Morning Market Commentary

- STI: +0.27% to 3267.5                                         - SET: +3.04% to 1523.9
- JCI: +1.16% to 4777.9                                         - KLCI: +1.04% to 1643.9
- HSCEI: +0.75% to 10978                                    - Hang Seng: +0.61% to 22251
- Nikkei 225: +1.69% to 12546.5                          - ASX200: -0.68% to 4956.5
- India NIFTY: -0.31% to 5633.9                            - S&P500: -0.33% to 1551.7

MARKET OUTLOOK:
By Joshua Tan, Head of Research

Developments in Cyprus concluded with the 20% levy on uninsured deposits >100k euros at Laiki Bank (loss leader) and the Bank of Cyprus (BOC) raised to no more than 40%, all other banks will impose a 4% levy on the same such deposits. Readers yesterday will recall that we reckoned the 20%/4% would raise only 2b + 1.1b, that ballpark estimate proved reasonably accurate as the levy was doubled for Laiki/BOC. Expected raising is now 4.2b + 1.1b = 5.3b. Senior bondholders would be hit as well in an unprecedented move, equity holders wiped out to take the figure closer to the 5.8b target.

So crisis averted, Cyprus stays in the EZ, but for the moment, this represents the perfect excuse for equities to take some profit. If equities do enter correction mode, we do see it as an opportunity to accumulate as our asset strategy view remains OW equities, MW bonds, MW commodities, UW gold.

The S&P500 has a bearish divergence in the daily, so watch out for this if it follows thru. For the STI, watch the 20dma: if it dips below the 50dma, chances are we’ll go lower. The SET yesterday rebounded 3% after an 8% correction in the space of week, as we have rebounded off the 50dma there, it may time to re-accumulate. The JCI also put in reasonably positive price action yesterday but signals to go back in are not so clean.

Greater China – CSI300, HSCEI, Hang Seng – on the other hand look poised to regain some ground having already put in a correction ahead of global stocks. Confidence in the economy there is regaining confidence after a positive reading for the March HSBC Mfg PMI..

(All equity indices mentioned in this note are tradable with Phillip CFDs or ETFs, for stocks/sectors in focus please see our Equity Strategy reports)

Macro Data:

In Singapore, headline inflation accelerated from 3.6 y-y % in Jan to 4.9% in February, owing higher private road transport costs. Nonetheless, the spike in Jan COE premiums is likely to be transient. Private road transport cost and accommodation cost accounted for more than three-quarters of headline inflation. Excluding these 2 components, MAS Core Inflation inched up 0.7%-ppt m-m to 1.9% y-y. Looking ahead, accommodation cost pressures and wage-cost pass through are likely to persist, resulting in headline inflation to stay elevated around 3.5 - 4.5% this year. While a stronger Singapore dollar might not be able to fully mitigate domestic drivers of inflation, we expect MAS to continue to stand pat -maintaining a modest and gradual appreciation of the S$NEER.

In Taiwan, industrial production fell by 11.45% y-y in Feb, marking the first y-y loss in 8 consecutive months, compared to the 19.05% y-y gain in Jan. The significant drop is mainly attributable to the Chinese New Year distortion and might not serve as an indicator of slowdown of manufacturing activities. Commercial sales fell by 6.00% y-y in Feb, after the 7.8% y-y gain in Jan, also due to the CNY distortion. Going forward, we expect a mild recovery  in both gauges due to the positive spillover to this exports oriented island from the economic recovery of mainland China.

Regional Market Focus

Singapore

• The benchmark STI closed marginally higher to 3,267.48 (+0.27%). The 5.2bn shares traded were worth S$1.3bn in value.
• NOL (Neutral, TP: S$1.32) received APL Temasek, the first of ten 14,000 TEU vessels to enter its fleet yesterday. These new vessels are expected to improve fuel efficiency by 20-30% per TEU at speed range of 15-18knots. The ongoing fleet renewal programme would improve the competitiveness of its fleet and lower unit slot cost for the company.
• 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 staged a strong rebound on Mon as worries about Cyprus eased. However, trading volume was relatively light, reflecting the lack of conviction in market direction amid concerns over the potential new measures to stem the rise of the baht. Bank and property counters as well as small to mid cap stocks outperformed other sectors.
• Thai bourse yesterday staged a strong rebound but trading volume was relatively light, reflecting the lack of conviction in market direction. Meanwhile, headlines out of the EZ came back to pressure the sentiment, though Cyprus finally compromised the deal with ‘Troika’ but there comes an adverse impact on bank bondholders and depositors as well as new imposed regulations to handle the banking system in the EZ. On domestic front, politics will come under spotlight as the debate over Bt2.2trl borrowing bill for long-term mega infrastructure projects will start later in the week. For today, the SET is likely to trade sideways in a range of 1510-1530 points.
• The short-term strategy is to be selective in stocks.
• Today we peg resistance for the SET index at 1540-1553 and support at1510-1494.

