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ASEAN STOCK WATCH 28  August  2010

ASEAN Markets Outperform World Exchange

Shayne Heffernan

ASEAN Markets set new record highs all week and the trend looks set to continue.

Malaysia, the week’s best performer, ended the week 1.15 percent higher, against last week’s gain of 2.56 percent. The FBM KLCI rose 0.22% to close at 1411.05 points on selected buying of SIME and Public Bank.

The strong buy from Shayne Heffernan on Genting Bhd has managed to provide investors with fast returns as the company posted a whopping 244.6% jump in net profit for its second quarter ended June 30 to RM739.2mil compared with RM214.5mil in the same quarter a year ago.

Revenue stood at RM4.1bil compared with RM2.1bil previously.

Genting said in a statement that the increase came mainly from its leisure and hospitality division following the commencement of Resorts World Sentosa (RWS) in Singapore.

It said the improved revenue from RWS was largely due to better luck in the premium players business, which also contributed to improved profit.

Genting said its casino in Britain benefited from an increase in business volume but the weaker pound sterling translated into lower casino revenue in ringgit terms.

It said revenue and profit from Genting Plantations Bhd was higher in the quarter as a result of better palm product prices and improved fresh fruit bunches production.

However, its power energy division Genting Energy Ltd recorded a lower revenue due to lesser generation of electricity by its Meizhou Wan plant in China.

Genting’s oil and gas division also posted a drop in revenue and profit due to lower share of entitlement in China.

The company said, overall, its better performance in the quarter was due to share of results in jointly controlled entities and associates.

For the six months ended June 30, Genting posted a 124% increase in net profit to RM971.6mil compared with RM427.6mil in the corresponding period a year ago.

Revenue jumped 71.4% to RM7.2bil from RM4.2bil before.

The company said it was cautiously optimistic about its prospects as regional competition continues.

“While business has been resilient, the management will continue to closely monitor the competitive environment and intensify its plans to meet growing competition.”

Genting also said that with the opening of Marina Bay Sands, RWS’s business had showed resilience and its business model had displayed impressive strength.

“RWS continues to be optimistic with its business model for the rest of the year,” it said.

It added that the resort hosted a series of high-profile entertainment events and promotions and would continue to fill the rest of its year-long calendar with activities to encourage fresh and repeat visitations.

It said RWS would continue to improve its attractions, facilities and infrastructure to meet guest expectations. Construction of the West Zone has started and it is expected to commence operations next year.

Genting also said the performance of its power division was expected to be impacted by the Meizhou Wan plant, which was experiencing lower-than-expected tariff increases and reduced generation hours.

The performance of its plantation division remains satisfactory.

Genting has declared a gross interim dividend of 3.3 sen per ordinary share of 10 sen each, less 25% tax, for the first half of 2010.

This represents a 10% increase compared with 3 sen per ordinary share of 10 sen each, less 25% tax, in the first half of last year.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) ended the morning session higher today, as the market recouped early losses.

The benchmark index was mostly in red in the morning trading session before advancing marginally higher.

At 12.30pm, the FBM KLCI added 0.99 points to 1,408.99 after opening 3.63 points lower at 1,404.37 points.

Losers led gainers 364 to 204 while 220 counters were unchanged. Turnover stood at 360.2 million shares worth RM657.8mil.

On Bursa Malaysia, British American Tobacco (M) Bhd topped the gainers’ list, appreciating 26 sen to RM45.10.

Other gainers included Lay Hong Bhd, Padini Holdings Bhd and Sime Darby Bhd.

Among banks, CIMB Group fell 1 sen to RM7.72, Public Bank Bhd added 12 sen to RM12.14 while and Maybank were 5 sen higher at RM8.27.

Leading the list of heavily-traded counters was Time DotCom Bhd, which fell 1.5 sen to 49.5 sen on a volume of 31.9 million shares done.

Dealers said market was expected to see downside pressure after the overnight slide on Wall Street.

Overnight, the Dow Jones Industrial Average fell 74.25 points to 9,985.81, below the psychological 10,000 level as investors shrugged off better US jobs data and braced for a sharp revision of US economic growth to be announced tonight.

F&N Subsidiary To Buy 23.1% Stake In Cocoaland For RM54.6m

Singapore closed up 0.44 percent, or 12.87 points, at 2,938.74.

Singapore Airlines fell 1.55 percent to 15.20, while Olam International rose 6.77 percent to 2.68.

