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||Asean Affairs 26 July 2012
ASEAN Market Update
By Shayne Heffernan Ph.D.
The euro rose on Wednesday after suggestions that European policymakers will consider new ways to tackle the region's debt crisis, while U.S. earnings supported the Dow.
Caterpillar and Boeing raised 2012 profit forecasts while chipmaker Broadcom predicted quarterly revenue growth, helping to offset news of an unexpected drop in new U.S. home sales.
Meanwhile, Apple Inc, the world's most valuable publicly traded company, fell 3.8 percent to $578.35 after it posted a rare miss in revenue late on Tuesday.
"I'm encouraged investors are taking the Apple news pretty well," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
"The stock is up more than 40 percent for the year so seems like a 3 percent drop is barely a speed bump."
Ablin said the news that Dow components Caterpillar and Boeing raised their outlooks "is a huge positive for the market."
Thai exports in June sliding by 2.5% year-on-year due to the ongoing euro-zone crisis.
Economists and private sector employees are more pessimistic. They see Thai exports growing by 8-10%.
Deputy Commerce Minister Poom Sarapol said Thailand shipped US$20.1 billion (636 billion baht) of goods in June. Euro-zone troubles impacted production and sales in several key markets such as Japan, South Korea, South Asia and Taiwan.
June exports to the 15-original EU members dropped by more than 16% year-on-year. Exports to Japan dropped by 0.5%, while US shipments rose by 5%.
June imports were $20.7 billion, up by 4.41% year-on-year. The country's deficit was $550 million.
Exports in the first half of the year were $113 billion, down by 1.66% year-on-year. During this period, Thailand imported $123 billion, up by 10.28%, incurring a trade deficit of $10.3 billion.
Mr Poom said the ministry maintains this year's export growth projection of 15% or $2.24 trillion, although several parties have expressed concern about whether the target was achievable. The ministry vowed to work harder to promote exports.
The FBM KLCI index gained 2.52 points or 0.15% on Wednesday. The Finance Index increased 0.07% to 14667.86 points, the Properties Index up 0.23% to 1044.02 points and the Plantation Index rose 0.24% to 8800.69 points. The market traded within a range of 10.21 points between an intra-day high of 1635.09 and a low of 1624.88 during the session.
Actively traded stocks include IHH, CYBERT, LUSTER, BORNOIL, CENSOF, LUSTER-WA, CENSOF-WA, HARVEST, AXIATA and L&G. Trading volume increased to 1320.94 mil shares worth RM2487.45 mil as compared to Tuesday’s 845.75 mil shares worth RM1513.75 mil.
Leading Movers were TENAGA (+10 sen to RM6.79), KLK (+46 sen to RM24.16), PETCHEM (+6 sen to RM6.55), PPB (+28 sen to RM15.48) and SIME (+2 sen to RM9.95). Lagging Movers were AXIATA (-3 sen to RM5.81), GENM (-3 sen to RM3.43), GENTING (-3 sen to RM9.27), UMW (-7 sen to RM9.82) and MMCCORP (-5 sen to RM2.47). Market breadth was negative with 298 gainers as compared to 448 losers.
Indonesia's foreign direct investment rose 30.2 percent on an annual basis to Rp 56.1 trillion ($5.92 billion) in the second quarter, the government said on Wednesday, showing the G-20 member remains a magnet for investors in a troubled global economy.
The year-on-year increase in FDI was stable with the 30.3 percent reported for the first quarter of 2012, mostly supported by investment in mining and base chemicals.
Indonesia, bolstered by upgrades to investment grade status by two rating agencies, has drawn strong portfolio and foreign direct investment in recent years.
Firms have been looking to tap abundant natural resources and booming middle class spending in Southeast Asia's largest economy.
Last year, Indonesia's total FDI was a record Rp 175.3 trillion, up 18 percent from 2010, and government policymakers have been relying on continued investment and domestic consumption to keep the economy growing by more than 6 percent year at a time exports are flagging.
Singapore Airlines’ first-quarter net profit soared 73 percent from last year, it said Wednesday, partly driven by higher passenger traffic.
But the growth statistic was magnified by a low profit figure for the corresponding period in 2011, when it was hit by higher fuel costs and soft demand due to the earthquake and tsunami disasters in Japan.
The carrier, considered a bellwether for the full-service airline industry, said net profit came in at Sg$78 million ($62 million) for the quarter to June 2012, compared with Sg$45 million last year, and was in line with analysts’ expectations.
Group revenue advanced six percent to Sg$3.78 billion, while expenditure climbed four percent to Sg$3.71 billion.
SIA shares closed at Sg$10.69 apiece at the stock market before the report was released.
Earnings were boosted by a rise in passenger volumes as it offered a host of promotions to bolster loads amid intense competition and a weak global economy, the airline said in a statement.
But it painted a gloomy outlook for the rest of the year in a “difficult environment,” with the price of jet fuel – which accounts for 40 percent of total expenditure – still near historical highs despite retreating.
“The global economy remains uncertain as Europe struggles to contain its debt crisis, while the United States faces a sluggish recovery,” said the airline, which analysts said gets over half of its earnings from premium passengers.
“This has negatively impacted business confidence and the outlook for travel demand. Promotional efforts undertaken to boost carriage add downward pressure on yields, especially in Europe and the United States,” it added.
SIA said the cargo business also remained under pressure, with forward indicators signaling weaker demand.
