Morning Market Commentary

- STI: -0.27% to 3279.5                                  - SET: +0.51% to 1586.8
- JCI: -1.01% to 4786.4                                  - KLCI: -0.33% to 1640.7
- HSCEI: +0.58% to 11102                            - Hang Seng: +0.28% to 22619.2
- Nikkei 225: +1.16% to 12381.2                  - ASX200: +0.75% to 3438.7
- India NIFTY: +0.99% to 5908.95                 - S&P500: +0.56% to 1563.2

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Perfect 10. The DJIA continued to march up higher for the 10th consecutive day, with the bulls inspired by signs of an improving US labour market (with the 4-week moving average of initial jobless claims at a 5-yr low and Feb unemployment at 4-yr low). Meanwhile, the S&P 500 is just a whisker away from its record high. Notwithstanding a possible pull back in the near term, the US macroeconomy is at an inflection point with all cyclinders (employment, consumption, investment, housing and trade) firing ahead. And that could continue to lend support to US equities risk rally. Thus, we are upgrading US equities from MW to OW in view of improving macro fundamentals as well as robust momentum (rather than value) in equities.

STI slipped, piercing through its 10dma support level on Thurs. In our Wed morning commentary, we wrote that the 3,300 psychological level could be re-tested even though it was cracked on Tues as price action (on Tues) suggests that the bulls managed to fend off some (but not all) the bears. Looking ahead, the bulls need to decisively overwhelm the bears to take the STI 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.

ASX200 is starting to look toppish; note the possible bearish triple top on the weekly time frame. Thus, we caution that there are high odds that the recent run above 5020 level might be a false breakout instead.

Nikkei 225 gapped up–albeit slightly- on Thurs. A minor pull back might be on the cards as the bulls struggle to clear the psychological 12,500 level in the absence of a fresh catalyst. Minor support level at 12,249. Next major event risk will be BoJ’s 4th April meeting.

HSCEI and HSI slipped below respective 10dma support levels. For the HSCEI and HSI, do note that the bearish short-term moving average cross over which portend further downward bias. Sentiment is weak on account of recent property tightening measures in China and Hong Kong as well as PBoC’s Zhou concern over inflationary pressures.

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

Macro Data:

In US, the labor market recovery is gaining traction. The 4-week moving average of initial jobless claims slumped to 346,750 for the week ending March 9, a 5yr low. Recall unemployment rate registered a 4-year low of 7.7% in Feb.

In Philippine, the central bank stood pat, maintaining benchmark policy rates at 3.5% in March. Looking ahead, odds of a rate cut are low at this juncture in view of resilient domestic demand, with benign inflation to boot. But we do not rule out the possibility of the BSP either reducing policy rates or performing RRR cuts to temper the appreciation of the Philippine peso, rather than stimulating growth per se.

In India, wholesale price inflation rose from 6.62% in Jan to 6.84% in Feb. We opine that 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 Apr 2012).

In Australia, the unemployment rate stayed at 5.4% in Feb. The payrolls rose by the most in almost 13 years, by 71,500 from Jan. The data show the Reserve Bank of Australia’s 1.75 percentage points of rate reductions in the past 17 months are rebalancing an economy where mining regions in the north and west have thrived, while builders and manufacturers in the south and east struggled. The improvement in job market has reduced the urgency of a cut in benchmark rate, which is currently staying at 3%, though the central bank does has scope for further cuts.

In South Korea, the Bank of Korea left benchmark interest rate unchanged at 2.75% after the 25 basis cut in last Oct, while the government is considering more fiscal support to the nation’s economy.   The economy is “expected to maintain its trend of modest improvement” in coming months, the BOK said in a statement after the decision. At the same time, fiscal tightening in advanced nations and changes in the yen’s value pose risks, the central bank said. A “moderate recovery” has been sustained since the fourth quarter of last year, although the improvement has been “faltering slightly,” it said. While tensions with North Korea have pared the won’s gains, the currency is still up about 24 percent against the yen in the past six months, hindering South Korea’s exporters of automobiles and electronics. The government is already delivering a fiscal boost by allocating 72 percent of budget spending for 2013 to the first half.

Regional Market Focus

Singapore

• The benchmark STI closed 9.02 points lower at 3,279.50 (-0.27%). There were 5.9bn shares traded worth S$1.4bn in value.
• The top active stocks include Singtel (+1.12%), SingHaiyi (+29.03%), Genting SP (-1.66%), Kep Corp (-0.60%), and SuperGroup (-2.37%).
• 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 choppy in a tight band almost throughout the session on Thu amid sector rotation from ICT and HELTH to petrochemical and property counters but late buying in bank shares led the composite SET index to end the day up 8.09 points to 1586.79 points.
• Bullish sentiment in global equities markets could set the stage for the composite SET index to test a key psychological level of 1600 today after it successfully closed above 1580 yesterday and upbeat US labor market data led the Dow to close at another record high on Thu. However, bouts of profit takings may likely set in after the SET index inches closer to the above psychological level. Although the strength of the baht to 29.55 per US dollar could boost foreign fund inflows, foreign portfolio investment picture remained mixed in the Thai stock market amid alternate bouts of buying and selling every other day and foreign investors held net short position in futures. In our view, the appreciation of the baht was the result of foreign fund inflows into the bond market. Deputy PM and Finance Minister Kittirat Na-Ranong also called on the Bank of Thailand to rethink its current baht policy which might hurt exports, a move that could result in any additional measures to weaken the baht. Even though we rule out a reversal of the baht’s uptrend, we believe the move could partially help slow the pace of the baht’s rise.
• For short-term trading strategy, we continue to recommend investors selectively buy stocks with more caution.
• Resistance on the main index is seen at 1590-1600 and support at 1580-1576 today.

