Southeast Asian stocks have clearly seen better days, but there is light at the end of the tunnel.
In the largest unloading of stocks on record by Bloomberg, overseas funds have yanked $5.1 billion out of Thailand, Indonesia and the Philippines alone this quarter.
Yet, while some analysts expect the selloff to continue, technical indicators hint at most Asian stock and currency markets having switched into correction mode.
While particularly Indonesia, ASEAN’s largest economy, has been experienced the greatest losses of its main stock index Jakarta Composite which dropped 14 per cent in the period, and has had the region’s second worst performing currency behind the Malaysian ringgit, things have reversed.
In the past days, the Indonesian currency experienced substantial gains, notably 1.8% against the dollar on October 6, the largest daily gain over six years.
Some pessimists still believe that the region’s markets will remain jittery for the time being, hit by the fallout from China’s economic slowdown and on concerns over a possible upcoming interest rate hike by the US Federal Reserve.
However, Investvine took a look at the stocks that were among those having lost the most over the past three months – with mining, energy and commodity stocks being hardest hit – and it seems that share prices are about to recover.
Hong Kong’s Hang Seng index, an important indicator for market moods in East Asia, made a big jump on October 5, traded flat on the following day and jumped another time more than 2 per cent on October 7, clearly indicating a rebound after a double-bottom since early September. Investors thus hope for the best that the mainland selloff over the past weeks at the exchanges in Shenzhen and Shanghai will have come to and end when bourses open on October 8 after a week-long national holiday in China.
Japan’s Nikkei also traded in positive territory over the past days, and currencies throughout the region seem to be building up strength. In any case, analyst believe that Southeast Asia’s built-up foreign reserves would be sufficient to save the region from repeating a 1997 melt down. These defenses are looking strong enough to hold up.
San Miguel is a food and beverage behemoth, the largest company in the sector in Southeast Asia. It is the owner of San Miguel Beer, one of the best selling products in the Philippines. A large part of its business is composed of food packaging and manufacturing, with production hubs located in Mainland China and beyond. Notably, the company is well diversified, with liabilities in fuel and oil through Petron Corp.
PTT is Thailand’s partly state-owned oil and gas giant. A Global Fortune 500 company, PTT is one of Thailand’s largest companies, with an extensive network of big-ticket assets, such as LPG terminals and gas pipelines across the Gulf of Thailand. However, this year has been though: Earlier in 2015, the company registered its first quarterly net loss in 16 years.
As the largest cement company in Thailand, Siam Cement is an apt construction bellwether. The company is 30 per cent-controlled by the Thai royal family. Notably, Indonesia has become a large part of their investment portfolio over the past few years, exposing the company to risk in that market as well.
Indika Energy is the energy arm of Indonesian conglomerate Indika Group, specialising in energy resources, services and infrastructure, namely coal. The company is an active explorer of coal and owns numerous coal mines across the archipelago.