Market Views 29 December 2011

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Announcements

This is the last edition of Market-Juice for this year.
See you in 2012!
Happy New Year ☺


Juice

Small Caps

Osaki Electric Co yesterday revealed itself as the mystery bidder that is going head-to-head with rival Boer Power (1685.HK) for all of SMB United's (S16) issued shares. Osaki is offering 40c per share, against Boer's 32c proposal in late October.
Comment: Noteworthy only. Price has moved.


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market View 27 December 2011

Juice

O&M
STX OSV (MS7) wins Nok 200m deal to build forage carrier that transports fish feed to fish farms. With this newest contract, Co's order wins for the year come in at an estimated Nok 10.5b vs FY10 of Nok12.5b, and ahead of initial expectations in 2Q11. Note that it’s orderbook current stands at Nok 17.5b, underpinning earnings visibility till 2014.
Comment: This is one to look out for as the market recovers


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 22 December 2011

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Juice

Coal

Gloucester Coal (ASX: GCL) halts trading on ASX for at least the whole day today.
Gloucester Coal’s parent, Noble Group, is willing to sell most of its 64.5% stake to Yanzhou Coal, reducing odds of competing bids, Australian Financial Review reports, citing unidentified source close to Noble.
* Noble is said to consider retaining cornerstone stake, wants marketing & trading rights over coal output from new entity, AFR says
* Analysts say shareholders may get cash and shares in Australian unit Yancoal, with Yanzhou to control 60%-70% of new co.: AFR
* Yanzhou is expected to pay at least $2b, Bloomberg reported previously; shares of Gloucester, Yanzhou, Noble are halted
Comment: It is not in Noble (N21)'s interest to sell its entire stake in GCL. GCL remains a strategic asset in Australia for Noble. Considering this situation, a likely outcome is Noble selling a stake in GCL to Yanzhou but retaining a cornerstone stake. This will put cash back on its balance sheet, book a profit from the sale as well as continue to enjoy the advantage of this asset.
Noble is still halted today


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 21 December 2011

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Juice

Macro

USD falls against 16 most traded currency pairs
Comment: Basically, weakness in the DXY. Beneficial for commodities. Names here will be our usual suspects, Noble (N21) and Olam (O32)

O&M

Dyna-Mac (NO4) said it had secured orders potentially worth S$115m
Comment: Getting played on the back of rising oil prices and a falling USD too

Coal

Noble (N21) calls for a trading halt pending clarification of news regarding its subsidiary, Gloucester Coal
Comment: We covered this yesterday

Shipping

Two shipping consortiums, of which Neptune Orient Lines' APL is a part, will join forces to form one of the most extensive vessel networks in the world, called The G6 Alliance. 'Container shipping is coming back to its senses. The alliances formed now are on the scale we've not seen before. It is a sign of desperate times as we're seeing them make the necessary capacity adjustments and not fight for market share,' he said.
Comment: Desperate situations call for desperate measures. Seems that this alliance can really be beneficial. Container shipping is more efficient on a greater scale


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 20 December 2011

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Juice

Flows

Interesting points to note from BNY's data last night. Net selling of Asian equities after the death of Kim Jong Il
Comment: This can mean 1) Profit-taking to close the books for the year, 2) flight to safety as tensions and risk may rise after the passing of the North Korean leader

Yet another interesting point on the flow front is selling of Italian and Spanish debt in the past 2 trading sessions. Data shows that the selling is 3 standard deviations from the normal for Spain and about 2.5 standard deviations for Italy.
Comment: Anything away from the normal average is abnormal. Anything above 2 standard deviations away is statistically very abnormal. Something very wrong is happening at the moment which may also account for the fall of the EURO under 1.3000 yesterday and staying there

Property

GLP (MC0) and China Investment Corp (CIC) are buying 15 logistic properties in Japan for US$1.6b, expecting demand for warehousing to be strong after the earthquake moving forward
Comment: CIC's first foray into logistic properties in Japan. GLP already has a foothold, making them a viable partner. This is familiar ground for GLP and it is expected to do well. Again, risks here involve the well-being of the Japanese economy in general as well. A stronger yen will also be beneficial

Coal

China's Yanzhou Coal Mining Co. (1171.HK) is in preliminary discussions with Gloucester Coal Ltd. (GCL.AU) to create a coal giant worth up to US$7.9b by merging their Australian assets, according to 3 people familiar with the matter.
Comment: Noble (N21) owns a 64.5% stake in Gloucester coal, which has a market capitalisation of US$1.4b. Such a deal may be beneficial to Noble if Yanzhou pays a premium for Gloucester. Do note that CIC owns a 14.5% stake in Noble


