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DBS Equity Research: Wired Daily 13 Mar 2015

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Publish date: Mon, 16 Mar 2015, 10:31 AM
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Asia Equity Strategy - Valuations, potential US interest rate hikes, and accelerating USD strength are likely to affect market volatility

The divergence in equity and currency markets in Asia is an anomaly. Our regional strategist believes that Asian equities are likely to succumb to USD strength. Asia equity markets are up 2.5% YTD as they continue to climb the wall of worry. With most indices nearing our year-end targets, she expects market trajectory to slow down in the coming quarter in view of the headwinds. Valuations, potential US interest rate hikes, and accelerating USD strength are likely to affect market volatility, especially for ASEAN markets. However, she views a near-term consolidation as a buying opportunity, as the external positions in most Asian countries have improved in the past few years. Our market recommendations are as follows: Overweight: China / Hong Kong; Underweight: Malaysia; Neutral: Singapore, India, Taiwan, Korea, Indonesia, Thailand, MSCI Hong Kong.

United Envirotech posted a net profit of S$12.5m for the three months ended Dec 31, 2014, up from S$8.4m a year ago. Meanwhile, revenue surged 80.6% to S$116.07m. The group said it remains positive about the outlook of the Chinese water treatment sector, as well as the demand for membrane products and membrane bioreactor technology.

Executive chairman of Sinotel Technologies, Jia Yue Ting, has made an offer to take the company private with an offer of S$0.098 in cash per share. The offer price represents a 100% premium to the last traded price. Edition is proposing to undertake a renounceable nonunderwritten rights issue of up to 4,699.3m new shares at an issue price of S$0.01 for each Rights Share, on the basis of eight (8) Rights Shares for every one (1) existing share held. The issue price represents a discount of approximately 57% to the last traded price. The Company is undertaking the Rights Issue to strengthen the financial position and capital base of the Group.

Trading company Intraco has won a S$6.6m award in an arbitration ruling on a dispute with privately held Timor Global, a Timor Leste coffee plantation and trading company. The dispute stems from a July 1, 2007, joint venture agreement between the two parties. Intraco's claim was for S$9.8m in total, of which S$3.2m has already been received before the issue of the arbitration award.

US stocks rebounded, led by banks as an unexpected drop in retail sales lifted hopes for keeping interest rates low. The volatility over the past week is likely due to market nervousness leading to next Thursday's FOMC meeting. The concern is that the FED may indicate an earlier-than-expected start to the interest rate hike cycle following the strongerthan-expected February employment numbers.

Source: DBS
DBS (D05)
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