KLCI: -0.07% to 1772.9
JCI: -0.70% to 4806.7                            SET: -0.72% to 1437.7
HSI: -1.13% to 20987                             HSCEI: -1.53% to 9584.5
Nikkei: +1.83% to 13245                        ASX200: +0.98% to 4861.4
Nifty: +0.15% to 5822.3                         S&P500: -1.39% to 1628.9


MARKET OUTLOOK:
By Joshua Tan, Head of Research
 
Both US equity and bond markets sank last night as Fed Chairman Ben Bernanke said that IF the US economy continues to improve along the Fed’s raised forecasts of the economy, it expects to begin tapering QE at year end (4q13) and wind down purchases completely by mid-2014 (4q13 tapering is in-line with our expectations). A rate hike though was indicated as a long way away (consensus expects 2015, we expect end 2014).
 
So there you have it – the end of QE is nigh… so US equity and bond markets sold off. Judging from the unanimous reaction, Asian markets will be vulnerable today.
 
Is this the end of the bull-market? We are not expecting so – yes, the market will price in the prospect of liquidity being sucked out of the markets – but at the same time remember it is predicated on a stronger US economy, so private sector money, which has largely missed the last 4 years of bull market, could come piling back in.
 
Remember, markets always price in before the event, so while this correction/consolidation could resume, things may actually pick up toward year end.
 
(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 Malaysia, inflation inched up 1.8% y-y in May, compared to 1.7% in the preceding month. With inflation still benign, we reckon that Bank Negara will likely stand pat at its upcoming July meeting.

 

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Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.213.79 (-0.49%). The 1.8bn shares traded were worth S$1.2bn in value.
• We expect some downward pressure today, as Fed Chairman signaled for QE tapering, likely beginning this year end if moderate growth continues.
• The STI is likely to react similar to the US markets, which registered equity and bond markets sell-offs.
• 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

• Trading in the Thai stock market was choppy in range on Wed ahead of the US Federal Reserve’s policy outcome on a possible tapering of its QE program. The SET index finished the session up 10.28 points at 1,437.7 points on Wed.
• Sentiment was subdued in Asia on Thu after the end of the Federal Reserve’s policy meeting. Federal Reserve Chairman Ben Bernanke said the US economy is expanding strongly enough for the central bank to begin slowing the pace of its monthly bond purchases this year with the goal of ending it in mid-2014 and reiterated that it will keep short-term fed funds rate near zero at least until US unemployment rate falls to a 6.5% threshold or lower. 
• Even though QE rollback was within market expectations, we believe the market may however need some little time to adjust to the real world in the near term. The resurgence of the US dollar pushed the baht down to above 31 to the US dollar. Under this circumstance, investors should watch out for another possible round of portfolio rebalancing by foreign investors. 
• We expect the SET index to trade in a wide range of 1400-1450 points. On the economic front, eyes will be on PMI data out of China and Europe and US initial jobless claim data today. A breakdown below 1400 could open up the way for further downside to retest the previous low of 1350 or lower.
• Resistance for the SET index is pegged at 1446-1468 and support at 1415-1400 today.

Indonesia

• The Jakarta Composite Index (JCI) finished with mild loss on Wednesday (19/06), ending a relatively flat trading day, as investors grew cautious ahead of the US Federal Reserve policy announcement later in the day. The JCI shed 33.796 points, or 0.70%, to close at 4,806.656. All but one sector ended in red on Wednesday. Construction, property and real estate sector fared worst with 1.62%-loss, followed by miscellaneous industry sector with 1.49%-drop, and basic industry sector with 1.40%-decline. The LQ45 index slipped 7.985 points, or 0.99%, to 795.892. Anticipations of risks of higher operational costs for public companies in Indonesia after the fuel price hike becomes effective also weighed on sentiments in Indonesia Stock Exchange on Wednesday. 168 shares tumbled, 87 shares gained, and 217 shares remained unchanged Wednesday on the Indonesia Stock Exchange. Volume on the regular board reached 3.678 billion shares worth IDR 5.084 trillion. Foreign investors posted net selling of IDR 801.28 billion.
• Indonesian stocks will likely decline today, as sentiments turned negative globally after the US Federal Reserve signaled its intention to reduce the monthly bond purchases this year, if incoming US economic data show positive outlook on the economy. On the upside, exporters stocks may get investors' attention as the Rupiah getting pressure from stronger US dollar. We see a decline on the JCI today, with the index's movement range between 4,750 and 4,909.

Sri Lanka

• The Colombo bourse ended the trading day within the positive terrain recovering from the 2 consecutive red closures. The market exhibited an noticeable upward during the early trading hours gaining nearly 0.7%, hence assisting the benchmark ASPI index to touch an intraday high of 6,235.92; however, the positive trend reversed after mid-day trading as a result of the selling sentiment of investors, but managed to remain positive at 6,209.23 (+0.26%) upon the closure. The S&P SL20 closed marginally negative at 3,495.68, dip by 0.04%. The total market capitalization recorded LKR 2.38Tn, indicating an YTD gain of 10%. The turnover for the day amounted to LKR 343.82Mn, where 50% of it was accounted by the three prime subscribers for the day; further, this was a gain of 17.83% compared to the previous  market day. With regard to the sectorial contribution, Bank Finance & Insurance (BFI) sector dominated the list providing LKR 145.86Mn; the sector witnessed considerable investor interest logging 1,377 trades, hence resulting in a total volume of 4.74Mn shares being traded. Diversified Holdings (DIV) also performed well adding LKR 64.96Mn to the turnover. A net foreign inflow of LKR 64.25Mn was recorded during the day, resulted by foreign purchases worth LKR 155.50Mn and sales of LKR 91.26Mn; the YTD net foreign inflow currently stands at LKR 16.22Bn. As at the daily closure, the USD stood at LKR 130.25 selling & LKR 127.08 buying.

