ASEAN KEY DESTINATIONS
ASEAN Markets Flat to Lower Today
By Shayne Heffernan Ph.D.Not a day to be buying in Asia today, Labor Department data tomorrow may show the pace of hiring accelerated in June while remaining at less than half the average for the first quarter of the year. Data today showed that fewer Americans filed first-time claims for unemployment insurance payments and companies added more workers than forecast, easing concern the labor market is faltering further.
European Central Bank President Mario Draghi said today’s cut in interest rates to a record low may have only a limited impact on the euro-area economy as it slides toward recession. China also lowered rates today in a bid to spur economic growth.
Concern about a global economic slowdown put the S&P 500 last month on the brink of a so-called correction, or a 10 percent decline from a recent peak. The index slumped 3.3 percent in the second-quarter, the biggest retreat since the period ending in September.
Consumer discretionary, technology and raw material companies had the biggest gains in the S&P 500 among 10 groups. Apple climbed 2.3 percent to $613.27, the highest since April. A measure of financial (S5FINL) shares in the benchmark gauge slumped 0.9 percent. JPMorgan lost 3.5 percent to $34.63. Bank of America slumped 2.5 percent to $7.86.
Prime Minister Yingluck Shinawatra yesterday chaired a meeting with nine economic ministers to review the crisis.
Participants agreed on a continued need keep a close watch on the situation.
The meeting heard the Thai economy was sound in May, as evidenced by positive indicators such as lower unemployment, stable forex and policy interest rates and declining oil prices.
The National Economic and Social Development Board (NESDB) said the Labour and Education ministries have been tasked with finding ways to balance the pool of unemployed graduates with industry needs.
Deputy Prime Minister Kittiratt Na-Ranong said unemployment remains below 1%, and it is normal to see a sharp rise in unemployed new graduates each May and June.
The Energy Ministry will continue to monitor energy prices, especially in light of the new EU sanctions on Iran that took effect on Sunday, he said.
The NESDB also reported the oil price will likely remain at the current level in both the short and the long term thanks to a surplus in the US.
As well, the euro-zone crisis has also seen a drop in oil price speculation.
In the first half, oil averaged US$108.18 a barrel, up by 2.8% year-on-year.
On Tuesday, West Texas and Dubai crude cost $87.66 and $95.08 a barrel, respectively.
Singapore's state-linked investment firm Temasek Holdings said Thursday its net profit in the last fiscal year fell 15.4 percent to Sg$11 billion ($8.7 billion) amid a slower global economy.
However, Temasek said the net value of its worldwide portfolio went up 2.6 percent to Sg$198 billion in the year ended March 31 from the previous financial year.
The net profit decline was due largely to a fall in contributions from companies in which Temasek holds stakes, the firm's annual report showed.
Contributions from associated companies, partnerships and joint ventures amounted to Sg$10.17 billion, down from Sg$13.44 billion in the previous financial period.
Singapore Airlines, in which Temasek has a 56 percent stake, saw its net profit for the year to March slump by 69 percent due to high oil prices and global economic uncertainty.
"It has been a difficult time for investors globally and you're likely to see that replicated across many portfolios globally," said Jason Hughes, head of premium client management with IG Markets Singapore.
Posting an $11 billion net profit "isn't actually as bad as some others would have performed over the same time period", he told AFP, describing it as a "healthy return".
Temasek said it invested a total of Sg$22 billion during the year and divested Sg$15 billion.
By the end of March, Temasek had 72 percent of its investments in Asia and the Singapore home market, down from 77 percent as it increased its stakes in Australia and New Zealand as well as North America and Europe.
Its investments in Australia and New Zealand accounted for 14 percent, up from 12 percent.
North America and Europe investments climbed to 11 percent from 8.0 percent.
Temasek pared back its investments in financial services to 31 percent from 36 percent -- a move analysts saw as a result of risks associated with the eurozone debt crisis.
It also cut investments in transport and industrials to 21 percent from 23 percent.
The company however raised its investments in telecommunications, media and technology, life sciences, consumer and real estate as well as energy and resources.
