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ASEAN STOCK WATCH Asean Affairs  13 December 2012

ASEAN Market Preview

ASEAN Markets will be mixed today following another day of politics in the USA.

Singapore still looks like the best value and Singapore Airlines, Olam International, K-REIT look like they are good buys.

The Dow Jones industrial average  .DJI slipped 2.99 points, or 0.02 percent, to 13,245.45 at the close. The Standard & Poor's 500 Index  .SPX inched up just 0.64 of a point, or 0.04 percent, to 1,428.48. But the Nasdaq Composite Index  .IXIC shed 8.49 points, or 0.28 percent, to end at 3,013.81.

Though the S&P 500 ended up just slightly, it was the sixth day of gains for the index - its longest winning streak since August.

The central bank committed to monthly purchases of $45 billion in Treasuries on top of the $40 billion per month in mortgage-backed bonds it started buying in September. It also said it will keep its near-zero interest-rate program in place until the U.S. unemployment rate falls to 6.5 percent from its current 7.7 percent.

Negotiations over plans to avoid the fiscal cliff intensified in Washington, but U.S. House of Representatives Speaker John Boehner said on Wednesday that "serious differences" remain with President Barack Obama in their talks. If no agreement is reached, steep tax hikes and budget cuts will fall into place early next year.

China is likely to have the world's largest economy by 2030 - surpassing the United States, the US National Intelligence Council said in a report released this week.

The country's rise will signify a shift in power from North America and Europe to Asia, the organization said.

Report: China to have biggest economy by 2030

The age of US and European dominance may be waning as emerging economies become increasingly important, the council said in its Global Trends 2030: Alternative Worlds report.

The organization is an analytical arm of the US Office of the Director of National Intelligence.

"China alone will probably have the largest economy in the world, surpassing that of the United States a few years before 2030," it said. "Meanwhile, the economies of Europe, Japan, and Russia are likely to continue their slow relative declines."

It also said China's total GDP will be 2.4 times as large as Japan's by 2030 and that "Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP, population size, military spending, and technological investment".

The report is the first by the intelligence organization to give a specific prediction of when China will become the world's largest economy.

Singapore

Singapore Airlines’ sale of its 49-percent stake in Virgin Atlantic will allow the cash-rich Asian carrier to focus resources on its fast-growing regional market, analysts said Wednesday.

The Singapore carrier’s tie-up with British billionaire Richard Branson’s Virgin Atlantic never really took off since the alliance began 12 years ago when the stake was bought for 600 million pounds ($966.5 million).

Singapore Airlines (SIA) on Tuesday said it will sell the stake to Delta Air Lines of the United States for $360 million in cash in a deal to be completed next year.

SIA said it “had been evaluating strategic options for the stake for some time, as the investment has not performed to expectations and the synergies the parties originally hoped for have not materialized.”

Analysts said SIA, consistently one of the world’s most profitable airlines, had little say in how Virgin Atlantic was run by the flamboyant Branson, and the sale allows it to exit an underperforming investment in the troubled European market.

“SIA can now focus on investments in the Asia Pacific region,” Brendan Sobie, a Singapore-based analyst with industry consultancy Centre for Aviation, told AFP.

Sobie said it made more sense for Delta to have a strategic stake in Virgin Atlantic as there are more synergies in their trans-Atlantic network.

Jason Hughes, an analyst with IG Markets Singapore, said that despite the higher acquisition price paid by SIA, the $360 million “will go down as a profit, as losses had already been accounted for in previous years”.

SIA shares closed 1.12 percent higher at Sg$10.87 as investors cheered the divestment.

Malaysian bank CIMB said in a note that the sale would give SIA a “short-term boost” but urged investors to focus on the long-term challenges posed by Middle Eastern carriers and budget airlines.

Shukor Yusof, an aviation analyst with Standard & Poor’s Equity Research, said SIA can use the extra cash to “redefine its business strategy on top of beefing up its regional subsidiaries”.

