SG Market (10 Oct 14)

US Market: US stocks suffered its worst selloff in six months, wiping out Wed’s strong rally as weak economic data from Germany and disquieting comments from several officials heightened growth worries on the global economy and the looming impact on corporate earnings. The blue-chip DJIA tumbled 335 pts to 16,659 (-1.9%) and the broad-based S&P 500 shed 41 pts to 1,928 (-2.1%), while the tech-heavy Nasdaq Composite lost 90 pts to 4,378 (-2.0%) and the small cap Russell 2000 sank 29 pts to 1,068 (-2.7%), its lowest level in nearly a year. Reflecting the wild gyrations over the past few sessions, the CBOE Volatility Index jumped 24% to 18.76, its highest reading since early Feb. Investors took cue from Europe, after exports in Germany for Aug saw its biggest monthly fall since Jan ’09. Leading think tanks also warned that the eurozone’s largest economy is on the verge of recession. This follows earlier reports in the week, which showed German industrial production contracted the most in five years. The carnage might have been triggered by ECB Preisdent Mario Draghi’s statement that Europe’s problems are structural, not cyclical and policy makers must lift inflation from its excessively low level. Adding to the market jitters, influential St Louis Fed Bank President James Bullard highlighted the disconnect between the street and Fed’s view of the interest rate hike outlook. Meanwhile, prominent investor Carl Icahn told CNBC that a market correction is coming and he is hedging his bets by shorting the S&P 500. Markets shrugged off the improvement in US jobless claims last week, which fell to by 1,000 to a eight-year low of 287,000. Energy shares were the biggest losers, sliding 3.7% to extend its recent slump, after crude oil prices fell to its lowest level since Dec ’12. Oil producers Chevron and Exxon Mobil declined 2.9% and 2.6% respecitvely. Material stocks lost 2.5%, dropping to its lowest level since Apr, led by Newmount Mining (-5%) and Dow Chemical (-3.5%). Alcoa fell 4.2% despite kicking off the results season with 3Q earnings that beat estimates. Amazon gave up 2.3% on news that it would open its first store in New York. Gap plummeted 12.5% after reporting a drop in same store sales and retirement of its CEO, while Advanced Micro Devices skidded 10% after naming a new CEO, just a week before it releases its quarterly earnings. Volume was heavy with 8.2b shares traded on US exchanges with declining issues overwhelming advancing ones by a hefty 7.5 to 1 on the NYSE and 6 to 1 on the Nasdaq. S’pore shares are likely to face renewed selling pressure following the topsy turvy movements on Wall Street with most investors likely to stay in their bunkers. The STI is expected to head south towards its 3,220 support area (200-day moving average) after hitting resistance at 3,260 yesterday. Stocks to watch: *REITS: MAS issued a consultation paper, with proposals aimed at giving REITs more balance sheet flexibility and improving corporate governance. Key proposals include: i) single-tier leverage limit of 45% for all REITs, ii) raising the development limit to 25% (from 10%) of the property assets, iii) linking performance fee to “an appropriate metric”, iv) limiting the acquisition/divestment fee only to recover the managers’ costs, v) requiring managers to provide more comprehensive disclosures to investors. *Tigerair: To make a one-off accounting provision of $93m for the subleasing of 12 of its surplus aircraft to Indian budget carrier, IndiGo. Tigerair is reviewing various funding options, including the possibility of a rights issue to strengthen its balance sheet. *Linc Energy: Adani has exercised its call option to buy Linc Energy’s interest in the Carmichael Royalty Deed for A$155m. First tranche payment of A$90m is due on or before 14 Oct, and the remaining A$65m is expected within the next 12 months. *Ezra: Its subsea services division, EMAS AMC, has finalized three contracts with Noble Energy, valued collectively at over US$300m. Scope of works include engineering, procurement, construction, installation of subsea tie-backs for the Big Bend, Dantzler and Gunflint field developments in the US Gulf of Mexico. *Swissco: Secured three chartering contracts with options worth US$17.3m. The offshore support vessels, comprising two new workboats and one anchor handling tug supply vessel, will be deployed in the Middle East. *Interra Resources: Acquired a 49% stake in PT Mentari Pambuang Internasional, the contractor under the Kuala Pambuang production sharing contract. *Yongnam: Secured three subcontracts worth a total of $76.6m, for work relating to the Thomson-East Coast Line Napier station and Marina South station and tunnels in Singapore, as well as installation of a temporary steel bridge in Hong Kong. *BBR: Secured its first contract from HDB for the installation of a 5MW-peak grid-tied solar photovoltaic system on the rooftops of more than 75 blocks in Ang Mo Kio Town. The town council will undertake a power purchase agreement over a 20-year tenure to pay for the solar generated electricity. *Courts: Its Big Box Megastore in Bekasi, Indonesia will open on 18 Oct. The megastore boasts and extensive 130,000 sf of retail space, and houses 12,000 product offerings from 200 brands and has been soft opened since 4 Oct. *GLP: Signed pre-lease agreements totaling 49,000 sqm with two leading express delivery companies in Eastern China. Both are existing multi-location customers of GLP. *Chiwayland: Issuing perpetual capital securities of principal amount of $30m to Shagang South-Asia. The net proceeds will be used mainly for the investment in the JVs relating to the three property development projects in Brisbane, Australia, and other potential investment opportunities in Australia. *Atlantic Navigation: Temporarily postponed its proposed new share placement due to unfavourable market conditions.