STI:        +0.95%     to     2,988.3          KLCI:        +0.67%     to     1,797.9
JCI:        +0.92%     to     4,424.7          SET:          +1.17%     to     1,295.2
HSI:       +0.72%     to     21,423.1         HSCEI:     +0.71%     to     9,537.7
Nifty:     +0.23%     to     6,036.3           ASX200:   +1.20%     to     5,131.4
Nikkei:   -0.18%     to     14,155.1         S&P500:   +1.24%     to     1,773.4

MARKET OUTLOOK:

MACRO DATA:

Hong Kong
The HSBC Hong Kong purchasing managers’ index (PMI) hits 23-month high in January, signaling improving private-sector business conditions. January’s PMI came in at 52.7 after recording a reading of 51.2 in December.

Purchasing activity grew at its fastest rate in 34 months as firms planned to raise production in line with stronger client demand. Both output and new orders extended their upward trends in January, new business from mainland China increased for the third successive month, while the pace of job cuts in private sector continued to moderate. Commenting on the Hong Kong PMI survey, the growth momentum in Hong Kong business activity is likely to be sustained at the start of 2014, buoyed by favourable demand conditions in the near future,  said John Zhu, economist at HSBC in Asia.

Thailand
Consumer confidence plunged to a 26-month low in January, hampered by the ongoing political turmoil. Consumer confidence index slipped to 71.5 in January from 73.4 in December, according to the survey by the University of Thai Chamber of Commerce.

Eurozone
The eurozone's economy grew less rapidly than first estimated as 2014 got underway.Data suggests that its composite Purchasing Managers Index --a measure of activity in the manufacturing and services sectors--rose to 52.9 in January from 52.1 in December, signaling the most rapid expansion since June 2011. However, the final January reading was lower than the preliminary estimate of 53.2 released last month.

Manufacturing orders in Germany surprisingly declined in December, though orders from the euro zone rose significantly potentially signaling a recovery.December data revealed weakness primarily in the domestic market. Domestic orders fell 1.6% on the month, while foreign orders grew 0.4%. Orders from within the euro zone were particularly strong. These were up 7.5% on the month. Capital goods orders from the euro zone were up a robust 16.5%, far surpassing the 1.0% increase in total capital goods orders.

Australia
Australia posted an unexpected trade surplus in December, buoyed by strength in mining exports. The resource-rich economy is emerging from a decade long mining investment boom that is now feeding through into increased export volumes. Mining companies have also been aided by a sharp fall in the Australian dollar, which has fallen 15% from its 2013 peak.

Australian retail sales rose in line with expectations in December in the latest sign that deep interest-rate cuts are boosting consumer sentiment and spending. Retail sales rose 0.5% in December from a month earlier. Australia's central bank has cut rates eight times since November 2011, seeking to stoke domestic sectors of the economy such as retail sales, as a mining boom that has powered growth for over a decade slows.

USA
Applications for U.S. unemployment benefits fell for the first time in three weeks as employers retained workers to meet demand. Jobless claims dropped by 20,000 to 331,000 in the period ended Feb. 1. The median forecast of economists surveyed by Bloomberg called for a decrease to 335,000.

The trade deficit in the U.S. widened more than forecast in December as exports ended a record year on a soft note.The trade gap expanded 12 percent to $38.7 billion, compared to a median estimate of economists surveyed by Bloomberg that called for a $36 billion gap. Exports showed a broad-based decline after surging in November to the highest ever, while imports edged up on rising consumer demand.

U.S. sales of petroleum products to foreign customers climbed to a record in December, capping their best year, continuing a drive toward fuel independence as domestic production improves. At the same time, the world’s largest economy will probably pickup faster than many of its counterparts, indicating imports will also climb.

The productivity of U.S. workers rose more than projected in the fourth quarter as the world’s largest economy expanded, helping to restrain labor costs.The measure of employee output per hour increased at a 3.2 percent annualized rate, after a revised 3.6 percent gain in the prior three months that was more than initially reported. The median forecast in a Bloomberg survey of economists called for a 2.8 percent advance in the fourth quarter. Expenses per worker decreased at a 1.6 percent pace, more than estimated.

Unit labor costs, which are adjusted for efficiency gains, were forecast to drop 0.7 percent in the fourth quarter, according to the Bloomberg survey median. They decreased 2 percent in the prior quarter.
 

