Dow Closes Above 13,000, First Time Since Crisis (29Feb)

Riding strength of economy, Dow Jones industrials close above 13,000 for first time since 2008

- STI: +0.78% to 2969.7

- MSCI Asia Pac ex-Japan: +1.02%

- Euro Stoxx 50: +0.27%

- S&P500: +0.34% to 1372

Economists braced for a 1% drop in US mfg new orders, but got a 4% drop on month instead. Core orders excluding transport fell 3.2%. Order for capital goods fell sharply as well with or without volatile aircraft. A result like this would usually caused a sell-off, but consumer confidence, improved hiring, and recovering housing, is causing the market to be more forgiving. Let us just say this: the job market is a lagging indicator, new mfg orders are leading indicators.

The S&P500 rises to a cycle new high on lower momentum, technically not a great sign, near term. The STI's pull back from 3000 so far is rather shallow, and is still in consolidation/correction mode despite yesterday's advance. Nonetheless, barring immediate ''tail'' risks (e.g. disorderly euro exit, middle east conflict) the odd underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions: if economy data is strong, stocks will of course rise; if economic data is weak, a correction will likely give way to a wave of liquidity and fiscal induced buying: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded. 

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Close But Not Quite For The Dow In Push For 13,000 (28Feb)

Housing news helps stock market erase early losses, but Dow finishes shy of 13,000 again

- STI: +1.05% to 2946.8

- MSCI Asia Pac ex-Japan: -1.11%

- Euro Stoxx 50: -0.42%

- S&P500: +0.14% to 1367.6

Germany passed its share of Greece's bailout despite growing dissent in Angela Merkel's party. We expect EZ parliaments to pass the bailout despite grumblings, as to not do so risks the unknown consequences of a messy Greek exit. This issue, as we have warned, is not over, and we will revisit it before the year is over as what Greece really needs is much deeper debt forgiveness than its 53.5% PSI haircut.

US pending home sales advanced more than expected. Housing will be a growth boost this year, but the actual lift off will be more muted as the inventory overhang is huge. We still expect growth to undershoot this year (<2%) as fiscal withdrawals bite, and now we have crude oil crimping already declining income growth.

SembCorp Ind posted profit gains of 10% (14.1c eps) for 4q11, 2% (45.3c eps) full year on utilities contribution. Mgt guides positive for its utilities outlook going forward as projects complete and come on line. Golden Agri posted a 36% decline in net profit, 11% decline full year, on reduced fair value gain and a rise in selling expenses.

The STI initially rallied yesterday but sold into strength to close negative, in line with our expectation of a pullback. The S&P500 is proving more resilient as positive home sales data reversed initial declines. Momentum though is still waning. Nonetheless, barring immediate ''tail'' risks (e.g. disorderly euro exit, middle east conflict) the odd underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions: if economy data is strong, stocks will of course rise; if economic data is weak, a correction will likely give way to a wave of liquidity and fiscal induced buying: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded. 

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Stocks Rise On Wall Street; Dow Hovers Near 13,000 (27Feb)

Dow Jones industrial average hovers near 13,000; consumer confidence surges past forecasts

- STI: +0.33% to 2978

- MSCI Asia Pac ex-Japan: +0.38%

- Euro Stoxx 50: +0.62%

- S&P500: +0.17% to 1365.7

Oil is just shy of US$110/bbl, as geopolitical risk is on the rise. Iran has its exports to Europe sanctioned and financial institutions which deal with Iran will be sanctioned by the US. We watch with bated breathe if Israel will attack Iran. Oil is our favourite asset class right now: if the global economy is strong, oil will rise, if its weak, we will have QE3, and oil will rise, if we have conflict, oil will rise. The big picture case for an overweight on upstream oil stocks, and oil correlated stocks, is compelling (due diligence on other things like valuations, industry, etc. considered).

Rising oil will do the global economy no good, of course. Market consensus is far too positive on the US which still faces slowing disposable income growth which will be under new pressure from rising oil. As the economy is on a fiscal crutch of about... US$1tr... about 80% of which will be withdrawn this year and next, we are warning clients of a potential undershoot of growth expectations by the second half of the year. Sticky inflation in Asia will be even more sticky, inhibiting a monetary policy response.

The S&P500's advance on low volumes, waning momentum, flirting with its previous peak, risks a meaningful pullback. The STI may have already begun a pullback, but could try a gap fill to 3000. Nonetheless, barring immediate ''tail'' risks (e.g. disorderly euro exit, middle east conflict) the odd underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions: if economy data is strong, stocks will of course rise; if economic data is weak, a correction will likely give way to a wave of liquidity and fiscal induced buying: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded.

