Morning Market Commentary
STI: +0.3% to 3188                                KLCI: +0.13% to 1768.7
JCI: +1.70% to 4478.6                           SET: -0.73% to 1388.4
HSI: +1.07% to 20904.6                         HSCEI: +1.81% to 9215
Nikkei: -0.39% to 14416.6                      ASX200: +0.40% to 4901.4
Nifty: -0.72% to 5816.7                          S&P500: +0.02% to 1652.6

 
MARKET OUTLOOK:

Our short term outlook for markets can be found in our 8th July Monday Weekly Market Outlook Webinar slides (www.uniphillip.com > education programs > phillip securities research webinar)

Our medium to long term outlook for markets and asset allocation strategy (equities, bonds, commodities, gold) can be found in the latest 8th July Global Macro Asset Strategy report – please click the link below.

We upgraded SG Banks this week – please see Banks under Sector Report below.

(PhillipCFDs and ETFs for trading the macro outlook can be found in the Global Macro report. PhillipUT Wrap Account offers tactical asset allocation of unit trusts without front loading sales charge.)

MACRO DATA:

USA: The Mortgage Bankers Association has informed that US citizens that applied for mortgage loans dropped 4.0% in the week ended on July 5th, bettering the previous contraction of 11.7%. Interest rates on fixed 30-year mortgages rose for the ninth week in a row to average 4.68 percent in the week ended July 5, the Mortgage Bankers Association said. It was the highest level since July 2011 and a 10 basis point increase over the week before. U.S. wholesale inventories dropped 0.5% in May , while wholesale sales climbed 1.6%. Economists had expected inventories to increase.

Eurozone: Germany's final EU-harmonized CPI increased +1.9% Y/y which was unchanged from prior and in line with expectations. CPI also increased +0.1% M/m, also unchanged from prior and in line with expectations. French industrial production (M/m) fell less than economists forecast in May as output of automobiles and electricity increased.  Production declined 0.4% after a 2.2% surge in April. Economists forecasted a 0.8% decrease.  Production did increase 0.4%, however, on a Y/y basis. Italian industrial production sa (M/m) grew 0.1% in May which was below economist’s expectation of 0.3% in contrast to the -0.3% contraction in April. Portugal’s EU- harmonized CPI climbed 1.2% from a year earlier, more than the 0.9% increase in May. June’s EU-harmonized CPI grew by 0.1% M/m vs. -0.1% estimate.

Greek industrial production fell -4.6% in May from the same month a year earlier, significantly below economists expectation of -1.0% and more than the -1.8% in Apr.

S. Korea’s June adjusted jobless rate is 3.2% vs 3.2% a month ago, in line with expectations.

Thailand kept its benchmark interest rate unchanged and maintained its one-day bond repurchase rate at 2.5%, with monetary policy committee members voting unanimously to hold.

In China, exports unexpectedly fell by 3.1% y-y in June, while the market was predicting a 3.7% y-y gain, after the 1.0% y-y gain in May. The weak exports data, together with the recent cash squeeze, indicates a dim economic outlook for the nation.

In Australia, Westpac Consumer Confidence index fell slightly to 102.1 in July from 102.2 in June, pointing to a faltering business sentiment amid uncertainties arising from China.

Regional Market Focus

Singapore

The benchmark STI closed higher at 3,188.04 (+0.30%). The 1.9bn shares traded were worth S$1.3bn in value.

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 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 fell on Wed amid fears of economic slowdown in China after a drop in exports and as the Bank of Thailand cut the country’s GDP growth forecast to below 5%. The SET index finished the session down 10.28 points at 1,388.41 points. 

The latest minutes of the Federal Reserve’s Jun policy meeting buoyed market sentiment in the near term after the US central bank said highly accommodative monetary policy is needed for the foreseeable future while many officials wanted more reassurance that the labor market was improving before reining in stimulus measures.

Foreign investors turned net buyers of Thai equities to the tune of around Bt1.8bn on Wed but increased net short positions in derivatives market to 1.9k contracts, still reflecting a lack of a serious return to the Thai market. The weakness of the US dollar on Fed minutes sent the Thai baht rapidly back higher to near 31 to the US dollar, a factor that could be some positive for the market.

