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Straits Times 3,114.16 -11.98 -0.38%
Hang Seng 26,719.58 -128.91 -0.48%
Dow Jones 26,770.20 -255.68 -0.95%
Shanghai Composite 2,938.14 -39.19 -1.32%
Yellen & China PMI In Focus
Perspective | 25 February 2014
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By: Ernest Lim
Articles (134) Profile

For the past two weeks, Asia markets staged a relief rally on the back of a rebound in the U.S. markets and as some experts viewed that the recent sell off has increased the attractiveness of the Asian markets on a relative valuation basis. (See Table 1 below)

Table 1: Indices’ performance over the past two weeks

Technical Analysis Of Indices’ Charts

S&P500 Index
It is good to see that S&P500 held above 1,800 for the past two weeks and reached an intraday high of 1,848 on 19 February, which was just three points away from the intraday record of 1,851 reached on 15 January 2014.

Currently, the Relative Strength Index seems to be forming a bearish divergence with S&P500’s price. Notwithstanding the bearish divergence, the trend remains up for now as seen from the trend lines. Near term supports are at 1,819 – 1,820 & 1,800 – 1,810. Resistances are at 1,850 & 1,875.

Chart 1: S&P500 held above 1,800 and reached an intraday high 1,848, 3 points away the record 1,851

Source: CIMB itrade complimentary chart (21 Feb 14)

Hang Seng Index
Two weeks ago, I had mentioned that Hang Seng index (Hang Seng) may see a technical rebound. This indeed materialised, which saw Hang Seng surge about 4.3 percent or 931 points to close at 22,568, above the 200-day Exponential Moving Average (EMA).

With reference to Chart 2 below, Hang Seng barely closed above its 200-day EMA (currently around 22,548). In order for the downtrend to be negated, Hang Seng should maintain above its 200-day EMA and clear the downward sloping upper channel (currently at 22,840) on a sustained basis. Near term supports are at 22,334 – 22,454.

Chart 2: Hang Seng manage to close above 200D EMA. Hope to see follow through buying

Source: CIMB itrade complimentary chart (21 Feb 14)

Straits Times Index
The StraitsTimes Index (STI) has jumped 147 points since the low of 2,953 on 4 February. Notwithstanding the rebound, the downtrend, which started since October 2013 (currently at 3,150) still prevails unless it can be broken to the upside. (See Chart 3 below)

See STI supports and resistances below.

Chart 3: STI jumped 147 points since the low of 2,953 on 4 Feb

U.S. Market Outlook – Yellen In Focus
U.S. investors recently shrugged off weak economic data as they attribute the recent weakness to the harsh winter conditions. Notwithstanding this, I believe the upcoming economic data in the next two months are likely to be closely watched as the market is trying to discern whether the weakness is genuine, or attributed to the weather.

This week’s focus will be undoubtedly on Fed Chair Yellen’s testimony before the Senate Banking Committee on Thursday. The market is likely to focus on Yellen’s views on how much the Fed views that the recent weak economic data is attributed to the weather. Also, the market is likely to be scrutinising Yellen’s tapering plans especially after the spate of weak economic data and the FOMC minutes last week.

The earnings season has come to a tail end as about 441 (out of the 500 S&P companies) have reported results. Upcoming results release mainly focuses on retailers such as Best Buy Co Inc, Gap Inc, Home Depot Inc, JC Penney Company Inc, Lowe’s Companies Inc, Macy’s Inc, Target Corp etc.

Singapore Market Outlook – China PMI & Singapore Corporate Results In Focus
Despite the recent market rebound, I am still about 95 percent invested. However, I may lighten my portfolio (by taking profit) in the next two weeks as I am wary of a potential bout of profit taking in the equity markets in the next two to four weeks. China’s recent bout of weak economic data is worrying and China’s official manufacturing PMI which will be closely watched, will be out on 1 March, Saturday.

Below are the technical chart analyses on Sino Grandness and Asian Pay TV for your reference.

1. Sino Grandness

About a month ago, I wrote that a measured downside technical target was around $0.650 after breaking the multi times tested support at $0.715. It reached a low of $0.640 on 5 February (one cent below my measured technical target) but promptly recovered and closed at $0.765 on last Friday.

Based on Chart 4, Sino Grandness is likely to breach $0.800 probably after some minor consolidation (around $0.725-0.765). The medium term technical target if it breaks $0.800 with volume expansion is approximately around $0.920. Average analysts’ target price is around $1.15.

