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ASEAN STOCK WATCH Asean Affairs   1  November  2010

Another Week of Gains in ASEAN

Shayne Heffernan

ASEAN Markets should hit new highs again this week as they continue to attract international investors. Thailand and Malaysia should lead the gains this week. The Set will close the coming week over 1000 and the Bursa Malaysia over 1500.

Influence from Wall St will provide a volatile week in ASEAN and investors in Jakarta will need to be mindful of severe downward swing in new York.

Ebeling Heffernan has said the CBOE Volatility Index, or VIX, is still relatively low, but it has been picking up steam in the last several days. The index, a valuable gauge of investor anxiety, rose 1.5 percent on Friday to close at 21.20.

Given the expectations in the market on QE-2 and the nature of the news coming this week the market could rally as much as 3.5% or fall as much as 2.5%.

Shayne Heffernan is predicting a rally on the week of 2% unless the Fed offers more than $500b in QE-2 funding.

This week the US federal government’s non-farm payrolls report, due on Friday, is expected to show a gain of 60,000 jobs in October, compared with September’s loss of 95,000 jobs. The U.S. unemployment rate, however, is seen holding steady at 9.6 percent.

More earnings from S&P 500 companies and a steady stream of top-tier economic indicators will give investors more evidence of the economy’s health throughout the week.

A series of foreign central bank meetings and the ongoing Currency War will also be headlines this week.

Wall Street professionals are unusually reticent to call the market,

Only one thing seems for sure: Volatility will play a major role.

Traders expect the week to end with a swing of around 2.5 percent in either direction, based on options activity in the SPDR S&P 500 fund (SPY). While that is not out of the ordinary, traders could see significant volatility during the week as events unfold.

QE-2 Estimates

Estimates for how much the Fed will eventually spend varied widely, from $250 billion to as high as $2 trillion.

The Bank of Japan has moved its policy meeting forward to the end of the week, right after the Fed’s meeting. Investors suspect the Japanese central bank — whose board members will meet on Thursday and Friday — may respond by stepping up its bond purchases in reaction to the Fed.

The Bank of England and the European Central Bank are also set to hold policy meetings during the week.

Among the readings on the U.S. economy expected during the week, Wall Street will watch two reports from the Institute for Supply Management.

The ISM index on U.S. manufacturing for October, due on Monday, is forecast to dip to 54.0 from September’s reading of 54.4, the Reuters poll showed. The ISM services- sector index for October, due on Wednesday, is seen edging up to 53.5 from September’s reading of 53.2.


Sembcorp Marine has closed over $700m USD worth of deals in the last month and is still trading at SG$4.50. With 2 major deals signed and earnings to be released this week we have a $7.20 price target on Sembcorp Marine in 2011.

Sembcorp Marine's subsidiary Jurong Shipyard (JSPL) has secured orders of US$384 million for two turnkey jack-up rigs with options for another four jack-up rigs from Seadrill.

Sembcorp Marine has also secured an approximately S$351 million contract to convert the Aframax tanker, the MT Arc II (ex MT Arc), to a Floating Production Storage and Offloading (FPSO) vessel, to be renamed FPSO Petrojarl Cidade de Itajai, for Teekay Petrojarl Production AS.

About the Company

Sembcorp Marine Ltd. is an investment holding company engaged in the provision of management services. The Company operates in two segments: ship and rig repair, building and conversion, and ship chartering.

The Company’s wholly owned subsidiaries include Bulk Trade Pte Ltd, which is engaged in bulk trading; Dolphin Shipping Company Private Limited, which is engaged in ship owning and chartering; JPL Corporation Pte Ltd, which is engaged in investment holding; Jurong Integrated Services Pte Ltd, which is engaged in steel fabrication work, and Jurong SML Pte Ltd, which is engaged in ship building, ship repair and related services.

In March 2009, the Company acquired the remaining 30% interest in JPL Corporation Pte Ltd


PTT Exploration and Production Pcl PTTEP

Shayne Heffernan of Ebeling Heffernan has issued a strong buy on PTT Exploration and Production Pcl PTTEP with a 310Baht price target in 2011 the stock is trading October 20 2010 at 170Baht.

PTT Exploration and Production Public Company Limited is a Thailand-based company engaged in the exploration, extraction, production and development of petroleum products. It produces crude oil, condensate, natural gas and liquefied petroleum gas (LPG).

The Company is also engaged in petroleum-related businesses, such as jetty, bulk tank and warehouse management. It owns and operates a gas transportation piping system. In 2009, the Company and its subsidiaries averaged 233,756 barrels of oil equivalent per day (BOED), and had investments in 42 exploration and production projects.

Its projects include gas projects in Oman and Myanmar, as well as oil projects in Vietnam and Australia. Natural gas contributes to 70 percent of its total sales.

PTT Exploration and Production Pcl (PTTEP) is on track to hit its net profit target of 30 billion baht ($1.01 billion) this year, with little impact from the rise in the baht, its chief executive Anon Sirisaengtaksin said.

PTTEP also expected to acquire at least one petroleum exploration business by the end of this year, he told reporters, without giving details.

“The strong baht doesn’t have much impact on the company as our expenses and revenue are in dollars. And we don’t have much debt in dollars, only $700-800 million,” Anon said.

PTTEP expected its third-quarter revenue to be similar to the second quarter’s as petroleum sales volume in the July-September quarter was at 260,000 barrels of oil equivalent per day, similar to the previous quarter, Anon added.

“For the whole year, sales volume of petroleum should beat our target by about 3-4 percent due to rising production.”

PTTEP is waiting for the results of an Australian investigation into an oil spill at its Montara oil field off the Australian coast in 2009. Asked about the progress on that, Anon said: “There is no progress at the moment. It’s still under investigation.”

In late August, an Indonesian government source said Indonesia planned to seek at least 20 trillion rupiah ($2.23 billion) from PTTEP as compensation for the spill. [ID:nSGE67O096]

PTTEP expects to start production in Montara in the second half of 2011. It has a production target of 35,000 barrels of oil equivalent per day.


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