Morning Market Commentary

- STI: -0.27% to 3289.5                                   - SET: +0.38% to 1566.9
- JCI: +0.54% to 4874.5                                  - KLCI: +0.18% to 1654.0
- HSCEI: +1.53% to 11484.4                          - Hang Seng: +1.41% to 23091.9
- Nikkei 225: +2.64% to 12283.6                    - ASX200: +0.66% to 3415.6
- India NIFTY: +1.41% to 5945.7                     - S&P500: +0.45% to 1551.2

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

For the STI, expect the battle to continue at the 3,300 level. Last Friday, the bulls lack high conviction and are unable to fend off the bears to clear the 3,300 psychological level (consistent with our earlier guidance). Looking ahead, the battle will continue at the 3,300 level which the STI need to decisively overcome in order to surge higher. Near-term support pegged at 3250/3200 level. 3319 (52-week high) will be the key resistance level, followed by 3400 psychological resistance level and subsequently 3800 major resistance.

"Pencil in a positive reading for Fri BLS data," we said and indeed the non-farm payroll data release came in above market's expectation, inspiring the bulls to take the DJIA to fresh high, with the S&P 500 just a whisker away from its record high. On balance, US macro recovery is gaining traction on account of the recent improvement in labour market in Feb as well as surge in orders of core capital goods in Jan. The US House has recently 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. Fingers crossed... We hope that this recent rally will continue like the raging 1980s bull market, rather than the euphoria before the storm (like what we saw during the 2007 peak which was followed by a slump).

The Nikkei 225 soared last Friday on the back of a weaker Yen, with USDJPY clearing strong resistance at the 95 level (last registered in Aug 2009)intra-day during Asian session last Friday.

Looking ahead, we think the Nikkei rally still has legs from a chartist perspective – so long as (i) the Nikkei continues to hug the upper bollinger band and (ii) the bulls continue to fend off the bears, ensuring that the Nikkei stays above the psychological 12,000 level.

The HSCEI and HSI bounced up above their respective 10dma support levels. Was this improved performance due to better-than-expected Feb exports for China? Doubt so given the muted performance of the CSI 300.

Looking ahead, we are still bearish about the HSI in the near term. Do note that the bearish short-term moving average cross over which portend further downward bias. The 40dma will be the strong resistance level.

Time is ticking away for Italy who is still entangled in a political stalemate. In Italy, parliament opens on March 15. At this juncture, there is still some time to resolve the deadlock in the formation of the new administration after the recent inconclusive elections. While a technocratic government might be appointed if Bersani fails to form an administration, Grillo has indicated that he will oppose such an administration. In such an event, Italians would have to vote –again for the second time. And that worried Fitch who downgraded Italy by one notch to BBB+ with a negative outlook, in line with S&P but with Moody's the most pessimistic amongst the trio.

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

Macro Data:

In US, non-farm payroll employment increased by 236,000 in Feb, shaving off 0.2%-pt from the unemployment rate which registered  a 4-year low of 7.7% in Feb. Recall the private payrolls increased 198,000 in Feb as indicated by the ADP employment data.

In China, retail sales rose 12.3% y-y in the first two months of 2013 from a year earlier, trailing the market expected 15.0% y-y reading. Industrial production rose by 9.9% in the first two months, trailing the market expected 10.3%. New yuan loan was 620 billion in Feb, trailing the market expected 700 billion reading. The nation’s exports unexpectedly rose by 21.8% y-y in Feb, while the market was predicting a 8.1% y-y gain, after the 25.0% reading in Jan. CPI rose by 3.2% y-y in Feb due to the increased spending during Chinese New Year, after the 2.0% reading in Feb. In general, the set of economic data shows that China’s economic recovery is still weak, therefore we do not expect any monetary tightening in the near term though the nation suffers pickups in inflation and home prices.

In Japan, GDP rose by an annualized 0.2% q-q in 4q12, compared to a preliminary calculation of a 0.4% q-q contraction. Following the government’s aggressive monetary loosening, the yen has fallen to a near 3 1/2 year low against dollar. The nation’s recession is likely over and heading towards a recovery. The government has an inflation target of 2.0% for 2013, and we expected more loosening on the way after the nation’s new central bank governor nominee Haruhiko Kuroda take over the reins.

