Morning Market Commentary

- STI: +0.44% to 3406.1                                               - SET: +1.66% to 1619.6
- JCI: +1.79% to 5176.2                                              - KLCI: +0.51% to 1776.2
- HSCEI: +1.55% to 10920.6                                     - Hang Seng: +1.05% to 22924.2
- Nikkei 225: +1.20% to 14312                                 - ASX200: +1.60% to 3562.7
- India NIFTY: +0.46% to 6111.3                              - S&P500: +0.63% to 1660.1

MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

Hope you have heeded our advice and entered on the recent pull-back in equities last week. Because US equities continued to surge ahead on the back of better-than-expected gains in consumer confidence as well as home prices.

Looking ahead, this positive sentiment is likely to spill over to Asian session today. But note that after the euphoria, equity markets (esp the US) might be more vulnerable to a sharp selloff.

10yr US Treasuries yields surged to a 13-mth high (2.17%) on increasing signs of improvement in the US economy. Note we have been UW Treasuries since last year on account of low reward-to-risk ratio and that proved to be a prescient call.

In view of the US economy gaining steam in its recovery, when will the Fed gradually withdraw the liquidity punch bowl? Key macro data risks ahead in the immediate horizon: core PCE deflator (31 May) and next week’s nonfarm payrolls data (7 June) prior to the 19 June FOMC.

In Thailand, Bank of Thailand (BoT) meets today. We reckon that BoT is likely to cut rates by at least 25 bps, on account of an easing in growth momentum (esp after yesterday’s weaker-than-expected April industrial production print) as well as relatively benign inflation.

While the Nikkei pierced thru’ the psychological 14,000 level during yesterday’s trading session, it bounced above its 40dma support level and ended above 14k, likely on bargain hunting. 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.

The STI wriggled its way above the 3,400 level. Notwithstanding a possible short bout of consolidation, STI remains on track to challenge its recent 3465 high so long as it remains above the 3320 support level.

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

Macro Data:

In US, consumer confidence -as measured by the Conference Board- surged 7.2 pts to 76.2 in May, the highest level since February 2008. Furthermore, Apr reading was revised upwards to 69 pts. Separately, home prices -based on the Case-Shiller home price index- increased 1.1% m-m sa in March as compared to a 1.3% gain in the preceding month.

In Thailand, industrial production declined 3.84% y-y in April, reversing from a 1.27% gain in the preceding month on account of softer external demand as well as a stronger Baht.

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.406.08 (+0.44%). The 3.3bn shares traded were worth S$1.5bn in value.
• Our analyst is Neutral on Sembcorp Marine, as recent rig contract awarded was within expectations.
• On Commodity Sector, our analyst reiterated his preference for Wilmar, due to lower downside pressure from CPO prices, and positive long-term fundamentals.
• 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 rebounded sharply to finish the session at 1,619.57 points on Tue, tracking overseas markets and snapping a four-day streak of losses but the SET index failed to break above 1,620 points.
• The SET is likely to trade into the upside, at a range-bound though, after the market rallied sharply yesterday, as well as the resilience in overseas stock markets as ECB and BOJ confirmed to continue on the ultra loose monetary policies, which has somewhat relieved concerns over the scale-down in the Fed’s QE pace. For today, the Bank of Thailand will consider the policy rate which is widely expected to be cut by 25bps to 2.5% at the Monetary Policy Committee meeting. Meanwhile, the baht has weakened to hover above Bt30 against US dollar while foreign investors continued to offload equities.
• The market sentiment remains fragile over the accommodative monetary policies while extreme volatility appears to be intact. Today’s trade is likely to be in the range of 1608-1630 points.

Indonesia

• The Jakarta Composite Index (JCI) advanced Tuesday (28/05), amidst stronger moves in Asia as the Japanese Yen turned lower. The JCI gained 91.099 points, or 1.79%, at 5,176.235. The advance on Tuesday included all major industry groups, led by miscellaneous industry sector that gained 5.79%, followed by consumer goods sector with 2.56%-rise, and construction, property and real estate sector with 2.37%-gain. The LQ45 index added 18.709 points or 2.19% at 871.568, with 35 of its 45 blue-chip stocks ended in green. 185 shares advanced and 93 shares declined Tuesday on the Indonesia Stock Exchange, where 5.96 billion shares worth IDR 6.73 trillion traded on the regular board. Foreign investors accumulated net sale of IDR 148.26 billion.
• Indonesian stocks may move in higher range today. Better than expected consumer confidence in the US may boost sentiments in Asia and Indonesia today. We expect the JCI to move higher, with support and resistance at 5,030 and 5,259.

