Published September 12, 2008
Closure to China Energy saga may be premature
By LYNETTE KHOO
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THE update by China Energy on the measures taken to strengthen internal controls and corporate governance is the right way forward, keeping shareholders in the know of where the company is heading.
While this sets the tone for closure to a chapter marred by unapproved and undisclosed payments, it has not fully addressed several related concerns.
It all started with the discovery of an additional payment of 191 million yuan (S$40.3 million) by China Energy in its acquisition of Jiutai Guangzhou - which was paid without approval or knowledge of its audit committee (AC) and unaccounted for in its financials. The AC engaged PwC in March to probe into this.
In its review, PwC said that the bulk of these payments went to a key contractor for the construction of Jiutai Guangzhou's dimethyl ether (DME) Phase 1 plant. This contractor is 60 per cent owned by the brother-in-law of China Energy chief executive officer Cui Lianguo.
PwC found no irregularity in the payments, but it stressed that certain approval processes in the group could be improved and advised that the board of directors take measures to enhance or strengthen such processes.
While investors should be pleased with the efforts made by the group to implement those recommendations, they should not hastily close this chapter yet as some questions are still up in the air.
For one, the acquisition of Jiutai Guangzhou was funded by IPO proceeds and the payment went far and beyond the amount set aside for it. Although China Energy had agreed to pay 197.8 million yuan in November 2006, an additional 191 million yuan was coughed out from the IPO coffers - possibly being channelled from some other uses.
This begs the question why the use of IPO proceeds could differ from what was presented in the IPO prospectus.
Since shareholders have bought into the IPO based on information in the IPO prospectus, it is only fair that their approval is sought or a timely update be given on a change in the use of funds. Otherwise, what protection is there for those who buy into an IPO and how much can they take the prospectus at its word?
And on the face of it, some conditions of this acquisition might not have been met. According to the IPO prospectus, the acquisition was conditional upon the eventual payment not exceeding 220 million yuan (110 per cent of the estimated sum) or it would require the approval of the AC and shareholders. The company also said that it did not expect any material difference in price save for any land revaluation difference and an additional capital injection of 51.7 million yuan, which was effected in September 2006.
But the total payment turned out to exceed the cap and the price difference was due mainly to debts owed by the target company for its plant construction. The fact that this acquisition still went through despite some unmet conditions is something that regulators should be mindful of.
It is unclear if SGX has taken up this matter privately with China Energy, since it does not usually disclose its dealings with individual companies. But if private sessions touched on these issues, then information should not be kept behind closed doors. This is so since it concerns shareholders' entitlement to the terms set out in an IPO prospectus.
More disclosure at the public level will also help reassure investors over Chinese listcos, given that Chinese IPOs form the bulk of foreign listings here.
And if the PwC executive summary - the only part of the review that is disclosed - cannot provide all the answers, then making the full PwC report accessible to the investing public may be necessary to provide a fuller picture.
It is also worth noting that since the PwC review was released, subsequent filings pertaining to this matter have been issued by group CEO Mr Cui, instead of the audit committee that engaged PwC. SGX should consider if it is best for a management executive to be the one driving announcements on a review on the use of funds by the management itself.
Surely, this gives rise to the appearance of a conflict of interest. Adding to this view is the fact that the acquisition of Jiutai Guangzhou is an interested person transaction involving Mr Cui, who owns controlling stakes in China Energy and the former vendors of Jiutai Guangzhou.
If these concerns are not adequately looked into, a closure to this episode could be premature. More transparency and disclosure is necessary to provide that clarity.
Strengthening internal controls and corporate governance is certainly a good thing, but resolving persisting issues surrounding these efforts is just as crucial.
Friday, 12 September 2008
Published September 12, 2008
KL won't tax IPPs' profits
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(KUALA LUMPUR) Malaysia's government has scrapped plans to levy windfall taxes on independent power producers' profits, a move that had been criticised by power companies which said it would hurt their credit ratings.
Independent power producers (IPPs) will instead make a one-off payment to the government, equivalent to a year's windfall levy payment, the government said in a statement yesterday. It has also suspended talks over power purchase agreements.
'It's definitely positive for market sentiment . . . I would think a one-off payment would not have a ratings impact,' said a bond trader, who said the windfall levy had weighed on prices.
In June, the government announced that a windfall profit levy of 30 per cent would be charged on return on assets for producers of electricity with return on assets in excess of 9 per cent for each financial year. The tax has hit the price of bonds issued by IPPs. Most IPPs, such as YTL Power, Sime Darby, Tanjong Plc and MRCB, strongly objected to the tax plan.
According to RAM Ratings, one third of the RM30 billion (S$12.5 billion) IPP-related bonds it rated were likely to be affected by a new windfall profit tax. -- Reuters
KL won't tax IPPs' profits
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(KUALA LUMPUR) Malaysia's government has scrapped plans to levy windfall taxes on independent power producers' profits, a move that had been criticised by power companies which said it would hurt their credit ratings.
Independent power producers (IPPs) will instead make a one-off payment to the government, equivalent to a year's windfall levy payment, the government said in a statement yesterday. It has also suspended talks over power purchase agreements.
'It's definitely positive for market sentiment . . . I would think a one-off payment would not have a ratings impact,' said a bond trader, who said the windfall levy had weighed on prices.
In June, the government announced that a windfall profit levy of 30 per cent would be charged on return on assets for producers of electricity with return on assets in excess of 9 per cent for each financial year. The tax has hit the price of bonds issued by IPPs. Most IPPs, such as YTL Power, Sime Darby, Tanjong Plc and MRCB, strongly objected to the tax plan.
According to RAM Ratings, one third of the RM30 billion (S$12.5 billion) IPP-related bonds it rated were likely to be affected by a new windfall profit tax. -- Reuters
Published September 12, 2008
New entity IJM Land aims to expand globally
It plans to launch 28 projects in M'sia over next six months
By PAULINE NG
IN KUALA LUMPUR
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IJM Land, the new entity formed as a result of the merger between the property units of Road Builder Group and IJM Corporation, wants to be an international property player, its enlarged domestic land bank notwithstanding.
'We will certainly go to places where we think we can make money,' IJM Land chairman Krishnan Tan said at the launch of IJM Land's corporate identity yesterday.
The developer of Ocean 8 at Sentosa Cove in Singapore has currently set its sights on Changchun, China, where it has planned a RM500 million (S$208 million) mixed development project, which Mr Tan said 'will certainly not be the last'.
It is also biding its time before making a foray into other developing countries such as Vietnam.
On Singapore, he told BT that IJM's development of Ocean 8 at that time was 'opportunistic', and that although the company had tendered for subsequent plots, it had not been successful.
So profitable was its maiden foray in waterfront housing in Singapore, IJM said, that the project contributed RM26.6 million in pre-tax profit on revenue of RM59 million for its fiscal year ended March 2007.
In its new manifestation, IJM Land's more than 4,000 ha land bank and total assets of some RM3 billion place it as Malaysia's fourth-biggest listed property developer by assets.
Over the next two decades, the company believes its large land bank could potentially realise a gross development value of more than RM20 billion.
Domestically, the new property heavyweight isn't lacking in projects. It has more than 60 ongoing projects and plans to launch another 28 over the next six months.
'Our plate is full,' said IJM Land managing director Soam Heng Choon.
Branding itself as an upmarket developer, the company is currently involved in luxury projects such as Ampersand@Kia Peng in the Kuala Lumpur city centre area, and the Light Waterfront Development in Penang, which Mr Tan assured 'will redefine Penang'.
IJM Corporation's acquisition of the Road Builder group last year also gives it a ready market in the mass housing range. Road Builder is credited with building the Seremban 2 township, which now boasts a population of over 50,000 people.
Mass housing has been more affected in the current soft property market, Mr Soam said, but IJM Land's wide product range would give it greater flexibility in its launches.
'We will put on the market what the market wants and can take,' he said, adding the medium to medium-high range of RM450,000 upwards was 'still doing well'.
Most of the company's land bank is located in the Klang Valley, Negri Sembilan and Malacca. Its total land bank is about one-third the size of Malaysia's largest landowner, conglomerate Sime Darby, which claims to have a land bank of 15,000 ha suitable for property development.
New entity IJM Land aims to expand globally
It plans to launch 28 projects in M'sia over next six months
By PAULINE NG
IN KUALA LUMPUR
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IJM Land, the new entity formed as a result of the merger between the property units of Road Builder Group and IJM Corporation, wants to be an international property player, its enlarged domestic land bank notwithstanding.
'We will certainly go to places where we think we can make money,' IJM Land chairman Krishnan Tan said at the launch of IJM Land's corporate identity yesterday.
The developer of Ocean 8 at Sentosa Cove in Singapore has currently set its sights on Changchun, China, where it has planned a RM500 million (S$208 million) mixed development project, which Mr Tan said 'will certainly not be the last'.
It is also biding its time before making a foray into other developing countries such as Vietnam.
On Singapore, he told BT that IJM's development of Ocean 8 at that time was 'opportunistic', and that although the company had tendered for subsequent plots, it had not been successful.
