(MICA (P) 027/12/2010) Ref No: RM2011_0053 18 March 2011 Singapore Technicals & Inter-market (Short/Intermediate Term): The STI lost 28.12 points (0.96%) on Wednesday to close at 2,942.88 on volume of 1.21 billion shares worth S$1.5 billion. Gainers lagged losers 98/372. The Shanghai Composite shed 33.51 points (1.14%) to close at 2,897.30. Yesterday's low at 2,885 is short term support. Close below 2,885 would likely tilt the SHCOMP towards short term bearishness. The S&P 500 was up 16.81 points (1.34%), closing at 1,273.69. Yesterday’s price action closed within Wednesday’s daily range, so while there were gains, price action wise, it remains neutral. We note that yesterday’s high and low at 1,261 and 1,279 were very close to support/resistance (1,261 & 1,280 respectively). Possibility of a shift in short term bias upward if there is a close near day highs that maintains above resistance at 1,280. FedEx forecasted improved revenue on strong demand, lifting shares 3.1% to $87.89. This is typically bullish given FedEx’s business model, but the news could be overshadowed quickly given the currently bearish market sentiment. On the geopolitical front, U.S. crude jumped $2/barrel post settlement due to a vote by the United Nations Security Council authorizing the imposition of a no-fly zone over Libya. Crude for April delivery settled higher, adding $3.44 (3.51%) to close at $101.42/barrel. The significance of the $100/barrel mark has dwindled with the oil market trading comfortably above/below it at this point. Japanese Yen has weakened significantly across the board. Rumours of BOJ intervention. Quadruple witching is on tonight, possibility of higher volatility in the markets. STI traded in a small range yesterday. Minus the gap down on the open, actual trading was more or less flat again with price finding support at the current swing lows in the 2,935/32 region. The intermediate term trend is still downward biased, though in the short term, price is neutral, consolidating between 2,965 (resistance) and 2,935/32 (support). Due to the neutral price action in the short term, we could see a good opening today due to the positive US session. Price has overdone the downside and the STI is due for at least some consolidation. Resistance at 2,965, then 2,988 before 3,000. Support at 2,935/32 before key support at 2,915/2,900. Close +/- % +/- FSSTI 2942.88 -28.12 -0.95 P/E (x) 10.07 P/Bv (x) 1.51 2.92 Dividend Yield STRAITS TIMES INDEX 2600 2800 3000 3200 3400 3/17 6/17 9/17 12/17 3/17 Source: Bloomberg Hong Kong Hong Kong stocks slumped resulting from the widespread concern of radioactive contamination in Japan and disappointing US economic data related to housing section and PPI. The HSI and HSCEI slumped 416.45 and 185.09 to 22284.43 and 12457.68 at the close respectively. Market volume was 90.02 billion. Our recommended strategy recently is short-term trading of thermal coal producers and cement producers, which have outperformed in recent days. For investors who have involved speculative trading of local food importers, they should be careful for the extremely high volatility. Recent critical resistance of the HSI is 22000-050. Close +/- % +/- HSI INDEX 22284.43 -416.45 -1.83 P/E (x) 12.75 P/Bv (x) 1.79 2.90 Dividend Yield HANG SENG INDEX 18000 19000 20000 21000 22000 23000 24000 25000 26000 3/17 6/17 9/17 12/17 3/17 Source: Bloomberg
Transcript
(MICA (P) 027/12/2010) Ref No: RM2011_0053
Phillip Securities Research Pte Ltd 18 March 2011
Singapore Technicals & Inter-market (Short/Intermediate Term): � The STI lost 28.12 points (0.96%) on Wednesday to close at 2,942.88 on volume
of 1.21 billion shares worth S$1.5 billion. Gainers lagged losers 98/372. � The Shanghai Composite shed 33.51 points (1.14%) to close at 2,897.30.
Yesterday's low at 2,885 is short term support. Close below 2,885 would likely tilt the SHCOMP towards short term bearishness.
� The S&P 500 was up 16.81 points (1.34%), closing at 1,273.69. Yesterday’s price action closed within Wednesday’s daily range, so while there were gains, price action wise, it remains neutral. We note that yesterday’s high and low at 1,261 and 1,279 were very close to support/resistance (1,261 & 1,280 respectively). Possibility of a shift in short term bias upward if there is a close near day highs that maintains above resistance at 1,280. FedEx forecasted improved revenue on strong demand, lifting shares 3.1% to $87.89. This is typically bullish given FedEx’s business model, but the news could be overshadowed quickly given the currently bearish market sentiment.
