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ASEAN STOCK WATCH Asean Affairs   30 November 2012

ASEAN Equity Preview

ASEAN Markets will open higher today as Wall St managed to make ground despite significant Economic uncertainty. Reflecting the U.S. budget talks, trading was choppy. Wall Street reversed early gains and fell shortly after House Speaker John Boehner, the top Republican in Congress, dashed hopes that lawmakers were getting closer to a budget deal that would avert automatic tax increases and spending cuts set for early 2013 - the fiscal cliff - that could push the U.S. economy into a recession next year. But the market rebounded by afternoon and the three major U.S. stock indexes rebounded to near their session highs.

There have been some signs that leaders are moving closer to a fiscal agreement. The S&P 500 has gained about 5 percent recently after a sell-off that took it down almost 8 percent following the U.S. election on November 6. But investors remain wary that politicians' ad hoc statements can spark quick reversals in the market.

China's international investment may match global investment here in five years, Commerce Minister Chen Deming said on Wednesday.

China's outbound direct investment this year will pass last year's to hit $70 billion and is set to increase in 2013, Chen said at a financial forum in Beijing.

"Maybe in the next five to 10 years, China's outbound investment and investment by international capital in China will balance," Chen said.

China's non-financial ODI was $58.1 billion in the 10 months to October, up 26 percent on the same period last year, according to the minister.

Foreign investment in China amounted to $91.7 billion for the same time frame. While this marked a 3.5 percent year-on-year drop, the top spot as the leading FDI destination had already been claimed from the United States.

"An increase in overseas investment by Chinese companies is an inevitable trend," Chen said.

"With foreign reserves of $3 trillion in hand, we will not sit back and watch the assets depreciate with the third round of quantitative easing. We must inject it into the real economy and make our contribution to global prosperity," he said.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank affiliated with the Ministry of Commerce, was even more optimistic, saying that it will probably take three years, or "five years at most," for outbound direct investment to match inbound.

"FDI in China is likely to grow in 2013 as the government further opens up the scope for investment, such as the services sector, and improves the investment environment. But growth will be slower than 10 percent owing to constrained transnational investments."

Cross-border investment is estimated to reach $1.6 trillion globally this year, 25 percent lower than the record of $2.5 trillion in 2007.


PTTEP shares will fall at least 13%, but will recover in 2013 after a new rights issue was announced.

 PTT Exploration and Production Pcl is offering new shares at a discount of as much as 12.6 percent for its planned up to $3.1 billion equity offering, as it raises funds for expansion and to pay for the purchase of UK-based Cove Energy.

The Thai state-owned company's equity raising is Thailand's biggest ever, and underscores a boom in equity capital market deals in Southeast Asia's rapidly growing economies.

PTT Exploration and Production (PTTEP) is offering 650 million shares in a range of 135-145 baht each, according to a term sheet of the deal seen by Reuters on Thursday. That represents a discount of 6.1-12.6 percent to Wednesday's close. The stock was down 1 percent in early Thursday deals.

Current shareholders have priority to participate in the offer ahead of other investors. Thailand's top energy firm PTT Pcl, which owns 65.3 percent of PTTEP, is fully supporting the fund raising.

At the top of the range, the offer would raise 94.25 billion baht ($3.1 billion), surpassing a previous record of $1.6 billion set in 1999 by Siam Commercial Bank Pcl, according to Thomson Reuters data.


Bumi Resources

Bumi Resources , Indonesia’s largest thermal-coal producer, is forecast to post a profit for the third quarter, in contrast to its performance during a year earlier.

The Jakarta-based company will probably report net income at $14.1 million for the July-September period, turning from a loss of $45.5 million in the same quarter last year, according to Bloomberg data.

Dileep Srivastava, a director at Bumi Resources, did not confirm the numbers. The company has yet to announce results for the cumulative nine-month period.

Coal production and sales volumes are set to increase 10 percent this year, according to Srivastava, added that coal prices are expected to fetch at $82 to $83 per metric ton. The average selling price for coal was $92.3 a ton last year.

Reuters reported, citing comments by Srivastava, that the coal miner expects its production to reach 75 million tons this year and increase to 85 million tons in 2013.

Bumi Resources posted losses during the first half of the year, as it was saddled with more than $3.8 billion in debt amid falling coal prices globally.

It recorded a $334.1 million loss in the first half, compared with a $226.7 million profit a year earlier, primarily due to expenses on paying debt. Interest payments on loans and finance charges amounted to $310.7 million. Still, Bumi Resources’ revenue rose to $1.9 billion from $1.8 billion, the company said in October.

Its shares have fallen 75 percent this year, compared to the benchmark stock index’s 13 percent gain.


