Warrants Highlight

Do We Smell a QE3 this Month?

Last week’s most anticipated event had to be Ben Bernanke’s speech in Jackson Hole, Wyoming on Friday night. The venue is the same address at which Bernanke announced a second round of quantitative easing back in 2010.

Global markets had been reluctant to do much ahead of the Fed Chairman’s speech at a meeting of central bankers; Singapore for example, recorded its lowest turnover in more than four months last Tuesday.

Below is a summary of Bernanke’s speech on Friday:

QE3 to tackle U.S unemployment?
Possibly hinting at QE3 in September, Bernanke told central bankers and economists that “non-traditional policies” shouldn’t be ruled out if economic conditions warrant them. He emphasized that a new round of bond purchases is an option, and repeated the FOMC’s last statement that the central bank “will provide additional policy accommodation as needed” to spur growth.

He defended the need for unconventional policies in the face of the U.S’ current unemployment rate, which Bernanke belies “is likely to remain far above levels consistent with maximum employment for some time” and that such long periods of unemployment will cause “enormous suffering and waste of human talent” and risk wreaking “structural damage on
the U.S economy that could last for many years.”

U.S unemployment currently stands at more than 8%. There will be further stats on the employment for the month of August at the end of this week.

Bernanke’s shout-out to Europe
Pushing a fix to Europe’s crisis, Bernanke’s speech also included a specific address to his European counterparts, that “some recent policy proposals in Europe have been quite
constructive” in his view and that he urges his European colleagues to “press ahead with policy initiatives to resolve the crisis,”

The European Central Bank will be meeting this week on September 6, and investors may now be expecting ECB’s president Mario Draghi to detail his August 2 proposal to reduce sovereign bond yields by buying debt in markets alongside Europe’s rescue fund.

Key Macro Data this week
Below are the dates for key macro data released this week. Investors may wish to note that the U.S market will be shut tonight for Labour Day.

Mon 3 Sep: China Non-manufacturing PMI (Aug), China HSBC Manufacturing PMI (Aug), Euro-zone PMI (Aug)
Tue 4 Sep: US ISM Manufacturing (Aug)
Thu 6 Sep: ECB announces Interest Rate, US ADP Employment Change (Aug)
Fri 7 Sep: US Non-farm Payrolls (Aug), US Unemployment Rate (Aug)

Singapore Market Wrap

STI outperforms other Asian bourses

Most Asian indices fell on Friday while awaiting the much anticipated speech by US Federal Reserve Chairman Ben Bernanke. In Japan, the consumer price index (CPI) fell 0.7% and the industrial production unexpectedly declined. Industrial production was expected to increase by 0.4% month on month, but it fell 1.2% instead, signalling that Japan may be slipping into a contraction. The decline accompanied signs of a slowdown across Asia as recent economic data from China and South Korea came in rather soft as well.

The STI did well compared to other parts of Asia and ended positive on Friday. The S&P affirmed Singapore's ‘AAA' ratings with stable outlook. S&P said that "strong public finances, solid net external creditor position, track record of political stability and prudent economic management" were reasons for the rating and added that the outlook remains stable on expectations that the government will maintain sizeable external and fiscal reserves.

The STI closed at 3025.46, down 0.8% wow while the HSI closed at 19482.57, down 2.0% wow.

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

HSI19400MBeCW121030 (Q7KW) exercise level 19,400.*
HSI19000MBePW121030 (Q7LW) exercise level 19,000.*

Singtel- one of the leaders of the STI
Singtel was one of the leaders on Friday, gaining 1.8% dod. The company announced that it has launched faster connectivity for its ConnectPlus and the network is now capable of transfers up to 10 Gbps. Also, they launched a cloud platform which attracted interest from businesses due to its ability to reduce costs while developing, testing and deploying new applications.

However, the government has decided to double the speed of Wireless@sg, the country's free public Wi-Fi system. With this new initiative, surfing speeds may be increased to more than 2Mbps, more than doubling the current speed. Also, the Infocomm Development Authority (IDA) is looking at a new system which will automatically recognise users via details in their SIM cards and this will reduce the hassle of signing in. If this move materializes, it may place increased competitive pressures on paid 3G plans by telecoms.

Singtel closed at $3.39, up 2.1% wow.

Call warrant SingTelMBeCW130301 (PB6W) exercise price $3.30.*
Long dated call warrant SingTelMBeCW130603 (Q4AW) exercise price $3.80.*

Wilmar affected by Chinese inflation concerns
As the economy in China slows, the Chinese government is stepping up measures to contain the prices of animal feed and cooking oil by selling state reserves, while warning Wilmar and Cofco Group not to speculate in the market excessively. This move comes at a time as the government bids to curb inflation.

Both Wilmar and Cofco control 60-70% of China's retail cooking oil market. The China Grain Reserves Corporation has been offering 400,000 tons of soybeans from state reserves every two weeks and has sold around 17% of the nation's monthly demand in August. At the same period, US soybean futures rose due to strong demand and tight supply, partly due to the drought that hit the US.

Edible oil producers like Wilmar, have been marginalized as costs rise more rapidly than retail prices. Wilmar closed at $3.13, down 1.6% wow.

Call warrant Wilmar MBeCW130102 (Q5QW) exercise price $3.15.*
Put warrant Wilmar MBePW130116 (Q5RW) exercise price $3.15.*

Overnight Market Wrap

Third QE on its way?

After the long awaited speech at Jackson Hole, US indices added gains, ending positive for the day on Friday. The S&P closed at 1406.58, up 0.5% day on day.

The Federal Reserve Chairman, Ben Bernanke, spoke of pressing issues like unemployment rates and kept investors' hopes up about the third quantitative easing. He said that "the unemployment rate is likely to remain far above levels consistent with maximum employment for some time" given the sluggish economy. Thus, he signalled that more stimuli may come soon since joblessness is a "grave concern". He went ahead to defend bond purchases, saying that the pros outweigh the cons.

US will be releasing their employment report for August on September 7 and the FOMC will be a week after that, on September 12-13. After Bernanke left the door for a third round of QE open, investors will be expecting the Fed to introduce measures if economic data remains lacklustre, especially labour.

Overnight Markets

Indices	Last	Change
STI	3025.46	0.5%
HSI	19482.60	-0.4%
DJIA	13090.80	0.7%
S&P 500	1406.58	0.5%
Nasdaq	3066.96	0.6%
China A50	7037.48	-0.6%

Corporate News

Corporate Announcements

Keppel's subsidiary has been awarded a contract to build a waste-to-energy facility in Poland.

Ex-dividend dates:
Wed 26 Sep: SGX ($0.15)
Tue 6 Nov: Olam ($0.05)