Focus returns to US-China talks at G20 | CMC Markets Daily Commentary
US equity markets closed higher for a fifth-straight day, backed by de-escalating trade tensions with Mexico and Fed rate cut expectations despite weak job readings. President Trump’s latest warning to raise further tariffs on China if Mr Xi won’t meet him in the G20 meeting shows a sense of urgency to strike a trade deal in order to contain risk within the negotiation table.
Recent fund flows suggest capital is flowing back to risk assets and emerging markets from safe-havens. Gold price, yen and treasuries have fallen from their recent peak and equity markets rebounded sharply since the beginning of June. This trend can carry on if the G20 outlook is pointing in the positive direction.
According to Bloomberg’s ETF flow monitor, foreign capital is returning to the Greater China market at a faster pace. In the last one week, China topped the list of EM net inflows, attracting US$ 1.325 billion in total. This was followed by Taiwan and Greater China markets, which recorded net inflows of 546 and 241 million respectively.
HK-Shanghai Link two-way flows have also more than tripled yesterday compared to a week ago. On June 10th, the HK-Shanghai stock connect has registered a net inflow of RMB 7 billion and HKD 1.86 billion in the northbound and southbound respectively. This is the highest reading seen since 29th March. The rate cut expectation in overseas markets, a de-escalation in US-China trade conflicts in the upcoming G20 meeting and a decline of the US dollar were among the key drivers for foreign capital to return to China.
Technically, the Hang Seng Index has found strong support at around 26,900 points and has since rebounded. After a big jump on 10th June, its 10-Day SMA has been pulled upwards, which is an early buy signal. A trend-reversal can be confirmed once its SuperTrend (10,3) flipped upwards as well.
The Singapore stock market has likely flipped to an attractive price as well. According to a recent SGX filling, the amount of corporate share buyback has jumped to a 9-month high at S$123 million, suggesting that companies deemed their shares undervalued at the current prices. In May, the STI has registered a total decline of 8.3%, or 7% excluding ex-dividend effect. This is the biggest single-month decline in May for nearly two decades. That will pave way for a stronger rebound in June.
Hong Kong 50 – Cash
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.