Warrants Highlight

Europe Paymasters Meeting Tonight

German Chancellor Angela Merkel and French President Fracois Hollande will be meeting tonight, hoping to iron out differences before another meeting with Greek Prime Minister Antonis Samaras in the next two days. The Greeks have been falling behind schedule in their debt targets, yet they are hoping that their neighbours to be prompt in their aid schedule.

“Last chance” to get back on track
Yesterday, the Eurogroup chief Jean-Claude Juncker reminded the Greeks that it is their “last chance” to get back on track with their structural reforms and privatisation programme. In reference to the Greeks request to lengthen the deadline to meet the creditors’ conditions, Juncker said it will depend on the findings of the Troika mission.

The Troika consists of the European Commission, the ECB and IMF. They will be assessing the Greece reform efforts in early September and are expected to report their findings by the end of September before the Euro-zone ministers decide whether to disburse the next EUR 31bn to Greece in Oct 8.

Indices waiting for the next catalyst
Without any market moving news for the past few weeks, Asian indices mostly traded sideways in August. The HSI hovered around 20,000, while the STI failed to break through its 3,100 levels. The VIX index (commonly regarded as the “fear index”) remained at low levels last seen in 2007.

As the summer holidays are coming to an end, we may expect more actions in the coming weeks. There are 2 ECB meetings scheduled for early and late September. In the US, the central bankers will be having their meeting in Jackson Hole at the end of this month. This will be followed by the FOMC meeting on 12-13 September.

Singapore Market Wrap

Japan's deficit drives Asian markets lower

Most Asian indices started the day weak and both the STI and the HSI gapped down at the start of their respective trading sessions. This was after Japan reported a wider than expected trade deficit. The Bloomberg survey expected a deficit of 270bil yen, but the actual deficit came in at 517.4bil yen. The strong yen and slowing global growth does little to help exports in the country and the trade deficit figure "adds pressure for government spending or monetary easing", says Bloomberg.

The Japan's Finance Ministry showed that shipments to China decreased 12% in July as compared to last year, while shipments to the European Union fell 25% as the Europe debt crisis curbed exports. Federal Reserve Bank of Chicago President Charles Evans said that a weakening in global trade is "awful" and the US central bank will consider the circumstances in deciding if monetary easing should be increased.

The STI closed at 3049.47, down 0.5% dod while the HSI traded below 20,000, closing at 19887.78, down 1.1% dod.

STI 3100MBeCW121031 (Q1AW) exercise level 3,100.*
STI 2950MBePW121031 (Q0ZW) exercise level 2,950.*

HSI19800MBeCW120927 (Q1DW) exercise level 19,800.*
HSI20400MBePW120927 (Q1SW) exercise level 20,400.*

S&P affirms Singtel A+/A-1 ratings
Yesterday, the S&P affirmed its ‘A+' long-term and ‘A-1' short-term corporate credit ratings on SingTel, with the outlook remaining at stable. This reflects the credit rating company's assessment of the likelihood of extraordinary government support for SingTel to ‘moderate' from ‘low' and the stand-alone credit profile on the company to ‘a' from ‘a+'.

Paul Draffin, a credit analyst at S&P said that he believes in the "competition in SingTel's core markets and capital demands from investing in new products and services will complement the group's traditional telecommunication services". In addition, the group's contributions from associate investments are expected to grow.

SingTel closed at $3.31, down 1.2% dod.

Call warrant SingTelMBeCW130301 (PB6W) exercise price $3.30.*

Stable banking requires ‘active, and sometimes intrusive supervision'.
According to the Today newspaper, Deputy Prime Minister Tharman Shanmugaratnam said that "the debate on banking reforms should focus on the active supervision of banks, instead of over-emphasising structural changes for the financial industry".

In light of the recent banking scandals that have rocked confidence in the finance sector, he mentioned that the foundation of stable banking and finance is the "active, and sometimes intrusive supervision". Yet, debates on banking reforms raises questions like "how huge should banks be" and "the role of national banks" and fails to give emphasis to supervision.

Local banks DBS closed at $14.58 while OCBC closed at $9.30, both losing 1% dod. UOB was the best performer out of the three banks, closing at $19.98, up 0.5% dod.

Call warrant DBS MB eCW121101 (QZ1W) exercise price $15.00.*
Call warrant DBS MB eCW121203 (Q4IW) exercise price $16.00.*
Put warrant DBS MB ePW121101 (Q4UW) exercise price $15.00.*

Call warrant OCBC Bk MBeCW121101 (QY0W) exercise price $9.20.*
Call warrant OCBC Bk MBeCW121203 (Q1QW) exercise price $10.00*
Put warrant OCBC Bk MBePW121018 (Q3MW) exercise price $9.00.*

Call warrant UOB MB eCW130103 (MW0W) exercise price $19.397.*
Call warrant UOB MB eCW121101 (Q3YW) exercise price $21.00.*
Put warrant UOB MB ePW121102 (Q3ZW) exercise price $19.00.*

Overnight Market Wrap

FOMC minutes sparks hopes of a QE3

Sales of existing homes rose in July, an indication that the housing situation in the US might be improving. Existing home sales increased by 2.3% to a 4.47mil annual rate. The increase came as no surprise since cheaper properties and record low mortgage loans would help bolster the industry. For the same reason, new home sales which is due tonight is also expected to increase.

The FOMC minutes was also released yesterday and "many (policy makers) judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable recovery of the economy". Policy makers also mentioned that they will step up further stimulus if unemployment rates stay above 8%. On the discussion of treasury securities buyback, some members were worried about the impact on the debt markets but a staff analysis says that there is "substantial capacity for additional purchases without disrupting market functioning."

The US indices erased earlier losses as investors saw a higher possibility of a QE. The S&P ended flat for the day, closing at 1413.49.

Overnight Markets

Indices	Last	Change
STI	3049.47	-0.5%
HSI	19887.80	-1.1%
DJIA	13172.80	-0.2%
S&P 500	1413.49	0.0%
Nasdaq	3073.67	0.2%
China A50	7232.49	-0.4%

Corporate News

Corporate Announcements

Results announcements:
Tue 28 Aug: Olam 4Q12

Ex-dividend dates:
Thu 30 Aug: Sakari ($0.02), UOB ($0.20)
Wed 26 Sep: SGX ($0.15)