SIA is facing stiffer competition from emerging full-service carriers like those from the Middle East – which have narrowed the gap in in-flight services at lower ticket prices – as well as from the increasingly popular budget airlines plying regional routes.
“Going forward, it is going to be tough,” said Shukor Yusof, an analyst with Standard and Poor’s Equity Research.
“Beyond the traditionally strong summer season, they will again face difficulties in terms of maintaining their status as the premium carrier in the world,” he told AFP.
Low-cost carriers, which have “increased their strength from year to year,” are also giving SIA tougher competition, Shukor said.
“But with a strong balance sheet, there is a strong possibility that they can still remain in the black for the full financial year,” he added.
SIA’s current financial year ends March 2013.
The airline’s full-year net profit ended March 31 this year slumped 69 percent after a rare loss in the fourth quarter of 2011 due to high oil prices and global economic uncertainty.
That was only the third quarterly loss in the history of the airline.
Philippine imports rose 10.1 percent in May to $5.386 billion from $4.893 billion a year ago, according to the National Statistics Office.
This followed a 13.6-percent weakening in imports in April, the sharpest decline so far this year. Imports dropped 3.2 percent in January, grew 2.5 percent in February, then dipped 3.3 percent in March.
Month on month, May imports increased 12.8 percent to $4.773 billion.
This brought total imports for the first five months of the year to $25.66 billion, down 1.9 percent from $26.15 billion in the same period last year.
Total external trade for May reached $10.318 billion, a 14.5 percent increase from $9.011 billion recorded during the same month in 2011. This was due to the 10.1 percent jump in imports.
Earlier, NSO reported that exports increased by 19.7 percent in May to $4.932 billion from $4.119 billion a year ago.
The country posted a trade deficit of $454 million in May from $774 million in the same month last year.
Electronics imports, which accounted for about a fourth of the total inbound shipments, slid 15.3 percent to $1.44 billion in May from $1.7 billion in the same month last year. However, this was up 9.3 percent from $1.318 billion in April.
Semiconductors, which make up the bulk of electronics, were down 22.6 percent to $1.101 billion from $1.422 billion from a year ago.
Importation of mineral fuels, lubricants and related materials posted the highest annual growth rate of 88.1 percent to $1.290 billion from $685.91 million in May last year.
Rounding up the top three imports is transport equipment, valued at $367.73 million, up 68.8 percent from $217.79 million a year ago.
The United States was still the Philippines’ top source of imports in May accounting for $652.26 million. This, however, represents a 1.1-percent decline from $659.83 million last year.
The other top sources of imports were China ($597.07 million, up 14.9 percent), Korea ($565.96 million, up 58.8 percent), Japan ($484.39 million, up 1.8 percent) and Taiwan ($476.61 percent, up 37.2 percent).
Peter Lee U, dean of the University of Asia and the Pacific School of Economics, said that except electronics, other imports should grow because of strong domestic consumption and production, especially with the stronger peso.
Yesterday in Asia
Tokyo closed down 1.44 percent, or 122.19 points, at 8,365.90, Seoul fell 1.37 percent, or 24.62 points to 1,769.31, and Sydney lost 0.23 percent, or 9.3 points, to close at 4,123.9.
Hong Kong closed 0.14 percent lower, shedding 25.87 points to 18,877.33, and Shanghai eased 0.49 percent, or 10.44 points, to 2,136.15.
– Singapore closed down 0.25 percent, or 7.52 points, at 2,990.92.
Oversea-Chinese Banking Corp. shed 0.75 percent to Sg$9.29 while Singapore Airlines gained 0.19 percent to Sg$10.69.
– Taipei fell 29.22 points, or 0.42 percent, to 6,979.13.
Hon Hai Precision shed 4.32 percent to Tw$81.9 while Taiwan Semiconductor Manufacturing Co. was 0.27 percent lower at Tw$74.6.
– Manila ended flat, nudging up 2.06 points to 5,161.80.
Ayala Corp. fell 1.0 percent to 411 pesos and SM Investments dropped 2.7 percent to 720 pesos while property developer Megaworld gained 4.7 percent to 2.23 pesos.
– Wellington ended flat, edging down 1.73 points to 3,458.98.
Air New Zealand slipped 1.7 percent to NZ$0.895, Fletcher Building was off 0.7 percent at NZ$5.77, and Telecom Corp. gained 1.6 percent to NZ$2.565.
– Kuala Lumpur was up 0.15 percent, or 2.52 points, at 1,635.09.
Newly listed IHH Healthcare rose 10 percent to 3.09 ringgit, KL Kepong added 1.9 percent to 24.16 ringgit, and PPB gained 1.8 percent to 15.48 ringgit.
– Jakarta closed up 0.22 percent, or 8.73 points, at 4,000.84.
Telkom rose 1.1 percent to 8,950 rupiah, gas distributor Gas Negara jumped 1.3 percent to 3,825 rupiah, and Bank Permata increased 2.88 percent to 1,430 rupiah.
– Bangkok added 0.08 percent, or 0.98 points, to 1,188.62.
Banpu dropped 2.27 percent to 430 baht, while PTT lost 0.93 percent to 318 baht.
– Mumbai fell 0.43 percent, or 72.03 points, to 16,846.05.
Jindal Steel fell 4.33 percent to 396.75 rupees while its larger rival Tata Steel fell 2.41 percent to 387.45 rupees.
Shayne Heffernan Ph.D.
Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
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