Market Mantra: 31/10/2017 (09:00)
SGX-NF: 10390 (-3)
For the Day: updated at 12:00
Key support for NF: 10330-10280
Key resistance for NF:
10450-10505
Key support for BNF:
24800-24600
Key resistance for BNF: 25150-25250
Trading Idea (Positional):
Technically, NF has to sustain over 10450 area for further rally towards
10505-10575 & 10625-10675 zone in the short term (under bullish case
scenario).
On the flip side, sustaining below 10425-10405 area, NF may fall towards 10330-10280
& 10195-10150 zone in the short term (under bear case scenario).
Technically, BNF has to
sustain over 25150 area for further rally towards 25250-25500 & 25600 zone
in the near term (under bullish case scenario).
On the flip side,
sustaining below 25100 area, BNF may fall towards 24800-24600 & 24450-24300
area in the near term (under bear case scenario).
As par early SGX indication, Nifty Fut (Nov) may open around 10390, almost flat amid muted global cues on concerns
about gradual cut in US corporate tax & renewed China concern amid bond
market turmoil coupled with renewed US political jitters and simmering Catalan
tensions in Spain.
As par reports, WH may
cut US corporate tax gradually
from around 35% to around 20% over next 5 years till 2022 with an average cut
of 3%/pa. This is contrary to earlier narratives of a lump sum cut at one go of
15% with even retrospective effect from Jan’17!!
The talk of a large corporate tax cut by Trump soon after his
election may be one of the prime factors apart from earning support behind the stellar
US market rally of over 27% in the last one year since Trumpism; SPX-500 made a
recent high of around 2580 from low of 2230 level on the US election day. This
may be very disappointing for the US corporates, especially for the SMES, but
this may be a reality; no Govt can afford to cut such large tax rate of 15% by
one go without support of alternative revenue.
Apart from gradual cut of US corporate tax, market may be also
concerned about probable delays in final drafting and legislative passage
because of various ambiguities and concern of revenue shortfall in various states
because of this tax reform.
USD & US stock market was also under pressure amid renewed thrust on Muller’s
investigation regarding Trump’s alleged Russian link for his election bid and surrender/arrest
of three key former campaign managers. One of the accused has turned into an approver
and is cooperating with Muller’s investigation team and thus, Trump’s political jitters and any direct
Russian connection will be in limelight in the days ahead.
As par latest report, Trump may announce his nomination for the next Fed chair on
Thursday after the Fed meet tomorrow and Powell may be his choice right now,
although Taylor may also be inducted into Fed as VC. Powell is seen less
hawkish than Taylor and he may be an ideal person to continue Yellen’s policy
(dovish/owlish) and thus USD came under
renewed pressure.
Overall risk-on sentiment was also affected due to China growth, deleveraging concern and
surging China bond yields, which may not be good for corporates & SMES
there as most of them rely on bond market for their financing need rather than
on banks.
Today China Govt PMI data for Oct flashed as subdued at 51.6 vs
est 52; prior 52.4; the fall in Mfg PMI may be a result of Govt tightening over
China property market and various curbs on production for tighter pollution
controls. But market may be also hopeful about China growth on surging Govt
capex, a solid property market and recovery in exports.
But risk-on sentiment improves slightly in the early Asian
session today after BOJ came pat as expected and USDJPY got some support; BOJ
will now basically maintain its neutral policy and try to keep the 10YJGB yield
near 0% by its YCC policy, even without buying huge JGB bonds & ETF every
month.
Overnight US stock market closed in negative on concern of gradual reduction in US corporate
tax coupled with Trump’s Russian jitters & mixed earnings. DJ-30 was down by around 0.36%, S&P-500 lost by almost 0.32% to
close around 2573, while NQ-100
edged down by around 0.03%; but stocks recovered to some extent in the late NY session
yesterday after reports suggests that Powell may be the front runner of next
Fed chief rather than Taylor, a known hawk.
A relatively dovish Fed chair in the form of Powell may be
favourable for US stock market as USD will stay lower and thus Powell is seen
as more stock market friendly like Yellen.
Overall, US market was yesterday helped by Techs on earnings
& Apple/-i-Phone8 boost up; but dragged by Healthcare/Merck, which fell
over by 6% on setback of a key cancer product. Also, telecoms were in pressure
after Soft Bank concern of merger between its US wireless subsidiary Sprint
(-9.3%) & T-Mobile (-5.4%) due to losing control over a large combined corporate
entity.
Overnight EU market edged up on signs of truce in Catalonia, but still considerable
worries remain.
US stock future (SPX-500) is now trading around 2568, almost unchanged on muted Asian
cues ahead of EU market opening. Looking ahead, all eyes may be on Fed
statement tomorrow for an assessment of the high probability Dec rate hike and
Fed’s view about overall trajectory of US economy.
Back to home, Indian market
(Nifty/India-50) is now trading around 10365, edged down by almost 0.22%;
market will focus on earnings & macro data as valuations are quite expensive
at this point of time amid muted Q1 & mixed Q2 earnings so far irrespective
of other noises and recaps & consolidation talks for the PSBS.
Dual combination of a higher USD & higher Oil may be not
good for the Indian economy despite a strong USD is good for export heavy Nifty
index; technically, 10500 zone may be a near term top as par extended EW cycle, which is
in the 3rd wave currently.
SGX-NF
