Warrants Highlight

US flirting with recession

As we neared the end of 2012, investors were increasing concerned about whether the US would be able to avert the automatic spending cuts and tax rises that threatened to throw the world’s largest economy back into a recession. President Barack Obama expressed hopes that a deal could be reached before Christmas but when no deal came through, market participants grew impatient.

US House of Representatives yet to give its blessings
At the eleventh hour, the White House and Congressional Republicans were able to concoct a deal, brokered by Vice President Joe Biden and Senator Mitch McConnell of Kentucky. Although the Senate has passed the bill with a vote of 89-8, the House of Representatives has yet to vote on the agreement. House speaker John Boehner had said in a statement that "decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members and the American people have been able to review the legislation".

Early this morning, it is said that the House Republicans oppose the Senate budget bill as it is overweight revenues. Republican Jack Kingston of Georgia said that "we are all greatly disappointed in the Senate.. this is really too heavy on revenues and too light on spending".

Taxes raised with spending cuts postponed
This Senate's deal will raise tax rates on income of individuals above $400,000 and married couples above $450,000, with tax benefits to remain for those earning less. Payroll taxes will rise to 6.2% from 4.2% last year, with the wealthy noticing an increase in their top income tax rates, from 35% to 39.6%. The automatic spending cuts will be pushed back for two months from its scheduled starting date. Compared to continuing current policies, this agreement is expected to increase taxes by $620 billion while little progress appears to be made on the spending cuts. Meanwhile, the unemployed will still be eligible for jobless benefits.

Key Macro Data this week
Wed 02 Jan: US ISM Manufacturing; Eurozone PMI manufacturing; Singapore GDP
Thu 03 Jan: China non-manufacturing PMI; HK retail sales; Singapore PMI
Fri 04 Jan: US Nonfarm payrolls, unemployment rate, factory orders; Eurozone PMI; HK PMI

Singapore Market Wrap

The STI rose 19.7% for 2012

The STI rebounded from a negative 2011 by climbing 19.7% to 3,167.08 year-on-year. The year ended with Prime Minister Lee Hsien Loong stating that Singapore's economy slipped into recession in the last three months of last year, with a forecast of 1-3 percent expansion for 2013.

Call STI 3250MBeCW130430 (R5XW) exercise level 3,250.*
Put STI 3100MBePW130430 (R5WW) exercise level 3,100.*

Commodities counters' mixed year
Performance of commodities stocks greatly underperformed the STI in 2012. Wilmar plunged 33.2% to $3.34, whereas Noble, the only positive among the 3 commodities counters, managed to climb 2.2% to close at $1.155 in 2012. Olam was badly hit when short-sellers Muddy Waters issued a report condemning Olam's accounting standards. The stock went as low as $1.365 in December before rallying to close 27.0% down at $1.555 for the year.

Call Wilmar MBeCW130910 (R5HW) exercise price $3.55.*
Put Wilmar MBePW130701 (R0NW) exercise price $3.10.*

Call Olam MBeCW130606 (R5FW) exercise price $1.55.*

Call NobleGrpMBeCW130401 (Q8AW) exercise price $1.20.*
Put NobleGrpMBePW130801 (R5RW) exercise price $1.00.*

Property stocks' bullish momentum
Property stocks such as Capitaland and Yanlord had a stunning year as they rose 67.4% and
59.2% in 2012 respectively. This return came despite cooling measures implemented by the Singapore and Chinese government to curb excessive investment in real estate. Capitaland ended the year at $3.70 whereas Yanlord closed at $1.39.

Call CapitalaMBeCW130704 (R5YW) exercise price $4.00.*
Put CapitalaMBePW130903 (R5TW) exercise price $3.50.*

Call Yanlord MBeCW130201 (Q4QW) exercise price $1.40.*
Call Yanlord MBeCW130910 (R5GW) exercise price $1.50.*

Overnight Market Wrap

S&P up 13% for the year

With President Barack Obama asserting that a deal to avert the so-called fiscal cliff is "within sight" the S&P had its best final day for the year since 1974, jumping 1.7% for its last session in 2012. After taking into account the index performance on its last day, the S&P effectively added 13% for 2012.

The S&P index started lower on Monday after failed negotiations over the weekend but turned for the better after Senate Republican Leader Mitch McConnell said that lawmakers reached an agreement on all tax issues and were "very, very close" to a deal to avert the fiscal cliff. (Bloomberg)

Overnight Markets

Indices	Last	Change
STI	3167.08	-0.8%
HSI	22656.90	-0.0%
DJIA	13104.10	1.3%
S&P 500	1426.19	1.7%
Nasdaq	3050.39	-
China A50	8329.00	2.1%

Corporate News

Corporate Announcements

Earnings release dates:
Tues 22 Jan: SGX (2Q13)