ASEAN KEY DESTINATIONS
ASEAN to Open Lower
By Shayne Heffernan Ph.D.
ASEAN + 3 Equity Preview, Singapore, China, Japan, Indonesia, Thailand, Malaysia, Philippines
Wall St fell sharply Friday and that will be felt early in the week in the ASEAN +3 Markets, Earnings will be the key factor for the week.
This week is one of the busiest weeks of the quarterly earnings reporting period on Wall St. About 86 companies in the Standard & Poor’s 500 are expected to post results. Those reports will lead markets around the world this week.
Last week the Dow Jones industrial average and the S&P 500 wrapped up their worst 2 week percentage drops since late November. The Dow and the S&P each fell 2.7 per cent for the two weeks from the close on March 30.
What to look for this week are the 10 Dow components reporting earnings: Intel Corp, Johnson & Johnson , Coca-Cola Co, DuPont, Microsoft, The Travelers Companies Inc, Verizon Communications Inc , American Express Co, General Electric Co, and McDonald’s Corp.
USA Economic indicators due next week include the Empire State and Philadelphia Federal Reserve’s manufacturing surveys, retail sales for March, housing starts and existing home sales.
The March nonfarm payrolls report, which was released on Good Friday when the cash US stock market was closed, showed just 120,000 jobs added last month. That figure fell far short of the forecast for 203,000 new jobs and raised questions about whether the recovery in the US labor market was stalling.
In Europe Spain, Italy and possibly Portugal are all on the path to Austerity and default, news of this will be a constant threat to the market as Europe’s Central Bank fails to deliver any real solutions.
The Other big news is China and the direction of the Chinese economy, most western reports are very negative but the data does not support this. in fact China seems to be performing in line with their expectations.
Numbers have fallen behind, but we are looking for a shift in Government policy to raise growth in China, China’s cabinet vowed on Friday to strengthen its fine-tuning of the economy as it grew by an annual rate of 8.1 percent in the first three months of 2012, its slowest pace in nearly three years.
“Efforts should be made to leave more room for new policies and prepare for hardships and tests,” the State Council said in a statement after a meeting on Friday.
The State Council said the economy is generally in stable shape, but is faced with many difficulties and challenges, Xinhua News Agency reported.
It pledged to improve macro-regulation, enhance demand management, and make policies more targeted, flexible and forward-looking, according to the statement.
The government’s overtures seemed to have met economists’ expectations that more policy adjustments may be on the way to curb the sliding economy, which has been dragged down by simultaneously slowing exports and investments.
Economists said it is too soon to say whether the slowdown could be halted in the second quarter, but the 8.1 percent growth rate in the first three months was close to the government’s tolerable bottom line.
The figure was well below the 8.9 percent growth recorded in the last quarter of 2011 and marked the fifth consecutive quarterly slowdown, piling further pressure on Beijing to loosen its monetary policy.
China’s economy was cooling sharper than the many forecasts of 8.4 percent growth, but it was still higher than the year’s target of 7.5 percent outlined by Premier Wen Jiabao in his government work report in March.
“That is a relatively high and sound economic growth worldwide,” said Sheng Laiyun, a spokesman with the National Bureau of Statistics.
According to the NBS, sharply falling exports in the first quarter amid sluggish demand from indebted European countries and the slower-than-expected recovering United States pulled down GDP growth, the NBS said.
An unexpected surge in credit growth caught analysts by surprise on the eve of the release of the mainland’s first- quarter economic growth data.
Analysts said the near-50 percent rise in March lending growth may mean the urgency for reducing the amount of capital banks are required to hold in reserve will diminish.
The People’s Bank of China said yesterday that new lending in March hit 1.01 trillion yuan (HK$1.24 trillion), outpacing estimates of 800 billion yuan.
New loans in the first quarter reached 2.46 trillion yuan, up 9.7 percent from a year earlier.
Mortgage borrowing accounted for 20.3 percent, or 499.5 billion yuan of new loans in the first quarter.
Of the total lending, 1.95 trillion yuan went to the non-financial sector. “The breakdown suggests a rebound in home sales,” said Lu Ting, China economist at Bank of America Merrill Lynch.
Since January, commercial banks in big cities, including Beijing, Shanghai and Guangzhou, have begun offering discounts of up to 15 percent on mortgages rates for first-home buyers.
Based on lending last month, some economists say their estimates of first- quarter gross domestic product may be low. GDP data are due out today.
“The worst is over, and the economy bottomed out in March,” said Lu. “We saw some small upside risk to our 9.3 percent year-on-year GDP growth forecast for the first quarter.”
Estimates of output growth vary. Goldman Sachs and China International Capital Corp forecast 8.5 percent while Nomura predicts 8 percent.
