DBS Equity Research: Wired Daily 2 Oct 2014

kiasutrader

Publish date: Thu, 02 Oct 2014, 10:59 AM

OCBC and UOB among nine foreign banks to get bank licence to operate in Myanmar

The short-term correction in US equities continued yesterday with the Dow losing more than 200pts. Aside from the usual geopolitical and US interest rate concerns, stocks reacted to data that showed a softening Eurozone manufacturing data and CPI. The HK pro-democracy demonstrations added to uncertainties.

US 10-year bond yield fell from 2.52% to 2.4% thus far this week towards the YTD low of around 2.33% as global uncertainties mount. The decline in bond yield shows a flight to safety on rising macro uncertainties. For equities, growth stocks could stay weak but yield and defensive names outperform

OCBC Bankand United Overseas Bank have been granted a foreign bank licence to operate in Myanmar. They are among the nine foreign banks that received preliminary approval from the Central Bank of Myanmar to prepare for the start of banking operations there. The others are: Australia and New Zealand Banking Group, Bangkok Bank, Industrial and Commercial Bank of China, Malayan Banking Berhad, and Japan's three largest banks - Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank and Sumitomo Mitsui Banking Corporation. Every licence allows each bank up to 12 months to prepare for the opening of one branch in Yangon. The banks have to comply with requirements set by the central bank, among other things, before the central bank grants the final licence. Under this preliminary licence, the banks will be allowed to offer wholesale banking products and services to foreign companies and joint ventures as well as domestic banks in Myanmar, including working capital financing and trade finance. The banks can only lend to foreign investors in foreign currencies and not the local kyat, unless they partner a local bank.

Keong Hong'sJV has appointed InterContinental Hotels Group (IHG), to manage its first hotel property in Singapore. Under the hotel management agreement, IHG will provide the full spectrum of hotel management services, including consultancy on the design and construction of the two new-build hotels. The former Joo Chiat Police Station site will have two hotels, food and beverage outlets and retail shops. The 131-room First Hotel Indigo and 451-room Holiday Inn Express are expected to open in 2016. The investment in Singapore and Maldives hotels will provide recurring income to the Group.

ASL Marine has issued S$50m in principal amount of 5.35% notes due 2018. The Notes are issued under the Company's S$500m multicurrency debt issuance programme. The Notes will mature on 1 October 2018 and will bear interest at a fixed rate of 5.35% per annum, payable semi-annually in arrear. The net proceeds will be used for general corporate purposes, including the financing of the working capital and capital expenditure requirements and the refinancing of the existing borrowings of the Group.

Singapore Exchange (SGX) has acquired the remaining 51% of Singapore-based Energy Market Company (EMC) from the Energy Market Authority (EMA), making EMC a wholly-owned subsidiary of SGX. This acquisition will allow EMC to leverage SGX s expertise and operational synergies to provide better services to market participants at more competitive rates.

United Envirotech had informed shareholders previously that it had been approached to explore a potential acquisition of shares in the Company. The discussions with these parties are still ongoing and there is no assurance that any definitive agreement or transaction will materialise.

Singapore's overall Purchasing Managers Index (PMI) bounced back to expansion mode last month - rising 0.8 points to 50.5, after slumping unexpectedly to 49.7 in August. The higher PMI reading of 50.5 was due to a further expansion in new orders (up 1.4 to 51.8), and the fact that new export orders (up 0.9 to 50.7), production output (up 1.5 to 51.1), and imports (up 1.2 to 50.4) all reverted to expansion in September. But contraction readings were recorded in overall inventory (49.4), input prices (49.6), and employment (48.8). Further expansion was seen in the electronics sector in September - the electronics PMI rose last month by 1.2 points to 51.9. The higher electronics PMI reading - its 20th consecutive month of expansion - was buoyed by growth in new orders from both domestic and overseas markets (both up 0.9 to 52.3 and 51.4 respectively); production output (up 2.7 to 53.6) and inventory (up 1.3 to 51.8) recorded higher readings as well.

Prices of private homes and HDB resale flats softened further in the third quarter, albeit at a slower rate for the private market. Flash estimates released by the Urban Redevelopment Authority (URA) on showed that the overall Private Residential Property Price Index, comprising both landed and non-landed homes, fell 0.6% over the third quarter - after slipping 1% in the preceding quarter. Prices have fallen 3.8% over four consecutive quarters. Resale HDB prices also showed continued weakness under the weight of the mortgage servicing ratio (MSR) that has shrunk the pool of potential buyers, particularly for larger units, while a continual supply of BTO (build-to-order) flats has soaked up some demand for resale flats. Flash estimates from the HDB showed the resale price index falling 1.6% in the third quarter, after slipping 1.4% in the second quarter. Resale prices have fallen by 6.8% since the third quarter of last year.

According to Mergermarket, a record has already been set for Asia-Pacific ex-Japan, with merger and acquisition (M&A) deal values for the first three quarters surpassing all other annual totals. The total deal value of US$427bn is 3.6% above that for the whole of 2013. The M&A intelligence firm revealed that the third quarter was also the sixth consecutive quarter to post total deal value higher than US$100bn, even though there were signs of M&A activity slowing down. The US$134.8bn worth of deals was 15.4% higher than the corresponding quarter last year but dropped almost a quarter (22.8%) from the second quarter of 2014, the firm said in its Global/Regional M&A Trend Report for Q3 2014.

Chinese manufacturing held firm in September, coming in slightly above expectations. The official purchasing managers index (PMI) came in at 51.5 in September. This was unchanged from August, but lower than the 51.7 reading in July. On Tuesday, a private PMI index published by investment bank HSBC also remained unchanged at 50.2 in September compared with August. A closer look at the sub-indices which constitute the index shows that while external demand held up, domestic demand remained weak. Production and new export orders - a gauge of external demand - were both on the rise, while new orders and business expectations fell slightly but remained in expansion territory.

Air freight volumes for Asia-Pacific carriers expanded 6.3% y-o-y in August, outstripping the global industry, as trade volumes in emerging Asia continue on the path to recovery. According to the International Air Transport Association (Iata), global air freight volumes climbed 5.1% in August, slightly lower than July's 6.1% rise. Capacity was up by 3.4% and freight load factor (FLF) worked out to 43.4%.

Source: DBS

OCBC Bank (O39)UOB (U11)Keong Hong (5TT)ASL Marine (A04)SGX (S68)

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