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||Asean Affairs 31 July 2012
ASEAN Market Preview
By Shayne Heffernan Ph.D.
Yesterday gains followed positive leads from Wall Street and Europe on Friday, while comments from European Central Bank chief Mario Draghi Thursday on saving the euro were reinforced by Germany, France and Italy over the weekend.
Over night in the USA Stocks finished mostly flat on Monday as investors paused following the best two-day run this year, with central bank meetings and a full load of U.S. economic data looming.
Traders have bet that the Federal Reserve and the European Central Bank will suggest further action to stimulate their economies is on the way when each meets later this week.
The sectors least sensitive to economic growth - telecoms, consumer staples and utilities - posted healthy gains, suggesting a cautious move to defensive plays.
Blue chips like Wal-Mart Stores (WMT.N) and AT&T (T.N) hit new 52-week highs. Wal-Mart rose 0.6 percent to end at $74.98 after hitting $75.24 earlier. AT&T added 0.8 percent to close at $37.43 after hitting $37.69.
Last week, a strong statement from ECB President Mario Draghi drove the Dow above 13,000 for the first time since early May, and gave the S&P 500 its biggest two-day rally since December.
Economist Shayne Heffernan has warned of a possible large fall late this week as Central Banks fail to live up to investor expectations.
Singapore’s central bank, the Monetary Authority of Singapore (MAS), has recently released its annual report, the “MAS Annual Report 2011/12,” emphasizing its commitment to tackling inflation and maintaining high levels of investor confidence whilst closely monitoring the effects of the Eurozone on Singapore’s economy.
In its economic outlook, the MAS said that the republic’s core inflation is likely to moderate to close to historical average of 1.7% by the year-end. Headline inflation, on the other hand, is said to remain elevated due to high imputed rentals on owner-occupied homes and private road transport costs.
Nevertheless, MAS noted that the city-state remains on track to grow at 1 – 3% in 2012 provided that there is no recession in US, no significant escalation of the Eurozone crisis, and no “hard landing” in China.
Analysis by Rikvin shows that the projected growth of 1 – 3% this year will moderate and bring Singapore’s economic growth to a sustainable level. “This is necessary to relieve cost pressures as the country has witnessed an average growth of 5.8% over the last half-decade, well over its underlying potential. That’s why there are low levels of unemployment and high capacity utilization,” explained Mr. Satish Bakhda, Head of Operations at Rikvin, a Singapore company registration specialist.
There are already a few signs of inflation easing out. Electricity tariffs have fallen and domestic oil-related prices are stable now. Also, the 6% increase in domestic wages last year, which was passed on to a variety of services costs, is expected to be more restrained going forward.
The MAS also assured Singaporeans about the efficacy of the city-state’s exchange rate-centered monetary policy framework, which has come into question due to the persistence headline inflation. “As communicated by Mr. Ravi Menon, Managing Director of MAS, the exchange rate policy stance has had a restraining effect on inflation through two channels by filtering import prices, as well as by moderating economic activity in the export-oriented sectors. This policy remains our broadest and most effective anti-inflation tool as Singapore makes a transition towards productivity-driven growth,” added Mr. Bakhda.
MAS will be releasing the next monetary policy statement as scheduled in October this year.
Industrial output in Thailand fell sharply in June and the central bank said monetary policy would probably remain easy to help factories continue their recovery from last year's floods.
Output slid 9.6 percent from a year earlier, much worse than the 2.5 percent fall forecast in a Reuters poll. It grew a revised 6.0 percent in May, the first annual rise since the floods devastated industry last October..
On a monthly basis, output dropped 3.5 percent in June after a revised 14.3 percent increase in May, the Industry Ministry said.
The fall in output in June was largely due to a high comparative base a year earlier, after a rebound in production following supply chain disruptions caused by the earthquake and tsunami in Japan in March 2011.
The FBM KLCI index gained 7.41 points or 0.46% on Monday. The Finance Index increased 0.41% to 14714.56 points, the Properties Index up 0.29% to 1048.05 points and the Plantation Index rose 0.33% to 8745.82 points. The market traded within a range of 9.09 points between an intra-day high of 1632.35 and a low of 1623.26 during the session.
Actively traded stocks include PATIMAS, BIOSIS-WA, BIOSIS, HUBLINE, THHEAVY, IHH, GPRO, LUSTER, COMPUGT and THHEAVY-WA. Trading volume increased to 1229.09 mil shares worth RM1284.98 mil as compared to Friday’s 978.76 mil shares worth RM1710.21 mil.
Leading Movers were PETGAS (+130 sen to RM19.30), AXIATA (+5 sen to RM5.85), HLBANK (+34 sen to RM13.80), IOICORP (+4 sen to RM5.34) and CIMB (+3 sen to RM7.84). Lagging Movers were BAT (-158 sen to RM60.36), MAXIS (-8 sen to RM6.32), TENAGA (-3 sen to RM6.79), YTL (-1 sen to RM1.87) and UMW (-4 sen to RM9.46). Market breadth was positive with 426 gainers as compared to 305 losers.
