
Intraday bias remains bullish till the time pair holds key support at 1,125 levels. A daily close above 1,135 will drag the parity higher towards key resistances at 1,142, 1,152, 1,162, 1,176, 1,182, 1,196, 1,201, 1,209 (20D EMA) and 1,220 (March 03, 2016 high) marks respectively.
On the other side, a sustained close below 1,125 will test key supports at 1,117/1,111/1,101/1,089/1,078/1,063/1,044 levels respectively.
In addition, South Korea?s Kospi was trading around 0.24 percent higher at 2,018.46 points.
We prefer to go long on USD/KRW only above 1,138, stop loss 1,117 and target 1,152/1,168.
News are provided byInstaForex.
Galaxy Note 7 Failure Weighs on Samsung?s Third-Quarter Profit
Samsung Electronics Co. Ltd. reported a net profit drop of 16.8% to 4.54 trillion Korean won or $4.0 billion during the third quarter, as the problematic recall and discontinuation of its Galaxy Note 7 smartphone trimmed the tech firm's mobile earnings to its lowest level in almost eight years.
Samsung's mobile operating profit sank 96% from a year prior to 100 billion won after the Galaxy Note 7 was pulled from the market due to reported incidents of overheating. The company initiated a global recall on September 2 to replace the units, but decided to scrap the smartphone altogether on October 11 as reports that Note 7 are still fire-prone surfaced.
Total operating profit for the third quarter plunged 30% to 5.2 trillion won, a steep decline from almost 7.4 trillion won a year prior. Meanwhile, revenue declined 7.5% to 47.82 trillion won. The South-Korean company had initially projected a 7.8 trillion won profit but trimmed its guidance, adjusting the figures to reflect the losses sustained from the withdrawal of the Note 7.
Still, the company had an optimistic outlook for the fourth quarter and expects the earnings to regain ground and to reach the same level seen during the fourth quarter of 2015.
News are provided byInstaForex.