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ASEAN STOCK WATCH Asean Affairs  18 December 2012

ASEAN Market Preview
After weeks of stalemate, President Barack Obama and Republican House Speaker John Boehner met at the White House on Monday, raising hopes that Washington will be able to head off steep tax hikes and spending cuts that threaten the economy.

All of the S&P 500's 10 sectors were higher, led by financials. The S&P Financial Index gained 1.5 percent, and shares of Bank of America  BAC.N rose 2.6 percent to $10.86 while Citigroup  C.N gained 3.1 percent to $38.79.

Boehner has edged closer to Obama's position by proposing to extend lower tax rates for everyone who earns less than $1 million. Still, his position remains far from that of President Obama.
"Trumping everything right now are the fiscal cliff talks. It seems like progress is being made. I think it's getting to the nitty gritty, and I think that's what the market is reacting to," said Alan Lancz, president of Alan B. Lancz & Associates Inc. in Toledo, Ohio.

"The bet right now is that something will come by the end of this week."

Investors worry the U.S. economy could slide into recession if the tax and spending changes are implemented.

China's real GDP growth, if the costs of ecological degradation and environmental pollution are taken out, is about 5 percent, Li Yang, deputy head of the Chinese Academy of Social Sciences, told a conference on Saturday.

The costs of ecological degradation and environmental pollution accounted for 8 percent of the GDP during the 1980s and 1990s, and they dropped to about 4 percent since 2005, Li said, while emphasizing that the growth model is not sustainable.

China's GDP grew about 10 percent annually in the past three decades, but the growth rate will be less emphasized in the coming years, Li said.

Lowering costs and enhancing productivity will become more important for the country, Li said at the two-day Central Economic Work Conference over the weekend.


Singapore

Mapletree Investments Pte Ltd, a firm owned by state investor Temasek, has hired major investment banks to manage an initial public offering next year of a real estate investment trust that would have only Chinese assets and raise US$1 billion, IFR reported.

Mapletree hired Citigroup, DBS, Goldman Sachs and HSBC to advise on the deal that will come to the market in the first half of next year, IFR, a Thomson Reuters publication reported.

The REIT will contain office and retail properties in China and will be listed on the Singapore Exchange.

Mapletree owns and manages S$20 billion (US$16.3 billion) of office, logistics, industrial, residential, retail and mixed-use properties across Asia as of March 2012 including VivoCity which is Singapore's biggest shopping mall, the investor says on its website.

Thailand

Thai Airways was fined A$7.5 million (RM24.18 million) in the Federal Court after admitting to engaging in price-fixing in a global air freight cartel.

The airline, which was one of several pursued by the Australian Competition and Consumer Commission (ACCC), settled its case and admitted to reaching understandings with other airlines about certain charges for fuel, security and Customs between 2001 and 2005, says the Australian Associated Press.

In a judgment handed down last Friday, Justice Anna Katzmann found Thai Airways had engaged in serious contraventions.

“This was deliberate, systematic conduct involving senior staff at the Thai station in Indonesia.

“For the understandings to be effective, they required the participation of all players in the market, including Thai,” the judge said.

The airline admitted to reaching understandings on fuel surcharge from October 2001 to October 2005, a security surcharge during the same period, and a Customs fee from May 2004 to October 2005 on air freight from Indonesia to several countries, including Australia.

The airline agreed to pay a A$7 million fine, A$500,000 towards the ACCC’s costs and to refrain from engaging in similar conduct for five years.

The ACCC agreed to allow Thai Airways to pay its fine in installments, due to the airline’s ongoing financial problems.

Malaysia

Standard & Poor's Ratings Services has affirmed its 'A-' long-term issuer credit rating on Sarawak while the outlook is stable.

The international ratings agency said on Monday it had also affirmed the 'axAA' long-term Asean regional scale rating on Sarawak.

Below is the statement issued by S&P:

Standard & Poor's Ratings Services today affirmed its 'A-' long-term issuer credit rating on the Malaysian state of Sarawak. The outlook is stable. We also affirmed the 'axAA' long-term ASEAN regional scale rating on Sarawak.

At the same time, Standard & Poor's affirmed the 'A-' issue ratings on Sarawak International Inc.'s US$800 million guaranteed notes (due August 2015), Equisar International Inc.'s US$800 million guaranteed notes (due June 2026), and SSG Resources Ltd.'s US$800 million guaranteed notes (due October 2022).

The rating on Sarawak reflects the state's very strong budgetary performances, high levels of cash reserves, and its supportive relationship with the federal government of Malaysia (foreign currency A-/Stable/A-2; local currency A/Stable/A-1; axAAA/axA-1+). These factors are weighed against a hefty debt burden, sizable contingent liabilities, and, to a lesser extent, an economy concentrated in commodities.

Indonesia

Bank Sinarmas, a lender owned by conglomerate Sinar Mas Group, is optimistic that its outstanding loans will grow 20 percent this year, to Rp 11 trillion, over last year.

Bank Sinarmas president director Freenyan Liwang said the company will focus on boosting loans to micro-, small- and medium-sized enterprises (SMEs).

Currently, SMEs account for about 60 percent of the lender’s loans, followed by corporate loans, which come in at about 20 percent.

In a bid to support growth in SME loans, Bank Sinarmas plans to expand its outlets by 100 units in 2013. Currently, Bank Sinarmas owns 264 outlets in 119 cities.

