ASEAN KEY DESTINATIONS
Asean Stock Watch- July 18
On Friday, the Dow Jones Industrial Average rose by 42.61, or 0.3 percent, to 12,479.73, brushing aside the impasse over the US’ borrowing limit and concerns over Europe’s financial health.
The benchmark index hit another record high on Friday after the central bank said the country could see investment inflows if the United States lost its top credit rating.
The Jakarta Composite Index gained 25.57 points, or 0.6 percent, to close at 4,023.20. The advance brought its gain for the week to 0.5 percent. A week earlier, the index had closed at an all-time high, breaking the 4,000 barrier for the first time.
Bank Indonesia said on Thursday that a US credit rating downgrade could cause money to flow into Indonesia in the short term as investors looked for better returns on assets, such as the rupiah. Moody’s Investors Service sparked a global sell-off on Wednesday after it put the United States — the world’s biggest economy — on credit watch.
Bank Indonesia on Tuesday kept its key interest rate at 6.75 percent in order to ensure economic growth.
“There’s the potential for investors moving to the Indonesian market because of the US credit rating change,” said Maxi Liesyaputra, an analyst with BNI Securities. “Because of economic growth and a steady interest rate, Indonesia could be a favorite investment destination.”
About 4.1 billion shares valued Rp 4.37 trillion ($511 million) were traded at the Indonesia Stock Exchange (IDX) on Friday. Gainers outnumbered decliners 121 to 98. Foreign investors bought Rp 214 billion more then they sold.
Bank Central Asia, the country’s largest listed lender, gained 3.8 percent to Rp 8,300. Astra International, the nation’s largest automotive retailer, rose 2.1 percent to Rp 70,400, its highest level since it joined the exchange in 1990. Unilever Indonesia, the biggest listed consumer goods firm, gained 1 percent to Rp 15,000.
The rupiah closed slightly stronger at 8,529 against the dollar on Friday. The currency slid 0.1 percent for the week.
Share prices on Bursa Malaysia are likely to tread cautiously this week in a narrow range of between 1,560 and 1,590 points on continued investor concerns over the US and European debt situation.
Global economic developments especially Europe's debt crisis and Wall Street's bearishness weighed down on sentiment in a week marked by the proposed RM11.85bil merger between Kencana Petroleum and SapuraCrest Petroleum.
Affin Investment Bank's Head of Retail Research Dr. Nazri Khan told Bernama that investors were eagerly awaiting the outcome of the European Central Bank (ECB) meeting last Friday which is expected to provide leads to the market.
He said the outcome will determine whether the ECB is robust enough to prevent any default by European banks.
Dr Nazri said the local bourse was expected to trade within a range of 1,560 and 1,590, supported by more news on the Economic Transformation Programme and the financial sector master plan which is still unannounced.
The market, which opened the week easier, rebounded following positive news from Italy, but retreated later the week on concerns of negative sentiment over global debt problems. For the week just ended, the market was bearish due to lack of interest and a continued sell-off in selected heavyweights after recent gains.
Kencana and SapuraCrest hogged the limelight as the biggest merger deal ever this year, with Kencana trading at noon last Tuesday, 14 sen higher at RM2.94 and SapuraCrest adding five sen to RM4.54.
By the week's end, Kencana rose three sen to RM2.99 and SapuraCrest Petroleum was unchanged at RM4.51.
On a Friday-to-Friday basis, the FBM KLCI dropped to 1,577.25 from 1,594.74 points and the Finance Index eased 181.35 points to 14,857.39.
The Plantation Index fell 136.19 points to 7,773.79 and the Industrial Index shed 27.06 points to 2,855.56.
The FBM Emas Index decreased 124.72 points to 10,809.61, the FBMT100 declined 117.03 points to 10,591.15 and the FBM Ace Index was lower by 69.07 points to 4,111.58.
Weekly volume dwindled to 3.798 billion shares valued at RM7.22bil from 4.66 billion shares valued at RM8.63bil previous week.
Turnover on the main market fell to 2.89 billion shares worth RM7.034bil from 3.52 billion shares worth RM8.38bil previously.
Volume on the ACE market was lower at 447.57 million units valued at RM78.42 million against 477.78 million units valued at RM76.28mil previously.
