Morning Market Commentary

- STI: +0.22% to 3291.6                                 - SET: +0.69% to 1527.3
- JCI: +1.04% to 4945.3                                 - KLCI: +0.16% to 1700.53
- HSCEI: -0.14% to 10426.6                          - Hang Seng: -0.46% to 21672
- Nikkei 225: -0.41% to 13221.4                    - ASX200: -0.60% to 3323.5
- India NIFTY: +2.16% to 5688.95                - S&P500: +1.43% to 1574.6

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Black grizzly bears are still on the roam and we probably have not seen the last of them- yet- notwithstanding yesterday’s bargain hunting and bounce. Apart from a fragile economic recovery, geopolitical tensions are elevated. Specifically, North Korea has issued an ultimatum that a strike will occur without advance notice. Thinking aloud, with gold in the doldrums, which assets will be the new safe haven? The likes of SG sovereigns - which has a prized AAA rating- comes to mind.

The next major event risk is the presidential election by Italian Parliament (this Thurs) to resolve the political gridlock. Already, centre-left Bersani (who fell short of attaining a majority in the recent elections) and tainted ex-PM Berlusconi have met to hammer out a deal. Without a proper government in place yet, we caution that Italy is not able to deal effectively with the crisis.

On Tues, the S&P  500 and DJIA rebounded -partly paring Mon's losses- on the back of better-than-expected macro data (housing starts, industrial production) as well as stronger-than-expected earnings reported (by Goldman Sachs, BlackRock, Coca-Cola and Johnson & Johnson).

The Nikkei slipped (albeit slightly) as USD/JPY likely succumbed to profit taking during Tues Tokyo session. Pullbacks will serve as an opportunity to accumulate long positions in Japan (Nikkei, Topix). Our base case has been that so long as the USDJPY continues to march towards (better if it clears above) the psychological 100 level, the Nikkei will continue to rise higher. Reckon USD/JPY is likely to retest the 99.95 level (11th Apr 2013 high) before challenging the psychological 100 level. Key support pegged at 95 psychological level. But it is important to remember that for a structural bull run in Japan, we need structural micro reforms!

After clocking in weak economic growth for 1q13, the new Chinese leadership needs to translate rhetoric to concrete reforms, otherwise markets –if left disappointed- will certainly not spare the rod. Near-term downward bias for the HSI and HSCEI as both indices remain mired in a bearish moving average crossover. HSCEI has slipped below its 200dma support level (10.5k level).  HSI is likely to challenge its key 200dma support at 21.5k level , with any upward bounce likely to be capped by the 10dma resistance level.

STI has remained resilient and continued to consolidate in a tight range, consistent with our earlier guidance. We are cautiously optimistic that the STI will likely challenge the 3320 resistance (followed by the psychological 3400 hurdle) so long as it stays above key support at 3250.

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

Macro Data:

In US, industrial production rose 0.4% m-m sa in March. But details beyond the headline number were less favourable. The stronger industrial production growth was largely due to the boost from weather-related gain in utilities. In fact, manufacturing inched down 0.1%. On the housing front, housing starts surged above 1mn units (almost a 5yr high) during March. Separately, consumer prices declined eased from 2.0% y-y in Feb to 1.5% y-y in March on account of lower energy and agriculture prices. (by Ng Weiwen)

In Euro zone, CPI grew by 1.2% m-m in Mar, after the 0.4% gain in Feb. On y-y basis, CPI rose by 1.7% y-y in Mar, meeting the market expectation, the same pace as in Feb. ECB President Mario Draghi said on April 4 that “inflation expectations are firmly anchored and in line with price stability over the medium to long term.”A separate report shows that the economic sentiment for the region fell to 24.9 in Apr from 33.4 in Mar, indicating a worsening confidence. In Germany, Euro zone’s biggest economy, the sentiment index fell from 48.5 in Mar to 36.3 in Apr, trailing the market expected 41.0, stirring up some concern the region’s largest might have difficulty maintaining the recovery momentum. (by Roy Chen)

In UK, PPI rose by 0.3% m-m in Mar, after the 0.8% m-m gain in Feb. On y-y basis, PPI rose by 2.0%, compared to the 2.3% y-y gain in Feb. Inflation stayed at 2.8% in Mar, the same as Feb. While the government has broadened the BOE’s scope to add to stimulus even as inflation remains above its 2% goal, a majority of the Monetary Policy Committee voted to maintain the size of the bond-purchase plan this month. (by Roy Chen)

Regional Market Focus

Singapore

• The benchmark STI closed +7.21 points higher to end at 3,291.58 (+0.22%). There were 3.3bn shares traded worth S$1.6bn in value.
• The top active stocks include Singtel (+1.40%), DBS (-0.13%), GoldenAgr (-1.80%), Kep Corp (-0.35%), and Ascendasreit (-3.50%).
• 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 traded choppy in a narrow range last Fri though the SET index spent most of the session in positive rather than negative territory led by buying in telecoms counters.
• Thai stocks are likely to continue a roller-coaster ride with a bearish bias after the long holidays Songkran Festival due to 1) a plunge in the broad US stock markets last Monday following China’s weaker-than-expected GDP and the dual explosions at Boston Marathon; 2) a tumble in commodities for a third consecutive day, particularly gold which bottomed in response to Cyprus gold selloff; and 3) a close watch on the court battle over the Preah Vihear dispute and a speed-up to vote for the amnesty bill by the Pheu Thai party which would trigger a mob from the opposing parties.
• If the US stock markets and gold would stage a rebound today, Thai stock is likely to come under pressure of a downside risk. We advise investors to buy on weakness, particularly domestic plays.