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Dow Flirts With 13,000 Again But Can't Make It (24Feb)

Stocks climb, but Dow can't quite clear 13,000 barrier at the close

- STI: -0.91% to 2968.3

- MSCI Asia Pac ex-Japan: -0.54%

- Euro Stoxx 50: -0.43%

- S&P500: +0.43% to 1363.5

Singapore may not have much room for a monetary policy easing response should growth continue to be weak, as core-inflation soared to 3.5%y-y from Dec's 2.6%, as tight labour supplies seem to have pressured wages upward and induced rising costs. MTI-MAS said that 'earlier cost increases, especially in the labour market, could continue to pass through to consumer prices'. Headline inflation eased from 5.5%y-y to 4.8% but is expected to remain elevated and volatile. (Sounds a bit like the situation China faces doesn't it? sticky inflation for them means no rate cuts only quantity measures like reserve ratio cuts. Asian countries still have room for a fiscal response if inflation rules out a monetary response.)

STI's decline yesterday adds to the case that momentum is waning, though today its possible to see a swing higher gap fill response as we rested on the 20day MA, plus the US last night advanced on stable unemployment claims. Still risks of a meaningful pullback are now higher. Markets though, need an excuse to sell and it could be economic data further disappointing as expectations are too high. Next piece of lousy data, we feel, will be probably something out of the US which is still an economy on a fiscal drip. Nonetheless, barring tail risks (e.g. disorderly euro exit, middle east conflict) the odd underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions: if the global economy is strong, stocks will of course rise; but then even if its weak, a correction will likely give way to a wave of liquidity and fiscal support: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded.

UOB reported results below PSR and consensus' expecations. Strong NIMs but provisions pushed NP lower. Mgt guided optimistically for higher NIMs and fee income ahead. ST Engg's results were above PSR estimates, with mgt guiding for higher sales and NP ahead. 

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Stocks Lower A Day After Dow's Blip Above 13,000 (23Feb)

Stocks edge lower a day after Dow's short-lived climb past 13,000

- STI: -0.97% to 2995.6

- MSCI Asia Pac ex-Japan: -0.02%

- Euro Stoxx 50: -0.89%

- S&P500: +0.33% to 1357.7

 

EZ mfg and services PMI preliminary data showed a relapse into contraction for the month of Feb (49.7 from 50.4). Our baseline has been that the EZ be in recession for 2012 due to collective austerity which will only intensify after March due to the new fiscal compact.

 

China's mfg PMI by the HSBC-Markit survey showed a 4th month of contraction albeit at an easing rate (49.7 from 48.8), new export orders flipped into contraction. The result is not strong enough to offset concerns, we feel of investment and exports having fallen like a rock in their rate of growth, also house prices declines are gathering pace. Odds for a fiscal stimulus, we feel, are getting higher.

 

Market declines yesterday (STI, S&P500) add to the case that momentum is waning. Risks of a meaningful correction are now higher. Markets though, need an excuse to sell and it could be economic data further disappointing as expectations are too high. Next piece of lousy data, we feel, will be probably something out of the US which is still an economy on a fiscal drip. Nonetheless, barring tail risks (e.g. disorderly euro exit, middle east conflict) the odd underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions: if the global economy is strong, stocks will of course rise; but then even if its weak, a correction will likely give way to a wave of liquidity and fiscal support: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded.

 

Wilmar and NOL both reported results that were below expectations. For Wilmar margin compression remains an issue for its refining business, though its new sugar business is a testament to its diversified model as the company still reported overall profit growth. For NOL, full year losses of US$478m outclassed even our analyst's most dismal projection of US$369m. The outlook for the shipper remains weak, according to our Transport Analyst. 

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Dow Breaks 13,000 But Can't Hold Gains (22Feb)

Dow crosses 13,000 for first time since 2008 but can't hold on

- STI: +0.13% to 3025.7

- MSCI Asia Pac ex-Japan: +0.02%

- Euro Stoxx 50: -0.34%

- S&P500: +0.07% to 1362.2

Greece received its bailout money, added feature was the ECB and national central banks redistributing portfolio profits on Greek debt back to national govts for further bailout support - the effect though will only reduce Greece's financing needs by 1.8b euros, hardly exciting. Private sector bondholders agreed to take a 53.5% writedown, but what Greece really needs is something closer to 70%. All in all, since Greece is trapped in an austerity-contraction-austerity cycle, this debt relief is still too small. Fiscal targets have much room to be missed as GDP targets have serious downside risk. This issue remains a risk throughout the year.

Oil is now US$107bbl, as Iran halts exports to Britain and France. Will Israel attack Iran over its nuclear programme?

The STI continues its delicate slice thru resistance region from here till 3200, so be nimble if markets find that excuse to sell. But the odd underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions (barring tail risks - disorderly euro exit, middle east conflict): if the global economy is strong, stocks will of course rise, but then even if its weak, a correction will likely give way to a wave of liquidity and fiscal support: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded.

S&P500 earnings season has seen most companies beat expectations, but rate of profit growth is slowing down. The index is approaching its last high (1370) so expect a reaction. But again, in the short/medium term, same underlying scenario as above.

