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ASEAN STOCK WATCH 14  August  2010

ASEAN Stocks End Week Well

Shayne Heffernan

Asean was the first of the world markets to bounce back today sparking a global rally fueled by ASEAN and Asian growth, an improving Germany and some positive sentiment news in the USA, we expect that trend to continue Monday.

The Jakarta Composite Index climbed 27.37 points, or 0.9 percent, to close at 3,053.01, losing 0.3 percent for the week. About 3.43 billion shares worth Rp 4.83 trillion ($540 million) changed hands. Gainers edged out decliners 119 to 81.

“Investors were encouraged after seeing good earnings,” said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management. “The global economy will get back on the recovery track in two or three months.”

Genting Singapore, a unit of Asia’s second-biggest listed casino operator, and Taiwan’s Wintek, which makes liquid-crystal displays, surged at least 6.9 percent after the companies returned to profit in the second quarter. Hutchison Whampoa rose 2.6 percent in Hong Kong after billionaire Li Ka-shing made his biggest investment in the shares in at least seven years.

The finance sector led local gains, with Bank Negara Indonesia, the nation’s third-biggest state-owned bank, advancing 5 percent to Rp 3,150. Thursday’s sale of a 3.1 percent stake in the lender attracted demand of 3.93 times more than shares on offer, and raised Rp 1.37 trillion.

Timah, Indonesia’s largest tin producer, rose 3.2 percent to Rp 2,425.

State-owned Perusahaan Gas Negara, the nation’s biggest distributor of the fuel, climbed 1.2 percent to Rp 4,100.

Meanwhile, the rupiah advanced the most since June on optimism the nation’s improving economy would continue to lure funds from abroad.

The rupiah gained 0.5 percent to 8,975 against the dollar as of 4:16 p.m. in Jakarta, the most since June 21, according to data compiled by Bloomberg. The currency ended the week down 0.4 percent.

The rupiah pared its losses for the week after research firm EPFR Global said funds investing in emerging-market local-currency debt have attracted $16.9 billion of net inflows so far this year, more than triple the record annual intake of $5 billion recorded in 2007.

Indonesia expanded at the fastest pace in almost two years during the second quarter, and foreigners invested $1.4 billion here this year.

“The rupiah is being supported by strong economic fundamentals and the trend of increasing foreign funds and portfolio investment,” said Helmi Arman, an economist at Bank Danamon in Jakarta. “There is no reason for a sustainable depreciation of the currency.”

The rupiah may average 9,100 against the dollar this year, Bank Indonesia Governor-designate Darmin Nasution said on Friday.

US oil giant Chevron has put portions of its stakes in the Ganal-Rapak sea gas project near East Kalimantan on the block, in what could be an $800 million deal.

There is also talk that ConocoPhillips, the third-largest US oil company by market value, is gearing up to divest parts of its Indonesian businesses, according to three bankers with knowledge of the matter.

Chevron owns 80 percent of the Ganal-Rapak project, and Italy’s ENI owns the rest. The second-largest US oil company aimed to reduce its holding to roughly 51 percent, one of the sources said.

The sale process has gained significant momentum since November when Chevron first said it was seeking partners in the project, which is expected to come on line in 2016.

There is no clear time table for the completion of the auction.

“It’s probably five to six years from production, and it will probably need some capital expenditure, so it’s not everyone’s cup of tea,” an Asia-based investment banker with direct knowledge of the auction said.

“Chevron’s got a lot of capex commitments in Australia — they’re trying to get some money and selling some non-core assets, or reducing their exposure or stakes in these assets.

The process is up and running and everyone is running around and looking for horses to back.”

Indonesia’s state-owned oil and gas firm Pertamina has said it was interested in taking a stake of at least 10 percent in the Ganal-Rapak project.

“If we get the official offer to bid, we will look into it seriously,” said Mohamad Afdal Bahaudin, Pertamina’s finance director.

Japanese companies Mitsubishi and Mitsui — which often prefer minority stakes to total takeovers — as well as Pertamina, were all likely to bid, one of the banking sources said.

A Chevron spokesman in Indonesia said the company “is evaluating partner opportunities for the Indonesia Deepwater Development Project.”

“The process is ongoing and subject to approvals by the government of Indonesia. Therefore, we are not disclosing details related to the process at this stage,” he said.

Indonesia, endowed with quality coal, oil, gas and mineral deposits and a neighbor to the world’s neediest resources consumer, China, is fast growing in stature as a destination for outbound deals and foreign capital.

This month, State Enterprises Minister Mustafa Abubakar said China Investment Corp. — that nation’s $300 billion sovereign wealth fund — may invest as much as $25 billion in Indonesia over the long term.

