ASEAN KEY DESTINATIONS
Asean Stock Watch- September 26
Major US stock indices inched upward Friday a day after plunging more than 3 percent, rebounding on hope that governments will act to prevent another financial crisis.
US markets followed Europe's increases earlier in the day buoyed by expectations the European Central Bank would increase efforts to ease financial market tensions in the eurozone over the debt crisis in Greece.
German Finance Minister Wolfgang Schaeuble said that the now-slated changes to the European Financial Stability Facility - which the German parliament is to vote on next week - would give the bailout mechanism" the necessary instruments to react appropriately to all developments." The blue-chip Dow Jones Industrial Average gained 37.65 points, or 0.35 percent, to 10,771.48.
The broader Standard & Poor's 500 Index added 6.87 points, or 0.61 per cent, to 1,136.43. The technology-heavy Nasdaq Composite Index climbed 27.56 points, or 1.12 percent, to 2,483.23.
The US currency fell against the euro to 74.07 euro cents from 74.24 euro cents on Thursday. The dollar rose against the Japanese currency to 76.61 from 76.24 yen
Indonesian analysts are playing down concerns of Indonesia entering a bear market, reiterating that the country’s economic fundamentals are strong.
The benchmark Jakarta Composite Index closed at a record high of 4,193 on August 1. Since then, though, it has lost 20 percent, meeting the technical definition of a bear market.
Shares have slumped in the past six weeks amid concern that Europe’s debt crisis will worsen and the US economy will slip back into recession. However, analyst Norico Gaman said Indonesia’s fundamental indicators suggested its market should be trading higher.
“I haven’t seen any bearish indication yet,” said Norico, the head researcher at BNI Securities. “The market’s drop has only been caused by negative sentiment, not by fundamental factors.”
He pointed to reports that Indonesia’s economic growth remained stronger than Europe, where growth in nations including Spain and Italy was expected to be less than 1 percent.
The Indonesian government has forecast the economy to grow 6.5 percent this year, up from 6.1 percent last year. The International Monetary Fund last week predicted growth of 6.4 percent for Indonesia, while two weeks ago the Asian Development Bank raised the nation’s growth forecast to 6.6 percent from a 6.4 percent prediction in April.
Analysts blamed the recent sell-off in Indonesia on foreign investors, who have withdrawn in the past few weeks to reduce their risk in emerging markets. In the second quarter, overseas investors were net buyers of Rp 21.4 trillion ($2.4 billion) in shares, according to Indonesia Stock Exchange data.
In August, they were net sellers of Rp 8.5 trillion. In September, investors abroad sold Rp 5.9 trillion more than they bought, as of Friday.
“This is inevitable when our market is dominated by foreign investors. When there are slight problems in the global market, they will quickly pull out,” said Pardomuan Sihombing, the head researcher at Recapital Securities. “We should encourage more locals to invest in the stock market so we don’t need to rely so much on foreign investors.”
Pardomuan said he stood by his prediction that the JCI would end the year at 4,500, which would put its price-to-estimated-earnings ratio at 18. The JCI rose 1.7 percent on Friday to 3,426, a day after losing 8.9 percent — its steepest fall in almost three years.
“Investors are only human,” he said. “Once they start thinking rationally and are more relaxed, they will re-enter the Indonesian market. Investors should have a longer-term view because Indonesia’s macroeconomic indicators are good and corporate performance is growing.”
Betrand Raynaldi, head researcher at eTrading Securities, said he kept his year-end forecast for the JCI at 4,200. Norico predicted a range of 4,050 to 4,450.
Kim Eng Securities was less bullish, lowering its target to 4,050 from 4,250. It said in a note to clients that “although we believe the weakening is temporary, it will take some time to fully recover.”
Some analysts have recommended investors focus on domestic-market oriented companies because consumer spending makes up more than half of Indonesia’s economic activity.
Harry Su, the head researcher at Bahana Securities, suggested buying shares in firms such as Unilever Indonesia, Kalbe Farma and Indofood Sukses Makmur.
“These are stocks that provide basic needs, which means demand for what they provide will remain even when the global economy contracts,” he said. “Over the next 12 months, we are confident the market will grow. It’s time to accumulate, but be careful of volatility.”
Exporters should be avoided, Harry said, because they were more affected by demand in the global economy. Prices for commodities have declined, and two of Indonesia’s biggest exports are crude palm oil and coal.
