STI: -0.02% to 3088.9                                         KLCI: +0.04% to 1721.1
JCI: -0.04% to 4169.8                                         SET: -1.01% to 1338.1
HSI: -0.15% to 21863                                         HSCEI: -0.36% to 9932.4
Nikkei: +2.21% to 13660                                    ASX200: +0.94% to 5123.4
Nifty: +1.17% to 5471.8                                      S&P500: +0.39% to 1663.5                

 
MARKET OUTLOOK:
By Joshua Tan, Head of Research

For the market outlook going forward, please register and tune in at 11.15am to our usual Monday weekly webinar by clicking on the blue link at the top of this morning note, or, by going to www.poems.com.sg > Weekly Webinar Market Call by Phillip Research.
 
This week’s webinar also gives an update on the Offshore & Marine sector.

(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

U.S.A: Purchases of new U.S. homes plunged 13.4 percent to a 394,000 annualized pace in July, the most in more than three years, raising concern higher mortgage rates will slow the real-estate rebound. This was lower than all 74 economist expectations.
 
Eurozone consumer confidence increased more than economists estimated in August. The index improved for the ninth month to -15.6, the highest level since July 2011.
German GDP swelled 0.7% qoq, in line with expectations.
 
In China, FDI rose by 24.1% y-y in July, beating the market expected 14.0% y-y gain, after the 20.1% y-y gain in June. The improved FDI, together with the 50.1 preliminary HSBC manufacturing PMI, points to a stabilizing economy.
 
In Taiwan, industrial production unexpectedly rose by 2.07% y-y in July, compared to the market expected 0.53% y-y drop and the 0.43% y-y drop in June. Commercial sales fell by 0.67% y-y in July, compared to market expected 0.26% y-y drop and the 0.25% y-y drop in June.
 
Singapore Consumer prices rose 0.3% m/m in July, missing Bloomberg’s average expectation by 30bps. Inflation advanced to 1.9% y/y in July from 1.8% y/y in June, moving closer to the Singapore central bank’s 2013 inflation forecast of 2% - 3%. The accelerating inflation was due to gains in food and transportation costs, according to Statistics Department.
 
 

Regional Market Focus

Singapore

The Straits Times Index (STI) ended 0.55 points lower or -0.02% to 3,088.85, taking the year-to-date performance to -2.47%.

The FTSE ST Mid Cap Index gained +0.53% while the FTSE ST Small Cap Index declined -0.41%. The top active stocks were Forterra Trust (+5.21%), Mirach Energy (+10.11%), DBS (+0.62%), UOB (+0.14%) and SingTel (-0.56%).

STI is held at support of 3050 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

Thai stocks rebounded at the open last Fri after a wave of surprisingly upbeat economic data out of major economies but the SET index reversed course to resume its slide on continued foreign sell-offs.

The Thai baht remained on the weak side but a slowdown in net foreign outflows may trigger some sporadic rebound in the SET index in the near term.

In the latest developments, US Federal Reserve officials said QE cutbacks would take into account the potential impact on developing economies especially India, Indonesia and Turkey, which are highly exposed to capital outflow risks. 

In our view, the market appears to lack positive triggers amid high uncertainties but the downside however seems limited. For investment strategy, we advise investors to play wait and see until the market flashes a buy signal. Equity exposure should be maintained at 25% of the portfolio with initial support and resistance seen at 1320 and 1366 points respectively. 

Resistance for the SET index is seen at 1366-1380 and support at 1320-1300 today.     

Indonesia

The Jakarta Composite Index (JCI) pared earlier gain on Friday (23/08), after the government unveiled its fiscal package to revive confidence and consumer spending in Indonesia. The JCI ended at 4,169.83, down 1.58 points, or 0.04%. The benchmark index lost steam after the announcement of the fiscal package. Earlier on Friday, the JCI rose 1.42% to 4,230.850 in the opening session. Four of the nine main stock sectors finished in green on Friday, led by mining sector with 1.62%-gain, followed by infrastructure sector, and trade, services and investment sector that climbed 0.85% each. For the week, the JCI plummeted 8.73%. The LQ45 index trimmed 0.242 points or 0.04% on Friday, to end at 689.256. The Rupiah remained weak, traded at IDR 10,805 against the US dollar. The plan for maintaining financial stability revealed by Indonesian government on Friday included additional tax deduction for exporters and reducing the number of permits needed to invest in the country. As part of the coordinated plan, Bank Indonesia on Friday announced a policy that eases restrictions on foreign exchange-buying for exporters and allows banks to hold more funds in vostro accounts to ensure sufficient dollar liquidity in Indonesia. Bank Indonesia Governor said the central bank will also allow banks to use it as counterparty in "swap and re-swap" derivative transactions. Decliners outran gainers 135 to 123 Friday on the Indonesia Stock Exchange, where 4.1 billion shares worth IDR 4.97 trillion changed hands on the regular board. Foreign investors accumulated net sale of IDR 197.83 billion.

Indonesian stock will likely rebound moderately today, with lead from global stock markets that headed in positive direction after higher closes on Wall Street on Friday. We expect the JCI to climb, with support and resistance at 4,098 and 4,276, respectively.

Sri Lanka

The Colombo Bourse depicted an unexpected extreme negative image for the week, dragging the indices further into the risky negative terrain. The market witnessed a blemish downward trend from the early hours onwards, to close the day at its intraday low of 5,951.83 dropping by 134.05 points, experiencing the worst loss after 15 months. The turnover for the day amounted to LKR 978.20Mn; this indicated a gain of 49.80% compared to the previous trading day. A total of 20.54Mn shares changed hands during the day resulting in a gain of 3.93% against the previous trading day. Under the sectorial round-up, Diversified Holdings (DIV) sector stood on top providing LKR 490.84Mn and Bank Finance & Insurance (BFI) sector emerged second contributing LKR 414.61Mn. Notably, the two sectors DIV & BFI collectively accounted to nearly 93% of the daily turnover. Foreign participants were bearish during the day for the second consecutive trading day, resulting in a net foreign outflow of LKR 72.50Mn; this reduced the year to date net foreign inflow to record LKR 18.35Bn.

Australia

The Australian share market on Friday outperformed Wall Street as the first positive Chinese manufacturing data in four months boosted the big banks and miners.  The benchmark S&P/ASX200 index was up 47.7 points, or 0.94  per cent to 5,123.4 points.

Today (26/08/13), the Australian market looks set to open higher following gains on Wall Street which enjoyed a jolt from Microsoft's announcement that chief executive Steve Ballmer will retire within the next 12 months. The US Commerce Department's unwelcome US new-home sales report for July - sales plunged 13.4 per cent month-on-month - also proved a catalyst for the rally.

No major economic news is expected on Monday.

In equities news, nib Holdings is expected to post full year results while Caltex Australia, Spark Infrastructure Group and Boart Longyear are slated to announce first half earnings.

Hong Kong

HSI dropped 31 points or 0.15% to 21,863. CEI lost 35 points or 0.36% to 9,932. Trading volume was HKD52.077 billion.

HSI opened high to 22,006 (+111) on Friday due to rebound of US and Europe markets but dragged down by A-share market in afternoon. HSI lost 654 points last week, which compensated to 710 points gain in previous week. CNOOC (883.HK), the best performed HSI constituent stock last week, gained 5.7% for a week after its interim results.

Henderson Land (12.HK) reported 1H13 core earnings of HKD3.45 billion, down 4% yoy but the share price gained 2.6% last Friday. The rumor that FIH (2038.HK)’s parent company Hon Hai is hiring as many as 90,000 workers to meet Apple’s demand in fourth quarter sent its share price up 8.6%.

Technically, the next resistance and support will be at 22,200 and 21,571 respectively.

Morning Note

Company Highlights

CWT Limited announced that it has entered into a Share Sale Agreement to acquire the entire 100% equity stake in Sinsenmoh Transportation Pte Ltd (“SSM”) from Synergy Trans-Link Sdn Bhd for a cash consideration of S$19 million (“Purchase Consideration”), subject to finalization of the 2013 financial audit of SSM and conditions precedent (collectively the “Acquisition”).
Established in 1978, SSM is a Singapore logistics company which undertakes chemical warehousing and transportation activities in Singapore. It owns a leasehold property of approximately 8,000 square metres Gross Floor Area (GFA) which consists of purpose-built Dangerous Goods (DG) warehouses equipped with chemical drumming facilities, and container yards at 32 Tanjong Penjuru,
Singapore. SSM is ISO 9001 certified and provides comprehensive land-based logistics for both bulk and packaged liquid chemicals including transport management, warehousing and inventory control, drum filling, labelling and repackaging, container haulage and bulk cargo handling, order processing, documentation and custom clearance for all imports and exports.. (Closing price: S$1.275, -%)

Jubilee Industries Holdings Ltd. announced that the Company has incorporated a wholly owned subsidiary in Singapore, J Capital Pte. Ltd., with an issued and paid up share capital of S$5,000,000 comprising 5,000,000 ordinary shares at an issue price of S$1 each (the “Incorporation”). The principal activity of J Capital Pte. Ltd. is mainly investing in quoted and/or unquoted securities. The Incorporation was funded from the aggregate net proceeds of approximately S$18 million raised by the Company pursuant to two placement exercises which were completed on 20 May 2013 and 15 August 2013. (Closing price: S$0.196, -%)

Giken Sakata (S) Limited announced that the Company has entered into: (a) a placement agreement with DMG & Partners Securities Pte Ltd (the “Placement Agent”) dated 23 August 2013 (the “Placement Agreement”) pursuant to which the Company has agreed to issue, and the Placement Agent has agreed to procure on a commercially reasonable efforts basis subscriptions for, up to 55,234,000 new ordinary shares in the capital of the Company (the “Placement Shares”) at an issue price of S$0.024 (the “Issue Price”) per Placement Share, on the terms and subject to the conditions of the Placement Agreement (the “Placement”); and (b) a subscription agreement with Roots Capital Asia Limited (the “Subscriber”) dated 23 August 2013 (the “Subscription Agreement”) pursuant to which the Subscriber has agreed to subscribe for 76,275,000 new ordinary shares in the capital of the Company (the “Subscription Shares”) at the Issue Price per Subscription Share, on the terms and subject to the conditions of the Subscription Agreement (the “Subscription”). (Closing price: S$0.035, -%)

Source: Macquarie Research - 26 Aug 2013