Monday, December 30, 2013

SG Market (30 Dec 13)

Market Roundup: US stocks ended Fri mostly flat in light trading after streak of six record-setting closes for the Dow and four straight highs for the S&P 500 on encouraging signs of an improving economy. The S&P 500 has advanced 29% in 2013, putting it on course for its biggest annual rally since 1997. From a technical perspective, the market is a little overbought and needs to take a pause to consolidate its gains. Social networking company Twitter, which soared earlier in the week, fell 13% as investors took profits after Macquarie downgraded the stock on valuation grounds. Other internet stocks also declined, including Facebook (-4%), Netflix (-2.5%) and Priceline (-1.6%). Bond prices fell, tipping the 10-year Treasury yield above the key 3% mark for the first time since Jul 2011 to 3.01%. It remains to be seen how financial markets will react to rising rates but the general consensus is that markets will take the rate hike in its stride if it is gradual and orderly but not if a sharp spike boosts yields so high that it will derail the housing and economic recovery. In Asia, the Shanghai Composite outperformed other Asian markets as fear of stress in China’s money markets eased, while Japan’s Nikkei retreated from a six-year high after data showed consumer prices rising more than expected. Following its mini X’mas rally which sent the STI almost 3% higher over six consecutive days, the benchmark index looks set to test the first resistance at 3,160 before technical indicators cross into overbought territory. Immediate support sits at around 3,120. Stocks to watch: *OKP: Awarded $4m contract by PUB to improve drainage at Chai Chee Road and New Upper Changi Road with completion due in Sep ’14. This brings the group’s gross order book to $451m. *Croesus Retail Trust: Extended its first right to negotiate for the purchase of these properties, Mallage Saga, Forecast Kyoto Kawaramachi, NIS Wave 1 and Luz Omori, till Mar 2014. *China Oilfield: Poposed disposal of all its operating subsidiaries to Executive Chairman and controlling shareholder Gao Yanming for a cash consideration of Rmb2m ($0.4m) vs its net liability of Rmb139m. Upon completion of the sale, the group will become an empty shell with positive equity of Rmb1.8m. The sale of its loss-making business will enable the group to clean up its balance sheet, give it more options to acquire a new business and seek to be removed from SGX Watch-List. *Changjiang Fertiliser: Signed MOU to acquire the production (under construction) and land assets of Yueyang City Xinsheng Fuhefei Co for Rmb136.7m. *Teho International: Proposed renounceable non-underwritten 2-for-5 rights issue @ $0.09 (47% discount to last close of $0.17) to raise net proceeds of $4.1m for repayment of borrowings (62%) and general working capital or potential acquisitions (38%). *Oriental Group: Proposed acquisition of previously leased steel production facilities from Jiangyin Dingsheng Jinshu Yayan Co for Rmb21.5m ($4.5m). The purchase consideration will be funded by proceeds from its convertible note issued in Aug ’12 and share placement in Apr ’13. *Riverstone: Awarded RM21.8m contracts to construct six glove production dipping lines and provide mechanical and engineering works and fire fighting systems to its factory building under construction in Perak Malaysia. When completed in 3Q14, the group’s annual production capacity will increase by 32% to 4.1b gloves. *China Gaoxian: Secured Rmb800m of new project financing comprising 1) Rmb500m five-year syndicated loan facility led by China Construction Bank to repay exisiting bridging loans and finance the construction and operation of new production facilities; 2) Rmb300m equipment finance lease from Hua Rong Finance Lease Co to take over certain purchase contracts entered into by the group with equipment manufacturers.

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