ASEAN KEY DESTINATIONS
Asean Stock Watch- August 2
The Dow Jones Industrial Average closed down 10.75 points, or 0.09 percent at 12,132.49, ending lower for the seventh straight session.
The S&P 500 dropped 5.34 points, or 0.41 percent, to end at 1,286.94. Most 10 S&P sectors were negative, led by health care and consumer discretionary The Nasdaq composite fell 11.77 points, or 0.43 percent, to end at 2,744.61.
US crude oil closed at US$95.32 a barrel, while gold settled at US$1,621.50 an ounce.
Stocks rose on the Indonesia Stock Exchange on Monday, sending the benchmark index to a record high after inflation slowed to a 14-month low in July and politicians in the United States reached a deal on the country’s debt.
The Jakarta Composite Index rose 62.64 points, or 1.5 percent, to close at 4,193.44, snapping a two-day decline during which investors were concerned about credit rating downgrades in the US, Spain and other nations that could have curbed global economic growth.
Almost 19.5 billion shares valued at Rp 18.58 trillion ($2.19 billion) were traded. Gainers far outnumbered decliners by 182 to 82. Foreign investors bought nearly Rp 249 billion more in shares than they sold.
The Central Statistics Agency (BPS) reported on Monday that the consumer price index last month increased 4.6 percent year-on-year, lower than the median estimate of 4.83 percent in a survey of 11 economists last week by the Jakarta Globe.
Reza Priyambada, a Jakarta-based analyst at Indosurya Asset Management, said the latest inflation report would not put pressure on the central bank to increase its key interest rate.
With the central bank’s key interest rate holding steady at 6.75 since February, consumer spending could be further stimulated, which could also boost companies’ earnings. Bank Indonesia holds its next policy meeting on Aug. 9.
Global stocks, including those on Asian markets, rallied on Monday after Sunday’s announcement from US President Barack Obama that the Senate would support the government’s plan to raise the federal debt ceiling and slash spending.
Reza said world markets had been waiting for a decision to lift the debt ceiling to avoid a government default. “The market responded positively from the news in the United States,” he added.
The JCI’s advance was led by construction stocks. The property sector rose 4.5 percent, making it the day’s biggest gainer by sector. Finance followed, with a 2.6 percent rise, and then consumer goods, which gained 2.2 percent.
“It is about time the construction sector increased as investors are looking for portfolio alternatives that are still relatively affordable,” said Purbaya Yudhi Sadewa, chief economist at Danareksa Research Institute.
Shares in some key players in the property sector posted the largest gains after reporting a surge in first-half profit.
Agung Podomoro Land, which specializes in apartment buildings, rose 11 percent to Rp 390. Ciputra Development jumped 9.1 percent to Rp 600, and Lippo Karawaci rose 8.97 percent to Rp 850. The Globe is affiliated with the Lippo Group.
In the finance sector, Bank Mandiri, the country’s largest lender by asset, rose 2.6 percent to Rp 8,050, while Bank Central Asia, the largest capitalized lender, rose 3.0 percent to Rp 8,550.
One of the biggest gainers in the consumer goods sector was cigarette-maker Gudang Garam, which was up 4.1 percent to Rp 53,000. Its first-half net income climbed 29 percent to Rp 2.3 trillion from a year earlier.
Meanwhile, the rupiah edged up 0.07 percent to 8,485 by 5:45 p.m. on Monday.
At home, the 30-stock FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) also recovered to finish 9.2 points, or 0.59 percent higher to 1,558.01.
Affin Investment Bank Bhd research head Andy Ong said the deal reached by US lawmakers to avoid a debt default met markets' expectations.
However, he said that in the near term, there were still elements of uncertainty for global financial markets as several rating agencies had threatened to downgrade the US sovereign credit rating from its triple A status.
A note issued yesterday by the US fixed income team of global asset management firm Schroders said at least one of the major rating agencies might still feel motivated to cut the triple-A credit rating of the US.
