SG Market

SG Market: Spore shares are likely to fall, after US stocks suffered their biggest decline since mid-10, on a slew of downbeat economic reports. The STI has recently faltered at the 3180 resistance & will look to the 3120 level for support. Portek will be in focus as it resumes trade after announcing a cash offer from International Container Terminal Services; the offer price of $1.20/share represents a 69% premium to Portek's last close at $0.71.

Economy: Spore May PMI at 50.8 vs 52.5 in Apr, slowing in line with regional indices, due to lower new domestic and export orders, as well as lower levels of pdtn output and inventory. Taiwan, S Korea, China all saw lower PMIs in May...

While manufacturing grew for the 8th straight mth, local mftrs showed some concern over possible slowdown in mkts such as US and Japan, with overall new orders sub-index growing at a slower pace in both the domestic and overseas mkts in May vs Apr...

Economists also noted another potential cause for concern is the input prices index's upward trend. The overall input prices index has expanded 17 mths in a row, with the electronics sector's input prices index gaining 1.1 pts to 55, which cld have implications for consumer price inflation down the rd.

Tourism: MasterCard Index of Global Destination Cities note that SG is expected to place among the top 10 destination cities worldwide this yr in terms of both international visitor arrivals and expenditure. Tip SG to see visitor numbers (for air travel) and grow 14.5% yoy to 11.4m, while visitor expenditure is expected to come in at US$10.8b, +24% yoy……

We note that news bodes well for hospitaility, retail, tourism and transport sector, who would be direct bnefiaciaries of growing visitors and receipt spendings. Notable plays include, CDL H-Trust, Ascott Residential Trust, Genting SP, StarHill Global, Suntec REIT, Mapletree Commercial Trust and SIA.

Baltic Dry Index: Up for 8th day on firmer capesize rates, but mkt for smaller panamaxes remains soft due to slower business. The overall index rose 0.41% or six to its highest since Apr4. The Pacific basin however remains difficult and despite the more positive earnings in the Atlantic, rates remain historically depressed and there is concern ballasting ships could snuff out the recovery according to analysts….

However in the near-term, concept plays for a rising BDI include Mercartor Lines, STX PO, Courage Marine and CoscoCorp.

SG Land Transport: Credit Suisse maintains mkt weight. House do not foresee major shift in policies post-elections, with many key initiatives to expand capacities in public transport currently underway. However, measures to address crowding issues, including increased bus/rail frequency, could raise cost profile for operators, resulting in lower future ROEs……

Believe impact is muted for Comfort Delgro and negative for SMRT, given that its rail operations generate 54% of its total revenue and 56% of its operating profit. House lowers f/casts by 2% for SMRT on slower population growth assumptions. Reiterate U/p for SMRT, TP $1.80 and prefer Comfort Delgro (O/p, TP $1.75), given the former’s overseas growth profile, which currently generates 42% of rev.

SG Banks: Nomura note that loans and advances accelerated in April growing at 21.1% yoy, while credit demand continues to broaden with general commerce growing 43.4% yoy. Tip sustained regional GDP expansion stoking credit demand and indications that margin pressure is bottoming to be key catalysts for sector…..

Recommends OCBC (Buy, TP $11.80) for strong ASEAN presence, and broad, integrated product platform. Also like DBS (Buy, TP $16.70) as it is showing traction in better leveraging its core franchise strengths, particularly S$ CASA deposit base, although biggest kicker remains interest rate direction.