ASEAN KEY DESTINATIONS
Asean Stock Watch- August 9
Stocks nose-dived Monday on Wall Street after a leading rating agency downgraded the US credit rating, with the three major indices losing more than 5.5 percent.
The blue-chip Dow Jones Industrial Average shed 634.76 points, or 5.55 percent, to 10,809.85. Drops on the other major indices were even steeper, with the Standard & Poor's 500 Index losing 79.92 points, or 6.66 percent, to 1,119.46. The technology-heavy Nasdaq Composite Index plunged 174.72 points, or 6.9 percent, to 2,357.69.
After Friday's market closing, the rating agency Standard & Poor's had announced that it cut the US long-term bond rating from AAA to AA-plus, causing alarm among investors worldwide and a selloff on international markets.
US President Barack Obama had sought earlier to calm investors. "Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we've always been and always will be a triple-A country," Obama said at the White House.
He noted that the downgrade came not because of concern about the US ability to pay its debts but because of worries about the political system's ability to act.
Despite the credit downgrade, investors sought out the relative safety of US debt, sending yields on 10-year Treasury notes to 2.32 percent, their lowest level since 2009. The price of gold soared to a record 1,723.40 dollars per ounce.
The weekend downgrade of the US credit rating compounded worries about the global economic outlook, pushing stock markets down worldwide despite concerted efforts by political leaders and the European Central Bank (ECB) to allay investors' broader fears.
The US currency gained against the euro to 70.49 euro cents from 69.98 euro cents on Friday. The dollar lost ground against the Japanese currency to 77.62 yen from 78.53 yen.
Investors should refrain from making big bets on Indonesia’s stock market anytime soon because of recent volatility and concerns that the United States and Europe will force a global economic slowdown, analysts and fund managers say.
“My advice is not to enter the market in the next one or two days. It is still very volatile. It could go up tomorrow but fall the next day,” said Adrian Rusmana, research director at Sucorinvest Central Gani.
Concerns that the financial crisis may have spread to Spain and Italy combined with news of the US credit rating downgrade continued to shake the Indonesia Stock Exchange on Monday, following Friday’s big decline.
On Monday the Jakarta Composite Index fell as much as 5.3 percent, before paring its loss to 1.8 percent. Just a week ago, the benchmark had closed at a record high.
Ruben Sukatendel, a fund manager at BNI Asset Management, is confident that there was still upside potential in Indonesia’s market, but he would not recommend entering the market immediately.
“We keep monitoring the market, but we are still in ‘wait-and-see’ mode,” he said. Fund managers are likely to keep their assets in cash before entering the market when the time is right, he said.
“Bond prices are still relatively expensive in Indonesia, and the market is not liquid. We don’t want our money to be bound up in the bond market and miss any momentum in the equity market,” said Ruben, who helps manage Rp 5 trillion in assets.
Ruben said BNI Asset Management is planning to buy into the equity market by the end of the week as prices look cheap. It could use 20 percent to 30 percent of its idle cash to buy stocks, he said.
Investors may get some guidance today, when Bank Indonesia meets for its monthly policy meeting.
Strong corporate profit, economic growth and stable interest rates are fundamental factors that may help to keep share prices from declining further.
The central bank is likely to keep its key interest rate unchanged, according to seven economists polled by the Jakarta Globe. It last tightened monetary policy back in February.
Bagus Hananto, head researcher at Onix Capital, said there are still opportunities to gain in Indonesia, especially with its stable economy as a support.
Kim Eng Securities Indonesia shared a similar view in its note to its clients on Monday, saying that despite “temporary turbulence”, the index is likely to rebound.
“For those with an investment horizon of over six months, we think there is opportunity for bottom fishing in the Indonesian market,” it said. “The country continues to show strong fundamentals and it is not too dependent on exports, making it relatively shielded from any global economy slowdown.”
The broker said that consumer goods, banking and the property sector remain attractive and warned against commodity and export-oriented stocks.
Share prices on Bursa Malaysia were lower across the board, in early trade, on persistent selling on rising fears, over the weaker global economic outlook, dealers said.
Losses in key heavyweights -- Maybank, Petronas Chemicals and Maybank, which contributes mostly to the FBM Kuala Lumpur Composite Index, dragged the benchmark index 53.88 points lower or 3.6 percent to 1,443.11 after 14 minutes of trading.
At 9 a.m., the FBM KLCI opened 28.59 points lower at 1,468.4 compared with yesterday's close of 1,496.99.
The Finance Index wiped out 552.689 points to 13,755.37, the Plantation lost 338.81 points to 6,932.17, and the Industrial Index decreased 89.04 points to 2,618.56.
The FBM Emas Index eroded 402.58 points to 9,825.37, the FBM Ace Index fell 189.0 points to 3,649.9, the FBMT 100 Index erased 380.17 points to 9,663.99 and the FBM70 Index fell 496.13 points to 10,609.3.
Losers thumped gainers by 653 to 9 with 35 counters unchanged, 794 untraded and 45 others suspended.
Turnover stood at 178.196 million shares worth RM223.989 million.
HWANGDBS Vickers Research Sdn Bhd, in its research note, said, the benchmark index may fall towards the next support level of 1,465.