So profitable was its maiden foray in waterfront housing in Singapore, IJM said, that the project contributed RM26.6 million in pre-tax profit on revenue of RM59 million for its fiscal year ended March 2007.
In its new manifestation, IJM Land's more than 4,000 ha land bank and total assets of some RM3 billion place it as Malaysia's fourth-biggest listed property developer by assets.
Over the next two decades, the company believes its large land bank could potentially realise a gross development value of more than RM20 billion.
Domestically, the new property heavyweight isn't lacking in projects. It has more than 60 ongoing projects and plans to launch another 28 over the next six months.
'Our plate is full,' said IJM Land managing director Soam Heng Choon.
Branding itself as an upmarket developer, the company is currently involved in luxury projects such as Ampersand@Kia Peng in the Kuala Lumpur city centre area, and the Light Waterfront Development in Penang, which Mr Tan assured 'will redefine Penang'.
IJM Corporation's acquisition of the Road Builder group last year also gives it a ready market in the mass housing range. Road Builder is credited with building the Seremban 2 township, which now boasts a population of over 50,000 people.
Mass housing has been more affected in the current soft property market, Mr Soam said, but IJM Land's wide product range would give it greater flexibility in its launches.
'We will put on the market what the market wants and can take,' he said, adding the medium to medium-high range of RM450,000 upwards was 'still doing well'.
Most of the company's land bank is located in the Klang Valley, Negri Sembilan and Malacca. Its total land bank is about one-third the size of Malaysia's largest landowner, conglomerate Sime Darby, which claims to have a land bank of 15,000 ha suitable for property development.
Published September 12, 2008
Telekom Malaysia rival wants broadband licence
Firm planning own privately funded, RM18b high-speed network
By S JAYASANKARAN
IN KUALA LUMPUR
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THE government's award of an RM11.31 billion (S$4.7 billion) nationwide, high-speed broadband (HSBB) network to state-owned Telekom Malaysia (TM) has not deterred a rival company that wants a licence to run a private network.
Easily accessible: Telekom Malaysia has 88 per cent of the broadband market while mobile phone operators Maxis and Celcom have a 6 per cent share each. TM's strong balance sheet also means that it can easily finance the rollout of a nationwide, high-speed broadband network
High Speed Broadband Technology (HSBT), which has links to the state government of Pahang, yesterday unveiled a concept plan for an RM18 billion high-speed network that would be privately funded and would not involve any government money.
In an announcement to Bursa Malaysia on Tuesday, TM said that it has received a letter of award from the Malaysian government for the HSBB project, with funding to be split between Kuala Lumpur (RM2.4 billion) and TM (RM8.91 billion).
The Pahang-based company is not deterred. Its spokesman, Shukor Ahmad, said yesterday that it would 'appeal' to the federal government for a licence so that households and companies can choose between the competition.
Net neutrality - the principle that broadband networks should be open to all Internet service providers (ISPs) without discrimination - is a big issue in developed nations and has clearly spread to Malaysia.
Although they have not voiced their discontent aloud, Malaysia's ISPs privately feel that an independent third party such as the government should own the HSBB network so every provider can compete on an equal footing.
Going by history, their fears could be justified. Back in the 1990s, telecommunications plans called for 'equal access' under which TM's monopoly of fixed lines would be gradually dismantled in favour of all telco firms. That has never happened, with TM still having 96 per cent of the fixed-line business. Operators are worried that TM will have the right to restrict access to its HSBB network. But nothing is cast in stone yet, HSBT stressed yesterday. Indeed, TM's deal has previously been put off twice. The formal agreement is supposed to be signed next Tuesday but that is not a firm date.
Even so, analysts believe that TM will eventually win out. They say that it would be difficult for the government to deny state-owned TM, which has 88 per cent of the broadband market, while mobile phone operators Maxis and Celcom have a 6 per cent share each. Moreover, TM's strong balance sheet means that it can easily finance the rollout.
In addition, TM needs new growth drivers. A restructuring exercise last year split the utility into two - Telekom Malaysia International with the international and wireless business, and TM with the drying-up fixed-line business and broadband.
With voice revenue fading, analysts believe revenue from data services is vital to TM. They say the trick is how the government manages the competition.
Telekom Malaysia rival wants broadband licence
Firm planning own privately funded, RM18b high-speed network
By S JAYASANKARAN
IN KUALA LUMPUR
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THE government's award of an RM11.31 billion (S$4.7 billion) nationwide, high-speed broadband (HSBB) network to state-owned Telekom Malaysia (TM) has not deterred a rival company that wants a licence to run a private network.
Easily accessible: Telekom Malaysia has 88 per cent of the broadband market while mobile phone operators Maxis and Celcom have a 6 per cent share each. TM's strong balance sheet also means that it can easily finance the rollout of a nationwide, high-speed broadband network
High Speed Broadband Technology (HSBT), which has links to the state government of Pahang, yesterday unveiled a concept plan for an RM18 billion high-speed network that would be privately funded and would not involve any government money.
In an announcement to Bursa Malaysia on Tuesday, TM said that it has received a letter of award from the Malaysian government for the HSBB project, with funding to be split between Kuala Lumpur (RM2.4 billion) and TM (RM8.91 billion).
The Pahang-based company is not deterred. Its spokesman, Shukor Ahmad, said yesterday that it would 'appeal' to the federal government for a licence so that households and companies can choose between the competition.
Net neutrality - the principle that broadband networks should be open to all Internet service providers (ISPs) without discrimination - is a big issue in developed nations and has clearly spread to Malaysia.
Although they have not voiced their discontent aloud, Malaysia's ISPs privately feel that an independent third party such as the government should own the HSBB network so every provider can compete on an equal footing.
Going by history, their fears could be justified. Back in the 1990s, telecommunications plans called for 'equal access' under which TM's monopoly of fixed lines would be gradually dismantled in favour of all telco firms. That has never happened, with TM still having 96 per cent of the fixed-line business. Operators are worried that TM will have the right to restrict access to its HSBB network. But nothing is cast in stone yet, HSBT stressed yesterday. Indeed, TM's deal has previously been put off twice. The formal agreement is supposed to be signed next Tuesday but that is not a firm date.
Even so, analysts believe that TM will eventually win out. They say that it would be difficult for the government to deny state-owned TM, which has 88 per cent of the broadband market, while mobile phone operators Maxis and Celcom have a 6 per cent share each. Moreover, TM's strong balance sheet means that it can easily finance the rollout.
In addition, TM needs new growth drivers. A restructuring exercise last year split the utility into two - Telekom Malaysia International with the international and wireless business, and TM with the drying-up fixed-line business and broadband.
With voice revenue fading, analysts believe revenue from data services is vital to TM. They say the trick is how the government manages the competition.
Published September 12, 2008
Bank writedowns reach US$511 billion
Many busy raising capital, bracing for rise in bad loans
By CONRAD TAN
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(SINGAPORE) Banks worldwide have suffered more than US$510 billion in writedowns and losses since the credit crisis started. And even those that haven't been hit badly are bracing themselves for possible loan losses by shoring up their capital buffers.
A look at their capital positions at end-June suggests that most major banks are comfortably above the minimum required by regulators in normal times.
But these are not normal times. Last weekend's rescue of US mortgage finance giants Fannie Mae and Freddie Mac, and growing doubts over the future of investment bank Lehman Brothers, which reported massive losses on Wednesday, show how quickly multi-billion dollar capital cushions can be crushed by mountains of bad debt.
Scott Bugie, credit analyst at rating agency Standard & Poor's (S&P), said yesterday that problems in the US banking sector are likely to continue well into next year. 'It won't be until 2010 that we see more stabilisation in banking performance.'
By Sept 10, banks had reported an estimated US$511.1 billion in asset writedowns and credit losses since the start of 2007, according to data compiled by Bloomberg, based on that day's exchange rates.
Kenneth Rogoff, a former chief economist at the International Monetary Fund, told BT in a recent interview that he expects many more US banks to collapse, including a major investment bank.
As overall economic growth slows, there simply won't be enough profit to sustain the current number of banks, he said. 'The financial sector is still in trouble. It needs to shrink.'
Despite the extensive damage already suffered by the banking sector, Mr Rogoff and several others expect worse to come. Nouriel Roubini, an economics professor at New York University, is forecasting that losses from the credit crisis will exceed US$1 trillion and could even reach US$2 trillion.
To replenish their capital reserves, most banks have been busy raising new funds through share or bond issues or by selling assets for cash - a total of US$359.4 billion since July last year, according to Bloomberg.
Citigroup has written down the most so far in credit-related losses - some US$55.1 billion. It has also raised the most capital by a bank - US$49 billion since July last year.
Its tier 1 capital ratio - a measure of a bank's ability to withstand losses - at end-June was 8.7 per cent, although the sale of its German retail banking operations in July is expected to boost the figure to 9.3 per cent when completed later this year.
Others, such as Swiss bank UBS, have also been busy raising funds to bolster their balance sheets.
Broadly speaking, the tier 1 ratio is the proportion of capital from shareholders that a bank holds in reserve against the money it lends, adjusted for the varying risk on different types of loans. The higher the tier 1 ratio, the safer a bank is supposed to be.
