SG Market (04 Feb 14)

Market Roundup: US stocks sank with benchmark indices breaking through key support levels in heavy trading after disappointing factory data heightened concerns about the economy before Fri’s monthly jobs report. Investor sentiment soured after ISM index showed US manufacturing expanded in Jan at its slowest pace in eight months as new orders slumped along with the cold weather. This came after China’s manufacturing PMI slid to 50.5 in Jan, a six-month low, while its service sector also slowed to a five-year low, signalling downside risk for the Chinese economy. Investors were also dismayed by poor auto sales in Jan from General Motors (-2.3%) and Ford (-2.7%). The selloff accelerated after stocks broke through key support levels. S&P 500 suffered its worst drop since Jun, extending its 2014 loss to 5.8% and broke below the key support level at 1,775, while the Dow breached its 200-day moving average for the first time since Dec ’12. Reflecting investor anxiety, the VIX index jumped 16.5% to 21.44, the highest level since Dec ’12 and up 56% this year, as losers overwhelm gainers by almost 6 to 1. Investors continue to flee to the safe haven assets with the 10-year Treasury yield slipping 9 bps to a three-month low of 2.58% and gold climbed 1.3% With markets in Hong Kong, China, Taiwan and Malaysia closed for Lunar New Year holidays, Japan’s Nikkei bore the brunk of the selling, retreating 2%, extending its decline to 10.3% from its Dec peak, officially putting its in correction territory. European stocks were also hammered with the Stoxx 600 dropping 1.3% to its lowest level since Dec 18 after losing 1.8% in Jan for its worst start to a year since 2010 and buggest monthly declince since Jun. Not surprising, regional bourse opened sharply lower this morning with Tokyo (-3.2%), Seoul (-1.6%) and Sydney (-1.4%) all in the red and S’pore is expected to follow suit. If 2,990 is breached, the next support area for the STI will be at the 2,920 level. Stocks to watch: *SIA Engineering: 3QFY14 net profit dipped 9.7% y/y to $60.5m as rising business costs outpaced the 2% growth in revenue to $283.8m. The lackluster bottomline was impacted by a 4.7% rise in expenditure, mainly from staff, subcontract and material costs, offset by a 2.5% rise in associate and JV contributions of $41m, which represents 59% of group’s pre-tax profit. Balance sheet remains solid with net cash balance of $444.3m ($0.40 per share) and NAV of $1.159. *Rex Int’l: Masirah Oil, a 64% owned subsidiary of Rex’s jointly-controlled entity, Lime Petroleum has discovered oil at its second exploration well in its Block 50 Oman concession. The well will undergo data acquisition before setting the completion for testing. Management notes the discovery confirms the high quality and value of the Oman asset, particularly as no discovery has been made before in the area. *Otto Marine: Disposing two of its work maintenance vessels for US$30m vs book value of US$17.4m. The net proceeds will be used to repay bank loans. On completion of the deal, Otto will realise an estimated net gain of US$6.4m or 0.2¢ per share *AsiaMedic: 25% owned associate Cryoviva has reached an amicable settlement with Cordlife over a website infringement and is negotiating for the quantum of damages to be paid. *Global Invacom: Appointed UK independent stockbroker finnCap as its nominated adviser for a potential secondary listing of its shares on the AIM of the London Stock Exchange. *KrisEnergy: Fully redeemed US$120m of Senior Guaranteed Secured Bonds due 2016, at 105.25%. The group has no outstanding bonds or other debt following this redemption. *Cosmosteel: Disclosed that it is currently exploring the possibility of undertaking a corporate action, including a potential new share issue.