Morning Market Commentary
STI: -0.63% to 3108.9                                         KLCI: -0.03% to 1744.9
JCI: +1.04% to 4218.5                                        SET: -1.15% to 1355.1
HSI: -0.69% to 21817                                         HSCEI: -0.49% to 9856.9
Nikkei: +0.21% to 13424                                    ASX200: +0.43% to 5099.9
Nifty: -1.83% to 5302.6                                       S&P500: -0.58% to 1642.8


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

Applications for US home loans fell for a second straight week and higher interest rates reduced refinancing activity. The mortgage index dropped 4.6% from the prior week on a seasonally adjusted basis. On the other hand, existing home sales jumped 6.5% to an annual rate of 5.39 million units, well over analysts' expectations of 5.15 million. and could make the US Federal Reserve more comfortable with its plans to wind down their economic stimulus program.

Regional Market Focus

Singapore

• The Straits Time Index (STI) ended 19.76 points lower or -0.63% to 3,108,99, taking the year-to-date performance to -1.83%.
• Keppel Corp, one of our top picks, continues to win contracts (newbuild accommodation semi-sub), bringing ytd wins to 69% of our analyst’s full year estimates.
• As the S&P500 trends towards our probably targets of 1580-1620, we suspect more downward pressure on the STI.
• STI is close to our near term support target of 3100 and the next major support is at 2930 which is our in-house probable downside target if the selloff continues.
• Top picks for the year to consider after the market has absorbed the shorter term cycle sell off are Pan United (Accumulate, TP: S$1.27), SGX (Buy, TP: S$8.30) & Keppel Corp (Accumulate, TP: S$12.25).

Thailand

• The SET index extended its losing streak to finish the session down 27.62 points at 1370.86 points on Tue as foreign selling pressure accelerated on concerns over the country’s economic outlook. 
• The overall market remained under pressure from foreign fund outflows after net foreign selling of Thai shares topped Bt11bn yesterday, the biggest daily sale in more than seven years. YTD net foreign outflows from the Thai stock market totaled Bt100bn. Heavy foreign selling was also witnessed in derivatives market with net short position of nearly 4.4k contracts amid economic worries in several Asian countries and uncertainty over a possible QE tapering in the US, which sent many Asian currencies including Thai baht sharply lower. The baht held steady at 31.66 to the US dollar in today’s early trade on Wed.
• The main economic event in Thailand today will be the Bank of Thailand’s Monetary Policy Committee meeting. The odds are in favor of leaving policy interest rate on hold at 2.5%. Meanwhile, the market will also remain focused on the minutes of the US FOMC’s Jul 30-31 policy meeting due out tomorrow.
• Sharp losses of up to 70 points over the last two sessions may set the stage for some rebound in the Thai stock market but the upside would continue to be limited, in our view.
• Today we peg resistance for the SET index at 1380-1400 and support at 1366-1350.    

• The Jakarta Composite Index (JCI) climbed Wednesday (21/08), as some stock markets in Asia recovered from Tuesday’s decline amidst fear of tapering of the US Federal Reserve’s bond purchases. The benchmark index of Indonesian stocks gained 43.465 points, or 1.04%, to 4,218.448, with seven of its nine major industry sectors ended in green. The LQ45 index that measures Indonesia’s blue-chip shares advanced 8.982 points, or 1.31%, to 696.153. The Rupiah, amidst concerns about Indonesia’s widening account deficit, slid 1.8% on Wednesday, traded at IDR 10,723 against the US dollar. Among the main sectors of the JCI, basic industry sector led gains with 3.92%-advance, followed by agriculture sector with 2.86%-gain, and infrastructure sector with 1.78%-rise. The gains on Wednesday was also supported by stock purchases by Indonesia’s pension funds, as valuations sank to record lows in the past 14 months. Gainers outpaced losers 167 to 96 Wednesday on the Indonesia Stock Exchange, where volume topped 5.09 billion shares worth IDR 5.75 trillion on the regular board. Foreign investors accumulated net sale of IDR 895.55 billion.
• Indonesian stocks will likely retreat today, after a rebound yesterday as domestic investors bought into undervalued stocks, as the Fed’s minutes showed supports for the US central bank’s tapering of its bond purchases if the US economy improves. We expect the JCI to decline, with support and resistance at 4,099 and 4,321.

• The trading day initiated on an adverse sentiment, leading the indices to drown further to the red terrain. The market witnessed a downturn from its early hours of trading, mainly due to the inactive investor participation and the heavy selling pressure which persisted.  The ASPI settled the day at 6,116.67 just 17 points above the 6,100 mark, having lost mega 107.67 points or 1.73% during the trading day, whilst recording its largest drop post to 05th June 2012 (a loss of 136.58 points). The S&P SL20 too closed within the negative terrain at 3,434.37, dipping by 59.81 points or 1.71%. As at the daily closure, the total market capitalization dropped to LKR 2.51Tn, reducing the year to date gain to 16.22%. The market PER and PBV were 17.32 x and 2.33x respectively. The turnover for the day was recorded as LKR 955.74Mn, indicating a drop of 15.46% against the previous trading day. During the day, a total of 26.76Mn shares changed hands resulting in a drop of 1.62% against the previous trading day. Under the sectorial round-up, Bank Finance & Insurance (BFI) sector topped the list providing LKR 659.73Mn, whilst accounting to 69.15% of the day’s total turnover. Further, Diversified Holdings (DIV) sector provided LKR 112.39Mn, and stood next in line to BFI. The two sectors BFI and DIV collectively made account to nearly 81% of the aggregated turnover for the day. In terms of share price movement, 145 companies lost while 51 companies gained within the trading day. Foreign participants were bullish during the day, resulting in a net foreign inflow of LKR 338.55Mn (Foreign buying for the day amounted to LKR 634.49Mn and selling amounted to LKR 295.94Mn); this extended the year to date net foreign inflow to 18.52Bn. As at the day’s closure, the USD stood at LKR 133.49/- selling and LKR 130.29/- buying.

