Market Snapshot

Tuesday, 17 September 2013

Summers’ Exit Ushers in Stock Spring Key Global Indices Global Equities Index Last Change (%) YTD (%) US equities carried on higher, as Lawrence Summers’ bowing out of the US DJIA 15494.78 0.77 18.24 race for the US Federal Reserve’s top job raised hopes that money policy US S&P 500 1697.60 0.57 19.03 could stay easy for some time yet. The Fed is expected to, after their two- US NASDAQ 3717.85 -0.12 23.13 day pow-wow, tap lightly on the brakes, reducing treasury purchases by UK FTSE 100 6622.86 0.59 12.29 USD5 billion. With Summers, the former Treasury Secretary out of the Nikkei 225 14404.67 0.00 38.57 picture, Fed Vice-Chair Janet Yellen is now the front-runner in Europe DJ STOXX 600 313.42 0.63 12.06 Washington’s top guessing game of the summer. In coming months, the Fed will also have to grapple with filling vacated seats on the Federal Open Asia & Emerging Markets Market Committee, as well as headship at some regional Fed banks. Index Last Change (%) YTD (%) Frenzy over Summers’ exit eclipsed an unexpected fall in New York Singapore STI 3179.48 1.90 0.39 manufacturing activity, as the Empire State index fell to 6.29 in September Hong Kong Hang Seng 23252.41 1.47 2.63 from 8.24 in August. A rise to 9 was expected. Factory output and Shanghai SE Composite 2231.40 -0.22 -1.66 capacity utilisation data rose in line with forecasts, rising 0.4% on-month India Sensex 19742.47 0.05 1.63 and to a 77.8% level respectively. Taiwan TWSE 8255.34 1.39 7.22 Malaysia KLCI 1770.80 0.00 4.85 Europe shares also got a boost from Summers’ Fed race withdrawal, with Korea KOSPI 2013.37 0.96 0.82 the DJ Stoxx 600 pushing 0.6% higher, Germamy’s DAX surging 1.2%, Indonesia JCI 4522.24 3.35 4.76 UK’s FTSE climbing 0.6%, and France’s CAC-40 rising 0.9%. Separately, Britain’s public investment authority has kick-started selling its stake in Thailand SET 1445.11 3.14 3.82 Lloyds, one of the banks it bailed out during the 2008 financial crisis. Brazil BOVESPA 53821.63 0.04 -11.70

Russia RTS 1436.14 2.83 -5.95 Southeast Asia

Fixed Income Southeast Asia stocks saw some of the best gains; they were hit hardest Previous Day by earlier by talk of Fed tapering. Singapore's STI rose 1.7%, Thailand’s Last Change (bps) Close SET jumped 2.6% and Philippine’s PSEC added 1.9%. Indonesia's JCI 2-yr US Treasury 0.39 0.43 -4.42 rose 3.3%, helped by investors still positive that the central bank is actively 5-yr US Treasury 1.62 1.69 -7.11 battling inflation after it hiked policy rates to 7.25% last week. This feel- 10-yr US Treasury 2.86 2.88 -2.03 good also pushed one-month rupiah forwards up. Malaysia markets were 3M Sibor 0.37 0.37 0.00 closed for a holiday.

3M Libor 0.25 0.25 -0.21 In economic news, Singapore’s non-oil domestic exports unexpectedly slid

iBoxx US Treasuries TR Index (USD) 6.2% on-year and fell 6% on-month in August. Electronics exports also showed weakness, tumbling 9.2% on-year. 214 North Asia 212 210 Asia equities started the week strong, rejoicing over Summers bowing out 208 from the Fed’s race to the top. Hong Kong’s Hang Seng rose 1.2%, South Korea’s Kospi gained 1%, and Taiwan’s TWSE ticked 1.4% up to 206 its highest close since 17 July. In other news, the shuttered Kaeseong 204 industrial complex reopened five months after North Korea threatened the 202 South with nuclear attacks. Japan markets were closed for a holiday.

200 Hong Kong equities were supported by a rally in gold producers as easing 198 Syria tensions helped the bullion cinch a second day of gains, clawing 196 back some of last week’s losses. Zhaojin Mining Industry rose 4.4%. Also helping was internet giant Tencent’s 1.6% gain as its market value topped 194 USD100 billion with the explosive growth of China’s internet use.

Jul-13 China shares however fell 0.2% as investors continued locking in profit

Jun-13

Apr-13

Mar-13 Aug-13 May-13 after a string of data showed growth is gaining speed, and Shanghai was

Source: Bloomberg, iBoxx Limited. bestowed free trade zone status. Data stated in local currency terms and is as of the last business day.

