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ASEAN STOCK WATCH Asean Affairs   25 May 2012

Asean Markets to Rally

 By Shayne Heffernan Ph.D.

 Another late rally in the USA is an encouraging sign going forward, and this indicates that Asia will rally over the next few months, now is the time to be buying value stocks in ASEAN.

Overnight in the USA

Though jobless claims have barely budged this month, there are no signs of deterioration in the labor market. The number of people still receiving benefits under regular state programs after an initial week of aid fell 29,000 to 3.26 million in the week ended May 12.

The so-called continuing claims data covered the week used by the household survey to derive the unemployment rate. The jobless rate dropped to 8.1 percent in April from 8.2 percent the prior month, mostly because more people gave up the hunt for work.

While more states are losing eligibility for extended benefits for the long-term unemployed, that is not yet being fully captured in the claims data as the figures are reported with a time lag.

Economists expect that as more people fall off the unemployment benefit rolls, that will artificially push down the jobless rate. Out-of-work people not receiving benefits are not obliged to be actively looking for work, a key criteria to be counted as unemployed.

Myanmar

Myanmar's economy looks set for rapid expansion although concerns over inflation, infrastructure and political stability remain, according to an international report.

The Economist Intelligence Unit (EIU), a leading resource for economic and business research, has predicted in its latest report on Myanmar this week that the national economy will expand by 5.2 percent in 2012-13, while inflation will rise to six percent.

The influential British group also said that imports will rise as foreign firms flood into the country in the wake of easing international trade sanctions. Exports will follow suit as production capacity increases on the back of this extra investment.

"Relatively strong regional demand for Myanmar's largest exports -- natural gas and gems -- will underpin export revenue in 2012," The Irrawaddy newspaper quoted the report as saying.

"Revenue from sales of natural gas is expected to rise sharply in 2013 when new fields come on stream. Revenue from other important exports, such as pulses and timber, with also strengthen in line with greater regional demand."

The EIU predicts that the end to Western sanctions will see trade links expand beyond Asia, leading to export revenues to increase to around 12 percent in 2014-16.

However, there is a note of caution over fears of a backlash from government hardliners after opposition leader Aung San Suu Kyi's National League for Democracy (NLD) party swept the April 1 by-elections, winning 43 of the 45 parliamentary seats it contested.

"The challenge now is how the administration will work with the small but growing democratic opposition in parliament," the report said.

"The government is all too aware that it faces another national election in 2015. The recent by-election results suggest that on a level playing field the USDP (the ruling party) would all but disappear as a political force, leaving the NLD in control of parliament - albeit with 25 percent of seats still set aside for the military."

Although an expected decline in global food prices means that Myanmar's import inflation will remain low this year, a January rise in petrol prices of 30 percent, coupled with a hike in electricity costs of 40 percent in late 2011, will likely keep inflation at around 5.7 percent in 2012.

"Increased investment, which will boost imports, will have a negative impact on the trade account, but the positive effect of higher investment flows on the capital account will outweigh this, resulting in an overall gradual appreciation of the local currency," the EIC said.

Thailand

The World Bank has forecast that the Thai economy will likely grow by 4.5 per cent this year, up from only 0.1 per cent expansion last year, thanks to the country's post-flood rehabilitation, Thai News Agency reported.

Dr. Kirida Bhaopichitr, Thailand-based senior economist of the World Bank, said on Wednesday that the World Bank's updated projection was indicated in its first report on Thailand in 2012, assessing that as much as some 1.5 trillion baht would be spent on the post-flood rehabilitation alone, which would boost the national economic expansion by 1.5 per cent this year, excluding other domestic consumption or spending.

The World Bank also predicted that Thai exports should expand by some 12 per cent this year, as the country's shipments to Europe in the first quarter of this year plunged by 16.3 per cent due to a considerable drop in demand in the huge European market, with Thai exports of computers and electrical appliances having faced the heaviest impact from the ongoing European crisis-- at least until the second half of this year.

Dr. Kirida acknowledged that the Thai economy is to cope with several risk factors this year, especially the persistent debt crisis of the euro zone, pointing out although less than 10 per cent of Thai exports are destined for Europe, the Thai economy is facing indirect impacts from parts of the country's reliance on other importing market which are Europe's direct trading partners, like China.

Moreover, the rehabilitation of flooded industrial estates has been delayed possibly until the end of the second quarter, which has affected Thailand's export-oriented production seen by a drop in the domestic industrial production by 15 per cent in January and 3.4 per cent in February 2012.

