Volatility dropped to extremely low levels as markets sink into the holiday mood on the last trading day ahead of Christmas. 

Trading volumes thinned ahead of the holidays also. But that couldn’t mask the fact that emerging markets are suffering from capital outflows, which is observed in the divergence in performance between US equities and Asian equities.

The Hang Seng Index slumped further, braking below the key support level of 21,800 and heading towards the next support level at around 21,360. Indian’s Nifty 50 futures dropped 1.34% yesterday to around 7,900 points – the lowest level in six months. Some other Asian markets namely Malaysia, Indonesia, Thailand and Taiwan were in the red too. Their performances are even worse when measured in USD due to currency depreciation.

Concerns over capital outflow, shrinking foreign reserves and a depreciating RMB worried a lot of Chinese investors too. There is speculation that the authorities will take the necessary measures to further tighten rules in order to curb outflow next year. USD/CNH is trading at around 6.94 this morning, a level not seen since 2003.

Singapore equities continue to consolidate. The Straits Times Index lost almost 1% yesterday, dropping into the 2,800-2,900 range – a comfort zone that it used to stay within for a couple of months. This morning we observed a rebound in the oil & gas sector but banks are still dropping. A relatively quiet calendar towards the end of the year suggests that the Straits Times Index may range between 2,800-2,960 points, unless we see a “window-dressing” rally next week.

Hong Kong 50 - Cash

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