STI:         +0.45%    to    3,167.4             KLCI:          -0.30%     to    1,867.0
JCI:         +1.45%    to    4,274.2             SET:            -0.75%     to    1,298.7
HSI:        +0.26%    to    23,306.4          HSCEI:        +0.42%    to    10,816.1
Nifty:       -0.04%    to    6,301.7            ASX200:      -0.09%     to    5,352.2
Nikkei:    +0.69%    to    16,291.3          S&P500:     +0.40%    to    1,848.4

MARKET OUTLOOK:
By Joshua Tan, Head of Research

Macro Data

China
China's purchasing managers' index (PMI) for the manufacturing sector fell for the first time since June 2013, albeit holding steady in the expansionary territory. December's manufacturing PMI was to 51 percent from November's 51.4 percent, according to the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP).
Major PMI compounds all declined in December, the sub-index for production fell 0.6 percentage points to 53.9 percent, the sub-index for new orders lost 0.3 percentage points to 52 percent, the sub-index for purchase quantity moved down 0.9 percentage points to 52.7 percent, while the sub-index for new export orders declined 0.8 percentage points to 49.8 percent.
The fall of the PMI in December reflected the fall in market demand and a cautious attitude by enterprises toward the future, said Zhang Liqun, an analyst with the Development Research Center of the State Council. However, economic growth is still in a process of stabilizing, Zhang added.

USA
The Conference Board said its sentiment index climbed to 78.1 from 72 in November, exceeding the median forecast of economists surveyed by Bloomberg and the strongest year-end reading since 2007. Other reports showed home prices climbed at the fastest pace in more than seven years and manufacturing was in a sustained expansion.

Business activity in the U.S. expanded December, capping the strongest three months in more than two years and adding to signs manufacturing gains will be sustained into 2014. While the MNI Chicago Report business barometer declined to 59.1 from 63 in November, numbers greater than 50 signal expansion. The index averaged 62.7 over the past three months, the highest since the period ended May 2011.

Eurozone
The yield on German 10-year bunds climbed 61 basis points, or 0.61 percentage point, this year to 1.93 percent at the close of trading on Dec. 30. That’s the biggest increase since 2006, when yields jumped 64 basis points.

S. Korea
South Korea’s exports are forecast to grow the most this year since 2011 as shipments of mobile phones and automobiles increase, even as the yen’s weakening against the won imposes limits on the nation’s trade. Overseas shipments in Asia’s fourth-largest economy will increase 6.4 percent this year after an estimated 2.2 percent gain in 2013 and a 1.3 percent decline in 2012.
 

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended 11.61 points higher or +0.37% to 3,164.90, taking the year-to-date performance to -0.07%.
• The FTSE ST Mid Cap Index gained +0.30% while the FTSE ST Small Cap Index gained +0.43%. The top active stocks were DBS (+0.59%), SingTel (+0.83%), HanKore (+35.00%), UOB (+0.52%) and OCBC (unchanged)
• 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.
• Since then, we said the next resistance is at 3170, and price now negotiating this resistance. A short term consolidation is likely, but a bullish bias in Jan 2014 due to macro fundamentals.
• Immediate supports at 3000 and 2930.

Thailand

• Today we peg resistance for the main index at 1370-1380 points and support at 1352-1337 points.
• Thai stock market last Friday extended its slide to end down 0.75%, pressured by internal factors with investors offloading equities ahead of long holidays on New Year and in the midst of uncertainty over the general election.
• Thai bourse is expected to start the year of 2014 with uneventful trading sentiment, pressured by intensifying domestic politics. The anti-government rally leader set to shut down Bangkok on Jan 13 to pressure caretaker Yingluck government to resignation, and to postpone the general election. In the meantime, the Election Commission will discuss today whether it will carry on the Feb 2 election after candidates were unable to get into registration venues due to anti-government protests in several provinces in the South.
• On external fronts, China later today will release PMI manufacturing. If the data disappoints the market, the market sentiment is likely to be gloomier.
• Trading sentiment in Thai stock market is unlikely to return to its cheerful mode over the next 1-2 days and trading range appears to remain narrow within 1260-1340 for a while after investors dumped equities ahead of year-end. For short-term market participants, we suggest to allocate stock investment at 25% of portfolio and to focus on strong fundamentals and attractive dividend stocks.
• Resistance for the main index is pegged at 1310-1330 points and support at 1290-1280 points today.

