Morning Market Commentary

STI: +1.91% to 3248.9                           KLCI: +0.70% to 1781.2
JCI: +2.80% to 4604.2                           SET: +4.22% to 1447
HSI: +2.55% to 21437.5                         HSCEI: +3.65% to 9551.6
Nikkei: +0.39% to 14472.6                     ASX200: +1.31% to 4965.7
Nifty: +2.04% to 5935.1                         S&P500: +1.36% to 1675

 
MARKET OUTLOOK:

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)
 
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: Initial jobless claims, a proxy for layoffs, increased by 16,000 to a seasonally adjusted 360,000 in the week ended July 6. That was more than the 335,000 new applications forecast by a Dow Jones Newswires survey of economists. This number of U.S. workers seeking new unemployment benefits rose last week to a level that still points to job growth but underscores the fitful nature of the labor market's recovery. Consumer sentiment climbed for a fourth straight week, reaching the highest levels in more than five years as Americans grew more upbeat about their finances. The Bloomberg Consumer Comfort Index improved to -27.3 in the period ended July 7, its highest level since January 2008, from -27.5 a week earlier.

Eurozone: Consumer prices in France, the euro zone’s second-largest economy, rose 0.2% from the previous month, and increased 0.9% from a year earlier. This was in line with economists’ expectations.

Ireland’s harmonized CPI increased +0.1% from the previous month and increased by 0.7% from a year earlier. This beat economist expectations of -0.1% and +0.4% respectively.

Seoul’s central bank kept their seven-day repurchase rate at 2.5%, matching economists’ expectations as it boosted its forecast for 2014 growth to the fastest pace since the recession in 2010. Governor Kim Choong Soo announces that BOK sees GDP rising 4% in 2014, up from an April projection of 3.8%.

Malaysia’s May production rises 3.4% Y/y versus median estimates of 2%, a decrease in growth from April’s revised rate of 4.7%. They have also left their overnight policy rate unchanged at 3% as forecasted.

Bank Indonesia boosted the key interest rate by 50 basis points to 6.5%, which is more than economists forecast of 6.25%. It also raised the deposit facility rate, the rate it pays lenders on overnight deposits, to 4.75% from 4.25%. The central bank said that this was “pre-emptive measure” and is aimed at maintaining monetary stability.

In Australia, unemployment rate rose to 5.7% in June, exceeding the market expected 5.6%, after the 5.5% reading in May. Full time employment fell by 4.4K in June, while part time employment rose by 14.8K. The weak labor market data and dim exports outlook due to slowdown of China may motivate the RBA to consider further rate cut in the future.

In Japan, machine orders rose by 10.5% m-m in May, far exceeding the market expected 1.9% m-m gain, after the 8.8% m-m drop in Apr. On y-y basis, machine orders rose by 16.5%, compared to the 1.1% y-y drop in Apr. The growing machine orders adds to the case by BOJ that nation's economy is moderately picking up.

Regional Market Focus

Singapore

The benchmark STI closed higher at 3,248.92 (+1.91%). The 2.1bn shares traded were worth S$1.5bn 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

The SET index outperformed its regional peers on Thu, surging as much as 58.63 points to 1,447.04 points on expectations that the US Federal Reserve would not taper off its stimulus measures in the near future.

US QE continuity hopes continued to underpin market sentiment especially after stronger-than-expected jobless claim data but mixed signals may however leave the market vulnerable to high volatility along the way.

The strength of the baht should keep foreign fund flows in the market after heavy foreign buying returned to the Thai stock and derivatives markets but yesterday’s strong run of nearly 60 points may leave the SET index exposed to bouts of short-term selling along the way as part of the market driver came from proprietary trading.

The SET index may be prone to volatility caused by bouts of profit taking along the way after yesterday’s sharp gains but we believe as long as the main index could hold above a key level of 1400, we advise investors to raise equity holdings back to 50% of the short-term portfolio with focus on strong earnings/dividend plays.

