Morning Market Commentary

- STI: +1.34% to 3291.8                                - SET: +0.65% to 1559.4
- JCI: +1.54% to 4824.7                                - KLCI: +0.59% to 1651.8
- HSCEI: +1.70% to 11359                           - Hang Seng: +0.96% to 22777.8
- Nikkei 225: +2.13% to 11932.3                 - ASX200: +0.02% to 3387.4
- India NIFTY: +0.59% to 5818.6                  - S&P500: +0.11% to 1541.5

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

The DJIA continued to trudge higher to fresh highs. Though the S&P 500 has lagged, it is also just a whisker away from its record high.

The risk-on sentiment in the US continued yesterday on the back of :
(i) better-than-expected growth in Feb private payrolls based on the ADP data (Keep a look out for Fri BLS data!)
(ii) surge in orders of core capital goods in Jan
(iii) US House approving a stopgap bill (now pending approval from Senate and Congress) to extend routine government funding for federal program/agencies, thereby avoiding a possible partial government shutdown on 27th March.

In essence, improving forward-looking indicators (such as the surge in new orders) - along with the capex rebound and housing recovery- inspired the bulls to charge ahead. Amid this euphoria, it is tempting to throw caution to the wind. Indeed, US equities are close to technically overbought levels. But the fact of the matter is - downside risks are still lurking at the backdrop, notwithstanding a brighter global macro outlook. 
Pls see our latest GMAS note (dated 4th March) where we fleshed out 8 possible downside risks that could throw sand to the wheels, dampen risk appetite and bring the risk rally to a halt.

This risk-on sentiment overnight is likely to spill over to Asian markets today.

The Nikkei 225 continued to soar to a new cyclical high on Wed. From a chartist perspective, the Nikkei continues to hug the upper bollinger band tightly, portending further upside ahead. Regular readers of our commentaries will probably be in the money already. Since Feb 7 market commentary, we have indicated that the Nikkei rally has legs and have also alerted clients to two successful short-term breakout trading opportunities based on event risks.

What’s next? While we remain cautiously optimistic about Japan; markets might eventually “sell the fact”. Furthermore, the Nikkei might struggle to clear the 14,000 strong resistance level as a weaker Yen (or specifically cheap credit and fiscal pump priming) is definitely not the panacea to Japan’s structural problems, especially without other micro reforms.

Meanwhile, China’s equity indices continued to recover from Mon’s sharp sell-off (triggered by fresh property curbs). The CSI 300, HSCEI and HSI drifted higher, perching above their respective 10dma support levels.

In Singapore, the STI gapped up on Wed and has filled the 26th Feb bearish gap. In the near term, there are greater odds of upsides for the STI as long as yesterday’s breakaway gap (to the upside) is not filled. 
Near-term support pegged at 3250 level. 3319 (52-week high) will be the key resistance level, followed by 3400 psychological resistance level and subsequently 3800 major resistance.

Today is central bank meeting frenzy. Specifically, central banks of Malaysia, EZ, Japan, Indonesia will meet today and we expect all of them to stand pat. Pls refer to our GMAS and ASEAN reports for the basis of our expectations. For BoJ, we are not expecting any major announcement surprise from the BoJ monetary policy meeting today as doves Kuroda and Iwata (new BoJ leadership nominees) will only preside the 4th April meeting if their nomination is confirmed by both houses.

(All equity indices mentioned in this note are tradable with Phillip CFDs or ETFs)

Macro Data:

In US, core capital goods orders were revised upwards from 6.3%to 7.2% m-m sa in Jan, though admittedly in part due to payback gains arising from seasonal adjustment factors. Meanwhile, the private payrolls increased 198,000 in Feb as indicated by the ADP employment data.

In EZ, final GDP estimates maintained 4q12 GDP for the bloc at -2.3%q-q saar, unchanged from previous estimates.

In Australia, GDP grew by 0.6% q-q in 4q12, meeting the market expectation, after the 0.5% q-q growth in 3q12. On y-y basis, GDP expanded 3.1% y-y in 4q12, the same pace as in 3q12. For the 2012 whole year, GDP grew by 3.6% y-y, marking the best performance since 2008. The growth is led by exports, which grew by 3.3% in 4q12, adding 0.7 percentage point to GDP growth. The RBA cut its benchmark rate to 3% in December, matching the half-century low set during the 2009 global recession as the labor market softens and an elevated currency hurts industries such as manufacturing and tourism. It predicts the nation’s mining investment boom will peak this year.

Regional Market Focus

Singapore

• The benchmark STI closed higher to 3,291.81 (+1.34%). There were S$6.1bn shares traded worth S$1.6bn in value. The top active stocks include Rowsley (+2.11%), DBS (+1.38%), GLP (+1.18%), Singtel (unchanged), and OCBC Bk (+1.39%).
• Mapletree Greater China Commercial Trust saw its public tranche 8.9 times subscribed, the stock will commence trading today at 2pm. 
• Our banking sector analyst wraps up the sector results season and is ”Neutral” on Banking sector due to lower y-y growth potential in FY2013, especially in 1H13 and maintains “Accumulate” rating on UOB and DBS, and “Reduce” on OCBC based on current valuations.
• Top picks for the year are Pan United (Buy, TP: S$1.21), SIAEC (Buy, TP: S$6.10) & Capitaland (Accumulate, TP: S$4.05). 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

• The composite SET index built on its gains on Wed, tracking record-high US equities led by property and building materials counters.
• Even though another record high for US equities bolstered risk sentiment, investors seemed to wait for more clues especially from the meetings of several central banks around the globe today including ECB, BOE and BOJ. However, many central banks are expected to stay pat on interest rates, but some central banks, in particular ECB may send a signal of further monetary easing to come as the euro had already weakened on expectations of the ECB move, which sent the US dollar higher and weighed on commodity prices, a factor that could drag Asian currencies lower. For foreign fund flows, the overall picture remained mixed the meantime with alternate bouts of buying and selling in both equities and derivatives markets. Overall we expect the composite SET index will continue to trade in a cautious range of 1550-1565.
• In the near term, investors could continue to selectively buy stocks but should exercise more caution and set a cut loss around 1540-1535 if the SET index breaks below 1550.
• Today we peg resistance for the SET index at 1565-1570 and support at 1555-1545.

