Morning Market Commentary

- STI: -0.63% to 3248.4                                   - SET: -1.57% to 1543.7
- JCI: +0.18% to 4831.5                                  - KLCI: +0.37% to 1631.5
- HSCEI: +2.22% to 10978.8                          - Hang Seng: +0.97% to 22256.4
- Nikkei 225: +2.03% to 12468.2                   - ASX200: -0.12% to 3393.5
- India NIFTY: -0.90% to 5694.4                     - S&P500: +0.67% to 1558.7

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Both the DJIA and S&P climbed on Wed after the Fed reaffirmed its commitment to continue with the current accommodative monetary policies (LSAPs). In fact, the resilience of US equities in view of uncertainties shrouding the latest Cyprus bailout suggest that the US market is still very much a healthy one.

But we will like to highlight a couple of points from Wed FOMC (which has been neglected by the popular media): (i) the FOMC statement was tweaked to address concerns of a disorderly exit strategy from LSAPs (ii) Bernanke -in his media conference- hinted that the pace of purchases might be adjusted should the labour market register a 'meaningful' improvement.

Sell the EURUSD rallies for now. A more sustained sell-off (rather than a short squeeze) in the EURUSD is likely, capping the EURUSD below strong resistance of around 1.30 in the near term due to uncertainties in Cyprus bailout as well as contagion concerns.

In Cyprus, the search for Plan B continues after parliament overwhelming voted down the proposed bank deposit levy, effectively failing to fulfill a pre-requisite to receive a €10bn bailout. Note the re-opening of banks in Cyprus -which are now on extended holiday till next week- could risk of further bank runs. What's next for Cyprus:  (i) alternative measures to raise the €5.8bn (which the bank  levy initially aimed to raise) through a higher (but targeted) haircut on deposits, sale of state assets (likely to Russians who has a vested interest)  (ii) Take the path of Greece restructuring.

The STI slipped below its 50dma support level on Wed, closing at its intra-day low and below the 3250 support level which has now turned into minor resistance. Looking ahead, prices are likely to consolidate before another attempt by the bulls in breaking above 3320 key resistance level, barring downside risks.

Was it a dead cat bounce on Wed? The CSI 300 bounced up from its lower bollinger band and the bulls mount a valiant attempt to push the HSI and 
HSCEI higher. But we cautioned that further near-term weakness is likely -particularly for the HSI and HSCEI- in view of the bearish short-term moving average cross over, especially if the flash March reading of China’s manufacturing PMI (scheduled to be released at 9.45 am SGP time today) disappoints.

In Japan, markets were closed on Wed for public holiday. Yesterday was also the first day in office for the newly-installed BOJ Governor Kuroda (dove), and his two deputies Iwata (ultra-dove) and Nakaso. Do keep a close lookout for comments from any of the trio as that will have broader implications on the JPY currency pairs as well as the Nikkei 225. With the USDJPY trading above 95 level now, next major resistance is its 3yr high at 96.7.

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

Macro Data:

In Malaysia, inflation inched up from 1.3% y-y in Jan to 1.5% in Feb. 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).

Regional Market Focus

Singapore

• The benchmark STI fell to 3,248.40 (-0.63%). The 3.2bn shares traded were worth S$1.3bn in value. 
• The STI traded sideways with the Singapore Market taking cue from macro driven news flow from Europe. Trading activities have slowed, as indicated by the dwindling trading value in recent weeks, after the end of the results season.
• 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

• Heavy sell-off dragged the composite SET index below 1535 at one time during the session but earlier losses were pared in the afternoon session but fears of potential additional measures to stem the baht’s rise continued to weigh on sentiment.
• Two straight sessions of steep losses of up to 57 points or 3.6% in the Thai stock market from its peak above 1600 could pave the way for some rebound today after the Federal Reserve pledged to keep supporting the US economy through stimulus. However, we believe further upside room for the market remains limited amid growing concerns about the rapid rise of the baht. The Thai baht this morning (0800 hrs Thailand time) continued its rise near 29 per US dollar, fueling more pressure from exporters to call on authorities to take more measures to stem the currency’s strength though the Bank of Thailand and the Ministry of Finance have taken no steps to do so at the time being. Yesterday net foreign selling of Thai shares accelerated to the tune of up to Bt3.2bn and foreign investors raised their net short positions in futures to as much as 3.5k contracts. Foreign sell-offs could likely put pressure and drag the market into a correction going forward.
• Failure to hold above 1550 could open up the way for further downside towards 1520 or lower. To play safe, investors should pare back equity holdings to only 30% of the portfolio. The short-term trading strategy is also to sell into strength and buy on weakness.
• Today we peg resistance for the composite SET index at 1560-1570.and support at 1534-1520.

