Morning Market Commentary

STI: -1.13% to 3367.5                            KLCI: +0.41% to 1783.5
JCI: +0.47% to 5200.7                           SET: -1.11% to 1601.6
HSI: +1.61% to 22554.9                         HSCEI: -1.55% to 10751.3
Nikkei: +0.10% to 14326                        ASX200: +0.08% to 4974.7
Nifty: -0.11% to 6104.3                          S&P500: -0.70% to 1648.4

MARKET OUTLOOK:
By Joshua Tan, Head of Research

Equities are actually looking a little vulnerable, as rebounds are being sold into. Could this be the correction everyone is waiting for?

The STI, Hang Seng, SET, and Nikkei have all sold off from their 20dma with solid candlesticks closing lower, bearish divergences are also evident. ASX200 continues to doji below the 100dma.

The S&P500’s chart pattern is a little more positive, but bear in mind last few days price action indicates indecision.

Usual concern sighted is withdrawal of Fed QE by year end. Our view is that such a withdrawal may provoke a selloff, but is also a signal that the US economy is actually strong enough to stand on its own – in such a case, a selloff may eventually give way to significant buying back in.

Thus we view any significant correction as a buying opportunity. In terms of improving global fundamentals, forward looking data in the US is actually quite encouraging, monetary policy in JP seems to be reviving confidence at least, and the rate of contraction in the EZ is easing. China, although we are positive, remains a concern, but structural reform announcements scheduled for Oct13 could be catalytic

As we said at year start: 2013 is the year for stocks. Our OWs are the US, SG, HK, CN, TH, PH, ID.

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Macro Data:
By Ng Weiwen & Roy Chen

Consistent with our expectations, Bank of Thailand cut the one-day repo rate by 25 bps to 2.5% in May (the first rate cut since Oct last year) , on account of an easing in growth momentum (esp. after Mon’s weaker-than-expected April industrial production print) as well as relatively benign inflation. Capital controls are also under consideration to curb the strength of the baht.

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.367.47 (-1.13%). The 4.2bn shares traded were worth S$2.0bn in value.
• Our analysts are positive with "BUY"s on both Boustead (Higher core-profitability) and Courts Asia (Strong sales growth expected).
• 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 held steady in the morning session before it traded in the red and finished the session down 17.96 points at 1,601.61 points on Wed after the BOT’s MPC cut policy interest rate by 25 bps in line with market expectations and QE concerns returned to the fore.
• The overall market picture is quite fragile in the absence of strong positive catalysts to drive a sustainable rebound while continued heavy foreign sell-offs of equities and bonds to the tune of Bt4.5bn and Bt8.6bn respectively after the MPC’s rate cut and concerns about US QE exit continued to be used as an excuse to take profits. The Thai baht weakened further to 30.22 to the US dollar this morning (0755 hrs Thailand time).
• In our view, the bias will remain to the downside for the SET index today and any rebound will be limited. Failure to hold above 1600 could open up an opportunity for a pullback towards 1580 and cut loss if the SET index breaks down below 1580. 
• Today we peg resistance for the SET index at 1610-1625 and support at 1597-1582.

Indonesia

• The Jakarta Composite Index (JCI) advanced on Wednesday (29/05), the positive market in Asia bring the JCI to the positive path. The JCI gained 24.458 points, or 0.47%, at 5,200.693. The advance on Wednesday included six from all major industry groups, led by Infrastructure sector that gained 1.87%, followed by the upbeat sentiment in construction sector with 1.62%, and consumer goods sector which is contribute 1.34% to JCI. The LQ45 index added 4.642 points or 0.53% at 876.192, with 21 of its 45 blue-chip stocks ended in green. JCI gain positively in the market despite there is negative sentiments in Asia after IMF cut its estimate for China's economic growth in 2013 and 2014. 151 shares were declines and 120 shares advances Wednesday on the Indonesia Stock Exchange, where 5.43 billion shares worth IDR 7.46 trillion traded on the regular board. Foreign investors accumulated net sale of IDR 888.287 billion.
• Indonesian stocks may move lower today. Amid worries from US market over global-growth prospects and fears from Federal Reserve will begin to scale back its bond-buying program. Negative data comes from Asia and foreign investors slowed their purchases of Japanese equity. We expect the JCI to move bearish, with support and resistance at 5,120 and 5,264.

