HINDUJA BANK (SWITZERLAND) LTD

HINDUJA BANK (SWITZERLAND) LTD
BUILDING WEALTH, ENABLING ENTERPRISE
September 19 th , 2012
WEEKLY MARKET COMMENTS
SUMMARY
• US Fed members confirm unlimited easingECB introduces OMT, markets are breathing
again.
• Greece and Ireland bail-out requests.
• Japan announces surprise QE.
• Saudi Arabia increase oil supply into the year end.
• Inditex 1H12 results beat estimates.
• Microsoft increases quarterly dividend.
• Heineken receives approval for Tiger Beer.
• EUR/USD: Rally running out of steam.
• EUR/CHF: Relief for the SNB.
• USD/CHF: Temporary range trading opportunity before USD up move.
• XAU/USD: Short term pivotal chart point.
GENEVA
Place de la Fusterie 3bis
P.O. Box 1011
1211 Geneva 1 • Switzerland
T. +41 58 906 08 08
F. +41 58 906 08 00
LUCERNE
Pilatusstrasse 35
P.O. Box 2960
6002 Lucerne • Switzerland
T. +41 58 906 02 02
F. +41 58 906 02 62
LUGANO
Via Serafino Balestra 2
P.O. Box 5877
6900 Lugano • Switzerland
T. +41 58 910 43 43
F. +41 91 923 55 73
ZURICH
Florastrasse 7
P.O. Box
8034 Zurich • Switzerland
T. +41 58 906 05 05
F. +41 58 906 05 06

GENERAL – Angela Bryde
IN THE HEADLINES THIS MORNING
Fed members spoke out confirming that the Fed
will buy more assets if the economy weakens,
they said the Fed is definitely not out of
ammunition, and will continue easing even when
the economy starts to improve.
Greece aims to justify next bail-out tranche
before the Troika’s visit and in Greece, whilst in
Ireland the Troika approved a EUR 1 billion
release after their visit.
In this grim condition, Australia has had their
AAA rating affirmed by Standard & Poor’s, with
a stable outlook.
Further to a morose close in the USA on worries
over Spain and Greece, we woke up today to all
Asian markets being buoyed by Japan
announcing a surprise strong monetary easing
measures, expanding its asset-purchase program
to JPY 80 trillion in Japanese Government bonds
and short-term Government bills. The program
will also be extended in 2013. However this rise
in Japan might be short lived as a lot of Japanese
companies are being impacted by the diplomatic
row between China and Japan over their islands.
Saudi Arabia has announced it will offer more
oil supply to the US, Europe and Asia through
GENEVA
Place de la Fusterie 3bis
P.O. Box 1011
1211 Geneva 1 • Switzerland
T. +41 58 906 08 08
F. +41 58 906 08 00
LUCERNE
Pilatusstrasse 35
P.O. Box 2960
6002 Lucerne • Switzerland
T. +41 58 906 02 02
F. +41 58 906 02 62
the end of the year, a sign the world’s largest oil
exporter is worried about the impact of rising
prices on the global economy.
Inditex SA, one of our favourite stocks, has
reported a 32% increase in their 1H12 earnings,
beating analysts’ estimates as they expanded in
emerging markets outside Europe. Profits rose to
EUR 944 millions. Inditex SA still have room to
move upwards as 22% of their business is in
Spain and 70% in the rest of Europe, so plenty of
possibilities still await them in other markets. It
should be noted here that the share is up 44% this
year. Certain analysts are worried that this might
not be sustainable.
Microsoft Corp announced increasing their
quarterly payout dividend by 15%, so they will
now pay USD 0.23 up from USD 0.20 – which
will cost the company an additional USD 1
billion – as it looks to find ways to boost
shareholder return.
Heineken NV has received approval for their
take over of Tiger beer from ThaiBev..
LUGANO
Via Serafino Balestra 2
P.O. Box 5877
6900 Lugano • Switzerland
T. +41 58 910 43 43
F. +41 91 923 55 73
ZURICH
Florastrasse 7
P.O. Box
8034 Zurich • Switzerland
T. +41 58 906 05 05
F. +41 58 906 05 06

