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Weekly Digest 2017/1|17 January 2017 Weekly Factsheet ended 13 Jan: Markets end mixed on weak China trade 6-Jan 13-Jan 1,675.49 1,672.50 -0.18 1.87 Dow Jones 19,963.80 19,885.73 -0.39 0.62 Nikkei 225 19,454.33 19,287.28 -0.86 0.90 DAX Index 11,599.01 11,629.18 0.26 0.02 Global indices ended the week on a mixed note. Despite some positive economic data releases such as Eurozone growth and rising U.S. retail sales, the market continued to remain cautious due to weakening China’s trade data, which could be dampened further by anticipated Trump’s anti-trade policy. In addition, the Fed officials showed concerns on long term risk to the economy such as high inflation and debt issue in spite of short term economic boost. Meanwhile, ECB is seen to maintain its monetary policy in 2017 due to expected subdued core inflation. UK FTSE100 7,210.05 7,337.81 1.77 2.37 STOCK MARKET HIGHLIGHTS AUS ORD 30 5,808.98 5,776.80 -0.55 -0.14 STI Index 2,962.63 3,025.07 2.11 4.63 22,503.01 22,937.38 1.93 3.67 3,154.32 3,112.76 -1.32 -0.74 TABLE 1: WEEKLY CLOSING IN MAJOR MARKET INDICES KL Composite Hang Seng SSE Index %wow %ytd 13-Jan 13-Jan KLCI ends in the red as BAT, HL Bank and Genting sold. Blue chips capped a volatile Friday on a downbeat note on selling of BAT, Hong Leong Bank and Genting Bhd due to the absence of strong follow-through buying from foreign funds while crude oil prices slipped. At 5 p.m., the KLCI was down 5.26 points or 0.31% to 1,672.50 snapping three days of gains, of which two days were supported by foreign buying. (The Star) Nasdaq ends at a fresh record, banks gain; Dow retreats from 20,000. U.S. stocks rose moderately Friday on the back of quarterly earnings from some of the country’s biggest banks. The Dow Jones Industrial Average DJIA, slipped 5.27 points to close 19,885.73. For the week, the blue-chip index is off 0.4%. The S&P 500 index SPX, added 0.2%, to end at 2,274.64 for a weekly loss of 0.1%, and the Nasdaq Composite Index COMP, climbed 0.5%, to finish at 5,574.12. (Marketwatch) Fiat rebound helps send European stocks higher into the weekend. European stock markets shook off recent weakness and marched higher on Friday, with Fiat Chrysler setting an upbeat tone for car makers just a day after being accused of cheating on emissions tests. The Stoxx Europe 600 index SXXP, advanced 1% to close at 365.94, easily erasing a 0.7% loss from Thursday. (Marketwatch) Asia stocks trade mixed as China export data disappoints. Chinese shares slid on Friday as investors digested China's underwhelming exports for December and disappointing fullyear trade figures. The Shanghai composite wavered for most of the session, and closed down 0.22% at 3,112.3. In South Korea, the Kospi lost 0.5% at 2,076.8, after the Bank of Korea left benchmark rates unchanged at 1.25%. The Nikkei 225 finished in the green, up 0.8% at 19,287.3. Australia's ASX 200 finished down 0.79% at 5,721.1. Hong Kong's Hang Seng advanced 0.4% by the afternoon. (CNBC) Dollar jumps after jobs report, erasing the week’s losses. The dollar rallied against its major rivals on Friday, turning firmly higher for the week as the latest reading on the labor market underscored the belief that inflation could be poised to return to the market. The ICE Dollar Index DXY, added 0.7% to 102.26, trading near its highs of the session. (Marketwatch) Source: Bloomberg CHART 1: KLCI DAILY PERFORMANCE Points 1685 Volume (mil) 330 280 1680 230 1675 180 1670 130 1665 80 1660 30 -20 9-Jan 10-Jan 11-Jan 12-Jan 13-Jan 1655 Source: Bloomberg CHART 2: MAJOR STOCK INDICES (DAILY % CHANGE) Dow %dod 3.0 Nikkei FTSE100 2.0 Nikkei 0.80 1.0 FTSE100 0.62 -1.0 Source: Bloomberg -2.0 13-Jan 12-Jan 11-Jan 10-Jan 9-Jan 8-Jan 7-Jan 6-Jan 5-Jan 4-Jan 3-Jan 2-Jan 0.0 Dow -0.03 Bumiputera Development | Development Gap | Human Capital | Macroeconomics & Market | Technology & Innovation ECONOMIC HIGHLIGHTS CHART 3: REGIONAL STOCK INDICES (DAILY % CHANGE) 1.5 %dod STI HSI Shanghai Malaysia: U.S. dollar correction may boost ringgit rebound. A U.S. dollar correction, if it happens, may slightly boost the ringgit for which the rebound, based on mainly on fundamentals, will likely be gradual. Amidst that general view, some economists see the U.S. dollar to potentially not strengthen too much in the long-term, especially in view of, among other factors, export competitiveness. It should provide a boost although I would caution against forecasting the level,” said Hor Kwok Wai, Chief Operating Officer, Hong Leong Bank. “It is possible that the ringgit may move towards the RM4.30 level to the U.S. dollar but that is as far as I would go,’’ said Chris Eng, Head of Research, Etiqa Insurance & Takaful. (The Star) Malaysia: Foreign workers’ levy payment deferred to 2018. Widespread relief was felt among industry employers after the government