Morning Market Commentary

- STI: -0.44% to 3288.5                                       - SET: +0.13% to 1578.7
- JCI: -0.39% to 4835.4                                       - KLCI: -0.62 to 1646.2
- HSCEI: -2.26% to 11037.4                              - Hang Seng: -1.46% to 22556.6
- Nikkei 225: -0.61 to 12239.6                           - ASX200: -0.14% to 5085.3
- India NIFTY: -1.06% to 5851.2                         - S&P500: +0.13% to 1554.5

MARKET OUTLOOK:
By Joshua Tan, Hd of Research

The S&P500 continues to inch toward its all time highest close of 1565 (the DJIA, Russell have already broken thru), as latest retail sales was above expectations indicating that payroll tax hike or no, the consumer is spending. Probably spurred on by recent employment gains. Data sets out of the US have been good: employment, consumption, investment, housing, trade are doing well. We are inclined to upgrade the US to OW from MW. But in the short term, one does wonders if we are due a major pullback for the US (from the price action and MACD – no real signals yet).

Greater China on the other hand continues to sell-off from the housing curbs, as Weiwen (Macro Analyst) warned in yesterday’s note. China A-shares (CSI300) has crashed thru 50dma, next stop is 2430 support. The HSCEI has fallen to 11k major support while Hang Seng is at 22.5k support. Price action suggests renewed selling. While this challenges our OW ratings for Greater China, which were successful to catch the initial rebound, we keep the ratings for now as this transition year may see a strong set of policy changes that may reignite the market.

Nikkei 225 may correct as the opposition indicated it wouldn’t support pro-stimulus Iwata. Price action does now at least warn that a pause is likely.

The STI (OW) continues to consolidate at the doorstep of its 3300 heavy resistance. ASEAN indexes – Thailand (OW), Indonesia (MW) and Philippine (OW) – still look relatively resilient, except that in a global context, major indexes are looking a tad tired.

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

Macro Data:

In US, better-than-expected Feb retail sales data suggest that consumers shrug off the drag from payroll tax hikes at the turn of this year as well as higher gasoline prices. Specifically, core retail sales -ex auto, gas and building materials-gained 0.4% m-m in Feb, following a 0.3% increase the preceding month. These encouraging data portend further upsides for consumption spending and consequently GDP growth in 1Q13.

In Euro zone, industrial production fell by 0.4% m-m in Jan, after the revised 0.9% m-m gain in Dec, indicating the faltering industrial activities in the region, despite the improving confidence.

In Australia, consumer sentiment rose to 110.5 in Mar, after the 108.3 reading in Feb, indicating an improving consumer confidence. The index for current conditions also picked up slightly to 113.8 in Mar, from 113.3 in Feb. A separate report shows that the number of housing loans decreased by 1.5% m-m in Jan, marking a fourth consecutive drop, after the 2.1% m-m drop in Dec. The central bank is holding the benchmark interest rate at 3%. With inflation staying within the target range, RBA still has scope for further interest rate cut.
 

Regional Market Focus

Singapore

• The benchmark STI closed 14.50 points lower at 3,288.52 (-0.44%). There were 5.3bn shares traded worth S$1.5bn in value.
• The top active stocks include Kep Corp (-1.10%), GoldenAgr (+1.67%), Singtel (+0.85%), SingXpress (+55.0%), and THBEV (+0.81%).
• 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 traded sideways in a tight range on Wed. ICT and HELTH counters led the market’s advance. Even though the composite SET index traded above 1580 during the session, it however failed to close above this level for the third day in a row.
• The third failed attempt to close above 1580 yesterday with some technical indicators poised to flash sell signals on the bearish divergence conditions, the risks may be skewed to the downside more than the upside for Thai stocks today. However, we believe the market could swing up and down on sector rotation and selective plays. Even though the market may be due for a short-term correction, we think the downside will be limited by strong economic growth outlook driven primarily by domestic engines in the medium to long term, which could encourage buying on dips from time to time. Overall we expect the SET index to trade in a narrower range of 1571-1582 today.  
• For short-term trading strategy, we continue to recommend investors selectively buy stocks with more caution.
• Today we peg resistance for the composite SET index at 1582-1586 and support at 1571-1563.

Indonesia

• Most Indonesian stocks declined on Wednesday (13/03), as stock markets in Asia retreated on concerns about the region’s economic prospect. The Jakarta Composite Index (JCI) retreated to 4,835.439, down 18.873 points, or 0.39%. Wednesday’s decline included eight of the 9 main sectors, with construction, property and real estate sector lost 1.92%, miscellaneous industry sector shed 1.05%, and consumer goods sector fell 0.61%. The LQ45 index slipped 3.960 points, or 0.48%, at 827.748. More than 130 shares declined, 106 shares advanced, and 232 shares stagnated Wednesday on the Indonesia Stock Exchange, where 5.24 billion shares valued at IDR 5.53 trillion traded on the regular market. Foreign investors accumulated net sales with the total value of IDR 277.08 billion.
• We estimate the JCI to be traded with support and resistance at 4,787 and 4,893, respectively.

