Thai Stocks Slump 21% From High in Longest Decline Since 1998; Indian rupee hits record low; posts biggest fall in nearly 18 years

Thai Stocks Slump 21% From High in Longest Decline Since 1998

Thai stocks retreated for a ninth day, sending the benchmark index down more than 20 percent from this year’s high, amid concern foreign outflows will accelerate as the economy weakens. The baht and government bonds dropped. The benchmark SET Index lost 2.7 percent to close at 1,293.97 in Bangkok, its longest losing streak since 1998. Siam Cement Pcl (SCC) and Total Access Communication Pcl (DTAC) dropped more than 3.6 percent and were among the biggest drags on the index. The baht weakened 0.8 percent to 32.18 per dollar, while the yield on 10-year government debt rose 14 basis points to 4.29 percent, the highest level since December 2009.Thailand entered a recession in the second quarter, according to figures released this month, while data yesterday showed exports unexpectedly fell last month. Southeast Asia’s second-biggest economy will probably post a current-account deficit of $550 million in July, according to a Bloomberg survey of economists.

“Companies with revenue from domestic markets should be affected by weak economic growth,” Jintana Mekintharanggur, director of equity investment at Manulife Asset Management Co. in Bangkok, which has about $200 million of assets, said by phone. “Overseas investors are unlikely to bring money back into equity markets in Thailand and the region until there are signs of strong economic growth.”

Fund Outflows

Overseas investors sold about $1.1 billion of Thai stocks and $1.2 billion of local bonds this month amid speculation that the U.S. Federal Reserve will reduce monetary stimulus this year. Outflows from Indonesian shares totaled $442 million, while investors withdrew $163 million from Philippine equities.

The three Southeast Asian markets led a four-year rally in global shares through May as growing local economies sent corporate profits to record highs and Fed stimulus spurred international investors to seek riskier assets. The SET index has dropped 21 percent from its May 21 closing high.

Thailand’s gross domestic product unexpectedly shrank 0.3 percent in the three months through June from the previous quarter, when it contracted a revised 1.7 percent, the National Economic & Social Development Board said on Aug. 19. The state agency cut its full-year expansion forecast to as little as 3.8 percent from a previous estimate of 4.2 percent. It lowered its export growth target to 5 percent from 7.6 percent.

Lower Valuations

Overseas shipments in July dropped 1.5 percent from a year earlier to $19.06 billion, the commerce ministry said yesterday. Economists had expected a 0.8 percent increase, according to a Bloomberg survey. The country posted a trade deficit of $2.28 billion last month, compared with an estimate of $2.03 billion.

“Global investors are worried about slowing growth in the region,” Kasamapon Hamnilrat, head of research at Krungsri Securities Co. in Bangkok, said by phone. “Weak export data may prompt more downward revisions in Thai GDP growth.”

Siam Cement, the nation’s biggest cement producer, dropped 3.7 percent to its lowest close since Nov. 30. Total Access slid 6.4 percent, the lowest level since April 12. CP All Pcl (CPALL), the nation’s largest convenience store operator, lost 2.9 percent.

The SET Index is valued at 11.4 times estimated profit for the next 12 months, the lowest level since July 2012, according to data compiled by Bloomberg. That compares with a multiple of 9.8 for the MSCI Emerging Markets Index.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

 

 

Indian rupee hits record low; posts biggest fall in nearly 18 years

9:32am EDT

By Swati Bhat

MUMBAI (Reuters) – The Indian rupee hit a record low on Tuesday and posted its biggest single-day fall in nearly 18 years after the lower house of Parliament approved a nearly $20 billion plan to provide cheap grain to the poor, raising concerns the fiscal deficit will blow out even further.

The partially convertible rupee closed at 66.24/25 per dollar after hitting a record low of 66.30, and down 2.9 percent from its close of 64.30/31 on Monday.

This is the biggest single-day drop for the currency since October 1995, according to Thomson Reuters data. The 194 basis points fall also marks the rupee’s biggest single-day decline in absolute terms ever.

Finance Minister P. Chidambaram said on Tuesday the government would stick to its fiscal deficit target for the year, while announcing cabinet approval for power and infrastructure projects worth 1.83 trillion rupees ($28.38 billion).

Yet the comments failed to sway investors, with market watchers skeptical about India’s ability to attract funds for infrastructure projects in an economy growing at a decade-low of 5 percent.

The rupee has been beaten down 17 percent so far in 2013 despite frantic attempts by the government and central bank to shore it up.

Indian stock markets were also hit on Tuesday, raising the prospect of further capital outflows, with the benchmark BSE index .BSESN falling 3.2 percent and the broader NSE index .NSEI ending down 3.45 percent. .BO

Overseas investors sold over $800 million worth of shares in the previous seven sessions through Monday, adding to pressure on the rupee.

“The Food Security Bill is the key reason for the rupee’s fall today. It would open floodgates for (credit) ratings downgrades, if the fiscal deficit is not reined in,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

The government hopes to contain the fiscal deficit at 4.8 percent of gross domestic product for the year ending in March, but fears are growing it will be tempted to launch a flurry of fresh populist spending ahead of elections which are due by May.

The Food Security Bill, budgeted to cost 1.35 trillion rupees annually, is a key part of the ruling Congress party’s strategy to win re-election in polls, with its focus on selling subsidized wheat and rice to 67 percent of its population of 1.2 billion.

The country’s record high current account deficit has already made it particularly vulnerable as global investors brace for the end of the Federal Reserve’s period of cheap money, and measures taken so far by policymakers have been inadequate to stem the rout.

Kotak Institutional Equities said there would be “no free lunch,” estimating India’s subsidy burden of the plan would end up reaching 827 billion rupees from the budgeted 606 billion rupees.

“There are substantial challenges in procurement, logistics and identification of beneficiaries,” the brokerage said in a note to clients.

Fitch Ratings analyst Art Woo said on Monday it was getting more challenging for India to meet its fiscal deficit target in the current fiscal year ending March 2014 with revenues slowing, in comments made before the lower house of parliament passed the food bill.

Standard & Poor’s is the only of the three major credit agencies to have a “negative” outlook on India’s “BBB-minus” sovereign credit rating. Any downgrade would put the country in “junk” territory.

The benchmark 10-year bond continued to fall with yields closing up 44 basis points at 8.78 percent tracking the rupee’s fall and its biggest single-day rise since July 16, when it rose 51 bps in the immediate aftermath of the central bank’s first cash tightening steps.

In the onshore forwards, the one-month rupee was being quoted at 66.81 while the offshore non-deliverable forward was at 67.05.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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