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||Asean Affairs 24 December 2012
ASEAN Equity Preview
On Friday in Asia
Japan’s Nikkei 225 index fell nearly 0.3 percent to 10,014.17. Hong Kong’s Hang Seng lost 0.8 percent to 22,470.67. South Korea’s Kospi shed 1.1 percent at 1,977.08. Australia’s S&P/ASX 200 fell 0.5 percent to 4,612.10. Benchmarks in Singapore and Taiwan also fell. Indonesia and the Philippines rose.
In the USA
The Dow Jones industrial average .DJI dropped 120.72 points, or 0.91 percent, to 13,191.00. The Standard & Poor's 500 Index .SPX fell 13.52 points, or 0.94 percent, to 1,430.17. The Nasdaq Composite Index .IXIC lost 29.38 points, or 0.96 percent, to 3,021.01.
Trading was volatile as confidence eroded in the prospect of a deal out of Washington, and in part due to quarterly expiration of options and futures contracts. The CBOE Volatility Index .VIX or VIX, the market's favored anxiety measure, finished below its high of the day.
Republican House Speaker John Boehner failed to garner enough votes from even his own party to pass his "Plan B" tax bill late on Thursday. It was the latest setback in negotiations to avoid $600 billion in tax hikes and spending cuts that some say could tip the U.S. economy into recession.
ASEAN stocks are seen trading in thin volume this shortened trading week as global markets await whether the United States can strike before year’s end a budget deal that will address a looming “fiscal cliff.”
But while the external environment was uncertain, a last-minute rally might still be possible on the back of year end window-dressing.
Bangko Sentral ng Pilipinas
The Bangko Sentral ng Pilipinas said 2013 could be a challenging year as far as preventing an even steeper appreciation of the peso was concerned, noting that a potential investment grade credit-rating for the country could drive more foreign portfolio investments.
Admitting it was actively buying dollars from the market in 2012 to temper what could have been a sharper appreciation of the local currency, the BSP said it expected the need for more action to keep the peso as less volatile as possible next year.
“Capital flows from a [potential] credit-rating upgrade will provide more challenge in terms of keeping the peso relatively stable and minimizing its volatility,” BSP Deputy Governor Diwa Guinigundo told reporters Friday.
In 2012, the peso appreciated against the dollar by more than 6 percent partly on account of significant inflows of foreign “hot money.” After hovering in the 43-to-a-dollar territory at the start of the year, the peso broke into the 40:$1 level before weakening to the 41:$1 band.
Market analysts said the Philippines, together with a few other emerging Asian countries, has become a preferred destination choice for portfolio investments given its favorable economic growth amid the general weakness of the global economy.
The BSP said foreign portfolio investments could grow further in 2013, thereby providing additional appreciation pressures on the peso.
All three major international credit-rating firms—Fitch Ratings, Standard & Poor’s and Moody’s Investors Service—now rate the Philippines a notch below investment grade following rating upgrades over the past two years.
The credit watchdogs cited the Philippine government’s declining debt burden, rising foreign exchange reserves and robust economic growth as among the factors for the upgrade.
“Without the BSP’s participation in the foreign exchange market, the peso could have been firmer, although we had to allow fundamentals to determine the peso-dollar rate,” Guinigundo added.
He reiterated the central bank’s exchange-rate policy of allowing the peso to appreciate specially if such movement was driven by “structural flows,” which included foreign direct investments and remittances. The BSP, however, said it would temper the rise of the peso if this was due to foreign portfolio investments, particularly those that involve speculation on the peso.
To temper the rise of the peso in 2012, the BSP engaged in heavier dollar purchases that pushed its expenditures and led to its losses. In the first three quarters of the year, the central bank had a net loss of P68.36 billion.
The BSP likewise slapped a higher capital requirement on banks’ holdings of non-deliverable forwards (NDFs), which were supposedly hedging instruments for importers and exporters but were believed to be used to earn from currency speculation.
The BSP also re-issued an old directive prohibiting banks from using money of foreigners from being invested in the central bank’s special deposit accounts (SDAs).
A joint research by First Metro Investment Corp. and the University of Asia and the Pacific said that after a 100-basis point cut in key interest rates in 2012, further rate cuts by the BSP could not be ruled out in the coming year alongside other measures to manage capital flows.
