STI: -0.63% to 3089.4                                         KLCI: -1.40% to 1720.4
JCI: -1.11% to 4171.4                                         SET: -0.25% to 1351.8
HSI: +0.36% to 21895                                        HSCEI: +1.13% to 9967.8
Nikkei: -0.44% to 13365                                     ASX200: -0.48% to 5075.8
Nifty: +2.00% to 5408.5                                      S&P500: +0.86% to 1656.9             

 
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

USA:
Initial claims for state unemployment benefits climbed 13,000 to 336,000, just above the level expected by economists. Despite the increase, the four-week average for new claims fell to its lowest level since November 2007.

The index of leading indicators rose in July by the most in three months, showing the world’s largest economy will improve in the second half of 2013. The outlook for the next three to six months increased 0.6 percent after non change the prior month, beating expectations of a 0.5 percent increase.

US FHFA House Price Index rose to 0.7%, beating expectations of 0.6%.

 
Eurozone:
Eurozone’s composite PMI grew to 51.7 in August from 50.5 a month earlier. This exceeded expectations of 50.9.

Germany’s manufacturing PMI grew to 52.0 in August from 50.7; this exceeded expectations of 51.1. Their services PMI increased to 52.4 from 51.3 a month earlier, exceeding expectations of 51.7.

Frances Manufacturing PMI remained unchanged at 49.7 in August; this was under expectations of 50.2. Their Services PMI dropped to 47.7 from 48.6 a month earlier, under expectations of 49.2.

 
In China, preliminary HSBC manufacturing PMI unexpectedly returned to 50.1 in Aug, indicating a weak expansion in the manufacturing sector, after the 47.7 reading in July. The improvement in PMI adds to a stabilizing outlook for the nation's economy.


In Japan, Machinery Tool Orders fell by 12.2% y-y in July, compared to the 12.4% y-y drop in June. Domestic machinery tool orders rose by 1.0% y-y in July, after the 7.9% y-y drop in June. Foreign order fell by 18.0% y-y in July, compared to the 14.5% y-y drop in June.
 

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended 19.59 points lower or -0.63% to 3,089.40, taking the year-to-date performance to -2.45%.
• The outperforming sectors today were represented by the FTSE ST Basic Materials Index which gained +1.72%. The two biggest stocks of the FTSE ST Basic Materials Index are Midas Holdings (-3.85%) and Geo Energy Resources (+18.31%). The underperforming sector was the FTSE ST Telecommunications Index, which declined -1.69% with SingTel posting a decline of -1.37% while Starhub gained +0.24%. The FTSE ST Industrials Index gained +0.77%, as with the FTSE ST Health Care Index (+0.09%).
• 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 probably 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

• Thai stocks opened sharply lower on Thu amid uncertainty over US Federal Reserve’s QE policy before losses were later pared by buying in energy counters. The SET index finished the session down 3.33 points at 1,351.81 points on Thu.
• The SET index may be poised for a rebound today, tracking overseas market gains after data showed better-than-expected manufacturing numbers out of China, Europe and the US. The upside target for the SET index is seen at 1380 points.
• Foreign fund flows will continue to bear close watching. Foreign selling spree continued for a fifth day in the Thai stock market to the tune of Bt3.6bn on Thu. Foreign investors however turned net long by 453 contracts in derivatives market but net foreign selling of Thai bonds accelerated to as much as Bt10bn. Overall capital outflows would continue to put downward pressure on the baht, a factor that is unlikely to trigger a return of foreign buying.
• Uncertainty remains high. For this reason, we advise investors to keep equity exposure at no more than 25% of the short-term portfolio until the SET index can break above 1400 points. Gradually book profits if the SET index is unable to break through 1400 points.
• Today we peg resistance for the SET index at 1366-1380 and support at 1340-1325.    

• Indonesian stocks tumbled for the third day this week on Thursday (22/08), after the US Federal Reserve signaled the possibility of the tapering of the bond purchase program in its FOMC minutes released on Wednesday (21/08), and as investors pulled away from emerging markets on risk of the reduction of QE3. The Jakarta Composite Index (JCI) fell 47.035 points, or 1.11%, to close at 4,171.413, with seven of its 9 major sectors finished in red. Commodity sectors, however, provided support for the index, as agriculture sector surged 5.89%, and mining sector advanced 7.09%. Among the declining sectors, property, construction and real estate sector fared worst with 5.78%-plunge, followed by basic industry sector with 3.42%-drop, and finance sector with 2.39%-loss. The LQ45 index trimmed 6.655 points, or 0.96%, to 689.498. The Rupiah remained weak on Thursday (22/08), as it is seen as one of the most vulnerable currency to the Fed’s withdrawal of monetary stimulus due to widening current account deficits, slowing economic growth and strong resistance to enacting much-needed reforms. Indonesia’s president said the government will announce a policy package on Friday (23/08), to stem growing inflation and maintain financial stability. Losers outran gainers 193 to 93 Thursday on the Indonesia Stock Exchange, where almost 5.92 billion shares worth IDR 6.09 trillion traded on the regular market. Most of the stock purchases in Indonesia on Thursday came from domestic investors, while foreign investors posted net sale of IDR 887.95 billion.
• The Jakarta Composite Index (JCI) may climb moderately today, recouping sharp losses this week, following higher closes in global markets. Also today, the Indonesian government is expected to announce a special plan to stem inflation and maintain financial stability. We expect the JCI to moderately rise, with support and resistance at 4,072 and 4,242.