The World Bank suggested that the Thai government increase infrastructure development projects but cut its populist policies which are costly and will not significantly benefit the national economy, referring to the rice mortgage scheme which costs the administration as much as 300 billion baht, the reduction in corporate income tax which costs as much as 52 billion baht, the cut in the excise tax on oil which costs 9 billion baht monthly and the 2.8-billion-baht project to buy tablet computers for young students.

It cautioned that such the populist policies will cause a loss in national income worth some 1.5 per cent of the country's gross domestic product or GDP this year and will account for some 3 per cent of expenses in the GDP, and that the Thai government should be prepared financially to cope with a possible renewed world economic recession.

The World Bank, meanwhile, predicted that the economies of developing countries in East Asia and the Pacific will grow by 7.8 on average this year, down from 8.2 per cent last year, caused mainly by a slowdown of the immense Chinese economy, saying, however, that it believes the countries in the region can cope with impacts from the euro zone crisis.


Singapore

DBS is a strong buy this week as the Indonesia Govt looks set to squash the take over of Danamon.

Singapore's Global Logistic Properties (GLP) said on Thursday its fourth-quarter net profit tripled from a year earlier, boosted by fair value gains on its properties in China and Japan.

The company earned $156.5 million for the three months ended in March, up from $49.2 million a year earlier. It recognised a net fair value gain of $55.8 million for the quarter, compared with a net fair value loss of $8.9 million a year earlier.

Net profit excluding revaluation rose 16 percent to $69.4 million on the back of a 23 percent increase in revenue.

GLP said the higher revenue was due mainly to the completion and stabilisation of its development projects in China and contributions from Transfar Logistics Base Co Ltd and Airport City Development Co Ltd, as well as the strengthening of the Japanese yen and Chinese yuan against the U.S. dollar.

GLP said it sees solid demand from various customer segments in China. Demand from local companies in China accounted for an increasing proportion of its business, it said.

Japan's economy has recovered from the earthquake and tsunami in March 2011, GLP said, adding the country's logistics industry has been driven by the third-party logistics market and the e-commerce sector has seen strong growth.

Indonesia

Investments in Indonesia face a downgrade as the Nationalization of key industries spills over to banking.

Indonesia’s central bank is set to limit the maximum stake a single shareholder can take in the country’s banks to below 50 percent, a move that could scupper Singapore-based DBS Group’s $7.3 billion bid for Bank Danamon.

DBS’s acquisition plans were thrown into limbo late last month when the Indonesian central bank said it would not approve the deal until it had published a long-awaited set of rules on bank ownership. Bank Indonesia did not disclose details of the rules at the time.

According to sources with direct knowledge of the plan, Bank Indonesia is expected to reduce the single-shareholder threshold from the current 99 percent to a level below 50 percent. That would likely ruin DBS’s plan to buy the 67.4 percent stake held by Singapore state investor Temasek Holdings in Indonesia’s Danamon, unless it negotiates an exemption.

The central bank is also expected to set out differing ownership rules depending on whether the shareholder is another financial institution, a non-financial institution or a family. Family shareholdings are expected to be given the lowest threshold, but all are expected to be under 50 percent.

Those rules could also force several other large shareholders to sell down their stakes in Indonesian banks, including the Hartono family which holds a 47.6 percent stake in Bank Central Asia.

Philippines

Confidence in the Philippines’ property market, fueled by economic growth, an influx of expatriate workers and rising investment by overseas Filipino workers (OFWs), is intensifying competition between the country’s major real estate players.

On April 17, Property giant Ayala Land announced investment plans worth P90 billion ($2.09 billion) for 67 new projects, in what the firm described as an “unprecedented” expansion into new market segments and new locations.

Major investment conglomerate SM Group revealed the same week that it would soon finalise plans to purchase a controlling stake in property developer Ortigas Holdings. Though neither side has divulged financial details of the deal, local media has speculated it could be worth $1 billion.

While SM Investments indirectly owns the country’s largest shopping mall developer and Metro Manila’s largest residential condominium builder, according to local media, Ortigas’ properties include “some of the country’s best residential, business and commercial developments”.

Such maneuvers and mergers are likely motivated by confidence-building factors, including increasing remittances from overseas workers, rapid growth in the business process outsourcing industry and the government’s low interest rate regime. In mid-April, the Philippines’ central bank decided to keep key policy interest rates at 4%, following two successive rate cuts.

In February, property developer CBRE said that a growing expat population was helping to fuel increased demand for luxury residential condominiums, adding that this factor, along with a growing need for hospitality accommodation, was creating a “mini-boom” in the local market.

Property developer and publicly-listed firm Century Properties Group Inc. (“Century”) reported a 93% increase in total revenue in 2011.

In a recent report, Century said the increase amounted to P4.02 billion from P2.09 billion in the same period in 2010.

