The year 2015 saw three major themes dominate: 1) Falling Commodity and Forex Prices, 2) China, Europe and Emerging Markets Slowdown and 3) Fed Rate Hike

1) Falling Commodity and Forex Prices

The year started with extreme volatility as oil prices plunged and exporter countries’ currencies depreciated in the face of weaker EM demand versus resilient OPEC production. The CHF’s surprise depegging from EUR resulted in investors experiencing extreme drawdowns and several funds closing in its aftermath. Investors later experienced further volatility as the mid year saw the Chinese Yuan’s surprise devaluation against the USD, changing expectations for EM growth in late 2015.

2) China and Emerging Markets Slowdown

Global growth rates remained stagnant, as slowing domestic growth led to the PBoC and other EM central banks cutting rates. Mid-year saw extreme volatility with the Chinese stock market crash, falling almost 20% in one day alone and -43% loss in stock value.

3) Fed Rate Hike

The hike was speculated on throughout 2015, and finally concluded in December; with a 25bp raise emphasized alongside a “gradual tightening” strategy. This hawkish move was very different from that USA’s largest trading partners, as the ECB, PBoC and BOJ eased monetary policies throughout 2015 in lieu of slowing growth.

2016 saw volatility across global markets, which cemented a global risk-averse sentiment amongst investors. Investors expect to manage risk exposure to industrial commodities balanced with Treasuries and Bunds.

China’s shock opening

China opened up the year with a crash, triggering two separate trade halts; indicative of regulators’ failure to adopt “less is more” adage. As the market matures and moves towards consumer-led growth, we expect debt-to-GDP ratio and capital outflow concerns to mount, managed by PBoC rate cuts.
With Chinese yuan positioned to depreciate against USD, expect excess industrial capacity to be managed as non-SOE enterprises grow and drive long-term secular growth.

EM meltdown vs Eurozone safehaven

Appetites for EM likely to remain depressed, with currencies positioned to depreciate sharply as oil trade term shocks persist and force pegged exchange rates to drop fiscal balances. Conversely Eurozone earnings having outperformed US (14% yoy growth) positioned to continue as ECB seems likely to ease further, expanding balance sheets and lifting bond yield expectations.

Fed fatigue on hikes

The hawkish Fed moves if kept to the 4-count hike rate schedule, will see USD strengthen as inflation nears target 2%, strong unemployment data against expansionary monetary policies from BOJ and ECB.
Stronger USD will see US continue with its self-reinforcing expansion, as domestic demand is driven higher versus low oil prices.

Global Equities

Fed policy rate normalisation saw Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOG) (“FANG”) maintain market leader positions with large market-caps that drove S&P500 advances. Expect overvaluation assessments, following capital gains taxes announcement and sales growth concerns mount. Conversely, financials are expected to rally as higher interest rates for banks positioned to improve net interest margins, modest investment equity and lead to cheaper valuations.
Technology positioned to stay as 2016’s top investor pick, as cloud computing and SaaS focused activity companies and fintech startups scale up activity globally.

Most popular Call Levels in 2015


i) EURUSD: Remained flat throughout 2015 as modest sell-side activity was counteracted by buying volume from asset managers. Follow through on market counterbalancing; as US economic data affects rate hike count against European PMI fundamentals forcing quarter-long weakening stalling further easing by ECB.

Watch EURUSD at 1.082
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ii) USDJPY: Conversely, USDJPY pair experienced high sell-side activity across diverse client groups and hedge fund managers contributing to bulk-buying rates. Interestingly, USDJPY’s 2015 range was a mere 1000 pips despite the growing divergence of monetary policy between the Fed and BOJ.
Risk aversion sentiments likely to see JPY draw strength as Asian equities remain weak, underpinned by China’s yuan devaluation. Fiscal 2016 expect USDJPY to see further consolidation and stronger correlations within equity markets; which if sustained would point towards lower levels for indices (NI225).

Watch USDJPY at 118.712
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iii) USDSGD: SGD experienced upward pressure from the USD resurgence, matched with downward pressure from Chinese slowdown. Expect weakness to continue into 2016 as risk-appetite wanes in favour of haven currencies, while MAS maintains high trading mid-point trading band and marginally reduced currency band slope.

Watch USDSGD at 1.446
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Equities: Is it time for BANTA to take over FANG?

i) APPL: Leading the cloud revolution Apple has expanded its product “halo effect”; deepening the link between existing and new platforms. Expect marginal declines, with -30% manufacturing scaledown to counteract inventory buildup.

Watch AAPL at 98.868
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ii) BABA: The world’s largest e-commerce marketplace that raised over $25B at IPO, experienced pullbacks over counterfeit good sales concerns. Users can expect to see BABA to maintain paywall with its Disney partnership, Alipay and mobile advertising throughout fiscal 2016 firming against China’s structural adjustments from investment-led growth.

Watch BABA at 63.672
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iii) FB: With a +34% stock price supplemented with strong user growth and lower-than expected revenue growth deacceleration that saw undersized EPS rates. Having chosen to expand its value-added service offerings, expect higher growth performances from Messenger monetization and social media news-review business line to hike stock prices into early fiscal 2016.

Watch FB at 63.672
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