Sri Lanka

• The Colombo bourse ended the trading day on a positive note; this was having recorded negative closures for the past two trading days.  The benchmark ASPI Index closed 21.11 points or 0.33% higher at 6,455.81 and the S&P SL20 stood at 3,644.64 gaining 17.68 points or 0.49%. As at the day’s closure the market capitalization stood at LKR 2.48Tn resulting in a YTD gain of 14.37%. The market PER and PBV stood at 17.53 and 2.38 respectively. The recorded turnover for the day amounted to LKR 906.12Mn; this was a gain of 62.66% against the previous trading day. Under the sectorial round-up ,Investor attractions were largely visible on Bank Finance & Insurance (BFI) sector, with 4,243 trades out of the total 10,705 trades being lodged within the day, hence assisting the sector to emerge as the top contributor under the sectorial summary providing LKR 300.96Mn (this accounts 33.21% of the daily aggregate turnover). Manufacturing (MFG) sector made a notable subscription of LKR 124.45Mn to the daily turnover. Shares totaling up to 49.25Mn were traded during the day resulting in an increase of 35.83% compared to the previous trading day. Price gainers outperformed the price losers by 119:86. Foreign participants appeared to be bullish during the day for the 14th consecutive trading day resulting in a net foreign inflow of LKR 102.47Mn; this extended the year to date net foreign inflow to record LKR 13.38Bn. In regard to the local FOREX market, the USD closed at LKR 128/- selling and LKR 124.95/- buying.

Australia

• The Australian share market closed flat on Wednesday, with the benchmark S&P/ASX200 index edging four points higher at 4,974.7 points.
• Today (30/05/13), the Australian share market is set to open lower as forecasts of slower global economic growth caused falls on overseas markets. Wall Street and European markets dropped after the Organisation for Economic Cooperation and Development trimmed its world economic growth forecast for 2013 to 3.1 per cent from 3.4 per cent.  
• In local economic news on Thursday, the Australian Bureau of Statistics releases private new capital expenditure and expected expenditure data for the March quarter, and building approvals figures for April. 
• In company news, Wesfarmers chief executive Richard Goyder and ASX chief executive Elmer Funke Kupper are among the speakers at the Stockbrokers Association of Australia annual conference in Sydney.

Hong Kong

• The Hang Seng Index closed today at 22554.93, down 369.32 points or 1.61% for the first time in three days on Wednesday. This is in line with a broader worldwide sell-off as strong US data fanned investors speculation that Federal Reserve may taper its bond buying programme.

Morning Note

Company Highlights

Frasers Commercial Trust announced that the Urban Redevelopment Authority of Singapore (“URA”) has granted a provisional permission (“PP”) for the proposed additions and alterations to the existing commercial development at China Square Central and erection of a new hotel block on 18 Cross Street, Singapore (“Property”). The Manager is currently evaluating the terms and conditions of the PP and is exploring all options with regard to the Property, which may require other regulatory approvals and will be subject to their commercial and financial viability. The Manager will make an announcement to Singapore Exchange Securities Trading Limited of any material development of this matter as and when appropriate. (Closing Price S$1.480, -1.7%)

DBS Bank announced that it has successfully priced its inaugural offshore RMB bond issue (the “Bonds”), settled in Singapore. The RMB 500 million fixed rate bonds due 7 June 2016, priced at 99.76%, will bear a fixed coupon of 2.5% per annum with interest payable semi-annually, and are expected to be issued on 7 June 2013. The issue attracted strong interest, with an order book of close to RMB 2 billion, being close to four times subscribed. The Bonds are expected to be rated Aa1 by Moody's Investors Service, AA- by Standard & Poor's Ratings Group and AA-by Fitch Ratings Ltd. (Closing Price S$17.12, -0.9%)

Thai Beverage Public Co. Ltd announced that Moody’s Investors Service, a rating agency, announced that Moody’s has removed the company from Moody’s Watch Status with possible downgrade, and that Moody’s company rating on the company has been changed from “Baa2” to “Baa3“ with stable outlook. (Closing Price S$0.675, -2.2%)

The consortium comprising Yongnam Holdings Ltd, Changi Airport Planners and Engineers and JGC Corporation, has submitted a proposal to the Myanmar Department of Civil Aviation (“DCA”) on the Request for Proposal (“RFP”) dated 8 February 2013, for the right to design, construct, operate and maintain Hanthawaddy International Airport (“HIA”) and its facilities on the basis of a public-private partnership agreement for a 30-year concession period, having achieved pre-qualification prior in February 2013. This is the consortium’s second proposal following an earlier submission in April 2013. The RFP requires the construction of an international passenger terminal building with an annual capacity for 12 million passengers, airfield facilities construction works on the runway, apron and taxiways. A joint venture will be formed to deliver the requirements under the concession agreement, should the consortium be successful in the HIA project. (Closing Price S$0.330, -1.5%)

Ezra Holdings Ltd announced that its subsea division, EMAS AMC’s pipelay vessel the Lewek Centurion has been contracted by Cecon in the North Sea for some 60km of pipeline installation work, in support of Cecon’s 2013 project commitments currently in-hand. Both parties have expressed a shared commitment to explore further opportunities for cooperation in the future. The Lewek Centurion is a 146m long DP-2 deepwater S-lay vessel with a 405Te pipelay tension capacity and a 300Te crane. Offshore operations are scheduled for Q3 2013. (Closing Price S$0.965, -2.0%)

Source: PhillipCapital Research - 30 May 2013