Morning Market Commentary

- STI: -0.06% to 3391.3                                                - SET: -0.89% to 1593.1
- JCI: -1.36% to 5085.1                                               - KLCI: -0.33% to 1767.1
- HSCEI: +0.29% to 10753.5                        - Hang Seng: +0.30% to 22686.1
- Nikkei 225: -3.22% to 14142.6                          - ASX200: -0.64% to 3506.6
- India NIFTY: +1.66% to 6083.2                          - S&P500: -0.06% to 1649.6

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Hop onto the bull and grab it by the horns! For those who have missed out on the recent equity rally, this pull-back in equities - as markets retraced from their recent peaks- offers an attractive opportunity to enter and accumulate our equity OWs in US, China-HK and ASEAN economies such as ID, PH, TH and SG.

We are still OW equities as

(i) global economic activity has not really fallen over the cliff (While the pace of expansion of the JP Morgan Global Composite PMI has eased, global manufacturing and services output still remain firmly in expansionary territory)

(ii) tail risks have receded particularly on the EZ front (as reflected by the decline in 10yr yields of peripheral EZ sovereigns)

(iii) G3 central banks (Fed, ECB, BoJ) are undertaking synchronised monetary easing. (Specifically, ECB is keeping an open mind on negative deposit rates while BoJ intends to double the monetary base in 2yrs)

In Japan, the Nikkei continued to slump for the third consecutive day to end just a whisker above the psychological 14,000 level. For the Nikkei rally to continue, Abe must implement his “3rd arrow” in Abenomics. Specifically, he needs to push through supply-side reforms to reinvigorate the economy. Abe’s commitment to the Trans-Pacific Partnership free-trade negotiations is a good start. But there is also a significant risk that Abe might shy away from other difficult –and politically unpopular- reforms ahead of parliamentary upper house elections in July. Now you know why we were previously hesitant to upgrade Japan from MW to OW!

In Greater China, downward bias for the HSCEI and HSI is likely to persist if the indices break decisively below their respective 200dma and 50dma support levels. Though, bargain hunting might lend some support to these indices

US markets will reopen today after the Memorial Day holiday yesterday.

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

Macro Data:

In Hong Kong, exports eased from 11.2% y-y in March to 9.0% in April on the back of sluggish external demand.

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.391.3 (-0.06%). The 2.6bn shares traded were worth S$1.5bn 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.

• Thai stocks traded in the red in another choppy session on Mon ahead of the widely watched Bank of Thailand’s interest rate decision meeting on Wed.
• In our view, sharp losses of as much as 50 points over the last three sessions could set the stage for the SET index to see some rebound today but gains may continue to be limited amid strong selling spree by foreign investors in both equities and futures to the tune of Bt3.6bn and 2.2k contracts and renewed selling pressure from institutions would add more pressure on sentiment.
• The market’s eyes will remain glued on the Bank of Thailand’s rate decision meeting tomorrow. Expectations are in favor of a 25-bps cut in policy interest rate to 2.50%.
• Today we expect the SET index to trade in a range of between 1580-1610 points. Intraday volatility is also likely to reign supreme.
• We peg resistance for the SET index at 1600-1610 and support at 1582-1570 today.

• The Jakarta Composite Index (JCI) declined on Monday (27/05), in a sell-off that followed cautious tones in most of the stock markets in Asia. The JCI shed 69.957 points, or 1.36%, at 5,085.136. The decline on Monday included seven of the 9 major industry groups. Miscellaneous industry sector fared worst, with 2.55%-loss, followed by basic industry sector with 2.28%-drop, and infrastructure sector fell 1.90%. The LQ45 index trimmed 16.780 points, or 1.93%, at 852.859, with 31 of its 45 blue-chip components finished in red. For every share that advanced, almost two declined Monday on the Indonesia Stock Exchange, where 4.47 billion shares worth IDR 6.2 trillion changed hands on the regular market. Foreign investors posted net sale of IDR 1.3 trillion.
• Indonesian stocks may move in limited range today, amid lack of leads as the US stock market closed for the Memorial Day. From Asia, positive momentum may come from the weakening yen that helps Japan exporters stocks to bounce back after large recent losses. We expect the JCI to move relatively sideways today, with support and resistance at 5,029 and 5,178.