Fraser and Neave (F&N)’s Bursa-listed subsidiary is buying a 23.1% stake in Cocoaland Holdings Berhad (CHB) for RM54.6m ($23.6m), in a bid to strengthen its food products portfolio. CHB, a Bursa-listed investment holding company whose units manufacture and distribute processed and preserved foods, fruit juices and other foodstuff, is Malaysia’s sole coco pie producer. A leading gummies manufacturer in the Asean region, CHB also exports to 50 countries. ‘Along with our investments in soft drinks, beer and dairies, this will give us a solid platform to realise our growth ambitions,’ said F&N Food and Beverage chief executive Koh Poh Tiong

Ying Li Acquires Chongqing Site For Rmb697m

Ying Li International Real Estate has acquired a commercial development site in China’s Chongqing city for Rmb697m ($139.5m). It added in a separate announcement that it has obtained credit facilities of up to US$200m from Standard Chartered Bank (China). The money will be used to make site acquisitions and develop projects, it said. The 102,483 square feet commercial site it bought will be developed into 968,752 sq ft of grade A office space and 430,556 sq ft of high-end retail space. The gross floor area will be about 1.7m sq ft. The site is in the Jiefangbei central business district and is part of the Chongqing municipal government’s Rmb600b plan to redevelop the city centre to make Chongqing CBD a financial hub. The project is expected to be completed by end-2013.

Eu Yan Sang’s Earnings Jump 47%; Proposes 1-For-5 Bonus Issue

Eu Yan Sang International posted a 47% yoy increase in its FY10 net profit to $19.2m, boosted in part by a $1.17m fair value gain on investment properties and a $331,000 revaluation gain on property, plant and equipment. Revenue increased 10%, mainly attributable to the increase in retail sales in all 3 core markets. Segmentally, traditional Chinese medicine (TCM) retail segment saw revenue rise 13% to $197.6m, while the TCM wholesale segment saw revenue fall 5% to $31m because of lower exports to China due to a license renewal issue. Revenue from clinics was flat at $14.3m. At the end of FY10, Eu Yan Sang had a retail presence of 165 stores and 21 clinics, having recently launched a medical centre in Hong Kong. Meanwhile, the company has declared a dividend of 2.5 cents – comprising a final dividend of one cent and a special dividend of 1.5 cents. It has also proposed a 1-for-5 bonus issue.

Singapore-based Olam International’s takeover play for dairy farm developer NZ Farming Systems Uruguay got a boost yesterday as a rival overseas bidder pulled out.

Olam this week raised its bid from 55c to 70c a share, valuing the NZX-listed company at $171 million.

The increased offer is too hot for Uruguay-based Union Agriculture Group which – before Olam raised its bid – had given notice it intended to make a 60c-a-share offer.

Union Agriculture had intended to launch its formal offer next week but decided against making a bid higher than Olam’s offer.

Philippine Stock Exchange index lost 36.91 points or about one percent to 3,558.67.

Dealers said the correction was expected as the index had risen sharply last week, halted only by jitters over a bloody hostage-taking incident in Manila this week.

Week on week, the index has also fallen by nearly one percent, a turnaround from the five-day run-up that allowed it to climb 3.58 percent last week.

The holding firms, property and industrial sectors took the worst beating as their respective counters fell 2.72 percent, 1.78 percent and 1.24 percent.

The mining/oil sector was the only counter that defied the downtrend, rising 1.83 percent as investors loaded up on stocks of Philex, whose share price surged 7.4 percent to P10.74.

The market was dragged down by profit-taking on PLDT, DMCI Holdings, PNB, EDC, Megaworld, BPI, SM Investments and JG Summit.

Aside from Philex, local banking giant Banco de Oro closed in positive territory, its share price rising 1.76 percent to P52.10.

There was only one gainer for every three decliners. Value turnover amounted to P4.6 billion.

Overnight, the Dow shed 74.25 points or 0.74 percent to 9,985.81, falling below the 10,000-mark for the first time since July 6.

Traders in Jakarta caused a late sell off on the exchange expecting the USA GDP to come in under 1.4%, the number beat estimates coming in at 1.6% which will lift Jkarta stocks Monday.

The Jakarta Composite Index suffered its steepest loss since Aug. 3, tumbling 40.4 points, or 1.3 percent, to 3,104.73. About 6.1 billion shares worth Rp 4.3 trillion ($477 million) changed hands. Decliners outnumbered gainers 147 to 52.

In local stocks, rallying big-cap stocks retreated, with state-owned Telekomunikasi Indonesia and Bank Rakyat Indonesia each sliding more than 2 percent.

