SG Market (24 Jun 15)

Regional bourses are trading higher this morning in Tokyo (+0.2%) and Seoul (+0.2%) but flat in Sydney.

From a chart perspective, the STI is still capped below the 200-dma at 3,360, with downside support at 3,268.

Stocks to watch:
*Economy: S’pore May core inflation came in at +0.1% y/y (Apr ’15: +0.4%), a new 5 year low, with economists questioning if persistent weakness reflects not only policy measures, but a deterioration in real demand as well. May overall inflation was at -0.4% (Apr ’15: -0.5%), and in-line with estimates. MAS flags that core inflation could stay subdued at current rate in next few months, which means it could potentially fall out of the government's 0.5% to 1.5% forecast range.

*Palm Oil: Australia’s Bureau of Meteorology highlighted that the El Nino developing across the Pacific is strengthening further, and showing patterns similar to the record strong El Nino which eventuated during the 1997-1998 period. The bureau however noted that it is not possible to determine accurately the intensity of the event for now, and more confident estimates on the El Nino’s strength will only be available after mid-year.

*Property: In an interview on a radio talk show, National Development Minister Khaw Boon Wan hinted at a possible raising of the income cap on both ECs and HDBs. The current household income ceiling of $12,000 for ECs was last raised from $10,000 in 2011, while BTO flats income ceiling was raised from $8,000 to $10,000 during the same period. Some analysts highlighted that it would be reasonable to perhaps raise the income ceiling for ECs from $12,000 to $15,000 and for BTOs to $12,000 from $10,000. Any changes are likely to be announced in August.

*China Merchants Holdings (Pacific): Proposed to acquire three expressways in Guangxi Zhuang Autonomous Region, China, for Rmb3.04b (HK$3.83b). Details on financing the acquisition has not been finalized, with the group citing the use of bank borrowings and/or the issuance of new securities. Upon completion, the additions will significantly expand the scale of its toll road operations and raise the number of toll roads operated to eight located across four provinces, with total length of the highway boosted by 39% to 575km. Average remaining concession period will increase by 24% from 13.6 years to 16.9 years.

*Raffles Medical: Launched new $4.0m 17k sf multi-disciplinary medical centre in Orchard Rd to serve local patients and medical tourists in the area. The centre offers traditional Chinese medicine services such as acupuncture and cupping, as well as a full spectrum of speciality services including cardiology and obstetrics. Highlights that the group’s patient load has risen by ~10% yearly over the past 2-3 yrs. Currently more than a third of patients at its flagship Bugis hospital are foreigners.

*SATS: 59.4%-owned TFK Corporation secured a multi-year inflight catering contract from Delta Air Lines, valued at ¥30b ($325m). TFK is expected to commence catering services to Delta at both Narita and Haneda International Airports in Tokyo by Oct '15, following the shut down of Delta's own inflight kitchen in Narita.

*Rex International: Drilling at 6507/11-11 on the Zumba prospect in the Norwegian Sea resulted in a dry well. Cost of the well to Rex stood at US$2.5m. Meanwhile, the Haribo prospect at PL616 in the North Sea was spudded, and drilling is expected to take 45 days to a depth of 3,350 metres. Total exploration potential in this licence is estimated at 159m barrels, at a geological probability of 25%.

*Singtel: Issued US$500m 10-year notes at 3.25%, drawn down under its $10b euro medium term note programme.