STI's 29pt decline yesterday to 3152 was within our expectations. We had pointed out back in September 19th that the index's rally was due for a stall heading into the uncertainty that follows the need to raise the US debt ceiling in October and a likely uninspiring 3Q results season that provides little impetus to power the index higher.

We had pegged ranged bound trade from 3150-3250 and the index is currently at the lower band level. We see limited downside, tweaking support levels to 3145 that is around current level and should this level not hold, 3100. While levels are slightly changed, it's part parcel of a choppy trend and we see bargain hunting opportunities on just modest downside. Our economist says virtually all of the goods & services cut back amount would represent spending delayed, not denied. In addition, the lost wages of government workers would also be repaid, retroactively, if the 1995 shutdown is anything to go by.

ASEAN aviation has expanded at a rapid pace since 2000, along with economic growth and the introduction of Low Cost Carriers (LCCs) into the region. With the middle class population set to increase from 79m to 196m by 2020, and factoring in the aggressive expansion plans by LCCs as well as progress of the ASEAN Open Skies talks, we project ASEAN short haul air traffic (intra-ASEAN and ASEAN - China/South Asia) to double by 2020 from 2012. LCCs will continue to grow rapidly, backed by a huge order book (>1,000 narrow-body aircraft on order). We like Tiger Airways (BUY, TP S$0.74) for its strong position in Singapore, and its increasing exposure to Indonesia and the Philippines.

ASEAN hotels have and will continue to benefit from the increased numbers of travellers into and within this region. Our top pick for SGX-listed hotel play is CDL Hospitality Trust.

Related industries such as airports, maintenance, repair and overhaul (MRO) and ground handling companies should also benefit. We believe investors should BUY ST Engineering(TP S$4.80) over SIA Engineering(HOLD, TP S$5.10) among the MRO players that will benefit from strong ASEAN travel demand. SATS is a HOLD (TP S$3.29) as it is mainly dependent on Full Service Carrier business.

Cordlife Grouphas proposed a private placement of 26.8m shares that is expected to raise gross proceeds of $33.5m. Cordlife intends to offer 17.8m shares at $1.25 each via placement agent while the remaining 9.038m shares will be taken up by Caerus Capital and four other investors via subscription agreements. The issue price of $1.25 represents a discount of 4.8% to the last volume-weighted average price. Of the net proceeds, $23.5m will fund its expansion plans abroad, including investments, joint ventures, acquisitions or strategic alliances, while the rest will be used for general working capital purposes.

Artivision Technologies expects to raise net proceeds of $4.27m from its proposed placement of 35.7m new shares at 12.222 Singapore cents each. This price is a discount of 10% from the last volume-weighted average price. Artivision intends to use up to $3.5m of the net proceeds to settle unpaid construction costs for the Thai factory of Colibri Assembly Thailand Co (CAT). The rest of the proceeds will be used for working capital requirements.

RH Petrogas is proposing to place up to 116m new shares at a placement price of S$0.63 for each share. The Placement Price represents a discount of approximately 9.47% to the last weighted average price. The estimated net proceeds will be approximately S$70.2m, and will be mainly used to fund the operating expenditure and capital expenditure in relation to exploration, development or production activities.

Vallianz Holdings, an integrated offshore marine solutions provider in the offshore oil and gas industry, has entered into a subscription agreement with Rawabi, a leading Saudi Arabian oil and gas service company, and an option agreement with Swiber. Under the subscription agreement, Rawabi will subscribe for redeemable convertible capital securities issued by Vallianz for a principal amount of US$35.2m. Under the option agreement, Swiber will be issued an aggregate of 500,000,000 non-transferable share options, which could raise gross proceeds of S$27.5m, assuming that all options are exercised. Recently in October 2013, Vallianz's order book was boosted to US$334.0m.

Singapore's purchasing managers' index (PMI) pointed to a further slowdown in new export orders, echoing the lessthan-stellar manufacturing data from the region earlier this week. September's reading of 50.5 is unchanged from August's reading, but fell short of the market's consensus forecast for a reading of 51.2. The stagnation of Singapore's overall PMI stood in contrast to signs of improvement across Asia. Most of the region's economies reported PMIs above the 50-point threshold which suggests expansion, except for South Korea and India, whose PMIs inched closer to the 50-point line but still pointed to contraction. Singapore's new exports also showed a slower pace of growth, whereas key Asian exporters such as China and Taiwan's new exports picked up steam, while Korea's shrank at a slower pace.

In a sign of Singapore's growing attractiveness as a listing venue for early-stage mineral, oil and gas firms, Australian upstream oil and gas company Linc Energy revealed plans to move its listing from Australia to Singapore. It also intends to offer shares to new investors together with the listing on the Singapore Exchange (SGX) mainboard. Linc produces oil in the US, and owns undeveloped coal and shale resources in Australia. It also possesses unique underground coal gasification (UCG) technology.

US stocks fell as the government shutdown entered a second day but managed to par losses after Obama summoned Congress leaders for the first high level talks on reopening the US government and raising the debt ceiling. According to Bloomberg median estimates of economists, a partial shutdown lasting a week will probably cut 0.1% pt from economic growth with costs accelerating if it continues. Meanwhile, the ADP employment change for September came in weaker-than-expected (actual 166k, consensus 180k).

Source: DBSV