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||Asean Affairs 3 October 2011
Asean Stock Watch- October 3
Wall Street provides a negative backdrop for the Asean market after the Dow Jones Industrial Average on Friday dropped 240.60 points or 2.16 percent to 10,913.38 as weak economic data from China triggered fears of a global economic slowdown.
Last Monday, the Indonesian benchmark stock measure slumped to its lowest level in a year, down 21 percent from a record high set on August 1.
That tumble took eight weeks, and it may take even longer for investors who bought at the top to recoup their losses, or even for the Jakarta Composite Index to climb back to its all-time highs.
Volatility is likely to continue, judging from developments overseas. European Union officials are still debating how to tackle debt problems among some of its members, particularly securing a second bailout package for debt-laden Greece.
There are also concerns about the possibility of the United States, the world’s largest economy, slipping back into recession. The US economy grew 1.3 percent at an annualized rate during the second quarter, after expanding 0.4 percent in the first quarter.
At the same time, an outflow of foreign capital is dragging asset prices lower as international investors reduce their risk in emerging nations such as Indonesia.
“The market is dealing with complex problems at the moment,” said Poltak Hotradero, head of research at the Indonesia Stock Exchange (IDX).
The JCI ended August 1 at 4,193 after a spate of earnings reports, ranging from property developers to commodity-related companies, were released.
Alam Sutera Realty’s first-half net income shot up 78 percent to Rp 706.4 billion ($81 million) from a year earlier as steady borrowing costs spurred consumers to take out loans for home purchases.
The JCI slumped into a technical bear market when its decline reached 20 percent from the Aug. 1 high to the Sept. 22 close. Europe is in the throes of Greece’s debt crisis, and the United States has lost its top-notch AAA credit rating due to a downgrade by Standard & Poor’s.
Destry Damayanti, an economist at Mandiri Sekuritas, said the market would struggle for an indeterminate period of time before moving back toward its record high, because some investors preferred to hold onto cash at the moment.
“It is a situation that is hard to predict because the market sentiment is still negative,” she said. “The global economy has yet to recover, so it would be difficult [for the JCI] to reach the 4,000 level this year. This is definitely a challenge for us, whether we can be consistent or not.”
Aviliani, an economist at the Institute for the Development of Economics and Finance (Indef), said she was optimistic the market would recover as soon as investors regained their confidence.
“At the moment, [investors] are still in wait-and-see mode,” she said.
Praska Putrantyo, an analyst at Infovesta Utama, said he was still optimistic the benchmark index would get back to the 4,000 level by the end of the year, “probably in early November,” on expectations that Greece would receive a second bailout and avoid default.
“Inflation in the last quarter usually eases, commodity prices are not surging and domestic companies are expected to announce strong financial reports,” he said.
In the 39 days of trading from Aug. 1, the JCI has lost 1 percent to 5 percent nine times, while gaining 1 percent to 5 percent 10 times — highlighting the huge swings in the market. On Sept. 22, it tumbled by 8.9 percent in its biggest one-day slide in almost three years.
Among the largest companies trading on the IDX, shares of Bank Mandiri have lost more than 20 percent from their recent highs, while those of Astra International, Indonesia’s largest auto distributor, have fallen more than 10 percent.
Still, some analysts are optimistic that the market could reach all-time highs by the end of the year, given the positive fundamental factors in Indonesia’s economy.
Bank Indonesia has kept its key interest rate steady at 6.75 percent since February as the inflation rate remains within the central bank’s target of 4 percent to 6 percent this year, which has led consumers to feel comfortable bor rowing from lenders.
BI has even hinted at reducing the key rate to ensure economic growth should Western nations slip into recession and drag the global economy with it.
Indonesia’s economy has fared better than some of those in the West. The International Monetary Fund forecasts Indonesia’s economy growing 6.4 percent this year, more than twice the rate for some nations in Europe such as Spain and Italy.
Even as there is uncertainty over the speed of recovery of the IDX, benchmark indexes in other nations have yet to climb back to record highs of more than a decade ago. Thailand’s benchmark stock gauge, the SET Index, closed at record high above 1,400 in the mid-1990s. It broke above the 1,100 mark in July. The measure closed Friday at 916.
The FBM KLCI remains in the red just before the mid-day break, shedding more than 2 percent to 1,355.
The index is being dragged by key blue-chips comprising mostly banks and plantation firms.
"The bears will likely return to Asian bourses today following Wall Street's slump last Friday," Hwang DBS told clients in today's morning note.
Major U.S. equity indices tumbled between 2.2 percent and 2.6 percent last Friday largely due to the problems in the Eurozone as well as its own problem of slow economic growth.
The benchmark FBM KLCI is expected to come under selling pressure, possibly retreating towards its immediate support level of 1,345 ahead, said Hwang DBS.
