IMF warns on slowdown all round

kimeng

Publish date: Mon, 15 Oct 2012, 09:57 AM

Warrants Highlight

IMF warns on slowdown all round

Last week saw the biggest weekly decline in US since June with the S&P 500 index falling 2.2% in the week. Investors remained concerned with the global slowdown as the US headed into its earnings season. In comparison, Asian indices did better, with the MSCI Asia Pacific Index falling 1.5% in the same period.

Code	Name	Type	Expiry	Exercise Price
RB1W	HSI21000MBeCW121129	Call	29-Nov-12	21000
RC7W	HSI21600MBePW121129	Put	29-Nov-12	21600
Q4OW	STI 3250MBeCW121231	Call	31-Dec-12	3250
Q4PW	STI 3100MBePW121231	Put	31-Dec-12	3100
QP3W	CN8500MBeCW121129	Call	29-Nov-12	8500
QP5W	CN7500MBePW121129	Put	29-Nov-12	7500

Bearish growth forecast caps optimism
The US saw employment data improving just as the nation heads towards elections on 6 Nov. Unemployment rate fell to 7.8% while jobless claims were the lowest since Feb 2008. Consumer confidence also unexpectedly increased signifying that people are growing more optimistic about the state of the US economy. Yet, US stocks declined after the International Monetary Fund (IMF) cut growth forecasts for the second time this year.

The IMF said that the slowdown might drag and even worsen if the US economic growth deteriorates or the Europe debt crisis continues to drag on. Special mention was also given to China as the IMF pointed out that the slowdown in the second largest economy worldwide is affecting other regions globally. The forecast of China's growth was lowered to 7.8% from 8% previously.

Stimulus speculation props up Chinese equities
Despite that, indices in China did well as investors brushed aside the revised growth estimates by IMF, with the Shanghai Composite index gaining 0.9% in the week. This came after the nation's central bank injected liquidity into the markets via reverse repurchases. Going forward, there are expectations that the government will do more to spur the economy. Over the weekend, China exports unexpectedly exceeded estimates, rising at its fastest pace in three months during September.

Spain just above junk
In Europe, credit rating agency downgraded Spain two levels to BBB-, a level above junk. Economic and political risks were stated as a reason behind the downgrade. Earlier in the week, German chancellor Angela Merkel visited Greece amid protests to give her support to the country. Her visit came after international creditors added pressure on Greece to live up to its austerity pledge. The country is given until 18 Nov to put reforms in place before it is given the next slice of the loan, which is long overdue.

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

Mon 15 Oct: China CPI, PPI, Singapore retail sales
Tue 16 Oct: US CPI and industry production, Eur CPI and trade balance
Wed 17 Oct: US housing starts and building permits
Thu 18 Oct: China GDP, HK unemployment rate
Fri 19 Oct: US existing home sales

Singapore Market Wrap

Breaking the losing streak

The STI finally broke its 4 days losing streak by ending Friday's trading session up 0.3% to close 3041.75. This is in spite of last Friday's news on Singapore's economy contracting 1.5% over the 3rd quarter, which was worse than economists' expectations. However, on a week-on-week (w.o.w) basis, the STI ended 2.1% in the red.

Call STI 3250MBeCW121231 (Q4OW) exercise level 3,250.*
Put STI 3100MBePW121231 (Q4PW) exercise level 3,100.*

UOB fell heaviest among banks
UOB is down 4.2% w.o.w to $19.00, falling the most compared to it's peers. It fell sharply after announcing it's intention to issue US$500 million worth of Medium Term Notes at an interest of 2.875%. In addition, the note has a first call feature 5 years from the date of issue and a total maturity of 10 years.

Call UOB MB eCW130104 (Q8BW) exercise price $19.50.*
Put UOB MB ePW130104 (Q8CW) exercise price $18.00.*

Capitaland down 4.2% w.o.w
Capitaland has reacted negatively since MAS announced another fresh round of property cooling measures on 5th of October. Further constraints on the duration and loans amounts property owners are able to apply for has added more pressure on property stocks. It opened at $3.25 at the beginning of the week, touching $3.11 for it's intra-week low, before eventually settling at $3.16 on Friday, down 4.2% w.o.w.

Call CapitalaMB eCW130204 (Q4HW) exercise price $3.40.*
Put CapitalaMB ePW130103 (Q4EW) exercise price $3.00.*

Overnight Market Wrap

Financials lead S&P lower

Last Friday, two of US biggest financial names were due to report earnings, hence it comes as no surprise that the financial sector were in focus.

The US indices ended differently with mixed investors' sentiments. Consumer confidence unexpectedly jumped to the highest in 5 years and JP Morgan announced record quarterly profits, largely beating analyst estimates. On the other hand, Wells Fargo's revenue fell short of expectations.

The S&P declined 0.3%, closing at 1428.59 with financials and energy being the biggest drag in the index.

Overnight Markets

Indices	Last	Change
STI	3041.75	0.3%
HSI	21136.40	0.7%
DJIA	13328.80	0.0%
S&P 500	1428.59	-0.3%
Nasdaq	3044.11	-0.2%
China A50	7281.89	0.2%

Corporate News

Corporate Announcements

DBS divested part of its investment in The Bank of Philippine Islands ("BPI") to Ayala Corp for S$757.3 million. DBS will hold an aggregate 9.9% investment in the bank and continue to have representation on the BPI board.

Earnings release dates:
Fri 12 Oct: SPH (4Q12)
Wed 17 Oct: Ascendas REIT (2Q13)
Wed 17 Oct: Kepland (3Q12)
Thu 18 Oct: SGX (1Q13)
Thu 18 Oct: Keppel Corp (3Q12)
Fri 19 Oct: CapitaMall Trust (3Q12)
Tues 23 Oct: Mapletree Industrial Trust (2Q13)
Thu 25 Oct: NOL (3Q12)
Thu 25 Oct: CapitaCommercial Trust (3Q12)
Thu 25 Oct: CapitaMalls Asia (3Q12)
Tues 30 Oct: Capitaland (3Q12)
Mon 5 Nov: SembCorp Marine (3Q12)
Wed 7 Nov: UOB (3Q12)
Wed 7 Nov: Biosensors (2Q13)
Thurs 8 Nov: Noble (3Q12)
Fri 9 Nov: SembCorp Industries (3Q12)
Fri 9 Nov: OCBC (3Q12)

Ex-dividend dates:
Tue 6 Nov: Olam ($0.05)

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