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ASEAN STOCK WATCH Asean Affairs   31 May 2012

ASEAN Market Outlook

 By Shayne Heffernan Ph.D.

Global equities tumbled, U.S. Treasury 10-year yields slid to a record and the euro weakened to a two-year low. An opinion poll showed most Greeks want to see the terms of a financial rescue revised. Costs to protect Spanish government debt with default swaps climbed to a record. In the U.S., the number of Americans signing contracts to buy previously owned homes fell in April by the most in a year.

Concern about Europe’s debt crisis drove the S&P 500 down 6.1 percent so far in May. Commodity, financial and technology companies have fallen at least 7.2 percent in the period. The gauge is on pace for a second straight monthly decline, following the best first-quarter gain since 1998.

The euro declined 1 percent to $1.2377 at 3:07 p.m. New York time. The single currency fell 1.5 percent to 97.93 yen. It dropped to 97.76 yen, the lowest level since Jan. 18. The yen gained 0.5 percent to 79.08 per dollar after touching 78.87, the strongest since Feb. 17.

The shared currency fell to its weakest since July 2010. It reached $1.1877 in June that year, which was the lowest level in four years, after escalating concern about Greece led to the bloc’s first bailout. Since its inception in 1999, the euro has traded as low as 82.30 U.S. cents, in 2000, and as high as $1.6038 in July 2008.

Emirates from the Gulf will launch a Dubai – Ho Chi Minh City daily service on June 4, making the southern Vietnamese economic hub its 124th international destination.

The non-stop flight, with 27 Business Class and 251 Economy Class seats, will depart Dubai at 9:25 am, arriving at Tan Son Nhat Airport at 7:20 pm.

From that day, travelers from Kenya will be able to fly from Nairobi to the Vietnamese city via the UAE carrier’s Dubai hub. Emirates will begin daily flights to Ho Chi Minh City using an Airbus A330-200 aircraft in a two class configuration, which would change to a Boeing 777-300 ER aircraft late this October.

“Emirates will offer tourists and business travelers from Kenya a convenient and comfortable option to access the fascinating and diverse country of Vietnam. Ho Chi Minh City is one of the most vibrant places in South East Asia and we are convinced that this will prove to be a highly popular route,” Emirates Regional Manager for East Africa Essa Sulaiman Ahmad said when announcing the new route in Nairobi on May 15.

“Vietnam is full of fascinating history and culture, from the UNESCO World Heritage Site of Hoi An to the islands of Halong Bay, to the beaches of Nha Trang and the floating markets of the Mekong River Delta.

Now, thanks to Emirates’ new service, this must-see destination is within even easier reach for Kenyans,” he added.

Vietnamese Deputy Minister for Trade Le Duong Quang, while receiving Kenya’s Ambassador to Vietnam Richard Ekai mid last year, said Vietnam was keen on working closely with Kenya and promised to pursue opportunities for high level trade visits to the African country.

Starting June 4, Emirates SkyCargo of Emirates will also offer belly hold cargo capacity on the passenger flights between Ho Chi Minh City and Dubai.

Etihad Airways, another fast-growing Gulf carrier, has plans to include Vietnam in its new routes in the next 18 months.

Etihad CEO James Hogan said his carrier was looking forward to a “significant” expansion, which would include a new service to Vietnam and flights to South America. Services to Etihad’s first South American destination would begin next year. Additional frequent flights to Asia and Australia are also in the works.

Meanwhile, Air Hong Kong, Jeju Air of South Korea, Saudi Arabian Airlines and Air China Cargo, have registered with the Civil Aviation Administration of Vietnam (CAAV) to open new routes to Vietnam by the end of the year, bringing the number of foreign airlines operating in the country to 48.

Jeju Air said it would operate daily flights between Seoul and Ho Chi Minh City, but has not announced the launch time.

According to CAAV, Silk Air of Singapore is eyeing a route to Hanoi in addition to its current service to Da Nang on Vietnam’s central coast.

In early May, Finland’s Finnair, a member of international airline alliance One World that provides more than 800 flights daily worldwide, announced its official presence in the Vietnamese market by naming Bien Dong Travel as the general sales agent.

Retteri Kostemaa, South East Asia business director of Finnair, said with 11 destinations, Asia now brought 65 percent of the carrier’s total turnover, and Vietnam was one of its most important markets. He said the airline was considering opening a direct route from Helsinki in the near future. From Vietnam, Finnair would team up with other carriers such as Vietnam Airlines, Cathay Pacific and Jetstar to create transit points connecting with Finnair flights to the Finnish capital.