But direct comparisons of banks' tier 1 ratios as an indication of their financial strength are difficult.
Standalone investment banks in the US such as Lehman, Goldman Sachs, Morgan Stanley and Merrill Lynch are regulated separately from commercial banks such as Citigroup and JP Morgan which take deposits from retail customers.
Commercial banks are required by the US Federal Reserve to maintain a tier 1 ratio of at least 6 per cent to be considered well-capitalised, while investment banks - which come under the US Securities and Exchange Commission - are not subject to a similar requirement.
In fact, the investment banks only started reporting their tier 1 ratios in the second quarter, after the collapse of Bear Stearns triggered heightened scrutiny of their capital positions.
Also, US investment banks - like Singapore banks - calculate their tier 1 capital ratios using the newer Basel 2 guidelines, while US commercial banks still follow Basel 1, a point that has sparked controversy recently in the US.
And as the troubles at Lehman, Fannie Mae and Freddie Mac have demonstrated, capital alone is no shield against a loss of confidence by investors.
Singapore banks - which have written down about $700 million so far - are well-capitalised, say analysts here. But even they have recently been beefing up their capital bases through preference share issues.
Banks heavily exposed to the worst-hit economies in the US and Western Europe are bracing themselves for a rise in bad loans in coming months, as economic growth slows or stalls. For some, however, massive writedowns are gobbling up their capital buffer as fast as they can rebuild it.
Lehman's tier 1 ratio of 13 per cent at end-June was the highest among the major banks, after it raised US$6 billion in June through a share offer, but the bank is now struggling to raise more through asset sales after suffering crippling losses in its fiscal third quarter due to gross writedowns of US$7.8 billion on mortgages and other assets. It now faces possible downgrades by debt rating agencies S&P and Moody's.
Bank writedowns reach US$511 billion
Many busy raising capital, bracing for rise in bad loans
By CONRAD TAN
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(SINGAPORE) Banks worldwide have suffered more than US$510 billion in writedowns and losses since the credit crisis started. And even those that haven't been hit badly are bracing themselves for possible loan losses by shoring up their capital buffers.
A look at their capital positions at end-June suggests that most major banks are comfortably above the minimum required by regulators in normal times.
But these are not normal times. Last weekend's rescue of US mortgage finance giants Fannie Mae and Freddie Mac, and growing doubts over the future of investment bank Lehman Brothers, which reported massive losses on Wednesday, show how quickly multi-billion dollar capital cushions can be crushed by mountains of bad debt.
Scott Bugie, credit analyst at rating agency Standard & Poor's (S&P), said yesterday that problems in the US banking sector are likely to continue well into next year. 'It won't be until 2010 that we see more stabilisation in banking performance.'
By Sept 10, banks had reported an estimated US$511.1 billion in asset writedowns and credit losses since the start of 2007, according to data compiled by Bloomberg, based on that day's exchange rates.
Kenneth Rogoff, a former chief economist at the International Monetary Fund, told BT in a recent interview that he expects many more US banks to collapse, including a major investment bank.
As overall economic growth slows, there simply won't be enough profit to sustain the current number of banks, he said. 'The financial sector is still in trouble. It needs to shrink.'
Despite the extensive damage already suffered by the banking sector, Mr Rogoff and several others expect worse to come. Nouriel Roubini, an economics professor at New York University, is forecasting that losses from the credit crisis will exceed US$1 trillion and could even reach US$2 trillion.
To replenish their capital reserves, most banks have been busy raising new funds through share or bond issues or by selling assets for cash - a total of US$359.4 billion since July last year, according to Bloomberg.
Citigroup has written down the most so far in credit-related losses - some US$55.1 billion. It has also raised the most capital by a bank - US$49 billion since July last year.
Its tier 1 capital ratio - a measure of a bank's ability to withstand losses - at end-June was 8.7 per cent, although the sale of its German retail banking operations in July is expected to boost the figure to 9.3 per cent when completed later this year.
Others, such as Swiss bank UBS, have also been busy raising funds to bolster their balance sheets.
Broadly speaking, the tier 1 ratio is the proportion of capital from shareholders that a bank holds in reserve against the money it lends, adjusted for the varying risk on different types of loans. The higher the tier 1 ratio, the safer a bank is supposed to be.
But direct comparisons of banks' tier 1 ratios as an indication of their financial strength are difficult.
Standalone investment banks in the US such as Lehman, Goldman Sachs, Morgan Stanley and Merrill Lynch are regulated separately from commercial banks such as Citigroup and JP Morgan which take deposits from retail customers.
Commercial banks are required by the US Federal Reserve to maintain a tier 1 ratio of at least 6 per cent to be considered well-capitalised, while investment banks - which come under the US Securities and Exchange Commission - are not subject to a similar requirement.
In fact, the investment banks only started reporting their tier 1 ratios in the second quarter, after the collapse of Bear Stearns triggered heightened scrutiny of their capital positions.
Also, US investment banks - like Singapore banks - calculate their tier 1 capital ratios using the newer Basel 2 guidelines, while US commercial banks still follow Basel 1, a point that has sparked controversy recently in the US.
And as the troubles at Lehman, Fannie Mae and Freddie Mac have demonstrated, capital alone is no shield against a loss of confidence by investors.
Singapore banks - which have written down about $700 million so far - are well-capitalised, say analysts here. But even they have recently been beefing up their capital bases through preference share issues.
Banks heavily exposed to the worst-hit economies in the US and Western Europe are bracing themselves for a rise in bad loans in coming months, as economic growth slows or stalls. For some, however, massive writedowns are gobbling up their capital buffer as fast as they can rebuild it.
Lehman's tier 1 ratio of 13 per cent at end-June was the highest among the major banks, after it raised US$6 billion in June through a share offer, but the bank is now struggling to raise more through asset sales after suffering crippling losses in its fiscal third quarter due to gross writedowns of US$7.8 billion on mortgages and other assets. It now faces possible downgrades by debt rating agencies S&P and Moody's.
Thursday, 11 September 2008
Published September 11, 2008
SELETAR AIRPORT
Another controversy comes in to land
By VEN SREENIVASAN
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(SINGAPORE) Another controversy has erupted at Seletar Airport as business-aviation operators cry foul over plans by the authorities to award a ground-services contract to a monopoly operator.
Business-jet operators and other tenants say they have been told by the Economic Development Board (EDB) - one of three agencies spearheading the $60 million redevelopment of Seletar Airport - that all ground-handling, fuel bunkering and maintenance operations will be in the hands of a single operator.
Tenders for ground handling will be called soon - and the winning bidder will be the sole provider of the services for 10 years.
This has raised concerns among small operators about a potential increase in operating costs.
'Right now we have our own team to load up our own tanks on our Hercules plane,' said Tony Evans of Safair, which operates a regional oil-spill quick-response business out of Seletar. 'What this means is we will soon be forced to use a third-party operator doing the work we can already do - and will be charged for it.'
Operators at Seletar say they are niche businesses with small flexible teams and timetables to keep costs down and response quick.
'We have no need for huge third-party ground operations services, fancy terminals or any other new services,' said Prithpal Singh, chief executive of Executive Jets Asia. 'What we need are hangars for our planes, direct access to the tarmac and flexible low-cost operations. A new operator - and a monopoly one at that - will surely need to recoup the investments it makes to set up here. And that translates to just one thing for us - higher costs.'
All this comes on the heels of another controversy - which is still simmering - over plans by the authorities to close the ageing airport 14 hours a day for 18 months, starting November, to extend its runway by 300m.
Businesses say this will severely restrict operations, especially 24-hour critical services such as medical evacuations. Operators say no update has been provided to enable them to prepare for the closure.
'As things are going now, it seems to us that the authorities want this place to be a clone of Changi, which is not a good thing for business aviation,' said Elyaas Parker, head of flight operations at Safair. 'The higher the cost, the more the chances that jet operators will overfly Seletar. Senai airport, just across the Straits, is crying out to us to relocate there. We don't want to move because we love it here in Singapore - and at Seletar. But if we ultimately have to go because of bureaucracy and costs, we are never coming back.'
There have also been complaints from small operators that the redevelopment emphasis at Seletar seems more focused on huge manufacturers like Rolls-Royce and Pratt & Whitney rather than on retaining the airport as a hub for business aviation.
Earlier this year, Rolls-Royce broke ground on a $320 million Trent aero-engine facility at Seletar Aerospace Park (SAP), while engine-maker Pratt & Whitney is building a US$30 million, 105,000 sq ft facility there. JTC Corp is now marketing Phase 2 of SAP and says it is 'in talks' with interested parties.
SELETAR AIRPORT
Another controversy comes in to land
By VEN SREENIVASAN
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(SINGAPORE) Another controversy has erupted at Seletar Airport as business-aviation operators cry foul over plans by the authorities to award a ground-services contract to a monopoly operator.
Business-jet operators and other tenants say they have been told by the Economic Development Board (EDB) - one of three agencies spearheading the $60 million redevelopment of Seletar Airport - that all ground-handling, fuel bunkering and maintenance operations will be in the hands of a single operator.
Tenders for ground handling will be called soon - and the winning bidder will be the sole provider of the services for 10 years.