Astra Agro has already started feeling the slump in orders. Shipments for its palm oil in the eight-months to August have slipped 44 percent from a year earlier to 29,548 tons.
“Don’t be too aggressive entering the market because there is still short-term volatility, at least until the start of October, when companies release their quarterly reports, and after the announcement of third-quarter economic growth,” Norico said.
Share prices on Bursa Malaysia Bursa are expected to continue their downtrend this week as investors remain concerned with more evidence of fiscal weaknesses in the global economy.
Affin Investment Bank, Head of Retail Research, Dr. Nazri Khan said the FTSE Bursa Malaysia KLCI (FBM KLCI) will continue to dip this week on growing fears over the global economy.
He said the US Federal Reserve Chairman Ben Bernanke's statement that there is a significant downside risk to the US economic outlook has spooked investors with the suggestion of a more serious deterioration in the US economy.
“Most economists now have a strong consensus that the latest measures are not going to prop the underlying economy. Market sentiments are also likely to be hit this week with more rating downgrade expected this week,” he said.
It said given the serious serial of downgrades, there is a dangerous possibility of the US and European government allowing a large bank to fail, compared to during the 2008 financial crisis.
“The fact that the FBM KLCI has undercut its 1,400 strong psychological support (to its low since May 2010) and FTSE All World is now firmly in a bear market with China Shanghai Composite Index, New York Stock Exchange Composite Index and Germany Dax Index scoring a fresh 52-week low, we believe there will be more downside in the near term,” said Nazri.
However, some positive surprises in the Budget 2012 to cushion the weaker external economies can help lift market sentiment for the local market.
“Some measures such as liberalisation in the healthcare and education, fiscal rewards for attracting foreign talent and fiscal support for the government linked companies on international collaboration are likely factors to boost the local market,” he added.
The upcoming Budget announcement is scheduled on Oct 7.
On week-to week basis, the key FBM KLCI dropped 64.99 points to 1,365.94 compared to previous Thursday's closing of 1,430.93.
The market was closed the previous Friday due to Malaysia Day celebration.
The FBM Emas Index dived 506.71 points to 9,233.62, the FBMT100 lost 494.23 points to 9,074.59, the FBM Ace Index declined 157.67 points to 3,591.82, the FBM70 Index erased 782.53 points to 9,666.72.
The Finance Index went down 779.24 points to 12,558.55, the Plantation Index decreased 224.08 points to 6,992.16 and the Industrial Index slipped 116.66 points to 2,526.44.
Total weekly volume surged to 4.039 billion shares worth RM7.481bil from 2.883 billion units valued at RM4.887bil the previous Thursday.
Cautious trading is expected at the Philippine Stock Exchange (PSE) this week on heightened risk aversion amid the volatility in global markets because of fears of another recession.
Following a brutal week that saw the benchmark index lose more than 10 percent, investor sentiment will take its cue from global markets until the United States and Europe come up with a sustainable and acceptable plan to get their houses in order.
“Having broken the psychological 4,000 mark, potential selling pressures might still be felt in sequel sessions as most cash-out and wait for barometers to find a good ‘stabilization zone,’” said Freya Natividad, investment analyst at 2TradeAsia.com.
Now trailing 7.5 percent year to date, the market may continue to trend on a downward channel in the absence of positive catalysts, BPI Trade said in a research note.
“Technical ‘relief rallies’ might be felt, but might be taken more as a dead-cat bounce owed to supply pressure,” Natividad added.
She pegged the benchmark index’s immediate and secondary support at 3,800 and 3,680, respectively. Resistance is at the 3,900 to 3,950 range.
Week on week, the PSE crashed 404 points or 10.40 percent, highlighted by a 210-point loss on Friday, its biggest one-day decline in three years. Total net foreign selling was valued at P1.67 billion.
“The last two trading days have only confirmed what we feared, that the PSEi has formed a head and shoulders since March and has already started the bearish sentiment in our market,” said Bonner Dytoc, senior instructor at Absolute Traders and Consulting Services Inc.
After the main index broke its 200-day moving average at 4,170, Dytoc advised market players to liquidate their positions and stay on the sidelines “until things become better.”
“The MACD has already started to show just how bad it has been as the fast line has started to go down even further giving us an indication that things are going to get worse,” he said, referring to the moving average convergence divergence..
