STI:         -0.78%    to    3,076.0          KLCI:          -0.32%    to    1,802.6
JCI:         -1.31%    to    4,437.3          SET:           +0.48%    to    1,314.6
HSI:         -1.25%    to    22,450.1        HSCEI:       -0.94%    to    10,014.0
Nifty:       -1.24%    to    6,266.8           ASX200:    -0.42%    to    5,240.9
Nikkei:    -1.94%    to    15,391.6        S&P500:    -2.09%    to    1,790.3

MARKET OUTLOOK:
By Joshua Tan, Head of Research

MACRO DATA:

Singapore
Singapore’s industrial production expanded at a faster pace in December, mainly driven by strong growth in the electronics sector. Manufacturing output grew to an annual rate of 6.2 percent, from 4.0 percent in the preceding month, according to Singapore Economic Development Board (EDB).

Output from electronics cluster jumped 22.2 percent on-year in December, more than double of November's growth of 11 percent. Meanwhile, output from transport engineering cluster rose 13.8 percent and output from chemicals cluster advanced 6.4 percent, as compared to the same period last year. In contrast, output from biomedical manufacturing cluster fell 14.9 percent on-year, which brings manufacturing output excluding biomedical engineering to increased 12.1 percent on-year.

USA
Treasuries gained for the longest stretch since April as emerging-markets losses and signs of slower U.S. economic growth led investors to seek safe assets. The benchmark 10-year yield reached the lowest level since November as a gauge of Chinese manufacturing showed contraction, Argentina’s peso plunged the most since 2002 and Turkey’s lira fell to a record. Short-term bill rates rose, with four-week rates reaching the most since October, on concern a U.S. debt-ceiling impasse next month may damp demand.
 

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended -24.25 points lower or -0.78% to 3075.99, taking the year-to-date performance to -2.81%.
• The FTSE ST Mid Cap Index declined -0.67% while the FTSE ST Small Cap Index declined -0.27%. The top active stocks were DBS (-1.01%), SingTel (+0.57%), Keppel Corp (-1.84%), OCBC (-0.73%) and CapitaLand (-1.39%).
• The outperforming sectors today were represented by the FTSE ST Telecommunications Index (+0.49%). The two biggest stocks of the FTSE ST Telecommunications Index are SingTel (+0.57%) and StarHub  (+0.24%). The underperforming sector was the FTSE ST Oil & Gas Index, which declined -1.35% with Keppel Corp ’s share price declining -1.84% and Sembcorp Industries ’s share price declining -0.94%. The FTSE ST Basic Materials Index declined -1.32%.  The FTSE ST Financials Index declined -0.81%.
• Support at 3075 and most likely 3050 are broken on the downside. The technical sentiment is short term bearish due to EM and China macro concerns.
• Although we have a longer term bullish bias due to macro fundamentals, we recognize short term market pessimism. Traders should wait for a clearer signal before going long.
• Immediate supports at 3000, 2930.

Thailand

• Thai stocks last Friday gyrated in the positive territory as the market was awaiting the Constitutional Court’s verdict who has the power to defer the Feb-2 general election. The SET index ended the session up 0.4%.
• Most overseas stock markets tumbled in the past week on rekindling global growth concerns after China released the downbeat economic reports. On Friday, the Dow Jones plunged more than 318 points with VIX index rising 31.74% to 18.14, while currencies of emerging markets drastically weakened. A key economic event in focus this week features the FOMC meeting to be held on Jan 28-29.
• In regards to statistic data, the SET index normally made the upward surges before the election date. However, the coming general election appears to be different as the Election Commission and the caretaker government today will discuss a postponement of the general election in the face of escalating peaceful protests.
• If the general election will be postponed, chance is slim though, the move is expected to have positive impact on the market sentiment for the near term. We see this as a good opportunity to cash in profits. Resistance is pegged at 1320 and support at 1300, 1285 points.

• Most stocks listed on the Indonesian Stock Exchange tumbled Friday (24/01), as fears about ripples from China’s manufacturing slowdown set in. The Jakarta Composite Index (JCI) dropped 1.31%, or 58.70 points, to end at 4,437.34. The blue-chip LQ45 index shed 13.60 points, or 1.78%, at 747.04. All of the nine main stock sectors finished in red on Friday, led by miscellaneous industry sector that fell 3.33%, trailed by finance sector which slid 1.40%, and trade and services sector declined 1.34%.
• China’s manufacturing sector registered an unexpected contraction in January, according to the preliminary manufacturing PMI data released by HSBC/Markit. The PMI index fell to 49.6 in January, down from a final December reading of 50.5, sending stocks in Asia lower on Friday.
• In Indonesia, 197 stocks ended in negative territory and 90 finished higher on Friday, with volume on the regular board dropped to 2.41 billion shares worth IDR 4.12 trillion. Foreign investors posted net sale of IDR 285.57 billion in shares.
• The Jakarta Composite Index (JCI) may continue to decline today, as regional markets track Wall Street lower amid concerns about manufacturing slowdown in China. We expect the JCI to trade move lower today, and peg its support and resistance at 4,408 and 4,495, respectively.

