- KLCI: +0.03% to 1788.4
- JCI: +0.54% to 5081.9                          - SET: +0.36% to 1623.5
- HSI: -0.26% to 22930.3                        - HSCEI:-0.69% to 11032.8
- Nikkei: -0.16% to 14758.4                   - ASX200: +0.77% to 3519.5
- Nifty: +0.25% to 5995.4                        - S&P500: +1.01% to 1650.3

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

S&P 500 and DJIA rocketed to fresh highs overnight BUT curiously the VIX (which is typically negatively correlated with equity prices) jumped 1.75%.

Markets are gyrating and clinging onto any strand of good news: better-than-expected results in NFP, then Mon retail sales, now a Tepper-inspired rally. This exuberance overnight is likely to spill over to Asian session today.
 
What's next? To sustain these highs or charge ahead, the global economy (which has been lacklustre thus far) has to pick up the slack and earnings as well as sales have to continue to grow. In fact, notwithstanding the synchronised monetary easing by major central banks, we are seeing an awkward trend of disinflation worldwide (US, China and EZ). Yesterday’s weak US. Apr reading of import prices further lends support to this thesis. Subdued inflation (or rather disinflation) does not bode well for coy earnings and sales.
 
HSI and HSCEI pierced through their respective 10dma support level. But as long as key support levels (i.e. HSI:22.5k, HSCEI: 11k) are not breached, the bullish case for both indices remains intact in spite of yesterday’s retracement. . While we are cognisant that the Chinese economy is restructuring, sluggish Chinese industrial production as well as retail sales data suggest that domestic demand (investment and consumption) is not picking up the slack.
 
While the STI ended broadly flat yesterday, it is on track to challenge the 3485 level as long as it remains above 3250 key support.
 
(All equity indices mentioned in this note are tradable with Phillip CFDs or ETFs)

Macro Data:

In EZ, factory output climbed 1.0% m/m as in March, registering the strongest monthly gain in nearly 2 years. In Germany, the ZEW index remains broadly unchanged, gaining 0.1pts m-m to 36.4 in May in view of sluggish conditions in the EZ.
 
In Indonesia, Bank Indonesia stood pat at its May monetary policy meeting, maintaining the policy rate at 5.75% with also no change to the overnight deposit facility rate (FASBI). Looking ahead, we reckon monetary policy should be pre-emptive and a rate hike- benchmark interest rate &/or its overnight deposit facility rate (FASBI)-  is warranted (likely within this year) in view of an impending spike in domestic inflationary pressures as fuel subsidies –which has been a fiscal strain but politically sensitive- would eventually need to be scaled back.

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Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.432.76 (+0.11%). The 0.39bn shares traded were worth S$0.22bn in value.
• 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

• The SET index traded to the upside in a narrow range on Tue boosted by upbeat US retail sales. The market took a pause after a failed break of the 1630-point resistance and it failed to break out of the sideways trend over the last five sessions.
• The overall directional bias may remain to the upside for Thai stocks, which could be headed for a test of new high at 1630 as the short-term boost would come from bullish overseas sentiment, the final stretch of the first-quarter earnings season in Thailand, continued foreign buying and renewed institutional buying yesterday.
• Major resistance for the SET index is seen at 1650 +/-. The short-term strategy is to sell the rallies and buy the dips within support and resistance levels. Today, we expect the SET index to trade in a range of between 1616 and 1635 points.  
• Today we peg resistance for the SET index at 1628-1635 and support at 1620-1616.

Indonesia

• The Jakarta Composite Index (JCI) gained 27.312 points, or 0.54%, to finish at 5,081.940 on Tuesday (14/05), after report that Bank Indonesia kept its benchmark rate unchanged at 5.75% for the fiftieth meeting. The advance on Tuesday was supported by six of the 9 major sectors, led by Consumer Goods sector with 1.27%-gain, Misc. Industry sector with 1.25%-advance, and Construction sector with 1.00%-rise. The LQ45 index added 5.792 points, or 0.68%, to end at 856.867. 140 shares climbed, 122 shares fell, and 98 shares remained unchanged Tuesday on the Indonesia Stock Exchange. Volume on the regular board reached 3.74 billion shares worth IDR 4.88 trillion. Foreign investors’ transactions accumulated to a net sell of IDR 154.372 billion.
• The Jakarta Composite Index (JCI) will likely trade higher with moderate gains today, after strong finishes on US stock markets on Tuesday and as regional markets started higher today, on the back of optimism about US economy and weaker Yen. We expect the JCI to moderately advance, with support and resistance at 5,022 and 5,112 respectively.

