- SET: -0.12% to 1400.5
- JCI: -2.48% to 4515.4                                 - KLCI: -0.37% to 1755.9
- HSCEI: -0.30% to 9237.5                           - Hang Seng: -0.59% to 20263.3
- Nikkei 225: +1.66% to 13230.1                 - ASX200: -0.72% to 3236.6
- India NIFTY: +0.21% to 5667.7                  - S&P500: +0.27% to 1592.4


MARKET OUTLOOK:

By Ng Weiwen, Macro Analyst

Is cash king? Notwithstanding a seemingly dead cat bounce (in US markets) last Fri,  equities and rates sold off (albeit at a slower pace last Fri)  as deleveraging ensued after a hawkish shift in the Fed's stance last week.
 
Markets are in a correction mode. We view the recent sell-off in markets as largely technical amid a still-healthy uptrend.
 
Commodities -as an asset class- might be confronted with possibly structural headwinds.
With possibly the renaissance of US manufacturing at the expense of China factories (which are weighed down by higher wage costs), the use of commodities in economic production will be used more efficiently and less intensively. Thus, even continued monetary easing might not be able to excite commodities bulls.
 
Our UW for gold since Oct12 and it has proved to be a prescient call. Gold tumbled to multi-year lows last week. Notwithstanding a brief respite, we reckon the downward bias for gold is likely to continue to persist on account of the following:
a) stronger USD on improved US trade balance (shale gas boom) as well as gradual pick up in economy
b) receding tail risks on the  EZ front (as reflected by the decline in 10yr yields of peripheral EZ sovereigns)
c) awkward trend of disinflation worldwide (US, China and EZ) notwithstanding the synchronised monetary easing by major central banks. Subdued inflation diminish the importance of gold as a hedge against rising inflation
 
Next key support for gold is pegged at 1157 (Jul 2010 low).
 
No change to our broad asset allocation of OW equities, MW fixed income, MW commodities and UW gold.
 
For the Nikkei, we might be at the tail end of the corrective wave and the index is forming a tentative support at 13k level.
 
For the STI, the bulls have to defend 3100 level which was pierced thru’ on Fri. Downward bias will likely persist as long as it does not decisively clear above the 3230 resistance level. Near term support pegged at 3100. But amid the seemingly doom and gloom, there are still opportunities for bargain hunting, esp for our top picks (SGX , Keppel Corp, Pan United).

Macro Data:

Nil

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Regional Market Focus

Singapore

• We initiate coverage on Amara Holdings with a “BUY”. Our analyst is positive due to stable recurring earnings with strong visible growth profile.   
• We expect the STI to consolidate at current levels, with key near term support at 3,100 levels.
• Top picks for the year are Pan United (Buy, TP: S$1.21), SGX (Accumulate, TP: S$8.00) & Keppel Corp (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 opened deep in the red, down nearly 50 points last Fri on persistent concerns over the Federal Reserve’s plan to dial back on QE before the SET index recouped some of earlier losses to finish the session down a mere 1.69 points, helped by buying in energy counters.
• The choppiness is likely to continue in the Thai stock market amid the extremely high level of intraday swings. Investors should keep an eye on portfolio rebalancing by foreign investors in the wake of the US Federal Reserve’s QE tapering plan. Currency weakness would be one of the catalysts for continued foreign sell-off after the strengthening of the US dollar put downward pressure on the Thai baht to above 31.1 to the dollar.
• Institutional buying should however lend some support to the market due to end-of-quarter ritual of window dressing. Statistics over the past decade showed 70%-80% prevalence of window dressing rally in Thai stocks during the last five trading days of 2Q with average market gains of between 1.3-2.0%.
• In current market conditions, we believe selective trading with the ‘sell the rallies and buy the dips’ strategy makes sense for the Thai stock market. Equity exposure should be capped at 25% of the short-term portfolio.
• Resistance for the SET index is seen at 1440-1468 and support at 1380-1350 today.

