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ASEAN STOCK WATCH Asean Affairs   10 May 2012

Asean Markets to Lead Global Bounce

By Shayne Heffernan Ph.D.

Concern about Europe’s debt crisis helped drive the S&P 500 down 2.8 percent in May. (SPX) Eight of 10 groups in the benchmark gauge retreated today. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 4.5 percent to 19.91, the highest level on a closing basis since April 11.

Stocks had tumbled more than 1 percent earlier in the session, with the S&P 500 hitting a two-month low over concerns about political uncertainty in Greece and Spain's weak banks.   

But the indexes recovered a lot of lost ground after news that the board of the European Financial Stability Facility agreed to make a payment of 5.2 billion euros in emergency aid to Greece, overcoming opposition from some euro-zone member states, according to a senior euro-zone official.

Equities fell as Alexis Tsipras, the leader of Greece’s Syriza party, said he failed to form a government and will hand back the mandate to President Karolos Papoulias tomorrow. The European Financial Stability Facility’s Board of Directors confirmed the release of 5.2 billion euros ($6.7 billion) from a first installment of 39.4 billion euros by the end of June.


United Overseas Bank Ltd. (UOB), Southeast Asia’s third-largest lender by total assets, posted a 12 percent gain in first-quarter profit, beating analyst estimates as all its main businesses grew.

Net income advanced to S$688 million ($550 million) from S$612 million a year earlier, the Singapore-based bank said in a statement to the stock exchange yesterday. That exceeded the S$626 million average of seven analyst estimates compiled by Bloomberg. Income from lending, fees and commissions, and trading and investment all rose.

Chief Executive Officer Wee Ee Cheong is seeking to boost profit after declines in the previous two quarters, when the value of investments slumped, trading income fell and the bank set aside more funds for loan defaults. Lending in Singapore, where UOB got 65 percent of pretax profit in 2011, grew by an average 27 percent in the first three months of this year.

“Where the results surprised is on income from trading and investment-related gains, always a difficult area to forecast,” said Matthew Smith, a senior analyst at Macquarie Capital Securities Singapore Pte. “Also, loan loss provisions were lower than expected.”

UOB’s net fees and commissions advanced 9.5 percent to S$362 million as earnings from wealth-management and corporate finance activities increased. Other non-interest income climbed 22 percent to S$268 million, driven by dividends, trading and gains from the sale of investments.


SIA, the world's second-largest carrier with a market value of USD$10 billion, warned that passenger yields would remain weak.

"Competition amongst airlines is expected to place downward pressure on passenger yields, especially in Europe and the United States where demand continues to be impacted by the anaemic economic outlook," it said in a statement on Wednesday.

SIA reported a net loss of SGD$38.2 million in January-March versus a net profit of SGD$171 million a year ago.

SIA's CEO Goh, who took charge in January 2011, has been forging alliances with other carriers around the world to help bring in more traffic for the carrier, particularly between Australia and Europe.

However, global airline passenger growth has slowed after a strong rebound in 2010 as concerns about the European sovereign debt problem kicked in, while jet fuel prices surged sharply, squeezing airlines' margins.

This year, SIA asked its pilots to volunteer for a no-pay-leave of up to two years to cut costs and reduce its cargo capacity by 20 percent due to persistent weakness in demand.

Hong Kong

Global clothing retailer Esprit Holdings (0330) is making headway in arresting a decline in revenue even as it continued to perform poorly in Europe.

Also, sales in the wholesale sector remained disappointing.

Between January to March, revenue fell by 7.8 percent year on year compared with a 10 percent fall in the second half of 2011.

For the nine months to March, revenue fell 7.2 percent to HK$24 billion from the corresponding period a year ago.

Retail sales accounted for 57.9 percent of total revenue of the group, up from 55.1 percent a year ago.

The wholesale sector, meanwhile, accounted for 41.3 percent of revenue during the same period, down from 44.2 percent a year back.

London-based insurer Prudential (2378) has reported a better-than-expected 8percent increase in new business profit during the first quarter, supported by a strong contribution from Asia.

Prudential earned 536 million (HK$6.70 billion) in the first three months of the year, beating the market estimate of 514 million.

The Asian operation - the 163-year-old insurer's biggest contributor - saw its new business profit rising 22percent to 260 million. But new business profit from the US and Britain dropped 3percent and 5percent respectively.

"Asia has became an increasingly important part of Prudential's business...amid uncertain economic environment in the West," chief executive Tidjane Thiam said yesterday.


The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slumped 40.3 points, or 1.7 percent, to 2,408.59 at the close, the biggest drop since March 28. The CSI 300 Index (SHSZ300) declined 1.9 percent to 2,657.51. The Bloomberg China- US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, lost 1.9 percent in New York.
Yesterday in Asia

Tokyo fell 1.49 percent, or 136.59 points, to 9,045.06 and Seoul dropped 0.85 percent, or 16.72 points, to 1,950.29.

Sydney slipped 0.91 percent, or 39.2 points, to 4,275.1 after the government unveiled a budget Tuesday aiming to reverse its deficit and put it in surplus by next year.

Hong Kong shed 0.75 percent, or 154.11 points, to 20,330.64 and Shanghai closed down 1.65 percent, or 40.29 points, at 2,408.59.

– Singapore closed down 1.06 percent, or 31.07 points, at 2,900.91.

Vehicle distributor Jardine Cycle and Carriage shed 2.74 percent to Sg$45.50 while Oversea-Chinese Banking Corp was down 0.56 percent at Sg$8.82.

– Taipei fell 0.93 percent, or 70.00 points, to 7,475.71.

Hon Hai Precision shed 1.36 percent to end at Tw$87.3 while Taiwan Semiconductor Manufacturing Co was 0.24 percent higher at Tw$84.6.

– Manila closed 0.52 percent lower, giving up 27.27 points to 5,214.79.

Philippine Long Distance Telephone shed 0.63 percent to 2,520 pesos, BDO Unibank slid 2.60 percent to 63.75 pesos and Megaworld rose 2.73 percent to 2.26 pesos.

– Wellington closed 0.21 percent, or 7.41 points, higher at 3,559.47.

Fletcher Building fell 0.64 percent to HK$6.18, Contact Energy was 1.22 percent lower at HK$4.84 and Telecom surged 2.72 percent to HK$2.64.

– Kuala Lumpur ended down 0.36 percent, or 5.70 points, at 1,584.90.

Plantation giant Sime Darby fell 0.10 percent to 9.77 ringgit, while budget carrier AirAsia lost 1.12 percent to 3.54 ringgit. CIMB Group Holdings inched up 0.13 percent to 7.64 ringgit.

– Jakarta fell 1.24 percent, or 52.01 points, to 4,129.06.

Telekomunikasi Indonesia dropped 4.82 percent to 7,900 rupiah, Aneka Tambang lost 1.79 percent to 1,650 rupiah and Astra International was 1.76 percent lower at 69,650 rupiah.

– Bangkok fell 1.93 percent, or 23.79 points, to 1,207.25.

– Mumbai dropped 0.40 percent, or 66.60 points, to 16,479.58.

India’s top property firm DLF fell 4.18 percent to 182.1 rupees while the country’s largest commercial bank State Bank of India fell 3.64 percent to 1,887.6.

Shayne Heffernan Ph.D.  

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


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This year in Thailand-what next?

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