Yi Xianrong, a senior researcher at the Chinese Academy of Social Sciences, forecasts between 8.4 and 8.5 percent.
Most predict January-March growth to be below the fourth quarter’s 8.9 percent.
UBS chief economist Wang Tao said there would be no need for a further cut in the bank’s reserve requirement ratio in the near term, as credit conditions have eased.
At present the RRR for large banks is at 20.5 percent, following the 50-basis-point cut by the central bank in February.
Foreign reserves hit a record US$3.3 trillion (HK$25.6 trillion) as of the end of March, the central bank said.
The economy rebounded strongly in the first quarter to avoid a recession, but with rising prices hurting consumers and businesses, the Monetary Authority of Singapore (MAS) yesterday allowed for a stronger Singapore dollar as it raised its inflation forecast.
“The MAS move is a slight surprise, but it was made possible by the healthier-than-expected gross domestic product numbers,” said DBS Bank economist Irvin Seah.
Initial estimates from the Ministry of Trade and Industry yesterday showed Singapore’s GDP grew by 9.9 per cent the first quarter from the previous three months, reversing the 2.5-per-cent decline in the fourth quarter and beating the median analysts’ forecast of a 6.3-per-cent rise.
From the corresponding period last year, first-quarter GDP rose 1.6 per cent, down from the 3.6-per-cent rise previously but topping a 0.7-per-cent analysts’ forecast.
Bumitama IPO a Hit
Bumitama has one of Asia’s youngest palm-oil plantations. It aims to continue expanding and improving the operations and product quality of its oil palm plantations to meet global demand for crude palm oil and palm kernel.
Mr. Lim Gunawan Hariyanto, Bumitama’s Executive Chairman and Chief Executive Officer, said, “Bumitama’s listing is an important part of our growth strategy as a young and fast-growing palm oil player. Our strategic move to list on SGX has placed us close to a large pool of international, sophisticated and blue-chip investor base. SGX’s robust regulatory and financial framework ties in well with our firm belief in upholding good corporate social responsibility and corporate governance. Bumitama’s listing in Singapore has attracted strong demand from funds and wealthy investors seeking to tap into the region’s prosperous resources sector.
“As one of the few pure upstream plantation players to be listed on SGX, we are confident that Bumitama is well-positioned to benefit from the growing demand for palm oil, anticipated upswing in CPO prices and the vibrant Indonesian economy.”
“We are proud to be Bumitama’s preferred listing partner and we warmly welcome you to the SGX family. Bumitana is now a key member of our strong pool of commodities and resource companies, offering global investors an attractive and wide range of investment options. Bumitama’s listing reinforces SGX’s strength and depth as an international capital-raising centre in this region,” said Mr Magnus Böcker, Chief Executive Officer of Singapore Exchange.
The listing of Bumitama Agri brings SGX’s pool of commodities & resources companies to 30 with a total market capital of over SS$74 billion (US$59 billion).
Four days after Trade Minister Lim Hng Kiang said in Parliament that the MAS was “very concerned” about stubbornly high inflation, the central bank forecast the consumer price index to rise between 3.5 and 4.5 per cent this year, up a full percentage point from its earlier forecast. The MAS said its core inflation measure, which strips out private road transport and accommodation costs, would average between 2.5 and 3 per cent, also a percentage point higher.
Catching the market by surprise, the MAS tightened policy, saying it would increase the slope of its policy band slightly for a modest and gradual appreciation of the Singapore dollar. It restored a narrower trading band and said there would be no change to the level at which the band is centered. Most economists had forecast no change in monetary policy.
The Singapore dollar rose after the announcement to end the day 0.6 per cent higher at S$1.2450 to the US dollar.
With economic activity turning out somewhat stronger than anticipated in the first quarter and with “resource markets” tightening further, the MAS said core inflationary pressures had persisted.
Core inflation rose to 3.2 per cent in the first two months of 2012 from 2.4 per cent in the fourth quarter of last year, even as headline inflation moderated to 4.7 per cent from 5.5 per cent.
The MAS said inflation rates would remain elevated over the next few months, before easing over the remainder of this year.
The MAS, which uses the exchange rate as a tool to control inflation, said the new policy stance would help anchor inflation expectations, ensure medium term price stability and help keep growth on a sustainable path.
However, some analysts are concerned that a stronger Singapore dollar may affect the competitiveness of Singapore’s open economy.
“The economy is still picking up slowly, while difficulties continue to prevail due to the earthquake,” the Cabinet Office said in the report for April, the sixth straight month it has used the same expression.
