Warrants Highlight

Long awaited QE3 rally - will it last?

Global indices cheered the Federal Reserve decision to introduce a third quantitative easing late Thursday. On Friday, the HSI rallied 2.9% dod, the STI added dod while the ChinaA50 rallied approximately 1% dod (as of 3.30pm close).

What’s QE3?
QE3 entails the purchase of US$40bil mortgage backed securities monthly with the objective of keeping long term interest rates low. Bernanke went on to add that the monthly purchases will continue until the labour situation “improves significantly”. He also announced that interest rates, which has been near zero from Dec 2008 will stay low from the initial 2014 to “at least till mid 2015”. Lastly, Operation Twist will resume with the Fed swapping US667bil short term debt with longer term maturities.

How different is this QE3?
While the first QE was arguably successful in helping the world’s largest economy avoid a deep recession, the effects of the second round of QE was largely considered less effective. At this present moment, the long term effects of QE3 remains debatable. Nonetheless, US Fed Chairman Ben Bernanke has thus far shown his determination with ‘unconventional’ methods in trying to kick start the spluttering US economy.

Keeping a watchful eye on Europe
While QE3 has eased short-term concerns over the US economy, market participants will be on the lookout for developments in the Eurozone. Just last week, the German courts ruled in favor of supporting the Euro. Going forward, Germany can provide up to 190bil Euro to the European Stability Mechanism, which oversees the bailout in Europe. Any additional amounts will require parliament approval. However, in other parts of Europe, Greece has yet to reach an agreement on budget cuts with the Troika, while Spain has adopted a wait-and-see attitude regarding their request for a bailout.

Key Macro Data next week
Below are the dates for key macro data released next week.

Mon 17 Sep: Eurozone trade balance
Tue 18 Sep: Hong Kong unemployment rate
Wed 19 Sep: US existing home sales, US Housing starts
Thu 20 Sep: Eurozone PMI, China HSBC flash manufacturing PMI

Singapore Market Wrap

Markets welcomed QE "Infinity"

While the first two Quantitative Easing (QE) measures had a price cap and timeline, last Thursday's open-ended stimulus package with no end date is effectively a blank cheque from the Fed. This "QE-Infinity" lifted the investor sentiments across the globe, helping the STI to rally 1.9% week-on-week (wow) to 3,070.42. Similarly, the HSI rose 4.2% wow to 20,629.8

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

HSI20400MBeCW121030 (Q7IW) exercise level 20,400.*
HSI20000MBePW121030 (Q7JW) exercise level 20,000.*

Big week for commodity players
Commodity stocks surged last week on the back of the Fed stimulus package. Wilmar (+4.2% wow, $3.24) which tumbled to its $3.00 psychological level last week, rallied 8.0% on Friday on strong volumes. The rally erased all its August losses.

Another stock which saw spectacular gains was Noble (+9.3% wow, $1.35). It is now it is 7-day rally, gaining 15.4%. Over the same period, the call warrant Q5OW gained 88.6%.

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

Call warrant NobleGrpMBeCW130401 (Q8AW) exercise price $1.20.*
Call warrant NobleGrpMBeCW130201 (Q5OW) exercise price $1.40.*

Shipbuilders return to $1.00
Chinese shipbuilders Cosco and Yangzijiang spent most of its recent weeks below the $1.00 level. Last week, both of them rallied 3.6% and closed at $1.00 and $1.015 respectively. Cosco announced on Thursday that it delivered three 57000 DWT bulk carriers to their buyers.

Call warrant YangzijiMBeCW121203 (QR1W) exercise price $0.95.*
Call warrant YangzijiMBeCW130102 (O9LW) exercise price $1.20.*
Put warrant YangzijiMBePW130103 (Q0CW) exercise price $ 0.95.*

Call warrant CoscoCoMBeCW121105 (QK3W) exercise price $0.950.*
Call warrant CoscoCorMBeCW130204 (Q4RW) exercise price $1.10.*

Overnight Market Wrap

Weak data supports QE3

The S&P started Friday's trading session on a good note, trending higher for the first one hour. However, it was short lived as the index made lower lows throughout the rest of the session. Fortunately, the index still ended positive for the day, adding 0.4% to close at 1465.77.

The rally was despite industrial production falling 1.2% in August as compared to July. This decrease is due to Hurricane Isaac as well as a large drop in car output. On the other hand, retail sales rose 0.9% in August, driven by demand for automobiles along with higher gasoline prices. CPI also rose, by 0.6% last month. Higher food and fuel costs with weak labour markets are taking its toll on consumers.

This latest set of economic data supports the Fed's view that more needs to be done. The third round QE3 may be just what the US needs to nurse its economy back to optimal shape.

Overnight Markets

Indices	Last	Change
STI	3070.42	1.3%
HSI	20629.80	2.9%
DJIA	13593.40	0.4%
S&P 500	1465.77	0.4%
Nasdaq	3183.95	0.9%
China A50	7295.57	0.9%

Corporate News

Corporate Announcements

Semb Marine acquired Smulders Group, a supplier focused on Oil and Gas markets based in UK.

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