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ASEAN STOCK WATCH Asean Affairs   29 November 2012

Asean Markets to Rally

Expect a rally in ASEAN today, Wall St marked the second straight day where a leading legislator dictated trading action. On Tuesday, stocks fell on pessimistic remarks from Senate Majority Leader Harry Reid, a Democrat from Nevada.

The market has been swinging for weeks now on headlines from Washington, with Wednesday's gyrations once again highlighting the importance that Wall Street is giving to finding a solution to avoid the series of tax increases and spending cuts that could push the U.S. economy into recession.

The Dow Jones industrial average .DJI rose 106.98 points, or 0.83 percent, to 12,985.11 at the close. The S&P 500 .SPX gained 10.99 points, or 0.79 percent, to 1,409.93. The Nasdaq Composite  .IXIC added 23.99 points, or 0.81 percent, to close at 2,991.78.

The S&P 500 bounced off a strong support area near 1,385 that includes both its 200- and 14-day moving averages. It closed above 1,400 for the third session in four - an optimistic sign for stock bulls.

ASEAN will follow that lead and should trade broadly higher, bad news from Europe is the only danger.


<strong>Will Olam Survive Muddy Waters: Sunny Verghese Vs Carson Block</strong>

Olam International Ltd is under attack from short sellers but the company looks to be holding on OK, I do not think Olam is the new Enron, and if we were to extend the theory of pre booked profits that is being spouted by the short sellers then every insurance company in the world is in bankruptcy and so are most of the banks.

Olam will survive this, and considering how much short selling would have been generated, and the net short position the company may bounce back over $2.00SGD and give the short sellers a nasty, but well deserved shock.

“There is no substance in their broad allegations,” Olam said today in a statement, promising a fuller response in due course. “We will clear our name and hold Muddy Waters accountable for their damaging actions.”

But instead of fighting the short sellers CEO Sunny Verghese needs to reach in to his pockets, rally his friends and burn the short sellers, it is not our opinion that the short sellers are well heeled enough to withstand much of an attack, there are plenty of rumors about the financial state of the short seller and Muddy Waters may be looking for a big winner here to salvage themselves.

Certainly I hope it is the case, it would be a shame for the reputation Singapore has built to be destroyed by the rumor and innuendo of Muddy Waters.

Sunny Verghese, here is the check list of what you need to do now.

1. Get some funds together, reach out to your financiers.
2. Prepare a detailed statement of financial standing.
3. Distribute that to Brokers, Banks, Hedge Funds and Bond Traders.
4. Make the Statement available to the public.
5. Buy the debt and the equities.

Based on volume I would estimate the short position averages around $1.90SGD, the brokers acting on behalf of the short seller would have a safety margin of around 30% so the stock needs to run to $2.34 to rid the company of the short seller.

The average short away from the short seller looks to be around 1.68SGD, so they will become buyers at the $1.86SGD point.

This will be an interesting week.

How the fight is shaping up.

Sunny Verghese

Has a good history
Should have access to capital

Poor reaction to the claims against him
Over 2 years of falling stock prices

Carson Block

Has done this better than anyone before
Has market followers that short and aid the position

May not have access to capital
A break of $2.34 would put him out of the game


Maxis Bhd posted lower net profit of RM442mil in its third quarter ended Sept 30, 2012 due to accelerated depreciation for network modernisation.

This compared with the earnings of RM537mil a year ago due to lower earnings before interest, tax, depreciation and amoritisation (EBITDA) of RM25mil and higher financing and amortisation costs of RM18mil and RM29mil.

It said on Wednesday revenue for the quarter under review was at RM2.21bil against RM2.24bil last year. Net profit was down to RM442mil against RM537mil.

For the nine-month period, revenue was higher at RM6.66bil against RM6.53bil a year ago supported by growth in all of its core businesses.

Maxis said EBITDA was RM3.29bil with EBITDA Margin at industry-leading 49.5%, despite strong competition and aggressive market initiatives. Net profit was down to RM1.48bil compared RM1.6bil a year ago.

“PAT performance for both the nine months and Q3, 2012 was impacted by accelerated depreciation for network modernisation. Additionally, PAT for the nine months ended Sept 30, was also impacted by asset write-off amounting to RM125mil,” it said.

On the Q3, 2012 earnings, chief executive officer Sandip Das said the quarter had shown growth across all core businesses.

“We are now well positioned to strengthen future revenue streams, having launched several tariff initiatives for our customers, over the last nine months, in the areas of IDD rates, roaming, mobile Internet, postpaid and prepaid. All of which are beginning to bear fruit.

“It is also reassuring to see that revenue generating subscribers growing in both postpaid and prepaid categories,” he said in a statement.

Mobile services recorded a year-on-year revenue growth of 1% or RM78mil driven by increasing mobile internet usage, higher sale of devices and higher wireless broadband revenues.