President Benigno Aquino III and his Cabinet approved, on Thursday night, 11 infrastructure projects worth more than P100 billion, including a key project connecting the North Luzon Expressway with the Southern Luzon Expressway and the Cavite-Laguna Expressway.

The meeting of the National Economic and Development Authority (NEDA) Board began at 11 a.m. Thursday, but the President and Cabinet officials emerged only at 6 p.m. for the lighting of Christmas tree in Malacañang, where Mr. Aquino exhorted Filipinos to “bring light’’ to the country.

Approved by the NEDA Board, chaired by the President, were the P25.56-billion NLEX-SLEX Connector slated from 2013 to 2016, and the P43-billion Cavite-Laguna Expressway from 2012-2017, Strategic Communication Secretary Ramon Carandang said.

Both projects were approved “in principle’’ pending review of their costs, he told reporters Thursday night. “They were approved conditionally. We want to do another verification of the costing. What you get are indicative costs. The President wants the numbers to be checked again to see if they can be lowered.’’

With their approval by the NEDA Board, the “projects could move forward,’’ Carandang said.

The rest were the P1.14-billion Albay West Coast Road Project (2014-2016); P2.1-billion Tacloban Airport Redevelopment Project (2013-2016); P8.8-billion Acquisition of Multi-Role Response vessels (2012-2016); P8.87-billion Mactan, Cebu Airport Terminal (Phase 1, 2014-2016); P1.7-billion Contactless Automatic Fare Collection System; P68-million Component A of the Convergence on Chain Enhancement for Rural Growth and Empowerment (2013-2019); P7.39-billion Extension of the Mindanao Rural Development Project 2 (2012-2014); P1.16-billion Rehabilitation of Angat Hydroelectric Plant Turbines 4 and 5  (2013-2014); and P13.14- billion School Infrastructure Project covering 10,679 classrooms  (2013-2014).

The projects total P113.54 billion.

“There were some clarifications with some of the others,’’ Carandang said, pointing out that 13 projects were tackled at the meeting.

He said that it took the President and the officials hours to approve the projects because “we go over each one of them in a quite a bit of detail.’’

“Some of them will be internally funded, some of them will have debt; some of them will have private equity funding. There are different financing schemes for the different projects,” he said.

After lighting the 43-foot-high Christmas tree made of small white lanterns and topped by a big white lantern in front of the Kalayaan Hall at around 6:10 p.m., the President issued a pre-Christmas message for Filipinos.

“Let’s not keep for ourselves the light that we can contribute to bring the light of hope on the path that our country is treading. Let’s continue to live out the lesson of the Almighty and focus on the well-being of one another…,’’ he said before Cabinet officials and Malacañang staff and employees. “Once again, advance Merry Christmas to all!’’

He wished everyone luck in the “parlor games’’ they’d be joining in pre-Christmas parties, and advised everyone to watch the food they eat.


 SP Setia Bhd, whose share price has come off rapidly over recent weeks as its shares are being removed from the MSCI Malaysia Index today, may now be cheap enough to pick up.

Year-to-date, its share price has fallen 18.70% to close at RM3.13.

CIMB Investment Bank Bhd research head Terence Wong told StarBiz that the house had a short-term “trading buy” call on the stock with a target price of RM4.30.

“The stocks linked to the index are followed by foreign funds, so when SP Setia is taken off, these funds may have sold down their stakes,” he said.

Although Wong remained positive on the company's prospects, analysts in general have mixed views on the property industry, including on SP Setia. RHB Research Institute Sdn Bhd analyst Loong Kok Wen said the shares were now cheap but was cautious on the industry outlook.

“Catalyst is lacking for the industry, the key hindrance being the election risk. Investors who pick up property shares will have to hold on to them for awhile,” she said.

Loong said SP Setia was trading at a price-to-earnings (PE) ratio of 16 times to 17 times at current price levels. “The shares usually trades at a PE ratio of 20 times versus the industry average of 15 times to 16 times,” she added.


Parkway Trust Management Limited (the "Manager"), as manager of Parkway Life Real Estate Investment Trust ("PLife REIT") is pleased to announce a strong set of results for the third quarter ("3Q 2012") and first nine months ("YTD 3Q 2012") ended 30 September 2012.

Mr Yong Yean Chau, Chief Executive Officer of the Manager said, "We are pleased to report another quarter of steady growth in 3Q 2012 as we continued to benefit from our new acquisitions this year and enjoy revenue gains through our favourable rental lease structures. Amid a challenging global economic climate, proactive efforts to ensure that our income streams remain sustainable whilst prudently managing costs have paid off, enabling us to extend our earnings and deliver better returns to Unitholders."

