ASEAN Market Preview East West, Medco, Petronas, PTTEP, Keppel
ASEAN Market Preview East West, Medco, Petronas, PTTEP, Keppel
On New Year’s Day, while the U.S. stock market was closed, Congress passed a bill to raise taxes on wealthy individuals and families, and preserve certain benefits, while avoiding immediate austerity measures. The combination of mandatory tax hikes and reduced federal spending, which had been set to go into effect on Jan. 1, had been known as the “fiscal cliff.”
” We had three choices: We were going to be off the cliff, we were going to be on the cliff, or we were going to avoid the cliff, and we avoided it,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.
“There’s a relief rally, some progress because we raised revenue, but I think it’s going to be short-lived because the relief rally today was created by politics, and the next cliff is going to be created by politics.”
The vote avoided income-tax hikes for all U.S. households, but failed to resolve other political budget showdowns. Spending cuts of $109 billion in military and domestic programs were delayed for just two months, as another fight over the U.S. debt limit also looms then.
The market’s surge was due to “the concrete news as opposed to a lack of specific news” that was common during the negotiations, said Stephen Carl, head of U.S. equity trading at The Williams Capital Group in New York.
U.S. stocks ended 2012 with the S&P 500 up 13.4 percent for the year, as investors largely shrugged off worries about the fiscal cliff. For the year, the Dow gained 7.3 percent and the Nasdaq jumped 15.9 percent.
China’s manufacturing business recovery maintained a steady pace in December, further consolidating a solid base for the economic recovery.
The manufacturing Purchasing Manager’s Index in December remained at 50.6, unchanged from November’s reading and indicating that expansion momentum has stabilized.
This is according to the National Bureau of Statistics and China Federation of Logistics and Purchasing, which jointly released the data on Tuesday.
It is the third consecutive month the PMI reading registered more than 50, the point separating expansion from contraction in manufacturing operational activities. The achievement is due to a moderate rebound in domestic demand, and steady growth in industrial production.
The December manufacturing PMI based on a survey from HSBC Holdings Ltd rose to a 19-month high of 51.5 from November’s 50.8, the fourth straight monthly rise and the second above-50 reading since October 2011, according to data the bank released on Sunday.
“It confirmed that China’s manufacturing sector is gaining momentum, as domestic demand continues to strengthen thanks to the filtering through of Beijing’s continuous pro-growth policy efforts,” said Ma Xiaoping, an economist in China with HSBC.
The still-challenging external environment, including weak European economic fundamentals, calls for sustained policy support on both the fiscal and monetary fronts, Ma said.
“This is something Beijing’s top leadership has already committed to into 2013, which will support 2013 GDP growth to rebound to 8.6 percent.”
Lian Ping, chief economist with the Bank of Communications, said that as short-term domestic market confidence has almost recovered and investment is picking up, industrial enterprises will start to increase inventory in 2013. He expects industrial production growth to stabilize this year.
The Bank of Communications forecast that industrial output for 2012 will increase 10 percent from a year earlier, and will rise to 11 percent in 2013.
The improving economic indicators encouraged Chinese investors at the end of 2012, with the Shanghai Composite Index rallying 1.61 percent on the last trading day of 2012 to 2,269.13 points.
Zhang Liqun, an analyst with the Development Research Center of the State Council, said on Tuesday that more advantages will emerge in 2013 to support growth and to improve the economic environment.
However, the modest rebound in the PMI and weak growth in new orders show that recovery in the manufacturing sector may suffer setbacks along the way, Zhang said.
“It still needs more measures to expand domestic demand to consolidate the improving economic situation.”
Singapore’s economy grew in the fourth quarter, avoiding a technical recession despite disappointing growth figures for 2012, government data showed on Wednesday.
Gross domestic product (GDP) rose 1.1 percent year-on-year in the three months to December from zero growth in the previous quarter, the Ministry of Trade and Industry said.
On a quarter-on-quarter basis, the trade-dependent economy expanded by a seasonally adjusted annualised 1.8 percent, reversing a revised 6.3 percent contraction in the third quarter. The figures are based on estimates.
Analysts feared the economy had likely slipped into a technical recession – two successive quarters of contraction – after Prime Minister Lee Hsien Loong said in a New Year’s Day speech that GDP rose 1.2 percent for the full year.
This was below the government’s target for the economy to expand 1.5-2.5 percent.
Keppel Offshore & Marine subsidiaries have won three construction contracts for offshore vessels with a combined value of S$420 million ($343 million).
Hydro Marine Services, a subsidiary of McDermott International, has commissioned Keppel Singmarine’s to build a deepwater pipelay (S-Lay) vessel.
Keppel’s Marine Technology Development (MTD) designed the vessel to support operations in up to 10,000 ft (3,280 m) of water. It is also claimed to provide efficient layrates for long trunklines, to be operable in severe weather, and to provide high levels of thrust output and power distribution.
Work will start during 1Q 2013 and should be completed within two and a half years.
Keppel Singmarine also has a contract is from Bhagwan Marine in Australia to build a catamaran (twin-hulled) air dive support vessel, designed by Incat Crowther, and due for completion in 1Q 2014. This will be deployed off northwest Australia to support Apache Energy’s offshore operations.