This has raised concerns among small operators about a potential increase in operating costs.
'Right now we have our own team to load up our own tanks on our Hercules plane,' said Tony Evans of Safair, which operates a regional oil-spill quick-response business out of Seletar. 'What this means is we will soon be forced to use a third-party operator doing the work we can already do - and will be charged for it.'
Operators at Seletar say they are niche businesses with small flexible teams and timetables to keep costs down and response quick.
'We have no need for huge third-party ground operations services, fancy terminals or any other new services,' said Prithpal Singh, chief executive of Executive Jets Asia. 'What we need are hangars for our planes, direct access to the tarmac and flexible low-cost operations. A new operator - and a monopoly one at that - will surely need to recoup the investments it makes to set up here. And that translates to just one thing for us - higher costs.'
All this comes on the heels of another controversy - which is still simmering - over plans by the authorities to close the ageing airport 14 hours a day for 18 months, starting November, to extend its runway by 300m.
Businesses say this will severely restrict operations, especially 24-hour critical services such as medical evacuations. Operators say no update has been provided to enable them to prepare for the closure.
'As things are going now, it seems to us that the authorities want this place to be a clone of Changi, which is not a good thing for business aviation,' said Elyaas Parker, head of flight operations at Safair. 'The higher the cost, the more the chances that jet operators will overfly Seletar. Senai airport, just across the Straits, is crying out to us to relocate there. We don't want to move because we love it here in Singapore - and at Seletar. But if we ultimately have to go because of bureaucracy and costs, we are never coming back.'
There have also been complaints from small operators that the redevelopment emphasis at Seletar seems more focused on huge manufacturers like Rolls-Royce and Pratt & Whitney rather than on retaining the airport as a hub for business aviation.
Earlier this year, Rolls-Royce broke ground on a $320 million Trent aero-engine facility at Seletar Aerospace Park (SAP), while engine-maker Pratt & Whitney is building a US$30 million, 105,000 sq ft facility there. JTC Corp is now marketing Phase 2 of SAP and says it is 'in talks' with interested parties.
Published September 11, 2008
FSLT's bold move to woo US investors
By VINCENT WEE
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WITH shipping trusts caught between the devil and the deep blue sea trying to boost volume while fighting investor ignorance, First Ship Lease Trust (FSLT) has embarked on a brave overseas foray to quote American Depository Receipts (ADRs) on the US-based International OTCQX trading platform in a bid to raise interest and unit price.
It's a bold move and - should it prove successful - one that may be emulated by the other two shipping trusts wallowing on the Singapore Exchange (SGX). The theory is that exposure to the more mature US market will improve liquidity and expand the base of unitholders over the long term, according to trustee-manager FSL Trust Management's president and CEO Philip Clausius.
FSLT certainly needs help. The trust has never regained its IPO price of 98 US cents or about $1.50 at the prevailing exchange rate. It hit a low of $1 in January and is now languishing around $1.10. There is a large dividend yield gap - that is, its units are underpriced - between FSLT (13-14 per cent yield) and US peers such as Seaspan Corp and Danaos Corp (7-8 per cent yield), which the trust hopes to close as more investors take up its units.
'US investors tend to have a better understanding of shipping stocks due to a critical mass of shipping companies listed there,' UOB KayHian Research said in a note last week.
While maintaining that FSLT has no regrets about choosing to list on SGX, senior vice-president and CFO Cheong Chee Tham hopes to appeal to this better knowledge of US investors through the ADR quotation.
He is keen to reach out especially to institutional and boutique investors who, due to their mandates, may not have been able to invest directly in FSLT units on SGX. 'By doing this ADR programme, we are exposing the company to this particular group of investors or others who may not have heard of us,' he said.
Both analysts and FSLT stress that it's important to get a critical mass of investors interested in shipping trusts for the sector to take off. And Mr Cheong certainly hopes the US move will jumpstart this process. It is hoped that with greater coverage, more shipping trusts will choose to list on SGX.
But this may be too simplistic. Both Seaspan and Danaos have market capitalisations of more than US$1 billion, which dwarfs FSLT's $550 million. And whether notoriously parochial US investors take notice of a small Asian-listed shipping trust is debatable.
Asian investors have not been impressed so far. 'Liquidity for the trusts is not there. If it's a down-cycle, why do you want to be in shipping and if up-cycle, then you should be in something more leveraged,' said an analyst.
The few research houses that cover the trust, such as DBS Research and UOB KayHian, have 'buy' calls with target prices of $1.65 and $1.61 respectively. But others point to the chicken-and-egg factors of lack of choice and liquidity for staying away. These were the same reasons given for the laggard performance of real estate investment trusts when they were first listed back in 2002. Yet over the past six years or so, they have taken off and are seen as a viable investment option.
Perhaps shipping trusts will slowly gain popularity in the same way. But more may need to be done to nudge the process along. Actively reaching out to foreign companies may be one idea. For example, Lloyd's List reported that Indian shipping companies will need as much as US$18 billion by 2012 for fleet replacement and will need to find ways to raise cash. These companies could be encouraged to come here to set up shipping trusts to raise funds.
FSLT's bold move to woo US investors
By VINCENT WEE
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WITH shipping trusts caught between the devil and the deep blue sea trying to boost volume while fighting investor ignorance, First Ship Lease Trust (FSLT) has embarked on a brave overseas foray to quote American Depository Receipts (ADRs) on the US-based International OTCQX trading platform in a bid to raise interest and unit price.
It's a bold move and - should it prove successful - one that may be emulated by the other two shipping trusts wallowing on the Singapore Exchange (SGX). The theory is that exposure to the more mature US market will improve liquidity and expand the base of unitholders over the long term, according to trustee-manager FSL Trust Management's president and CEO Philip Clausius.
FSLT certainly needs help. The trust has never regained its IPO price of 98 US cents or about $1.50 at the prevailing exchange rate. It hit a low of $1 in January and is now languishing around $1.10. There is a large dividend yield gap - that is, its units are underpriced - between FSLT (13-14 per cent yield) and US peers such as Seaspan Corp and Danaos Corp (7-8 per cent yield), which the trust hopes to close as more investors take up its units.
'US investors tend to have a better understanding of shipping stocks due to a critical mass of shipping companies listed there,' UOB KayHian Research said in a note last week.
While maintaining that FSLT has no regrets about choosing to list on SGX, senior vice-president and CFO Cheong Chee Tham hopes to appeal to this better knowledge of US investors through the ADR quotation.
He is keen to reach out especially to institutional and boutique investors who, due to their mandates, may not have been able to invest directly in FSLT units on SGX. 'By doing this ADR programme, we are exposing the company to this particular group of investors or others who may not have heard of us,' he said.
Both analysts and FSLT stress that it's important to get a critical mass of investors interested in shipping trusts for the sector to take off. And Mr Cheong certainly hopes the US move will jumpstart this process. It is hoped that with greater coverage, more shipping trusts will choose to list on SGX.
But this may be too simplistic. Both Seaspan and Danaos have market capitalisations of more than US$1 billion, which dwarfs FSLT's $550 million. And whether notoriously parochial US investors take notice of a small Asian-listed shipping trust is debatable.
Asian investors have not been impressed so far. 'Liquidity for the trusts is not there. If it's a down-cycle, why do you want to be in shipping and if up-cycle, then you should be in something more leveraged,' said an analyst.
The few research houses that cover the trust, such as DBS Research and UOB KayHian, have 'buy' calls with target prices of $1.65 and $1.61 respectively. But others point to the chicken-and-egg factors of lack of choice and liquidity for staying away. These were the same reasons given for the laggard performance of real estate investment trusts when they were first listed back in 2002. Yet over the past six years or so, they have taken off and are seen as a viable investment option.
Perhaps shipping trusts will slowly gain popularity in the same way. But more may need to be done to nudge the process along. Actively reaching out to foreign companies may be one idea. For example, Lloyd's List reported that Indian shipping companies will need as much as US$18 billion by 2012 for fleet replacement and will need to find ways to raise cash. These companies could be encouraged to come here to set up shipping trusts to raise funds.
Published September 11, 2008
Racial slur saga: Umno suspends state party leader
Decision reflects Malay party's need to accommodate ethnic minorities
By S JAYASANKARAN
IN KUALA LUMPUR
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AN emergency meeting of the Supreme Council of the United Malays National Organisation (Umno) yesterday suspended a party leader from Penang for three years for alleged racist remarks and insubordination to the party leadership.
Damage control: Prime Minister Abdullah (right) shaking hands with Gerakan president and former Penang chief minister Koh Tsu Koon after BN's Supreme Council meeting in Kuala Lumpur on Tuesday
Umno's surprisingly tough stance against Ahmad Ismail could go a long way towards appeasing ethnic Chinese members of the country's ruling Barisan Nasional (BN) coalition, in which Umno is dominant. Besides the Malaysian Chinese Association (MCA) and Gerakan, BN includes three smaller Chinese parties from East Malaysia.
'The council is of the opinion that Ahmad's statements and actions have caused tension and raised objections and we view the matter seriously,' Prime Minister Abdullah Ahmad Badawi told reporters after a three-hour meeting of the Supreme Council.
