MARKET OUTLOOK

US equity indices ended higher, rebounding from losses in the early part of the trading session (Price action: Long lower shadows as well as short upper shadows in the S&P 500 and DJIA indicate that sellers actually dominated early in the trading session.) What led equities to reverse their course? Well, President Obama and Republican House Speaker Boehner expressed optimism of a compromise on the fiscal cliff. Specifically, while Boehner is willing to raise revenue if accompanied by spending cuts, he repeated his opposition to raising income tax rates - which Obama wants to implement for the top 2% of income earners. A gridlock it might seem, but we reckon a partial deal could still take place around extending Bush tax cuts for the lower and middle-income households.

In the weeks ahead, we expect markets to turn jittery and gyrations are likely to be the norm rather than the exception - unless the US presents a blueprint (with details) on how the nation intends to tackle the impending fiscal cliff. Even if equities might retrace lower in the near term, a major sell-off is unlikely at this juncture (unless the US economy fails to avert the dreaded fiscal cliff) as markets are expecting some form of a deal by Christmas.

With some major equity indices in Asia Pacific retracing lower at the close of yesterday’s trading session, we spotted a couple of ‘windows of opportunity’ for near-term trading. But traders trading these windows must be mindful that the bulls don’t re-assert themselves today (which is likely given the positive tone of US fiscal budget negotiations during US hours yesterday), overwhelm the bears and close these breakaway gaps (formed to the downside).

(i) Short (with tight stops) FTSE China A50 Index USD1 CFD. We reiterate this trade recommendation which we initiated yesterday (those who took up our suggestion will probably be in the money already). As mentioned, selling pressure might intensify (in the near-term) after the Shanghai Composite (SHCOMP) closed below the psychological 2000 level - for the first time since Jan 2009. The slide in SHCOMP is also likely to continue, since the bears are overwhelming the bulls at this juncture and markets are showing no signs of attempting to reclaim the 2000 level.

(ii) Short (with tight stops) Hong Kong 40 Index HKD5 CFD (Hang Sang Index) , H Shares Index HKD5 CFD (China Enterprise Index: H-shares)

(iii) Short (with tight stops) Indonesia Index USD1 CFD (MSCI Indonesia Index)

Macro Data

In the US, new single-family home sales inched down 0.3% m-m to 368,000 saar in Oct, following a significant downward revision to Sept data. While this seemed to suggest that the pace of housing recovery might be moderating, we wish to point out that other recent housing indicators have still pointed a favourable picture thus far.

In Thailand, the central bank (BoT) stood pat in Nov, maintaining the benchmark one-day bond repurchase rate at 2.75% -consistent with our expectations- in view of resilient domestic demand as well as an improving global economy.

In Philippine, 3Q12 economic growth accelerated -more-than-expected- on the back of resilient domestic demand. Specifically, the economy expanded by 1.3% q-q seas adj in 3Q12 as private consumption received a boost from remittances as well as accommodative policy rate. Looking ahead, odds of a rate cut are low in view of resilient domestic demand. But we do not rule out the possibility of the BSP cutting rates further to temper the appreciation of the Philippine peso, rather than stimulating growth per se.

Company Highlights

Wing Tai Holdings Limited announced that Winzen Investment Pte. Ltd. (a subsidiary of the Company) has been awarded the tender for a 70-year leasehold land parcel F1-3 at Luodian New Town in Shanghai Baoshan District having an approximate site area of 53,837.9 square metres at the price of RMB533,000,000. Following the award of the tender, Winzen will incorporate a new company in Baoshan District to develop the Land as a residential development for sale. (S$1.720, +0.292%)

COSCO Corporation (Singapore) Limited announced that COSCO (Guangdong) Shipyard Co., Ltd (a subsidiary of the Company’s 51% owned subsidiary, COSCO Shipyard Group Co., Ltd), has secured a contract from a European company to build two bulk carriers of 35,500 dwt each. Both vessels are scheduled for delivery in the second half of 2014. The total contract value for the above two bulk carriers is over US$41 million. (S$0.910, +1.111%)

United Overseas Bank Limited announced that its wholly-owned subsidiary UOB Asset Management Ltd has entered into an agreement with Sumitomo Mitsui Asset Management Co., Ltd to set up a 50%:50% joint venture fund management company in Singapore. It is intended for the paid-up capital of the JV Company to be at least S$1 million. The joint venture company, to be named “UOB-SM Asset Management Limited”, is primarily intended to expand the distribution of UOBAM’s and SMAM’s investment capabilities in the Asian markets (including Japan), and for UOBAM and SMAM to co-develop and co-manage products to be sold through the JV Company. The establishment of the JV Company is subject to the relevant regulatory approvals. (S$18.580, +1.752%)

China New Town Development Company Limited announced the successful auction of land use rights of the land parcel (F1-3) located at the Company’s Shanghai Luodian project by the Shanghai Municipal Bureau of Planning and Land Resources on 28 November 2012. The buyer is Winzen Investment Pte Limited, a wholly-owned subsidiary of Wing Tai Holdings Ltd which is a leading property development company listed on the Singapore Exchange Securities Trading Limited. Reference is made to the announcement of the Company dated 4 October 2012. The site area of the land parcel is approximately 53,837.9 square meters with a plot ratio of 1.01 times which is equivalent to 54,376.28 square meters in terms of gross floor area. It was sold at RMB533 million which is equivalent to approximately RMB9, 900.09 per square meter of site area and RMB 9,802.07 per square meter of GFA. The piece of land was sold at a premium of 22.52%. (S$0.048, 0%)

Source: PhillipCapital Research - 29 Nov 2012