- SET: +0.95% to 1643.4
- JCI: +1.35% to 5214.98                               - KLCI: +0.45% to 1777.2
- HSCEI: +1.52% to 11186.5                         - Hang Seng: +1.78% to 23493
- Nikkei 225: +1.47% to 15360.8                  - ASX200: +0.44% to 3563.05
- India NIFTY: -0.49% to 6156.9                   - S&P500: -0.07% to 1666.3

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Gold (and to a greater extent, silver) rebounded overnight. But pls don't get caught in this bull trap. We continue to UW gold.

Note we have been UW for gold since Oct12 and it has proved to be a prescient call.

Looking ahead, the downward bias for gold is likely to continue to persist on account of the following:

a) stronger USD on improved US trade balance (shale gas boom) as well as gradual pick up in economy
b) receding tail risks on the  EZ front (as reflected by the decline in 10yr yields of peripheral EZ sovereigns)
c) greater risk-on appetite (fresh highs in most equity indices)
d) awkward trend of disinflation worldwide (US, China and EZ) notwithstanding the synchronised monetary easing by major central banks. Subdued inflation diminish the importance of gold as a hedge against rising inflation

Spot on! HSI gapped up and tested the 23.5 k level during intra-day. During Mon morning webinar as well as last week’s morning commentary, we emphasised that the bullish setup for the HSI remains intact, notwithstanding the retracement in recent days. Looking ahead, as long as the HSI remains above the 22.5k support level, the HSI is on track to challenge the 23.5k level next, followed by 23.95k (prev high).

Major risk event for gold and equities will be Bernanke’s testimonial before the Joint Economic Committee on 22nd May where we will get greater clarity on the pace of LSAPs.

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

Macro Data:

In Thailand, GDP contracted 2.2% q-q sa in 1q13, reversing from growth of 2.8% in the preceding quarter. Looking ahead, in view of the benign inflation as well as pre-emptive Oct rate cut, we expect BoT to stand pat unless economic activity substantially slows down.  Though this weaker-than-expected GDP print might tilt the balance for a small rate cut.

 

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Regional Market Focus

Singapore

• The benchmark STI closed higher at 3.454.23 (+0.14%). The 3.0bn shares traded were worth S$1.4bn 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

• Thai stocks rallied sharply and stayed in the green throughout the session on Mon on better-than-expected economic data out of the US and Japan despite concerns that the Federal Reserve would scale down its QE program.
• The SET index is expected to stay choppy in a range of 1630-1650, receiving the boost from renewed foreign buying in both equities and futures and hopes of an interest rate cut by the Bank of Thailand at its May 29 meeting after the country’s 1Q13 GDP grew at a slower than expected pace of 5.3% as a result of softer than expected export growth, which prompted the NESDB to cut its 2013 growth forecast to 4.2%-5.2% from 4.5%-5.5%.
• The Federal Reserve Chairman Ben Bernanke’s Congress testimony on Wed, which may provide clues on the health of the US economy and its QE program could put a cap on the upside and drag the SET index lower.
• In our view, sector rotation plays will likely be more active with focus on the potential beneficiaries of the rate cut.
• Today we peg resistance for the SET index at 1646-1650 and support at 1637-1631.

Indonesia

• The Jakarta Composite Index (JCI) climbed on the first trading day of this week (20/05), JCI gained 69.293 points, or increased by 1.35%, to 5,214.976. The increase on Monday was supported by eight of the nine major industry groups, led by Basic Industry sector that rose 2.80%, Miscellaneous Industry sector added 1.78% and Consumer Goods sector gained 1.75%. The LQ45 index closed higher than the previous close, at 884.134 or advanced 1.62%. In economics news, Indonesia’s Investment Coordinating Board (“BKPM”) said 24 infrastructure projects to be prioritized for private and foreign investors this year. The news helped bolster shares Infrastructure sector on Monday. 157 shares advanced, and 116 shares declined Monday on the Indonesia Stock Exchange, where 5.15 billion shares worth IDR 7.00 trillion changed hands on the regular market. Foreign investors posted net purchase of IDR 532.879 billion.
• The Jakarta Composite Index (JCI) will likely to retreat today, with profit takings are imminent after a sharp rally yesterday, and ahead of a major market moving event where the US Federal Reserve chairman Ben Bernanke will testify on the outlook for the US economy before the Joint Economic Committee of Congress in Washington. We expect the JCI to move lower on cautious stance, with support and resistance each at 5,128 and 5,287.

