Morning Market Commentary

- STI: +0.20% to 3286                                         - SET: +0.71% to 1598.1
- JCI: +0.69% to 4819.3                                      - KLCI: -0.80% to 1627.6
- HSCEI: -0.73% to 11020.9                               - Hang Seng: -0.38% to 22533.1
- Nikkei 225: +1.45% to 12560.9                       - ASX200: +1.75% to 5120.2
- India NIFTY: -0.62% to 5872.6                         - S&P500: -0.16% to 1560.7

Boustead (BUY S$1.40, TP S$1.80) - Update
By Joshua Tan, Head of Research

Boustead on Friday announced that it has invested in a S$75m 20MW Solar Utility Portfolio in Japan (JV, 50% + 1 share). As our 25th Feb initiation report points out, Boustead generates tremendous free cash such that it returns about 50% of earnings to shareholders while the remainder it redeploys into new investments. We will be calling up management for more details, as of now the stock is on an uptrend and this announcement is likely to be taken positively.

MARKET OUTLOOK:
By Joshua Tan, Head of Research

The S&P500 wobbled on Friday as a poor print on consumer sentiment offset outperformance in industrial production. Overall, data is still positive there as production, investment, housing, trade are on good trends while core-retail sales cruises along and incomes are hit 1H13 due to the payroll tax hike. All in, we expect 2H13 US GDP to pick up from 1H13. As such we will be formally upgrading US equities to OW this week.

Over in the EZ, Germany seems to be recovering while the rest of the EZ is still in contractionary territory albeit slightly better. The bloc still remains a macro risk going forward.

Nikkei 225 (MW) is likely to continue pushing higher on anticipation of a dovish 4th April BOJ meeting. Beware that markets sell the fact post-meeting as JP needs structural reform, not just a dovish monetary policy.

China A and H shares may rebound this week as both CSI300 and HSCEI are at strong support regions (2500, 11k respectively) and we may see some optimism with regards to Li Keqiang’s and his “reform” minded team officially taking over the reigns 15th Mar last week. Hang Seng may also rebound this week. But for a sustained rally going forward, we really do need concrete reforms rather than a lot of rhetoric about it so far. Our OW rating on Greater China is predicated on this.

The STI (OW) seems capped by the 3300 level, but we expect it to clear this level at some point this year. ASEAN indexes continue to do well with our OWs on TH and PH working out particularly well. We are looking to upgrade ID (MW) soon to OW as the rupiah has strengthened on an improved current account. KLCI (MW) remains an avoid till after the election as it tests the 200dma for the umpteenth time.

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

Macro Data:

US industrial production rose 0.7% m-m sa in Feb, rebounding from a 0.3% contraction in the preceding month. Separately, core CPI -which exclude food and energy- rose by 2.0% y-y in Feb, up from 1.9%  in Jan. Lastly, consumer sentiment deteriorated in March. Specifically, the University of Michigan consumer sentiment index declined 5.8 pts to 71.8 (lowest reading since end 2011) in the prelim March report, largely on account of weakening expectations.

In Singapore, retail sales declined 1.4% m-m sa in Jan, following a  0.4% contraction in the preceding month. Ex motor vehicles, retail sales decreased 1.1%.

Regional Market Focus

Singapore

• The benchmark STI closed 6.55 points higher at 3,286.05 (+0.20%). There were 7.2bn shares traded worth S$2.9bn in value.
• The top active stocks include Wilmar (-1.48%), HKLand US$ (-3.31%), GLP (+1.53%), Capitaland (-4.23%), and GoldenAgr (-2.48%).
• Property stocks fell in the afternoon session on last Friday after official data show developers’ sales in February dropped 65% m-m, a month after the government implemented a comprehensive package of cooling measures.
• 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 rallied near a key psychological level of 1600 last Fri driven by buying in bank shares but sporadic bouts of short-term profit taking kicked in along the way.
• More bouts of profit taking could be in the cards today after the benchmark SET index rallied to finish the session near a key psychological level of 1600 last Fri. Cyprus on early Sat secured a long-awaited bailout of up to 10bn euros to bolster its troubled banking sector and public finances but it came with a string attached that EU would confiscate 10% of its private bank deposits in bailout tax, reigniting fears over Europe’s debt crisis though the bailout was still subject to a parliamentary vote. Even though many euro-zone nations said it is unlikely to affect bailout plans for other countries, we believe the above news could inevitably undermine confidence in the market. Stock markets in Australia and Japan opened sharply lower by up to 1% this morning and Dow Jones futures lost as much as 100 points. Due to bearish external cues, we think the SET index would follow overseas markets lower towards support at 1584 today though net foreign buying of Thai shares nearly reached Bt4bn last Fri. 
• For short-term strategy, we advise investors to gradually cut equity holdings to 50% of the portfolio with eyes on European debt crisis after Cyprus bailout concerns. 
• Today we peg resistance for the composite SET index at 1600-1607 and support at 1593-1584.

