GIC Monthly Market Review - CTBC Private Bank · Jan Feb Mar Apr May Jun Elections 15 Netherlands...

1 January 2017

GIC Monthly Market Review

Investment Strategy and Outlook

January - 2017

2 January 2017

2016 2017F 2018F

Global 3.0 3.4 3.8

US 1.5 2.3 2.8

Europe 1.5 1.1 1.4

Japan 0.6 1.2 1.2

China 6.7 6.4 6.0

2016 2017F 2018F

Global 3.2 3.4 -

US 1.6 1.9 2.2

Europe 1.0 1.3 1.5

Japan 0.0 0.6 1.1

China 1.8 2.5 2.4

# of times

Q1 Q2 Q3 Q4

Fed 3 Fed median forecast appropriate rate of 1.375% at the end of 2017

CTBC 2 0.75 0.75 1.00 1.25

• Much rests of the enactment and success or not of Trump’s proposed policies • GDP momentum and earnings positive, but much of the good stuff priced in –

lots of bad stuff being ignored – risks are to the downside, opportunities for European bond tantrums, low duration, high volatility

• Earnings: Japan still cheap to the U.S. – Valuations are full and will come under pressure

• Divergence will in full force this year produces winners and losers • Sentiment and positioning are divergent therefore risks are high for a sell-off • Themes:

‒ Event risks in the year ahead are significant ‒ Small Caps are a selective reflation winner. U.S. > Europe, High uncertainty

is a drag, Japan neutral to positive, Open EMs (Asia) could face further headwinds if Trump closes trade windows, raises tariffs and immigration cut, advise caution on a Trump Rally

‒ Corporate Tax cuts ignite opportunities ‒ Sector deregulation in the U.S. beneficial to interest groups such as

financials ‒ Do not ignore ESG (environment, social and governance) in EM ‒ Rotation opportunities as reflation either appears or stutters ‒ Equity Duration – in the face of falling yields ‒ Policy proposals we need to track are:

1. Lower Corp Tax Rates 2. Overseas Cash Repatriation 3. Regulatory Rollback 4. Government Infrastructure Spending

Macro Roadmap – 2017: Global GDP Growth 3.4 GDP Forecast

Inflation Forecast

2017 Fed Rate Hikes

Key Forecasts for 2017

3 January 2017

Key Forecasts for 2017: Country Growth & Inflation

U.S. IPB IMF CON.

Growth 2.3 2.2 2.2

Inflation 1.9 2.3 2.3

Source: CTBC, Bloomberg, 9 January 2017

Eurozone IPB IMF CON.

Growth 1.1 1.5 1.4

Inflation 1.3 1.1 1.3 China IPB IMF CON.

Growth 6.4 6.2 6.4


Japan IPB IMF CON.

Growth 1.2 0.6 1.0


Australia IPB IMF CON.

Growth 2.3 2.7 2.6


Global IPB IMF CON.

Growth 3.4 3.4 3.2


U.K. IPB IMF CON.

Growth 1.2 1.1 1.2


4 January 2017

2017: a year dominated by POLTICAL UNCERTAINTY

Jan Feb Mar Apr May Jun

Elections

15 Netherlands

Parliamentary Elections

26 HK

Chief Executive Election

23 April - 7 May France

Presidential Election

(2 Rounds)

4 U.K.

Regional Elections

11 France

Legislative Elections

Central

Bank

Policy

Meetings

19 ECB

30 - 31 BoJ

2 Fed

2 BoE

9 ECB

15 - 16 BoJ

16 Fed

16 BoE

26 - 27 BoJ

27 ECB

4 Fed

11 BoE

8 ECB

15 Fed

15 BoE

15 - 16 BoJ

Important

Events

20 U.S.

Presidential Inauguration

17 - 20 Switzerland

World Economic Forum

Annual Meeting

31 U.K. & EU

Invocation of Article 50

Lisbon Treaty (Brexit)

possible by this date

March China

12th National People Congress

Government Work & Fiscal

Budget Report

March / April

ASEAN Summit

3 China

1st International Belt & Road

Initiative Summit

26 - 27

G7 Summit

7 Korea

Deadline for Court Ruling on

President Impeachment

Jul Aug Sep Oct Nov Dec

Elections

25 India

President Elected by Electoral

College Deadline

26 Singapore


(Date not confirmed)

