- There was no respite to the sell-off in US stocks, with the Dow plunging to a four year low and the Nasdaq at a six-year bottom. This spilled over to Asia, where markets trended lower with the exception of minor gains in Japan and Indonesia.
- Economic data in Asia remained upbeat. Singapore's manufacturing output was up for the fifth straight month, rising 15.8% year-on-year in August, due mainly to biomedical sciences, chemicals and electronics.
- Malaysia received more recognition for its restructuring efforts when ratings agency Moody’s raised the country’s foreign currency ceilings.
- Korea’s August exports showed a 18.9% year-on-year jump in August while imports also registered a 13.5% rise in the same period. The IMF raised the country’s 2002 GDP target to 6.3%.
CORPORATE NEWS
Japan: Politics continued to dominate headlines. The governor of the Bank of Japan said its scheme to buy shares from banks was intended to put pressure on politicians to clean up the financial sector. However, the head of Financial Service Agency, Yanagisawa, strongly opposes the plan, saying the Japanese banking system is not in danger. Whether through buying of shares or a bank rescue, a public bailout appears inevitable – making Yanagisawa’s cabinet position tenuous. Industrial production data and the Tankan survey will be released this week.
Australia: Equity markets saw another volatile week with the S&P/ASX 200 finishing down 2.1%. The financial sector was weak on concerns over bank accounting issues. The energy sector fell the most, despite oil prices remaining above US$30 per barrel.
Hong Kong: Two of our holdings, Sun Hung Kai Properties and Smartone (mobile telephony provider), reported results that were better than our expectations. Smartone's return to profitability and resumption of dividend payment came largely on the back of aggressive cost-cutting, including lower marketing spending. Meanwhile, margins for Sun Hung Kai are expected to continue contracting as the company clears the more expensive pieces of land bank it acquired just before the Asian crisis. Its management also announced a special dividend of $0.60 to celebrate its 30th anniversary.
India: ICICI Bank, one of our holdings, successfully placed 16% of its shares in the market, thereby alleviating stock overhang concerns and improving the bank's capital adequacy ratio.
Indonesia: HM Sampoerna announced first half results showing profits tripling to Rp888 billion - its share price rose more than 2% as a result. Telkomsel, a subsidiary of Telekomunikasi Indonesia (one of our core holdings) will be spending $500 million next year to expand its coverage after announcing a 43% increase in profits to Rp1.3 trillion in the first half.
Malaysia: Banking stocks led the decline last week following the government's announcement to raise statutory reserve requirements if banks do not expand their loan portfolios. Public Bank, one of our holdings, fell 7% at one stage, but recovered slightly by end-week. Maxis Communications and Telekom Malaysia continued to show strong interest in bidding for Indonesia’s Indosat. Meanwhile, the Indonesian parliament finally approved the sale of IBRA's 51% interest in Bank Niaga to Commerce Asset Holding Berhad.
Philippines: A quiet week on the corporate front. Although Globe Telecom indicated that third quarter subscriber growth will match those of the second quarter, the figures do highlight that the pace of subscriber growth has begun to slow.
Singapore: Singapore Telecom was denied the right to raise local phone rates by the government despite the company arguing that local telephone charges have remained unchanged for more than ten years.
Taiwan: Financial companies dominated corporate news as Fubon Financial, one of our holdings, auctioned off its 14.8% stake in smaller bank United World Commercial Chinese Bank, booking a gain of NT$3.1bn. Cathay Financial bought the shares.
Thailand: Weak equity sentiment dampened recent offerings, as shown by Finansa’s (asset manager) failure to hold above its IPO price of Thb25 and the government's placement of BankThai (mid-tier bank) which has not been fully subscribed despite being offered at a discount. Amid the current challenging environment, our funds benefitted from the 13% rise in Thai Stanley Electric (automotive lamp manufacturer) following impressive first half results. Central Pattana (commercial property development) also announced plans to launch a two billion baht property fund to help finance its bid to manage the World Trade Centre.
ASIAN FIXED INCOMEMovements in Asian Yankee bond spreads were largely driven by specific news events. Hutchison paper came under pressure after the company announced a EUR plus GBP bond deal. Other Hong Kong property credits were also weighed down by S&P's cautious comments on the sector. Malaysian sovereign paper staged a brief rally on the Moody’s upgrade, but the gains fizzled out. S&P also upgraded the ratings of six Korean banks, including Woori Bank, which is in the midst of marketing its US$300m new issue. Prices on existing bank debt rose on this news.
PORTFOLIO WEIGHTING
Country / Weighting (vs benchmark)*Australia / Underweight
China / Neutral
Hong Kong / Neutral
India / Overweight
Indonesia / Overweight
Japan / Underweight***
Korea / Neutral
Malaysia / Neutral
Singapore / Overweight
Taiwan / Underweight
Thailand / Overweight
Others ** / Overweight
* benchmark: MSCI AC Asia Pacific ex-Japan Index
** New Zealand, Pakistan, Philippines, Sri Lanka
*** benchmark: MSCI AC Asia Pacific Free
INDICES PERFORMANCEWOW / YTD / 27-09-2002 / 20-09-2002 / 28-12-2001
Australia All Ords / -2.03% / -11.84% / 2,965.60 / 3,027.20 / 3,363.80
Hang Seng / -0.36% / -18.69% / 9,294.46 / 9,328.22 / 11,431.59
CLSA China World / -1.75% / -7.96% / 566.73 / 576.81 / 615.76
India NSE50 / 0.71% / -5.55% / 976.45 / 969.60 / 1,033.80
Indonesia JCI / 1.02% / 5.34% / 412.97 / 408.80 / 392.04
Japan Topix / 1.35% / -9.29% / 936.22 / 923.78 / 1,032.14
Korea KOSPI / -5.74% / -4.32% / 663.72 / 704.12 / 693.70
Malaysia KLSE / -3.76% / -6.40% / 647.36 / 672.64 / 691.64
New Zealand / -2.03% / -3.96% / 1,979.31 / 2,020.37 / 2,060.90
Pakistan (26/09) / 1.65% / 58.67% / 2,013.85 / 1,981.08 / 1,269.21
Philippines PCOMP / -2.01% / -4.12% / 1,119.92 / 1,142.87 / 1,168.08
Singapore STI / -3.32% / -15.50% / 1,373.89 / 1,421.03 / 1,625.98
Taiwan TWSE / -4.98% / -22.03% / 4,208.80 / 4,429.25 / 5,398.28
Thailand SET / -3.64% / 11.48% / 338.72 / 351.52 / 303.85
Sri Lanka / 2.15% / 38.65% / 856.96 / 838.95 / 618.08
US DJ / -3.56% / -24.03% / 7,701.45 / 7,986.02 / 10,137.00
UK FTSE / 1.22% / -25.47% / 3,907.20 / 3,860.10 / 5,242.40
Nasdaq Composite / -1.80% / -39.66% / 1,199.16 / 1,221.09 / 1,987.26
MSCI AC A/P Free X Japan / -3.33% / -9.28% / 150.38 / 155.57 / 165.76
ML Asian Dollar Index / 0.32% / 13.12% / 162.36 / 161.84 / 143.52
JPM Singapore Govt Bonds / 0.66% / 6.06% / 116.77 / 116.00 / 110.10
Source: Aberdeen Asset Management Asia Limited, Bloomberg, Reuters
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Asian Weekly Report – September 2002Pg 1