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ASEAN STOCK WATCH Asean Affairs  3 October 2012

ASEAN Market Preview

By Shayne Heffernan Ph.D.

The Dow was pressured by stocks closely tied to the pace of growth, including Caterpillar Inc and Boeing Co. A major headwind for the economy has been declining demand from Europe, which has been drifting toward recession.

The S&P rose nearly 6 percent in the third quarter, lifted by accommodative moves by the Federal Reserve and European Central Bank, which market participants bet would boost flagging growth.

If Madrid were to seek a rescue, it would trigger European Central Bank buying of its bonds and help to ease U.S. investors' nervousness about impact of the euro zone's debt crisis on the U.S. economy.

Spanish Prime Minister Mariano Rajoy said a request for European aid was not imminent following a report the country could apply for help soon. Germany has signaled that Madrid should hold off on making its request, according to European officials on Monday.

Thailand

PTT, Thailand’s largest oil and gas conglomerate, plans to start an oil retailing operation in Burma with a local partner, the Bangkok Post reported on Monday.

PTT Oil Myanmar will have retailing and wholesaling, plus depot and transport operations, said a company official.

An official said PTT’s goal to become a regional oil retailer within five years, said Auttapol Rerkpiboon, executive vice president for communication and international markets. The move is expected to begin sometime in the next six months, following passage of Burma’s new foreign investment law.

"Myanmar has very strong potential in the oil retailing business. Demand is expected to grow sharply after the country opens to foreign investors and tourists," said Auttapol.

Currently, Burma’s oil consumption per head is very low at 38 litres annually, compared to 140 litres in Cambodia and Thailand's 700 litres. Each year, Burma consumes 2.4 billion litres of oil compares with 44 billion litres in Thailand.

PTT earlier this month signed a memorandum of understanding with Myanmar partner Denko Trading Co to study business opportunities there.

Demco, the local conglomerate, operates 15 petrol stations in Yangon with a land bank of about 60 rai that is expected to be developed into an oil depot.

Auttapol said the feasibility study will take around six months to complete. The group expects to use the PTT brand in developing business in Burma.

PTT said it would aggressively expand its lube oil business in Burma with an aim to become the second largest player there. Currently, it ranks third with a 15 per cent market share after Thailand's Trane (30 per cent) and UAE-based Falcon (18 per cent).

Malaysia

Maybank on Tuesday announced the launch of the Maybank World MasterCard to capture a greater market share of those with an annual income of S$120,000 and above.

The bank aims to increase its total card base by 10 per cent within the first two years of the World MasterCard's launch.

Head of Consumer Banking, Maybank Singapore, Alan Lau said: "The Maybank World MasterCard completes the suite of card products Maybank offers to the market.

"We believe our positioning of the card will give us better penetration into the affluent segment. In turn, this will increase total card spend, since our existing cardholders who earn S$120,000 and above have almost twice the propensity to do so compared to others.

"Targeted at individuals with a minimum annual income of S$120,000, the card offers a hefty 19.7 per cent discount at Shell petrol stations in Singapore, through collaboration with Best Petrol & Diesel Supply Pte Ltd," he said at the launch.

According to data from the Inland Revenue Authority of Singapore (IRAS) 2010/2011 Annual Report, the market size of those in the annual income band of SS$100,001 and above numbered around 218,200 in 2010.

This represents a 42 per cent growth over a three-year period.

Indonesia

Indonesia’s largest coal miner Bumi Resources described itself on Tuesday as under attack after its parent company, founded by British billionaire Nathaniel Rothschild, ordered a probe into its finances.

London-listed coal giant Bumi Plc owns a 29 percent stake in the Jakarta-based Bumi Resources. Last week it ordered an investigation into “potential financial and other irregularities,” including a $637 million writedown of development funds and assets.

Bumi Resources had undergone a “motivated attack,” said director Dileep Srivastava. “We don’t know who is behind it and what the motivation is,” he added.

Bumi Plc has engaged in a long-running public feud with Bumi Resources, owned by the wealthy Indonesian Bakrie family. Rothschild was ousted as co-chair of Bumi Plc in March after calling for a “radical clean-up” of the Indonesian firm.

Srivastava declined to name who was behind the attack and said the company was “very confused” by Bumi Plc’s announcement.

Srivastava was speaking at a public disclosure of the company’s financial standing demanded by the Indonesian Stock Exchange. He described Bumi Resources as “a class act” that had trebled coal production since 2003 to an expected 75 million tons this year.

But the company’s shares have slid by 68 percent this year, and fell 20 percent in the three days following Bumi Plc’s announcement last week of a probe.

Ratings agency Moody’s revised Bumi Resources’ outlook from stable to negative the day after Bumi Plc’s statement. Standard and Poor’s downgraded Berau Energy, owned by Bumi Resources, citing the “potential negative effect” of the investigation.

Bumi Resources is one of many companies owned by the family of Aburizal Bakrie, one of Indonesia’s wealthiest men and a probable candidate for the nation’s 2014 presidential election.

Singapore

Kellogg Company (NYSE: K) and Wilmar International Limited (SGX: WIL)announced a 50:50 joint venture between Kellogg and Wilmar for the manufacture, sale and distribution of cereal, wholesome snacks and savory snacks in China. Wilmar's wholly-owned subsidiary in China, Yihai Kerry Investments Co., Ltd, will participate in the joint venture.