“The news over US government’s move to lengthen their debt maturity profile has been factored-in and China has cleared-up expectations of potential intervention. The stimulus, however, might come from fiscal support to open industrialized markets’ industries to foreign partners,” said Natividad.
Singapore shares opened higher on Monday, with the benchmark Straits Times Index at 2,699.79 in early trade, up 0.05 percent, or 0.99 points.
Around 57.2 million shares exchanged hands.
Losers beat gainers 73 to 39.
The Stock Exchange of Thailand main index went down 32.43 points or 3.27 percent to close at 958.16 points at the end of trading session on Friday afternoon. The trade value was 50.11 billion baht, with 5.37 billion shares traded.
The SET50 index ended at 667.02 points, down 22.08 points or 3.20 percent, with a total trade value of 40.77 billion baht.
The SET100 index fell 49.20 points or 3.28 percent to stand at 1,449.00 points, with a total turnover of 45.73 billion baht.
The SETHD index went down 29.94 points or 3.09 percent to stand at 939.16 points, with total trade value of 15.59 billion baht.
The MAI index dropped 10.35 points or 3.78 percent to close at 263.41 points, with total transaction value of 543.90 million baht.
Top five most active values were as follows;
PTT closed at 290.00 baht, down 12.00 baht (3.97 percent)
ADVANC closed at 120.00 baht, down 3.50 baht (2.83 percent)
PTTCH closed at 100.00 baht, down 8.50 baht (7.83 percent)
TOP closed at 51.50 baht, down 4.00 baht (7.21 percent)
SCC closed at 284.00 baht, down 11.00 baht (3.73 percent)
Shares on the nation's stock exchanges declined last week as speculative trades, discouraging economic data, and mixed third-quarter earnings results from listed companies took their toll, a trend expected to continue into the new trading week.
In figures released last week, inflation rose nationwide by a rate of 18.16 percent in the first nine months of the year, although it showed signs of slowing on a month-to-month basis, rising by just 0.2 percent in Hanoi during September and 0.88 percent in HCM City.
The rise in consumer prices has shown signs of decelerating and the Ministry of Finance announced last week that it was determined to keep fuel prices stabilised towards the end of the year, but heavy profit-taking after a recent rally drove down indices on both of the nation's stock exchanges, said FPT Securities Co analyst Le Thi Bich Hang.
Sharp declines on world markets last week also weighed heavily on the confidence of investors on Viet Nam's market, Hang said, noting disappointment with the US Federal Reserve's failure last week to adopt stronger stimulus measures.
Standard and Poor's also cut Italy's sovereign credit rating last week from A+ to A, with a negative outlook, making it the sixth country in the eurozone it has downgraded this year.
Meanwhile, the threat of a second recession loomed larger, as the IMF lowered growth forecasts for both the US and Europe, estimating a US growth rate of just 1.5 per cent this year, and growth in Europe of just 1.6 per cent.
In response to the discouraging news, the VN-Index lost 3.67 percent over the course of last week, closing on Friday at 440.30 points. The average daily value of trades on the HCM Stock Exchange declined by 20 percent from the previous week to VND940.4 billion (US$45.2 million), while the average daily volume of trades fell by 37 percent to about 45.3 million shares.
On the Hanoi Stock Exchange, meanwhile, the HNX-Index also slid by 0.39 per- cent over the course of the week, closing Friday at 74.58. Daily volumes and values each plunged by 40 percent, averaging 40.6 million shares per session for a value of VND463 billion ($37.9 million).
Blue chips were the biggest losers of the week. The VS-Large Cap index, which tracks money flows into large-cap stocks, declined by 5.75 percent, led by steep declines in shares of insurer Bao Viet Holdings (BVH), food producer Masan Group (MSN) and real estate developer Vincom (VIC). With penny stocks also losing value, mid-cap stocks were the market's only gainers during the week, with the VS-Mid Cap index rising by 0.65 percent.
Foreign investors continued to be net sellers on both stock exchanges last week, unloading a combined VND134.2 billion ($6.5 million) worth of shares.
This week, investors were expected to turn their focus increasingly on third-quarter earnings reports. Analysts with the financial newswire vietstock.vn said that earnings securities companies, real estate developers and shipping companies were all expected to slow from previous reporting periods.
"Grey will likely continue to be the primary color for business profits since the business environment is hardly changing," they wrote.
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