• Indonesian stocks finished mostly higher on a quiet trading day at the end of the year Monday (30/12), with investors anticipated the January effect and a row of domestic economic data early in January.
• The Jakarta Composite Index (JCI) climbed 61.197 points, or 1.45%, to 4,274.177. All of the nine major industry groups advanced on Monday, led by agriculture sector with 3.22%-surge, followed by miscellaneous industry sector with 2.36%-gain, and infrastructure sector with 1.88%-rise. The LQ45 index closed 9.653 points or 1.38% higher, at 711.135.
• In 2013, the benchmark index of Indonesian stocks posted 1.66%-decline, one of its worst performances in 10 years, as current account deficit and fiscal framework weighed on stocks and the Rupiah. The JCI rose 12.9% in 2012 and 3.2% in 2011. Gainers outran decliners 174 to 92 Monday on the Indonesia Stock Exchange, where 2.51 billion shares worth IDR 2.85 trillion traded on the regular market. Foreign investors’ transactions accumulated to a net purchase of IDR 704.02 billion.
• The Jakarta Composite Index (JCI) will likely to begin this year on a positive note today, supported by commodity-related stocks. We expect the JCI to advance today, with support and resistance at 4,219 and 4,302, respectively.

• The Bourse maintains its positive trend, ahead of the New Calendar Year. With the year coming to an end and just few hours away for the New Year 2014, the bourse managed to move up further extending gains for the fourth consecutive trading day and closing positive once again despite the drop of 3.58 points (or 0.11%) in the S&P SL20 index. The benchmark ASPI index closed the year, 13 points above the 5,900 mark for the first time after 5th November 2013 gaining 13.58 points or 0.23% from its previous trading day. Further on, the ASPI which opened the year at 5,643.00 managed to reach a highest level of 6,488.85 within the year, however closed the year with a YoY gain of 4.78%. With regard to the movement on share price, 96 companies gained whereas 75 companies posted dips in share price. The total market capitalization leaped to LKR 2.46Tn, charting a year to date gain of 13.49%. The market PER and PBV were 15.92x & 1.96x respectively. The daily aggregated turnover amounted to record LKR 565.26Mn. Under the sectorial wrap-up, Bank Finance & Insurance (BFI) sector topped the list providing LKR 245.88Mn and Diversified Holdings (DIV) sector stood next in line providing LKR 186.79Mn to the daily aggregate turnover. Shares totaling up to 20.44Mn changed hands within the day resulting in a gain of 66.59% compared to the previous day. Foreign participants concluded the last trading day of the year on a bullish note resulting in its 6th successive net foreign inflow, amounting to LKR 163.20Mn; foreign purchases for the day amounted to LKR 227.29Mn and sales amounted to LKR 64.09Mn. The year to date net foreign inflow for the calendar year 2013 aggregated up to record 22.87Bn, indicating a reduction of nearly 16.00Bn in comparison to the preceding year. Looking at the currency markets, the rupee depreciated for the second straight day falling to a lowest level in a week, currently the USD is selling at 132.34/-.

• The Hang Seng Index gained 0.3% to close at 23,306.39 on 31 December, a half day session.
• The CEI gained 45.45 points, 0.42%, to close at 10, 816.14.
• Performance from financials helped boost the market as China banks gained as Bank of China gained 0.56% and ICBC 0.56%. AIA gained 1.04%. Hutchison Whampoa rose 0.4%.
• The Hang Seng Index rose 2.9% for the year but the CEI lost 5.4% for 2013.

Morning Note
Company Highlights

Ying Li International Real Estate Limited announced that the Company has successfully handed over 94% or 572 of 608 of the residential units in Tower 4 and 5 of the Ying Li International Plaza project since the completion in mid-November 2013. The remaining units are expected to be handed over in 2014. The buyers of most of these units are awaiting the local authorities’ disbursement of their housing provident funds to complete the payment for their units. To date, 99% of the residential units in Tower 4 and 5 have been sold. The 572 residential units, together with a small number of shop houses, which have been handed over to date represent a total revenue of about RMB 389 million to the company. (Closing Price S$0.395, +1.282%)

Source: Phillip Securities Research - 2 Jan 2014