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ASEAN STOCK WATCH Asean Affairs  7 January 2013

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U.S. lawmakers narrowly averted the "fiscal cliff" by coming to a last-minute agreement on a bill to avoid steep tax hikes this weeks -- driving the rally in stocks -- but the battle over further spending cuts is expected to resume in two months.

Investors also have seen a revival of worries about Europe's sovereign debt problems, with Moody's in November downgrading France's credit rating and debt crises looming for Spain and other countries.

One of the biggest worries voiced about earnings has been whether companies will be able to continue to boost profit growth despite relatively weak revenue growth.


For the fourth quarter, estimates are slightly better but are well off estimates for the quarter from just a few months earlier. S&P 500 earnings are expected to have risen 2.8 percent while revenue is expected to have gone up 1.9 percent.

Back in October, earnings growth for the fourth quarter was forecast up 9.9 percent.

In spite of the cautious outlooks, some analysts still see a good chance for earnings beats this reporting period.


 China may fine-tune its monetary policy in 2013 by reducing interest rates and the reserve requirement ratio to support economic growth, according to research results published Friday.

A small interest rate cut at the right time could substantially decrease financing costs and improve expectations for profitability, said researchers from the China Development Bank, the State Information Center and the Shanghai Securities News who have worked together to forecast key economic indicators and policies in 2013.

Inflation will likely hit 3 percent this year, lower than the 3.3-percent maximum interest rate that lenders are currently allowed to set for one-year deposits, creating room for further interest rate decreases, the researchers predicted.

The researchers also said they expect moderate reductions for the RRR, or the amount of money banks must set aside as reserves, to prevent a pessimistic economic outlook from taking hold.

The central bank trimmed benchmark interest rates and the RRR twice in the first seven months of 2012 to spur growth. But it has since resisted further cuts, preferring to use open market operations instead.

The RRR for large-sized lenders currently stands at 20 percent, leaving plenty of room for a cut, the researchers said in several reports published in the Shanghai Securities News.

Authorities also have room to change the country's fiscal policy, as the fiscal deficit remains low in comparison to China's GDP, said Fan Jianping, chief economist at the State Information Center, a government think tank.

Other economic indicators are expected to improve slightly from last year, with fixed-asset investment expected to rise by about 22 percent in 2013, greater than the year-on-year growth of 20.7 percent recorded in the first 11 months of 2012.

Value-added industrial output is likely to expand by 10.5 percent in 2013, the researchers noted, up slightly from the 10-percent rate recorded in the first 11 months of last year.

Retail sales adjusted for inflation will increase at nearly the same pace as last year, while foreign trade will maintain slow growth of around 7.8 percent, the researchers said.


A group led by Singapore property firm Overseas Union Enterprise Ltd extended its S$13.1 billion (RM32.5 billion) offer for Fraser and Neave Ltd (F&N) to January 14, prolonging its battle with Thai billionaire Charoen Sirivadhanabhakdi.

On Wednesday, Charoen’s group extended his US$7.2 billion offer to take over F&N, a Singapore property and drinks conglomerate, for the fifth time until January 10.

Charoen owns a combined 34 per cent of F&N through Thai Beverage pcl and TCC Assets Ltd, and is trying to increase his stake in F&N to more than 50 per cent to foil the Overseas Union group’s counterbid.

Read more: OUE-led group extends F&N offer to Jan 14


Bangkok Bank Pcl, said it aimed for loan growth of 6-7 percent in 2013.

The projection was in line with the country's forecast economic growth of 4-5 percent for next year, Chairman Kosit Panpiemras told reporters.

Thai banks are facing their best earnings cycle in 20 years, underpinning a significant re-rating of the sector, brokerage Nomura said, citing strong macro data in November such as business confidence and private investment.

"Strong macro data-points underpin our view that an investment cycle is developing effectively for the first time since the 1997 financial crisis, driving a corporate and SME loan cycle and a doubling of Thai bank profits from 2011-14F," it said.

Bangkok Bank Pcl and Kasikornbank Pcl had the highest corporate and SME loan exposures and were its top picks, the broker said in a report dated Jan. 2.

Its price target for Bangkok Bank is 262 baht while that for Kasikornbank is 230 baht.

Bangkok Bank shares were down 0.5 percent at 195 baht while Kasikornbank shares gained 1.3 percent to 198.5 baht. The broader banking subindex edged up 0.14 percent while the benchmark SET index was up 0.35 percent.


