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ASEAN STOCK WATCH Asean Affairs  9 October 2012

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By Shayne Heffernan Ph.D.

MSCI’s Asia Pacific ex-Japan and All Countries World Indexes are both up around 13 percent over the year-to-date.

China, the engine of global growth in recent years and a key consumer of commodities, is due to release at the end of next week its growth data for the third quarter, which analysts expect to be the weakest three months of the year. But with the euro zone sliding back towards recession amid a still unresolved debt crisis and the US recovery far from secure, investors remain reluctant to chase growth-sensitive riskier assets too aggressively.

The World Bank expects China’s GDP growth for 2012 as a whole to come in at 7.7 percent, which would be its lowest in more than a decade.

The World Bank on Monday slashed its 2012 growth forecast for developing countries in East Asia and the Pacific to 7.2 percent, dragged down by China’s worst economic performance in 13 years. Thia followed a warning issued Sunday by Asian Economist Shayne Heffernan, <a href="" target="_blank">Shayne Heffernan Week Ahead on the Global Markets </a>

It said China’s economy would grow just 7.7 percent this year, down from 9.3 percent in 2011 and its slowest rate since 1999, but added that stimulus measures would help push it back above the crucial 8.0 percent mark in 2013.

The 2012 gross domestic product (GDP) projections in a report called the East Asia and Pacific Data Monitor were down from a May forecast of 7.6 percent growth in the region and 8.2 percent in China.

The report comes as the Washington-based World Bank and International Monetary Fund prepare to hold their annual meetings at the end of the week. The Group of Seven advanced economies will also meet to discuss the global outlook.

Despite the downgraded numbers, Bert Hofman, the World Bank chief economist for East Asia and the Pacific, said: “Our main forecast is still that China will have a soft landing.”

He also told journalists in Singapore that while there is a risk of a major slowdown, “we think it’s small, not least because of the policy space that the authorities still have and the likelihood that they will indeed use it.

“They have enough fiscal space, they still have some monetary space so they could revamp the economy… if and when needed.”

Hofman noted that China was being hit by a “double whammy” of an export slowdown and softer domestic demand.

In East Asia and the Pacific, regional growth will be the slowest since 2001, even worse than at the peak of the global financial crisis in 2009, Hofman said.
The bank, however, said this should rebound to 7.6 percent in 2013, driven by domestic demand. But it warned that a worsening of the eurozone debt crisis, problems in the United States and a further slowdown in China are major risks.


The peso dropped on the first trading day of the week following the release of a World Bank report saying the region of East Asia and the Pacific may grow by a pace slower than earlier anticipated for this year given global economic challenges.

The local currency closed at 41.47 against the US dollar on Monday, down by 4 centavos from Friday’s finish of 41.43:$1.

Intraday high hit 41.45:$1, while intraday low settled at 41.515:$1.

Volume of trade amounted to $786.1 million from $604 million previously.

The World Bank said in the report that growth prospects of emerging markets from East Asia and the Pacific might be dampened by the economic problems confronting the eurozone and the United States, both of which have always been major export markets.

“Weaker demand for East Asia’s exports is slowing the regional economy, but compared to other parts of the world, it’s still growing strongly, and thriving domestic demand will enable the region’s economy to bounce back to 7.6 percent next year,”  Pamela Cox, World Bank vice president for East Asia and the Pacific, said in a statement.

The World Bank estimates East Asia and the Pacific to grow by 7.2 percent this year, slower than the 8.2 percent in 2011.

Traders said views that the prolonged problems in advanced economies could dampen export and thus growth performance of emerging Asian countries adversely affected demand for emerging-market assets.

The decline of the peso was despite the fact that World Bank raised its growth forecast for the Philippines for this year from 4.6 to 5 percent.

The World Bank said strong domestic demand in the Philippines has been partially shielding the Philippines from the ill-effects of a weak global economy.

Traders said the appetite for peso-denominated securities was affected by sentiment for the region.


The Stock Exchange of Thailand is hanging on over 1300 but according to Economist Shayne Heffernan Thailand investors should be looking to lock in profits.

“It is time to exit or at least hedge your exposure to Thailand” Shayne Heffernan said today, While the local Economy is strong and the leadership of Yingluck Shinawatra has been surprisingly good international forces are going to take their toll on the local market.

Thailand is trading at 18 times earnings while regional markets like Singapore and Shanghai are trading a touch over 11, this is an anomaly in the market that will not last.

The Asian Development Bank (ADB) has lowered its 2012 gross domestic growth projection for Thailand from 5.5% to 5.2% on the back of a global economic recession that has hurt the Thai export sector.

The bank’s senior economist, Lucksamon Atthapich, said on Wednesday the ADB also slashed its growth forecast for 2013 to 5% from the previous projection of 5.5%.

The ADB has also lowered its growth projection for developing countries in Asia to 6.1% from 6.9% and to 6.7% in 2013, down significantly from 7.2% in 2011, she added.

Ms Lucksamon said the ADB expected Thai exports to grow by only 5% this year, with a strong potential of further growth next year.

