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10 Reasons the S& P 500 will reach 1,600 this year

By Oliver Pursche

As fears of sequestration and a slowing economy begin to affect investor psychology, I thought it helpful to take a step back and provide some optimism and specific reasons why, after what I believe will prove to be a brief pullback, the S& P will cross into new highs and touch 1,600 before ending the year around 1,575. In a nod to David Letterman, here's my top 10 list:

1. The impact of sequestration on our economy is exaggerated. The projections ignore the additional immediate spending related to Hurricane Sandy relief. The extra $60 billion in spending will offset the first month or so of spending cuts related to sequestration.

2. Fourth quarter 2012 GDP figures are likely to be revised upward, as will estimates for first quarter 2013 GDP expectations, giving investors added confidence that our economy is growing at a mild but increasing pace.

3. There is significant pent-up demand for auto sales (great WSJ article on Thursday Feb. 21 regarding used-car demand). This is a big-ticket item and will impact GDP going into the summer months.

4. According to a recent study by the St. Louis Fed, housing inventories (the number of homes available for purchase) are below 2001 levels — ergo there is a good chance of further price appreciation and a pickup in homebuilding (risks, of course, are the so-called " shadow" inventory held by banks. However, recent legislative actions in several key states like Florida and California reduce the risk of a " massive" dump of inventory.)

5. Rising home prices and low interest rates. Who's happier than a slinky on an escalator? Homebuilders — expect a pickup in housing starts (as visible by the sharp rise in building permits) beginning this spring.

6. Increased housing starts will lead to a real rise in capital spending on consumer durables, like appliances and furniture.

7. The positive impact of sequestration will be a reprieve in the rise of gasoline prices. I do expect prices to rise again later in the spring, but the temporary drop in gas prices will also help offset the negative impact of higher payroll taxes.

8. Interest rates and inflation will remain low — in spite of current fears that the Fed will raise rates sooner than promised, don't expect a change in policy in 2013 or 2014. As this reality sets in, along with the rising GDP figures, the improved fundamentals will power U.S. equities higher.

9. " The great rotation" from bonds to equities — as some have called it — has begun. Fund flows from money markets in December and January (and most likely in February as well) into equities have steadily picked up. I believe that after a brief pullback in rates over the coming weeks, bond investors will finally lose patience and start rotating capital into equities.

10. S& P 1,600 is only about 6.5% away — not that big of a stretch with 10 months to go, especially given the recent pullback in stocks and the better than expected earnings and revenues so far.

Of course there are risks to this outlook, but investors who have been bearish have lost out on significant gains so far. I'll stick to my optimism all the while remaining somewhat defensive in my investment strategy.

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23-Feb-2013 00:00

Straits Times Index / STI to cross 3000 boosted by long-term investors

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Charging Ahead...The Dawn of A New Era

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22-Feb-2013 22:29

Baker Technology / It's time to rebound ????

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22-Feb-2013 20:50

Straits Times Index / STI to cross 3000 boosted by long-term investors

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Fed's Bullard: Fed Policy to Stay 'Easy' for 'Long Time'

Published: Friday, 22 Feb 2013 | 7:09 AM ET

By: Matthew J. Belvedere

iStock

The Federal Reserve's " very aggressive" easy money policy is going to stay that way for a " long time," St. Louis Fed President James Bullard told CNBC on Friday.

" This is a monetary policy that packs a punch," said Bullard, who's a voting member on the Federal Open Market Committee(FOMC).

Uncertainty about the future of the central bank's bond buying program has weighed on the stock market in recent days.

(CNBC Explains: Fed's Bond Buying Program, Also Known as 'Quantitative Easing')

The St. Louis Fed president said in Friday's " Squawk Box" interview, " Fed policy is very easy and it's going stay easy for a long time."

On Wednesday, the FOMC released minutes of its January meeting, which said " many participants" expressed concerns about " potential costs and risks arising from further asset purchases."

" I think policy is much easier than it was last year because the outright purchases are more potent tool than the 'Twist' program was … I don't think markets have fully absorbed that switch."

