CNH: CNH Edges Lower Post Fixing, Scope To Give Back Some Recent Outperformance

Major markets saw strong inflow momentum to start the week on Monday, aided by the risk on bounce induced by positive US-China trade headlines/developments. Taiwan saw just over $1bn in net inflows, although this wasn't enough to bring the 5-day sum back into positive territory. The Taiex is trying to move higher today, but is just short of record highs, holding near 28000. 

• For South Korean markets, net inflows were not quite as strong yesterday, while early trends today are notably poorer. Close to $1bn in net outflows has been seen in Tuesday trade to date (see KSFINET Index on BBG), as the Kospi softens, down more than 1%. The local index has surged so far in Oct and is still close record highs above 4000. US-South Korea trade concerns persist particularly over the $350bn investment pledge and its impact on local FX. BBG notes onshore retail investors moving into USD denominated assets to protect against further FX losses. This may be impacting offshore investor sentiment as well.
• Indian inflow momentum remained positive into the end of last week, but had slowed. Chatter around the US-India trade deal has died down somewhat, while local equity index gains have slowed relative in Oct.
• In SEA, inflow momentum remains strong into Indonesia, not impacted by FX weakness. Trends are more mixed elsewhere. 

 Table 1: Asian Markets Net Equity Flows 

Source: Bloomberg Finance L.P./MNI 

• The biggest liquidity injection in several weeks and comments from the PBOC Governor that central bank buying of bonds will resume (as reported on Xinhua)  was enough to give bond markets a bid this morning.  
• The 10-Yr bond future is up +0.285 to 108.43 its biggest one day gain since April.  The move sees the 10-Yr back above all major moving averages, bouncing off the 20-day EMA.
• The 2-Yr bond future is up +0.09 to 102.47 trading through the 20, 50 and 100-day EMA to be near to the 200-day EMA of 102.47 which it last traded above in June.
• CGBs are consolidating after a late afternoon rally yesterday, with the 10-Yr settling at 1.80%.  It has traded in a 1.80 - 1.90% for several weeks and a break below could see it return to the 1.70 - 1.80% range it traded in through August and September.