11 Norway

Parliament Elections

Spain

Tentative Timing of Catalonia

Independence Referendum

22 Germany

Parliamentary Elections

Deadline

19 Chile


20 South Korea


Central

Bank

Policy

Meetings

19 - 20 BoJ

20 ECB

27 Fed

3 BoE

7 ECB

14 BoE

20 - 21 BoJ

21 Fed

26 ECB

30 - 31 BoJ

2 Fed

2 BoE

14 ECB

14 Fed

14 BoE

20 - 21 BoJ

Important

Events

7 - 8 Germany

2017 G20 Hamburg Summit

August

ASEAN Summit

November China

19th Party Congress confirm

new members of Standing

Committee (likely)

7th Party Plenum (likely)

December China

Central Economic Work

Conference

5 January 2017

Key Forecasts for 2017

• Price path was expected to be choppy in 2016 due to tepid global growth, divergent central bank policies, and downside movement in oil/commodity prices. Election has seen some turn in policy mix.

• Continued range trading is likely to be a profitable strategy in 2017. • We expect to see gains for S&P 500 more likely to come in 2017 as

sentiment and growth continue to improve.

• Brexit created headwinds for the struggling European banks. Volume of new issuance and trading activity will likely be subdued in the near term on heightened uncertainty.

• China government stimulus critical to arrest the slowing growth. Possible MSCI inclusion could be a catalyst could lead to fund flows into China.

Index Year End Price Short-Term View

S&P 500 2,380 2,277 OW

Euro Stoxx 600 392 365 N

Topix 1,860 1,553 N

MSCI Asia ex Japan

513 527 N

Equity Outlook FX & Commodities Outlook

Pair 2017

Year End Price

EURUSD 0.95 – 1.00 1.05

USDJPY 125.00 117.02

USDCNY 7.20 6.92

USDSGD 1.49 1.44

USDCAD 1.38 1.32

USDCHF 1.08 1.02

AUDUSD 0.68 0.73

GBPUSD 1.10 1.23

Source: Bloomberg, as of 8 January 2017

• Expect oil markets will continue to rebalance In 2017. Strategic energy recommendations limited to 55 – 65 target. Going forward, we continue to favor energy exposure over base and precious metals, agriculture and softs. Still, we are tactically long copper, silver and sugar based on short-term catalysts. We will look for sell-offs in deferred oil markets to get long. Lastly, we continue to favor long inflation-related plays.

• Trumponomics turns out to be a disappointment • Political Risks: European elections, Brexit negotiation, Asia

geopolitical risks • Policy uncertainty • Trade war that re-ignites stagflation possibility • China capital outflow / CNY depreciation

FX Rates Targets for Year End 2017:

Key Risks

6 January 2017

Long Term Themes Implications

• Debt Super Cycle • End of a Super Cycle often marked by an increase in debt, which

we may now see in the U.S. as Europe and EM are still at early stages of post debt deleveraging

• Technological Disruption • IT in mature phase, and it’s the first and last stages where

investors make profits

• EM Deleveraging • Need to see structural reforms

• Multi-Polar Geopolitics • End of American hegemony

• End of the Bond Bull Market • An on going call

• Subpar Long-Run Returns • Occurring both in equity and bonds

• Mal-Distribution on Income • Affects economic / social stability and consumer behavior

• European Politics • Year of Elections and Binary Events

• Higher Volatility • FX as the major tool for the spread of Vol

GIC Potential Themes 2017

7 January 2017

Key Themes Implications

• A year of reflation • More US rate hikes => $ strength to continue but in a more moderate manner

• Linkers to outperform US Treasury • FRNs to outperform fixed rate bonds • Tactical Unwind of the Trump Reflation Trade

• Policy focus shifts from monetary to fiscal

• Fixed income: coupon clipping for yield focused investors; short duration for ability to reinvest at higher rates; yield curve strategies

• Corporate default rate to fall – HY or IG ok for now • Commodities to benefit • EM fundamental to improve but watch for sentiment

• Great rotation finally arrives… • Higher equity returns but expect divergence • Prefers value style • US: sector selective – Financials, H/care, Industrial, Real Estate + smid cap • Japan, India, Indonesia and Russia likely to outperform • China – focus is back on addressing leverage and asset bubbles. Possible

