Morning Market Commentary

- STI: +0.53% to 3248.4
- MSCI SE Asia: +0.20% to 881.6
- HSCEI: -0.58% to 12095.8
- HSI: -0.15% to 23598.9
- MSCI APxJ: -0.44% to 477.3
- Euro Stoxx 50: +0.53% to 2722.9
- S&P500: +0.00% to 1494.8

MARKET OUTLOOK:
By Joshua Tan, Hd of Research

North Korea’s announcement of a planned nuclear test with the US in mind caused a huge intra-day reversal in N.Asian markets – China’s CSI300 gave up a 1.8% gain (on the back of better PMI, see Macro data) to close down almost 1%! While the HSCEI, Hang Seng, KOSPI and TWSE all lost ground as well. ASEAN however shrugged off the news and the STI continued to gain ground as we guided earlier in the week, as did Thailand’s SET. We’re thinking sabre rattling from North Korea, Asia should be used to by now. Underlying economic data continues to suggest economic expansion so we expect a resumption of the uptrend.

The KLCI was on holiday yesterday. When it re-opens our stance is as we wrote yesterday. We have had a positive rejection off the 50wma/200dma, so it looks like a bounce higher is building legs. Nonetheless, PhillipCFD traders keep your stops tight in case it fails (in which case, a move below the 50wma/200dma, short). Something to note about the KLCI: this is now the SECOND test of the 50wma/200dma in THREE months. That’s not good for what has been a low volatility uptrend. Political risk is mounting as the market perceives a weak mandate for BN this election. Our asset strategy has Malaysia on Marketweight due to political risk.

China, and HK strategist inform us that they are renewing their stock pick list:
- Hd of China Research: China Merchants Bank (3968 HK), China Life Insurance (2628 HK)
- Hd of HK Research: AIA (1299 HK) and HSBC (5 HK)
- SG Equity Strategist: SIA for a turnaround play. Pan United, SATS, SGX for profit growth. SIAEC for an excellent long term investment. Capitaland for China exposure.

As usual we finish off with our market outlook for the year: we continue to believe that this is a year for stocks and maintain OW on CN, HK, SG, TH and PH markets. Investors looking to invest in the first 4 markets should check out our Country Strategy reports, else invest/trade them thru ETFs/CFDs listed in the Asset Strategy reports.
 

Macro Data:

In US, jobless claims unexpectedly dropped by 5000 to 330,000 in the week ended on Jan 19, marking the level in 5 years, while the market was predicting a hike to 355,000. The labor market may face a hurdle from higher payroll taxes that took effect this month. As part of a budget agreement, Congress agreed to let the tax that funds Social Security return to its 2010 level of 6.2 percent from 4.2 percent, which exerts some downward but manageable pressure on household consumption going forward

In Eurozone, manufacturing PMI rose to 47.5 in Jan, beating the market expected 46.6 and earlier 46.1, indicating a slower contraction in the region’s manufacturing sector. Services PMI also improved to 48.3 in Jan from prior 47.8, indicating a slower contraction of activities in service sector. In Germany, manufacturing PMI improved significantly to 48.8, from 46.0 in Dec, indicating a stabilizing manufacturing sector and services PMI hiked to 55.3 from 52.0 in Dec, indicating an accelerating expansion in the nation’s service sector. In Contrast to Germany, manufacturing PMI in France fell to 43.6, from 45.2 in Dec, indicating a faster contraction in manufacturing business. Services PMI also exacerbated, falling to 42.9 in Jan from 44.6 in Dec, indicating a fast contraction in the nation’s service sector. European Central Bank President Mario Draghi suggested this week the worst of the debt crisis may be over, saying the “darkest clouds” have lifted thanks to decisive policy steps last year.

In South Korea, GDP grew by 0.4% q-q in 4q12, trailing the market expected 0.5% q-q pace, after the 0.1% q-q gain in 3q12. On y-y basis, GDP rose by 1.5% y-y in 4q12, the same pace as it was in 3q12, while the market was expecting a 1.8% y-y gain. The Bank of Korea lowered its forecast for the nation’s 2013 growth on 11th Jan to 2.8 percent from an October estimate of 3.2 percent. The economy will expand 3.8 percent next year, and consumer inflation will accelerate to 2.8 percent from this year’s 2.5 percent, according to the central bank’s projection.

In China, HSBC flash PMI for Jan reported 51.9, beating the market expected 51.7 and the 51.5 reading in Dec, indicating a continued acceleration in the nation’s manufacturing sector.

In Hong Kong, export growth unexpectedly rose to 14.4% y-y in Dec, from the 10.5% y-y pace in Nov, while the market was predicting a slowdown 9.2% y-y. The improved export data is mainly attributable to the rising demand from China’s re-acceleration and the recent improvement in US retail sales.

In Vietnam, inflation accelerated to 7.07% in Jan, exceeding the market expected 6.95% pace, after the 6.81% pace in December. The hiking inflation has limited the central bank’s scope to add to last month’s interest-rate cut and bolster the economy.
 

