- SET: +0.39% to 1471.0
- JCI: +0.29% to 4774.5                                 - KLCI: +0.57% to 1772.2
- HSCEI: +0.80% to 9744.5                           - Hang Seng: +1.22% to 21225.9
- Nikkei 225: +2.73% to 13033.1                   - ASX200: +0.40% to 3344.8
- India NIFTY: +0.72% to 5850.1                   - S&P500: +0.76% to 1639.0
 
MARKET OUTLOOK:
By Ng Weiwen, Macro Analyst

In China, notwithstanding the relief bounce, downward bias persists. HSCEI and HSI have collapsed below their respective 50/200dma support levels and are treading along their respective lower bollinger bands. Fears over weaker-than-expected growth in China were reinforced by weak activity (industrial production, export performance, etc) during May.
 
While both the CPI and PPI have surprised to the downside, reckon that odds of monetary easing are still low at this juncture. Policy making for the Chinese government is going to be increasingly complex as property prices –in tier 1 cities- continue to rise and monetary easing in a bid to stimulate growth at this juncture will definitely send the wrong policy message! Do not expect massive stimulus (like those during 2008-09) from the Chinese government as the new leadership have expressed greater tolerance for slower growth in a bid to restructure the Chinese economy.  Indeed structural reforms are more critical than monetary or fiscal stimulus in ensuring sustainable economic growth.
 
Major downside risks confronting the Chinese economy will be a collapse of the shadow banking system as well as some SOEs which could jolt investor sentiment in Chinese markets.  But as usual, expect the Chinese government to stand ready to clean up the mess. But markets will definitely not spare the rod.
 
The STI continued to bounce up on Mon but the bulls struggled to charge thru' the 3200 level. As we have mentioned during yesterday’s morning webinar, if STI can decisively clear above the 3200 psychological support level, do trade the bounce. Near term key support level pegged at 3100.

(Please see our Global Macro Asset Strategy reports for our Asset Allocation strategy and 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 Singapore, NODX continued to contract by 4.6% y-y in May as compared to the 1.0% decrease in the preceding month, with the contraction in electronic exports outweighed gains in non-electronic exports. On a 3-month moving average basis, NODX continued to decline by 3.5% in May 2013 after the 12.8% decline in the preceding month. While seemingly incongruent as compared to gains in industrial production as well as manufacturing PMI, it might be the case that manufacturers have been stockpiling inventory in anticipation of future demand – which if not materialise- could see softer IIP prints ahead as inventories are drawn down.
 
In US, home builder confidence rose to a 7-year high in June, registering a 8pts gain to a reading of 52pts as households capitalise on the relatively low mortgage rates.
 
In India, the central bank (RBI) stood pat, maintaining its repurchase rate unchanged at 7.25% in view of downward pressure on the rupee which might pose upside risk to inflation.

 

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Regional Market Focus

Singapore

• The benchmark STI closed higher at 3,183.44 (+0.70%). The 1.8bn shares traded were worth S$1.2bn in value.
• We release our Singapore Strategy report, and revise our top picks. Sectors preferred include the Industrials and Telcos.
• Our analyst also initiated on Ezra with “Neutral” rating, citing good exposure to upbeat subsea market.
• Top picks for the year are Pan United (Buy, TP: S$1.21), SGX (Accumulate, TP: S$8.00) & Keppel Cord (Accumulate, TP: S$12.34). Pan United, a dominant supplier to the construction industry in Singapore, is expected to ride on the construction boom. We also note a near term catalyst from potential increase in PUC’s stake in the profitable Changshu Xinghua Port. SGX should post higher revenue from higher Securities and Derivatives trading volumes. Keppel Corp’s YTD order wins are high, while margins are expected to be attractive due to its better track record compared to global peers.

