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ASEAN STOCK WATCH Asean Affairs   19 July 2012

ASEAN Market Outlook

By Shayne Heffernan Ph.D.

The policy-making Federal Open Market Committee meets for two days starting July 31. The group voted last month to extend Operation Twist, a program intended to push down long-term borrowing costs by extending the maturities of assets on the Fed’s balance sheet. As many as four policy makers were “quite receptive at this time” to more asset purchases, Atlanta Fed President Dennis Lockhart said July 13, citing minutes of the June meeting.

Retail sales unexpectedly declined in June for a third straight month, a sign that limited progress in job creation is holding back the biggest part of the economy, Commerce Department figures showed July 16.

The U.S. added 80,000 jobs in June, and the unemployment rate remained at 8.2 percent, the Labor Department reported July 6. Growth in private payrolls was the weakest in 10 months. The figures underscore Bernanke’s concern that growth may not be fast enough to lower unemployment stuck above 8 percent since February 2009.

“Consumers across the globe continue to feel the effects and impacts of prolonged uncertainty in Europe, the further cooling of the economy in China, and a protracted recovery here in the United States,” Coca-Cola Co. (KO) Chief Executive Officer Muhtar Kent said in a conference call yesterday. The Atlanta- based company is the world’s biggest soft-drink maker.

Genting

Genting Malaysia Bhd could benefit from the spillover effect of the proposed regulatory amendments to Singapore's Casino Control Act (CCA) as the authority plans to step up the oversight of the gaming industry in the republic.

The Act governs the operations of the two integrated resorts (IRs) in Singapore, one of which is Genting Malaysia's Resorts World Sentosa.

"We foresee that visitation of Singaporeans to Singapore casinos will decline going forward with the proposed amendments. On the other hand, we believe that Genting Malaysia could, to some extent, benefit from the spillover effect," Alliance Research Sdn Bhd analyst Cheah King Yoong said in a report yesterday.

It was reported that the Singapore government is carrying out a month-long public consultation exercise to review the proposed amendments to the CCA, including limiting the number of visits to casinos for individuals who gamble often and are deemed financially vulnerable and that the penalty for casino operators that breach the CCA be increased to as much as 10% of their gross gaming revenue.

According to the authority, between 4,000 and 6,000 Singaporeans and permanent residents are expected to be affected by this move.

"Although the impact of the proposed regulatory amendments to Genting Singapore and Marina Bay Sands remains to be seen, we believe their respective operational and business risks would have increased substantially, should the amendments be implemented," said Cheah.

He believes that the regulatory uncertainties could cap the upside of Genting Singapore Plc's share price in the coming months, and consequently it could also limit the upside of Genting Bhd's share price in the near term.

"We gather that there is an increasing trend of visitations by Singaporeans to Resorts World Genting. With the CCA becoming more stringent going forward coupled with increased cross-selling activities between Resorts World Genting and Resorts World Sentosa, we foresee visitations by Singaporeans to Resorts World Sentosa to rise going forward," he added.

Alliance is maintaining an "overweight" on the gaming sector, and reaffirming Genting Malaysia as its top pick with a "buy" call and a target price of RM4.26.

Bumitama

Plantation companies were oversold on the back of "over-pessimistic" crude palm oil (CPO) price assumptions.

Most people were implying long-term price of 2,300 ringgit ($720) to 2,800 ringgit per metric tonne, or 7 percent to 20 percent below current levels, Heffcap said.

Soybean export availability is likely to drop in June-November 2012 due to the South American crop failure earlier this year. Substitution or restocking is expected to lift CPO prices in the second half of 2012, Heffcap said.

It forecast a 7 percent upside to around 3,200 ringgit for CPO prices. Planters with significant volume growth such as First Resources and Bumitama Agri Resources stand to benefit the most from both pricing and volume recoveries,Heffcapsaid.



PTTEP

Thailand’s PTT Exploration and Production (PTTEP) is all set to acquire London-listed Cove Energy after a nearly five-month take-over battle.  The state-run oil and gas company was left the sole bidder for Cove Energy after global energy major Royal Dutch Shell pulled out from the auction.
 
Shell, Europe’s largest energy company, on July 16 announced that it would not revise its offer of 220 pence per Cove share and would not take part in the auction procedure. This led to PTTEP’s recommended offer of 240 pence per Cove share becoming the highest offer available to Cove shareholders.  The PTTEP offer valued Cove at 1.22 billion pound sterling (US$1.9 billion).
 
Cove announced on July 17 that its board of directors has recommended to its shareholders to accept PTTEP’s offer, which is valid until July 25 2012.
 