postponed the mandatory imposition of foreign workers’ levy payment on employers until 2018. Transport Minister Datuk Seri Liow Tiong Lai said yesterday that the deferment was necessary in the absence of a proper ecosystem under the newly introduced Employer Mandatory Commitment (EMC) to resolve issues involving foreign workers. Liow said it was also agreed that employers be given the right to source and employ workers for any industry, thus cutting red tape. (The Edge) Malaysia: Malaysia among most exposed to Fed rate hike – World Bank. Malaysia is one of three large, financially integrated economies in the East Asia and Pacific region most exposed to an adverse reaction to the US Federal Reserve’s (Fed) anticipated hike in interest rates or an increase in global risk aversion which could also slow growth, the World Bank said. Malaysia, Indonesia and Thailand are economies with sizeable external, foreign currency denominated and/or short-term debt, it added. The World Bank said Malaysia’s GDP is expected to accelerate to 4.3% from an anticipated 4.2% in 2016, as the adjustment to lower energy prices eases and commodity prices stabilise. (The Edge ) Malaysia: Government to collect RM42 bil in GST this year. The government, via the Royal Malaysian Customs Department, expects to collect RM42 bil in goods and services tax (GST) this year compared with RM41 bil last year, said Deputy Finance Minister Datuk Othman Aziz. Othman said the target could be achieved through the cooperation of all parties in the face of the worldwide economic slowdown, which Malaysia was not spared. He said although there were companies which failed to follow the GST directive, this was small at about 5%. (The Edge ) Malaysia: FBM KLCI to trend higher in 2017. Market analysts are optimistic about a continued uptrend in the FBM KLCI following its recent winning streak, after registering a 3% decline in 2016 and starting 2017 on a bearish note. “We see the 1Q17 to be positive although it is still difficult to time the market,” said Chris Eng, head of research at Etiqa Insurance & Takaful. The FBM KLCI closed at 1,667.90 yesterday. Eng noted that a stronger economic is expected this year with a 4.5% GDP growth forecast, with ongoing infrastructure and construction projects. Better market performance and economic data from China have also contributed to the positive sentiment. (The Edge ) STI 1.07 1.0 0.5 HSI 0.21 13-Jan 12-Jan 11-Jan 10-Jan 9-Jan 8-Jan 7-Jan 6-Jan 5-Jan 4-Jan 3-Jan 2-Jan 0.0 Shanghai -0.35 -0.5 -1.0 -1.5 CHART 4: RINGGIT vs MAJOR CURRENCIES (% W-O-W) %wow USD/MYR EUR/MYR Yen(100)/MYR 2.8 1.8 2.00 0.8 13-Jan 6-Jan 30-Dec -1.2 23-Dec 16-Dec 9-Dec 2-Dec 0.13 -0.2 -0.21 -2.2 CHART 5: RINGGIT vs REGIONAL CURRENCIES (% W-O-W) 2.4 %wow SGD/MYR Baht100/MYR KRW100/MYR 1.9 1.4 1.32 0.9 0.65 0.23 13-Jan 6-Jan 30-Dec 23-Dec -0.6 9-Dec -0.1 16-Dec 0.4 -1.1 -1.6 -2.1 Source: Bloomberg CHART 6: CRUDE OIL vs CRUDE PALM OIL 55 $ per barrel/ Crude oil Crude oil CPO RM per tonne/ CPO 3300 54 53 52 3200 51 50 13/1/2017 11/1/2017 9/1/2017 7/1/2017 5/1/2017 3/1/2017 1/1/2017 30/12/2016 28/12/2016 26/12/2016 24/12/2016 22/12/2016 20/12/2016 18/12/2016 16/12/2016 3100 14/12/2016 49 DISCLAIMER: This report is for information purposes only. We have based the data and information in these reports from sources we believe to be reliable. However, we do not guarantee as to the accuracy or completeness of the information provided. Any recommendation or opinion that is provided in this document, if any, does not have regard to the investment objective and particular needs of any specific addressee. No parts of this publication may be reproduced or redistributed in any form or any means without a prior written permission of the publisher. E.U.: S&P sees ECB staying in support mode until 2018. Rating agency Standard and Poor's said it did not expect the European Central Bank to switch away from its supportive monetary policy before 2018, despite signs that inflation pressures are beginning to return. A report by S&P's chief European economist and a colleague said 2017 was likely to mark the return of inflation in the eurozone, though core readings that strip out more volatile goods such as crude oil should remain subdued and give the ECB leeway to maintain support. (Reuters) Star) U.S.: Producer prices rise as energy costs push higher. U.S. producer prices rose for a second straight month in December amid rising costs for energy products, leading to the biggest YoY gain in just over two years. The Labor Department said its PPI for final demand increased 0.3% last month after advancing 0.4% in November. That lifted the YoY increase in the PPI to 1.6%, the largest gain since September 2014. The PPI rose 1.3% in the 12 months through November. Economists polled by Reuters had forecast the PPI rising 0.3% last month and surging 1.6% from a year