The state-owned Bank Mandiri, Bank Rakyat Indonesia and Bank Negara Indonesia, along with private lenders Bank Central Asia, Bank Danamon Indonesia and Bank CIMB Niaga will continue to enjoy strong growth in profit year next year, according to estimates by analysts polled by Bloomberg News.
Bank Mandiri is forecast to post a profit of Rp 17.1 trillion ($1.7 billion) next year, up 19 percent from this year. The country’s largest lender by assets posted net income of Rp 12.2 trillion last year. Its net income in the first nine months rose 21 percent to Rp 11.1 trillion from the same period last year.
BRI will likely post a profit of Rp 18.8 trillion next year, up from an estimated Rp 16.8 trillion this year. Net income of BRI, Indonesia’s most profitable bank, was Rp 15.1 trillion last year.
BNI, the fourth-largest lender by assets, is forecast to book a Rp 7.61 trillion profit in 2013, up from Rp 6.57 trillion estimated this year. BNI’s 2011 profit was Rp 5.83 trillion.
The same holds true for BCA, which is forecast to jump to Rp 13.5 trillion next year from an estimated Rp 11.6 trillion this year. Last year’s profit at BCA, which is partly controlled by Djarum Group, stood at Rp 10.819 trillion.
Profit at Bank Danamon, which is controlled by Singapore wealth fund Temasek Holdings, will likely increase to Rp 4.63 trillion next year from an estimated Rp 4.04 trillion this year. Danamon’s profit was Rp 3.34 trillion last year.
Analysts estimated net income at Bank CIMB Niaga, a subsidiary of Malaysian lender CIMB Group, will rise to Rp 4.07 trillion next year, from an estimated Rp 3.52 trillion this year. Last year’s profits at CIMB Niaga stood at Rp 3.17 trillion. Net income at Bank CIMB Niaga rose 30 percent to Rp 3.1 trillion in the January-September period this year. Total outstanding loans at CIMB Niaga rose 14 percent to Rp 138.9 trillion in the first three quarters.
Bank Mandiri, BRI and BNI forecast moderate lending growth between 20 percent and 23 percent next year on strong loan demand by the country’s consumers and corporations. That would be in line with the central bank’s target for the country’s 120 commercial banks.
The bank executives said that the domestic market still offers abundant opportunities, such as in small- and medium-enterprise companies and the infrastructure sector, which is at the center of the government’s master plan to maintain economic growth. Still, executives were also vigilant with uncertainty looming with the US fiscal cliff and the European debt crisis that could put pressure on the price of commodities and investment in Indonesia.
“Given all that background, we are optimistic, but remain cautious,” said Felia Salim, vice president director of BNI.
Achmad Baiquni, BRI’s finance director said loans for working capital might decelerate amid a global growth slowdown. On top of that, loans for consumers will be crippled by tighter rules imposed by the central bank, he said.
One such rule was to increase the down payment on purchases of cars and houses, which was imposed in June. Data from Bank Indonesia showed that lending growth slowed slightly to 22.4 percent year on year in October, from 22.9 percent a month earlier.
On the other hand, analyst noted that fierce competition among domestic banks had encouraged banks to become more cost-efficient, which in turn boost their profits. Commercial banks’ operating expenses to operating income ratio (BOPO), which is a measure of bank’s efficiency, was at an average of 74 percent as of October, down from 85 percent last year. The smaller the ratio means the bank is more efficient.
CLIQ Energy Bhd has received approval from the Securities Commission (SC) to list on the Main Market of Bursa Malaysia Securities as a special-purpose acquisition company (SPAC).
In a statement yesterday, the oil and gas exploration and production company said under the SC guidelines for SPACs, 90% of proceeds would be placed in a trust account managed under an appointed custodian.
“For this exercise, the funds raised will be held in a trust administered by Deutsche Bank Group,” it said.
It said it would have to secure a qualifying asset within three years after listing.
“Failure to do as such would result in the liquidation of the company. Under the SC guidelines, public investors would be guaranteed the return of at least 90% of their investments,” it said.
CLIQ Energy said it planned to raise over RM500mil from placement to selected retail and cornerstone investors, high net-worth individuals as well as public and private funds.
