- SET: -1.22% to 1562.1
- JCI: -1.19% to 5068.6                                  - KLCI: -0.32% to 1769.2
- HSCEI: -0.85% to 10599.2                          - Hang Seng: -0.41% to 22392.2
- Nikkei 225: +1.37% to 13774.5                   - ASX200: -1.02% to 3473.8
- India NIFTY: -2.26% to 5985.95                 - S&P500: -1.43% to 1630.7

MARKET OUTLOOK:

By Ng Weiwen, Macro Analyst
 
Last week, we told clients to grab the bull by the horns as pullbacks -back then- offered an attractive point of entry to accumulate our equity OWs.
 
Looking ahead, we advise readers to sit tight and be prepared for significant market volatility ahead.
 
Have markets been complacent previously? Well we did highlight earlier this year that markets have run ahead of fundamentals and are artificially propped up by sychronised monetary easing by the G3 central banks (Fed, ECB and BoJ). Though Bernanke did recently hint of gradually withdrawing the liquidity punch bowl.
 
The problem with complacency is that after the euphoria, risk assets –such as equities- might be more vulnerable to a sharp selloff.
 
The Nikkei is the perfect example. We have warned about downward bias for the Nikkei during our last Mon webinar. How did we get so clever?
 
From a chartist (specifically Elliot Wave) point of view, the Nikkei has completed wavelet 5 of wave 1. And the sharp correction that we witnessed last week is part of the corrective wave 2. Furthermore, the Nikkei has formed a bearish double top, when it hit around the 16k level. Looking ahead, the Nikkei seems to be on the verge of collapsing thru’ its 50dma support level.
 
From a macro fundamental perspective, 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.
 
Cautiousness is likely to reign in Singapore bourses. Falling through the key 3320 support level, the tone will be markedly bearish for the STI.

(Please see our Global Macro Asset Strategy reports for ETF and CFD instruments to trade the macro outlook. PhillipUT Wrap Account offers tactical asset allocation of unit trusts without front loading sales charge.)

Macro Data:
By Ng Weiwen & Roy Chen

In US, consumer sentiment index was revised upwards by 0.8pts to 84.5 between the prelim and final May readings. The 8.1 pts m-m gain was largely due to buoyant sentiment on the back of gains in equities as well as housing prices, along with a decline in gasoline prices. Will US consumer spending hold up? Well, Apr data hints of softer consumer spending. Personal spending decreased in April by 0.2% m-m sa after registering gains in the preceding two months, suggesting that the PCE boost to 2q growth will likely to ease. Disposable personal income also declined by 0.1% in April reversing from a 0.2% gain in March, owing to slower increases in salaries.
 
In China, the NBS manufacturing PMI gained for the eighth consecutive month by 0.2pts m-m to 50.8 in May. But mixed readings from NBS and Markit suggest that the underlying recovery momentum is still sluggish.

 

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Regional Market Focus

 

Singapore

• The benchmark STI closed lower at 3.3311.37 (-0.74%). The 3.3bn shares traded were worth S$3.5bn in value.
• We expect STI to be bearish in the short term, as the index fell through the key 3320 support level.
• Top picks for the year are Pan United (Buy, TP: S$1.21), SIAEC (Buy, TP: S$6.10) & Boustead Singapore (Buy, TP: S$1.93). 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 opened higher last Fri before the SET index reversed course to fall sharply and finish the session down nearly 20 points after foreign sell-offs in local stock, derivative and bond markets. 
• The SET index is likely to continue its consolidation mode today as traders continued to keep an eye on any moves that may affect the US Federal Reserve’s QE action and key economic data out of major economies to look for clues on the recovery of the global economy.
• Portfolio rebalancing by foreign investors continued amid net foreign outflows from several Asian stock markets including Thai bourse. Net foreign outflows from Thai equities nearly reached Bt25bn over the past two months.
• In our view, we expect another extremely choppy session of consolidation for the SET index today. Even though some rebound is likely especially around 1550 +/-, we believe gains would continue to be limited.
• Resistance for the SET index is pegged at 1575-1590 and support at 1550-1538 today.