ago. (Reuters) E.U.: German economy surges at fastest rate in five years. The German economy expanded at the fastest pace in five years in 2016 and the growth momentum is expected to continue this year as rising private and state spending help Germany cement its position as the locomotive of the eurozone. Europe's largest economy expanded by 1.9% last year, a preliminary estimate from the Federal Statistics Office. Economists had expected growth in GDP of 1.8% for 2016 after an expansion rate of 1.7% in the previous year. The growth rate of 1.9% matched the highest forecast in the poll. (Reuters) U.K.: Inflation to hit a two-year high. Inflation is set to hit its highest level in more than two years this week, according to economists, as the sharp drop in sterling since the referendum fuels a rise in the cost of living. Official figures due to be published on Tuesday are expected to show that fuel, food, air fares and clothing prices have driven the headline rate to 1.4% in December, from 1.2% in November. If economists polled by Reuters are correct, the rate would be the highest since August 2014, when the consumer prices index was 1.5%. Malaysia: Positive start for Bursa on foreign fund inflow. Bursa Malaysia saw net inflow of foreign funds amounting to RM101.8 mil in the first week of 2017, up from RM31.2 mil in the prior week, said MIDF Research. This could be attributable to the general inflow into Asia last week and supported by Malaysia’s encouraging trade numbers, which saw an uptick in exports by 7.8% yoy in November 2016, it added. In its weekly fund flow report yesterday, the research house said on a net daily basis, foreign investors were seen buying last Tuesday and Friday, with the bulk on the latter day of RM136.4 mil. (The U.S.: Retail sales boosted by auto demand; producer prices climb. U.S. retail sales rose in December amid strong demand for automobiles and furniture, providing further evidence that the economy ended the fourth quarter with momentum and is poised for stronger growth this year. The Commerce Department reported that retail sales increased 0.6% last month after rising 0.2% in November. Sales were up 4.1% from December 2015. They rose 3.3% for all of 2016, up from 2.3% in 2015. (Reuters) U.S.: Consumer sentiment in U.S. hovers near highest in 12 years. Consumer confidence was little changed in January from its highest level since the start of 2004, showing Americans are still optimistic that fresh economic policies will spur growth. The University of Michigan said that its preliminary index of sentiment was 98.1, after 98.2 in December. (Bloomberg) U.S.: Fed officials see quick economic boost from Trump, risks to follow. Federal Reserve officials cautioned on Thursday that the fiscal and tax plans sketched out by the incoming Trump administration could trade a short-term economic boost for longer-run inflation and debt problems they might have to counteract. Fed regional bank presidents agreed in principle that the policies President-elect Donald Trump is likely to pursue will increase economic growth - through direct spending, the consumption and investment spurred by tax cuts, and the boost to business from lighter regulation. (Reuters) E.U.: Eurozone economy registering surprisingly strong growth spurt. Industries across the eurozone cranked up output in November and Germany ended the year with its strongest growth in five years, pointing to an economic spurt that may be arriving earlier than some ECB policymakers expect. Eurozone industrial output in the 19-country currency bloc surged 1.5% MoM and 3.2% YoY as firms stepped up production before Christmas. Both figures were far better than expected. (Reuters) (Guardian) U.K.: Pound slides as much as 1.6% as May reported to seek hard Brexit. The pound slid below $1.20 for the first time since October’s flash crash, after reports that U.K. Prime Minister Theresa May will signal plans to quit the European Union’s single market to regain control of Britain’s borders and laws. The currency has slumped 19% against the dollar since the U.K. opted to leave the EU in June’s referendum, with declines since the initial aftermath of the vote mainly sparked by concern May would pursue a so-called hard Brexit. (Bloomberg) U.K.: 'Brexit tourists' exploit weak pound to boost U.K. high street sales. Legions of “Brexit tourists” flocked to the U.K. to take advantage of the weak pound over Christmas, triggering a huge rise in spending on foreign credit cards. Foreign shoppers spent more than £725m on the British high street during December, up 22% or an extra £130m compared to the previous year, according to payments processing firm Worldpay. Bargain -hunters from Hong Kong were the biggest spenders, closely followed by visitors from the United States, United Arab Emirates and mainland China. (Guardian) Japan: Core machinery orders fall as demand