Market Wrap by Decoder – 18 Nov 13

• HK/CN – 2 child policy faces early test from families. China’s relaxed family planning policy will keep its population stable and support the economy but it faces hurdles from the very people that the policy is intended to benefit. Guo Zhenwei, a family planning official from National Health and Family Planning Commission, said that the population should be kept at about 1.5bil to ensure the country’s economic and social development. The fertility rate should be about 1.8, up from about 1.5 to 1.6. However, urban families may not like the idea especially when the cost of living is hitting the roof in the cities. Young people are struggling to find jobs to make ends meet and the spiraling property prices are not making things any better. Under the new policy, couples are allowed to have a 2nd child if either of them is an only child – most influential measure in sweeping reforms announced by the Communist Party. –

• MY – 3Q GDP @ 5% YoY Vs 4.4% in 2Q, above expectation while 3Q current account surplus of RM9.8b was in line.

• Overnight markets extended gains as macros disappoint (counter intuitive) and Yellen’s testimony on the Fed’s commitment to policy accommodation until the economy improves were seen. Empire mfging -2.21% Vs +5% cons/Import price drop MoM as well as YoY/Capacity utilization 78.1% Vs 78.3% cons. Sector wise, Energy/Mat/Utilities/Financials outperformed while Consumer lagged. Bonds were flat with the 10 yrs yield unchanged @ 2.7%. China’s details on the meeting can be seen very positive, with overnight ADR adding 2-3%. The relaxation of the 1 child policy/reform plans SOE, land, government are taken very positively and should propel SHcomp/HSI to higher levels even after last Friday’s 1.7% surged. (find attached note from Citi on their views on the reforms)


Market Wrap by Decoder – 14 Nov 13

• IN – Close today.

• HK/CN – China banks on bigger local commercial lenders. Foreign ownership of any single Chinese commercial bank will be capped @ 25% and investors should hold stakes for the long term, said China’s banking regulator. The CBRC also announced that it had scrapped the minimum requirement for setting up a sub-branch, allowing commercial banks with strong risk controls to expand in rural areas and improve services to agriculture. Foreign investors such as HSBC won’t be able to have controlling stake in Chinese banks and hence it is unlikely to capture any synergies between their mainland branches and these local lenders. Small players will also feel the squeeze as local banking giants extend their reach into rural areas. The growing dominance of the larger lenders therefore points to continued slow reform in the banking sector. –

• SG – Stress tests done by IMF/MAS show that SG banks are well buffered and can even take 50% plunge in ppty prices over the next 2 years. However, risks for the industry still remain such as a jump in credit/real estate prices. (Nevertheless, +ve news for the local banks)

• MY – 3Q GDP #s will be out today. Cons = 4.7% YoY Vs 4.3% in 2Q.

• US stocks closed at record highs for a 2nd day after Janet Yellen, Fed Reserve Chairman nomination, vigorously defended the Central Bank’s bond buying program. She made it clear that the Central Bank will not be in any hurry to reduce the pace of its asset purchases and the benefits reaped will exceed the cost involved. Cisco was down 11% after the coy reported below cons top-line results and said it expects 2Q revenue to decline by up to 10%. Luckily, the other tech names were not really affected by this negative guidance. NYSE vol traded was down 14% as compared against the recent 10 days moving average.

Morning Wrap by Decoder – 14 Nov 13

• HK/CN – And the winners are…state-owned giants. The National Development and Reform Commission (NDRC) will ramp up reform in investment and finance and in the pricing of natural resources, according to a statement on its website yesterday. The NDRC expects significant progress in improving the socialist market economy by pushing reform forward, chairman and party secretary Xu Shaoshi told senior officials yesterday. Zhang Yi, vice chairman of the State-owned Assets Supervision and Administration Commission (SASSAC) said that the leader’s decision to restructure the economy has long-term implications for SOEs and they are clearly the winners of this plenary session. Opposition to monopolies seems to be a taboo now and analysts are not expecting spinoffs/share sales among the SOEs any time soon. –