Third, Keppel Shipyard has a contract from EMAS Offshore Construction and Production to modify and upgrade the FPSO Lewek Arunothai. The yard’s work scope includes installation of new structures, piping systems and a deck crane; refurbishment of the living quarters; and fabrication and installation of rigid arm and external turret mooring systems.
Following completion in 2Q 2013, the FPSO will be deployed as an early production system on the Kamelia field in the Malaysia/Thailand Joint Development Area in the North Malay basin.
It will be capable of handling 100 MMcf/d of gas, 1,000 b/d of condensates, and 500 b/d of water.
Tevin Vongvanich, President and CEO of PTT Exploration and Production Public Company Limited or PTTEP is pleased to announce that PTTEP and its partners discovered new oil field from the 6th exploration well Mouia Aissa-1 (MAS-1) drilled in Hassi Bir Rekaiz Permits, Algeria.
The well was drilled to a total depth of 3,844 meters on November 11, 2012 and yielded the petroleum discovery in formation of Triassic Argilo Greseux Inférieur (TAG-I) reservoir. The flow test (Drill Stem Test – DST) was conducted and discovered the crude oil flow at approximately 5,243 barrels per day (BPD) and natural gas flow at approximately 5.0 million standard cubic feet per day (MMSCFD) – the highest flow rate that has ever been discovered in Hassi Bir Rekaiz Permits.
PTTEP and its partners have planned in the 1st exploration phase of Hassi Bir Rekaiz Permits to drill 9 exploration wells during late 2011 to early 2013. At present, 6 exploration wells were completely drilled with 5 success wells. PTTEP and its partners are now on process of flow test the 7th exploration well.
Hassi Bir Rekaiz Permits is located onshore in the Eastern part of Algeria. It covers an area of 5,378 square kilometers. PTTEP is the operator with 24.5% interest. Its joint venture partners of this project comprise of SONATRACH (the Algerian National Oil and Gas Company) with 51% interest and CNOOC Limited (China’s largest producer of offshore crude oil and natural gas) with 24.5% interest.
Apart from Hassi Bir Rekaiz, PTTEP also jointly operates the Bir Seba field, in Algeria 433a & 416b Permits in Algeria, which is currently under the development phase.
Petroliam Nasional Bhd’s US$60bil (RM186bil) capital expenditure over the next five years will underpin the oil and gas sector in the country with more offshore activities and contracts expected to be awarded in the second quarter.
The exploration and production (E&P) activities would continue and be viable, based on the current oil prices, according to RHB Research Institute.
It also expected the three-pronged strategy by Petronas would pinch the decline in production.
The strategies include enhancing oil recovery (EOR) at existing oilfields, development of marginal oilfields and adding its resource base.
Bloomberg data showed that the US light crude oil 8 sen lower at US$90.72 per barrel and Brent down by 48 sen at US$110.14 per barrel at 5pm yesterday.
OSK Research Institute said despite year-to-date crude production dropping 58% due to stop-order in Sudan, by enhancing its E&P activities, Petronas was targeting for long-term sustainable growth.
It also expected the supply for oil to surpass the demand level but oil price would remain steady about US$80 per barrel for next year due to the stimulus programme in western countries and tension in the Middle East. Petronas recorded seven discoveries of oil and gas in Malaysia for third quarter of 2012 – the Bidara, Gambir RDR, Kurma Manis-1, Berangan-1, Tembakau-1, Kluang North-2 and Tukau Timur Deep-1. Total discoveries so far in the year-to-date period stands at 21 new discoveries.
In December, Petronas awarded a production sharing contract for Block SB311 offshore Sabah (PSC) to ConocoPhillips Sabah Gas Ltd (40%), Shell Energy Asia Limited (30%) and Petronas Carigali Sdn Bhd (30%).
Furthermore, the company has completed a US$5.3bil takeover of Progress Energy Resource Corp.
Petronas year-on-year’s net profit for its third quarter ended Sept 30 2012 declined by 21.95% to RM12.44bil while revenue dropped to RM68.3bil from RM71.8bil.
According to the company, the revenue for the third quarter declined primarily due to lower sales volume and the lower prices of crude oil, adding that crude oil sales volume decreased.
Medco Energi Internasional, the country’s largest listed oil and gas firm, has allocated $270 million for capital expenditure this year, the company’s president said over the weekend.
“For 2013, the company prepares capital expenditure for the development of major projects at $270 million,” wrote Medco president director, Lukman Mahfoedz, in an e-mail to the Jakarta Globe, adding that of those funds the company plans to spend $120 million to develop existing production fields and a further $70 million for exploration activities.
Medco’s major projects include the development of its oil fields in Libya, the Senoro gas fields in Central Sulawesi and the Block A gas field in Aceh, of which Medco holds stakes of 50 percent, 30 percent and 41.67 percent, respectively.
The latest contingent resources estimates from the Libyan assets and Senoro fields were 588 million barrels of oil equivalent (mmboe) and 167.88 mmboe, respectively. The assets in Aceh are said to contain 666 billion cubic feet of natural gas.