• Witnessing its 4th positive closure for the week despite the minute drop seen on Tuesday, the bourse was able to contentedly climbed higher moving to a highest level post to 12th June last year. The benchmark ASPI closed at 6,255.63 gaining 29.49 points or 0.47%; during the past three trading days the index gathered 102.09 points or 1.65%. The S&P SL20 gained 0.26% or 8.96 points to close green at 3,478.09.With regard to the movements in share prices, a total of 115 companies posted gains while 79 posted drops. As at the day’s closure, the total market capitalization hurdled to LKR 2.60Tn while extending the year to date gain to 5.80%. The market PER & PBV stood at 16.84x and 2.07x respectively. The aggregated turnover for the day amounted to LKR 1.45Bn, indicating a dip of 22.40% against the previous trading day.  Under the sectorial wrap-up, Diversified Holdings (DIV) sector stood out as the prime contributor providing LKR 618.20Mn, accounting to 42.56% of the total turnover. Bank Finance & Insurance (DIV) sector added LKR 449.41Mn to the daily turnover. The two sectors DIV & BFI collectively accounted to nearly 75.00% of the aggregated turnover for the day. The day witnessed an aggregate quantity of 134.41Mn shares changing hands, recording a gain of 2.05% compared with the previous trading day. Foreign participants ended the week on a bearish note having charted inflows for the past three trading days, to record a net foreign outflow of LKR 384.82Mn (the highest outflow logged as at date); this was resulted by foreign selling worth LKR 684.46Mn and buying of LKR 299.64Mn. Further on, this dragged the year to date net foreign inflow below the LKR 1.0Bn mark. With regard to the local FOREX, the USD is selling at LKR 132.23/- and the buying rate stands at LKR 129.35/-.

• HSI slid 283 points or 1.25% to 22,450. CEI lost 95 points to 10,014. Trading volume increased to HKD77.25 billion.
• HK market was weak, tracking overnight weakness in US markets. HSI failed retain at 250-MA levels and reached the lowest point since Sep 13. For last week, HSI lost 683 points or 3%, CEI slid 153 points or 1.5%.
• Software stocks under-performed. Tencent (700.HK) fell 4%. Sinosoft Tech (1297.HK), Kingdee Int’l (268.HK) and Kingsoft (3888.HK) lost 8.6%, 7.3% and 6.4% respectively.
• New energy stocks under-performed with China Windpower (182.HK) and New Env Energy (3989.HK) down 8.9% and 6.8% respectively.
• Lenovo Group (992.HK) gained 1.2% after confirmed agreement to buy IBM’s low-end server business and was the best performed blue chip.
• Citic 21CN (241.HK), being the market focus as Alibaba Group acquired its 54% stake, surged 3.72 times
• Technically, HSI lost 250-MA, so called bull-bear line, sending a negative signal. We expect a further correction. The next resistance and support will be at 22,587 and 22,000 respectively.

Morning Note
Company Highlights

Yoma Strategic Holdings has made its first foray into Myanmar's fast-moving consumer goods(FMCG) sector by entering into a definitive Business Sale Agreement (BSA) with the Asia Beverages Co., Ltd. group of companies (the “ABC Group”) which is subject to certain conditions. Yoma Strategic, together with PMM Partners Limited, will acquire a 30% and 20% interest respectively in ABC Group’s assets and businesses relating to the production, branding, marketing and distribution of bottled water, spirits, wines, beers, alcoholic beverages and other FMCG products in Myanmar. The aggregate consideration of Yoma Strategic’s proposed acquisition of 30% of the ABC Group's Assets and Business Operations is up to US$11.1 million comprising an initial amount of US$3.3 million and a further amount of up to US$ 7.8 million to be paid at a later stage based on certain performance benchmarks, with funding to be derived from internal resources. (Closing Price S$0.750, -1.3%)

Olam International Limited has entered into an agreement with a consortium of Chinese investors to sell part of its forestry and saw milling assets in Gabon for a gross consideration of US$18.0million.The divestment includes the sale of two saw mills in the Makokou region of Gabon, 2.5 hectares of land in the Special Economic Zone (SEZ) at Nkok, Gabon and associated forestry concessions. The transaction will result in a one-off loss of US$4.5 million on the sale of assets. In addition, the Company will record a one-time restructuring charge of US$6.5 million. The sale of the business is expected to generate annualised manufacturing and overhead cost savings of approximately US$13.5 million from FY2015, reduce the fixed capital invested in the business by US$22.5 million and release US$20.0 million of average working capital invested in this business. (Closing Price S$1.465, -0.3%)

Oversea-Chinese Banking Corporation refers to its announcement dated 6 January 2014 and the media report in Bloomberg in respect of an extension of exclusive talks on a potential acquisition of shares in Wing Hang Bank, Limited by OCBC. OCBC announced that it has entered into an extension agreement with the Substantial Shareholders to extend the exclusivity period under the Exclusivity Agreement. Under the terms of the Extension Agreement, the Substantial Shareholders have agreed that, until 3 March 2014, they will engage exclusively with OCBC to seek to finalise the terms for the Possible Offer. (Closing Price S$9.5, -2.1%)

OUE Commercial Real Estate Investment Trust announced it has garnered strong support from investors for its initial public offering of 208,000,000 Units (the “Offering”). Trading of the OUE C-REIT Units on the SGX-ST is expected to commence at 2.00 p.m. on 27 January 2014. The balloting results for the Public Offer will be released on 24 January 2014. (Closing Price -, -)

SingHaiyi Group Ltd. announced that the Company proposes to seek the approval of shareholders of the Company to undertake a share consolidation of every ten(10) existing issued ordinary shares in the capital of the Company held by the Shareholders at a books closure date to be determined by the directors of the Company into (1) ordinary share in the capital of the Company (“Consolidated Share”), fractional entitlements to be disregarded . (Closing Price S$0.021, -%)

Source: Phillip Securities Research - 28 Jan 2014