SG Market (02 Dec 14)

US stocks started Dec with losses, dragged by weaker than expected Black Friday sales, a slowdown in China’s manufacturing output, and volatility in oil price. The DJIA shed 51 pts to 17,777 (-0.3%), while the S&P 500 dropped 14 pts to 2,053 (-0.7%). The tech-heavy Nasdaq declined 64 pts to 4,727 (-1.3%), after a broad sell-off in the tech names. The CBOE VIX index jumped 7.2% to 14.3. Sentiment soured after China’s official factory index fell to 50.3 for Nov, below the 50.5 forecasted by analysts, while in the US, the ISM factory index remained relatively unchanged at 58.7 for Nov, registering its second strongest level since Apr ’11. Retailers were amongst the biggest losers, after post-Thanksgiving sales came in lower than expected. Shares of Best Buy and GameStop retreated more than 5.2% to pace decliners, while Amazon fell 3.7% and Macy’s was down 1.7%. Tech stocks underperformed as investors took profit following a strong Nov performance by the Nasdaq. A major US broker also cut its rating for the US tech sector to Market Weight from Overweight. Apple shares plunged almost 5% during a one-minute window, swinging from US$117 to US$111.27 in frenzied trading between 9.50 am and 9.51am, highlighting the jitteriness in the markets, even amongst the institutional investors. Falls among other notable tech names - Twitter (-6.5%), Tesla Motors (-5.3%), Facebook (-3.4%), Google (-1.5%) and Netflix (-1.4%). Alibaba tanked 5.1%, recording its fourth consecutive day in the red, after a US retailing coalition lobbied for Congress to end special tax treatment for the Chinese e-commerce firm and other online retailers. Interestingly, oil price rebounded, with the WTI crude futures gaining more than 4.3% to settle at US$69/bbl, as investors speculated that the sell-off could be overdone. Exxon Mobil and Chevron advanced 2.0% and 2.6%, respectively, to prop up the Dow. Other oil players also advanced, including ConocoPhilips (+2.6%) and Occidental Petroleum Corp (+3.8%). Accordingly, the transport stocks reversed their recent advance, and fell 2.7% as a group. The major Airliners Southwest Airlines and Delta Airlines declined more than 2.2%, returning some of their gains which were sparked by better earnings prospects ahead as a result of lower fuel prices. S’pore shares will likely remain volatile, amid the recent sharp swings in commodities prices (ie. oil, palm oil, gold, silver). The current risk-off mood suggests downside risk for the STI toward the 3,271 level (50 day moving average). Upside capped at 3,360. Stocks to watch: *GLP: Signed two new agreements totalling 78k sqm in Eastern and Northern China, comprising 67k sqm to a large international fashion retailer, and 11k sqm to a leading smartphone manufacturer . Separately, GLP Park Shihudang in Shanghai is 100% leased upon completion. *Spackman: Entered into a non-binding MOU to acquire 51% of Fireworks Co, a renowned Korean TV commercial post-production house. *CDL Hospitality Trust: Acquiring two hotel properties in Japan, comprising i) the 138-room Hotel MyStays Asakusabashi in the Tokyo city centre, and ii) 116-room Hotel MyStays Kamata near Haneda Airport. The aggregate consideration of ¥5.8b (~$63.8m) translates to a pro forma 9M14 annualized NPI yield of 5.7%, and offers DPU accretion of 1.2%. Expected completion around 19 Dec ’14. *Sysma: Secured a new contract to erect a two-storey detached house in Belmont Road for $10m, bringing the group’s order book to $156m. *Serrano: Awarded seven new interior fit-out contracts worth an aggregate $20.2m, with delivery expected between Feb ‘15 and Dec ‘17. *Raffles Medical: Erecting a new 20-storey extension building at RafflesHospital. To be built at a cost of $310m, the extension will yield a GFA of 530,000 sf, almost double the size of the current facilities. Separately, the company has entered into a two-year collaboration with the Ministry of Health, where RafflesHospital’s Emergency Dept will receive patients transported to it by Singapore Civil Defence Force emergency ambulances during office hours. The hospital’s emergency department now treats ~3,000 patients a month, and the ambulatory care centre is expected to increase patient load by another 10-20%. *Cosco: Its 51% owned Cosco Shipyard Group has secured a US$30m contract from a European buyer to build one 4,500 sqm Livestock Carrier. Delivery is scheduled in 2Q16. Additionally, the ship owner has an option to contract an additional similar vessel within the next six months. *SGX: Nov securities daily average value grew 8% m/m to $1.1b (+20% y/y), and derivatives daily average trading volume rose 17% m/m to 629,408 contracts (+45% y/y). Total commodities saw a record volume of 530,566 contract, rising 26% m/m, and growing more than six times y/y. *Jaya: Following the sale of its operating subsidiaries to Mermaid Marine Asia in Apr, Jaya updates that it has received a notice from the purchaser in connection with an alleged breach of warranties. The purchaser is claiming the sum of $15.6m, being the cap amount agreed for all claims arising from the disposal. If the purchaser’s claims are valid, Jaya’s NAV will fall from $19.6m (2.5¢) to $4m (0.5¢).