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22-Feb-2013 20:16

Straits Times Index / STI to cross 3000 boosted by long-term investors

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St. Louis Fed's Bullard: Fed Policy Is 'Easy' and Going to Stay Easy for 'Long Time'

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22-Feb-2013 20:13

Straits Times Index / STI to cross 3000 boosted by long-term investors

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STI 3400 COME MNEY COME

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22-Feb-2013 19:42

Straits Times Index / STI to cross 3000 boosted by long-term investors

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Despite developments including a “negative fourth-quarter gross domestic product number, lackluster January retail sales and a renewed flare-up in Europe, equities continue to grind higher,” wrote strategists at Charles Schwab, in a note.

“It appears to us this resilience is helping to pull previously nervous investors out of cash and some fixed income products and back into stocks. Should this nascent trend take hold, we believe it could add fuel the next move higher in the stock market as sidelined cash remains relatively high after five straight years of equity mutual fund outflows,” they said.

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22-Feb-2013 19:38

Straits Times Index / STI to cross 3000 boosted by long-term investors

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Feb. 22, 2013, 5:55 a.m. EST

Stock futures signal Wall St. bounce H-P rising

Fed speakers on tap for Friday

By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — U.S. stock index futures saw small gains Friday, signaling investors remained cautiously willing to buy dips after a two-day pullback, with shares of Hewlett-Packard Co. expected to be in the spotlight a day after the bruised computer maker posted stronger-than-expected quarterly results.

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22-Feb-2013 19:16

Genting Sing / Genting SP Next Move

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Genting Singapore

VIPs Are Making A Roaring Comeback

The worst is over upgrade to BUY. We upgrade Genting Singapore

(GENS) to BUY with a higher TP of SGD1.67 (+24%). While GENS

delivered results that were within expectations, VIP volumes at Resorts

World Sentosa (RWS) positively surprised. Going forward, VIP volumes

may positively surprise again as Singapore is now a CNY hub with

Industrial and Commercial Bank of China (ICBC) as the clearing bank.

Within expectations. 4Q12 core net profit of SGD169.7m (-36% YoY,

+27% QoQ) brought FY12 core net profit to SGD665.2m (-35% YoY) or

100% of our FY12 estimate. Final DPS of SGD0.01 (+0% YoY) was

also within expectations. FY12 core net profit was down 35% YoY as

full-year VIP volume eased 5% YoY to SGD60b, and on a lower VIP

win rate of 3.1% (-30bps YoY).

But, VIP volumes beat our estimates. 4Q12 core net profit was down

36% YoY due to a lower VIP win rate of 3% (-90bps YoY), a higher

percentage of VIP GGR provided at 8% (+4ppts YoY) and start-up

losses at Marine Life Park. That said, 4Q12 VIP volume surged 56%

YoY to SGD18.6b, its highest level. This is because Chinese VIPs, who

account for > 50% of VIP volume, returned after China’s economy

improved (Chart 4) and politics stabilised.

Raising earnings estimates by 9-13%. We now assume that VIP

volumes at both casinos will grow 10% p.a., from being flattish in FY13

and growing 8% p.a. thereafter previously (Table 1). We assume that

RWS would still command 47% share of VIP volume going forward. The

net impact is to raise our earnings estimates by 9-13%. Our new

estimates imply 17% 3-year forward earnings CAGR.

Upgrade to BUY. As earnings have recovered QoQ, we believe that

GENS should no longer trade at 11x 12M forward EV/EBITDA or -1SD

to its historical mean, but rather at the historical mean 12M forward

EV/EBITDA of 13x. Thus, we raise our TP from SGD1.35 to SGD1.67

(Table 2) and call from HOLD to BUY. GENS will likely benefit from

more Chinese VIP volumes going forward, as Singapore is now a CNY hub, improving the convertibility of the CNY in Singapore.