Warrants dropped to 435.669 million units worth RM263.18mil from 640.58 million units worth RM168.95mil from previous Friday.
The Philippine stock market may likely keep its bullish trend on early positioning by investors amid expectations of better second-quarter corporate earnings.
Set against the backdrop of economic uncertainties abroad, analysts expect a shift in focus from cross-border concerns to domestic corporate earnings.
“As we draw closer to [towards the close of the month to early August], its [earnings] influence on trading decisions will loom larger and the market may, for the time being, appear to ignore the fluctuations in global markets,” said Jun Calaycay of Accord Capital Equities Corp.
“The market’s core strength lies on certain industry plays and solid economic data. While there are pressures from the outside, the market will remain resilient with the growing appetite for defensive industries,” said Maria Arlysa Narciso of AB Capital Securities Inc.
The unrelenting rise in gold and oil prices will keep investors on the mining and oil sector, which closed at an all-time high of 22,048.10 on Friday.
Emerging economies such as the Philippines stand to benefit from debt problems in the US and Europe, which would heigthen risk appetite.
“With the help of the ratings upgrade and solid fundamentals, we think that the index can move higher to its next target of 4,500,” said Narciso.
“The yearend target for the market is 4,800 and I think we can hit it sooner,” said Joseph Roxas, president of Eagle Securities Inc.
The moving averages remain on an uptrend, confirming that the market is amid a bull run.
“There have been many stocks that have already broken out but there are still some diamonds in the rough that have yet to show their potential,” said Bonner Dytoc, senior instructor at Absolute Traders & Consulting Services Inc.
The PSEi’s support is at 4,340 while resistance at 4,500, analysts said, with the index seen to trade between the 4,340 to 4,470 range.
Singapore shares opened lower on Monday, with the benchmark Straits Times Index at 3,074.03 in early trade, down 0.33 percent, or 10.21 points.
Around 71.7 million shares exchanged hands.
Volatility continued on the Stock Exchange of Thailand last week as worries about EU debt situation and the possibility that the fragile US economy may need another stimulus package. Foreign investors responded by reducing their holdings in risky assets including Thai stocks. The SET index moved between 1,059.75 and 1,084.74 points and closed on Thursday before the long weekend at 1,088.46 points, down 0.78 percent from the week before.
Net sellers last week were foreign investors with 2.7 billion baht, brokers at 1.68 billion and local institutions 3.1 billion, while retail investors were net buyers of 7.48 billion baht.
Big movers: Large market cap stocks moved down as foreign investors cut back. PTT topped the table in value and closed the week down 0.3 percent at 334 baht. SCC shed 1.33 percent to 370 baht.
- The banking sector remained the top pick among investors to speculate on operating results that will be announced this week. BBL closed at 162 baht baht, down 3.3 percent, KBANK shed 0.8 percent to 127.50 baht, SCB was down 3.3 percent to 116 baht, and KTB fell 2.5 percent to 19.80 baht.
- "Political" stocks such as ADVANC and THCOM and domestic consumption plays such as PF and CPALL remained active. ADVANC closed at 114.5 baht, up 4.1 percent from a week earlier, while THCOM slipped 0.7 percent to 9.80 baht. PF rose to 0.91 baht from 0.87 a week earlier, and CPALL closed at 47.50, down from 47.75 baht.
Newsmakers: To no one's surprise, the central bank's Monetary Policy Committee (MPC) raised its policy interest rate another 25 basis points to 3.25 percent. BBL and KBANK followed quickly with increases in their deposit and lending rates.
- The Securities Analysts Association (SAA) announced its latest survey of analysts' opinions and forecasts. While upbeat about the new government and economic growth, the analysts have reservations about the impact on business of promised higher wages: to 300 baht a day for labourers and 15,000 a month for bachelor's degree holders. They like the idea of a corporate tax cut as promised by Pheu Thai.
- The revised SAA forecast is for the SET Index to peak at 1,221 point in the second half with an average at 1,197 and a bottom at 995. Gross domestic product (GDP) is expected to grow by 4.3 percent in 2011 and 4.7 percent in 2012. They forecast earnings-per-share growth of 16.7 percent this year and 13.2 percent in 2012.
