Morning Market Commentary

- STI: +0.45% to 3308.9                                  - SET: +0.08% to 1559.1
- JCI: -0.03% to 4996.9                                   - KLCI: +0.02% to 1706.7
- HSCEI: +0.03% to 10590.8                         - Hang Seng: +0.14% to 22044.4
- Nikkei 225: +1.89% to 13568.4                   - ASX200: -0.11% to 3310.5
- India NIFTY: +0.89% to 5834.4                    - S&P500: +0.47% to 1562.5

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

In the US, inflation expectations have likely eased and markets had run ahead of economic fundamentals. Recall on this page as well as the webinar yesterday, we discussed possible incipient signs of deflationary pressures as gleaned from the tumble in commodities, rally in Treasuries amid a stable dollar.

What does all these mean? Risk assets (such as equities) seem ripe for profit taking!
While S&P 500 bounced up on Mon, reckon it is more of a relief rally. For the rally to actually sustain, earnings are critical.

Today’s major risk event will be China’s HSBC Flash Manufacturing PMI for April (released around 9.45am SGP time). This data point will provide further clues as to whether China is heralding an era of slower growth after a weak 1q13 GDP print (with industrial output and fixed asset investment undershooting). Notwithstanding the soft patch that the Chinese economy is in, we reckon that it is important to acknowledge that China is undergoing a structural transformation which involves ongoing rebalancing from traditional investment and export growth drivers towards domestic consumption.

We are penciling near-term downward bias for the HSI and HSCEI as both indices remain mired in a bearish moving average crossover, in spite of Mon’s slight upward bounce.

The Nikkei gapped up on Monday as the G20 expressed greater tolerance for a weaker yen as the USD/JPY remained a whisker away from the psychological 100 level. This is consistent with our base case that so long as the USD/JPY continues to march towards (better if it clears above) the psychological 100 level, the Nikkei will continue to rise higher. We are cautiously optimistic about Japan as we are seeing incipient signs of attempts at implementation of structural micro reforms (economic and fiscal) which are essential ingredients for a structural bull run in Japan to materialise. Major risk event will be BoJ’s April monetary policy meeting decision as well as inflation data this Friday (26 Apr) which could shed some light on progress on the deflation front.

Notwithstanding the strong start to European (specifically Italian) equities on Mon, uncertainties continue to linger on the EZ front. Note while Giorgio Napolitano was re-elected president of Italy, a new government has not been formed and we expect the process to be messy and do not rule out a political impasse which will cause jitteriness and weigh on markets.

In Singapore, 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. Today’s key risk event will be the release of March CPI inflation (1pm SGP time).

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

Macro Data:

In US, the housing market recovery continues, albeit at a slower pace. Existing home sales rose 3.3% seas adj annualised in 1q13, following firmer growth of 13.9% in the preceding quarter. (By Ng Weiwen)

Regional Market Focus

Singapore

• The benchmark STI remained range bound to close at 3,308.92 (+0.45%). The 2.3bn shares traded were worth S$1.2bn in value.
• Thai Beverage (+6.2%) and Jardine Matheson (+4.3%) were among the top performers in the STI. FNN closed significantly lower after resuming trading yesterday and continued to slide in early trading this morning.
• 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 finished the session up 13.64 points at 1559.1 points on Mon in line with gains in overseas markets after G-20’s approval of Japan’s easing but the composite SET index remained stuck at key resistance level of 1560.
• Overall bullish sentiment remains intact while technical indicators are about to confirm a buy signal. A possible breakout above 1580 could set the stage for a retest of the previous high of the year. However, sustained gains of up to 37 points over the last three sessions may leave the market vulnerable to more sporadic bouts of profit taking but we think investors may raise equity exposure back to 50% of the short-term portfolio as long as the composite SET index holds above 1540.
• Eyes will be on China and euro-zone PMI data due out this morning as well as possible baht measures after more apparent impact on exports.
• Resistance for the composite SET index is pegged at 1570-1585 and support at 1550-1535 today.

• Most Indonesian stocks fell on Monday (22/04), erasing early session gains, despite higher closes on Asia stock markets as the Yen weakened. The Jakarta Composite Index (JCI) shed 1.538 points, or 0.03%, to close at 4,996.923. The decline included six of the 9 main sectors, with Basic Industry sector lost 1.41%, Agriculture sector fell 0.77%, and Construction, Property and Real Estate sector trimmed 0.63%. Shares in Miscellaneous Industry sector halted the JCI from further declining, with 0.94%-gain. The LQ45 index added 0.418 points, or 0.05%, to close at 847.371. 165 shares rose, 97 shares fell, and 209 shares remained unchanged Monday on the Indonesia Stock Exchange, where 4.03 billion shares worth IDR 4.91 trillion traded on the regular board. Foreign investors posted net purchase of IDR 317.55 billion.
• With lack of leads from global and regional markets, the Jakarta Composite Index (JCI) will likely trade in range today. We expect the JCI to move in the range between 4,945 and 5,051.