Indonesia

• The Jakarta Composite Index (JCI) tumbled Friday (21/06), extended losses to the third consecutive day as stock markets in Asia continued falling after the US Federal Reserve's plan to wind down bond purchases hit investors' confidence. The JCI lost 114.622 points, or 2.48%, to 4,515.372. The decline on Friday included all 9 major industry groups, with infrastructure sector fared worst with 3.78%-plunge, basic industry sector also fell 3.78%, and miscellaneous industry sector shed 3.14%. The LQ45 index slid 24.341 points, or 3.20%, to close at 736.263. On Friday, Indonesian government officially announced the increase in subsidized fuel prices, as expected. Price of subsidized gasoline rose 44% to IDR 6,500 a liter, and subsidized diesel fuel rose 22% to IDR 5,500. Bank Indonesia said it expects inflation to reach 2.2% - 2.4% (MoM), above the historical range of between 0.7% - 0.9%, after the administration raised subsidized fuel prices. Year-on-year, inflation is seen to reach 7.67% to 7.87%. 200 shares fell and 70 shares rose Friday on the Indonesia Stock Exchange, where regular market volume reached 4.88 billion shares worth IDR 8.38 trillion. Foreign investors' transactions netted in a net sale of IDR 2.25 trillion.
• The Jakarta Composite Index (JCI) looked set for a moderate rebound today, after a steep decline last Friday (22/06) that brought the index to near 4,500. Modest gains on US markets on Friday and rally in Japan this morning may spur positive momentum for Indonesian market today. But gains may be capped by concerns about looming inflationary pressure after the government's plan to raise subsidized fuel price became official since the weekend. We expect the JCI to rise moderately, with range of movement between 4,429 and 4,605.

Sri Lanka

• The Colombo Bourse depicted a negative closure during the day whilst the indices took a sharp dip dragging the ASPI and the S&P SL 20 by 56.17 and 25.57 points respectively, which was mainly triggered by the sluggish participation of the investors and continues selling.  The daily turnover for the day was LKR 565Mn; this indicated a drop of 83.74% compared to the previous trading day. Distilleries Company PLC (DIST) stood out as the top subscriber for the day providing LKR 93.2Mn, accounting to 16.5% of the daily turnover; the counter reached an intraday high of LKR 193.00/- and a low of LKR 190.00/-, while closing the day at LKR 191.90/- . Additionally, off board activity was witnessed on DIST (LKR 60.2Mn) where 312K shares were blocked at price LKR 193/-. Under the sectorial summary, Bank Finance & Insurance (BFI) sector stood on top, providing LKR 312.38Mn and Beverage Food & Tobacco (BFT) sector emerged second, contributing LKR 97.31Mn. During the day, a total of 18.13Mn shares changed hands resulting in a decrease of 21.47% against the previous trading day.

Australia

• The Australian share market on Friday suffered a second straight day of losses. The benchmark S&P/ASX200 index was down 19.6 points or 0.41 per cent to 4,738.8 points.
• Today (24/06/13), the local bourse looks set to open lower following a mixed performance on Wall Street as the fallout continues from the US Federal Reserve's signalling it could soon start winding back its stimulus measures. The SFE 200 is pointing downwards 51 points or 1.08 per cent to 4,637.
• No major economic news is expected on Monday.
• In equities news, Metcash is due to post full year results.

Hong Kong

• HSI and CEI dropped 119 points and 27 points to 20,263 and 9,237 respectively. Volume increased to HKD97.17 billion.
• Galaxy Entertainment (27.HK), after breaking listed record last week, dropped 8.38% last Friday to HKD39.35. China Coal (1898.HK) rebounded 4.6% to HKD4.55 after reaching 4-year low.
• HSI and CEI declined 3.54% and 4.43% last week respectively, mainly due to concern Fed will reduce stimulus and HSBC China PMI trailed estimates.
• Technically, 14-RSI is now at 22 low level, we expect a technical rebound. The support and resistance level will be at 20,000 and 20,800 respectively.

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Morning Note

Company Highlights

Singapore Airlines updated that they have received confirmation from Australia’s Foreign Investment Review Board (FIRB) that it will not object to SIA’s proposed increase of its stake in Virgin Australia to 19.9%. FIRB approval will enable Singapore Airlines to complete the purchase of an additional 255.5 million shares in Virgin Australia at 48 Australian cents per share, for a total consideration of A$122.6 million. The transaction is expected to be completed by the end of next week. Singapore Airlines acquired an initial 10% of Virgin Australia in late 2012 through an injection of funds in Virgin Australia Holdings. The additional shares, representing a 9.9% stake, will be acquired from the Virgin Group. (Closing price: S$10.000, -0.498%)