• The Australian share market on Wednesday closed higher as strong gains among the major banks offset falls by several major resources companies. The benchmark S&P/ASX200 index was up 21.8 points or 0.43 per cent to 5,100.
• Today(22/08/13), the Australian market looks set to open lower following falls on Wall Street after minutes from the Federal Reserve's last meeting gave no more clarity on the central bank's plans for its stimulus program.
• No major economic news is expected on Thursday.
• In equities news, Insurance Australia Group, Seven West Media, Echo Entertainment, Pacific Brands, Origin Energy, Fortescue Metals Group, Fairfax Media, Specialty Fashion Group, Village Roadshow and Brambles Industries are among the companies expected to post full year results.  Sydney Airport and Alumina are slated to announce first half results.

• HSI dropped 152 points or 0.69% to 21,817. CEI lost 48 points or 0.49% to 9,856. Trading volume declined to HKD55.12 billion
• U.S 10-year Treasury rate was at high level, local property sector under-performed market, Cheung Kong (1.HK), Sino Land (83.HK), Hang Lung PPT (101.HK) dropped 1.6%, 2.2% and 3% respectively.  
• Software sector kept the strong up trend, Kingdee Int’l (268.HK), Sinosoft Tech (1297.HK) and Chinasoft Int’l (354.HK) surged 7.7%, 6% and 4.5% respectively.
• CNOOC (883.HK) climbed 4.9% after interim results released. Its net production of oil and gas increased by 23.1% and EPS gained 7.9% yoy, beat the market expectation.
• Technically, HSI dropped below 100-MA and 250-MA yesterday, giving a negative signal. The next resistance and support will be at 22,200 and 21,571 respectively.

Morning Note

Company Highlights

UOL Group Limited announced that its stake in its subsidiary, Pan Pacific Hotels Group Limited (PPHG), has increased to 589,689,763 shares or 98.28 per cent of PPHG’s issued share capital. The increase in its shareholding was pursuant to the transfer and settlement on 21 August 2013 of an aggregate of 7,943,559 PPHG shares tendered in acceptance of the company’s exit offer at S$2.55 per PPHG share between 12 August 2013 to 16 August 2013. Following the increase of stake in PPHG, UOL will exercise its right of compulsory acquisition of the group after 21 September 2013. (Closing price: S$6.39, +1.268%)

Singapore's Sembcorp Industries Ltd said a joint venture that owns and operates a US$1 billion power and water plant in Oman will launch an initial public offering next week to raise around S$172.2 million (US$135 million). Sembcorp Salalah Power and Water Co will offer 33.4 million existing ordinary shares, representing 35 per cent of its issued share capital, at 1.59 Omani rial or around S$5.17 per share. The IPO is set to be launched on the Muscat Securities Market on Aug 28. Sembcorp Utilities, a unit of Sembcorp Industries, currently has a 60 per cent stake in the joint venture. Oman Investment Corp (OIC) owns 35 per cent and Bahrain-based BDCC Investment Company (BDCC) holds 5 per cent. After the listing, Sembcorp will hold a 40 per cent stake, while OIC will have 21.9 per cent and BDCC 3.1 per cent. (Closing price: S$4.92, +0.408%)

Parkson Retail Asia Limited reported that its group revenue grew 3.2 per cent to S$446.2 million in FY2013, from S$432.5 million from the preceding year ended 30 June 2012 (FY2012). This was achieved on the back of gross sales reaching S$1.1 billion in FY2013. However, as a result of the weaker same-store sales growth and higher rental expense, the group’s net profit in 4QFY2013 was S$3.4 million, compared to S$8.9 million in 4QFY2012. On a full year basis, net profit was S$37.9 million compared to S$45.5 million in FY2012. (Closing price: S$1.40,  -3.448%)

Neo Group Limited announced that it has inked a 5-year licence agreement with an Indonesian company, P.T. Umi Sushi Indonesia to launch three “umisushi” food retail stores in the special central region of Jakarta, Indonesia. The group said this move positions it to expand further the geographical footprint of its food retail business into the region, from its present base of 19 umisushi food outlets in Singapore. (Closing price: S$0.445, -%)

Otto Marine Limited announced that its 90-per cent owned subsidiary, Marine Ship Management (S) Pte Ltd, has entered into a shares sale agreement with Messrs. Noor Haizam Bin Wasir and Mohd Azmy Bin Khosne to acquire 49 per cent of the total issued shares in Expro Synergy Sdn Bhd for a total consideration of RM980,000. The group added that it will be increasing its investment in Expro Synergy by RM147,000. Otto Marine’s percentage shareholding is expected to remain at 49 per cent of the total issues shares in Expro Synergy. (Closing price: S$0.047, -2.083%)

Source: PhillipCapital Research - 22 Aug 2013