February 13, 2019

Most Southeast Asian stock markets fell on Monday, with Philippine shares recording their worst fall in two weeks, as investors awaited a US Federal Reserve rates review and key Sino-US trade talks.

The Fed is expected to leave rates unchanged on Wednesday, as policymakers had made it clear that they plan a “patient” pause in rate hikes. The central bank is resigned to a wait-and-see approach to further tightening in the face of a global economic slowdown, US federal government shutdown, trade tensions, and waning business and consumer confidence.

Investors were sceptical about the actual progress made at the talks, especially about core US demands for structural policy changes in China. Many people that were briefed on the negotiations said that while Chinese negotiators engaged US officials on intellectual property and technology transfer practices, they did not bring any new proposals to the table.

Adding to the investor’s caution is the start of a crucial round of Sino-US trade talks on Wednesday and Thursday. Philippine market shares fell as much as 1.7 percent on profit-taking before recovering partially to close 0.9 percent lower. “There were a large-scale sale of shares of companies with the large institutional following, investors are now cautious about what will happen in the US Fed meeting,” said a research analyst at AP Securities in Manila, Rachelle Cruz.
Index heavyweights SM Prime Holdings and BDO Unibank Inc lost 2.4 percent and 1.5 percent, respectively, while Premiere Entertainment closed at its highest level since November 1997. Malaysian shares fell 0.4 percent, dragged by the utility and basic material stocks. Effects of the China-US trade war were seen with data showing Malaysia’s exports to China, a major trading partner, contracted 0.5 percent annually in December, while shipments to the United States surged 13.5 percent.

Singapore shares closed at 0.4 percent lower, with Singapore Press Holdings and DBS Group Holdings falling 1.2 percent and 2.4 percent, respectively. in the meantime, Thai shares gained 0.5 percent, with PTT production and exploration emerging as the top boost to the index after the company posted an 88.6 percent rise in full-year profit. PTT Production and exploration rose 2.1 percent, while Airports of Thailand gained 1.5 percent.

Most Southeast Asian stock markets dipped on Tuesday, with Malaysia leading the decline and Thailand snapping a nine-session winning streak, as concerns heightened about Sino-US trade relations after the United States charged Huawei Technologies Co Ltd with fraud.

The US Department of Justice charged Huawei, a Chinese company, and the company’s chief financial officer with conspiring to violate US sanctions on Iran by doing business through a subsidiary it tried to hide.
Chinese and US officials resumed talks in Beijing, with US Commerce Secretary Wilbur Ross predicting on Monday that the world’s largest economies would reach a trade deal that they could “live with.”

“We don’t have any option than to look at it from a bigger picture. You can’t view it on the day to day basis because the trade deal is not a one-day thing,” said Charles William Ang, associate analyst at COL Financial Group Inc.
“There might be recent developments, but it has been an issue for quite some time now so you cannot judge the impact.”

A further escalation in the China-US trade war will likely trigger an even sharper global economic slowdown this year, economists said in a recent Reuters poll. Malaysian shares closed with 0.4 percent lower with investors nervously awaiting the latest round of China-US trade talks which will take place in Washington on Wednesday and Thursday.

Telecom firm Axiata Group Bhd lost 4.4 per cent, while chemical producer Petronas Chemicals Group fell 2 percent. Energy stocks caused Thai shares to close lower. Index heavyweights PTT and PTT Exploration and Production declined 1 percent and 2.5 percent, respectively.

Investors now await February inflation data due on Friday for clues about the economy. A Reuters poll showed the annual headline inflation rate in January might have slowed from the previous month and stayed below the central bank’s target range for a third straight month.

Singapore shares fell to 0.7 percent intraday before recovering to close 0.4 percent lower. Keppel Corp and Singapore Airlines Ltd fell to 1.1 percent and 0.8 percent, respectively.
Vietnam shares were the only gainers in Southeast Asia, recovering from early losses to rise to 0.4 percent. The standard stock index closed higher for a fifth straight session. The top gainers were the financial and real estate stocks, with Vinhomes JSC rising more than 1 percent and Vietcombank climbing over 2 percent.