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By Shayne Heffernan Ph.D.Economist Shayne Heffernan expects earnings reports for S&P 500 companies to show a drop of about 2.7 percent on a year-over-year basis. This would mark the first quarterly drop in three years for S&P 500 companies' earnings.
Such warnings about earnings have left investors cautious after a rally that has driven the S&P 500 up nearly 16 percent so far in 2012, lifting it to an almost five-year high.
Earnings season will begin when Dow component Alcoa Inc reports quarterly results after Tuesday's closing bell. Analysts expect Alcoa's third-quarter results to show the aluminum company broke even, down from a profit of 15 cents per share a year earlier, according to Thomson Reuters data.
Among other large multinationals that have warned about earnings, citing weak demand in Europe and China, are FedEx Corp , Caterpillar Inc and Hewlett-Packard Co . FedEx shares shed 0.7 percent to $85.73, while Caterpillar's stock lost 0.8 percent to $84.76. HP shares fell 0.9 percent to $14.33.
Petroliam Nasional Bhd (Petronas) and Singapore's Keppel Corp are in negotiations to build a planned power plant in Pengerang, Johor, sources close to Petronas told StarBiz, confirming an earlier report by Singapore's Straits Times.
The power plant both parties will build is aimed at supplying electricity to industries at Petronas' planned RM60bil refinery and petrochemical integrated development (RAPID) petrochemical complex in Pengerang, as well as into the Singapore power grid.
“Petronas' talks with Keppel follows from their acquisition of a 30% stake in Singapore power company GMR Energy, to ultimately participate in the dynamic power supply system in Singapore, aside from powering' up RAPID,” said one source.
Last September, Petronas purchased a 30% stake in GMR Energy Singapore Pte Ltd, which is developing an 800MW combined-cycle gas-turbine power plant on Jurong island, Singapore.
The Singapore Straits Times report stated that Keppel might get a 30% stake in the 1,200MW plant that would be part of Petronas's RAPID project in Pengerang. Petronas has yet to respond to queries from StarBiz on this deal.
If and when the Petronas-Keppel joint venture goes through, it would mark the first time a Malaysian-based power plant supplies power into Singapore as well as the first time for a Singapore entity to invest in the Malaysian power sector.
A power sector professional told StarBiz that it only made sense for Petronas to seek to sell power to Singapore from its planned power plant in Pengerang.
“It doesn't make sense to just produce enough power for industrial demands in Pengerang. It is also better to build a larger plant than a smaller one, to achieve economy of scale' benefits and to ensure there's a sufficient buffer.
“It then also makes sense for the balance electricity to be sold into the Singapore grid, which has a very dynamic price discovery system,” the expert said.
Although more known for its shipbuilding prowess, the choice of Keppel as a partner for Petronas is not surprising.
A unit of Keppel Corp, Keppel Energy has a track record in developing, owning and operating power plants in Brazil, China, the Philippines and Nicaragua.
In Singapore, Keppel Energy operates a 500MW gas-fired combined-cycle power plant on Jurong Island that commenced operations in 2007. In 2010, work began to expand the Jurong plant's capacity to 800MW.
Since 2000, Keppel Energy has had a licence to participate in the Singapore electricity market.
Keppel Energy has also had a past relationship with Petronas, having a long-term natural gas supply deal with the latter since 2004.
Petronas is in the power sector in Malaysia via investments in the Kimanis power plant and the proposed Lahad Datu power plant in Sabah.
The Kimanis plant is jointly developed by Petronas Gas Bhd in partnership with Yayasan Sabah through NRG Consortium (Sabah) Sdn Bhd.
Meanwhile, the Lahad Datu plant is being built by a Tenaga Nasional Bhd-led consortium together with Petronas and a Sabah state entity.
China, Malaysia and Thailand’s currencies are undervalued relative to the economies’ medium-term fundamentals, and the countries in question should focus on fiscal policy to support growth, the International Monetary Fund said Tuesday.
In its World Economic Outlook, the IMF found that while foreign exchange movements since the global financial crisis had been consistent with demand rebalancing, gains in currencies of nations with external surpluses had halted over the past eight months.
It warned that continued accumulation of international reserves was contributing to global imbalances and associated weaknesses, and said these were likely to remain above desirable levels in the absence of decisive action by governments.
Astro Digital, a subsidiary of Astro Malaysia Holdings Bhd, has entered into a strategic collaboration with Google to extend the distribution of its Astro branded content to Malaysia and the rest of the world via YouTube.
Since March 2012, Astro and Google has entered into a content hosting services agreement which will allow Astro to have incremental reach beyond its current customer base, the company said in a statement here Tuesday.
Astro Malaysia Chief Operating Officer Henry Tan said Astro will capitalise on new technologies and develop new products to expand its customer reach and enhance its service proposition to consumers.
This partnership will widen the distribution of its Malaysian content onto digital platforms such as YouTube, so that the company can go beyond the household to access non-Astro customers as well as Malaysians living abroad or anyone in the world, who are interested in the company's content offering.
Currently available on YouTube are six full length "catch-up" channels including Astro Awani, Astro Prima, Astro Oasis, Astro Xiao Tai Yang, Astro AEC and Astro Vaanavil from NJOI, available across three vernacular languages.
The full-length videos are available within a week from broadcast, and Astro offers the latest news, exciting kids' educational shows, religious programmes and the best Malay, Chinese and Indian entertainment, drama and concerts.
To date, Astro has over 300 hours of library content with about eight hours weekly refresh rate, on YouTube.