Umno's decision reflects its need to accommodate minorities after recent elections showed a clear trend among non-Malays to vote for the Opposition. The trend triggered moves by minority parties in the BN to stand up to Umno to prove their independence and self-worth.
Some Umno leaders had speculated that Mr Ahmad would receive only a token punishment because his statements resonated among Umno faithful who feel politically threatened by the non-Malay swing after the March 8 election.
Mr Ahmad allegedly branded Malaysian Chinese 'squatters' and refused to apologise after he was told to do so by the party leadership. Instead, he went further - likening the Chinese to American Jews 'who not only dominate economically but want to dominate politically' and warning the Chinese 'not to push the Malays'.
Penang MCA and Gerakan units promptly severed all ties with Umno Penang and insisted Mr Ahmad be sternly punished. Some Gerakan leaders wondered openly if it was time to pull out of the BN. Their veiled threats may, in part, help explain Umno's uncompromising attitude towards Mr Ahmad. Opposition leader Anwar Ibrahim has repeatedly maintained that the BN government will fall through defections by BN lawmakers to his Pakatan Rakyat coalition, perhaps as early as next week.
Analysts said yesterday Mr Abdullah had to be seen to be reasserting control, especially after the chief of the armed forces advised the government on Tuesday to act tough against anyone stoking up racial tension. 'Whatever the rights and wrongs of the matter, the Prime Minister has to be seen to exercise leadership,' said former top journalist and political commentator A Kadir Jasin. 'This thing has been going on for weeks now and he has been flip-flopping. You have to end it because if you don't, it can take a life of its own.'
Meanwhile, Mr Anwar, 61, met reporters yesterday after the first hearing on his sodomy case resulted in it being postponed to Sept 25. His lawyers objected to a proposal by the Attorney-General to move the case from the Sessions Court to the High Court, arguing that lower court was perfectly capable of handling the case. The judge fixed the date for both sides to give their arguments.
Outside the court, Mr Anwar said he 'has the numbers' but may have to wait a few days after his target date of Sept 16 to make an announcement because 42 BN lawmakers have been sent for an 'educational' trip to study farming in Taiwan and will not return until after Sept 16. 'In any case, there will be a surprise occurring on that day,' he told reporters.
His aides seem to agree.
'Umno is on its way out, it is a sinking ship,' Din Merican, a former corporate figure who joined Mr Anwar's party early this year, told BT. 'Change is coming. I never thought I would see Umno brought down to its knees in my lifetime.'
Racial slur saga: Umno suspends state party leader
Decision reflects Malay party's need to accommodate ethnic minorities
By S JAYASANKARAN
IN KUALA LUMPUR
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AN emergency meeting of the Supreme Council of the United Malays National Organisation (Umno) yesterday suspended a party leader from Penang for three years for alleged racist remarks and insubordination to the party leadership.
Damage control: Prime Minister Abdullah (right) shaking hands with Gerakan president and former Penang chief minister Koh Tsu Koon after BN's Supreme Council meeting in Kuala Lumpur on Tuesday
Umno's surprisingly tough stance against Ahmad Ismail could go a long way towards appeasing ethnic Chinese members of the country's ruling Barisan Nasional (BN) coalition, in which Umno is dominant. Besides the Malaysian Chinese Association (MCA) and Gerakan, BN includes three smaller Chinese parties from East Malaysia.
'The council is of the opinion that Ahmad's statements and actions have caused tension and raised objections and we view the matter seriously,' Prime Minister Abdullah Ahmad Badawi told reporters after a three-hour meeting of the Supreme Council.
Umno's decision reflects its need to accommodate minorities after recent elections showed a clear trend among non-Malays to vote for the Opposition. The trend triggered moves by minority parties in the BN to stand up to Umno to prove their independence and self-worth.
Some Umno leaders had speculated that Mr Ahmad would receive only a token punishment because his statements resonated among Umno faithful who feel politically threatened by the non-Malay swing after the March 8 election.
Mr Ahmad allegedly branded Malaysian Chinese 'squatters' and refused to apologise after he was told to do so by the party leadership. Instead, he went further - likening the Chinese to American Jews 'who not only dominate economically but want to dominate politically' and warning the Chinese 'not to push the Malays'.
Penang MCA and Gerakan units promptly severed all ties with Umno Penang and insisted Mr Ahmad be sternly punished. Some Gerakan leaders wondered openly if it was time to pull out of the BN. Their veiled threats may, in part, help explain Umno's uncompromising attitude towards Mr Ahmad. Opposition leader Anwar Ibrahim has repeatedly maintained that the BN government will fall through defections by BN lawmakers to his Pakatan Rakyat coalition, perhaps as early as next week.
Analysts said yesterday Mr Abdullah had to be seen to be reasserting control, especially after the chief of the armed forces advised the government on Tuesday to act tough against anyone stoking up racial tension. 'Whatever the rights and wrongs of the matter, the Prime Minister has to be seen to exercise leadership,' said former top journalist and political commentator A Kadir Jasin. 'This thing has been going on for weeks now and he has been flip-flopping. You have to end it because if you don't, it can take a life of its own.'
Meanwhile, Mr Anwar, 61, met reporters yesterday after the first hearing on his sodomy case resulted in it being postponed to Sept 25. His lawyers objected to a proposal by the Attorney-General to move the case from the Sessions Court to the High Court, arguing that lower court was perfectly capable of handling the case. The judge fixed the date for both sides to give their arguments.
Outside the court, Mr Anwar said he 'has the numbers' but may have to wait a few days after his target date of Sept 16 to make an announcement because 42 BN lawmakers have been sent for an 'educational' trip to study farming in Taiwan and will not return until after Sept 16. 'In any case, there will be a surprise occurring on that day,' he told reporters.
His aides seem to agree.
'Umno is on its way out, it is a sinking ship,' Din Merican, a former corporate figure who joined Mr Anwar's party early this year, told BT. 'Change is coming. I never thought I would see Umno brought down to its knees in my lifetime.'
Published September 11, 2008
M'sia's July exports surge 25% to RM63b
Electrical, electronic sector boosts sales with 12% jump
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIA'S exports amounted to RM63.4 billion (S$26.24 billion) in July, a robust 25.4 per cent year-on-year expansion achieved mainly on the back of an unexpectedly strong performance by electrical and electronic (E&E) products.
Continuing on its fine run in recent months, the E&E sector posted a 12 per cent, or RM2.6 billion, rise to RM24.5 billion in July.
Import growth for the month climbed to nearly 15 per cent, resulting in a trade surplus of RM14.5 billion for July, the statistics department said yesterday. This was almost 82 per cent higher than in July 2007.
Economists, however, caution a looming global economic slowdown and falling commodity prices would likely lead to slimmer trade surpluses in coming months.
Exports of commodities and resource-based products had not varied by much in July, but the E&E segment - the country's largest export revenue earner valued at RM24.5 billion or 38.7 per cent of total exports - had provided the 'extra push'.
'I least expected such strength in E&E since it quite closely tracks Singapore's and that hasn't been doing so well, so I am surprised,' said CIMB chief economist Lee Heng Guie.
'But it remains to be seen if the uptrend continues,' he said in reference to indicators which show the economy to be slowing in the United States where Malaysia exports the bulk of its E&E components.
Because of that as well as the downtrend in commodity prices, full-year export growth is expected at 10-11 per cent, with import growth around 7-8 per cent.
Mr Lee expects export growth in the second half to be 'thin single digit', and to decelerate to 2-3 per cent next year - similar to in 2007.
Aseambankers Research pegs 2009 export growth at 5 per cent and import expansion at 7.5 per cent. It expects Malaysia's trade surplus to hit RM126 billion this year and to fall to RM118.8 billion in 2009.
As a small oil producer but one of the largest crude palm oil exporters, Malaysia's export revenues have been buoyed by record-high prices this year, but prices are easing.
Malaysia's top 10 trading partners - Singapore, the US, Japan, China, Thailand, Korea, Indonesia, Hong Kong, Taiwan and Germany - accounted for slightly over 70 per cent of the country's total trade in the first seven months.
M'sia's July exports surge 25% to RM63b
Electrical, electronic sector boosts sales with 12% jump
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIA'S exports amounted to RM63.4 billion (S$26.24 billion) in July, a robust 25.4 per cent year-on-year expansion achieved mainly on the back of an unexpectedly strong performance by electrical and electronic (E&E) products.
Continuing on its fine run in recent months, the E&E sector posted a 12 per cent, or RM2.6 billion, rise to RM24.5 billion in July.
Import growth for the month climbed to nearly 15 per cent, resulting in a trade surplus of RM14.5 billion for July, the statistics department said yesterday. This was almost 82 per cent higher than in July 2007.
Economists, however, caution a looming global economic slowdown and falling commodity prices would likely lead to slimmer trade surpluses in coming months.
Exports of commodities and resource-based products had not varied by much in July, but the E&E segment - the country's largest export revenue earner valued at RM24.5 billion or 38.7 per cent of total exports - had provided the 'extra push'.
'I least expected such strength in E&E since it quite closely tracks Singapore's and that hasn't been doing so well, so I am surprised,' said CIMB chief economist Lee Heng Guie.
