KLCI: -0.58% to 1806.9
JCI: -1.40% to 4510.6                            SET: +0.82% to 1442.9
HSI: -0.42% to 23206                             HSCEI: -0.13% to 10627
Nifty: +0.76% to 6299.2                         ASX200: -0.25% to 5417.5
Nikkei: -1.20% to 14327                        S&P500: -0.38% to 1756.5

MORNING COMMENTARY:
(By Ken Ang and Benjamin Ong)

DBS – 3Q13 Results – 1st take

DBS beat our expectations, reporting net profit of S$862 million. The beat was on lower than expected expenses and loan allowances made. Net interest income rose 2%q-q as loans grew strongly at 3% q-q despite significant depreciation of IDR and INR this quarter. YTD, loans have registered strong growth of 15%. NIMs were relatively stable at 1.60%, declining 2bps q-q due to downward pressure on customer loans, but mitigated by lower funding cost. Fees and Commission continues to be strong, despite weaker market activities in the quarter. We continue to see good traction for trade-related, loan-related and wealth management fees and commission. Trading income was lower q-q on weaker market activities. Expenses remained well managed. Credit quality remains benign, with higher provisions being made potentially for a specific loan in the manufacturing industry. Further updates will be provided after the analyst briefing later this afternoon.    

OCBC – 3Q13 Results – 1st take

OCBC beat our expectations, reporting net profit of S$826 million. Earning beat was mainly on the higher profit from GEH’s non-participating funds. Net interest income of OCBC rose by 4% q-q due to an increase in volumes of customer loans but was offset slightly the lower rates earned on non-bank customers. For non-interest income, it grew 29% q-q underpinned by strong profits from life assurance which was largely from unrealized mark-to market gains on GEH’s Non-Participating Fund. Net trading income was down 48% on q-q market volatility. For fees and commissions, we see a slowdown in wealth management fees and slight decrease in brokerage fees due to lower volumes of securities traded. Investment banking and trade related fees saw a growth q-q which resulted in overall fees and commissions to improve by 1.4% q-q.
      
MARKET OUTLOOK:
By Joshua Tan, Head of Research

Macro Data

Singapore:

The job market stayed tight, as the seasonally adjusted overall unemployment rate declined to 1.8% over the quarter in September, from 2.1% in June, according to the Ministry of Manpower. Total employment rose by 28,100 in the third quarter of 2013, higher than 26,200 in the same period last year, driven mainly by services and construction sectors.

Business confidence decreased for the second consecutive quarter to -1 in the third quarter of 2013 from 8 in the previous quarter.

Thailand:
Current account balance reversed into red figures in September, marking a deficit of USD534 million after a brief improvement of USD1.28 billion surplus in the August, according to Bank of Thailand (BOT). Commenting on the September’s deficit, BOT said that the surplus in capital account offsets the current account deficit, which was weighed mainly by the negative balance in the services, income and transfer account, leaving the overall balance of payment in surplus.

Hong Kong:
Retail sales growth slowed to 4.9% y-o-y in September amid the unsteady world-wide economy, after expanding 7.2% in August, the Census and Statistics Department said. Low unemployment and the continuing growth of inbound tourism should provide support to retailers in the near term, a government spokesman said in the statement.

USA:
The MNI Chicago Report business barometer jumped to 65.9 from 55.7 in September, the biggest monthly increase in more than three decades. Readings above 50 signal expansion. The index exceeded the most optimistic estimate in Bloomberg survey, in which the median projection was 55. A gauge of orders advanced to the highest level in nine years.

Eurozone:
Euro-area inflation cooled to the slowest in almost four years in October, moving further away from the European Central Bank’s goal. The annual rate fell to 0.7 percent, the lowest since November 2009, from 1.1 percent in September. The median forecast in a Bloomberg News survey of 42 economists was for the rate to stay at 1.1 percent. Separate data today showed unemployment was at a record 12.2 percent in September.

Japan:
Japan’s salaries extended the longest slide since 2010, even as Prime Minister Shinzo Abe urges companies to raise workers’ wages as part of his bid to reflate the world’s third-largest economy. Regular wages excluding overtime and bonuses fell 0.3 percent in September from a year earlier, marking a 16th straight month of decline, according to labor ministry data released today. Total cash earnings rose 0.1 percent.

Taiwan:
Taiwan’s economy grew at the slowest pace in a year in the third quarter, as a weak global recovery reduced demand for the island’s exports, increasing pressure on the central bank to extend an interest-rate pause. Gross domestic product rose 1.58 percent from a year earlier, after increasing 2.49 percent in the second quarter. The median estimate of 22 economists in a Bloomberg News survey was 2.57 percent.

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Regional Market Focus

Singapore

• The benchmark STI closed lower at 3.210.67 (-0.61%). The 1.8bn shares traded were worth S$1.3bn in value.
• The FTSE ST Mid Cap Index declined -0.13% while the FTSE ST Small Cap Index gained +0.06%. The top active stocks were SingTel (-1.31%), Golden Agri-Resources (+3.45%), UOB (-0.72%), DBS (-0.59%) and Global Logistics Properties (+0.65%).
• 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$12.07). Deep Value Plays are Amara (Buy, TP: S$0.74), Boustead (Buy, TP: S$1.94) and Courts (Buy, TP: S$1.03).