Sri Lanka

• The Colombo bourse ended the trading day on an negative sentiment resulting in both indices closing within the negative terrain, amidst all three maturities yielding up for the second successive week by 5 basis points each at the Treasuries auction held today. The negative closures in the indices and the adverse market movements were as a result of the sluggish nature and the prevailed selling sentiments of the market participants. The benchmark ASPI Index closed negative at 5,685.82 losing 18.50 points or 0.32% having recorded a positive closure during the prior day. The S&P SL20 Index too closed within the red terrain at 3,235.24 a declining of 11.85 points or 0.36% having surged positive for 6 consecutive days. The market capitalization as at the day’s closure stood at LKR 2.19Tn resulting in a year to date gain of 0.82%. The market PER and PBV stood at 15.37 and 2.10 respectively. The turnover for the day amounted to LKR 447.02Mn indicating a drop of 33.44% against the previous trading day; Further, this was the lowest turnover value recorded since 22nd February 2013. Under the sectorial summary Bank Finance & Insurance and Diversified Holdings sectors stood out to be the top contributors for the day with subscriptions worth LKR 205.32Mn and LKR 127.07Mn respectively, Further the two sectors made a significant 74.4% contribution to the day’s aggregate turnover value. During the day, a total of 17.98Mn Shares changed hands resulting in a decrease of 9.31% against the previous trading day. Price losers surpassed the price gainers by 100:74. Foreign participants appeared to be bullish during the day resulting in a net foreign inflow of LKR 64.4Mn; which is an inflow for the 5th consecutive trading day; further this extends the year to date net foreign inflow to LKR 3.17Bn. In regard to the local FOREX market, the USD closed the day at LKR 127.91/- selling and LKR 124.76/- buying.

Australia

• The Australian share market on Wednesday closed lower, with the benchmark S&P/ASX200 index down 25.5 points to 5,092.4.
• Today (14/03/13), the Australian market is set for a flat start despite an unexpectedly strong increase in US consumer spending in February. Wall Street rose slightly, its ninth straight session of gains.
• In local economic news, the Australian Bureau of Statistics (A.B.S) will release labour force data for February.  Reserve Bank of Australia (R.B.A) assistant governor (Economic) Christopher Kent is scheduled to deliver a speech to an Australian Institute of Builders dinner in Sydney.
• In company news, Myer (MYR.ASX) releases its first half financial results and Sigma Pharmaceuticals releases its full year results.  Foxtel chief executive Richard Freudenstein is due to speak at the ASTRA 2013 Conference in Sydney.

Hong Kong

• Local stocks swung between gain and loss. The HSI and HSCEI slumped 333  points and 254 points to 22556 and 11037 respectively. Market volume was73.66 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 23300 level.

Morning Note

Company Highlights

Further to its announcement on Feb 28, 2013, Ezion Holdings Ltd said it has received the SGX-ST approval for the mainboard listing and quotation of 50 millon ordinary shares at an issue price of S$1.895 per new share. The entire net proceeds will be about S$93.5 million, all of which will be used to finance the acquisition of a liftboat to be used to support the oil and gas activities of a South East Asian-based national oil company. (Closing price: S$1.945, -2.261%)

Olam International Ltd announced it has sold Taraori Rice Mills Private Ltd, the holding company for its rice milling assets in India, to Spanish rice and pasta manufacturer, Ebro Foods, for US$14.5 million. "Through this sale we are monetising more than the book value of fixed investments, as well as releasing working capital - which will be used to reinforce our core supply chain and trading business in non-basmati rice from India and other origins for our conventional markets," said Rajeev Raina, global head of Olam's rice segment. The basmati rice mill, located in Haryana, India was acquired in 2008 and has a processing capacity of 18 tonnes of paddy per hour. (Closing price: S$1.675, +0.601%)

IHH Healthcare said its 60-per-cent owned GHK Hospital has purchased a land parcel in Hong Kong for HK$1.69 billion (S$271.07 million) to build and run a private hospital. The plot at Aberdeen Inland Lot No 458, Nam Fung Path in Wong Chuk Hang has a total site area of 27,500 sq m and a maximum gross floor area of 46,750 sq m. The total capital investment required for the new hospital is pegged at HK$5 billion, inclusive of the land acquisition cost. It is slated to commence operations in late 2016, with a total capacity of 500 beds. (Closing price: S$1.370, +0.366%)

Progen Holdings Limited announced that its wholly-owned subsidiary, Progen Pte Ltd, has been awarded a contract worth S$11.381 million for air-conditioning and mechanical ventilation installation at Changi General Hospital. The project will commence this year and is expected to complete in 2014. The group said the new contract is expected to contribute positively to its financial performance in 2013 and 2014 and is expected to have a material impact on group’s earnings per share for the financial year ending 31 December 2013. (Closing price: S$0.149, -%)

Source: PhillipCapital Research - 14 Mar 2013