Go NE Asean, Young S’porean

A report by worldwide management consulting firm McKinsey & Company released on Sept 14 found that eight out of 18 of the world’s best-performing emerging economies — including Cambodia, Laos, Indonesia and Vietnam — are in South-east Asia. These economies averaged at least 3.5%  annual per capita gross domestic product (GDP) growth over 50 years, or 5 per cent annual growth over 20 years.

But be warned Cambodia and Laos is bandit country: you can get killed by unhappy biz rivals. Vietnam is a lot safer.

Indonesia? A country of the future. But it has always been like that.

Advertisement

Chinese zodiac’s animals: global distribution per capita

To herald China’s most important holiday, we [Economist] have taken a light-hearted look at the global distribution of the animals of the Chinese zodiac. The Middle Kingdom is home to some of the world’s largest herds, flocks, packs, and broods. It has the second-largest number of horses, 6.7m, after America’s 10m (although neither feature in our charts, which account for population). Instead, Mongolia, where horses are integral to its nomadic tradition, tops the ranking. Similarly, there are four times as many pigs in China as anywhere else, but Denmark’s huge pork industry means it has the highest pig-to-person ratio. Of the ten animals shown, China is among the top nations in total numbers for all but tigers, dragons (Komodo) and rats (guinea pigs in Peru and Bolivia, the only numbers available from the FAO). Snake (the departing year) and monkey are omitted for lack of data. Xin Nian Kuai Le!

Asean countries– Brunei (Rooster), M’sia and Thailand (Tiger), Indonesia (Dragon) and Laos (Tiger and Ox) — appear on several of these charts.

Click link to see all all the charts or in bigger format http://www.economist.com/blogs/graphicdetail/2014/01/daily-chart-19

Asean-round up

In Thailand – up 7.5% since the New Year – the market has been helped by a raft of initial public offerings and a boom in cross-border takeovers by Thai companies.

But the Stock Exchange of Thailand is also becoming a hub, connecting its securities trading with that of Malaysia and Singapore, and helping Laos develop its fledgling equity and bond market.

It has also signed a memorandum of understanding to help Burma do the same. FYI, the Laos market, tiny and illiquid, is up 17% in the last five weeks.

The Philippines has for decades resolutely defied the expectations that have been heaped upon it since the end of the Marcos era, and underperformed with monotonous regularity.

However, the fundamentals do look convincing now: low inflation of about 3-3.5%, growth estimated at above 6% through to 2016, strong consumption, election spending and rising foreign investor interest.

The economist Nouriel Roubini, who predicted the 2008 financial crisis (and got the recovery dead wrong by continuing to maintain a determinedly gloomy attitude to the world economy ever since), had surprising comments for the Philippines earlier this month, predicting 7% growth and praising its economic success based on fiscal and governance reforms.

He even predicted the rating agencies would grant it an investment grade rating – a stamp of approval for foreign investors. At present, the country’s rating is a notch below investment grade.

By contrast the economy in Vietnam is now in the doldrums and experts pointing to decades of economic mismanagement as the cause. Many Vietnamese are now saying their trust in the government has gone. Sounds familiar?

Another exciting year is in store for initial public offerings (IPOs) in Malaysia. A recent report by HwangDBS Vickers Research identified close to 30 companies that may be floated on the Malaysian bourse this year.

Among the biggest IPOs set for this year are Malakoff Corp Bhd, Iskandar Waterfront Holdings Sdn Bhd, the power assets of 1Malaysia Development Bhd (1MDB), AirAsia X and possibly Westports Malaysia.

Corporate bonds issuance hit nearly RM124 billion (S$49.7 billion). A record amount of nearly RM146 billion was raised through corporate bonds and IPOs, an 89% jump over the RM77.2 billion raised in 2011, going by capital market statistics released by the Securities Commission.

The corporate bond market raised 73% more than the RM71.2 billion raised in 2011; it was the highest amount raised to date, with sukuk issuances amounting to RM97.5 billion or 79% of total bond issuances.

The increase in government-guaranteed assurances boosted growth in private debt securities (PDS) and 2013 issuances are expected to be even higher.

Asean round-up

Vietnam’s prime minister admits ‘faults’ on economy

And its China-plus-one Asean country for MNC manufacturers: In contrast to 2005, the previous time anti-Japanese riots flared, China is not the only fast-growing, well-populated, low-cost market around. Back then, Japanese firms hedged their China risk with a “China-plus-one” strategy, implying that they would find an extra Asian supply hub, such as Thailand. Now, that has grown into a wider “China-plus” strategy, because their options these days have widened to include Indonesia, Myanmar, Vietnam, Cambodia, the Philippines and India. (From the Economist’s last but one issue).

Will Laos join the other Asean countries now that it’s in WTO? Unlikely, but its been growing fast (and under the radar) http://www.bbc.co.uk/news/business-20078312. Stag Yaw should pop across from Hanoi to check out the gals biz prospects?

M’sia’s Westport is planning a US$500bn IPO for the first quarter of 2013 reports Reuters.  Thirteen companies have raised US$6.4bn so far this year on KLSE making it the 4th biggest IPO mkt after US, China and Japan. And CEO and COO are locals, not FTs like those of SGX.

