Thursday, January 11, 2007

Asian Markets' Jitters

As reported in TheEdgeDaily - Asian stock markets fell and regional currencies weakened in the morning session today (Thursday) triggered by a series of negative news, including investment curbs in Thailand, Venezuela’s proposal to nationalise its utilities and the fall of oil prices to a 15-month low of US$55 (RM193) per barrel. Jakarta’s stock market was the worst hit, losing 3.96% or 70.51 points to 1,710.36 while the rupiah fell 0.55% to a two-week low on worries that Indonesia could also follow Thailand in imposing investment curbs. Japan’s Nikkei 225 fell 295.37 points to 16,942.4, Hong Kong’s Hang Seng Index was down 329.74 points to 19,568.34, Singapore’s Straits Times Index dropped 47.2 points to 2,961.15 and South Korea’s KOSPI lost 18.55 points to 1,355.79. However, the Stock Exchange of Thailand Index bucked the trend adding 0.71% or 4.39 points to 621.14, after falling 2.6% on Jan 9. On Bursa, the Kuala Lumpur Composite Index (KLCI) fell just 5.77 points or 0.52% to 1,113.19.

KLCI fell the least -... when did we become the strong man of Asia???

Analysts said the proposed nationalisation of Venezuela’s telephone and electric companies and Thailand’s move to cap foreign voting rights in Thai companies to 49% rattled investor confidence in emerging markets. The Caracas Stock market plunged 15% on Jan 9 after Venezuela President Hugo Chavez threatened to nationalise the country’s major utilities. I can understand the Thailand effect but Venezuela??? I guess one could argue that the Venezuela situation would be lumped as additional risk aligned with investing in emerging markets.

Oil price falling a negative??? That is news to me. It may temporarily halt the uptrend of CPO owing to the "viability" aspect of producing biodiesel vis-a-vis fuel price, but the benefits of lower oil prices are enormous - less inflationary pressures in the US, Europe and Japan - all having to contend with inflationary pressures, which now will subside. Of course, the US already showed some economic weakening in their domestic economy, and this will hurry the Fed to lower rates soon - good for equities.

There is a wild card though, the recent bombings in Thailand was compounded by 3 bomb explosions yesterday in the Philippines killing 7 and wounding 29 - obviously trying to disrupt this weekend's Asean summit there.

Our Thai friends are shaking their heads. Just back in December, they did a U-turn on a major policy, rocking its own stockmarket. Now, another policy reversal. Now they say that foreign ownership limitations of Thai companies won't affect the country's telecom sector - was this to appease the Singapore government - maybe the lion whispered to the elephant "Ehh, friend friend la... the leech is out of the forest already.. !!" These kind of nervous steps and missteps would shake the confidence of foreign investors even more, what will they do next, what won't they do, what is permanent or is everything fluid...

The risk climate of investing in stocks, particularly in Asia, has just been raised somewhat, better be sidelined, reduce.

1 comment:

swifz said...

There are no reasons but news writer always try to put one due to the believe of cause and effect.

Venezuela is the flip of the butterfly that causes a storm in Asia.

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