Thailand

• Thai stocks took a rollercoaster ride between red and green territories throughout the morning session before the market climbed upward in the afternoon and finished the session at 1471.04 points in thin turnover of Bt43,475mn ahead of the US Federal Reserve’s policy outcome.
• More wild swings could be in store for the SET index but the trading range would further narrow ahead of the US Federal Reserve’s policy outcome which may provide clues on QE tapering.
• Foreign selling abated but no signs of return to buying Thai stocks are yet in sight. The Thai baht/US dollar rate steadied around 30.6-30.7. In Thailand, key factors to watch will be possible GDP downgrade to below 5% and anti-government protests.
• We maintain our ‘sell the rallies, buy the dips’ strategy as long as the SET index stays in a trading range of 1440-1550 points.  In our view, new additions to and deletions from the SET50, SET100 and SETHD indices will likely attract speculative buying today.
• Resistance for the SET index is pegged at 1484-1500 and support at 1457-1440 today.

Indonesia

• The Jakarta Composite Index (JCI) finished higher on Monday (17/06), as stock markets in Asia posted  broad gains on the back of optimism about the US Federal Reserve maintaining its bond purchase size in the FOMC meeting later this week. The JCI gained 13.760, or 0.29%, to close at 4,774.504. The advance on Monday included four of the 9 major industry groups, led by basic industry sector with 2.23%-gain, trade and services sector with 2.05%-climb, and construction, property and real estate sector with 0.51%-rise. The LQ45 index added 2.363 points, or 0.30%, at 792.706. In Asia, most markets extended gains on Monday. Stocks in multiple regional markets overcame choppy early trading to turn solidly higher amid some optimism over the outcome of the Federal Reserve’s policy decision later this week, especially on the pace of its monthly bond purchases. 157 shares advanced and 108 shares declined Friday on the Indonesia Stock Exchange, where 3.68 billion shares valued at IDR 5.18 trillion changed hands on the regular board. Foreign investors posted net sale of IDR 310.51 billion.
• Indonesian stocks looked set for another climb today, supported by positive moves in the US stock markets overnight and upbeat start in Asia this morning. Downside risk would come from investors' lingering concerns about the risk of inflation ahead of the Ramadan month, particularly after Bank Indonesia unexpectedly raised its benchmark rate by 25 bps to 6.00% last week. We see the JCI to climb moderately higher today, with price band between 4,723 and 4,830.

Sri Lanka

• The Bourse exhibited a slowdown on its activities which resulted in the low volume and turnover levels being logged. Further, this triggered the indices to close negative for the day. The ASPI index dropped minute 0.28 points to close at 6,219.11. The S&P SL20 price index (3,496.76) closed below 3,500 levels losing 7.56 points or 0.22%. As at the daily closure, the total market capitalization stood at LKR 2.39Tn indicating an YTD gain of 10.19%. Further, the market PER and PBV stood at 16.88 and 2.30 respectively. The turnover for the day (LKR 310.13Mn) was a drop of 46.27% against the previous trading day, as the lowest turnover after 12th April 2013. Under the sectorial round-up, Beverage Food & Tobacco (BFT) surpassed the other sectors providing LKR   116.73Mn while alone accounts to almost 38% of the day’s total turnover. The Bank Finance & Insurance (BFI) sector added LKR 76.77Mn to the daily turnover. The traded share volume during the day (8.73Mn shares) resulted in a dip of 69.23% against the earlier trading day whilst charting the lowest traded volume post to 24th December 2012. Foreign participants were net buyers for the day, noting a net foreign inflow of LKR 90.44Mn (Foreign purchases were LKR 146.17Mn and sales were 55.74Mn); this resulted in the year to date net foreign inflow to record LKR 16.12Bn. The local FOREX market for the day closed with, the USD selling at LKR 130.38/- and buying at LKR 127.20/-.

Australia

• The Australian share market on Monday closed higher driven by renewed demand for banking stocks. The benchmark S&P/ASX200 index was up 34.1 points, or 0.71 per cent, to 4,825.9 points.
• Today, the Australian market looks set to open lower despite gains on Wall Street ahead of the widely-anticipated US Federal Reserve's policy meeting that's expected to give an indication on the central bank's plans on its stimulus measures.  The SFE 200 is pointing downwards 22 points or 0.45 per cent to 4,807.
• In economic news on Tuesday, the Reserve Bank of Australia will release the minutes to its monthly board meeting while the NSW government brings down its budget   Bunnings managing director John Gillam, Harvey Norman chief executive Katie Page, Coles MD Ian McLeod, Woolworths supermarkets and petrol MD Tjeed Jegen are scheduled to address the Australian National Retailers Association's conference on Retail Nation 2013 in Sydney.
• No major equities news is expected.

