KLCI: -0.15% to 1774
JCI: +0.92% to 5089.3
SET: +0.81% to 1614.1
HSI: +0.86% to 23244
HSCEI: +1.53% to 11284.7
Nikkei: +0.74% to 14285 ASX200: +1.09% to 5199.8
Nifty: +0.43% to 6069.3 S&P500: +0.41% to 1632.7
MARKET OUTLOOK:
By Joshua Tan, Head of Research
Equities continue to outperform the other asset classes this year – in line with our global asset allocation call at year start: OW Equities, MW Bonds, MW Commodities, UW Gold.
Sell in May seems more and more a remote possibility since technical momentum revived itself 2 weeks ago. Weak macro data has more or less been shrugged off as markets look ahead, but the fact that earnings (US, HK, SG) seems to have reaccelerated sequentially (according to Bloomberg data), may also be supportive. Central Bank easing in the EZ and Australia has also helped sentiment.
On the softness of economic data – a silver lining – new orders for durables, capital goods may have already started turning around, as our charts show a small tick up after what has been almost a year long deceleration. As our other Macro Analyst Weiwen says, if you do sell in May, please do not go away! This is still the year for stocks. Our OW markets are the US, Greater China, SG, TH, PH, ID.
SG stocks earnings have been largely in line with expectations with outperformance in Banking earnings. One of our top picks SIAEC (S$5.29) has had a fantastic run this year (and last year!) returning +20% this year, our target price is S$6. We continue to like Pan United (S$0.945, TP S$1.21), Boustead (S$1.40, TP S$1.81), and our recently added initiation, Cordlife, has returned 26% already (S$0.815, TP S$0.84).
(Please see our Global Macro Asset Strategy reports for ETF and CFD instruments to trade the macro outlook. PhillipUT Wrap Account offers tactical asset allocation of unit trusts without front loading sales charge.)
Macro Data:
By Ng Weiwen & Roy Chen
In Malaysia, exports eased more-than-expected by 2.9% y-y in March, following the decline of 7.7% in the preceding month. The continued export slump was largely due to sluggish shipments of palm oil and electrical products. Bank Negara (BN) will meet today (9 May) and we reckon BN will likely to stand pat- maintaining the Overnight Policy Rate at 3%, barring any extreme deterioration in the global macro environment or upside in inflation.
In China, exports rose by 14.7% y-y in Apr, exceeding the market expected 9.2% y-y pace, compared to the 10.0% y-y pace achieved in Mar. The well-performing data triggered some skepticism in the market. We have no comment on this, but we do caution that the rest of economic metrics such as PMIs indicate the momentum of the nation's economic recovery is weakening. Despite the risk of rising housing price still exists, we do not rule out the possibility of loosening by the central bank if the outlook continue deteriorating.
Regional Market Focus
Singapore
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The benchmark STI closed higher at 3.413.02 (+0.88%), convincingly past the 3,400 level.
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The 2.7bn shares traded were worth S$1.9bn in value.
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Our analyst maintained positive views on Wilmar, citing healthy volume growth across all segments and 3 consecutive quarters of positive results.
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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
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Thai stocks yesterday ended up 13 points at 1614.15 points after rallying to flirt with 1620 points. The SET hit the 19-year high during intraday trade in response to unexpectedly strong macro data out of China and German.
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Thai bourse today is expected to trade in a similar range of 1600-1620 to yesterday while the market sentiment continues to be positive, taking cues from gains in overseas markets following unexpectedly strong macro data. Adding to bullishness is earnings plays which appear to help buoy the market. Nevertheless, profit-taking activities seem to be intact along the way amid technically bearish signals. Capital inflows continue to give mixed vibes, moving in and out of the stocks on daily basis, while the Thai baht appreciated against the USD and regional currencies once again.
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Chinese CPI is due out this morning which would affect the market sentiment whilst US weekly initial jobless claims due tonight (Thailand time).
Indonesia
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The Indonesia stock market is closed today.
