Morning Market Commentary

- STI: +0.45% to 3337.7                                 - SET: +1.31% to 1574.3
- JCI: -0.34% to 4994.5                                  - KLCI: -0.06% to 1706.3
- HSCEI: +1.30% to 10772.8                         - Hang Seng: +0.98% to 22401.2
- Nikkei 225: +0.60% to 13926.1                  - ASX200: +0.26% to 3397.1
- India NIFTY: +1.36% to 5916.3                   - S&P500: +0.40% to 1585.2

OCBC – Great Eastern 1Q13 results highlight
by Ken Ang

Great Eastern Holdings Limited reported 1Q13 profit of S$207.5 million. This represents a 21.0% y-y, and 8.0% q-q decline. Profit from life assurance declined 19.2% y-y, 15.2% q-q, to S$178.2 million, due to weaker contributions from non-participating funds. Contributions from non-participating funds declined 36.7% y-y, 27.1% q-q, from exceptionally high contribution levels registered last year. We note that New Business Embedded Value (NBEV), which is a measure of long term profitability of new sales, declined 7.1% y-y in 1Q13. NBEV had previously also registered a 21.4% y-y decline in 4Q12. On a positive note, Great Eastern guided that a high proportion of Profit from Insurance Business to be recurring in nature. This portion has been consistently more than S$100 million in the last five quarters, and represents 71.0% of 1Q13’s total Profit from Insurance Business. 1Q13’s Profit from life assurance was above our forecast of S$130 million, and is expected to contribute positively to OCBC’s 1Q13 results.

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Main key risk event today (for the Nikkei as well as risk sentiment) will be BOJ’s monetary policy meeting (which we do not expect any new major policy announcements and shift from Kuroda’s dovish stance earlier in April).  Keep a close eye on BoJ’s inflation forecasts and revisions for FY 2013 thru’ 2015 as that would given an indication of the BoJ’s commitments to end an era of deflation and reflate the economy. Any positive policy surprise could provide the catalyst for the USD/JPY to clear the elusive psychological 100 level and consequently boost the Nikkei (with is already at multi-year high).

In the US, the S&P500 continued to inch up (silently) on the back of reassurance that the labour market is gradually healing based on lower-than-expected initial jobless claims data as well as hopes of an ECB rate cut next week.

UK narrowly avoided a triple-dip recession and that sent the cable (GBP/USD) wild (+ 130 pips) on release of the 1q13 GDP data, after trading in a relatively tight range in recent days. But do fade this rally in the cable; it’s likely to be unsustainable in view of the broader economic climate. Disappointing EZ PMIs (esp Germany) have increased the odds of a rate cut at the next monetary meeting on 2nd May. We are pencilling in a possible 25 bps cut in refinancing rate, with no change to the deposit rate floor. Though, we caution that a rate cut –even if materialise- may not actually boost the real economy (esp for economies that need it most).

HSI gapped up (slightly) above its 20dma. But reckon that any technical rebound is likely to be limited unless the HSI decisively clears above 22.5k level which markets have yet to attempt.

STI next stop: 3400 psychological hurdle; key support pegged at 3320/3250. In Singapore, the main event risk will be March industrial production data –scheduled for release at 1pm today. The Singapore dollar has been strong of late, with the USD/SGD slipping to 1.2371 intra-day low during Asian session yesterday. But that was largely due to PBoC’s record yuan fixing. Looking ahead, USD/SGD is likely to remain stable without significant impetus either direction.

