Beyond The realm Of possibilities 2013 3rd Quarter Report
目錄 Table of Contents Market Outlook 3 7 US Dollar Index. 4 EURUSD... 5 GBPUSD. 6 USDJPY.... 7 Products Performance Review 8 16 POWERFUND.. 9-12 DFSP Series 13-16
Market Outlook
Market Outlook The Dollar fell to a 7-month low, edging the Dollar index to 80 level as markets were disappointed as Fed Chairman Ben Bernanke failed to announce definitive tapering plans for its $85 billion bond purchasing program during this quarter s much anticipated FOMC meeting on September 17 th -18 th. Investor speculation and uncertainty turned into disappointment, resulting in overall USD weakness. US Dollar Index Future Daily Price Chart Renewed U.S. fiscal concerns regarding funding and debt ceiling negotiations have materialized, resulting in troubled hiring plans and business capital investment. Inflation pressure is low, with production capacity holding headline and core CPI below the 2% y-o-y trend. The Dollar is close to its bottom range seen in Q1, suggesting there is possibility of a rebound in Q4. In the longer term, Fed tapering and rising yields will prove a stronger Dollar. It is now expected for the FOMC to begin its reduction in bond purchases in December to early 2014.
Market Outlook The Euro climbed to the 7-month high, being the best currency performer among developed market currencies this year; supported by ECB s shrinking balance sheet. The ECB continues to emphasize the fragility of the Eurozone s economic recovery; even with the US Federal Reserve policy, ECB President Mario Draghi maintains that interest rates remain low at a dovish 0.5%. EURUSD Daily Price Chart Composite PMI peaked at a 27-month high this quarter, along with the unemployment rate. Market sentiment seems to have recovered, with economic indicators continuing to build momentum for the currency. This continued strength, along with peripheral political risks poses a threat to the strength of the currency. The Euro is near its 2013 highs, however, we see the possibility of Fed tapering in Q4 or early Q1 of 2014 along with the stagnation of the banking union as key risks to the Euro, depreciating the Euro against the Dollar in the longer term.
Market Outlook GBPUSD is almost 5% higher since the beginning to the end of this quarter as the pairing saw a significant reversal upward in the beginning of June. As markets became less focused on the BOE s forward rate guidance and more on data. UK economic momentum continues to be positive this quarter, though the recovery seems weak and partly driven by household spending and construction activity; supported by the governments Help to Buy scheme and accommodative monetary conditions. GBPUSD Daily Price Chart August service PMI climbed to 60.5, the highest since December 2006, while manufacturing PMI fell to a disappointing 56.7 in September, following the highest reading in 30 in August. Market sentiment have also improved, with improved retail and vehicle sales. The unemployment rate has also improved due to forward guidance, falling to 7.7% as compared to 7.8% in the past four consecutive months. The Fed s possibility of tapering along with the BOE s decision to reiterate its dovish stance may apply downward pressure on the sterling. The U.K. has returned to growth, but conditions still remain fragile. We expect U.S. and U.K growth differentials to be Dollar positive as the fiscal and current account positions remain relatively weak.
Market Outlook USDJPY is slightly lower since the beginning of Q2 as the pairing continues to consolidate, trading within its six month range. The depreciation of the Yen over the last 12 months puts Japan on a fairly more competitive level versus other major economies. Excessive weakening would face resistance from their trade counterparts. USDJPY Daily Price Chart Much of the focus this quarter was on Japan s Prime Minister Shinzo Abe s decision to raise sales tax from 5% to 8%, subsequently implementing a fiscal stimulus that will include tax breaks to offset the toll on consumption. Investment activity increased by 1.5% q-o-q, implying that inflation expectations are no longer postponing investment spending. It is expected for Japan s real GDP to advance by 2% this year, followed by a 1.8% gain in 2014. As event risks such as the U.S. government shutdown due to the fiscal impasse between the republicans and democrats weigh on the Dollar, the Yen will be the go-to safe haven currency. We expect once these U.S. headwinds to cease going forward into 2014 and tapering is decided; we are likely to witness downward pressure on the Yen as relative central bank policy diverge.
Products Performances 8
POWERFUND
POWERFUND Stable and Persistent Positive Return The Q3 performance of POWERFUND was in line with the expectation of the fund manger. The fund s NAV was up 2.83% in the third quarter, i.e. bringing the YTD return to 6.15%. In the past three months, the monthly returns were above 0.52%, in line with our target, i.e. diversification through correlations with traditional assets. 10
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Performance Review: DFSP Series 13
Diversified FX Trading Segregated Portfolio (USD & EUR) DFSP USD Fund rose 0.81% in Q3 of 2013. Regardless of the market conditions, DFSP Serial Fund is able to deliver a stable return. DFPS EUR Fund of rose 2.46% in Q3 of 2013. The return mainly derived from the performance in arbitrary operation. Comparing to traditional equity fund, the Fund demonstrates its capability to disperse risk and attain higher return-to-risk ratio. 14
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