ASEAN KEY DESTINATIONS
Asean Stock Watch-May 24
Stocks dropped solidly on Monday with European debt fears and easing Chinese growth giving investors jitters.
The Dow Jones Industrial Average of blue-chip stocks closed down 130.78 points (1.05 percent) at 12,381.26. The broader S&P 500-stock index tumbled 15.90 points (1.19 percent) to 1,317.37, while the tech-heavy Nasdaq Composite fell 44.42 points (1.58 percent) to 2,758.90.
Stocks sank on opening and recovered only somewhat by the end of the session, with all but one of the 30 Dow components ending in the red. S&P's downgrade of Italian sovereign debt fed fears of a spreading euro zone crisis, while slowing Chinese manufacturing figures were a new sign of a slowdown in the world's number-two economy.
'Centre stage belonged to global uneasiness surrounding the euro-area debt crisis, after Standard & Poor's downgraded its outlook for Italy, Fitch lowered its outlook on Belgium, debt restructuring in Greece remained uncertain, and Spain's ruling party was trounced in regional elections over the weekend,' said analysts at Charles Schwab.
Caterpillar lost 2.5 percent and Boeing dropped 1.6 percent; both depend importantly on sales in China. Among tech stocks, China's Internet giant Baidu lost 3.9 per cent.
Apple closed down 0.25 percent at US$334.37, overcoming earlier losses that grew out of iPad production concerns after a deadly explosion at the Foxconn factory in China which makes iPads.
Investors fled emerging market assets amid the worsening debt crisis in Europe and a potential slowdown in the US economy, sending the Jakarta Composite Index lower on Monday.
The JCI fell 94.50 points, or 2.44 percent, to close at 3,778.45, the index’s biggest drop since January 10. The benchmark index had a record close on Friday, on investor appetite for emerging-market assets.
Standard & Poor’s cut its ratings outlook for Italy’s debt from stable to negative on Saturday, citing its poor growth prospects and concerns about its ability to reduce public borrowing, while Fitch Ratings slashed Greece’s rating three levels to B+. Those cuts, rising inflation rates and more expensive commodities all weighed on investor sentiment.
There was still positive news in Indonesia, though, such as easing inflation. Statements from Finance Minister Agus Martowardojo that the state would not reduce fuel subsidies should also calm fears about rising prices.
“Investors are still worried about what is happening in Europe,” said Mastono Ali, an analyst at CIMB Securities. “Among the domestic factors, the macroeconomic situation is good as inflation has eased. The government is unlikely to hike the price of Premium as it was highlighted in a meeting with analysts.”
About 8.7 billion shares worth Rp 5.6 trillion ($655 million) changed hands on Monday. Decliners beat gainers 241 to 28. Foreign investors were net sellers, dropping Rp 673.19 billion worth of shares after buying Rp 89 billion on Friday.
Nearly every sector was hit by Monday’s fall. Astra International, Indonesia’s top auto retailer, fell 4.5 percent to close at Rp 59,200 while Astra Agro Lestari, a plantation subsidiary of Astra International, lost 3.5 percent to Rp 23,150. Bank Mandiri, Indonesia’s biggest lender by assets, fell 2 percent to Rp 7,100.
The pain spread throughout the JCI’s peers in Asia. Indexes in South Korea, China and Hong Kong all lost more than 2 percent, while the Nikkei lost 1.5 percent.
The rupiah weakened 0.5 percent to trade at 8,587 to the US dollar as the JCI closed on Monday. It has gained 4.6 percent this year, second-best among Asia’s 10 most-traded currencies.
The FTSE Bursa Malaysia KLCI (FBM KLCI) futures contract on Bursa Malaysia Derivatives was traded higher despite the weaker underlying cash market.
At 9.21am, May 2011 was 3.5 points better at 1,522.0, June 2011 added 5.0 points to 1,522.0 while Sept 2011 and Dec 2011 were both up 2.5 points each to 1,519.0 and 1,518.5, respectively.
Turnover amounted to 2,351 lots while open interest stood at 22,030 contracts.
The benchmark FBM KLCI was 2.61 points easier at 1,526.37, at 9.20am, after opening 2.3 points higher at 1,531.28.
SINGAPORE shares opened lower on Tuesday, with the benchmark Straits Times Index at 3,108.25 in early trade, down 0.07 per cent, or 2.23 points.
Around 139.5 million shares exchanged hands.
Gainers beat losers 111 to 69
Bad news from Europe sent red ink washing through the markets on Monday and left Singapore shares at their lowest level in three weeks.
The bruising data sent the benchmark Straits Times Index diving 58.06 points, or 1.83 per cent, to 3,110.48, the sharpest fall since March 15 when Japan's nuclear crisis wiped more than 3 per cent off local shares.
However, analysts are unfazed by Monday's rout, noting that there are many reasons for investors to pull out of the market and stay out.
Todd Martin, Asia equity strategist at Societe Generale, said: “I would say the markets are acting quite sane.”
