Morning Market Commentary

- STI: -0.31% to 3158.7
- MSCI SE Asia: -0.14% to 860.4
- Hang Seng: -0.41% to 22513.6
- MSCI APxJ: -0.47% to 462.9
- Euro Stoxx 50: -0.10% to 2628
- S&P500: +1.19% to 1430.4

Property Sector Update:

Developers sold fewer residential units in November with 1,087 units unloaded (-44% m-m, -36% y-y), excluding ECs. The lower sales could be due to lower new launches in the month (773 units) and the absence of sizable new projects ahead of year-end holiday’s season. Nonetheless, take-up rates have been over 100% since June 2012. Among the different regions, OCR saw the most decline of sales with 711 units sold by developers (-52%m-m) and sales in RCR declined to 167 units (-48%m-m). CCR, however, closed more transactions with 209 unit sold (+45%m-m). Top seller in the month was Eco Sanctuary by SP Setia, with 140 units sold at median price of $1,050psf. That followed by 133 units sold from d’Leedon (by CapitaLand’s JV), out of the 300 units launched in the month. We maintain our view that residential property prices to remain resilient with ~1% growth in 2012 but possibly 5% downward correction in 2013, and continued to prefer CapitaLand (TP: $3.97)
 

MARKET OUTLOOK

The STI, Hang Seng, KLCI (N.Asian and ASEAN markets in general) paused in synch yesterday, it’s still too early to say whether there will be a pullback in the immediacy or a resumption in the uptrend. We do note however that feedback from market participants is that after a near relentless 6 week rally, are we due one soon.

In the near term, some possible further encouragement from the US: markets there may be regaining footing after a glimmer of progress in fiscal cliff negotiations as Republican leader John Boehner has conceded for the first time the possibility of tax raisings (for> US$1m earners) in exchange for controls on spending entitlements, the President is therefore now willing to explore concessions on social security.

We note also that Crude has poked its head above the 50dma which has acted as resistance for about 3 months. Dollar index is also on the decline. Both are good signs for stocks.

In the longer term, 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. As for the US economy, the main drag has been investment, but this could easily reverse and spark a strong rebound should we get progress on resolving the fiscal cliff.

SG equity strategist favours Capitaland, SATS and SIAEC.

Macro Data:

In Singapore, NODX registered modest growth of 0.4% y-y 3mma in Nov, compared to the 2.6% decline in the preceding month. However, weakness in the electronics cluster continued to persist. Specifically, electronics NODX continued to contract by 16.5% in Sept, following the 0.8% decline in the preceding month. As we have guided previously in our ASEAN macro strategy report, the weakness in electronics manufacturing output as well as exports is likely to persist in the near term as (i) Singapore is not plugged into the tablet and smartphone value chain (unlike South Korea and Taiwan) and (ii) global demand -as reflected in the SEMI book-to-bill ratio- remains tepid.

In the US, manufacturing in the New York region shrank more than forecast, showing weakness in the industry is persisting. The Federal Reserve Bank of New York’s general economic index dropped to minus 8.1, the fifth month of contraction, from minus 5.2 in November. The median forecast of 55 economists in a survey called for minus 1. Readings less than zero signal contraction.

In Euro zone, export fell for a second month in Oct by 1.4% m-m seasonally adjusted (sa) in Oct, after the 1.3% m-m sa fall in Sept. Import rose by 0.6% m-m in Oct and trade surplus narrowed to 7.9 bn euros from the revised 11 bn euros in Sept. Germany’s export fell by 3.6% m-m sa in Oct while import rose by 3.4% m-m. France and Italy reported export declines of 2.1% m-m sa and 1.4% m-m sa respectively. The ECB has signaled the weakness in economic activities is likely to extend into the first half in 2013 and reduced its growth forecast to a 0.5% contraction in 2012 and a 0.3% contraction in 2013.
 

Regional Market Focus

Singapore

• The benchmark STI closed marginally lower at 3,158.7 (-0.31%). The 1.9bn shares traded were worth S$1.0bn.

• 19 of the STI components closed lower with the biggest decline in Land Transport Conglomerate, ComfortDelGro. Our transport analyst believes that there is no fundamental reason for this fall and continues to stay positive on the counter.

• Despite lower sales of residential units in Nov, our property analyst maintained his view for resilience in residential property prices in 2012. However, he expects a mild correction of prices in 2013.