The Indonesia Stock Exchange (IDX) recorded outflows of $31 million on the session, erasing $27.4 million of combined inflows over the four past days, according to Reuters data.

Among other decliners, Bumi Resources dropped 5.1 percent, while Bakrie Sumatera Plantation fell 3.5 percent.

Bank Mandiri, Indonesia’s biggest lender by assets, fell 1.7 percent, while Bank Rakyat Indonesia, the second-largest, declined 2.6 percent.

Domestic banks had their recommendation lowered to “underweight” from “neutral” by JPMorgan Chase, citing a decline in profitability.

Indofood Sukses Makmur, the country’s top instant noodle maker, advanced 1.7 percent to Rp 4,575. The company’s instant noodle unit said its parent planned to sell a 20 percent stake in the subsidiary through an initial public offering next month.

Holcim Indonesia, the country’s third-biggest cement maker, fell 4.3 percent after Citigroup rated the company a “sell” in new coverage, saying a lot of the good news on potential market share gains may be already priced into the stock.

The rupiah declined the most in two weeks as economists predicted the central bank would leave borrowing costs unchanged amid accelerating inflation.

The rupiah fell 0.3 percent, the most since Aug. 12, to 9,018 against the dollar as of 4:04 p.m. in Jakarta, according to Bloomberg. The currency dropped 0.4 percent on the week.

According to economists’s estimates, the nation’s inflation rose to an annualized 6.7 percent in August from a year earlier, after surging to 6.22 percent the month before. The inflation report is due on Wednesday.

A separate survey forecast that Bank Indonesia would keep its key rate at 6.5 percent later next week, despite central bank Deputy Governor Hartadi Sarwono warning of persistently high inflation.

Apratim Chakravarty, the Jakarta-based head of global markets at HSBC, said the situation would keep the rupiah in check. “From Bank Indonesia’s perspective, they don’t want volatility in the currency, so they won’t want any untoward strength.”

SET index closed at 900.37, up 14.27 or 1.61% in trade worth 43.60 billion baht on Friday.

Stocks with most active value were as follows:

PTTEP decreased to 141.00 baht, down 1.00 baht.

TMB increased to 2.56 baht, up 0.14 baht.

JAS increased to 1.60 baht, up 0.06 baht.

CPF increased to 26.00 baht, up 0.75 baht.

PTT was unchanged at 258.00 baht.

Ford Motor Company and Mazda Motor Corporation are investing US$350 million in their 50:50 joint venture in Thailand to support the production of the next generation of pickup trucks.

The investment in the plant of AutoAlliance Thailand (AAT) in Rayong will enable production of the new Mazda and Ford compact pickups to start in mid-2011.

The companies said the investment would support facility upgrades and supplier tooling. It would lift Ford and Mazda’s total joint investment in AAT to $1.85 billion since it began in 1995.

“The new investment marks another important step forward in AAT’s development as a manufacturing hub,” said Toshinori Kusuhashi, the president of AutoAlliance Thailand.

The government will oversee the value of baht to prevent it fluctuating too much, Prime Minister Abhisit Vejjajiva said on Friday afternoon.

“Relevant state agencies will introduce needed measures to stabilise the value of the Thai currency, but will not act against the money market’s mechanism. We have already experienced an expensive lesson from doing so in the past,” said Mr Abhisit.

The prime minister said the Bank of Thailand must oversee the baht’s value and interest rates to ensure they stay at appropriate levels and in line with the changing situation. Any decision to adjust the policy rate must be made carefully as the central bank is also duty-bound to curb inflation.

He had discussed the economic situation with the Office of the National Economic and Social Development Board and believed the current inflation rate is controllable. Inflation is unlikely to be higher than the current level.

Mr Abhisit said even though the economy would grow at a slower pace in the second half of the year, the growth rate could be higher than seven per cent this year. He projected economic expansion would slow down to four to five per cent next year.

“Thailand is still very under held by international investors,” Korn told investors in Singapore today. “By most measurements, Thailand remains one of the cheapest stock markets in the region so the only reason why investors were shying away from Thailand must be because of their concerns related to the political instability.”

The Thai equities rally, which surpassed the 20 percent threshold for a bull market in early August, has accelerated as tension eased since deadly street protests claimed 89 lives in April and May, and the Cabinet lifted emergency rule in 17 provinces. Southeast Asia’s largest economy after Indonesia grew 9.1 percent in the second quarter as exports countered the impact of the political unrest.


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