Consequently, total non-voice revenue as a percentage of total mobile revenue grew 2.5% points to 45.4%.

Prepaid and postpaid average revenue per user (ARPU) remained relatively unchanged at RM37 and RM107, respectively, compared to the corresponding preceding period.

“True to our continued commitment to dividend, we have declared a third interim dividend of eight sen per share amounting to RM600mil to our shareholders this quarter, successfully maintaining our track record of consistent dividend pay-out with the previous quarters,” added Sandip.


Thailand’s top energy firm PTT Pcl is considering building a US$28.7 billion (RM87.64 billion) oil refinery in central Vietnam, a company official said today, in what would be a record foreign investment in the country.

A report in Vietnam’s state-run Tuoi Tre newspaper said the refinery would have a capacity of 660,000 barrels per day (bpd), or almost five times the current capacity of the Dung Quat oil refinery – Vietnam’s sole such facility.

“The Vietnam government has hired PTT’s subsidiary to study the possibility of a refinery project in Vietnam. PTT has not yet decided whether they will invest in the project ... and it should take a long time for PTT to make a commitment,” PTT’s chief financial officer, Surong Bulakul, said.

PTT has reported its pre-feasibility study of the proposed refinery to the Binh Dinh central provincial government, the newspaper said, quoting the management board of the economic zone where the plant would be located.

The proposed facility could be built in Nhon Hoi, about 1,000km (620 miles) south of Hanoi, according to the website of the Binh Dinh economic zone management board. (

Provincial officials have requested PTT to prove its financial capacity and swiftly complete a feasibility study to give to the two governments. Nhon Hoi has a port with a capacity of 30,000 deadweight tonnes, which will be further expanded by 2020, the economic zone management board said.

Construction of the Nhon Hoi refinery could begin in 2016 and the plant is expected to start operating in 2019, pending approval by the Vietnamese government, the newspaper added.

Vietnam’s sole oil refinery, Dung Quat, currently has a capacity of 135,000-bpd but it is expected to be nearly doubled to 240,000 bpd by 2017.

The Southeast Asian country has been planning at least four other refineries to raise its refining capacity to 25-30 million tonnes by 2020 as stated by the government.


Bumi Resources </strong>fell the most in two months to its lowest close in almost four years amid concern about the company’s ability to pay its bills, following an announcement that its total debt stood at $3.8 billion.

Shares of Indonesia’s largest coal miner fell 6.8 percent, the biggest decline since Sept. 24, to Rp 550 on the Indonesia Stock Exchange (IDX) on Tuesday.

The stock had not closed that low since Feb. 4, 2009.

“Investors see that the company is heavily indebted, [which] makes them hesitant to buy shares,” Edwin Sinaga, president director of brokerage firm Financorporindo Nusa, said on Tuesday.

In a filing to the IDX on Monday, Bumi Resources said that its total debt was due between 2012 and 2017.

“[It’s] nothing new — that’s the number in all our previous disclosures,” said Dileep Srivastava, a director at Bumi Resources, via e-mail on Tuesday.

He noted the company has been bombarded by negative media coverage because of its debt, while shareholder rifts are adding pressure on the firm internally.

Bumi Resources’ debt-to-common equity ratio is 489 percent, compared to 74 percent for Astra International, the biggest publicly traded company, according to Bloomberg data. Its market capitalization  is Rp 11.4 trillion, compared to Astra’s Rp 315.8 trillion, Bloomberg data show.

Bumi Resources, controlled by the Bakrie Group, has been at the center of investors’ attention in the past few months due to a high-profile dispute involving Bumi Plc co-founder Nathaniel Rothschild and the Bakrie family. 

Srivastava said Bumi Resources “[does] not comment on shareholders as a matter of policy.”

Falling coal prices have also contributed to the 74 percent drop in share prices this year. It posted a net loss of $322 million in the first half, turning from $231.7 million in profit for the same period last year.

“Bumi is a super beta stock,” Srivastava said, referring to the stock’s volatility relative to the market.

He added that “nothing has changed overnight.” He said the company is focusing on “higher production” targets. It seeks to increase its coal mining production to 100 million metric tons of coal by 2014 from its 2012 estimate of 75 million tons.

Bumi Resources is “strengthening internal cash generation through higher volume and monetizing non-core assets at profit to repay [the] debt,” Srivastava said.

He added that the company’s priority is settling the remaining $1.3 billion in debt owed to the China Investment Corporation “far ahead of maturity dates.”

Srivastava said last month that Bumi Resources is committed to disposing its secondary assets and its mineral mining arm, Bumi Resources Minerals.

Michael Tjoajadi, the president director at Schroder Investment Management Indonesia, was quoted by Bloomberg on Nov. 12 as saying that Bumi Resources’ minority shareholders are at risk, as the coal miner faces two probes into its finances and is part of a falling out between Nat Rothschild and the Bakrie family.

Shares have plunged 74 percent this year. On Dec. 30, each share was valued at Rp 2,175.

