Morning Market Commentary

- STI: -0.10% to 3293.3                                   - SET: +1.33% to 1490.3
- JCI: -0.45% to 4877.5                                   - KLCI: +0.35% to 1696.2
- HSCEI: +0.79% to 10694.2                          - Hang Seng: +0.75% to 22034.6
- Nikkei 225: +0.73% to 13288.1                   - ASX200: +1.20% to 3364.8
- India NIFTY: +1.16% to 5558.7                    - S&P500: +1.22% to 1587.7

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

In US, the S&P 500 soared -achieving a record intra-day high (1589)- as the bulls led the charge from the opening bell till the closing. We continue to UW Gold in view of the risk-on mood as well as the relative strength of the US Dollar. The main takeaway from the March FOMC minutes (accidentally released a couple of hours earlier) is as follows: Several voting members expect asset purchases to slow down later this year and completely stop by end of 2013. Are we alarmed? As we have guided on this page yesterday, it is best to discount the minutes of the March FOMC meeting which was conducted against the backdrop of a significant gains in non-farm payrolls (NFP) as well as  retail sales. Since then, the US economy has entered a soft patch with a pullback in NFP gains, deteriorating consumer confidence as well as weaker industrial production growth. Indeed, Tues release of the wholesale inventories data (where the change in inventories was dismal) reflects that risks to US 1q13 GDP growth are to the downside. So in a nutshell, expect the Fed to remain dovish at least in the near term.

Positive sentiment overnight is expected to spill over to Asian session today. But geopolitical tensions in the region continue to linger with N Korea raising the stakes too high that makes it impossible for it to back down from its threats credibly.

There are a couple of central bank monetary policy meetings ahead. Bank Indonesia meets today while MAS meets on Friday.

For Indonesia, reckon that odds of a Bank Indonesia rate hike (in its benchmark interest rate or its overnight deposit facility rate (FASBI) )  at this meeting have increased. A policy rate hike at the upcoming 11th Apr policy meeting – from record low levels of 5.75% since Feb 2012- might bolster the rupiah and stem possible capital outflows.

Note we are overweight (OW) Indonesia on account of the following: (i) Good value. Ytd, MSCI Indonesia garnered a total return of around 13%. Fairly priced compared to our OWs in Thailand and Philippines which have become expensive (ii) Pace of Indonesian rupiah depreciation has eased for now- in part due to BI interventions. But current account deficit is expected to narrow on easing palm oil and thermal coal prices. Furthermore, a possible rate hike to curb inflationary pressures could also stem capital outflows.  (iii)     Strong Investment Cycle, coupled with healthy domestic consumption.

For Singapore, we expect MAS to continue to stand pat at the semiannual monetary policy meeting this Friday- maintaining a modest and gradual appreciation of the S$NEER- in a bid to anchor inflation expectations, barring a significant slowdown in the global economy. Nonetheless, there is a risk that MAS might reduce the slope of the policy band if the outlook of the global economy is deemed sufficiently weak in 2H13. But this is a small risk (<10%) as concerns of a wage price spiral as well as inflation bias (compared to growth) is likely to result in MAS maintaining its hawkish bias. Apart from administrative measures (such as the property and car loan curbs), forward guidance in monetary policy communication might also be used as a tool.

We are cautiously optimistic that while the STI might consolidate in a tight range, it will likely challenge the 3320 resistance (followed by the psychological 3400 hurdle) so long as it stays above key support at 3250.

In Japan, the Nikkei continued to inch up but is on the verge of closing within its bollinger bands. Pullbacks will serve as an opportunity to accumulate long positions in Japan (Nikkei, Topix). An escalation of the NK crisis will provide an excuse for the rally to pause.

Chinese trade data -which suggest weak external demand- only cause a murmur in the CSI300 which inched down slightly. Looking ahead, the CSI 300 is confronted with strong resistance at the 2.5k level while remaining in a bearish short-term moving average cross over.