Market Snapshot 17 September 2013 Commodities South Asia O/N Change 52-week 52-week Last (%) High Low India equities were flat after inflation quickened its pace to a six-month high in August, stoking fears that the central bank may have little wiggle room to Gold 1312.79 -1.01 1796.08 1180.57 support growth. New Reserve Bank of India governor Raghuram Rajan makes Crude oil 106.59 -1.50 112.24 84.05 his first interest rate decision on Friday, after earlier announcing reforms. The Wheat 641.25 2.15 926.50 623.00 Sensex rose earlier in response to Summers exiting the Fed race. Wholesale Corn 456.50 1.44 800.00 450.00 prices jumped a higher-than-expected 6.1% in August, driven by food prices Soybean 1348.25 -9.44 1736.25 1271.00 growing at a three-year high of 18.18%. Sugar 485.70 -1.28 582.50 456.70 Fixed Income Coffee 119.25 -0.62 200.00 115.25 US Treasuries rose for a fourth straight session as Summers’ withdrawal led to Commodities Research Bureau (CRB) Index hopes that the Fed will be less enthusiastic about tightening quickly, raising 490 interest rates and potentially nipping economic recovery in the bud. Fed buying has been a key pillar of support for the US Treasury market. Late- afternoon, the benchmark 10-year note rose 6/32 in price to yield 2.872%. 480 Commodities

Oil futures fell as continuing negotiations with Syria gave comfort that the 470 country is unlikely to face military attack anytime soon. Supply concerns also eased with Libya restoring about 25% of its crude output after talks between the government and striking workers worked out, and oil export terminals in 460 Mexico re-opened for business after Hurricane Ingrid lost steam, becoming a tropical depression instead of a hurricane.

450 Gold prices took the cue from a calmer Syria that crimped demand for the

traditionally safe-haven metal. Jul-13

Jun-13

Apr-13

Mar-13

Aug-13 May-13 Sources: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Source: Bloomberg, iBoxx Limited Newswires, Reuters Data stated in local currency terms and is as of the last business day where applicable. O/N represents overnight.

ASIAN INSIGHTS US: The Fed Taper Caper, Debt and Bernanke’s Replacement US New Home Sales After months of speculation, market watchers now expect the US Federal Reserve to begin reducing monetary stimulus by around USD10-20 billion (out of the USD85 billion monthly) by the end of the two-day Federal Open Market Committee, or FOMC, meeting, which begins later today. Over the past few months, the intermediate to the longer-end US Treasuries rates have already risen sharply and are at levels not seen since mid-2011, just before the Fed anchors the entire yield curve lower with explicit forward guidance.

As a result, the steepness of the yield curve in the two-year/five-year segment clearly reflects interest rate risks in the two-to-five year timeframe. More recently, the yield on two-year USTs have started rising to discount the possibility of rate hikes in 2015, but further moves have to be first confirmed by the start of tapering, which have to be a prerequisite for rate hikes down the line. Having discounted a significant amount of interest rate risks, Fed tapering may well turn out to be a “non event.” Source: Group Research

The market is looking beyond this reduction, widely known as ‘taper’, and into the policy stance taken by Fed over the medium term. With geopolitical risks in Syria on the backburner, attention will be focused on US data and the choice for the next Fed Chairman when Bernanke steps down in January. With former Treasury Secretary Lawrence Summers (viewed to be more hawkish compared to main rival and Fed Vice-Chairperson Janet Yellen) quitting the race, policy continuity and a gradual pace of tapering is expected.

Risks however, are apparent. US data have been mixed of late. While ISM numbers have outperformed, rising mortgage rates have put a dampener on housing data. Depressed mortgage applications will be a constraint towards the Fed’s tapering timetable. The risk in tapering now is that the Fed may have to U-turn later. Why? In a word: housing. Since early May, mortgage rates have risen by 100-120 basis points. Mortgage applications (for purchases) have fallen by 17%. New home sales in July fell by 13.4% on-month. For the past two years, housing has been the poster-child for the recovery. But in July alone, one-third of the two-year recovery in new home sales was wiped off the map. Another month or two of that and Fed tapering would come to an abrupt halt. What markets would do is an open question.

Apart from the Fed, attention is also turning to the looming deadline to lift the USD16.7 trillion US federal debt ceiling. Treasury Secretary Jack Lew warned that his department would have exhausted its emergency measures to keep paying government bills. Some estimates say the government will run out of money by the middle of October if no deal is reached between Congress and the White House.

With the White House seen grappling with many issues – Syria, Fed succession and the debt ceiling – without providing clarity or certainty, this taper could well end up as a “buy the rumour, sell the fact” event.

Source report: DBS Group Research. Daily Breakfast Spread. 16 September 2013. (Summarised by DBS Group Wealth Management /CIO Office.)

Market Snapshot 17 September 2013

FX Pulse

Currencies FX Round-up

O/N Change O/N O/N Last The USD fell across the board as Lawrence Summer’s giving up a shot at being (%) High Low the Fed’s next head raised expectations that monetary policies would stay easy EUR/USD 1.3334 0.30 1.3386 1.3293 for some time. The euro was 1.3334, the yen at 99.08, and the pound at 0.13. USD/JPY 99.08 -0.30 99.52 98.46 Dollar weakness also helped most emerging market currencies higher, pushing AUD/USD 0.9318 0.79 0.9394 0.9245 the South African rand to a five-week high, and helping the Turkish lira and NZD/USD 0.8170 0.48 0.8230 0.8118 Mexican peso notch sharp gains as well. GBP/USD 1.5896 0.13 1.5963 1.5871 USD/SGD 1.2619 -0.59 1.2695 1.2594 The Aussie rose to a three-month high on Monday as the USD weakened. Focus USD/CNY 6.1202 0.02 6.1228 6.1170 today will be on the release of the Reserve Bank of Australia’s September EUR/AUD 1.4309 -0.49 1.4393 1.4219 meeting minutes, after the central bank indicated there was no pressing need to AUD/SGD 1.1759 0.20 1.1877 1.1730 cut rates. This stance has helped the AUD to rally. Early this morning, the Aussie NZD/SGD 1.0310 -0.12 1.0436 1.0288 snapped gains against the Kiwi as investors expect RBA minutes to confirm an GBP/SGD 2.0062 -0.46 2.0238 2.0048 easing bias.