MSCI inclusion could be a catalyst

• …in a year of busy geopolitical event agenda

• Risk-on, risk-off, high volatility • Back to basics: Focus on fundamentals and long term trend • GBP – sell but buy OTM calls, or sell middle buy wings • Underweight French Debt

Investment Theme for 2017

8 January 2017

Economic View Implication

Our GIC meeting, at the end of the year sees markets mostly up by an average of 5% with most of the performance being delivered in the last quarter of this year. Up until the U.S. election the MSCI world index was flat on the year as it struggled to regain ground from February lows (down -11.6% on the back of extremely low oil prices). From then it clawed back 15% to Brexit whereupon it fell again by -7% by June close, thereafter we bounced +11.3% to today’s levels. At the start of the year we did warn of increased volatility and the path of the MSCI bears testament. EM has been even more volatile and this is likely to continue into 2017 as the Geopolitical environment unfolds . We currently have little insight into Trump’s political views, although our experience to-date would suggest it is rather mercurial. A series of binary election results in Europe in 2017 will also keep us on a knife edge.

Markets have mostly gone our way. Over the course of the last three GIC meetings we had increased our equity exposures while reducing our cash and bond holdings. This has paid off into the end of the year where the lion’s share of returns have been made post Trump election results. At this stage we believe too much good news has been priced in and not enough of the risks that continue to confront us. As a result, we have taken profits on the high level asset allocations by reducing the overweight equity leg and putting that money into IG bonds and cash. We are still constructive on the market and would like to buy on dips from an overweight cash position as some of the unknowns peel away. We have a strong anti inflation position in silver and gold and base metals. As always with risks of high levels of volatility, it is important to STAY BALANCED, and diversified.

U.S.: We finally got our 25bp fully discounted rate hike from the Fed and the market has settled into a higher yield trading range centered around 2.5%, up 60+bp or so from Q3. Also, the forecasts around the future path of interest rates has convened at 2 or 3 times for the year ahead. The game changer of course is the implied hand over from monetary lead support to fiscal lead support. The U.S. is the first and the rest of the world is, for now, divergent.

The U.S. continues to be the bright spot on the global economic horizon and the fact that it is going to (but has not yet) receive an extra boost from measures other than purely monetary, means that their economy will benefit, bringing with it the normal trappings of success. Good public and corporate health will translate into earnings and higher equity prices. U.S. is still our preferred market but with A less significant OVERWEIGHT.

Although Europe has improved in macroeconomic terms there are still a disturbingly high number of politically driven events that could lead to greater uncertainty and underperformance in 2017. This includes the Dutch, French and German elections and the triggering of Article 50 at the end of March. We see short to medium term challenges to growth and investment, but these are fully priced in and we are positive on European value.

The ECB, in view of the lack of any other ‘game in town’ is the de-facto player for Europe. Their latest move left experts arguing whether or not they had in fact, tapered. They reduced monthly purchases but extended the program – each one of these could be argued independently, but overall we believe they are leaving their powder dry to undertake future action should it be required. Decrease underweight to NEUTRAL.

China has shown further signs of economic stabilization. There are increasing signs that growth targets would be sacrificed in favor of reform targets particularly regarding debt and over inflated real-estate. China and open EM Asia may suffer should the U.S. brand China a currency manipulator and slap on a 45% tariff, and other trade restrictions.

China has had a good year. It has managed significant reforms while maintaining growth at levels at or above their targets. A year on, we do not hear of any fears around ‘hard landings’. Controlling FX outflows is now central to policy and we see changes in the basket to address this. Decrease overweight to NEUTRAL. (Taiwan remains overweight)

Japan’s economy has not been moving slowly into expansionary territory. The weakness in the Yen which followed on from the recently announced zero bound BoJ policy juxtaposition against a more hawkish Fed has lead to stronger equity markets.

Dollar/Yen dependent. Of all the parts of the Japanese economy that are doing relatively better, it is the exporters that are thriving. Domestic consumption is still too low. Given that much of the Yen weakness has already played out, we reduce overweight o a NEUTRAL.

USD looks overbought, a short term respite is inevitable, divergence supports medium term and twin deficits are long term negative. Oil yr end 2017 $60

For commodities, we have an overweight long silver/gold position some base metals. Oil stable to higher. Softs - positive

House View Summary – 29 December 2016 GIC

9 January 2017

Key Assets Performance: 2016 in the books

Equities For 2016, China posted largest annual lost in 5 years. Fixed Income HY outshone IG in returns, we still prefer IG over HY to avoid increasing credit rating

and default risks in a rising rate environment down the road. FX Dollar regained some strength as we approached end of 2016. Commodities Rebound in most of the complex, but market was rather volatile throughout the year.

