Morning Market Commentary

- STI: +0.39% to 3180.8
- MSCI SE Asia: +0.18% to 865.3
- Hang Seng: +0.16% to 22541.2
- MSCI APxJ: +0.02% to 462.6
- Euro Stoxx 50: -0.10% to 2648.5
- S&P500: -0.48% to 1419.8

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Even Santa was turned off by the ongoing political brinkmanship -which led to the current fiscal budget impasse- and duly decided to give US a miss. Specifically, the S&P 500 and DJIA slumped after returning from Christmas, threatening to break below their respective 50dma support levels. Instead, Japan and China equity markets continue to enjoy a Santa Claus rally.

Apple Inc (AAPL:Nasdaq) tumbled from the opening bell with the bears taking charge. Notwithstanding Samsung's recent withdrawal of a key Apple lawsuit in Europe, we are doubtful of a major inflection (up) for Apple Inc (AAPL:Nasdaq) yet. The test of support level on 17 Dec failed and subsequently the stock bounced up from over-sold levels. Hope you were not caught in that bear trap. Nonetheless, in view of the intact 'death cross', traders can consider entering trading shorts (with tight stops) since AAPL has broken below the head and shoulder neckline of 520-530. Though, if you have shorted since the huge sell-off on 05 Dec, it might be advisable to take some profits from these existing short positions now from a trade management perspective.

In Japan, we are turning constructive on the economy as well as the equity market under the new leadership. With the Nikkei closing at 9- month high and yen falling to a 20-month low, what lies ahead? Well the election of Liberal Democratic Party (LDP) as well as Shinzo Abe as Prime Minister will see the thrust of economic policies on boosting the flagging corporate sector with an emphasis on a weaker yen. Specifically, we should expect more aggressive monetary easing (with possibly 2% inflation target) as well as fiscal pump priming.

ETF: Nomura ETF Nikkei 225; CFD: Japan 225 Index JPY100 CFD (Nikkei 225)
 

Macro Data:

In the US, the housing market recovery continues to gain traction. Specifically, the Case-Shiller 20-city composite index rose 4.3% y-y (0.7% sa m-m) in Oct, registering a  stronger-than-expected pace.

In Singapore, manufacturing output rose 1.9% m-m sa in Nov, following growth of 1.2% in the preceding month. Ex-BMS, manufacturing output rose at a more modest pace of  0.6% m-m sa. However, manufacturing sector is still rather soft. Specifically, the electronics cluster - which accounts for around a third of total manufacturing output- continued to decline by 8.7% y-y 3mma in Nov, compared to 10.2% contraction in the preceding month. Looking ahead, Singapore’s electronics has been -and will continue to remain lacklustre at best -especially since it is geared towards the production of PCs (where demand has been sluggish) instead.

In Thailand, exports surged 27% y-y in Nov (based on Ministry of Commerce data), following a 16% gain in the preceding month. Recall the central bank (BoT) had earlier 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.
 

Regional Market Focus

Singapore
 

• The benchmark STI inched up to 3,180.8(+0.39%). The 3.3bn shares traded were worth S$0.8bn.
• PrimerPartners, the Independent Financial Adviser to the offer of SC Global, advised the Independent Directors to recommend that shareholders accept the offer and advised that the financial terms of the offer are fair and reasonable.
• Our top picks for the Singapore Market are Pan United, SIAEC & Capitaland. Pan United is a dominant supplier to the construction industry in Singapore and we expect the company to perform well given the strong pipeline of infrastructure work over the next few years. SIAEC is a key beneficiary of the aviation growth story in the region and offers excellent dividend yields. Capitaland would be a beneficiary of the stabilisation of property prices and bottoming out of economic conditions in China.

Thailand
 

• Thai stocks moved in a narrow band but traded in the green throughout the session on Wed. Retail, publishing and telecom stocks led the market’s advance.  
• In the absence fresh trading catalysts, investors’ focus will remain on the return of the US Congress from Christmas recess today amid concerns about the ‘fiscal cliff’ of harsh tax increases and spending cuts next year in case of failure to reach an agreement by year-end deadlines. Trading volume is likely to remain muted as some investors have still been on vacation during the holiday-shortened week of Christmas and New Year. However, LTF/RMF buying should continue to be a key driver of the market but the upside appears limited in the face of external uncertainties.
• The short-term strategy is to sell the rallies, buy the dips in a trading range of 1375-1389.
• Resistance on the main index is pegged at 1385-1389 and support at 1378-1373 today.

