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ASEAN STOCK WATCH Asean Affairs  6 November 2012

ASEAN Market Update
Leading world economies pressed the United States on Sunday to act decisively to avert the fiscal cliff, calling it the biggest short-term threat to global growth.

The market's reaction was muted to data showing the pace of growth in the U.S. services sector slowed modestly in October. Data from the Institute for Supply Management showed new orders slipped, but employment improved.

Market participants may also have to deal with interpreting economic data that could soon start to show the impact of Hurricane Sandy on the economy after battering the U.S. Northeast last week.

The 112th session of the Canton Fair, China's largest trade fair, witnessed a decline in both participants and turnover, according to the event's closing press conference on Sunday.

Statistics from the fair's organizer show that, as of Saturday, 188,145 overseas participants from 211 countries and regions have signed into the fair, said spokesman Liu Jianjun.

The figure was 10.26 percent lower than the last session, in spring, and 10.5 percent lower than the corresponding period last year, he said.

The declining number of overseas buyers at the fair -- a barometer of China's export situation -- indicated weak global demand amid a sluggish recovery, compounded by a more recent eurozone debt crisis, according to insiders.

And regular customers and exhibitors comprised a major portion of over 73.3 percent of all participants in the fair, Liu added.

The fair has also seen a fall in its turnover of 32.68 billion U.S. dollars, a 9.3-percent decrease compared to the spring session.

Orders from the traditional market of European countries and Japan dropped considerably, while those from emerging markets showed minor declines.


Indonesia

Japfa Comfeed Indonesia, one of the country’s largest chicken breeders and animal feed producers, posted big earnings growth in the first three quarters of the year, reflecting national demand for meat.

In a filing to the Indonesia Stock Exchange on Friday, the company showed that its net income rose 74 percent to Rp 925 billion ($96.2 million) in the January-to-September period this year compared to the same period a year earlier. Revenue rose 13 percent to Rp 13.4 trillion.

Historically, most of Japfa’s income comes from its poultry division, which includes the production of poultry feed, day-old chicken breeding and commercial farming.

Ivan Chamdani, an analyst with Trimegah Securities in Jakarta, said in a note to clients that the company’s nine-month net income had surpassed his estimate of Rp 886 billion for the full year. Japfa’s net income reached 97 percent of the consensus of analyst estimates.

But Ivan said the big growth in net income was helped by non-operational earnings, such as foreign exchange gains. The company’s financial statement shows that in the nine-month period, Japfa posted Rp 19.3 billion in foreign exchange gain, compared to a Rp 2.57 billion loss a year earlier. Its interest income also more than doubled to Rp 38.7 billion.

On a quarterly basis, for the July-to-September period, net income stood at Rp 344 billion, up 58 percent from the same period last year, Trimegah’s calculations show.

At the end of last week, the shares were trading at Rp 4,950, an increase of 29 percent since the start of the year.






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Malaysia

SapuraKencana Petroleum is buying the rigs business including the full tender rig organisation from Seadrill Ltd for an enterprise value of US$2.9bil.

Seadrill said on Monday the total enterprise value included US$363mil in remaining capital expenditures linked to the newbuilds programme and all the debt in the tender rig business including existing bank facilities of about US$800mil as Dec 31, 2012.

"Seadrill will, to support this position, receive a minimum of US$350mil in new shares of SapuraKencana. This comes in addition to the 6.4% stake that Seadrill presently owns in SapuraKencana," it said.

Both companies had entered into a non-binding memorandum of understanding to combine and integrate both companies' tender rig businesses. Seadrill said the enlarged tender rig business under SapuraKencana would comprise, 16 tender rigs in operation, and an additional five units currently under construction.

"In addition SapuraKencana would also be offered the right to be the manager for three further tender rigs which are not part of the transaction," it said.

Seadrill said the operating rigs and the newbuilds were currently contracted under long-term fixed price contracts with Chevron, Shell, PTTEP, and Petronas Carigali.