Thailand’s Bangkok Airways has also just appointed Transviet Promotion Co., Ltd. as its general sales agent for Vietnam.

In late March, America’s United Airlines and Japan’s All Nippon Airways announced the expansion of their trans-Pacific joint venture to enable them to cooperate in terms of airfare and network on the Vietnam-US routes starting in April.

Earlier on March 23, Cebu Pacific of the Philippines launched its Manila-Hanoi services, operating two weekly flights.

Also in March, Saudi Airlines Cargo launched its new freighter flights from Ho Chi Minh City, operating twice a week linking Vietnam with the Middle East and Frankfurt in Germany.

In late April, Vietnamese Prime Minister Nguyen Tan Dung approved a new aviation transport pact between Vietnam and the UK signed last December to enhance air transport ties between the two countries as well as investment and cooperation relations.

The agreement highlighted a significant increase in flight frequency between the two countries. British and Vietnamese transport officials agreed to bring the number of weekly services between the two countries up from only three flights a week in their first aviation agreement inked in 1994 and revised in 1999 to 14.

Last year, the International Air Transport Association (IATA) predicted that Vietnam would become the third fastest growing market in the world by 2014 after China and Brazil, with a growth grate of 10 percent compared to the current world average of 5 percent.

CAAV said the Vietnamese market posted a 14 percent growth rate last year. It estimates Vietnam would see 34-36 million air passengers a year by 2015, and 52-59 million passengers by 2019. Meanwhile, cargo transport would witness a rapid increase to 850,000-930,000 tons by 2015 and 1.4-1.6 million tons by 2019.

Myanmar is keen to encourage visitors and investors, Under the new arrangement, visitors from ASEAN, Australia, China, Denmark, France, Germany, India, Italy, Japan, South Korea, North Korea, New Zealand, Norway, Spain, Sweden, Switzerland, Taiwan, the UK and the US, will be able to avail of a 70-day business visa for US$50, a 28-day entry visa for meetings, workshops and events for US$40, or a 24-hour transit visa for US$20.

While only available at Yangon International Airport for now, the VOA service will be introduced at Nay Pyi Taw and Mandalay airports in the near future. A tourist VOA is also in the pipeline.

VOA is currently granted to visitors from any country arriving on Myanmar Airways International flights from Phnom Penh, Siem Reap and Guangzhou.

Bank Negara Indonesia, the nation’s fourth largest by assets, continued to post stellar numbers in the first quarter this year, thanks in part to strong consumer lending in Indonesia’s economy.

Still, the outlook for this year remains modest.

The Jakarta-based lender said that net income rose 23 percent, to Rp 1.54 trillion ($165 million) in the first quarter, from Rp 1.25 trillion in the same period last year, president director Gatot Suwondo said on Monday.

Net interest income, the income from loans after deducting interest on deposits, grew 21 percent to Rp 3.49 trillion in the period, from Rp 2.89 trillion a year earlier. Non-interest income increased 14 percent to Rp 1.69 trillion.

Gatot said that outstanding loans grew 19 percent, to Rp 165 trillion by the end of the first quarter this year. Consumer lending continued to show the biggest growth, “driven mostly by home borrowing,” he said. Mortgage loans grew 50 percent, to Rp 12.95 trillion. Consumer lending in total rose 33 percent.

Darmadi Sutanto, director for consumer lending at BNI, said the central bank’s plan to raise the down payment minimum on houses next month has not affected the lender’s performance.

“At this point, we are still optimistic,” Darmadi said, adding that BNI’s priority to cater to first-home buyers might buffer the risk coming out of this.

“The policy is to reduce speculative buyers,” he added. “Our aim is mostly geared toward the first-home buyer, far from speculators,” he added.

Gatot said the bank maintained its less aggressive target of 18 percent to 20 percent in loan growth this year, and it might lean toward the lower end of the range, he added. The banking industry is targeting 18 percent to 22 percent in loan growth this year.

Meanwhile, he expects operational costs to continue to increase for the rest of the year as BNI goes forward with expansion. In the first quarter the operational costs increased by 33 percent, mostly on human resources.

In the first quarter, it hired 4,896 new employees while adding 330 new outlets.

Shares of BNI fell 0.7 percent, to Rp 3,625 on Monday.

