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ASEAN STOCK WATCH Asean Affairs  12 November 2012

ASEAN Market Preview

Tax Hikes, Fiscal Cliff and the EuroCrisis will dominate the news this week, and none of it will be good. Be careful this week and only look for great value.

President Barack Obama said on Friday he was prepared to compromise with Republicans to avert a looming U.S. fiscal calamity, but insisted a tax increase for the rich must be part of any bargain.
Obama, who was re-elected on Tuesday, reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls. His spokesman said he would veto any deal that did not include an extra contribution from the wealthiest.

Obama invited congressional leaders to the White House next Friday to discuss the issue, the most pressing challenge as the president prepares to starts his second term in office. He will also hold a news conference on Wednesday.

John Boehner, the Republican speaker of the House of Representatives, repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the crisis.
He too claimed a mandate from the elections, in which voters gave Republicans continued control of the House.

The statements showed the two men, who have been divided on the issue for two years, were still far apart, leaving doubts over whether the "fiscal cliff" could be averted.

China's growing appetite for energy and raw materials is expected to give a kick to the world's sluggish bulk commodity market. Currently, China is the world's biggest consumer of aluminum, cooper, iron ore and cotton.

Ungad Chadda, senior vice-president of Toronto Stock Exchange, a world leader in mining and energy financing, takes China's 2020 blueprint as good news and is fascinated at the buildup of infrastructure under Chinese leaders.

Other market-moving elements relating to China's 2020 goal, Chadda said, include the emerging middle class and Chinese people's growing consumption power.

Morgan Stanley China has projected a golden decade for China's consumption. By 2020, the country's total retail sales will be equivalent to two-thirds of that of the United States and will account up 12 percent of the world's aggregate, it said.

For many Chinese people, the global market is no longer a vague concept.


 The resale housing market has kicked off the fourth quarter on an upbeat note, with both prices of non-landed private homes and Housing and Development Board flats rising last month from the third quarter, data yesterday from the Singapore Real Estate Exchange (SRX) showed.

The average per square foot price for resale private residential property throughout the island was S$1,209 last month, up 4.3 per cent from the third-quarter average of S$1,159, according to the SRX, a consortium of 11 leading property agencies including DWG, ERA and PropNex.

Homes in the Rest of Central Region (RCR) led the gain with a 4.5-per-cent increase over the third quarter, followed by those in the Outside Central Region (OCR), which saw a 4.2-per-cent rise. The Core Central Region (CCR) showed a 1.8-per-cent increase.

Mr Lee Sze Teck, Senior Manager of Training, Research and Consultancy at DWG, said: "The price gap between RCR and OCR non-landed homes was 32.3 per cent in the first quarter of last year. Prices in the OCR continued to rise at a faster rate over the next few quarters.

"This resulted in a narrowing in the price gap between RCR and OCR homes to 29.2 per cent last month. Buyers and investors turned their attention to the RCR, which explains a larger gain for RCR homes in October versus the CCR and OCR."

In the HDB market, resale prices inched up 1.1 per cent last month from the third quarter to a median of S$455,000 islandwide, the SRX data showed.

The median cash-over-valuation (COV) premium continued its uptrend to reach S$33,000 in October, a 10-per cent-increase from the third quarter and just S$3,000 shy of the five-year historical high of S$36,000 attained in the third quarter last year since tracking began in 2007, the SRX said.


Exports in September unexpectedly rose despite the volatile global economic environment, with shipments of electrical and electronic products supporting growth.

The Statistics Department said that September's exports grew 2.6% year-on-year to RM60.21bil helped by the growth of exports to Asean countries, the United States, India and Taiwan.

Imports rose by 9.6% to RM53.74bil in September.

The jump in exports exceeded economists forecast of a 2.9% decrease, especially after the country's exports slumped 4.5% in August, according to a Bloomberg survey.

Exports of manufactured goods in September grew 2.4% year-on-year and 7.6% month-on-month to RM40.86bil.

Major export products for the month were electrical and electronic products (35.4%), liquefied natural gas (8.1%), palm oil which includes crude palm oil; fractionated palm oil; palm kernel oil, olein and stearin (7.8%), refined petroleum products (6.7%), and chemicals and chemical products (6%).

Meanwhile, exports to Asean countries recorded double-digit growth of 18.9% to RM16.3bil, accounting for 27.1% of Malaysia's total exports. This was due to higher exports of both commodities and manufactured goods.

Exports to the United States grew for the fifth consecutive month since May, and rose 6.3% year-on-year to RM5.27bil, contributed mainly by electrical and electronic products.

However, total exports to China decreased by 10.8% to RM7.66bil, due to lower exports of rubber and palm oil.

Exports to Japan in September also decreased by 2.2% to RM7.04bil owing to lower exports of liquefied natural gas.

Exports to the European Union (EU) in September decreased by 12.5% to RM5.14bil due to weaker demand for electrical and electronic products, rubber as well as chemicals and chemical products.

For the first nine months of 2012, Malaysia's total trade expanded by 4.3% year-on-year to RM982.74bil as exports rose by 1.7% to RM525.50bil while imports grew by 7.6% to RM457.24bil.

Exports of manufactured goods for January till September 2012 was valued at RM353.51bil, accounting of 67.3% of total exports.

Malaysia's top five export destinations were Singapore (RM71.62bil or 13.6%), China (RM66.45bil or 12.6%), Japan (RM63.50bil or 12.1%), United States (RM45.65bil or 8.7%) and Thailand (RM28.25bil or 5.4%).


Last week, the main-share Philippine Stock Exchange index gained 0.82 percent to 5,468.79 on the back of good third-quarter income results and a benign inflation rate.