• Our top picks for the Singapore Market are SIAEC, SATS & Capitaland. SIAEC & SATS are yield plays that benefit from strong underlying business trends. Capitaland would be a beneficiary of the stabilization of property prices and bottoming out of economic conditions in China.

Thailand

• Thai stocks remained stuck in range on Mon. Even though the SET index spent most of the session in the green amid more sector rotation, gains were limited by sporadic bouts of short-term profit taking while investors were keeping a close eye on progress in US budget talks.

• Big gains of more than 100 points on Wall Street lifted by optimism about a deal to avert the US fiscal cliff by year-end deadlines could set the positive tone for the Thai stock market today. The Thai baht stayed on the strong side with the unit hovering at 30.59 per US dollar in today’s early trade (0755 hrs Thailand time), corresponding with foreign fund inflows. Foreign buying of Thai equities continued yesterday to the tune of Bt1.3bn but data however showed foreign investors unwound some positions to book profits in derivatives markets as they held net short positions of more than 700 contracts yesterday, leaving the market vulnerable to bouts of short-term profit taking. However, uncertainty over the US fiscal cliff talks along the way before end-of-year deadlines could add volatility to the market from time to time. Overall we expect the SET index to trade in a range of between 1350 and 1365 today.

• The short-term strategy is to be selective in stocks. We advise investors to look for laggards relative to peers/broader market and focus on year-end spending plays.

• Resistance on the main index is seen at 1365-1370 and support at 1357-1350 today.

Indonesia

• The Jakarta composite index closed slightly up on Monday (18/12), amidst mixed closes on Asian markets as investors turned optimistic after Japan’s election but US “fiscal cliff” dampened sentiments. The JCI added 6.994 points, or 0.16%, to close at 4,315.857. The advance included five of the 9 major stock sectors, with miscellaneous industry gained 1.32%, mining added 0.69%, and infrastructure also climbed 0.69%. Indonesia’s blue-chip stocks finished in a mixed bag on Monday, with the LQ45 index gained a modest 1.674 points, or 0.23%, to 737.557, as 19 of its components rose, and other 19 components fell. More than 110 shares advanced, 135 shares declined, and the remaining 219 shares stayed unchanged Monday on the Indonesia Stock Exchange, where 3.331 billion shares valued at IDR 4.19 trillion changed hands on the regular market. Foreign market participants posted net purchases worth IDR 66.437 billion in total.

• The Jakarta composite index will likely trade higher today, after positive closes on US markets overnight. We expect the JCI to trade within 4,280 - 4,344 range.

Sri Lanka

• The Colombo bourse unwrapped the third week of December and remained within the negative territory for the second consecutive trading day recording adverse closures on all the indices. This was as a result of the lack of buying interest prevailed in whole the day. The Benchmark ASPI stood at 5,503.51 losing 19.21 points; this was a decrease of 0.35% compared to the previous trading day. The liquid MPI closed the day at 5,011.90, dropping 33.30 points. Meanwhile, losing 13.35 points, the S&P SL20 Price Index closed the day at 3,009.44. The market capitalization for the day stood at LKR 2.11Tn recording a year to date loss of 4.49%. The day’s turnover stood at LKR 532.88Mn, an increase of 5.43% against the previous trading day. The best performers were Investment Trusts (LKR 203.76Mn) and Bank Finance & Insurance (LKR 138.48Mn) respectively. The total traded volume for the day amounted to 26.98Mn shares; this was a 75.07% Increase against the previous trading day. Price losers outnumbered the price gainers at a ratio of 90:66. The foreigners appeared to be bullish during the day, recording a net foreign inflow (LKR 102.46Mn) for the second consecutive trading day. This extended the year to date net foreign inflow to record LKR 36.74Bn.

Australia

• The Australian market closed weaker on Monday with the gold sector leading the broader market lower. The benchmark S&P/ASX200 index lost 9.7 points or 0.21 per cent to 4,573.4 points.

• The Australian share market is likely to open higher after Wall Street rose on hopes of progress in United States budget talks. The SFE Futures 200 is pointing upwards 34points or 0.74 per cent to 4,607.

• On the economic news front for Tuesday, the Reserve Bank of Australia (RBA) releases the minutes from its December 4 board meeting. The Australian Bureau of Statistics (ABS) publishes international merchandise imports data for November.

