Check out the key picks for this week by SaxoStrats team

STOCK FOCUS - China Easing Bias

  • The China easing bias is firmly in place - we have had 3 RRR cuts this year, we saw record MLF liquidity injection on Monday, then on Tuesday the fiscal stimulus package including 65 billion yuan in tax cuts expanding the preferential policy for small firms to all firms plus an infrastructure spending package all aimed at boosting domestic demand.
  • All this signals a policy shift towards easing and looking at the State Council Meeting statement confirms that as the “neutral monetary policy” phrase was dropped. So we have the double barrelled fiscal and monetary easing which is likely to support growth momentum in china for the time being curbing downside risks.
  • Expected by the market to benefit from the easing bias BHP Billiton Plc shares rose by 6.1% early last week, more than any full-day gain since September 2016 and Hong Kong-listed infrastructure names (construction, railways, cement stocks such as 01186:xhkg, 00390:xhkg, 03311xhkg, 01800:xhkg and 00914:xhkg) also caught a very strong bid
  • Trade your view with Saxo
    • BHP AU Shares (BHP:xasx) Stocks or Call/Put options over
    • 01186:xhkg
    • 00390:xhkg
    • 03311xhkg
    • 01800:xhkg
    • 00914:xhkg

STOCK FOCUS - IPO Pipeline

Pinduoduo IPO (PDD:xnas)

  • Tencent backed, Pinduoduo (“PDD”) the fast growing Chinese ecommerce company listed on the NASDAQ on Thursday 26th closing at USD26.70 up ~40% from its USD19 IPO price
  • PDD operates a social ecommerce site that leverages group discounts to attract new users and is threatening the duopoly ecommerce market in China, ambitions to dethrone Alibaba’s Taobao and JD.com
  • PDD has achieved a user base of around 100 million monthly active users and 1 million merchants in only 3 years (iQiyi 433mn MAU and Groupon 49mn MAU)
  • PDD partners with Tencent and uses the WeChat platform to engage users in “team purchases”
  • Strong user growth and revenue growth coupled with 77% margins would allow Pinduoduo to become profitable by next year as the additional revenues will go straight to the bottom line (if the current business model is maintained).
  • PDD still has a way to go but if the top line growth accelerates on the same trend along with the rapid acquisition of new users then the potential is there.
  • Trade your view with Saxo - PDD:xnas

China Tower (00788:xhkg)

  • China Tower wants to raise up to $8.7 billion with the greenshoe exercised on strong demand the deal could raise up to $10bn with a possible listing date on the HKEX of 08/08/18
  • The offering may place China Tower ahead of Xiaomi, as the world’s biggest IPO this year and the largest since Alibaba
  • China Tower was formed by combining the transmission facility assets of China Mobile, China Unicom, and China Telecom in 2015 as part of a broader plan to reform the nation’s state-dominated wireless industry. The company is the world’s largest owner of telecom tower infrastructure, per the prospectus.
  • Trade your view with Saxo - China Tower (00788:xhkg) will be available for trading with Saxo on Listing Day 8th Aug

FX FOCUS - Movement in Turkish Lira and Renminbi

USDTRY

  • Initially mentioned on our weekly Macro Monday phone call, as a contrarian risk - we just had our first central bank of Turkey meeting post the recent Turkish elections where Erdogan continues to solidify his power base & put his friends & family into key roles, including his son-in-law as the head of Treasury & Finance
  • The market was expecting a +100bp hike to 18.75% but the central bank did not hike sending USDTRY from around 4.75 pre the decision to around 4.83. Our Global Macro Strategist KVP, with the thesis “trust Erdogan to be Erdogan” argues new highs & break of 5.00 on USDTRY is possible
  • Trade your view with Saxo - USDTRY

USDCNH

  • There has been a lot of focus of late on the general depreciation of RMB vs the USD: as of mid last week the yuan has depreciated by around -4.4% on a YTD basis (-7.2% on a 3M basis). This deprecation is actually a big outperformance versus the likes of the Turkish Lira or the Brazilian Real which have depreciated by around 22% and 11.50% respectively on a YTD basis versus the US Dollar
  • Even among its Asian peers, we have seen more weakness in the likes of the Indonesia Rupiah (-6.50% YTD) & Indian Rupee (-7.35% YTD) against the USD.
  • Now that CNH has traded over 6.80 the key level that everyone is watching is 7.00, which would take us back above multiple highs on USDCNH
  • Trade your view with Saxo - USDCNH

MACRO - US Non-Farm Payrolls later this week

  • With the last two months of US non-farm payrolls beating expectations, it will be interesting to note if the 185k estimate for Fri 3rd Aug, will also see a surprise to the upside.
  • The US labor market continues to run hot, through a variety of different lenses, though in many ways the key focus will again be on Average hourly earnings, which are estimated at +2.7%e, as better read of US inflation.
  • US market latest leading indicator figures seem to imply further pressure on prices & potentially already signs of input prices rising up as a result of steel & aluminum tariffs.
  • The technical chart picture, still suggests that US equity indices are more constructively positioned than their global peers, with the Nasdaq-100 & Russell2000 looking to be ahead of the pack, for example the Dow Jones & S&P500 (bigger multi-nationals & offshore earnings hit by a stronger USD)
  • Trade your View with Saxo:
    • on broader US indices such as the Nasdaq-100, Russell2000 here & here
    • Or chose a sector specific focus such as the financial ETFs [iShares Dow Jones US Financial Sector Index Fund - IYF:arcx] if you are hawkish (long)
    • or dovish (short) on the US Fed hiking or are looking for a contrarian play say in high yield market [iShares iBoxx USD High Yield Corporate Bond Fund - HYG:arcx]

Weekly Most Traded A shares

Stock CodeStock Name*Saxo CodeAverage Daily Value Traded RMB (19-25 Jul)
601318 CH EquityPING AN INSURA-A601318:xssc4,642,548,824
000063 CH EquityZTE CORP-A000063:xsec2,931,799,818
600309 CH EquityWANHUA CHEMIC-A600309:xssc2,559,837,904
000651 CH EquityGREE ELECTRIC-A000651:xsec2,380,685,123
000725 CH EquityBOE TECHNOLOGY-A000725:xsec2,329,997,125
000636 CH EquityGUANGDONG FENG-A000636:xsec2,308,259,968
600519 CH EquityKWEICHOW MOUTA-A600519:xssc2,183,716,533
300059 CH EquityEAST MONEY INF-A300059:xsec2,141,934,618
000333 CH EquityMIDEA GROUP CO-A000333:xsec2,093,501,669
002027 CH EquityFOCUS MEDIA IN-A002027:xsec1,948,192,071

Source: Bloomberg