'But it remains to be seen if the uptrend continues,' he said in reference to indicators which show the economy to be slowing in the United States where Malaysia exports the bulk of its E&E components.
Because of that as well as the downtrend in commodity prices, full-year export growth is expected at 10-11 per cent, with import growth around 7-8 per cent.
Mr Lee expects export growth in the second half to be 'thin single digit', and to decelerate to 2-3 per cent next year - similar to in 2007.
Aseambankers Research pegs 2009 export growth at 5 per cent and import expansion at 7.5 per cent. It expects Malaysia's trade surplus to hit RM126 billion this year and to fall to RM118.8 billion in 2009.
As a small oil producer but one of the largest crude palm oil exporters, Malaysia's export revenues have been buoyed by record-high prices this year, but prices are easing.
Malaysia's top 10 trading partners - Singapore, the US, Japan, China, Thailand, Korea, Indonesia, Hong Kong, Taiwan and Germany - accounted for slightly over 70 per cent of the country's total trade in the first seven months.
Published September 11, 2008
Malaysia okays RHB's Viet buy
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(KUALA LUMPUR) Malaysia's fourth largest lender RHB Capital has won the central bank's approval to buy a stake in a Vietnamese brokerage firm, the company said yesterday.
RHB Capital, controlled by Malaysia's state pension fund, announced in March it would pay RM13.3 million (S$5.5 million) for a 49 per cent stake in Vietnam Securities Corporation.
The acquisition is now subject to approvals from the Vietnam authorities, it said in a statement to Bursa Malaysia.
Malaysian companies have been keen investors in nearby Vietnam in recent years although Vietnam's deteriorating macroeconomic conditions of late have also led to some short-term hiccups.
Malaysia's largest lender Maybank, which in March announced a plan to buy a 15 per cent stake in Vietnam's An Binh Bank, said on Tuesday that it would pay a lower price of RM327.1 million for the stake, down from the earlier agreed price of RM430 million.
Maybank said that the acquisition sum was cut in view of the change in economic environment in Vietnam.
Vietnamese inflation is expected to top 25 per cent this year, according to government projections. Consumer prices jumped 28.3 per cent last month from a year ago, mainly due to a spike in food and fuel prices.
Vietnam has been a magnet for foreign investment in recent years, thanks to the large supply of low-cost labour and the government's opening-up policy. -- Reuters
Malaysia okays RHB's Viet buy
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(KUALA LUMPUR) Malaysia's fourth largest lender RHB Capital has won the central bank's approval to buy a stake in a Vietnamese brokerage firm, the company said yesterday.
RHB Capital, controlled by Malaysia's state pension fund, announced in March it would pay RM13.3 million (S$5.5 million) for a 49 per cent stake in Vietnam Securities Corporation.
The acquisition is now subject to approvals from the Vietnam authorities, it said in a statement to Bursa Malaysia.
Malaysian companies have been keen investors in nearby Vietnam in recent years although Vietnam's deteriorating macroeconomic conditions of late have also led to some short-term hiccups.
Malaysia's largest lender Maybank, which in March announced a plan to buy a 15 per cent stake in Vietnam's An Binh Bank, said on Tuesday that it would pay a lower price of RM327.1 million for the stake, down from the earlier agreed price of RM430 million.
Maybank said that the acquisition sum was cut in view of the change in economic environment in Vietnam.
Vietnamese inflation is expected to top 25 per cent this year, according to government projections. Consumer prices jumped 28.3 per cent last month from a year ago, mainly due to a spike in food and fuel prices.
Vietnam has been a magnet for foreign investment in recent years, thanks to the large supply of low-cost labour and the government's opening-up policy. -- Reuters
Published September 11, 2008
As £ plunges, S'pore firms get pounded
Those that didn't hedge find export receivables falling
By SIOW LI SEN
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(SINGAPORE) The free-falling British pound is hurting exporters and Singapore companies with investments and operations in the UK.
The pound is down 3 per cent against the Singapore dollar since the beginning of the month. It has slumped about 12 per cent so far this year, and more than a fifth in the past 12 months. Year to date, the pound has also fallen in the double digits against the other major currencies.
The UK's slumping housing market, tight credit and financial market conditions have put tremendous pressure on the currency across the board, said Callum Henderson, head of FX strategy, Standard Chartered Bank.
Temasek Holdings, for example, has major investments in the UK. Last year it raised its holding in Standard Chartered Bank to 19 per cent from 13 per cent and spent £pounds;975 million on a 2 per cent stake in Barclays Bank.
Business links between Singapore and the UK are very strong because the UK is the destination of choice in the EU for local companies. As at 2006, 81 per cent of investments in the EU had been channelled to the UK, comprising $15.6 billion.
The love affair is reciprocated. As at 2006, the UK was the largest foreign direct investor in Singapore, with $54.78 billion.
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Mohit Singh, HSBC director and head of corporate sales for global markets, said the weakening of the pound against the Sing dollar in recent weeks has had a significant impact on companies exporting to the UK.
A company that exports to the UK has had to deal with the pound sinking 22 per cent against the Sing dollar in the past year, he said. 'Firms that have not previously hedged against depreciation in the pound are now finding that their export receivables from the UK have deteriorated in value once converted to the local currency.
'In addition, Singapore companies with investments in the UK are now looking at a translation loss when the book value of the investment is translated to Sing dollars for balance-sheet reporting purposes.'
Recent heightened volatility in the currency market has made it more difficult for companies to effectively draw up budgeting and growth plans, Mr Singh added.
Listed companies that have seen profit from UK operations slashed include Sembcorp Industries, City Developments, Comfortdelgro and Singapore Food Industries.
Sembcorp has utility operations in the UK, which it bought for £pounds;103 million in 2003. Turnover from this business fell 15 per cent to $355.9 million in the first half of 2008, while profit plunged 51 per cent to $34.4 million.
A Sembcorp spokeswoman said UK operations contributed 13 per cent of group profit in H1. 'We do not expect movements in the pound sterling to affect the performance of our assets within the UK itself,' she said. 'Any impact in the translation of profits from pound sterling to Singapore dollar, when these contributions are consolidated at group level, may only be determined at year-end in the light of the exchange rate then.'
Sembcorp operates in several countries, which will help mitigate any impact overall, the spokeswoman said.
A Comfortdelgro spokeswoman said its UK Metroline turnover fell 6.6 per cent in Q2 because of the weakening pound. Excluding the foreign exchange impact, turnover would have been 5.3 per cent higher. 'We continue to look at introducing new routes, increasing mileage travelled and improving our operational efficiencies,' the spokeswoman said.
CityDev, which owns London-listed Millennium & Copthorne Hotels, said the weaker pound and the absence of tax credits dragged Q2 profit down 15.1 per cent.
As for UK companies heading here, there has been no indication of any concern over the slide in the currency, said Brigitte Holtschneider, executive director of British Chamber of Commerce, Singapore.
When companies go overseas, it is to find new customers and new markets, she said. Most UK companies set up in Singapore as their regional headquarters. 'You'd have all your income and running costs in those currencies,' said Ms Holtschneider.
How low can the pound go?
Said Standard Chartered's Mr Henderson: Technically the first level to watch for is $2.4373, which was the Sept 15, 2000, low. On Tuesday, the pound stood at $2.51.
As £ plunges, S'pore firms get pounded
Those that didn't hedge find export receivables falling
By SIOW LI SEN
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(SINGAPORE) The free-falling British pound is hurting exporters and Singapore companies with investments and operations in the UK.
The pound is down 3 per cent against the Singapore dollar since the beginning of the month. It has slumped about 12 per cent so far this year, and more than a fifth in the past 12 months. Year to date, the pound has also fallen in the double digits against the other major currencies.
The UK's slumping housing market, tight credit and financial market conditions have put tremendous pressure on the currency across the board, said Callum Henderson, head of FX strategy, Standard Chartered Bank.
Temasek Holdings, for example, has major investments in the UK. Last year it raised its holding in Standard Chartered Bank to 19 per cent from 13 per cent and spent £pounds;975 million on a 2 per cent stake in Barclays Bank.
Business links between Singapore and the UK are very strong because the UK is the destination of choice in the EU for local companies. As at 2006, 81 per cent of investments in the EU had been channelled to the UK, comprising $15.6 billion.
The love affair is reciprocated. As at 2006, the UK was the largest foreign direct investor in Singapore, with $54.78 billion.
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Mohit Singh, HSBC director and head of corporate sales for global markets, said the weakening of the pound against the Sing dollar in recent weeks has had a significant impact on companies exporting to the UK.
A company that exports to the UK has had to deal with the pound sinking 22 per cent against the Sing dollar in the past year, he said. 'Firms that have not previously hedged against depreciation in the pound are now finding that their export receivables from the UK have deteriorated in value once converted to the local currency.
'In addition, Singapore companies with investments in the UK are now looking at a translation loss when the book value of the investment is translated to Sing dollars for balance-sheet reporting purposes.'
Recent heightened volatility in the currency market has made it more difficult for companies to effectively draw up budgeting and growth plans, Mr Singh added.