Sri Lanka

• The Colombo bourse concluded the day on a negative note resulting in both indices closing negative once again. This was mainly due to the sluggish participation of the investors seen throughout the trading day. The benchmark ASPI Index closed within the red terrain for the second consecutive day at 6,434.70 losing 11.84 points or 0.18% and the S&P SL20 Index dipped by 14.95 points or 0.41% to close at 3,626.96. The market capitalization as at the day’s closure stood at LKR 2.47Tn resulting in a year to date gain of 14%; further, the market PER and PBV stood at 17.47 and 2.38 respectively. The turnover for the day LKR 557.07Mn indicated a drop of 20.09% against the previous trading day. Under the sectorial round-up, Land & Property (L&P) and Diversified Holdings (DIV) sectors topped the list providing LKR 88.80Mn and LKR 83.59Mn respectively. The two sectors collectively accounted 31% of the day’s aggregate turnover.  During the day, a total of 36.26Mn shares changed hands resulting in a gain of 12.10% against the previous trading day. Price losers were ahead of the gainers while the loser to gainer ratio was being recorded at 132:72. Foreign participants appeared to bullish during the day for the 13th successive trading day resulting in a net foreign inflow of LKR 74.70Mn; this assisted the year to date net foreign inflow to record LKR 13.28Bn. As at the day’s closure, the USD stood at LKR 127.90/- selling and LKR 124.85/- buying.

Australia

• The Australian share market posted a slight gain on Tuesday, ending a five-day run of losses. The benchmark S&P/ASX200 index added 10.8 points, or 0.22 per cent, to 4,970.7 points.
• Today (29/05/13), the Australian market is set for a relatively flat start despite Wall Street's rise to a new record high. Strong gains in US home prices and consumer confidence pushed the Dow Jones Industrial Average to 15,409.39, it’s highest ever level.  
• In economic news on Wednesday, Westpac and the Melbourne Institute release their leading indexes of economic activity.  The Australian Bureau of Statistics releases construction work done figures for the March quarter, and the Housing Industry Association publishes new home sales data for April.
• In company news, Westfield Group holds its annual general meeting in Sydney. Gaming machine maker Aristocrat releases its first half results, and Programmed Maintenance Services will issue its full year results. Wesfarmers is holding a strategy briefing day for investors.

Hong Kong

• The Hang Seng Index closed today at 22924.25, up 238.20 points or 1.05%, helped by optimism in major Chinese banks and conglomerates.

Morning Note

Company Highlights

Interra Resources Ltd announced that its jointly controlled entity, Goldpetrol Joint Operating Company Inc. (“Goldpetrol”), has commenced drilling infill development well YNG 3255 in the Yenangyaung oil field in Myanmar. Interra has a 60% interest in the Improved Petroleum Recovery Contract of the Yenangyaung field and also owns 60% of Goldpetrol which is the operator of the field. Interra estimates that the results of the drilling and completion should be available in approximately six weeks. The Company will announce the results as soon as they may be ascertained as well as updates reflecting critical or unexpected events during drilling. (Closing Price S$0.480, +3.2%)

Thai Beverage Public Co. Ltd announced that TRIS Rating Co. Ltd, a rating agency in Thailand for domestic credit, announced today that TRIS has removed the company from TRIS’s CreditAlert with negative, and that TRIS’s company rating on the company has been changed from “AA” to “AA-“ with stable outlook. (Closing Price S$0.690, +1.5%)

Synear Food Holdings Ltd announced that there was a fatal incident at the Company’s new plant in Zhengzhou City, Henan Province, People's Republic of China on 27 May 2013. The New Zhengzhou Plant is engaged in the production of savoury dumplings and glutinous sweet dumplings and has a maximum capacity of 150,000 tons per annum. The State Admission of Work Safety in Zhengzhou is investigating the incident and as a safety precaution, has ordered the cessation of operations at the New Zhengzhou Plant. The company is unable to assess the impact of the suspension of operations at the New Zhengzhou Plant at this point in time. It is monitoring the situation and will make further announcements should there be any material developments in this matter. (Closing Price S$0.186, 0.0%)

Anwell Technologies Ltd announced that the Group’s wholly-owned subsidiary, Sungen International Limited (“SUNGEN”) has entered into two agreements separately for the exclusive rights to provide Engineering, Procurement And Construction (“EPC”) services to develop a 10.5MW solar project in Brazil and a 10MW solar project in Japan respectively (“Projects”). The Company will make further announcement(s) as and when there are any significant developments in respect of the Projects. (Closing Price S$0.146, -26.6%)

Ossia International Ltd announced that the Group is expected to report a loss for its draft financial results ended 31 March 2013 (“FY2012”). Further details of the Group’s performance will be disclosed when the Group announce its FY2012 unaudited full year results on or before 30 May 2013. (Closing Price S$0.00, 0.0%)

Source: PhillipCapital Research - 29 May 2013