ASEAN KEY DESTINATIONS
Asean Stock Watch- August 8
On Friday, the Dow Jones Industrial Average closed with a gain of 60.93 points to 11,444.61 on the back of a better-than-expected jobs report, ending a turbulent week that allowed the index to recover a marginal fraction of the 512 points it lost the day before.
But the world’s biggest financial system took another blow after ratings agency Standard & Poor’s removed for the first time the triple-A rating the US had held in the last 70 years, saying a Washington agreement was not enough to address the gloomy outlook for the nation’s finances.
Rival rating firms Moody’s Investor Service and Fitch Ratings maintained their top ratings for US debt after Washington reached a last-minute deal to avert a default.
US economic indicators that are due this week are the Federal Open Market Committee meeting announcement, international trade, jobless claims, retail sales and consumer sentiment
Analysts said on Sunday that the United States’ credit rating downgrade by Standard & Poor’s would have little effect on Indonesia.
Bank Indonesia Deputy Governor Hartadi A. Sarwono said the bank was closely watching the situation and would take the steps necessary to stabilize the market, but added that the economy remained resilient and the central bank “could manage fluctuations well.” S&P lowered the US rating on Friday by one notch from AAA to AA+, saying that US politicians were increasingly unable to manage the country’s huge fiscal deficit and debt.
The agency struck a bold note, warning that the future outlook was negative. It said the rating could be downgraded further within two years if progress was not made in balancing the country’s lopsided finances.
The two other major ratings agencies, Moody’s and Fitch, last week affirmed their top rating of US debt but also assigned it a negative outlook.
Fauzi Ichsan, an economist at Standard Chartered Bank, said there was no need to panic as the downgrade came from only one of the ratings agencies. Indonesia’s strong fundamentals would help it weather a crisis, he added.
“We may see another overreacting panic in the financial market, following Friday’s turmoil, but a correction should only last one or two days, including in Indonesia,” he said.
Destry Damayanti, an economist at Mandiri Sekuritas, said on Sunday that global conditions would not hit Indonesia as badly as they did in 2008.
The finance sector had reduced reliance on borrowing since 2008, she said. “The stock market is likely to be under heavy pressure for another week, but everyone had been warned because the US outlook had been revised since June and rumors of S&P’s downgrade had been going around.”
Destry said the S&P downgrade could be a “blessing in disguise” as global investors would now turn their eyes to emerging countries, such as Indonesia.
“There is a good chance for a surge of capital inflow to Indonesia,” she said, adding that the inflow would likely come into bonds because investors were now more selective when it came to Indonesian stocks.
“Our bond market, especially government bonds, is still appealing to investors, and additionally, Indonesia’s bond market is more stable nowadays,” she said.
MAS and AirAsia requested on Monday morning that trading in the shares of their companies be suspended from 9am onwards pending an announcement.
News reports earlier noted that both airlines were close to finalising a share-swap deal in which AirAsia's co-founder Tan Sri Tony Fernandes would get a 20 percent stake in MAS.
Khazanah Nasional, which owns over 17 percent of MAS, was said to have concluded negotiations with Fernandes to come up with a deal to save the national carrier after its poor showing in the last two quarters.
Sources said the deal would be signed this week as it has received the Government's approval and could be inked by today.
Fernandes and co-founder partner Datuk Kamarudin Meranun together held a 26.28 percent in AirAsia.
Philippine share prices are expected to remain resilient despite headwinds brought about by growing concerns on the health of financial systems in the US and Europe.
After reaching new heights, the Philippine Stock Exchange index reacted negatively to Wall Street’s decline on the last trading day of the previous week, falling by as much as 100 points before support kicked in at 4,347.
“The good thing about the last trading day’s movement is that it was able to gain back more than half of what was lost,” said Bonner Dytoc, senior instructor at Absolute Traders and Consulting Services Inc.
“Even if it ended in the red, there could be some momentum for the following week for the index to continue to bounce higher,” Dytoc added.
Week on week, the composite index dropped 21 points or 0.48 percent with the sell-off fuelled by the negative sentiment over debt troubles in US and Europe.
“The MACD [moving average convergence-divergence] lines have signaled a correction in the making but it is still in the positive territory. In short, these indicators are telling us that we shouldn’t be too worried about our situation,” Dytoc said.
Singapore shares opened lower on Monday, with the benchmark Straits Times Index at 2932.55 in early trade, down 2.08 percent, or 62.23 points.
Around 61.8 million shares exchanged hands.
Losers beat gainers 202 to 10.
