Another day of slow and choppy trade is expected in ASEAN as investors
around the world seek clarity on several major issues, a Debt Crisis is on the
horizon in the EU and the USA.
Greece’s international lenders
failed again to reach a deal to release emergency aid to the debt-saddled
country. Lenders will try again next Monday, but Germany signaled that
significant divisions remain.
A truce between Israel and Hamas
gave stocks some support around midday after Egypt announced a ceasefire would
come into effect later in the day.
Fears that the fiscal cliff
discussions in Washington could be drawn out or yield no resolution have been
at the forefront of investors’ minds in recent weeks. Combined with concerns
about the euro zone’s continued debt problems, the worries had driven a
sell-off that has taken more than 5 percent off the S&P 500 since Election
Day in early November.
Positive comments from U.S.
politicians that they will work to find common ground have helped the S&P
500 recoup some of that loss in recent sessions.
The Dow Jones industrial average
.DJI gained 48.38 points, or 0.38 percent, to 12,836.89 at the close. The
Standard & Poor’s 500 Index .SPX added 3.22 points, or 0.23 percent, to
1,391.03. The Nasdaq Composite Index .IXIC rose 9.87 points, or 0.34 percent,
to close at 2,926.55.
China will not follow other
economies in delaying implementation of tougher capital requirements on banks,
a senior banking regulator said on Tuesday.
Instead, the country will allow
banks to introduce new instruments to raise capital, said Wang Zhaoxing,
vice-chairman of the China Banking Regulatory Commission.
Wang said China will not follow
in the footsteps of the United States, Europe or any other economies that have
considered postponing the adoption of tougher banking requirements called for
by global regulatory standards.
“China has promised to anticipate
the establishment of the global financial supervision system and adopt the
international standards,” Wang said. “More importantly, we took the domestic
situation and our own development needs into consideration when we drafted the
rules.”
He said regulators want to
improve the ability of banks to manage risk and encourage banks to improve
their business structures.
“It will be a Chinese version of
capital criteria, tailored to suit Chinese banks’ balance sheets, risk and
business models.”
The banking regulator also
expects the new rules to help banks improve their capital quality. The stricter
criteria will call for larger banks to have a capital adequacy ratio of 11.5
percent and non-systemically important ones to have a ratio of 10.5 percent.
Wang said regulators will soon
release guidelines to encourage banks to develop capital instruments that will
help them replenish their capital. Those are likely to come out before the end
of the year.
“Banks will not maintain the pace
of expansion they have seen in the past 20 or 30 years, when they piled up
profits very easily and rapidly.”
The State Council announced in
June that the new rules will take effect at the beginning of 2013.
Economist and Hedge Fund Manager
Shayne Heffernan of www.livetradingnews.com takes a look at Banco de Oro,
Guinness Anchor, Bank Rakyat, UOB, Siam Cement
Thailand
Thailand’s Siam Cement Group
(SCG) has announced plans to build a new plant in Myanmar’s Tanintharyi Region,
but awaits the approval of both the Myanmar Investment Commission and President
U Thein Sein.
SCG President and CEO, Mr Kan
Trakulhoon, has said that the company is also analysing the impact that the
recently signed foreign investment law will have on the project. However, in
spite of the announcement, there has been no mention made of the plant’s
potential production capacity.
SCG officials have discussed the
project with President U Thein Sein during his official visit to Thailand in
September, during which he stated that he would make a decision regarding his
approval of the project once he returned to Myanmar.
Singapore
ING Groep NV agreed to sell its
Thailand asset management unit to Singapore’s United Overseas Bank Ltd for 10
million euros (S$15.7 million) in cash, as the Dutch financial group pushed
ahead with its Asian divestments.
After failing to find a single
buyer for its entire Asia business, ING is breaking up the sale along different
geographies. The disposal of the Thai unit leaves ING with asset management
operations in South Korea, Hong Kong, Malaysia, Taiwan and Japan.
The sale is part of ING’s wider
asset disposal programme aimed at repaying the 10-billion-euro ($12.7 billion)
state bailout received during the 2008 financial crisis. Last month, ING agreed
to sell part of its Asia insurance operations for $3.8 billion.
UOB, the smallest of Singapore’s
three banks, said in a statement on Tuesday that ING’s Thai unit held about
113.8 billion baht ($3.70 billion) of assets as of the end of September. The
purchase is not expected to have a material impact on UOB’s earnings, the bank
said.
The Thai unit is the
third-biggest of ING’s Asian fund management unit. South Korea is the largest
and Taiwan the second-biggest.
ING’s Asia investment management
business has a book value of 200 million euros and manages about 43.3 billion
euros of assets in the Asia-Pacific region, according to company filings.
Indonesia
Bank Rakyat Indonesia, the
country’s second largest lender by market, plans to sell dollar-denominated
bonds in the first half of next year to help meet its lending growth target.
“We will probably issue
dollar-denominated global bonds,” Sofyan Basir, chief executive of the lender,
said in Makassar, South Sulawesi.
Sofyan, who was attending the
ground-breaking ceremony of a Bosowa Group cement plant, said the minimum
amount of the bonds should be $500 million, “because it will be global bonds.”
In the debt and investment
banking business, typically the benchmark size of bond sales is equal to $500
million.
“It will probably be issued in
the first semester of next year,” Sofyan said, without disclosing the terms of
the bond sale.
BRI will join its rivals in
tapping global investors funds.
Bank Mandiri, the country’s
largest lender by assets, might sell rupiah- and dollar-denominated bonds next
year as part of its plan to increase lending in Indonesia.
