Morning Market Commentary

- STI: -0.28% to 3258.6                                      - SET: -3.30% to 1478.9
- JCI: -1.66% to 4723.2                                      - KLCI: -0.24% to 1626.9
- HSCEI: -0.44% to 10896.5                              - Hang Seng: -0.50% to 22115.3
- Nikkei 225: -2.35% to 12338.5                       - ASX200: -0.16% to 4967.3
- India NIFTY: -0.13% to 5651.4                        - S&P500: +0.72% to 1556.9

MARKET OUTLOOK:
By Joshua Tan, Head of Research

So latest we have it is that Cyprus has made a last ditch attempt to raise that 5.8b euros by imposing a 20% levy on uninsured deposits above 100k euros at the Bank of Cyprus, while all other banks will impose a 4% levy on the same such deposits.

Will it work? The facts are 38b of deposits are in accounts of over 100k. As the Bank of Cyprus holds 27% of all deposits in Cyprus, a very rough back of the envelope calculation suggests 2b will be raised from Bank of Cyprus, while 1.1b will be raised from the other banks. Hmm… 3.1b, or just over half of the required 5.8b, albeit on a very ballpark estimation. Lets hope this ballpark throw is way off or we’re going to see more back and forth between Cyprus and the rest of the EZ.

For the moment, this represents the perfect excuse for equities to take some profit – so we are seeing signs of correction mounting across equities globally.

The S&P500 has a bearish divergence in the daily. For the STI, watch the 20dma: if it dips below the 50dma, high chance we’ll go lower. ASEAN indexes are in correction mode for the SET while the JCI’s long red candlestick on Friday, with a mini top formed in the preceding weeks, also suggests further downside.

Only China A shares seem to looking up as it has already put in a short term correction and now could rebound on the better than expected HSBC Mfg PMI reading for March.

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

MACRO DATA:

In China, MNI Flash business sentiment indicator reported 58.39 in Mar, slightly lower than the 60.98 reading in Feb, but still indicating a relative high market confidence. Sub reading for new orders fell slightly to 56.34 in Mar, from prior 58.24, while sub reading for production fell slightly to 56.72, from earlier 57.89. The high reading from MNI business sentiment indicator, together with the earlier announced HSBC manufacturing PMI, adds to a continued mild economic recovery of the nation.

In the EZ, the German Ifo business climate indicator registered the first decline since October, slumping from 107.4 in Feb to 106.7 in March (below market’s expectations). The continued uncertainty surrounding Cyprus is likely to weigh on business sentiment and German’s growth risks are certainly to the downside.

Regional Market Focus

Singapore

• The benchmark STI closed marginally lower to 3,258.57 (-0.28%). The 5.5bn shares traded were worth S$1.4bn in value.
• We initiated coverage on Courts Asia with a Buy recommendation and TP of S$1.14. We believe that the company would benefit from population growth and increase in new housing units in Singapore over the next few years. Service income from its credit facilities is also a key revenue driver for its business.
• 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

• The composite SET index tumbled as much as 50 points last Fri amid Cyprus’ financial troubles and concerns over potential new measures to stem the baht’s rise as well as clam down speculation in the stock market. Trading volume hit a record high of more than Bt100bn.
• The sharp losses of up to 50 points last Fri could set the stage for a short-term rebound in the Thai stock market on easing worries about Cyprus bailout plan after Cypriot legislators approved key bills to set up a solidarity fund to raise 5.8bn euros, raising hopes that Cyprus would secure a 10bn euro bailout package from ECB. Volatility is however expected to be extremely high amid ongoing uncertainties over European debt crisis and the rapid rise of the baht. Domestic political situation also bears close watching late this week especially the draft Bt2trn infrastructure development bill which will be forwarded to the House of Representatives for consideration in an extraordinary session between Mar 28 and 29, 2013. Today we expect the composite SET index to trade in a range of between 1471-1490 points. 
• The short-term strategy is to be selective in stocks.
• Resistance for the composite SET index is pegged at 1490-1508 and support at 1471-1436.

Indonesia

• The majority of stocks listed on the Indonesia Stock Exchange ended in red on Friday (22/03), as stock markets in Asia were pressured by concerns about bank crisis in Cyprus. The Jakarta Composite Index (JCI) plunged 79.507 points, or 1.66%, to close at 4,723.159. All 9 major industry groups finished lower, with mining sector lost 2.99%, consumer goods sector fell 2.45%, and construction, property and real estate sector shed 2.23%. The LQ45 index trimmed 17.273 points, or 2.12%, at 798.859, with more than two-third of its blue-chip components declined. For every stock that rose, more than 3 fell Friday on the Indonesia Stock Exchange, where transactions on the regular board reached 6.122 billion shares worth IDR 7.355 trillion. Foreign investors posted net sales of IDR 301.29 billion.
• The Jakarta Composite Index (JCI) potentially will be traded higher today, as bailout deal in Cyprus lifts sentiments in Asia’s early sessions. We expect the JCI to trade with support and resistance at 4,658 and 4,849, respectively.