Listed companies that have seen profit from UK operations slashed include Sembcorp Industries, City Developments, Comfortdelgro and Singapore Food Industries.
Sembcorp has utility operations in the UK, which it bought for £pounds;103 million in 2003. Turnover from this business fell 15 per cent to $355.9 million in the first half of 2008, while profit plunged 51 per cent to $34.4 million.
A Sembcorp spokeswoman said UK operations contributed 13 per cent of group profit in H1. 'We do not expect movements in the pound sterling to affect the performance of our assets within the UK itself,' she said. 'Any impact in the translation of profits from pound sterling to Singapore dollar, when these contributions are consolidated at group level, may only be determined at year-end in the light of the exchange rate then.'
Sembcorp operates in several countries, which will help mitigate any impact overall, the spokeswoman said.
A Comfortdelgro spokeswoman said its UK Metroline turnover fell 6.6 per cent in Q2 because of the weakening pound. Excluding the foreign exchange impact, turnover would have been 5.3 per cent higher. 'We continue to look at introducing new routes, increasing mileage travelled and improving our operational efficiencies,' the spokeswoman said.
CityDev, which owns London-listed Millennium & Copthorne Hotels, said the weaker pound and the absence of tax credits dragged Q2 profit down 15.1 per cent.
As for UK companies heading here, there has been no indication of any concern over the slide in the currency, said Brigitte Holtschneider, executive director of British Chamber of Commerce, Singapore.
When companies go overseas, it is to find new customers and new markets, she said. Most UK companies set up in Singapore as their regional headquarters. 'You'd have all your income and running costs in those currencies,' said Ms Holtschneider.
How low can the pound go?
Said Standard Chartered's Mr Henderson: Technically the first level to watch for is $2.4373, which was the Sept 15, 2000, low. On Tuesday, the pound stood at $2.51.
Published September 11, 2008
Lehman to cut losses, says it's safe for now
After US$3.9b Q3 loss, the investment bank will spin off real estate arm, sell majority stake in investment-management division
By ANDREW MARKS NEW YORK CORRESPONDENT
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ONLY a few days after Wall Street was buoyed by the US government's plan to rescue and take over Freddie Mac and Fannie Mae, another major financial institution, Lehman Brothers, kept markets on a yo-yo.
Fears that it might default on its debt had sent the US stock markets into a swoon on Tuesday while Lehman's own stock slumped nearly 45 per cent. Yesterday, it sought to allay the worries by moving up the date of its earnings release by a full week, reporting in the early morning hours before the US markets opened that it expects to lose US$3.9 billion in the third quarter, and announcing that it plans to sell a majority stake in its investment-management division.
The company, which announced a cut in its annual dividend to 5 cents a share from 68 cents, also said it plans to spin off its commercial real-estate assets into a new company.
Lehman, the fourth largest investment bank in the US, has been seeking an outside investor for some time. Its hopes for raising new capital sank when the Korea Development Bank suspended talks to invest in Lehman, citing disagreements over the terms of the transaction and the condition of financial markets around the world.
However, the company's morning announcement appeared to allay fears on Wall Street yesterday, as traders reacted to Lehman's third quarter earnings pre-announcement and plans to raise equity with a round of buying that produced solid gains for the US stock market in the early going.
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The Dow Jones Industrials was up 71 points, or 0.62 per cent, to 11,302 at 10:15 am, after posting a 280 point, or 2.6 per cent decline on Tuesday. The S&P 500 was also rebounding yesterday, climbing 10.91 points, or 0.89 per cent, and the Nasdaq was up 22 points, or one per cent.
Lehman said it plans to spin off to shareholders US$25 billion to US$30 billion of its commercial-real-estate portfolio into a separate company, called Real Estate Investments Global. This will be publicly traded and will substantially reduce Lehman's remaining exposure to the troubled commercial real estate sector.
It is also in talks with Blackrock, the fund management group, to sell US$4 billion of the bank's UK residential mortgage portfolio. The sale is expected to complete within the next few weeks.
'The concentration of positions in commercial-real-estate-related assets has become a significant concern for investors and creditors,' Lehman said.
The Wall Street firm also said it intends to sell a majority stake, estimated at roughly 55 per cent, in a subset of its asset management business.
'This is an extraordinary time for our industry, and one of the toughest periods in the firm's history,' said Richard Fuld, Lehman's embattled chief executive, according to a company statement.
'The strategic initiatives we have announced today reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance sheet risk, reinforcing our focus on client-facing businesses and returning the firm to profitability,' Mr Fuld said.
Lehman's shares were up 7 per cent yesterday morning, and analysts said that Lehman, which also reported that it has cut its residential mortgage exposure by nearly half, had succeeded in reassuring investors that it's not in imminent danger of failure. For now.
'We're okay in terms of market sentiment until we get into the earnings season,' said Marc Pado, chief market strategist at Cantor Fitzgerald. 'There's going to be more we're going to have to deal with in terms of write-downs at the brokerage firms. The question for investors is whether the banks are largely done with their problems? That'll come out the third week of September, and the market will remain nervous until then,' Mr Pado observed.
Lehman to cut losses, says it's safe for now
After US$3.9b Q3 loss, the investment bank will spin off real estate arm, sell majority stake in investment-management division
By ANDREW MARKS NEW YORK CORRESPONDENT
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ONLY a few days after Wall Street was buoyed by the US government's plan to rescue and take over Freddie Mac and Fannie Mae, another major financial institution, Lehman Brothers, kept markets on a yo-yo.
Fears that it might default on its debt had sent the US stock markets into a swoon on Tuesday while Lehman's own stock slumped nearly 45 per cent. Yesterday, it sought to allay the worries by moving up the date of its earnings release by a full week, reporting in the early morning hours before the US markets opened that it expects to lose US$3.9 billion in the third quarter, and announcing that it plans to sell a majority stake in its investment-management division.
The company, which announced a cut in its annual dividend to 5 cents a share from 68 cents, also said it plans to spin off its commercial real-estate assets into a new company.
Lehman, the fourth largest investment bank in the US, has been seeking an outside investor for some time. Its hopes for raising new capital sank when the Korea Development Bank suspended talks to invest in Lehman, citing disagreements over the terms of the transaction and the condition of financial markets around the world.
However, the company's morning announcement appeared to allay fears on Wall Street yesterday, as traders reacted to Lehman's third quarter earnings pre-announcement and plans to raise equity with a round of buying that produced solid gains for the US stock market in the early going.
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The Dow Jones Industrials was up 71 points, or 0.62 per cent, to 11,302 at 10:15 am, after posting a 280 point, or 2.6 per cent decline on Tuesday. The S&P 500 was also rebounding yesterday, climbing 10.91 points, or 0.89 per cent, and the Nasdaq was up 22 points, or one per cent.
Lehman said it plans to spin off to shareholders US$25 billion to US$30 billion of its commercial-real-estate portfolio into a separate company, called Real Estate Investments Global. This will be publicly traded and will substantially reduce Lehman's remaining exposure to the troubled commercial real estate sector.
It is also in talks with Blackrock, the fund management group, to sell US$4 billion of the bank's UK residential mortgage portfolio. The sale is expected to complete within the next few weeks.
'The concentration of positions in commercial-real-estate-related assets has become a significant concern for investors and creditors,' Lehman said.
The Wall Street firm also said it intends to sell a majority stake, estimated at roughly 55 per cent, in a subset of its asset management business.
'This is an extraordinary time for our industry, and one of the toughest periods in the firm's history,' said Richard Fuld, Lehman's embattled chief executive, according to a company statement.
'The strategic initiatives we have announced today reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance sheet risk, reinforcing our focus on client-facing businesses and returning the firm to profitability,' Mr Fuld said.
Lehman's shares were up 7 per cent yesterday morning, and analysts said that Lehman, which also reported that it has cut its residential mortgage exposure by nearly half, had succeeded in reassuring investors that it's not in imminent danger of failure. For now.
'We're okay in terms of market sentiment until we get into the earnings season,' said Marc Pado, chief market strategist at Cantor Fitzgerald. 'There's going to be more we're going to have to deal with in terms of write-downs at the brokerage firms. The question for investors is whether the banks are largely done with their problems? That'll come out the third week of September, and the market will remain nervous until then,' Mr Pado observed.
Wednesday, 10 September 2008
Published September 10, 2008
Foreign funds flowing out fast: research firm
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(KUALA LUMPUR) Foreign investors are moving their money out of Malaysia at an alarming rate due to domestic political uncertainties and record inflation rate, a local research firm said, local media reported yesterday.
'Funds are exiting the country at a worrying rate. In the first half of 2008, a total of RM125 billion (S$51.95 billion) in funds was withdrawn from Malaysian shores. This first half 2008 outflow has already exceeded the total outflows of RM92.3 billion for the whole of last year,' HLeBroking Research wrote in its Traders' Brief to its retail customers on Monday.
'All in all, fund outflows are increasing drastically, while fund inflows are decreasing drastically from last year,' the New Straits Times quoted it as saying.
The effects of the outflow of funds can be seen from the selling out of Malaysian bonds and the ringgit, the research firm said.
'As a result of plunging bond prices, bond yields for the three-year Malaysian Government Securities is now at the alarming 4.18 level.