Expressindo Transindo Utama, the operator of Express Taxi, is planning an overseas roadshow in the coming months, as part of its effort to draw investor interest for its shares in an initial public offering that is planned at the end of this year.
Stephen Sulistyo, managing director for business development and investment at Rajawali Corporation, which owns a controlling stake in Expressindo, said the roadshow’s planned destinations included Singapore, Hong Kong and Europe.
Hoesen, a director at the Indonesia Stock Exchange (IDX), said last Thursday that the bourse hoped Expressindo would sell more than 20 percent of its shares to the public. The IPO would mark the first time an Indonesian cab operator had listing on the IDX.
Details such as share price and the size of the sale haven’t been announced by Expressindo or Rajawali. Media reports have said that state brokerage Mandiri Sekuritas and JPMorgan Indonesia have been appointed as the underwriters for the IPO.
Sulistyo said Expressindo planned to use the proceeds to help finance its fleet expansion. The group aims to boost its taxi operation to 8,000 units this year. The company currently owns 7,000 taxis.
“We aim to reach our target of owning a total of 15,000 cabs,” he said.
Expressindo was established in 1989 and today says that it controls a 19 percent share of the taxi market across the country. It also provides car rental and fleet management services.
Its biggest rival is the Blue Bird Group, which started with 25 cabs in 1972 and now has a fleet of around 21,000 and is the biggest taxi company in the country.
Expressindo, which operates taxis in Greater Jakarta, also has transportation services in other cities, including Medan, Surabaya, Semarang as well as on Bali and Lombok islands.
Its Tiara Express offers premium taxi services to customers in the Jakarta area.
Privately held Rajawali, created in 1984, is controlled by billionaire Peter Sondakh. The Jakarta-based company has interests in hotels, cement, consumer goods, retail, transportation and department stores across the country.
The peso slightly fell on the first trading day of the week following the release of a report over the weekend that the US economy grew by a slower pace in the second quarter.
The local currency closed at 41.93 against the US dollar on Monday, down by 3 centavos from Friday’s finish of 41.90:$1.
Intraday high hit 41.81:$1, while intraday low settled at 41.96:$1. Volume of trade amounted to $985.10 million from $837.65 million previously.
The depreciation of the peso came after the US government reported that the world’s biggest economy grew by only 1.5 percent in the first quarter from a year ago. This was slower than the 2-percent growth registered in the first quarter.
Traders said the decelerated growth of the US economy was deemed by some investors as an indication that the global economy would remain relatively week, at least over the short term. As such, emerging markets like the Philippines are seen to also partly suffer in the form of anemic export revenues.
Slowdown in the US economy is also seen to drag growth of emerging markets through other channels, such as investments and remittances.
Tokyo closed up 0.80 percent, or 68.80 points, at 8,635.44, Sydney gained 0.85 percent, or 35.9 points, to 4,245.7 and Seoul also climbed 0.80 percent, adding 14.63 points to 1,843.79.
Hong Kong rose 1.61 percent, or 310.44 points, to 19,585.40 but Shanghai was down 0.89 percent, or 18.85 points, at 2,109.91.
– Taipei rose 0.48 percent, or 34.39 points, to 7,158.88.
Formosa Plastics added 0.62 percent to Tw$81.4 while Taiwan Semiconductor Manufacturing Co. was 0.38 percent lower at Tw$79.0.
– Manila closed 1.12 percent higher, gaining 58.35 points to 5,277.90.
Metropolitan Bank and Trust added 1.95 percent to 96.80 pesos while Philippine Long Distance Telephone rose 0.22 percent to 2,704 pesos.
– Wellington added 0.50 percent, or 17.60 points, to 3,518.89.
Fletcher Building was up 1.01 percent at NZ$6.02, Telecom rose 2.55 percent to NZ$2.61 and The Warehouse was steady at NZ$2.58.
– Jakarta was up 0.37 percent, or 14.91 points, to 4,099.12.
Car maker Astra rose 0.75 percent to 6,700 rupiah while Indocement gained 3.3 percent to 20,150 rupiah.
– Bangkok was up 1.30 percent, or 15.31 points, to 1,193.32.
Banpu gained 2.01 percent to 406 baht, while PTT added 1.55 percent to 327 baht.
– Kuala Lumpur closed up 0.46 percent, or 7.41 points, at 1,632.35.
Plantation group Sime Darby gained 0.10 percent to 9.83 ringgit, while Telekom Malaysia added 1.06 percent to 5.72 ringgit.
– Singapore closed up 1.14 percent, or 34.31 points, at 3,032.80.
DBS Bank was up 0.61 percent to Sg$14.74 and Singapore Telecom was 2.01 percent higher at Sg$3.55.
– Mumbai rose 1.81 percent, or 304.49 points, to 17,143.68.
State Bank of India was up 4.63 percent at 2,031.05 rupees while Tata Motors rose 4.16 percent to 221.65.
Shayne Heffernan Ph.D.
Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
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