Daily Morning Watch - 12 October 2012

SINGAPORE

Singapore 's GDP (seasonally adjusted and annualized basis) contracted 1.5% QoQ in 3Q (-1.0% expected) vs +0.2% (upwardly revised) in 2Q according to the government. On a YoY basis, GDP expanded 1.3% in 3Q (+1.2% expected) vs +2.3% in 2Q.

The Monetary Authority of Singapore has kept its monetary policy unchanged, saying: "The Singapore economy should continue to expand but at a modest pace in 2012 and 2013.  The labour market should remain tight. (...) MAS Core Inflation is expected to average around 2.5% in 2012 and 2-3% next year. (...) CPI-All Items inflation is likely to come in slightly above 4.5% in 2012(...). It is expected to ease gradually to 3.5-4.5% in 2013. (...) The appreciating stance of exchange rate policy since April 2010 has provided some restraint on the build-up of inflationary pressures, which in part reflects supply-side constraints in the economy. MAS Core Inflation receded recently but will face upward pressure from higher food and services costs.  CPI-All Items inflation will remain elevated for some time. MAS will therefore maintain the policy of a modest and gradual appreciation of the S$NEER (Nominal Effective Exchange Rate) policy band. There will be no change to the slope and width of the policy band, as well as the level at which it is centred. This policy stance is assessed to be appropriate in containing inflationary pressures and keeping the economy on a path of restructuring towards sustainable growth."

DBS Group (DBS) announced it has agreed to sell a 10.4% stake in The Bank of Philippine Islands to Ayala Corp for S$757M reducing its holding to 9.9%. The Bank added: "The transaction is in line with DBS' disciplined capital management and strengthens its capital position ahead of the introduction of Basel III on 1 January 2013. (...) The transaction will realise a gain of appx. S$450M against the carrying value of the investment."

Global Logistic Properties (GLP) said it has signed an agreement for a $1B credit facility with China Merchants Bank, adding: "The 10-year, secured credit facility provides for borrowings at a preferential interest rate for up to $1B for onshore and offshore funding requirements for the Co's development needs in China."

US indices were mixed on Thursday. On the US economic data front, On the US economic data front, initial jobless claims dropped 30,000 to 339,000 (370K expected) in the week ended October 6th. Import Price Index rose 1.1% MoM (+0.7% expected) and fell 0.6% YoY (-1.3% expected) in September. Finally, the trade deficit grew 4.1% to $44.2B ($44.0B expected) in August from $42.5B the previous month. Stocks in the diversified financials and automobiles & components sectors traded higher while shares in the telecommunication services and technology hardware & equipment sectors were under pressure. Looking at some US company news, Sprint Nextel (S +14.29% to $5.76) "confirmed that it is currently engaged in discussions with Softbank regarding a potential substantial investment by Softbank in Sprint" according to a Co statement. Separately, Fastenal (FAST +8.44% to $45.89): 3Q rose 10.4% YoY to $802.6M. Net income was $109.3M or $0.37 per share (as expected) vs $96.8M or $0.33 per share in the same period a year ago. Cooper Tire & Rubber (CTB +5.83% to $19.78) jumped in above average volume following an Economic Times of India report that Apollo Tyres Ltd may seek a controlling stake in the Co. In other news, CONSOL Energy (CNX +8.01% to $35.48), Peabody Energy (BTU +8.95% to $26.18), Arch Coal (ACI +15.74% to $7.94), Alpha Natural Resources (ANR +16.96% to $8.55) traded sharply higher in strong volume.

In Europe, in Germany , consumer price index rose 2% annually in September, unchanged from the preliminary estimates. The French consumer price index declined 0.3% in September compared to a 0.7% rise in August. Annually, the consumer price index eased to 1.9% in September from 2.1% in August. In Spain , the consumer price inflation climbed to 3.4% in September from 2.7% in August. Regarding stocks, ING agreed to sell its insurance operations in Malaysia to AIA for 1.3 billion. Burberry Group jumped after the company said first-half total revenue rose 6% to £883 million compared to £830M in the prior year. This morning, the Nikkei225 index opened slightly higher.

CHINA - HK

CNOOC Ltd (883): Canada 's government announced it has extended its "thorough and careful" review of the Co's take-over bid for oil & gas explorer Nexen Inc by 30 days to November 11.

Country Garden Holdings (2007) reported contracted sales down 9.0% YoY to 29.6B yuan in January-September.

KWG Property (1813) said September advanced sales surged 52.0% YoY to 1.2B yuan.

China Southern Airlines (1055) announced parent group bought 5M A-shares in the Co yesterday boosting its holding to 42.27% of A-share capital (53.12% of A+H share capital) from 42.22%.

Geely Automobile (175) posted September sales up 33% YoY (+43% MoM) to 43,055 vehicles and 9-month sales up 11% YoY to 323,938, equivalent to 70% of its annual target. September domestic sales jumped 11% YoY to over 31,400 units.

Baoshan Iron & Steel (600019): S&P has lowered its long-term corporate credit rating on Baosteel Group Corp to "A-" from "A" with "Stable" outlook. The rating firm pointed out: "We lowered the ratings on Baosteel to reflect our view of its deteriorating stand-alone credit profile, which we've lowered to 'bbb' from 'bbb+'. We expect lackluster operating performances and increasing investments in 2012-2013, as reflected in likely weak cash flow protection measures. In our view, the Co's profitability during the period is likely to be lower than that in 2011, given a continuing oversupply of steel amid uncertain macroeconomic conditions in China ."

SAIC Motor Corp (600104) reported September sales up 4.6% YoY to 393,986 vehicles and 9-month sales up 11.0% to 3.31M.

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