ASEAN KEY DESTINATIONS
Asean Stock Watch- August 10
U.S. stocks saw its biggest one-day gain since May 2010 Tuesday as investors buy up beaten-down stocks and following the Federal Reserve's announcement that interest rates will be kept near zero for at least two more years.
The Dow Jones Industrial Average closed up 429.92 points, or 3.98 percent, to close at 11,239.77. The S&P 500 rallied 49.84 points, or 4.45 percent, to finish at 1,169.30. The Nasdaq surged 124.83 points, or 5.29 percent, to end at 2,482.52.
Gold prices hit a record USD1,778 an ounce in its biggest three-day rally since the financial crisis in late 2008.
European shares closed broadly higher, ending a 20 percent decline over 2.5 weeks as traders buy up deeply-discounted stocks.
Overnight, the Dow Jones Industrial Average finished the day down 5.5 percent to 10,809.85, its first close under 11,000 since November and the key index’s worst point-decline since Dec. 1, 2008.
Stocks declined for a sixth consecutive trading day on Tuesday, sending the main index to its lowest level in almost four months on concern that slowing global economic growth will hit demand for export commodities such as palm oil and rubber.
The Jakarta Composite Index fell 115.15 points, or 3 percent, to close at 3,735.12, its lowest since April 13. The benchmark has lost 11 percent since closing at a record high on Monday last week, which puts the market technically in a correction. For the year it’s up 0.9 percent.
More than 10.14 billion shares worth Rp 9.46 trillion ($1.1 billion) were traded at the Indonesia Stock Exchange. Decliners beat gainers by 245 to 29.
Stocks plunged in the United States last night, and markets across Asia and Europe followed suit, after Wall Street’s initial reaction on Monday to Standard & Poor’s Friday night downgrade of US debt.
Markets in Singapore, Hong Kong and South Korea lost more than 3 percent on Tuesday, while in early European trading stocks in Britain and Germany were down more than 2 percent.
“The Europe market opened negatively, and that might have caused the JCI to go down,” said Deni Hamzah, analyst with Corfina Capital.
Commodity-related stocks declined the most after prices for some materials declined. Among sectors, mining stocks lost 4.8 percent, consumer goods dropped 3.3 percent decline, and the finance sector shed 2.9 percent. The agriculture sector lost 2.7 percent.
Bumi Resources, the nation’s largest coal producer, fell 6.3 percent to Rp 2,600, while rival Adaro Energy declined 6.5 percent to Rp 2,175. State-controlled miner Tambang Batubara Bukit Asam fell 7.8 percent to Rp 17,850. Medco Energi International, the largest listed oil producer lost 2.1 percent to close at Rp 2,325. Oil dropped more than 6 percent on Monday.
Astra Agro Lestari, the largest listed plantation company, fell 4.9 percent to Rp 21,200. Sampoerna Agro lost 1.5 percent to Rp 3,325. Crude palm oil for October contract retreated 1.8 percent to 2,943 ringgit at Bursa Malaysia.
Jaya Agra Wattie, a rubber plantation company, fell 6.1 percent to Rp 465. Rubber futures dropped more than 4 percent.
The rupiah fell 0.5 percent against the dollar to 8,540. Deni said the rupiah’s value is fine as long as it can be kept around 8,650. “The central bank also would not want the rupiah to be too strong as it can be a burden to the exporters,” he said.
The government has specific instruments to overcome the negative impact of Standard & Poor’s downgrade of the United States’ credit rating from triple A to AA-plus, says Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop.
It is the first time the US credit rating has been lowered since the country won top ranking in 1917.
Nor Mohamed said the government had for a very long time adopted its own principles in managing the economy and these were not based on ideology.
“Malaysia is an open economy. Of course we will receive some negative spill-over effect from the downgrade.
“But what happened is that equity markets worldwide crashed, including the local bourse, which succumbed to the pressure yesterday and wiped out another 10 percent of market capitalisation today,” he added.
Nor Mohamed said the 10 percent slide was not that significant as Bursa Malaysia had increased by 50 percent. “So, the fall can be taken as a correction after the recent gains. So it is not really an issue,” he said in an interview here today.
News of the downgrade saw share markets plunging across the globe, including Malaysia. Nor Mohamed said Malaysia was more flexible compared with the United States and Europe, as it managed the economy more practically and according to specific needs.
“In this instance, we have to spend more to create consumer spending and undertake more export oriented promotions. The government has already given a bonus to enhance domestic consumption,” he added.
Besides, economic diversification will also play an important role in making Malaysia less dependent on Europe and the United States for export markets.
Nor Mohamed also said the Economic Transformation Programme (ETP), Government Transformation Programme and National Key Result Areas were among the catalyst to spur the economy.
“We have created a system which is managed comprehensively. We use investors’ funds, from both domestic and foreign, and we don’t have problems in securing bank loans. Our banking system is flushed with billions of ringgit.”
The Philippines’ benchmark stock index on Tuesday suffered its biggest drop since the sell-down that happened after the Lehman Brothers bankruptcy, which set off the worst global economic crisis in decades.
At the Philippine Stock Exchange, the composite index dived 174.21 points, or 4.02 percent to 4,157.03, its biggest point drop since closing down 239.66 points on October 27, 2008 or soon after the Lehman Brothers bankruptcy the preceding month.
Tuesday’s close was also the biggest percentage decline since March 16, 2009 when the market lost 4.66 percent to end at 1,769.67. The market is now down 44.11 points or 1.05 percent so far this year.
