STI:         -1.07%     to     3,100.2           KLCI:           -0.32%     to     1,808.3
JCI:         +0.41%     to     4,496.0          SET:            +1.38%     to     1,308.3
HSI:         -1.51%     to     22,733.9         HSCEI:        -2.10%     to     10,109.5
Nifty:       +0.11%     to     6,345.7           ASX200:     -1.07%     to     5,263.0
Nikkei:     -0.79%     to     15,695.9         S&P500:     -0.89%     to     1,828.5

MARKET OUTLOOK:
By Joshua Tan, Head of Research

MACRO DATA:

China
Chinese manufacturing contracted for the first time in six months in January, as the HSBC’s preliminary reading of China’s purchasing managers’ index (PMI) came in at of 49.6, after a final figure of 50.5 in December. A number below 50 indicates contraction.

The marginal contraction was mainly weighed down by weaker domestic and export demand. New export orders and employment in January fell in a faster rate. The new orders stood at 49.8, shrinking for the first time in six months.

Singapore
Singapore’s headline annual inflation rate fell further to 1.5 percent in December, pulled by a lower private transport costs. November’s consumer price index rose 2.6 percent. Private road transport costs skidded 2.8 percent during the month. Meanwhile, accommodation cost advanced 2.9 percent and food prices climbed 2.7 percent.

On a monthly basis, consumer prices dropped 0.3 percent in December, after logging a 0.7 percent increase in the previous month. For the whole of 2013, inflation rate stood at 2.4 percent, sharply lower than the 4.6 percent in 2012.

The core inflation, preferred gauge by the Monetary Authority of Singapore (MAS), which excludes costs of accommodation and private road transport, eased slightly by 0.1 percentage point to 2 percent in December from  the prior month. Core inflation for 2013 dropped to 1.7 percent from 2012’s 2.5 percent.

USA
Applications for U.S. unemployment benefits held near a six-week low, showing firings remain muted following the holidays.  Jobless claims rose by 1,000 to 326,000 in the period ended Jan. 18, Labor Department data showed today in Washington. The median forecast of 50 economists surveyed by Bloomberg projected 330,000.

Eurozone
Euro-area factory output expanded faster than economists forecast in January and a gauge in China signaled a surprise drop in manufacturing, highlighting the uneven nature of the global recovery. A euro-area manufacturing index increased to 53.9 from 52.7 in December, Markit Economics said in a statement today. That exceeded the median estimate of 53 in a Bloomberg News survey of 39 economists.

Australia
Australian homebuyers are borrowing at the fastest pace in four years amid record prices, straining debt levels already among the developed world’s highest as interest rates are set to climb. The value of new mortgage approvals jumped 25 percent in November from a year earlier, the fastest annual pace since September 2009, to a record A$26.9 billion ($23.8 billion), according to the statistics bureau.

The trimmed mean of core prices rose 2.6 percent in the three months through December from a year earlier, data showed yesterday, above the mid-point of the Reserve Bank of Australia’s 2 percent to 3 percent target range. Traders dropped the odds of a Feb. 4 rate cut to 7 percent from 17 percent and the Aussie rose as much as 0.9 percent yesterday.

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended -33.5 points lower or -1.07% to 3100.24, taking the year-to-date performance to -2.04%.
• The FTSE ST Mid Cap Index declined -0.70% while the FTSE ST Small Cap Index declined -0.87%. The top active stocks were DBS (-1.81%), UOB (-0.34%), SingTel (-1.13%), OCBC (-0.83%) and SunVic (-15.13%).
• The outperforming sectors today were represented by the FTSE ST Utilities Index (+0.07%). The two biggest stocks of the FTSE ST Utilities Index are Hyflux (+0.86%) and HanKore (unchanged). The underperforming sector was the FTSE ST Basic Materials Index, which declined-3.52% with Midas Holdings’s share price declining -1.02% and Geo Energy Resources’s share price remaining unchanged. The FTSE ST Basic Materials Index declined -3.52%. The FTSE ST Financials Index declined -0.90%.
• The short term consolidation is continuing after an unsuccessful breakout at resistance at 3170 as we mentioned 2 weeks ago.
• We have a longer term bullish bias due to macro fundamentals.
• Immediate supports at 3075, 3050 and 3000.

