Morning Market Commentary

- STI: +0.14% to 3273.9
- SET: +0.73% to 1472
- JCI: -0.47% to 4416.9
- KLCI: +0.11 to 1637.1
- HSCEI: +0.82% to 12100.1
- Hang Seng: +0.39% to 23671.9
- MSCI APxJ: -0.45% to 473.7
- S&P500: -0.18% to 1500.2

MARKET OUTLOOK:
By Joshua Tan, Hd of Research

The STI has been on strong 7 day advance, but yesterday’s inverted hammer close may indicate the market may soon be in the mood to profit take, its very hard to tell at the moment but just take note. We’re obviously still OW Singapore for the year. US markets yesterday stalled on weak pending homes data, but after strong runs in data, weak months are to be expected. New orders for capital goods was fantastic though and this augers well for the economy going forward.

China-HK markets responded very well to industrial profit data. We reiterate for OW stance for CSI300, HSCEI and Hang Seng for the year: earnings upward revisions are very likely for 2013 and valuations still on the low end of the range.

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, while MW on the US, MY and ID. Investors looking to invest in the first 4 markets should check out our Country Strategy reports, else invest/trade them thru ETFs/PhillipCFDs listed in the Asset Strategy reports (see Sector/Strategy Reports section).

Equity Strategists:
- Hd of China Research: China Life Insurance (2628 HK), China Lumena New Material (67 HK)
- Hd of HK Research: AIA (1299 HK) and HSBC (5 HK)
- SG Equity Strategist (Derrick Heng): For 1Q2013, we believe that cyclical stocks in the Industrials space could do well in the near term: SIA (Buy, TP: S$13.40), Keppel Corp. (Accumulate, TP: S$12.38) & NOL (Accumulate, TP: S$1.36). Top picks for the year are Pan United (Buy, TP: S$0.88), SIAEC (Buy, TP: S$5.00) & Capitaland (Accumulate, TP: S$3.97). 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. Although current price (S$0.97) has overshot our TP, and may experience short term profit taking, we look forward to 4q12 results to reassess our TP. 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.
 

Macro Data:

In US, orders for durable goods rose by 4.6% y-y, exceeding the market expected 2.0% y-y gain, after a 0.7% y-y gain in Nov. Orders for non-defense capital goods excluding aircraft, a proxy for future business investment in items like computers, engines and communications gear, increased 0.2% m-m following gains of 3% m-m in November and October. The advance over the past three months is the biggest since mid-2011.

In Italy, consumer confidence fell to 84.6 in Jan from the 85.7 reading in Dec, indicating weakening consumer sentiment. This month the central bank cut its forecast for gross domestic product in 2013 to a decline of 1 percent compared with a previous estimate of a 0.2 percent reduction. Both the government and the central bank expect a recovery in the second half of this year amid increasing exports.

In South Korea, consumer confidence rose to 102 in Jan, marking the highest in 8 months, after the 99 reading in Dec. The central bank kept borrowing costs unchanged at 2.75 percent for a third month on Jan. 11 and reiterated its commitment to support economic growth as it cut its forecast for expansion this year. South Korea’s economy expanded 1.5 percent in the fourth quarter from a year earlier, less than analysts forecast, a Jan.24 central bank report showed. Finance Minister Bahk Jae Wan last week signaled officials may do more to ease currency volatility, aiding exporters such as Samsung Electronics Co. that account for nearly half of gross domestic product.

In Vietnam, trade balance reported 200 mil USD in January, after a revised 498 mil USD in Dec, exceeding the market expected 109 mil USD surplus. Retail sales rose by 8.1% y-y in Jan, compared to an average growth of 16.0% in 2012. Trade surpluses in Vietnam allow policy makers the option of allowing some foreign-exchange appreciation if they want to limit inflation or to continue to build up reserves.
 

Regional Market Focus

Singapore
 

• The benchmark STI traded higher to 3,273.91 (+0.14%). 4.2bn shares were traded with value worth S$1.8bn.
• For 1Q2013, we believe that cyclical stocks in the Industrials space could do well in the near term: SIA (Buy, TP: S$13.40), Keppel Corp. (Accumulate, TP: S$12.38) & NOL (Accumulate, TP: S$1.36).
• Top picks for the year are Pan United (Buy, TP: S$0.88), SIAEC (Buy, TP: S$5.00) & Capitaland (Accumulate, TP: S$3.97). 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. Although current price (S$0.97) has overshot our TP, and may experience short term profit taking, we look forward to 4q12 results to reassess our TP. 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 continued to make new highs driven largely by buying in bank, building materials and property shares amid better-than-expected economic data out of Europe and stronger-than-expected earnings results from US companies though sporadic bouts of profit taking set in along the way. The Thai baht remained on the weak side.
• The composite SET index continued its upward march to make new highs in more than 17 years driven mainly by liquidity inflows into Asia but sporadic bouts of short-term profit taking also picked up pace. On a regional level, foreign fund outflows from Korean markets had continued for about two weeks while funds still flew into the Thai stock market but the pace slowed somewhat last week before foreign investors turned net sellers of Thai stocks for the first time in 11 trading days yesterday. In the near term, foreign fund flows will bear close watching. Key factors to watch for the meantime remain the US Federal Reserve’s FOMC two-day policy meeting on Jan 29-30 and US labor market report due out this Fri as well as earnings reporting season in the US and Thailand.
• In the near term, we believe short-term plays will continue to do well in current market conditions but investors should be more cautious in trading.
• Resistance on the main index is pegged at 1477-1483 and support at 1464-1454 today.