- The SAA also forecast foreign investors would be net buyers of 34.57 billion baht in Thai shares in H2, and local institutional investors 18.29 billion.
- High-growth sectors for the second half are hotels at 220.23%, petrochemicals 81.61%, and food 32.68%. For 2012 the analysts favour shipping (48.39%), banks (12.94%) and electronics (12.85%). High dividend yield growth in H2 is expected in telecommunications, averaging 7.15%, electronics 5.51%, and building materials 3.99%. For the full year the SAA sees the yield from telecoms at 6.35%, electronics 6.12% and property 5.05%.
- TISCO, as it does every quarter, opened the earnings season last week by reporting a 13% year-on-year gain in Q2 net profit. However, its net interest margin narrowed to 4.1% from 5.1% a year earlier, as rising rates pushed up funding costs.
- Ireland was downgraded to junk status last week, pushing up commodity prices such as gold and oil, and fund flows to the US dollar and emerging markets again.
- Eight out of 90 European banks failed stress tests projecting how they would fare in another recession, and 16 more barely passed. Those in trouble will need more capital to withstand any worsening of financial and economic conditions on the continent.
Coming up this week: Banks will announce Q2 performances and the market expects good results due to loan growth and increases in net interest margins.
- Yingluck Shinawatra may be able to name her cabinet if the Election Commission endorses her election tomorrow after a delay last week.
Stock to watch: Capital Nomura Securities recommends speculative investment in stocks that are poised to report good Q2 performances. It says the plastics maker VNT should benefit as PVC spreads are seen as rising into next year as China's supply tightens and demand from Japan increases. It expects the company to report its best quarterly profit in three-and-a-half years.
- SAMTEL should realise gains from a 3G project in the second quarter. SCB will gain from interest increases and also realise income from SCNYL. BAY should perform well in the next two quarters, while KTB should gain from lending to finance government projects in H2.
- The SAA consensus on fundamental stocks includes AP, BBL, KBANK, PTTEP, SAT, and SCB. Stocks that are fully valued are QH, TMB and TRUE.
Technical view: Phillip Securities sees support this week at 1,060 and resistance at 1,080.
The VN-Index retreated by about 1 percent yesterday to close at 414.74 points, ending two days of gains on the HCM City Stock Exchange.
The value of trades declined by 18 percent from Thursday's already meager level, reaching just VN377.7 billion (US$18.3 million) with only 19.3 million shares changing hands. Decliners outnumbered advancers overall by 134-68.
Blue chips tumbled, dragging the Index down. Among the 10 leading shares by capitalisation, only three, including real estate developer Hoang Anh Gia Lai (HAG), Sacombank (STB) and dairy producer Vinamilk (VNM), managed slight gains. STB, with 1.7 million shares exchanged, was the most-active share on the HCM City bourse and closed at VND13,600, a gain of 0.7 per- cent.
On the Ha Noi Stock Exchange, the HNX-Index also closed off by 0.47 per cent yesterday, ending the session at 71.54 points. The value of trades was exceedingly modest, reaching just VND168.7 billion ($8.2 million) on a volume of only 16 million shares.
Losers outnumbered gainers by 130-91.
Kim Long Securities Co (KLS), with nearly 1.74 million shares traded, was the most-active on the northern bourse. KLS shares closed down by 0.9 per cent to VND10,600 per share after the brokerage house announced a net profit of over VND55 billion ($2.7 million) in the second quarter, lifting its first-half profit to about VND85 billion ($4.2 million).
Foreign investors were net sellers on both exchanges yesterday, unloading nearly two million shares worth a net of over VND17.5 billion ($850,000).
Analysts agreed the bear market would likely drag on through the end of this year, with rising inflation and unstable economic conditions undercutting investor confidence.
Rapidly rising gold prices continued to draw the attention of speculators away from stocks, as gold hit an all-time record high of over VND39 million ($1,892) per tael on Thursday and remained elevated yesterday. (A tael is equivalent to 1.2 ounces.)
Most investors rushed to sell at the high prices, however, and Tran Hai Yen, a analyst with Bao Viet Securities Co, predicted that current stability in currency exchange rates would restrain volatility in gold prices.
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