State-controlled builder Pembangunan Perumahan</strong> said it could book up to Rp 18 trillion ($1.9 billion) in new contracts this year, exceeding its initial target of Rp 16.8 trillion.

Corporate secretary Betty Ariana said that from January to October, the firm known as PTPP booked Rp 16.3 trillion in new contracts. Given the trend, Betty estimated the year-end figure would be at about Rp 18 trillion.

The contracts will primarily come from construction work that includes engineering, procurement and construction.

Work contracts that have been secured by the company through October include the construction of the Kalibaru container terminal in Tanjung Priok, North Jakarta.

PTPP won the tender for six construction projects, according to an Aug. 10 letter from the board of directors for port operator Pelahuban Indonesia II (Pelindo II).

PTPP has been appointed to handle Rp 8.2 trillion worth of construction projects at the new Tanjung Priok.

The work includes building a container yard, a breakwater disposal and a breakwater container yard. It will also include overburdening and reclamation projects.

Other major projects it secured include the Educity Apartment complex in Surabaya, East Java, the Landmark Pluit property in North Jakarta, Kualanamu airport in North Sumatra, a geothermal power plant in Muara Labuh, West Sumatra, and a gas power plant in Duri, Riau.

PTPP is also building roads in Papua.

Bambang Triwibowo, the president director of PTPP, said that this year, net income is predicted to rise by 28 percent, to Rp 309 billion.

The company set aside Rp 455 billion for capital expenditure next year for building property, offices, toll roads, ports and other infrastructure.

Shares in PTPP, which went public in 2010, rose 1.2 percent to Rp 850 in Tuesday trading in Jakarta.


Amid the country’s solid 7.1-percent economic growth in the third quarter, the main-share Philippine Stock Exchange index surged to new all-time highs, bucking the downturn in most markets in the region.

The PSEi climbed 47.27 points, or 0.85 percent, to mark its best ever finish at 5,633.72. A new intra-day peak of 5,636.33 was likewise recorded.

Because of the stellar economic growth in the first three quarters of the year and given the still rosy prospects until yearend, Metrobank’s research team has upgraded its full-year GDP growth forecast for this year to 6.6 percent from 5.5 percent.

“On the demand side, household consumption will remain as the growth driver. Consumer spending will still be supported by the sustained inflow of remittances and the still well-anchored inflation expectations,” Metrobank said.

On the supply side, Metrobank said the services sector would be supported by the rosy outlook for the real estate and tourism sub-sectors.

Public construction is expected to sustain its growth in the second half of the year on accelerated government spending ahead of the congressional elections next year while the agriculture sector is also seen to sustain its rebound given that no adverse weather condition was experienced in the last months of the year.

But the next question is how this robust growth would affect monetary policy. The Bangko Sentral ng Pilipinas (BSP) has so far slashed its key interest rates by 100 basis points this year but mostly due to concerns over a sharply appreciating peso rather than growth.

One out of 10 households in the country is supported by remittances from relatives overseas. The peso value of these remittances shrinks whenever the local currency is appreciating. Exporters who earn in foreign currency are also affected by a strong peso.

Monetary easing seen

JP Morgan, in a research report on Wednesday, said the strong growth reduced but did not eliminate potential for monetary easing.

“Domestic demand has been strong in the Philippines. This strength has reflected a low interest-rate environment, combined with strong remittance inflows and steady government consumption this year (spending has been slower this year than planned but is still stronger than last year). Moreover, the government has been pushing investment via private-public partnerships (PPPs), which though slow, are starting to get off the ground,” JP Morgan said in its research.

JP Morgan noted that while an important signal, the PPPs themselves may have a small direct effect on growth, likely around 0.5 percent of GDP on average until 2020.

Fastest expansion

HSBC economist Trinh Nguyen said that in contrast to the region, which experienced slowing growth in the third quarter, the Philippines saw the fastest economic expansion this year.

“Exports of both goods and services, private and public consumption, and investment soared despite the global slump. This reflects both timely policy actions by the BSP and the government as well as the resilient nature of the consumption-driven economy. With such a strong performance, the BSP will hold rates when it meets in December,” Nguyen said.

On the whole, economic growth was broad-based, which means “most of the economy’s engines are humming stronger,” said Jose Mari Lacson, head of research of Campos, Lanuza & Co.

“Most notable, however, was the tag team of private and public construction, which drove industrial production higher. While manufacturing sustained its improvement, we do note a deceleration in services growth. And the services slowdown was across the sub-sector, meaning even retail and wholesale trade demand may have started to plateau—a possible repercussion of the stronger peso. The bottomline, however, is that the recovery in agriculture and stronger industrial production had more than offset the slowdown in services and reduced purchasing power of overseas remittances in the third quarter of 2012,” Lacson said.

Shayne Heffernan Ph.D.  
Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
3 Raffles Place #07-01
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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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