STI:       +0.28%     to     3,070.2            KLCI:            -0.07%     to     1,846.2
JCI:       +0.85%     to     4,232.0            SET:              -0.24%     to     1,346.6
HSI:       -1.10%     to     22,888.8           HSCEI:         -1.68%     to     10,777.9
Nifty:     -0.81%     to     6,166.7             ASX200:      +2.08%     to     5,202.2
Nikkei:  +1.74%     to     15,859.2          S&P500:      -0.06%     to     1,809.6

MARKET OUTLOOK:
By Joshua Tan, Head of Research

Equity markets are reacting positively to the Fed's announcement that it will reduce bond purchases from US$85b/mth to US$75b/mth, while keeping the Fed Funds Rate near zero longer than usual - even should the unemployment rate fall below 6.5% (which it expects so by end-2014), and so long as inflation keeps below 2.5%. Bond purchases will be further reduced so long as economic data continues in the right direction.

Our asset allocation strategy remains to OW stocks, NW/UW bonds, NW commodities, UW gold.

Macro Data

USA:
Previously owned home purchases dropped 4.3 percent to a 4.9 million annual rate, the National Association of Realtors reported today in Washington. The median forecast of economists in a Bloomberg survey called for the pace to slow to 5.02 million. Still, the group projects 2013 will be the best year for the industry in seven years, with an estimated 5.1 million properties sold.

The index of U.S. leading indicators rose more than forecast in November, a sign the economic expansion will gain traction in the months to come. The Conference Board’s index, a gauge of the outlook for the next three to six months, increased 0.8 percent last month after rising 0.1 percent in October, the New York-based group said today. The median forecast of economists surveyed by Bloomberg called for an advance of 0.7 percent.
 

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended 8.45 points higher or +0.28% to 3,070.23, taking the year-to-date performance to -3.06%.
• The FTSE ST Mid Cap Index gained +0.01% while the FTSE ST Small Cap Index gained +0.22%. The top active stocks were SingTel (-1.95%), DBS (+0.61%), Keppel Corporation (+1.61%), UOB (+0.89%) and OCBC (+0.41%).
• However, we had pegged near term support at the key technical 3050 level and said the probability of a short term bounce is likely at that level. The US market strength also increases the odds of this Santa Claus rally as mentioned in our Monday Webinar .
• We expect a possible short term cycle up. However, if price breaks below 3025, it may signal a shift in investor psychology in the longer term.
• Immediate supports at 3000 and 2930.

Thailand

• Thai stocks traded in range on Thu before the composite SET index finished the session down 0.24% in light turnover while the US Federal Reserve’s decision to taper its QE program might spur capital outflows.
• US equities gained on Thu after the Federal Reserve announced a plan to trim its massive stimulus program and a gradual improvement in US economic data also pointed to the recovery in the world’s largest economy.
• In Thailand, domestic political tensions resurfaced after the anti-government People’s Democratic Reform Committee (PDRC) has called for another mass rally this Sun in a bid to oust caretaker PM Yingluck Shinawatra. Chances are however slim that violence will erupt, in our view.
• Foreign selloff of Thai shares moderated from the prior week but renewed political tensions put a cap on the market’s upside potential and may possibly trigger risk aversion selling ahead of the planned major protest over this weekend. However, we believe buying interest from LTF/RMF and year-end institutional window dressing should lend support to the market. Today we expect the SET index to trade in a tight range of 1335-1360 points.
• Resistance for the SET index is expected at 1360-1380 points and support at 1340-1320 points today.

• Indonesian stocks climbed Thursday (19/12), as investors saw the US Federal Reserve’s decision to scale back its stimulus measure as signal to economic strength that may help Indonesia’s economy and exports. Jakarta Composite Index (JCI), the country’s benchmark stock index, rose 35.698 points, or 0.85%, to finish at 4,231.980. Shares in miscellaneous industry sector led gains that included seven of the nine major industry groups with 3.18%-advance, followed by basic industry sector that climbed 1.27%, and finance sector added 0.94%. The LQ45 index gained 8.428 points, or 1.21%, to 705.443.
• The Fed’s decision on Wednesday to begin rolling back its bond buying program raised optimistic view of the US economy, prompting hopes for more exports from Indonesia which is facing wide current account deficit. The Rupiah, however, dipped further to beyond 12,200 on Wednesday, on strength of the greenback. 126 shares climbed and 101 shares declined Thursday on the Indonesia Stock Exchange, where 2.91 billion shares worth IDR 3.70 trillion changed hands on the regular market. Foreign investors posted net purchase of IDR 345.89 billion.
• The Jakarta Composite Index (JCI) will likely take a pause today, after advancing a day earlier on positive sentiments worldwide. We expect the JCI to trade sideways today, and peg the near-term support and resistance at 4,184 and 4,281, respectively.