Resistance for the SET index is seen at 1460-1480 and support at 1440-1420 today.

Indonesia

Stocks traded on the Indonesia Stock Exchange advanced on Thursday (11/07), after Bank Indonesia raised its benchmark rate in a broadly expected move, as the central bank ramped up its effort to control inflation and contain capital outflows. The Jakarta Composite Index (JCI) surged 125.578 points, or 2.8%, to finish at 4,604.222. Financial sector fared best Thursday, among gainers that included all nine major industry groups. The sector's index rose 4.40%. Gains in other sectors included consumer goods that added 4.24%, and basic industry sector climbed 2.72%. Blue-chip stocks also rose, bringing the LQ45 index to close 26.444 points or 3.55% higher at 771.449. Bank Indonesia (BI) on Thursday (11/07) announced that it raise the benchmark rate by 50 basis points to 6.50%. The interest rate hike had been widely expected, but the percentage of increase was twice the broad expectation of 25 basis points. BI also increased the overnight deposit facility rate, or “FASBI”, by 50 bps to 4.75%. Inflation this month is estimated at 7.5% year-on-year, from 5.9% in June, with prices seen to increase after the government raised subsidized fuel prices. 207 shares climbed and 68 shares fell Thursday on the Indonesia Stock Exchange. Volume on the regular board rose 16% from Wednesday's 3.95 billion shares, to 4.59 billion shares on Thursday with a total value of IDR 6.95 trillion. Foreign investors purchased IDR 70.8 billion worth of stocks.

The Jakarta Composite Index (JCI) will likely rise today, as sentiments in global markets improved after the Federal Reserve chairman Ben Bernanke's reassuring comment that the US central bank will maintain its accommodative policy. Investors will also consider the latest 50-basis points interest rate hike by Bank Indonesia (BI) a positive move in stemming inflation. We expect the JCI to climb today, with minor support and resistance at 4,459 and 4,694.

Sri Lanka

The Colombo bourse ended the trading day on an upbeat sentiment, adding further to the gains recorded on the previous trading day as well. The market witnessed a steady upward trend from early hours of trading mainly resulted by active participation of the investors and also the buying interest which prevailed, hence reaching an intraday peak of 6,067.44 gaining a notable 51.39 points from a day earlier, however settled a few points lower at 6,062.38 (0.77%). The S&P SL20 managed to gather 27.82 points to end the trading day at 3,392.90, 7 points below the 3,400 mark. As at the days closure the market capitalization moved up to LKR 2.33Tn, noting an YTD gain of 7.41%. The market PER and PBV stood at 16.19 and 2.21 respectively. The daily turnover aggregated up to record LKR 241.92Mn; this was a gain of 6.02% against the previous trading day. Bank Finance & Insurance (BFI) sector topped the list under the sectorial summary providing LKR 58.98Mn. Diversified Holdings (DIV) sector also performed providing LKR 55.80Mn to the daily aggregate turnover. Shares totaling up to 17.50Mn changed hands during the day resulting in a dip of 45.13% compared to the previous trading day. Price gainers outpaced the price losers by 108:62. Foreign participants appeared to be bullish during the day for the 2nd consecutive trading day resulting in a net foreign inflow of LKR 6.95Mn; this was resulted by foreign buying of LKR 28.71Mn and selling of LKR 21.75Mn. In regard to the local FOREX market, the USD closed at LKR 132.50/- selling and LKR 129.30/- buying.

Australia

The Australian share market on Thursday moved upwards 1.3 per cent, as investors were encouraged by comments out of the US. Shares in Australia soared on US Fed chairman Ben Bernanke's comments that central bank support through stimulus would continue for the foreseeable future, after flagging an end to it sent markets diving last month. Job numbers provided the other major influence, with investors focusing less on the bad news of a rise in unemployment to 5.7 per cent in June, and more on the better than expected 10,400-plus net jobs created. The benchmark S&P/ASX200 index was up 64.3 points or 1.31 per cent to 4,965.7 points.

