STI:         +0.23%     to     3,174.7             KLCI:              -0.75%     to     1,853.0
JCI:         +1.24%     to     4,327.3             SET:                -5.23%     to     1,230.8
HSI:         +0.14%     to     23,340.1           HSCEI:           -0.99%     to     10,709.3
Nifty:       -1.28%      to     6,221.2             ASX200:         +0.29%    to     5,367.9
Nikkei:    +0.69%     to     16,291.3           S&P500:         -0.89%     to     1,832.0

MARKET OUTLOOK:
By Joshua Tan, Head of Research

Macro Data

Singapore
Singapore GDP expanded at a slower pace in the fourth quarter of 2013 as manufacturing activity weakened significantly. Singapore economy grew 4.4 percent on a year-on-year basis in the final quarter of 2013, compared to a revised reading of 5.9 percent in the preceding quarter. According to advance estimates from the Ministry of Trade and Industry (MTI), GDP contracted 2.7 percent on a quarter-on-quarter seasonally-adjusted annualized basis, a reversal from the 2.2 percent expansion the previous quarter.

The manufacturing sector, accounting for roughly 20 percent of GDP, grew 3.5 percent on a year-on-year basis, decelerating from the 5.3 percent growth in the previous quarter. On a quarter-on-quarter basis, the sector contracted at an annualized rate of 4.0 per cent, after a 1.2 per cent growth in the third quarter of 2013.

China
HSBC China Manufacturing Purchasing Managers’ Index (PMI) moderated to 50.5 in December after logging a reading of 50.8 in the previous month. Despite the lower reading, which was mainly due to slower output growth, the final PMI sustained the fifth above-50 reading in a row, owing to a steady increase of new orders, said Hongbin Qu, HSBC chief economist China.

Indonesia
Consumer price index (CPI) edged up slightly to 8.38 percent in December from a year ago, due to rising foods and transportation prices during the holiday season, according to the Central Statistics Agency (BPS). Annual inflation rate was 8.37 percent in November. Indonesia’s annual inflation rate for year 2013 recorded at 8.38 percent, which is still in line with Bank Indonesia and the government’s ceiling at 9 percent. The 2013 inflation rate was almost double of 2012’s – 4.3 percent.

Indonesia posted a trade surplus of $776.8 million in November, its biggest trade surplus since March 2012, from a revised $24 million in October, based on the data from BPS. The November surplus eased pressure on the central bank to raise interest rates further, who has been attempting to narrow the current account deficit and support the currency.

Thailand
Consumer price index (CPI) eased to a seasonally adjusted annual rate of 1.67 percent, compared to 1.92 percent in the preceding month, according to the Ministry of Commerce. The core CPI, which excludes certain food articles and energy, increased 0.91 percent year-on-year in December. On month-on-month basis, the core measure rose 0.1 percent.

India
The HSBC India Manufacturing PMI dropped slightly to 50.7 in December from November’s 51.3 as slower domestic order flows weighed on factory output growth.

Hong Kong
Retail sales rose to a seasonally adjusted rate of 8.5 percent in December, following a 6.3 percent growth in the preceding month, according to the Census and Statistics Department. "Looking ahead, the stable job and income conditions and sustained growth of inbound tourism should continue to support the retail business in the near term", said the agency.
 

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended 7.22 points higher or +0.23% to 3,174.65, taking the year-to-date performance to +0.31%.
• The FTSE ST Mid Cap Index gained +0.26% while the FTSE ST Small Cap Index gained +0.64%. The top active stocks were HanKore (+8.33%), GSH Corporation (+7.41%), DBS (unchanged), SIIC Environment (+3.83%) and SingTel (unchanged).
• Since Dec, 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

• Thai stock market kicked off the year of 2014 with more significantly negative note, tumbling 5.23% at the end of the day. Rising tension in domestic politics after the anti-government leader Suthep Thuagsuban set the Jan 13 for shutting down the capital of Bangkok, insisting to reform the country’s politics before election.
• Overseas stock markets also tracked the weakness on Wall Street after the index plummeted to hit the record low. On internal front, political tension has been rising significantly as the pro-government group or so-called ‘Red Shirt’ prepares the mass gathering against the anti-government protesters, while the Election Commission today will make decision whether it will carry on with the Feb 2 election.
• The market is expected to embrace selling pressure which normally takes place during early year as some LTFs meet the maturity periods. This is expected to weigh on the stock market sentiment. Yesterday, foreign investors returned to slightly buy equities for the first time.
• For today, staying sidelines are advised while awaiting the market correction to come to a close after the SET index broke down below the 1260 key support. There is potential for sporadic bouts of rebound but gains appear to be limited at some extent on surrounded negative factors while some portion of investors may cash in profits ahead of the weekend.
• Resistance for the main index is pegged at 1260-1280 points and support at 1200-1180 points today.