Regional Market Focus

Singapore

• The benchmark STI remained range-bound and closed at 3,289.53 (-0.27%). The 3.5bn shares traded were worth S$1.7bn in value. 
• Among the various sectors under our coverage, we prefer an exposure to the Industrials (Capital Goods) sector as majority of the stocks in this sector have strong order visibility and would benefit from positive long term trends in their niche area of business. With the unusually large discount of CPO to soybean prices, we believe that Golden Agri. could be the wild card in the Commodities space after the CPO market works through the high level of inventory.
• Top picks for the year are Pan United (Buy, TP: S$1.21), SIAEC (Buy, TP: S$6.10) & Boustead Singapore (Buy, TP: S$1.80). 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. There are hidden gems within Boustead Singapore and we believe that the stock would continue to re-rate as the market appreciates the economic moat in its businesses.

Thailand

• Thai stocks opened sharply higher last Fri but gains were later pared. Better-than-expected US jobless claim data bolstered positive sentiment throughout the session but investors remained cautious in trading in the absence of fresh leads after the composite SET index surged to a 19-year high.
• We believe the positive momentum will likely continue in the Thai stock market today but we rule out a strong rally as the composite SET index now flirted with a 19-year high while bouts of profit taking kicked in from time to time, which resulted in some intraday correction. In the absence of fresh leads, we advise investors to keep an eye on factors that may affect the market, especially the US debate for a fiscal 2013 appropriations bill and political progress in Italy. There are also a number of stocks that will trade ex-dividend (XD) today including the likes of HANA, SPALI and TK.
• For short-term trading strategy, we recommend investors selectively buy stocks with more caution.  
• Today we peg resistance for the composite SET index at 1572, 1578 and support at 1562, 1555.

Indonesia

• The Jakarta Composite Index (JCI) added another day of rally on Friday (08/03), backed by positive sentiments in Asia that sees some major stock indexes in the region climbed. The JCI finished with 26.196 points, or 0.54% gain, at 4,874.495. The climb included all but one of the 9 major industry groups, led by trade and services sector that advanced 1.23%, mining sector climbed 1.14%, and miscellaneous industry sector also gained 1.14%. Agriculture sector fared worst on Friday, with sector index shed 0.23%. The LQ45 index that tracks Indonesia’s blue-chip shares added 4.969 points, or 0.60%, at 837.284. As many as 142 shares rose, 109 shares fell, and 221 shares stayed unchanged Friday on the Indonesia Stock Exchange, where 6.518 billion shares worth IDR 5.861 trillion traded on the regular board. Foreign investors accumulated net sales worth IDR 286.77 billion in total.
• Higher closes on US markets on Friday may stoke sentiments in Asia today. We expect the Jakarta Composite Index to trade higher today, with support and resistance at 4,826 and 4,929 respectively.

Sri Lanka

• The Colombo bourse continued with yesterday’s positive momentum resulting both indices elevated further within the positive region for the second consecutive day. This was mainly due to the active participations of the foreign and corporate Investors and ASPI Index closed positive at 5,680.02 for the second consecutive day, gaining 16.66 points or 0.29%. The S&P SL20 Index too closed within the green terrain for the third successive day at 3,220.41, indicating an upsurge of 5.55 points or 0.17%. The market capitalization as at the day’s closure stood at LKR 2.18Tn resulting in a year to date gain of 0.70%.The daily turnover soared to heavy LKR 2.54Bn indicating a significant increase of 94.75% against yesterday; Further, this was the highest turnover value recorded since 31st January 2013. Banking, Finance & Insurance and Beverages, Foods &Tobacco topped the list under the sectorial summary contributing LKR 1.98Bn and LKR 247.1Mn respectively. During the day, a total of 46.24Mn Shares changed hands resulting in a decrease of 23.69% against the previous trading day. Price gainers outperformed the price losers by 97:95. Foreigners appeared to be extremely bullish during the day with the recorded crossings resulting a net foreign inflow of LKR 2.18Bn, the highest net foreign inflow for the year while extending the year to date net foreign inflow to record LKR 2.53Mn. In regard to the local FOREX market, the USD closed at LKR 128.96/- selling and LKR 125.80/- buying.