It continued to invest in the resources sector after the March financial year, buying stakes in the US firm Cheniere Energy, China's Kunlun Energy and Ivanhoe Mines, which has assets in Asia and Australia.
After March, it raised its stake in China's ICBC bank, following a similar move in China Construction Bank in the previous financial year.
"Urbanisation and middle income population growth continue to underpin the long term transformation of Asia and other growth economies," said Temasek chief executive Ho Ching.
Temasek chairman S. Dhanabalan said Asia's long-term growth remained healthy, and while the US and Europe "present significant risks" they also offer potential opportunities.
"We continue to stay in net cash and have the full flexibility to respond to opportunities whey they arise or stay liquid depending on the risks ahead," he said in a statement.
Temasek said the ongoing debt crisis in the eurozone remained a huge risk for the rest of the world.
"We see contingent risk from Europe as potentially significant," Chia Song Hwee, Temasek's head of strategy, said in a press conference.
"Their weak economic conditions are compounded by the fiscal austerity and structural issues of a single currency bloc of countries with varying competitiveness."
Temasek however said a hard landing for the Chinese economy was unlikely.
"They have ample policy room and political will to avoid a sharp slowdown in a leadership transition year," Chia said.
Three Indonesian auto makers have reported strong vehicle sales in June, showing robust demand by consumers and allaying some fears that a new down-payment rule would hurt the industry.
Honda Prospect Motor, the distributor of Honda Motor in Indonesia; Suzuki Indomobil Sales, the distributor of Suzuki Motor; and Nissan Motor Indonesia announced their June sales numbers in separate statements on Wednesday.
Honda Prospect Motor said its car sales reached 7,410 units in June, marking the auto maker’s best month this year. Car sales grew 10 percent in May and were more than three times higher than the June 2011 sales figure of 2,165 units.
Suzuki Indomobil Sales reported selling 12,121 cars in June, a rise of 25 percent from its May sales figures and 61 percent higher than the same month last year.
Nissan Motor Indonesia said it sold 5,925 cars in June, its second-best monthly sales total so far this year. Those high sales numbers pushed the company to a record six-month sales tally.
Car and cement sales are seen as leading economic indicators for Indonesia.
Analysts said robust demand by Indonesians had been fueled by an accelerating economy, allowing consumers to shrug off a new banking regulation designed to tamp down on high-risk lending.
“Since the beginning, I believed that the down-payment regulation would not have much impact on car sales, but more on motorcycle sales,” said Adrian Joezer, an analyst with Mandiri Sekuritas in Jakarta. “Our people’s purchasing power is relatively strong and stable, so a down payment of 30 percent shouldn’t be a problem if they need to buy a car.”
The new banking rule, which the government put into effect on June 15, requires consumers to make a minimum 30 percent down payment for new car purchases. The ruling was intended to improve prudent lending practices at Indonesian banks.
The Association of Indonesian Automotive Industries (Gaikindo) has reduced its sales target for the year to 850,000 cars from an initial forecast of 1 million on concern about the regulation.
Despite the rosy sales figures, the three firms were dwarfed by Astra International, Indonesia’s leading automaker, which reported selling 51,002 units in May alone, claiming 53 percent of all car sales in the country during that month.
Honda said on Wednesday that its Jazz hatchback was the firm’s biggest seller in June, accounting for 32 percent of all sales. Honda sold 10,038 units of the hatchback in Indonesia between January and June.
“The supply chain of Honda has returned to normal after Thailand’s floods,” Adrian said, adding that the stabilized production and supply chain had enabled Honda to meet strong demand.
The newly launched Honda CR-V also helped push up sales, the company said. “The launching of new models from Honda is refreshing the automotive market in Indonesia and helped increase Honda’s sales,” said Jonfis Fandy, marketing director at Honda Prospect Motor.
Suzuki Indomobil Sales said that its new Ertiga model was key in pushing the auto maker’s sales figures past the 10,000 mark in June. The Ertiga was the company’s biggest seller in Indonesia last month, with 4,402 units sold.