Thailand

• Thai stocks rallied sharply in the afternoon trade on Thu after the Constitutional Court accepted a petition by the Election Commission to look into a contentious issue of postponing the Feb 2 general election. The SET index finished the day up as much as 17 points or 1.38% on Thu.
• US equities extended losses on Thu in the wake of disappointing manufacturing data out of China, fueling concerns about the fallout on the global economy. Softer-than-expected US house prices and home sales also sent the CBOE Volatility Index (VIX), a fear gauge on Wall Street up 7.2% to 13.77. Investors also turned to gold as safe haven.
• Volatility is expected to be high in the Thai stock market today ahead of the charter court’s decision on whether a new election date can set and whether either the Election Commission or the government has the authority to postpone the poll. A breakout above a key 1300-point barrier yesterday is seen as a good sign while net foreign buying of Thai equities and futures to the tune of Bt1.8bn and 1,300 contracts respectively should lend support to the market. For today’s strategy, we advise investors to raise equity holdings to 50% of the short-term portfolio as long as the SET index maintains its break above 1300 points. We expect a trading range of 1285-1325 points for the SET index today.
• Today we peg resistance for the SET index at 1320-1340 points and support at 1290-1280 points.

• The Jakarta Composite Index (JCI) advanced Thursday (23/01), as earnings season kicked off, and amid hopes that the January effect would continue to support sentiments.
• The JCI rose 18.553 points, or 0.41%, to close at 4,496.042, while the blue-chip LQ45 index gained 3.259 points, or 0.43%, to 760.633. Of the nine major industry groups, six closed in green and the remaining three ended lower. Agriculture sector fared best on Thursday with 1.81%-climb, followed by finance sector with 1.48%-gain, and basic industry sector with 0.64%-advance.
• Gains on Thursday were supported by positive earnings from some listed companies that have reported their results for last year. Bank Rakyat Indonesia (BBRI), Indonesia’s largest micro finance lender, reported 14% increase in net income last year to IDR 21.2 trillion (USD 1.74 billion), thanks to larger interest income and fee-based income. Shares of Bank Rakyat advanced 3.57% to IDR 8,700 on Thursday.
• Gainers outran decliners 169 to 117 Thursday on the Indonesia Stock Exchange, where 3.16 billion shares worth IDR 5.32 trillion changed hands on the regular market. Foreign investors posted net purchase of stocks worth IDR 591.57 billion.
• The Jakarta Composite Index (JCI) will likely turn lower today, amid downbeat performances at global markets overnight, after a contraction in China’s manufacturing sector. We expect the JCI to trade lower, with its near-term support and resistance at 4,470 and 4,523, respectively.

• The Market ended the day on an optimistic note assisting both indices to further accrue gains and maintain its stay within the green terrain. The benchmark ASPI index closed positive for the 2nd consecutive trading day at 6,226.14 gaining 13.47 points or 0.22%, touching its highest level post to 16th August 2013. Following a similar trend, the S&P SL20 index too closed positive at 3,469.12, gaining 10.86 points or 0.31%. As at the daily closure the total market capitalization stood at LKR 2.59Tn, charting a year to date gain of 5.30%. A series of off-market blocks totaling up to LKR 696.22Mn amounted to nearly 40.00% of the daily aggregated turnover of LKR 1.87Bn, which indicated a gain of 33.91% as against its previously recorded. Under the sectorial overview, Diversified Holdings (DIV) sector topped the list providing LKR 750.18Mn.  Bank Finance & Insurance (BFI) too performed well providing LKR 464.34Mn.Moreover, the two sectors DIV and BFI collectively made account to nearly 65.00% of the daily turnover. During the day, a total of 131.71Mn shares changed hands indicating an increase of 21.23% against the previous trading day. With regard to the share price movement, 110 companies gained while 89 companies lost. Foreign participants appeared to be bullish during the day for the third consecutive trading day, resulting in a net foreign inflow of LKR 236.73Mn, supporting the year to date net foreign inflow (LKR 1.21Bn) to cross the LKR 1.00Bn mark for the first time during the year.  Foreign purchases for the day amounted to LKR 762.53Mn and sales were LKR 525.80Mn. With regard to the local FOREX market, the USD closed at LKR 132.24/- selling and LKR 129.36/- buying.

• HSI slid 348 points or 1.51% to 22,733. CEI lost 217 points or 2.1% to 10,109. Trading volume was HKD68.395 billion.
• HK market was weak after China HSBC manufacturing PMI (Jan) released at 49.6, indicating contracting manufacturing activities. 
• China financial sector led the indexes down on default risk of financial products. CM Bank (3968.HK), Minsheng Bank (1988.HK) and CCB (939.HK) slumped 4.1%, 3.5% and 3% respectively.
• Hang Lung PPT (101.HK) lost 5.1% after posting last year core earnings which was down 18% yoy.
• Macau gambling stocks under-performed again. Galaxy Ent (27.HK) and Sands China Ltd (1928.HK) dropped 2% and 2.9% respectively.
• Lenovo Group (992.HK), the largest PC maker in the world, was suspended from trading yesterday on agreement to buy IBM’s low-end server business.
• Technically, HSI failed to retain at 10-MA and 20-MA levels, which is vulnerable to further correction. The next resistance and support will be at 23,000 and 22,500 respectively.