Thai export products that were down in the midst of a slump in global demand included electronics, electrical appliances, garments, natural rubber and rice, she said, adding that rice exports are unlikely to improve soon because the price of Thai rice was higher than its competitors.

Prime Minister Yingluck has chosen to pursue some of her Brother Thaksins better projects and this will help mitigate the global slowdown, while I have faith in Thailand long term, as a trader it is time to take some money off the table.

How to Hedge Your Investments

Buy Value, Buy at the Right Time and Buy for the Long Term.

Why should you hedge?. The answer is simple, you can secure profits long term if you limit your risk.

“Global risks are rising, you cannot afford to be apathetic and remain inward-looking.”

Economist Shayne Heffernan offers a simple guide to building a hedge.

To understand hedging you must first understand a basic but ignored concept that all investors and traders should know. Equity Beta, which is a calculation of how volatile a stock is when the market itself is moving. Beta shows the sensitivity to overall market movements of an individual equity in your portfolio.


The government plans to limit the land available for exploration by a single mining company in Indonesia to 25,000 hectares in an effort to maintain the sustainability of natural resources in the country, a senior economic minister says.

“We are considering providing each mining company with at most 25,000 hectares of land to be managed,” Coordinating Minister for the Economy Hatta Rajasa said in Jakarta on Sunday. “We are aware that this policy may have pros and cons, but we are very concerned about the sustainability of Indonesia’s natural resources. Therefore, a new system in developing natural resources is needed.”

The minister, however, said that the government will consider providing additional land for mining companies, but only to build supporting facilities such as housing for employees.

Only large investors benefit from the current system of natural resources management, but the country suffers losses, especially the people, he said.

“For instance, investors that are exploiting tens of thousands of hectares of forest areas, they do not get the local people involved,” he said.

He added that cases in which investors have contracts of work set at 30 to 40 years in the oil and gas sector were unfair to the community.

Hatta also argued that Indonesia should no longer supply raw materials abroad. A ban on the export of certain raw minerals is set to go into effect in 2014.

“We need to urge foreign parties to help manage and build our industry. All should be changed, we can’t just sit down and be a spectator like this. This nation has a big role in confronting these problems,” the minister added.


Singapore's economy probably contracted further in the third quarter because of poor demand for its manufacturing exports, tipping the island into a recession and reinforcing expectations of policy easing by the central bank at its meeting next Friday.
Gross domestic product likely shrank by 1.8 percent in July-September, worsening from the 0.7 percent quarter-on-quarter seasonally adjusted and annualised drop in April-June, according to a median estimate of 12 economists polled by Reuters.

From a year ago, the economy probably grew by 1.0 percent, slower than the second quarter's 2.0 percent expansion, reflecting the impact of the slowdown in the big export markets of Europe, United States and China on the trade-reliant city-state.

Advance estimates for third quarter gross domestic product will be released at 8:00 a.m. local time (0000 GMT) on Friday, at the same time the Monetary Authority of Singapore (MAS) issues its half-year monetary policy statement.


In a statement to Bursa Malaysia, BIMB Holdings revealed that it has been given the go ahead by the central bank, Bank Negara Malaysia (BNM), to start talks with Dubai Financial Group (DFG) and Lembaga Tabung Haji (TH) about buying out its stake in Bank Islam Malaysia.

The statement said that BIMB Holdings had received a letter from the Malaysian central bank which ‘stated that BNM has no objection in principle for BHB to commence negotiations with DFG and TH in relation to a preliminary interest to acquire DFG’s equity interest in Bank Islam’.

The negotiations are to be completed on or before 31 March 2013. BIMB went on to say that BNM’s consent ‘should not be construed as an approval for the Proposal. All parties would be required to obtain prior approval of the Minister of Finance, with the recommendation of BNM, pursuant to the Islamic Banking Act 1983, before entering into any agreement...’

TH, the Malaysian hajj pilgrims fund board, owns a 51.8 per cent stake in BIMB Holdings and also an 18.5 per cent stake in Bank Islam. BIMB Holdings current has a 51 per cent stake in Bank Islam while  DFG owns the remaining 30.5 per cent.

Hong Kong's Hang Seng fell 0.9 percent to 20,824.56. South Korea's Kospi lost 0.7 percent to 1,981.89 and Australia's S&P/ASX200 dropped 0.3 percent to 4,481.90.  

Indonesia's Jakarta Composite Index shed 1 percent to 4,268.23. Last week, the index closed at 4,311.31, a record-high for the second consecutive day.  
Mainland China's Shanghai Composite Index shed 0.6 percent to 2,074.42 and the smaller Shenzhen Composite Index lost 0.5 percent to 849.30.  

Benchmarks in Singapore, Taiwan and Thailand also fell. New Zealand's rose. Markets in Japan were closed for a public holiday.

Shayne Heffernan Ph.D.  

Linda Johnson, Business Development Director - Private Client Group, Heffernan Capital Management
3 Raffles Place #07-01
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