Australia

• The Australian share market on Wednesday gained ground as investors took a cautiously optimistic stance ahead of the end of the Fed's policy meeting and keenly awaited update on US economic stimulus measures. The benchmark S&P/ASX200 index was up 47.0 points, or 0.98 per cent to 4,861.4 points.
• Today (20/06/13), the local market looks set to open lower following sharp falls on Wall Street after Federal Reserve chairman Ben Bernanke said the central bank expects to taper its bond-buying stimulus measure later this year. The SFE 200 is pointing downwards 55 points or 1.12 per cent to 4,820.
• In economic news on Thursday, the Commonwealth Bank business sales indicator for May is due out. Telstra chief executive David Thodey is scheduled to deliver the keynote address at the Trans-Tasman Business Circle function in Sydney.
• No major equities news is expected.

Hong Kong

• HSI and CEI dropped 238 points and 149 points to close at 20,986 and 9,584 respectively. Volume increased slightly to HKD61.88 billion
• Before Fed meeting, HSI opened low at 21,138 (-38). But it declined significantly after the rumor that China IPO will resume and it was dragged down by China A shares dropped.
• Chow Tai Fook (1929.HK), world’s largest listed jewelry chain, climbed 2.3% to HKD8.86 after annual results announcement and management said they expect a double digits growth in sales this fiscal year. The net profit dropped 13% yoy to HKD5.51 billion, trailed consensus estimates.
• Technically, we still have a bearish view in short term as 10-MA passed below 250-MA. HSI is expected to gain support at 20,800 and resistance level is 21,375.

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Morning Note

Company Highlights

Mapletree Logistics Trust announced that a sale and purchase agreement has been entered into with Oakline Co. Ltd for the acquisition of The Box Centre (the “Property”) in South Korea for a purchase consideration of KRW28.75 billion (approximately S$32.0 million). The Property is located in Gyeonggi-do - widely recognised as the largest logistics cluster in South Korea where around 70% of its warehouses and distribution centres are sited - is approximately 60 kilometres from Seoul. Completed in March 2012, the Property is a modern warehouse facility with a total gross floor area of approximately 27,000sqm, comprising a 3-storey dry warehouse with a gross floor area of 24,071 sqm and an ancillary office block. At the purchase consideration of KRW28.75 billion, the Property will provide an initial net property income yield of 8.4% and is expected to be DPU-accretive. (Closing price: S$1.14, +0.4%)

Golden Agri-Resources Ltd announced that PT Sinar Mas Agro Resources and Technology Tbk (“SMART”), a subsidiary of the Company listed on the Indonesia Stock Exchange, has released a “Disclosure of Information on Affiliated Transaction of SMART” (“Disclosure of Information”) relating to the acquisition of 35.19% ownership in PT Super Wahana Tehno (“SWT”), a company established in Indonesia that produces and distributes bottled ionized mineral water under the “PRISTINE” brand and water ionization machine. Together with the acquisition of 14.81% ownership in SWT from a third party, upon completion of the said acquisitions, SMART will hold in aggregate, 50% ownership in SWT. (Closing price: S$0.570, -0.9%)

Mun Siong Engineering Limited announced that it has secured an additional maintenance contract for a period of one year with a new client on Jurong Island, Singapore. At the same time the Group has also entered into a three years maintenance contract with an existing long term customer, under a new set of terms and conditions. These additional service contracts add on to the Group’s total maintenance contracts to 13. The maintenance services cover a wide spectrum of facilities involved in the down-stream process industry. These additions are expected to contribute positively to the Group but are not expected to have a material effect on the earnings per share and the net tangible assets per share for the financial year ending 31 December 2013. (Closing price: S$0.080, 0.0%)

UOL Group Ltd announced that its interest in associated company, United Industrial Corporation Limited (“UIC”), has increased to 599,346,565 shares or 43.467% of UIC’s issued capital (1,378,849,220 shares). The increase in its shareholdings was pursuant to off-market and open market purchases by wholly-owned subsidiary, UOL Equity Investments Pte Ltd, of an aggregate of 642,000 UIC shares on 19 June 2013 for the average price of S$3.05636 per share. (Closing price: S$6.26, -1.1%)

Macquarie International Infrastructure Fund Limited (MIIF) announced that it has agreed to sell its 100 per cent interest in Miaoli Wind for cash consideration of NT$2.25 million (S$94,768). The divestment to Challenger Emerging Market Infrastructure Fund Pte Ltd (EMIF) was negotiated on an arm’s length commercial basis and is subject to closing conditions, including regulatory approval. MIIF has valued Miaoli Wind at zero since 31 December 2009 because wind speeds have been significantly lower than forecasted at acquisition. (Closing price: S$0.171, 0.0%)

Tat Hong Holdings Ltd announced that the Company has established a S$500,000,000 Multicurrency Medium Term Note Programme (the "MTN Programme") and that in connection therewith, the Company has appointed Oversea-Chinese Banking Corporation Limited to act as the arranger and dealer of the MTN Programme. The net proceeds arising from the issue of the Notes under the MTN Programme (after deducting issue expenses) will be used by any company within the Group for general corporate purposes, including refinancing of existing borrowings, and financing capital expenditure and general working capital of the Group. (Closing price: S$1.405, +0.4%)