AUD/NZD 1.1404 0.31 1.1434 1.1346 The Chinese yuan fell on suspected CNY-selling by the People’s Bank of China. EUR/SGD 1.6827 -0.31 1.6974 1.6807 This was an attempt at tempering CNY gains after the central bank set the parity EUR/GBP 0.8388 0.18 0.8392 0.8371 rate on Monday at a record low of 1.6554 following USD weakness, causing a

small sell off in the dollar against the yuan. SGD VERSUS MAJOR CURRENCIES USDSGD AUDSGD NZDSGD GBPSGD CNYSGD Sources: Bloomberg News, Dow Jones Newswires, Reuters. 107

102

97

92

87

Jul-13

Jun-13

Apr-13 Sep-13

Mar-13

Aug-13 May-13

Source: Bloomberg Data stated in local currency terms and is as of the last business day where applicable. O/N represents overnight.

TECHNICAL SUMMARY

Currency Short term Direction Support 1 Support 2 Resistance 1 Resistance 2

EUR/USD Range 1.3253 1.3103 1.3397 1.3452 GBP/USD Bullish 1.5774 1.5625 1.6000 1.6177 USD/JPY Bullish 98.53 96.83 99.97 100.86 AUD/USD Bullish 0.9220 0.9110 0.9387 0.9510 NZD/USD Bullish 0.8093 0.7950 0.8227 0.8295 USD/CAD Bearish 1.0272 1.0170 1.0356 1.0469 USD/SGD Bearish 1.2555 1.2490 1.2687 1.2757 AUD/SGD Bullish 1.1695 1.1570 1.1880 1.1950 NZD/SGD Bullish 1.0220 1.0110 1.0424 1.0525 GBP/SGD Bullish 2.0000 1.9867 2.0275 2.0400 EUR/SGD Bearish 1.6720 1.6640 1.6966 1.7046 EUR/AUD Bearish 1.4159 1.3859 1.4469 1.4697 AUD/NZD Range 1.1333 1.1217 1.1468 1.1657 XAU/USD Range 1304 1272 1352 1390

Source: DBS CIO Office Note: These are short-term technical readings with a two-week horizon. All figures are as of last business day.

Market Snapshot 17 September 2013 Economic Calendar – 17 September 2013

Country Event Period Survey Actual Prior

SK PPI YoY Aug -- -- -0.90% Focus

SI Non-oil Domestic Exports YoY Aug 2.20% -- -0.70% As the top central bankers at the US Federal Reserve meet, the US expects HK Unemployment Rate SA Aug 3.30% -- 3.30% CPI to clock 1.6% on-year in August, and the September housing data to US CPI YoY Aug 1.60% -- 2.00% show stability. US NAHB Housing Market Index Sep 58 -- 59

Source: Bloomberg

Bond risk rating changes

Risk rating Effective Bond Name Issuer Reason New Existing

06/09/2013 ICBCAS 6 11/04/21 ICBC ASIA LTD 4 3 Moody's downgraded the issuer credit rating from A3 to Baa1

09/09/2013 F 4 7/8 03/26/15 FORD MOTOR COMPANY 3 4 S&P upgraded the paper credit rating from BB+ to BBB-

12/09/2013 HTHROW 6 1/4 09/10/18 HEATHROW FUNDING LTD 3 4 Tenor reduction Information updated as of 12 September 2013.

Disclaimers and Important Notice

The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only. This publication is intended for DBS Bank and its clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of DBS Bank.

This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into, for cash or other consideration, any transaction, and should not be viewed as such. This publication is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations and is not to be taken in substitution for the exercise of judgment by the reader, who should obtain separate legal or financial advice. DBS Bank does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences financial or otherwise.

The information and opinions contained in this publication has been obtained from sources believed to be reliable but neither DBS Bank nor any of its related companies or affiliates (collectively “DBS”) makes any representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to change without notice. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. DBS accepts no liability whatsoever for any direct indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents.

The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.

If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission. If verification is required, please request for a hard- copy version.

Country Specific Disclaimer China: This report is distributed in China by DBS Bank (China) Ltd. Indonesia: This report is made available in Indonesia through PT DBS Indonesia. PT DBS Indonesia is regulated by Bank Indonesia. Singapore: This report is distributed in Singapore by DBS Bank Ltd.

DBS Bank Ltd Co. Reg. No.: 196800306