Indonesia
 

• The Jakarta composite index ended moderately higher Wednesday (26/12), but volumes were low as investors returned from Christmas holiday. The JCI gained 24.880 points, or 0.59%, to close at 4,275.094. Shares in agriculture sector led gains that included eight of the 9 major industry groups with 1.51%-rise, trailed by trade and services sector with 1.26%-gain, and financial sector with 0.97%-advance. Miscellaneous industry sector fared worst on Wednesday, as the sector’s largest constituent – Astra International (ASII) – lost more than 1.3%. The LQ45 index which tracks blue-chip stocks edged 3.674 points or 0.51% up, to 729.595. More than 125 shares advanced, 97 shares declined, and 246 shares remained unchanged Wednesday on the Indonesia Stock Exchange, where 1.855 billion shares worth IDR 2.171 trillion changed hands on the regular board. Foreign market participants posted net sales of IDR 22.917 billion in total.
• Indonesian stocks may get a lift from positive momentum in Asia this morning, as monetary policy hope boosted sentiments. We expect the JCI to trade with support at 4,235 and resistance at 4,295.

Sri Lanka
 

• All Indices experienced a steady growth throughout the day and closed the day recording positive closures on all three indices. The Benchmark ASPI stood at 5,570.91 after gaining 46.02 points; this was an increase of 0.83% compared to the previous day. The more liquid MPI closed the day at 5,060.83 with an increase of 21.01 points and The S&P SL20 Price Index closed the day at 3,060.37 after gaining 21.59 points. The market capitalization for the day stood at LKR 2.14Tn recording a year to date loss of 3.34%.219 counters engaged in trading today, further the market recorded 130 positive price contributors against the 41 negative subscribers.
• The day’s turnover stood at LKR 242.4Mn after an increase of 139.37% against the previous trading day.  The best performers under the sectorial summary were Diversified Holdings (LKR 161.1Mn) and Bank Finance & Insurance (LKR 40.3Mn) respectively.  The total traded volume for the day was 8.27Mn. This is a 27.47% increase against the previous day.  The foreigners were net buyers for the day recording a net inflow of LKR 119Mn, extending the year to date net foreign inflow to record LKR 37.96Bn.

Australia
 

• ASX200 index closed at 4635.19 on Monday and the market was closed on Tuesday and Wednesday.
• Technically, the index has cleared the previous 2012 high at 4571 and is now challenging the resistance region near 4650. The bottoming out of China economy would likely continue lending support to demand for Australia’s commodity export and we are observing the biggest rally in commodities since 2010. It would increase the odds that the market continues heading north.

Hong Kong
 

• Hong Kong stocks swung slightly, the HIS closed at 22541 points, rose 0.2%, due to Christmas eve, the market only open half day, trading volume below average.
• Technically, the HSI is expected to consolidate at around 22,000 with near term support and resistant at 22,400 and 22,800 respectively.

Morning Note

Company Highlights

CapitaLand Limited Wednesday announced that wholly-owned serviced residence business unit, Ascott Ltd, on Wednesday said it has clinched contracts to manage three more properties in Shanghai and Suzhou, China. The 90-unit Ascott Heng Shan Shanghai, located in the Xuhui District, is scheduled to open in 2014. The 250-unit Ascott Emerald City Suzhou in the Suzhou New District, and the 194-unit Somerset Baitang Suzhou in the Suzhou Industrial Park, are scheduled to open in 2015 and 2017 respectively. With the latest additions, the wholly owned serviced residence business unit of CapitaLand now has more than 10 serviced residences in Shanghai and Suzhou, it said. (Closing price: S$3.720, +0.813%)

INDEPENDENT financial advisors for SC Global have said the offer of S$1.80 per share from its controlling shareholder and chief executive officer Simon Cheong is "fair and reasonable", said a circular despatched to shareholders on Wednesday. SC Global's independent directors accepted the advice, and recommended that shareholders accept the offer, or sell their shares in the open market if they can obtain a better price (after deducting related expenses). Shareholders who wish to accept the offer must do so by 5.30pm on Jan 16. (Closing price: S$1.925, -1.028%)

Source: PhillipCapital Research - 27 Dec 2012