Freenyan said that about 8 of the new outlets will be placed in areas still untouched by banks, such as in Sumatra’s rural areas, Sulawesi and Papua. The cost for investing in an office varies from Rp 200 million to Rp 3 billion ($20,700 to $312,000) each.

Bank Sinarmas also plans to boost its credit channeling to financing companies. On Friday, it signed a Rp 200 billion deal with automotive financing company Bussan Auto Finance for credit channeling.

The deal would allow customers of Bussan to get loans from Bank Sinarmas to buy cars. Bank Sinarmas has signed similar deals with 20 other financing companies.

In related news, Bank Sinarmas expects to book Rp 241 billion in net income this year that will be supported by a 15 percent increase in loans.

In 2011, Bank Sinarmas booked Rp 112.65 billion. In the first half of this year, net profit was booked at Rp 117.4 billion.

Philippines

The Philippine economy could expand at just below the minimum yearly average needed to curb poverty as it builds momentum for future years, according to trade leaders.

Trade Undersecretary Cristino Panlilio said in an interview that the economy could grow 6.7 to 6.8 percent in terms of gross domestic product (GDP) this year. That would make the Philippines the second or third in Asia, with China expected to top, he said.

“We did 6.5-percent (GDP growth) as of September. So if we do 6.7, 6.8 percent (in the fourth quarter), we should average at 6.7,” Panlilio said.

“Increased investments as well as public and private spending are seen to drive growth. Normally the last three months are big months because of the Christmas buying spree,” Panlilio said.

As of October, trade officials have entertained 25 investment missions composed of several firms each. “I am sure we will end the year with something like 32 in-bound missions,” Panlilio said.

On exports, Panlilio said electronics was “flat out” but non-electronic merchandise could pull up exports such that it could break the all-time high of $51.4 billion hit in 2010 because of agricultural products.

Government and consumer spending would more likely boost the economy but exports might not perform as strongly as the strong peso tended to benefit heavy importers yet weakened exporters’ revenue, said Philippine Exporters Confederation Inc. president Sergio Ortiz-Luis and Federation of Philippine Industries chairman Jesus Lim Arranza.

The impact of typhoon “Pablo” on this year’s agricultural output was seen to be “minimal” and might be more felt early next year but the restoration efforts in affected areas in Mindanao could even help boost GDP through public spending, Agriculture Secretary Proceso Alcala said in a phone interview.

The inter-agency Development Budget Coordination Committee (DBCC) has lowered its target for exports growth to 8 percent (from the original 10 percent) and imports to 7 percent (from 12 percent).

The Philippines beat expectations in the third quarter with its 7.1-percent GDP growth, ahead of other economies within Asean. China registered a 7.7-percent GDP growth in the same period.

The third-quarter performance of the Philippines was way above the market’s media forecast of 5.4 percent, Economic Planning Secretary Arsenio Balisacan said, adding that full-year growth would likely beat the target of 5 to 6 percent and move toward the previously “aspirational” 7- to 8-percent range needed every year to spur employment and curb poverty. The country’s top economist said this was expected to translate to more jobs and better incomes for Filipinos.


Yesterday in Asia

Tokyo climbed 0.94 percent, or 91.32 points, to 9,828.88, Sydney closed down 9.7 points, or 0.21 percent, at 4,573.4 and Seoul shed 0.60 percent, or 11.97 points, to 1,983.07.

Hong Kong shed 0.41 percent, or 92.37 points, to 22,513.61 but Shanghai ended up 0.45 percent, or 9.71 points, at 2,160.34 on hopes for pro-growth domestic policies from Beijing to boost the economy after a key meeting at the weekend.

– Taipei fell 0.88 percent, or 67.49 points, to 7,631.28.

Taiwan Semiconductor Manufacturing Co. lost 1.42 percent to Tw$97.0 while Hon Hai Precision Industry dived 4.7 percent at Tw$87.2.

– Manila fell 1.46 percent, or 83.26 points, to 5,623.85.

SM Investments Corp. slid 3.32 percent to 816 pesos while BDO Unibank dropped 2.74 percent to 70.90 pesos.

– Wellington fell 0.32 percent, or 12.69 points, to 3,966.49.

Fletcher Building was down 1.45 percent at NZ$8.14, Contact Energy was off 0.60 percent at NZ$5.01 and Telecom ended up 0.19 percent at NZ$2.16.

– Jakarta ended up 6.99 points, or 0.16 percent, at 4,315.86.

Carmaker Astra International rose 1.34 percent to 7,550 rupiah and Bank Permata jumped 2.36 percent to 1,300 rupiah,

– Kuala Lumpur shares lost 3.40 points, or 0.21 percent, to 1,648.58.

AirAsia fell 1.9 percent to 2.62 ringgit while Maxis slipped 0.9 percent to end at 6.50. Tenaga Nasional edged up 0/6 percent to closr at 6.82 ringgit.

– Singapore closed down 0.31 percent, or 9.73 points to 3,158.70.

Fraser and Neave gained 0.63 percent to Sg$9.63 and City Developments added 1.55 percent to Sg$13.12.

– Bangkok added 0.04 percent, or 0.59 points, to 1,359.09.

Coal producer Banpu gained 4.98 percent to 422 baht, while Siam Cement lost 2.38 percent to 410 baht.

– Mumbai slid 0.38 percent, or 72.38 points, at 19,244.42.

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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