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ASEAN STOCK WATCH Asean Affairs   10 April 2012

ASEAN Market Outlook: Stocks to Open Lower

 By Shayne Heffernan Ph.D.

Last week we exited a good deal of positions prior to this round of earnings, this was done as I feel we are close to AAPL being re-weighted that will spark a short term sell off, Spain will become Greece the Sequel and geopolitical tensions in Syria and Iran are a concern, this week North Korea added itself to the list with a proposed missile launch that has angered Japan, Taiwan, South Korea and the World.

This week is filled with holidays in ASEAN and given the Macro concerns it is a good week to watch.

The cumulative risk from Europe’s disastrous fiscal management, the inaccuracy of US markets while they are so heavily reliant on AAPL, and the political push that we expect to see in Syria will not see us buying much this week.

last night The Dow and the S&P 500 extended losses to a fourth day on Monday, as investors took their cues from last week’s disappointing jobs report, which raised new concerns about the U.S. economy’s recovery.

The Dow Jones industrial average closed below its 50-day moving average for the first time since December 19.

One thing we will be buying is the Bumitama Agri IPO in Singapore on April 12, we will be actively looking at the market as it falls and seeing what represents value.

Apple Inc (NASDAQ:AAPL) Trading Outlook

Apple Inc (NASDAQ:AAPL) Long term looks headed to $1000 plus as iTunes and Apple TV start to bring new revenue for the company. For now however I would not be adding to my positions, last week I reduced my own and the HCM’s Account positions in AAPL, I expect the stock to settle back to the $520 area in May/June.

Bumitama Agri IPO in Singapore on April 12

The Market is looking forward to the Bumitama Agri IPO in Singapore on April 12, the IPO was 31 times subscribed, the highest oversubscription rate for a corporate offer since Yangzijiang Shipbuilding’s IPO in 2007.
Bumitama Agri have some big name cornerstone investors for their Singapore IPO including UOB and Wilmar.

When it lists on April 12, Bumitama will join other palm oil firms listed in Singapore, including Wilmar International and Golden Agri Resources. Bumitama has one of the youngest palm oil plantations in Asia and owns 190,000 hectares of land, of which only 100,000 have been planted with palm oil, leaving room for more growth.

HCM are expecting the stock to double in a short period of time after the IPO from retail buyers, “most of the IPO stock has gone to Long-Only Funds and High Net Worth families in Asia.” Shayne Heffernan said today.
There is no more IPO stock available.

The only way to buy any will be on market at the open on April 12.

Bumitama said in a prospectus it plans to sell 327.4 million shares, including an overallotment option, at 0.745 Singapore dollars each — the top of an indicative price range of 0.675 to 0.745 Singapore dollars. HCM have a $2 2013 price target on the stock.

Bumitama said a total of 124.8 million shares were placed to cornerstone investors, including Hwang Investment Management, UOB Asset Management and Wilmar.

Malaysia’s IOI Corporation, now a controlling shareholder of Bumitama, will own 30 percent of the Indonesian firm after the IPO.

Spain Will Default: Why Greece Might Become a Black Swan Event

Following on from the disastrous Greece Default, the ECB, IMF and World Bank are ready for the Sequel, Spain.

A poorly received Spanish bond auction early in the week continued to spread jitters around Europe, with economists warning Spain could become the latest flashpoint in the sovereign debt crisis.

The International Monetary Fund fanned those fears, saying Spain was facing ”severe” challenges. It insisted that last week’s strict budget must be put into practice to cut its deficit.

”Clearly the challenges Spain is facing are severe. Market sentiment remains volatile,” said IMF spokesman Gerry Rice.

The euro fell to a three-week low against the dollar on concerns about repercussions from problems in Spain, whose economy is twice the size of that of Greece, Ireland and Portugal combined.

Borrowing costs on Spanish and Italian bonds rose as investors moved into assets seen as less risky, including German and US government bonds.

European stocks fell for a third week, the longest losing streak since August, as Spain’s rising borrowing costs boosted concern the euro-area has yet to contain its debt crisis, and the US Federal Reserve damped expectations for further monetary stimulus.
Banking shares led declines. Banca Popolare di Milano Scarl and UniCredit slid at least 12 per cent each this week. Peugeot dropped 10 per cent after a report showed US sales of light vehicles rose less than forecast. Cairn Energy Plc gained 3.7 per cent after agreeing to buy Agora Oil & Gas to expand in the North Sea.

Why Greece Might Become a Black Swan

On the eve of the Greek default I wrote regarding the possibility of the Greece action becoming a Black Swan, now it is clear that Europe is on the edge of a Black Swan Event.

As deleveraging pressures grew towards the end of 2011, European banks offered for sale a significant volume of assets, notably those with high risk weights or market prices close to holding values.

Offerings with high risk weights included low-rated securitised assets, distressed bonds and commercial property and other risky loans. Although some such transactions were completed, others did not go through because the offered prices were below banks’ holding values.

Strong deleveraging pressures during the final quarter of 2011 were also associated with weak or negative growth in the volume of credit extended by many European banks. Credit extended by financial institutions in the euro area, for example, turned down during this period, with credit to non-bank private sector borrowers in the area falling by around 0.5%, while assets vis-àvis non-euro area residents declined by almost 4%. Outstanding loans to euro area non-financial corporations grew by just over 1% and loans to households for house purchases by around 2%, while consumer credit declined by just over 2%.

European banks also cut lending to emerging markets. Their consolidated foreign claims on emerging Europe, Latin America and Asia had already started to fall in the third quarter of 2011.

New syndicated and large bilateral loans from EU banking groups to emerging market borrowers then fell in the final quarter of the year. This was in contrast to lending to western Europe and other developed countries, which was essentially unchanged . At the same time, banks tightened terms on new loans to corporations and households in emerging markets. The more pervasive tightening in emerging Europe than elsewhere may have reflected the widespread ownership of banks in the region by EU banking groups. Reduced lending to emerging Europe may also reflect lower demand, however, as the region’s economic growth forecasts fell by more than those for any other during the final quarter of 2011.

Shayne Heffernan Ph.D.  
Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408 Fax: +65 6329 9699
Email :
Suite 53 Athenee Tower
63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330
New York 347 5th Avenue, Suite 1402-508 NY, NY 10016


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