Is the September Stock Market Correction Over?

… today which tells me, investors are nervous in spite of the slew of good news with the Nvidia (NVDA) merger, vaccine hopes, and a China rebound.
nasdaq price performance versus stock market indices september investing image

Although a 10-15% stock market correction is normal, the bigger question is whether the bounce we just saw from recent lows is a sell rather than buy opportunity?

Both the Nasdaq 100 and S&P 500 Indices are trading into resistance.

For the S&P 500, that number is 342. For the Nasdaq 100, we are looking at 282.

The Dow Jones Industrial Average has to hold 28,000.

Interestingly, volatility also closed green today which tells me, investors are nervous in spite of the slew of good news with the Nvidia (NVDA) merger, vaccine hopes, and a China rebound.

Furthermore, the Federal Reserve meeting minutes will be released Wednesday.

The expectations are for a dovish stance.

What interests me is what they say about their plan for getting inflation up, which has yet to be defined.

Is there a possibility of another severe market correction this year?

Without a stimulus plan from the government, although I believe it will happen in the final hours before the election, the stock market will get hurt.

Plus, the election and rising protests could hurt if the violence increases.

Moreover, a second wave of COVID is the most frightening possibility.

So, what should investors watch for now?

The outliers are still the best “tell.”

Junk Bonds (JNK etf) have to hold around 104.80. High grade corporate bonds (LQD etf) should hold 135.50.

Perhaps the most important outlier is what happens to the dollar. A move in DXY or the dollar continuous contract under 92.80 could spark more buying in the commodities, but also more fear about the recent rally in the Chinese Yuan.

Volatility is yet another key as the index held the 50-DMA and over 26.00 could be an early warning sign.

For now, I am still very bullish in gold, silver, and miners.

I am also watching, with no position, a bullish bias in uranium and natural gas.

If the market holds, I still like some of the small cap growth stocks.

For example, I am watching Fastly (FSLY) for a move back over 84.00.

Otherwise, please watch the indices carefully here and if they start to rollover, I would raise stops and take profits on the winners.

Trading Levels for Key Stock Market ETFs:

S&P 500 (SPY) 342 key resistance to clear 338 support then 333

Russell 2000 (IWM) 153 pivotal 150.75 key support

Dow (DIA) 280 pivotal 274 key

Nasdaq (QQQ) 282 resistance 275 support 272 must hold

KRE (Regional Banks) Could not confirm a recuperation phase so back to bearish

SMH (Semiconductors) 171.50 support 175 resistance

IYT (Transportation) Strong relative to the other sectors. Must hold 200

IBB (Biotechnology) Sitting right on the 50-DMA at 135.90

XRT (Retail) 49.00 the 50-DMA

Volatility Index (VXX) Eyes here tomorrow especially if VIX clears 26.00

Junk Bonds (JNK) 104.80 support

LQD (iShs iBoxx High yield Bonds) 135.50 support

Check out this video I did with The Dollar Diva (Debbie) from September 14:

Twitter: @marketminute

The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

SGX, In Collaboration With HSBC And Temasek, Completes Pilot Digital Bond For Olam International

… Olam International; This marks the first step towards wider use of smart contracts and distributed ledger technology (DLT) for the Asian bond market.
  • SGX’s digital asset issuance, depository and servicing platform was used to launch and settle in parallel, the first digital bond issuance for Olam International
  • This marks the first step towards wider use of smart contracts and distributed ledger technology (DLT) for the Asian bond market

Singapore Exchange (SGX), working together with HSBC Singapore and Temasek, has completed its first digital bond issuance on SGX’s digital asset issuance, depository and servicing platform, successfully replicating a S$400 million 5.5-year public bond issue and a follow-on S$100 million tap of the same issue by Olam International.

An Asia first for a syndicated public corporate bond, this digital bond marks another milestone in SGX’s use of digital asset technology, by streamlining processes for issuers, underwriters, investors and ecosystem participants across primary issuance and asset servicing.

SGX utilised DAML, the smart contract language created by Digital Asset, to model the bond and its distributed workflows for issuance and asset servicing over the bond’s lifecycle. SGX’s solution uses smart contracts to capture the rights and obligations of parties involved in issuance and asset servicing, such as arrangers, depository agents, legal counsel and custodians.

The digital bond used HSBC’s on-chain payments solution which allows for seamless settlement in multiple currencies to facilitate transfer of proceeds between the issuer, arranger and investor custodian.

