Looking for clues amid earnings season

kimeng

Publish date: Mon, 29 Oct 2012, 09:58 AM

Warrants Highlight

Looking for clues amid earnings season

Code	Name	Type	Expiry	Exercise Price
RC6W	HSI22000MBeCW121129	Call	29-Nov-12	22000
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

The MSCI Asia Pacific index fell 1.6% this week, erasing the month's gains. This comes after companies missed earnings estimates as well as concerns over global growth that intensified. In particular, the HSI stood out, beating the regional index and ending flat for the week. This week, the Hong Kong de facto central bank stepped in to sell the HKD so as to depreciate the nation's currency. The USD/HKD currency cross was trading near the upper limit of its peg to the US dollar of 7.75 thus making the intervention legitimate.

Hong Kong- world's most expensive properties
Over the weekend, the Hong Kong's government announced its first property tax targeted at overseas buyers in a bid to try and curb the rising property prices in the city. Financial minister John Tsang told reporters that foreigners would have to pay a 15% tax upon purchase while resale tax on property would be raised by 5%. Under the new regulations, property owners who sell their houses within 6 months of purchase will have to pay tax of 20%. Those who sell within 7 months to a year will have to pay tax of 15%. This will apply for three years instead of two previously. These measures came after home prices doubled over three years, and Hong Kong became the most expensive place to own a property in the world.

While the Hong Kong home prices have gained 18% this year, the nine-member Hang Seng Property Index has risen 30%, driving up the benchmark HSI.

US corporate results not convincing
In the US, investors continued to monitor companies' quarterly results and forecasts which have been disappointing. The S&P 500 Index fell 1.5% for the week with all the 10 groups in the index sliding at least 0.8%. According to data complied by Bloomberg, out of the companies that have reported earnings, 59% missed analysts' estimates for sales. However, only about a third of the companies missed projections for earnings.

In other economic news, the Fed made a statement saying that the US economy is still growing modestly and unemployment remains elevated while the central bank continues its monthly purchases of $40 billion in mortgage-backed securities. After the statement was released, US equities inched down.

Signs of Eurozone weakening further
Investors remained concerned about the European debt crisis as the Eurozone manufacturing and services unexpectedly declined to 45.8 in October. In country specific news, the unemployment situation in Spain continued to deteriorate with more than one out of four Spanish jobless and the German's business confidence surprisingly fell. In addition, German Finance Minister said that Greece may not meet requirements for its bailout.

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

Mon 29 Oct: US personal spending, German CPI
Tue 30 Oct: German unemployment, US consumer confidence
Wed 31 Oct: Eur CPI, Singapore unemployment
Thu 1 Nov: US ISM manufacturing, China manufacturing PMI
Fri 2 Nov: US unemployment rate

Singapore Market Wrap

Negative Singapore manufacturing output wraps up week

The Economic Development Board reported that manufacturing dropped 2.5% from a year earlier, which was lower than economists' expectation of a 1.8% increase.
The Singapore market had a short week with Friday on holiday to celebrate Hari Raya Puasa, the STI raising marginally 0.3% to 3057.51 week-on-week (w.o.w).

Call STI 3100MBeCW130131 (PA7W) exercise level 3,100.*
Put STI 2800MBePW130131 (PA8W) exercise level 2,800.*

Capitaland setting up US$215 million China Fund
Capitaland has announced the establishment of it's first value housing private equity fund, Capitaland China Value Housing Fund. The fund will invest primarily in value housing developments in China, has a fund life of 5 years and consist of US$215 million (about S$264 million). The fund's seed investment comes from 2 value housing projects, the Rivervale in Guangzhou and The Floravale in Shanghai. Capitaland rose 1.8% to $3.33 w.o.w.

Call CapitalaMBeCW130204 (Q4HW) exercise price $3.40.*
Put CapitalaMBePW130103 (Q4EW) exercise price $3.00.*

NOL's US$50 million 3Q profit
NOL had reported net earnings of US$50 million for 3Q12, comparing to US$91 million net loss a year ago. It is also the first time since 4Q10 that the shipping and logistics group posted a net profit. Cost efficiencies, stable rates and volume growth helped the improved earnings. NOL remained unchanged at $1.17 last week prior to it's Thursday earnings release.

Call NOL MB eCW130604 (Q8FW) exercise price $1.30.*

Overnight Market Wrap

US announces mixed data while concerns in Europe grow

On a day where Singapore was closed for a public holiday, the S&P rose 0.2% over a two day period. On Thursday, the index rose 0.3% dod but fell 0.1% dod on Friday, closing at 1411.94.

On Thursday, pending home sales disappointed with an increase of 0.3% for the month of September. The Bloomberg survey was expecting a 2.5% increase and the S&P index of 11 homebuilders fell 3.7%. On the other hand, durable goods orders increased 9.9% in September, beating estimates of 7.5%.

On Friday, data showed that the economy in the US expanded more than forecast in the third quarter, driven by a pickup in consumer spending, a rebound in government outlays as well as gains in residential construction. Adding to the positive news, consumer sentiment climbed for the month of October, implying that consumers are more willing to spend. Despite the positive economic news, the S&P failed to hold up as investors appeared to be more concerned that the debt crisis in Europe may be worsening. German Finance Minister said that doubts whether Greece will meet requirements for its bailout remain.

Overnight Markets

Indices	Last	Change
STI	3057.51	0.4%
HSI	21545.60	-1.2%
DJIA	13107.20	0.0%
S&P 500	1411.94	-0.1%
Nasdaq	2987.95	0.1%
China A50	7148.74	-1.8%

Corporate News

Corporate Announcements

Wilmar and Clariant establish 50-50 Joint Venture for amines and selected amines derivatives. Subject to regulatory approvals, including merger clearances, the Joint Venture is expected to be operational in spring of 2013.

NOL is selling it's No. 456 Alexandra Road NOL Building for a consideration of S$380 million to Fragrance Group

Earnings release dates:
Tues 30 Oct: Capitaland (3Q12)
Wed 31 Oct: IndoFood Argi (3Q12)
Thurs 1 Nov: DBS (3Q12)
Fri 2 Nov: SIA (2Q12)
Fri 2 Nov: Starhub (3Q12)
Fri 2 Nov: Cosco (3Q12)
Mon 5 Nov: SembCorp Marine (3Q12)
Tues 6 Nov: Ezion (3Q12)
Tues 6 Nov: SATS (2Q13)
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)
Fri 9 Nov: Wilmar (3Q12)
Mon 12 Nov: Genting (3Q12)
Wed 14 Nov: GLP (2Q13)
Wed 14 Nov: City Dev (3Q12)
Wed 14 Nov: STX OSV (3Q12)

Ex-dividend dates:
Wed 24 Oct: SGX ($0.04)
Tue 6 Nov: Olam ($0.05)
Fri 7 Dec: SPH ($0.17)

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