Indonesia

• The Jakarta Composite Index (JCI) pared early session loss on Tuesday (16/04), and closed significantly higher at 4,945.253, up 50.661 points, or 1.04% for the day. The increase was supported by all but two major sectors, with commodity sectors fared worst and infrastructure sector performed best. The index of Infrastructure sector surged 2.67%, Miscellaneous Industry gained 1.74%, and Basic Industry sector climbed 1.49%. The LQ45 index rose 12.823 points, or 1.55%, at 838.421, with 26 of the 45 blue-chip components closed in positive zone. 148 shares finished in red, 109 shares advanced, and 214 shares stagnated Tuesday on the Indonesia Stock Exchange. Regular market volume reached 3.94 billion shares valued at IDR 4.95 trillion. Foreign investors accumulated net sales of IDR 329.06 billion.
• Indonesian stocks will likely climb today, on the back of global positive sentiments after a day of rallies on the US markets, and higher starts in Asia this morning. Upbeat US housing data would also lift sentiments in Asia and Indonesia today. We expect the Jakarta Composite Index (JCI) to trade higher, with support and resistance at 4,826 and 4,975, respectively.

Sri Lanka

• The bourse ended the day displaying an extended positive image continuing the forward drive witnessed during the past three trading days. This attributed both indices to maintain its stay within the green spaces. The Benchmark All share price Index augmented 12.80 points or 0.22% to close at 5,852.68, the highest recorded index value after the 28th of January 2013. The S&P   too comfortably ended within the green territory at 3,351.57 having gained 18.03 points or 0.54%. The Market Capitalization stood at LKR 2.24Tn at the closure, resulting YTD gain of 3.44%. The Market PER and PBV were noted as 15.81 and 2.15 respectively. Crossings totaling up to LKR 1.27Bn were logged during the day while providing a circa of 80.63% to the daily summative turnover LKR 1.58Bn; additionally, the turnover was a massive increase of 447.75% against the previous trading day. BFI sector was most preferred during the day witnessing 2,042 trades out of the total 5,549 trades. DIV (Diversified Holdings) seized the second place having provided LKR 57.94Mn and both sectors BFI and DIV together accounted to a substantial 95.32% of the daily turnover. A total of 64.65Mn shares changed hands during the day resulting in a rise of 134.44% against the prior trading day. Price gainers outstripped the price losers by 115:67. Foreign participants appeared to be bullish for the 11th successive trading day recording purchases worth LKR 1.33Bn and sales worth 696Mn which in turn resulted in a net foreign inflow of LKR 637.87Mn; this extended the YTD net foreign inflow (LKR 7.11Bn) to cross the LKR 7Bn mark for the 1st time during the year. In regard to the local FOREX market the USD closed the day at LKR 127.04/- selling and LKR 124/- buying.

Australia

• The Australian stock market moved downwards on Tuesday, with the benchmark S&P/ASX200 index dropping 0.34 per cent to 4,950.8 points.
• Today (17/04/12), the Australian market looks set to open firmer after a positive finish on Wall Street and a rebound in commodities prices. The SFE Futures 200 is pointing upwards 48 points or 0.97 per cent to 4,994.
• In economics news on Wednesday, the Australian Bureau of Statistics will release merchandise imports figures for March, while the Housing Industry Association is due to release its December quarter residential land report. The Westpac-Melbourne Institute's leading index of economic activity is also due out.  
• In company news, miner BHP Billiton releases its March quarter production report, while Atlas Iron will publish its March quarter results.

Hong Kong

• Local stocks fell. The HSI and HSCEI dropped 101 points and 14 points to 21672 and 10427 respectively.
• 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

Keppel Land Limited and China Vanke Co., Ltd have entered into a strategic partnership that will see both companies jointly develop properties in Singapore and China. The first joint venture project will be a condominium development in Tanah Merah in Singapore, where Wkdeveloper sig I Private Limited, a wholly-owned subsidiary of Vanke, will acquire a 30% stake from Keppel Land for an aggregate cash consideration of about $135.5 million. Keppel Land, through its wholly-owned subsidiary, Sherwood Development Pte Ltd, was awarded the prime residential site for $434.55 million in October 2012. The first joint venture project between Keppel Land and Vanke is in Singapore for the development of 726 condominium units on a 3.2 ha site at Tanah Merah. (Closing price: S$3.970, -0.501%)

Wilmar International Limited announced that it has acquired from Societe Nationale d’Investissement a 27.5% equity stake in Cosumar S.A., a company listed on the Casablanca Stock Exchange, for an aggregate cash consideration of MAD2.3 billion (approximately USD263 million). Subsequent to this transaction, a block of up to 26.5% will be sold by SNI to a consortium of Moroccan institutional investors, who together with Wilmar will constitute a strategic 54% controlling block in Cosumar. Based in Casablanca, Cosumar is the sole sugar supplier in Morocco. It is also the third largest sugar producer in Africa, with ownership of one of the largest refineries in the world, as well as seven beet and cane sugar mills situated in five regions in Morocco. (Closing price: S$3.270, -1.208%)

Source: PhillipCapital Research - 17 Apr 2013