Morning Market Commentary

STI: -1.54% to 3193.5                            KLCI: -0.27% to 1769.6
JCI: -0.41% to 5001.2                            SET: -2.13% to 1490.2
HSI: -1.05% to 21838                             HSCEI: -1.07% to 10361.2
Nikkei: -0.85% to 12904                         ASX200: -1.12% to 4781.2
Nifty: -0.04% to 5921.4                          S&P500: +0.85% to 1622.6

MARKET OUTLOOK:
By Joshua Tan, Head of Research

So the S&P500 ticked up, as expectations of tonight’s Non-farm payrolls (163k) will undershoot hence reducing odds of the Fed tapering QE? One day its expectations of tapering, another day its not, if you just read the news, its impossible to be trading directional… Actually the S&P500 has bounced off the 50dma, which has for this run up (since Dec12) acted as the uptrend support. Pay attention to what technical lines an index has been obeying, and odds will be better.
 
As for the STI, we gapped down and closed at the 200dma, which since Jul12 acted as the uptrend support, so there is a good chance of a relief bounce from here.
 
The Hang Seng although having gone thru its 200dma is at support line 21750, a positive reaction today may indicate a relief bounce.
 
SET gapped below its 100dma and looks like the downside prevails toward the 200dma.
 
Price action continues to look weak for the Nikkei, ASX200. The ASX200 is close to its 200dma but price action is very negative.
 
Of note, we reiterate downgrading Philippines from OW to MW (yesterday) as although the macro outlook for the country remains positive, the index has vastly outperformed this year and valuations are expensive. Simply, it needs to digest the run-up which it has had.
 
Overall, weakness in global equities is not yet decisively over. Global macro team will signal when we think is a good time to re-enter equity markets, as we believe the bull run is not over yet, and that the second half of the year should see an improvement in the global economy.
 
(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:

In US the four-week moving average of initial jobless claims rose 5k to 353k. Looking ahead, we reckon that payroll growth will moderate in line with the recent softening in claims data (consistent with softer employment sub indicators in ISM and Markit PMI surveys) as the lagged effect of fiscal tightening measures weigh on the economy.
 
In Euro Zone, ECB left its benchmark rate at 0.50%, as ECB President Mario Draghi said the region’s economy will return to growth by the end of the year. In Germany, the biggest economy in Euro Zone, factory orders fell by 2.3% m-m in Apr, exceeding the market expected 1.0% m-m drop, after it rose by a revised 2.3% m-m in Mar. Separate reports show the domestic orders declined 3.2% in April, while foreign demand dropped 1.5 %, with orders from the euro area down 3.6%.
 
In UK, BOE held its target for bond purchases at 375 bn pounds, as the governor Mervyn King concluded the nation’s economic recovery is not yet strong enough to warrant a withdraw of the stimulus program. The benchmark rate is left unchanged at 0.5%.
 

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3,193.51 (-1.54%). The 2.5bn shares traded were worth S$1.7bn in value.
• The STI broke through the 3,200 support level, closing at the 200 dma, an uptrend support. There is a good chance of a relief bounce from here. 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

• The composite SET index broke below 1500-point support to finish the session at 1,490.21 points on Thu as expectations that the US Federal Reserve might roll back its QE and continued foreign sell-offs weighed on sentiment.
• The weak bias for Thai stocks will likely remain in place in the absence of positive triggers for a rebound while the same old negative headwinds from a possible QE exit in the US and strong portfolio rebalancing by foreign investors may continue to weigh on sentiment.
• The market’s focus will now turn to the closely watched US labor market data today, a factor that may make a rebound difficult while the elevated level of intraday volatility will be the order of the day. We expect a trading range of 1470-1510 points for the SET index today.
• The support level of 1440-1460 points may be used as a buying opportunity to bet on a rebound but investors should limit equity holdings to 25% of the short-term portfolio until more developments in factors affecting the market will play out. 
• Today we peg resistance for the SET index at 1510-1523 and support at 1470-1460.

• Most Indonesian stocks fell Wednesday (05/06), bringing the Jakarta Composite Index (JCI) to close slightly above the 5,000 level, as the majority of stock markets in Asia finished in negative territory following weak lead from the US market overnight. The Jakarta Composite Index (JCI) lost 20.391 points, or 0.41%, at 5,001.221, with four of its 9 major industry groups closed in green. Shares in finance sector fared worst, with the sector’s index fell 1.14%, followed by consumer goods sector that shed 1.03%, and basic industry sector trimmed 0.82%. LQ45, the index measuring Indonesia’s blue-chips stocks, fell 5.635 points or 0.67%, at 831.092, with 18 of its blue-chip components finished lower. In Asia, most stock indexes ended negative, trailing lower closes on US markets overnight, on concerns that the US Federal Reserve may soon reduce its asset purchase program. Weakness in Asia also came after Japan’s Prime Minister Shinzo Abe’s blueprint to spur long-term economic growth in the country fell short of expectations. More than 155 shares declined and 115 shares advanced Wednesday on the Indonesia Stock Exchange, where composite volume on the regular board topped 4.39 billion shares valued at IDR 5.6 trillion. Foreign investors’ transactions accumulated to a net sale of IDR 614.97 billion.
• The Jakarta Composite Index (JCI) will likely to move sideways with negative bias today, as rebounds on US stock markets overnight may be offset by negative starts in Asia this morning. We expect the JCI to trade within 4,830 and 5,051.