"The total order backlog amounts to US$1.55bil as of end of October 2012. The majority of the operating rigs are currently deployed in Southeast Asian waters. Of the 15 operating rigs, nine are barges and six are semi-tenders, which are capable of operating in water depths of up to 6,500 feet," it said.

Seadrill said one of the main objectives of the transaction is to develop a strong leading player in the Far East market.

Singapore

DBS Group Holdings Ltd , Southeast Asia's biggest lender, posted a 12 percent rise in third-quarter net profit, beating expectations on a sharp drop in bad debt charges and on double-digit growth in income from its core lending business.

The bank's net profit surprisingly exceeded its second-quarter figure as well, bolstered by strong fee and commission income amid gains in investment banking and wealth management.

The outlook for Singapore's banking sector is challenging as new government measures to cool the property market will likely slow demand for mortgages, while low interest rates are expected to hit margins.

Singapore authorities expect GDP growth this year of between 1.5 and 2.5 percent, down from 4.9 percent last year and below what they believe is the economy's trend growth of 3-5 percent.

Philippines

The contribution of exports to the Philippine economy may shrink in the years ahead given the bleak growth prospects in major export markets, the Bangko Sentral ng Pilipinas said Monday.

However, it said the Philippines was expected to hit its medium-term growth targets despite a slowdown in exports.

The BSP said the crisis that continued to grip the eurozone and the lackluster performance of the US economy would continue to drag Philippine export earnings.

The adverse effects of anemic exports on the economy’s growth are seen to be offset by higher spending by Filipino households and businesses. As such, the Philippines was still poised to achieve its growth targets in the coming years, the monetary agency added.

“The export sector remains an important driver of economic growth and provider of jobs. However, given the difficult global markets, it would be a big challenge for exports to sustain its role in the economy,” BSP Deputy Governor Diwa Guinigundo told the Inquirer.

“[But] domestic demand will be an important element in a rebalancing effort in sustaining the growth momentum of the economy,” he added.

Exports account for roughly 30 percent of the Philippines’ gross domestic product (GDP).

The National Statistics Office earlier reported that the country’s exports fell 9 percent year on year to $3.8 billion in August. Falling export earnings of the Philippines and other emerging markets were attributed largely to the economic problems of the United States and the eurozone, two of the biggest export markets.

Exports in August brought the total for the first eight months of the year to $35.28 billion, up year on year by 5.4 percent.

Export industry players in the Philippines said that latest developments indicated that the 10-percent export growth target for this year was no longer attainable.

The government has set an economic growth target of between 5 and 6 percent this year, 6 and 7 percent in 2013, and at least 7 percent in the succeeding years.

According to the BSP, inflation was expected to remain manageable and within the target range of 3 to 5 percent until 2014. Relatively stable consumer prices allow interest rates to stay low as well.

The central bank said it believed an environment of low inflation and low interest rates would encourage people to spend and businesses to purchase capital and invest more.

It expressed confidence that the favorable economic fundamentals of the country would help encourage more foreign direct investments and infusions from local firms.

“Private investments not only in [infrastructure projects under the] PPP but also in other sectors like manufacturing, construction and agro-industries could be the other counterweight to weak [export earnings],” Guinigundo said.

The Public-Private Partnership, or PPP, is a program in which private firms are invited to invest in public infrastructure projects.

Thailand

Siam Cement Group (SCG) is seeking the Philippine government’s support to further promote sustainable development in the country, a ranking official of the firm said Monday.

Pramote Techasupatkul, chairman of SCG’s sustainable development committee and president of SCG Cement, said in an interview that the Philippine government should work closely with the private sector in establishing sustainable development practices.

Sustainable development is a global agenda being pushed by concerned companies and is determined by the resulting balance in the economy, society and environment.