The broader all-shares index plunged 87.94 points, or 2.94 percent to 2,906.18.
Decliners dominated advancers, 170 to 14, while 14 issues were unchanged. A total of 8.09 billion shares worth P8.37 billion changed hands.
Net foreign selling stood at P1.5 billion.
“Investors found little or no reason to shift to a bargain hunting stance as the events of the day failed to ease concerns over a second recession,” said Jun Calaycay of Accord Capital Equities Corp.
“The dust might only start to clear after regional investors digest the Fed’s next move to revive growth, more than expectations for another status quo on interest rates,” said Freya Natividad, investment analyst at 2TradeAsia.com, referring to the start of a two-day meeting by the US central bank last night.
The market’s downward momentum is still heavily evident, but the shift in sentiment may be coming in “sooner than later,” she said.
Natividad advised investors to book profits and use excess cash to accumulate a good number of blue chips and second-line companies, which have fallen to bargain levels.
“While it is true that the magnitude of the two-session drop this week is an inviting prospect for bargain hunting, at this point, even contrarians may take a while before throwing money into what is beginning to look like a bottomless pit,” Calaycay said.
Astro del Castillo, managing director at First Grade Finance Inc., said the market may only see a shift in momentum as the US formulates a permanent solution to its debt problems.
“Domestically, we remain positive despite the doldrums. If you look at corporate figures, this sell-off is unjustified. Reality will set in, meaning investors will be encouraged to look at our basic fundamentals, which remain strong,” said del Castillo.
Calaycay pointed out that when the broad economy struggled to keep its head above water amid the recession in 2009, stocks posted a full-year return of 63 percent to set a record.
“At least through the first semester of the year, a similar corporate backdrop appears to develop,” he said.
At the Philippine Dealing System, the peso shed 2 centavos to close at 42.52 against the greenback from 42.50 the previous trading day. Volume surged to $1.297 billion from $1.038 billion the previous day.
“Risk appetite may take a back seat on global growth concerns, persistent caution over developments in debt-stricken nations in the Euro zone, and uncertainty over the US economy despite its recent debt-ceiling agreement,” an analyst from Metrobank said.
“In addition, US dollar demand by both onshore and offshore clients may stall any gains by the PHP against the US dollar and put any bias skewed to the left to a halt. Although the weakness of the US dollar is more or less still intact, it may be wise to be prudent on being bearish versus the said currency,” the analyst said.
Singapore shares opened higher on Wednesday, with the benchmark Straits Times Index at 2,906.11 in early trade, up 0.77 percent, or 22.11 points.
Around 110.5 million shares exchanged hands.
Gainers beat losers 178 to 77.
The Stock Exchange of Thailand main index went down 35.65 points or 3.31 percent to close at 1,042.54 points at the end of the trading session on Tuesday. The trade value was 63.04 billion baht, with 6.69 billion shares traded.
The SET50 index ended at 724.92 points, down 25.19 points or 3.36 percent, with a total trade value of 48.90 billion baht.
The SET100 index fell 56.10 points or 3.43 percent to stand at 1,580.23 points, with a total turnover of 55.55 billion baht.
The SETHD index went down 36.79 points or 3.57 percent to stand at 994.37 points, with total trade value of 18.10 billion baht.
The MAI index dropped 11.47 points or 3.73 percent to close at 295.80 points, with total transaction value of 748.13 million baht.
Top five most active values were:
BBL closed at 155.00 baht, down 7.00 baht (4.32 percent)
KBANK closed at 124.50 baht, down 5.50 baht (4.23 percent)
PTT closed at 311.00 baht, down 11.00 baht (3.42 percent)
SCB closed at 117.00 baht, down 1.50 baht (1.27 percent)
PTTCH closed at 143.00 baht, down 7.50 baht (4.98 percent)
Shares retreated yesterday on both national exchanges, with decliners overwhelming advancers amid growing uncertainty over both the global and domestic economies.
The domestic gold price escalated yesterday and hit a new all-time high of VND44.3 million (US$2,150) per tael, while global equities markets responded negatively to ratings agency Standard & Poor's unprecedented downgrade of the US sovereign credit rating from AAA to AA+.
Gold also hit a new global record of over $1,700 per ounce. (One tael is equivalent to 1.2 ounces.)
A super-heated local gold market yesterday overshadowed the National Assembly's passage late last week of tax breaks for securities investors.
"Investors seeking safe investment haven in gold will affect capital flows into the securities and real estate markets," said Phan Dung Khanh, head of analysis for Kim Eng Securities Co.
"Soaring gold prices suggest the economy is still in difficult times and the stock market is unlikely to improve in the short term."
On the HCM City Stock Exchange yesterday, the VN-Index closed at 396.41 points, a decline of 1.12 percent from last Friday's session. The value of trades remained meager at VND462.7 billion ($22.5 million), with 24.7 million shares changing hands.
Mid-cap and small-cap shares were the biggest losers, losing 2.29 per cent and 1.26 per cent on average, respectively, while blue chips declined by just 0.68 per cent, according to figures from the financial website vietstock.vn. Sales during yesterday's session came mostly from small investors who aimed to convert shares into cash to buy gold, Vietstock analysts said.
On the Ha Noi Stock Exchange, the HNX-Index fell by 1.8 per cent to end the day at 67.32 points. The value of trades totaled just VND228.7 billion ($11.1 million), a decline of over 33 per- cent from Friday's value, with only 23.4 million shares traded.
Foreign investors concluded yesterday as net sellers on both exchanges, unloading a combined VND52 billion ($2.5 million) worth of shares.
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