PLife REIT registered gross revenue of S$23.9 million for 3Q 2012, an 8.5% increase from the previous corresponding period ("3Q 2011"). This was primarily due to a full quarter's revenue contribution from the three Japan properties acquired in March 2012 and two months'

1 The number of units used to calculate the Distribution per Unit ("DPU") comprise the number of units in issue as at 30 September

2012 and 30 September 2011 respectively.

contributions from its units at Gleneagles Medical Centre Kuala Lumpur ("GMCKL")2. Revenue growth was further driven by higher rent from the Singapore properties mainly due to increased growth rate of CPI + 1% (i.e. 6.31%) in Year 6 of the lease term commencing 23 August 2012. For YTD 3Q 2012, gross revenue increased 8.0% from the same period last year ("YTD 3Q 2011") to S$70.1 million, due to revenue contribution from the properties acquired in 2011/2012 and higher rent from the existing properties. Net property income rose 9.5% and 8.2% year-on- year to S$22.1 million and S$64.3 million for 3Q 2012 and YTD 3Q 2012 respectively.

Finance costs rose by a marginal 1.7% for 3Q 2012 despite the growth of the portfolio. The increase was mainly due to additional financing costs incurred to finance the properties acquired in March and August 2012 and higher amortisation of transaction cost relating to debt facilities, offset by interest cost savings from the lower locked in hedged rates arising from the extension of interest rate hedges completed in August 2011. On a year-to-date basis, finance costs for YTD 3Q 2012 fell by 3.7%, helped largely by interest cost savings for the period.

As a result of the yield accretive Japan acquisitions, higher rent from the Singapore properties and savings from lower financing costs, distributable income for 3Q 2012 and YTD 3Q 2012 increased 7.1% and 6.8% respectively to S$15.6 million and S$46.1 million. Distributable income per Unit ("DPU") for 3Q 2012 grew from 2.4 cents in the same period last year to 2.58 cents.
Healthy balance sheet

Following the pre-emptive refinancing exercise completed in 25 June 20123, PLife REIT has no refinancing needs for its existing total debt portfolio until FY2014, with a weighted average debt maturity period of 2.68 years (as at 30 September 2012). Its gearing level as at 30 September
2012 stood at 36.4%, well below the 60% gearing limit imposed under the Monetary Authority of Singapore's Property Funds Guidelines and representing further debt headroom for future acquisition opportunities.

Mr Yong concluded, "Notwithstanding near term uncertainties, the long term prospects of the regional healthcare industry remains firm, driven by increasing demand for quality healthcare. We will continue to work on improving our portfolio performance and strengthening our financial position to be able to capture growth opportunities as and when they arise."

Yesterday in Asia

Tokyo added 0.99 percent, or 92.53 points, to 9,400.88, Sydney was 0.68 percent, or 30.4 points, higher at 4,477.7 and Seoul climbed 1.15 percent, or 22.07 points, to 1,934.85.

Hong Kong also rose 0.99 percent, picking up 213.91 points to 21,922.89 but Shanghai fell 0.51 percent, or 10.04 points, to 1,963.49, a near four-year low.

– Taipei rose 0.92 percent, or 68.62 points, to 7,503.55.

HTC rose 1.17 percent to Tw$259.0, while TSMC was 0.63 percent higher at Tw$96.5.

– Manila closed 0.12 percent higher, adding 6.73 points to 5,640.45.

SM Investment gained 4.09 percent to 877 pesos while BDO Unibank rose 0.49 percent to 71.45 pesos. Philippine Long Distance Telephone Co. was unchanged at 2,586 pesos.

– Wellington ended 0.12 percent higher, adding 4.62 points to 4,016.77.

Sky Television rose 3.0 percent to NZ$5.22 and Tower advanced 2.6 percent to NZ$1.95.

– Jakarta rose 0.33 percent, or 14.26 points, to 4,319.09.

Bank Permata rose 1.42 percent to 1,430 rupiah, Hero Supermarket gained 3.11 percent to 4,150 rupiah, while Indah Kiat Pulp & Paper fell 7.89 percent to 700 rupiah.

– Bangkok added 0.74 percent, or 9.63 points, to 1,309.57.

Oil company PTT edged up 0.63 percent to 318 baht, while electricity firm EGCO lost 1.57 percent to 125.50 baht.

– Singapore closed 1.13 percent, or 34.13 points, higher at 3,045.90.

Olam International was 4.0 percent higher at Sg$1.56 and SingTel rose 0.62 percent to Sg$3.27.

– Kuala Lumpur ended flat, inching up 0.8 points to close at 1,607.32.

CIMB Group Holdings rose 0.3 percent to 7.48 ringgit, while UEM Land Holdings fell 1.4 percent to 2.09 ringgit.

– Mumbai gained 1.75 percent, or 328.83 points, to 19,170.91 points.

Wind energy giant Suzlon Energy rose 8.8 percent to 18.55 while private bank ICICI Bank rose 4.9 percent to 1,081.75 rupees.

Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager

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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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