The Jakarta-based lender, which
was created by the merger of four state banks more than a decade ago, plans to sell
between $500 million and $800 million in bonds, Pahala N. Mansury, the bank’s
finance director, said last week.
BRI and Bank Mandiri are gearing
up to boost their lending activities in the country to meet rising demand by
the consumers and corporations.
Sofyan said that the cost to sell
dollar-denominated bonds would be cheap.
“When it’s cheap, we will take
it,” Sofyan added.
BRI, which focuses on lending to
small- and medium-sized enterprises, said lending is expected to grow about 20
percent next year.
“In the past two years, BRI has
consolidated [its management], but next year it will be ready,” said Sofyan, in
a show of optimism that the lender will achieve such a target.
Small and medium enterprises
account for 70 percent to 80 percent of BRI’s outstanding loans. BRI is the
Indonesian version of Grameen bank in Bangladesh.
Sofyan said that net income is
expected to grow 15 percent next year. He did not provide details.
Net income at BRI rose to Rp 13.6
trillion ($1.4 billion) in the first nine months of this year from Rp 10.43
trillion in the same period last year.
Net interest income, or income
from loans after deducting interest charges on depositors, rose 2 percent to Rp
26.7 trillion in the period this year from Rp 26.2 trillion last year.
Net income at BRI is expected to
jump to Rp 16 trillion this year. The lender posted a net income of Rp 15
trillion.
Shares of the lender closed
unchanged at Rp 7,200 on the Indonesia Stock Exchange (IDX) on Tuesday.
(Shayne Heffernan’s Macro Notes
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Malaysia
Guinness Anchor Bhd’s (GAB)
earnings rose 2.9% to RM56.83mil in the first quarter ended Sept 30, 2012 from
RM55.21mil a year ago.
It said on Wednesday its revenue
was down 11.8% to RM392.28mil from RM444.62mil while earnings per share were
18.81 sen compared with 18.28 sen.
“The drop (in revenue) can be
attributed to two reasons. First, there was no speculative buying by the trade
this year ahead of the National Budget announcement.
“Second, the company instituted a
nine-day business freeze at the end of its first quarter to facilitate the
migration phase of the company’s IT infrastructure project, Project Quantum.
Sales achieved during this nine-day period will be recognised in Q2
performance,” it explained.
GAB managing director Charles
Ireland said the results were ahead despite there being no speculative buying
as the government announced that there will be no beer excise increase well
ahead of the Budget 2013 announcement.
Charles added that the nine-day
business freeze also meant a shorter first quarter for F13.
“Our first quarter has always
been 91 days, while the second quarter is 92 days. But Project Quantum’s
business freeze meant our F13 first quarter was only 82 days, while the second
quarter will be 101 days due to the rollover of nine days.”
Philippines
Philippine stocks surged to a new
record high for the 27th time this year as propects of a new round of local
banking merger and acquisition (M&As) and progress on the legislation of
revenue-generating “sin” tax reforms boosted investor sentiment.
The main-share Philippine Stock
Exchange index soared by another 33.6 points, or 0.61 percent, to close at
5,534.18. A new intraday peak was also hit at 5,553.57.
Value turnover was high at P14.92
billion including a block transaction on Banco de Oro. Tycoon Henry Sy has been
realigning shares to certain family-owned holding firms and has not sold to any
external party, industry sources said.
The outperformer among index
stocks was Ayala Corp. (+4.9 percent) after it was confirmed that the group was
in talks on a prospective Bank of the Philippine Island-Philippine National
Bank consolidation. BPI and PNB went on voluntary trading suspension after
confirming ongoing talks.
Metrobank (+2.26 percent), DMCI
(+1.95 percent), JG Summit (+1.89 percent), AGI (+1.44 percent), BDO (+1.32
percent) and Petron (+1.16 percent) also contributed to the day’s gains.
Index heavyweight PLDT (+1.13
percent) was up even as National Telecommunications Commission (NTC) has
ordered telco service providers to reduce off-net SMS charges from P1 to 80
centavos, and to reimburse subscribers 20 centavos per off-net SMS since
December last year.
Jose Vistan, head of research at
AB Capital Securities, said the market was driven by financial services (+1.72
percent) in turn due to the excitement over BPI’s prospective acquisition of
PNB. Vistan said this news had a spillover effect on other banking issues as
investors were revaluing these issues on expectations that this may lead to
similar M&A deals.
Vistan said AB Capital would
stick to its yearend index target of 5,600. He said the market has been trading
at a price-to-earnings ratio of 17-18x, which meant that investors have been
paying 17 to 18 times the amount of money made for a given year.
“Right now, the market will be
starting to price in fundamentals of 2013, which would involve ratings upgrade,
momentum on corporate earnings, growth from construction spending, government
spending and election spending,” Vistan said. “So it’s a pretty positive local
fundamental backdrop. In terms of external concerns, we’ve seen the worst, so
there’s nowhere to go but up.”
Vistan said the PSEi might rise
to 6,100 at yearend 2013.
Joseph Roxas, president of Eagle
Equities Inc., said sentiment was also boosted by the progress of sin tax
legislation. “The enactment will lead to a credit rating upgrade and a drop in
the government’s interest payments,” he said.
The Philippine government is
currently rated at one notch below the much-coveted investment grade by the
three major global credit-watchers—Moody’s, Fitch and Standard & Poor’s.
Other stocks that rose in heavy
volume on Wednesday were Empire East (+3.26 percent), Bloomberry (+4.74
percent), ABS-CBN preferred (+1.96 percent), LT Group (+1.21 percent), GT
Capital (+3.66 percent), Manila Mining (+8.2 percent) and East West Bank (+7.59
percent).
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