• MY – Some buying interest in the plantation space recently. CPO is holding at RM2600 lvls and comments by the Ministry may be supportive (palm oil demand in India/Europe remains strong). Besides, Indonesia’s output may drop as well as the plantations enter the low-yielding cycle. Coupled with strong consumption in China (China’s import rose 60% in Sept from end June), it seems like the price of this commodity will be supported. (By UBS/Standchart)

• US Markets saw a rebound from the profit taking, ignoring Fed President – Fisher’s comment on an impending QE tapering. Good corporate earnings and bullish guidance from the retail giants (Macy/Gap/JCPenny) provided the head start. Asian markets’ weakness (due to the lack of details from the China plenum) doesn’t seem to have any impact on the overnight markets as investors are pinning on hopes that Yellen’s testimony on Thursday will be bullish for equities. Nasdaq added 1+%, as big names like Google/Microsoft/Cisco/FB/Twitter/Linkedin all helped lifted the index higher. Over in UK, stocks fell as BoE may start considering rate hikes as falling unemployment (7.6%) edges closer to the 7% target. Oct’s inflation of 2.2% Vs 2.5% cons gave the Central Bank more rooms to play around. Elsewhere, gold and crude added 1% on dead cat bounce as the major downtrend is still intact.

Market Wrap by Decoder – 8 Nov 13

• HK/CN – Progressive water pricing system to go nationwide. China will penalize heavy users of water with higher rates under a new nationwide pricing mechanism designed to cut wasteful consumption of the resource, said Guo Jianying – deputy inspector of the National Development and Reform Commission’s price department. Guo said that the low rates have resulted in a lot of wasted water. “We are facing a shortage of water while at the same time allowing heavy wastage of such resources”, he said. A progressive pricing system in which heavy users will pay more than those who consume less, may help resolve the problem, Guo said. Observers expect heavy consumers, such as leather, glass and metal suppliers will be seriously affected by the new water pricing mechanism –

• US stocks tumbled the most in a month on Thurs as a drop in personal consumption growth in 3Q raised questions about the strength of the US recovery. Initial jobless claims stood @ 336K, pretty much in line with the forecast. Over in EU, Draghi surprised the traders by cutting the BM interest rate to 0.25% (record low) but he emphasized that the cut has got nothing to do with the recent strength in the Euro. Among the negative sentiment, Twitter still received overwhelming response to its debut, adding 70% to its market cap at the closing (despite setting its IPO $1 higher than the range given 23-25). NYSE value traded saw a 20% increase against the recent average @ 27,792.

Market Wrap by Decoder – 06 Nov 13

• TW – Index continue to be under pressure as FINIs’ positions in local TAIFEX and options are hinting on the downside. Retail short margin units and FINIs TSE borrowed shares were both hitting record high levels, signaling that the investors are bearish of the market. (From KGI) TIER revised down TW’s 2014 GDP # to 1.93% from the previous 2% estimated in May.

• HK/CN – Central bank warns of long deleveraging period. China’s economy is set for a long period of deleveraging and eliminating excess capacity and the key will be to ensure a stable monetary and financial environment, the PBoC said Tuesday in its quarterly monetary report. China’s previous economic development model, which relies heavily on external demand and local government investment, is no longer adequate, the central bank said. As a new growth engine has yet to be seen, the country’s economy will continue to face various challenges. Companies that borrowed a lot of debt over the past years will have to go through a deleveraging period and remove excess capacity. Such trend will inevitably affect economic growth, said PBoC. Banking regulators will urge lenders to tighten credit to cement, iron and steel and other sectors suffering from overcapacity problems and grant more loans to small firms. This is inline with Premier Li’s call to boost the quality of the economy. –

• Markets started on lows and recovered after the streets saw the ISM non mfg #s. Unfortunately, that single piece of news wasn’t enough for the indices to close in the green. Sectorwise, telco/utilities lagged while consumer staples/tech outperformed. Crude saw another 1.3% decline to 5 months low on rising domestic supplies. For the treasuries, 10 yrs bonds traded lower as tapering concerns creep back (yield hit 2.67%). Sentiment was negative in the eurozone as EU cuts the growth forecast in 2014 from 1.2% to 1.1% and raises jobless rate forecast.

