Tuesday, October 12, 2010

SE Asia Stocks-retreat; Thailand recoups most early losses

BANGKOK: Thai stocks edged lower on Tuesday, Oct 12 but recouped most of their early losses as unnerved investors returned to the market after the government imposed expected measures to tame the surging baht currency.

Thailand will impose a 15 percent withholding tax on interest payments and capital gains earned by foreign investors on Thai bonds from Wednesday, the latest bid by an emerging economy to tame its surging Thai baht currency.

The benchmark SET index, Southeast Asia's third-best performer this year, ended down 0.08 percent, still hovering below a 14-year high set early in the month.

"The measures came largely in line with expectations. Part of the market was cautious about a possible imposition of capital controls," said Warut Siwasariyanon, head of research at Finansia Syrus Securities.

"The resumption of the bond tax will help cool the hot bond market going forward. It also will keep investors on watch for future action by policymakers, not just for Thailand but across the Asian region," he said.

Investors bought battered blue chips, with shares in the biggest bank Bangkok Bank and the biggest industrial conglomerate Siam Cement each rising almost 1 percent, erasing early falls.

Thai baht rebounded in late afternoon, reversing its morning losses despite the bond tax. The local curreny rose over 10 percent against the dollar this year, making it the second-strongest Asian currency after the yen.

The Thai market recorded $78.92 million of inflows on the day, adding on $217 million inflows over the past four sessions, stock exchange data showed. Gains in broad Asian currencies along with the bull run on equities in the region have been in large part the result of hot money flowing out of developed economies.

Meanwhile, broad Asian stocks fell on Tuesday ahead of the U.S. corporate earnings season. By 0948 GMT, the MSCI Asia ex-Japan index was down 1.4 percent, led by a 1.9 percent loss in MSCI's Philippines and a 1.3 percent fall in MSCI's South Korea.

Philippine's index, which set a fresh all-time high the day before, fell 1.2 percent to the lowest since Oct. 4, while Indonesia edged 0.04 percent lower, moving at a level below a record high hit last week.

Singapore lost 0.4 percent, Malaysia edged down 0.06 percent after climbing to the highest since Jan 15 2008, and Vietnam dropped 1.1 percent, after a flat session on Monday.

Foreign investors bought $19 million worth of Philippine shares on the day, reversing their $3.8 million selling on Monday, and added $6.2 million of Indonesian equities after offloading $70 million over the past two sessions, Thomson Reuters data showed.

Valuations of Jakarta and Manila are now relatively stretched. Indonesia trades at a 12-month forward price to earnings of 15.6, well above all Asia's 13.4, with the Philippines' 14.5, according to Thomson Reuters' StarMine.

"They are both running current account surpluses and have benefited from robust domestic demand. Indonesia looks expensive relative to local bonds while Philippines less so," said Sean Darby, strategist at Nomura International (HK) Ltd.

"I think Asean has had a very good run this year and any signs of capital inflow controls and these markets will sell off first," he said.

Investors cashed in recent gainers and big caps across the region, with Singapore's top telecoms firm Singapore Telecommunications Ltd falling 0.3 percent, Malaysia's financial firm CIMB Group sliding 0.6 percent.

However, palm oil shares continued a brightspot in the region amid a prospect of higher demand for palm oil. Malaysia's IOI Corp rose 0.4 percent, building on a 1.5 percent rise on Monday while Indonesia's Astra Agro Lestari gained 4.4 percent, adding a 7.1 percent gain on Monday. - Reuters


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