• The Jakarta Composite Index (JCI) advanced Thursday (02/01), after data showed manufacturing picked up in December and larger surplus in November trade balance.
• The benchmark index of Indonesian stocks rose 53.088 points, or 1.24%, to finish at 4,327.265. Gains on Thursday included seven of the nine major industry sectors, led by basic industry sector that surged 2.25%, followed by consumer goods sector with 2.21%-gain, and property, construction and real estate sector with 1.91%-climb. LQ45, the index trailing Indonesia’s blue-chip stocks, added 12.381 points, or 1.74%, to close at 723.516.
• Indonesia posted larger surplus in balance of trade in November, to USD 776.8 million, from a surplus of USD 42 million a month earlier, thanks to 1.45%-increase in exports to USD 15.93 billion, data released by Statistics Indonesia showed. Another data released by the same agency showed inflation in December rose slightly to 8.38% year-on-year, from 8.37% in November. In manufacturing sector, HSBC’s Indonesia manufacturing PMI rose to 50.9 in December, from 50.3 a month earlier.
• We expect the Jakarta Composite Index (JCI) to move lower today, as investors may take cues from negative closes in the US overnight. The JCI will likely within 4,275 - 4,354 range today.

• Investor cheer extends further amidst the policy interest rate cut, and despite heavy foreign selling. Stocks managed to gain further extending gains to witness the longest winning streak of five days for the first time after early October 2013 whilst maintaining its forward drive and concluding the first market day of 2014 on a cheerful sentiment following to the policy rate cut of 50 basis points by monetary board of CBSL, Sri Lanka at their first monetary policy meeting for 2014. The active participation of the investors and the buying interest which prevailed pushed the bourse to reach an intraday peak of 5,970.08 (gaining close to 1%) towards the latter part of trading, however as at the closure the benchmark ASPI closed a few points lower at 5,968.04 (up by 55.26 points or 0.93%) nevertheless reaching a highest level post to 17th October 2013. During the past 5 trading days the ASPI gathered 122 points or 2.09%. The S&P SL20 re-entered the positive terrain and settled at 3,285.39 having gained 21.52 points or 0.66%. The total market capitalization as at the day’s closure hurdled to LKR 2.48Tn charting a year to date gain of 0.93%. The market PER and PBV stood at 16.07x and 1.97x respectively.  Under the sectorial summary, Bank Finance & Insurance (BFI) witnessed highest investor interest, where 1,442 trades resulted in an aggregated quantity of 10.54Mn shares changing hands while assisting the sector to top the list providing LKR 552.73Mn (nearly 60.00% of the total turnover). Manufacturing (MFG) stood second contributing LKR 112.55Mn.Moreover, the two sectors BFI & MFG collectively made a 70.46% contribution to the day’s total turnover.  During the day, a total of 28.25Mn shares changed hands resulting in an increase of 38.20% against the previous trading day.   Foreign participants appeared to be bearish during the first market day of 2014 resulting in a net foreign outflow of LKR 350.84Mn. Foreign selling for the day amounted to LKR 574.30Mn and buying was LKR 223.47Mn. With regard to the local FOREX, the USD closed the day at LKR 132.23/- selling and LKR 129.27/- buying.

• The Hang Seng Index gained 33.66, 0.14%. to close at 23,340.05 yesterday as gains were held back by a slip in Chinese manufacturing data.
• The HSBC/Markit manufacturing PMI fell from 50.8 to 50.5 yesterday for November’s data.
• Tencent (0700.HK) closed at a record high of HK$504.50, gaining 2 percent. AIA (1299:HK) rose 1.16% to HK$39.35.

Morning Note
Company Highlights

Soilbuild Construction Group Ltd reported that its wholly-owned subsidiary, Soil-Build (Pte.) Ltd., a BCA A1-graded construction company with over 37 years of experience, has been awarded with a S$26.8 million contract by Soo Kee Jewellery Group to construct their corporate headquarters, being a proposed erection of a 7-storey industrial building with basement carpark lots at Changi Business Park Vista. The contract is the fourth Changi Business Park project that has been awarded to the Group. This construction project is expected to commence work by January 2014 and be completed by second quarter of 2015. It also brings the Group’s latest order book to S$389.5 million to date, which would be substantially completed over the course of the next 24 months. (Closing Price S$0.270, -1.8%)

Aspial Corporation Limited makes its first major overseas foray with the acquisition of 383 King Melbourne, Australia, for A$41.5 million (approximately S$46.5 million) from MWM Australia Pty Ltd. The Sale and Purchase Agreement was entered into via the Group’s wholly-owned subsidiary WCL-King (Vic) Pty Ltd. (Closing Price S$0.425, -)

Sarin Technologies Ltd announced that in the quarter just ended Hari Krishna Exports Pvt. Ltd. placed orders for four additional systems, which will, upon completion of their delivery this month, bring to twelve the number of Galaxy TM and Solaris TM systems (of various models) they have in use, thus becoming our second  customer to have over ten systems installed in-house. (Closing Price S$1.910, +3.2%)

Source: PhillipSecurities Research - 3 Jan 2014