Japan’s trade contraction eases in September

The Japanese trade balance in September sent positive surprises to the markets this morning. The country’s exports previously dropped 9.6% but this month, it only fell 6.9% y-o-y. The 6.9% fall also surpassed the market forecast of a 10.4% drop. The September trade balance bounce back to 498.3 billion yen, a strong swing from the reading of deficit of 19.2 billion yen in the previous month.  

The volatility of USD/JPY pair remains relatively low this morning. USD/JPY is trading within a range between 103.80 and 104.00 area.  The US dollar index continues to strengthen last week as the case of a Fed rate hike by the end of this year has now become more convincing. Thus the downside of USD/JPY is limited, with major support levels at 102.80 and 100.00 respectively. 

Southbound flow into Hong Kong equity slows down in October

The enthusiasm of Chinese money flowing into the HK equity market has cooled down dramatically after the National Day Holiday. According to Bloomberg data, the Hong Kong-Shanghai link directed more than $8 billion funds into the HK equity market though the stock connection in the month of September. That is the largest monthly inflow through the link since it first launched in 2014. 

The flow this month, however, shrank by over 90%. The sudden cessation of southbound flow shows the hesitancy in mainland investors’ entrance into Hong Kong’s markets as the valuation continues to climb (over 12 times trailing Price to Earnings). The upcoming earnings season and uncertainties surrounding the US presidential elections might also have reduced their risk appetite and dampened their enthusiasm in entering the current markets. 

The Hang Seng index is traded at 23,400 area this morning, with immediate support and resistance levels at 23,200 and 24,000 respectively. This month, investors should pay special attention to the 3Q earnings figures, Including Tencent, CK Hutchison, HSBC, China Life Insurance and the four big banks.  

Hong Kong 50- Cash

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