ASEAN - ASEAN Market Preview Peso, Sei Mangkei, Singapore, Maybank, PTT, Sakari

Economist and Hedge Fund Manager Shayne Heffernan of www.livetradingnews.com takes a look at Asean Markets Peso, Sei Mangkei, Singapore, Maybank, PTT, Sakari

Private sector business activity across the eurozone shrank at its fastest rate in three-and-a-half years in October, a key survey showed on Tuesday.

The Purchasing Managers Index, a leading indicator compiled by the Markit research firm, produced a combined manufacturing and services score of 45.7 points, down from 46.1 in September and below an earlier flash estimate of 45.8.

This was “a level historically consistent with the region’s economy contracting at a quarterly rate of around 0.5 percent,” said Markit senior economist Rob Dobson.

Citing yet more evidence of a widespread downturn, with all of the big-four economies seeing output decline, Dobson said there were signs the contraction in Germany was quickening, with Ireland the only real “brighter spot.”

Leaders from Asia and Europe on Tuesday renounced protectionism and vowed to promote trade between the two regions in the face of “substantial” uncertainties facing the global economy.

Dozens of leaders converged on small landlocked Laos for the Asia-Europe Meeting (Asem), seeking to strengthen links between two regions that together account for about half of the world’s economic output.

Following a charm offensive by EU officials to reassure Asia that the euro crisis is finally easing, the participants voiced hope that the European economy would “gradually recover” from its current slump.

But they struck a cautious tone about the worldwide economic outlook.

“Global growth has decelerated with substantial remaining uncertainties and downside risks,” the closing statement said.

Top European officials including French President Francois Hollande and Italian Prime Minister Mario Monti led efforts to boost trade with Asian nations that have been a rare bright spot in the gloomy global economy.

Leaders from the two regions pledged to refrain from erecting barriers to trade and investment, saying closer economic relations were crucial to nurse the ailing world economy back to health.

“Part of the growth in Asia is also the result of the open market in Europe because we are the most important destination for Asian products,” European Commission President Jose Manuel Barroso said.

Thailand

Thailand’s biggest oil and gas firm, PTT Pcl, plans to invest an average US$2bil-US$2.5bil in energy assets a year until 2020, excluding acquisitions, as it seeks to secure resources to meet rising domestic and regional demand.

State-controlled PTT also said it would focus on developing existing assets in 2013 after two major acquisitions gas explorer Cove Energy and Singapore-listed coal mine operator Sakari Resources Ltd resulted in an higher-than-expected investment budget this year.

Malaysia

Malayan Banking Bhd plans to open 144 more branches and increase its market share in the Asean region in the next three years.

President and Chief Executive Officer Datuk Seri Abdul Wahid Omar said today the bank is eyeing to open an additional four branches in Laos, Singapore (13), Cambodia (nine), Philippines (48) and Indonesia (70).

This would increase the number of branches from one to five in Laos, from 22 to 35 in Singapore, from 11 to 20 in Cambodia, from 52 to 100 in the Philippines and from 380 to 450 in Indonesia.

Abdul Wahid was speaking to reporters at the opening of Maybank’s first branch in Laos on Monday by Prime Minister Datuk Seri Najib Tun Razak.

Maybank enjoys a five per cent market share in Singapore, three per cent in Indonesia and one per cent in the Philippines, and hopes to increase these figures in the next three years, said Abdul Wahid.

With the opening of the Laotian branch, Maybank has a physical presence in all 10 Asean countries including three branches in Brunei and two in Vietnam, although it has not gone into retail banking in Thailand and Myanmar yet.

In Thailand, Maybank has an investment bank, Maybank Kim Eng, with 45 branches, but only a representative office in Myanmar.

“We plan to set up our own branch in Thailand by 2014 and are still discussing with the Thai regulator on the matter. We also plan to convert our representative office into a full-fledged branch.

“It is important for us to complete our presence in Asean in facilitating trade and investment in the region as it moves towards the Asean Economic Community by 2015,” Abdul Wahid said.