The government’s view is similar to that of the Bank of Japan, which said on Tuesday the economy is showing signs of picking up, while its Governor Masaaki Shirakawa offered an upbeat view on the outlook.
The government said the nation’s exports are “levelling off”, upgrading its view for the first time since August. It previously said exports were weakening.
Japan posted its first trade surplus in five months in February after shipments to the United States rose at their fastest annual pace in more than a year.
“The moderate recovery in the U.S. economy had a positive effect on Japan’s economy, with some recovery in Japan’s shipments to Asia. And falls in exports to Europe seem to be halting,” said Minoru Masujima, director of macroeconomic analysis at the Cabinet Office.
“But it is not a situation where exports will rise rapidly or in which the overseas economic recovery is gathering steam, and impact on Japan’s economy.”
With little or no rise in Japan’s core consumer prices, the government expects mild deflationary pressure to continue, and sees achieving the Bank of Japan’s 1 percent consumer inflation target as some way off.
The BOJ will consider easing monetary policy at its next rate review on April 27 by boosting government bond purchases under its asset-buying programme, sources familiar with the central bank’s thinking said, as it battles to nudge inflation towards its target.
Consumer spending is holding firm partly due to government subsidies for fuel-efficient cars, and industrial output is picking up moderately, the report said.
“Domestic demand is relatively solid but not strong and factory output is continuing a slow pickup. We would like to assess more data on whether to upgrade the assessment on the economy.”
Japan’s economic recovery is expected to take hold in the coming months but there are risks from Europe’s debt crisis, higher oil prices and concerns about the electricity supply, it said.
Prime Minister Yoshihiko Noda’s administration is being buffeted by conflicting pressures over energy policy, with big businesses urging it to get nuclear reactors back on line and keep atomic power in the energy mix to keep the economy afloat, while many voters worry about safety after the Fukushima radiation crisis triggered by last year’s disaster.
All but one of the nation’s 54 reactors are offline due to public safety fears, mostly idled as they came due for maintenance.
The government is keen to get some reactors restarted soon to avoid power cuts in the summer, when electricity demand peaks, but none of the reactors can be restarted until they clear safety reviews and receive approval from local governments.
The government also remains vigilant for fluctuations in financial markets, with the yen having strengthened from last month’s 11 month-low of 84.187 yen.
The dollar fetched 80.91 yen on Thursday, while the euro was around 106.15.
“Resurgence in the yen’s strength and falls in share prices could negatively affect the economy through business and consumer sentiment, if such trends accelerate,” another official said.
Finance Minister Jun Azumi said on Wednesday he was watching forex moves with great interest and Japan would respond to currency moves by examining market trends.
The economy is expected to expand 1.9 percent in the fiscal year that started on April 1 as post-quake rebuilding in the northeast gathers steam.
It is Thai New Year and markets have been closed for several days
The Stock Exchange of Thailand main index went up 14.96 points or 1.30% to close at 1,169.45 points at the end of trading session on Thursday afternoon. The trade value was 20.60 billion baht, with 2.38 billion shares traded.
The SET50 index ended at 821.45 points, up 10.69 points or 1.32%, with a total trade value of 14.49 billion baht.
The SET100 index rose 23.20 points or 1.32% to stand at 1,783.25 points, with a total turnover of 16.64 billion baht.
The SETHD index went up 9.83 points or 0.89% to stand at 1,109.56 points, with total trade value of 4.29 billion baht.
The MAI index gained 4.29 points or 1.51% to close at 289.04 points, with total transaction value of 200.46 million baht.
Top five most active values were as follows;
KBANK (XD) 154.00 baht, up 5.50 baht (3.70%)
IVL 33.50 baht, down 0.50 baht (1.47%)
ADVANC 168.00 baht, up 3.00 baht (1.82%)
BANPU (XD) 572.00 baht, down 6.00 baht (1.04%)
PTTGC 67.00 baht, up 0.50 baht (0.75%)
Markets will re-open Tuesday in Thailand.
Krung Thai Bank shareholders approved the issue of up to 310 billion baht in new debentures, with the timing and other details left to the discretion of the board. The state-owned bank currently has 41.39 billion baht in outstanding debt.
KTB president Apisak Tantivorawong said the bank could look to raise 50 billion baht in funds this year to help cover maturing debt. An additional 200 billion baht worth of debentures would be used to cover business investment and loan growth.
The bank posted loan growth of 4.5% for the first quarter alone, well ahead of its full-year growth target of 7-8%.
“While we asked shareholders to approve the issue of a relatively large amount of new debt, we will only issue new debentures to match our liquidity needs,” Mr Apisak said, adding that he did not expect the issuance plan to affect the bank’s existing borrowing costs.
