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||Asean Affairs 1 February 2013
Asia Markets Day Ahead
Domestic and foreign-inbound mergers and acquisitions deals by strategic investors fell to a five-year low last year, but activity will rebound in 2013, international accounting firm PricewaterhouseCoopers said.
Last year, 2,953 M&A deals were made by domestic and foreign strategic buyers in China and their value totaled $97.1 billion, down 28 percent year-on-year, according to a report released by PwC on Wednesday.
Overall, there were 4,115 M&A deals related to the Chinese market totaling $199.5 billion, down 9 percent year-on-year.
According to the report, Japan remained the most active foreign-inbound M&A investor in China in 2012 for the second consecutive year, but the number of deals involving Japanese investors declined 30 percent year-on-year, mainly because of the Diaoyu Islands issue. The biggest deals in 2012 still came from the United States and Europe.
Although the number of the Chinese mainland's outbound deals surprisingly showed a small decline to 191 in 2012 from 206 in 2011, deal values grew 54 percent year-on-year to reach a new record high of $65.2 billion, comprising more than a third of overall M&A activity measured by value, by far the highest proportion ever, the report said.
US stocks were down, trimming the best January gain for the Dow Jones Industrial Average since 1994, on disappointing earnings as investors weighed economic data ahead of tomorrow’s jobs report.
Standard & Poor’s 500 Index lost 0.1% to 1500.05
Dow Jones Industrial Avg lost 0.2% to 13884.04
Nasdaq composite added 0.03% to 3142.31
In London, the FTSE100 rose 0.731% to 6276.88
China iron ore was higher at $US152.50 a metric tonne
Gold fell $US1.15 to $US1661.50 an ounce
WTI crude oil fell 64 cents to $US97.30 a barrel
Reuters/Jefferies CRB index was down 0.27% at 303.93
European stock markets fell as dealers fretted over the shrinking US economy and a flood of company earnings news, with Madrid hit hard by poor results from eurozone banking giant Santander.
London’s FTSE 100 lost 0.735 to 6276.88
Frankfurt’s DAX 30 lost 0.45% to 7776.05
In Paris the CAC 40 lost 0.87% to 3732.60
Oil prices diverged as markets focused on US jobs data and after the market moved on a Federal Reserve monetary policy announcement as well as unrest in the Middle East region.
Brent North Sea crude for delivery in March had climbed 25 cents to $US115.49 a barrel by 0653 AEDT.
New York’s main contract, light sweet crude for March, meanwhile closed 45 US cents lower at $US97.49 a barrel after reaching a four-month peak at $US98.24 on Wednesday.
Gold prices retreated from one-week highs as some investors locked in profits on the recent rally while others took a cautious stance ahead of upcoming employment data.
The most-actively traded contract, for April delivery, on Thursday closed at $US1662.0, down $US19.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices settled at a one-week high of $US1,681.60 on Wednesday after disappointing US economic-growth data caught the market by surprise.
Base metals closed lower on the London Metal Exchange (LME) as investors cashed in on recent gains, following a mixed bag of US economic data.
At the PM kerb close, LME three-month copper was down 0.7 per cent at $US8,165 a metric. Aluminum was also 0.7 per cent lower at $US2,090/ton. Copper hit a near-four-month high at $US8,291.25/ton earlier
Living up to President Aquino’s advance information that the numbers would impress, the Philippine economy expanded 6.8 percent in the fourth quarter of 2012, lifting full-year growth to 6.6 percent.
The figures that government economists and statisticians announced Thursday beat their targets and analysts’ expectations.
Socioeconomic Planning Secretary Arsenio M. Balisacan said that on hindsight, the government’s 5- to 6-percent growth target for the past year seemed conservative.
Median forecasts from the World Bank and other institutions were 5.9 percent for the fourth quarter and 6.4 percent for the full year.