� On the geopolitical front, U.S. crude jumped $2/barrel post settlement due to a vote by the United Nations Security Council authorizing the imposition of a no-fly zone over Libya. Crude for April delivery settled higher, adding $3.44 (3.51%) to close at $101.42/barrel. The significance of the $100/barrel mark has dwindled with the oil market trading comfortably above/below it at this point. Japanese Yen has weakened significantly across the board. Rumours of BOJ intervention. Quadruple witching is on tonight, possibility of higher volatility in the markets.
� STI traded in a small range yesterday. Minus the gap down on the open, actual trading was more or less flat again with price finding support at the current swing lows in the 2,935/32 region. The intermediate term trend is still downward biased, though in the short term, price is neutral, consolidating between 2,965 (resistance) and 2,935/32 (support). Due to the neutral price action in the short term, we could see a good opening today due to the positive US session. Price has overdone the downside and the STI is due for at least some consolidation. Resistance at 2,965, then 2,988 before 3,000. Support at 2,935/32 before key support at 2,915/2,900.
Hong Kong � Hong Kong stocks slumped resulting from the widespread concern of radioactive
contamination in Japan and disappointing US economic data related to housing section and PPI. The HSI and HSCEI slumped 416.45 and 185.09 to 22284.43 and 12457.68 at the close respectively. Market volume was 90.02 billion.
� Our recommended strategy recently is short-term trading of thermal coal
producers and cement producers, which have outperformed in recent days. For investors who have involved speculative trading of local food importers, they should be careful for the extremely high volatility. Recent critical resistance of the HSI is 22000-050.
Close +/- % +/-HSI INDEX 22284.43 -416.45 -1.83P/E (x) 12.75P/Bv (x) 1.79
2.90Dividend Yield
HANG SENG INDEX
18000
19000
20000
21000
22000
23000
24000
25000
26000
3/17 6/17 9/17 12/17 3/17
Source: Bloomberg
Regional Market Focus 18 March 2011
2
Thailand � Thai stocks traded choppy with a downside bias in line with overseas markets on
concerns over the effect of the Japanese disaster on the world economy. The composite SET index ended 5.78 points lower at 1,002.35 in turnover of Bt24.53b on Thu. Foreign investors remained net sellers of Thai equities for the third day in a row with net sales of Bt1.59b.
� The Thai stock market could see a rebound today in line with most Asian bourses in early trade on strong overseas lead after US stocks and global oil prices bounced back. The Group of Seven industrial nations also agreed on Fri to jointly intervene in the currency market to stem a sharp yen rise that complicates Japan’s battle with the devastation caused by last week’s massive earthquake and an unfolding nuclear crisis. The Japanese yen edged off a record high against the US dollar to 81.29 yen in early trade Fri (0745 hrs Thailand time) after a conference call by G-7. Uncertainty over other same negative factors however remains high against the backdrop of Japan’s nuclear crisis and Middle East unrest that could trigger extreme levels of volatility along the way and may limit the market’s upside potential as the advance would be driven by bargain hunting after a lot of bad news is priced in rather than a clear trend reversal to the upside.
� In our view, selective trading still makes sense for the Thai market in the near term. Investors should also look for companies likely to see gains from the Japanese crisis.
� Resistance on the main index is pegged at 1010-1015 and support at 996-990 today.
Close +/- % +/-SET INDEX 1002.35 -5.78 -0.57P/E (x) 13.71P/Bv (x) 1.94
3.80Dividend Yield
STOCK EXCH OF THAI INDEX
600
700
800
900
1000
1100
3/17 6/17 9/17 12/17 3/17
Source: Bloomberg
Regional Market Focus 18 March 2011
3
Singapore Keppel Land Ltd – Company update Recommendation: Buy Previous close: S$4.12 Fair value: S$4.99
▪ Keppel Land topped Sengkang condominium site tender with $286.79mil ▪ Merely 4.5% higher than the second highest bidder ▪ Superior accessibility to Sengkang integrated transportation hub and amenities. ▪ Upgrade from Hold to Buy with fair value unchanged at $4.99
Singapore Strategy ▪ Macro data, Earnings, Yield curves, continues to signal recovery and a bull market continuance though we know its hard
for investors to concentrate on this while Japan battles a possible, though unlikely, nuclear meltdown. In our humble opinion, if we were to bet on an outcome, it would be that radiation catastrophe would be averted, in which case markets have presented a significant buying opportunity. Top picks now include DBS, Wilmar, in addition to our previous picks Noble, SembMarine, KeppelCorp, SembCorp Ind.