• The Colombo bourse concluded the day on a mixed sentiment having faced to lot of fluctuations within the trading hours. The benchmark ASPI index closed within the red terrain at 5,872.43 dipping 9.82 points or 0.17%; and followed the negative closure of the prior trading day. However, the S&P SL20 price index closed positive at 3,338.38 with a tiny 2.26 points or 0.07% and recovering from the continuous drops on previous 2 days.
• The market capitalization stood at LKR 2.25Tn resulting in a year to date gain of 3.79% and the market PER and PBV stood at 15.87 and 2.16 respectively. The turnover for the day totaled up to record LKR 885.28Mn resulting in a drop of 14.37% against the previous trading day.
• Under the sectorial round-up Bank Finance & Insurance (BFI) Sector provided LKR 506.25Mn witnessing notable investor interest, BFI made a 57.19% contribution to the daily turnover while topping the list. Hotels & Travels (H&T) sector stood next in line to BFI providing 76.32Mn; even though BFI topped amongst the sectors in terms of turnover contribution, H&T stood to be the sector which grabbed highest investor interest during the day recording 1,707 trades out of the total 9,063 trades being noted. Additionally, Beverage Food & Tobacco sector (BFT) also logged 1,067 trades, which mainly derived from HVA Foods PLC (840 trades).
• Shares totaling up to 36.77Mn changes hands during the day resulting in a decrease of 17.15% against the previous trading day. Price losers outperformed the price gainers by 97:78. Foreigners appeared to be bullish during the day for the 15th successive trading day resulting in a net foreign inflow of LKR 390.75Mn, while extending the year to date net foreign inflow (LKR 8.20Bn) to cross the LKR 8Bn mark for the 1st time during the year. In regard to the local FOREX market, the USD closed at LKR 127.58/- selling and LKR 124.53/- buying.

• The Australian share market on Monday closed higher, led by resources stocks that rebounded from last week's sharp hits because of falling commodity prices. It was the second consecutive day of gains on the local bourse, with most sectors having positive days. The benchmark S&P/ASX200 index is was up 34.7 points, or 0.9 per cent to 4,966.6.
• Today (23/04/13), the Australian market looks set to open higher after gains on Wall Street and a mixed performance on European markets as traders balanced political progress in Italy, with the surprise re-election of President Giorgio Napolitano, with disappointing earnings and housing data from the US. The SFE Futures 200 is currently pointing upwards 13 points or 0.26 per cent to 4,972.
• No major economic news is expected on Tuesday.
• In equities news, Evolution Mining March is due to post quarter results, while the Brisbane Broncos holds its annual general meeting. Meanwhile, Aurizon chief executive Lance Hockridge is slated to speak at a CEDA lunch.

• Local stocks rallied. The HSI and HSCEI rose 30 points and 3 points to 22044 and 10590 respectively. Market volume was 53.70 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

Frencken Group Limited announced that its wholly-owned subsidiary, Precico Electronics Sdn Bhd, has on 22 April 2013 entered into a Sale and Purchase agreement with CIMB Islamic Trustee Berhad. The SPA is in connection with a proposed sale and leaseback arrangement with respect to the Vendor’s properties located in Penang, Malaysia.  (Closing price: S$ 0.193, -%)

Sino Grandness Food Industry Group Limited announced that its employees based in Qionglai city, Sichuan Province, PRC (“Qionglai”) are safe and its production facility in Qionglai has not been affected by the earthquake that struck Ya'an city, Sichuan Province, PRC (“Ya’an”) on 20 April 2013. Presently, majority of the Group’s juice production volume are still being outsourced to manufacturers based in provinces near the coastal areas such as Guangdong, Fujian and Zhejiang as these provinces are closer to the key retail points for the Group’s own-branded Garden Fresh juices.  (Closing price: S$ 1.220, -3.175%)

China Bearing (Singapore) Limited announced that the Company had on 19 April 2013 entered into a placement agreement with UOB Kay Hian Private Limited as placement agent pursuant to which UOBKH has agreed, on a best effort basis, to procure subscribers for up to 46,000,000 new ordinary shares in the capital of the Company (“Placement Shares”) at the placement price of S$0.0297 per Placement Share. (Closing price: S$ 0.042, +27.273%)

Keppel Corporation Limited announced that the Company and its wholly-owned subsidiary, Ocean Mineral Singapore Holding Pte Ltd*, have on 19 April 2013 entered into a joint venture agreement with UK Seabed Resources Ltd.* and Lion City Capital Partners Pte. Ltd.* to form Ocean Mineral Singapore Pte Ltd, a Singapore-incorporated company. The principal business activities of OMS are obtaining and maintaining licences for, and causing to be carried out, the exploration and harvesting of polymetallic nodules in certain areas of the international seabed. OMS has applied for its first exploration licence with the International Seabed Authority (“ISA”), established under the United Nations Convention on the Law of Sea, and the application will be considered by the ISA in July this year. (Closing price: S$ 11.320, +1.162%)