SG Market (03 Jun 13)

SG Market: S’pore shares may see further downside following the late session sell-off on Wall Street on month-end portfolio rebalancing and window dressing, coupled with the weak Nikkei opening (-2.2%) in Japan. The slight improvement in China’s May PMI is unlikely to reverse the negative sentiment over the slowdown in the Chinese economy. On the corporate front, the recent sell-down in Reits and high dividend stocks is not without basis. Unknown to many, the yield curve in S’pore has steepened sharply over the past four weeks with bond yields jumping by 50bps, mirroring the spike in US bond yields. As such, the 8-10% decline in Reit prices have merely adjusted to compensate for this rise in interest rates. This is compounded by a capital flight out of slowing Asia back to an improving US. The STI has penetrated below its 50-day moving average, signaling it is clearly in a corrective mode. If the 3,310-3,320 support zone on the STI fails to hold, expected the benchmark index to head towards the next line of defence at 3,280. Upside resistance will be marked at the 50-dma at 3,350. Stocks to watch for: *DBS: Extends the long-stop date for the share purchase agreement of 67.4% stake in Bank Danamon until 1 Aug 13 from 2 Jun 13 to give more time to work on the ownership and reciprocity details set by the Indonesian authorities. *Biosensors: Entered into licensing agreement with Eurocor GmbH, a unit of Opto Circuits India for their drug eluting balloon technology. Under an OEM arrangement, Biosensors will market and sell under its own brand, three DEBs (BioStream, BioPatn 014 and BioPath 035) manufactured by Eurocor. Following CE approval expected within the next six weeks, the group would launch its DEBs in major European markets and selected regions in Mid-East, Africa and Asia. *Sembcorp Industries: Sembcorp Utilities has been appointed by the Vietnamese government to be the owner and developer of a 1,200MW power plant project in the Dung Quat Economic Zone in central Vietnam. When completed, the power plant will be included in the country’s power development master plan under a build-operate-transfer arrangement. The is SCI’s second power project in Vietnam as it also owns a 33% stake in the 746MW Phu My 3 gas-fired power plant in Vung Tau province in southern Vietnam, which commenced operations in 2004. *#ISDN: Proposed to acquire 80% stake in PT Potensia Tomini Energi, which has an exclusive concession to develop a 20MW hydropower plant in Central Sulawesi, Indonesia for Rp8b or $1m. The group has also set up JVs to acquire concession rights to a coal mine in the Kalewa Township, Myanmar, and for the construction of a 540 MW coal-fired power plant there. *Global Yellow Pages: Proposed to undertake a capital reduction to cancel out $87.7m of share capital in relation to its goodwill impairment of certain assets and trademarks. The purpose is to write off its accumulated losses, rationalize its balance sheet to better reflect the value of the underlying assets and enable it to pay future dividends. The capital restructuring will have no effect on the number of issued shares, NAV or earnings of the group. *Magnus Energy: Subsidiary SPAC Coal calls off its acquisition of Hudson Minerals Holdings, which has a 80% interest in PT DAS, which owns an iron ore mining concession in Padang, Indonesia after making several revisions to its investment and facing production delays and technical issues over the past three years. *RH Energy: Pertaining to the proposed RTO of Chiwayland, SIC has granted approval for waiver of vendor’s obligation to make a mandatory offer and for the independent shareholders to vote at a general meeting for the whitewash resolution. *Swiber: exploring options to establish Islamic trust certificates programme to broaden and deepen its investors’ pool. Maybank KE has been appointed to assist.