SCG is willing to share its knowledge in sustainable development with the Philippine government. Manila officials can then use these guidelines to encourage local businesses to adopt a sustainable development policy, Techasupatkul said during the SCG Asean Sustainable Development Symposium held in Bangkok, Thailand.

“In the Philippines, we also need the support of the government. We can show the authorities [how] we did it, [but] we also need their support to invite other industries to join us,” the Thai executive said.

SCG maintains a presence in the Philippines through kraft paper manufacturer United Pulp and Paper Co. Inc. (UPPC), ceramic tiles and bathroom fixtures producer Mariwasa Siam Ceramics Inc., concrete roof tiles manufacturer CPAC Monier Philippines Inc., SCG Trading Philippines Inc., Green Siam Resources Inc., Green Alternative Technology Specialist Inc. and SCG Marketing Inc.

Green Alternative is a joint-venture company involved in waste management. The company turns municipal solid waste into alternative fuel.

Also, UPPC uses state-of-the-art, eco-friendly technology in manufacturing its products.

The Dow Jones Sustainable Indexes considers SCG to be a world leader in the building materials and fixtures sector.

The Dow Jones index is a benchmark used by investment funds that incorporate sustainability in their portfolio for better returns.

In order to ensure consistency within an organization, SCG established a sustainable development committee to enact and implement eco-friendly guidelines for each business unit.

Yesterday in Asia

Tokyo fell 0.48 percent, or 43.78 points, to 9,007.44, Seoul closed 0.55 percent, or 10.5 points, lower at 1,908.22 but Sydney finished up 0.31 percent, or 14.0 points, at 4,474.1.

Hong Kong fell 0.47 percent, or 104.93 points, to 22,006.40 and Shanghai ended 0.14 percent, or 3.02 points, lower at 2,114.03.

– Taipei fell 0.35 percent, or 25.11 points, to close at 7,185.36.

Leading smartphone maker HTC dropped 1.52 percent to Tw$194.0 while Taiwan Semiconductor Manufacturing Co. was 0.44 percent higher at Tw$90.3.

– Manila rose 0.61 percent, or 33.31 points, to 5,457.82.

Metropolitan Bank and Trust gained 3.16 percent to 98 pesos while Benguet Corp. rose 50 percent to 22.65 pesos.

– Wellington lost 0.15 percent, or 5.81 points, to end at 3,908.27.

Telecom fell 1.0 percent to NZ$2.40, while Fletcher Building added 0.1 percent to NZ$7.00 and The Warehouse rose 0.6 percent to NZ$3.14.

– Singapore was down 0.30 percent, or 9.06 points, to 3,031.69.

Keppel Corp. added 1.89 percent to Sg$10.80 while Singapore Telecommunications fell 0.63 percent to Sg$3.18.

– Jakarta fell 0.83 percent, or 35.95 points, to 4,302.94.

Cigarette maker Gudang Garam dropped 2.5 percent to 46,650 rupiah, car maker Astra slipped 1.9 percent to 7,750 rupiah and state-owned lender Bank Negara Indonesia was down 2.6 percent at 3,700 rupiah.

– Kuala Lumpur closed 2.09 points lower, or 0.13 percent, at 1,654.04.

Public Bank lost 1.7 percent to 15.54 ringgit, Bumi Armada eased 1.3 percent to 3.85 and RHB Capital shed 0.8 percent to 7.50.

– Bangkok edged up 0.01 percent or 0.10 points to 1,306.70.

Banpu lost 0.26 percent to 389 baht, but PTT Plc gained 0.94 percent to 322 baht.

– Mumbai ended flat, closing up 0.04 percent, or 7.42 points, at 18,762.87.

Drug giant Dr.Reddy’s Labs rose 1.36 percent to 1,794.7 rupees while Jet Airways rose 4.19 percent to 376.6 rupees.


Shayne Heffernan Ph.D.  
 
 
Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
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ASEAN  ANALYSIS

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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