Asia Market update: GLD ETF flow, equities, CNH and local currency views

Equities

The dust seems to have settled in Asian equity markets after the running of the equity Bulls was triggered by renewed trade dialogue between the US and China and the Fed that managed to out-dove an already dovish leaning market as investors have moved into wait and see mode.

Overnight President Trump laid down the law overnight, and in no uncertain terms told both Japan and China that it's as much their problem as the US's to protect the Straits of Hormuz which suggest the G-20 will have another significant issue to iron out beyond trade. Not to mention that not so delicate question in Hong Kong regarding the extradition bill.

But with little, if any G-20 risk premiums getting baked into the equity markets equation markets continue to trade on an even keel so far this week.

Gold flow update

The GLD ETF buying remains stupendous after its most massive inflow last Friday which hit eye-watering 35 tons.  We expect further weakness in the greenback as US rates continue to fall, and this will be extremely promising for Gold markets as the one moth XAU-DXY just beached -70 % this morning.

Asia Currency Markets

Currency volumes in CNH are light with spot and forward trading in tight ranges, but CNH has underperformed a basket of Asia currencies especially the high yielders as this is one area in the market’s traders continue to price in trade war risk premiums.

Flow into Asia FX remain robust, as local currency markets are benefiting for dovish Fed that brings forward rate cut expectation for several regional central banks and triggered a flurry of Fixed Income demand creating a very harmonious and fluid backdrop for local capital markets.