Singapore

Singapore’s manufacturing sector has contracted four months in a row in October, according to data released by the Singapore Institute of Purchasing & Materials Management (SIPMM) on Monday.

The country’s Purchasing Managers’ Index (PMI) was 48.3 points in October, compared with 48.7 in September.

A PMI reading of below 50 indicates that the manufacturing economy is generally declining.

The latest data showed a further decline in new orders, new export orders and production output.

In particular, experts note that the electronics sector recorded further declines in October.

The electronics index registered a 2.5 point drop over the previous month to reach 47.5

Singapore’s weaker performance is in sharp contrast with the rebound recorded elsewhere in the region such as China, Taiwan and South Korea.

October data showed that China’s Purchasing Manager’s Index expanded to 50.2 in October from 49.8 in September. HSBC PMI reading for China also rose to 49.5 in October, although it’s still in contraction territory. The bank’s PMI readings for Taiwan and South Korea also rebounded.

Analysts say the region’s rebound is due to year-end festive demand pick-up and recent product launches for consumer gadgets, like smartphones and tablets.

Singapore’s electronics sector, on the other hand, remains dragged down by weak demand from the PC sector.

Mr Song Seng Wun, Regional Economist, Singapore, CIMB Research, said: “PC component parts and peripherals account for a disproportionate chunk, it looks like … weak demand for PC parts and components have continued to be a big drag on Singapore tech and hence overall factory output. Whether Singapore’s tech sector may revive in the coming months, (much) will depend on Microsoft and its launch of Windows 8, and the launch of its range of PCs where it might drive spending by businesses and consumers. If that happens, you may find demand for hard disks, PC parts and components.”

Economists said most indicators are negative given the uncertain global environment.

But some analysts say the pick-up in economic activities from major regional economies may filter down to next month’s Singapore PMI numbers.

Indonesia

As many as 10 investors have expressed interest in putting trillions of rupiah into Indonesia’s Sei Mangkei special economic zone in North Sumatra, a high level official at the Industry Ministry has said.

According to Dedi Mulyadi, the ministry’s director general for industrial zone development, investors would develop a total of 200 hectares of land into industrial pursuits ranging from crude palm oil derivative products to fertilizer and industrial gas, among other ventures.

Data from the ministry show Sinergi Oleo Nusantara, which is 30 percent owned by state plantation firm Perkebunan Nusantara (PTPN) III, plans to invest Rp 3.74 trillion ($389 million) in the downstream palm oil sector and an oleochemical plant in the zone.

Unilever Oleokimia Indonesia — which is affiliated with Indonesia’s top consumer goods company, Unilever Indonesia — will pour in Rp 2.45 trillion, also in the oleochemical industry.

Bambang Permadi Soemantri Brodjonegoro, the acting head of fiscal policy at the Finance Ministry, said in September that the government had awarded a tax holiday to Unilever Oleokimia Indonesia.

Sei Mangkei is also in the crosshairs of Cipta Buana Utama Mandiri, which plans to build a fertilizer plant worth Rp 537 billion.

Ministry data did not reveal any other specific planned investment sums, but listed state plantation firms PTPN III and PTPN IV, and industrial gas supplier Aneka Gas, as prospective investors.

“These interests for investment are awaiting the status of the land in the Sei Mangkei zone,” Dedi said on Friday.

Sei Mangkei’s special status was cemented by a government regulation issued in February. It set out a 36-month deadline for developing the industrial zone. Investors operating there would receive incentives like tax breaks, lower import tariffs and the provision of supporting facilities.

However, development has been hindered since the Simalungun district head, where Sei Mangkei is located, refused to issue a permit for the special zone on the grounds that the South Sumatra Legislative Council (DPRD) had yet to pass a spatial master plan bylaw.

Dedi said that with an expedited change of the zone’s status, he was sure that more investors would express interest. “There are 10 now; this shows that the prospects are really good,” he said.