Indonesia
 

• Most Indonesian stocks ended lower on Monday (28/01), amid mixed closes on Asian markets, after a corporate-results-driven rally on Wall Street Friday (25/01). The Jakarta Composite Index shed 20.661 points, or 0.47%, to close at 4,416.937. The decline included all 9 major industry groups, with trade and services sector lost 1.02%, infrastructure sector declined 0.81%, and consumer goods sector slipped 0.67%. LQ45 – the index trailing Indonesia’s blue-chip stocks – fell 3.767 points, or 0.50%, to close at 754.702. More than 145 shares advanced, 94 shares declined, and 231 shares stayed unchanged Monday on the Indonesia Stock Exchange, where 3.31 billion shares worth IDR 3.29 trillion changed hands on the regular market. Foreign investors posted net sales worth IDR 65.33 billion in total.
• Indonesian stock market will likely climb today, however with moderate gains, as regional Asian markets may provide leads. We are looking at 4,365 and 4,468 as the JCI’s support and resistance for today.

Sri Lanka
 

• The Colombo bourse concluded the first trading day of the week on a negative sentiment, mainly as a result of the sluggish participation of the investors; however, the indices closed on a mixed note. The All Share Price Index (ASPI) dropped 23.10 points or 0.39% during the day and closed at 5,855.09; the S&P SL20 Price Index (S&P) closed at 3,194.72 within the green terrain, gaining 4.07 points or 0.13%. Furthermore, the market capitalization for the day stood at LKR 2.25Tn which resulted in a year to date gain of 3.76%.
• The day recorded a turnover of LKR 759.6Mn; which was a significant 33.44% increase against the prior trading day. Diversified Holdings (LKR 564.3Mn) and Investment Trusts (LKR 77.8Mn) stood out as the best performers under the sectorial summary. A total of 16.3Mn shares changed hands during the day; this was a 10.83% increase against the previous trading day.  Price losers outnumbered the price gainers at a ratio of 142:49. Foreigners appeared to be bullish during the day resulting a net foreign inflow of LKR 21.9Mn while reducing the year to date net foreign outflow to LKR 431.4Mn.Further, this was after recording net foreign outflows totaling up to LKR 1.09Bn for 5 consecutive days. During the day, the USD closed at quoted price of LKR 128.7/-.

Australia
 

• The Australian share market was closed on Monday for the Australia Day public holiday. The benchmark S&P/ASX200 index on Friday closed up 25.0 points or 0.52 per cent to 4,835.20.
• Today, the Australian market looks set to open flat following mixed performances on US and European markets.
• On the economic news front for Tuesday, the National Australia Bank's monthly business survey for December is due out.
• In equities news, the Federal Court is scheduled to decide on Nine Entertainment's $3.4 billion recapitalisation plan, which creditors approved on January 21 and Oil Search (OSH.ASX) is expected to releases its fourth quarter production report while Beach Energy is due to releases its first half report.

Hong Kong
 

• Local stocks rallied. The HSI and HSCEI gained 91 points and 98 points to 23671 and 12100 respectively. Market volume was 67.498 billion, dropped 21% dod.
• The market railed following the boost in China market. However, we believe the market is going to consolidate, as some of the technical indicators shows the HSI is overbought. We suggest for investors to stand on sideline and wait for a clear trading signal.
• Technically, the HSI is expected to gain a support from 23300 level, major resistance will be 23800 level.