Regional Market Focus

Singapore
 

• The benchmark STI was little changed at 3,248.39 (+0.53%). 3.6bn shares were traded with value worth S$1.7bn.
• As guided in our market commentaries, Tiger Airways reported a profit turnaround in the quarter and markets rallied in response. Despite the near term exuberance, we maintain our negative view on the stock on valuation grounds.
• Our property analyst raised his RNAV estimate and target price for Keppel Land.
• We maintain our positive view on Keppel Corp with results in line with our expectations. The company would be dishing out higher cash distributions and a one-off dividend in specie of K-REIT.   
• 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
 

• Volatility remained extremely high throughout the day on Thu but Thai stock spent most of the session in the positive territory amid rotation into big-cap petrochemical, energy and property names. The composite SET index rallied to test 1450 but failed to break through.
• Better-than-expected economic data out of the US, China and Europe is likely to keep bullish sentiment intact. Next resistance for the composite SET index is seen at 1460 but we believe extreme volatility will continue to reign supreme along the way as all types of investors have increasingly turned to short-term trading. Yesterday foreign buying of Thai shares dropped to only around Bt60mn. The Thai baht this morning (0800 hrs Thailand time) continued its slight fall to 29.85 per US dollar. Investors may await fresh trading cues from the US FOMC policy meeting during the middle of next week and US labor market data due out before the end of the next week. Overall we expect the composite SET index to remain choppy in a range of 1440-1460 today.    
• For short-term strategy, we believe selective plays will continue to do well in current market conditions but investors should be more cautious in trading as sporadic bouts of profit taking may kick in along the way though the market would continue to trade in an uptrend. Cut-loss point is raised to 1420.
• Today we peg resistance for the SET index at 1455-1462 and support at 1440-1432.

Indonesia
 

• The Jakarta Composite Index edged up on Wednesday (23/01), after dominantly traded in negative territory in earlier and afternoon sessions, as markets in Asia turned lower on disappointing monetary decision from the Bank of Japan. The JCI rose 2.179 points, or 0.05%, at 4,418.727, with four of the 9 major industry groups ended in positive zone. Financial sector gained 0.55%, miscellaneous industry climbed 0.48%, and mining added 0.40%. LQ45 – the index tracking Indonesia’s blue-chip stocks – shed a fraction of a point, at 755.215. More than 100 shares advanced, 117 shares declined, 247 shares stagnated Wednesday on the Indonesia Stock Exchange, where 3.390 billion shares worth IDR 3.391 trillion traded on the regular board. Foreign market participants accumulated net purchases worth IDR 49.50 billion.
• Indonesian stocks will likely advance in today’s sessions, buoyed by global markets’ positive sentiments. We expect the composite index to trade within 4,365 – 4,469 range.

Sri Lanka
 

• Bourse slows towards the end. The Colombo bourse exhibited a flat movement throughout the day and concluded the last trading day of the week within a negative terrain staying both indices on red spaces. This was mainly due to heavy selling pressure prevailed during early hours and the sluggish participations of the investors. The Benchmark ASPI dropped marginal 5.47 points or 0.09% and stood at 5,878.19 while the S&P SL20 index dipped tiny 1.15 points (0.04%) to close at 3,190.65. The recorded daily turnover was LKR 569.2Mn, which was a 55.32% reduction against to the previous trading day. A total of 28Mn shares were traded during the day, which was a 61.09% decrease compared to the previous trading day. Bank Finance & Insurance (LKR 294Mn) and Manufacturing (LKR 73Mn) turned out as the best performers under the sectorial review. Foreigners appeared to be bearish for the 5th successive trading day resulting a net foreign outflow of LKR 99.3Mn during the day while extending the year to date net foreign outflow to LKR 453.4Mn.
• Week at a Glance. The Colombo Bourse displayed a positive sentiment during the week which resulted both the indices to record positive closures against the closure of previous week. The ASPI gained marginal 2.42 points or 0.04% and the S&P SL20 index up by marginal 16.29 points or 0.51% during the week. The week recorded a turnover of LKR 4.8Bn supported by 26 crossings totalling up to LKR 2.85Bn accounting to significant 59.38% to the aggregated weekly turnover, which was an increase of 15.14% compared to the previous week. During the week, a total of 296Mn shares (126.75% increase compared to the previous week) changed hands.
• Foreign sales amounting to 2.27Bn outpaced the foreign purchases of LKR 1.3Bn during the week, resulting a net foreign outflow of LKR 934.5Mn as at the closure of the week and the total market capitalization stood at LKR 2.26Tn, recording a year to date gain of 4.17% and the market PER(X) and PBV(X) stood at 16.64 and 2.16 respectively. The USD closed at LKR 128.67/-, this was the highest quoted rate during the week.

