Morning Market Commentary
STI: -0.85% to 3220.9                                       KLCI: -0.08% to 1792.2
JCI: -0.31% to 4685.1                                       SET: -0.52% to 1453.1
HSI: -0.01% to 22541.1                                    HSCEI: +0.21% to 10206
Nikkei: -2.12% to 13752                                   ASX200: -0.10% to 5152.4
S&P500: -1.43% to 1661.3                              Nifty: +0.75% to 5742.3

 
MARKET OUTLOOK:

By Joshua Tan, Head of Research (assisted by Kenneth Koh)

We seem poised for a near term selloff in stocks.
 
While it’s been a mixed earnings season we have noticed that negative earnings momentum may have bottomed out (we’ll show the chart this Monday 19th Aug), forward looking economic data has been encouraging, while in the asset markets bond prices remain weak, and commodities keep testing overhead resistance – the picture suggests to us that looking ahead, better economic growth should lead a gradual rebound in earnings to keep this stock market bull-run intact.
 
But near term, we could test the upward sloping trend lines again – equities have not seemed to be finished pricing in Fed tapering yet – which given the improving pace of the US economy could see tapering as soon as Sep. That said we’d like reiterate that tapering is a signal for an improving economy, which is bad for bonds but good for stocks – so even that tells us this equity bull-run is just taking a pause. So keep some powder dry for opportunities.

The webinar can be viewed from our archive at www.uniphillip.com > Education Programs > Phillip Securities Research Webinar

For our longer term outlook please see the latest Global Macro Asset Strategy report below.
 
(PhillipCFDs and ETFs for trading the market outlook can be found in the webinar slides above or the Global Macro report below. PhillipUT Wrap Account offers tactical asset allocation of unit trusts without front loading sales charge.)

Macro Data

US jobless claims dropped last week to the lowest level in almost six years. It declined by 15,000 to 320,000 in the week ended Aug 10, the fewest since October 2007.CPI increased 0.2 percent after a 0.5 percent gain in June which was in line with expectations.Industrial production was stagnant mom in Jul, this is under expectations of 0.3% growth.
 
Singapore retail sales dropped by 4.0 percent yoy. This was under the 3.2% growth prior, and under expectations of 2.3%.
 
In New Zealand, performance of manufacturing index rose to 59.5 in July, marking the highest reading since June 2004, after the revised 55.2 in June. The significantly improved reading indicates a strong manufacturing activity. A separate report shows that consumer confidence index rose to 123 in Aug to 119.8 in July, indicating a better outlook for domestic consumption.

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3,220.92 (-0.85 %). The 2.0bn shares traded were worth S$1.2bn in value.
• The STI may face continued pressure on the back of continued concerns over potential tapering of QE. Our analysts guide for a potential near term selloff in stocks, as per our Morning note’s Market outlook. 
• The STI also broke through near-term support of 3,200 this morning, while downward pressure continues. 
• Top picks for the year are Pan United (Accumulate, TP: S$1.27), SGX (Buy, TP: S$8.30) & Keppel Corp (Accumulate, TP: S$12.25).

Thailand

• Thai stocks traded in the red on Thu in the absence of positive catalysts but the SET index managed to hold above 1450 points. Persistent QE concerns in the US led the main index to finish the session down 7.56 points at 1,453.07 points.
• The SET index is expected to see another session of sideways-to-down action today with support pegged at 1440 points amid uncertainty over monetary tightening as fears of QE tapering in the US resurfaced after a mixed bag of US economic data including better-than-expected initial jobless claims and a sharp deceleration in Mid-Atlantic manufacturing growth and concerns also emerged that the Bank of England may raise interest rates sooner than expected after data showed stronger-than-expected retail sales.
• Renewed foreign buying with net purchases of Bt1.68bn in equities and net long futures position of 546 contracts could likely help temper the market’s decline to a certain extent.
• We advise investors to bring equity exposure back to 50% of the short-term trading portfolio to wait and see how things will pan out.
• Today we peg resistance for the SET index at 1460-1475 and support at 1450-1440. 

