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Notable trends and dislocations (Asia)
Most regions in Asia reported modest declines last week, led by Hong Kong's HSCEI, which lost 2.0% week-over-week. Much of the decline came on Thursday following the US Fed's decision to hike rates 25bps. Also in China, the People's Bank of China (PBOC) injected 410bn yuan (about $60bn) into the financial system via reverse-repos, the largest cash boost since January. The central bank said the funds are meant to ease concern amid a seasonal funding squeeze. The biggest contributors to the index's loss were financials names, including China Life Insurance (2628 HK), which fell 5.7%, Ping An Insurance Group Co of China Ltd (2318 HK), which dropped 3.7%, Bank of China Ltd (3988 HK), which declined 1.8%, and China Merchants Bank Co Ltd (3968 HK), which fell 5.7%. We saw a similar decline from Hong Kong's HSI index, which lost 1.6% percent last week.

After the HSCEI and HSI, last week's biggest losers were Korea's KOSPI and India's NIFTY, which each returned -0.8% week-over-week. In Japan, the Nikkei fell 0.3%. On Friday, the Bank of Japan (BoJ) left its monetary policy unchanged—it will continue to control the yield curve via its negative benchmark rate and its asset purchasing program. The final region to report a loss last week was Taiwan's TWSE, which lost 0.4%.

On the other hand, the only region to see a gain last week was Australia, which saw its ASX 200 benchmark increase 1.7% week-over-week. The biggest contributors to the gain were Commonwealth Bank of Australia (CBA AU), which gained 3.4%, Westpac Banking Corp (WBC AU), which increased 1.9%, and CSL Ltd (CSL AU), which added 2.9%.

10 day realized vol picked up in Asia last week, up 2.0 vol points to 9.6%
• Asian 3m ATM volatility declined on average 0.1 vol point to 12.3% last week, while 10 day realized vol increased on average 2.0 vol points to 9.6%. Notably, the HSI's realized vol increased 5.4 vol points, the biggest increase in the region. On the other hand, the NKY was the only index to see a decline in 10 day realized vol—it dropped 4.3 vol points week-over-week to 7.2%.

• On average, term structures among Asian indices steepened by 0.2 vol points to 4.2% last week. The TWSE 12M-1M term structure steepened the most, increasing 1.0 vol point to 2.9%. On the other hand, Hong Kong's HSI saw the only flattening as its term structure flattened 0.1 vol point to 4.9%.

• Asian 3M 90-110% skews widened 0.5 vol points on average to 3.8%. Taiwan's TWSE widened the most, increasing 2.3 vol points to -0.2%.

Table 7: Volatility measures of major Asian indices (data as of 16-Jun-17)

[Table Data]
Index | 3Mth ATM Implied Volatility (Current / Weekly change / 4Yr percentile) | 10D Realized Volatility (Current / Weekly change / 4Yr percentile) | 12Mth-1Mth ATM Vol Spread (Current / Weekly change / 4Yr percentile) | 3Mth 90-110 Skew Spread (Current / Weekly change / 4Yr percentile) | Equity Market Weekly return
HSI | 12.4% / 0.2% / 2.1% | 10.2% / 5.4% / 20.6% | 4.9% / -0.1% / 97.8% | 3.3% / 0.9% / 41.4% | -1.6%
HSCEI | 15.0% / -0.4% / 0.0% | 10.7% / 4.8% / 7.8% | 5.4% / 0.2% / 98.1% | 1.4% / 0.5% / 36.5% | -2.0%
NKY | 13.8% / -0.2% / 0.1% | 7.2% / -4.3% / 1.8% | 5.8% / 0.5% / 99.9% | 5.8% / 0.0% / 73.9% | -0.3%
KOSPI 200 | 12.2% / 0.2% / 19.7% | 11.1% / 1.1% / 53.1% | 4.0% / 0.2% / 77.0% | 3.8% / 0.3% / 43.7% | -0.8%
ASX 200 | 11.8% / -0.2% / 17.7% | 15.7% / 5.1% / 77.1% | 2.7% / 0.0% / 59.5% | 6.4% / -0.1% / 22.5% | 1.7%
NIFTY | 10.7% / 0.2% / 2.2% | 4.8% / 1.0% / 0.4% | 4.0% / 0.0% / 76.1% | 5.9% / -0.1% / 64.1% | -0.8%
TWSE | 10.5% / -0.6% / 7.2% | 7.8% / 1.0% / 20.3% | 2.9% / 1.0% / 71.2% | -0.2% / 2.3% / 3.9% | -0.4%

Source: BofA Merrill Lynch Global Research

18 Global Equity Volatility Insights | 20 June 2017
Bank of America Merrill Lynch
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