Warrants Highlight

Risk of property bubble in Hong Kong

Macquarie is listing new HSI warrants this morning.

Macquarie’s HSI warrants

GDP missed estimates
Last week, Hong Kong announced their GDP which was estimated to increase 1.7% year on year (yoy). However, the nation missed estimates, growing modestly by 1.3% yoy. Shortly after, its government cut its full year GDP growth forecast to 1.2% as export growth stalled in the third quarter.

Exports from EU decline
Though exports to China and Japan posted faster growth during the third quarter, exports to counterparts in Europe registered a double digit decline, along with sluggish growth recorded to the US and other major Asian markets.

Government economist Helen Chan said during a media briefing that “external demand remained subdued in the face of recession-ridden European economies, the slow-growing US economy as well as the setback in Asian production and trade flows”.

While she was optimistic about the economy in the fourth quarter, she had reservations regarding the full year's growth. She said, “Although the economic situation is expected to further pick up in the fourth quarter, the sluggish economic performance in the first nine months of the year will nevertheless drag the year’s overall growth”.

Risk of a property bubble
In addition, Chan also addressed the property market in Hong Kong, stating that mortgage payment to income ratio has worsened to about 50% during the third quarter, adding more burden to families. This could signify “a mounting risk of a property bubble in the city”.

The property markets in Hong Kong had made headlines over its rising prices against the backdrop of a cooling economy. According to the China Daily, residential prices rose further by 6% over June, representing some 20% surge in the first nine months of 2012, surpassing the previous peak in 1997 by about 26%.

New cooling measures expected to further curb property prices
The good news is that the recently imposed Special Stamp Duty (SSD) on short term home resales seemed to have dampened speculative activities. The government expects the new SSD and new Buyers’ Stamp Duty (BSD) that slapped an unprecedented 15% tax on home buyers who are not permanent residents, to further cool home prices.

Singapore Market Wrap

Positive US housing news fails to rally Singapore market

US existing home sales climbed in October, spurring the S&P to rally 2.0% on Monday night. Propelled by an era of low mortgage rates, 4.79 million purchases were transacted, compared to 4.75 million. However, the positive news and the rally of S&P failed to have the same impact on the cautious Singapore market, with the STI rising marginally 0.3% to 2958.82 day-on-day (d.o.d).

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

Olam plunged after Muddy Waters' report
A report from short-seller Carson Block's Muddy Water questioning Olam's accounting methods caused Olam to plunge to it's intraday low of $1.545. Olam has stated that they reject the assertions made by Muddy Water and may issue further statements if the report is published. Olam had requested for a trading halt in the mist of the session and only resumed trading at 3:30pm. Olam eventually recovered slightly to close 7.5% down to $1.61 d.o.d.

Call OLAM MB eCW130201 (Q4MW) exercise price $2.00

UOB buys ING Thai asset management business
UOB's asset management arm will be purchasing all the shares of ING Funds Thailand Co., a unit of ING group, the biggest Dutch financial services company. This transaction is valued at 10 million euros and will be expected to be completed in the first half of 2013. UOB slipped 0.22% to $17.87 for the trading session.

Call UOB MB eCW130103 (MW0W) exercise price $19.397.*
Put UOB MB ePW130104 (Q8CW) exercise price $18.00.*

Overnight Market Wrap

Housing data surprise yet again

Last night, the S&P fell in the earlier part of the session, led by Hewlett-Packard (HP). The company dived 12% as it announced a charge of USD 8.8 billion linked to its subsidiary. HP gave the reason of "accounting improprieties" which happened before the takeover.

Fortunately, the index erased losses in the later part of the trading session to add less than 0.1% for the day. New construction rose 3.6% to an annual rate of 894,000 in the month of October. This is the highest in four years, showing more evidence of a recovering housing sector.

During the trading session last night, Ben Bernanke said that fixing the fiscal cliff may bring about a "very good year" next year. However, he also said that failure to do so would pose a "substantial threat" and the central bank does not have the tools to offset the potential harm to the economy.

Overnight Markets

Indices	Last	Change
STI	2958.82	0.3%
HSI	21228.30	-0.2%
DJIA	12788.50	-0.1%
S&P 500	1387.81	0.1%
Nasdaq	2916.68	0.0%
China A50	6917.00	-0.6%

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Ex-dividend dates:
Fri 7 Dec: SPH ($0.17)