Morning Market Commentary
STI: -0.76% to 3173.3                                         KLCI: -0.55% to 1778.4
JCI: -5.58% to 4313.5                                         SET: -3.27% to 1398.5
HSI: -0.24% to 22463                                         HSCEI: -0.21% to 10199
Nikkei: +0.79% to 13758                                    ASX200: -0.03% to 5112.5
S&P500: -0.59% to 1646.1                                Nifty: -1.69% to 5414.8


MARKET OUTLOOK:

By Joshua Tan, Head of Research
 
This week’s webinar re-iterates that a correction in equities is underway, in line with our warning in last Monday’s webinar and last Friday’s morning commentary. Still, we expect this to be a near term correction and that the larger uptrend re-assert itself at some point. We will flag clients when we think that will be in our morning commentary and Monday webinars.

The webinar can be viewed in our archive at http://www.uniphillip.com/ > Education Programs > Phillip Securities Research Webinar

(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

Japan exports rose by 12.2% y-y in July, slightly trailing the market expected 12.8% y-y pace but improved over the 7.4% y-y gain in June. Imports rose significantly by by 19.6% y-y in July, beating the market expected 16% y-y growth, compared to the 11.8% y-y gain in June. The weak yen is expected to continue bolstering the nation's exports.

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended 24.20 points lower or -0.76% to 3,173.33, taking the year-to-date performance to +0.20%.
• The outperforming sectors today were represented by the FTSE ST Telecommunications Index which gained +0.71%. The two biggest stocks of the FTSE ST Telecommunications Index are SingTel (+0.81%) and StarHub (+0.48%). The underperforming sector was the FTSE ST Industrials Index, which declined -2.28% with Jardine Matheson Holdings and Jardine Strategic Holdings posting declines of -4.44% and -5.33% respectively. The FTSE ST Health Care Index declined -1.21%.
• The STI may face continued pressure on the back of continued concerns over potential tapering of QE.
• We peg near-term support at 3,100, while downward pressure is expected to continue from current levels. 
• 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

• The composite SET index lost as much as 47.28 points on Mon after data showed the Thai economy unexpectedly slipped into mild recession in 2Q13 and the NESDB slashed its 2013 GDP growth forecast for the country to 3.8%-4.3% and concerns about a possible QE tapering in the US also added to market nervousness.
• The market lacked strong positive triggers for an upmove while overseas markets remained focused on the timing of a possible QE tapering in the US, which could possibly take place this Sep at the soonest and Thai GDP miss helped accelerate the pace of net foreign selling in the Thai stock market to the tune of more than Bt3.6bn on Mon. Foreign investors also held a net short position of more than 1.7k contracts in derivatives market. 
• Local politics will be another factor to watch, especially the controversies about the 2014 fiscal budget bill, the Bt2trn infrastructure loan bill and charter amendment bill.
• If the SET index fails to hold above a key psychological level of 1400 points, we advise investors to scale back equity exposure to 25% of the portfolio and play wait and see. Even though yesterday’s sharp tumble could set the stage for an intraday bounce, we think it may be best to wait until the main index can break above 1420 points.
• Resistance for the SET index is pegged at 1400-1420 and support at 1375-1350 today.   

• The Jakarta Composite Index (JCI) sharply declined Monday (19/08), amid fear that the Rupiah may further weaken if the US Federal Reserve begin its bond purchase tapering as soon as September, and as data showed widening current account deficit in the second quarter. The JCI plunged 5.58%, or 255.136 points, to end at 4,313.518. The sharp drop on Monday included all nine major industry groups, led by basic industry sector with the steepest fall of 7.46%, followed by construction, property and real estate sector with 6.38%-loss, and finance sector with 6.34%-decline. LQ45, the index trailing Indonesia’s blue-chip stocks, off 50.772 points, or 6.69%, to 708.085. The steep decline in stocks on Monday occurred amid investors’ sell-offs after data from Bank Indonesia showed current account deficit in the second quarter widened to USD 9.8 billion, or 4.4% of the GDP for the quarter. The Rupiah fell to 10,495 against the US dollar on Monday, and the yield on 10-year notes rose to 8.37%, the highest seen since March 2011. But Bank Indonesia said that pressure on the country's current account deficit will ease in the second half of the year due to an improvement in the financial and capital account. Decliners outran gainers 292 to 20 Monday on the Indonesia Stock Exchange, where 3.91 billion shares worth IDR 5.99 trillion changed hands on the regular market. Foreign investors’ transactions accumulated to a total net sale of IDR 1.78 trillion.
• Indonesian stocks may further decline today, as global stock markets remained bearish at large, amid speculations that the US Federal Reserve may taper its bond purchase as soon as next month. On the upside, however, investors may look for bargain blue-chip stocks after a steep drop yesterday. We expect the JCI to trade in negative territory today, with support and resistance at 4,160 and 4,613, respectively.

