DBS Equity Research: Wired Daily 10 Dec 2014

kiasutrader

Publish date: Wed, 10 Dec 2014, 02:56 PM

SSEC pullback support around 2800, short-term trend rests sideways before trending higher

The sharp pullback for Chinese stocks yesterday is not surprising given the recent strong run and is in-line with our view that the run-up will turn choppier in the near-term. Profit taking sat in after Chinese authorities said certain lower-rated bonds can no longer be used as collateral for some short-term loans. SSEC's decline yesterday went close to our stated pullback support of around 2800 and retraced 38.2% of the run from 2420 in mid-November. Technically, we see the SSEC stabilizing around 2800 support with the short-term turning sideways for now before trending higher again.

Brent crude oil hit a fresh five-year low on Tuesday before rebounding to near US$67 a barrel, as some buyers emerged in the hope that prices are bottoming following a more than 40% slide since June. Fast-growing US shale output has hurt the ability of the Organisation of the Petroleum Exporting Countries (Opec) to manage supplies, sending prices sharply lower in anticipation of a large oil glut early next year.

Technically, we see USD59-60pbl as an important short-term inflexion point for the Brent crude. Declining oil prices have wiped off nearly S$5.77bn from the market capitalisation of offshore and marine (O&M) companies listed on Singapore Exchange (SGX) in one month, as the industry begins to feel the impact of lower crude prices. According to data compiled by The Business Times of 23 key O&M companies, their combined market cap declined from S$36.86bn on Nov 4 to S$31.09bn on Dec 4, marking a 15.7% loss of their total market cap over this period.

Nordic Grouphas been awarded a contract worth over US$2m from a repeat customer. This contract is awarded by Armada Cabaca, a wholly owned subsidiary of Bumi Armada and involves the design and supply of a Remote Operated Hydraulic Valve Control System. With the addition of this contract, the Group has an outstanding order book of approximately S$43.3m as of to date.

Polaris has entered into a two (2) years exclusive master distributorship agreement (MD Agreement) with Commtiva Technology to promote and distribute Infocus brand in Singapore, Malaysia, Thailand, Vietnam, Philippines and Cambodia. The MD Agreement can be renewed and extended based on mutual agreement by the parties.

Excelpoint Technology will be distributing the complete RF and microwave portfolio, including the Hittite Microwave Products from Analog Devices (ADI), a global leader in high‐performance semiconductors for signal processing applications. These products will be distributed through its network of offices spanning more than nine Asian countries. Excelpoint Technology is an authorized distributor of ADI. The Group has been distributing ADI's products since the 1980s.

QT Vascular, a developer and manufacturer of minimally invasive medical devices for the treatment of vascular diseases, has been granted patent right for a "balloon catheter with improved column strength and torque". This technology is used in the Group's GliderXtremeTM PTA balloon catheter.

In a push to make property indices more reflective of market changes, the Housing & Development Board (HDB) - the first among official agencies here to change the way it computes its price index - has unveiled details on how its revised approach will be more comprehensive and robust. HDB said that it was expanding the coverage of its resale price index (RPI) to all towns and flat models, having excluded 12 towns in the past. It is also adopting a new method to compute the RPI, which it says is better able to screen out "noises" in measuring price changes. Other government agencies that track property prices, namely the Urban Redevelopment Authority (URA) and JTC, could soon be making changes to their respective property price indices too.

Heavy buying by Singapore companies, such as an $8.1bn purchase in the US by a consortium including sovereign wealth fund GIC, has sent acquisitions to record highs this year. Singapore's companies have bought close to $59bn in assets both domestically and overseas. Buying by GIC and Temasek Holdings, the government's two investment firms, accounts for more than a third of the total. Together, GIC and Temasek have spent close to a record $21bn, according to figures from Dealogic, a data-tracking company, more than double the $8.9bn they spent last year.

US markets recovered from an intra-day drop as a rally among energy and technology shares offset reaction to a drop in Chinese and Greek equities. Chinese stocks fell after authorities said certain lower-rated bonds can no longer be used as collateral for some short-term loans. Meanwhile, investors were concerned over Greece's move to bring forward the process for choosing a new head of state risks triggering parliamentary elections that could put in power a party that opposes the terms of the nation's bailout by the European Union.

Source: DBS

Nordic (MR7)Polaris (5BI)QT Vascular (5I0)

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