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ASEAN STOCK WATCH 26  August  2010

ASEAN Markets to Rally, Singapore Economy Surges

Shayne Heffernan

ASEAN Markets held on well today and after a better night on Wall St ASEAN will rally today. When the Jakarta index approached 3000 Shayne Heffernan of Ebeling Heffernan predicted a rapid rally after the 3000 mark fell, “Jakarta Stock Exchange is on the 3000 pt barrier, once that falls the market may surge toward 3150 very fast” Shayne Heffernan said on July 20.

Today the JCI rose 24 points, or 0.8 percent, to close at 3,138.91. Volume was high, with 7.7 billion shares worth Rp 4.27 trillion ($474 million) traded. Gainers trounced decliners 125 to 47.

Foreign investors ignored a raft of gloomy economic data from across the globe and took the Jakarta Composite Index to a record high again on Wednesday, even as most Asian markets tumbled on concern that the global recovery was faltering.

The advance came despite a plunge in sales of existing homes in the United States, slowing exports in Japan and a drop in South Korean consumer confidence.

Frederik Daniel Tanggela, an analyst at Sucorinvest Central Gani, said overseas investors dominated buying as sentiment for the domestic stock market continues to improve.

Meanwhile, the rupiah gained the most in a week, trading at 8,983 against the dollar as of the stock market’s close, on speculation the central bank would allow the currency to appreciate to cap inflationary pressures caused by rising prices of imported goods.

Inflation has been ahead of and during the fasting month, with the Central Statistics Agency (BPS) forecasting year-on-year inflation of 6.5 percent for August, topping the 15-month high of 6.22 percent in July.

“The central bank wants the dollar-rupiah to trade below 9,000 to calm inflation,” said Aris Setiawan, a currency trader at Bank Chinatrust Indonesia.

“It is easy for the central bank to handle the currency and allow the rupiah to trade between 8,950 and 8,980 because of low volumes in the month of Ramadan.”

Central banks intervene in currency markets by arranging purchases or sales of foreign exchange. The rupiah has gained 4.6 percent this year as overseas investors have bought $1.7 billion more of Indonesian shares than they have sold.

In local stocks, Bakrie Group coal miner Bumi Resources surged 11.6 percent.

Bank Bukopin rose 2.8 percent to Rp 740, its highest close since its debut in July 2006, on news that Jaminan Sosial Tenaga Kerja (Jamsostek), the state pension fund, plans to buy a 20 percent to 25 percent stake in the lender.

Indopoly Swakarsa Industry, which manufactures flexible packaging products, jumped 17 percent, the biggest gain since its shares were listed in July. Indopoly was rated “buy” by OSK Nusadana Securities Indonesia, which said the company was “well-positioned” to benefit from “strong demand growth.”

Biscuit maker Mayora Indah rose 4.8 percent to Rp 8,800, its highest level in at least 19 years.

The Straits Times Index (STI) gained 3.70 points to end at 2,926.55 on a volume of 1.16 billion shares worth S$1.09 billion. Decliners outnumbered rising stocks 210 to 182, with 865 issues even.

Fraser and Neave rose 2.22 percent to S$5.52 while United Overseas Bank fell 1.60 percent to S$18.42.

The economy of Singapore, Asia’s second-smallest country after the Maldives, may be the world’s fastest-growing in 2010 after ballooning demand for goods and services prompted the government to raise forecasts three times since January. Gross domestic product increased 17.9 percent in the first half, ahead of the trade and industry ministry’s full-year prediction of between 13 percent and 15 percent and surpassing India’s expectations of 8.5 percent growth and China’s of 9.5 percent.

Companies added about 63,000 jobs in the six months to June 30, according to the Ministry of Manpower, a year after Singapore exited its worst recession since independence in 1965. Monthly tourist arrivals exceeded 1 million for the first time in July after Las Vegas Sands Corp. and Genting Singapore Plc opened the city’s first casino resorts.

Property developers, shopping mall operators and hoteliers accounted for about 25 percent of Singapore’s 112 bond issues this year, Bloomberg data show.

CapitaLand, Southeast Asia’s biggest developer, and its units sold S$1 billion ($735 million) of bonds this month in maturities ranging from four to 10 years. The company paid a 4.3 percent coupon when it sold S$350 million of 10-year bonds at par on Aug. 17 compared with 4.4 percent when it sold S$100 million of eight-year notes in 2003, the data show.

