Analysis

Asia market wrap up: Hong Kong, China GDP and Australia Markets

It sell-off Friday again for the HSI !!

The HSI is selling off as it has been prone to entering virtually every weekend of late as the sight of Hong Kong protesters marching in Central and obstructing traffic has sent more jitters across all local markets. But there is more focus than ever falling on  Hong Kong this weekend.  Recall, the Hong Kong Protester Bill was put through the US legislature this week which is heightening market sensitives around the weekend protest as any perceived heavy-handed response from the police against the pro-democracy protesters could trigger a US response. Of course, this would not be good for the trade talks which have been heading in a positive direction. 

 

China GDP 

While the weaker China  GDP suggests an economic pull to ease monetary policy to support the real economy, but a 6 % GDP won't necessarily add to the case for urgent stimulus, as the 6.0-6.5% range is with the government's annual target, and so far China is facing limited risk in breaching this for the year.

If there’s one thing China’s massive army of retail equity investor like it’s the thought of easy money from the Pboc.Unfortunately for China stock market investors, the Pboc are not so willing at this stage. 

Risk traders have priced in a weakening trend for China's economy and for the Pboc to provide relatively loose monetary policy but in a targeted way to ensure the macro leverage ratio doesn't rise. With the Pboc, who arguably have plenty of policy ammunition to the right the ship, probably unwilling to turn on the monetary taps, investors are taking risk off the table while also factoring in both the Hong Kong scrim and Monday's possible Brexit abyss.

However, currency and rates traders aren't getting bent out of shape by backwards-looking data. Instead, they remain focused on what lies ahead, which is hopefully the US Administration scrapping some of those tariffs which would be an unmitigated positive for global growth.

USDCNH traded down to  7.07 after the lower-than-expected fixing. But weaker China GDP pushed offshore spot off the low. And is trading firm into the London open as UK traders get their first look at the weaker state of the HK and mainland equity markets.

 

Australia Markets

The Herald Sun's Terry McCrann argued that "It is now very clearly time for the RBA to take a breather: to allow those cuts to percolate through the economy and to assess what the outcome has been; critically, in the context of the broader dynamics impacting on both the global and local economies." RBA Governor Lowe, speaking at the IMF on Friday, hosed down prospects of further interest-rate cuts, saying the Australian economy should return to trend growth next year. While noting that further OCR cuts were possible, Lowe said he "wouldn't assume it". 

The Aussie dollar has been trending higher throughout the day with RBA watcher McCrann throwing a damp cloth on near term rate cuts.

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