“Our production by the end of 2014 and 2015 will increase significantly from the current 65,000 barrels of oil equivalent per day with the completion of several major projects such as Senoro, Libya and Block A,” Lukman said.
He added that Medco is aiming to generate $270 million in operating income and $360 million in Ebitda (earnings before interest, tax, depreciation and amortization) this year.
“It was estimated that the company’s operating income would reach $238 million and Ebitda around $337 million by the end of 2012.”
The Jakarta-based company saw a 7.6 percent decline in revenue during the first nine months of 2012 to $634 million from a year earlier.
Lukman attributed the decline in revenue to the company’s move to deconsolidate revenue from Medco’s utility subsidiary, Medco Power. “In January , Medco completed the dilution of our ownership on Medco Power to 49 percent and hence Medco Power revenue is no longer consolidated in the books of Medco Energi Internasional.”
“This transaction is in line with Medco strategy to refocus its business in the exploration and production of oil and gas,” Lukman added.
Medco completed in December a $90 million transaction to acquire a 21.25 percent interest in a Yemen oil and gas block, just days after it finalized the sale of a 63.9 percent stake in its subsidiary, Medco Sarana Kalibaru, raising some $36 million in fresh funds with the sale.
East West Bank doubled the number of its branches to 245 in 2012 in line with plans to build a 350-strong local distribution channel to support further growth objectives by 2014.
In a disclosure posted on the Philippine Stock Exchange on Monday, EastWest said it opened 123 new branches—which the bank calls as “stores”—in different areas in Metro Manila, Luzon, Visayas and Mindanao in 2012. As of the end of 2011, its distribution channels numbered only 122.
“EastWest’s commitment to its shareholders is to open new stores around the country at a rapid pace, which it has fervently pursued,” the bank said.
The bank said it would continue its “store” expansion and grow the network to at least 350 by 2014 as committed when it went public in 2012.
Last November, EastWest was included in the MSCI Global Small Cap indices list. MSCI is a trusted and leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. The MSCI Small Cap Index measures the equity performance of small cap stocks in developed and emerging markets around the world.
In October 2012, EastWest was named by financial magazine The Asian Banker as the sixth-strongest bank in the Philippines.
Late last year, EastWest announced its offering of P5 billion worth of Long-Term Negotiable Certificates of Time Deposit (LTNCD), which will mature in five years. The first tranche was issued in November totaling P1.5 billion.
From January to September last year, East West grew its net income by 12 percent year on year to P1.36 billion. It expanded its loan book by 36.1 percent year on year to P60.97 billion.
In Asia Yesterday
Hong Kong was the biggest riser in Asia, adding 2.89 percent, or 655.06 points, to 23,311.98, receiving an additional boost from positive Chinese manufacturing data.
Sydney gained 1.23 percent, or 57 points, to 4,705.9, and Seoul put on 1.71 percent, or 34.05 points, advancing to 2,031.10.
Financial markets in Japan and mainland China were closed for a public holiday.
– Taipei was up 1.04 percent, or 79.72 points, at 7,779.22.
Taiwan Semiconductor Manufacturing Co. added 2.68 percent to Tw$99.6 while leading smartphone maker HTC was 0.83 percent higher at Tw$303.0.
– Manila advanced 0.83 percent, or 48.26 points, to 5,860.99.
Conglomerate Ayala Corp rose 1.74 percent to 526 pesos, while its property arm Ayala Land Inc. was up 0.75 percent at 26.65 pesos.
– Singapore closed up 1.09 percent, or 34.66 points, to 3,201.74.
Agricultural commodities trader Wilmar International gained 5.7 percent to Sg$3.53 while Fraser and Neave, the subject of rival takeover bids by Thai and Indonesian tycoons, fell 0.31 percent to Sg$9.67.
– Kuala Lumpur fell 0.84 percent, or 14.23 points, to 1,674.72.
Kuala Lumpur Kepong shed 5.5 percent to 22.68 ringgit while Bumi Armada slipped 2.5 percent to 3.88.
– Jakarta rose 0.69 percent, or 29.79 points, to 4,346.48.
Lender Bank Mandiri rose 1.9 percent to 8,250 rupiah and car maker Astra International fell 1.32 percent to 7,500 rupiah.
– Bangkok rose 1.11 percent, or 15.52 points, to 1,407.45.
Coal producer Banpu added 2.43 percent to 422 baht, while electricity firm EGCO dropped 2.32 percent to 147.50 baht.
– Mumbai’s Sensex index rose 0.68 percent, or 133.43 points, at 19,714.24 points, a 20-month-high.
India’s motorcycle maker Bajaj Auto rose 3.32 percent to 2,208 rupees and the largest passenger car maker Maruti Suzuki rose 3.23 percent to 1565 rupees.
– Wellington was closed for a public holiday.
Heffernan Capital Management
Business Development Director – Private Client Group,
3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408
Fax: +65 6329 9699
Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals. He is also an active consultant working with Corporations around the World.
He is recognized as one of the leading Economists in South East Asia, as well as the preeminent authority on ASEAN. His opinions and forecasts are widely read by decision makers in the region and Internationally.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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