Today we peg resistance for the SET index at 1395-1416 and support at 1380-1350.

Indonesia

Most Indonesian stocks rose Wednesday (10/07), bringing the Jakarta Composite Index (JCI) higher from the record percentage-drop this year, as investors bought into bargain stocks. The JCI advanced 1.70%, or 74.844 points, from yesterday's close at near 4,403, to finish at 4,478.644. The gain on Wednesday was supported by 7 of the 9 major industry sectors, led by consumer goods sector with 3.34%-surge, trailed by construction, property and real estate sector with 3.20%-gain, and infrastructure sector with 2.62%-advance. Blue-chip stocks also rose, with the LQ45 index measuring them gained 16.792 points, or 2.31%, to 745.005. From the monetary front, Bank Indonesia (BI) is broadly expected to raise its benchmark rate by another 25 basis points to 6.25% on the board of governors' meeting scheduled on Thursday (11/07), after it raised borrowing costs to 6.00% at the prior meeting as it anticipates to avert inflation after the recent subsidized fuel price hikes. The government expects inflation to reach 7.2% this year, compared with 5.9% in June. Gainers outpaced decliners 180 to 76 Wednesday on the Indonesia Stock Exchange, where 3.95 billion shares worth IDR 5.29 trillion traded on the regular market. Foreign investors posted net stock selling of IDR 592.89 billion.

The Jakarta Composite Index (JCI) will likely advance today, following the remark from US Federal Reserve's chairman Ben Bernanke after US market close on Wednesday (10/07) that the Fed is in no hurry to raise short-term rates. The plunge of US dollar overnight may also provide support for the Rupiah, helping to ease inflation fears in Indonesian capital market. On the downside, however, the widely expected benchmark rate hike by Bank Indonesia on its board of governors meeting later today may limit gains. We see a potential upside for the JCI today, with minor price band within the range of 4,380 and 4,544.

Sri Lanka

The bourse concluded the trading day on a positive note re-entering into the green territory; having suffered losses for the past 5 trading days losing 160.63 points or 2.64%. The ASPI index gathered 35.89 points or 0.60%, to close the day at 6,016.05. The S&P SL20 index also streamed in the same trend and closed within the green terrain at 3,365.08, accruing 17.12 points or 0.51%. As at the daily closure the total market capitalization stood at LKR 2.31Tn, with a year to date gain of 6.59%. The market PER and PBV recorded at 16.15 & 2.20 respectively. The day witnessed a turnover of LKR 228.18Mn, indicating a drop of 10.29% against the previous trading day. During the day, a total quantity of 31.88Mn shares changed hands, charting a noteworthy gain of 121.67% compared with the previous trading day. Under the sectorial summary, Diversified Holdings (DIV) sector stood out as the prime contributor providing LKR 75.49Mn, while accounting to 33.08% of the aggregated turnover for the day. Further, the Bank Finance & Insurance (BFI) sector added LKR 56.54Mn to the daily turnover. With regard to share price movement, 106 companies gained whereas 67 companies lost. Foreign participants were bullish during the day, to result in a net foreign in flow of LKR 8.11Mn (foreign buying amounted to LKR 43.82Mn & selling amounted to LKR 35.71Mn); this resulted in the year to date net foreign inflow to record LKR 15.74Bn. The local FOREX market for the day closed with, the USD selling at LKR 132.50/- and buying at LKR 129.30/-.

Australia

The Australian share market on Wednesday closed higher despite slipping in afternoon trade due to concerns about an economic slowdown in China. Data from the world's second largest economy showed exports unexpectedly fell 3.1 per cent in June, and imports fell 0.7 per cent. The benchmark S&P/ASX200 index was up 19.7 points, or 0.40 per cent, at 4,901.4 points

Today (11/07/13), the Australian market looks set to open higher despite mixed results on Wall Street following the release of the Federal Reserve's policy meeting minutes that signalled the central bank aims to unwind its stimulus measures earlier than thought. The US central bank's June 18 and 19 Federal Open Market Committee meeting showed "about half" of the participants thought the $US85 billion a month bond buying program should be wound up by the end of this year. US Fed chairman Ben Bernanke signalled last month that quantitative easing (QE) could end by mid-2014, depending on economic circumstances.