Indonesia

• The Jakarta Composite Index (JCI) ended with modest gain on Wednesday (20/03), amid mixed finishes in Asia stock markets as uncertainty loomed after Cyprus parliament rejected the bailout plan that included levy on deposits. The JCI added 8.873 points, or 0.18%, to close at 4,831.500. Construction, property and real estate sector led gains that included five of the 9 major industry groups, with 2.69%-rise. Infrastructure sector followed with 0.68%-climb, and miscellaneous industry sector rose 0.36%. Commodity stocks suffered losses on Wednesday, with the mining sector index plunged 1.52%, and agriculture sector shed 1.40%. The LQ45 index that measures blue-chip shares edged 1.248 points or 0.15% higher to 823.527. 147 shares ended in positive zone, 132 shares dropped, and 193 shares stagnated Wednesday on the Indonesia Stock Exchange, where 6.758 billion shares worth IDR 6.757 trillion traded on the regular market. Foreign investors accumulated net purchase of IDR 10.63 billion.
• The Jakarta Composite Index (JCI) potentially will move higher today, on the back of positive momentum from US markets overnight. We estimated the JCI to trade with support and resistance at 4,789 and 4,865, respectively.

Sri Lanka

• The Colombo bourse continued yesterday’s positive momentum to close positive for the third consecutive trading day of the week; this was amidst all three maturities yielding higher for the third successive week at the TB auction held during the day . The benchmark ASPI Index closed within the green terrain at 5,734.82 gaining 11.96 points or 0.21% and the S&P SL20 Index closed positive at 3,299.56 indicating an upsurge of 15.77 points or 0.48%. As at the day’s closure the Market capitalization stood at LKR 2.2Tn resulting in a year to date gain of 1.70%.  The turnover for the day totaled up to record 539.68Mn; this is a drop of 42.2% against the previous trading day. Diversified Holdings and Bank Finance & Insurance topped the list under the sectorial summary contributing LKR 236.12Mn and LKR 225.6Mn respectively while collectively making a 85.55% contribution to the daily aggregate turnover. Price gainers outperformed the price losers by 91:86. Foreign participants appeared to be bullish during the day for the 2nd consecutive day resulting in a net foreign inflow of LKR 209.7Mn, while assisting the year to date net foreign inflow (LKR 4.19Bn) to reach its 4Bn mark. In regard to local FOREX market the USD closed at LKR 128.11/- selling and LKR 124.96/- buying.

Australia

• In Australia, the share market on Wednesday tumbled for a third straight day, led by hefty falls from the major miners in response to a bleak outlook for iron ore prices. The benchmark S&P/ASX200 index was down 20.1 points, or 0.40 per cent, at 4,967.3 points.
• Today, the Australian share market looks set to open higher after rebounds on most European markets and Wall Street in anticipation of a possible resolution to the Cyprus crisis and the outcome of a two-day Federal Reserve monetary policy meeting. The SFE Futures 200 is pointing upwards 36 points or 0.72 per cent to 4,999.
• In economic news on Thursday, the Reserve Bank of Australia is due to release its March Quarter Bulletin. The American Chamber of Commerce in Australia lunch in Brisbane is slated to feature Boeing Australia and South Pacific president Ian Thomas.
• In equities news, Premier Investments is expected to post first half results, as is Credit Union Australia and Brickworks and Washington H Soul Pattinson & Company. Aristocrat has an investor presentation day.

Hong Kong

• Local stocks swung between gain and lost. The HSI and HSCEI gained 214 points and 238 points to 22256 and 10978 respectively. Market volume was76.23 billion.
• The Shanghai Composite Index down 50% from previous peak, completing the golden ratio 0.5 target, we expect the rebound wave is launching; the goal of Shanghai Composite Index is 2800 points for this year.
• Technically, the HSI is expected to gain a support from 22000 level, major resistance will be 23000 level.

