Morning Market Commentary

STI: -0.93% to 3336                               KLCI: -0.48% to 1774.9
JCI: -1.37% to 5129.7                            SET: -1.27% to 1581.3
HSI: -0.31% to 22484                             HSCEI: -0.57% to 10689.9
Nikkei: +5.15% to 13589                        ASX200: -0.89% to 4930.7
Nifty: +0.32% to 6124                            S&P500: +0.37% to 1654.4

MARKET OUTLOOK:
By Joshua Tan, Head of Research

The STI and Hang Seng recovered some lost ground after yesterday’s selloff to close the day with long tails in their candlesticks. The STI bounced off its 100dma to close near the 50dma. But this is a mild positive as the global context of equity indices however indicates a continued broad bias downward. The Nikkei especially exhibits strong downside bias and this could be a drag on the region. The S&P500 despite closing higher last night gave up half the initial gain. The ASX200 is looking vulnerable with as investors there digest rate cutting as a signal of a weaker economy.

US 1q13 was revised lower from 2.5%q-q to 2.4%q-q, mainly due to govt cutbacks. But consumption and investment was encouraging. Like we have been saying, we expect 2H13 economic numbers to look better as forward looking indicators for the US are improving.

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Macro Data:
By Ng Weiwen & Roy Chen

In US, macro data released on Thurs came in weaker-than-expected. Based on revised GDP estimates, the US economy expanded at 2.4% annualised (vs initial est. of 2.5%) in 1q13, on account of a sharper decline in government spending. Separately, the four-week moving average of initial jobless claims ticked up to 347,000. Looking ahead, reckon that payroll growth will moderate in line with the recent softening in claims data as the lagged effect of fiscal tightening measures weigh on the economy.

In Philippines, GDP rose stronger-than-expected by 7.8% y-y (2.2% q-q sa) in 1q13 on the back of strong manufacturing performance as well as healthy financial intermediation. Reckon that the central bank (BSP) is likely to stand pat but with possible further cuts to the SDA rates.

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.336.01 (-0.93%). The 4.3bn shares traded were worth S$2.3bn in value.
• Our analyst note order book wins of S$280mn for Sembcorp Marine, while maintaining a "Neutral" call.
• 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 tumbled sharply on Thu in line with overseas markets as concerns about a tapering of the US Federal Reserve’s QE and foreign selling spree continued to weigh on sentiment.
• Thai stocks may continue to face wild swings and remain in a consolidation mode today though stock markets in Asia rebounded in early trade on Fri, led by a strong rally in Japanese equities, which could trigger some rebound in the Thai bourse but we think foreign selling pressure in equities, futures and bonds could put a lid on the rebound and domestic political issues still bear close watching.
• Due to high intraday volatility, the SET index may trade in a wide trading range but it is unlikely to easily break above a key psychological level of 1600. On the downside, pare back equity holdings if the SET index fails to close above 1580.
• In our view, selective plays will be more active today as all changes in the MSCI Equities Indices May 2013 Semi-Annual Index Review will be implemented as of the close of today.
• Resistance for the SET index is pegged at 1590-1600 and support at 1572-1560 today.

Indonesia

• The Jakarta Composite Index (JCI) was decrease on Thursday (30/05). The JCI lost 71.046 points, or 1.37%, at 5,129.647. The decline on Thursday included eight from nine major industry groups, led by Infrastructure sector that fell 2.54%, followed by mining sector which was decrease 2.08%, and last was finance sector which contribute 1.85% negative to JCI. The LQ45 index decline by 18.431 points or 2.10% at 857.761, with 33 of its 45 blue-chip stocks ended in red. From Asia the Nikkei Stock Average were slump more than 5% on heavy selling, amid concerns about market volatility as the dollar slid closer toward the 100-yen level.194 shares were declines and 102 shares advances Thursday on the Indonesia Stock Exchange, where 5.18 billion shares worth IDR 6.96 trillion traded on the regular board. Foreign investors accumulated net sale of IDR 1.43 trillion.
• The Jakarta Composite Index (JCI) will likely to rebound today, from the significant loss of more than 1% on Thursday (30/05). Higher closes in the US overnight and positive starts in Asia may lift sentiments today, with investors seeking bargains. We expect the JCI to climb today, with support and resistance at 5,072 and 5,207 respectively.