28%

16%

13% 12% 11%

9%

6% 5% 4%

3% 3% 2%

(11)%

14%

10% 8%

7% 4% 4% 3% 3%

1%

(0)%

5% 4% 3% 2% 2% 0%

(1)%(3)%

(4)%(6)%

(17)%

35%

24%

21% 19% 19%

15% 14%

11% 11% 9%

(9)%

(20)%

(10)%

0%

10%

20%

30%

40%

Ru

ssia

MIC

EX

UK

FTS

E 1

00

Ge

rman

y D

AX

Taiw

an T

WSE

US

S&P

50

0

Au

stra

lia A

SX 2

00

Fran

ce C

AC

40

Jap

an N

ikke

i 2

25

Ind

ia N

ifty

50

SG S

TI

HK

Han

g Se

ng

Euro

Sto

xx 5

0

Ch

ina

Shan

ghai

Asi

an H

Y

EU H

Y

US

HY

EU IG

Asi

an I

G

Spai

n 1

0Y

Ge

rman

y 1

0Y

US

IG

UST

10

Y

Ital

y 1

0Y

CA

D

Do

llar

Ind

ex

JPY

TWD

NZD

AU

D

SGD

EUR

CN

H

CN

Y

GB

P

Pal

lad

ium

Bre

nt

Cru

de

WTI

Cru

de

Silv

er

LME

Co

pp

er

Nat

ura

l Gas

Nic

kel

LME

Alu

min

um

Go

ld

Pla

tin

um

Co

rn

2016 to 6 Jan 2017 Dec 2016 to 6 Jan 2017

10 January 2017

Global Macro: Outlook for Growth

Global GDP

Source: Bloomberg, 8 January 2017

• Into the end of 2016 we are seeing more and more economic buds as we observe signs of growing strength in the U.S. and stabilization in China. •We suspect Europe will remain at the

rear of the group albeit Germany has seen decent progress.

Baltic Dry Index

China Trade

11 January 2017

Global Macro: Outlook for Inflation

Inflation in Key Countries


12 January 2017

Global Macro: Outlook for Economic Growth

Surprise Index


• In our après “U.S. Election GIC” of November 11th, we confirmed from a macro economic view that we are still on track for a stronger H2 in 2016 and as a direct result of that along with the implications from a Trump victory ringing in our ears we made a number of substantial adjustments to increase risk exposures. Data into 2016 year end confirmed the positive track. •However, the positive start to 2017, is

one where we seek to take profits as much of the ‘good news’ seems to have been priced in.

Systemic Stress in Eurozone Financial System

Indicator calculated using market-based financial stress measures. Values fall within 0 and 1, closer the values to 1, the higher stress levels.

Stress Lower

13 January 2017

Global Macro: Manufacturing Sector

Manufacturing PMI – showing signs of strength


14 January 2017

Global Macro: Services Sector

Services PMI – within expansion territory


15 January 2017

Global Macro: Liquidity and Financial Conditions

• In December the Fed, true to its indications, raised rates for the second time only in ten years and for the first time in a year. •The reassessment of the macro outlook

is rooted in the expectation of inflation in a global move away from the single minded focus on monetary policy to the use of a broader set of tools which include fiscal spending, tax and other policy reform. •Central banks, for some months now,

have been imploring governments to do more to help their own economies as the additional stimulus from zero or negative rates appeared to be reaching its limits.

Source: Fed, ECB, PBoC, BCA, Bloomberg, 8 January 2017

Credit Impulse – More momentum in China, while others lag

China Monetary Conditions

Euro Area

U.S.

China

Lower/higher reading reflect tighter/looser monetary conditions compared with previous period.

Looser

16 January 2017

Global Macro: We expect more unexpected tides in 2017

Market Volatility

•We must expect the unexpected and further to that expect the market to trade very differently from accepted predictions. •While Fed rate rise in December

was fully priced in to the all markets, it does drive home the divergent policies that will now be in place around the world and this will bring with it increased FX and other asset class volatility. •Thematically, we see volatility

higher over the course of 2017 driven by massive economic disparities and geopolitical risk.