Key efficiencies observed within the pilot include timely ISIN (identifier) generation, elimination of settlement risk (for issuer, arranger and investors), reduction in primary issuance settlement (from 5 days to 2 days) as well as automation of coupon and redemption payments and registrar functionality. For more information, please visit this webpage.

Building on this digital issuance, SGX will work with issuers, arrangers, custodian banks and investors to digitalise bond issuance, depository and asset servicing, progressively growing the fixed income ecosystem.

Lee Beng Hong, Senior Managing Director, Head of Fixed Income, Currencies and Commodities (FICC), SGX, said, “We are very excited that this collaboration with HSBC and Temasek has led to the successful completion of the first digital syndicated public corporate bond in Asia. Debt capital markets globally are characterised by deeply engrained legacy systems and processes which can be made faster, more accurate and efficient with this new technology. DLT and smart contracts are rapidly evolving technologies, and our vision is to fully digitalise the end-to-end corporate bond issuance and asset servicing process. We look forward to playing a part in strengthening the fixed income market infrastructure of Singapore, Asia’s fixed income hub for bond issuers.”

David Koh, Head of Global Liquidity and Cash Management, HSBC Singapore, said, “We’re proud to be working closely with SGX and Temasek to drive faster, more transparent, and fully secure settlements for bond issuers and investors. This first digital bond issuance for Olam International shows how our on-chain solution can fulfil payment needs in DLT-based ecosystems, and demonstrates our desire to shape and participate in the next generation of asset networks, to better service our securities services clients. We look forward to bringing this technology to our clients in Singapore and beyond.”

Chia Song Hwee, Deputy Chief Executive Officer at Temasek, added, “Innovative technologies such as blockchain technology are key enablers that can transform processes and systems to create game-changing opportunities. We are pleased to have partnered SGX, HSBC and Olam in this initiative. The successful bond issuance validates the potential for issuances of other assets and products, and marks an important milestone towards improving financial processes and workflows.”

N Muthukumar, Managing Director and Group CFO of Olam International, said, “Olam is delighted to pilot Asia’s first digital bond in close partnership with SGX, Temasek and HSBC. Going digital will make the entire process more efficient and transparent for all parties – issuers like us receive our funds more speedily, investors get their bonds more quickly while the arrangers, custodian and banks benefit from the reduced probability of error and speed. This is in line with Olam’s focused push into digitalisation as part of our refreshed strategy, to grow sustainably and live our purpose of re-imagining global agriculture and food systems.”

“The bond market is one of the last bastions of risk, holding on to paper and manual processes,” said Yuval Rooz, Co-founder and CEO, Digital Asset. “Despite the growth in electronic bond trading, there are still many aspects that require manual intervention. SGX’s DAML smart contract solution solves a major pain point market participants have been working to fix for years. We look forward to our continued work with SGX as they move to digitise the end-to-end bond issuance process.”

SGX_DAP_01Sep20

Investment Strategy In Government Bonds

It is hard to say how much investing in government bonds will help your pension portfolio, but there are some unique benefits for those willing to take their time. Those who invest in individual bonds can often choose between 1 – 2 bond funds or buying in a broker account. If this seems too complex to broaden your investment portfolio, or if you don’t want to use a financial adviser as a guide, there are two other ways to add fixed-income instruments to your investment. Buying bonds in the form of a government bond fund or private equity fund can be a headache, and consulting a qualified asset manager can help you choose the best approach to take now. [Sources: 7, 8, 9, 18]

Like shares, government bonds can be held and sold to other traders on the market. Investors can also buy government bonds on the secondary market from banks and brokers who buy them directly from the government or from a bank or broker in exchange for government bonds. [Sources: 10, 13]

If you need short-term investment grade bonds, you can buy ETFs in the same way as government bonds. You can reduce your risk by combining a government bond portfolio with a portfolio of other high-quality bonds, such as equities or bonds from other countries. [Sources: 7, 17]

If your main strategic objective when taking out bonds is diversification, you can choose an active or passive bond selection strategy. Investors seeking capital preservation and income diversification can simply buy bonds and hold them until maturity. This approach has the potential to lead to long-term investment in government bonds and other high-quality bonds. [Sources: 12, 16]

Since bonds with longer maturities typically have higher interest rates, this strategy involves investing in long-term bonds. Treasury bonds carry the risk that interest rates will rise over time, reducing the value of the bond. [Sources: 1, 11]