In the broader market breadth remains negative with 504 counters down, 104 up while 152 remain unchanged.
Crude palm oil 3-month futures are down RM70 to RM2,835 per tonne.
Nymex crude oil loses $1.25 to US$77.95 per barrel.
The ringgit is quoted at 3.2087 to the US dollar.
The Philippine stock market is expected to climb back above the 4,000 line this week with guarded optimism creeping back into the market on hopes of a favorable resolution to the European debt crisis.
After gaining 2.84 percent in the previous week, the Philippine Stock Exchange index is expected to follow this up with another week of gains as the build-up of momentum may invite more funds and bargain-hunting in anticipation of third quarter earnings.
“After having tipped 4,000-line in intraday trades Friday, the market is expected to keep investor interest moving into the last three months of the year,” said Jun Calaycay of Accord Capital Equities Corp.
Last week’s positive swing wiped out a third of the 830-point loss in the previous 38 sessions.
Investors are seen to gradually accumulate index counters following a successful test of the 3,700-line, proving the resiliency of the domestic equity market, Calaycay added.
Despite the optimism, sentiment remains guarded until the findings of the European Union, International Monetary Fund and European Central Bank’s visit to Greece are announced.
“Even if a fresh tranche of bailout funds are given to Greece, another growing concern is Italy. The country’s debt to GDP ratio comes second to Greece which is the highest in the Euro zone,” said Maria Arlysa Narciso of AB Capital Securities Inc.
“Short-term bounces might be an opportunity to exit for now until the picture clears for the overall macro framework in industrialized markets. Concerns over prospective weakness in demand for Asian exported goods will be highlighted on weekly progression of economic barometers overseas,” said Freya Natividad, investment analyst at 2TradeAsia.com.
“The PSEi would likely swing erratically between gains and losses until it finds a solid ground where it can consolidate. When finally there is enough reason to rally, the index can breach 4,000 and probably head towards 4,150,” said Narciso.
This week, the PSE will begin extending trading hours until 1 p.m. before it fully implements afternoon trading next year.
“As you know, the program is by next year the afternoon sessions actually all happen so this is a warm-up,” said Hans Sicat, PSE president and chief executive.
Singapore shares were lower at 12.45 pm on Monday, with the benchmark Straits Times Index at 2,608.01, down 2.51 percent, or 67.15 points.
About 733.6 million shares exchanged hands.
Losers beat gainers 365 to 61.
Thai stocks opened down 33.00 points at the start of trade Monday morning.
The Stock Exchange of Thailand main index opened at 883.21 points, down 3.60 percent from Friday’s close. The trade value was 1.42 billion baht, with 234.92 million shares traded.
The SET50 index opened at 610.41 points, down 25.89 points or 4.07 percent, with a total trade value of 1.16 billion baht.
The SET100 index fell 55.40 points, or 4.01 percent, to 1,326.18 points, with a total turnover of 1.28 billion baht.
The SETHD index went down 30.39 points, or 3.40 percent, to 863.01 points, with a total turnover value of 462.39 million baht.
The MAI index dropped 5.55 points, or 2.25 percent, to stand at 240.91 points, with total transaction value of 11.95 million baht.
Top five most active values were:
PTT stood at 248.00 baht, down 12.00 baht (4.62 percent)
BBL stood at 135.00 baht, down 6.00 baht (4.26 percent)
BANPU stood at 498.00 baht, down 26.00 baht (4.96 percent)
KBANK stood at 111.00 baht, down 6.00 baht (5.13 percent)
TOP stood at 48.50 baht, down 2.25 baht (4.43 percent)
About 60 percent of shares nosedived when Vietnam's stock market opened Monday morning, driving down both of the nation's indices.
On the HCM Stock Exchange, the VN-Index lost 1.28 percent to close today at 422.12. Market value fell 61 percent against Friday's figure, to end at VND495 (US$23.8 million), with just 29.5 million shares changing hands.
Losers overwhelmed gainers by 184-48, with large-caps declining.
Eight of the 10 biggest shares by market capitalisation lost value, with insurer Bao Viet Holdings (BVH) dropping to the floor, while others declined by between 0.9 percent to 2.5 percent. Just two codes posted gains. They were Sacombank (STB), which closed 1.8 per cent up; and dairy producer Vinamilk (VNM), up 0.8 percent.
STB was also the most active stock on the southern bourse with 1.37 million shares exchanged. It closed at VND14,500 ($0.70).
On the Ha Noi Stock Exchange, the HNX-Index declined 1.35 per cent to finish at 70.38 points. Today's trades remained sluggish, with just 36.7 million shares, worth nearly VND363.5 billion ($17.5 million), traded.
Losers outnumbered gainers by 211-59. Kim Long Securities (KLS), the most active stock nationwide, saw 3.6 million shares exchanged. However, it lost 3.4 percent of its value to close at VND11,400 ($0.55).