Morning Market Commentary

- STI: -0.07% to 3294.1                                 - SET: +1.03% to 1545.5
- JCI: -0.28% to 4998.5                                 - KLCI: +0.00% to 1706.3
- HSCEI: +3.12% to 10587.3                        - Hang Seng: +2.33% to 22013.6
- Nikkei 225: +0.73% to 13316.5                 - ASX200: +0.65% to 3314
- India NIFTY: +1.66% to 5783.1                  - S&P500: +0.88% to 1555.3

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Markets had run ahead of economic fundamentals (soft patch in US and Chinese economy) in recent months and risk assets (such as equities) seem ripe for profit taking!

We caught a whiff of deflation. Commodities (gold, silver, oil, copper) having tumbled last week. Treasuries have rallied (i.e. US 10yr yield have declined) while the dollar has remained stable. All these are incipient signs of deflationary pressures, rather than a flight to safety.

Incipient signs of a bearish head and shoulders! The S&P 500 has been flirting with its 50 dma support level. If S&P 500 close decisively below the 1539 key support level, next major support at the 1525 level. Odds are that any bounce will lead to a lower high and consequently a right shoulder of the bearish head and shoulders.

Earnings will be critical to sustain this equity rally in the US. Note this recent rally –thus far- has not been driven by earnings Instead, it has been more of a multiples expansion rally.

Reckon that Chinese policymakers are confronted with a major headache on account of strong credit growth but weak GDP growth (with industrial output and fixed asset investment undershooting) as the recent credit expansion-notwithstanding numerous property curbs- is likely to complicate the context/environment against which policies are set henceforth. The recent bounce in property prices does not help in alleviating the headache (yet) but the jury is still out on the effectiveness of the recent rounds of property curbs given that they are only a couple of weeks old.

Notwithstanding last Fri’s bout of risk-on sentiment, we are penciling near-term downward bias for the HSI and HSCEI as both indices remain mired in a bearish moving average crossover. HSCEI is likely to re-test its 200dma level (10.5k level).  HSI needs to take out 22.5k to go higher.

In Japan, we are seeing attempts of structural micro reforms by the Abe administration and this lead us to be cautiously optimistic about the Nikkei.  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. Implementation of structural micro reforms (economic and fiscal) are necessary ingredients for a structural bull run in Japan to materialise.

The risk of profit taking (correction) this 2Q13 for Equities has risen (see Global Macro 12th April), given softness in US and Chinese data. We do still believe a pull-back in equities offers an attractive opportunity to accumulate our OWs in US, CN & HK (on compelling valuations), ID, PH, TH (resilient domestic demand) and SG (construction boom, attractive dividend yield). No change to our view it’s still a year for stocks.

Risks to monitor in the region (apart from NKorea’s usual aggressive rhetorics): (i) possibility of human-to-human transmission of a new strain of H7N9 bird flu strain (ii) Malaysia 13th GE (5th May) polling will likely cause some jitteriness in regional markets.

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

Macro Data:

In China, MNI China flash business sentiment index rose to 59.3, from the final reading of 58.2 in Mar. Sub index for new orders rose to 59.0 from the 54.8 reading in Mar, and sub index for production rose to 57.8 from 55.2 in Mar. The improving index indicates a continued recovery in China’s economy. (by Roy Chen)

In Germany, PPI fell by 0.3% m-m in Mar, after the 0.2% m-m drop in Feb, reflecting a slowdown in demand for industrial products. On y-y basis, the index gained 0.3%, compared to the 1.2% y-y gain in Feb. (by Roy Chen)

Regional Market Focus

Singapore

• The benchmark STI remained range bound to close at 3,294.05 (-0.07%). The 2.7bn shares traded were worth S$1.5bn in value. 
• Our commodities analyst raised his recommendation on Wilmar to Accumulate and downgraded Golden Agri. to Neutral. We think that the impact of China’s bird flu may be less than initially feared and believes that the 14% share price correction since late January offers a decent entry point. Our downgrade on Golden Agri. is driven by expectations of weak CPO prices.  
• We will be presenting on Cordlife (recent initiation: Buy, TP: S$0.84) in today’s weekly webinar. Do stay tuned for our view. 
• 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 surged 15.7 points last Fri, tracking overseas market gains after finance leaders of the G-20 economies edged away from a long-running drive toward government austerity in rich nations to stimulate economic growth.
• Technically speaking, a close above 1540 last Fri was a positive sign that correction had already come to an end but there will remain a number of factors to watch in fundamental terms especially potential impact from China’s worst earthquake in three years last Sat as well as the rapid rise of the baht with growing calls from the private sector for the Bank of Thailand to take any measures. Due to these uncertainties, volatility should continue to be the order of the day in the Thai stock market, in our view.
• The short-term strategy is to ‘sell the rallies and buy the dips within support and resistance levels to cushion against the risk of market volatility.
• Resistance for the SET index is pegged at 1550, 1570 and support at 1538, 1523.