Hong Kong

• HSI surged 1.23% to 21,226. CEI gained 0.8% to close at 9,744 after decline in 12 consecutive trading days. Volume decreased to HKD56.3 billion.
• 3 of the HSI constituent stocks gained more than 4%, including CNOOC (883.HK), SWIRE PACIFIC A (0019.HK), HANG LUNG PROPERTY (101.HK).
• CKI HOLDINGS(1038.HK), CHEUNG KONG (1.HK), POWER ASSETS (6.HK) and  Li Ka Shing Foundation Ltd agreed to form JV for acquiring entire issued share capital of VAN GRANSEWINKEL, which mainly engaged in the business of waste processing and production of renewable energy from incineration of waste in Netherlands. Market reaction was positive on the JV project, CKI, CK and POWER ASSETS climbed 3%, 3.7% and 3% respectively.
• Technically, HSI is trying to fill the gap at 21,308. The support will still be 20,800.

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Morning Note

Company Highlights

Tuan Sing Holdings Limited announced that its indirect wholly-owned subsidiary, Dillenia Land Pte Ltd, has been awarded the tender for the collective sale of all strata lots and the common property in the development known as Gilstead Court at the price of S$150,168,000.00. The acquisition on the Property is subject to Strata Titles Board’s approval. The freehold Property has an approximate site area of 75,479 sq ft. With a plot ratio of 1.4, the price of S$150,168,000.00 would translate to S$1,292 per sq ft per plot ratio, including a 10 per cent balcony area. There is no development charge payable. (Closing price: S$0.340, 0.0%)

TEE International Limited announced that Global Environmental Technology Co. Ltd (“GETCO”) which is 49%-owned by the Company’s wholly-owned subsidiary, TEE Resources Pte Ltd has formed a consortium with Cisco Engineering Co. Ltd (“CISCO”) and Lam Water Solution Co, Ltd (“LAM”) to enter into a contract with Bangkok Metropolitan Administration to manage and control the water level at Makkasan Water Catchment area by periodically pumping water into the Chao Phaya River. The Contract awarded to the consortium is worth THB209,784,600 (VAT inclusive), approximately equivalent to SGD8,607,462 and commenced from 1 May 2013 for a period of three years. GETCO, CISCO and LAM will own 30%, 50% and 20% respectively in the consortium which the Group total effective interest is 14.7%.  (Closing price: S$0.345, 0.0%)

Cityneon Holdings Limited announced that a total contract sum of S$5.7 million has been awarded to its wholly-owned subsidiary in Singapore, Cityneon Events Pte Ltd, for two packages to supply and provide (1) Furniture, Fittings & Equipment, and (2) Marquees & Associated Equipment, for the Formula 1 Singapore Grand Prix. The Contract period shall be for 3 years from 2013 to 2015, with an option to renew for another 2 years from 2016 to 2017. These Contracts are expected to contribute positively to the earnings per share and net tangible assets per share of the Company and its subsidiaries for the current financial year ending December 2013. (Closing price: S$0.250, 0.0%)

Roxy-Pacific Holdings Limited announced that RH Draycott Park Pte. Ltd, a wholly-owned indirect subsidiary of the Company, has entered into a conditional agreement to acquire a freehold residential site situated at Lot 4296N Mukim  22 at 111 Tampines Road, Singapore 535133, also known as Yi Mei Garden at the purchase price of S$136,000,000. The said freehold residential site has a total land area of 78,030sq ft and an existing plot ratio of 2.1 under the 2008 Master Plan for residential development. (Closing price: S$0.600, +0.8%)

Fabchem China Limited announced that the Group’s profit is expected to be significantly lower for 1Q2014, as compared to 1Q2013. This was mainly attributable to two factors as follows: 1) The temporarily production suspension of its commercial explosives production by the Chinese authorities from 20 May 2013 to 14 June 2013, and 2) Continual pressure on the market-driven selling prices of ammonium nitrate. This profit warning is based on a preliminary review of the unaudited financial results of the Group. Details of the Group’s results in 1Q2014 are expected to be released on or before 14 August 2013. (Closing price: S$0.185, 0.0%)

Source: PhillipCapital Research - 18 Jun 2013