SG Market (17 Jun 14)

US Market: US shares inched higher in a choppy session, buoyed by positive manufacturing data and a flurry of merger news, which overshadowed the turmoil in Iraq ahead of a mid-week US Fed meeting. The DJIA added 5 pts to 16,781 (+0.03%), while the S&P 500 advanced 2 pts to 1,938 (+0.1%) and the Nasdaq gained 10 pts to 4,321 (+0.2%). Manufacturing output climbed by a more than forecast 0.6% in May after a revised 0.3% drop in Apr and factory activity in NY region accelerated this month, sparking hopes for a strong pick-up in economic growth this quarter. Yet, most investors appeared to be waiting for Wed's FOMC meeting to see if there will be a new policy direction or decision on bond purchases and interest rates. Meanwhile, the IMF has cut its 2014 growth forecast for US from 2.8% to 2%, giving scope for interest rates to stay low for longer than expected. Over in Iraq, government forces and militants battled for control over a northern town, with US officials weighing the possibility of drone strikes against the jihadist fighters. Markets see-sawed around flat line most of the day with investors favoring energy and utilities names, while financials got hit along with materials stocks. In corporate action, US medical device maker Covidien surged 20.5% after agreeing to buy its Irish rival Medtronic (-1.1%) for US$42.9b, while US telecom operator Level 3 Communications dropped 4.1% on plans to buy Internet business provider TW Telecom in a US$7.3b deal. Pipeline operator Williams jumped 18.7% after announcing it would buy over the remaining 50% of Access Midstream Partners (+1.9%) for US$6b. Meanwhile, US data storage company SanDisk rose 3.6% after announcing its US$1.6b acquisition of flash memory firm Fusion-io (+22.4%). In other news, Yahoo slid 5.8% after 22.6% owned Alibaba reported a slowdown in revenue growth to 38.7% in the March quarter from 62% in previous quarter, while GE lost 0.8% after Siemens and Mitsubishi made a joint bid for Alstom’s energy unit, challenging the US$17b offer by GE. S’pore shares are likely to stay on the backfoot as investors await fresh economic guidance from Fed amid signs that Iraq may be sliding into civil war. Immediate support for the STI lies at 3,285, with the next line of defence at 3,270, while topside resistance remains at 3,320. Stocks to watch: *SIA: May passenger carriage edged up 2.5% y/y on the back of 2% increase in capacity. Consequently, pax load factor (PLF) climbed 0.3 ppt to 74.9%, with improvement across all route regions except East Asia, which was dragged by softer demand to Bangkok. SilkAir’s pax carriage rose 1.3% as capacity grew 1.1%. Consequently, PLF increased by 0.2 ppt to 66.4%. Cargo load factor increased 0.9ppt to 62.9%, helped by a 1.6% reduction in capacity, as traffic dipped 0.1%. *DBS: Acquired 50% of Hutchison DBS Card Limited from Whampoa Limited for cash consideration of HK$546m. *Koh Brothers: Awarded a $126.5m construction contract by JV company KBD Westwood, to build the executive condo project at Jurong West. Work will commence 15 Jun 2014 and expected to be completed in three years. *Vallianz: Proposed to issue up to 400m new shares (18.8% of existing share base) at $0.13545 each, comprising 230m shares to placement agents UOB Kay Hian, Tata Capital Markets and Religare Capital, and 170m shares to several funds. Net proceeds of $52.2m will be used for the group’s fleet expansion (70-80%) and general working capital (20-30%). *TT Int’l: Proposed to issue up to 167.3m shares (20% of existing share base) at $0.1545 each, through placement agent CIMB. Net proceeds of $24.8m will be used for capex, financing costs and working capital requirements of the Big Box project. *Huan Hsin: Disposing its 30% stake in Li Sheng Electronic (Kunshan), which fabricates steel moulds for the notebook industry, for US$3.5m. *Anwell: A trade creditor has obtained a court order to seize assets of Anwell’s subsidiary Henan Kerry Digital, for outstanding trade payables of ~Rmb 94m owed. Henan Kerry, which recorded a FYJun13 book value of Rmb 229.4m, is still able to use the assets for daily business operations. *GKE: Updated that its 49% owned GKE Metal Logistics associate has customers which have cargo stored in Qingdao port, but to the best of its knowledge, the unit’s management and/or employees are not implicated in the on-going investigation of a metals loan scandal.