It said the public issue would be between 200 million and 667 million new ordinary shares of one sen each, along with between 200 million and 667 million free detachable warrants on the basis of one warrant for every new share subscribed under the public issue.
Its chairman Datuk Azmi Mohd Ali said CLIQ Energy would focus on acquiring and unlocking the value of oil and gas assets located in the Asian and Oceania regions to remain sustainable on a long-term basis.
“This includes acquiring small- and medium-sized discovered oil and gas fields with relatively low to moderate risks, and the rights that allow the company to take part in the development and production of these fields,” he said.
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.
Advancement of Mozambique LNG Project in Rovuma Offshore Area 1, Mozambique
Mr. Tevin Vongvanich, the President and CEO of PTT Exploration and Production Public Company Limited or PTTEP reveals that PTTEP AI (a subsidiary of PTTEP) and its joint venture partners have awarded Front End Engineering Design (FEED) contracts for both onshore LNG (liquefied natural gas) construction and offshore installation for its newly acquired block "Rovuma Offshore Area 1" in Mozambique which contains the vast natural gas resources discovered currently estimated to hold between 35 and 65 plus trillion cubic feet of recoverable natural gas.
The competitive Onshore LNG FEEDs will be performed by 3 consortiums comprised of (1) a joint venture comprised of JGC Corporation and Fluor Transworld Services, Inc., (2) a joint venture between an affiliated company of CB&I and Chiyoda Corporation, and (3) International Bechtel Co. LTD. which will deliver of a full engineering, procurement and construction plan, and a lump sum turnkey price for an initial LNG development that will include two liquefaction trains for the Rovuma Offshore Area 1 joint venture with capacity of 5 million tons of LNG per annum (MMTPA) per train, as well as associated common facilities. The FEEDs will also develop an overall LNG Park plan allowing the capability to produce approximately 50 MMTPA in the future years.
The competitive Offshore Installation FEEDs will be performed by another 3 consortiums comprised of (1) Technip USA, Inc., (2) a joint venture comprised of Subsea 7 (US) LLC and Saipem SA, and (3) a joint venture comprised of McDermott, Inc. and Allseas USA Inc. will deliver of a full engineering, procurement, installation and commissioning plan for subsea production systems.
Once all of the above designs and estimated costs are submitted, a LNG contractor and an offshore contractor will be selected and awarded for Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) contracts to continue advancing the project toward expected first LNG cargo in 2018.
Moreover, Anadarko, as the operator of Mozambique Offshore Area 1, reached Heads of Agreement (HOA) with Eni, as the operator of Mozambique Offshore Area 4, establishing foundational principle for the coordinated development of the common natural gas reservoirs spanning both areas. The HOA is designed to facilitate a work program whereby the two operators will conduct separate, yet coordinated offshore development activities, while jointly planning and constructing common onshore liquefaction facilities in the form of an LNG (liquefied natural gas) park at Cape Afungi, in Cabo Delgado Province of northern Mozambique.
Mr. Tevin added that "Awarding of multiple FEED contracts and reaching an HOA with Eni is a significant step that moves forward the monetization of the discovered natural gas resources in addition to the on-going efforts on securing LNG customers. All joint venture partners are grateful for the support of ENH and the government of Mozambique and look forward to continue moving this transformational project toward first production".
The joint venture partners for Rovuma Offshore Area 1 are PTTEP AI with 8.5%, Anadarko Mozambique Area 1 Ltd as the operator with a 36.5% interest, Mitsui E&P Mozambique Area 1 Ltd with 20%, BPRL Ventures Mozambique B.V. with 10%, Videocon Mozambique Rovuma 1 Ltd with 10% and Empresa Nacional de Hidrocarbonetos, ep's (ENH), Mozambique National Oil Company, 15% interest is carried through the exploration phase.
In August 2012, PTTEP successfully acquired the entire shares of Cove Energy Plc and became the partner in Rovuma Offshore Area 1 and other petroleum blocks in Mozambique and Kenya with other joint venture partners. This success marks PTTEP's significant step into the highly prolific East Africa hydrocarbon region which will be a vital LNG production base in the future in order to support the increasing demand of Asian region including Thailand.
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