Thailand
Khon Kaen Sugar Industry – Company Results Recommendation: Buy Previous close: Bt12.80 Fair value: Bt14.90
▪ Higher sugar prices and the absence of loss from hedging contracts led sugar miller KSL to report a sharp improvement in FY1Q11 net profit in both YoY and QoQ terms. The quarterly profit skyrocketed as much as 329% YoY.
▪ We upgrade KSL shares to 'BUY' with a price target of Bt14.90/share.
▪ Management has a more positive view on the Thai economic outlook. KTC is therefore planning a more aggressive expansion this year.
▪ We raise our 2011 profit outlook for credit card issuer KTC by 23.9% to Bt485.69m to reflect its more aggressive expansion plan. The new profit target represents a stellar growth of 116.7% YoY. The forecast assumes revenue growth of 12%, the cost to income ratio of 47.7% and a slight increase in loan-loss provisions.
▪ Following earnings upgrade, we revise upwards our price target for KTC to Bt18.20/share. We upgrade KTC shares to 'BUY.'
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Regional Market Focus 18 March 2011
4
Market News
US � Production at U.S. factories increased for a sixth month in February, indicating manufacturing will keep stoking the economy and
underscoring the Federal Reserve’s view of a stronger expansion. The 0.4 percent rise in manufacturing output, which makes up 75 percent of all industrial production, followed a 0.9 percent January gain that was three times as large as initially estimated, Fed figures showed today. A gauge of Philadelphia- area factories unexpectedly climbed to a 27-year high. (Bloomberg)
Singapore � Alpha Investment Partners is said to be doing due diligence to purchase Capital Square. Alpha is the property fund management arm of
Keppel Land. A deal could be struck as early as next week and market watchers tipped the price to be in the region of $2,300-2,400 per square foot on net lettable area - or about $889-927 million. Still, it would be the biggest office deal so far this year. In January, Income took a 49 per cent equity stake in the company holding 16 Collyer Quay, formerly known as Hitachi Tower. That deal valued the 999-year leasehold office building at about $626 million or $2,250 psf. (BT Online)
� The Republic's non-oil domestic exports growth was lower than expected in February - and it's tipped to stay low for a while because of the fallout of the recent earthquake that hit Japan, a key supplier and major market. The NODX rose just 7.8 per cent year-on-year last month, when the market was looking to a 10.5 per cent jump. And it was a big comedown from the revised 20.7 per cent increase in January. Month-on-month, the NODX was up a seasonally adjusted 2.9 per cent in February, after a 2.1 per cent rise in the previous month. (BT Online)
� Global carriers operating to Japan have been monitoring developments closely and adjusting capacities and schedules accordingly. Several have also moved their crew bases away from Tokyo amid continuing aftershocks hitting the city. Singapore Airlines (SIA) said it is delaying the introduction of its A380 superjumbos on its Singapore-Narita-Los Angeles service in the wake of the current events in Japan. The A380s were due to replace the ageing B747-400s - which operate flights SQ11 and SQ12 between Singapore and Los Angeles - on March 27. (BT Online)
Greater China Region � Yuan non-deliverable forwards fell to a six-week low as the risk of radiation leaking from a nuclear power plant in Japan prompted