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EU Ministers Work Through Night On Greece Bailout (21Feb)

EU ministers work through the night on Greek bailout, but issues remain over spending controls


- STI: +0.69% to 3021.2
- MSCI Asia Pac ex-Japan: +0.7%
- Euro Stoxx 50: +1.19%
- S&P500: closed for public holiday

European finance ministers have not yet ended their meeting on Greece's bailout needs, but hopes of a deal are high. While Greece has done what it can in terms of finding the extra 325m euros in budget cuts and political commitments, what they really need is much stronger debt relief than the current 50% writedown on private sector bondholders - if an announcement contains that the official sector can participate by the ECB distributing its gains or holdings back to the national govts to participate in the writedown, that would be welcome. Otherwise whatever we get as currently proposed may buy us time, but not solve Greece's woes.

China cut its reserve ratio by 50bp was very much welcomed by global markets, as we have said, stocks face a short/medium term win-win in a wave of liquidity and possibly fiscal stimulus (see next para). That's the reality, complacent or not...

The STI continues its delicate slice thru resistance region from here till 3200, so be nimble if markets find that excuse to sell. But the underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions: if the global economy is strong, stocks will of course rise, but then even if its weak, govts have signaled a wave of liquidity and fiscal support: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded.

OCBC reported results that met our expectations but beat consensus, mgt is cautiously optimistic. Stepping down of popular CEO David Connor will be filled by internal succession.

S&P500 earnings season has seen most companies beat expectations, but rate of profit growth is slowing down. The index is approaching its last high (1370) so expect a reaction. But again, in the short/medium term, the underlying scenario is that equities face a win-win situation (see above).

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Dow Average Closes Within 50 points of 13,000 (20Feb)

Hopes for resolution on Greece's debt crisis bring the Dow to within 50 points of 13,000



- STI: +0.79% to 3000.6
- MSCI Asia Pac ex-Japan: +0.98%
- Euro Stoxx 50: +1.24%
- S&P500: +0.23% to 1361

Singapore's Budget was aimed at addressing social mobility as the lower income, disabled, and aged were the focus. The link from that to the corporate side is the issue of productivity. Greater caps on the proportion of foreign labour allowed for Mfg, Services and Construction were imposed to push companies to improve productivity and hence wages. In addition, the maximum proportion of PMETs allowed is reduced from 25% to 20%. In the short term, the move may be negative on earnings for such industries due to tight labour market conditions, but the doubling of subsidies for training workers aims to offset such cost concerns over the longer term, hopefully.

Of further note is the drive to increase bus services by 800 buses over the next 5yrs, of which 550 will be govt funded while 250 will be capex obligation for transport companies SMRT and Comfort. The two companies will be running 20% expanded bus fleets with capex 68.75% subsidized, so it seems. Our Transport analyst says that this is mildly positive news for SMRT and CD (prefer CD), as the pending changes in the fare review mechanism remains a key source of uncertainty over bus revenue outlook.

China cut its reserve ratio by 50bp - yes, chances of a hard landing there just keep getting higher... we have warned that investment and exports have both dropped like a rock. Property prices also saw a drop in 47 out of 70 cities. But not to worry, if it gets worse, we will see a massive fiscal stimulus, as Premier Wen has already hinted ...

EZ finance ministers decide today whether Greece merits its tranche of bailout money or not. Chances are, fingers crossed, no surprises ... Greece has ticked all the boxes to warrant getting its money - including political commitments and 325m of further cuts.

The STI is in resistance region from here till 3200, so be nimble if markets find that excuse to sell. But the underlying story remains, equities face a win-win scenario over the short/medium term, and corrections will likely be used to add positions: if the global economy is strong, stocks will of course rise,but then even if its weak, govts have signaled a wave of liquidity and fiscal support: (1) the Fed will consider QE3 if the US economy weakens, (2) China considers 'fine tuning' policy in 1q12 - expect fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB could easily be expanded.

STI earnings this season have generally met our expectations.

S&P500 earnings season has seen most companies beat expectations, but rate of profit growth is slowing down. The index is approaching its last high (1370) so expect a reaction. But again, in the short/medium term, the underlying scenario is that equities face a win-win situation (see above).

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Dow Within 100 of 13,000 As Stocks Barrel Higher (17Feb)

Stocks sharply higher as traders shift focus from Greece to good jobs news at home

- STI: -1.14% to 2977

- MSCI Asia Pac ex-Japan: -1.35%

- Euro Stoxx 50: -0.18%

- S&P500: +1.1% to 1358

US housing starts and unemployment claims were better than expected, while EZ and Singapore both contracted less than expected for 4q11. Singapore posted -2.5%q-q saar rather than the anticipated -4.9%. Indonesia moderated their growth outlook on slower global growth.

In an effort to plug a wider than expected hole in Greece's budget last year, EZ finance ministers are considering lowering the interest rate it charges Greece while the ECB considers channeling gains from distressed debt back to EZ govts for contribution to bailout funds.

The STI could rebound today but it is in messy resistance region so its going to be a bit of tough grind higher. Our near term view is that although markets are likely to use corrections to load up in view of anticipated policy support: (1) the Fed will consider QE3 should the US economy weaken, (2) China considers 'fine tuning' policy in 1q12 - expect a big fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB has successfully resulted in backdoor QE, be nimble as the market's expectation of a strong economic rebound are high, and there could be some interim selling before we ride a wave of liquidity and fiscal stimulus.

