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ASEAN STOCK WATCH Asean Affairs  17 October 2012

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Economic data showed the overall U.S. Consumer Price Index rose 0.6 percent in September as the cost of gasoline surged, posing a threat to consumers' spending power. On the other hand, inflation pressures look unlikely to derail the Federal Reserve's ultra-easy policy path.

The S&P 500 is on track for its second consecutive advance, and its best two-day run in a month on the heels of last week's 2.2 percent slide. That was the benchmark index's worst weekly decline in four months as investors looked for more evidence on the global economic climate from large multinational companies.

United Overseas Bank (UOB)

United Overseas Bank (UOB) aims to double loans to South-east Asian small businesses by 2015 and expects strongest loan growth to come from Thailand and Indonesia.

To tap on an expected rise in demand for funding from small businesses, the bank will hire at least 100 relationship managers in the next year, growing its team of regional business bankers by at least 10 per cent.

It also intends to invest in new technology, said Victor Lee, UOB group head of business banking, a unit set up three years ago within its retail bank to serve small businesses - those with an annual turnover of less than $20 million.

In Singapore, UOB has grown its sales force by 50 per cent over the last two years to station business banking managers in all 67 branches.

Mr Lee said it now serves one in every two small businesses in Singapore, which now accounts for half of UOB's business banking revenue.

He thus expects the next phase of growth to come from Malaysia, Thailand and Indonesia.

Each of the three markets should contribute at least as much as Singapore does to business banking revenue by 2015, Mr Lee said.

Stable economic growth, increased domestic spending and strong intra-regional trade flows are trends he thinks will provide small businesses with opportunities for growth, and UOB with the opportunity to reach new customers.

A rising number of infrastructure projects in Malaysia and Indonesia, reconstruction activities in Thailand, as well as a rise in tourism spending next year may also lift small businesses' need for financing.

In particular, Mr Lee sees "much headroom for growth" via UOB's network of more than 150 branches in Thailand and more than 200 branches in Indonesia.

Apart from investing more in people, the bank will be rolling out in both markets a $15-million credit application tool already in use in Singapore and Malaysia, which has halved loan processing time.

Bank lending growth in general has slowed this year on the back of economic uncertainty, but Mr Lee says there has been some resilience in loans to small businesses.

UOB has seen strong growth in property loans to businesses here due to increased asset ownership - small business owners are choosing to buy instead of rent factories and offices.

"Locally, we are seeing strong growth in property loans because of asset ownership. That growth has outstripped our expectations this year," Mr Lee said.

Elsewhere in the region, the business banking unit's strength has been in equipment financing. "We are seeing customers buying their first tractor, or excavator or truck, or renewing equipment," he said.

Maxis Bhd

Public Investment Bank initiated coverage of Maxis Bhd, the country’s largest mobile phone operator, with a "neutral" rating and a target price of RM7.26 per share, citing dismal growth prospects due to narrowing profit margins.

“Though we acknowledge progressive growth from the non-voice segment, we think Maxis’ strategy of offering more competitive voice packages for the sake of reclaiming its subscriber losses will eventually depress its margins,” Public Investment said in a note.

However, the research house said Maxis’ downside risks will be cushioned by its dividend yield of 40 sen per share.

Maxis shares slipped 1.02 percent against the Malaysian benchmark stock index’s 0.86 percent fall.


Shares in Susco Pcl gained as much as 10.7 percent to touch their highest since September 1994 on expectations the oil retailer would get a strong revenue boost from its recent acquisition of petrol stations of Malaysia's Petronas.

Susco shares were up 9.1 percent at 2.64 baht, climbing at one point to 2.68 baht.

The stock has risen around 15 percent since Sept. 17 when it announced the acquisition of Petronas's assets, outperforming a 0.7 percent fall of the energy subindex and a 2.2 percent gain of the broader SET index.

For the company statement, click

The Petronas assets would generate around 15 billion baht ($487 million) of revenue per year from the next year, which would double the revenue base for Susco, bolstering the stock's valuation, broker Bualuang Securities said in a report.

"We expect Susco's forward price to earnings multiple of 10.5 times, falling from its current price to earnings of 15.5 times, on the back of the acquired Petronas assets," it said in note to clients.


State oil and gas firm Pertamina on Monday reported $37 million in losses since 2010 due to illegal tapping of its Tempino-Plaju pipeline in Sumatra.

At a meeting with lawmakers in Jakarta, Pertamina president director Karen Agustiawan said from 2010 through Oct. 11 of this year, more than 370,000 barrels of crude oil had been stolen from the pipeline, resulting in total losses of $37.01 million.

“The number of cases have been increasing from year to year,” Karen told members of the House of Representatives’ Commission VII, which oversees energy, mineral resources and environment.

Karen said crude oil stolen from the pipeline totaled 8,120 barrels in 2010, with the number increasing almost twelve-fold to 94,529 barrels in 2011, and soaring to 267,510 barrels from January to Oct. 11.

Most of the illegal tapping took place in the South Sumatra district of Musi Banyuasin, where a section of the pipeline exploded earlier this month, killing nine people, according to Metro TV, and injuring others. Some of the victims were allegedly illegally siphoning oil from the pipeline.