Compared with the latest available data from other Asean countries, the Philippines’ fourth quarter growth in gross domestic product (GDP), the value of goods produced and services rendered in a given period, was higher than Vietnam’s 5.4 percent and Singapore’s 1.1 percent.
Indonesians are still pessimistic toward the current state of the economy but are more optimistic about its prospects for the next 12 months, according a report by a market research firm released on Wednesday.
Consumers’ views of the current economy compared to last year hit a level of 74, but their views on the economy in the next 12 months compared to now was registered at 119, in a survey conducted last month by InsightAsia. A neutral level is 100.
When asked about the current state of the economy, compared with a year ago, 45 percent of respondents replied negatively while only 21 percent perceived an improvement. When asked about the future of the economy, 41 percent said it was somewhat better or much better.
Consumer confidence in Indonesia increased by seven points, to 100, the second-biggest increase among six Asian countries surveyed. Malaysia’s consumer confidence increased 18 points, to 116, according to the report. InsightAsia currently ranks Indonesia fourth in the region behind Malaysia, China (108) and Singapore (106).
Finance Minister Kittiratt Na-Ranong yesterday urged the Bank of Thailand to opt for a lower interest rate, though the decision will ultimately be made by the Monetary Policy Committee (MPC) and its seven members _ four of whom come from outside the central bank.
Mr Prasarn yesterday said the central bank considers many aspects when taking a position on monetary policy. He acknowledged that the differential between local and foreign interest rates often plays a role in the movement of foreign capital.
He was responding to the renewed conflict between the government and the central bank over rates, ahead of a Feb 20 MPC meeting that will decide whether to leave a key rate at 2.75%.
"The central bank would not decide on interest rates based on a single factor," said Mr Prasarn.
He named long-term economic stability as the central bank's priority, saying the MPC analyses local data rather than following the trend of the US and Japan as suggested by some.
"There are more factors than interest rate differentials that determine the trend of foreign capital flows," said Mr Prasarn.
The governor took issue with the notion that the central bank should cut interest rates to discourage capital flows and avert a financial bubble, saying lower rates might lead investors to seek better returns and spur speculation.
Meanwhile, Mr Kittiratt dubbed the current interest rate "way too high".
FBM KLCI ended January on a softer note as investors were cautious ahead of the country's general elections (GE), which prompted profit taking by local funds and retail investors while foreigners were seen accumulating.
At 5pm, the FBM KLCI was down 0.18 point or 0.01% to 1,627.55. Turnover was 1.07 billion shares valued at RM2.01bil. There were 265 gainers, 413 losers and 343 stocks unchanged.
The KLCI surged to an all-time high of 1,699.68 on Jan 4 but hopes of it crossing the psychological important 1,700 level failed to materialise on investors' rising concerns about the GE.
Singapore's largest companies by sales turnover are making less profits.
According to the Singapore 1000 report, the gross profit margin for Singapore's largest 1,000 firms fell to 5.8 per cent, compared to 7.0 per cent last year.
The number of loss-making companies also increased to 105, from 80 in 2012.
"The low profit increase shows the impact higher costs are having on the profitability of Singapore's corporate sector," said Chen Yew Nah, managing director at DP Information.
"During the ranking period, raw material and oil prices as well as jumps in rents, labour and transport costs all had an impact of the bottom-line of Singapore's leading companies," added Chew.
Singapore's corporate leaders are seeing lower profit margins although combined sales surpassed the S$2 trillion mark. Sales increased 21.7 per cent to S$2.42 trillion in 2013.
The bulk of the increase in sales came from companies in the commerce-wholesale sector, as higher commodity prices drove up revenue.
Sales in the sector jumped 31.8 per cent to S$1.6 trillion, of which S$881 billion came from the trade of fuel and related products.
Manufacturing firms also contributed significantly to sales growth, with S$219.0 billion in revenue, while the transport and storage sector recorded sales of S$156.7 billion.
Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager
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Heffernan Capital Management
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Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
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