BPI Securities said that this week, the Philippine market “may continue to traverse the upward trend as spending for the holiday season is approaching.”

Freya May Natividad, an analyst at said the 5,400 zone was likely to be supported this week by funding windows that have been opened to emerging markets such as the Philippines, citing a $1-billion risk-sharing facility announced by IFC and Citi Global to help boost trade in emerging markets through 2015. “This might help support ascents to 5,500, barring unforeseen negative events,” Natividad said. Immediate support is 5,400 and resistance at 5,500, she said.

AB Capital Securities analyst Gregg Ilag, on the other hand, said since valuation multiples have expanded significantly this year, a further upside might be limited.

“The Philippine Stock Exchange index (PSEi) was trading at 14x 2012 earnings during the start of the year and is now at 17x. We think that additional multiple expansions for this year are improbable unless 2012 earnings are upgraded. Given that earnings were generally in line with expectations, upgrades on earning projections are unlikely,” Ilag said.

A price to earnings multiple of 17x means that investors are paying 17 times the amount of money the market will make in a given year.

From a technical perspective, Ilag said there might be consolidation between 5,400 and 5,450. “Momentum indicators are showing a near-term positive divergence but are near the overbought territory,” Ilag said.

Ilag said investors should remain selective in buying equities. The brokerage has a “buy” recommendaiton on JG Summit and Ayala Corp.


Garuda Indonesia said on Friday it will spend a total of Rp 21.4 trillion ($2.2 billion) to bring in 24 new airplanes next year to help achieve the goals of its Quantum Leap program.

The 24 planes include four Boeing 777-300 ERs, two Airbus 330-200s, 10 Boeing 737-800 NGs, seven Bombardier CRJ1000s and an Airbus 330-300.

“The price of a Boeing 777 is about US$150 million. An Airbus 330 is $100 million, a Boeing 737 is $50 million and a Bombardier is between $20 million and $25 million,” Garuda president director Emirsyah Satar said on Friday on the sidelines of the Garuda Indonesia Travel Fair 2012 in Jakarta.

He added that the new Boeing 777 and Airbus planes would be used to serve international routes, replacing Garuda’s aging Boeing 747 aircraft.

“Flights to Jeddah for minor hajj trips [outside of the normal hajj season] and other [international routes] will be served by our new planes,” Emirsyah said.

Garuda currently uses 95 airplanes that serve 32 domestic and 18 international routes.

In addition to the 24 aircraft, twenty other airplanes are expected to arrive by the end of the year, bringing the fleet's total number to 105. The average age of its planes is 5.8 years old.

Under its robust Quantum Leap expansion program, Garuda is targeting to utilize a total of 194 aircraft by 2015.

Garuda aims to serve up to 20 million passengers this year, including those flying with its subsidiary airline, Citilink Indonesia.

Emirsyah said the figure would represent a 17 percent increase in passengers, higher than the projected 14 percent growth of the global aviation industry this year.


Thailand Stock Exchange

The Thailand Stock Exchange finished the week 1.2% lower, no surprise though as Thailand has been the leading ASEAN Exchange this year up a total of 25.9% for the year. Investors in Thailand need to be cautious for now as there are ongoing problems in Europe and the USA that have the ability to create a sharp sell off.

Deleveraging in Europe and the US Fiscal Cliff will at some point in the coming months create Rally’s and Dips so it is ideal for traders.

For the Thailand Stock Exchange I advise you seek value, Low PE and good sectors are key, never buy a stock you do not have a long term positive outlook on, always keep in mind value.

Q3 was tough on Thai Exports, exports declined by 1.13 per cent compared to the same period last year, but there is some big news, Toyota plan to make 1m Cars per annum in Thailand.

The Auto Sector is the second most important industry for economic growth in any Country, and Thailand has excelled in that sector, long term Thailand still looks good. Auto manufacturing has an above average multiplier effect. For every one auto manufacturing job, there are 4-6 jobs outside of that segment that are related.

Automotive manufacturing has enormous reach touching every part of the country, employment in automotive and automotive parts manufacturing ranks among the top three manufacturing industries.

Despite a global slowdown Thailand will still record growth of between 4.5% and 6% depending who you ask, I think it will be closer to 6% as a result of the wage hikes and a recovery in food prices.


Focus this week in Vietnam will be on what the Government has planned for the spiraling bad debts that are plaguing the banking sector. Non-performing loans in Vietnam’s banking system rose to an estimated 8.8 percent of total lending by June 30 from 8.6 percent at the end of March, a state-run newspaper said.

Total loans in Vietnam’s banking system are estimated at 120 percent of gross domestic product, or between $150-$160 billion, according to government data.

Fitch Ratings has put the non-performing loan figure at 13 percent.

Vietnam recorded average credit growth of 26.56 percent a year in the 2008-11 period, while non-performing loans expanded at an average 51 percent a year, the central bank has said.

Bad debt rose swiftly in the past few years due to economic instability, high inventories, rapid credit expansion, risk management weakness and poor supervision of lenders, it said.


Between January and September 2012, total shrimp exports reached over USD 1.63 billion, falling 3.9 per cent from the same period in 2011. However, shipments to Japan – Vietnam’s main shrimp market – were valued at USD 440.6 million, having gone up 11 per cent and making up 27.11 per cent of exports, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

The Ministry of Agriculture and Rural Development (MARD) has sent a good message: Vietnam’s rice exports have been increasing rapidly over the last few years, raising the hope that Vietnam’s rice exports may reach the record high of 7.7 million tons in 2012.

Analysts have also commented that it is now the “golden time” for Vietnam to boost exports, when the world’s demand increases rapidly. Rice export companies have geared up to boost the rice exports in the last months of the year in the context of the world’s fluctuating price market.

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?

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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