“It’s also good to exit out of Europe because the market conditions there are quite atrocious,” he told AFP.

Shukor said conflicting management styles with Branson was one of the chief reasons why the alliance failed to prosper beyond a code-sharing agreement.

“Branson remained the controlling shareholder and he called the shots,” he said.

Virgin Atlantic also did not have enough slots at London’s high-traffic Heathrow airport for SIA to latch on in its bid to gain a share of the lucrative trans-Atlantic route to New York, Shukor added.

Analysts said SIA’s decision to buy the stake in Virgin Atlantic in March 2000 was a good move at the time because Asia was just emerging from the 1997-1998 financial crisis.

But the center of global economic power has since shifted to Asia, sparking a travel boom in the region.

Passenger traffic in the Asia Pacific is forecast to account for 33 percent of the global market in 2016, up from 29 percent in 2011, according to trade body International Air Transport Association (IATA).

“This makes the region the largest regional market for air transport, ahead of North America and Europe which each represent 21 percent,” IATA said in a statement on their latest industry forecast.

SIA has been investing both in the premium travel segment, where it faces competition from Middle East carriers, and in the low-cost market where it is challenged by budget airlines.

SIA in June launched a long-haul budget wing called Scoot while maintaining a substantial stake in low-fare carrier Tiger Airways. It also operates a regional wing, SilkAir.

SIA and Scoot in October announced orders for 45 Airbus and Boeing aircraft. The orders came after SilkAir in August said it would buy 54 new Boeing planes with an option to buy a further 14 aircraft.

Thailand

Siam Commercial Bank  opened a representative office in Yangon, Myanmar.

Siam Commercial Bank (SCB) was granted approval to open the office by the Central Bank of Myanmar in April this year, and in the intervening months has organised seminars and information sessions to boost its profile ahead of opening the office.

The office, at 17 Kabar Aye Pagoda Road in Bahan township, was opened by chairman of SCB’s executive committee Dr Vichit Suraphongchai and watched over by officials from the Central Bank, Myanmar private banks and representatives of noteworthy Thai companies operating in Myanmar.

The opening was followed by a gala dinner in the evening that featured speeches by Dr Vichit, Thailand’s ambassador to Myanmar, and U Win Aung, chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry.

Dr Vichit said the bank’s presence in Myanmar represented a “mutual growth partnership”, and the bank wanted to play a role in the nation’s blossoming in the next 20 to 30 years.

“With this new office in Myanmar, SCB will have a presence in all countries in Indochina,” he said, adding that he was personally excited to be working in Myanmar.

“My excitement arises not just from the tremendous upgrade in business volume or the booming investment climate in Myanmar. My excitement stems from my personal desire to be part of something that could last 20 or 30 years and that later will be regarded as something historic,” he said.

“All of us can make history by being part of the emerging economic story of Myanmar,” he said.

“SCB has been active in Myanmar long before today. Today’s grand opening of our on-the-ground presence can only serve to further our commitment to Myanmar and its people,” he said.

Malaysia

Malaysian state investor Khazanah Nasional Bhd is selling up to 60 million shares worth around 408 million Malaysian ringgit ($133 million)in the country's largest electricity utility, Tenaga Nasional Bhd , according to a source familiar with the deal.

The sale will be priced at between 6.75 and 6.80 ringgit per share, said the source who declined to be named as the information was private.

The selling price is about 1.7 to 2.5 percent lower than the stock's closing price of 6.92 ringgit on Tuesday.

The sale, representing about 1 percent of Tenaga's existing issued shares, will reducer Khazanah's stake in the power company to 34 percent.

Officials at Khazanah and Tenaga were not immediately available for comment.

CIMB Group Holdings Bhd and Deutsche Bank are the joint bookrunners on the share sale, the source said.