Chatter also persists that Chevron competitor ConocoPhillips is gearing up to divest parts of its Indonesian businesses.

The rumors have been circulating for a long time, and Conoco has denied such speculation in the past. It declined to comment on the matter.

Conoco is in the middle of an asset-selling campaign that Deutsche Bank estimates could raise $15 billion as it seeks to reduce debt.

It operates seven production-sharing contracts for oil and gas in Indonesia, producing a total of 93 million barrels of oil equivalent per day, according to its Web site.

Local energy players such as Medco Energi Internasional had heard the sale may proceed and were expressing interest, a Jakarta-based corporate source said.

Any deal for Chevron or Conoco would elevate Indonesia even higher as an Asian destination for high-profile, cross-border resources deals.

Last year, BP sold its stake in an offshore oil and gas block in West Java to Pertamina, claiming it no longer fit the company’s long-term strategy.

“It’s a logical move for Chevron to get quick money and ease their financing burden a little, but it has been in the air for as long as I can remember and I’ll believe it when they sign something,” said Kurtubi, an independent Jakarta-based energy analyst and former employee of Pertamina.

However, he thought the Japanese would show strong interest in the asset, given a tendency to prefer minority stakes and a need to secure resources.

“The Japanese are the most likely buyers as this type of deal suits their business style, guaranteeing gas supply,” Kurtubi added.

At Friday’s closing, there were 502 gainers, 228 losers and 269 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,360.15 up 10.82 points, the FBMACE was at 3,813.26 down 9.07 points, and the FBMEmas was at 9,212.06 up 72.03 points.

Turnover was at 996.007 million shares valued at RM1.360 billion (S$580.93 million).

In what Shayne Heffernan considers Malaysia’s must own stock Genting Malaysia Bhd’s subsidiary Genting New York LLC won a 30-year franchise to redevelop the Aqueduct Racetrack in Ozone Park, New York, according to a Singapore Straits Times report. The franchise will give Genting New York the licence to operate the city’s first slow machine-styled “racino” video lottery terminals.

Second best according to Ebeling Heffernan’s Shayne Heffernan is AirAsia Bhd, revenue for the second quarter is estimated to rise 16% compared with the previous corresponding period and 4% higher quarter-on-quarter to RM928mil on higher fare and traffic, said stockbroking research company ECM Libra Investment Research.

It said this would make the first half revenue hit 50% of the budget airline’s RM3.6bil target for the current financial year ending Dec 31.

“Revenue is expected to be sustained at 21.5 sen per km in the first quarter of the current financial year, higher by 33% year-on-year. We expect overall cost/available seat kilometres to rise year-on-year to 11.5 sen/available seat kilometres mainly on higher jet fuel,” it said in a statement yesterday.

The company also said it expected AirAsia to record 5% year-on-year higher adjusted net profit of RM135mil (up 22% quarter-on-quarter), assuming that non-fuel cost remained unchanged on a quarterly basis.

The Straits Times Index added 6.36 points or 0.22 per cent to 2,933.40. In the broader market, gainers beat losers 2 to 1 in a volume of 250 million shares valued at $233.6 million.

Top advancers included Genting S’pore, City Development, MCL Land, UOB, DBS and Boustead S’pore.

United Overseas Bank (UOB), the last of the three listed local banks to announce earnings, reported a 28 per cent increase in its second quarter profit as declining bad loan charges offset a slump in client trading and share sales.

Net income jumped to $602 million in the three months ended June 30 from $470 million in the corresponding period a year earlier even as non-interest income plunged 31 per cent, the bank said yesterday.

Stocks in the 30-company index closed mixed. Among those that finished higher heavyweight Philippine Long Distance Telephone Co. and Alliance Global Group, Inc. which finished in the positive.

Property firms Filinvest Land, Inc. and Robinsons Land Corp. meanwhile ended lower.

The Philippine Stock Exchange index declined by 0. 38 percent or 13.58 points to 3,469.52, while the broader all- share index slipped by 0.24 percent or 5.52 points to 2,203.68.

Trading volume reached 954 million shares worth P3.2 billion ($70.48 million) with 67 stocks advancing, 54 declining and 36 unchanged.

Of the six counters, only the industrial and the mining and oil sectors made a last-minute rally. The financial sector meanwhile was unchanged from Thursday’s close.

Investors, the brokerage said, opted to liquidate profitable positions on the back of rising pessimism and a resurgence of uncertainty on the pace of global recovery.

But the market’s 1.32 percent week-on-week drop is hardly a cause for concern.


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