TCM, the sole distributor of Nissan cars in Malaysia, launched its first B-segment model, the 1.5L Almera in Malaysia early November last year and recorded 2,500 unit sales.

This, the research firm said, was a massive gap-up compared with the 11-month of 2012 average monthly Nissan total industry volume (TIV) of 2,934 units, and November Nissan TIV of 4,476 (maiden contribution from Almera), overtaking Honda to become the second largest non-national.

It has hence increased its projection by 2.1% to 2.5% over financial year 2013 (FY13) and FY14. It is also expecting Nissan to hit record-high sales volume this year of 50,000 units.

Currently the research house analysts' projections are 5% to 13% higher than consensus (FY13-14F) and a consensus earnings revision is a very strong re-rating catalyst in the near term. Further upside risk could come from improved margins given higher plant output.


Alam Sutera Realty, a property developer unit of the Argo Manunggal Group, has set aside Rp 2.5 trillion ($259 million) this year for capital expenditure as the company aims to advance its expansion plans including the development of a residential compound in Serpong, Banten.

This year’s capex will be down on its Rp 3 trillion investment last year.

“Most of this [year’s] capex we aim to be financed by internal funds since our marketing sales are large enough,” said Nathan Tanugraha, corporate finance and investor relations manager at Alam Sutera. Marketing sales refers to proceeds from sales of property projects that are not finished.

Nathan said he expected bank loans to account for only 5 percent of capex this year, but declined to disclose details on the loans. He said the company was open to opportunities to increase its land bank through acquisitions.

The company’s marketing sales by the end of November stood at Rp 3.6 trillion, surpassing Alam Sutera’s target of Rp 3.5 trillion sales for the full year.

Based on the marketing sales, Nathan estimated that revenue probably rose to Rp 2.2 trillion in 2012, which is 59 percent higher than the Rp 1.3 trillion in revenue recorded in 2011. Net income was estimated at Rp 1 trillion for 2012.

The company reported Rp 1.7 trillion in revenue and Rp 738.9 billion in net income in the first nine months last year.

The company is aiming for revenue between Rp 2.2 trillion and Rp 2.3 trillion this year, on marketing sales of Rp 4.2 trillion.

Last year, the company said it was aiming to expand its land bank in Serpong and also buy land in Pasar Kemis, near Tangerang, in Banten. The company has yet to disclose further details.

The company sold 9 percent of its enlarged capital to an affiliated party to raise money for the land acquisitions. The company has about 200 hectares of land banked in its compound in Serpong.

In December, the company acquired Wisma Argo Manunggal, an office building in Jakarta’s central business district, from Daya Sakti Perdika, an affiliated company. The office building has leasable area of 13,809 square meters across 20 floors, a report by brokerage OSK Nusadana said.

The office building has an occupancy rate of 90.3 percent with rent price of Rp 75,000 per square meter per month.

Shares in Alam Sutera rose 5 percent to Rp 630 in Friday trading in Jakarta. Last year, they rose 24 percent.


 D&L Industries has teamed up with Japan’s leading chemical engineering company Showa Denko K.K. to produce a new line of eco-friendly materials that can replace conventional nonbiodegradable plastic bags.

D&L’s subsidiary, D&L Polymer and Colours Inc. (DLPC), has entered into an original equipment manufacturing (OEM) agreement with the Japanese firm for the compounding and manufacturing in the country of Bionolle Starcla, a starch-based material that is fully biodegradable and compostable.

“Bionolle Starcla will breathe new life into the plastics industry, which has lost almost 40 percent of its business to the ban (on the use of plastic bags),” Lester Lao, managing director of DLPC, said in a statement.

“We are also complementing the paper industry as we help it enhance its products and still be environment-friendly. It’s like having the best of both worlds.”

The recent bans of plastic bags nationwide have opened up demand for paper bags as alternatives. But D&L said that paper bags, unless heavily modified, can hardly meet the strength, ease of use, and affordability of plastic bags.

Bionolle Starcla is designed to run on conventional plastic blown film line. Films produced with this material, when exposed to soil, fresh water, seawater, compost, landfill and activated sludge, fully decompose. This material is currently used in mulching films, as well as garbage, compost and shopping bags. New applications include laminates for the paper industry.

Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager

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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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