Sri Lanka

• The Colombo bourse ended the trading day on an optimistic note assisting both indices to accrue notable gains and to maintain its stay within the positive terrain. This was mainly as a result of the active participation of investors seen on most parts of the trading day. The benchmark ASPI index closed positive for the 4th successive trading day at 6,466.67 gaining 85.97 points or 1.35%; this was the highest value recorded after 14th October 2011 (6,549.91). Furthermore, surpassing the 3,600 level the S&P SL20 index closed at 3,649.35 up by 60.09 points or 1.67% recording yet another all-time-high. The daily turnover totaled to LKR 1.28Bn resulting in 8.48% reduction when compared to the previous trading day. During the day, investor attraction was largely observed on the Bank Finance & Insurance (BFI) sector with 2,566 trades out of a total 11,525 trades been noted hence assisting BFI to emerge as top contributor under the sectorial summary having provided LKR 438.04Mn which alone accounts to 1/3rd  of the daily aggregate turnover value. Further the Diversified Holdings (DIV) sector made a contribution of LKR 258.89Mn, standing next in line to BFI .Moreover, the two sectors BFI and DIV collectively made a 54.33% contribution to the daily aggregate turnover. A total of 44.03Mn shares changed hands resulting in a drop of 24.78% against the previous trading day. In terms of share prices, 101 companies gained and 114 companies lost during the day. Foreign participants appeared to be bullish during the day for the 8th successive trading day resulting in a net foreign inflow of LKR 288.36Mn, as a result of foreign purchases worth LKR 350.89Mn and sales of LKR 62.54Mn; this assisted the year to date net foreign inflow to reach LKR 11.47Bn. In regard to the local FOREX market, the USD closed at LKR 127.80/- selling and LKR 124.75/- buying.

Australia

• The Australian share market on Monday closed stronger, pushing above one per cent during the day but easing to around half a per cent higher by the finish. The benchmark S&P/ASX200 index was up 28.2 points or 0.54 per cent to 5,209 points.
• Today (21/05/13), the Australian local market looks set to open lower following Wall Street’s lead falling slightly ahead of Federal Reserve Chairman Ben Bernanke's testimony on the economic outlook to Congress.
• In economic news on Tuesday, the Reserve Bank of Australia releases the minutes of its May board meeting. Treasury Secretary Dr Martin Parkinson is scheduled to address the Australian Business Economists' lunch on Budgeting in Challenging Times. 
• In equities news, Financial services company Thorn Group is due to post full year results and Ruralco Holdings its first half results, while Boart Longyear and Quickflix have annual general Meetings.   Norton Gold Fields opens its Enterprise Mine in Kalgoorlie.

Hong Kong

• Hong Kong shares jumped to their highest since early February on Monday, led by Chinese cyclical counters, as investors chased a resurgent mainland China market which stretched a winning streak into a fourth session.
• The Hang Seng Index closed up 1.8 percent at 23,493 points, its highest since Feb. 4. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 1.5 percent.
• The CSI300 of the leading Shanghai and Shenzhen A-share listings rose 0.7 percent while the Shanghai Composite Index ended up 0.8 percent in their fourth consecutive day of gains. (Source: Reuters)

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Morning Note

Company Highlights

XMH Holdings said that Credence Capital Fund II (Cayman) Limited, founded by Koh Boon Hwee, has agreed to subscribe up to 36.05 million new shares at S$0.2774 each, raising net proceeds of S$9.92 million. Credence will become the company's first major institutional investor with a 19.9 per cent stake in XMH's total enlarged issued and paid up share capital. (Closing Price S$0.325, +12.07%)

Hafary Holdings announced that it has received approval-in-principle for transfer of listing to SGX Mainboard. It has also declared second interim dividend of 1.5 cents per share. (Closing Price S$0.245, 0%)