The slew of bad news began on Friday, when Fitch Ratings cut Greece's debt rating by three notches.
This was followed on Saturday by Standard & Poor's slashing its outlook for Italy from 'stable' to 'negative'.
Thai stocks fell by 1.73 percent yesterday as part of an Asian sell-off driven by Greece's rating downgrade and concerns over a global economic slowdown.
The Stock Exchange of Thailand index closed at 1,053.97, down 18.97, in moderate trade worth 27.76 billion baht. Leading the sell-off were energy stocks, down 2.28 percent, banks, off 1.63 percent, and petrochemicals, down 3.67 percent.
Other markets in the region fared worse, with Seoul down 2.64 percent, Hong Kong dropping 2.11 percent and Shanghai falling by 2.93 percent.
The sell-off came after ratings agency Fitch cut Greece's rating by three notches to B+ due to the country's fiscal woes. The action led to fresh fears over Europe's public finances and sent the euro down against the dollar.
The SET index has lost more than 50 points since reaching its high for the year of 1,107 points on April 20. The fall is due to worries about Europe and concerns over the sustainability of the global economic recovery amid rising energy and commodities prices and the planned tightening of monetary policy by central banks in coming months.
But analysts believe prospects for the Thai market remain strong. Kongkiat Opaswongkarn, chief executive of Asia Plus Securities, said stocks should rise 10-15 percent from current levels. Earnings growth for listed companies is forecast at 18% this year.
The global economic crisis has had only a minor impact on local firms, Dr Kongkiat said. Corporate balance sheets remain strong, with debt-to-equity levels of just one times and earnings growth trends still favourable.
According to the SET, the index hit a low of 384.15 in late 2008 at the height of the global crisis, while it reached its peak during the current cycle last month at 1,109.92 - a gain of more than 188 percent.
Dr. Kongkiat said the SET was one of the most active markets in the region in the first quarter, thanks to high profit growth, particularly for the banking sector. Recommended sectors going forward include agriculture, food and petrochemicals.
"The most attractive factor for investing in Thai stocks is the prospect for profit growth," he said at an investment conference organised by the Wharton School of the University of Pennsylvania.
"Concerns include ongoing worries about the global economy. I think domestic politics only has a minor impact. Thai political instability is something that is quite normal and priced in, so political change isn't really a major factor [for investors]."
Listed companies posted record first-quarter net profits of 205.29 billion baht, a 29.74% increase from the same period last year. Revenues for the first quarter were 2.12 trillion baht, up 18.22 percent.
Leading all companies in terms of profitability was PTT, followed by Siam Commercial Bank, Indorama, PTT Exploration and Production and Siam Cement.
Of the companies reporting first-quarter results, 393 or 85.43 percent reported net profits for the period, the SET announced yesterday.
Dr. Kongkiat said the SET should expand its products to instruments such as oil exchange-traded funds to give companies and investors a new investment option and a tool to hedge risk.
The VN-Index plunged by 3.5 percent yesterday to close at 417.82 points, a spine-chilling slide of 15 points and the lowest level of the Index in the past two years, raising alarm bells about ongoing sluggish trades on the HCM City Stock Exchange.
Trang An Securities Co analyst Ngo Minh Duc pointed the finger at interest rates, with rates as high as 22 percent per year for loans to business in nonmanufacturing sectors.
"As interest rates rise, investors begin to sell off nonmanufacturing assets," Duc said. Losers outnumbered gainers during yesterday's session by 206-34, with 111 codes dropping to their floor prices.
The value of trades saw a modest, 7 percent uptick, however, reaching VND629 billion (US$30 million) on a volume of 32 million shares – a 20-percent increase in volume over last Friday's session.
The 10 leading shares by capitalisation mostly weighed on the Index, with six codes bottoming out, including insurer Bao Viet Holdings (BVH), Vietinbank (CTG), software giant FPT (FPT), finance group Hoang Anh Gia Lai (HAG), food producer Masan Group (MSN) and PetroVietnam Finance (PVF).
Phu My Fertilisers (DPM) and real estate developer Vincom (VIC) both fell by around 2 percent, while only Eximbank (EIB) and Sacombank (STB) closed flat.
On the Hanoi Stock Exchange, the HNX-Index also plummeted, shedding 3.2 percent of its value to close at just 74.5 points. The value of trades rose by 13 percent over Friday, however, to VND355 billion ($17 million), with 31 million shares changing hands.
"I do not see any signs of a new rally. The market is waiting on a shift in the State's tight monetary policies," Duc said.
"The decline in share prices could last all year," he predicted. "Only when the real estate bubble bursts could the stock market possibly come back healthy."
Foreign investors continued as net sellers in HCM City and net buyers in Hanoi yesterday. On the southern bourse, they sold 3.7 million shares worth VND135 billion ($6.6 million), while they bought a net of just VND2.8 billion ($136,600) worth of shares in Hanoi.
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