17 January 2017

Asset Allocation: Asset Class Level

• On Trump the jury is still out on whether he can deliver. Time will tell and in the meantime, call to reduce risk is strong.

• We have adjusted our risk taking downward taking profits on equities and reinvesting in now much cheaper IG bonds and raising cash.

• We doubled our cash holdings to 8% keeping power in reserve when volatility and time affords us a cheaper entry level with less uncertainty.

50%

50%

53%

37%

6%

4%

55%

28%

9%

8%

- 11%

+ 7%

+ 4%

-20% -10% 0% 10% 20% 30% 40% 50% 60%

Equity

Fixed Income

Alternatives

Cash

BM SAA TAA TAA Change

18 January 2017

Asset Allocation: Country Level

• We feel that markets (and U.S. in particular) are somewhat over extended having priced in too much good news with no concrete evidence to support, and trading more on hope than reality.

• We are especially exposed but less so to the U.S. and Taiwan.

• Other adjustments include turning more neutral on Japan (currency hedged) and China, and resetting Europe exposure to benchmark on a valuation basis.

• We believe Europe is showing signs of

improvement, but also acknowledges that the region faces several headwinds due to uncertainties from political events such as elections and referendums in 2017.

6.2%

4.4%

3.7%

2.7%

2.2%

1.6%

3.7%

32.1%

13.2%

20.8%

7.0%

3.0%

2.8%

8.0%

9.4%

7.5%

5.0%

0.0%

1.0%

3.4%

40.0%

16.4%

20.0%

5.1%

2.8%

11.0%

1.1%

- 3.9%

+ 1.0%

+ 2.3%

- 7.0%

- 1.8%

+ 9.4%

+ 2.4%

+ 1.3%

+ 5.2%

+ 0.5%

-10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Australia

China

Korea

Taiwan

HK

India

ASEAN

U.S.

Japan

Europe

UK

France

Germany

Europe Others

EM ex Asia

SAA TAA 29 Dec TAA Diff vs. previous adjustment

19 January 2017

Asset Allocation: C1 through C5

TAA*: Difference from last TAA; SAA*: Difference from current TAA to current SAA. TAA – Reflects the GIC views on financial markets and aims to capture short-term market inefficiencies. We review the TAA in our monthly Global Investment Committee Meeting.

U.S. 8 - 4 + 1 15 - 5 + 3 22 - 9 + 5 29 - 6 + 7 31 - 6 + 6

Europe 4 + 2 7 + 3 11 + 4 15 + 7 18 + 9

Japan 3 + 1 6 - 1 + 1 9 - 3 + 2 12 - 2 + 4 12 - 3 + 3

Asia ex Japan 3 - 1 7 - 2 13 - 3 18 - 2 24 - 2

EM ex Asia 0 0 - 3 0 - 5 0 - 6 0 - 8

Total 18 - 3 + 2 35 - 5 + 1 55 - 11 + 2 74 - 3 + 5 85 - 2 + 1

Global IG Bonds 24 - 25 19 + 1 - 20 14 + 4 - 13 8 + 1 - 10 2 - 5

Global HY Bonds 27 + 21 18 + 1 + 13 7 + 3 + 4 3 + 1 + 1 1 + 1 + 1

EM Bonds 11 8 7 5 1

Total 62 - 4 45 + 2 - 7 28 + 7 - 9 16 + 2 - 9 4 + 1 - 4

Global REITs 0 - 1 2 - 1 2 - 1 3 - 1 3 - 2

Commodities 5 + 3 6 + 4 7 + 4 6 + 4 7 + 4

Total 5 + 2 8 + 3 9 + 3 9 + 3 10 + 2

Cash Cash Equivalents 15 + 3 12 + 3 + 3 8 + 4 + 4 1 + 1 + 1 1 + 1 + 1

100 100 100 100 100

11 - 14 14 - 16 16 +

Fixed Income

Alternatives

Total

Proposed SD Band (%) 6 - 9 9 - 11

TAA * SAA *TAA

29 DecTAA * SAA *

Equity

TAA * SAA *TAA

29 DecTAA * SAA *

TAA

29 Dec

TAA Results (%)

C1 C2 C3 C4 C5

TAA

29 DecTAA * SAA *

TAA

29 Dec

20 January 2017

Chart shows how the UST yield curve has strongly Bear-steepened from November 8, 2016. The belly of the curve is the most defensive place to be in when the yield curve starts to bear-steepen before

flattening over the medium term.