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

Macro Data:

In China, exports grew by 10.0% y-y in Mar, slower than the market expected 11.7% y-y gain and 21.8% y-y gain in Feb, while import rose by 14.1% y-y, leaving an unexpected trading deficit of USD 880 million. Exports fell to major partners including US, EU, Japan and South Korea. Despite the double digit growth for a third straight month, China has not seen firm evidence of a stable recovery in exports as external demand remains uncertain. The recovery in overall economy is mild. (by Roy Chen)

In Philippine, exports slumped nearly 16% y-y in Feb, weighed down by significantly lower electronics shipments. 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 (which has been weighing on exports!), rather than stimulating growth per se. (by Ng Weiwen)

Regional Market Focus

Singapore

• The benchmark STI closed 3.32 points lower to 3,293.25 (-0.10%). There were 3.0bn shares traded worth S$1.3bn in value.
• The top active stocks include Singtel (-0.55%), GLP (unchanged), ISDN (+17.39%), OCBC Bk (+0.56%), and DBS (-0.38%).
• 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.

• Thai stocks saw another session of wild swings on Wed, whipsawing between positive and negative territory within a trading range of more than 30 points before the composite SET index finished the session up nearly 20 points. Buying in telecoms, property and commerce counters led the market’s gains.
• Sentiment is likely to remain positive towards Thai stocks today. There is potential for further upside in the composite SET index to retest a key psychological level of 1500. Even though heavy foreign selling of Thai shares continued for the second day in a row to the tune of more than Bt2bn, foreign investors however increased their long bets on futures to 1,668 contracts yesterday.
• Due to the exceptionally high level of intraday volatility and in the run-up to long Songkran holiday amid uncertainty in the Korean peninsular and concerns over possible baht measures, the market may be vulnerable to profit taking to limit risk exposure ahead of the long weekend holiday. In this sense, we think it would be difficult for the SET index to break above the key 1500-point barrier.  
• Today we peg resistance for the SET index at 1500-1518 and support at 1480-1464.

• Most Indonesian stocks ended in negative territory on Wednesday (10/04), despite positive moves in Asia after the release of China’s trade data. The Jakarta Composite Index (JCI) shed 22.112 points, or 0.45%, at 4,877.475. The benchmark index had declined for two consecutive days, ahead of the central bank’s policy meeting on Thursday (11/04), which is feared to result in an interest rate hike and affect industries such as banking, automotive, and consumer goods related to consumer loans. Index of miscellaneous industry sector dropped 1.70%, trade and services fell 1.39%, and financial shed 0.51% on Wednesday. The LQ45 index lost 4.360 points, or 0.53%, at 822.865. The Rupiah rose 0.32% to IDR 9,687 against the American dollar, and Indonesian government 10-year bond yield fell 1.7 basis points to 5.655. In economic news, Indonesia’s retail sales grew 13.9% in February from a year earlier, but shrunk 0.4% from a month earlier, a survey of the central bank showed. Retail sales are expected to grow 10.5% in March from a year ago. 93 shares advanced, 158 shares declined, and 222 shares stagnated Wednesday on the Indonesia Stock Exchange, where 4.2 billion shares worth IDR 4.99 trillion changed hands on the regular board. Foreign investors accumulated net selling of IDR 262.96 billion.
• The Jakarta Composite Index (JCI) will likely trade sideways today, with positive moves on the US markets overnight and weaker Yen supported sentiments in Asia, but cautions ahead of Bank Indonesia policy meeting weighs on Indonesia stocks. We expect the JCI to move within 4,855 - 4,953 range today.

• The Colombo bourse ended the trading day on an expectant sentiment resulting in both indices to close within the green terrain, having recorded negative closures on previous trading day. Retailer participation was quite visible throughout the day and ASPI Index closed within the green terrain at 5,794.30 gaining 26.70 points or 0.46%. The S&P SL20 Index too closed positive at 3,322.49 indicating an upsurge of 5.74 points or 0.17%. As at the day’s close the Market Capitalization stood at LKR 2.22Tn indicating an YTD change of 2.41%.The daily turnover amounted to record LKR 309.38Mn, a dip of 22.50% in comparison to the previous trading day. During the day investor attractions were vastly on Bank Finance & Insurance (BFI) sector with 1,365 trades out of the total 4,371 trades. BFI emerge on top under the sectorial summary having provided LKR 135.31Mn which accounts to nearly 44% of the daily aggregate turnover.
• Diversified Holdings (DIV) also made a noteworthy contribution worth LKR 45.32Mn. The two sectors BFI & DIV collectively made a 58.38% subscription to the total turnover. During the day, the total 14.07Mn Shares which changed hands were almost as same as the previous trading day as per the volume being traded. Price gainers outpaced the price losers by 103:68. Foreign participants appeared to be bullish during the day for the 8th successive trading day resulting in a net foreign inflow of LKR 11.44Mn, while extending the year to date net foreign inflow to record LKR 5.98Bn. In regard to the local FOREX market the USD closed at LKR 127.13/- selling and LKR 124.09/- buying.