Hong Kong

• China’s shares soared more than 4 percent on Friday, as investors speculated that the upcoming economic work conference that will set the tone for China's economic policies in 2013. The benchmark Shanghai Composite Index gained 4.32 percent, or 89.15 points, to 2,150.63. The Shenzhen Component Index closed strong at 8,530.9, up 4.4 percent, or 359.55 points. Combined turnover on the two bourses jumped to 208.23 billion yuan from 98.2 billion yuan the previous trading day.

• Hong Kong stocks rode on the rally of China’s market. The benchmark Hang Seng Index gained 160.40 to 22,605.98 and traded between 22,636.43 and 22,396.72. Turnover totaled 72.35 billion HK dollars, comparing with Thurday’s 62.49 billion HK dollars.

• Technically, the HSI is expected to consolidate at around 22,000 with near term support and resistant at 22,400 and 22,800 respectively.

Company Highlights

Global Logistic Properties Limitedannounced that it has signed two leases totalling 33,500 square metres (361,000 square feet (“sq ft”) to Vipshop, one of China’s leading e-commerce companies. One of the leases signed was for the doubling of space at Vipshop’s Eastern China regional distribution centre in Kunshan, Jiangsu Province, with a new lease of 27,000 sqm (290,000 sq ft) at GLP Park Qiandeng. The other was a new lease of 6,500 sqm (70,000 sq ft) at GLP Park Daxing in Beijing to fulfil the customer’s distribution requirements in Northern China. Including an existing 21,500 sqm (231,400 sq ft) leased at GLP Park Sanshan in Foshan, Guangdong Province, Vipshop now occupies a total of 85,000 sqm (915,000 sq ft) with GLP across China. (Closing price: S$2.750, -1.434%)

China Paper Holdings Limitedannounced that a fire broke out in the late afternoon of 13 December 2012, at its office in South Part, Jianshe Road, Cangshan County, Linyi City, Shandong Province, PRC. The Board wishes to inform that there were no casualties caused by the fire and the fire took approximately one hour to be put out. According to the investigations carried out by the local authorities, the fire was caused by an electrical short circuit in the office premises. As the Company’s financial records were kept in the affected office premise where the fire occurred, the financial records for FY2011 were destroyed by the fire, whereas the financial records for the first eight months of 2012 were partially damaged and the financial records for September to November 2012 were severely damaged. The Company has started to communicate with its customers and suppliers in order to obtain copies of the invoices and other transactional records that were damaged, so as to reconstruct the financial records. The Company estimates that it will take approximately four to six months to reconstruct the financial records. As such, the Company has informed its auditors of the situation and will discuss a possible delay to the annual audit for FY2012. (Closing price: S$0.044, -)

COSCO Corporation (Singapore) Limitedannounced that COSCO Nantong Shipyard Co. Ltd., a subsidiary of the Company’s 51% owned subsidiary, COSCO Shipyard Group Co. Ltd., has secured a contract valued over USD370 million from a European company to build one FPSO. The FPSO will measure 78 meters in diameter, 32 meters high and will have a storage capacity of up to 400,000 barrels of oil. The FPSO is scheduled for delivery in June 2015. (Closing price: S$0.870, -0.571%)

The Manager of CapitaCommercial Trustannounced that it has issued its 10,000,000,000 1.35875 Per Cent. Notes due 2019, pursuant to the MTN Programme established by CCT MTN on 20 November 2007. The obligations of CCT MTN under the Notes are unconditionally and irrevocably guaranteed by the CCT Trustee. The proceeds from the issuance of the Notes denominated in Japanese yen have been hedged into Singapore dollars amounting to S$148,300,000, and will bear a Singapore dollar fixed interest rate of 2.8875 per cent. per annum payable semi-annually in arrears and will mature on 17 December 2019. (Closing price: S$1.640, 0.613%)

KGA Capital Pte. Ltd made a voluntary conditional cash offer to all the shareholders of Rokko Holdings Ltd for all the issued and paid-up ordinary shares other than those Shares held, directly or indirectly, by the Offeror as at the date of the Offer and Shares held by the Company as treasury shares. The offer price for each Offer Share will be S$0.11 in cash. (Closing price: S$0.070, -)
 

Source: PhillipCapital Research - 18 Dec 2012