Market Wrap by Decoder – 20 Feb 14

• SG: Singapore 4Q GDP rose more than expected, +5.5% YoY Vs +5.2% estimated. Government keeps 2014 GDP growth estimated between 2-4%

• HK/CN (China Galaxy):

1. CIRC increased the threshold for insurance funds investment in stock market from 25% to 30%. Currently actual insurance funds investment in the stock market is about 10.23%, the potential injection may reach 1.5 trillion yuan.

2. CSRC: To actively promote pilot program of administrative reconciliation in securities and futures industry.

3. Board of Sinopec (600028.SH) agreed to introduce civil capital into the fuel products sales process and promote diversified ownership after assurance and evaluation.

4. As the SHIBOR continued to decline during past week, PBOC may conduct repo in the open market today.

5. HSBC China Flash PMI for Feb will be published today. Analysts expect the figure is 49.5%, same as last month.

6. 2.39 billion Yuan fund outflow was observed in the A-share market during previous trading day.

• US stocks closed lower after the minutes from Fed Reserve’s policy meeting revealed little consensus about when ST rates would begin to rise. Housing start in Jan spooked the market with a larger than expected drop (888K Vs 963K est) and headlines from IMF telling investors that the global growth still remains fragile with persistent downside risks drenched the sentiment. Treasuries finished on their lows with 10 yrs yield @ 2.73% with the bulk of the retreat coming after the release of the FOMC minutes. Some interesting points to note are: strong support for continuing to taper the monthly pace of asset purchases and several market participants argued that there should be a “clear presumption” that purchases would be trimmed by $10bn per meeting/policymakers agreed that forward guidance would need to be changed soon since unemployment is closed to 6.5%/few participants suggested that federal funds rate should be raised relatively soon.

• Facebook bought what’s app for $16bn in stocks and cash.


Morning Wrap by Decoder – 18 Feb 14

• SG: GLP SP – Received fresh capital of $2.5bn from Chinese investor consortium to invest in their business in China. With this transaction, GLP’s effective stake in the China assets will be reduced from 100% to 66%. Separately, the GLP group also announced a US$163mn private placement to the Chinese consortium with 74mn shares priced @ $2.755/share, representing a 4.4% discount to 18 Feb’s price. This placement represents 1.5% of the outstanding share capital of GLP on a fully diluted basis. Out of the $2.5bn, 1.6bn will be disbursed within the next week months and the remaining will be given 12 months from now. With the new capital, GLP will have sufficient firepower for monetizing land reserves and the consortium will serve as a strategic partner to establish new relationships and opportunities given their deep linkages in China.

• HK/CN (China Galaxy):

1. PBOC conducted repo in the open market yesterday withdrawing 48bn yuan funds.

2. Premier Li Keqiang: The economic system reform has to deeply adjust the interest relationship.

3. The reform plan for State-owned Enterprises has been submitted. The plan is expected to be launched after NPC & CPPCC, two important meetings of Chinese government.

4. CSRC declares the IPO registration mechanism reform schedule will not be changed.

5. First-batch private bank licenses are estimated to be granted soon. The regulations on financial reform will be issued in the near future.

6. MOC: China FDI in January is 10.763 billion USD, rising 16.11% y/y.

7. 12.06 billion Yuan fund inflow was observed in the A-share market during previous trading day.

• US stocks were sluggish after the long weekend break on Monday. However, Nasdaq was resilient and continued to make recent highs to hit level not seen since the Tech bubble back in 2000. Economic data were WTE which added on to the weakness in the markets. Feb Empire mfg came in below @ 4.48 Vs 8.5 while Feb NAHB Housing market index slipped to 46 Vs consensus of 56. Vol was a bit below average @ 709m shares traded @ NYSE.

Market Wrap by Decoder – 14 Feb 14

• HK/CN (Morgan):

1. China Macro:China targeting 7.5% YoY export growth in 2014, lower than the 7.9% target in 2013.

2. Citic Bank (998.HK, 601998.SH) A share price hit upper limit again on Thursday and increased 36% within one week. Local media said the POS Online Commercial Loan product has granted Rmb1.5bn loan since launched at the end of 2013. They denied that Alibaba would buy their stocks.

3. Lenovo (992): CEO said they are confident to help Motorola turnaround in next few quarters and will bring Motorola handset to mainland China market. 3QFY14 net profit grows 29.5% YoY. PC market share increased to 18.5%.

4. SJM (880) started to build the new resort in Cotai yesterday and the cost of it increased HK$5bn due to higher labor cost, and the total investment is 30bn.

5. Melco Crown (6883) said the unaudited 2013 EBITDA and net income are US$1.288bn and US$5.1bn, +40% and +24% YoY respectively. The EBITDA growth rate in 4Q13 was 49% YoY and the company will distribute US$191mn dividend.