Buy (from Hold)

Share price: SGD1.50

Target price: SGD1.67 (from SGD1.35)

Maybank Kim Eng Research

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22-Feb-2013 19:09

COSCO SHP SG / Cosco Vs Yangzijiang --- which will you invest ?

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HEADWINDS REMAIN



• FY12 net profit fell 24% YoY 
• S$17.6m of write-backs in provisions 
• Debt levels remain a concern 


FY12 results within expectations 
COSCO Corp (S’pore) reported a decent set of results that were within 
ours and the street’s expectations. FY12 revenue decreased 10% to 
S$3.7b, while PATMI fell 24% to S$106m. The declines largely 
reflected the general weakness in the shipbuilding environment and 
COSCO’s initial expansion into the offshore segment. The group’s 
order-book improved to USD6.1bn, up from USD5.7b as of last 
quarter-end.  


Margins appear to have stabilized… 
In 4Q12, COSCO wrote back S$17.6m of provisions for its contracts. 
This represents the third consecutive quarter of write-backs after an 
eight-quarter trend of making provision for expected losses. This 
implies improved execution for its shipbuilding and offshore projects. 
Its margins also appear to have stabilized. Excluding the provisions 
and write-back of provisions, the group’s gross margin was 12.2% for 
FY12, slightly lower than 12.8% in the previous year. 


But cash generation remains weak 
However, the group’s cash generation capability remains weak. 
Despite a 10% decline in revenue in FY12, cash outflow in operating 
activities ballooned to S$580m from just S$52m a year ago. The main 
culprit was its trade and other receivables. This is largely because 
payment schedules for the recent contracts are more back-loaded 
(typically 20/80), resulting in the shipyard having to fund most of the 
shipbuilding costs upfront, before collecting back the amounts owed 
on vessel delivery dates. 


Will net gearing continue to rise? 
COSCO’s net gearing (net debt against shareholder’s equity) increased 
to 1.0x as of end-2012 (end-2011: 0.4x). As the group continues 
construction in 2013 on the low-margin and back-loaded contracts 
secured in 2010-2012, its debt level may continue to rise 
incrementally going forward. Meanwhile, management acknowledged 
that the business and operating conditions in 2013 may be even more 
difficult and challenging. Rolling forward to FY13F, we raise our fair 
value estimate to S$0.90 (on 1.5x P/B). Maintain HOLD. 


  

  OCBC Investment Research

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22-Feb-2013 18:23

Midas / Midas

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 Midas warned that full year 2012 is expected to show

a significant drop in sales and profit versus last year

due to lower sales, higher operating expenses and

finance costs and higher share of losses from its 32.5%

owned associate company (Nanjing Puzhen).

 The above should not come as a surprise given that 9

months sales and profit is already down 25% to

Rmb652mln and 92% to Rmb11mln respectively.

 Key point is that both Midas and its 32.5% owned

associate company has announced several new

contract wins this year and the China government has

restarted investments into the railway sector to revive

GDP growth.

 As a result, consensus is expecting 2013 profit to

rebound 10x to Rmb140mln against 2012’s depressed

Rmb14mln.

 Maintain BUY.

Lim & Tan Securities

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22-Feb-2013 17:11

Straits Times Index / STI to cross 3000 boosted by long-term investors

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Charging Ahead...The Dawn of A New Era

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22-Feb-2013 15:34

China Minzhong / China Minzhong Food forum

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Good move up!

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22-Feb-2013 15:17

Genting Sing / Genting SP Next Move

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Better than going to casino.

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22-Feb-2013 15:12

Straits Times Index / STI to cross 3000 boosted by long-term investors

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Covering your own backside by saying may drag for months ah? hahaha

Isolator ( Date: 22-Feb-2013 15:05) Posted:

Going into distrbution mode that may drag mths from now...... Then big one.... lol

stevenlim109 ( Date: 22-Feb-2013 14:52) Posted:

sifu iso let's chant together !!! STI 2000 !!!! STI 2000 !!!!!

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22-Feb-2013 15:08

Ezion / Ezion

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Congrats to all holders. Huat ah!

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