SG Market (24 Sept 14)

US shares fell for the third straight day, with healthcare/drugmakers falling on a government crackdown on tax-saving mergers, and further dragged by coordinated attacks on Syria The DJIA fell 80 pts to 17,092 (-0.5%), while the S&P 500 slipped 8 pts to 1,987 (-0.4%) and the Nasdaq dipped 12 pts to 4,516 (-0.3%). The VIX index rose 8.8% to 14.90. European shares also trade lower after a gauge of activity in the eurozone's manufacturing and services sectors for Sep fell to its lowest level for the year. Sentiment in US stocks was impacted after the Treasury’s new rules on inversions begin applying to deals that were closed yesterday. The rules include a prohibition on “hopscotch” loans which enables companies to gain access to foreign cash without paying US taxes. Medtronics and AbbVie, with pending inversions, fell 2.9% and 1.2% respectively. Separately, in the Middle East, the US and its allies launched a series of airstrikes against key positions in Syria, targeting the militant Khorasan Group, increasing geopolitical concerns. The news caused oil prices to advance, resulting in energy shares outperforming. Among other stocks in focus, Alibaba fell for a second day, shedding 3% on further profit taking following its stellar IPO debut. This morning, Japan and Korea indices are trading lower at -0.6% and -0.3%, respectively. Expect a soft open for Singapore, and continued dull activity as investors stay on the sidelines. Immediate topside resistance seen at 3,330 where the 20 and 50-day moving averages are converging. Downside support remains at 3,280 level. Nevertheless, the rig builders segment may get a slight reprieve after a foreign broker issued a bullish initiation report on Keppel Corp, and on new order wins by SMM and Cosco. Stocks to watch: *SMM: Secured a US$190m contract with Bechtel, to fabricate LNG processing modules for deployment in a Western Australia resource project. Work is expected to commence from Nov’14. *Cosco: Its 51% owned Cosco Shipyard Group secured contracts valued at ~US$230m to build one 21,000dwt module carrier and one floating accommodation unit (FAU). Deliveries are scheduled for 2Q16 and 1Q17, respectively. Cosco also secured options for five additional FAUs. *OEL: Non-binding MOU with Shao Tianping to acquire 60% to 100% of Hong Kong firm, Allied Resources, for between $22.5m and $37.5m. Allied Resources holds a 50% stake in Qian An Oilfield Development, which is involved in extracting oil and natural gas from two producing oilfields in China. PetroChina owns the other 50% stake in Qian An. OEL will begin due diligence and work towards finalizing the agreement within 60 days. *Global Invacom: Acquiring OnePath Networks, an Israel incorporated company with principal activities in telco solutions for the commercial, government and military markets. The deal is conditional upon satisfaction of certain conditions, expected to take place in ~45 days. *Pteris: Awarded a Rmb227m contract by Zhengzhou XinZheng International Airport for the supply and installation of Airport Passenger Boarding Bridges, which will contribute positively to Pteris’ earnings in FY14. *SMRT: JV with Toshiba to supply energy efficient propulsion systems to mass transit operators in global markets (excl. Japan). The technology, called Permanent Magnet Synchronous Motor, will cut power consumption of SMRT’s first generation trains by 30%, reduce noise levels and is maintenance-friendly. *Ying Li: The share placement to China Everbright (CEL) has been completed and the latter is now the second largest shareholder of Ying Li with a 14.9% stake. Accordingly, CEL has appointed two directors to join Ying Li’s Board. As part of their growth plans, CEL and Ying Li are currently exploring several mix-use development projects in China’s first-tier cities. *China Sunsine: Says that it organised a plant visit for analysts and investors to its Shandong factories between 15 and 18 Sep. There were subsequently a few positive reports issued by certain brokerage houses, which has led to heightened public awareness of the company, and may explain the higher volume and price movement of its shares. *Versalink: The Malaysia-based office furniture maker will make its listing debut today. The group offered 37m invitation shares at $0.30 each. Its public offering comprising 1.5m shares was 12x subscribed.