The planned acquisition is in line with Thailand’s effort to balance out the country’s vast energy import requirements through the PTT Group and its subsidiaries’ ambitious investment and acquisition plans overseas. Cove has an 8.5% interest in Mozambique offshore area 1 or Rovuma project, which is estimated to have resources of up to 30 trillion cubic feet natural gas. It also has a 10% stake in the Rovuma onshore area and 10% to 25% interest across seven blocks in Kenya’s offshore deepwater.
 
 “Cove and its interest in the Rovuma project represent a strong fit for PTTEP and the proposed acquisition of Cove is consistent with its strategy of leveraging the liquefied natural gas (LNG) value chain of the PTT Group,” the Thai company said in a statement on February 24, when it announced its initial bid of 220 pence per share of Cove. On May 23, PTTEP announced an improved cash offer of 240 pence per share to acquire Cove, after Shell in April raised its offer for Cove from 1.95 a share to 2.20, matching PTTEP's previous offer.
 
PTTEP has said it plans to finance the acquisition from its existing resources and available facilities. The company in June raised US$500 million from a 30-year global bond as well as 5 billion Thai baht (US$158 million) from a hybrid security in the domestic market.
 
In November 2010, PTTEP acquired a 40% interest in the Kai Kos Dehseh (KKD) oil sands project in Canada for US$2.28 billion.

Malaysia

The FBM KLCI index gained 5.85 points or 0.36% on Wednesday. The Finance Index increased 0.51% to 14698.57 points, the Properties Index up 0.47% to 1048.97 points and the Plantation Index down 0.07% to 8815.62 points. The market traded within a range of 5.00 points between an intra-day high of 1645.39 and a low of 1640.39 during the session.

Actively traded stocks include AT, CYBERT, NICORP, MTRONIC, ASUPREM, LUSTER, PATIMAS, AXIATA, LUSTER-WA and SKPETRO. Trading volume decreased to 1126.46 mil shares worth RM1457.83 mil as compared to Tuesday’s 1347.33 mil shares worth RM2013.17 mil.

Leading Movers were PBBANK (+12 sen to RM14.24), TM (+10 sen to RM6.25), DIGI (+4 sen to RM4.44), BAT (+158 sen to RM57.88) and CIMB (+4 sen to RM7.90). Lagging Movers were PETCHEM (-2 sen to RM6.58), GENTING (-2 sen to RM9.44), MMCCORP (-3 sen to RM2.53), KLK (-6 sen to RM23.80) and MMHE (-5 sen to RM5.45). Market breadth was positive with 362 gainers as compared to 358 losers.

Yesterday in Asia

Tokyo fell 0.32 percent, or 28.26 points, to 8,726.74, Sydney shed 0.42 percent, or 17.20 points, to 4,123.6, while Seoul gave up 1.48 percent, or 27.05 points, to 1,794.91.

Hong Kong was down 1.11 percent, or 215.45 points, at 19,239.88 but Shanghai rose 0.37 percent, or 7.91 points, to 2,169.10.

– Singapore ended flat, edging up 2.41 points to 3,017.21.

Singapore Telecom was up 1.16 percent at Sg$3.48 and oil rig maker Keppel Corp. advanced 1.5 percent to Sg$11.06.

– Taipei fell 1.09 percent, or 77.95 points, to 7,049.05.

Hon Hai Precision lost 1.69 percent to end at Tw$87.0 while leading smartphone maker HTC eased 1.68 percent to Tw$293.0.

– Manila closed 1.22 percent lower, giving up 64.57 points to 5,220.55.

Ayala Corp. was down 5.02 percent at 435 pesos while Philippine Long Distance Telephone Co. slipped 0.44 percent to 2,722 pesos.

– Wellington closed 0.15 percent, or 5.19 points, higher at 3,474.06.

– Jakarta was almost unchanged, nudging 0.96 points up to 4,081.64.

– Kuala Lumpur added 0.36 percent, or 5.85 points, to 1,645.00.

Top lender Malayan Banking gained 0.34 percent to 8.77 ringgit, while Telekom Malaysia added 1.63 percent to 6.25 ringgit. Newly listed telecoms services provider OCK Group lost 1.12 percent to 0.44 ringgit.

– Bangkok closed 0.33 percent lower, losing 4.07 points to 1,220.14.

Banpu dropped 0.43 percent to 464 baht, while PTT gained 1.19 percent to 340 baht.

– Mumbai rose 0.47 percent, or 79.71 points, to 17,185.01.

India’s second-biggest motorcycle maker Bajaj Auto rose 5.20 percent to 1,522.35.


Shayne Heffernan Ph.D.  

Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
Sales@Heffcap.com
 
Singapore
3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408 Fax: +65 6329 9699
Email : info@heffcap.com
 
Bangkok
Suite 53 Athenee Tower
63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330
THAILAND Email : info@heffcap.com
 
New York 347 5th Avenue, Suite 1402-508 NY, NY 10016



 


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