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ASEAN Stock Market Preview

Another rough day in ASEAN as reality starts to set in and global markets retreat from stimulus highs.

Worries about Cypriot finances increased after the European Union gave Cyprus until Monday to raise the billions of euros it needs to get an international bailout, or face the collapse of its financial system and likely exit from the euro bloc.

Investors fear a collapse of the banking system in Cyprus will tighten credit across Europe and become yet another hurdle in the region’s bumpy road out of economic crisis.

The worries over Cyrus hit the market after weeks of gains that saw the Dow break record highs and the S&P 500 come within striking distance of its all-time record close of 1,565.15.

In Singapore economy will likely grow at a slightly faster pace this year than previously expected, helped by a pick-up in manufacturing and financial services, according to a survey of economists carried out by the Monetary Authority of Singapore (MAS).

Economists now expect Singapore’s gross domestic product (GDP) to grow 2.8 per cent this year, slightly higher than the median estimate of 2.7 per cent in the previous poll, according to the latest quarterly Survey of Professional Forecasters.

The official forecast is for GDP growth of 1 to 3 per cent this year.

The bulk of growth is likely to come in the second half of the year, however, with economists now forecasting 0.8 per cent on-year growth in GDP for the first quarter of 2013, slightly down from the 1.2 per cent median forecast in the previous survey.

Manufacturing is forecast to expand by 3.3 per cent this year, an improvement from the 3 per cent prediction in the previous survey. Financial services are likely to grow by 3 per cent, better than the 2.5 per cent previously forecast.

Meanwhile, inflation is likely to dip to 3.8 per cent this year, a forecast that is unchanged from the previous survey, but down from last year’s 4.6 per cent.

To help keep inflation in check, most commentators say the MAS is likely to persist with its policy of letting the Singapore dollar rise against the currencies of its main trading partners.

According to the survey, the Singapore dollar is likely to end the year at 1.200 to the US dollar, strengthening from current levels of around 1.250.

Private consumption is expected to grow at 2.8 per cent, according to the survey, slower than the 3 per cent forecast in December.

For the labour market, the respondents continue to forecast the unemployment rate to be 2 per cent by year-end.

Looking ahead, for next year, the economy will gather steam, with GDP growth reaching 4 per cent while inflation will cool even further to 3.4 per cent, according to the predictions in the survey.

The Bank of Thailand and the Finance Ministry have shown great tolerance for the surge in the baht, which yesterday touched 29.09 to the US dollar, yet another post-1997 high.

Unmanageable risk from the flood of liquidity produced by the US, the EU and Japan to tackle their economic woes is one explanation. Sounder domestic economic fundamentals are another.

The central bank seems more inclined to let market forces influence the foreign exchange market.

Prasarn Trairatvorakul, governor of the Bank of Thailand, has said the rapid appreciation of the baht on Monday and Tuesday mainly reflected improved sentiment in the Thai economy relative to others in East and Southeast Asia.

Around the region, Malaysia will hold a general election mid-year, heightening business climate risk, Indonesia is mired in a current account deficit, and South Korean exports stand to be seriously affected by Japan’s depreciating yen.

Mr Prasarn said foreign holdings in the domestic bond market have increased over the years.

But it remains more attractive than others in the region, as the lower proportion of foreign holdings creates better opportunities for investors to rotate their portfolios.

The Finance Ministry has affirmed that no “non-market measures”, meaning capital controls, will be implemented.

The Philippine Stock Exchange is proposing an overhaul of guidelines governing companies under financial distress or corporate rehabilitation to include “red alerts” prior to actual bankruptcy, aiming to better protect minority investors who can otherwise get stuck with an illiquid insolvent investment.

The PSE issued on Thursday a concept paper through which the regulatory framework for companies undergoing corporate rehabilitation or about to undergo rehabilitation could be improved, drawing from best practices in other jurisdictions.

Under the existing rehabilitation guidelines, the PSE–upon receipt of a disclosure or any planned or actual filing of a petition for rehabilitation–will immediately impose a trading suspension on the shares of a company that is actually or potentially the subject of rehabilitation proceedings.

But the PSE noted that under the existing guidelines, there is no exit mechanism for the minority stockholders of distressed companies in view of the immediate suspension of the trading of shares.

