The market could come under pressure following Wall Street’s negative reaction to the Fed’s interest rate outlook, with REITs and yield stocks most at risk, while lower oil prices could spur profit-taking in oil-related counters.
Regional bourses opened mixed, with Tokyo (+0.9%) higher, and Seoul (-0.4%) and Sydney (-0.6%) weaker.Technically, immediate resistance for the STI is at the 2,960 triple-top, with underlying support at the 2,882 breakaway gap.
*Economy: Economists have pared 2016 GDP growth forecast to 1.4% (prior: 1.8%) on substantially weaker estimates for the finance & insurance and wholesale & retail sectors. Forecast for 2017 was also trimmed to 1.5% from 1.8%.
*Telcos: TPG Telecom emerged as the fourth Singapore telco, after winning the new entrant spectrum auction with an aggressive $105m bid (reserve price: $35m). TPG’s steep valuation may result in a price war, while its anticipated participation in the upcoming general auction could end with higher spectrum prices. This spells a tougher outlook for Singapore telcos. M1 (Sell, TP $1.90) is most vulnerable, followed by StarHub (Hold, TP $3.52) and Singtel (Hold, TP $3.68).
*Genting Singapore: The promotion bill to legalise casinos in Japan has been passed in the upper house. MKE opines that GENS’ recent share price rally may be premature, as the subsequent implementation bill has yet to be passed, while current valuations have overstretched fundamentals. Sell with TP of $0.73.
*SIA: Divesting its 10% stake in Tigerair Taiwan to China Airlines by 1Q17, as part of efforts to consolidate both Tigerair and Scoot under the "Scoot" brand.*ST Engineering: Jiangsu Huatong Kinetics, its 75:25 JV with China SOE Jiangsu Huatong Machinery, has been placed under voluntary liquidation. A $61m impairment charge was taken in 3Q16.
*Silverlake: Its stake in Chinese associate Global InfoTech was diluted to 11.92% from 12.43% after the latter completed the issue of 3.6m new shares at Rmb15.91 apiece to partly fund the acquisition of Shanghai RuiMin Internet Technology for up to Rmb300m. The target provides financial technology services and solutions in China.
*Ryobi Kiso: Secured new contracts worth $58m, bringing the ytd order win to $227m. Some of the contracts involve foundation and geoservices work for clients such as HDB, JTC, Changi Airport and NUS.
*Sabana REIT: Acquiring 107 Eunos Avenue 3 for $36.1m. The newly constructed light industrial property comes with an NPI guarantee of $3.1m p.a., and 24 years left on its lease.
*Viva Industrial Trust: Secured a $22m five-year term loan facility from UOB, with the borrowings secured against its 30 Pioneer Road property.
*Sunpower Group: Issued US$110m of convertible bonds due 2022 with an initial conversion price of $0.50 to CDH Fund V, to help fund the group's green investment-related businesses. The manager of the fund is CDH China Management Co., a PE firm that focuses on growth capital and middle market buyout investments in Greater China.
*Ace Achieve: 2QFY17 net profit slumped 30.2% to Rmb11.2m, due to sharp erosion in gross margin to 16.1% (-12.5ppt) from increased competition in the ICT system integration segment. Revenue of Rmb163.9m (+31.1%) was lifted by ICT system integration sales (+108.8%) but pared by contraction in its business support solutions (-17.9%) and maintenance & servicing (-76.6%) segments. Bottomline supported by government incentives of Rmb3.3m (2QFY16: nil). NAV/share at Rmb0.23.
*China Kangda Food: Sold its chicken and rabbit farm assets for Rmb5.7m and expects to book disposal gain of Rmb0.9m.