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ASEAN STOCK WATCH 21  August  2010

ASEAN Markets Rally as World Markets Slide

Shayne Heffernan

As the rest of the World’s markets slid, ASEAN with the exception of Singapore managed to rally closing the week at all time record highs, and Shayne Heffernan is expecting more growth in the coming months.

Kuala Lumpur closed higher today at 1,395.02 up 2.46 points despite the caution it will probably slide back today after five days of winning streak.

Shayne Heffernan has identified Bursa Malaysia as having a long winning streak ahead of it and expects the exchange to break 1500 in early 2010.

Losers led gainers with 394 counters down, 316 up and 327 remained unchanged with turnover of RM1.34bil.

Among the top three gainers are F&N that added 32 sen to RM14.54, Nestle gained 18 sen to RM39.66 and JTinter climbed 16 sen to RM6.02.

And for the heavyweights, CIMB added 8 sen to RM7.70, Maybank gained 6 sen to RM8.13 and Tenaga was up 7 sen to RM8.79.

FBM KLCI rose 43.2 points or 3.2% in five straight days to 1,392.56 – a new high since Feb 8.

AirAsia Bhd’s share price rose to its highest in more than 2½ years to RM1.75, its intraday high yesterday, on strong buying interest buoyed by a strong set of second-quarter results released on Wednesday.

Its share price had appreciated 25.36% so far this year, out-performing the stock market’s benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index, which gained 9.41% in the same period.

AirAsia closed up 5 sen, or 2.98%, at RM1.73 after trading between its intraday high and a low RM1.70. It was also the sixth most actively-traded counter on Bursa Malaysia with a volume of 20 million shares.

Bloomberg quoted AirAsia group CEO Datuk Seri Tony Fernandes as saying the company was still studying whether to start paying dividends for the first time since its listing in 2004 after recording its sixth consecutive quarterly profit.

“That’s a big step forward for us,” he said, adding that AirAsia was on course to list its units in Thailand and Indonesia in the first half of next year.

On Wednesday, the carrier announced that it made a net profit of RM198.9mil for the three months to June 30, a 43% jumped from RM139.2mil in the previous corresponding period, on turnover of RM940.6mil.

AirAsia’s core-operating profit for the period was RM168.5mil, a 31% increase from RM128.4mil previously. Its core-operating profit margin for the period was at 17.9%, 0.7 percentage point higher than the 17.2% achieved a year ago.

The strong set of results came largely within analysts’ expectations and some brokerages have raised their share price target for AirAsia.

OSK Research expects AirAsia to continue to post strong numbers going forward. “With the second half being the stronger half as forward bookings are higher than last year, we expect the carrier to meet our earnings before interest, tax, depreciation and amortisation forecast of RM1.35bil for the financial year ending Dec 31 (FY10) (from RM1.3bil in FY09), although we expect new plane deliveries to result in higher depreciation,” it said.

The research house also raised AirAsia’s core pre-tax profit for FY10 by 15% and FY11 by 28% as it has revised downwards its interest costs for FY10 and FY11 by 14% and 10% respectively due to the stengthening of the ringgit and interest charges collected from its associates.

OSK also raised AirAsia’s 2011 revenue target by 4% as it tweaked it allocation for the effective planes based in Malaysia from 53 to 55.

“AirAsia’s second-quarter financial results came in above our expectations due to lower-than-expected interest expenses,” ECM Libra said in a report yesterday.

The improvement in its revenue indicated a recovery in demand for air travel, it said, adding: “This led to an increase in adjusted net profit of 27% year-on-year to RM164.6mil, bringing year-to-date total to RM271.6mil. This hits 55% of our FY10 estimates of RM492m.”

Looking ahead, it expects “demand recovery to accelerate.”

Meanwhile, Kenanga Research said AirAsia’s first six months core net profit of RM272mil came slightly above its expectations and within consensus at 56% and 47% respectively. “The FY10 outlook is stable with more good news coming up,” it said.

“The strong rebound in the second quarter and positive outlook for its earnings, coupled by positive news flow, prompted us to ascribe higher price earnings ratio to 10 times which is still at a discount to its peers,” it said.

Philippine Stock Exchange (PSE) index rose by 0. 92 percent or 33.11 points to 3,593.60, while the broader all- share index climbed by 0.9 percent or 20.18 points to 2,262.08.

Net foreign buying in the Philippine Stock Exchange doubled to P15.8 billion in the first semester from P8.3 billion in the same period last year, PSE president and chief executive officer Val Antonio Suarez said Friday.

The volume of trades in the market also jumped 32.5 percent as the daily turnover for the first half of the year stood at P4.2 billion from P3.2 billion in the same period last year, Suarez said.

He said the favorable economic backdrop and the positive outlook of investors on emerging economies such as the Philippines presented bright prospects for the stock market.

The PSE chief noted that as the US-led crisis bottomed out, the stock market has rebounded strongly. The main-share PSE index has surged 14.7 percent as of Aug. 17 and recorded its highest level in more than two years since the crisis when it closed at 3,525.81 points on Aug 10.

In 2009, the PSEi likewise gained 63 percent, a turnaround from the 48.3 percent decline in 2008.

The shares of the PSE has also benefitted from the trading rebound, gaining P15 or 5.58 percent to end at P284 each last Thursday, buoyed by its recent positive earnings announcement.

Based on its financial statement submitted to the Securities and Exchange Commission on Monday, the PSE’s net income soared 91 percent in the first six months due to higher listing and trading-related revenues and lower operating expenses. Net income grew to P148.3 million in the period from January to June, from P77.6 million in the same period last year. In the April to June quarter, net income also rose 33 percent to P65.79 million from 49.36 million in the same period last year.