Today (12/07/13), the Australian market looks set to open higher after the Dow Jones Industrial Average and S&P 500 vaulted to new records following Federal Reserve chairman Ben Bernanke's pledge to maintain the central bank's easy-money policy for the foreseeable future.

In economic news on Friday, the Australian Bureau of Statistics is due to release Housing finance figures for May.

In equities news, Inabox Group, a wholesaler of telco services to small businesses, lists on the ASX.

Hong Kong

HSI and CEI gained 532 points or 2.55% to 21,437 and 336 points or 3.65% to 9,551 respectively. Trading volume rebounded to HKD731 billion.

Preimer Li Kequiang said in a speech that as long as economic growth and employment stay above a certain floor, China would focus on structure adjustment. It brought speculation of stimulus plan. China banks, brokerages led the index up. CITIC Securities (6030.HK), Minsheng Bank (1988.HK) and Haitong Securities (6837.HK) climbed 7.2%, 7% and 6.9% respectively.  

Recent statements from China Securities Regulatory Commission signaled financing policies for property developers may be relaxed, Greentown China (3900.HK), Kaisa Group (1638.HK) and Agile Property (3383.HK) gained 10%, 9.9% and 7% respectively.

Technically, next support and resistance levels will be at 21,000 and 21,630 respectively.

Morning Note

Company Highlights

Blumont Group Ltd. announced that, on 11 July 2013, Blumont together with Alexander Molyneux (“AAM”) and Pacific Advisers Pte Ltd (“PA”) (collectively, the “Consortium”) have agreed to jointly make an investment in Prospect Resources Limited (the “PSC” or “Issuer”) through a newly incorporating entity (the “Newco”). Blumont will own 60% of the total equity interest in Newco (the “New Subsidiary”) and further information on the incorporation of the New Subsidiary will be announced in due course. (Closing price: S$ 1.210, -%)

Oxley Holdings Limited announced that it has today issued S$100,000,000 fixed rate notes due 2018 (the “Series 2 Notes”) under its S$300,000,000 multicurrency medium term note programme (the “Programme”). The net proceeds from the issue of the Series 2 Notes under the Programme (after deducting issue expenses) will be used for general corporate purposes, including refinancing of existing borrowings and financing of working capital and capital expenditure requirements of the Issuer or its subsidiaries. (Closing price: S$ 0.360, +1.408%)

Mencast Holdings Ltd announced that its wholly-owned subsidiary, Mencast Subsea Pte Ltd (“Mencast Subsea”) under its Offshore and Engineering division, has won two separate contracts extending to 31 December 2015 (plus one year option to renew) from Keppel Singmarine Pte Ltd (“Keppel Singmarine”) and Keppel Shipyard Limited (“Keppel Shipyard”) for the provision of MRO services which include:(a) Underwater inspection and maintenance works (b) Seabed survey inspection (c) Hydrographic survey  (d) Side Scan Sonar survey. (Closing price: S$ 0.530, -%)

Boustead Singapore Limited announced that its wholly-owned subsidiary, Boustead Trustees Pte. Ltd. as trustee of Boustead Real Estate Fund (a trust established under the laws of Singapore) (the "Purchaser"), has on 10 July 2013, entered into a conditional put and call option agreement (the "Put and Call Option Agreement") with Ausgroup Singapore Pte. Ltd. (the "Vendor"), for the proposed acquisition of the property at 36 Tuas Road, Singapore 638505 (the "Property") together with the (i) building(s) and structure(s) constructed on the Property; and (ii) the mechanical and electrical equipment located in the Property (the "Acquisition"). On completion of the Acquisition ("Completion"), the Purchaser will lease the Property back to the Vendor for a term commencing on the date of Completion up to 14 May 2025 (the "Lease-back") (Closing price: S$ 1.360, -%)

Source: PhillipCapital Research - 12 Jul 2013