Karen said there are a number of traditional oil refineries, particularly in Simpang Bayat and Sungai Lilin in Musi Banyuasin, where stolen crude oil is turned into gasoline, diesel and kerosene.
“The markets [for the end products] are Jambi, Lampung, Bangka Belitung and Pekanbaru,” Karen said, as quoted by the Indonesian news portal

National Police chief detective Gen. Sutarman, who attended the same House meeting, said a portion of the final products are also sent to Tangerang, Banten, and some were even exported to China.

He added that roughly 3,350 people were allegedly involved in illegal tapping activities along the pipeline, and that South Sumatra Police handled 61 illegal tapping cases from January to September alone.

The 267-kilometer Tempino-Plaju pipeline channels crude oil from Tempino village in the Jambi district of Muaro Jambi to a Pertamina refinery in Palembang’s Plaju subdistrict.

Pertamina announced shortly after the fatal explosion that it had disbursed $90 million to build a new pipeline along the same corridor, saying the current conduit was 70 years old and highly vulnerable to illegal tapping. The new pipeline is expected to commence operations in December.


Philippine Long Distance Telephone Co. (PLDT) has approved the issuance of new voting shares to allow the company to comply with the Supreme Court’s interpretation of foreign ownership limits in local utilities.

In a disclosure, PLDT said it would issue 150 million new voting preferred shares to BTF Holdings Inc., a subsidiary of the phone firm’s employee beneficial trust fund. The creation of the shares was approved in a special shareholders’ meeting last March.

Officials earlier said the shares would only be issued if the Supreme Court threw out petitions by PLDT’s top executives—chair Manuel V. Pangilinan and CEO Napoleon Nazareno—that sought a reversal of a previous decision that said the telco’s ownership structure was in violation of restrictions on foreigners. In a ruling last week, the Supreme Court upheld its previous ruling in a vote of 10-3.

PLDT said the new shares would bring down the voting rights of foreign shareholders in PLDT to 34.5 percent, down from the previous 58.4 percent.

The new voting preferred shares “shall have voting rights at any meeting of stockholders for the election of directors and all other matters to be voted upon by the stockholders in any such meetings.”

BTF Holdings, as the owner of the new shares, “shall be entitled to cumulative dividends at the rate of 6.5 percent annually,” the disclosure added. The new shares will not be convertible into common shares, which have a higher dividend yield.

PLDT said the creation of the   new shares was prompted by the Supreme Court’s change in the definition of the term “capital” when dealing with local corporations. PLDT said previous opinions by the Securities and Exchange Commission defined capital to include shares that did not have voting rights.

Under the old definition, the company said it complied with constitutional restriction that prohibited foreigners from owning more than 40 percent of the shares of any public utility company. However, this changed in 2011 in the case of Wilson Gamboa vs. Finance Secretary Margarito Teves et al., when the tribunal said that the term “capital” should only cover shares that gave investors the right to vote.

Yesterday in Asia

Tokyo rose 1.44 percent, or 123.38 points, to 8,701.31, Sydney gained 0.18 percent, or 8.1 points, to 4,491.5 and Seoul climbed 0.83 percent, or 15.95 points, to 1,941.54.

Hong Kong advanced 0.28 percent, or 58.82 points, to 21,207.07 and Shanghai was flat, giving up earlier gains to finish 0.11 points up at 2,098.81.

– Singapore closed up 0.12 percent, or 3.76 points, at 3,046.81.

Jardine Cycle and Carriage fell 0.06 percent to Sg$50.27 while Keppel Corp. gained 0.27 percent to Sg$11.25.

– Taipei rose 0.70 percent, or 52.12 points, to 7,471.02.

Taiwan Semiconductor Manufacturing Co. gained 1.27 percent to Tw$87.5 while Hon Hai Precision was 0.11 percent higher at Tw$87.6.

– Manila ended 0.31 percent higher, adding 16.72 points to 5,399.94.

– Wellington gained 0.62 percent, or 24.33 points, to 3,940.70.

Fletcher Building was up 2.17 percent at NZ$7.52, Chorus gained 2.08 percent to NZ$3.43 and Telecom put on 0.84 percent to close at NZ$2.40.

– Kuala Lumpur ended flat, nudging down 0.92 points to 1,653.52.

Maxis fell 1.7 percent to 6.85 ringgit, CIMB Group shed 1.4 percent to 7.55 ringgit and Malaysia Marine & Heavy Engineering eased 1.0 percent to 5.00 ringgit.

– Jakarta added 0.36 percent, or 15.55 points, to 4,329.08.

Astra was up 2.6 percent at 8,050 rupiah and Telkom rose 2.6 percent to 9,850 rupiah.

– Bangkok eased 0.24 percent, or 3.07 points, to 1,287.49.

– Mumbai fell 0.73 percent, or 135.85 points, to 18,577.70.

Tata Motors fell 2.62 percent to 262.3 rupees while Reliance Industries lost 1.21 percent to 813.25 rupees.

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?

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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.

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