Sri Lanka

• The Colombo Bourse dropped for the 2nd consecutive trading day as a result of sluggish participation of investors and also the selling pressure which prevailed on most part of the trading day. The Benchmark ASPI index dipped further by 32.44 points or 0.52% to close at 6,206.59 and the S&P SL20 price index closed at 3,500.50 losing 18.35 points or 0.52%. As at the daily closure, the total market capitalization stood at LKR 2.38Tn indicating a gain of 9.75% YTD and the market PER and PBV stood at 16.78 and 2.29 respectively. The day recorded an aggregate turnover of LKR 636.59Mn; this was a gain of 18.96% against the prior trading day. During the day, investor attractions were largely visible on Bank Finance & Insurance (BFI) sector with 2,024 trades out of the total 8,621 trades being recorded within the day, hence assisting the BFI sector to emerge as the top contributor under the sectorial summary having provided LKR 239.64Mn which alone accounts to nearly 38% of the daily aggregate turnover. Diversified Holdings (DIV) too made a notable subscription worth LKR 160.04Mn to the daily turnover. Additionally, the two sectors BFI and DIV collectively accounted to 63% of the daily aggregate turnover. Shares totaling up to 23.96Mn were traded during the day resulting in a tiny drop of 2.76% compared to the previous trading day. Foreign participants appeared to be bullish during the day, noting a net foreign inflow of LKR 154.32Mn as a result of foreign purchases worth LKR 183.94Mn and sales worth LKR 29.61Mn; this extended the year to date net foreign inflow to record LKR 9.91Bn. In regard to the local FOREX market, the USD closed the day at LKR 127.86/- selling and LKR 124.81/- buying.

Australia

• The Australian share market on Tuesday closed higher after a volatile day of trading due to the impending federal budget.  The benchmark S&P/ASX200 index was up 10.7 points or 0.21 per cent to 5,221 points.
• Today (15/05/13), the Australian market looks set to open higher after US stocks surged to new record highs on renewed optimism as a prominent hedge fund manager said the 2013 rally has further to go. The SFE Futures 200 is pointing upwards 19 points or 0.36 per cent to 5,225.
• In economic news on Wednesday, the Australian Bureau of Statistics is due to release the wage price index for the March quarter and April's new motor vehicle sales data. Former Future Fund chairman David Murray and HSBC Australia chief economist Paul Bloxham are expected to address the Australian British Chamber of Commerce-KPMG Budget Briefing in Sydney. Fairfax Media chief executive Grey Hywood is slated to address the American Chamber of Commerce lunch at Sydney's Shangri-La hotel.
• In equities news, Commonwealth Bank is expected to post its March third quarter trading update

Hong Kong

• Local stocks dropped. The HSI and HSCEI declined 60 points and 77 points to 22930 and 11033 respectively. Market Turnover 59.24 billion.
• As we expected, the HSI stared correction, we suggest investors to increase the weighting on cash, aggressive investors are also suggested to use derivatives for grasping the short term downward trend. However, we believe it is a short term correction, we maintain a cautious bullish view for long term.
• Technically, the HSI is expected to gain a support from 22800 level, major resistance will be 23800 level.  

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Morning Note

Company Highlights

Moody's Investors Service has upgraded Yanlord Land Group Limited's senior unsecured debt rating to Ba3 from B1, and has assigned Ba3 rating to the RMB bond to be issued by Yanlord Land (HK) Co., unconditionally guaranteed by Yanlord Land Group Limited. At the same time, Moody's has affirmed Yanlord's Ba3 corporate family rating. The outlook on all ratings remains stable. The proceeds of the RMB bonds will be used to finance existing and new projects. (Closing price: S$1.475, -1.667%)