• Indonesian stocks ended mostly lower Thursday (15/08), amidst weak performance in Asia following a pullback on Wall Street on concerns about rising US treasury yields. The Jakarta Composite Index (JCI) shed 14.604 points, or 0.31%, to 4,685.129. The decline on Thursday included six of the 9 major industry sectors, with shares in miscellaneous industry sector fared worst. Index of miscellaneous industry sector dropped 2.74%, consumer goods sector slipped 0.66%, and agriculture sector fell 0.47%. Upbeat performance of stocks in infrastructure sector and property sector supported the JCI on Thursday. LQ45, the index measuring Indonesia’s blue-chip shares, slid 4.961 points, or 0.63%, at 781.325. From the monetary front, Indonesia’s central bank – Bank Indonesia – on Thursday held its benchmark rate unchanged at 6.5%, after two consecutive increases. Bank Indonesia has been widely expected to keep its reference rate unchanged at its board of governors meeting this month, but rate increases are seen likely in near future, amid weakening Rupiah and volatile bond market. Decliners outpaced gainers 134 to 104 Thursday on the Indonesia Stock Exchange, where 2.8 billion shares worth IDR 3.74 trillion changed hands on the regular board. Foreign investors accumulated net purchase of IDR 235.4 billion.
• The Jakarta Composite Index (JCI) will likely extend losses today, after downbeat closes on Wall Street and negative starts in Asia today, on concerns that the US Federal Reserve will taper its bond purchase program as soon as September. We expect the JCI to trade lower, with support and resistance at 4,656 and 4,701.

• The Market ended the day on an optimistic note assisting both indices to further accrue gains and maintain its stay within the green terrain. The benchmark ASPI index closed positive for the 3rd consecutive trading day at 6,220.10 gaining 11.43 points or 0.18%, recording its highest value after 12th June 2013. Following a similar trend, the S&P SL20 index too closed positive at 3,495.69, just 4 points below the 3,500 mark. The daily turnover amounted to LKR 646.60Mn, recording a dip of 66.80% against the previous trading day. Bank Finance & Insurance (BFI) sector topped the list under the sectorial summary providing LKR 319.03Mn.  Diversified Holdings (DIV) too performed well providing LKR 166.12Mn.Moreover, the two sectors BFI and DIV collectively made account to nearly 75% of the daily turnover. A total of 24.33Mn shares changed hands indicating a drop of 50.81% against the previous trading day. In terms of share price movement, 131 companies lost while 58 companies gained during the day. Foreign participants appeared to be bullish during the day for the second consecutive trading day, resulting in a net foreign inflow of LKR 103.48Mn; this was resulted by foreign purchases worth LKR 291.74Mn and sales of LKR 188.26Mn. This assisted the year to date net foreign inflow to reach LKR 17.30Bn. With regard to the local FOREX market, the USD closed at LKR 133.18/- selling and LKR 129.98/- buying.

Australia

• The Australian share market on Thursday edged lower due to mixed reactions to corporate earnings reports. The benchmark S&P/ASX200 index dropped 5.0 points, or 0.1 per cent, to 5,152.4.
• Today (16/08/13), the Australian market looks set to open lower following falls on Wall Street after better-than-expected US jobless claims figures stoked fears of early US Federal Reserve stimulus tapering.
• In economic news on Friday, Reserve Bank of Australia assistant governor (Financial Markets) Guy Debelle is scheduled to speak on The Impact of Payments System and Prudential Reforms on the RBA's Provision of Liquidity, at an Australian Financial Markets Association (AFMA) and RBA briefing. The RBA's Payments System board meeting is also scheduled.
• In equities news, Automotive Holdings Group, Platinum Asset  Management and AVJennings are expected to post full year results,  and Santos and APN News & Media are due to post their first half  results, while the ANZ is slated to provide a trading update.

Hong Kong

• HSI lost 1 points to 22,539 and CEI gained 21 points or 0.21% to 10,206, the fifth day gain. Trading volume was HKD77.608 billion, the highest from July.
• China coal sector showed significant correction following 2 weeks rebound. China Coal (1898.HK), China Shenhua (1088.HK) and Yanzhou Coal (1171.HK) declined 4.3%, 2.1% and 3.5% respectively.
• China may expand bribery investigation on drugs and medical equipment industry, Shihuan Pharm (460.HK), CMS (867) dropped 6.9% and 6.5% respectively.
• Li & Fung (494.HK) surged 11.6% after interim results released, core operating profit rose 1% yoy to USD223 million and dividend payout also gave surprise.
• Technically, next resistance and support will be at 22,800 and 22,238 respectively.