• The Colombo bourse extended its losses for the 4th consecutive trading day mainly triggered by the lethargic participation of investors as well as the heavy selling pressure on those stocks holding a substantial weightage on the indices. Furthermore, the price losers thrashed the price gainers by 137:60. The benchmark ASPI (6,372.38) was dragged down by 50.46 points or 0.79% to close below 6,400 levels for the 1st time in nearly 3 weeks whilst recording the largest dip since 26th February 2013. The S&P SL20 price index plunged by 1% to close the trading day 3,596.34; having lost 38.71 points within the trading day. As at the day’s closure, the market capitalization dropped to LKR 2.45Tn while reducing the YTD gain to record 12.89%. Further, the market PER and PBV stood at 17.30 and 2.35 respectively. The turnover for the day totaled up to record LKR 1.37Bn recording 67% up against the previous trading day. Under the sectorial round-up Bank Finance & Insurance (BFI) sector topped the list providing LKR 687.62Mn. Beverage Food & Tobacco (BFT) sector secured the second place providing LKR 166.30Mn. Additionally, the two sectors BFI and BFT collectively accounted to 62.50% of the daily aggregated turnover. A total of 37.83Mn shares changed hands during the day resulting in an increase of 39% against the previous trading day. The foreign participant appeared to be bullish during the day, resulting a net foreign inflow of LKR 552.32Mn extending the year to date net foreign inflow (LKR 15.31Bn) to surpass the LKR 15Bn mark for the 1st time during the year. In regard to the local FOREX, the USD closed the day at LKR 128.04/- selling and LKR 124.99/- buying.

• The Australian share market on Thursday closed more than one per cent lower as investors were swayed by ongoing negative sentiment. It was the tenth fall in 13 sessions. The benchmark S&P/ASX200 index was down 54.0 points, or 1.12 per cent, at 4,781.2 points.
• Today (07/06/13), the local market looks set to open flat after erratic swings on Wall Street and falls on European bourses after the European Central Bank and Bank of England kept rates on hold. The ECB on Thursday kept its key refinancing rate unchanged at an all-time low of 0.50 per cent in a widely anticipated move. Also as expected, the BoE kept its main interest rate at 0.50 per cent, where it has stood for more than four years.
• In economic news on Friday, the Australian Industry Group/Housing Industry Association performance of construction index (PCI) for May is due out. Bank Of Queensland chief executive Stuart Grimshaw is to speak at a Financial Services Council/Deloittte lunch in Brisbane, while BHP Billiton chief executive Andrew Mackenzie is scheduled to address a Melbourne Mining Club function in London.
• No equities news is expected on Friday.

• Affected by weak sentiment in U.S. and Europe markets, HSI opened 160 points lower than previous day and end at 21,838 (-230). HSCEI dropped in the 7th consecutive trading days and closed at 10,361 (-256). None of the HSI constituent stocks recorded gain.
• Shun Tak Holdings Ltd (242.HK) said it has entered into agreement regarding to 1/3 equity interest in JETSTAR HK with up to USD66 million. Share price of Cathay Pacific Airways (293.HK) declined by 3.8% to HK$14.16.
• Link REIT (823.HK) still dropped 2% to HK$38.8 after results announcement in previous day. It is believed to be due to investors worry about Fed would stop bond buying very soon.
• Technically, HSI is still weak and next supports will be 21,500 and then 21,423, the lowest point of this year.

Morning Note

Company Highlights

Eu Yan Sang International Ltd announced that it has today issued S$75 million 4.10 Per Cent. Notes Due 2018. The Notes are issued under the S$300,000,000 Multicurrency Medium Term Note Programme established by the Company on 22 May 2013 (the “Programme”). DBS Bank Ltd. has been appointed to act as the sole lead manager and bookrunner for the issue of the Notes. The Notes are issued at an issue price of 100 per cent. of their principal amount and in denominations of S$250,000. The Notes will bear interest at a fixed rate of 4.10 per cent. per annum payable semi-annually in arrear and have a tenor of five years. (Closing Price S$0.755，-0.658%)

Jaya Holdings Limited, announced that the Group has signed contracts for three of its four new build platform supply vessels (PSVs) well ahead of their delivery dates from the shipyard. The total value of these three contracts is more than US$60 million, including optional extension periods. (Closing Price S$0.600 -1.639%)

Source: PhillipCapital Research - 7 Jun 2013