Krung Thai’s largest outstanding issue, KTB192A due 2019, last traded on Tuesday with a weighted yield of 6.35% for a spread of 265 basis points against treasuries.
Meanwhile, shareholders of CIMB Thai Bank yesterday approved the issue of up to 40 billion baht in new debentures.
The bank, 93.15% owned by Malaysia’s CIMB Group, will also raise up to 4.89 billion baht in new capital through a rights offering of three new shares for every 10 shares held.
CIMB Thai chief executive Subhak Siwaraksa said funds from the share and bond issues would be used to finance business growth.
Siam Commercial Bank shareholders last week gave the bank approval to issue up to 100 billion baht in additional debt on top of existing approval to float 150 billion in debt.
The 250 billion baht in funds would be used to support growth in the bank’s retail finance, small business and corporate banking units.
The bank currently projects loan growth of 12-14% for 2012. SCB reported outstanding loans of 1.29 trillion baht at the end of 2011, up 22% from the year before.
The country’s consumer price index (CPI), a main gauge of inflation, is expected to have increased by only 2.1% from a year earlier, based on the median estimate of seven economists surveyed by Bloomberg as of Friday.
In February, Malaysia’s CPI growth eased to 2.2% year-on-year from 2.7% year-on-year in the preceding month.
Based on economists’ analysis, Malaysians will unlikely see any surprising trend, when the Department of Statistics unveils the CPI number for March on Wednesday.
“We expect the easing trend to continue, underpinned by slower global growth and base effects,” OSK Research said in its earlier report.
The research house had in the same report said it expected Malaysia’s full-year inflation to be around 2.7% for 2012, compared with 3.2% in 2011.
Nevertheless, it reckoned that inflation risks were on the rise and that could put more upside to its forecast. These risks, as OSK Research saw it, included high oil prices, aggressive government spending on infrastructure and Economic Transformation Programme-related projects as well as government cash handouts and civil servant pay increases. The planned introduction of a minimum wage could also add to inflationary pressures, it said.
The FBM KLCI index gained 1.85 points or 0.12% on Friday. The Finance Index increased 0.09% to 14338.07 points, the Properties Index up 0.52% to 1031.37 points and the Plantation Index down 0.01% to 8843.33 points. The market traded within a range of 3.96 points between an intra-day high of 1604.71 and a low of 1600.75 during the session.
Actively traded stocks include HIBISCS-WA, INGENS, AWC, MTRONIC, NICORP, CSL, AGLOBAL, HIBISCS, UTOPIA and JCY-CE. Trading volume increased to 1347.97 mil shares worth RM1656.07 mil as compared to Thursday’s 1108.97 mil shares worth RM1601.78 mil.
Leading Movers were TENAGA (+10 sen to RM6.61), UMW (+11 sen to RM7.53), PBBANK (+2 sen to RM13.74), PETCHEM (+2 sen to RM6.75) and AIRASIA (+3 sen to RM3.47). Lagging Movers were CIMB (-2 sen to RM7.69), GENTING (-4 sen to RM11.04), GENM (-2 sen to RM3.78), YTLPOWR (-2 sen to RM1.83) and IOICORP (-1 sen to RM5.39). Market breadth was positive with 400 gainers as compared to 325 losers.
The local stock market rallied sharply on Friday as investor sentiment remained buoyant despite a weaker-than-anticipated first quarter economic growth in China.
Taking cue from a strong performance in Wall Street overnight, the main-share Philippine Stock Exchange index added 50.52 points or 1 percent to close at 5,097.30.
The index has ended in positive territory for the second consecutive session as the market started to shake off a long Lenten holiday hangover. This allowed the index to gain by 58.38 points or 1.12 percent this week.
Value turnover for the day amounted to P5.7 billion. Buying was more selective than broad-based, however, as there were only 78 advancers versus 83 decliners while 47 stocks were unchanged.
The market was supported by the holding firm, property and mining/oil counters whose main indices had gone up by 1.7 percent, 1.39 percent and 1.1 percent, respectively.
An outperformer among index stocks is JG Summit, whose share price surged by another 7.2 percent to P33.5 per share. This was after CLSA Asia-Pacific initiated coverage on JGS with a “buy” recommendation and a 12-month target price of P43 per share. Food unit URC likewise benefited, rising by 3.84 percent.
Other index gainers were AGI, Metrobank, SMIC, AC, Megaworld, AP, DMCI and EDC.
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 : email@example.com
Suite 53 Athenee Tower
63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330
THAILAND Email : firstname.lastname@example.org
New York 347 5th Avenue, Suite 1402-508 NY, NY 10016
Comment on this Article. Send them to email@example.com
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below