Gaikindo is scheduled to release official national car sales numbers by the second week of July.
The local stock index closed at a new record high on Thursday as news about Standard & Poor’s sovereign credit rating upgrade on the Philippines and benign local inflation cushioned against a regional downtrend.
The main-share Philippine Stock Exchange index gained 15.26 points or 0.29 percent to close at a 5,369.98, a new all-time high closing.
Value turnover amounted to about P5.2 billion. There were 91 advancers that beat 59 decliners while 50 stocks were unchanged.
Most counters were modestly higher. Only the holding firm counter was slightly in the red.
“Share prices went up due to the reports that we got an upgrade from S&P,” said Manny Cruz, chief strategist at Asiasec Equities. “The biggest gainers were casino-lined stocks.”
“For the near term, we’re expecting the market to have a heavy resistance at the recent high (all-time intra-day high) of 5,403. We’re looking for support at 5,327 and 5,272,” Cruz said.
Index stocks SM, Megaworld, Metrobank, PLDT, AC, Metro Pacific, AGI, SM Prime and AP led the PSEi higher. However, the best performer among the 20 most actively traded stocks were LR and Belle, which were respectively up by 6.83 percent and 3.85 percent to P9.23 and P5.40.
The market was anticipating the SM group, which has a majority interest in Belle, to announce a deal with Macau’s Melco Crown Entertainment.
Likewise among the gainers were Bloomberry (+2.41 percent), Security Bank (+0.77 percent), Puregold (+0.35 percent) and Dizon (+2.63 percent).
Yesterday in Asia
Tokyo closed 0.27 percent, or 24.37 points, lower at 9,079.80, and Seoul was flat, rising 0.06 percent, or 1.04 points, to close at 1,875.49.
Hong Kong closed 0.50 percent, or 99.38 points, higher at 19,809.13, but Shanghai slipped 1.17 percent, or 25.97 points, to 2,201.35 amid continued concerns about China’s slowing economic growth.
Sydney was flat, giving up 0.07 percent, or 3.0 points, to close at 4,169.2.
– Taipei fell 0.47 percent, or 34.81 points, to 7,387.78.
Smartphone maker HTC shed 4.9 percent to Tw$339.5 while Taiwan Semiconductor Manufacturing Co. was 0.25 percent lower at Tw$81.0.
– Wellington edged up 0.03 percent, or 1.08 points, to 3,484.20.
Air New Zealand rose 0.55 percent to NZ$0.915, Telecom Corp. fell 0.2 percent to NZ$2.49 and Fletcher Building was off 0.64 percent at NZ$6.22.
– Manila closed up 0.29 percent, or 15.26 points, at 5,369.98.
SM Investments Corp. gained 0.50 percent to 742 pesos while Megaworld Corp. rose 0.01 percent to 2.29 pesos.
– Singapore closed 0.77 percent, or 22.70 points, higher at 2,971.47.
United Overseas Bank advanced 1.20 percent to Sg$19.38 and Fraser and Neave gained 1.96 percent to Sg$7.30.
– Kuala Lumpur rose 0.04 percent, or 0.68 points, to 1,614.43.
Telecommunications company Axiata Group gained 0.36 percent to 5.55 ringgit, while budget carrier AirAsia added 1.35 percent to 3.75.
– Jakarta fell 0.15 percent, or 6.08 points, to 4,069.84.
Aneka Tambang slipped 1.41 percent to 1,400 rupiah, Astra Agro Lestari slid 0.45 percent to 22,200 rupiah and Indocement slid 0.53 percent to 18,800 rupiah.
– Bangkok rose 0.64 percent, or 7.65 points, to 1,201.80.
Banpu was unchanged at 468 baht, while PTT gained 0.60 percent to 338 baht.
– Mumbai added 0.43 percent, or 75.86 points, to 17,538.67, a three month closing high.
India’s largest private bank ICICI Bank rose 2.04 percent to 920.9 rupees while leading vehicle maker Tata Motors advanced 1.61 percent to 240.
Shayne Heffernan Ph.D.
Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
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