STI earnings this season have generally met our expectations: Keppel Corp, Starhub, SIA, beat / DBS, Singtel, SIAEC met / CMT, SPH, Comfort missed. CMA missed but the outlook positive. Olam's profit dropped 12%y-y but was above bloomberg consensus. Capitaland's profit fell 20%y-y.

S&P500 earnings season has seen most companies beat expectations, but rate of profit growth is slowing down. Wave of liquidity from possible QE3 likely to push markets higher on P/E expansion over next 6 months at least.

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Apple Falls, Drags Wall Street Lower (16Feb)

- STI: +0.81% to 3011.7

- MSCI Asia Pac ex-Japan: +1.5%

- Euro Stoxx 50: +0.23%

- S&P500: -0.54% to 1343.2

Did markets really punch thru due to China's pledge to contribute to EZ bailout funds? We think markets are actually anticipating a wave of stimulus globally (see next next para). US industrial production was above expectations even as retail sales was below a few days ago.

All the boxes seem to have been ticked in order for Greece to receive its next tranche of money from the 130b euros bailout package. Greece's parliament has voted austerity measures into law, its two biggest political parties Pasok and New Democracy have sent written pledges to the troika in support of austerity measures even after elections, and 'substantial progress' has been made to outline 325m euros of extra cuts. Yet the rhetoric coming out of EZ politicians is that they are prepared if Greece exited the Euro. Playing with fire indeed...

The STI continues to cut thru messy resistance region so be nimble if momentum shifts to the downside. Near term, although markets are likely to use corrections to load up in view of anticipated policy support: (1) the Fed will consider QE3 should the US economy weaken, (2) China considers 'fine tuning' policy in 1q12 - expect a big fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB has successfully resulted in backdoor QE, be nimble as market's expectation of a strong economic rebound are high, and there could be some interim selling before we ride a wave of liquidity and fiscal stimulus. 

STI earnings this season have generally met our expectations: Keppel Corp, Starhub, SIA, beat / DBS, Singtel, SIAEC met / CMT, SPH, Comfort missed. CMA missed but the outlook positive. Olam's profit dropped 12%y-y but was above bloomberg consensus. Capitaland's profit fell 20%y-y.

S&P500 earnings season has seen 68% of companies beat expectations, but rate of profit growth is slowing down. Wave of liquidity from possible QE3 likely to push markets higher on P/E expansion over next 6 months at least.

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Stocks Stage Late Rally And Finish Flat (15Feb)

Stocks rally in last half-hour and finish flat for the day; Greece drives trading again

- STI: +0.37% to 2987.4
- MSCI Asia Pac ex-Japan: -0.52%
- Euro Stoxx 50: -0.13%
- S&P500: -0.09% to 1350.5

US retail sales was below expectations, gaining 0.4%m-m, half consensus expectations, back data was revised 0.1%pt lower as Dec stagnated and Nov was lowered to 0.3% gain. We still have a below consensus expectation that 2012 US growth will be below 2% on progressive fiscal tightening.

In Europe, Moody's downgraded the credit rating of Italy (A2 to A3), Spain (A1 to A3) and Portugal (Ba2 to Ba3), and warned that the UK might lose its top rating. Greece's two biggest political parties, Pasok and New Democracy, send written pledges to the troika that they will support austerity measures even after elections. The pledge was another condition for receiving bailout money. Other outstanding issue is to find 325m euros of extra cuts. Greece's economy shrank 6.8% for 2011 compared to 6% contraction in 2010.

The STI is in messy resistance region so be nimble if momentum shifts to the downside. Near term downside risks are that the 'easing rate of economic contraction' story could start to lose its sheen and the economic rebound from here lacklustre, but markets are likely to use corrections to load up in view of anticipated policy support: (1) the Fed will consider QE3 should the US economy weaken, (2) China considers 'fine tuning' policy in 1q12 - expect a big fiscal loosening, and (3) unlimited long term refinancing operations (3yrs) by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt thru the banks. We are talking about a wave of liquidity and fiscal stimulus on signs of global economic weakness, which we anticipate.

STI earnings this season have generally met our expectations: Keppel Corp, Starhub, SIA, beat / DBS, Singtel, SIAEC met / CMT, SPH, Comfort missed. CMA missed but the outlook positive. Olam's profit dropped 12%y-y but was above bloomberg consensus. Capitaland's profit fell 20%y-y.

S&P500 earnings season has seen 68% of companies beat expectations, but rate of profit growth is slowing down. Wave of liquidity from possible QE3 likely to push markets higher on P/E expansion over next 6 months at least.

But prospects of a wave of policy stimulus complicates things. If the economy is strong, naturally, stocks will go up. If the economy is weak, we will have QE3, continued ECB LTROs, China's stimulus, and stocks will go up. Stocks could be a win win proposition for the next 6 months till 4q12. The larger trend could then still be lower as markets will be facing a US economy that will undergo very strong fiscal tightening in 2013, the EZ would be in the middle of austerity as induced by the New Fiscal Compact, while China could by then be seeing the tail end of a fiscal stimuli, and we still have a possible disorderly Greek euro exit to keep us on our toes.