• The Market witnessed a slight drop during the day ending its four consecutive days rally, resulting in the indices to conclude on a mixed note; this was mainly due to the inactive participation of the investors which prevailed on most parts of the trading day.  Having gathered a total of 102.97 points (1.67%) during the past 4 trading days, the ASPI index closed 8.87 points (or -0.14%) lower at 6,224.34. However, the S&P SL20 managed to breathe in within the green terrain at 3,494.18 gaining a tiny 2.63 points or 0.08%. As at the daily closure the total market capitalization stood at LKR 2.56Tn, indicating a year to date gain of 18.27%. The market PER and PBV stood at 17.63 and 2.37 respectively. The daily turnover of LKR 1.13Bn was predominantly supported by 2 negotiated transactions worth LKR 872.81Mn accounting a share of nearly 80%; the daily turnover noted an increase of 89.64% against the previous trading day. With regard to the sectorial contribution, Bank Finance & Insurance (BFI) sector topped the list providing LKR 904.45Mn; the sector witnessed considerable investor interest logging 939 trades, hence resulting in a total volume of 15.54Mn shares being traded.  Diversified Holdings (DIV) sector also performed well adding LKR 91.41Mn to the turnover. The two sectors BFI & DIV accounted to almost 90% of the aggregate turnover for the day. A total of 27.20Mn shares were traded within the day. Price losers outstripped the price gainers by 110:64. Foreign participants appeared to be bullish during the day for the fourth consecutive trading day, resulting in a net foreign inflow of LKR 849.31Mn; foreign purchases for the day amounted to LKR 956.06Mn and selling amounted to LKR 106.75Mn. Moreover, this pushed the year to date net foreign inflow (LKR 18.18Bn) above the LKR 18Bn mark for the first time during the year.  As at the daily closure, the USD stood at LKR 133.25/- selling & LKR 130.05/- buying.

• The Australian share market on Monday moved lower with CBA and TLS going ex-dividend. The benchmark S&P/ASX200 index was 1.4 points, or 0.03 per cent lower  to 5,112.5.
• Today (20/08/13), the Australian market looks set to open lower after Wall Street continued its downward trend on mediocre economic news and higher bond yields.
• In economic news on Tuesday, the Reserve Bank of Australia is due to release the minutes of its monthly board meeting. The Australian Bureau of Statistics releases the International merchandise import figures for July, while the Commonwealth Bank business sales indicator for July is also due out.
• In equities news, BHP Billiton, Arrium, QBE, Ansell, Tassal Group, Commonwealth Property Office Fund and Sonic Healthcare are among the companies expected to post full year results, while Oil Search, Invocare and Coca-Cola Amatil are slated to release first half results. The National Australia Bank is scheduled to give its third quarter trading update.

• HSI dropped 54 points or 0.24% to 22,643. CEI lost 21 points or 0.21% to 10,199. Trading volume reduced to HKD44.307 billion only.
• Due to concerns of adjustment of national electricity price in Oct, Huaneng Power (902.HK), Huadian Power (1071.HK) and China Power (2380.HK) lost 9.4%, 7.8% and 7.7% respectively.
• State Council released “Broadband China” strategy and implementation plan, China Fiber Optic (3777.HK) and O-Net Comm GP (877.HK) gained 15.4% and 14.3% respectively.
• UBS quoted saying by AAC Tech’s management that AAC Tech’s 3Q sales is expected to have close to double-digit growth only, trailed market estimates. AAC Tech (2018.HK) dropped 7.8%.
• Technically, next resistance and support will be at 22,800 and 22,238 respectively.

