Most Southeast Asian stocks now undergoing ‘correction’

[prichar s.]

Most Southeast Asian stocks now undergoing ‘correction’
June 13, 2013, 1:59 AM

The cacophony in the Japanese share market is no longer able to muffle the noise being made by falling stocks elsewhere in Asia.

Southeast Asia stood out, as Singapore’s Straits Times Index SG:STI -1.33% slipped into a correction – having dropped more than 10% from its May 22 high. Regional benchmarks from Thailand, the Philippines, and Indonesia, which were already in that territory, were sliding even faster.

By mid-afternoon, the Philippines’s PSE Composite was down 4.8%, Thailand’s SET Index was off 4.3% and Indonesia’s JSX was off 1.7%, compared with Singapore STI’s 1.5% drop. The Philippine, Thai and Indonesian benchmarks – all of which rank among the best-performing global indexes over the past four years – are now down between 5% and 10% from their respective closing levels last week. Their week-to-date losses are more than those suffered by other major regional stock indexes.


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The selloff appears to have steepened against the backdrop of fears the Fed will taper down its bond purchases and follows this week’s Bank of Japan meeting, where the Japanese central bank disappointed those who had been expecting more QE firepower in view of recent volatility.

Credit Suisse economist Robert Prior-Wandesforde says that while markets recognized that the Fed would eventually taper its quantitative easing, nobody wanted to think about it …. until now.

“Markets are effectively in the process of pricing this in, with the most expensive markets generally taking the biggest hit,” he said. “It is important to remember that, as [Fed Chairman Ben] Bernanke himself said, the tapering will be slow and only occur if the real economy is showing a sustained improvement (good for Asian exporters).”

And while the selloff in equities was also accompanied by a drop in regional currencies, new capital controls to limit fund outflows were likely still some time away, he said.

“For the hotter Asean (Association of South-East Asian Nations) markets, the withdrawal of liquidity should really be considered good news … assuming, of course, it doesn’t go too far! In our view, monetary conditions had been too loose for too long, leading to overheating pressures – some of which could now be eased somewhat,” Wandesforde added.

– V. Phani Kumar

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