Indonesia

• Most Indonesian stocks ended in the negative zone on Thursday (14/03), amid rising Asian regional indices, although cautions about the economic outlook in the region loomed. The Jakarta Composite Index (JCI) closed down 49 072 points, or 1.01%, at 4,786.367. All major sectors fell, with consumer goods sector that fell 2.22%, miscellaneous industrial sector fell 2.11%, and the basic industry sector trimmed 1.56%. While the LQ45 index closed at 816.592, down 11.156 points or 1.35%. A total of 166 stocks fell, 92 stocks rose, and 95 shares stagnated Thursday (14/03) on the Indonesia Stock Exchange, where 6.10 billion shares worth IDR 6.02 trillion changed hands on the regular market. Transactions by foreign investors summed up to a net sell of IDR 430.781 billion.

Sri Lanka

• The bourse ended the fourth trading day of the week on an encouraging note and both indices to regain into green territory. The ASPI Index closed positive at 5,688.98 gaining tiny 3.16 points or 0.06% during the day having recorded negative closure on previous day. Meanwhile, the S&P SL20 Index increased by 5.79 points or 0.18% to close at 3,241.03 having closed within the red terrain during the prior trading day. As at the day’ closure the market capitalization stood at LKR 2.19Tn noting a year to date gain of 0.88%.The turnover for the day totaled up to LKR 609.21Mn denoting an increase of 36.28% compared to the previous trading day. Under the Sectorial summary Bank Finance & Insurance and Diversified Holdings stood out as the best performers contributing LKR 250.4Mn and LKR 182.7Mn respectively,  while making a 71.09% subscription to the daily aggregate turnover value. Shares totaling up to 25.4Mn were traded during the day resulting in an increase of 41.36% against the prior trading day. Price losers outpaced the price gainers by of 89:77.The foreigners appeared to be bullish during the day for the sixth successive trading day resulting in a net foreign inflow of LKR 261.2Mn while extending the year to date net foreign inflow to record LKR 3.4Bn; further, the net foreign inflows recorded during the past six trading days totals up to nearly LKR 3.1Bn. In regard to the local FOREX market the USD closed the day at LKR 127.99/- selling and LKR 124.84/- buying.

Australia

• The Australian share market on Thursday closed lower as better than expected jobs data dented the chance of more interest rate cuts. The S&P/ASX200 index lost 60.2 points or 1.2 per cent to 5,032.2.
• Today (15/03/13), the Australian market is set for a strong start to trade with encouraging jobs figures in the United States helping Wall Street post its longest winning streak in more than 16 years. The SFE Futures 200 is pointing upwards 51 points or 1.01 per cent to 5,081.
• In local economic news, there is no data scheduled for release.

Hong Kong

• Local stocks swung between gain and loss. The HSI and HSCEI rose 63 points and 65 points to 22619 and 11102 respectively.
• We believe the market is going to consolidate, as some of the technical indicators are 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

Noble Group Ltd said it has priced US$400 million of its S$3 billion medium-term-notes (MTN) programme, first announced on Aug 17, 2011. The notes will bear interest per num, payable semi-annually. The yield for the notes to maturity in 2018 is 3.787 per cent per annum. Closing dates for the issuance of notes will be on Mar 20, 2013. (Closing price: S$1.175, +0.427%)

First Real Estate Investment Trust (First REIT) announced its trustee HSBC Institutional Trust Services (Singapore) Ltd has on Mar 13, 2013 signed a mandate letter for the establishment of a S$500 million multicurrency medium term note (MTN) programme. Documentation for the programme is currently in progress and an announcement will be made upon the establishment and signing of the programme documents, said the manager of the reit. The Hongkong and Shanghai Banking Corporation Limited and Oversea-Chinese Banking Corporation Limited have been appointed as joint lead arrangers of the programme. (Closing price: S$1.155, -0.431%)

THE subsea services arm of Ezra Holdings, EMAS AMC, has secured a US$165 million (S$206 million) engineering, procurement, construction and installation (EPIC) contract in the North Sea. Det norske oljeselskap, a drilling operator in the Norwegian continental shelf, awarded EMAS the contract to conduct rigid pipe-laying and related subsea work in the Ivar Aasen field. The contract also has an option for EMAS AMC to procure and install a subsea power cable connecting the neighbouring Edvard Grieg platform to the Ivar Aasen platform. Project management and engineering work will commence immediately and will be managed from EMAS AMC's office in Oslo. Offshore activities are scheduled to commence in 2015, with completion in 2016. (Closing price: S$1.070, -%)

Koyo International Ltd said its wholly owned subsidiary Koyo Engineering (S.E.Asia) Pte Ltd has been awarded two mechanical and electrical (M&E) engineering contracts worth S$23.7 million. The first contract, at S$15.21 million, was awarded by Jurong Town Corporation (JTC) on mechanical and electrical works for the proposed erection of a six-storey multi-user research and development building with basement car park. The second contract, valued at S$8.51 million, was awarded by Kong Meng San Phor Kark See Monastery, and will require the M&E company to conduct mechanical & electrical building services for its monastery at 88 Bright Hill Road. (Closing price: S$0.064, -%)

Source: PhillipCapital Research - 15 Mar 2013