In Malaysia Eastern & Oriental Bhd (E&O) is looking to expand to Japan as part of a long-term overseas expansion plan, according to deputy managing director Eric Chan.

“We want to establish ourselves regionally,” Chan said at the signing ceremony of the company’s latest project, a 51%-49% joint venture with Mitsui Fudosan Residential Co Ltd (Mitsui Residential) to develop The Mews Serviced Residences at Jalan Yap Kwan Seng in Kuala Lumpur.

“Our collaboration with Mitsui gives us leverage on the Japanese market and it is significant for us to be paired with them.

“Joint ventures with such commercial giants help and as both entities are strong names in the market, we are confident that there would be demand for our product.”

Mitsui Residential is a wholly-owned subsidiary of Mitsui Fudosan Co Ltd, Japan’s largest property company with revenues of 1.34 trillion yen (RM43bil) as of last March. It collaborated with international property and hotel conglomerate City Development Ltd for the development of St Regis Hotel & Residences in Singapore five years ago.

The sale and purchase agreement for The Mews, which has a gross development value of RM400mil, would be effected via E&O’s special-purpose vehicle KCB Holdings Sdn Bhd and Mitsui Residential’s wholly-owned subsidiary SEA Investment Three Pte Ltd, which paid RM41.29mil for the land share.

Tokyo climbed 1.34 percent, adding 167.46 points to 12,635.69 and Shanghai gained 0.30 percent, or 6.87 points, to 2,324,24, but Seoul closed 0.44 percent lower, losing 8.59 points to 1,950.82, while Hong Kong shed 0.14 percent, or 30.56 points, to end at 22,225.88.

Sydney fell 0.16 percent owing to political uncertainty after Prime Minister Julia Gillard called a snap leadership vote among her Labor party, which has grown frustrated at its weak showing in polls ahead of a September election.

The S&P/ASX 200 ended down 7.9 points at 4,959.4 having spent the day either side of the break-even line.

– Wellington slipped 0.16 percent, or 6.93 points, to 4,342.51.

Mainfreight fell 4.7 percent to NZ$11.20 and Telecom eased 1.3 percent to NZ$2.23, while Fletcher Building was up 1.6 percent at NZ$8.71.

– Manila closed 0.83 percent higher, adding 53.36 points to 6,472.98.

The index had lost 5.79 percent over the previous eight sessions.

SM Investments rose 0.29 percent to 1,025 pesos, Philippine Long Distance Telephone added 3.23 percent to 2,810 pesos and Megaworld Corp. was 2.22 percent up at 3.69 pesos.

– Taipei rose 0.18 percent, or 13.81 points, to 7,811.84.

Taiwan Semiconductor Manufacturing Co. was 0.10 percent lower at Tw$98.7 while HTC shed 3.04 percent to Tw$239.0.

– Bangkok fell 0.92 percent or 14.15 points to 1,529.52.

Airports of Thailand dropped 3.25 percent to 119 baht, while Bangchak Petroleum added 5.26 percent to 35 baht.

– Jakarta closed down 28.83 points, or 0.60 percent, at 4,802.67.

Indocement Tunggal Prakarsa fell 1.41 percent to 17,500 rupiah, Aneka Tambang slid 0.74 percent to 1,340 rupiah, and Gudang Garam decreased 1.26 percent to 47,150 rupiah.

– Kuala Lumpur shares shed 0.79 points, or 0.05 percent, to close at 1,630.75.

Genting Malaysia lost 2.6 percent to 3.38 ringgit, while Felda Global Ventures Holdings fell 1.1 percent to 4.49. UEM Land Holdings added 3.8 percent to 2.74 ringgit.

– Singapore rose 0.59 percent, or 19.25 points, to close at 3,267.65.

Oversea-Chinese Banking Corporation gained 0.49 percent to Sg$10.25 and City Developments Limited increased 2.72 percent to Sg$10.97.

– Mumbai fell 0.48 percent or 91.32 points at 18,792.87 points.

Tata Motors slid 4.22 percent to 273.75 rupees, while Bajaj Auto fell 4.61 percent to 1,755.3 rupees.