Mai hui MHmarkets: June 20, 2023 - Fundamental Reminder

☆09:15 CNY Loan Prime Rate 1Y (JUN/20)

Some experts believe that with the MLF (medium-term lending facility) operating rate cut of 10 basis points on June 15, the new LPR cut on June 20 is a probable event.

☆09:30 AUD RBA Meeting Minutes (JUN) 

Watch out for any mention of the Australian Fed's subsequent tightening pace.

☆18:30 USD Fed Bullard Speech 

Pay attention to whether he will mention his views on the Fed's subsequent policy path.

☆23:45 USD Fed Williams Speech 

Investors need to pay attention to his views on the subsequent policy path of the Fed.

Market Overview

Review of Global Market Trend

On Monday, spot gold fell sharply in the European session and once fell below the $1,950 mark to an intraday low of $1,947.86, eventually holding the $1,950 mark and closing down 0.38% at $1,950.47 per ounce; spot silver “faltered” near the $24 mark and eventually closed down 0.97% at $23.95 per ounce.

The dollar index recovered from the one-month low touched on Friday and rose to a daily high of 102.57 before the U.S. session, eventually closing up 0.18% at 102.48.

Crude oil rose and then fell, with WTI crude rising to a daily high of $72.25 before giving back all of its gains and turning lower in the U.S. session, eventually closing down 0.21% at $71.44 per barrel; Brent crude closed down 0.24% at $76.08 per barrel. European natural gas futures fell 14%, plunging for a second straight day, giving back some of the gains driven by supply risks and hot weather earlier this month.

U.S. stocks were closed for one day yesterday due to the Juneteenth holiday.        

European stocks were sluggish, with Germany's DAX closing down 0.96%; Britain's FTSE 100 index closed down 0.71%; France's CAC 40 index closed down 1.01%; Spain's IBEX 35 index closed down 0.69%; Italy's FTSE MIB index closed flat; Europe's Stoxx 50 index closed down 0.74%.

Market Focus

1. Malaysia reduced stamp duty on stock transactions to 0.1% from 0.15% effective July.

2. End of equipment maintenance season and Russia reportedly raised crude oil processing to the highest level in more than two months.

3. The market is expected to increase bets on an expected interest rate hike in the U.K., with the country's 2-year government bond yield rising to 5% for the first time since 2008.

4. The European Central Bank is reported to have asked banks to be prepared for tougher stress test results.

5. Warren Buffett passively increased its stakes in five major Japanese trading companies, where its holdings in the five trading houses averaged more than 8.5%.  

Geopolitical Situation

Conflict Situation

1. British military intelligence: In the past 10 days, it is highly likely that Russia has started to move some of the Dnipro forces (DGF) from the east coast to the Zaporizhzhia and Bachmuth regions. The redeployment of Russia's Dnipro forces (DGF) could involve thousands of troops from Russia's 49th Army.

2. Ukrainian Deputy Defense Minister: Ukrainian forces have liberated eight settlements in offensive operations over the past two weeks, including the village of Piatihatki.

3. The General Staff of Ukraine's armed forces said Ukrainian forces struck Russian military targets, including command posts, ammunition depots, fuel depots and antiaircraft missile systems. Over the past day, Russian forces lost 630 soldiers, five tanks, six armored vehicles, 18 artillery systems and 12 tactical drones, among other equipment.

4. Russian Ministry of Defense: The Russian military used sea-based high-precision weapons to hit the Ukrainian warehouses storing foreign military equipment, and repded several Ukrainian attacks in Kupiansk, Dijman, Donetsk, Zaporizhzhia, Kherson and other directions. The Russian air defense forces intercepted a number of Ukrainian “Hakasz” rockets, and shot down a Ukrainian Mi-8 helicopter and several drones.

Assistance Situation

1. Zelensky: I had a phone conversation with Sunak and discussed Ukraine's defense needs and our further cooperation to expand Ukraine's capabilities on the battlefield, in particular through long-range weapons.

2. Russian media: Israel's Defense Ministry denied providing Merkava tanks to Ukraine.

3. UK media: US space company Lockheed has said it will offer training to Ukrainian pilots if NATO Allies provide F-16s to Kyiv.

4. Zelensky spoke to von der Leyen and discussed financial support for Ukraine and the 11th round of EU sanctions against Russia.

Energy Situation

1. Russian media: Uzbekistan has signed a two-year natural gas contract with Russia under which Uzbekistan will purchase 2.8 billion cubic meters of natural gas from Russia annually.

2. Eurostat data: Total EU imports of crude oil and oil products from Russia in March were 90% lower than their monthly average from 2019 to 2022.

3. Market news: Russia boosted crude processing to the highest level in more than two months.

4. The new ammonia terminal in Taman, Russia, will fully meet the export needs of Russian ammonia producers, TASS quoted Uralfertilizer as saying.

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs：BOE likely to slow pace of UK bond issuance】

The BOE may slow the pace of bond sales under its quantitative tightening program as investors struggle to digest the large volume of bonds, Goldman Sachs said on June 19. Analysts at Bank of America forecast that the BOE's bond sales would fall from the current £10bn a quarter to £7.5bn as officials weigh plans to shrink their balance sheet next year. Our bottom line is that the BOE will reduce the pace of sales to around £7.5bn a quarter and keep its annual target for selling down its holdings unchanged at £80bn next year, says Ibrahim Qadri, an analyst at Goldman Sachs. That is partly due to the need for investors to absorb a lot of bonds amid persistently high government bond issuance, he said, adding that higher gilt yields, as well as increased volatility and lower liquidity in bond markets, will also factor into policy makers' considerations.

02

SOCIETE GENERALE

【SOCIETE GENERALE：Downgrading South Korean stocks to neutral over exaggerated AI upside】

On June 19, SocGen Bank downgraded South Korea to neutral from overweight, while it raised India to overweight from neutral, as the market is overstating the upside of artificial intelligence stocks, according to the bank's strategists, including Frank Benzimra and Raja Agarwal. The AI boom has been a major catalyst for gains in Asian stocks, especially in hardware tech-heavy South Korea. In Asia, including Japan and South Korea, the performance of stocks exposed to domestic growth and those exposed to the tech bull market is likely to be “more balanced” in the second half of the year. Moreover, in India, with 6 per cent economic growth, declining volatility, resilient earnings and returns for foreign investors, “the conditions are in place for equity market outperformance for the full year”; Manufacturing and technology are the two big themes for the future of the Indian equity market.

03

MUFG

【MUFG：Dollar gains may be limited as Fed rate hikes come to an end】

On June 15, the dollar's rally after the Federal Reserve paused today may not last long unless U.S. economic activity and inflation data released later exceed expectations, MUFG said. The bank's currency analyst Lee Hardman said the Fed should soon end rate rises as evidence of disinflationary pressures continues to build. While another rate increase is likely in July, “we remain unconvinced” that a second increase is warranted, as weaker data on economic activity and inflation could prompt the Fed to signal that policy tightening has been sufficient.