Morning Note

Company Highlights

United Overseas Bank Limited announced that Uni.Asia Capital Sdn Bhd has today submitted an application to Bank Negara Malaysia for approval for the sale of its entire shareholding in Uni.Asia Life Assurance Berhad to a joint venture company to be set up by The Prudential Insurance Company of America and Bank Simpanan Nasional. UAC is a joint venture company owned by DRB-HICOM Berhad’s wholly-owned subsidiary, Gadek (Malaysia) Berhad as to 51%, and by UOB’s wholly-owned subsidiary, United Overseas Bank (Malaysia) Bhd as to 49%. UAC owns 100% of UAL which is a life insurer in Malaysia. The Divestment is subject to satisfaction of conditions precedent, including the obtaining of regulatory approvals. Upon completion, UAL will cease to be an associated company of UOB and UOBM. The sale consideration of RM 518 million will be settled in cash, and was arrived at on a willing-buyer-willing-seller basis, taking into consideration, among others, net asset value and in-force value of UAL. As at 31 March 2013, the net tangible asset of UAL was RM 2.93 per share. The Divestment is not expected to have a material impact on earnings or the net tangible assets of UOBM or the UOB Group for the current financial year. The Divestment is in line with the UOB Group’s intention to rationalize its businesses and focus on building its banking and asset management business. (Closing Price S$21.700, -1.364%)

Singapore Telecommunications Limited announced that its wholly-owned subsidiary, SingTel International Investments Private Limited has today entered into a conditional share purchase agreement with MacRitchie Investments Pte. Ltd. to acquire 788,538 equity shares in the capital of Bharti Telecom Limited. The Acquisition represents approximately 3.62% of the equity shares in BTL. BTL is a promoter company of Bharti Airtel Limited and, as at the date of this Announcement, holds approximately 43.57% of the share capital of BAL. The Acquisition would allow SingTel to increase its effective stake in BAL, and is in line with SingTel’s strategic focus on maximising the value of its existing businesses, which includes reviewing opportunities to increase shareholdings in existing associates. SingTel’s effective interest in BTL will increase from 36.16% to 39.78%, and its effective interest in BAL will increase from 30.76% to 32.34%. The aggregate consideration payable for the Sale Shares is INR 18,592,501,189 or S$383,576,342. The Settlement Price was arrived at on an arm’s length and willing-buyer willing-seller basis, based on, inter alia, a price per BAL Share of INR 294.69, which is approximately 10% less than the volume weighted average price of INR 327.44 per BAL Share on the Bombay Stock Exchange Limited and the National Stock Exchange of India Ltd. for the 30 trading days prior to (and excluding) 15 August 2013. (Closing Price S$3.760, -1.312%)

ISDN Holdings Limited’s foray into Myanmar’s fast-developing energy sector received another boost with an official endorsement from Myanmar’s Ministry of Electricity naming ISDN as the new partner in the Kalewa coal-fired power plant. ISDN will develop the Kalewa coal-powered project together with Myanmar-based Tun Thwin Mining Co. Ltd, after replacing formerly appointed China Guodian Corporation. (Closing Price S$1.115, -3.879%)

XMH Holdings Ltd announced that the Group has secured orders from an Indonesian customer worth a total of S$4.6 million. The return customer has placed an order for 50 units of marine engines and 10 units of gearboxes for a total of 303 million JPY1 (approximately S$3.9 million). The Indonesian customer has also taken up a previous order for 50 Gensets worth a total of S$725,000, bringing the total value of the orders to approximately S$4.6 million. The engines, gearboxes and power generating sets will be installed on tug boats and the staggered delivery of the orders will be fulfilled from end 2013 to end 2014. (Closing Price S$0.390, - %)

Vard Holdings Limited announced that Vard Electro AS, which is wholly-owned by Vard Group AS, a 100% held subsidiary of the Company, has acquired 100% shareholding interest in Johangarden AS from unrelated parties. JGAS owns business premises in Tennfjord, outside lesund, Norway. Vard Electro will consolidate part of its operations at the facilities owned by JGAS. The consideration for the transaction was NOK 12.4 million. The book value and the net tangible asset value of the transaction was NOK 1.2 million. The consideration was arrived at taking into account valuations performed by the Company and negotiated on a ‘willing-buyer willing-seller’ basis, and was satisfied in cash. The above investment was funded by internal resources and did not have any material impact on the earnings per share and net tangible assets per share of the Company. (Closing Price S$0.875, 0.575%)

Ntegrator International Ltd announced that it is sinking its roots deeper into Myanmar, with the issuance of a Certificate of Incorporation (Temporary) and Form of Permit (Temporary) by the Government of the Republic of the Union of Myanmar for the incorporation of an indirect wholly-owned subsidiary in Myanmar, Ntegrator Myanmar Ltd. This latest development enables Ntegrator Myanmar to directly apply for licenses to import equipment, thus enabling Ntegrator to offer customers in both the private and public domain a wider, complete suite of enterprise solutions. In addition to suppliers such as ECI Telecom and RAD, the Group had also recently signed reseller agreements with new and existing vendors for the distribution of equipment to the Myanmar market. The Group is currently also finalising distributorship agreements with several other key suppliers to offer a full suite of enterprise solutions in Myanmar. (Closing Price S$0.074, - %)

Source: PhillipCapital Research - 16 Aug 2013