Temasek is Singapore’s most prolific borrower this year after it issued notes in British pounds and Singapore dollars with maturities of between 10 and 40 years, according to Bloomberg data. The state-owned investment company is paying a 4.2 percent coupon for its 40-year notes, 10 basis points less than the 4.3 percent it paid for 10-year money in 2009.

Temasek sells bonds “as public markers of our credit quality,” spokesman Jeffrey Fang said in an e-mailed response to questions. As well as improving capital efficiency and funding flexibility, they “foster the discipline of engaging with both international and Singapore bondholders,” he said.

The investment company’s 4.2 percent notes due 2050 are trading at 104.83 cents on the dollar to yield 3.958 percent, according to Standard Chartered prices. Sold at par, they traded as high as 109.9 cents on Aug. 18.

“With reasonable growth coming back into Asia, locking in a low coupon for the next 10 years is a pretty smart thing to do,” said Sean Henderson, Hong Kong-based head of Asia debt syndication for HSBC Holdings Plc, the No. 3 arranger of Singapore bond sales this year. “Singapore borrowers tend to be rare and very high quality names, so investors have been comfortable about extending durations in order to get a bit of extra yield.”

Olam International Ltd., the Singapore-based commodities trader, paid 7.5 percent this month when it sold $250 million of 10-year bonds, its longest-maturity notes. The bonds traded at 101.13 cents on the dollar to yield 7.338 percent today, according to Royal Bank of Scotland Group Plc prices. Olam declined to comment in an e-mailed response to questions.

While companies can typically borrow larger sums in the U.S. dollar bond market, according to HSBC’s Henderson, they pay slightly less to sell bonds in Singapore. Companies completed 35 U.S. dollar-denominated sales that raised $500 million or more in Asia excluding Japan this year compared to nine corporate sales of at least S$500 million.

Interbank Costs.

The Singapore interbank offered rate that banks charge each other to borrow U.S. dollars was last at 0.31328 percent, its lowest in at least 23 years. The rate rose to as much as 5.7775 percent during the global financial crisis as banks hoarded capital after the collapse of Lehman Brothers Holdings Inc.

Borrowers sold $2.5 billion of bonds in the city in 1999 and issuance ranged between about $5 billion and $7 billion a year for much of the last decade, Bloomberg data show.

“The regulators in Singapore have been working hard to make this market appealing to both investors and issuers,” said Clifford Lee, head of fixed-income for DBS Group Holdings Ltd., the top-ranked underwriter of Singapore dollar bond sales. “There’s no withholding tax and the approval process for foreigners to sell bonds is simple and quick if it’s just an offering to accredited investors,” he said.

VTB Group, Russia’s second-largest bank, raised S$400 million from two-year notes this month. It was the only Russian issuer to target Asian investors apart from Moscow-based gas company OAO Gazprom, which sold yen-denominated bonds in 2007.

Agricultural Bank of China Ltd., China’s biggest lender by customers, sold $50 million of floating-rate notes through its Singapore unit in April. The lender has offices in the city- state as well as in Hong Kong, London, Tokyo, Seoul, Frankfurt, Sydney and New York, according to its website.

“We are seeing an increased maturity and sophistication in the Singapore capital markets,” Standard Chartered’s Russell- Davison said. “2010 is set to be a big year, reflecting the confidence of both issuers and investors.”

The main-share Philippine Stock Exchange index gained 23.65 points or 0.67 percent to close at 3,554.15, ignoring an overnight bloodbath in Wall Street. This was on the back of a strong rebound by Ayala Land and Meralco, which were heavily dumped in the last minute of the previous session in what many dealers said could have been precipitated by a trading error.

Without the sharp rebound by ALI and Meralco, overall sentiment was still weak.

Although the market has yet to fully recover from Tuesday’s heavy profit-taking that pulled down the PSEi by 2.3 percent, bargain-hunters have started coming back.

Trading was mixed across sectors, with the property sector surging 5.5 percent on the back of ALI’s recovery. The industrial sector likewise firmed up.

The mining/oil and holding firms continued to take a beating as their respective indices fell 2.65 percent and 1.6 percent. The financial sector was also down 0.69 percent.

Despite the rebound, decliners overwhelmed advancers, 96 to 38, while 33 stocks were unchanged. About P4.4 billion worth of shares were traded.