In local economic news on Thursday, the Australian Bureau of Statistics (ABS) is due to release labour force data for June. The NAB June quarter Australian residential property survey is also due out.

In equities news, Arrium mining and minerals chief executive Andrew Roberts is scheduled to speak at a Melbourne Mining Club lunch while CSR has its annual general meeting scheduled.

Hong Kong

HSI gained 221 points or 1.1% to 20,904. CEI climbed 164 points or 1.8% to 9,215. Trading volume was HKD52.855 billion.

China June export and import data both trailed estimates, narrowed the gain of HSI in the morning. But Hong Kong property sector and China Coal sector led the gain finally. New World Dev (17.HK), CKH (1.HK) and China Shenhua (1088.HK) rose 3%, 2.6% and 4% respectively.

Chow Tai Fook (1929.HK), the leading jewelry chain in China, climbed 12.9% to HKD9.16 after announcement of 3 months ended 30 June, 13 results. The Group achieved 63% growth in revenue and same store sales growth of 48%.

Technically, HSI is above 10-MA and 20-MA and yesterday gained support at 20-MA obviously after bad China export data released. We expect the support and resistance levels to be 20,638 and 21,000 respectively.

Morning Note

Company Highlights

Tiong Seng Holdings Limited announced that the Issuer has on 10 July 2013 established a S$250,000,000 Multicurrency Medium Term Note Programme (the “Programme”), under which the Issuer may issue notes (the “Notes”) from time to time. The net proceeds arising from the issue of the Notes under the Programme (after deducting issue expenses) will be used for general corporate purposes, including the refinancing of existing borrowings and financing of investments and acquisitions and the working capital and capital expenditure requirements of the Issuer and its subsidiaries.  (Closing price: S$ 0.265, +1.923%)

Mirach Energy updated that KM-606 production well that was drilled in December 2012 and suspended due to extreme bad weather conditions in the earlier months, is now ready for production after well perforations at a targeted layer. The well was drilled up to 485 metres and encountered five layers of oil zone that aggregate 22.4 metres. Perforation was completed for 1 metre at one of the five oil zones at 285 metres deep and recorded daily production of 40 barrels of oil per day. KM-601 well that commenced production in November 2012 has a cumulative production of about 7000 barrels of oil as at June 2013.KM-600 that was drilled earlier is still pending well logging data analysis and testing. (Closing price: S$ 0.375, +1.351%)

LionGold Corp Ltd, Singapore’s first Main Board-listed gold company, has released its annual report for the financial year ended 31 March 2013. Over the period, interests in six gold companies, with a combined transaction value of S$190 million, were acquired. A substantial stake in a second Australian gold producer, Unity Mining Limited, has since been purchased, in May 2013. The Group’s mining portfolio now includes 5.5 million ounces of gold resources, of which nearly 900,000 ounces are classified as reserves. (Closing price: S$ 1.120, -0.885%)

Loyz Energy Limited announced that its whollyowned subsidiary, Loyz Oil Pte. Ltd. (“Loyz Oil”) had acquired 1,200 ordinary shares (the “Acquisition Shares”) in Zenith Oil & Gas Limited (“Zenith”) on 9 July 2013 from Leo Energy Ltd, a party that is unrelated to the Company, its directors, chief executive officer and controlling shareholders. The issued and paid-up capital of Zenith is USD2,000, comprising 2,000 ordinary shares. Further to the acquisition, Loyz Oil has an interest of 60% of the shareholdings in Zenith, comprising 1,200 ordinary shares. The total consideration for the acquisition was USD1,200, which was based on 60% of the initial paid-up share capital of Zenith. (Closing price: S$ 0.285, -3.390%)

Source: PhillipCapital Research - 11 Jul 2013