Check out the key picks for this week by SaxoStrats team

FX FOCUS

CNH

  • Renminbi likely to play catch up to EM currencies & the US dollar, given that China was out last week
  • Structurally speaking it’s hard to see a scenario where we don’t get over 7.00 sooner rather than later, especially as Trump is likely to get more combative in the run-up to the Nov 6 US midterms
  • TRADE YOUR VIEW WITH SAXO – USD/CNH and options

AUD

  • The RBA meet again last week in what has become a consistent non-event, as they once again left rates on hold at 1.50%. Whilst they indicate that if they had to move it would be to the upside, KVP our Global Macro strategist has a dovish skew on both the RBA & RBNZ – he favors shorts against the AUD & NZD vs. being long the USD or the likes of NOK & SEK
  • TRADE YOUR VIEW WITH SAXO – AUD/USD and options

GBP

  • Cable continues to trade all over the map, with not neat-term clear pattern for the bulls or bears – one potential strategy could be to go long the volatility in the underly, by buying ATM calls & puts with the thinking being that when we finally get the move on Brexit (c. by Nov with final Deadline in Mar 2019), one will make enough money on one of the options to more than make up for the premium outplayed
  • TRADE YOUR VIEW WITH SAXO - GBP/USD and options

EQUITIES FOCUS

Aston Martin IPO

  • The British carmaker, famous for furnishing James Bond’s vehicle of choice, has begun trading on October 3.
  • Aston Martin narrowed their turbocharged IPO range from £17.50-£22.50 per share, scaling back the upper end by 11%, to a new marketed range of £18.50-£20.00 giving a valuation range between £4.20bn to £4.54bn. The IPO is set to price toward the bottom end of that range at £19.00 per share giving the luxury carmaker a valuation of £4.31bn.
  • Aston Martin builds its growth case on the expanding population of HNWI and their desire to own high end luxury vehicles. The recent turnaround strategy has renewed confidence in Aston Martin, not only as a prestigious heritage brand with beautiful cars, but as a profitable manufacturer of high-end luxury vehicles. the company has returned to profit in 2017 for the first time since 2010 and has emerged the fastest growing automotive brand of 2018
  • Both Ferrari and Aston Martin have claimed a luxury valuation multiple, this has not deterred investors given Ferrari has rallied 170% since listing, can Aston Martin do the same? Based on the fundamentals, whilst a £4.31bn valuation seems excessive, the Aston Martin IPO embodies the unique proposition upheld by luxury brands as the opportunity to gain exposure to one of the last remaining all British car brands is certainly rare.
  • Valuation might go out the window and Aston may have a license to kill when investors consider the proposition to own a slice of an iconic brand that is synonymous with luxury and elegance. Watch out critics: Bond villains are typically vanquished!
  • TRADE YOUR VIEW WITH SAXO - Aston Martin [AML:xlon]

Tesla

  • A lot of news has hit Tesla and CEO Elon Musk lately. While Musk’s latest actions have been unquestionably negative for the company and shareholders.
  • Despite all the challenges and uncertainties, it is believed that many observers are greatly underestimating Tesla and what’s happening with electric vehicles of late.
  • Tesla will soon report Q3 numbers and deliveries. It is expected that the company will hit the target. Tesla is currently at a run rate of 360,000 cars (all models) and will probably hit 500,000 in first half of 2019.
  • The risks, however, are still immense. The biggest risks are bankruptcy, Elon Musk, the new production tent not being approved by the local state, faster-than-expected arrival of competing EVs, and a slower-than-expected decline in battery costs.
  • TRADE YOUR VIEW WITH SAXO – Tesla [TSLA:xnas]

Macro

Inflation & Amazon & US Financials

  • It's worth noting that last week saw Amazon (employs over 500,000 in the US) increase its minimum wage rate to $15, which once again illustrates how tight the labor market is in the US. The potential structural readings from this, are more pressure on wage inflation, that could flow into the CPI readings of the Fed & create a bias towards more hawkishness, higher US rates & higher US yields.
  • Interestingly enough, US financials ETF IYF – after outperforming the S&P in 2017 – is lagging by over 5% over the last year. This is unusual as the financials tend to do well in a rate rising environment, recent pullback relative to the S&P, could be due to the market that was expecting a more Hawkish Fed from their Sep meeting.
  • TRADE YOUR VIEW WITH SAXO – S&P options [SPX:xcbf] and futures [ESZ8]

Weekly Most Traded A-shares*

Stock CodeStock NameSaxo CodeAverage Daily
Value Traded RMB
(27 Sept - 3 Oct)
601318 CH EquityPING AN INSURA-A601318:xssc5,143,378,333
600519 CH EquityKWEICHOW MOUTA-A600519:xssc3,556,952,667
000063 CH EquityZTE CORP-A000063:xsec2,315,493,333
000651 CH EquityGREE ELECTRIC-A000651:xsec2,124,773,667
000858 CH EquityWULIANGYE YIBI-A000858:xsec1,989,491,000
600036 CH EquityCHINA MERCH BK-A600036:xssc1,734,130,667
002460 CH EquityJIANGXI GANFEN-A002460:xsec1,733,085,667
300104 CH EquityLESHI INTERNET-A300104:xsec1,652,339,000
600309 CH EquityWANHUA CHEMIC-A600309:xssc1,644,147,500
002415 CH EquityHANGZHOU HIKVI-A002415:xsec1,633,349,333

* Source: Bloomberg