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Insight 21.04.2016

Oil volatility driving global markets

Oil volatility driving global markets

Oil volatility headlined global markets. Brent prices collapsed on Monday after key producers failed to reach an agreement on an output freeze during a weekend meeting held in Doha.


After hitting a four month high last week, oil prices dropped -6.7% on Monday as fear of an oversupply glut resurfaced. However, the correction pared some losses following a Kuwaiti labor strike hit the local oil industry.

Since last Friday’s closing, the CSI 300 and the Shanghai SE Composite were down -1.04% and -1.15% respectively. Data from China rebounded broadly in March with industrial production picking up to 6.8% year on year (YoY), reaching a nine-month high while fixed asset investment beat market consensus by posting a 10.7% growth YoY. GDP growth for the first quarter of this year came in line with expectation at 6.7% YoY, slightly below 6.8% growth in previous quarter. China trade numbers recovered from last month with exports and imports growing at 18.7% and -1.7% respectively, both figures beating market expectation. In the property sector, easing policies appeared to be effective with prices recovering and more recently construction starting to turn positive. Property sales were up 6.5% last year and surged 33% YoY in the first three months of 2016. In Hong Kong, property developers New World Development (7.85 HKD, +0.77%) and Hang Lung Properties (15.96 HKD, +1.27%) supported the Hang Seng index, which was up +0.56% since Friday. On the worst performing side, telecommunication service provider China Unicom (9.74 HKD, -2.60%) issued a profit warning.

In Japan, the NIKKEI 225 and TOPIX closed on Monday down -3.40% and -3.03% respectively. In addition to a weakening dollar that strengthened the yen, a magnitude-7 earthquake hit Kumamoto where Honda (3078 JPY, +1.42%), Toyota (5680 JPY, -1.05%) and Sony (2913.5 JPY, -0.73%) announced temporary operations’ suspension at their respective plants. Both indexes rebounded on Tuesday with Kuraray Co. (1428 JPY, +4.85%) and Asahi Kasei Corp (769.8 JPY, +4.59%) ranking among NIKKEI 225 best performers since Friday.

South Korea’s KOSPI started the week declining -0.17%. On the political scene, South Korea’s Saenuri ruling conservative party suffered an unexpected defeat against the main opposition The Minjoo Party, as Ms. Park has been criticized over rising unemployment, falling exports and rising levels of household debt. Out of the 300 seats in the single-chamber national assembly, The Minjoo party won 123 seats, Saenuri 122 seats and the People’s Party 38. Prior to recent defections, Saenuri party held a majority with 157 of the 300 seats.


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Guillaume Poncet
Analyst

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