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 19 December 2011

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Juice

Macro

Bloomberg News tallied the debt disclosed by all 231 local government financing companies that sold bonds, notes or commercial paper through Dec. 10 this year. The total amounted to 3.96tril yuan (US$622bil), mostly in bank loans, more than the current size of the European bailout fund. There are 6,576 of such entities across China, according to a June count by the National Audit Office, which put their total debt at 4.97tril yuan. That means the 231 borrowers studied by Bloomberg have alone amassed more than 3/4 of the overall debt. The fact so few of the companies have accumulated that much debt suggests a bigger problem, says Fraser Howie, the MD of CLSA Asia-Pacific Markets. “You should be more worried than you think,” he said of Bloomberg’s findings. “Certainly more worried than the banks will tell you. “You know how this story ends -- badly.”
Comment: China cannnot save the world as it has its own problems. This boom may not be coming to bust anytime soon but we have to keep this in mind. The bubble shall burst in time to come

Property

Hong Kong luxury home rents, which fell last quarter for the first time since mid-2009, may slump 10% next year as banks and hedge funds scale back amid the threat of a global recession, according to brokers including Jones Lang LaSalle Inc. (JLL) and Colliers International. “We’re definitely at that tipping point,” said Anne-Marie Sage, Hong Kong-based head of residential leasing at Jones Lang. “We’ve began to see vacancies at the very top end of the market. The banking and the financial sector have basically stopped all movement.”
Comment: When it rains, it pours. While we already know that property prices are not going to hold up, rental market may crash as well. This phenomenon not only will occur in HK but in Singapore too. For those thinking that the economics of the 2 countries differ greatly, that may not be the case. Note that the foreigners holding up the rental market can be relocated easily regardless of industry or rank, be it white or blue-collared workers

China’s home prices posted their worst performance this year with more than half of the 70 biggest cities monitored in November recording declines after the government reiterated plans to maintain property curbs.
Comment: Where the money is coming from, the situation is bleak


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 16 December 2011

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Ideas

Macro
Michael Platt, founder of the $30b hedge fund BlueCrest Capital Management LLP, said most of the banks in Europe are insolvent and the situation will worsen in 2012 as the region’s debt crisis accelerates. Austerity will ultimately lead to slower growth in Europe, making the region’s debt woes even worse, he said. A solution will come when the European Central Bank pumps significant amounts of money into economies, something it lacks a mandate to do.
Comment: Seems that either way, European markets are gone. This is gradually being priced into the market through the selling of the EURO. The worst has not been fully priced in yet


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 15 December 2011

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Ideas

Rubber
GMG (5IM) announces two new JVs to expand natural rubber processing capacity in the Ivory Coast. The investments will be funded from internal resources. Earlier this wk, GMG’s subsidiary struck a US$410m deal with Cameroon’s govt to develop 45.2k ha of palm oil and rubber plantations. The stock trades at 8.9x P/E, 1.4x P/B.
Comment: GMG has been in the limelight for this week. Share price however, remains weak. This can be an opportunity for long-term investors

O&M
SembMarine (S51) said on Thursday that its unit has secured a US$291.6m worth of contract to build an accommodation semi-submersible rig with options for another 2 units. The rig is ordered by a subsidiary of Prosafe SE, a leading owner and operator of semi-submersible accommodation/service rigs. It is scheduled for delivery in the Q2 of 2014.
Comment: Finally we see some contracts to SembMar. However Keppel is still better on track with their orderbook expectations


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 14 December 2011

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Ideas

Macro

Federal Reserve policy makers refrained from taking new actions to bolster growth at the world’s largest economy.
Comment: Ben Bernanke spent his 58 birthday on the FOMC with no presents. Let's give him credit for that. Considering the direction
of the USD and the resilience of the US markets, there is no immediate concern for the FED to push out more measures. All eyes on
Europe as the EURUSD pair pushes towards 1.3000. As I have mentioned to some, 2 views are in force as the EURUSD pair moves
towards a 1.2000 consensus, 1) ECB printing money 2) EU zone break up which includes but but limited to an exit by Germany


Market-Juice Special - How Ponzi Schemes form
Everyone has heard how bad or evil Ponzi Schemes are with Madoff being a hallmark example.
Market-Juice now shows you how innocently a Ponzi Scheme can be devised.
1) Imagine you are a fund manager and you canvassed $100m from investors and you contractually promise to give them a 10% return
2) When the market is good everything is fine however, sometimes you do not make 10% but that is fine as there is enough money
in the pot to distribute and, still have investable money
3) When the market is bad, you start making losses
4) Now lets say you start a year with $100m and end the year with $100m, flat
5) You still have to pay out $10m (10%) so you are left with $90m
6) The following year, you start with $90m when your investors assume you have $100m7) Even if you make 10%, you have $99m, you pay out $10m but now you have $89m left
8) It is a vicious cycle if you cannot outperform the 10% benchmark after a bad year and you end up drawing down on the money pot
9) Up to a certain point, you realise that you have to canvass more money to add to the money pot to pay off your initial investors
10) Voila! Ponzi Scheme formed!


