2015.07.30 Daily

FOMC in last night was within market expectation that they should open the door to first rate hike in this year and the possible hike in September. I believe FOMC could afford to increase it soon although market expects December or next year. Not only US economy but also US financial market looks somewhat stronger than emerging countries’. The corporate earnings and sales were very solid rather than market expectation, so equity price could arise further. USD was appreciated maybe under the confidence of both of economy and equity market.

Apparently, US economy seems to be so firm with positive labor market and corporate profits, while pending home sales slipped last month which could mean subdued asset market not the inflection point. Contrary to US, today, Korean companies’ profits were very disappointed and cause the weak equity market. Korean economy looks very gloomy especially with Chinese economic slowdown. KRW turned to be depreciated against USD in 4 days again. In bond market, foreign investors sold their position in 2 consecutive days and yields were up by 1-2bps, today. That said, Korean financial market showed triple weakness.

Many strategists argue more weakening for Chinese equity market because they believe Chinese government has manipulated the market as using huge supports. They expect the unwinding of this in line with a suggestion from IMF who could decide whether Renminbi would be selected in SDR or not. They unlikely see recent upturn in residential market and Baltic dry index because they only focus on tumbled trade volume caused by Chinese economic slack. But, I want to advise them to think about the cause and ramification.

What is prior? Economic downside pressure or restructuring which have led the contraction in consumption from governors? Pessimists would likely or want to believe in first thing. But, we all know that the true is second one. It looks somewhat clear that Chinese government could handle their economy and financial markets at all, but pessimists have argued the panic market, maybe with their short-sell position for Chinese equity and would pray for this.

Today, SHCOMP was down -2.2%, and they likely are very pleasure with this. I see further volatility in markets not only in Shanghai but also other global financial markets. Likewise, in KTB futures market, the foreign traders seemed to be nervous today, but they could smile tomorrow.

We would meet the GDP data in US tonight, and this may decide the short-term direction in markets. But, it would be just one material under the market fluctuation at most. Anyway, pessimists could continue to dream the end of the world further. I much wonder the end of them, not of world. Deteriorated economy was just past event, from now on, the more important thing is to view the future after unprecedent monetary easing globally. As they continue to dream, almost markets price has been convergence to prepare big explosion. It would be much interesting.