Australia

• On Friday, the Australian share market finished higher, up 14.2 points or 0.28 per cent to 5,123.44.

Hong Kong

• Local stocks rallied. The HSI and HSCEI rose 320 points and 172 points to 23091and 11484 respectively. Market volume was 72.18 billion.
• Technically, the HSI is expected to gain a support from 22800 level, major resistance will be 23800 level.

Morning Note

Company Highlights

Tiger Airways Holdings said its Australian unit Tiger Airways Australia Pty Ltd (Tiger Australia) had received a request from the Australian Competition and Consumer Commission (ACCC) for further information regarding the group's planned sale of 60 per cent of the existing shares in Tiger Australia to Virgin Australia Holdings Limited. "Tiger Australia will fully cooperate with the ACCC and provide the requested information as soon as possible," the Singapore-listed company said. "Tiger Australia and Tiger Airways Holdings will continue to consult further with the ACCC regarding the transaction." Tiger's planned sale of the controlling stake of the Australian unit to Virgin for A$35 million is currently being vetted by the Australian competetition regulator, which has also been seeking public feedback. The ACCC will release its conclusion on March 14. (Closing price: S$0.685, -1.439%)

Raffles Education Corporation announced plans to set up a university in Sri Lanka with an investment of S$25 million, over five years. The private education provider inked an agreement with the Board of Investment of Sri Lanka to establish Raffles University Sri Lanka through its wholly-owned Raffles Assets (Private), which was incorporated in the country with an issued and paid-up capital of S$4 million. "Sri Lanka is an emerging market filled with opportunities. With economic growth, there will be increased demand for university education," said chairman and chief executive officer of RafflesEducationCorp, Chew Hua Seng. (Closing price: S$0.370, -%)

Centurion Corporation Limited said it had acquired two accommodation assets in Johor, Malaysia for RM9.18 million (S$3.68 million). The acquisitions will boost its overall portfolio and add approximately 7,000 beds to the group's existing 20,200 beds in Malaysia. Its indirect wholly owned subsidiary, Centurion Dormitories Sdn Bhd, has inked share sale agreements with three individuals for the assets. The first is a 10,970-sqm plot of land in Senai. It is adjacent to the group's existing development and costs RM5.48 million. The group plans to develop additional blocks of workers accommodation on the newly acquired plot of land for a further 6,000 beds. (Closing price: S$0.260, -%)

Plastics manufacturing company Scintronix Corporation said that a former director, Ho Kang Peng, had filed an appeal against a decision by the High Court. Last month, the court found that Ho had breached his fiduciary duties to avoid potential conflicts of interests by failing to seek the approval of the board for the remuneration packages offered to other directors, who had moved with him to another company, Fu Yu Corporation. Ho was also found to have compromised the interests of the group by authorising payments to a Taiwanese company, Bontech Enterprise, for services that were not rendered. The court dismissed a third allegation that Ho had planned to move employees who held key appointments in TTL Holdings, as Scintronix was known previously, to Fu Yu and its subsidiaries. (Closing price: S$0.024, -11.111%)

Transcu Group has appointed its founder, Akihiko Matsumura, as chairman of the board, after the passing of its previous chairman, Hironori Aihara. Mr Matsumura had served as Transcu's executive director from November 2008 to October 2012. He retired from that position, and became a non-executive director and vice-chairman of the group. After Mr Aihara passed away on Feb 4, Mr Matsumura temporarily took over his responsibilities as chairman. "The board wishes to announce the formal appointment of Mr Matsumura as the chairman of the board with effect from March 8, 2013," Transcu said on Friday. (Closing price: S$0.013, -%)

Source: PhilliipCapital Research - 11 Mar 2013