For example, if you want to buy a home in 15 years, you can schedule your Treasury bond investments to match the time you expect to need the money. If you choose to capitalize on higher returns by investing more in government bonds, your position as a Treasury bond could be diminished in the future when yields return to normal. This strategy could be considered first for conservative investors – investors who are unsure how to invest but want a predictable plan for working until retirement age. [Sources: 9, 10]

Investors looking for the traditional benefits of bonds can also choose a passive investing strategy that seeks to match the performance of bond indices. This includes buying and holding bonds until maturity or investing in bond funds or portfolios that track bond indices. Diversification is key – if you are only interested in Treasury bonds, you should diversify as much as possible to stay fully invested. An iShares Treasury Bond ETF (ETF) can help investors maintain their exposure to the Treasury bond market. [Sources: 2, 8, 16]

While a passive strategy involves investing in selected bonds, an active strategy requires an individual bond selection to track the performance of the index. [Sources: 12]

Investors looking for a safe investment with high returns would need a minimum investment of £1,000 in return for flexibility. Corporate bonds can be bought on the Retail Bond Platform on the London Stock Exchange. You don’t have to access your money until the bond matures, and the fund is within the FDIC’s $250,000 limit. [Sources: 3, 15]

They can buy Treasury bonds managed by the Federal Reserve Bank of New York, the US Treasury or the Treasury Department of the Secretary of State. [Sources: 1]

For most retail investors, the best way to invest in these bonds is to buy TreasuryDirect bonds or ETF bond funds. While you can buy government bonds directly from the US government, most bonds must be purchased through the Federal Reserve Bank of New York or the Secretary of State’s Treasury. Because government bonds are better valued and represent a safer and safer investment, traders who prefer riskier investment strategies may prefer high-yield bonds to government bonds. Investors who want to diversify their bond holdings may need to take a little more risk to get involved, but forget higher returns. [Sources: 0, 4, 6, 15]

This type of bond is well suited – for purchases – and – holding strategies, because it minimizes the risk associated with embedded options that are included in the bond issue contract and remain with the bonds for life. [Sources: 14]

Buying government bonds typically carries little or no default risk, but when the bond is traded on the open market, it can lose value when interest rates rise above the face value of the bonds. When buying individual bonds, investors want to manage their interest rate risk by diversifying the maturities of their bonds. This strategy involves an investor buying longer-dated bonds rather than medium-term bonds, a financial asset invested in long-term government bonds that are limited by the government’s bond issue contract and its maturity date. We begin by looking at two types of government bonds: sovereign debt and sovereign equity. [Sources: 3, 5, 7, 18]

Sources:

(0): https://www.cmcmarkets.com/en-gb/trading-guides/invest-in-bonds

(1): https://www.fool.com/investing/how-to-invest/bonds/treasury-bonds.aspx

(2): https://www.blackrockblog.com/2020/06/02/trending-now-treasury-etfs/

(3): https://www.asktraders.com/learn-to-trade/stock-trading/how-to-buy-government-bonds/

(4): https://www.wellsfargo.com/goals-investing/investing-types/bonds/

(5): https://buckinghamadvisor.com/you-can-be-too-conservative-051313/

(6): https://investinganswers.com/articles/bonds-101-how-navigate-complex-world-bonds

(7): https://www.bankrate.com/investing/how-to-invest-in-bonds/

(8): https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/bond-investment-strategies

(9): https://www.sdmayer.com/insights/blogs/wealth-management/is-investing-in-government-bonds-a-smart-move-sdm/

(10): https://www.acorns.com/money-basics/investing/long-term-treasury-bonds/

(11): https://www.wiseradvisor.com/article/bond-strategies-for-various-financial-goals-235/

(12): https://saylordotorg.github.io/text_personal-finance/s20-03-bond-strategies.html

(13): https://tendercapital.com/en/what-is-the-difference-between-government-bonds-and-corporate-bonds/

(14): https://www.investopedia.com/articles/bonds/08/bond-portfolio-strategies.asp

(15): https://www.realwealthnetwork.com/learn/safe-investments-with-high-returns/

(16): https://www.pimco.com/en-us/resources/education/everything-you-need-to-know-about-bonds

(17): http://www.dvzcpa.com/investment-strategies.php?item=83&catid=28&cat=Investment%20Basics:%20What%20You%20Should%20Know

(18): https://www.forbes.com/advisor/investing/how-to-buy-bonds/

Qatar’s capital market should encourage more primary issuances

Bursa Derivatives positioned itself for rapid growth through a strategic partnership with the CME Group — the world’s largest derivatives exchange …

A strategic document envisioned for broadening Qatar’s capital market has listed out a wide range of recommendations, including developing a derivatives market in Qatar.

