Forex traders are eagerly awaiting interest rate decisions from the BOJ and ECB at 12pm and 7:45pm Singapore time today, respectively. 

These announcements are expected to be the key volatility drivers in the forex market.

In the previous meeting, ECB President Draghi mentioned that reflationary forces had replaced deflationary ones, hinting to the market that the central bank will consider tapering its massive asset-purchasing program, or quantitative easing soon. The euro has since surged to its highest level against the greenback in over 13 months, into the 1.1523 area, as the market tries to price in a hawkish outlook in advance. Germany’s 10-year treasury yields have also surged over 60 pips since Draghi’s last comment at the ECB forum in June. 

In today’s meeting, the market expects the ECB to hold its policy rate unchanged, and to provide more clues of the eurozone’s inflation outlook and tapering plan. A more hawkish tone could send the euro into rallying mode again, whereas a dovish statement could lead to the reverse. 

In Japan, the CPI remains soft at 0.4%, a level far below the central bank’s long-term target of 2%. The market therefore anticipates no change in its monetary policy any time soon, despite more hawkish tones from other central banks, including the ECB, Bank of England and Bank of Canada recently. 

Asian markets closed higher on Wednesday, as investor confidence got boosted by upbeat earnings and the ongoing rally in Wall Street. The Hang Seng Index climbed 0.51% to 26,667 points – its highest level seen since June 2015. The largest company listed in HKEx, Tencent (700 HK) surged over 4% to a record high of HK$299, inching closer to its psychological resistance level of HK$300. 

The SGX embraces its largest IPO in six years 

Singapore’s largest IPO in six years – NetLink NBN Trust – was listed in the SGX yesterday. The IPO share price opened flat and then traded within a narrow range slightly below the IPO price at S$0.805-0.810. Trading volume was decent, with over 80 million shares changing hands in the first ten minutes of its debut.  

The IPO received two times oversubscription in the book running, which was not too bad considering the size of the IPO. Compared to previous IPOs, however, this ratio wasn’t that impressive. For example, Kimley was 8.3 times, Jumbo was around 8 times, UnUsUal was over 30 times.

The Straits Times Index has recently broken through the key resistance level of 3,300, with strong sentiment around the global equity rally. Improving fundamental elements remained upbeat, supporting current or even higher valuations. 

As GLP has recently received a privatisation offer and might exit the SGX soon, the market needs fresh blood to boost liquidity and keep investors engaged. The SGX should seek more high-quality IPOs in both catalyst and mainboard to boost liquidity and depth. The IPO trend has increased over the past three years (S$500mil raised in 2015, S$2.3bn in 2016 and S$2.8bn raised year-to-date), showing development in the IPO market. 

Technical analysis:

Tencent

  • 10-Day Simple Moving Average is sloped upwards
  • SuperTrend (10,3) flipped to green colour from red, indicating the bullish side is taking control
  • Broken out above the 123.6% Fibonacci extension level, with the next resistance level at 302 area (138% Fibonacci level)

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