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Asia Pacific Equity Strategy - Close to trough valuations, but still no foreign investor capitulation

Shared By Stock Fanatic on Tuesday, June 30, 2015 | 30.6.15


MSCI Asia ex-Japan P/B drops to 1.5x book
Figure 1 highlights that MSCI Asia ex-Japan (MXASJ) price-to-book has dropped to 1.5x. This is close to the last low of 1.47x seen in January 2014. Beyond the Jan 2014 low, P/ B has only been lower in 1998 and 2008 (financial crises), 2001 global recession and the 2003 SARS episode. Figure 2 highlights that Korea's P/B has dropped to 0.98x, just above the 0.97x low seen in 2009. For MSCI China, current P/B of 1.62x compares with the last two lows of 1.51x in October 2008 and 1.36x in June 2013. See Figure 4.

Global Equity Strategy - Greece - where now?

Pic Credits : openeurope.org.uk/
Our key conclusions are that:
There is only a one in three chance of a Grexit (rising to, at least, 50% if the ELA were withdrawn). This is largely because 70% of the electorate want to stay in the Euro (and 57% on a recent poll even at the expense of austerity);

The critical issue in the next week is whether the electorate realise that a ‘No’ vote is nearly tantamount to a Grexit;

Even in the event of a Grexit, there is only a one in three chance that this leads to a systemic European crisis;

OIR BITES: ComfortDelGro Corporation Ltd – Seeking opportunities in London’s rail business

ComfortDelGro Corporation Ltd (CDG) announced this morning that it has incorporated a wholly owned subsidiary in the United Kingdom, with an issued and paid up capital of GBP1.

The Realty Singapore - Singapore REITs into capital raising phase

In today's edition
The Singapore REITs seem to be racing with the Fed. A number of them have come to market over the last month to raise capital to fund announced or potential acquisitions. With some of the sizable acquisition yet to be funded, we do see more equity capital raisings for the sector in the next quarter, just ahead of the potential increase in rates. 

In addition to the existing REITs, a number of IPOs are racing at the same time. Over the weekend, press reported that both Manulife and Tianfang are looking to list REITs in Singaopre. This together with the previously announced China business park REIT by Kailong will see at least 3 new small portfolios to be marketed in the coming quarter.

Suntec REIT - Divestment and redevelopment of Park Mall announced

Divestment and redevelopment of Park Mall announced
Suntec REIT announced today that it has entered into a conditional property sale agreement for the sale of Park Mall at S$411.8m, in line with the latest valuation of the property as at 31 Dec 2014. In conjunction, Suntec REIT will take a 30% stake in Park Mall Investment Limited, the joint venture company set up to redevelop Park Mall into a commercial development. with the rest 70% held by SingHaiyi Group and Haiyi Holdings, entities related to Gordon Tang. The commercial development will comprise two office blocks and an ancillary retail component with details to be followed later on. Under the joint venture, Suntec REIT will have the ability to acquire one office block with the other parties collectively have ability to acquire the other office block and the right of first refusal to acquire the retail podium.

China Insurance Sector - El Niño approaching

• We expect the occurrence of the El Niño effect in 2015 to hit the China P&C insurers’ combined ratio by some 2pp over 2H15-2016

• Property and auto insurance likely to be the most affected in terms of claims; plus, pricing pressure is mounting in auto insurance

We continue to prefer life insurers to P&C insurers; reiterate positive views on China Life, Ping An and PICC Group

Top pick for the day - Indonesian Rupiah (IDR)

A period of strengthening


Indonesian Rupiah has been on a weakening trend since 2011 and we reckon that it could soon see some strength in the months to come

Prices have weakened to below the 2008 lows of 13000 to the US Dollar (USD)

Starburst Holdings - Hit by contract delays

■ 1H15 expected to be weak due to delay in contract awards

■ Expect a strong recovery in FY16 and FY17

■ Beneficiary of higher defence spending in Southeast Asia and the Middle East

Maintain BUY, TP cut to S$0.56

Phillip Futures Energy Daily Outlook - The US Dollar Index continues to affect oil markets while we wait for Iranian nuclear deal to pan out.

Pics Credit : www.nedayeazadi.net
Fundamental and Technical Analysis
Iranian nuclear negotiation deadline is Today: We continue to eye negotiations as this would likely be the key event for this week. A successful negotiation would likely cause the market to move into oversupply with Iranian crude. However, the key issue should be about the timing that this would happen as this was the impasse of the negotiations that was seen previously. Speculations that the negotiations could continue for the next few days has surfaced. Therefore, suggesting that delays to the agreement could be expected.

US Dollar Index became extremely volatile with uncertainties from Greece’s default: The US Dollar Index gapped up on open this week but subsequently dropped throughout the day. This display of volatility comes from the uncertainty with Greece. With Greek debt repayment deadline today and a referendum scheduled on Sunday, it is unsure how the situation will pan out. What we are certain is that there will be high volatilities this week. Moving forward, depending on how the US Dollar Index moves, we would expect to see oil prices affected as well.

Jardine Cycle & Carriage - Fund raising for acquisitions

■ 1-for-9 rights issue at S$26 per share to raise US$768m

■ Stronger balance sheet could pave the way for more acquisitions to boost its earnings streams

■ Weak outlook for Astra International remains the key challenge for JC&C’s near-term prospects

■ Upgrade to HOLD with adjusted TP of S$34.50

Frasers Centrepoint Trust - Northern Lights

FCT is one of our top picks in the retail sector
We maintain our BUY recommendation, with TP of S$2.20. We believe that Causeway Point, which accounts for 46% of the Trust’s net profit income, will continue to surprise on the upside and support price performance.
**** Recommendation ****
 
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