Morning Note
Company Highlights

Singapore Telecommunication’s partner, Optus Business today announced that it has signed a five year, (AU) $30 million contract for managed ICT and mobility services with Australian engineering and property services leader UGL Limited. Under the whole-of-business agreement, Optus Business will deliver domestic and regional data network services, as well as custom design a range of intelligent business management applications that will enable UGL to improve productivity and business efficiency.  (Closing price: S$3.50, -1.13%)

Sunvic Chemical Holdings Limited is pleased to announce the disposal of its AA and AE production facilities currently held under the Group’s indirect wholly-owned subsidiary, Taixing Jurong Chemical Co., Ltd for an aggregate transaction value of approximately RMB 3.9 billion to Arkema Asie SAS. The disposal will be done via the setting up of a joint venture between Sunvic and Arkema to hold the production facilities of Taixing Jurong. The aggregate transaction value of the Proposed Joint Venture will be approximately RMB 3,900,000,000, and will therefore be subject to shareholder approval as a major transaction under Chapter 10 of the SGX-ST Listing Manual. The Proposed Joint Venture will be carried out in five stages involving a transfer of up to 100% of Taixing Jurong’s interest in Taixing Sunke Chemicals Co., Ltd. to Arkema. The profit from the Proposed Disposal of the Sale Assets is approximately RMB 1,866,000,000 (before tax) as at 31 December 2013. The sale proceeds of RMB 3,900,000,000 will be used to reduce the Group’s bank borrowings and grow its intermediate chemical business in the PRC through the setting up of new facilities and the expansion of sales channels. (Closing price: S$0.645, -15.132%)

Yangzijiang Shipbuilding (Holdings) Ltd. wishes to announce that the Company has through its wholly-owned subsidiary, Yangzijiang Shipping Pte Ltd entered into an agreement with Dhle (IOM) Ltd and Nakona Enterprises Limited to acquire the remaining 55% of the equity interest in the share capital of four single ship-owning companies, namely, MV TW Hamburg Shipping Company Ltd, MV TW Manila Shipping Company Ltd, MV TW Beijing Shipping Company Ltd, and MV TW Jiangsu Shipping Company Ltd (“SPVs”). Each ship-owning company is the owner of one unit of 92,500 DWT post-panamax bulk carriers. Under the Agreement, the consideration to acquire the remaining 55% equity of four SPVs is USD1,250,000 each.  (Closing price: S$1.22, -1.215%)

CapitaLand Limited, through its wholly-owned subsidiary CapitaLand China, has secured a prime 57,369 square metre residential site in Sunjia, Jiangbei District, Ningbo for RMB1,117,984,125 (approximately S$232 million) in a government land tender. This translates to about RMB8,858 (approximately S$1,840) per sqm per plot ratio. CapitaLand plans to build an estimated 1,100 units of small and medium-sized units on the site to cater to first-time homebuyers and upgraders. Construction is expected to begin in 3Q 2014 with the first phase targeted for launch in 2015. (Closing price: S$2.87, -1.034%)

Devotion Energy Group Limited refers to the proposed voluntary delisting of the Company from the Official List of the Singapore Exchange Securities Trading Limited pursuant to Rules 1307 and 1309 of the listing manual of the SGX-ST and the cash offer by Provenance Capital Pte. Ltd. , for and on behalf of Climate Holding Ltd, to purchase all the issued ordinary shares (excluding treasury shares) in the capital of the Company on the terms and subject to the conditions set out in the Joint Announcement and the Exit Offer Letter. The Company wishes to announce that it has obtained confirmation from the SGX-ST that it has no objections to suspension of trading of the Shares from 9.00 a.m. on Wednesday, 29 January 2014. Shareholders should note that the last trading date of the Shares is Tuesday, 28 January 2014 at 5.00 p.m., and trading of the Shares will be suspended with effect from 9.00 a.m. on Wednesday, 29 January 2014. The Company will make an announcement on the definitive date for the Delisting in due course after the close of the Exit Offer. (Closing price: S$0.188, 0%)

Source: Phillip Securities Research - 24 Jan 2014