FOREIGN EXCHANGE – Mattia Agostinetti
EUR/USD
As we have noted previously, Mr Draghi’s
Quantitative Easing (QE) leads to EUR strength
whilst Mr Bernanke’s brand of QE leads to USD
weakness. Last Thursday was a case in point as
Mr Bernanke’s remarks gave the EUR a real shot
in the arm. Does this mean we should try and get
on the back of a EUR/USD move up and alter our
medium term outlook? We think this would be
premature as firstly, part of the rally was
squaring/squeezing short positions. Secondly, it
all happened very quickly and the market always
needs to digest such a move. So there is much for
GENEVA
Place de la Fusterie 3bis
P.O. Box 1011
1211 Geneva 1 • Switzerland
T. +41 58 906 08 08
F. +41 58 906 08 00
LUCERNE
Pilatusstrasse 35
P.O. Box 2960
6002 Lucerne • Switzerland
T. +41 58 906 02 02
F. +41 58 906 02 62
price action. As for fundamentals, EUR/USD is
now trading 4 cents above the level implied by
the interest rate differential between German and
US two-year government debt. Over the past two
and a half years EUR/USD has not deviated for
any length of time by more than 5 cents from the
level implied by the interest rate differential. Add
disappointing ZEW numbers and continuing
concerns over Spanish and Italian bond yields
into the mix, we consider any further upward
potential for the EUR to be limited.
LUGANO
Via Serafino Balestra 2
P.O. Box 5877
6900 Lugano • Switzerland
T. +41 58 910 43 43
F. +41 91 923 55 73
ZURICH
Florastrasse 7
P.O. Box
8034 Zurich • Switzerland
T. +41 58 906 05 05
F. +41 58 906 05 06

EUR/CHF
As pressure on the EUR eased, the CHF was able
to benefit and traded above 1.21 for the first time
since March. Amidst the euphoria however it
would be premature to suggest a change of policy
as any set back to “risk on” would take us back to
the 1.20 floor. As the pressure on the CHF eased,
at least for the time being, our sight deposits
proxy measurement for FX flows showed the
smallest increase since May. What does this
USD/CHF
Little to add to last weeks remarks and we would
counsel patience and remain medium term long
USD. In the meantime, traders appear reluctant to
GENEVA
Place de la Fusterie 3bis
P.O. Box 1011
1211 Geneva 1 • Switzerland
T. +41 58 906 08 08
F. +41 58 906 08 00
LUCERNE
Pilatusstrasse 35
P.O. Box 2960
6002 Lucerne • Switzerland
T. +41 58 906 02 02
F. +41 58 906 02 62
mean for the CHF? It will continue to hover
slightly above 1.20 as long as investors are happy
with the “risk on“ trade and demand for CHF as a
safe haven currency slackens. Nevertheless, it is
still far too early to suggest a significant and
sustainable weakening of the Swiss franc as this
would imply a comprehensive and plausible
solution to wider Euro zone problems.
take on big one way bets and are content to play a
USD/CHF 0.9230-0.9330 range.
LUGANO
Via Serafino Balestra 2
P.O. Box 5877
6900 Lugano • Switzerland
T. +41 58 910 43 43
F. +41 91 923 55 73
ZURICH
Florastrasse 7
P.O. Box
8034 Zurich • Switzerland
T. +41 58 906 05 05
F. +41 58 906 05 06

XAU/USD
As noted, Gold has been a major beneficiary
of recent USD weakness. Gold looks set to
continue to go higher in the medium term
against a background of unsolved Eurozone
issues and wider geo-political concerns. That
said, we are at a pivotal chart point (USD
GENEVA
Place de la Fusterie 3bis
P.O. Box 1011
1211 Geneva 1 • Switzerland
T. +41 58 906 08 08
F. +41 58 906 08 00
LUCERNE
Pilatusstrasse 35
P.O. Box 2960
6002 Lucerne • Switzerland
T. +41 58 906 02 02
F. +41 58 906 02 62
1’775) failure to break would see us looking
back towards the USD 1’750 level. Should
we get through this resistance point, the
market looks to rally up to the USD1’790
level in short order.
The information in this publication was developed using data which Hinduja Bank (Switzerland) Ltd assumes to be accurate; nevertheless,
Hinduja Bank (Switzerland) Ltd accepts no liability and offers no guarantee. The availability of such information does not constitute a
recommendation to buy or sell any of the securities discussed therein. Statements made in this publication can be changed without prior
notice. Moreover, the content is not intended for individuals (or entities) who (which), by reason of their nationality or domicile or for any
other reason, are subject to foreign regulations prohibiting access to banking services or investment instruments via one or several
distribution channels, or prohibiting or restricting the use of any information provided in this document.
LUGANO
Via Serafino Balestra 2
P.O. Box 5877
6900 Lugano • Switzerland
T. +41 58 910 43 43
F. +41 91 923 55 73
ZURICH
Florastrasse 7
P.O. Box
8034 Zurich • Switzerland
T. +41 58 906 05 05
F. +41 58 906 05 06