SG Market (20 Jun 13)

SG Market: US stocks and Treasures sank after Fed chif Ben Bernanke hinted that the central bank may scale down its unprecedented bond purchases this year and end it in mid-2014 if the US economy continues to improve. The FOMC also said in a statement that downside risks to the economic outlook and labour market have diminished. Policy makers raised the growth forecasts for next year to a range of 3-3.5% and reduced the projection for unemployment to as low as 6.5%. While investors had expected the Fed to cut back its monetary stimulus, markets were surprised by the explicit timeline given. The prospects of a premature exit from the quantitative easing that has fuelled a rally in financial markets since 2010 clearly spooked the market as benchmark 10-year bond yields jumped 17 bps to 2.36%, its highest level in 15-months and the USD strengthened against 14 of 16 major peers. Interest rates in S’pore have also been steadily climbing in tandem with the higher US rates with SGD 10-year bond yields rising 30 bps in the first two weeks of June to 2.11% and 81 bps since the start of the year. S’pore shares are expected to take a hit as early morning trades saw Japan’s Nikkei tumble 1.8% and Australia’s ASX 200 slid 1.3%. Dividend-yielding stocks and REITs will be particularly vulnerable and face renewed selling pressure. Expect further downside risk if the 200-day moving average on the STI at 3,193 is breached with next support at 3,110. Overhead resistance is at 3,250. Stocks to watch for: *SIA: Placed firm order for 30 Airbus A350-900s worth US$8.6b with options for another 20 aircraft at the Paris Airshow. Under the terms of the deal, the carrier could convert the options into the larger A350-1000. SIA now has 70 firm orders for the A350. The latest contract follows its recent US$17b record order for 30 A350-900s and 30 B787-10Xs. *Mapletree Logistics: Acquires eight South Korean property for KRW28.75b ($32m). The three-storey warehouse facility with 27,000 sqm GFA will have an initial 8.4% net property yield on a six-year sale and leaseback arrangement with built-in rental escalation from second year onwards. Acquisition takes total portfolio to 111 properties with book value of $4.1b. *Sunvic Chemical: Shelves original plan to use its long delayed catalyst-assisted cracking plant to produce propylene and petroleum-related products from heavy fuel oil, citing changes in tax rules and unfavourable operating environment. Instead, the group will now incur additional capital expenditure in excess of Rmb100m to modify the cracking plant to produce methyl tertiary-butyl ether for use as a fuel additive in motor gasoline. The plant conversion is expected to be completed by Jul 13. *Mun Siong: Secured a one-year maintenance contract with new client on Jurong Island plus another three-year contract with existing long term customer under new terms. These additional service contracts bring the group’s total number to 13 covering a wide spectrum of facilities in the downstream process industry. *Tat Hong: Establishes a $500m multicurrency medium term note programme to be used for general corporate purposes, including refinancing of existing borrowings, financing capital expenditure and general working capital. As of Mar 12, net gearing stood at 65% with short term debt of $301.6m against cash of $68.8m.