6. GCL Poly (3800) announced to buy 369mn shares of Same Time Holdings (451) for HK$1.44bn. The price is HK$4 per share, 70% discount to yesterday market close. After the deal, GCL’s stake would increase to 67.99%.

7. BYD (1211): Local media said BYD will cooperate with ABB and Daimler to build the largest EV charging network in the world.

8. China FTZ: China Securities Journal said Guangzhou Baiyun Airport is about to be included in the Guangdong, HK and Macau FTZ.

9. China Banks: S&P said China banks’ profit margin and loan quality will deteriorate in 2014 due to tight credit and deregulation.

• TH: Market is closed for Makha Bucha Day (Full Moon Day).

• Stock markets traded steadily higher throughout the session after a weak opening due to a WTE retail sales in Jan (-0.4% Vs flat est) and jobless claims that just exceeded expectation (339K Vs 335K). US futures also pointed to a lower open which coincides with the strength in Yen once again created fear in the market. Subsequently, the rally is broad based, with utilities/tech/telco topping the chart while industrial/consumer/financial lagged behind. Treasuries kept going higher, pushing the 10 yrs yield down 6bps to 2.73%.

Market Wrap by Decoder – 13 Feb 14

• HK/CN ():

o Export growth accelerated to +10.6% YoY (Consensus: +0.1% YoY), up from +4.3% YoY in December, with a notable rise in export growth to G3 countries. Import growth picked up to +10.0% YoY (vs. +8.3% YoY in Dec), despite the LNY effect and a very high base a year ago. Raw material products (iron ore, copper and steel products) booked stronger imports.

o Hang Seng Index: Mengniu (2319) becomes member of HSI with weight 0.73% to replace China Coal (1898). BYD (1211) joined HSCEI component and Zoomlion (1157) was kicked out.

o Prada (1913) 2013 SSSG was +7% YoY and net income increased 9% YoY. Revenue from Prada raised 11% YoY but from Miu Miu went up only 1% YoY. Great China revenue leads the growth in Asia with 15% YoY.

o Esprit Holdings (330) will close 17 loss-making stores in France and more than 100 local employees will be affected.

o Alibaba: Reuters estimates the valuation of Alibaba is US$128bn according the equity transaction between Tiger Global Fund and Giant Group.

o HK Property: Government said it is very unlikely to cancel the double stamp duty tax this year.

o HK Macro: Government said HK need 30k more construction workers due to the future infrastructure construction plan and 20k of them are skilled workers.

o China Anticorruption: Premier Li Keqiang said the so-called three public consumptions (vehicle purchasing and maintenance, overseas trips and official receptions) will definitely decrease in 2014.

• Msia: 4Q GDP +5.1%yoy (above consensus +4.8%yoy/SCB +5%yoy). FY GDP +4.7%yoy Export growth +2.9% yoy, higher than 1.7% a quarter ago, while import growth also accelerated to 4.4% from 1.8%. Sector-wise, agriculture growth slowed to 0.2% y/y from 2.1% in Q3. Manufacturing growth picked up to 5.1% y/y from 4.2%, while construction remained stable (9.7% in Q4 versus 10.1%). Services growth accelerated to 6.4% y/y in Q4 from 5.9% in Q3. Overall a positive result for Malaysia and in line with our view that export growth will continue to improve and support GDP growth in 2014.
• US markets started off higher after positive comments from ST. Louis Fed Reserve President James Bullard. However, markets traded lower along the day although Bullard said that the recent weak economic data had not deterred his optimism about the US economy. Separately, the Senate also voted in favor of the extension of the debt ceiling till March 2015 but there wasn’t any knee jerk reaction from the investors as well. Sector wise, energy/material (yesterday’s leaders) finished among the losers on trading yesterday. 10 years yield inched up 3bps, settling @ 2.76%. Nothing exciting about the T/O, with around 630m shares changed hands.

Market Wrap for 12 Feb 14

• HK/CN (Morgan):

o China Banks: Local media said the amount of Jan 2014 new loan granted by big four banks was only Rmb350bn, -7% YoY and also ~100bn lower than the number of first 20 days in Jan. The estimated deposit outflow for big four in Jan reached Rmb450bn.

o China Internet Finance: Local media reported PBoC will regulate online finance to ensure risk under control and the safety of clients’ information. On a separate note, local media said the there might be some violations in the promotion materials of Alibaba’s fixed term product for overstating annual returns.

o Tencent (700) signed contract with Wangfujing (600859.SH) to start WeChat in-store shopping in Wangfujing’s flagship store from this Valentine’s Day. On a separate note, Vanke (000002.SZ) declared that they would not establish bank together Tencent and Guojin Securities (600109.SH) said they were not under any M&A negotiation with Tencent.

o China liquidity: PBoC did not do any open market operations and there were Rmb330bn reverse repo expired on Tuesday.

