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ASEAN STOCK WATCH Asean Affairs   10  December  2010

ASEAN Move to New Highs

Shayne Heffernan

ASEAN is pressing on new highs this week and tomorrow that trend will continue. US stocks wavered between small gains and losses Thursday as data providing mixed readings on the US economy failed to send the market in a clear direction.

Ebeling Heffernan have upgraded the 2011 growth target for Palm Oil.

So far Palm oil has rallied 36 percent this year, headed for its second straight annual advance, on optimism that rising demand in China may strain global supplies curbed by rain and drought in producing nations.

Global demand for eight vegetable oils will exceed output for the first time in eight years in 2010- 2011 and China’s import reliance is at “an alarming level,” Oil World said in a Nov. 19 report.

Heavy rains caused by a La Nina weather event have reduced oil-palm yields in Indonesia and Malaysia, the top producers. La Nina has also caused drought that curbed South American planting of soybeans, threatening global edible oil supplies and driving prices higher. Malaysia’s production dropped 1 percent to 14.3 million tons in the first 10 months of the year, according to data from the nation’s palm oil board.

February-delivery futures rose as much as 1.3 percent to 3,640 ringgit, a 29-month high, and traded at 3,617 ringgit at 12:13 p.m. on the Malaysia Derivatives Exchange.

China, the biggest user of commodities, has pledged to control prices by cracking down on the use of bank credit to speculate in agricultural markets and by selling soybeans and vegetable oil from state reserves.

The biggest buyer of soybeans is expected to import 57 million tons in the year from Oct. 1, up 13 percent from a year ago, the U.S. Department of Agriculture data show. Imports may exceed 14.2 million tons from October through December, up 4 million tons from a year earlier, Oil World said this week.

The Indonesian Stock Exchange (IDX) is among the best performing stock markets in Asia this year. The benchmark Jakarta Composite Index (JCI) has grown about 45 percent so far this year as foreign investors continued to pump funds into the Southeast Asia’s biggest economy. On Wednesday, the index rose 1.28 percent to close at its new record high of 3,769.99.

Estimates are that US$60 trillion was seeking to be invested at present, $48 trillion of which is owned by European and US’ investors.

Indonesia’s 6.5 percent benchmark interest rate has attracted foreign investors to invest in both debt and capital markets. About Rp 115.3 trillion of foreign funds have entered the nation’s stock and debt markets so far this year, a condition that has worried regulators due to fears over a sudden reversal that could hamper economic activities.

Tigor M. Siahaan, Citi’s country business manager, estimated Wednesday Moody’s would soon upgrade Indonesia’s sovereign rating to a level below the investment grade in line with the improvement of the country’s economic performance. “Moody’s was here last week talking to the government. So in several weeks we expect them to come up with an upgrade,” he told attendees at the same seminar.

Meanwhile BNP Paribas said Indonesia’s benchmark index may increase 20 percent within a year on an expected upgrade on the country’s sovereign debt rating. “Despite outperforming its peers in the region this year, we do not believe that the benefits of the re-rating have been fully priced in,” analyst Elvira Tjandrawinata told Bloomberg. “Other catalysts could include a continued pick up in investment, which would feed consumption, making it stronger and sustainable,” Elvira said.

The Indonesian stock market hit an all-time closing high on Wednesday, led by banking shares and helped by foreign buying, but other Southeast Asian markets ended mixed on concerns over eurozone debt and Chinese monetary tightening. Indonesia, the region's best performer this year, jumped 1.3 percent to close at 3,769.99, surpassing the previous peak hit on November 10.

Singapore gained 0.3 percent to a near-three-week high and Malaysia rose 0.6 percent to its highest since November 11, both in high volume compared with their 90-day average. The Philippines gained 0.6 percent. Thailand, the region's second-best performer in 2010, lost 1.5 percent, while Vietnam fell 1.7 percent, both to one-week lows.

Concern over eurozone debt problems, further tension on the Korean peninsula and fears of monetary tightening in China kept investors on the sidelines on Wednesday, analysts said. Despite volatility due to global economic concerns and rising currencies, investors are still turning to the region when they want to find risky assets with valuations that remain attractive.

"With the exception of Indonesia, all the Southeast Asian countries continue to be at PE deficits relative to Western counterparts at a time when growth here continues to be at a great premium," said Rob Sivitilli, J.P. Morgan's head of corporate finance and M&A for Southeast Asia. Indonesia is trading at 15.2 times this year's projected earnings, below all-Asia's 13.3 and more expensive than most of the other regional markets. Thailand is trading at 12.6, lower than the 14 of Singapore, 13.8 of Malaysia and the Philippines' 13.5, Thomson Reuters StarMine data show.

Jakarta attracted $21.8 million in inflows on Wednesday, with banking shares in demand, led by a 20 percent gain in Bank CIMB Niaga and a 2.3 percent rise in Bank Central Asia. In Bangkok, banking and energy shares led the fall after the country's top industrial conglomerate, Siam Cement, said it would sell a 15.59 percent stake in the country's top olefins maker, PTT Chemical, for 33 billion baht ($1.10 billion).

"We saw poor sentiment from selling in PTT Chemical, which came under pressure due to the share sale offer at a lower-than-market price," said Parin Kitchaotornpitak, senior analyst at Far East Securities. However, the Thai market enjoyed $58.7 million in foreign inflows on Wednesday, extending net offshore buying to over $292 million in the past six sessions.


Shayne Heffernan brings more than 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over US$500m and 1 that reach a peak market cap of US$15billion. He has managed and overseen start-ups in Mining, Shipping, Technology and Financial Services.


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