Sri Lanka

• The Colombo bourse closed on a mixed note having surge positive for 6 successive days. The benchmark ASPI Index closed within the green terrain at 5,768.88 gaining 5.05 points or 0.09% and the S&P SL20 Index closed negative at 3,312.71 dipping 0.57 points or 0.02%. The turnover for the day amounted to LKR 1.07Bn indicating an increase of 59.26% against the previous trading day.
• Bank Finance & Insurance and Diversified Holdings topped the list under the sectorial summary contributing LKR 602.57Mn and LKR 303.71Mn respectively while collectively making a 84.63% contribution to the daily aggregate turnover. During the day, a total of 34.65Mn Shares changed hands resulting in a marginal decrease of 4.63% against the previous trading day.
• Price losers outperformed the price gainers by 100:93, where SMB Leasing PLC (X) (33.33%) led the price gainers, on the other hand Hapugastenne Plantation PLC (-14.55%) led the price losers. Foreign investor interest continued on the Colombo Bourse for the 4th consecutive day resulting in a net foreign inflow of LKR 153.8Mn.

Australia

• The Australian share market on Friday closed slightly higher after solid gains for the major banks offset weak overseas leads. At the close on Friday, the benchmark S&P/ASX200 index was up 7.9 points or 0.16 per cent to 4,967.3 points.
• Today, the Australian market looks set to open higher after Wall Street closed the week 90 points up. The SFE Futures 200 is pointing upwards 39 points or 0.78 per cent to 5,008.
• There is no major economic news scheduled for Monday.
• In equities news, Domino's Pizza Enterprises is scheduled to hold a special meeting.

Hong Kong

• Local stocks dropped. The HSI and HSCEI dropped 110 points and 47 points to 22115 and 10896 respectively. Market volume was 60.17 billion.
• We believe the market is going to rebound, due to Cyprus said to reach tentative deal to avert default, according to latest Bloomberg news. Apart from that the ADR closing price also indicated the Hong Kong market may rebound today.
• Technically, the HSI is expected to gain a support from 22000 level, major resistance will be 23000 level.

Morning Note

Company Highlights

China Fishery Group has warned the board of directors of Copeinca - the Peruvian firm that it is eyeing in a takeover bid launched last month - against blocking its voluntary cash offer by issuing new shares. Unless it receives a satisfactory response from the Copeinca board, China Fishery will consider taking legal action to prevent the board from obstructing its US$556 million offer, seen by Copeinca as hostile. (Closing price: S$0.475, +1.064%)

IEV Holdings Ltd has made its foray into the renewable energy business with a biomass production project in Vietnam. The Catalist-listed firm said that it planned to construct its maiden plant to manufacture pellet forms of rice-husk biomass in the middle of the Mekong Delta - the "Rice Bowl of Southern Vietnam". The company hopes to achieve its first pellet production in the first half of next year. As the company is in the process of finalising its plans in Vietnam and obtaining tenders for the construction of the plant, no figures have been released. However, IEV said it had conducted extensive study and market research over nine months to determine the feasibility of the business. It aims to target the international market for its biomass products, beginning with North Asian countries including Taiwan and Korea, for power generation and industrial use. (Closing price: S$0.470, -%)

Mapletree Logistics Trust's (MLT) planned divestment of its property at 30 Woodlands Loop to a new buyer has been granted in-principle approval by JTC Corporation, after a deal with another prospective buyer fell through last year. The new buyer, Advanced CAE, a unit of Advanced Holdings which supplies process equipment and clean-energy technology solutions, has entered into an option-to-purchase agreement with MLT's trustee, HSBC Institutional Trust Services, to buy the property for $15.5 million. The sale price represents a 50.5 per cent premium over its 2007 purchase price of $10.3 million, and a 40.9 per cent premium over its year-ago valuation of $11 million. Advanced Holdings plans to make the four-storey factory building its new permanent home, by moving in its operations now sited at 29 Senoko South Road. (Closing price: S$1.205, +1.261%)

Otto Marine said its Indonesia-based shipyard, PT Batamec, has secured contracts worth $6.3 million to fabricate, assemble and deliver four pre-erected columns and pontoon blocks from a "renowned" Singapore-based customer. The fabrication and assembly of pre-erected columns amounts to a contract value of $2.7 million, while the pontoon blocks amounts to a contract value of $3.6 million, it said. Both projects are scheduled for delivery in June 2013. The offshore marine group expects these contracts to have a positive contribution for its financial year ending Dec 31, 2013. (Closing price: S$0.087, +3.571%)

Sinotel Tech said it has recovered the last of the remaining 31.3 million yuan ($6.2 million) made to an unauthorised supplier for the purchase of 4G equipment. Last April, Sinotel revealed that three of its employees had cheated it of 105.4 million yuan through fraudulent purchases. (Closing price: S$0.107, +0.943%)

Tiger Airways will have to take a hard look at whether to continue with its loss-making operations Down Under if its bid to divest a 60 per cent stake in Tiger Australia to Virgin Australia (VA) fails to secure regulatory approval, says group CEO Koay Peng Yen. Pointing out that Tiger Australia has been in the red for the last five-and-a-half years, he stressed that the tie-up with VA would not only help strengthen the airline but also prove beneficial for passengers in Australia by intensifying competition. Mr Koay also reiterated that scouring for another investor served no purpose if the proposed sale did not get the green light as a non-airline investor would not bring strategic synergies to the table. (Closing price: S$0.705, +0.714%)

Source: PhillipCapital Research - 25 Mar 2013