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US Market Shakes Off Greek Worries And Advances (14Feb)

Banks and industrials lead rally for stocks after Greek cost-cutting; Apple tops $500 a share

- STI: +0.55% to 2976.3
- MSCI Asia Pac ex-Japan: +0.78%
- Euro Stoxx 50: +0.43%
- S&P500: +0.68% to 1351

More policy support is waiting in the wings for the global economy. Premier Wen of China announced that policy will be 'fine tuned' this 1q12. As China is undergoing a rapid slowdown in investment and exports, that's 70% of GDP at risk. We expect a fiscal stimulus in the form of tax reduction as last year was a bumper year in govt. revenues. But monetary stance will continue to be targeted and prudent as inflation is sticky - no interest rate cuts but possible 2 more 50bp reserve ratio cuts.

The STI started yesterday a little weak but consolidated intra-day to push higher. The STI is in messy resistance region so be nimble if momentum shifts to the downside. Near term downside risks are that the easing rate of economic contraction story could start to lose its sheen, and the economic rebound from here lacklustre, but that may not matter to markets as policy, policy, policy, is likely to keep near term momentum in an upward bias: (1) unlimited long term refinancing operations (3yrs) by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt thru the banks, (2) the Fed considers QE3 should the US economy weaken, (3) China considers 'fine tuning' policy in 1q12 - expect a big fiscal loosening.

STI earnings this season have generally met our expectations: Keppel Corp, Starhub, SIA, beat / DBS, Singtel, SIAEC met / CMT, SPH, Comfort missed. CMA missed but the outlook is positive.

S&P500 earnings season has seen 68% of companies beat expectations, but rate of profit growth is slowing down. Wave of liquidity likely to push markets higher on P/E expansion.

But prospects of a wave of policy stimulus changes things. If the economy is strong, naturally, stocks will go up. If the economy is weak, we will have QE3, China's stimulus, and stocks will go up. Stocks could be a win win proposition for the near future.

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Stocks Fall Sharply As Greek Deal Is Held Up (13Feb)

Stocks fall most in 2012 over Greek deal holdup; first losing week of the year for S&P 500

- STI: -0.71% to 2960

- MSCI Asia Pac ex-Japan: -1.58%

- Euro Stoxx 50: -1.65%

- S&P500: -0.69% to 1342

As the weekend progressed, in between friends and family, PSR checked bloomberg to see the outcome of the Greek austerity vote, which was by no means a foregone conclusion as Athens was set ablaze and Parliamentarians differed. A negative result would lead to not receiving its bailout money, ensuing chaos as public service would shut down. A default within the Euro, markets can handle, a default leading to exit, has unknown consequences. Fortunately, the vote has passed and Greece will receive its bailout money, and stay within the Euro. We stave off disaster again.

China's export import data was in a word, abysmal. On the 3 month rolling basis, on-year growth has plunged for both exports and imports. Downside risks for a hard landing have increased a fair bit. Consequences for ASEAN are that it looks as if China won't be providing much growth impetus for 2012 at least.

Equity markets have rallied without pause since the low, and Friday was across the board profit taking in Asia, and the US. The STI is in messy resistance region and risks for the short term may begin to shift to the downside, but should we see continued resilience above the 200 day MA over this period, then the near term bias continues to be up. With China's poor external trade data, downside risks have increased though: expectations of economic data are running high, and the easing rate of economic contraction story could start to lose its sheen. Yet ultimately a wave of liquidity could drive markets higher, underlying positives for equities are policy based: (1) unlimited long term refinancing operations (3yrs) by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt thru the banks, and (2) the Fed considers QE3 should the US economy weaken.

STI earnings this season have generally met expectations: Keppel Corp, Starhub, SIA beat / SIAEC met / CMT, SPH missed. CMA missed ours but we maintain Buy on a positive outlook. S&P500 earnings season now sees 68% companies having beaten expectations, rate of profit growth could still be slowing down.

But prospects of QE3 complicates things. If the economy is strong, stocks will go up. If the economy is weak, we will have QE3, and stocks will go up. Could stocks be a win win proposition? QE has a more consistent effect on the S&P500 than the STI though.

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Stocks Close Higher After Debt Deal In Greece (10Feb)

Stocks pop after Greek deal but fall back later; deal was expected anyway, analysts say

- STI: -0.03% to 2981

- MSCI Asia Pac ex-Japan: +0.16%

- Euro Stoxx 50: +0.37%

- S&P500: +0.15% to 1351.9

Greek politicians have agreed to endorse austerity measures proposed by its technocratic government in order that Greece might receive its next tranche of bailout money. This is a positive development, but the troika will defer its decision on dispensing the bailout money unless the program is made into law. On the bond exchange, negotiation seem to have settled on 30yr bonds with a 3.6% yield, much lower than private holders had desired. Greek finance minister warns that Greece will have to decide soon if it stays in the Euro or not.