Indonesia

• The Jakarta Composite Index (JCI) dropped below 5,000 in a sideways trading on Friday (19/04), despite rising momentum in Asia on bargain buying after stocks dropped the previous day. The JCI fell 14.177 points, or 0.28%, at 4,998.461, erasing earlier gain in the morning session. The drop on Friday included seven of the 9 major industry groups, led by Mining sector that shed 1.21%, followed by Basic Industry sector trimmed 0.63%, and Miscellaneous Industry sector trimmed 0.53%. But two other sectors supported the benchmark index, as the Construction, Property and Real Estate sector gained 0.27% and Agriculture sector climbed 0.22%. The LQ45 index lost 2.594 points, or 0.31% at 846.953, with 25 of its 45 components closed in red. 154 shares closed lower, 111 shares rose, and 206 shares remained unchanged Friday on the Indonesia Stock Exchange, where 5.61 billion shares worth IDR 5.51 trillion traded on the regular board. Foreign investors posted net purchases worth IDR 246.93 billion.
• The Jakarta Composite Index (JCI) potentially will extend recent rise today, bolstered by continued positive sentiments on global markets, and as weakness in Yen lifted markets in Asia this morning. We estimate the JCI to trade moderately higher, with support and resistance at 4,964 and 5,041.

Sri Lanka

• The Colombo bourse ended the day on a negative note which resulted in the indices closing within the red terrain. This was mainly as a result of the selling pressure which prevailed during most parts of the day; however favorable movements were observed during early hours of trading. The benchmark ASPI dropped by 9.58 points or 0.16% to close negative for the 1st time during the week at 5,882.25; having surged positive for 6 consecutive trading days which in turn accumulated 124.23 points or 2.14%. The S&P SL20 Index too closed negative for the second successive day at 3,336.12 after dropping 15.03 points or 0.45%. The turnover for the day amassed to record LKR 1.03Bn which is an increase of 29.09% against the previous trading day. During the day investor attractions were vastly on Bank Finance & Insurance (BFI) sector with 1,950 trades out of the total 9,038 trades been recorded, hence assisting BFI emerge as top contributor under the sectorial summary having provided LKR 690.37Mn which accounts to 66.78% of the daily aggregate turnover. Land & Property (L&P) stood next in line to BFI providing LKR 63.67Mn. During the day, a total of 44.38Mn shares changed hands resulting in a rise of 4.57% against the previous trading day. Price losers surpassed the price gainers by 118:82. Foreign interest toward the bourse seem to be continuing, where a net foreign inflow of LKR 490.96Mn was recorded as a result of 604.04Mn worth purchases and sales of LKR 113.09Mn; this extended the year to date net foreign inflow to record LKR 7.80Bn. Further, the inflows recorded for the past 14 days totaled up to record LKR 2.89Bn.

Australia

• The Australian stock market on Friday ended in positive territory, after resource stocks stood their ground. The benchmark S&P/ASX200 index was up 7.5 points or 0.15 per cent to 4,931.9 points,
• Today (22/04/13), the Australian market looks set to open higher following gains on international markets as investors eyed the G20 summit and upcoming IMF and World Bank spring meetings focused on global economic strains. The SFE Futures 200 is pointing upwards 21 points or 0.42 per cent to 4,947.
• In economic news on Monday, Reserve Bank of Australia (RBA) deputy  head, payments policy department, Mark Manning is due to appear before the Parliamentary Joint Committee on Corporations and Financial Services' inquiry into the Corporations and Financial Sector Legislation amendment Bill.
• In equities news, Australand has its annual general meeting.

Hong Kong

• Local stocks surged. The HSI and HSCEI rose 501 points and 320 points to 22016 and 10587 respectively. Market volume was 65.98 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

Triyards Holdings Limited announced that its wholly-owned subsidiary, SAV Land Pty Ltd, has entered into a conditional contract of sale dated 18 April 2013 with Henderson Supply Base Pty Ltd , pursuant to which the Seller has agreed to sell and SAV Land has agreed
to purchase a property in Australia known as Lot 5 Clarence Beach Road, Henderson Western Australia 6166. (Closing price: S$ 0.760, -0.654%)

Sembcorp Industries announced that it will be developing a new energy-from-waste facility in Teesside, the UK, which will be the Group’s first energy-from-waste facility outside Singapore. The new energy-from-waste facility will be capable of producing up to 49 megawatts of gross power or 190 tonnes per hour of steam, using municipal and commercial waste. The facility will be located at Wilton International, a 770-hectare industrial site which Sembcorp owns, operates and manages in Teesside. (Closing price: S$ 4.900, -1.606%)

AsiaMedic Limited, a premier healthcare provider in Asia, announced it has signed an teleradiology service agreement with Nyein Hospital and City Hospital, both located in Mandalay, Myanmar. Teleradiology involves the transmission of radiological patient images, such as X-rays, CTs, and MRIs, from one location to another for the purposes of sharing studies with other radiologists and physicians. AsiaMedic will provide the hardware, software and technical support to facilitate a connectivity platform between the Group and the hospitals, as well as the professional interpretation of radiological images submitted by their radiographers. Started in 2005, City Hospital operates 130 beds with plans to expand to 300 beds, while Nyein Hospital, established in 1999, operates 180 beds. AsiaMedic will work closely with both hospitals as they invest in building up their diagnostic capabilities and subsequent new facilities. For the current phase, the cost of setting up the connectivity platform will be borne by the client. (Closing price: S$ 0.096, -)