Morning Note

Company Highlights

Ezion Holdings Limited announced that it has secured a charter contract with a value of approximately USD 48.2 million over a 3 year period to provide a service rig to be used by an international oil company to support its oil & gas activities in the Arabian Gulf. The Service Rig is expected to be deployed and working in the offshore oil & gas fields in the Arabian Gulf before the end of 2013 after its refurbishment and upgrading. The above mentioned project will be funded through internal resources as well as bank borrowings. (Closing price: S$1.970, +0.510%)

Jason Parquet Holdings Limited announced material adjustments to the 2012 Preliminary Results, and Potential Exposure Risk of the Group for the Financial Year ending 31 December 2013, arising from the proposed application in the High Court of the Republic of Singapore to place United Fiber System Limited’s subsidiary, Poh Lian Construction (Pte.) Ltd. under judicial management. Based on the 2012 Preliminary Results and after adjusting for payments subsequently received from Poh Lian, an amount of approximately $1.03 million remains due and owing to JPS from Poh Lian in relation to works done in FY2012. After due assessment of the FY2012 Exposure, the Board has decided that it would be prudent to make an additional provision for doubtful debts of approximately $0.38 million in the financial statements of the Company for FY2012. The Group also has an additional sum of approximately $0.34 million due and owing to JPS from Poh Lian in relation to works done in 2013 to-date. Subject to the outcome of the Proposed JM, the FY2013 Exposure may be provided for or written off in the Company’s financial statements for FY2013. (Closing price: S$0.200, -6.977%)

Koon Holdings Limited announced that, arising from the proposed application in the High Court of the Republic of Singapore to place United Fiber System Limited’s subsidiary, Poh Lian Construction (Pte.) Ltd. under judicial management, adjustments to the Group’s full year financial statement for the 12 months ended 31 December 2012 have been made. As a result of the adjustments, the Group’s net profit before tax will decrease by S$4,784,000 from a net profit before tax of S$2,375,000 to a net loss before tax of S$2,409,000. The Group’s net profit after tax will decrease by S$3,971,000 from S$3,994,000 to a net profit after tax of S$23,000. The Group’s net loss before tax will be S$2,409,000. The Group’s net profit after tax will be S$23,000. The Profit attributable to Owners of the Company will decrease by S$2,978,000 from S$3,024,000 to S$46,000. Given the Company’s robust financial position, the size of its retained earnings and the strength of its order book, the Board resolved to make no change to their recommendation of a final dividend of S$0.005 per ordinary share to the Company’s shareholders. (Closing price: S$0.230, +2.222%)

Singapore Exchange and Philippine Dealing System Holdings Corp have signed a Memorandum of Understanding to develop fixed income access between Singapore and Philippines. Also included in the MOU is the development of trading platforms to support cross-border fixed income trading. SGX and PDS will also explore the development of cross-border and intra-regional clearing, settlement and depository services for these fixed income markets. The collaboration will start with the cross-border depository of Republic of the Philippines Government Bonds and Singapore Government Securities between Philippines Depository and Trust Corp and SGX’s Central Depository (CDP). Domestic banks and institutional clients in the respective countries will be able to hold their government bond investments in their respective depositories via a link between PDTC and CDP. (Closing price: S$7.600, -1.170%)

Sim Lian JV (BP) Pte. Ltd. a joint venture between Sim Lian Group Limited and Sim Lian Development Pte Ltd, announced that it will launch Hillion Residences on Thursday, 21 March 2013, making it Singapore’s first mixed-use development in the west to integrate residential living with a retail mall, bus interchange as well as both MRT and LRT stations. Primed to be the heart of up-and-coming Bukit Panjang, Hillion Residences features 546 units comprising one to four-bedroom units and penthouses across three residential blocks above the retail mall and transportation hubs. The 99-year leasehold private condominium is expected to receive its Temporary Occupation Permit in September 2018. (Closing price: S$0.865, +1.170%)

Source: PhillipCapital Research - 21 Mar 2013