investors to favor safe- haven assets such as the dollar. The yuan fell 0.05 percent closing at 6.5744 per dollar in Shanghai, from 6.5713 yesterday, according to the China Foreign Exchange Trade System. It touched 6.5628 on March 7, the highest since China unified official and market exchange rates at the end of 1993. The People’s Bank of China set the currency’s reference rate 0.04 percent stronger at 6.5690 per dollar. The currency is allowed to trade up to 0.5 percent on either side of the official rate. (source: Bloomberg)
� Chilean policy makers unexpectedly accelerated the pace of interest rate increases today as inflation expectations expand beyond the central bank’s target and economic activity exceeds estimates. The five-member policy board, led by bank President Jose De Gregorio, raised the overnight rate by a half-point to 4 percent, matching the forecast of three of 22 economists surveyed by Bloomberg. The remaining 19 analysts forecast a quarter-point increase for the second straight month. (source: Bloomberg)
Thailand � Foreign investors remained net sellers of Thai equities for the third day in a row with net sales of Bt1,586.18m on Thu. (Source: Bisnews) � The Thai industries Sentiment index (TISI) for Feb slipped for the first time in three months to 108.2 from 112.7 in Jan, according to the
Federation of Thai Industries (FTI). The decline was attributable to manufacturers’ concern over the increase in production costs caused by the rising oil prices, interest rates, minimum wage and the drought. (Source: Bangkok Post)
� The Federation of Thai Industries (FTI) said Thai auto exports in Feb 2011 rose 8.96% YoY and 18.53% MoM to 80,699 units as orders rose across all markets. In value terms, Feb auto exports upped 1.47% YoY to Bt35,277m. Domestic vehicle production in Thailand also jumped 17.91% YoY and 3.08% MoM to 150,743 units in Feb 2011. (Source: Post Today)
� Group of Seven nations finance chiefs will hold talks on financial markets and Japan’s economy today after the Mar 11 earthquake triggered a drop in global stocks and drove the nation’s currency to a post World War II high. The discussions will begin at 7 a.m. Tokyo time and will encompass currencies. (Source: Bloomberg)
Regional Market Focus 18 March 2011
5
Dollar Index 75.96 -0.09%
70
75
80
85
90
3/18/10 6/18/10 9/18/10 12/18/10
Source: Bloomberg
Gold 1403.73 +0.18%
900
1000
1100
1200
1300
1400
1500
3/18/10 6/18/10 9/18/10 12/18/10 3/18/11
Source: Bloomberg
Crude oil 101.42 +3.51%
65
70
75
80
85
90
95
100
105
110
3/18/10 6/18/10 9/18/10 12/18/10
Source: Bloomberg
US Treasury 10yr Yield 3.255 -0.01%
2
2.5
3
3.5
4
4.5
3/18/10 6/18/10 9/18/10 12/18/10 3/18/11
Source: Bloomberg
FSSTI 2942.88 -0.95%
2500
2600
2700
2800
2900
3000
3100
3200
3300
3400
3/18/10 6/18/10 9/18/10 12/18/10
Source: Bloomberg
DJI 11774.59 +1.39%
9000
9500
10000
10500
11000
11500
12000
12500
13000
3/18/10 6/18/10 9/18/10 12/18/10
Source: Bloomberg
HSI 22284.43 -1.83%
18000
19000
20000
21000
22000
23000
24000
25000
26000
3/18/10 6/18/10 9/18/10 12/18/10
Source: Bloomberg
SET 1002.35 -0.57%
600
700
800
900
1000
1100
03/18/10 06/18/10 09/18/10 12/18/10
Source: Bloomberg
Regional Market Focus 18 March 2011
6
JCI 3484.21 -1.34%
2300
2550
2800
3050
3300
3550
3800
4050
3/18/10 6/18/10 9/18/10 12/18/10
Source: Bloomberg
SHCOMP 2897.298 -1.14%
2300
2700
3100
3500
3/18/10 6/18/10 9/18/10 12/18/10
Source: Bloomberg
Regional Market Focus 18 March 2011
7
Major World Indices
Indices % Chg Chg Last Indices % Chg Chg Last
TEL AVIV 100 INDEX +1.30 +14.89 1158.87 ALL ORDINARIES INDX +0.44 +20.50 4658.90
HANG SENG INDEX -1.83 -416.45 22284.43 S&P/TSX COMPOSITE INDEX +1.64 +221.33 13746.15
JAKARTA COMPOSITE INDEX -1.34 -47.27 3484.21 FTSE 100 INDEX +1.75 +97.88 5696.11
FTSE Bursa Malaysia KLCI -0.02 -0.35 1492.09 CAC 40 INDEX +2.43 +89.65 3786.21
KOSPI INDEX +0.05 +1.06 1959.03 DAX INDEX +2.20 +143.04 6656.88
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