• The Colombo bourse ended the day on an upbeat sentiment, gaining notably to reach a highest level post to 7 November 2013. The market moved at a slower pace during the first half of trading, however towards the latter part it trended upwards to reach an intra-day peak of 5,869.15 gaining 57.39 points, and as at the daily closure the benchmark ASPI settled slightly lower at 5,867.00 (up by 55.24 points or 0.95%). The S&P SL20 gained over 1.00% (or 32.75 points) to close within the day at LKR 3,224.46.
• With regard to the movements in share prices, a total of 137 companies posted gains while 41 posted drops. The aggregated turnover for the day amounted to LKR 567.37Mn, indicating a dip of 4.25% against the previous trading day.
• Under the sectorial summary, Bank Finance & Insurance (BFI) sector stood out as the prime contributor providing LKR 188.31Mn, accounting to 33.19% of the total turnover. Manufacturing (MFG) sector added LKR 117.86 to the daily turnover. The two sectors collectively accounted to nearly 55.00% of the aggregated turnover for the day.
• During the day, shares totaling up to 24.76Mn changed hands, recording a gain of 14.90% compared with the previous trading day. As at the day’s closure, the total market capitalization leaped to LKR 2.44Tn extending the year to date gain to 12.61%. The market PER & PBV stood at 15.01x and 1.98x respectively. Foreign participants were bearish during the day, resulting in a net foreign outflow of LKR 14.41Mn; this was resulted by foreign selling worth LKR 235.64Mn and buying of LKR 250.05Mn. Further, this reduced the year to date net foreign inflow to LKR 22.58Bn. With regard to the local FOREX, the USD is selling at LKR 132.37/- and the buying rate stands at LKR 129.21/-.

• The Australian market looks set to open slightly higher despite a flat lead from Wall Street following the Federal Reserve's announcement it would begin tapering its stimulus measures.
• On Thursday, the Australian market surged more than two per cent after the Fed announced it would cut its monthly bond purchases by $US10 billion, to $US75 billion.
• Locally, in economic news on Friday, the Commonwealth Bank releases its business sales indicator for November.
• In equities news, Sydney Airport releases November traffic results while Rio Tinto chief executive Sam Walsh is slated to speak at a British Chamber of Commerce lunch.
• In Australia, the market on Thursday enjoyed a welcome lift after the Fed's decision to start winding back its stimulus program for the US economy. The benchmark S&P/ASX200 index was up 106.1 points, or 2.08 per cent, at 5,202.2.

• HSI lost 255 points or 1.1% to 22,888, CEI slipped 183 points or 1.68% to 10,777. Trading volume increased to HKD74.321 billion.
• HK market was weak after Fed said it will reduce bond purchase scale and PBOC refrained from injecting cash into financial system. HSI lost 100-MA of 22,898.
• China financial sector dragged indexes down as SHIBOR surged. NCI (1336.HK), Ping An (2318.HK) and Bankcomm (3328.HK) lost 4.7%, 3.2% and 2.2% respectively.
• Hang Lung Property (101.HK), the weakest blue chip, slumped 4.6%. New World Dev (17.HK) and Wharf Holdings (4.HK) dropped 2% and 1.7% respectively.
• Gas stocks out-performed with China Res Gas (1193.HK) and Enn Energy (2688.HK) up 2.9% and 2.2% respectively, both reached record high.
• China Windpower (182.HK) was up 5.3% as Huadian Fuxin (816.HK) agreed to subscribe its new shares
• Technically, 14-RSI dropped to 35.8, we expect HSI to have a rebound. The next resistance and support for HSI are 23,294 and 22,463 respectively.

Morning Note
Company Highlights

Pacific Radiance announced that it will add 2 advanced PSVs to its newbuild programme, which already has 17 offshore vessels in the line-up. This move dovetails with plans to expand presence in targeted high-growth markets following successful IPO in November. Latest pair of vessels are due to be delivered in 4Q 2015. (Closing Price: S$0.850, -1.163%)

In continuation of Global Yellow Pages’ strategy to expand in the food and beverage sector, the company has entered into a conditional sale and purchase agreement to acquire the global brand Gloria Jean’s Coffees for S$40.7 million. Gloria Jean’s Coffees is a leading global specialty coffee and coffee house chain with over 800 coffee houses across 39 countries worldwide. In conjunction with this acquisition, the company has proposed to issue up to 1,257,682,564 new ordinary shares and one free detachable warrant for each Rights Share at an issue price of S$0.05 for each Rights Share, on the basis of 3 Right Shares for every 2 existing ordinary shares. (Closing Price: S$0.094, +5.618%)

Source: PhillipCapital Research - 20 Dec 2013