Sri Lanka

• The Colombo Bourse noted a slight drop within the day resulting in the indices closing negative.  The Benchmark ASPI index dipped 0.69 points or a minute 0.01% to close at 6,455.12 and the S&P SL20 price index closed at 3,640.04 losing 4.60 points or 0.13%. As at the day’s closure, the total market capitalization stood at LKR 2.48Tn indicating an YTD gain of 14.36%. The market PER and PBV stood at 17.52 and 2.38 respectively. The day recorded an aggregate turnover of LKR 2.56Bn indicating a significant gain of 182.29% against the previous trading day; additionally, this was the highest turnover recorded after 6th May 2013. Under the sectorial summary, Chemicals & Pharmaceuticals (C&P) sector topped the list providing LKR 1.77Bn while accounting to 69.26% of the total turnover. Manufacturing (MFG) sector too made a notable subscription of LKR 290.44Mn to the daily turnover. Additionally, the two sectors C&P and MFG collectively accounted to 80.62% of the daily aggregate turnover. Shares totaling up to 48.65Mn were traded during the day resulting in a drop of 1.21% compared to the previous trading day. In regard to share price movement, 103 companies gained while 102 companies lost. Foreign participants appeared to be bullish during the day, noting a net foreign inflow of LKR 165.03Mn (foreign purchases were LKR 323.85Mn and sales were LKR 158.82Mn); this extended the year to date net foreign inflow to record LKR 13.55Bn. As at the day’s closure, the USD stood at LKR 127.99/- selling and LKR 124.94/- buying.

Australia

• On Thursday, the Australian share market closed at a six-week low, with the benchmark S&P/ASX200 index down 44 points at 4,930.7.
• Today (31/05/13), the Australian share market is set to open higher after a rise on Wall Street overnight. Disappointing US economic data pushed Wall Street higher on hopes the US central bank will continue with its economic stimulus program. The SFE 200 is pointing upwards 14 points or 0.28 per cent to 4,956.
• In local economic news on Thursday, the Reserve Bank of Australia publishes financial aggregates for April.
• In company news, Origin Energy managing director Grant King is among the speakers at the Stockbrokers Association of Australia annual conference in Sydney.

Hong Kong

• The Hang Seng Index closed today at 22484.31, down 70.62 points or 0.31%. While HSI could not fight off gloom from Nikkei’s 5% same-day plunge, trading as low as 22,290.72 at mid-day, it managed a sharply rebound before day close.

Morning Note

Company Highlights

Sinotel Technologies Ltd refers to the earlier announcements made in relation to the unauthorised purchase payments of approximately RMB105.4 million conducted fraudulently by ex-employees. The company announced that it had on 16 May 2013 and 21 May 2013 disbursed a total sum of RMB38.8 million from the recovered funds for the purpose of repaying a bank loan secured by the group upon its maturity. The company has yet to make a decision on the use of the remaining recovered funds of RMB66.6 million as at the date of this announcement and will continue to provide updates as and when the remaining recovered funds have been materially disbursed. (Closing Price S$0.090, -10.0%)

China International Holdings Ltd announced that it has acquired the remaining 5% of the registered share capital of Beijing Shiji Longquan Real Estate Development Co. Ltd from 北京信原兴业房地产经纪有限公司 for a cash consideration of RMB500,000, equivalent to S$103,275.91 (based on an exchange rate of S$1.00 : RMB4.8414). The Consideration was arrived at on a willing buyer, willing seller basis, taking into consideration, inter alia, the following: (1) the net book value of Beijing Shiji Longquan is RMB8,865,858.10, equivalent to S$1,831,259.16 (based on an exchange rate of S$1.00: RMB4.8414) as at 31 December 2012; and (2) the potential revenue to be derived from the provision of engineering and land leveling service for preliminary land development projects by Beijing Shiji Longquan. After the Acquisition, Beijing Shiji Longquan is now a wholly-owned subsidiary of the Group. (Closing Price S$0.039, -2.5%)

Singapore Airlines has agreed to order 30 more Airbus A350-900s and 30 Boeing 787-10Xs in deals valued at more than US$17 billion. The agreement with Airbus comprises 30 firm-ordered A350-900s for delivery from the 2016/17 financial year, plus options for 20 more. The options may be converted into firm orders for larger A350-1000s. The agreement with Boeing comprises 30 firm-ordered B787-10Xs for delivery from the 2018/19 financial year. It is conditional upon Boeing formally launching the B787-10X programme. The new orders will lift to 126 the number of firm aircraft commitments Singapore Airlines has in place with Airbus and Boeing. (Closing Price S$10.84, -0.5%)

Lee Kim Tah Holdings Ltd announced that L&W Construction Private Limited, its 50:50 associated company with Woh Hup (Pte) Ltd, has successfully acquired a 25 acres and 15.5 guntas freehold land at Devanahalli Village Bangalore, India for a total consideration of Rs1,014 million (approximately S$23.38 million). The acquisition is fully funded by internal resources in equal proportions with Woh Hup. The development is expected to take place over the next five to six years. As such, it is not expected to have any significant financial impact on the Company for the financial year ended 31 December 2013.  (Closing Price S$0.795, 0.0%)

Source: PhillipCapital Research - 31 May 2013