The “Capital Market Report 2020”, unveiled by Qatar Financial Centre (QFC), with the support of Refinitiv here yesterday emphasised that Qatar’s capital markets should identify specific initiatives to encourage more primary market issuances, facilitate liquidity in secondary markets, establish a wider investment pool, and promote foreign investment through the development of the appropriate regulatory frameworks.

Establishing a derivatives market in Qatar would add to the breadth of capital markets, offering investors risk management tools to hedge their investments and business exposure.

It would also create a new source of business for local market makers and intermediaries, the report said. It also recommended QSE to initially offer single-stock futures in the market, which can typically be easier to structure, manage and promote to domestic investors. Another product that warrants close consideration would be an LNG futures contract, building on Qatar’s position as the world’s largest LNG exporter.

The careful execution of such a product could attract considerable interest from international investors and establish this contract as a pricing benchmark for LNG — akin to the ICE’s JKM LNG futures contracts.

The report recalled that the establishment of derivatives markets has been part of the capital market development plans in Malaysia. Citing Malaysian success story, it noted the development of its derivatives market, which grew from RM 84 billion (US$11.4bn) in 2000 to RM 512 billion (US$121.2bn) in 2010 and is expected to reach RM 4.2 trillion (US$994.1 billion) in traded volume by 2020.

Before the implementation of its first capital market masterplan, Malaysia’s derivatives market was spread across three exchanges where mostly palm oil futures contracts were traded.

These exchanges were later consolidated as Bursa Derivatives exchange under Bursa Malaysia. Bursa Derivatives positioned itself for rapid growth through a strategic partnership with the CME Group — the world’s largest derivatives exchange — and migrating to CME’s Globex trading platform in 2010.

Participating in a webinar, which coincided with the launch of the report, market experts said Qatar-based corporates are yet to be persuaded to tap the local bond markets in favour of more accessible and cheaper bank financing. These corporates may be lured by relaxing capital issuance regulations and more targeted awareness efforts as to the benefits of issuing bonds compared to bank financing as a viable and attractive alternative.

Large corporates in the energy, transport and logistics sectors make ideal candidates for issuing bonds and Sukuk since they require substantial financing for working capital over a longterm horizon. Issuing debt instruments will help diversify the company’s funding base, and it is also a less restrictive compared to bank financing as the debtors have no say over the running of the business – granting them significantly greater freedom of operations.

The experts noted bond and Sukuk issuance in Qatar totalled $28bn in 2019, representing a CAGR of 28 percent since 2015. Growth in 2019 was largely driven by conventional bonds. El Sadiq Al Fatih Hamour, Director of Financial Institutions, QFC; Jinan Al Taitoon, Senior Research Analyst, Islamic Finance, Refinitiv; Thaddeus Charles Malesa (QFC); Jiazhong Wang (QFC); Andrew Wingfield of Simmons&Simmons,Middle East; and Fami Alghussein, CEO, Aventicum Capital Management shared their thoughts on the findings of QFC report.

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Factbox: SoftBank’s Ever-Growing Mountain of Debt

TOKYO — SoftBank Group Corp has built a global conglomerate of telecoms and tech companies on an ever-growing mountain of debt that major …

The company’s weighted average cost of debt is 3.7%, the seventh-highest among all companies on the Nikkei 225 Stock Average, according to Refinitiv data. One way that the company has helped keep financing costs down is by appealing directly to retail investors in Japan, and to fans of its Fukuoka Hawks baseball team.

SoftBank has 2.1 trillion yen in outstanding Hawks bonds, which have been marketed toward retail investors and baseball fans. Interest rates on the debt range from 1.26% to 1.64%, compared to a simple average of 3.9% on SoftBank’s other outstanding bonds, according to company data.

RATED JUNK

Moody’s Investors Service and S&P Global rate SoftBank’s debt at Ba1 and BB+ respectively, both one step below investment grade for most institutional investors, or junk.

On the other hand, Japan-based rating agency JCR rates SoftBank A-, which is investment grade according to its scale.

WARNING SIGNS

Credit-default swaps protecting SoftBank’s debt for five years cost 234 basis points, the second highest among all Japanese corporates behind shipper Kawasaki Kisen Kaisha Ltd.