Morning Market Commentary

- STI: -0.30% to 3443.9                                  - SET: +0.00% to 1643.4
- JCI: -0.50% to 5188.76                                - KLCI: +0.58% to 1787.38
- HSCEI: -0.92% to 11083.2                          - Hang Seng: -0.54% to 23366.4
- Nikkei 225: +0.13% to 15381                      - ASX200: +0.70% to 3587.9
- India NIFTY: -0.70% to 6114.1                   - S&P500: +0.17% to 1669.2

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

The S&P 500 and DJIA continued to inch up -clocking in a 19th (!) consecutive positive Tuesday as well as fresh highs. We -along with markets- are awaiting with abated breath Bernanke's testimony (Wed 10pm, SGP time) as well as the FOMC minutes (Thurs 2am, SGP time).

Today is a loaded day with 2 key risk events lined up.

(i) Key risk event will be Ben Bernanke’s testimonial before the Joint Economic Committee on 22nd May where we will get a better sense of the Fed’s assessment of the US economic outlook and greater clarity on the pace of LSAPs. Do scrutinise the wording of the May FOMC minutes which will be released shortly later after Bernanke’s testimonial. Recall the Fed had previously indicated in its May FOMC statement that the pace of asset purchases could be -either increased or decreased- from the current US$85bn/mth depending on macro conditions.

(ii) Japan will announce its monetary policy decision today. Reckon BoJ is likely to stand pat after announcing aggressive monetary easing measures in early Apr in view of (a) the Japanese economy humming again with an acceleration in 1Q GDP, better-than-expected readings in manufacturing (PMI at 13-mth high) as well as household consumption and (b) increased inflation expectations. Notwithstanding the possible pause, note the BoJ intends to double(!) the  monetary base in 2yrs (from 138tn at end-CY12 to 270tn at end-CY14).

STI remains on track to challenge the 3485 level as long as it remains above 3250 key support. Bernanke’s testimonial to Congress on Wed might provide the fillip. Stay nimble!

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

Macro Data:

In Hong Kong, CPI inflation accelerated faster than expected, gaining 4% y-y in April, following a 3.6% rise in the preceding month, on account of higher food prices.

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.443.90 (-0.30%). The 2.6bn shares traded were worth S$1.8bn in value.
• Top active stocks include KREIT (-2.41%) and SingTel (-2.21%). While SingTel closed lower possibly on profit taking, our analyst remains positive on SingTel due to dividend yield, and growth potential in overseas markets.
• 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 traded in range on Tue. The SET index attempted to test the 1,650-point barrier two times but failed to break through as the market awaited clarity on whether the Federal Reserve would taper its QE program and the BOT’s MPC meeting by the end of this month.
• The SET index is expected to continue its attempt to retest the 1650-point barrier again today while the market is awaiting the minutes of the FOMC meeting on Apr 30-May 1 and the Federal Reserve Chairman Ben Bernanke’s Congress testimony today for clues on its QE program amid market expectations that the US central bank will continue with its bond buying program despite growing calls from several Federal Reserve presidents for the Fed to start to taper its QE program.
• Foreign and institutional sell-offs in equities and futures could weigh on the upside and bouts of short-term profit taking would bring more volatility to the market especially when the SET index approaches the 1650-point barrier.
• Today we peg resistance for the SET index at 1650-1660 and support at 1637-1630.

Indonesia

• Most Indonesian stocks declined Tuesday (21/05), retreating from the rally on the previous day, as stock markets in Asia ended mixed following declines on Wall Street overnight. The Jakarta Composite Index (JCI) shed 26.217 points, or 0.50%, to finish at 5,188.759. The decline on Tuesday included six of the 9 major industry groups, with Consumer Goods sector fared worst (-1.69%), trailed by Miscellaneous Industry sector (-0.80%) and Infrastructure sector (-0.79%). Commodity sectors, however, supported the JCI on Tuesday. Index of Agriculture sector advanced 0.44%, and Mining sector gained 0.14%. The LQ45 index lost 5.149 points, or 0.58%, at 878.985. 160 shares declined and 96 shares advanced Tuesday on the Indonesia Stock Exchange, where 4.99 billion shares worth IDR 5.71 billion traded on the regular board. Transactions by foreign investors summed up to a net purchase of IDR 1.64 billion.
• The Jakarta Composite Index (JCI) will likely to rebound today, as stock market in Asia started in positive territory, after comments from two Federal Reserve Presidents that the Fed could still continue its bond purchase program depending on the economic outlook. We expect the JCI to move higher, with support and resistance each at 5,110 and 5,291.