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

Macro Data:

In the US, the labour market is healing (albeit slowly). Initial jobless claims slumped by 16k wk-on-wk to 339k for the week ending Apr 20 from the preceding week figure (which was revised higher).  The 4-week moving average of claims declined by 5k, as compared to the 4k gain in the preceding week. This suggest that the recent large upward swing in claims in the second half of March is likely to be transitory, distorted by seasonal effects.  (by Ng Weiwen)

In Philippine, the central bank (BSP) stood pat in April, maintaining the key policy rate while cutting the rate on its special deposit account by 50 bps, likely in an attempt to temper the appreciation of the Philippine peso, rather than stimulating growth per se. (By Ng Weiwen)

In South Korea, GDP grew by 0.9% q-q in 1q13, beating the market expected 0.7% q-q pace, after the 0.3% q-q gain in 4q12. On y-y basis, GDP grew by 1.5% y-y, the same pace as the 1.5% y-y pace achieved in 4q12. The better than expected GDP data would likely refrain from the further benchmark rate cut in the near term.  (by Roy Chen)

Regional Market Focus

Singapore

• The benchmark STI remained range bound to close at 3,337.71 (+0.45%). The 2.2bn shares traded were worth S$1.7bn in value. 
• Olam International released its annual strategy review and strategic plan for FY2014-2016. Four key priorities were established: 1) Accelerate free cash flow generation, 2) Reduce gearing, 3) Reduce complexity and 4) Promote better understanding of Olam’s business. This announcement appears to address the key critics of high gearing and low cash generation of its business. With the stock trading >2% higher in early trading today, it seems that the market is taking this shift in strategy positively.
• 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 rallied sharply throughout the session on Thu as there had been no tough measures from the Bank of Thailand to tackle the baht. Big-cap telecoms and energy counters led the market’s advance.
• Thai stocks appear headed for a retest of a key psychological 1600 level today driven by earnings plays and oil price rebound, which would lift energy stocks despite a continued selling spree by foreign investors. For the last three sessions, net foreign selling in the Thai stock market topped Bt10bn. However, we think the composite SET index is unlikely to break above the key barrier of 1600 as concerns over possible baht measures would weigh on sentiment.
• Key factors to watch will be (i) the Japanese economic outlook after Bank of Japan’s meeting today and (ii) 1Q13 US GDP data, which is expected to point to a recovery.
• Resistance for the composite SET index is seen at 1586-1600 and support at 1563-1550.

Indonesia

• The Jakarta Composite Index (JCI) finished with moderate decline on Thursday (25/04), amidst mixed closes on stock markets in Asia, as investors stayed on the side line ahead of the Bank of Japan meeting result on Friday (26/04). The JCI shed 17.084 points, or 0.34%, at 4,994.523. The decline included all but one major industry groups, with Financial sector gained 0.86%. Miscellaneous Industry sector lost 4.71%, Agriculture fell 0.54%, and Basic Industry sector declined 0.45%. The LQ45 index trimmed 2.837 points or 0.33%, at 847.824, with 24 of its 45 blue-chip constituents ended in red. 152 shares declined, 100 shares advanced, and 219 shares stagnated Thursday on the Indonesia Stock Exchange. Regular board volume reached 5.1 billion shares with a total value of IDR 6.04 trillion. Foreign investors posted net sale of IDR 375.55 billion.
• The Jakarta Composite Index will likely move sideways today, with mixed leads from stock markets in the US and weak start in Asia. We estimate the JCI to move within 4,937 – 5,045 range today.