Wilmar will contribute infrastructure, supply chain scale, an extensive sales and distribution network in China, as well as local China market expertise to the joint venture. Kellogg will contribute a portfolio of globally recognized brands and products, along with deep cereal and snacks category expertise. The Joint Venture will use the Kellogg's? and Pringles? brands. Together, Kellogg and Wilmar will leverage this complementary expertise to maximize marketing and manufacturing synergies.

China is expected to become the largest food and beverage market globally within the next five years, driven both by the growth of a middle class consumer base in large cities and an increased desire for a wide range of packaged and branded foods. Cereal consumption is currently being driven by rapid growth in milk consumption, along with consumers' desire for healthy and convenient breakfast foods. Snack foods also represent a very large growth opportunity.

"China's snack-food market alone is expected to reach an estimated $12 billion by year-end, up 44 percent from 2008," said John Bryant, Kellogg Company's president and chief executive officer. "To capture this growth, we will leverage the key strengths Kellogg and Wilmar bring to the partnership – the globally recognized Kellogg's? and Pringles? brands and deep category knowledge; scale and local market experience; and our mutual commitment to consumer-focused innovation.

"This joint venture positions our China business for growth and fundamentally changes our game in China. Our organizations have developed a strong working relationship and trust. I am pleased to be working together with Kuok Khoon Hong and his talented team, and have every confidence that our partnership will be a long-term success," concluded Bryant.

Wilmar's Chairman and Chief Executive Officer, Kuok Khoon Hong, added, "This joint venture with Kellogg will complement our existing Consumer Product business and leverage on our extensive distribution network and support infrastructure in China.  With our joint strength and shared vision, I am confident that we will be able to develop a leading cereal and snacks business together."

The joint venture company will be headquartered in Shanghai, China.

Launch of the joint venture is subject to customary conditions, including regulatory approvals by the Chinese government and anti-trust approvals.

Read more here: http://www.heraldonline.com/2012/09/24/4285693/kellogg-company-and-wilmar-international.html#storylink=cpy


Philippines

The country’s foreign exchange reserves, which recently breached the $80-billion mark, are seen to have hit an “excessive and costly” level.

According to Johanna Chua, chief economist for Asia Pacific at Citi, some indicators would show that the gross international reserves (GIR) of the Philippines are already the second-highest in the region, following China’s, particularly in terms of proportion to certain foreign liabilities of the country.

The accumulation of reserves has traditionally been viewed positively as these serve as buffer in times of external shocks, such as global recession. For instance, if a global crisis would cause emerging-market currencies to sharply depreciate, the BSP could use the reserved dollars to buy pesos and prevent significant fall of the local currency.

However, Chua said foreign-exchange accumulation entails costs, and so having more than enough is imprudent.

“The reserves are almost excessive, if not already excessive,” Chua said in a press briefing on Tuesday.

Chua said that by accumulating dollars—with the BSP shelling out pesos to buy the foreign currencies—the central bank infuses additional liquidity into the economy. Consequently, it will have to accept higher amounts of deposits from banks and spend more on interest payments, unless it will allow the additional cash in the economy to trigger faster inflation.

“Having too much [reserves] makes one suffer from high cost of sterilization,” she added. “Sterilization” refers to the act of siphoning off excess liquidity in the economy to prevent accelerated increase in consumer prices.

Dollar buying aids in the buildup of reserves on one hand, and prevents steep appreciation of the peso on the other. A sharp and sudden rise of the peso drags down competitiveness of the export sector and reduces the peso income of remittance-dependent households.

The Bangko Sentral ng Pilipinas said the act of buying dollars thus helps maintain economic stability in the country.


Yesterday in Asia

Tokyo ended 0.12 percent lower, shedding 10.46 points to 8,786.05, Seoul closed flat, dipping 0.18 points to 1,996.03 and Sydney jumped 1.01 percent, or 44.4 points, to 4,433.0.

Taipei rose 0.56 percent, or 42.96 points, to 7,718.68.

Hong Kong, Shanghai and Mumbai were closed for public holidays.

Traders took their lead from Wall Street, which ended broadly higher after the Institute for Supply Management said its Purchasing Managers Index (PMI) edged up to 51.5 last month from 49.6 in August – representing the first expansion after three months of contraction.

– Singapore closed up 0.70 percent, or 21.28 points, at 3,079.14.

Keppel Corp. gained 0.44 percent to Sg$11.49 and Singapore Airlines added 0.56 percent to Sg$10.77.

– Manila closed 0.76 percent higher, adding 40.16 points to 5,348.68.

Philippine Long Distance Telephone was unchanged at 2,760 pesos while Ayala Corp. rose 0.23 percent to 420 pesos. Banco de Oro Unibank rose 2.09 percent to 65.90 pesos.

– Wellington rose 1.08 percent, or 41.22 points, to 3,871.25.

Fletcher Building gained 1.4 percent to NZ$7.16 and Mainfreight was up 1.2 percent at NZ$10.39. Air New Zealand closed at a 19-month high, adding 2.1 percent to NZ$1.21.

– Jakarta gained 0.48 percent, or 20.55 points, to 4,256.84.

– Kuala Lumpur rose 0.47 percent, or 7.72 points, to 1,651.03.

UEM Land Holdings added 3.5 percent to 1.78 ringgit, while Genting Malaysia rose 2.5 percent to 3.68 ringgit. Sime Darby lost 0.6 percent to 9.74 ringgit.

– Bangkok rose 0.46 percent, or 5.95 points, to 1,305.66.

Mobile telephone giant Advanced Info Service dropped 0.93 percent to 212 baht, while retailer Siam Makro added 3.54 percent to 410 baht.


Shayne Heffernan Ph.D.  

 

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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.

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