Sri Lanka

• The Colombo bourse exhibited a slight slowdown during the day which resulted in the indices concluding on a mixed note; this was having recorded its 19 month peak during the previous trading day. The benchmark ASPI Index closed negative at 6,441.64 losing 25.03 points or 0.39%; this was having recorded positive closures for the past four trading days while collecting 260.08 points or 4.13%. However, the S&P SL20 Index closed on the positive side for the 4th successive trading day at 3,660.94 gaining 11.59 points or 0.32%. The market capitalization as at the day’s closure stood at LKR 2.47Tn resulting in a year to date gain of 14.12%. The market PER and PBV stood at 17.49 and 2.38 respectively.  The turnover for the day accumulated to record LKR 2.20Bn indicating a gain of 71.12% against the previous trading day. Under the sectorial round-up, Bank Finance & Insurance (BFI) and Diversified Holdings (DIV) sectors stood out to be the top contributors for the day with subscriptions worth LKR 930.79Mn and LKR 529.83Mn respectively. Further, the two sectors made a significant 67% contribution to the day’s aggregate turnover value.  During the day, a total of 39.46Mn shares changed hands resulting in a decrease of 10.39% against the previous trading day. Price losers were ahead of the gainers while the loser to gainer ratio was at 131:72. Foreign participants appeared to be bullish during the day resulting in a momentous net foreign inflow of LKR 1.09Bn as a result of foreign purchases worth LKR 1.52Bn and sales of LKR 433.12Mn; further this was the highest net foreign inflow figure noted in nearly 2  months (after 7th March 2013). In regard to the local FOREX market, the USD closed the day at LKR 127.81/- selling and LKR 124.76/- buying.

Australia

• The Australian share market on Tuesday closed around half a per cent lower, dragged down by weakness among the banks and industrial stocks. The benchmark S&P/ASX200 index was down 28.9 points or 0.55 per cent, to 5,180.10 points.
• Today (22/05/13), the Australian market looks set to open lower despite gains on Wall Street ahead of US Federal Reserve chairman Ben Bernanke's testimony in Congress. The SFE Futures 200 pointing downwards 28 points or 0.53 per cent to 5,192.
• In equities news, Myer is due to release its third quarter sales figures, while Adelaide Brighton, Iluka Resources and Petsec Energy hold annual general meetings.
• In economic news on Wednesday, the Westpac/Melbourne Institute Survey of Consumer Sentiment index is due to be released.

Hong Kong

• The Hang Seng Index closed today at 23366.37, down 126.66 points or 0.54%, with the Main Board's turnover amounted to HK$71.3 billion.
• The Hang Seng China Enterprises Index ended at 11083.23, down 103.31 points or 0.92%.
• ICBC (01398), with Goldman Sachs selling all shareholding, dropped 2.13% to HK$5.52, while CCB (00939) and Bank of China (03988) also fell 1.37% and 1.31% respectively. The three banks wiped a total of 65 points off the HSI.
• Heavyweights Tencent (00700) and China Mobile (00941) were down 1.75% and 1.04% respectively, while HSBC (00005) gained 0.17% to close at HK$90.4, a record high for more than 4 years.
• COSCO Pacific (01199) rebounded 4.1% as it agreed to sell all its stake in CIMC to parent company. China Resources Power (00836) extended loss this afternoon and ended the day falling 4.3%, making it the worst-performing Blue Chip today. (Source: Infocast News)

Morning Note

Company Highlights

Keppel Corporation has agreed to sell 180 million units of Keppel Reit for S$279.9 million, or S$1.555 per unit. After the completion of the 6.7 per cent stake sale, expected to take place on May 27 2013, Keppel Corp's stake in Keppel REIT will decrease to 51.5 per cent from 58.2 per cent. (Closing Price S$11.02, -0.181%)

Plastoform Holdings will be removed from the Singapore Exchange watch-list effective 22 May 2013, after more than two years on it. This came after it recorded its first full-year pre-tax profit for FY2012 after five years in the red, and achieved a 120-day average market capitalisation of above S$40 million. (Closing Price S$0.041, +5.128%)

Indonesia's central bank has approved the bid by Singapore's DBS Group to buy up to 40 per cent of PT Bank Danamon, governor Darmin Nasution said on Tuesday. (Closing Price S$17.35, -0.914%)

Source: PhillipCapital Research - 22 May 2013