Feb 25, 2013

ASEAN - ASEAN Market Preview

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Singapore represents the best overall value in ASEAN this week.

Global markets will be closely watching the Fiscal Cliff issues in the USA and we will see a very choppy week with the downside risk far too great to be buying anything other than value stocks.

There is a correction coming without any doubt.

The outlook for Singapore’s economy is “cautiously positive”, the government said on Friday, reiterating its growth forecast of 1-3 percent for this year after fourth quarter and 2012 gross domestic product data came in slightly better than expected.

Singapore’s trade-dependent economy grew 1.3 percent in 2012, a touch above the advance estimate of 1.2 percent, the Ministry of Trade and Industry said in a statement. In 2011, the economy grew 5.2 percent.

“The global macroeconomic conditions have stabilized in recent months against the backdrop of improved financial market conditions. Nevertheless, global economic growth is likely to remain subdued,” the ministry said in a statement. “Against this macroeconomic backdrop, the outlook for the Singapore economy remains cautiously positive.”

Ow Foong Pheng, permanent secretary at the ministry, underscored that the outlook was based on no drastic deterioration in the global economy. “Our assessment for Singapore’s growth outlook in 2013 is based on modest fiscal cutbacks in the U.S. and no outright crisis in the eurozone,” he told a news conference.


Talks on the U.S. budget crisis began again this week leading up to the March 1 deadline for the so-called sequestration when $85 billion in automatic federal spending cuts are scheduled to take effect.

“It’s at this point a political hot button in Washington but a very low level investor concern,” said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. The fight pits President Barack Obama and fellow Democrats against congressional Republicans.

Stocks rallied in early January after a compromise temporarily avoided the fiscal cliff, and the Standard & Poor’s 500 index .SPX has risen 6.3 percent since the start of the year.

But the benchmark index lost steam this week, posting its first week of losses since the start of the year. Minutes on Wednesday from the last Federal Reserve meeting, which suggested the central bank may slow or stop its stimulus policy sooner than expected, provided the catalyst.

National elections in Italy on Sunday and Monday could also add to investor concern. Most investors expect a government headed by Pier Luigi Bersani to win and continue with reforms to tackle Italy’s debt problems. However, a resurgence by former leader Silvio Berlusconi has raised doubts.


Economic growth is expected to pick up 0.43 percentage points from last year to reach 8.23 percent in 2013, according to a report released Saturday.

Export growth will accelerate to 12.22 percent this year, up from 7.9 percent in 2012. Import growth will hit 17.83 percent, in comparison to 4.3 percent last year, said a report compiled by Xiamen University and the Economic Information Daily, a subsidiary of the Xinhua News Agency.

Although global monetary easing has to some extent piled up inflationary pressure for China, the economy will not see serious price hikes this year, the report said.

It projected the rate of inflation at 3.11 percent for 2013, up from 2.6 percent last year.

The report suggested restructuring income distribution as a fundamental government measure to correct the imbalance of the country’s economic structure, which is featured by declining ratios of final consumption, especially residential consumption, in gross domestic product.

The report, the 14th of its kind so far, employs a macroeconomic model to calculate and demonstrate economic trends in the country.


Japanese Prime Minister Shinzo Abe stressed that his “Abenomics” recipe would be good for the United States, China and other trading partners.

“Soon, Japan will export more, but it will import more as well,” Abe said in the speech. “The U.S. will be the first to benefit, followed by China, India, Indonesia and so on.”
Abe said Obama welcomed his economic policy, while Deputy Chief Cabinet Secretary Katsunobu Kato said the two leaders did not discuss currencies, in a sign that the U.S. does not oppose “Abenomics” despite concern that Japan is weakening its currency to export its way out of recession.

The United States and Japan agreed language during Abe’s visit that could set the stage for Tokyo to join negotiations soon on a U.S.-led regional free trade agreement known as the Trans-Pacific Partnership.

In a carefully worded statement following the meeting between Obama and Abe, the two countries reaffirmed that “all goods would be subject to negotiations if Japan joins the talks with the United States and 10 other countries.

At the same time, the statement envisions a possible outcome where the United States could maintain tariffs on Japanese automobiles and Japan could still protect its rice sector.

“Recognizing that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States, the two governments confirm that, as the final outcome will be determined during the negotiations, it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations,” the statement said.

Abe repeated that Japan would not provide any aid for North Korea unless it abandoned its nuclear and missile programs and released Japanese citizens abducted decades ago to help train spies.
Pyongyang admitted in 2002 that its agents had kidnapped 13 Japanese in the 1970s and 1980s. Five have been sent home, but Japan wants better information about eight who Pyongyang says are dead and others Tokyo believes were also kidnapped.

Abe also said he hoped to have a meeting with new Chinese leader Xi Jinping, who takes over as president next month, and would dispatch Finance Minister Taro Aso to attend the inauguration of incoming South Korean President Park Geun-hye next week.

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