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 12 December 2011

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Announcements

market-juice now comes in Daily and Mid-day editions depending on market conditions

Ideas

Coal
Gloucester Coal Ltd. gained 4.1% to A$7.69. The miner is targeting 5.5m tons of production in the 2012 fiscal year and 10m tons by 2015, according to a regulatory filing.
Whitehaven Coal Ltd. agreed to buy Aston Resources Ltd. A$2.25b in shares to create the biggest independent publicly traded coal company in Australia. The offer values Aston at A$11 a share, 13% more than Aston’s closing price on Dec. 9
Comment: The coal market seems bussling. Gloucester Coal is partially owned by Noble (N21). Also consider short-term trades on Sakari (AJ1)

Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 09 December 2011

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Announcements

market-juice now comes in Daily and Mid-day editions depending on market conditions


Ideas

Singapore

Banks brace for slower growth in home loans.But foreigners not major source of mortgage business
Comment: Foreigners were the main source of demand for the mass market private residences which dragged up the entire mass market. The chain reaction from this demand shift is what is going to affect everything from condos to public housing

To avoid paying ABSD, developers must build, sell all units on residential sites within 5 years
Comment: Seems that developers may have to change their strategy. No more hording of land, no more taking their time to sell inventory from newly acquired sites

The residential market in Sentosa Cove - where foreigners and corporations accounted for 46% of home purchases in the first 11mths of 2011 - could be hit especially hard by the latest round of cooling measures, say analysts.
Comment: According to Kim Eng's report yesterday, Ho Bee (H13) has 469 units, CityDev (C09) has 207 units and SC Global (D2S) has 31 units unsold at Sentosa Cove

Analysis of the property situation
Comment: A few moons ago, I have expressed my reservations to the booming property market in this note. At this point, my estimate for the correction is anything between 20 to 30% decline. The reason for this is, 1) it is not in the interest of the government to force property into a bear market, that will be lose-lose. So a 20% decline is reasonable for now. Reservation of buyers shall push this to the maximum. 2) The additional 10% decline may come from the downstream effect to 10% ABSD which is applicable to the top end of the demand curve, the foreigners. Why I call them this is mentioned above


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views Mid-day 08 December 2011

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Announcements
market-juice now comes in Daily and Mid-day editions depending on market conditions

Ideas
Singapore Property
Starting today, foreigners and corporate entities buying private homes in Singapore will have to pay an extra 10% by way of an additional buyer's stamp duty. This duty will also apply to permanent residents (PRs) buying their second or subsequent homes and Singaporeans buying their third residential property or more - though only to the tune of 3%. Overseas properties are excluded from the count of properties owned. Comment: Policy likely to affect banks and developers. Of the banks, DBS has abt S$52b in loans to housing and construction sector, UOB $53b, abt 40% of their loan book. OCBC has less exposure abt S$41b (34%) (data frm June 2011)Of the Developers, Citydev has the most unsold units at 5381, Cland at 3135 and Frasers (F&N) at 2258.
Prices have gapped down at opening today and probably set to move lower over the next few days

Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 07 December 2011

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Announcements
market-juice now comes in Daily and Mid-day editions depending on market conditions

Ideas
Macro
“There are so many exogenous factors that to try to forecast the market with a degree of confidence is difficult,” Birinyi says. The best strategy for stock investors, he says, is to stick with iconic brands, such as Apple Inc. (AAPL) or Ralph Lauren Corp. (RL), and with companies that offer “meaningful dividends” of at least 5%. Birinyi is the president of stock market research and money- management firm Birinyi Associates Inc.
Comment: Yet another prominent analyst and fund manager makes a statement on volatility. Traders trive on volatility but investors can sometimes be frustrated. Suggest taking a shorter-term trading perspective for the next 6 mths
Singapore
More layoffs loom and may linger next year. Unions expect 20% more retrenchments this year; next year even more uncertain: PM Lee
Comment: This affirms my statement mention in this note some weeks ago. Many are unaware of the weakness of the economy with fluffed up statistics being declared. Citibank just announced that it will cut 4500 jobs and limit hiring to "critical" jobs. Citi is not the first bank to do so and to such extent. When banks start controlling head count in such a way to control costs, other industries usually follow. This is a global phenomenon, not a local one. We are not isolated and resilient to the global environment as we will like to be

Casino Gaming
Melco Crown Entertainment (6883.HK) to start trading in HK today
Comment: Melco is the company of Lawrence Ho, son of tycoon Stanley Ho. First listed in the US, it now has a secondary listing in HK. Currently, the Melco Int (200.HK) is the property development arm. Melco Crown Entertainment is the casino arm. Consider trading the HK market. Commissions are generally lower than the Singapore market and get exposure to more alternatives to Genting

Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views Mid-day 06 December 2011

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Announcements

market-juice now comes in Daily and Mid-day editions depending on market conditions


Ideas

Macro
S&P put Germany, France and 13 other euro-area nations on review for a downgrade yesterday, saying “continuing disagreements among European policy makers on how to tackle” the region’s debt crisis risk damaging their financial stability
Comment: The US has already been downgraded. A downgrade of EU nations is not unexpected

The S&P 500 Index may advance to between 1,330 and 1,345 this month before the rally reverses, according to Tom DeMark, the creator of indicators to show turning points in securities.
Comment: Anyone uses the DeMark indicators? If you see my upside target, it is around there too
Property

The phenomenon of shadow office space is making a comeback. Tenants who find themselves stuck with excess space are looking to dispose of it by finding sub-tenants or replacement tenants.
Comment: I find this point a red flag. The office properties space lagged the residential property sub-sector. This phenomenon is a sign of reversal in the boom uptrend that we have seen in the last 2 years. This just shows the impending reversal into a bearish trend of the property market, regardless of sub-sector. Considering the extent of the last boom, residential sub-sector can be reasonably expected to see more volatile movements


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 05 December 2011

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Ideas

Macro
Prime Minister Mario Monti will lobby parliament to support a 30b-euro package of austerity and growth measures to trim the euro-region’s second-biggest debt and prevent Italy from sparking the euro’s breakup.
Comment: It is quite sensible for the Italians to think about this. Considering the current market condition, this is likely to give some +ve catalyst to the markets for now. Flow indicators have shown +ve Flow into equities across US and developing countries. As such catalysts are not very sustainable for longer rallies, suggest sticking to high betas in the Commodities and O&M space for the ride

Barton Biggs, who trimmed bullish bets in September before U.S. stocks posted the biggest monthly gain since 1991, said that while he doesn’t want to be fully invested in equities, “it’s hard to get really bearish.”
Comment: Barton Biggs is one of those people the market listens to, even though his performance has not been as spectacular as Soros or Buffett

Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views 02 December 2011

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Announcements

Introducing market-juice!
Adrian's Market Views notes has a new identity and a whole suite or services.
You can now view market-juice online, @ market-juice.blogspot.com
You can also follow market-juice on Facebook and Twitter
This is the soft-launch of market-juice. Look forward to your feedback ☺


Ideas

Commodities
Olam (O32) to set up US$49m rice farming and milling facility. The facility, located in Nigeria, will see operations commence in 2012. The facility will begin to generate revenue in FY2013, and will be fully operational by FY2016.
Comment: News came out after market close yesterday. Suggest to accumulate under 235

Laggard call: Dyna-Mac (NO4). Price has declined tremendously and may be lagging behind all the other O&M

Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements

Market Views Midday 01 December 2011

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Announcements

Introducing market-juice!
Adrian's Market Views notes has a new identity and a whole suite or services.
You can now view market-juice online, @ market-juice.blogspot.com
You can also follow market-juice on Facebook and Twitter
This is the soft-launch of market-juice. Look forward to your feedback ☺


Ideas
Macro
Six central banks led by the Federal Reserve agreed to cut the cost of providing dollar funding via swap agreements and to make other currencies available as needed. The People’s Bank of China cut banks’ reserve requirements yesterday for the first time since 2008
Comment: Markets seemed terribily rigged now with a coordinated effort to provide liquidity. A "great QE" for now. Together with PBOC cutting banks RRR, this pumps even more easy money into the market. Markets will probably soar for a today and tomorrow with some profit-taking here and there. Another thing to note is that this will cause DXY to decline and commodity prices to go up. Looking at high beta commodity stocks for trading


Update 233pm

Noble: Coal prospector Aspire Mining (AKM.AU) said Noble has agreed to market coking coal from the Ovoot project being developed in northern Mongolia.
The alliance gives Noble marketing rights to at least half of the first 5m mt of coal produced at Ovoot, subject to the establishment of a road and rail port link with customers.
It said the pact with Noble will focus on a supply chain to customers in China, north Asia and other coking coal markets served by sea. It also will see the establishment of the Ovoot coal brand.
News of the deal buoyed Aspire's shares, which ended the day 8.9% higher at A 30.5 cts.
Aspire currently is working to increase the estimated resource at Ovoot, which initially has been shown to have 330.7m tons.
Noble earlier this year agreed to help Australia's Xanadu Mines Ltd. (XAM.AU) explore for coking coal, iron ore and ferroalloys in Mongolia.
Noble has an 8.3% stake in Aspire, which also has other coal projects in Mongolia, and a 9.9% interest in Xanadu.
Noble is up 6.1% at $1.21

Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements