ASEAN KEY DESTINATIONS
Asean Stock Watch- September 19
A rebound in Wall Street on Friday provides a good launching pad for this week’s Asian trading. The Dow Jones industrial index gained 75.91 points, or 0.66 percent, to finish at 11,509.09, trading favorably for a fifth straight day to post its longest winning streak in two months.
Prompted by global economic turmoil and market uncertainty, international investors are beginning to reduce their portfolios in Indonesia and other emerging markets, causing the rupiah and the Jakarta Composite Index to falter in recent days.
In a sign of confidence in the nation’s economy, ratings agencies such as Moody’s have indicated the possibility of raising Indonesia’s credit rating one notch to investment grade.
Foreign net sales in the capital market totaled Rp 3.6 trillion (US$410 million) last week, with investors moving to safe-haven assets such as the US dollar as Europe’s debt crisis widens.
After two French banks were downgraded on Tuesday, foreign investors sold off equities worth Rp 1.4 trillion on Wednesday.
The absence of positive news is expected to keep shares on Bursa Malaysia volatile this week with a possibility of the benchmark FBM KLCI testing the psychological 1,400 support level.
An analyst said players were likely to remain on the sidelines while awaiting fresh direction. “Investors are monitoring the situation in Europe carefully before deciding whether to step into the market,” he said.
Affin Investment Bank Head of Retail Research Dr Nazri Khan said the world economy was losing its momentum with the downgrade of two of France's top banks by Moody's leading to a deterioration in market sentiment.
“Nevertheless, although the current situation is dominated by negative catalysts, some investors have gained confidence on news that Germany and France are committed to support Greece to stay in the European Union,” he said.
There had been speculation that Greece might pull out of the European Union amid worries of default on its debt.
Nazri said although external factors overweighed internal factors, investors would return to the market a week before budget day on October 7. “We advise our clients to take defensive stocks like telecommunications and consumer-related stocks,” he said, adding that the market was currently being dominated by defensive buying.
For the week just ended, the FBM KLCI dropped 38.19 points to 1,430.93.
The FBM Emas Index lost 298.10 points to 9,740.33, the FBM Top 100 Index declined 251.64 points to 9,568.82 and FBM ACE Index deceased 28.32 points to 3,749.49.
The Finance Index fell 354.17 points to 13,337.79, Plantation Index slipped 189.6 points to 7,16.24 and the Industrial Index was 64.92 points lower at 2,643.10.
The holiday-shortened week saw total market volume decreasing to 2.88 billion shares valued at RM4.88bil from 3.5 billion shares valued at RM6.29bil previously.
The Main Market turnover fell to 2.20 billion units worth RM4.77bil from 2.66 billion units worth RM6.124bil.
Warrants decreased to 186.53 million units valued at RM14.139mil from 225.18 million shares valued at RM20.95mil.
Volume on the ACE Market declined to 474.33 million units worth RM78.5mil from 634.159 million units worth RM66.315 million.
Philippine share prices will continue to take their cue from external markets, which have been showing improvement in recent days on the back of rising confidence that Europe will avoid a financial crisis.
“Friday’s rebound was in part induced by certain technical parameters falling into oversold territory,” said Justino Calaycay of Accord Capital Equities Corp.
“The fresh breakout of such levels may provide momentum to Monday’s trades and sustaining such will again depend for a large part on further developments across our borders,” Calaycay added.
The Philippine Stock Exchange index lost 56 points from the previous week, closing below its 4,300 support line because of the volatility in major markets.
The market will open with a positive backdrop from Wall Street. The Dow Jones Industrial Average rose 75.91 points, or 0.7 percent, to close at 11,509.09 on expectations that the European sovereign debt crisis may be resolved.
“Conditions also in both Europe and US may be fixed for now but a lasting solution is what is needed,” said Maria Arlysa Narciso of AB Capital Securities Inc.
Overseas troubles have been partially addressed with the European Central Bank’s liquidity plan and trading in the local market may shift to fundamentals-based trades entering the penultimate week of the third quarter, said Calaycay.
During those days that foreign markets were worrisome, blue chips fell in the background led by PLDT, which fell more than 3 percent to P2,300. Philex Mining Corp. also lost its hold on the index as it pulled back to P24.95.
“Without positive factors to drive the PSEi up, the index may remain under the mercy of events in foreign markets,” Narciso said.
At home, the economy is also showing warning signs of weakness driven by higher oil prices and lower exports, which account for a significant chunk of the country’s gross domestic product.
Calaycay said the downward revision on the outlook for the local economy may have little impact on the market since investors may have factored these into previous months’ trades.
“There is a certain degree of confidence in saying that current price levels already reflect these adjustments, including higher-than-forecast inflation numbers. Thus meeting the new targets alone will be sufficient impetus to push prices higher,” he added.
Singapore shares opened lower on Monday, with the benchmark Straits Times Index at 2,774.78 in early trade, down 0.47 percent, or 14.26 points.
Around 43.6 million shares exchanged hands.
Losers beat gainers 77 to 37.
Thai composite stocks index (SET) closed on Friday at 1,033.34, down 2.87 points, or 0.28 per- cent amid Bt 19.60 billion turnover.
Blue chip SET-50 index was at 718.64, down 2.70 points, or 0.37 percent.
Top five active (value) stocks: PTT, ADVANC, BBL, DTAC, KBANK.
The nation's two benchmark stock indices saw significant declines yesterday as new cash flows into the market once again began to slow.
"The decline is inevitable, as the market has reached the peak of a short-term bull position," said Viet Finance Co analyst Le Van Thanh Long.
On the HCMC Stock Exchange, the VN-Index shed nearly 3 percent of its value to finish the session at 457.11 points.
Decliners outnumbered advancers by 216-34.
The value of trades slightly fell from Thursday's level, totaling just VND1.27 trillion (US$61.4 million), while volume dived 16.4 percent to 59 million shares.
"The value of trades continued above VND1 trillion, signaling that some investors still have faith in the recovery of the market," stated analysts for financial information website vietstock.vn.
None of the 10 leading shares by capitalisation managed gains. Insurer Bao Viet Holdings (BVH), food processor Masan Group (MSN), PetroVietnam Finance (PVF) and real estate developers Hoang Anh Gia Lai (HAG) and Vincom (VIC) all bottomed out, plunging to their floor prices.
Profit-taking in blue chips was heavy, with foreign sellers accounting for nearly 40 per cent of the trading volume on the HCM City market yesterday. However, foreign investors picked up a net of VND227 billion ($11 million) worth of shares, the highest single-day level in nearly two years.
The General Department of Customs yesterday announced that the trade deficit in the first eight months of the year shrank by 26.7 per cent compared to the same period last year, totalling $5.8 billion.
"The decrease will help reduce the pressure on the economy's overall balance of payment, and support the State Bank in controlling exchange rate in the coming time," said Le Huu Quan of Stoxplus Financial Media.
However, independent analyst Le Dat Chi argued that recent capital flowing into the market was mostly speculative, reflecting investor pessimism about the economy.
"Better business operations are fundamental to a real recovery, but we cannot be sure [it's coming]," Chi said, noting that enterprises were still struggling due to high lending interest rates. A recent slight decrease in rates only reflected administrative orders and not the market, he added.
However, he added, "If gold prices do not increase further and the global stock market is not affected by major economic shocks, the domestic market will rally," he said.
Global stocks closed the week on a high, with hopes that European policymakers would finally come up with a plan to combat a deepening debt crisis, Reuters reported.
On the Ha Noi Stock Exchange yesterday, the HNX-Index also declined by 2 per cent, closing at 74.88 points. The value of trades plunged 20 per cent to VND583 billion ($28.2 million) on a volume of 51.7 million shares.
Kim Long Securities Co (KLS) continued as the most-active share, with 5.5 million traded.
Foreign investors were net buyers on the northern bourse, unloading a net of VND9.4 billion ($454,100) worth of shares.
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