Hatta Rajasa, Indonesia’s coordinating minister for the economy, in July threatened to rescind Sei Mangkei’s special economic status if local leaders could not resolve the spatial planning problem.

Also of concern, Dedi said recent labor demonstrations had caused anxiety among prospective investors, who were looking at doing business in Indonesia with increasing uncertainty.

He added that the ministry and the Industrial Estates Association (HKI) were drafting criteria for industrial park facilities that would be eligible for a “vital object” designation. The label would allow for a given facility to receive added protection from law enforcement.

“It should be effective in preventing possible acts of vandalism against facilities in industrial parks,” Dedi said.

The granting of Sei Mangkei’s status is part of the government’s economic master plan (MP3EI), consisting of Rp 4,000 trillion in total investment for infrastructure projects and value-adding facilities for processing natural resources. The plan aims at facilitate Indonesia’s rise to one of the world’s top 10 economies.

Philippines

The peso inched up slightly on Tuesday as market participants awaited what would happen in the US presidential election.

The local currency closed at 41.21 against the US dollar, up by 3 centavos from the previous day’s finish of 41.24:$1.

Intraday high hit 41.185:$1, while intraday low settled at $41.285:$1.

Volume of trade amounted to $750.7 million from $672.7 million previously.

Traders said there was appetite for peso-denominated securities given the overall positive sentiment on the Philippine economy, although the market manifested a wait-and-see mode as they waited for the results of the election in the world’s biggest economy.

The peso had appreciated by about 6 percent in the first 10 months of the year, partly due to inflows of foreign portfolio investments amid a favorable performance of the domestic economy.

Traders said the peso would likely remain relatively strong, perhaps staying in the 41-to-a-dollar territory throughout the rest of the year, on the back of projections the economy would meet the government’s growth target of 5 to 6 percent.

Yesterday in Asia

Tokyo softened 0.36 percent, or 32.29 points, to 8,975.15, Seoul rose 1.05 percent, or 19.95 points, to 1,928.17 and Sydney closed 0.24 percent, or 10.7 points, higher at 4,484.8.

Hong Kong slipped 0.28 percent, or 61.97 points, to 21,944.43 while Shanghai closed down 0.38 percent, or 8.03 points, at 2,106.00.

Taipei rose 51.32 points, or 0.71 percent, to 7,236.68.

Leading smartphone maker HTC gained 3.35 percent to Tw$200.5 while Hon Hai Precision was 2.63 percent higher at Tw$89.8.

Manila rose 0.29 percent, or 15.79 points, to 5,473.61.

Wellington rose 0.50 percent, or 19.41 points, to 3,927.67.

Air New Zealand surged 3.75 percent to NZ$1.25 and Fletcher Building added 1.9 percent to NZ$7.13 while Fisher & Paykel Appliances shed 0.4 percent to NZ$1.27.

Singapore closed down 0.41 percent, or 12.36 points, at 3,019.33.

Sembcorp Marine fell 5.97 percent to Sg$4.41 and Keppel Corp. shed 2.78 percent to Sg$10.50.

Kuala Lumpur was 8.41 points lower, or 0.51 percent, at 1,645.63.

British American Tobacco fell 2.6 percent to 59.84 ringgit, Maxis shed 2.5 percent to 6.74 and AirAsia lost 2.3 percent to 2.98.

Jakarta ended up 0.26 percent, or 11.33 points, at 4,314.27.

Lender BCA rose 3.0 percent to 8,500 rupiah and cement maker Semen Gresik climbed 1.4 percent to 14,750 rupiah.

Bangkok fell 0.45 percent, or 5.86 points, to 1,300.84

Banpu slid 0.26 percent to 388 baht, while PTT Plc dropped 0.93 percent to 319 baht.

Mumbai rose 0.29 percent, or 54.51 points, to 18,817.38 points.

Indian drug giant Cipla increased 4.18 percent to 396.35 rupees while private housing finance firm HDFC rose 1.75 percent to 782.35 rupees.

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