- SET: -0.74% to 1631.3
- JCI: +0.37% to 5208                                      - KLCI: -0.20% to 1783.88
- HSCEI: -0.27% to 11053                               - Hang Seng: -0.45% to 23261.1
- Nikkei 225: +1.60% to 15627                         - ASX200: +0.47% to 3604.7
- India NIFTY: -0.32% to 6094.5                      - S&P500: -0.83% to 1655.4

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Alert! A meaningful pull back in equity indices might be on the way. Both the S&P 500 as well as DJIA formed a 'bearish pin bar' with US markets surrendering early gains after a volatile session overnight.

Parsing Bernake's testimonial to the Congress as well as May FOMC minutes, there was essentially nothing new.  But markets were certainly spooked about the possibility of an earlier tapering of LSAPs.

The key takeaways  as follows:
(i) Bernanke remained cautiously optimistic about the recent US economic performance
(ii) While tapering could kick off in the next few FOMC meetings, that is still contingent on sustained improvement in the labor market
(iii) May FOMC minutes indicate that a thorough study of exit strategies is underway

What do we think?
(i) The tapering of LSAPs could commence this year and most likely during the later part of this year.
(ii) Fiscal uncertainties still pose significant headwinds for the US economy
(iii) US Treasury yield curve is likely to continue to bear steepen.

No surprises from BoJ’s monetary policy decision on Wed. Consistent with our expectations, BoJ stood 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).

Key takeaway from Kuroda’s post-meeting conference is his willingness to be flexible in the pace of its JGB purchases to rein in the recent volatility in JGBs. Should BoJ front-load QE, that would provide a fillip for the USD/JPY as well as the Nikkei.

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

Macro Data:

Based on 1Q Economic Survey advance GDP est (released today 8am), Singapore economy expanded 1.8% q-q saa in 1q13, easing from the 3.3% growth in the preceding quarter.

In Malaysia, CPI inflation inched up to 1.7% y-y in April, following a 1.6% rise in the preceding month, on account of higher food prices which was mitigated by government subsidies.

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Regional Market Focus

Singapore

• The benchmark STI closed higher at 3.454.37 (+0.30%). The 3.8bn shares traded were worth S$1.7bn in value. 
• Markets today may react negatively to the possibility of an earlier tapering of LSAPs in the US, as per our morning commentary.   
• 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 attempted to retest 1650 several times but failed to break through on Wed amid sporadic bouts of selling ahead of the release of the minutes of the FOMC meeting. The pace of selling accelerated sharply in late trading before the SET index finished the session at 1,631.27 points.
• Thai stocks are expected to trade to the downside and any rebound will be limited after US Federal Reserve Ben Bernanke reiterated his dovish view in his testimony to Congress yesterday that it was too early to withdraw existing stimulus measures but he also cited the risks of holding interest rates too low for too long and left a room for a cutback in bond buying, while the US dollar regained strength and the Thai baht weakened to 29.89 to the US dollar this morning. Domestic political situation as well as interest rate decision and baht measures next Wed remain key internal factors to watch.
• Resistance for the SET index is pegged at 1637-1645 and support at 1625-1612 today.

Indonesia

• US stocks slid Wednesday (22/05), reversing gains after minutes from the Federal Reserve’s latest meeting and comments from the Fed chairman suggested the central bank may begin tapering its bond-buying program in coming months. The Dow Jones Industrial Average dropped 80.41 points, or 0.5%, to 15,307.17 after rising as much as 155 points earlier in the session and falling more than 121 points. The Standard & Poor’s 500 Index slumped 13.81 points, or 0.8%, to 1,655.35, after rising as high as 1,687.18. The Nasdaq Composite fell 38.82 points, or 1.1%, to 3,463.30. US stocks declined after The Federal Reserve’s chairman, Ben Bernanke, commented that the Fed could take a step down in the pace of asset purchases in the next few meetings.
• The Jakarta Composite Index (JCI) will likely to move sideways with positive bias today, amidst lack of clear momentum from global markets, after US stocks declined overnight on concerns that the Federal Reserve may scale down its bond purchase program, while stock markets in Asia started mixed after the Japanese Yen continued falling.