uncertainty sets in. Japan's core machinery orders fell in November at the fastest pace in seven months in a sign that some companies may be turning cautious about capital expenditure because of uncertainty over domestic and overseas demand for goods and services. Core or- DISCLAIMER: This report is for information purposes only. We have based the data and information in these reports from sources we believe to be reliable. However, we do not guarantee as to the accuracy or completeness of the information provided. Any recommendation or opinion that is provided in this document, if any, does not have regard to the investment objective and particular needs of any specific addressee. No parts of this publication may be reproduced or redistributed in any form or any means without a prior written permission of the publisher. ders, a highly volatile data series regarded as a leading indicator of capital expenditure, fell 5.1% in November from the previous month, more than the median estimate for a 1.7% decline. (Reuters) China: Beijing will 'take off the gloves' if Trump continues on Taiwan: China Daily. China has shown restraint in the face of provocations by U.S. President-elect Donald Trump over Taiwan, but if he continues after assuming office Beijing will "take off the gloves", an official Chinese state-run newspaper said on Monday. (Reuters) China: China posts worst export fall since 2009 as fears of U.S. trade war loom. China's massive export engine sputtered for the second year in a row in 2016, with shipments falling in the face of persistently weak global demand and officials voicing fears of a trade war with the United States that is clouding the outlook for 2017. The world's largest trading nation posted gloomy data with 2016 exports falling 7.7% and imports down 5.5%. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009. (Reuters) China: Foreign direct investment to China rises 4.1% in 2016 on year. Foreign direct investment (FDI) to China increased 4.1% on the year to CNY813.22b in 2016, the country's commerce ministry said. FDI to China in December rose 5.7% YoY to CNY81.42b, the Ministry of Commerce said in a statement on its website. FDI in services increased 8.3% in 2016 and made up 70.3% of all FDI, it added. (Reuters) China: Credit growth exceeds estimates as lending remains robust. China’s broadest measure of new credit expanded faster than expected, bringing the total of new loans extended last year to roughly equal the size of Italy’s USD1.8t economy. Aggregate financing remained robust at CNY1.63t ($236b) in December, compared with a median estimate of CNY1.3t in a Bloomberg survey. New yuan loans stood at CNY1.04t, exceeding all 37 estimates in the survey. The broad M2 money supply increased 11.3% from a year earlier after climbing 11.4% in November. (Bloomberg) Global: Trump tax cuts could jump-start global economy, World Bank says. President-elect Donald Trump’s tax cuts and spending plans could deliver a shot in the arm to the U.S. economy, lifting growth around the world, although uncertainty about his trade policies adds to the risks, according to the World Bank. The Trump administration could squander the economic gains of fiscal stimulus if it imposes new trade barriers that provoke retaliation by other countries, the Washington-based development lender said Tuesday in the latest update to its global economic outlook. (Bloomberg) RELEASE FOR THE WEEK (JAN 16–20, 2017) U.S. Jan Empire Manufacturing on Jan 17 MBA Mortgage Applications on Jan 18 Dec CPI on Jan 18 Dec Industrial Production on Jan 18 Dec Capacity Utilization on Jan 18 Weekly Initial Jobless Claims on Jan 19 Eurozone JNov Trade Balance SA on Jan 16 Jan ZEW Survey Expectations on Jan 17 Dec CPI on Jan 18 ECB Main Refinancing Rate on Jan 19 ECB Marginal Lending Facility on Jan 19 ECB Deposit Facility Rate on Jan 19 Japan Dec Machine Tool Orders on Jan 16 Nov Industrial Production on Jan 16 Nov Capacity Utilization on Jan 16 Dec Machine Tool Orders on Jan 19 Dec Nationwide Dept Sales on Jan 20 Nov All Industry Activity Index on Jan 22 China 4Q16 GDP on Jan 19 Dec Industrial Production on Jan 19 Dec Retail Sales on Jan 19 Dec Fixed Assets Ex Rural YTD on Jan 19 Malaysia Dec CPI on Jan 18 BNM Overnight Policy Rate on Jan 19 Foreign Reserves as at 13 Jan 2017 on Jan 20 DISCLAIMER: This report is for information purposes only. We have based the data and information in these reports from sources we believe to be reliable. However, we do not guarantee as to the accuracy or completeness of the information provided. Any recommendation or opinion that is provided in this document, if any, does not have regard to the investment objective and particular needs of any specific addressee. No parts of this publication may be reproduced or redistributed in any form or any means without a prior written permission of the publisher.