• Msia: GDP #s today @ 6pm, cons 4.8% YoY Vs 5% in 3Q. Separately, S&P said that Malaysian banks’ generally healthy financial positions should mitigate the effects of high household debt & property prices but it expects the government to take actions to curb the recent rapid rise in property prices & growth in household debt (major concerns). Failing which, downgrades would be likely.

• Overnight market extended their 4 days winning streak as Fed Reserve Chairwoman Yellen pledged to keep interest rates low and continue to tape the pace of bond purchases as the economy improves. Her speech was thought to be well rehearsed and offered little insights from the previous ones done by Bernanke. The usual lines were included – unemployment rate of 6.5% is not a triggering point for the Fed to act/Fed will keep interest rates low for extended period depending on market conditions, notably unemployment rate and inflation/ Fed will continue to monitor the market conditions and will be ready to act if there’s significant deterioration. Markets were also in high spirit as news from Washington sighted signs that the House of Representatives are ready to pass an unconditional bill to raise the debt ceiling. Treasuries ended on their lows with 10 yrs yield @ 2.72% (+ 4bp). T/O was below average with around 700m shares traded.

Morning Wrap by Decoder – 10 Feb 14

• HK/CN (China Galaxy):

1. PBOC issued China Monetary Policy Report for Q4 2013. The regulator tends to keep stable monetary policy and proper liquidity in 2014 as it believes the fast growth in money supply has been controlled.
2. CSRC got 25 new applications for M&A from 15 listed companies in January and processed 21 M&A cases.
3. Chairman Xi Jinping: China will need deeper reform and openness to realize greater development.
4. China State Council: To build unified pension system for rural and urban residents.
5. Report says 180 billion was poured into the IPO subscription. The institutions behind the IPO underwriting are reported to cash 8.37 billion yuan their holdings.
6. 12.27 billion Yuan fund inflow was observed in the A-share market during previous trading day.

• SG: SGX may add trading restrictions after penny stock crash –

*May introduce a min price for mainboard shares and impose rules on collateral for some trades after a slump in the stocks of three companies
*May also set up independent listing committee
*Plans to shorten trade settlement period to 2 days from 3 by 2016

• KR/TW: May react +vely to an announcement from MSCI on Friday night that it may look to reclassify them as develop markets in 2014 and the announcement will be due in June.

• US stocks rallied last Friday despite Jan NFP missing estimates (113K Vs 180K) as the unemployment rate hits 6.6% (Vs 6.7% and lowest since 2008). The key unemployment rate is currently just 0.1% shy of the Fed’s target of 6.5% and investors cheered as more Americans are able to enter the workforce. T/O dipped 10% below 2 weeks average while the fear indicator VIX fell another 11% (-25% in 2 days). US Treasury Sec – Jack Lew urged the congress to increase the debt ceiling as he is not confident that the extraordinary measures will last beyond the deadline of Feb 27th. Sector wise, healthcare/tech/material/industrial outperformed while the defensive telco/utilities lagged the broader market. Moody’s downgraded Puerto Rico GO (general obligation) rating to junk with –ve outlook. Turkey’s outlook was also cut to -ve by S&P. Crude rallied 2.1% to hit intraday high for the first time since Dec.

Market Wrap by Decoder – 19 Dec 13

• HK/CN – Central Bank nipping at digital currency bit by bit. China’s bitcoin exchange, the world largest market for the digital currency, has stopped accepting customer deposits after the PBoC ordered third-party payment providers to halt services to related websites. Zhou Jinhuang, director of PBoC payment dept gave the word to a group of third party payment providers @ a closed door meeting on Monday. In the wake of the government curbs, bitcoin has fallen 61% to about US$334 from US$863 on Monday. It was priced @ US$1142 on 5th Dec before the CB’s action. Market observers said bitcoin’s value will continue to fall as the PBoC steps up the measures until bitcoin disappear from the mainland. –

• Markets settled @ their highs after dovish forward guidance from the Federal Reserve offset the immediate impact of a tapering announcement. FOMC reduced its 85bn monthly asset purchases to 75bn, reducing by 10bn – an amount that was below what the streets are expecting. The Fed also pledged to keep the Fed Fund Rate near 0% ‘well past’ the time that the unemployment rate decline below 6.5%. Investors interpreted that the Fed is confident in the underlying strength of the US economy. 10 years treasuries yield ended with a tiny gain @ 2.89%. T/O was robust, +20% vs 2 weeks average and highest since Sept. Asian markets gapped up on the back of the overnight tapering news (overhang removed on tapering/debt ceiling in Jan) but we should see some pullback as investors would want to lock in some profit before Christmas (sell on news).