In Singapore, the budget is coming up and is likely to focus on productivity, the birth rate, the aged. Already the prime minister has hinted that it would be desirable to increase employer CPF contribution rates for workers over 50. We don't expect any major fiscal loosening as unemployment is low even though growth prospects are subdued with downside risks. Fiscal bullets will be kept in reserve.

Underlying near term market positives for equities are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, while the US has outperformed, (2) unlimited long term refinancing operations (3yrs) by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt thru the banks, and (3) Fed anchors low rate expectations till late 2014 and considers QE3. Near term downside risks are: (1) expectations of economic data are running high, but we still face massive fiscal tightening in the EZ and progressively stronger tightening in the US this year, and (2) Greece may default leading to a exit-Euro catastrophe, however, a default within the Euro could actually be market positive.

STI earnings this season have generally met expectations: Keppel Corp, Starhub, SIA beat / SIAEC met / CMT, SPH missed. S&P500 earnings season now sees 68% companies having beaten expectations, rate of profit growth could still be slowing down.

But prospects of QE3 complicates things. If the economy is strong, stocks will go up. If the economy is weak, we will have QE3, and stocks will go up. Could stocks be a win win proposition? QE has a more consistent effect on the S&P500 than the STI though.

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Stocks Rally From Early Losses To Close Higher (09Feb)

Waiting for Greece, stocks rally from losses and finish up; Dow's best close since May '08

- STI: +0.83% to 2982.1

- MSCI Asia Pac ex-Japan: +1.33%

- Euro Stoxx 50: -0.05%

- S&P500: +0.22% to 1349.9

The PBoC pledged support of first time home buyers saying that banks will ensure differentiated downpayments and interest payments between first mortgages and not, as it maintains a delicate balance of cooling house prices while preventing an outright collapse. As China wage growth has been strong in the teens, there is significant downside support already. Minimum wage has been targeted by the govt to rise 13% this year.

In contrast, Greece is looking to slash minimum wage by 20%, layoff 15,000 state workers, trim state wages, merge pension funds, and implement structural reform, as they struggle to convince the troika that enough will be done to arrest fiscal decline as well as aid growth. 20th March is the deadline to secure bailout financing, before which the bond exchange must be concluded. Greece faces a negative feedback loop of austerity-contraction.

Underlying near term market positives for equities are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, while the US has outperformed, (2) unlimited long term refinancing operations (3yrs) by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt thru the banks, and (3) Fed anchors low rate expectations till late 2014 and considers QE3. Near term downside risks are: (1) expectations of economic data are running high, but we still face massive fiscal tightening in the EZ and progressively stronger tightening in the US this year, and (2) Greece may default leading to a exit-Euro catastrophe, however, a default within the Euro could actually be market positive.

STI earnings this season have generally met expectations: Keppel Corp, Starhub, SIA beat / SIAEC met / CMT, SPH missed. S&P500 earnings season now sees 68% companies having beaten expectations, rate of profit growth could still be slowing down.

But prospects of QE3 complicates things. If the economy is strong, stocks will go up. If the economy is weak, we will have QE3, and stocks will go up. Could stocks be a win win proposition? QE has a more consistent effect on the S&P500 than the STI though.

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Stock End Higher, Erasing Early Losses (08Feb)

Stocks finish higher, erasing early losses; Dow closes at highest since May 2008

- STI: +0.6% to 2957.8
- MSCI Asia Pac ex-Japan: +0.08%
- Euro Stoxx 50: +0.25%
- S&P500: +0.2% to 1347

Greece is still front and centre. Markets are very blase about it though as stocks headed higher. The country is fighting on two fronts: (1) structural reform (for growth, e.g. nominal wage cuts) and budget cuts proposals (for fiscal stability) otherwise they will not receive their next tranche of bailout money, and (2) stalled talks on the bond exchange. We've been thru this before. A default within the Euro should not be catastrophic but a default followed by Euro exit mindboggling to say the least. Former preferred so we can put this behind us.

Growth expectations throughout Asia have been revised lower, latest being Indian officials forecasting less than 7% and Chinese officials warning of Industrial Production at 11% growth for the year. Indonesia remains bouyant with expectations of infrastructure development and resilient domestic demand.

Near term underlying market positives for equities are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, while the US has outperformed, (2) unlimited 3yr refinancing operations by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt, and (3) Fed anchors low rate expectations till late 2014 and considers QE3. Near term downside risks are: (1) expectations of economic data are running high, but we still face massive fiscal tightening in the EZ and progressively stronger tightening in the US this year, (2) Greece might still default.STI earnings this season have generally met expectations: Keppel Corp, Starhub, SIA beat / SIAEC met / CMT, SPH missed. S&P500 earnings season has some concern: although 2/3 companies have beat expectations, rate of profit growth could be slowing down.

But prospects of QE3 complicates things. If the economy is strong, stocks will go up. If the economy is weak, we will have QE3, and stocks will go up. Could stocks be a win win proposition? QE has a more consistent effect on the S&P500 than the STI though.