Australia
 

• On Thursday the Australian stock market closed at a 20-month peak driven by strong gains for high yielding stocks. At the close on Thursday, the benchmark S&P/ASX200 index was up 22.4 points or 0.47 per cent to 4,810.2.
• Today, the local market looks set to open higher, despite a mixed performance on Wall Street overnight. The SFE Futures 200 is pointing 14 higher or 0.29 per cent to 4,795.
• Locally in equities news, Penrice Soda Holdings is due to hold a spill meeting, while ResMed is scheduled to release first half results, in San Diego, and Atlas Iron is expected to release December quarter results.
• No major economic news is expected for Friday.

Hong Kong
 

• Local stocks swung between gain and loss. The HSI and HSCEI dropped 17 points and 49 points to 23339 and 11858 respectively. Market volume was 78.294 billion, rose 6.6% dod.
• Technically, the HSI is expected to gain a support from 23300 level, major resistance will be 23800 level.

Morning Note

Company Highlights

Mapletree Commercial Trust is proposing a private placement of up to 197,369,000 new units in MCT, at the issue price of between S$1.14 and S$1.18 per New Unit to raise gross proceeds of approximately S$225.0 million. The Issue Price Range represents a discount of 6.2% and 2.9% respectively to the volume weighted average price of S$1.2151 per unit. The Manager has obtained the approval of unitholders of MCT at the extraordinary general meeting held on 23 January 2013 in respect of the proposed acquisition of a building known as Mapletree Anson as an interested person transaction. The Manager intends to use the net proceeds from the Private Placement to part fund the Acquisition. (Closing price: S$1.215, unchanged)

Starhill Global REIT announced that SGREIT proposes to acquire the Plaza Arcade Building, a retail property located in central Perth, for A$48.0 million (approximately S$61.92 million) from Plaza Dato Pty Ltd. The Plaza Arcade is located in the city centre and enjoys dual frontage on Hay Street and Murray Street, the only two retail pedestrian streets in the city. The three-storey property is a heritage-listed building and comprises around 30 speciality tenancies. The acquisition is expected to be approximately 1.9% accretive to SGREIT’s distribution per unit. The proposed Australian acquisition is expected to be completed within the first quarter of 2013. It will be funded by a combination of debt and proceeds raised from Starhill Global REIT’s rights issue in 2009. (Closing price: S$0.825, +1.852%)

Centurion Corporation Limited announced that Centurion Dormitories Pte. Ltd., a wholly-owned subsidiary of the Company, has entered into a share purchase agreement with Kang Choon Boon to acquire 800,000 issued ordinary shares in the capital of Dormitory Investments Private Limited held by KCB. The Sale Shares represent the remaining 10% of the issued share capital of DIPL that CDPL does not already own. The completion of the Proposed Acquisition has taken place, following which CDPL holds all the issued share capital of DIPL. Accordingly, DIPL has become an indirect wholly-owned subsidiary of the Company. The consideration payable for the Sale Shares is S$4,825,000. (Closing price: S$0.220, +2.326%)

Chip Eng Seng Corporation Ltd announced that the Company’s wholly-owned subsidiary, CEL Property Pte Ltd has emerged as the top bidder of the land parcel at Yishun Ring Road / Yishun Avenue 9 for mixed commercial & residential development. The tender price for the Site is S$ 212,100,000 or S$8,551 per square meter per plot ratio. The Site has a land area of 8,858.3 sqm and tenure of 99 years. It has an allowable gross plot ratio of 2.8 and a maximum permissible gross floor area of 24,803.24 sqm. The proposed development will comprise condominium units ranging from studio apartments to 4 bedroom apartments and 2 to 3 levels retail podium. The Proposed Development will be financed by internal fund and bank borrowings and is not expected to have any material impact on the net tangible assets and earnings per share of the Group for the current financial year ending 31 December 2013. (Closing price: S$0.680, +2.256%)

Intraco Limited having conducted a preliminary review of the draft financial results of the Company and its subsidiaries for the financial year ended 31 December 2012, would like to inform shareholders that the Company is expected to incur a loss. Based on information available, the Board considers it is prudent to make provisions for doubtful debts and write-down in value of inventory, which will likely result in a loss for FY2012. The Company will be announcing its FY2012 results before 1 March 2013. Further details of the Group’s performance will be disclosed in the announcement. (Closing price: S$0.605)

Yangzijiang Shipbuilding (Holdings) Ltd. announced that Seaspan Corporation has exercised the options to build additional four (4) units of 10,000 TEU containerships with Jiangsu New Yangzi Shipbuilding Co., Ltd. and Jiangsu Yangzi Xinfu Shipbuilding Co., Ltd. The total contract value is US$0.36 billion. These four (4) newly developed container vessels which are fuel-efficient and eco-friendly in nature are scheduled for delivery in 2014. The vessels’ proprietary design meets the current demand for larger capacity vessels with lower emission. (Closing price: S$1.010, +1.000%)

Source: PhillipCapital Research - 25 Jan 2013