• The Colombo Bourse exhibited a slowdown during the day as a result of sluggish participation of investors and the selling pressure which prevailed on most parts of the trading day due to probable month end profit taking. This triggered the indices to close negative for the day. The Benchmark ASPI index dipped 42.31 points or 0.65% to close at 6,446.54; this was having closed positive for the past two trading days. The S&P SL20 price index following the trend, closed negative at 3,641.91 losing 24.13 points or 0.66%; this was having accumulated 167.70 points or 4.71% during the past 6 trading days. As at the daily closure, the total market capitalization stood at LKR 2.48Tn indicating an YTD gain of 14.20%. Further, the market PER and PBV stood at 17.50 and 2.38 respectively. The day recorded an aggregate turnover of LKR 697.13Mn; this was a gain of 25.37% against the previous trading day. Under the sectorial round-up, Diversified Holdings (DIV) sector topped the list providing LKR 164.19Mn which alone accounts to nearly 24% of the daily aggregate turnover. However investor attractions were largely visible on Bank Finance & Insurance (BFI) sector (LKR 103.44Mn) with 1,745 trades out of the total 8,411 trades being recorded within the day. Additionally, the two sectors DIV and BFI collectively accounted 38.39% of the daily turnover. Shares totaling up to 32.35Mn were traded during the day resulting in a gain of 59.66% compared to the previous trading day. In regard to share price movements, 140 companies lost and 68 companies gained within the day. Foreign participants appeared to be bullish during the day, noting a net foreign inflow of LKR 113.20Mn (foreign purchases LKR 159.80Mn and sales of LKR 46.60Mn). This extends the year to date net foreign inflow to LKR 13.20Bn. The local FOREX market for the day closed with, the USD selling at LKR 127.88/- and buying at LKR 124.83/-.

• The Australian share market posted its fifth straight fall on Monday, with the benchmark S&P/ASX200 index dropping 23.6 points, or 0.47 per cent, to 4,959.9 points.
• Today, the local market looks likely to continue to fall on Tuesday. Wall Street and London markets were closed overnight for Holidays.  The SFE Futures 200 is pointing downwards 22 points or 0.44 per cent to 4,951.
• In company news on Tuesday, OZ Minerals holds its annual general meeting in Melbourne. Commonwealth Bank chief executive Ian Narev and Wesfarmers chief executive Richard Goyder are among the speakers at a chief financial officers' conference in Sydney. Suncorp is holding an investor day, and the Australian Petroleum Production & Exploration Association (APPEA) conference continues in Brisbane.
• There's no economic news scheduled.

• The Hang Seng Index closed today at 22686.05, up 67.38 points or 0.30%. Though Nikkei’s downward plunge continue to hurt investor sentiment, HSI was buoyed by the higher benchmark Shanghai Composite Index, which rose 4.55 points to 2293.08, or 0.20%.

Morning Note

Company Highlights

Asia-Pacific Strategic Investments Ltd announced that the Company has on 24 May 2013 entered into a non-binding memorandum of understanding with Labelle Global Limited in respect of the Company’s proposed acquisition of 51% interest in Prometheus Venture One Limited. The Target, through its China subsidiaries, is in cooperation with Shanghai Metro Group, the owner of Shanghai Metro System, to develop the metro’s commercial environment. The aggregate consideration payable by the Company will be fully satisfied by the allotment and issue of new shares in the capital of the Company to the Vendor. Subject to the Independent Valuation Report and the Conditions Precedent, it is expected that the Consideration Shares shall constitute approximately Twenty-Nine Percent (29%) of the enlarged share capital of the Company. (Closing Price S$0.275, +1.9%)

Singapore Press Holdings Ltd announced the proposed establishment of SPH REIT and the injection of the Paragon Property and Clementi Mall into SPH REIT. In aggregate, the Paragon Property and Clementi Mall will be sold to SPH REIT for a fixed consideration of S$3,070.5 million. The Company currently expects to hold, either directly or indirectly, approximately 70% of the units in SPH REIT at the completion of the initial public offering of the Units. The Company also proposes to seek the approval of Shareholders for the declaration of a special one-tier tax-exempt dividend of S$0.18 per share which the Shareholders will receive in cash on such date as the Directors shall determine in their discretion after the completion of the Proposed Transfers. (Closing Price S$4.39, +0.5%)

Global Premium Hotels Ltd announced that it is proposing to establish an S$300,000,000 multicurrency medium term note programme and has appointed Oversea-Chinese Banking Corporation Ltd to act as the sole lead arranger of the Programme. Documentation for the Programme is currently in progress and an announcement will be made upon establishment of the Programme and signing of the Programme documents. (Closing Price S$0.270, +1.9%)

Fragrance Group Ltd announced that it had signed a mandate letter for the establishment of an S$1,000,000,000 multicurrency medium term note programme, appointing DBS Bank Ltd to act as the sole arranger of the Programme. Documentation for the Programme will commence shortly and an announcement will be made upon establishment of the Programme and signing of the Programme documents. (Closing Price S$0.245, -2.0%)

Technics Oil and Gas Ltd announced that it has been awarded contracts worth a total of S$10.6 million for the supply of Air Spread Systems from Singapore. This contract is not expected to have positive material impact on the earnings per share for the financial year ending September 2013. (Closing Price S$0.850, +1.8%)