"Essentially, investors will be more inclined to sell rather than buy equities following Wall Street's extended freefall," it said.
Major US stock bellwether tumbled further last night (down between 5.5 per cent and 6.9 per cent at the closing bell) in the aftermath of S&P's downgrade of the US sovereign credit rating.
"Given the prevailing jittery market mood, it seems too early to bottom fish at this juncture. Capital preservation will be the priority of most investors for now," said the research house.
Actives, Compugates Holdings and Ingenuity Solutions-WA 2011/16 were both unchanged at six sen and two sen, respectively while SAAG Consolidated eased half-a-sen to six sen.
Leading losers were Panasonic Manufacturing Malaysia, which lost RM1.40 to RM22.30, followed by British American Tobacco which dropped RM1.22 to RM43.38 and LPI Capital declined RM1.14 to RM12.00.
Heavyweights, Maybank dropped 28 sen to RM8.35, CIMB lost 36 sen to RM7.94, Sime Darby declined 26 sen to RM8.69 and Petronas Chemicals fell 30 sen to RM6.13.
On other note, Ranhill Bhd, an engineering and construction firm, was suspended from trading this morning after receiving a takeover notice from a consortium of investors, including its Chief Executive Hamdan Mohamad, at 90 sen a share.
The counter, which was last traded at 74.5 sen per share, will resume trading in the afternoon.
Philippine share prices took a beating on Monday as the historic US credit downgrade by Standard & Poor’s weighed on the local stock market.
At the Philippine Stock Exchange, the composite index fell 106.31 points, or 2.4 percent to 4,331.24, its worst finish since falling by 105.06 points, or 2.73 percent in February 10.
The broader all-shares index shed 61.11 points or 2 percent to 2,994.12 with all six sub-indices closing in the red.
Decliners beat advancers, 132 to 22, while 33 stocks were unchanged. A total of 6.44 billion stocks worth P6.91 billion changed hands.
Net foreign selling hit more than P1 billion.
“It shakes confidence not only on the US, but on the global financial community,” said Jun Calaycay of Accord Capital Equities Corp.
“The reason for that is quite elementary—if the biggest economy was challenged to meet its short-term obligations, then lesser economies can be suspect as well. Risk premiums on loans [and sovereigns] may rise as well,” he added.
While the downgrade had been expected, its announcement still brought with it more negativity given that investor sentiment was hinged on developments overseas.
“Dow futures are currently significantly lower and a beating tonight might prompt a break of the PSEi’s support of 4,320,” said Prince Anthony Yeung of AB Capital Securities Inc.
Calaycay said the sell-off has overshadowed “the still sound and decent domestic fundamentals,” which may mean that local investors expect “the economy to slow and corporate bottom-lines to suffer as an end-result.”
With the US and Europe besieged by debt problems, growth will come from Asia, which could benefit from continued transfer of funds from developed to emerging markets like the Philippines, said Freya Natividad, investment analyst at 2TradeAsia.com.
“But there are also some risks since 17 percent of Chinese exports go to the United States,” she said.
“The anticipated flow of capital into emerging markets from developed markets should provide a push both for the real economy and investments. We have already seen the build-up of the country’s reserve position to over $70 billion as of July,” Calaycay said.
The downgrade also weakened the US dollar.
“This results in a double-whammy for Philippine exporters. Not only is the market squeezed, but the translation of the revenue flow narrows. The stronger peso also hurts remittances and thus, consumer spending,” Calaycay said.
Oil prices however would fall, with the peso appreciation easing pressures on domestic fuel prices.
On Monday, the peso traded higher against the dollar despite renewed global risk aversion.
Traders said markets may have discounted S&P’s move.
At the Philippine Dealing System, the local unit gained 8 centavos to close at 42.50 to the greenback, from 42.58 last Friday.
The dollar-peso pair opened at 42.55 and moved up to 42.67 and tested a low of 42.44.
Total trading volume hardly changed at $1.038 billion.
The Bangko Sentral ng Pilipinas said the local currency will remain stable at 42 to 45 against the dollar within the year on the back of steady inflow of remittances from Filipinos working abroad, export receipts and gross international reserves.
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.
The Stock Exchange of Thailand main index went down 15.19 points or 1.39 percent to close at 1,078.19 points at the end of trading session on Monday Afternoon. The trade value was 40.01 billion baht, with 4.97 billion shares traded.
The SET50 index ended at 750.11 points, down 11.04 points or 1.45 percent, with a total trade value of 30.75 billion baht.
The SET100 index fell 24.55 points or 1.48 percent to stand at 1,636.33 points, with a total turnover of 35.78 billion baht.
The SETHD index went down 19.33 points or 1.84 percent to stand at 1,031.16 points, with total trade value of 10.40 billion baht.
The MAI index dropped 2.27 points or 0.73 percent to close at 307.27 points, with total transaction value of 841.30 million baht.
Top five most active values were as follows;
PTT closed at 322.00 baht, down 8.00 baht (2.42 percent)
SCB closed at 118.50 baht, unchanged
KBANK closed at 130.00 baht, down 2.50 baht (1.89 percent)
BANPU closed at 696.00 baht, down 8.00 baht (1.14 percent)
BBL closed at 162.00 baht, down 1.00 baht (0.61 percent)
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