Sri Lanka

• The Colombo bourse ended the trading day on a positive note; this resulted in both indices concluding within the green terrain.  The benchmark ASPI Index closed positive at 6,461.62 having gained 19.98 points or 0.31%. The S&P SL20 Index too closed positive for the 5th consecutive trading day at 3,663.98 up by 3.04 points or a minute 0.08%. As at the day’s closure the market capitalization stood at LKR 2.48Tn noting a YTD gain of 14.47%. Following with, the market PER and PBV stood at 17.54 and 2.39 respectively. The recorded turnover for the day amounted to LKR 767.67Mn; this was a drop of 65.03% against the previous trading day. During the day, investor attractions were largely visible on Bank Finance & Insurance (BFI) sector with 1,844 trades out of the total 7,265 trades being noted within the day, hence assisting the BFI sector to emerge as the top contributor under the sectorial summary having provided LKR 352.73Mn which alone accounts to nearly 46% of the daily aggregate turnover. Diversified Holdings (DIV) too made a notable subscription worth LKR 147.15Mn to the daily turnover. Additionally, the two sectors BFI and DIV collectively accounted 65% of the daily aggregate turnover. Shares totaling up to 20.48Mn were traded during the day resulting in a drop of 48.09% compared to the previous trading day. Price gainers outperformed the price losers by 100:97. Foreign participants appeared to be bullish during the day for the 10th consecutive trading day resulting in a net foreign inflow of LKR 308.42Mn as a result of foreign purchases worth LKR 356.39Mn and sales worth LKR 47.97Mn; this extended the year to date net foreign inflow to record LKR 12.87Bn. In regard to the local FOREX market, the USD closed at LKR 127.85/- selling and LKR 124.80/- buying.

Australia

• The Australian share market on Wednesday closed lower for a second consecutive day, dragged down by the banks and a surprisingly poor consumer sentiment report. The benchmark S&P/ASX200 index was down 14.7 points, or 0.28 per cent, at 5,165.4 points.
• Today (23/05/13), the Australian market looks set to open lower after Wall Street finished down despite a morning rally during the early part of Federal Reserve Chairman Ben Bernanke's testimony to Congress. The SFE Futures 200 is pointing downwards 21 points or 0.40 per cent to 5,171.
• In equities news, James Hardie is due to have a full year results briefing.
• No major economic news is expected on Thursday

Hong Kong

• HK stocks closed weaker on Wednesday in shortened session as the local bourse halted trading in the morning session due to inclement weather.
• The Hang Seng Index ended down 105 points to 23,261. The H-share index also fell 30 points to 11,053. Turnover decreased to HK$52.4bn from HK$71.3bn on Tuesday. Among the 50 blue chips, 19 rose and 29 fell, with two stocks remaining steady. China Resources Power (00836) slipped 4.5% to HK$20.15 on news of potential ban of low quality coal import, while Esprit (00330) soared 3.6% to HK$11.56, making themselves the largest blue-chip loser and gainer.
• Market heavyweights were softer. China Mobile (00941) fell 0.8% to HK$84.8. HSBC (00005) edged down 0.2% to HK$89.4 after going ex-dividend today.
• China IPPs fell across the board. Huadian (01071) plunged 9% to HK$3.77. Huaneng (00902) slid 8% to HK$7.94. Datang (00991) fell 4.7% to HK$3.41. China Power (02380) retreated 7.3% to HK$2.94. (Source: ETNet)

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Morning Note

Company Highlights

Silverlake Axis announced that it had entered into a Sale and Purchase Agreement with Brightsphere Sdn Bhd, Shieh Yee Bing, and Sua Shii Huey, in respect of the Proposed Acquisition of Cyber Village Sdn Bhd (“CVSB”). The audited profit after tax of CVSB for the financial year ended 31 December 2012 and the net tangible assets value of CVSB as at 31 December 2012 were approximately RM6.63 million and RM4.96 million, respectively. (Closing Price S$0.815, +1.875%)

TEE International is pleased to announce that a preliminary prospectus relating to the Invitation and Proposed Listing of TEE Land (its real estate business) has been lodged with the Monetary Authority of Singapore (the “MAS”) today. (Closing Price S$0.475, 0%)

Dukang Distillers Holdings announced that it has entered into two separate Sale and Purchase Agreements to acquire two storeys of office space in Zhengzhou City, Henan Province, PRC as the Group’s headquarter for a total consideration of approximately RMB 106.0 million (RMB 17,130 per sqm). The purchase consideration was arrived on a willing buyer-willing seller basis, and based on the valuation commissioned by the company, was valued at RMB 110.43 million. (Closing Price S$0.515, +3.00%)

Changjiang Fertilizer Holdings has issued a response to an article published on Xinhua Net and China Daily on 20 May 2013, alleging the company of illegal deposit-taking amounting to approximately RMB 1.5 billion. (Closing Price S$0, 0%)