Potential catalysts include 4QFY13 results to be announced on or before 26 Feb; potential roadshows in end February or / and March and their annual March business trade fair where new products may be launched. Naturally, the progress on their Garden Fresh IPO will be closely tracked too.

Chart 4: Sino Grandness is likely to breach $0.800 probably after some minor consolidation

Source: Metastock 21 Feb 14

Note: I have emailed to clients on 14 Feb citing that Sino Grandness is resting on a good support i.e. 200D EMA which was around $0.665-0.670. I mentioned that even if it went below its 200D EMA, it does not spend too much time below its 200D EMA.

2. Asian Pay TV

Based on Chart 5 below, Asian Pay TV seems to be forming an inverse head and shoulder pattern. The inverse head and shoulder pattern will be complete when it breaks the neckline approximately around 0.790-0.80 with volume expansion. If confirmed, the measured technical target price is around $0.855.

Average analysts’ target price is around $1.06. The Trustee Manager has reaffirmed the distribution guidance of 4.13 cents per unit and 8.25 cents per unit for 2HFY13F and FY14F respectively. Hence estimated 2014F div yield based on Friday’s closing price of $0.785 is 10.5 percent.

Its earnings results will be released on 24 February.

Chart 5: Inverse Head and Shoulder pattern if it can breach 0.790-0.800 on volume expansion

Source: CIMB itrade complimentary chart (21 Feb 14)

Note: I have emailed the above chart analysis to my clients on 19 Feb, Wed morning citing the above pattern. Asian Pay was trading around $0.770 at that time.

Please note that I am putting my equity allocation above just for discussion purpose. Everybody is different in terms of returns expectations, risk profile, portfolio size, commitments, market outlook, stock preference etc. As such, everybody’s allocation in equities differs.

In addition, it is noteworthy that the above is my personal opinion and may not cater to your specific risk profile etc. The question of when to buy / sell and what to buy / sell differs greatly from individual to individual. Furthermore, it is extremely important to bear in mind that the market outlook is never static. It can change suddenly if there are sudden big events unfolding from the market – some events can happen as quickly as a few hours.

STI near term supports and resistances are:

Current: 3,100

Support 1: 3,084 – 3,086

Support 2: 3,071

Support 3: 3,062 – 3,066

Support 4: 3,043

Resistance 1: 3,116

Resistance 2: 3,133

Resistance 3: 3,143

Resistance 4: 3,150

*Supports and resistances are not static levels. They may be subject to change daily.

*Summary of Economic Calendar for the Week ahead (SIN time)

22 – 23 Feb, Sat & Sun: (ALL) G20 Meeting;

24 Feb, Mon: (EUR) German Ifo Business Climate; (USD) Flash Services PMI;

25 Feb, Tues: (CNY) CB Leading Index m/m; (USD) CB Consumer Confidence / Richmond Manufacturing Index / FOMC Member Tarullo Speaks;

26 Feb, Wed: (GBP) Second Estimate GDP q/q; (USD) New Home Sales;

27 Feb, Thurs: (USD) Core Durable Goods Orders m/m / Durable Goods Orders m/m / Unemployment Claims / Fed Chair Yellen Testifies in the Senate;

28 Feb, Fri: (USD) FOMC Member Fisher Speaks / Prelim GDP q/q / Chicago PMI / Revised UoM Consumer Sentiment / Pending Home Sales m/m / FOMC Members Kocherlakota & Stein Speak;

1 Mar, Sat: (CNY) Manufacturing PMI;

*All economic data especially China data (if any) are subject to changes without notice. The above list is not exhaustive. I have merely listed the economic data which I feel has more impact to the market.

Please refer to Forex Factory Calendar for a more detailed / up to date list of economic events.

All the best for your investment and trading!

Information sources: Various sources such as Bloomberg, Daily FX, Dow Jones, Forex calendar, Zacks Investment Research, Reuters, SGX, Yahoo Finance, and Business Times etc.

Ernest Lim is a CFA, CA and has worked at GIC Special Investment. He has a solid feel of the markets and financial world and is now a remisier.

Please click here for more information about this author.

Sino Grandness Food Industry Group  0.043 -0.001 -2.27%   
Business: Integrated manufacturer & distributor of own-branded Garden Fresh juices as well as canned fruits & vegetables. [FY17 Turnover] Beverage (72.4%), canned pdts (27.6%).

Insight: Aug-18, 1H18 revenue jumped 10.6% to Rmb1.7b mainl... Read More
Asian Pay Television Trust  0.168 -- --   
Business: First listed biz trust in Asia focused on pay-TV biz.

Insight: Feb-19, FY18 total revenue and EBITDA fell 6.3% an... Read More

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