Aside from ALI, investors picked up shares of PLDT, Banco de Oro, EDC and First Holdings, helping the market firm up after Tuesday’s staggering losses.

Overnight, the Dow Jones Industrial Index was down 133.96 points or 1.32 percent at 10,040.45. The broader S&P 500 index was flat while the tech-heavy Nasdaq lost 1.66 percent.

Risk aversion remains high in overseas markets as double-dip recession fears intensified following reports of weak US home sales in July.

The Stock Exchange of Thailand (SET) composite index on Monday dropped 5.94 points or 0.67 per cent to close at 884.51 points. The market value was 49.39 billion baht, with 22.63 billion shares traded.

Top five most active values were as follows;

JAS closed at 1.64 baht, down by 0.10 or 5.75 per cent.

TMB closed at 2.38 baht, up by 0.08 or 3.48 per cent.

BTS closed at 0.87 baht, up by 0.01 or 1.16 per cent.

SSI closed at 1.90 baht, up by 0.07 or 3.83 per cent.

TRUE closed at 7.30 baht, up by 0.50 or 7.35 per cent.

Union Frozen Products Group (UFP), one of Thailand’s leading frozen seafood manufacturers and exporters, has projected its annual sales will reach 15 billion baht within five years.

To achieve the goal, the company plans to foster its co-operation with international trading partners in the United States, Japan and Europe and penetrate new markets in the Middle East and Eastern Europe, said chief marketing officer Anurat Khokasai.

Next year, it will also add three to five new menu items for ready-to-eat seafood products, generating 500 million baht annually. Its new business of slicing fish for export to Japan will also help raise sales by 300-400 million baht a year.

Siam Cement Group (SCG), Thailand’s top industrial conglomerate, wants to establish a global presence for its SCG and COTTO brands of building materials starting in Asean.

Currently, Vietnam is considered the first strategic country for the move to establish the international recognition of its SCG brand for construction products and COTTO brand for sanitary ware including tiles and faucets.

Other countries in Indochina, including Burma and Cambodia, as well as the Philippines, are the next targets of Siam Cement’s Brand Management Office, which is tasked with increasing the awareness of the brands in the domestic and overseas markets.

“The move is expected to further strengthen our leadership in both the construction and sanitary ware markets,” said brand director Anuvat Chalermchai.

In Malaysia KLCI dipped below the 1,400-level to close 8.80 points lower at 1,396.97 as the local market went into negative territory after a eight-day rally as investors cut their positions on concerns that the global economic recovery could be derailed amid dismal economic data in the United States and Europe.

Major heavyweights except for Maybank and Genting slipped into the red as selling pressure persisted after the eight-day rally.

The Finance Index shed 75.16 points to 12,642.31 and the Plantation index declined 59.96 points to 6,500.27 while the Industrial Index lost 34.25 points to 2,658.85.

The FBM Emas Index slipped 69.64 points to 9,358.74, the FBM70 Index slid 97.521 points to 9,165.52 and the FBM ACE Index dwindled 48.14 points to 3,738.70.

Turnover was lower at 873.09 million shares worth RM1.73 billion from 894.451 million shares worth RM1.651 billion on Tuesday.

Decliners beat advancers 585 to 186 while 268 counters were unchanged, 327 untraded and 38 suspended.

Among actives, Time Dotcom shed two sen to 55 sen, Axiata Group dwindled eight sen to RM4.42, Tejari Technologies eased two sen to 25.5 sen and SIG Gases was flat at 88.5 sen.

For heavyweights, CIMB shed six sen to RM7.85, Maybank rose one sen to RM8.13, Proton slid 10 sen to RM4.63 and Genting improved nine sen to RM8.99.

The Main Market volume surged to 766.997 million shares worth RM1.711 billion from 736.642 million shares worth RM1.622 billion on Tuesday.

Warrants dropped to 44.912 million units valued at RM7.603 million from 53.562 million units worth RM8.191 million on Tuesday.

Turnover on the ACE market dwindled to 55.517 million units at RM10.867 million from 99.569 million units worth RM17.799 million on Tuesday.

Consumer products accounted for 52.5 million shares traded on the Main Market; industrial products 143.3 million; construction 82.6 million; trade and services 267.2 million;

technology 22.7 million; infrastructure 37.9 million; finance 70.4 million; hotels 1.3 million; properties 60.5 million; plantations 17.1 million; mining 2,000; REITs 10.8 million; and closed/fund 114,800.


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