Thailand

• Thai stocks took a roller coaster ride on Thu. The composite SET index lost nearly 10 points at the open on domestic political worries but late bargain buying led the main index to reverse course to finish the session up 11.76 points at 1,442.88 points.
• The odds are in favor of a move lower for Thai stocks today after the House of Representatives passed the draft blanket amnesty bill in the third reading by a vote of 310 to 0 yesterday as Democrat MPs staged a walkout. Protests against blanket amnesty are also likely to escalate. 
• The prolonged protests could hurt the domestic economy and erode investor confidence. Foreign fund flows remained mixed with alternate bout of selling and buying. In our view, any political violence could spark foreign sell-off and skew the market to the downside in the near term. For this reason, a close watch should be kept on developments in political protests. The 1400-point level could be used as a buy-in point. 
• Resistance for the SET index is expected at 1450-1463 points and support at 1415-1430 points today.

Indonesia

• The Jakarta Composite Index (JCI) fell Thursday (31/10), amidst broad declines in Asia after the US Federal Reserve left its bond purchase rate unchanged as expected. The JCI slid 64.247 points, or 1.40%, to end at 4,510.631. The decline on Thursday included all but one major industry groups. Miscellaneous industry declined the most with 3.12%-drop, followed by property, construction and real estate sector with 2.57%-fall, and consumer goods sector with 2.25%-decrease. Infrastructure sector stood out among other industries with 0.27%-gain. The LQ45 ended 14.274 points or 1.86% lower, at 754.807. 174 shares declined and 82 shares rose Thursday on the Indonesia Stock Exchange, where 3.77 billion shares worth IDR 5.31 trillion changed hands on the regular board. Foreign investors’ transactions accumulated to a net purchase of IDR 181.68 billion.
• Indonesian stocks may waver between gains and losses today, after higher closes on US markets overnight, but with investors also weighing third quarter earnings results from Jakarta-listed firms. We expect the Jakarta Composite Index (JCI) to move in sideways channel today, with support and resistance each at 4,449 and 4,578.

Sri Lanka

• The Colombo bourse ended the trading day on a positive note, adding further to the gains recorded on the previous trading day.  The ASPI extended gains for the second consecutive trading and settled the day at 5,954.62 with a gain of 20.21 points. The S&P SL20 gained 16.25 points or 0.50% to settle at 3,282.07. The daily aggregated turnover amounted to record 632.87Mn. Under the sectorial round-up, Diversified Holdings (DIV) sector topped the list providing LKR 212.81Mn and Manufacturing (MFG) sector stood next in line providing LKR 151.39Mn to the daily aggregate turnover. A total of 47.07Mn shares changed hands during the day resulting in a dip of 62.88% compared to the previous trading day. The total market capitalization as at the day’s closure moved up to LKR 2.48Tn, extending the year to date gain to 14.24%. The market PER and PBV were 15.75x & 2.08x respectively. Price gainers surpassed the price losers by 91:83. Foreign participants appeared to be bullish during the day for the 2nd consecutive trading day resulting in a net foreign inflow of LKR 121.48Mn, resulted by foreign buying of LKR 311.44Mn and selling of LKR 189.96Mn. This assisted the year to date net foreign inflow (LKR 23.10Bn) to surpass the LKR 23.00Bn mark for the first time during the year. Looking at the local FOREX markets, the USD is selling at 132.67/- and is buying at LKR 129.41/-.

Australia

• The Australian share market on Thursday closed slightly lower with falls by most major banks but gains among industrial stocks. The benchmark S&P/ASX200 index was down 5.4 points, or 0.1 per cent, at 5,425.5.
• Today, the Australian market looks set to open flat following falls on Wall Street and most European bourses after eurozone employment figures failed to impress. Eurozone unemployment is back flirting with the 20-million mark, after what analysts said was a stark "revising away" of a tourism-led summer breather.  The key unemployment rate across the 17-country currency area hit a record 12.2 per cent in September, with about 19.5 million people classed as jobless by European Union data agency Eurostat. 
• In economic news on Friday, Reserve Bank of Australia (RBA) will release the index of commodity prices for month just ended, the Australian Industry Group posts the performance of manufacturing (PMI) index for the month just ended, while the RP Data-Rismark Home Value Index for September is due out, as is the producer price index for September quarter.
• In equities news, Macquarie Group is slated to post first half results and David Jones its first quarter sales.

Hong Kong

• HSI dropped 97 points or 0.42% to 23,206. CEI lost 13 points or 0.13% to 10,627. Trading volume was HKD59.198 billion.
• For October, HSI climbed 346 point or 1.5%. CEI outperformed with 311 points or 3% gain.
• Mainland property sector out-performed on reduced policy risk with Shimao Property (813.HK), Country Garden (2007.HK) and R&F Properties (2777.HK) gained 5.5%, 3.9% and 3.8%.
• Kunlun Energy (135.HK), the best performed HSI constituent stock in October, climbed 1.3% yesterday and 17% for a month. 
• Minsheng Bank (1988.HK) declined 2.4% after 3Q13 results with net interest margin compression.
• Technically, HSI gained support at 10-MA and 20-MA. The next resistance and support for HSI are 23,554 and 23,000 respectively.