Check out the key picks for this week by SaxoStrats team

FX FOCUS – Turkish Lira

  • Our Global Macro Strategist, KVP was talking risks to Turkish Lira weeks ago when USDTRY was trading below 4.50, since then we have seen it well north of 7.00, before coming back to this 6.00 / 6.30 range
  • He still feels that things have to get a lot worse before they get better & believes that we are likely to see 7.00 to 7.50 before we see 5.50. Given the volatility & higher carry on the Lira, he would prefer to paly this view with long call options on USDTRY with a Dec 24 expiry to make sure he captures both potential Fed Hikes on Sep 26 & Dec 19
  • TRADE YOUR VIEW WITH SAXO – USDTRY Options

FX FOCUS – RMB

  • The PBoC has officially confirmed that the “counter-cyclical factor” has been reintroduced into the USD-CNH fixing mechanism to stabilise the currency and ease downward pressure
  • Daily fixing since mid June has emphasised a strong CNH but CCF reintroduction acts as an official acknowledgement of pursuing a stable currency
  • This clearly suggests that the Chinese authorities are keen to defend the 7.00 hurdle for USD-CNY and see the importance of a stable currency
  • The important question is will CNH appreciate significantly from now on. We don’t think so as it does not make sense to see a much stronger CNY from both the economic and trade war perspectives. In our view, the CNH’s weakness is justified as the economy is still struggling between growth, debt and leveraging
  • TRADE YOUR VIEW WITH SAXO – USDCHN Spot and Options

STOCK FOCUS – China Markets

  • China is openly supporting a stable CNY and through this “commits” to intervention and support of economy. Ultimately could be more risk taking in the short term in China
  • Stable CNY and a weaker US Dollar supports our believe that Chinese market is close to lows (with the ultimate test being the 200 billion September 6th new tariffs)
  • Chinese policy makers have been aggressive at the margin on monetary and fiscal side, it will be some time until this trickles into the real economy and into the data, but financial markets discount this this ahead of time so over the next couple of months we expect to see improved sentiment in China
  • Trade recommendation: Buy China A-shares ETF- MCHI:XNAS @ market open 61.30 with stop/loss @ 57.00 on close
  • TRADE YOUR VIEW WITH SAXO:
    - The A-shares list at the bottom of this note
    - A-shares ETF - MCHI:XNAS

STOCK FOCUS – TESL

  • Tesla [TSLA:xnas] has been in the news over the last few weeks with privatization rumors one driving the stock close to $390 before then reverting back. Most recently Musk has backpaddled indicating that staying public is the better alternative. Tesla continues to be one of the most heavily contested names with people either loving or hating the electric vehicle company & its eclectic Maverick CEO, Elon Musk. It’s a favorite short amongst hedge funds
  • This has all occurred as we continue to make new all-time highs in not just technology (Nasdaq-100, NQU8) but also the broader market with the S&P 500 (ESU8, SPY:arcx) also reaching new heights
  • The bullish break-out that we previously flagged (on our weekly Macro Monday Call) on Apple [AAPL:xnas] is still intact, with 210 & 199 being the key levels of support for the bulls
  • TRADE YOUR VIEW WITH SAXO – Tesla [TSLA:xnas]

BONDS – European Bonds

  • Playing the Italian political soap opera through Spanish Bonds / 10-year futures
  • Those expecting potential overhang on Europe, through either Italian politics and/or a Turkish contagion (refugees) may look to play widening spreads on peripheral European bonds. One way is to be long German bond futures [FGBLZ8] vs. short Spanish bond futures [FBONZ8] – with the latter’s yields holding up very well compared to Italy (1.44% vs. 3.18%)
  • Italian 10yr spread to German bunds are up c. 130bp since the start of the year to these 280bp lvl. Whilst the Spanish 10yr spread to German bunds are pretty much unchanged for the year at around these 107bp lvls
  • TRADE YOUR VIEW WITH SAXO - German bond futures [FGBLZ8] and Spanish bond futures [FBONZ8]

Weekly Most Traded A-shares*

Stock CodeStock NameSaxo CodeAverage Daily
Value Traded
RMB (23-29 Aug)
000063 CH EquityZTE CORP-A000063:xsec4,527,692,661
601318 CH EquityPING AN INSURA-A601318:xssc3,280,859,773
600519 CH EquityKWEICHOW MOUTA-A600519:xssc2,184,810,486
000725 CH EquityBOE TECHNOLOGY-A000725:xsec1,910,993,049
000858 CH EquityWULIANGYE YIBI-A000858:xsec1,716,149,125
000001 CH EquityPING AN BANK-A000001:xsec1,636,608,194
000651 CH EquityGREE ELECTRIC-A000651:xsec1,593,174,150
600536 CH EquityCHINA NATIONAL-A600536:xssc1,587,813,061
000333 CH EquityMIDEA GROUP CO-A000333:xsec1,285,755,951
600276 CH EquityJIANGSU HENGRU-A600276:xssc1,221,713,747

* Source: Bloomberg