Morning Market Commentary
- STI: +0.38% to 3168.4
- MSCI SE Asia: -0.05% to 861.6
- Hang Seng: +0.71% to 22606
- MSCI APxJ: +0.04% to 465.0
- Euro Stoxx 50: +0.11% to 2630.5
- S&P500: -0.41% to 1413.6
MARKET OUTLOOK
Asian markets continue to look fairly positive, the STI’s upside breakout thru a wedge formation that has capped the upside since Oct2010, is over a week old now (see today’s webinar for chart). APxJ index has also convincingly cleared the 450 resistance, the Hang Seng has rallied strongly and the Chinese A-share market (CSI300) builds upon its bottoming signal (MACD bullish divergence in the weekly charts) by trading thru the 2300 resistance.
US markets however traded the other way last week, as expectations of Apple were scaled back and little progress was made on the US fiscal cliff negotiations. Key near term risk for the Asian ascent then remains stalled fiscal cliff negotiations, as markets are building in expectations of a deal before the year is over.
We contend that the best trade in terms of risk-reward remains China (see CN & HK Strategy 23rd Nov, webinar slides last Monday). The A-share market (CSI 300) is coming off a low base and has confirmed a bottoming signal (MACD bullish divergence) in the WEEKLY charts (better than if it was the daily chart). Economic indicators continue to corroborate a turning for the economy, and we also note also that it’s a domestic economy rebound play, and so
more insulated from fiscal cliff tail risk that lurks in the background. Also now that the CSI300 has cleared the 2300 resistance, next stop is the 2500 – consider long with ETF 83188.HK. For the same reasons consider long the FTSE China A50 with Phillip CFD A50.
Looking into 2013, the fact that the STI has finally cracked its wedge formation, 3q12 earnings were not as bad as feared, and Asia’s economic indicators are trending better, are all encouraging signs. We are increasingly positive on stocks 1H13. Main risk is the US fiscal cliff which has already severely damaged investment in the US for much of this year.
SG equity strategist favours Capitaland, SATS and SIAEC.
In Singapore, unemployment remained tight on account of healthy domestic-oriented activities as well as more stringent foreign manpower policies. Specifically, seas adj. unemployment rate declined marginally from 2.0% in June to 1.9% in Sept. Separate data release indicate that retail sales rose 0.6% m-m sa while retail sales ex-auto registered an increase of 0.3%. For Singapore, modest economic growth (2 - 3%) and high inflation (domestically-driven) environment might be the new norm as the economy restructures. If not for the tight labour market, the economy would be at risk of stagflation, which is defined as low growth, high inflation and significant slack in the labour market.
In US, industrial output rebounded in Nov, from the disruptions caused by Hurricane Sandy. But stripping out the volatility arising from Hurricane Sandy, output likely remained soft and flat. Specifically, industrial production expanded 1.1% m-m in Nov, reversing from a contraction of 0.7% in the preceding month. On the inflation front, CPI declined 0.3% m-m in Nov (+1.8% y-y), owing to lower energy prices. Well-anchored inflation expectations as well as relatively benign inflation (below the Fed's 2% inflation target) will enable the Fed to focus on its monetary efforts in boosting the economy.
In the Eurozone, private sector activity likely contracted for the 11th consecutive month in December. Specifically, while the flash estimate of the composite EZ PMI rose to 47.3 (the highest in 9 mths), it remain mired in contractionary territory. On the inflation front, CPI remain unchanged at 2.2% y-y in Nov.
In China, HSBC flash manufacturing PMI reported 50.9 in Dec, beating the market expected 50.8 and prior 50.5, continuing the sign of re-acceleration in the nation’s manufacturing business. The government announced to remove the 1 bn USD ceiling on investment by overseas sovereign wealth funds and central banks in its capital market, as part of the government’s effort to shore up the slumping equity market, though other qualified foreign institutional investors (QFII) will still be subject to this limit. During the annual central economic work in Beijing, the leaders had set the tone for 2013 to “pursuing quality and efficiency of economic growth” and expanding domestic demand to aid“sustained and healthy development”. The government committed to “fully deepen reforms” in the economy and “firmly promote opening-up” next year, according to Xinhua, the state-run news agency. The nation will also maintain controls on the property market and increase urbanization. The new leaders may keep its 7.5% GDP growth target for 2013.
In Japan, Tankan large manufacturers index, a gauge for business sentiment, fell to -12 in 4q12, a fifth straight negative reading and the lowest since mar 2010, after the -3 reading in 3q12. The slide in sentiment, together with the earlier announced second quarterlyconsecutive contraction in GDP, may push the central bank for further easing policy during the policy meeting on Dec. 20.
Singapore
Thailand
Indonesia
Sri Lanka
Australia
Hong Kong
Silverlake Axis Ltdannounced that its subsidiaries have secured three new software and services contracts and one ongoing software and services contract expansion totalling approximately RM135 million. These customers are located in South East Asia and Africa. (Closing price: S$0.500, 1.010%)
Sound Global Ltd announced that they have won the joint bid with China Railway 18th Bureau for No.6 Water Treatment Plant Project in Changchun City, Jilin Province, the PRC. Located in Changchun City, Jilin Province, the long-term designed water supply capacity of the project is 500,000m3/ day with the near term capacity at 250,000m3/ day. No 6. Water Treatment Plant Project requires a total investment of approximately RMB2.035 billion, which will be invested, built and transferred as a BT project. The project is expected to commence construction in 2013 and to complete in 2015. The construction of the project will greatly relieve the inadequate water supply problem in Changchun City, and will play an important role in supporting the sustainable development of Changchun City. (Closing price: S$0.560, 0.901%)
CapitaLand Limited wishes to announce the sale of its entire 100% stake in Beijing CapitaLand Xin Ming Real Estate Development Co., Ltd. for a cash consideration of RMB502 million (approximately S$97 million). BCXM, a company incorporated in the People’s Republic of China, owns a residential site under development with gross floor area of 14,364 square metre in Beijing’s Dong Cheng District, PRC. The Sale is made as part of CapitaLand Group’s ongoing strategy of capital productivity. (Closing price: S$3.760, 1.075%)
Source: PhillipCapital Research - 17 Dec 2012
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Created by kimeng | Dec 29, 2022
Created by kimeng | Dec 29, 2022