In total Astro has 14 channels on YouTube and these channels have achieved over 35 million cumulative views since the launch of YouTube Malaysia on March 22, 2012.
Astra Daihatsu Motor, an Indonesian carmaker, plans to spend Rp 1 trillion ($104 million) in the next three years to build 30 new dealerships and upgrade its existing dealerships across the nation.
Suparno Djasmin, an ADM official, said the company plans to build an average of 10 dealerships every year.
“A dealership will cost between Rp 30 billion to Rp 40 billion,” Suparno said in Jakarta. At that price, the construction of the planned 30 dealerships should cost the company around Rp 1 trillion or more.
That would lift the total number of ADM dealerships to 226 by 2014. The company currently has 196 dealerships across Indonesia.
In addition to constructing and upgrading dealerships, the company also plans to build stock yards in several provinces in Indonesia. The company plans to build the first such stock yard in Medan, the capital of North Sumatra.
Suparno said that each stock yard will need up to one hectare of land. “A stock yard of that size will be able to accommodate up to 600 vehicles,” Suparno said in Jakarta on Monday.
ADM, based in Jakarta, is engaged in the passenger and commercial motor vehicle industry. The company, which is partly controlled by Astra International, manufactures components for motor vehicles. It also distributes motor vehicles under Daihatsu and other brand names.
Rising purchasing power among many Indonesians has prompted a number of global consumer companies to expand their business in Indonesia. The government has forecast the economy to grow by 6.5 percent this year.
The International Monetary Fund has kept its 2012 growth projection for the Philippines, but reduced its figure for next year as it sees a weaker global economy, which may dampen sentiments of investors and consumers.
In its latest issue of “World Economic Outlook” released Tuesday, the IMF said the Philippines would grow by 4.8 percent this year, sticking to the 2012 forecast it made in July.
But the growth outlook for 2013 was cut to 4.8 percent from the previous projection of 4.9 percent.
The IMF’s forecast is below that of the government’s range of 5 to 6 percent for this year, and 6 to 7 percent for next year.
In the report, the IMF said that the Asia-Pacific region would be facing graver risks next year due to the escalation of the crisis in Europe and the failure of the United States to address its fiscal problems.
Apart from being the Philippines’ biggest export markets, the eurozone and the United States are also two of the country’s biggest sources of foreign direct investments.
Exports account for about 30 percent of the Philippine economy.
The problems now upsetting some of the world’s most advanced nations may eventually dampen investment and consumption activities of economies across Asia, the IMF said.
The multilateral institution now expects the global economy to grow by just 3.3 percent this year, reducing its initial forecast of 3.5 percent. For 2013, the IMF also trimmed its global economic growth forecast to 3.6 percent, from 3.9 percent.
Yesterday in Asia
Sydney rose 0.52 percent, or 23.4 points, to close at 4,505.3 – a 14-month high thanks to rising iron ore prices. Seoul eased 0.14 percent, or 2.85 points, to 1,979.04 and Tokyo fell 1.06 percent, or 93.71 points, to 8,769.59.
Hong Kong rose 0.54 percent, or 112.72 points, to 20,937.28. Shanghai advanced 1.97 percent, or 40.81 points, to 2,115.23, with the market also helped by a huge central bank injection of funds aimed at boosting liquidity.
– Singapore closed 0.35 percent, or 10.74 points, lower at 3,065.91.
Singapore Telecom was unchanged at Sg$3.19 and Singapore Airlines eased 0.85 percent to Sg$10.56.
– Taipei fell 0.31 percent, or 23.88 points, to 7,592.01.
Taiwan Semiconductor Manufacturing Co. shed 2.24 percent to Tw$87.1 while leading smartphone maker HTC was 7.0 percent limit-down at Tw$267.0.
– Manila closed 0.72 percent lower, shedding 39.23 points to 5,394.90.
Philippine Long Distance Telephone fell 1.09 percent to 2,730 pesos and Metropolitan Bank and Trust dropped 2.33 percent to 90.30 pesos.
– Wellington slipped 0.41 percent, or 15.92 points, to 3,907.99.
Fletcher Building was off 2.4 percent NZ$7.30 and Telecom closed down 0.63 percent at NZ$2.37.
– Jakarta rose 0.28 percent, or 12.02 points, to 4,280.25.
Gold miner J-Resources gained 9.5 percent to 5,750 rupiah, car maker Astra rose 1.3 percent to 8,200 rupiah and gas distributor Gas Negara added 2.3 percent to 4,250 rupiah.
– Kuala Lumpur added 0.19 percent, or 3.10 points, to 1,663.32.
YTL Power International gained 1.9 percent to 1.64 ringgit while Sime Darby added 1.2 percent to 9.78 ringgit. MMC Corp. eased 1.9 percent to 2.63 ringgit.
– Bangkok slipped 0.94 percent, or 12.23 points, to 1,292.48.
Electricity firm EGCO fell 1.12 percent to 132 baht, while Siam City Cement dropped 1.40 percent to 353 baht.
– Mumbai rose 0.45 percent, or 84.38 points, to 18,793.36.
Engineering giant Larsen and Toubro rose 2.06 percent to 1,628.7 rupees while Infosys rose 1.85 percent to 2,536.95.
Cash-strapped Kingfisher Airlines fell 4.76 percent to 12.00 rupees, its seventh straight day of losses as striking workers refused to return to work without payment of salaries, keeping the flights grounded since last week.
Shayne Heffernan Ph.D.
Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
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