DBSVickers.Report 16 Jun 14

Today’s Focus
 STI – No change in short-term view, 3270 important
support
 China upgrade to overweight – Picks here are Yangzijiang,
China Merchant and Midas
We maintain our view that further short-term upside for the STI
is capped at 3340-3365 on valuation grounds as it currently
trades at 14.1x (+0.25SD) 12-mth forward PE. The 3270 level is
an important near-term support that held intact last week. Our
assumption is that it should hold intact as the STI grinds
gradually higher towards 3350. But in the event that the index
falls below 3270, a correction is signalled with the STI heading
down to 3220 first followed by 3170.
Singapore market trading activity was muted last week with a
daily average value of just S$975mil. This trend is likely to
continue through June following the start of the FIFA World
Cup 2014 tournament. Investors are also watchful of the
insurgence activities in Iraq and their impact on oil price should
there be supply disruption.
Our regional equity strategist raises HK/China equity markets to
Overweight from Neutral. She believes that the fear of a hardlanding
scenario has faded and there is also new found
confidence in China’s policy flexibility.
Our HK research team has a year-end target of 25,770 (10%
upside) for the HSI at 11x FY15F PE and 11,850 (12.5% upside)
for the H-share index at 7.5x FY15F PE. For stocks listed on the
SGX with Chinese exposure, we like Yangzijiang, China
Merchant and Midas.
Consensus expects the US QE tapering pace to be lowered to
US$35bil/mth from the current US$45bil/mth at the FOMC
meeting this Wednesday. The FED is also expected to leave
interest rates unchanged at 0.25%.
Technics Oil & Gas Limited announced that the commercial
terms and conditions proposed by them and its Middle-East
Consortium partner in the setting-up of the Gas Processing
Facility in South Asia (were not accepted by the counterparty.
As such, Technics and its Middle-East Consortium partner have
decided to discontinue with the arrangement relating to the
project. This contract was not expected to have positive
material impact on the earnings per share for the financial year
ending 30 September 2014.