• The Australian share market closed slightly lower on Wednesday, the benchmark S&P/ASX200 index lost 8.8 points to 4,968.
• Today (11/04/13), the local share market looks set to open stronger after US stocks powered to record highs. The SFE Futures 200 is pointing upwards 44 points to 0.88 per cent to 5,008.
• In economic news on Thursday, the Australian Bureau of Statistics is due to release its jobs figures.
• In equity news, Woolworths will deliver its third quarter sales results.

• Local stocks rebounded. The HSI and HSCEI rallied 164 points and 83 points to 22034 and 10694 respectively. Market volume was 59.34 billion.
• We believe the market is going to rebound due to China’s CPI in March is lower than market expected and stocks recovered, especially for the Mainland insurance and cement sectors, investors expected the level of tighten monetary policy will not be further enhanced, we believe HSI will start a wave of rebound in short term.
• However investors are suggested to maintain attention to the development of two Korea conflicts, which is a major uncertainty to the market recently, we suggest a cautious bullish view in short term.
• Technically, the HSI is expected to gain a support from 21500 level, major resistance will be 22300 level.

Morning Note

Company Highlights

Dapai International Holdings Co. Ltd announced that the Company’s auditor, Moore Stephens LLP, had issued an emphasis of matter relating to the going concern assumption in the Independent Auditor’s Report on the financial statements of the Group for the financial year ended 31 December 2012. A copy of auditors’ comments on accounts together with the extract of the relevant notes to the Financial Statements is annexed to the announcement. (Closing price: S$0.025, -7.41%)

Pacific Healthcare Holdings Limited announced that the Company's Auditors, Ernst & Young LLP, had issued their report on the Company's financial statements for the financial year ended 31 December 2012 containing the emphasis of matters relating to the going concern assumption and differences of opinion between directors. A copy of the Auditors' report is annexed to this announcement. (Closing price: S$0.088, +3.53%)

China Animal Healthcare Limited announced that it has entered into a conditional subscription agreement with Lilly, a new investor which is independent of the Company, for subscription of Shares and Warrants representing a non-controlling minority shareholding in the Company. Lilly’s investment will be conducted in two tranches. In the first tranche, Lilly will subscribe for the First Tranche Shares and Warrants and, in the second tranche, Lilly will subscribe for Second Tranche Shares which, together, would raise an aggregate amount of S$120,000,000 to be primarily used to partly fund the Possible Delisting Offer and to repay the Convertible Bonds. (Closing price: S$0.265, Trading Halt)

Cortina Holdings Limited announced that it has on 9 April 2013 granted an Option To Purchase in favour of Fong & Sons Pte. Ltd, an unrelated party, in relation to the property owned by the Company located at 100 Orchard Road #02-52 Concorde Hotel & Shopping Mall Singapore 238840. The sales consideration of the property is S$2,000,000.00 (exclusive of prevailing Goods and Service Tax thereon). The proposed disposal is expected to result in a net gain on disposal of approximately S$1,106,690 after taking into account the book value of the Property of S$886,310 and estimated expenses of S$7,000. (Closing price: S$0.840, Unchanged)

Tiger Airways Holdings Limited announced that in relation to its earlier announcements, the Reference Price of the Convertible Securities, being the volume weighted average price of the Shares over the five (5) consecutive trading days ending on and including 10 April 2013 is S$0.647. The Conversion Price of the Convertible Securities, which has been set at a premium of 15.0 per cent to the Reference Price and rounded down to the nearest whole multiple of 0.5 cent, subject to the Minimum Conversion Price of S$0.650 and the Maximum Conversion Price of S$0.900, is initially S$0.740. (Closing price: S$0.635, -1.55%)

Source: PhilipCapital Research - 11 Apr 2013