GIC - Fixed Income: Rates Outlook

21 January 2017

Chart shows the UST10yr yield vs the Bank of America Merrill Lynch MOVE Index. The UST volatility has spiked up initially and is consolidating sideways even as the UST yields go higher. Volatility is expected to stay high at least into January 20, 2017.

GIC - Fixed Income: UST Volatility Outlook

22 January 2017

Chart shows the US 2yr & 10yr Inflation Breakeven Rate & Conference Board Consumer Confidence Index. Inflation breakeven rate is a measure of inflation between the UST nominal yield and the real yield. 2yr breakeven rates have jumped the most YTD, but the 10yr breakeven rates has reached 2%. Consumer confidence for December has jumped to the highest level in 15 years at 113.7. Strongest pickup in inflation expectation and confidence were after November 8, 2016. Trump’s fiscal stimulus program is largely responsible for the jump in these expectations.

GIC - Fixed Income: US Inflation Breakeven Rate

23 January 2017

UST10yr yield has spiked up more than 70bp from November 8, 2016. Spread between the 10yr UST and the German Bund yield has touched a record high of 233bp from 165bp in

November. Fed is divergent and stands alone in tightening policy while the rest of the world are still easing.

GIC - Fixed Income: 10yr Bund/UST Spread History

24 January 2017

Credit Spreads vs. Benchmark Yields Chart shows the UST10yr yield vs. the 5yr Asian IG CDS. 5yr Asian IG CDS has at first widened in tandem with rising UST yields initially just after the election. While the 5yr UST has climbed 70bp, the 5yr Asian IG CDS has actually compressed about 20bp to pre-election

level. Asian credits enjoy strong local bids, lower correlation to global risk assets and have outperformed UST.

GIC - Fixed Income: Asian Credits

25 January 2017

Chart shows the scatter graph of the median yields of Asian credits vis-a-vis their ratings, YTM and maturity. 10yr BBB yields have jumped by more than 75bp as IG spreads widened in tandem with rising UST yields. As we are in the midst of the rising rates environment, credit spreads and yields have both risen significantly. As an idea, the median range for a 10yr BBB rated name is between 4.75%-5.25% and an A rated name between

4%-4.5%. Hurdle rate for most pension funds and insurance companies is 4% for a 10yr A-rated name. In the 5yr area, it’s 3.75%-4.25% for BBB and 3%-3.5% for A rated names. Median Range: BBB 10Y 4.75 – 5.25% BBB 5Y 3.75 – 4.25% BB 5Y 4.75 – 5.25% BB 3Y 4.25 – 4.75% B 5Y 6.5% B 3Y 5.5%

GIC - Fixed Income: Credit Spreads

YTM Maturity

26 January 2017

GIC – Equity: 2017 Year-end Targets

Index % Index % Index %

S&P 500 2,277 2,220 (2.5) 2,380 4.5 2,538 11.5

Euro Stoxx 600 365 339 (7.2) 392 7.3 415 13.6

Topix 1,553 1,628 4.8 1,860 19.7 1,890 21.7

MSCI Asia ex Japan 527 484 (8.2) 513 (2.7) 581 10.2

2017 Year End Targets

IndicesCurrent

LevelBear Scenario Base Scenario Bull Scenario

Source: CTBC, Bloomberg, as of 8 January 2017

27 January 2017

GIC – Equity: U.S. Sector Strategy

28 January 2017

GIC – Equity: Europe Sector Strategy

29 January 2017

GIC – Equity: Asia Sector Strategy

30 January 2017

Equity: Main Indices, Valuations and Targets

Source: CTBC, Bloomberg, 8 January 2017 Technical Analysis Summary

1 Year Performance

31 January 2017

Foreign Exchange

EURUSD & USDJPY (Invert)


USDCNY & USDCNH (both Invert)

Dollar Index • USD – With Trump planning to cut taxes and increase

spending, this brought a fresh perspective about the possibility of higher US growth and a stronger dollar.

• EURUSD – We remain bearish on the EURUSD and see

an initial test of 1.00 and if the anti-EU sentiment rises further from the elections that will be held, a further push to 0.95 cannot be ruled out. We forecast GBPUSD to fall toward 1.10.

