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ASEAN STOCK WATCH 5  August  2010

ASEAN Markets Still Attractive as New Highs are Set

Shayne Heffernan

www.livetradingnews.com

China, India, ASEAN have been an essential part of any investment portfolio, if you are not yet invested in these high growth regions it is time to look at them now.

Asia is expected to grow 7.5 percent in 2010, led by China (10.5 percent), India (9.4 percent) and the 10 Southeast Asian economies expected to grow by a collective 6.4 percent, the International Monetary Fund said.

China has been the high growth front runner for sometime, but expect to see India and ASEAN start catching up very fast in 2011.

The impressive growth rates start from a low base, as the entire region was hard-hit by the global recession in 2009 when demand for Asian exports shrank. A surge in export demand in the US and Europe, their traditional markets, provided an immediate impetus for growth, although that demand is forecast to slow in the second half of 2010 and in 2011.

Southeast Asia’s export-led economies have performed even better than expected. Singapore expects growth of 13 to 15 percent this year; Thailand, despite its political problems, 7 to 8 percent; Vietnam 6.5 percent and Indonesia and Malaysia at least 6 percent. Foreign direct investment (FDI) is likewise on the upswing.

Indonesia, the region’s biggest domestic market with a population of 240 million, saw foreign and domestic investment rise 40 percent in the second quarter year-on-year, while Vietnam’s FDI inflow in the first half of this year jumped 5.9 percent from the same period in 2009 to $5.4 billion.

Malaysia’s FDI inflow in the first quarter reached $1.65 billion, more than the $1.38 billion it attracted in all of 2009. Thailand saw new applications for foreign investment tax privileges grow 7.4 percent to $5.9 billion worth of projects in the first half of 2010.

Foreign investors are returning the region for a number of reasons, including the draw of growing domestic markets and the implementation of regional free trade agreements such as the ASEAN Free Trade Area (AFTA) that went into force in January, slashing tariffs on intra-regional trade to 0-5 percent.

According to a survey conducted by the Japan External Trade Organization in March, Vietnam, and Indonesia are the two most attractive countries in the region for Japanese firms’ future investment plans, largely because of their large domestic markets.

The survey found that that among the FTAs in effect in the Asia-Pacific region, AFTA was the most utilized, with about 33 percent of trading firms citing its use.

Thailand’s exports to AFTA countries rose 51 percent in June, although much of this was just feeding in to the global supply chain that ultimately ends in the US and Europe. But some of those exports were also going to ASEAN consumers, such as imports of made-in-Thailand automobiles.

“I think everyone now realizes that Thailand is a major automotive and parts hub for the region,’’ said Chao Kaengchon, chief economist for the Kasikorn Economic Research Centre. “We have gained credibility as a relatively effective hub for production so when AFTA comes along we gain more.’’

Ford Motors in June announced a $450-million expansion in Thailand, and at least six Japanese carmakers have committed to manufacturing small eco-cars in the kingdom.

Meanwhile, other ASEAN countries can expect to benefit, in the long run, from rising labour costs in China. There are signs that the shoe industry is returning to Indonesia, where labour costs are now considerably lower than on China’s eastern coast.

Vietnam, Cambodia, Laos and even Myanmar, where minimum wage ranges from 30 to 54 dollars a month, can expect to benefit from a production shift away from China in such labor-intensive sectors such as garment and shoe manufacturing.

In Myanmar at least six new garment factories have opened this year, backed by investors from Hong Kong, China, South Korea and Japan.

The Stock Exchange of Thailand (SET) composite index moved up 2.86 points, or 0.33 percent, to close at 867.34 points on Wednesday.

Some 9.36 billion shares worth 30.95 billion baht (about 967 million U.S. dollars) changed hands.

The SET composite index moved up 1.30 points, or 0.15 percent, to close at 864.48 points on Tuesday.

Thailand’s gross domestic product (GDP) in the first half of 2010 could grow 10 per cent because of strong exports, Prime Minister Abhisit Vejjajiva said on Wednesday.

A 10 per cent growth would be considered high as Thailand had experienced political instability, Mr Abhisit said.

“High growth in exports in the first half of the year is the main driving force and it also pinpoints the country’s economic potential,” he said.

He said investors from other regions had shown more interest in the Association of Southeast Asian Nations (Asean) and the Asean Free Trade Area (Afta) will play an important part in the development of Thailand’s economy in the future.

He said the government recognised the importance of implementing the Asean Free Trade Area.

Measures had been prepared to prevent trade liberalisation affecting production prices and other areas. The government will improve the logistics system, cooperate more with the private sector and encourage Thai businesses to invest abroad, he said.

“Thailand and other countries in Asean will have to join forces to develop their economies further,” the premier said.

Meanwhile, the Excise Department reported that revenue in the first 10 months of the 2010 fiscal year (October 2009-June 2010) totalled 340.90 billion baht, higher than the set target by 96.99 billion baht, or 39.77 per cent.

“Excise tax revenue for July was 34.56 billion baht, 10.64 billion baht or 44.47 per cent higher than the target,” Excise Department director-general Areepong Bhucha-Oom said.

The largest source was oil and petroleum products which totaled 128 billion baht, followed by automobiles (63.6 billion baht), beer (50.4 billion baht), tobacco (44.9 billion baht) and liquor (35.5 billion baht), he said.

In July, the highest revenue was from oil and petroleum products (12.6 billion baht), followed by automobiles (7.90 billion baht), tobacco (4.75 billion baht), beer (4.41 billion baht), and liquor (3.10 billion baht), he said.