Oxley Holdings Limited announced that the Group’s wholly-owned subsidiary, Oxley Star Sdn. Bhd., has on 21 June 2013 entered into a joint venture agreement with Beverly Heights Properties Sdn Bhd, pursuant to which Oxley Star was granted the absolute, exclusive and irrevocable authority, power and right in, over and to the development of the land owned by BHP and held under Geran No. 62839 for Lot 3643 and Geran No. 44471 for Lot 2859, both of which are situated in Mukim 18, Daerah Timor Laut, Penang, Malaysia. The Land has a freehold tenure and an aggregate area of approximately 119,876 square metres. Under the Agreement, Oxley Star shall carry out and complete the development on the Land through phased development, construction and building, inter alia, residential accommodation based on BHP’s proposed plans, which are subject to the approval of the relevant authorities. Oxley Star will be entitled to all income generated from the Project including 70% of the gross total sales of the built-up saleable area of the Land. BHP will be entitled to 30% of the gross total sales of the built-up saleable area of the Land with a minimum entitlement of not less than RM500,000,000 and a maximum entitlement not exceeding RM900,000,000. (Closing price: S$0.370, +5.714%)

COSCO Corporation (Singapore) Limited announced that COSCO (Nantong) Shipyard Co. Ltd., a subsidiary of the Company’s 51% owned subsidiary, COSCO Shipyard Group Co. Ltd., has secured contracts from a Singapore entity for the conversion of two semi-completed hulls to high-end floating accommodation units valued at over USD170 million each. The contract for the first unit is effective. The units are scheduled for delivery 24 months after the contracts are declared effective. An announcement would be made when the contract for the second unit is rendered effective in six months’ time. (Closing price: S$0.760, +0.662%)

Willas-Array Electronics (Holdings) Limited refers to the announcement made on 18 March 2013 in relation to the proposed dual primary listing of its ordinary shares on the Main Board of The Stock Exchange of Hong Kong Limited. Further to the Announcement, the Board wishes to announce that the Company has today made an application to the SEHK for the listing of, and permission to deal in, all the Shares on the Main Board of the SEHK. The Board wishes to highlight to the shareholders of the Company that the Proposed HK Listing will involve fairly extensive preparatory work and regulatory clearance, and that this process may involve an uncertain time frame. In addition, as the Proposed HK Listing is subject to, the approval of SEHK and other relevant authorities and the approval of the Shareholders on matters relating to the Proposed HK Listing at a special general meeting, the Proposed HK Listing may or may not occur. (Closing price: S$0.152, -2.564%)

Marco Polo Marine Ltd has via its 49.6%-owned subsidiary, PT Pelayaran Nasional Buana Bina Raya TBK, acquired and taken delivery of a newly built 9,000 BHP Anchor Handling Tug Supply (AHTS) vessel from a third party shipbuilder. The Acquisition, which is in line with the Group's expansion plans to entrench its market presence in the fleet management of Offshore Support Vessels in Indonesia, was timely, given the current robust market demand in Indonesia for such a vessel and that it would take at least 18 months to build one. The Acquisition is funded largely through a vessel loan, with the balance from the proceeds of the Initial Public Offering of PT BBR TbK which was concluded in early 2013. The mid-sized AHTS vessel, named “MP Prevail” is currently undergoing the reflagging exercise to Indonesian flag as there is currently very limited supply of such vessels operating in Indonesia waters. Once the abovementioned reflagging exercise is completed, MP Prevail is expected to be chartered to one of the leading oil companies in the region for deployment in Indonesia waters. (Closing price: S$0.375, 0%)

JB Foods Limited announced that it has reallocated all the unutilized proceeds from the Subscription originally allocated for future acquisition and expansion plans to fund the Company’s general working capital instead. The Board has considered the impact of the change in the use of proceeds on the Group’s business and is of the view that the Reallocation will meet the financial needs of the Group more efficiently. The Board believes that such flexibility in financial management is in the best interest of the Company and its shareholders as a whole. Upon completion of the Reallocation, the Company intends to use its internal resources or look to alternative finance options to fund any future acquisition and expansion plans as and when they arise. (Closing price: S$0.365, 1.389%)

Guthrie GTS Limited announced that CIMB Bank Berhad, Singapore Branch, for an on behalf of United SM Holdings Pte Ltd., has on 21 Jun 2013 made a voluntary unconditional cash offer for all issued and paid-up ordinary shares in the capital of the Company. The Offeror is a joint venture held by Hearty Gains Limited and Activewatch Limited. As at the date of the Offer Announcement, the Offeror does not own any shares. However, each of AS and PM has a deemed interest in shares representing approximately 69.15% of the total number of issued shares. The consideration for each Offer Share will be S$0.88 in cash. (Closing price: -, -%)