In the region, Asian stocks fell in early trade on Monday before clawing back some of their losses following frantic weekend efforts to calm financial markets after a downgrade to the United States' credit rating.
The Stock Exchange of Thailand main index went down 30.63 points or 2.73 percent to close at 1,093.38 points at the end of trading session on Friday Afternoon. The trade value was 67.28 billion baht, with 7.94 billion shares traded.
The SET50 index ended at 761.15 points, down 22.17 points or 2.83 percent, with a total trade value of 50.50 billion baht.
The SET100 index fell 48.80 points or 2.85 percent to stand at 1,660.88 points, with a total turnover of 58.84 billion baht.
The SETHD index went down 22.14 points or 2.06 percent to stand at 1,050.49 points, with total trade value of 16.98 billion baht.
The MAI index went down 5.86 points or 1.86 percent to close at 309.54 points, with total transaction value of 612.02 million baht.
Top five most active values were as follows;
PTT closed at 330.00 baht, down 10.00 baht (2.94 percent)
SCB closed at 118.50 baht, down 4.00 baht (3.27 percent)
BBL closed at 163.00 baht, down 2.00 baht (1.21 percent)
KTB closed at 19.50 baht, down 0.50 baht (2.50 percent)
BANPU closed at 704.00 baht, down 24.00 baht (3.30 percent)
Last week's stock market trades were the first to take place since Circular No 74 took effect on August 1, allowing investors to buy and sell the same shares within a single session.
"The circular will help prevent market manipulation and market collapse, since the ability of investors, banks and securities firms to control risks remained restricted," said Hoa Binh Securities Co analyst Nguyen Phuc Thinh.
"But it will be easier for investors to buy shares which they expect an immediate rise in prices, with the opportunity to take advantage of the rise to realise gains."
The State Securities Commission, however, had also issued a guiding document concerning provisions of Circular No 74 which had done more to confuse investors than to clarify the regulation, Thinh said.
"After the VN-Index exceeded 500 points in March, Viet Nam's stock market has so far seen the greatest decline in the region," said the director of the Informatics and Applied Economics Research Institute, Dinh The Hien, in a meeting on Saturday. "Supportive factors did not appear in June and July, so the market was unable to attract investors. However, the economy is gradually stabilising compared to previous months."
"We believe that the commitments of the new government will help the economy improve in the last months of the year," said the Au Viet Securities Co analysts.
Nevertheless, the Ministry of Finance's pricing department, in its report on market prices in July and its forecast for August, predicted that the prices of many essential consumer goods would rise this month, including petroleum. The agency also forecast inflation in August would continue to increase at a monthly rate of about 1 percent.
Meanwhile, the VN-Index last week closed down at 400.88 points on Friday, a decline of nearly 1.2 percent compared to the previous week's session despite advancing sessions on Thursday and Friday.
"Investors were negatively affected by the decline on the US stock market," wrote Au Viet Securities Co analysts in a report.
The average daily value of trades on the HCM City Stock Exchange reached VND741.8 billion (US$36 million), about twice the previous week's level, on an average daily volume of 41.7 million shares. Thursday's session helped drive up the overall averages for the week, with the value of trades climbing to VND1.8 trillion ($87.4 million) for that day.
"Thursday's session saw short-term speculation taking place in a number of codes," said Thinh. "The volume of exchanged shares increased, following the big movements in prices as demand met supply."
With shares nearing an historic low in value, technical factors also supported a rebound, Thinh said.
Many shares saw heavy trading through the negotiation method during last week, including Sacombank (STB) which saw 83.2 million shares traded by this method. On Thursday alone, nearly 75 million STB shares were sold, purportedly due to the Dragon Capital fund's divestment of its stake in Sacombank.
Declines in the shares of insurer Bao Viet Holdings (BVH) and real estate developer Vincom (VIC) pulled the overall value of the insurance and real estate sectors down 5.97 and 5.58 per cent, respectively.
Heavy profit-taking on Friday also drove the HNX-Index down to a cumulative loss of 1.45 per cent on the week and a close on Friday of 68.54 points. The average daily value on the Ha Noi Stock Exchange jumped by 32 per cent over the previous week, however, to VND258.8 billion ($12.6 million), with an average of 27.2 million shares traded per session.
Foreign investors were net sellers on both exchanges, picking a combined net of VND230.4 billion ($11.2 million).
Hien predicted that, this quarter, the VN-Index would continue to range between 400 and 420 points.
"In September, although share prices will not gain much, long-term investment opportunities will crop up," said Hien. "If, at the end of the fourth quarter, signals of lower interest rates and inflation become clearer, the VN-Index may rise in the short term, reaching 500 points."
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