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Market Report Summary - 8 June 2015

Core Content

This market report provides an overview of the economic and financial conditions in China and other global markets as of 8 June 2015. It includes insights on economic growth, sector updates, stock market performance, commodity prices, currency exchange rates, and interest rates. The report also highlights major economic releases for the week and notes the potential for improved economic conditions in the second half of the year.

Main Views and Key Information

Economic Outlook

• 2H Growth Expectations: The report suggests that the Chinese economy may show signs of improvement in the second half of the year (2H) despite a potential slowdown in the second quarter (2Q).
• Growth Projection: It is anticipated that 2Q growth could fall below 7%, but there could be a mild rebound in 2H.
• Positive Signals: The rebound in coal prices and an increase in new orders are seen as positive indicators for economic recovery.
• Consumption Recovery: The report forecasts a rebound in retail sales due to rising fuel prices and the wealth effect from the stock market.
• Investment Concerns: Investment growth is expected to face further downside due to high inventory levels and tight credit conditions.

TMT Sector Highlights

• Alibaba's Investment: Alibaba has invested $194 million into China Business News to establish a financial data platform.
• Lenovo's IPO: Legend Holdings, the parent company of Lenovo, has received approval for a $2 billion IPO in Hong Kong.
• Smartphone Growth: The number of global smartphone users is projected to reach 6.1 billion by 2020, surpassing basic fixed phone subscriptions.
• Alibaba's Application to Invest in Taiwan: Alibaba has submitted a new application to invest in Taiwan.
• IP Development: Advances are noted in the nurturing of intellectual property.

Stock Market Performance

• HK Equities: The Hang Seng Index closed at 27,260 with a decline of 1.1%, while the H-Share Index fell by 1.5%.
• China Equities: The CSI 300 Index increased by 1.0%, and the Shenzhen Composite Index rose by 0.9%.
• Asian Equities: The Nikkei 225, Korea KOSPI, and Taiwan TWSE all showed minor declines.
• US/European Equities: The S&P 500 and NASDAQ saw slight declines, while the UK FTSE 100 and Germany DAX experienced moderate drops.

Commodity Prices

• Oil: WTI crude oil prices rose slightly to $59.13 per barrel.
• Gold: Gold prices declined to $1,168.6 per troy ounce.
• Industrial Metals: Copper and aluminium prices increased, while nickel and zinc prices showed mixed movements.
• Coal: Coal prices remained stable with slight fluctuations.
• Commodity Composite Index: The Reuters/Jefferies CRB index increased by 0.4%.

Currency Exchange Rates

• Global & Regional FX Rates: EUR/USD rose to 1.11, USD/JPY increased to 125.64, and GBP/USD rose to 1.53.
• RMB Cross Rates: EUR/RMB increased to 6.99, and JPY/RMB decreased slightly to 4.94.
• RMB Onshore Forward Premium: The forward premium for RMB decreased across different time frames.
• RMB NDF Premium: The NDF premium for RMB also showed a decline in the short term but remained relatively stable over the longer term.

Interest Rates and Bond Yields

• HIBOR and LIBOR: HIBOR 3-month rates were at 0.39%, while USD LIBOR 3-month rates were at 0.28%.
• SHIBOR: The SHIBOR 3-month rate was at 2.89%.
• Bond Yields: Chinese government bond yields showed slight declines for the 1Y and 3Y, while US treasury yields were stable or slightly increased.

Major Economic Releases

• China: Releases include exports, imports, and traded balance for May, as well as CPI and PPI for May.
• Japan: GDP for 1Q is expected to be 2.7% annualized.
• Other Markets: Unemployment rates in the Philippines and South Korea, and central bank policy meetings in Thailand, are also highlighted.

Conclusion

The report highlights the potential for gradual improvement in the Chinese economy during the second half of 2015, driven by positive signals in production and consumption. It also discusses the impact of external factors such as the Greek crisis and potential USD retreat on the Chinese economy. The TMT sector showed significant activity, with major investments and growth projections. The financial markets experienced mixed performance, with some indices showing slight gains and others declines, while commodity prices and interest rates remained relatively stable.