Sri Lanka

• Wednesday, 24 April 2013: The Bourse concluded the trading day on an encouraging manner resulting positive closures on both indices and assured further appreciations in their respective green territories. This was mainly as a result of the active participation of the investors throughout the day. Most counters noted price gains during the day whilst the gainer to loser ratio being a smashing 145:56. The benchmark ASPI index (5,933.73) closed positive accruing substantial 50.21 points or 0.85% to close above 5,900 levels recording the highest index value after 1st  October 2012; besides, during the past 2 trading days ASPI gathered 61.30 points or 1.04%. The S&P SL20 price index too closed positive for the third successive day at 3,358.51 having gained 13.66 points or 0.41%.
• The Market capitalization as at the day’s closure leaped to record LKR 2.27Tn resulting in a year to date gain of 4.88% and the market PER and PBV stood at 16.03 and 2.18 respectively. The recorded turnover for the day was LKR 975.32Mn, a gain of 37.64% from its previous day. 
• Under the sectorial round-up, the limelight fell on the Power & Energy (P&E) sector recording a turnover of LKR 313.33Mn providing a 32.13% to the day’s total turnover value hence assisting P&E to top the list; The sector was mainly supported by the subscription made by PAP. Bank Finance & Insurance (BFI) stood second in terms of both, turnover contribution and grabbing investor interest during the day; BFI recorded a turnover of LKR 190.38Mn as a result of 1,815 trades taking place. Further, Manufacturing sector (MFG) turned out to be the sector perceiving the highest investor participation recording 1,839 trades out of the total 10,325 trades being noted within the day.  The two sectors P&E and BFI collectively made account to 52% of the aggregate turnover recorded.
• A total of 138.32Mn shares changed hands within the day resulting in massive upsurge of 356.57% against the previous trading day. Having recorded Net Foreign Inflows for 16 continuous trading days which accumulated LKR 3.5Bn, foreign participants appeared to be bearish for the 1st time during the week which in turn resulted in an out flow of LKR 161.54Mn while diminishing the year to date Net Foreign Inflow to LKR 8.26Bn. In regard to the local FOREX, the USD closed at LKR 128.37/- selling and LKR 125.32/- buying.

Australia

• The Australian share market was close on Thursday for the Anzac Day public holiday. On Wednesday the market closed close to 1.5 per cent higher as low inflation figures raised investors' expectations of an interest rate cut.  The benchmark S&P/ASX200 index was up 86.2 points or 1.72 per cent to 5,102.4 points
• Today (26/04/13), the local market looks set to open higher after Wall Street gained on positive US jobless figures.  The SFE Futures 200 is pointing upwards 12 points or 0.23 per cent to 5,127.
• In economic news on Friday, the Reserve Bank of Australia (RBA) is due to release March financial aggregates figures. Australia's consumer price index (CPI), the key measure of inflation, rose 0.4 per cent in the first three months of 2013, below expectations for a rise of 0.7 per cent. 
• In equities news, ResMed is expected to post third quarter results.

Hong Kong

• Hong Kong shares rose 0.98 per cent on Thursday, a second straight healthy advance on receding fears that China will introduce fresh measures to tighten monetary policy.
• The benchmark Hang Seng Index added 218.19 points to end at 22,401.24 on turnover of HK$62.80 billion (US$8.10 billion).
• But Chinese shares closed down 0.86 per cent. The benchmark Shanghai Composite Index fell 19.01 points to 2,199.31 on turnover of 84.5 billion yuan (US$13.7 billion). (Source: BT Online)

Morning Note

Company Highlights

Raffles Education Corporation Limited announced that it intends to issue S$50,000,000 5.9% Fixed Rate Notes due 2018 (the "Notes"). The Notes will be issued under the S$300,000,000 Medium Term Note Programme established by the Company on 22 February 2012 (the "Programme"). The Hongkong and Shanghai Banking Corporation Limited and United Overseas Bank Limited have been appointed as the joint lead managers and bookrunners for the Notes. (Closing price: S$ 0.330, 1.538%)

Riverstone Holdings Limited announced the issue and allotment of an aggregate of 8,415,880 ordinary shares in the capital of the Company at the exercise price of S$0.31 each, pursuant to the exercise of the 8,415,880 warrants. These new shares has been listed and quoted on the Singapore Exchange Securities Trading Limited on 26 April 2013.  (Closing price: S$0.490, +1.031%)

AIMS AMP Capital Industrial REIT Management Limited, as manager of AIMS AMP Capital Industrial REIT, announced that further to its announcement dated 17 April 2013 in relation to the proposed private placement of new units in AIMSAMPIREIT (the “New Units”) to institutional and other investors (the “Private Placement”) and its announcement dated 17 April 2013 in relation to the close of the Private
Placement, approval in-principle has been obtained today from Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing of, dealing in, and quotation on the Main Board of the SGX-ST of, 68,750,000 New Units which are to be issued pursuant to the Private Placement at an issue price of S$1.60 per New Unit. (Closing price: S$1.785, +2.586%)

Source: PhillipCapital Research - 26 Apr 2013