Sri Lanka
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The Colombo Bourse retains positive. The Colombo bourse concluded the day on an optimistic note resulting in both indices concluding positive. Steady upward momentum was observed during early hours of trading however a selling sentiment was observed prior to mid-day which in turn resulted in the erratic movements in the market; post mid-day the market experienced a steady progression. The benchmark ASPI Index closed positive at 6,210.10 for the 5th consecutive day gaining 8.42 points or 0.14%. The S&P SL20 Index too closed within the green terrain for the 11th successive day at 3,521.30, indicating a gain of 9.35 points or 0.27%. The market capitalization as at the day’s closure stood at LKR 2.38Tn resulting in a year to date gain of 9.81%; the market PER and PBV stood at 16.79 and 2.29 respectively. The turnover for the day totaled up to LKR 1.47Bn indicating an increase of 5.66% against the previous trading day. Bank Finance & Insurance and Diversified Holdings topped the list under the sectorial summary contributing LKR 706.39Mn and LKR 264.08Mn respectively. However, in terms of investor interest BFI witnessed the most number of trades recording 4,058 trades out of the total 14,130 trades being noted. The two sectors BFI and DIV collectively accounted to 66.23% of the day’s aggregate turnover. During the day, 50.86Mn Shares changed hands resulting in a drop of 6.58% against the previous trading day. Price losers outperformed the price gainers by 107:98. Foreign participants appeared to be bearish for the 1st time during the week resulting in a net foreign outflow of LKR 92.13Mn as a result of foreign sales of LKR 400.48Mn and purchases worth LKR 308.35Mn; this was having recorded inflows for the past 7 trading days. In regard to the local FOREX, the USD closed the day at LKR 127.91/- selling and LKR 124.86/- buying.
Australia
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The Australian share market on Wednesday closed at its best level in almost five years, driven by record US market highs and positive Chinese trade data. Resources stocks led the Australian market to near the 5,200-points level, the highest close since August 2008. The benchmark S&P/ASX200 index was up 56.1 points, or 1.09 per cent to 5,199.8 points.
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Today (09/05/13), the Australian market looks set to open higher following solid gains on Wall Street overnight on positive economic data from Germany and China. The SFE Futures 200 is pointing upwards 58 points or 1.12 per cent to 5,192.
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In economic news on Thursday, the Australian Bureau of Statistics (ABS) releases labour force data for April, while the Housing Industry Association Trades report for March quarter is also due.
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In equities news, News Corp posts third quarter fiscal earnings, National Australia Bank announces its first half results and Billabong is expected to provide details of a possible takeover. Meanwhile, Rio Tinto, Santos and Caltex have annual general meetings scheduled.
Hong Kong
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Local stocks climbed. The HSI and HSCEI rose 197 points and 169 points to 23244 and 11284 respectively. Market Turnover 65.08 billion.
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Due to the RQFII details is going to confirm, market expected the total RQFII size will be about 200 billions, Mainland securities corporation outperform the market. Apart form that, the market expected China 4G licenses will be issued on 17th May 2013, favor telecommunication equipment producers, we maintain a cautious bullish view in short term.
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Technically, the HSI is expected to gain a support from 22800 level, major resistance will be 23800 level.
Morning Note
Company Highlights
AusGroup Limited subsidiary AGC Industries Pty Ltd, has been awarded a contract extension for further fabrication work worth approximately AU$13.6 million on the Chevron-operated Gorgon Project, taking the total contract value to more than AU$80 million. Fabrication will continue to be undertaken at AGC’s manufacturing and fabrication facilities in Kwinana and Henderson, Western Australia, and is creating jobs for approximately 280 people. AGC’s original contract for 12,000 pipe spools has been extended to approximately 21,500 pipe spools under the agreement. The contract involves high specification fabrication of stainless and carbon steel pipework, non-destructive testing, post-weld heat treatment, blasting and LNG specification painting related to the LNG modules for trains 1-3 on the Gorgon Project. (Closing price: S$0.480, 3.226%)
Seroja Investments Limited issued a profit warning regarding the financial results of the Group for the first quarter ended 31 March 2013. The Group is expected to report a loss for 1Q2013 as compared to the corresponding period last year. The loss is mainly due to lower gross margin, mainly attributable to lower freight rates as well as higher operating expenses incurred for their fleet of vessels. (Closing price: S$0.165, 0.610%)
Ramba Energy Limited announced that it has discovered at least 274 feet of gross pay at the Lemang block, located in Sumatra, Indonesia. Testing results from the Akatara-1 exploration well – the second well drilled by Ramba at the Lemang block – flowed up to 11.0 million standard cubic feet per day of gas and 380 barrels of condensate per day with a gravity of 60 API from the primary reservoir. The Akatara-1 well has been temporarily suspended as a discovery well on 27 April 2013 at approximately 3:00 a.m. pending further field development. Ramba drilled to a total depth of 6,400 feet in exploration drilling, encountering 15 potential reservoir layers. The discovery at the Akatara-1 is the second discovery by Ramba at the Lemang block, as, in December 2012, the Group encountered 222 feet of gross oil and natural gas pay at the Selong-1 exploration well. (Closing price: S$0.510, -0.971%)
Zhongmin Baihui Retail Group Ltd announced profit guidance in respect of the financial results of the Company and its subsidiaries. The Board expects the Group to report a loss after taxation in 1Q 2013 as compared to 1Q 2012. This was mainly attributable to losses incurred at its Nanjing Nanzhan Store as it had only opened for operations in September 2012. (Closing price: S$1.640, -0.606%)