Mr Areepong was confident his department would be able to meet the excise tax revenue target of 366 billion baht set by the Ministry of Finance this fiscal year, thanks to the recovering economy.

Gold miner Kingsgate Consolidated Ltd says it will list a 49 per cent held subsidiary, probably on the Thai stock exchange, to expand in southeast Asia.

It says it plans to use the funds to expand via acquisitions, mergers and production growth in the region.

Chief executive Gavin Thomas said the float was the best way to enhance Kingsgate’s long-term relationship with Thailand.

A prospectus would be filed in the December quarter, Mr Thomas told reporters on Wednesday at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia.

He said the Thai stock exchange would help fast-track a listing if Kingsgate decided to list on that bourse.

“There has been a lack of investment opportunities in Thailand for the past few years … and there is a lot of cash in Thailand for good projects,” he said.

He said tax breaks enjoyed by Kingsgate in Thailand made it a good place to be.

The company can claim a 125 per cent tax deduction on a new processing plant for its Chatree mine that has progressed to the financing stage and will allow the miner to substantially boost gold output.

“There is no problem with banks – we were up there last week and all of them have said they were very happy to lend $US100 million ($A109.5 million) for the Chatree expansion,” Mr Thomas said.

“So we’re very comfortable that there is going to be competition (to fund Kingsgate) and that the rates will be very cheap.”

Mr Thomas said the company would probably offer scrip for any acquisitions of companies or producing or near-production projects, but could add a cash component if the price was right.

He says Kingsgate’s acquisition hunt will be worldwide, but southeast Asia has the brightest future.

Kingsgate says it will become the second largest Australian gold miner, in terms of market capitalisation, after Newcrest Mining Ltd acquires Lihir Gold Ltd.

Kingsgate shares closed down nine cents at $9.79.

Jakarta bounced back after a terrible days trading on Tuesday, today the index had gained 17.35 points, or 0.6 percent, to 2,991.00 at 10:18 a.m, but dropped back to 2,971.7 in midday trade. By the close, it had regained some of its strength, finishing 0.3 percent higher at 2,983.25, though it failed to get back above the 3,000 level today it should hit that target in the morning session today.

Financial stocks gained after the central bank kept its benchmark interest rate at a record low of 6.5 percent for a 12th straight month, avoiding an increase in borrowing costs.

Among the leaders was Bank Mandiri, the country’s biggest bank by assets, which rose 2.7 percent to Rp 5,800, its sharpest increase since July 15. Bank Rakyat Indonesia, the second-largest bank by assets, saw a 1.7 percent gain to Rp 9,200.

Telekomunikasi Indonesia, the nation’s biggest telephone company, gained 1.3 percent to Rp 8,100, climbing back from a three-week low.

But International Nickel Indonesia, better known as Inco, the nation’s largest nickel producer, fell 2.3 percent to Rp 4,250, its biggest decline in more than a week. Inco had its rating downgraded to “underweight” from “overweight” by JPMorgan Chase & Co. analyst Stevanus Juanda, who cited the risk of declining production volume for 2011.

Volume was lower than on Tuesday, with 4.8 billion shares worth Rp 4.4 trillion ($492.8 million) changing hands. Gainers outnumbered losers 98 to 89.

Meanwhile, the rupiah fell, ending a nine-day rally, after the central bank left its policy rate unchanged. The rupiah dropped 0.2 percent to 8,953 per dollar as of 4:26 p.m., according to data compiled by Bloomberg.

The currency also retreated on speculation Bank Indonesia might intervene to curb price swings after the rupiah climbed to its strongest level in more than three years, analysts said.

“You’ll probably see the currency consolidate at these levels from a shorter-term perspective,” said Apratim Chakravarty, head of global markets at HSBC Holdings in Jakarta.

The Malaysia stock market ended lower here on Wednesday.

The Kuala Lumpur Composite Index (KLCI) was at 1,362.74 down 1. 09 points or 0.08 percent, and the Emas was at 9,231.54 down 1.25 points or 0.01 percent.

Turnover decreased to 811.41 million shares valued at 1.19 billion ringgit Malaysia (375.51 million U.S. dollars), compared with 1.10 billion shares valued at 1.46 billion ringgit Malaysia ( 460.71 million U.S. dollars) on Tuesday.

The shares prices in Singapore fell 12.9 points or 0.43 percent on Wednesday with the benchmark Straits Times Index ( STI) closing at 3,001.87 points.

The overall volume stood at 1.59 billion shares worth 1.31 billion Singapore dollars (about 0.97 billion U.S. dollars).

Vietnam’s stock market index, VN-Index, closed at 486. 71 points on Wednesday, down 5.19 points, or 1.06 percent, against the previous trading day.

A total of 41.53 million shares worth 1.22 trillion Vietnamese dong (VND) (64.05 million U.S. dollars) changed hands at the Ho Chi Minh City Stock Exchange. Prices of 43 stocks went up, 172 dropped while 40 remained unchanged.

HNX-Index, the index of Vietnam’s Hanoi Stock Exchange, went down 2.62 points, or 1.74 percent, to 147.86 points

The Philippine share market finished higher on Wednesday.

The benchmark Philippine Stock Exchange index rose 19.51 points or 0.56 percent to 3,503.49. The broader all-share index increased by 0.4699 percent or 10.39 points to 2,221.35.

Trading volume reached 902.3 million shares worth 3.25 billion pesos (70.4 million U.S. dollars).


 


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