Asia Stocks: The week that was

SINGAPORE, Aug. 22 (UPI) -- Asia stock markets had another strong week, with most indexes reaching 13-month highs, generally following U.S. markets.

Investors have been encouraged by signs of an economic recovery in the United States, confirmed by a string of strong domestic economic indicators in the region. With most of the second quarter data out of the way, investors believe Asia economies are now on the rebound.

"Asian equities have performed strongly in August, fueled by optimism that the regional economies are passed their worst," said Mike Moran, economist for Standard Chartered. The MSCI ex-Japan index, a broad measure of regional stock performance, has risen 17.3 percent since the beginning of June (roughly the time SARS was believed to have been contained in Asia).

"Most encouraging are indices such as HK and Singapore, heavily affected by SARS and the global slowdown, finally shaking off the tag of international pariah in investors' eyes," Moran added.

In Thailand, the local stock market has been riding high on expectations of domestic economic growth, as the country's GDP is expected to grow on average by 4.8 percent this year, after a 5.3 percent growth last year.

The index is now at a four-year and closed Friday at 534.8, up 3 percent on the week.

Two sectors remain in favor: banking and property

Reports a merger between BankThai and Industrial Finance Corp. of Thailand (IFCT) will be concluded by year end boosted sentiment in the banking sector early on this week, which was further reinforced by news Krung Thai Bank would conduct a study on streamlining the operations of TPI Polene and parent Thai Petrochemical Industry ahead of granting a loan to TPI Polene.

Investors also took heart from the central bank's latest initiative to clean the sector of non-performing loans. Bank of Thailand Governor indicated this week the central bank is drafting a proposal to help transfer all outstanding non-performing loans and assets out of the banking system.

Meanwhile, Land and Houses, Thailand's largest house builder, reported strong second quarter earnings, reinforcing positive sentiments toward the sector, which has been underpinned by the low level of interest rates.

SOUTH KOREA

Another strong week for Korean shares, with the benchmark Korea Composite Stock Price Index (KOSPI) closing Friday at 754.72 points, up 3.8 percent on the week, though activity was trailing off Friday on the back of selling on telecom giant SK Telecom.

The market is now at a 13-month high amid speculation the country will benefit from a U.S. economic turnaround, especially as Korea has officially entered a technical recession for the first time in 5 years. GDP growth in the second-quarter contracted 0.7 percent on the previous earlier, compared with a 0.4 percent drop in the first quarter.

Interest in various units of the Hyundai group lent support early on in the week, as investors speculated some of the units may become the target of merger and acquisitions. There were talks the brother of late Hyundai founder Chung Ju-yung plans to keep buying into the ailing conglomerate to eventually take over the group. Chung owns Kumgang Korea Chemical Co. (KCC), which was reported Wednesday to have bought 3.07 million shares in Hyundai Merchant Marine, becoming its third-largest shareholder.

Chip giant Samsung Electronics, which account for 20 percent weighting in the KOSPI, powered ahead throughout the week following gains in its U.S. peers. Foreign investors remain strong buyers of the stock, which has now risen nearly 70 percent since early February.

LG Electronics, the world's sixth-largest mobile phone maker, also attracted buying interest after it reported its handset sales volumes had risen by a third on a monthly basis in July.

TAIWAN

Strong July export order data, up 14.8 percent year on year, lend support to the Taiwanese market on hopes the economy is turning around. The TAIEX shares index closed the week at a 14-month high at 5,646.62, up 2.9 percent on the week.

Banking stocks which usually trade as a proxy to the economy, lend support, especially as parliament is expected to pass financial reform laws when it reconvenes in September after summer recess.

The semiconductor heavy market benefited from advances in their U.S. counterparts. Taiwan Semiconductor Manufacturing Co gained after major customer Broadcom slightly raised its third-quarter outlook.

DRAM maker ProMOS Technologies posted strong gains after reporting it trimmed second-quarter net losses by 64 percent year-on-year, giving a bright outlook for the second half of the year.

Chunghwa Telecom, Taiwan's largest phone company, reported a slim rise in second-quarter profit due to higher Internet usage and the firm's dominance in fixed-line services, but investors remain concerned of price pressures looming as competition in the sector intensifies.

HONG KONG

Despite the grim current economic situation, Hong Kong shares moves ahead this week on hopes the local economy will benefit from a U.S. economic recovery. The benchmark Hang Seng Index ended at a 13-month high at 10,760.73, up 3.2 percent on the week.

Hutchison Whampoa posted gains after reporting a two percent rise in first-half net profit as losses at European third-generation mobile phone business offset growth at its ports and retail arms. The news prompted from brokers to raise their target price on the stock.

Property firms were generally firmer as investors speculated the easing of restrictions on mainland China residents to travel to Hong Kong could help developers.

Banking stocks benefited from news that ICBC (Asia), the Hong Kong unit of China's largest bank, would buy the Hong Kong banking assets of European financial services giant Fortis. The company said it would buy the asset of Fortis Bank Asia with cash and shares, but did not disclose details. The news came two weeks after Wing Hang Bank said it plans to buy Chekiang First Bank from Japan's Mizuho Financial Group.

SINGAPORE

The market started the week on a very strong footing after Prime Minister Goh Chok Tong announced upcoming changes to contribution to the Central Provident Fund. Though the details have not been flesh out yet, employers' contributions will probably be cut, a more seen benefiting corporate and ensuring Singapore's wages stay competitive.

While employees must pay 20 percent of their wages into the fund, employers may be able to reduce their contribution to as low as 10 percent of wages from 16 percent under the plan.

Sentiment an economic recovery is now underway was also reinforced by news non-oil domestic exports had risen 10.8 percent year on year in July, below the 18.7 percent rise in June, but still market expectation.

After taking a 2-day breather in the middle of the week, the Straits Times Index (STI) continued on its uptrend to close Friday at 1,640.19, a fresh 13-month closing high and up 2.9 percent on the week.

Economically sensitive stocks such as banks gain.

Trailing behind in the rally were the property counters, as investor showed some concerns on whether recent buying interest will be dampened with the lower CPF contributions expected, that will lower affordability.

Of concern too is the proposal for a sliding scale of rates for different age groups, as it is likely to also lower upgrading demand for HDB flat, traditionally a cornerstone of the private residential market, economists said.

MALAYSIA

The key Kuala Lumpur Composite Index remained an under-performer in the region this week, closing at 743.35, up only 2 percent, still the highest closing level since July last year.

Analysts believe the index's medium term uptrend remains intact. On the domestic front, the release of corporate results that have at least met with market expectations, coupled with rising anticipation of a favorable 2004 Budget to be unveiled September 12, are continuing to fuel investor interest.

Strong performances by recent new listings have also served to strengthen sentiments, they said.

National carmaker Proton is under selling pressures, as investors remain concerned with the competitiveness of the carmaker following the advent of AFTA in 2005 and aggressively priced new models being launched by competitors.

All eyes remained on the banking sector, as a consolidation is now underway. Commerce Asset-Holding, which is expected to make a bid for AMMB, posted sharp faints after Malaysia's largest pension fund bought more shares in the firm. The Employees Provident Fund (EPF) bought another 3.1 percent stake in Commerce raising its shareholding to one fifth.