Indonesia

• Most Indonesian stocks advanced Monday (25/03), after a significant drop on Friday (22/03), as investors sentiment turned higher after news that Cyprus agreed on bailout terms with the Euro zone. The Jakarta Composite Index (JCI) surged 54.742 points, or 1.16%, at 4,777.901. The gain included seven of the 9 major industry groups, led by consumer goods sector with 2.45%-rise, followed by real estate sector and miscellaneous industry sector with gains of 2.25% and 1.85% each. The majority of the blue-chip stocks also rose, with the LQ45 index climbed 11.172 points, or 1.40%, at 810.031. For every stock declining, more than two advanced Monday on the Indonesia Stock Exchange, where 5.378 billion shares worth IDR 5.566 trillion changed hands on the regular board. Foreign investors accumulated net sales of IDR 951.44 billion in total.
• The Jakarta Composite Index (JCI) potentially will be traded lower today, after rising as much as 1.16% yesterday, as optimism about Cyprus bailout deal faded. We estimate the JCI to trade lower, with support and resistance at 4,738 and 4,806, respectively.

Sri Lanka

• The Colombo Bourse concluded the first trading day of the week on a negative note having surged positive for nearly 7 consecutive days, resulting in both indices closing within the red terrain. This was mainly as result of sluggish participation of the investors, observed throughout the trading day.
• The benchmark ASPI index lost 23.33 points or 0.40% to close the day at 5,745.55 having surged positive for 7 successive trading days. The S&P SL20 price index too closed negative for the second consecutive trading day at 3,295.96 after a loss of 16.75 points or 0.51%.
• As at the day’s closure, the market capitalization stood at LKR 2.21Tn resulting in a year to date gain of 1.90%, and the market PER and PBV stood at 15.54 and 2.12 respectively.
• The turnover for the day totaled up to record LKR 353.43Mn recording a drop of 67% against the previous trading day and total of 12.82Mn Shares changed hands resulting in a decrease of 63.01% against the previous trading day.
• Foreigners appeared to be bullish during the day for the fifth successive trading day resulting in a net foreign inflow of LKR 101.6Mn, while extending the year to date net foreign inflow to record LKR 4.54Bn. In regard to the local FOREX market, the USD closed the day at LKR 128.48/- selling and LKR 125.32/- buying.

Australia

• In Australia, the share market on Monday closed higher led by the major banks as Cyprus struck a bailout deadline-day deal with the European Central Bank. At the close on Monday, the benchmark S&P/ASX200 index was up 22.9 points at 4,990.2 points.
• Today (25/03/13), the Australian share market looks set to open lower, following Wall Street’s overnight lead.
• Locally, in economics news on Tuesday, Reserve Bank of Australia governor Glenn Stevens is due to speak at the Australian Securities and Investments Commission annual forum in Sydney.
• In equities news, camping and outdoor goods supplier Kathmandu is scheduled to release its first-half results.

Hong Kong

• Local stocks rebounded. The HSI and HSCEI rose 136 points and 81 points to 22251 and 10978 respectively. Market volume was 60.68 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 22000 level, major resistance will be 23000 level.

Morning Note

Company Highlights

Lian Beng Group announced that it has won a S$220 million contract to construct Bartley Ridge, a development comprising nine residential blocks along Mount Vernon Road. Eight of the nine blocks will rise 18 storeys high, and the last block, 19 storeys. The blocks, with a total of 868 units, will have penthouses. The construction is expected to commence this month and is due to be completed in mid-2016. (Closing price: S$0.430, -%)

Swissco Holdings Limited has diversified its business model to move higher up the value chain and into the oil rig sector. The company has, through its wholly-owned subsidiary Seawell Drilling Pte Ltd, incorporated a special purpose vehicle (SPV) with two partners, predominantly to enter into engineering, procurement and construction (EPC) contracts for oil rigs. Swissco will hold a 46.5 per cent stake in the SPV, Rockwood Asset Holdings Limited; its partners Golden Arch Worldwide Offshore Ltd and Pulau Investments Limited will hold a 45.3 per cent and 8.2 per cent stake respectively. Swissco will fund its US$8.2 million investment in Rockwood through a loan from Golden Arch, which is payable upon delivery of its first oil rig through the issuance of 35.57 million Swissco shares at 28.35 cents apiece. The conversion shares are equivalent to 8.22 per cent of the existing shares of the group and 7.59 per cent of the enlarged issued share capital. (Closing price: S$0.265, +1.923%)

Yoma Strategic Holdings has set up a new joint venture (JV) with First Myanmar Investment Co Ltd (FMI), a unit of Serge Pun & Associates (Myanmar) Ltd which is held by Yoma's executive chairman, Serge Pun. The JV company, YSH Finance Ltd, was incorporated in the British Virgin Islands to hold Yoma's and FMI's joint investments in new investment opportunities in Myanmar, it said. The JV will be 80-per-cent owned by Yoma, with the remaining 20 per cent held by FMI. Yoma added that its current investment in the JV entity is less than 3 per cent of the its latest consolidated audited net tangible assets. (Closing price: S$0.795, -1.242%)

Source: PhillipCapital Research - 26 Mar 2013