• Witnessing yet another day of losses, the Colombo bourse stretched further into the red terrain mainly due to the lowly buying sentiment and the slothful participation of the investors. Further this resulted in the ASPI to fall below 6,100 mark for the 1st time in three weeks, and to close at 6,085.88 (down by 30.79 points). The S&P SL 20 closed at 3,422.27 losing 12.10 points or 0.35%. A series of off-market deals totaling up to LKR 450.73Mn limited the on-board activity to LKR 202.26Mn, whilst accounting a share of nearly 70% of the daily aggregated turnover which amounted to LKR 652.99Mn; the turnover noted a drop of 31.68% against the previous trading day. Under the sectorial summary, Diversified Holdings (DIV) sector provided LKR 393.37Mn, dominating the list while accounting to 60.24% of the total turnover. Bank Finance & Insurance (BFI) sector added LKR 171.21Mn to the daily turnover. The daily volume amounted to 19.76Mn shares, indicating a drop of 26.14% against the previous trading day. Price losers surpassed the price gainers by 117:48. As at the daily closure the total market capitalization reduced to LKR 2.51Tn, while minimizing the year to date gain to 15.64%. Foreign participants appeared to be bearish for the first time during the week, resulting in a net foreign outflow of LKR 92.44Mn; this reduced the year to date net foreign inflow to LKR 18.43Bn. The local FOREX market for the day closed with, the USD selling at LKR 133.54/- and buying at LKR 130.34/-.

• The Australian share market on Thursday fell as local investors followed offshore leads and sold riskier stocks, including those in resources companies. The benchmark S&P/ASX200 index was 24.3 points, or 0.48 per cent, lower to 5,075.7.
• Today (23/08/13),The Australian market looks set to open higher following gains on Wall Street despite a three-hour shutdown of the Nasdaq market that disrupted trade on other exchanges as well.
• In equities news, Lend Lease, Crown, Mirvac, Sims Metal Management and IOOF Holdings are expected to post full year results.
• No major economic news is expected on Friday.

• HSI rebounded 77 points or 0.36% to 21,895. CEI gained 110 points or 1.13% to 9,967. Trading volume increased to HKD57.31 billion.
• Dragged down by weak U.S. and emerging markets, HSI opened low at 21,538 (-280) yesterday, but swung from gain and loss after HSBC August manufacturing PMI released at 50.1. HSI rebound significantly after Germany maunfacturing PMI released at 2-year high in afternoon.
• Local property sector still under-performed the market, Wharf Holdings (4.HK) and Cheung Kong (1.HK) lost 1.2% and 0.7% respectively.
• Ju Teng Intl (3336.HK), released interim results with net profit climbed 7% yoy to HKD 260 million and is expanding business to smartphone cases, the share price surged 9.6%.
• Technically, HSI is now close to 250-MA at 21,897, the trend will positive if closed above it today. The next resistance and support will be at 22,200 and 21,571 respectively.

Morning Note

Company Highlights

Singapore Telecommunications Limited announced that its wholly-owned subsidiary, SingTel Interactive Pte Ltd (STI), has entered into a conditional sale and purchase agreement for the sale of its entire equity stake in OpenNet Pte Ltd to CityNet Infrastructure Management Pte Ltd for S$37.8 million in cash. CityNet is the trustee-manager of NetLink Trust. The shares for sale comprise approximately 30 per cent of the issued ordinary shares in the capital of OpenNet. (Closing price: S$3.59, -1.374%)

Sabana Shari’ah Compliant Industrial Real Estate Investment Trust Limited announced that Standard &Poor’s Rating Services has affirmed the trust’s BBB- long-term corporate credit rating and maintained its stable outlook on Sabana. In its release, S&P notes that the rating reflects its expectation that Sabana REIT’s steady rental growth and high occupancy rates will support its business risk profile. It added that it expects the trust to successfully manage its upcoming lease expiry in 2013 and 2015. The outlook also reflects its view that any future asset acquisitions will not raise Sabana REIT’s ratio of debt to assets above 40. (Closing price: S$1.135, +0.442%)

Vard Holdings Limited announced that it has secured a new contract for the design and construction of one offshore subsea construction vessel for Farstad Shipping for NOK800.0 million. With this newbuilding, VARD has two equal vessels under construction for Farstad Shipping, as a part of Farstad’s fleet development within the subsea market. The vessel will be of VARD 3 07 design, developed for subsea and IMR (Inspection, Maintenance and Repair) operations. It has a total length of 143 meters, beam of 25 meters and a deck area of more than 1,800 square metres. The vessel is arranged for three ROVs (Remote Operating Vehicles) and can accommodate 130 persons. Delivery is scheduled from Vard Langsten in 3Q2015. The hull will be delivered from Vard Tulcea in Romania. (Closing price: S$0.87, +1.163%)

Azeus Systems Holdings Limited announced that Azeus Systems Limited, a wholly-owned subsidiary of the group, has received the approval to enter into three standing offer agreements for the supply of IT professional services with the Hong Kong government. This marks the fourth consecutive approval from the Hong Kong government for the agreements. The approval was received following the expiration of the previous agreements as announced in August 2009. The new agreements have taken effect since July 31, and will last for a period of 48 months. (Closing price: S$0.143, -%)