Daily Morning Watch - 11 October 2012

SINGAPORE

Fraser and Neave Ltd (FNN)'s board said it agrees with its adviser JPMorgan that the buyout bid by Thai tycoon Charoen Sirivadhanabhakdi is "not compelling, though fair". In other news, Overseas Union Enterprise (OUE) confirmed it had made the S$1.4B unsolicited cash offer for the Co's hospitality and serviced residence business.

US indices were under pressure on Wednesday. On the US economic data front, MBA Mortgage Applications for the week ended October 5th fell 1.2%. Wholesale inventories rose 0.5% MoM (+0.4% expected) in August. The Fed's Beige Book reported that both "credit standards" and "employment conditions" were little changed. Stocks in the food & staples retailing and consumer services sectors traded higher while shares in the energy and automobiles sectors were under pressure. Regarding some major US company news, Alcoa (AA -4.6% to $8.71) posted a 3Q adjusted EPS of $0.03 (breakeven expected) compared to an EPS of $0.14 a year ago, on revenue of $5.8B, down 9% YoY. In other news, Tesoro (TSO -5.59% to $38.7), Valero Energy (VLO -6.15% to $29.47), Denbury Resources (DNR -3.2% to $16.05), Western Refining (WNR -6.59% to $24.52), were under pressure after Chevron (CVX -4.18% to $112.45) said its downstream earnings in the 3Q would decline significantly compared to its 2Q. Seperately, FedEx (FDX +5.15% to $89.99) announced it's targeting a "$1.7B annual profitability improvement during the next 3 years".

In Europe, in Germany , wholesale price inflation soared 4.2% annually in September after rising 3.1% in August. France 's industrial production increased 1.5% on a monthly basis in August, from the 0.6% rise in July. Italy 's industrial production decreased a calendar-adjusted 5.2% annually in August. S&P downgraded the debt rating on Spain to "BBB-" from "BBB+" with a negative outlook. Regarding stock, EADS jumped after the company and BAE Systems decided to terminate their merger discussions. This morning, the Nikkei225 index opened lower with a bearish gap.

CHINA - HK

China passenger car sales fell 0.3% YoY (+7.9% MoM) to 1.32M units in September and were up 6.9% to 11.27M units in January-September, reported the China Association of Automobile Manufacturers. Overall vehicle sales, covering also commercial vehicles, fell 1.8% YoY to 1.62M units in September and were up 3.4% to 14.09M units in January-September.

Hong Kong's gold shipments to mainland China dropped 29% MoM to 53.508 tons in August according to the HK government. August gold imports from mainland China fell 19% MoM to 24.193 tons.

AIA Group Ltd (1299) announced record 3Q value of new business of $300M, up 22% YoY, adding: "In 3Q, ANP (Annualised New Premium) increased to $696M, representing an underlying year-on-year growth of 17% excluding the contribution from a single large Australian group scheme written in 2011. VONB margin expanded by 11.0 percentage points to 42.6% from 31.6% in 3Q2011. Highlights of the quarter include strong contributions to ANP growth from Singapore , Indonesia and the Philippines and significant margin improvements in Hong Kong , Thailand and Malaysia . (,,,) TWPI (Total Weighted Premium Income) increased by 3% to $3,852M." Separately the Co said it has agreed to acquire ING Management Holdings ( Malaysia ) Sdn Bhd from ING Insurance Asia NV for E1.34B, adding: "The acquisition represents a compelling financial investment for shareholders and will be immediately accretive to earnings. It is expected to generate cost synergies of $24M by 2015 and the purchase price will be funded through a combination of AIA's internal cash resources and external debt financing that will retain AIA's existing strong financial position."

ICBC (1398), Agricultural Bank of China (1288), Bank of China (3988) and China Construction Bank (939): Central Huijin Investment Ltd, a unit of China's sovereign-wealth fund, reported it purchased shares in the four major Chinese banks on the secondary market yesterday and will keep buying such shares over the next 12 months.

China Coal Energy (1898) said its parent group bought 700K H-shares and 2.52M A-shares in the Co raising its holding to 57.54% from 57.52%.

China Overseas Land & Investment Ltd (688) reported property sales grew 30.8% YoY to HK$8.6B in September and were up 28.8% to HK$91.9B in January-September.

China State Construction International (3311) said contracts newly signed in January-September amounted to HK$33.7B, up 30.6% YoY and equivalent to 96.2% of its annual target.

China Railway Construction (1186) announced successful bidding of 2 expressway projects in China 's Liaoning province worth 5.2B yuan in total.

Baoshan Iron & Steel (600019) said it will keep prices of its main products unchanged for a second month in November.

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