STI: -1.32% to 3167.9                          KLCI: -0.42% to 1768.6
JCI: -2.43% to 4316.2                          SET: -0.51% to 1417.5
HSI: -1.50% to 22859                           HSCEI: -1.70% to 10316
Nifty: -1.68% to 5735.3                        ASX200: -1.66% to 5218.9
Nikkei: -2.06% to 14455.8                    S&P500: -0.60% to 1681.6
      
MARKET OUTLOOK:
By Joshua Tan, Head of Research

Macro Data

Eurozone CPI has missed expectations of 1.2%, coming in at 1.1% for September, yoy. This is down from the previous figure of 1.3%.

Japan’s industrial output falls -0.7% mom against expectations of -0.3% after a hefty gain the previous month, but company production forecasts indicate that factory output and the broader economy are still on track to steady recovery.

Australia’s inflation gauge rose 0.2% in September, following a 0.1% rise in August and an increase of 0.5% in July. Retail sales rose 1.1% in August from a year earlier and housing starts rose 8.8%, up for 12 months in a row.

South Korea’s business confidence, measured by the business survey index (BSI), jumped 5 points from a month earlier to 8.2. This figure was the highest in four months.
 
China: Final reading of China’s HSBC Manufacturing Purchasing Managers’ Index (PMI) showed a marginal increase to 50.2 in September from 50.1 in the previous month. The rise was mainly buoyed by stronger overseas demand where new business from overseas grew for the first time in six months, HSBC's chief economist for China, Qu Hongbin, said in a statement. Despite the final gauge was a little disappointing as compared to the HSBC’s preliminary September PMI of 51.2, it adds to evidence that the Chinese economy are on track to recovery.

Thailand’s current account returned to the black to $1.29 billion in August, its first time in four months. Exports edged 2.5% higher in August to $20 billion, its first time since April, while imports fell 2.5% on a yearly basis to $17.8 billion due to a higher spending on foreign goods a year ago.

India’s current account deficit widened to $21.8 billion (equivalent to 4.9% of GDP) in the April-June period, as compared to $18.1 billion (equivalent to 3.6% of GDP) a quarter ago. However, the economists in Reuters expect the gap to ease in subsequent quarters as gold imports was curbed alongside a weaker Indian currency and improving global demand (to encourage exports).
 

Regional Market Focus

Singapore

• The benchmark STI closed lower at 3,167.87 (-1.32%). The 4.6bn shares traded were worth S$1.8n in value.
• The FTSE ST Mid Cap Index declined -1.56% while the FTSE ST Small Cap Index declined -1.23%. The top active stocks were Yangzijiang (-6.01%), UOB (-2.87%), SingTel (-1.32%), Keppel Corp (-1.05%), and DBS (-0.67%).
• The STI’s performance today may hinge on the outcome of the US government spending cuts. There are concerns that a shutdown may stunt economic growth. The outcome of this discussion may also set the tone for the upcoming raising of US debt ceiling talks to be held soon.
• We peg key near term support at 3,100 levels.
• Top Picks are DBS (Accumulate, TP: S$17.50), SingTel (Accumulate, TP: S$3.99) and Keppel Corp (Accumulate, TP: S$12.25). Deep Value Plays are Amara (Buy, TP: S$0.74), Boustead (Buy, TP: S$1.94) and Courts (Buy, TP: S$1.14).

Thailand

• Thai stocks followed regional bourses especially TIP markets lower on Mon on concerns about US budget negotiations which remained deadlocked as deadline neared. The SET index finished the session down 2.42%. Energy stocks fell the most among all counters.
• The risk of a US government shutdown on Oct 1 remained after the Democrats-controlled Senate shot down a proposal by the Republican-led House of Representatives to delay Obama’s healthcare program for a year in return for temporary funding of the federal government beyond Mon. The Democrats and Republicans had until Sep 30 midnight to reach an 11th-hour deal to avert a US federal government shutdown.
• In our view, we believe US budget deal could be finally reached before the deadline. In case of a shutdown, we think the shutdown would last only a few days. If US budget deal could be reached before the deadline (1100 hrs Thailand time), speculative buying would return to big caps. Overall we think the SET index looks set for a lower open and will later trade in range today. Failure to reach budget deal before deadline could trigger further selling.
• Resistance for the SET index is pegged at 1400-1420 points and support at 1350-1380 points today.

• Indonesian stocks tumbled on Monday (30/09), as US budget stalemate that risked government shutdown raised wide concerns in Asia. The Jakarta Composite Index (JCI) fell 107.543 points, or 2.43%, to 4,316.176. The LQ45 index lost 26.067 points, or 3.53%, at 712.901. All nine major industry sectors closed in red on Monday, with basic industry sector plunged 4.66%, finance sector slipped 2.90%, and consumer goods sector shed 2.79%. Decliners outran gainers 194 to 63 Monday on the Indonesia Stock Exchange, where 3.06 billion shares worth IDR 4.43 trillion changed hands on the regular board. Foreign investors posted net sale of IDR 805.69 billion.
• The Jakarta Composite Index (JCI) will likely trade sideways with negative bias today, as fears about the partial shutdown of US government weighed on markets, but sentiments improved in Asia this morning on corporate optimism. We expect the JCI to trade modestly lower today, with support and resistance at 4,254 and 4,435, respectively.

• With the third quarter of the calendar year 2013 coming to an end, the Colombo bourse concluded the last trading day of September on a mixed note resulting the benchmark ASPI to close with a loss of 5.30 points and settle just 3 points above the 5,800 mark while the S&P SL20 closing with a gain of 4 points; further on, for the current quarter the ASPI has lost 5.19% while the S&P SL20 has reduced by 6.33%. With regard to movement in shares prices, a total of 123 companied lost while 74 companies gained. Under the sectorial review, Bank Finance & Insurance (BFI) dominated the list providing LKR 296.28Mn while accounting to nearly 40% of the total turnover and Land & Property (DIV) sector made a subscription of LKR 201.29Mn. As at the day’s close, the total market capitalization stood at LKR 2.39Tn, charting a year to date gain of 10.27%. The market PER & PBV stood at 16.50x and 2.20x respectively. Foreign participants stretched their bullish run for the 8th consecutive trading day resulting in a net foreign inflow of LKR 127.58Mn resulted by foreign purchases of LKR 165.68Mn and sales which amounted to LKR 38.10Mn. Further, this extended the year to date net foreign inflow to reach LKR 19.94Bn. The local FOREX market for the day closed with, the USD selling at LKR 133.62/- and buying at LKR 130.27/-.

• The Australian share market suffered its heaviest daily fall in almost two months as nervous investors sold out due to a political impasse in the United States. The benchmark S&P/ASX200 index was down 88.2 points, or 1.66 per cent, to 5,218.9 points.
• Today (01/10/13), the Australian market looks set to open slightly higher despite falls on Wall Street as a partial US government shutdown loomed due to Washington political gridlock over a new budget.
• In economic news on Tuesday, the Reserve Bank of Australia holds its monthly board meeting and makes its  interest rate decision. It also releases the index of commodity prices for September. The Australian Bureau of Statistics (ABS) is due to release retail trade for August while the Australian Industry Group performance of manufacturing (PMI) index for September is due out. Also due out is the RP Data Rismark Home Value Index for August, the HIA New home sales data for August and the Dun and Bradstreet business expectations survey. No major equities news is expected.

• Market is closed today (1-Oct-13 ) as it is a public holiday.

Morning Note
Company Highlights

YHM Group Limited announced that it has secured a contract with a value of more than of US$37 million over a 20 year period to lease a set of hydro-electric power generation equipment for power supply to a national utility board in South Asia. The Company expects the lease to commence after the commissioning of the power plant which is expected to be before end 2013. The Company has sought shareholders’ approval in entering into offshore and on-shore oil and gas and marine related businesses on 27 Nov 2012. The Company’s entry into this transaction allows it to diversify its earnings stream through a stable operating model, and would allow the Company to establish a foothold in the energy services business segment. This transaction will not change the risk profile of the Company. (Closing Price: S$0.061, -15.278%)

Nam Cheong Limited announced that Nam Cheong International Ltd., a wholly-owned subsidiary of Nam Cheong, has secured sale contracts with a total value worth approximately US$120 million for four units of Platform Supply Vessels. The PSVs were sold to a new customer, an emerging offshore marine services company based in Latin America. Revenue from the Contracts will be recognised over the relevant contractual period in accordance with the Group’s revenue recognition policy. The Contracts are expected to contribute positively to the earnings of the Group for the financial years ending 31 December 2013 and 31 December 2014. With the Contracts, Nam Cheong’s order book stands at approximately RM1.7 billion. (Closing Price: S$0.280, 1.818%)

Ezion Holdings Limited announced that the Company has: (a) through its wholly-owned subsidiary, Ezion Offshore Logistics Hub Pte Ltd, entered into a sale and purchase agreement dated 30 September 2013 with Ocean Sky International Limited pursuant to which EOLH shall sell as legal and beneficial owner, and Ocean Sky shall purchase, all the issued and paid-up share capital of Ezion Offshore Logistics Hub (Tiwi) Pty Ltd, for a cash consideration of S$100,000; (b) entered into a subscription agreement dated 30 September 2013 with Ocean Sky pursuant to which Ocean Sky shall allot and issue to the Company, and the Company shall subscribe for, 440,000,000 new ordinary shares in the capital of Ocean Sky (the “Subscription Shares”) at the issue price of S$0.108 per Subscription Share; and (c) entered into an option agreement dated 30 September 2013 with Ocean Sky pursuant to which Ocean Sky shall issue to the Company, and the Company shall acquire, 165,000,000 share options, with each Option carrying the right to subscribe for one new ordinary share in the capital of Ocean Sky at the exercise price of S$0.108 per Option. The consideration for the Acquisition of Options is S$1.00. (Closing Price: S$2.200, -7.173%)

Noble Group Limited announced that the Company has entered into a detailed term sheet dated 27 September 2013 with X2 Resources TopCo LLP, an English limited liability partnership, in relation to a proposed investment in a newly established private mining venture. X2 intends to seek committed capital for investment in producing or near producing opportunities in the metals and mining sector in accordance with certain acquisition criteria. The Company (or a subsidiary of the Company) will make an equity commitment of US$500 million in X2. The equity investment will be drawn down progressively, pro rata with other investors, only when X2 makes investments. The Company will be X2’s preferred marketing partner and provider of supply chain management and logistics services. (Closing Price: S$0.930, - %)

TA Corporation Ltd announced that the Group has secured two contracts worth an aggregate of S$77.34 million as follows:- (i) Proposed condominium development at Marine Parade Road with contract sum of S$60.19 million awarded by Ladyhill (Private) Limited, a subsidiary of CapitaLand Residential Limited. The contract period is 34 months and work is scheduled to commence by end 2013; and (ii) Proposed mixed landed housing development at Whitley Road with contract sum of S$17.15 million awarded by Unique Resi Estate Pte. Ltd., a joint venture company owned by some local listed and private companies. The contract period is 24 months and work is scheduled to commence by end 2013. These two contracts are not expected to have a material impact on the Group’s net tangible assets and earnings per share for the financial year ending 31 December 2013. (Closing Price: S$ -, - %)

STATS ChipPAC Ltd. announced that it has successfully reached further insurance settlement of approximately $19.6 million with its insurers as final compensation for its business interruption insurance claims related to the flooding of its Thailand plant in the fourth quarter of 2011. This insurance recovery is in addition to the $26.7 million obtained in October 2012 as compensation for plant and equipment damages. The total insurance settlement obtained by the Company is approximately $46.3 million. The additional insurance settlement will be recognized as exceptional gain in the third quarter 2013 results. (Closing Price: S$ 0.325, -2.985%)

Mirach Energy Limited updated that the daily production volume at Kampung Minyak Oil Field is currently recorded at 126 barrels of oil per day, from less than a hundred barrels per day in August 2013. This is following the completion of KM-611, which was spudded on 5 September 2013, and is currently producing at a stabilised oil flow rate of around 36 barrels of oil per day. The cost of drilling and completing KM-611 is estimated at around US$0.63 million. On the other hand, KM-607, which completed drilling in August 2013, has not commenced production yet. This is due to a delay in well completion process as the operation team has recommended more adequate surface facilities and equipment to cope with the additional pressure experienced from the well bore. (Closing Price: S$ 0.450, -5.263%)

Vallianz Holdings Limited announced that Vallianz Capital Ltd, a wholly-owned subsidiary of the Company, has entered into a sale and purchase agreement dated 1 October 2013 with Swiber Offshore Construction Pte. Ltd. pursuant to which Vallianz Capital has acquired 2,000 ordinary shares in the capital of Rawabi Swiber Offshore Services Co. Ltd., representing 50% of the issued and paid-up share capital of the Target, for a total cash consideration of US$1,450,000. This also boosted Vallianz Holdings Limited’s order book to US$344.0 million. (Closing Price: S$ 0.059, 1.724%)

Source: PhillipCapital Research - 1 Oct 2013