“The mixture of low growth and high budget deficits even under the more aggressive budget proposals suggests a downgrade of the US government's AAA rating has now become the most probable outcome. Ratings agencies are out to salvage their business plans (that is, be less reactive to calamity) and at least one of the major agencies may feel motivated to cut the quality rating,” said the Schroders note.
OSK Research head Chris Eng said he expected global markets to continue to rise this week on positive news from the United States.
On concerns about the eurozone debt crisis spreading to Italy and Spain, Eng said, “Eurozone leaders should be able to peter over the cracks this year, but it might be a different story next year.”
On the local bourse, Eng said it had underperformed in July and therefore, it should play “a bit of catch-up”.
“Although the local bourse will be quite volatile, our year-end target of 1,680 for the FBM KLCI remains unchanged,” said Eng.
Ong added that Bursa Malaysia investors would also look towards corporate results from the second quarter.
“Our year-end target of 1,630 for the FBM KLCI stays,” said Ong.
Meanwhile, Jupiter Securities Sdn Bhd head of research Pong Teng Siew pointed out that the resolution to the US debt crisis was only a temporary measure.
“It allows the US government to continue to function for the time being. The US debt issue remains unsustainable and they need to address the problem on a longer term outlook.”
Pong said sentiment in financial markets would continue to be cautious as investors were also concerned about the eurozone debt crisis.
He said the local market was unlikely to climb sharply in the coming months.
“While it is possible the FBM KLCI will breach the highs seen in July, it will not be by a wide margin. The upside potential is very limited.”
The FBM KLCI had closed at an all-time high of 1594.74 on July 8.
Pong cautioned that recently the pace of improvement in corporate earnings had slowed tremendously and margins were compressed due to rising raw material costs.
“Also, the outlook for global trade has dimmed somewhat. It is possible the US may run into a recession late this year or early next year.”
Pong was also not optimistic about the growth of the Malaysian economy due to external headwinds.
“Our outlook is not terribly optimistic. We capped our gross domestic product (GDP) growth target at 4 percent for Malaysia this year after the results of the first quarter.”
For the first quarter of 2011, Malaysia recorded a GDP growth of 4.6%.
Last Monday, local dailies reported that Allianz Group chief economist Dr Michael Heise expected Malaysia to record a 4.3 percent GDP growth this year due to dampening effects from the Japanese supply chain disruptions in the second quarter.
However, Heise added that Malaysia's GDP growth could be higher than the expected 4.3 percent “if Japan bounces back strongly”.
THE peso hit a three-year high, while the stock market climbed to a fresh record on Monday after Washington reached a last-minute agreement to raise the US debt limit and avert a default by the world’s biggest economy.
At the Philippine Dealing System, the peso bounced back to the 41-to-a-US dollar level and closed at its strongest in three years.
The dollar-peso pair opened high at P42.10 and tested the low of P41.90, before closing at P41.925, up 21.5 centavos from P42.140 last Friday.
Total trading volume rose to $899.30 million from $844.870 million last Friday.
The currency pair is expected to trade at the P41.80 to P42.60 range within the week.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. attributed the peso’s strength to risk appetite brought about by the uncertainties surrounding the advanced economies, specifically the US and its possible downgrade.
“So, while the debt issue in the US causes some volatility, the other factors can dominate. Like in our case right now we’re appreciating like our neighbors. They’re also appreciating. Mainly because of the better economic performance compared to advanced economies. So there are more opportunities here,” Tetangco said.
Interest rate differentials are still in favor of emerging markets like the Philippines since advanced economies have maintained their easy monetary policy and low interest rates, the BSP chief said.
“This is why we still see inflows into the emerging markets that have been causing the strengthening of the currencies not only the peso but across the region,” he said.
At the Philippine Stock Exchange, the composite index jumped 46.90 points, or 1.04 percent to 4,550.53, surpassing its previous high of 4,507.04 on July 20.
The broader all-shares index added 23.78 points, or 0.76 percent to 3,146.84 as all counters were in the green led by mining and oil and financials.
Advancers outnumbered decliners, 109 to 39, while 38 stocks were unchanged. A total of 6.80 billion stocks worth P5.06 billion changed hands.