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Stocks Slip On Wall Street As Greek Talks Drag On (07Feb)

US stocks edge lower as talks over new Greek austerity plan drag on

- STI: +0.76% to 2940

- MSCI Asia Pac ex-Japan: -0.01%

- Euro Stoxx 50: -0.29%

- S&P500: -0.04% to 1344

Markets could take a breather as the Greek bond exchange deal is stalled: private sector bond holders are reluctant to accept a much lower coupon rate of 3.6% to help plug a more than anticipated fiscal hole in 2011's budget. Who can blame them, when the economy seems trapped in a death spiral of austerity-contraction-austerity. While market consensus is no default, we don't think a Greek default is an outside chance, and is a major source of near term downside risk. Potentially, a messy exit from the Euro would have uncalculable impact, but a default within the euro should be a short term shock.

Near term underlying market positives for equities are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, while the US has outperformed, (2) unlimited 3yr refinancing operations by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt, and (3) Fed anchors low rate expectations till late 2014 and considers QE3. Near term downside risks are: (1) expectations of economic data are running high, but we still face massive fiscal tightening in the EZ and progressively stronger tightening in the US this year, (2) Greece might still default.

STI earnings this season is looking better: Keppel Corp, Starhub, SIA beat / SIAEC met / CMT, SPH missed. S&P500 earnings season has some concern: although 2/3 companies have beat expectations, rate of profit growth could be slowing down.

For our larger trend market outlook, see Strategy 27 Jan 2012. But prospects of QE3 complicates things. If the economy is strong, stocks will go up. If the economy is weak, we will have QE3, and stocks will go up. Could stocks be a win win proposition? QE has a more consistent effect on the S&P500 than the STI though.

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Jobs Report Lifts Dow To Highest Mark Since '08 (06Feb)

Stocks jump on reports of strong January job growth; oil rises for first time in a week

- STI: +0.6% to 2917.9

- MSCI Asia Pac ex-Japan: +0.13%

- Euro Stoxx 50: +1.49%

- S&P500: +1.46 to 1344.9

US non-farm payrolls outperformed all expectations for Jan (243k jobs added), and not only that, Nov and Dec got revised higher by 60k jobs. The whole of 2011 got revised higher by 180k jobs more, which has caused the year average rate of additions to jump from 137k to 152k jobs added per month, a respectable amount. Current annual rate of additions, including Jan's outperformace, is at 163k jobs added per month. This is a good report, but the problem is maintaining it in order to generate sufficient income to offset the fiscal tightening we expect this year.

Greek bond exchange deal is stalled, and its economy seems trapped in a death spiral of austerity-contraction-austerity. Major source of near term downside risk.

The STI has finally followed thru above its 200 day moving average. The S&P500 has also for the time being challenged it short-term bearish divergence on the MACD. So chances lean to the upside for the near term. Near term underlying market positives for equities are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, while the US has outperformed, (2) unlimited 3yr refinancing operations by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt, and (3) Fed anchors low rate expectations till late 2014 and considers QE3. Near term downside risks are: (1) expectations of economic data are running high, but we still face massive fiscal tightening in the EZ and progressively stronger tightening in the US this year, (2) Greece might still default.

STI earnings this season is looking better: Keppel Corp, Starhub, SIA beat / SIAEC met / CMT, SPH missed. S&P500 earnings season has some concern: although 2/3 companies have beat expectations, rate of profit growth could be slowing down.

For our larger trend market outlook, QE3 changes things. If the economy is strong, stocks will go up. If the economy is weak, we will have QE3, and stocks will go up. Either way, stocks will go up. Other positive development in the EZ is that the ECB's language approves the New Fiscal Compact as a step toward Fiscal Union, which is a necessary pre-condition to QE, hence there is every likelihood the ECB is trying to find the excuse to QE Italian and Spanish debt and ringfence them in the event of a Greek default.

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US Stocks Flat Ahead of Unemployment Report (03Feb)

Waiting for the number: US stocks little changed ahead of crucial unemployment report

- STI: -0.11% to 2901

- MSCI Asia Pac ex-Japan: +1.53%

- Euro Stoxx 50: +0.3%

- S&P500: +0.11% to 1325.5

In China, officials indicated that they would help the plight of small business by urging banks to be more leniant in lending them credit. At the same time, banks will limit dividend payouts to shore up capital. The announcment is a positive for China stocks as SMEs starved of credit has been a major hard landing concern.

The Eurozone takes another step toward fiscal union. Lead EZ finance minister Jean-Claude Junker says, “We have an internal market, we have a common currency, but we don’t have a centralized economic authority,". The statement was directed at EZ's structural growth problem.

US unemployment claims fell.

The STI gave up a follow thru to the upside and remains stuck to its 200 day moving average.  The S&P500 is as well undecided, challenging its short-term bearish divergence on the MACD. Again follow thru is required to confirm a move in either direction. In the short term, expectations of fundamentals are high: (1) US data looks good but we are entering 2012 with much less economic momentum than the market had thought, (2) Greece might still default, and (3) although two-thirds S&P500 companies have beat expectations, rate of profit growth could be slowing down. STI earnings this season is looking mixed: Keppel Corp, Starhub beat / SIAEC met / CMT, SPH missed. SIA's net profit fell 53%y-y but the market seems to have expected worse.