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended +28.18 points higher or +0.95% to 2988.27, taking the year-to-date performance to -5.58%.
• The FTSE ST Mid Cap Index gained +0.59% while the FTSE ST Small Cap Index gained +0.22%. The top active stocks were SingTel (+1.16%), DBS (+0.80%), UOB (+0.72%), OCBC (+1.76%) and GLP (+0.73%).
• The outperforming sectors today were represented by the FTSE ST Technology Index (+2.40%). The two biggest stocks of the FTSE ST Technology Index are Silverlake Axis (+2.35%) and STATS ChipPAC (+1.67%). The underperforming sector was the FTSE ST Oil & Gas Index, which gained +0.26% with Keppel Corp’s share price gaining +0.10% and Sembcorp Industries’ share price declining -0.95%.The FTSE ST Basic Materials Index gained +2.06%. The FTSE ST Financials Index gained +0.79%.
• The headwinds from Jan's economic data - under performing ISM mfg data, housing sales, auto sales, good jobs report (more tapering) and lower-than-expected corporate results suggest a weak, muted or ranged bound market.
• Although we have a longer term bullish bias due to macro fundamentals, we recognize intermediate term market pessimism.
• However, Daily RSI is oversold, and there is a good possibility of short covering / short term bounce for this week and next before a resumption of intermediate downtrend.
• Immediate support at 2930.

Thailand

• Thai stocks followed overseas bourses sharply higher on Thu. Buying interest in late trading led the composite SET index to end the session up 14.99 points at 1,295.24 points though foreign investors stayed on the selling side.
• US equities finished 188 points higher on Thu after a drop in initial claims for state unemployment benefits for the first time in three months boosted confidence in the economy that could gather steam after the Federal Reserve’s QE tapering. Strong leads from Wall Street also shore up sentiment in Asian stock markets in today’s early trade.
• In our view, Thai stocks look set to track overseas stock markets higher today but watch out for possible bouts of profit taking if the SET index inches closer towards the 1300-1310 point resistance level. Net foreign selling of Thai shares also continued for a 10th consecutive day. Domestic political uncertainty continued to weigh on the economy in the near term if a new government cannot be formed. The Tourism Authority of Thailand (TAT) said international tourist arrivals to Thailand rose by a mere 0.6%-1% on average in Jan 2014. Today the anti-government People’s Democratic Reform Committee (PDRC) will launch a succession of ‘Robin Hood’ rallies to raise Bt10mn in funds for the farmer’s flight to get paid by caretaker government under its controversial rice pledging scheme. We expect a trading range of 1270-1310 points for the SET index today. The short-term strategy remains to ‘sell on rallies and buy on dips’ within support and resistance levels. Equity exposure should be gradually raised to 50% of the portfolio if the main index can decisively break above 1300 points.
• Resistance for the SET index is seen at 1300-1310 points and support at 1285-1275 points today.

• HSI gained 153 points or 0.72% to 21,423. CEI climbed 67 points or 0.71% to 9,537. Trading volume decreased to HKD58.368 billion.
• HK market was firmer after falling to the lowest level since July, 13. Macau gambling sector and China coal sector led indexes up.
• Galaxy Ent (27.HK) and Sand China (1928.HK) surged 7% and 10.9% respectively as analysts were still optimistic on the Macau gambling revenue growth.
• China Coal sector out-performed with China Shenhua (1088.HK) and China Coal (1898.HK) up 5.8% and 2.8% respectively.
• China cement sector out-performed as analysts raised target prices. CNBM (3323.HK) and Anhui Conch (914.HK) gained 3% and 3.6% respectively.
• Lenovo Group (992.HK) kept under-performed with 2.4% loss after announced acquisition of Motorola Mobile.
• Technically, HSI had a technical rebound as we expected. The next resistance and support for HSI will be at 21,746 and 21,000 respectively.

Morning Note

Company Highlights

Otto Marine secures charter contract for Sea Frost worth approximately US$8.0 million. (Closing Price: $0.081, 3.846%)

PEC Ltd starts the New Year with S$79 million worth of new contracts from repeat MNC customers.  (Closing price: 0,00%)

Keppel Corporation has secured a contract from UMW Drilling worth US$218 million. (Closing Price: 10,300, 0.097%)

Source: Phillip Securities Research - 7 Feb 2014