Market Wrap by Decoder – 05 Nov 13

• Malaysia/Indonesia markets are closed today.

• KR – FIIs sold W180bn, the highest level since July 8 and they are net sellers for 2 out of the past 3 trading days. As for the local retailers, they continue to redeem in the markets, selling for 43 consecutive days and raising US$6bn worth in cash.

• TH – Thailand’s top FM sold stocks as protest hurts growth. BBL AM runs 7/10 best performing Thai Equity Funds for the past 3 yrs and they have been raising cash since mid Oct.

• HK/CN – Beijing looks to eastern region as growth model. China’s eastern provinces need to press on with industrial upgrades to become models for the rest of the country. Vice Premier Zhang Gaoli told local governments at an internal economic forum Monday, capping a four-day trip to Shanghai and Zhejiang province. Zhang said a major factor in the overhauls will be private investment, which can help drive growth, advance market reform and create jobs. He told the local governments to streamline administrative approvals and create an open and fair environment for private capital to operate. Before his trip ended Monday, Zhang visited Alibaba holdings HQ in Hangzhou, the international container port in Pudong and the newly established free trade zone in Shanghai. Observers said the Central Government intends to use Alibaba as a model of success in the nation’s new economic development. –

• US stocks settled with modest gains due to some BTE corporate earnings and all the 10 sectors were in the green (energy/telco leading them). NYSE value traded was disappointing, down 12% Vs recent 10 days average as investors seek reasons to buy into the markets at current levels. Treasuries held small gains throughout with the 10 years yield shedding 2 bps to 2.6%.

Market Wrap by Broker – 1 Nov 13

Baltic Dry: 1504 +1.35% Gold: 1324.02 -0.90% Palm Crude: 2593 +1.81%
VIX: 13.75 +0.73% WTI Crude: 96.33 -0.05% USD/SGD: 1.2418 -0.28%
*(OCBC) 3Q13 #s: NP S$759m -59%YoY due to absence of 1-off divestment gains a yr ago, but was higher than berg est. of S$662m. NIM fell QoQ to 1.63% vs 1.62% (1.75% a yr ago) on re-pricing on S’pore home loans. However, core NP (excl. divestment gains) +5%YoY as strong asset growth & improved fee income offset lower NIM & trading revenues. NII +4% while non-interest income +3%.

*(DBS) 3Q13 #s: NP S$862m +1%YoY, higher than berg est. of S$839m as they improved their income (NII +6%YoY: trade loans, corporate borrowing & secured consumer loans increased.) But NIM fell to 1.6% from 1.67% a yr ago from lower loan spreads & yields on investment securities.

*Mapletree GCCT(MAGIC) 1H FY 2013/2014#: announces maiden DPU of 3.193c, an increase of 10.4% over their fcst DPU of 2.882c payable on Nov 29. NPI +11.3%, Gross REV +10.6% on strong rental reversions in Festival Walk(HK) & Gateway Plaza(China).

*SMRT Corp(MRT) 2Q14 #s: NP S$14.3m -57%YoY came below berg est. of S$21.5m, despite REV +5.3%YoY as higher staff & depreciation expenses, as well as repair & maintenance costs dragged the #s. Interim div of 1cps declared.

*(OSIM) 3Q13 #s: NP S$23m +16%YoY on REV +7%YoY driven by higher consumer demand for massagers & nutritional supplements; Operations in North Asia contributed the lion’s shr to rev. Interim div of 1cps, unchanged vs a yr ago.
OSIM was 89% shorted out of total shs traded yday.

*Soilbuild Cnstr(SOIL) 3Q13 #s: NP S$6.32m +13%YoY on the back of healthy progress in its construction projects, while REV +44%YoY.