“The share performance reflects investor optimism on our growth story and is a vote of confidence on the initiatives we have taken to improve the operations of the exchange,” Suarez said.

Singapore remains sensative to Wall St stock swings and today Singapore shares fell 0.61 percent and are expected to remain weak in the afternoon as investors stayed on the sidelines after poor U.S. data led to Wall Street losses overnight.

By the midday break the Straits Times Index was down 17.93 points at 2,928.84. Nearly 100 million shares had changed hands.

A report showing first-time claims for jobless benefits rose to a nine-month high at a seasonally adjusted 500,000 last week undermined hopes a labor market recovery will support the U.S. economy.

Shares of casino operator Genting Singapore GENS fell as much as 3.3 percent to S$1.49 as investors were cautious about whether a plan by its parent Genting Malaysia GENM to purchase its UK casino operations will be approved.

Precision moulding firm JLJ Holdings , whose unit was named in a lawsuit involving Apple, fell as much as 16 percent to S$0.13 after it said its executive chairman will step down for the time being.

As we predicted early in the week by Shayne Heffernan Jakarta hit yet another record high.The JCI got off to a slow start, falling as low as 3,084.99 after Thursday’s record of 3,105.35. But by the end of Friday, it managed to rebound and rise 12.37 points, or 0.4 percent, to close at 3,117.72. The benchmark index ended the week up 2.1 percent.

About 5.60 billion shares worth Rp 4.32 trillion ($479.5 million) changed hands, and gainers outnumbered decliners 108 to 74.

Overseas investors were net buyers of Indonesian equities by $230 million this week, the most in two months, according to data from the Indonesia Stock Exchange (IDX).

“The domestic market and investors are looking elsewhere for direction because the global economy is not showing any significant recovery,” said Harry Manuputty, an market analyst from local brokerage Pacific Duaribu Investindo.

The most active stock by value was Bumi Resources, the country’s largest coal producer, which soared 16 percent to Rp 1,500 after falling 2.1 percent the day before. It was the stock’s steepest gain since May 26.

On the heels of its lucrative debut on the market, Berau Coal, the country’s fifth-largest coal producer, rose 2.3 percent to Rp 10,465. The shares had shot up 11.3 percent in their first day of trading on Thursday.

The finance sector was a mixed bag, with Bank Central Asia, the nation’s biggest lender by market value, advancing 0.8 percent to Rp 6,000, while Bank Rakyat Indonesia, the second-largest bank by assets, fell 1 percent to Rp 9,600.

Telekomunikasi Indonesia, the country’s biggest telecommunications provider, dropped 2.2 percent to Rp 8,800.

The rupiah remained stable, edging down slightly to 8,973 against the US dollar as of 4.21 p.m. from 8,965 a day earlier.

The currency rose 0.1 percent this week on optimism accelerating growth in Southeast Asia’s biggest economy would keep pulling in investors from overseas. Indonesia’s prospects for winning a credit-rating upgrade this year is also supporting a buoyant rupiah.

“Market appetite for Indonesian assets is still very high,” said Mika Martumpal, an senior analyst at Bank Commonwealth, adding that the odds of an upgrade “adds some incentive.”

Fitch Ratings in January upgraded Indonesia to BB+, the highest noninvestment grade. Standard & Poor’s followed suit in March, and Moody’s Investors Service adjusted its outlook to “positive” in June. Standard & Poor’s and Moody’s both rank the nation two levels below investment grade.

The robust Stock Exchange of Thailand SET index closed at 893.92, up 2.69 or 0.30% in trade worth 40.23 billion baht on Friday.

Stocks with most active value were as follows:

TRUE increased to 6.65 baht, up 0.30 baht.

PTT was unchanged at 266.00 baht.

CPF increased to 26.50 baht, up 0.25 baht.

JAS increased to 1.46 baht, up 0.10 baht.

QH increased to 2.40 baht, up 0.06 baht.

Coal producer Banpu fell 4.00 baht to 614.00 baht

Bangkok Banks stand out as incredible value after news today that the combined lending portfolio of commercial banks this year is expected to expand by about nine per cent – in line with the target, Sorasith Sunthornkes, assistant governor at the Bank of Thailand (BoT), said on Friday.

The banks’ lending was up 5.9 per cent in the first six months of the year compared to the same period last year, on the back of economic recovery.

Stable politics had also boosted the confidence of people, encouraging them to seek more loans, said Mr Sorasith.

The assistant governor believed telecommunication firms have investment plans on network expansion ahead of the introduction of a 3G mobile phone system and they will need more capital.

Loans to property developers, particularly for housing and condominium projects along the electric train routes continued to expand, he added.

As of the end of July, the non-performing loans (NPLs) of commercial banks stood at 4.9 per cent, slightly up from 4.8 per cent in June due to the expansion in lending.

The Thai economy will be challenging in the second half after exports were weaker in July, Finance Minister Korn Chatikavanij said Friday, although he said it’s not clear whether it signals a slowdown in shipments.

He told reporters that the trade deficit in July of $939 million also helps take pressure off the Thai baht, which has gained 4.8% against the U.S. dollar so far this year.

“Although July export data still looked good, it’s below June. I’m not sure whether this is the sign that exports have slowed down,” he said, adding that overall the economy still looks fine but will need to be monitored closely.

Southeast Asia’s second-largest economy swung to a trade deficit in July after imports surged 36.1% to a 23-month high of $16.5 billion, while exports rose 20.6% on year to $15.56 billion.

Exports grew for the ninth consecutive month in July, but slowed from June’s 46.3% on-year surge to a historical high of $18.04 billion.

Korn said the Bank of Thailand has always taken care of the baht, which is the key reason it remains in line with regional peers.


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