Indonesia

• The Jakarta Composite Index (JCI) rebounded on Friday (15/03), as stock markets in Asia strengthened on optimism about the US economy. The JCI rose 32.957 points, or 0.69%, at 4,819.324. Friday’s gain was supported by the climbs of six of the 9 major industry groups, led by basic industry sector that jumped 2.55%, followed by mining sector and consumer goods sector which gained 1.39% and 1.24%, respectively. The LQ45 index that measures Indonesia’s blue-chip shares added 5.157 points, or 0.63%, at 821.749. As many as 178 shares rose, 81 shares declined, and 213 shares remained unchanged Friday on the Indonesia Stock Exchange, where 5.85 billion shares valued at IDR 7.32 trillion traded on the regular market. Foreign investors’ transactions accumulated to a net sales totaling IDR 423.79 billion.
• Stock traded on the Indonesia stock exchange may be due for corrections today, as the Jakarta Composite Index (JCI) declined from its recent overbought condition, and drops in US stock markets on Friday may lead to negative sentiments in Asia today. We expect the JCI to test the minor support at 4,775, while headwind comes from its immediate resistance at 4,877.

Sri Lanka

• The Colombo bourse continued yesterday’s positive momentum, resulting in both indices retaining within the positive region for the second consecutive day, and to conclude the last trading day of the week on a favorable note. The benchmark ASPI Index closed within the green terrain at 5,704.53 gaining 15.55 points or 0.27%. Further, the S&P SL20 Index too closed positive at 3,262.44 recording an increase of 21.41 points or 0.66%.The turnover for the day amounted to LKR 729.95Mn indicating an increase of 19.82% against the previous trading day. Diversified Holdings and Bank Finance & Insurance topped the list under the sectorial summary contributing LKR 275.9Mn and LKR 192.2Mn respectively while making a 64.12% contribution to the daily aggregate turnover. During the day, a total of 20.18Mn Shares changed hands resulting in a decrease of 20.61% against the previous trading day. Foreign participants appeared to be bullish during the day for the 7th consecutive day resulting in a net foreign inflow of LKR 335.5Mn.

Australia

• The Australian share market on Friday posted its biggest one-day gain for 2013, with the benchmark S&P/ASX200 index adding 88 points to 5,120.2.
• Today, the Australian market is set for weak start following the weekend events that saw a European Union bailout of Cyprus and the end of Wall Street's long run of consecutive gains.  The SFE Futures 200 is pointing downwards 67 points or 1.30 per cent to 5,055.
• On the local economic news front for Monday, the Australian Bureau of Statistics (ABS) releases lending finance data for January and new motor vehicle sales numbers for February. The Australian Securities and Investments Commission (ASIC) will hand down its report on the impact of high frequency trading on Australia's financial markets.

Hong Kong

• Local stocks swung between gain and loss. The HSI and HSCEI fell 86 points and 81 points to 22533 and 11021 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

Singapore Telecommunications Limited announced that completion of the sale of its wholly-owned subsidiary SingTel Pakistan Investments Limited’s entire 30% stake in Warid Telecom (Private) Limited to Warid Telecom Pakistan LLC has taken place. SingTel had previously announced on 29 Jan 2013 that had entered into an agreement for this sale. (Closing price: S$3.580, -1.105%)

Boustead Singapore Limited announced that the Company’s wholly owned subsidiary, Boustead Knowledge Pte Ltd has on 15 March 2013 entered into a joint venture with Kinnarii Power Assets Pte Ltd, a Singapore-based regional-focused renewable project developer, to develop utility-scale solar photo voltaic projects in Japan. The Directors are of the view that the Joint Venture presents an excellent opportunity for Boustead Knowledge to expand its expertise in renewal energy projects and will mark its first foray into utility-scale solar photo voltaic projects in Japan. (Closing price: S$1.400, -0.709%)

Source: PhillipCapital Research - 18 Mar 2013