Morning Note

Company Highlights

Indofood Agri Resources Ltd. (the "Company") announced the proposed acquisition of a post-closing 50% economic interest in Companhia Mineira de Acar e lcool Participaes (“CMAA” and, together with its subsidiaries, the "Target Group”). The Target Group has been established since 2006 in Brazil and is principally engaged in the cultivation and processing of sugar cane for the production and marketing of ethanol and sugar, as well as cogeneration of electric power from sugar cane bagasse. Currently the Target Group operates one mill in Vale do Tijuco with a total crushing capacity of 3.0 million metric tonnes per year, which was completed in 2011 and can be expanded to 3.8 million metric tonnes. In consideration of the Proposed Acquisition, IndoAgri Brazil will pay an aggregate purchase price of approximately R$143.4 million (which is equivalent to US$71.7 million). (Closing price: S$1.325, +1.1%)

Singapore Post Limited announced that SingPost Investments Pte. Ltd., a wholly-owned subsidiary of the Company has incorporated a wholly-owned subsidiary in the Republic of Mauritius, known as SingPost Storage Company Limited. The issued and paid up capital of SingPost Storage is S$17,000,000. The principal activity of SingPost Storage is that of an investment holding and treasury company for, including without limitation, the Company’s property related investments and assets. (Closing price: S$1.210, unchanged)

AIMS AMP Capital Industrial REIT today announced a S$25.4 million redevelopment of 103 Defu Lane 10, which will triple the value of the asset. Upon completion, the asset is expected to be valued at S$42.6 million1, up from its current value of S$12.0 million2. The Manager has secured an anchor tenant for the redeveloped site. Singapore company Focus Network Agencies (Singapore) Pte Ltd (FNA) has signed a lease over approximately 76 percent of the property. (Closing price: S$1.580, unchanged)

COSCO Corporation (Singapore) Limited (the “Company”) announced that two shipbuilding contracts signed by COSCO (Guangdong) Shipyard Co., Ltd, a subsidiary of the Company’s 51% owned subsidiary, COSCO Shipyard Group Co., Ltd, with a European ship owner for the construction of two (2) PX121 Platform Supply Vessels (PSVs) have been made effective on 28 January 2013 at a value of approximately US$54 million in total. (Closing price: S$0.960, +0.5%)

Boustead Singapore Limited announced that its wholly-owned subsidiary, Boustead Projects Pte Ltd (“Boustead Projects”) has been awarded a multi-million dollar contract by HSBC Institutional Trust Services (S) Limited as trustee of AIMS AMP Capital Industrial REIT to design and build a new facility for a redevelopment of an industrial property in Singapore. The latest contract has raised the Boustead Group’s order book backlog (as at the end of September plus new orders since then) to S$352 million. (Closing price: S$1.120, unchanged)

Asia Enterprises Holding Limited (the “Group”) provided an update of its financial performance for the three months ended 31 December 2012 (“4Q12”) and the 12 months ended 31 December 2012 (“FY2012”). Based on a preliminary review of the Group’s unaudited financial results for 4Q12, the Group expects to report a loss in 4Q12, as compared to a net profit recorded in 4Q11. This is attributable to the following factors: (i) Lower revenue in 4Q12 as compared to 4Q11 as order flow remained weak and selling prices were weaker than a year ago due to competitive pressure in the steel distribution industry. (ii) A one-time write-down in the value of certain steel products in the Group’s inventory due to the prolonged downtrend in the international prices of these products since the second quarter of 2012. (Closing price: S$0.260, +6.1%)

Jubilee Industries Holdings Ltd (the “Company”) issued a profit warning regarding the unaudited full year financial results of the Company and its subsidiaries (the “Group”) for the financial year ended 31 December 2012. Based on its preliminary review, the Group is expected to report a net loss for the Full Year Results, mainly due to lower revenue. (Closing price: S$0.092, -2.1%)

Ascott Residence Trust ("Ascott REIT"), announced that the Manager is proposing to carry out a placement of 114,943,000 new units in Ascott REIT (the "New Units") to institutional and other investors at an issue price range of between S$1.305 per New Unit and S$1.335 per New Unit so as to raise gross proceeds of no less than S$150 million. (Closing price: S$1.420, +0.4%)

Moya Asia Limited  informed shareholders of the Company that barring any unforeseen circumstances and to the best of the Board’s knowledge, the Group expects to be in a loss position for the 3-month financial period ended 31 December 2012 (“4Q2012”) and consequently expects to report a net loss of up to approximately S$1 million for the financial year ended 31 December 2012 (“FY2012”), mainly as a result of an unexpected increase in project costs, which was due to design changes in relation to the Cambodia projects. (Closing price: S$0.045, unchanged)

Sinobest Technology Holdings Ltd. (the “Company”) refered to the announcement in relation to the mandatory unconditional cash offer by Asiasons WFG Capital Pte Ltd (“Asiasons”), for and on behalf of Bon Ween Foong (the “Offeror”), to acquire all the issued ordinary shares in the capital of Sinobest Technology Holdings Ltd. that are not already owned, controlled or agreed to be acquired by the Offeror and parties acting or deemed to be acting in concert with him. (Closing price: S$0.132, unchanged)

Source: PhillipCapital Research - 29 Jan 2013