Indonesia

• The Jakarta Composite Index (JCI) rallied on Wednesday (06/03), amidst gains in Asia stock markets, following rallies of US stocks overnight. The JCI jumped 72.982 points, or 1.54%, setting a new record high at 4,824.683. The climb was supported by all of the 9 major sectors, led by infrastructure sector with 3.16%-gain, construction, property, and real estate sector with 2.39%-climb, mining sector with 1.76%-advance, and consumer goods sector also with 1.76%-gain. The majority of the blue-chip stocks also rose on Wednesday, as the LQ45 index climbed 14.480 points, or 1.78%, at 829.404. 193 shares rose, 68 shares fell, and 211 shares closed unchanged Wednesday on the Indonesia Stock Exchange, where 7.257 billion shares worth IDR 6.55 trillion changed hands on the regular board. Foreign investors accumulated net purchases worth IDR 612.75 billion.
• The Jakarta Composite Index (JCI) will likely to continue rising in Thursday’s sessions, trailing positive closes on US markets overnight. The expected climb will further be confirmed if the index breaches minor resistance at 4,850. Minor support for the JCI lies at 4,740.

Sri Lanka

• The Colombo bourse concluded the third trading day of the week on a positive note amidst all 3 maturities yielding higher at the Treasury bill auction. Further the equity market indices concluded within the green terrain as a result of the active participation of the investors and also the buying sentiment which was quite evident throughout the trading day. The benchmark ASPI Index closed positive for the first time during the week at 5,663.36 gaining 36.59 points or 0.65% recording its highest gain since 8th February 2013. The S&P SL20 Index closed positive for the second consecutive trading day recording 3,214.86, an increase by 5.94 points or 0.19% compared to the prior day. As at the day’s close, the market capitalization stood at LKR 2.18Tn recording a year to date gain of 0.40% and the Market PER and PBV stood at 15.31 and 2.09 respectively. The total turnover for the day amounted to LKR 1.31Bn denoting an increase of 116.66% against the previous trading day. Under the Sectorial review Bank Finance & Insurance and, Beverage Food and Tobacco topped the list by contributing LKR 674Mn and LKR 361Mn respectively. During the day, a total of 60.6Mn were traded resulting in an increase of 348.97% compared to the previous trading day. Price gainers outpaced the price losers at a ratio 138:66. The foreigners appeared to be bearish for the first time during the week resulting in a net foreign outflow of LKR 248.5Mn having recorded inflows for two successive days. There by reducing the year to date net foreign inflow to LKR 358.69Mn. In regard to the local FOREX market, the USD closed the day at LKR 129.05/- selling and LKR 125.89/- buying.

Australia

• The Australian share market on Wednesday closed at new four-and-a-half-year highs as local investors joined the global buying spree. The benchmark S&P/ASX200 surged 0.8 per cent to finish at its highest level since September 2008, beating the recent peak from late February. The benchmark S&P/ASX200 index was up 41.4 points or 0.82 per cent to 5116.8 points.
• Today the local market looks set to open higher, continuing that gains that reached a four-and-a-half year high and as the Dow Jones extends its record-breaking run. Currently, the SFE Futures 200 is pointing upwards 4 points or 0.0781 per cent to 5,126.
• In economic news on Thursday, the Australian Bureau of Statistics (ABS) releases international trade in goods and services for January, and overseas arrivals and departures data. Meanwhile, the Australian Industry Group/Housing Industry Association's performance of construction index (PCI) for month just ended is due out.
• No major equities news is expected but Australia Post chief executive Ahmed Fahour is scheduled to speak at Australia-Israel Chamber of Commerce lunch in Sydney.

Hong Kong

• Local stocks rallied. The HSI and HSCEI rose 217 points and 189 points to 22777 and 11359 respectively. Market volume was 73.25 billion.
• We believe the market is going to consolidate, as some of the technical indicators is showing the HSI is overbuying, investors are suggested to stand on sideline and wait for a clear trading signal.
• Technically, the HSI is expected to gain a support from 22500 level, major resistance will be 23000 level.

Morning Note

Company Highlights

Communication Design International Limited announced that it had  entered into a  legally-binding  heads of agreement  (the “HOA”) for the proposed acquisition by the Company of the entire issued share capital of Teranova Group Limited  (the “Proposed Acquisition”)  from Phoon Wui Nyen as the vendor (the “Vendor”), Under the HOA, the Parties  had  agreed  that they shall use their best endeavours to negotiate in good faith to agree and sign  the  definitive share purchase agreement regarding the Proposed Acquisition  (the “Definitive Agreement”) within three (3) months from the execution of the HOA (i.e. by 5 March 2013).  (Closing price: S$0.059, +7.273%)

Global Logistic Properties Limited announced that it has signed approximately 15,000 square metres (“sqm”) (162,000 square feet (“sq ft”)) of new leases with a third party logistics provider in Changzhou, Eastern China. With the new lease, the occupancy rate for GLP Park CND, GLP’s first development in Changzhou, has reached 97% within three months of its completion. (Closing price: S$2.57, +1.181%)

Source: PhillipCapital Research - 07 Mar 2013