Morning Market Commentary

- STI: +0.10% to 3292.87                                   - SET: +0.68% to 1577.65
- JCI: -0.41% to 4854.3                                      - KLCI: +0.24 to 1657.9
- HSCEI: -0.42% to 11435.8                              - Hang Seng: -0.00% to 23090.8
- Nikkei 225: +0.53 to 12349                             - ASX200: +0.46% to 5146.9
- India NIFTY: -0.06% to 5942.4                        - S&P500: +0.32% to 1556.2

MARKET OUTLOOK:
By Joshua Tan, Head of Research

The S&P500 inches daily toward its all time highest close of 1565, spurred by good sets of data from employment, consumption, investment, housing, trade. While we have been tempted to raise the US to OW from MW for a while – we do worry that consumption may reverse course later on as recent gains have purely been because savings were dipped into in a big way to compensate for the payroll tax hike. Having said that we will upgrade to OW if retail sales this week holds out.

Our OW ratings for Greater China have taken a beating from the recent property curbs, with China A-shares (CSI300) dojiing on the 50dma, capped by the 20dma, while the HSCEI and Hang Seng have both regained some footing, rebounding off support levels (11k and 22.5k respectively). Greater China is likely to enter a period of consolidation now as recent economic data has come below expectations.

Nikkei 225 continues its steep ascent as the market anticipates an ultra dovish stance from the BoJ’s 4th April meeting. Going long now is the trend to trade, but beware that markets “sell the fact” post 4th April.

The STI (OW) continues to consolidate at the doorstep of its 3300 heavy resistance, and we are looking for the index to eventually clear higher on account of an improving global economy.

ASEAN is looking positive as Thailand (OW), Indonesia (MW) and Philippine (OW) indexes grind forward on their domestic demand stories. The KLCI (MW) also continues to make up for lost ground though political uncertainty would advise caution till post election.

All indexes mentioned can be traded via a PhillipCFD or ETF (see Global Macro Asset Strategy reports)

Macro Data:

In Malaysia, exports rose 3.5% in Jan, reversing from a 5.8% contraction in the preceding month. Nonetheless, trade surplus was the smallest in nearly 11 years on account of buoyant imports (+16% y-y) - fuelled by resilient domestic demand and capex investments. Meanwhile, industrial production rose 4.6% y-y in Jan. In view of the impending 13th General Elections as well as resilient domestic demand, we maintained our view that Bank Negara Malaysia will continue to stand pat till after, and re-assess its policy rate position post-elections (barring any extreme deterioration in the global macro environment).

In India, exports rose 4.3%y-y while imports inched up 2.6% y-y in Feb, resulting in a trade deficit of $14.9 bn. In view of some progress made by the government in addressing some of the structural growth constraints as well as easing inflationary pressures, the RBI might have more policy room to stimulate growth after cutting rates by 25 bps in Jan (the first cut since Apr2012).

In Euro zone, Germany’s exports rose by 1.4% m-m in Jan, exceeding the market expected 0.5% increase, after the 0.2% m-m gain in Dec. While the German economy shrank 0.6 percent in the final three months of last year, the Bundesbank predicts it will rebound in the current quarter. Confidence among investors and businesses jumped in February and retail sales rose the most in more than six years in January. In France, industrial production fell by 1.2% m-m in Jan, exceeding the market expected 0.2% m-m drop, underlying the slowdown in the French economy. Sentiment among manufacturing executives climbed for a third month in February, the Bank of France said last week. The central bank’s services index, which is more closely correlated with domestic demand, fell.

In Japan, core machinery order fell by 13.1% m-m in Jan, after the 2.8% m-m gain in Dec. Japan returned to growth in the fourth quarter as the yen began to slide, bolstering Abe’s campaign to end 15 years of deflation and revive the world’s third-biggest economy.

Regional Market Focus

Singapore

• The benchmark STI remained range-bound and closed at 3,292.97 (+0.10%). The 4.5bn shares traded were worth S$1.7bn in value.
• The top active stocks include HPH Trust US$ (+2.53%), Wilmar (-3.79%) and Singtel (+1.16%).  
• OUE Ltd expands its portfolio beyond Singapore with the acquisition of an office tower in downtown Los Angeles in the US for S$459mn. Our analyst believes the assets provide room for improvement in both rental income and capital value, and maintain his Accumulate rating (TP: 3.07) on the stock.
• 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 stayed in the green throughout the session on Mon following gains in US equities. Profit taking however kicked in along the way after recent strong rally. Foreign buying spree continued in the Thai stock market but the amount dropped to a mere Bt251mn.
• US stocks extended further gains while the CBOE Volatility Index, Wall Street’s fear gauge, dropped 8.2% to 11.56, closing at its lowest level since Feb 2007, suggesting investors were not spooked by Monday’s brief pullback. In our view, another record close for the Dow could open room for Thai stocks to rise further today though volatility is set to rise on intraday profit taking and lower foreign buying. Technical signals also pointed to a continued uptrend in the composite SET index with 10-day EMA line at 1550 seen as a technical crossroads.
• For short-term trading strategy, we continue to recommend investors selectively buy stocks with more caution.
• Resistance for the composite SET index is seen at 1584, 1593 and support at 1571, 1564 today.

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 closed lower by 14pts or 0.25% to end the day at 5,677 on Monday. It is closed today for Mahashivratri public holiday.

Australia

• On Monday, the Australian share market closed higher during a quieter day of trading as the state of Victoria enjoyed a public holiday removing many of the market participants. On the close the benchmark S&P/ASX200 index was up 23.5 points to 5,146.9.
• Today (12/03/2013), the Australian market is set to open flat, despite Wall Street rising to another record high overnight. 
• In local economic news for Tuesday, National Australia Bank is expected to release its business survey for February.

Hong Kong

• Local stocks swung between gain and loss. The HSI and HSCEI dropped 1 points and 48 points to 23090 and 11435 respectively. Market volume was 59.03 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 said that it flew a total of 552,000 passengers in February, a 44 per cent increase from 384,000 a year earlier. During the same month, the budget carrier racked up 861 million revenue passenger-kilometres, up 42 per cent from the previous year. The airline's capacity rose 36 per cent to 1.03 billion available seat-kilometres, improving the passenger load factor by 4 percentage points to 84 per cent. On the Tiger Singapore front, total passengers in February stood at 354,000, up 24 per cent from a year earlier. Passenger load factor grew 3 percentage points to 83 per cent. At the same time, revenue passenger-kilometres grew 32 per cent to 652 million, while capacity increased 27 percentage points to 782 million available seat-kilometres. (Closing price: S$0.685, -%)

OVERSEAS Union Enterprise Limited (OUE) is buying the tallest building in California, the US Bank Tower, and some related properties for US$367.5 million (S$459.4 million), the group said. Standing at 1,018 feet, the US Bank Tower has 72 levels of office space and six levels of underground parking. It occupies an area of about 1.4 million square feet. As part of the acquisition, OUE is also buying the accompanying Maguire Gardens and a car park facility in downtown Los Angeles. "OUE intends to leverage on its strengths in leasing and asset repositioning to increase occupancy and net operating income yield on the asset," the group said. (Closing price: S$2.860, +1.779%)

Source: PhillipCapital Research - 12 Mar 2013