Thailand's PTTEP said it hopes to sign a petroleum-sharing contract with Myanmar's government in June.

Officials at PTT Exploration and Production Plc said they are optimistic about concluding a petroleum-sharing contract with the Myanmar government in early June to conduct oil and natural gas exploration in two onshore petroleum concession blocks.

"We're just waiting for the confirmation date for the G and EP2 Blocks from the Myanmar government," PTTEP Chief Executive Officer Tevin Vongvanich said in a Bangkok Post report.

"A tentative date has already been set for early next month. Myanmar is one of our focus countries in upstream petroleum, and we're also preparing gas development plans for its central government."

In January PTTEP was awarded exploration and production concessions in the G and EP2 petroleum blocks, which cover more than 5,000 square miles. PTTEP operates four natural gas blocks in Myanmar at Yadana and Yetakun, which collectively produce 1.1 billion cubic feet per day for the Thai domestic market.

The peso fell on Wednesday as the euphoria over the improved credit outlook of the Philippines waned amid pressing concerns over the debt crisis in the eurozone.

The local currency closed at 43.50 against the US dollar, down by 28 centavos from the previous day’s finish of 43.22:$1.

Intraday high hit 43.34:$1, while intraday low settled at 43.56:$1. Volume of trade amounted to $1.032 billion from $878.74 million previously.

The drop of the peso and other emerging market currencies came following reports that the credit rating of Spain was downgraded by Egan-Jones Ratings Co. amid an unfavorable economic outlook.

Traders said the probability of a prolonged eurozone debt crisis has made investors averse to perceivably risky assets, such as those denominated in emerging-market currencies like the peso.

The fact that European banks have remained problematic has also been a source of concern for fund owners, traders said.

Tokyo fell 0.28 percent, or 23.89 points, to 8,633.19, Seoul was 0.27 percent, or 5.05 points, lower at 1,844.86 and Sydney shed 0.49 percent, or 20.2 points, to 4,094.2.

Hong Kong tumbled 1.92 percent, or 365.24 points, to 18,690.22 and Shanghai slipped 0.21 percent, or 4.97 points, to 2,384.67.

– Singapore closed down 0.64 percent, or 17.90 points, at 2,783.95.

Oil rig maker Keppel Corp. was up 0.10 percent at Sg$10.19 while beverage distributor Fraser and Neave shed 2.23 percent to Sg$6.59.

– Taipei fell 1.10 percent, or 80.49 points, to 7,261.80.

HTC shed 1.85 percent to Tw$424.0 while TSMC was 0.73 percent lower at Tw$81.7.

– Manila fell 0.10 percent, or 4.79 points, to 5,018.32.

SM Investments fell 0.79 percent to 687.50 pesos, while DMCI Holdings was 2.48 percent off at 56.95 pesos.

Philippine Long Distance Telephone rose 0.17 percent to 2,310 pesos.

– Wellington closed flat, edging up 3.05 points, to 3,481.34.

Fletcher Building rose 0.16 percent to NZ$6.26, Chorus was up 1.25 percent at NZ$3.25 and Telecom fell 1.16 percent to NZ$2.55.

– Jakarta ended flat, edging down 1.15 points to 3,917.92.

Aneka Tambang lost 2.26 percent to 1,300 rupiah, Indosat slid 3.01 percent to 4,025 rupiah and Timah fell 1.37 percent to 1,440 rupiah.

– Kuala Lumpur ended 0.63 percent, or 9.85 points, higher at 1,575.17.

Financial firm CIMB Group Holdings gained 1.77 percent to 7.49 ringgit, while telecoms company Axiata Group added 0.57 percent to 5.33. Carmaker DRB-HICOM lost 0.41 percent to 2.42 ringgit.

– Bangkok closed 1.30 percent, or 15.03 points, lower at 1,138.63.

PTT dropped 1.92 percent to 307 baht, while BANPU lost 1.69 percent to 466 baht.

– India’s benchmark Sensex index slid 0.77 percent, or 126.43 points, to 16,312.15 points, snapping two days of gains, a day ahead of the announcement of expected weak quarterly economic growth figures.

Tata Motors was one of the biggest losers, down 11.8 percent, or 32.55 points, to 243.35 rupees on worries about a fall in operating margins at its luxury Jaguar Land Rover subsidiary.

Shayne Heffernan Ph.D.  

Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
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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.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More


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