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ASEAN STOCK WATCH Asean Affairs  9 August 2012

ASEAN Market Preview, Philippines, Thailand, Singapore, Malaysia, Indonesia

By Shayne Heffernan Ph.D.

Expectations for stimulus from the European Central Bank and the U.S. Federal Reserve falsely triggered the recent gains, but investors found little reason to keep pushing stocks higher after driving the market to three-month highs according to Economist Shayne Heffernan.

The three major U.S. stock indexes opened lower but recovered at midday, led by consumer staples .GSPS and health care .GSPA. Both are defensive plays, an indication that investors are keeping their enthusiasm in check.


Singapore's economy grew by 1.7 per cent in the first half of 2012 and is on track for 1.5-2.5 per cent growth for the year, says Prime Minister Lee Hsien Loong.

In his message on the eve of the nation's 47th National Day tomorrow, Lee said Singapore would celebrate the occasion amid an unsettled world with Europe and the US facing serious economic problems.

Lee said Asia did better than other regions, but China and India were slowing down and tensions were simmering in South China Sea.

"Against this backdrop, Singapore is doing quite well. Internationally, Singapore's standing is high, whether with emerging countries like India and China or advanced nations like the US," he said.

Domestically, Lee said, Singapore was clearing the backlog of applicants for HDB flats, building more MRT lines and upgrading its bus services.

"Our GST Vouchers and U-Save rebates will help lower-income households cope with inflation," he said.

However, Lee reminded Singaporeans to be wary of the future.

"Today Singapore is a success story, but the world is not standing still. The next two decades will be different. The emerging economies in Asia are advancing rapidly.

"Breakthroughs in science and technology will transform our lives. Singapore will encounter many new challenges and opportunities," he said.

He said to still be a shining red dot twenty years from now, Singapore must rethink its approaches and reinvent itself.

"We must anticipate changes and prepare for what lies ahead. Singaporeans will remain at the heart of all that we do, as we update our policies to best serve our people," he said.


Thailand's central bank said its monetary policy committee decided against cutting interest rates last month because economic growth was close to potential and monetary conditions were already accommodative, with credit growth robust.

The Bank of Thailand said in minutes of its July 25 policy meeting, published on Wednesday, that two members wanted a cut of 25 basis points, but the benchmark rate was left unchanged at 3.0 percent.

It said in the minutes that these two members were worried a weak global economy could have a bigger than expected impact on exports. They also felt support from fiscal stimulus measures might be delayed and their impact might be more muted than expected.

Underlining concerns about the threat to exports from a global slowdown, the central bank has cut its forecast for economic growth this year to 5.7 percent from 6 percent.


Foreign lenders including Citigroup and HSBC have blocked customers from withdrawing US dollars from their Indonesian automated teller machines, a move intended to comply with a Bank Indonesia ruling that aims to protect the rupiah.

“Citi has stopped providing service for dollar ATM withdrawals since Aug. 6, 2012, as per Bank Indonesia’s regulation,” Citibank Indonesia spokeswoman Mona Monika told the Jakarta Globe on Tuesday.

Citibank ATMs now carry a notice informing customers that they will need to visit a branch of the bank in order to withdraw dollars.

“Our customers with dollar accounts are still able to withdraw dollars directly through teller service at our branches. This withdrawal will not be charged up to the ATM withdrawal limit,” Mona said. The previous ATM withdrawal limit was $500 or $1,000 a day, depending on the customer’s card limit, she said.

Mona said that despite the central bank ruling officially commencing in March, Citibank needed time to make the necessary adjustments.

London-based HSBC issued notification of a similar policy. “Effective from September 1, 2012, US dollar cash withdrawal service through HSBC ATMs throughout Indonesia will be terminated,” HSBC said in a statement.

Bank Indonesia announced in March that lenders would no longer be allowed to provide dollar-note withdrawals via ATMs. The rule requires customers to provide underlying documents for some foreign exchange transactions. It also limits the amount of foreign currency that can be bought for speculative purposes to $100,000 a month.

The move is another step by the central bank to arrest the decline in the rupiah, which has weakened 4.5 percent so far this year against the dollar, in line with the country’s deteriorating exports. Indonesia’s goods trade has been in the red for three straight months and posted a record $1.5 billion deficit in June.

Bank Indonesia has been trying to boost onshore foreign-exchange liquidity by requiring all proceeds from exports be placed in local bank accounts.