ThaiBev: Time for a Pause that Refreshs? Time for a Tiger?

Why Thaibev and friends are trying to line up S$9bn from banks for a general offer for F&N, and so derail the APB sale.

Problem is that if they win and block the sale, APB could still go to Heinken on worse terms. Heineken has the right of first refusal over the APB shares held by F&N/ Heineken jointly and there is a formula to resolve valuation questions: not based on stk market prices. Meanwhile, Heineken still has mgt control. So far, the Thais have played the game shrewdly, but things could go wrong. And they are highly leveraged.

Asia overtook Europe and the Americas in 2007. In 2011 it drank 67bn litres of beer, to the Americas’ 57bn and 51bn in Europe, according to Euromonitor.

What’s more, as developed markets such as Europe, the US and Australia stagnate, Euromonitor forecasts that beer consumption (by volume) will grow by 4.8% in Asia Pacific every year between 2011 and 2016.

AND

 the countries with the biggest growth prospects in the region are Vietnam, Cambodia and Laos, where Euromonitor forecasts that volumes drunk will grow at up to 9% per year between 2011 and 2016.

http://www.bbc.co.uk/news/magazine-19488060

Korean and Jap exchanges are eating SGX’s lunch in ASEAN

Korea Exchange, which runs the world’s 13th-largest stock market, is helping ASEAN countries set up exchanges in return for stakes in the bourses. It helped Laos (last year) and Cambodia (recently) open their stock market trading platforms.

The Cambodian government has a 55%ish stake in the Cambodia Securities Exchange, while the Korea Exchange which provided information-technology systems, owns the rest. It holds 49% in Lao Securities Exchange, while the Laotian government owns 51%.

It is hoping to do the same for Myanmar even though the Tokyo Stock Exchange and Daiwa Securities had negotiated a “memorandum of understanding” to establish a stock exchange and develop the country’s capital markets.

Korea Exchange said that it would do its best to win the Myanmar government’s confidence until Myanmar makes a final decision and enters into a binding agreement for the establishment of its exchange.

True, these are “peanut” deals, but they are the kind of deals one would expect SGX to do given that these nations are ASEAN members. And anyway, while SGX may think it is a global player, it hasn’t done anything globally. It made a dumb bid for ASX (dumb because no-one except SGX and ASX mgts tot the Oz authorities would allow the bid*); and had to close its dark pool joint venture Chi-East in May as business volumes were weak and unlikely to improve.

——

*The bid would have benefitted ASX’s shareholders, in the main brokers using ASX’s trading platform. Brokers are damned gd at getting non-brokers particularly foreigners to buy into them or their investments. British brokers made their fortunes in the 1980s (including one David Cameron’s father) by selling out to, in the main, US banks.

Happened in India recently.   Private equity firms (think Americans again), which had invested in Indian stock brokers between 2005 and 2008, are in the main, struggling to exit these investments as current valuations of broking firms are less than half of what they were during the stake purchases due to a drop in profits on account of declining trading volumes and shift in the business model to a capital-driven one. http://articles.economictimes.indiatimes.com/2012-06-15/news/32254600_1_pe-firms-broking-equity-firms

Frontier Markets: Do they offer value?

Where is the dividing line between frontier and emerging markets? “It’s not very clear,” said emerging markets specialist Mark Mobius of Templeton. “Generally speaking, frontier markets are those that are relatively small and illiquid and have been pretty much ignored up to now.

‘Cambodia or Sri Lanka would be examples, along with Vietnam and Pakistan. But then you have other markets, like those in the Middle East which have not traditionally been part of emerging markets, such as Kuwait, Abu Dhabi and Dubai.”

By his definition, we have three around us: Cambodia, Sri Lanka and Vietnam.

Interested in Cambodia and Laos?

Frontier Investment and Development Partners says that investment in China’s neighbours has become an option for those interested in China itself, reports the FT. FIDP claims to be a private equity investor.

FIDP, which has offices in Singapore, Cambodia and Mongolia, has launched its Cambodia and Laos fund, and is due to start investing its first $50m (£32m, €37m) by July. The fund is “an extended China play”, designed to profit from exports to China as well as the shift of investor interest from west to east. It will focus largely on agriculture and infrastructure, seeking to benefit from China’s continued demand for raw materials and its desire for food security and the need to improve transportation links for trade

Both Cambodia and Laos boast swathes of undeveloped land and untapped reserves of resources. The discovery of oil reserves off the south-west coast of Cambodia has yet to be quantified and the potential for Laos to become a major source of hydropower using the Mekong river has also not yet been utilised. But … these countries are primed for rapid growth.

And as roads are built and an unbroken rail network is created across the region, the proximity to China of countries such as Cambodia and Laos will provide them with an additional advantage over commodity exporters further afield.

China has provided large sums towards developing infrastructure and transportation links in both countries. In March, a Chinese delegation to Cambodia pledged to expand commercial ties between the two countries, including an agreement between telecommunication companies Chinese Huawei Technologies and Cambodia’s CamGSM.