From Jan. 1-Oct. 31, 2011, cost and expenses amounted to P2.89 billion as compared to P1.81 billion during the comparable period in 2010. As a result, Century’s net income grew 447% to P781 million over the same period in 2011 as compared to P143 million in 2010, the report said.

Century’s pre-sales data indicated that it pre-sold P18.4 billion for the full year 2011, which equals 129% growth as compared to its P8 billion in pre-sales for the full year 2010. On a unit basis, Century pre-sold 5,367 units for the full year 2011, as compared to 2,325 units for the full year 2010. Century believes it was able to attain this sales growth in large part due to its efforts to sell to Filipinos living overseas, as well as foreign nationals. In 2011, approximately 67% (in terms of value) of Century’s pre-sales came from international markets.

For 2012, Century’s Chief Financial Officer Jose Carlo R. Antonio said that the company planned to have a capital expenditure budget of P7.3 billion to P8.3 billion. Century has four current master planned developments, namely Century City in Makati City, Canyon Ranch in Cavite, Azure Urban Residences in Paranaque City and Acqua Residences in Mandaluyong City. Upon full completion, these four master planned developments are expected to contain 23 condominium buildings with 15,703 condominium and office units, and 955 single detached homes, with a total expected gross floor area of 1,185,024 sq.m. Furthermore, in 2012, Century is planning to launch a 4.4-hectare project along Commonwealth Avenue in Quezon City to offer approximately 2,000 affordable housing units, and is also constructing a lifestyle center that is expected to include a variety of retail offerings to complement its existing developments in Century City.

As of Oct. 31, 2011, Century (including its former affiliate Meridien and main shareholder Century Properties, Inc.) has completed 20 condominium buildings (4,128 units) with a total gross floor area of 548,262 sq.m.  Century’s roster of noteworthy developments include the award-winning Essensa East Forbes (“Essensa”) in Fort Bonifacio, the Philippines’ first Fully-Fitted and Fully-Furnished condominium South of Market (“SOMA”) in Fort Bonifacio, SOHO Central in the Greenfield District of Mandaluyong City, Pacific Place in Ortigas and a collection of French-inspired condominiums in Makati City called Le Triomphe, Le Domaine and Le Metropole.  Additionally, as of Dec. 31, 2011, Century also manages 51 properties including the Asian Development Bank and Makati Medical Center.

In Asia Yesterday

Tokyo was flat, edging up 6.78 points to 8,563.38, and Seoul gained 0.32 percent, or 5.85 points, to 1,814.47, while Sydney slipped 0.28 percent, or 11.2 points, to 4,055.8.

Hong Kong ended 0.64 percent, or 119.79 points, lower at 18,666.40 while Shanghai fell 0.53 percent, or 12.46 points, to 2,350.97.


– Singapore was flat, edging down 0.89 points to 2,779.53.

Oil rig maker Keppel Corp. shed 0.20 percent to Sg$9.99 while real estate developer Capitaland was up 1.24 percent at Sg$2.46.

– Taipei eased 0.32 percent, or 22.86 points, to 7,124.89.

Hon Hai Precision was 1.95 percent lower at Tw$85.3 while Taiwan Semiconductor Manufacturing Co. added 1.90 percent to close at Tw$80.6.

– Manila was down 0.49 percent, or 24.31 points, at 4,904.22.

Philippine Long Distance Telephone fell 1.01 percent to 2,358 pesos and Universal Robina dropped 3.01 percent to 57.95 pesos.

– Wellington slipped 0.40 percent, or 14.01 points, to 3,496.19.

Contact Energy fell 1.03 percent to NZ$4.81, Fletcher Building lost 1.90 percent to NZ$6.18 and Telecom was 0.39 percent higher at NZ$2.59.

– Jakarta was flat, nudging 3.30 points lower to 3,984.87.

Coal company Bumi Resources rose 4.0 percent to 1,840 rupiah, palm oil producer Astra Agro gained 4.6 percent to 19,200 rupiah and heavyweight Telkom lost 3.2 percent to 7,500 rupiah.

– Bangkok closed 1.36 percent, or 15.08 points, higher at 1,125.78.

Banpu gained 1.29 percent to 470 baht, while PTT added 1.62 percent to 313 baht.

– Kuala Lumpur rose 0.55 percent, or 8.54 points, to 1,548.25.

Power utility Tenaga Nasional rose two percent to close at 6.54 ringgit and Malayan Banking gained 0.8 percent to 8.50 ringgit, while AMMB Holdings ended unchanged at 6.17 ringgit.



Shayne Heffernan Ph.D.  

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ASEAN  ANALYSIS

This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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