Underlying short term market positives are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, (2) unlimited 3yr refinancing operations by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt, and (3) Fed anchors low rate expectations till late 2014 and considers QE3.

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Stocks Rise On Manufacturing Data (02Feb)

Stocks rise as manufacturing data raises optimism about economic improvement; Greece helps too

- STI: -0.07% to 2904.8

- MSCI Asia Pac ex-Japan: +1.13%

- Euro Stoxx 50: +2.24%

- S&P500: +0.89% to 1324

Spat of PMI data as usual on the first day:

Singapore's Mfg PMI contracted at a faster rate in Jan from Dec, but electronics flipped into a mild expansion from contraction.

China Mfg PMI accelerated mildly, as did new orders. But new export data and imports contracted at a faster pace. Input prices expanded from contraction, showing the stickiness of inflation, and that policy will continue to lean toward prudent. Although China will avoid hard landing, its re-balancing toward domestic demand is having a restrained positive impulse on the rest of the world. Taiwan and S-Korea pace of mfg contractions eased.

EZ Mfg PMI pace of contraction eased further with Germany and Austria expanding, rest contracting. The easing of contraction, new orders and new export orders included, has got the market excited that recession might be avoided. 1q12 may see stabilization, but the New Fiscal Compact, which will kick in in March, will see large scale fiscal austerity. EZ recession for 2012 still in our baseline.

US Mfg PMI accelerated a point from 53.1 to 54.1, a decent showing. New orders and exports orders also accelerated. Customer's inventory continues its messy trend higher, which is actually a bearish signal. Overall, consistent with our 1.5% growth outlook for the year.

We're starting to think perhaps Euro leaders are getting comfortable with the idea of a Greek default. The New Fiscal Compact, will entail fiscal discipline enshrined in national law - this in Mario Draghi's own words is a step toward fiscal union. We have argued before that fiscal union is a necessary condition for frontdoor QE - yes, the big bazooka.  If the bazooka is being prepped, then Italy and Spain could be ringfenced from contagion stemming from a Greek default.

The STI is still treading water above the 200 day moving average. We need some follow thru in either direction to confirm a move. The S&P500 on the other hand, challenging its short-term bearish divergence on the MACD. Again follow thru is required to confirm a move in either direction. In the short term, expectations of fundamentals are high: (1) US data looks good but we are entering 2012 with much less economic momentum than the market had thought, (2) Greece might still default, and (3) although two-thirds S&P500 companies have beat expectations, rate of profit growth could be slowing down. STI earnings outlook this season has only just begun, Keppel Corp beat consensus expectations (met PSR's), CMT, SPH missed. SIAEC met our's and mgt guidance was positive in tone. Underlying near term market positives are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, (2) unlimited 3yr refinancing operations by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt, and (3) Fed anchors low rate expectations till late 2014 and considers QE3.

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Dow And S&P Have Best January Since '97 (01Feb)

A slow, steady climb leads Dow and S&P to their best January since 1997

- STI: +0.64% to 2906.7

- MSCI Asia Pac ex-Japan: +1.13%

- Euro Stoxx 50: +0.5%

- S&P500: -0.05% to 1312.4

US consumer confidence took an unexpected fall, and the Chicago PMI decelerated. German retail sales unexpectedly dropped. Japan mfg PMI accelerated, industrial production is up, while S. Korea's industrial production fell. Recent tone of data points to the US slowing from 4q11, while the EZ and Asia slow in their pace contractions. Singapore seems to be putting in an economic bottom and but a convincing GDP rebound in 1q12 is a question mark in our opinion - we face a slowing US, a very austere EZ, and a slowing China.

Greece's fiscal situation is looking a bit desperate as bondholders hold out for an increased yield. Who can blame them? Wouldn't you want more yield to reflect the risk of a govt that consistently underperforms fiscal targets? (They missed their 2011 target by 15b euros) While the political and market rhetoric has been ''confidence'' in reaching a solution, we are starting to get worried. As the ECB's backdoor QE has resulted in Italian and Spanish yields dropping, there may be increasing EZ leaders' confidence that an effective ''firewall'' has been erected, i.e. let Greece default, we can handle it...

The STI has poked its head above the 200 day moving average again, third time. We need some follow thru in either direction. The S&P500 on the other hand has put in a short-term bearish divergence on the MACD, so risks of a short-term pullback for the US continue. Fundamentals for the short term, we think, are looking more to the downside: (1) the marked improvement in US data have started to come in below expectations as we are entering 2012 with much less economic momentum than the market had thought, (2) Greece might still default, and (3) although two-thirds S&P500 companies have beat expectations, rate of profit growth could be slowing down. STI earnings outlook this season has only just begun, Keppel Corp beat market expectations (met PSR's), CMT and SPH missed. On the other hand, market positives are: (1) the rate of contractions in the Eurozone and Asia have eased somewhat, (2) unlimited 3yr refinancing operations by the ECB has successfully resulted in backdoor QE of Eurozone sovereign debt, and (3) Fed anchors low rate expectations till late 2014 and considers QE3.

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