- Year End Target: EURUSD 0.95 – 1.00 / GBPUSD 1.10 • USDJPY – UST interest rate differentials between the

Fed and BOJ likely to keep USD bid. - Year End Target: 125 • USDCNY – What remains is indeed a China that will

anchor its growth only around 6.4% in 2017, higher US rates and funding costs for its debt, a more stable FX regime that needs to be maintained with constant monitoring and measures to avoid continuing capital flight from locals. We see another 3%-4% depreciation of the RMB.

- Year End Target: USDCNY 7.20

32 January 2017

Commodities: Constructive on Commodities

Demand-side risk to increase price volatility


Recovery of Oil

Gold Price

• Gold will remain sensitive to shifts in U.S. fiscal and monetary policy expectations. The possibility of border-adjusted taxes in the U.S. will hang like the proverbial Sword of Damocles over the gold market. Should it pass, the Fed could be forced to keep interest rates lower for longer to offset the massive tightening in financial conditions such a tax would impose. Gold has been excellent tool to hedge last year’s trading volatility. We recommend actively trading the ranges again this year.

• Overall outlook for commodities is

supportive on the back of a stronger global growth picture. We remain overweight oil, expecting continued opportunities from volatile markets. Going forward, the contribution of demand-side risk to price volatility will increase. This will also be evident in iron ore, steel and base metals.

33 January 2017

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needs.

2. This document and the investments and/or products referred to herein should not be construed as any recommendation for you to enter into the investment briefly described above and this

document must be read with CTBC’s General Terms and Conditions including without limitation Risks Disclosure Statements, Supplemental Terms and Conditions and such terms and

conditions specified by CTBC from time to time.

3. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice from a

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10. Investments involve risks. Past performance figures, predictions or projections are not necessarily indicative of future or likely performance. Actual performance may differ from the

projections in this document.

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12. Any scenario analysis is provided for illustrative purpose only and is no indication as to future performance and it does not reflect a complete analysis of all possible scenarios that may arise

under an actual transaction. All opinions and estimates given in the scenarios are illustrative and do not represent actual transactions.

13. The information in this document must not be reproduced or shared without our written agreement.

14. This document does not identify all the risks or material considerations that may be associated with you entering into of the transaction and the transaction period you wish to consider.

15. This document does not and is not intended to predict actual results and no assurances whatsoever are given with respect thereto. It does not present all possible outcomes or takes into

consideration all factors that may affect or influence the transaction.

16. This document is based on CTBC’s understanding that you have inter alia sufficient knowledge, experience and access to professional advice to make your own evaluation and choices of the

merits and risks of such investments and you are not relying on the CTBC nor any of our representatives or affiliates for information, advice or recommendations of any sort whatsoever.

17. You should have determined without relying on CTBC or any of our representatives or affiliates for information, advice or recommendations of any sort whatsoever, the economic risks and

merits as well as the legal tax and accounting aspects and consequences of the transaction and that you are able to fully assume such risks.

18. CTBC accepts no responsibility or liability whatsoever for any loss of whatsoever nature suffered by you arising from the use of this document or reliance on the information contained herein.

19. CTBC may have alliances with product providers for which CTBC may receive a fee and product providers may also receive fees from your investments.

20. The following exemptions under the Financial Advisers Regulations apply to the CTBC and its representatives:

(1) Regulation 33(1) – Exemption from complying with section 25 of the Financial Advisers Act (“FAA”) when making a recommendation in respect of (a) any designated investment

product (within the meaning of section 25(6) of the FAA) to an accredited investor; (b) any designated investment product (within the meaning of section 25(6) of the FAA) that is a

capital market product, to an expert investor;

(2) Regulation 34(1) – Exemption from complying with section 27 of the FAA when making a recommendation in respect of (a) any investment product to an accredited investor; (b) any

capital markets product to an expert investor or (c) any Government securities;

(3) Regulations 36(1) and (2) – Exemption from complying with sections 25, 26, 27, 28, 29, 32, 34 and 36 of the FAA when providing any financial advisory service to any person

outside of Singapore who is (a) an individual and (i) not a citizen of Singapore; (ii) not a permanent resident of Singapore; and (iii) not wholly or partly dependant on a citizen or

permanent resident of Singapore; or (b) in any other case , a person with no commercial or physical presence in Singapore.

GIC Monthly Market Review - CTBC Private Bank · Jan Feb Mar Apr May Jun Elections 15 Netherlands...

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