The central bank is also mulling a plan to relax requirements on foreign exchange transactions in order to attract more foreign money to the country.

The rupiah traded at 9,472 against the dollar on Tuesday, compared with 9,461 on Monday, according to data from Bank Indonesia.


The FBM KLCI index gained 4.80 points or 0.29% on Wednesday. The Finance Index increased 0.15% to 14690.29 points, the Properties Index up 0.41% to 1059.89 points and the Plantation Index rose 0.19% to 8678.3 points. The market traded within a range of 4.93 points between an intra-day high of 1637.80 and a low of 1632.87 during the session.

Actively traded stocks include NICORP, ESCERAM, ASUPREM, BIOSIS-WA, PERMAJU, IHH, GPRO, BIOSIS, CYBERT and CENSOF. Trading volume decreased to 1231.58 mil shares worth RM1755.55 mil as compared to Tuesday’s 1414.23 mil shares worth RM2033.29 mil.

Leading Movers were DIGI (+6 sen to RM4.69), TENAGA (+7 sen to RM6.97), IOICORP (+4 sen to RM5.17), PETCHEM (+5 sen to RM6.56) and BAT (+92 sen to RM60.30). Lagging Movers were IHH (-6 sen to RM3.19), GENM (-2 sen to RM3.28), GENTING (-2 sen to RM8.87), YTLPOWR (-1 sen to RM1.77) and AMMB (-1 sen to RM6.36). Market breadth was negative with 348 gainers as compared to 357 losers.


Fitch Ratings said the exposure of the Philippine banking sector to risk of failure due to excessive lending remained low, but warned of the threat of a rising credit growth-related stress for banking sectors in the Asia-Pacific region.

In its latest report on Asia-Pacific, Fitch said the credit story in the Asia-Pacific was very much different from that of developed countries in the West. While credit growth is slowing down in advanced economies, it has been accelerating in Asia-Pacific by a pace fast enough to cause concern.

Given enormous liquidity enjoyed by banking sectors in Asia-Pacific countries, including the Philippines, Fitch said there must be some forms of control on credit growth in the region to ensure this was kept within prudent limits.

“Fitch believes that above-trend credit growth in tandem with booming property and equity markets remains the most reliable early-warning indicator (of system-wide risk for banks), particularly in countries where regulatory forbearance is prevalent,” Fitch said in the report titled “Asia Pacific’s Banks Rising Leverage Highlights Concerns.”

The credit watchdog said the latest macroprudential index (MPI) for the Philippines stood at “1,” which indicated low risk of system-wide stress preceded by rapid credit growth and asset price bubbles.

An MPI of “2” indicates moderate, while “3” means high risk.
Asia-Pacific countries that obtained the same comfortable MPI index for their banking sectors as that of the Philippines were Malaysia, Taiwan, Thailand, South Korea, Japan, India and New Zealand.

Fitch, however, said several countries in the region had an MPI of “3.” These are China, Hong Kong, Indonesia, Mongolia and Sri Lanka. These countries, it said, must immediately implement measures to arrest the worrisome pace of credit growth.

A credit growth that has been consistently faster than the growth of the economy or one that pushes outstanding loans of banks to exceed deposits is considered worrisome, it said.

In the meantime, countries in the region that are in the moderate risk category, or those with an MPI of “2,” are Australia, Vietnam and Singapore.
Since last year, Philippine banks have been posting double-digit growth in outstanding loans. The total loan portfolio of universal and commercial banks in the country hit P2.88 trillion as of the end of May, up by 14.7 percent from P2.51 trillion a year ago. This rate of growth led many to believe that the country was in the early stage of a credit boom.

However, Fitch said the case of the Philippines was much less worrisome if compared with the other countries in Asia-Pacific.

Although credit is growing significantly in the Philippines, deposits are also on the rise. As a result, the loans-to-deposit ratio for the Philippine banking sector remains at a relatively comfortable level of 58 percent, according to Fitch.

Moreover, the credit-to-gross domestic product (GDP) ratio in the Philippines remains below 50 percent compared with the over 150 percent for China and the over 200 percent for Hong Kong.

Excessive lending, especially one that is not accompanied by growth in deposits, makes banks prone to the risk of default and to probability of liquidity problems. Failure of the banking sector usually drags the growth of an economy.

Shayne Heffernan Ph.D.  

Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408 Fax: +65 6329 9699
Email :
Suite 53 Athenee Tower
63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330
New York 347 5th Avenue, Suite 1402-508 NY, NY 10016


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