In November, Khazanah sold an 8.7 percent stake in Malaysia Airport Holdings Bhd through a placement worth around 583 million ringgit ($191 million). ($1 = 3.0595 Malaysian ringgit)

Philippines

Swiss mining giant Xstrata has set back the commercial production of its $5.9-billion project in the Philippines to 2019 due to problems with security and the government, the company said Wednesday.

Sagittarius Mines Inc., Xstrata’s local unit, which is developing the Tampakan copper-gold project in the southern Philippines, cited “challenges” that arose since it originally scheduled operation to begin in 2016.

The obstacles include the local government’s 2010 ban on open pit mining and the national government’s failure to issue an environmental compliance certificate (ECC) that would overturn the ban, the company said.

A company statement also cited “security issues” in the project site, an apparent reference to armed groups that have attacked workers and contractors of the mine.

“If local government endorsement and final approvals from the national government are forthcoming… construction could potentially commence in 2015, enabling commercial production in 2019,” the statement said.

Sagittarius has described the Tampakan project as one of the world’s largest undeveloped copper-gold deposits.

The project would be the Philippines’ largest ever foreign investment but it has been opposed by leftist anti-mining activists, tribal groups and even church leaders.

The Philippines is believed to have some of the biggest mineral reserves in the world – the government estimates the country has at least $840 billion in gold, copper, nickel, chromite, manganese, silver and iron ore deposits.

However, the minerals have been largely untapped, partly because of a strong anti-mining movement led by the influential Catholic Church, while poor infrastructure and security concerns have also kept investors away.


Yesterday in Asia

Tokyo rose 0.59 percent, adding 56.14 points to 9,581.46, Seoul was up 0.55 percent, gaining 10.82 points to 1,975,44, and Sydney climbed 0.17 percent to a 17-month high, adding 7.8 points to 4,583.8.

Hong Kong ended up 0.80 percent, adding 179.41 points to close at 22,503.35, while Shanghai was 0.39 percent, or 8.03 points, higher at 2,082.73.

– Taipei rose 1.0 percent, or 76.5 points, to 7,690.19.

HTC rose 4.05 percent to Tw$282.5 while TSMC was 0.1 percent higher at Tw$98.4.

– Manila closed 0.20 percent lower, dipping 11.71 points to 5,819.79.

Ayala Corp. fell 3.22 percent to 510 pesos while Philippine Long Distance Telephone slipped 1.29 percent to 2,596 pesos.

– Wellington ended 0.77 percent, or 30.92 points, lower at 3,995.26.

Telecom fell 2.0 percent to NZ$2.19, Fletcher Building also lost 2.0 percent to NZ$8.28 and Contact Energy was down 2.1 percent at NZ$5.10.

– Singapore closed up 0.75 percent, or 23.24 points to 3,141.57.

Keppel Corp. gained 1.87 percent to Sg$10.87 and Oversea-Chinese Banking Corp. added 1.25 percent to Sg$9.75.

– Kuala Lumpur shares rose 8.18 points, or 0.50 percent, to 1,649.75.

Telekom Malaysia gained 2.1 percent to 5.80 ringgit, while Axiata Group added 1.1 percent to 6.40. Petronas Dagangan shed 3.6 percent to 22.68 ringgit.

– Jakarta ended up 19.61 points, or 0.45 percent, at 4,337.53.

Car maker Astra International rose 4.2 percent to 7,450 rupiah and paper producer Pabrik Kertas Tjiwi Kimia climbed 2.5 percent to 2,050 rupiah.

–Bangkok added 0.99 percent, or 13.24 points, to 1,354.57.

Oil company PTT gained 0.91 percent to 331 baht, while Siam Commercial Bank lost 0.85 percent to 174 baht.

– Mumbai fell 0.16 percent, or 31.88 points, to 19,355.26 points.

Mahindra and Mahindra was up 2.20 percent at 948.40 rupees and Jindal Steel and Power was down 1.55 percent at 412.85 rupees.

Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager

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ASEAN  ANALYSIS

This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More

 

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