“The gains today were boosted by President Barack Obama’s announcement that US congressional leaders have reached an agreement to raise America’s debt ceiling,” said AB Capital Securities Inc.
“Asian markets, including the Philippines, breathed a sigh of relief after the announcement of a debt deal in the US. We hope this positive trend continues to fuel confidence in the stock market,” said Hans Sicat, PSE president and chief executive. Net foreign buying stood at P187 million.
Bank stocks led by Bank of the Philippine Islands and Metropolitan Bank and Trust Co., which rose 2.2 percent and 2.7 percent, respectively, helped lift the main index, adding at least five points each.
Local stocks also got a boost from the move of credit watcher Standard & Poor’s to affirm the country’s debt rating with a stable outlook, said Freya Natividad, investment analyst at 2TradeAsia.com, adding that investors were also positioning because of the arrival of the ghost month of August.
Local equities may have one more day of gains, taking their cue from the expected rise in global markets Monday night. The next target for the main index is at 4,580, its near-term consolidation breakout target.
“We could encounter profit taking at the said level as the current gains are being driven by the increase in the US debt ceiling,” said AB Capital, adding that Monday’s move was an “event-driven” rally, which is lacking in terms of a broader fundamental catalyst.
The market’s valuation has reached 16.1 P/E, close to its historical upper P/E band of 17 times
Singapore shares opened lower on Tuesday, with the benchmark Straits Times Index at 3,201.59 in early trade, down 0.43 percent, or 13.68 points.
Around 89.8 million shares exchanged hands.
The Stock Exchange of Thailand (SET) composite index on Monday gained 10.61 points, or 0.94 per cent, to close at 1,144.14 points. The market value was 34.64 billion baht, with 5.19 billion shares traded.
The SET50 index rose 7.43 points, or 0.94 percent, to stay at 801.44 points, with a total transaction value of 24.01 billion baht.
The SET100 index ended the session at 1,746.66 points, up 16.24 points, or 0.94 percent, with a total trade value of 29.29 billion baht.
The SETHD index rose 8.98 points, or 0.83 percent, to stay at 1,095.70 points, with a total market value of 9.29 billion baht.
The Market for Alternative Investment (mai) index went up 1.58 points, or 0.50 percent, to close at 319.60 points, with a total turnover of 742.34 million baht.
Top five most active values were as follows;
PTTCH closed at 165.00 baht, up 2.50 baht, or 1.5 percent.
PTT closed at 350.00 baht, up 3.00 baht, or 0.86 percent.
TOP closed at 78.75 baht, up 2.00 baht, or 2.61 percent.
CPF closed at 32.25 baht, up 0.50 baht, or 1.57 percent.
BBL closed at 174.50 baht, up 0.50 baht, or 0.29 percent.
Blue chips on the HCM Stock Exchange today tumbled, which made the VN-Index drop 0.9 per cent to close the session at 401.95 points.
Of the 10 leading shares in terms of capitalisation, insurer Bao Viet Holdings (BVH) bottomed out, while five others plunged between 1.7-4.1 percent.
Eximbank (EIB) closed the day unchanged. Three others of the biggest codes advanced, including property Hoang Anh Gia Lai (HAG) up 0.6 per cent, food producer Masan Group (MSN) up 1.6 percent and Sacombank (STB) up 2.2 percent. However, the gains were not enough to lift the VN-Index.
Market value of the southern bourse, however, jumped 18 per cent over yesterday's level to VND436.4 billion (US$21.2 million) on a volume of 22.3 million shares.
STB was the most-active code in HCM City, with 1.5 million shares changing hands.
On the Ha Noi Stock Exchange, the HNX-Index slumped by 1.4 percent to conclude today's session at 68.60 points.
Trades were sluggish, with just VND203.4 billion ($9.9 million) worth of 21 million shares. That value only reached 86.3 percent of yesterday's figure.
Kim Long Securities Co (KLS) was most heavily traded, 2.55 million of its shares exchanged. However, it ended down nearly 2 percent. PetroVietnam Construction Co (PVX) followed with 1.6 million shares.
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