Indonesia

• The Jakarta Composite Index (JCI) declined on Friday (31/05), as the Rupiah tumbled to record low at more than 9,850 against the US dollar, on concern a postponed fuel price hike will hurt Indonesia's current account deficit as oil imports are poised to rise. The JCI lost 61.019 points, or 1.19%, at 5,068.628. The steep decline on Friday included all but three of the nine major industry sectors. Infrastructure sector fared worst, with 4.19%-plunge, followed by consumer goods sector with 2.85%-drop, and financial sector with 1.91%-decline. The LQ45 index fell 18.293 points, or 2.13%, to close at 839.468. Indonesian Rupiah forwards plunged to the lowest level since September 2009 as concerns about worsening current account deficit grew. The central bank, Bank Indonesia, intervened in the currency market on May 29. The newly appointed central bank governor, who was also the former finance minister Agus Martowardojo said Bank Indonesia will continue its intervention when necessary to guard the exchange rate at a level that reflects the country's economy. More than 140 shares tumbled and 151 shares advanced Friday on the Indonesia Stock Exchange, where volume on the regular board topped 9.3 billion shares worth IDR 13.46 trillion. Foreign investors' trades accumulated to a net sale of IDR 569.5 billion.
• The Jakarta Composite Index (JCI) will likely to extend its decline today, amidst negative tones in global and regional markets at the start of this month and as the Rupiah remained weak. Concerns about the delayed government decision to increase subsidized fuel price may also hurt sentiments, with Indonesia’s current account deficit expected to deteriorate. We expect the Jakarta Composite Index to move lower, with support and resistance at 5,014 and 5,177 respectively.

Sri Lanka

• The Colombo bourse ended the last trading day in May on a positive note; this resulted in the indices to close within the green terrain.  The benchmark ASPI Index closed 7.94 points or 0.12% higher at 6,463.06 and the S&P SL20 stood at 3,646.32 gaining 6.28 points or 0.17%. The recorded turnover for the day amounted to LKR 731.72Mn; this was a dip of 71.39% against the previous trading day. Under the sectorial round-up ,Investor attractions were largely visible on Bank Finance & Insurance (BFI) sector, with 2,512 trades out of the total 8,786 trades being lodged within the day, hence assisting the sector to emerge as the top contributor providing LKR 219.42Mn (this accounts 30% of the daily aggregate turnover). Diversified Holdings (DIV) sector too made a notable subscription of LKR 113.29Mn to the daily turnover. Shares totaling up to 34.23Mn were traded during the day resulting in a drop of 29.66% compared to the previous trading day. Price gainers outperformed the price losers by 114:82. Foreign participants appeared to be bullish during the day for the 16th consecutive trading day resulting in a net foreign inflow of LKR 118.51Mn; this extended the year to date net foreign inflow to record LKR 13.66Bn.

Australia

• The Australian share market closed flat on Friday, with the benchmark S&P/ASX200 index closed down 4.1 points to 4,926.6.
• Today (03/06/13), the local share market is set to open significantly lower after heavy falls on Wall Street on Friday night.  But encouraging manufacturing data out of China on the weekend could provide a boost for mining stocks. The SFE 200 is pointing downwards 57 points or 1.15 per cent to 4,876.
• In local economic news on Monday, the Australian Bureau of Statistics releases business indicators for the March quarter and retail trade for April.  The TD Securities and Melbourne Institute inflation gauge for May is to be released, as is the ANZ job advertisements series for May. Also out is the Australian Industry Group performance of manufacturing index for May and the latest Dun & Bradstreet business expectations survey.

Hong Kong

• The Hang Seng Index closed lower for the third consecutive sessions at 22,392.16, down 92 points or 0.41%. In-line with the region-wide market’s bearish tone, HSI closed near the low of the day.

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Morning Note

Company Highlights

Mapletree Greater China Commercial Trust Management Ltd., as Manager (the “Manager”) of Mapletree Greater China Commercial Trust announced that DBS Trustee Limited, Mapletree Greater China Commercial Trust Treasury Company (S) Pte. Ltd. and Mapletree Greater China Commercial Treasury Company Limited1 have today established a US$1,500,000,000 Euro Medium Term Securities Programme (the “Programme”). In connection therewith, the Manager has appointed Citigroup Global Markets Singapore Pte. Ltd. and DBS Bank Ltd. as Arrangers and Dealers of the Programme. (Closing Price S$1.015, 0-%)


TEE International Limited announced the deregistration of the following overseas subsidiary and associates: 1) The Company’s wholly-owned subsidiary, Trans Equatorial Engineering Pte. Ltd.’s (“Trans”) dormant subsidiary in Thailand, Oscar Property Management Co., Ltd, had completed its deregistration with the Department of Business Development, Ministry of Commerce in Thailand. 2) Trans’ dormant associate in Philippines, Trans Equatorial Philippines, Inc, had completed its deregistration with the Securities and Exchange Commission in
Philippines. 3) The Company’s dormant associate in Malaysia, Foremost Prestige Sdn Bhd, had completed its deregistration under Section 308 of the Companies Act, 1965 of Malaysia. The deregistration of the above companies are not expected to have any material impact on the net tangible assets or earnings per share of the Company for the financial year ending 31 May 2013. (Closing Price S$0.440, -%)

Scorpio East Holdings Ltd. announced due completion of the Proposed Placement today, pursuant to which the Placement Shares were allotted and issued to the Placees in accordance with the terms and subject to the conditions of the Placement Agreement. The Placement Shares shall rank pari passu in all respects with the existing Shares of the Company. Following the completion of the Proposed Placement, the total number of issued Shares has increased to 184,168,117 Shares.   (Closing Price S$0.090, -12.621%)