Morning Note

Company Highlights

CITY Developments Limited (CDL) has sold 289 units or 76 per cent of its 380-unit executive condominium (EC) project Lush Acres in Sengkang West since the project opened for booking on Saturday, Aug 17. The 99-year leasehold project's average price is S$785 per square foot. The development comprises three to five-bedroom units. Unit sizes range from 915 sq ft for a three-bedroom apartment to 1,722 sq ft for a five-bedroom apartment. (Closing price: S$10.64, +1.141%)

IN a move that might broaden retail participation in the market, the Singapore Exchange (SGX) is proposing to reduce the standard size of securities traded from 1,000 units to 100 units and one unit eventually. In a briefing this afternoon, SGX head of securities Nels Friets said this will enable retail investors with a limited amount of money to diversify into blue chips. The change to a lot size of 100 units is targeted to be implemented in the first quarter of next year. For example, the minimum investment required to buy one lot of UOB shares is currently S$21,440, or 1,000 x S$21.44 a share, before commissions and other costs. With the change to a lot size of 100 units, investors will now need to commit only S$2,144 per lot. (Closing price: S$7.51, -0.53%)

UOL Group Limited announced that its interest in associated company, United Industrial Corporation Limited (UIC), has increased to 600,334,565 shares or 43.538 per cent of UICs issued capital. 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 96,000 UIC shares on 19 August 2013 for the average price of S$3.091 per share. (Closing price: S$6.29, -0.475%)

KrisEnergy Limited announced that together with Mubadala Petroleum, it has agreed the final investment decision for the Nong Yao oil development in the G11/48 contract area in the Gulf of Thailand. The first oil is anticipated in the first half 2015. The development concept for the initial phase of the Nong Yao field comprises 23 wells, a wellhead processing platform and a minimum facility wellhead platform with the export of crude oil via a floating storage and offloading vessel. The expected production capacity will be up to 15,000 barrels of oil per day and 30,000 barrels of fluids per day. (Closing price: S$1.29, -0.386%)

F J Benjamin Holdings Limited announced that its subsidiary F J Benjamin (Singapore) Pte Ltd and Guess? Inc have entered into agreements to renew the retail and distribution agreement of Guess as well as the franchise agreement of Guess Accessory Stores for Singapore, Malaysia and Indonesia to 31 December 2019. The agreement includes options to renew for an additional five years to 31 December 2024 subject to certain compliances. (Closing price: S$0.26, -1.887%)

FORMER property developer China Mining International's mandate to pursue metal mining businesses in China has been given a new lease of life, with a reverse takeover (RTO) set to transform the firm into a pure mining company. The proposed RTO will see a firm called China Geological Exploration Holdings (CGE) inject some of its mining assets into China Mining International in a friendly deal. CGE is fully owned by the Geo-exploration and Mineral Development Bureau of the Henan province, a government bureau responsible for resource mining and exploration activities in both China and overseas. The bureau holds about 200 licences to mining concessions in China, and 96 licences in over 20 other countries, its deputy director, Wang Jian Ping, told reporters on Monday. (Closing price: S$0.075, -1.316%)

Cedar Strategic Holdings Limited announced that it was planning a one-for-two rights issue of up to three billion new shares at an issue price of 0.5 S-cents each. The company plans to use the money for the development and investment in real estate assets as well as for working capital purposes. The issue price of renounceable non-underwritten rights issue represents a 37.5 per cent discount to the last traded price of 0.8 S-cents per share for shares traded on the Catalist board on August 16. Assuming that the rights Issue is fully subscribed, the net proceeds, after deducting estimated costs and expenses of S$0.350 million, is expected to be as much as S$14.66 million based on maximum subscription scenario. (Closing price: S$0.007, -12.5%)

Source: PhilliCapital Research - 20 Aug 2013