'Essentially, the loss of faith of foreign investors has increased the cost of funds for Malaysia in general, making it hard for people to raise funds to finance economic activities,' it added.
One factor causing international investors to withdraw their funds from the country was the political uncertainty, HLeBroking Research said.
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'The Kuala Lumpur Composite Index (KLCI) was sold down, with drastic changes in foreign shareholdings, while prices of bonds begin depreciating sharply, increasing yield and, at the same time, the country's cost of raising new funds,' it said.
The country's inflation also rose to a 26-year high of 8.5 per cent in July, following the fuel price hike a month earlier. - Xinhua
Foreign funds flowing out fast: research firm
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(KUALA LUMPUR) Foreign investors are moving their money out of Malaysia at an alarming rate due to domestic political uncertainties and record inflation rate, a local research firm said, local media reported yesterday.
'Funds are exiting the country at a worrying rate. In the first half of 2008, a total of RM125 billion (S$51.95 billion) in funds was withdrawn from Malaysian shores. This first half 2008 outflow has already exceeded the total outflows of RM92.3 billion for the whole of last year,' HLeBroking Research wrote in its Traders' Brief to its retail customers on Monday.
'All in all, fund outflows are increasing drastically, while fund inflows are decreasing drastically from last year,' the New Straits Times quoted it as saying.
The effects of the outflow of funds can be seen from the selling out of Malaysian bonds and the ringgit, the research firm said.
'As a result of plunging bond prices, bond yields for the three-year Malaysian Government Securities is now at the alarming 4.18 level.
'Essentially, the loss of faith of foreign investors has increased the cost of funds for Malaysia in general, making it hard for people to raise funds to finance economic activities,' it added.
One factor causing international investors to withdraw their funds from the country was the political uncertainty, HLeBroking Research said.
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'The Kuala Lumpur Composite Index (KLCI) was sold down, with drastic changes in foreign shareholdings, while prices of bonds begin depreciating sharply, increasing yield and, at the same time, the country's cost of raising new funds,' it said.
The country's inflation also rose to a 26-year high of 8.5 per cent in July, following the fuel price hike a month earlier. - Xinhua
Published September 10, 2008
Govt perks rekindle interest in Cyberjaya
By PAULINE NG IN KUALA LUMPUR
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AS costs surge worldwide, Malaysia is banking on its cheap land, good infrastructure, generous tax breaks, and 'hand-holding' services to attract multinational companies to its Cyberjaya hub.
Land there was RM35 (S$14.6) per square foot 10 years ago when former prime minister Mahathir Mohamad mooted the idea of a Multimedia Super Corridor (MSC) with its benefits to attract global firms to undertake information communication technology activities in Malaysia.
Land prices have since risen to RM65 psf. They could fetch above RM100 psf, but have been capped to encourage firms to set up.
Two recent newcomers - Dell and India's Satyam - could be the tipping point needed to accelerate Cyberjaya's growth, promoters say of the hub sited 30km from Kuala Lumpur.
Although the MSC has not spawned significant home grown technology, Malaysia has established itself as a top business process outsourcing hub.
Last year, Dell completed a 200,000 plus sq ft global business centre at Cyberjaya, while Satyam is building a 600,000-plus sq ft global delivery campus.
'They will also affect SMEs here,' says Redza Rafiq, managing director of Cyberview - a government-owned company that owns the land in Cyberjaya and the man tasked with 'restructuring the Cyberjaya project'.
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After a slow start - it has taken more than a decade for supply of enterprise space in the cyber-city to exceed 5 million sq ft, for example - interest has picked up in the last three years.
The number of companies applying to operate at Cyberjaya has jumped 57 per cent in the last two years to 474. Most are SMEs, more than half of which are involved in software development, Mr Redza said at a news briefing yesterday. Shell, HSBC, DHL, IBM and BMW are some of the 30 MNCs there.
Singapore-based Emerio Corporation plans to make Cyberjaya its new headquarters on completion of a 100,000 sq ft building next year. And Ascendas has acquired 2.8ha for a planned science park.
Malaysia has several other MSC-status hubs around the country. Cyber-centres such as Kuala Lumpur City Centre and KL Sentral areas have proved attractive - despite rents that are more than double Cyberjaya's RM2.50 psf - because of the many amenities around them. Some 20,000 people work at Cyberjaya now, but critics say the place still lacks lifestyle facilities.
So far, only 374ha of the 1,523ha of land for sale has been sold.
Govt perks rekindle interest in Cyberjaya
By PAULINE NG IN KUALA LUMPUR
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AS costs surge worldwide, Malaysia is banking on its cheap land, good infrastructure, generous tax breaks, and 'hand-holding' services to attract multinational companies to its Cyberjaya hub.
Land there was RM35 (S$14.6) per square foot 10 years ago when former prime minister Mahathir Mohamad mooted the idea of a Multimedia Super Corridor (MSC) with its benefits to attract global firms to undertake information communication technology activities in Malaysia.
Land prices have since risen to RM65 psf. They could fetch above RM100 psf, but have been capped to encourage firms to set up.
Two recent newcomers - Dell and India's Satyam - could be the tipping point needed to accelerate Cyberjaya's growth, promoters say of the hub sited 30km from Kuala Lumpur.
Although the MSC has not spawned significant home grown technology, Malaysia has established itself as a top business process outsourcing hub.
Last year, Dell completed a 200,000 plus sq ft global business centre at Cyberjaya, while Satyam is building a 600,000-plus sq ft global delivery campus.
'They will also affect SMEs here,' says Redza Rafiq, managing director of Cyberview - a government-owned company that owns the land in Cyberjaya and the man tasked with 'restructuring the Cyberjaya project'.
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After a slow start - it has taken more than a decade for supply of enterprise space in the cyber-city to exceed 5 million sq ft, for example - interest has picked up in the last three years.
The number of companies applying to operate at Cyberjaya has jumped 57 per cent in the last two years to 474. Most are SMEs, more than half of which are involved in software development, Mr Redza said at a news briefing yesterday. Shell, HSBC, DHL, IBM and BMW are some of the 30 MNCs there.
Singapore-based Emerio Corporation plans to make Cyberjaya its new headquarters on completion of a 100,000 sq ft building next year. And Ascendas has acquired 2.8ha for a planned science park.
Malaysia has several other MSC-status hubs around the country. Cyber-centres such as Kuala Lumpur City Centre and KL Sentral areas have proved attractive - despite rents that are more than double Cyberjaya's RM2.50 psf - because of the many amenities around them. Some 20,000 people work at Cyberjaya now, but critics say the place still lacks lifestyle facilities.
So far, only 374ha of the 1,523ha of land for sale has been sold.
Published September 10, 2008
Malaysia army weighs in on racial slur saga
It calls for govt action against those who incite hatred among the races
By S JAYASANKARAN IN KUALA LUMPUR
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IN an unusual break from military protocol, the chief of Malaysia's armed forces called on the government yesterday to take stern action against anyone inciting racial hatred.
Describing it as a 'national security threat', Abdul Aziz Zainal said: 'Racial issues are the most feared by the security forces, as it can lead to chaos.'
It was a startling statement coming from the military, given that it has rarely strayed into the civilian and political arena.
The nuance was not lost on former trade minister Rafidah Aziz, the head of the women's wing of the dominant United Malays National Organisation (Umno).
'When the top brass of the army talks like that, it means it's very serious,' she said in an appeal to politicians of all stripes to refrain from hurling derogatory comments at one another.
The latest statements underscore the heightened political tension in Malaysia amid growing racial bickering between component parties of the governing Barisan Nasional (BN), or National Front, coalition.
Ironically, the Opposition led by Anwar Ibrahim has little to do with the furore - all the accusations are being hurled by BN members. Even so, tension has been catalysed by fears that Anwar could topple the government by inducing mass defections from the BN.
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Meanwhile, Prime Minister Abdullah Badawi made a stand of sorts yesterday when he told reporters that Umno's supreme council would take 'immediate stern action' against Ahmad Ismail, the Umno division chief at the centre of a racial storm in Penang.
Mr Abdullah revealed this after a BN Supreme Council meeting at which the two Chinese-based BN parties - Gerakan and the Malaysian Chinese Association - had asked for Mr Ahmad to be punished for calling the Chinese 'squatters' and 'immigrants' during a recent by-election. Mr Abdullah said that the BN 'totally rejected Mr Ahmad's statements'.
Despite orders from the Umno leadership, Mr Ahmad refused to apologise. Instead, he compounded the matter by likening Malaysian Chinese to American Jews 'who not only dominate economically but want to dominate politically'.
'Consider this a warning from the Malays,' he said in an outburst on Monday night. 'The patience of the Malays has a limit. Do not push us against the wall for we will be forced to turn back and push the Chinese for our own survival.'
Following this, the Penang units of Gerakan and the MCA announced the severance 'of all ties' with Umno Penang.
In a separate development that may not bode well for beleaguered PM Abdullah, former premier Mahathir Mohamad will return to Umno, the party he quit in a huff three months ago. According to Sanusi Junid, a close Mahathir ally, the former leader will endorse Tengku Razaleigh Hamzah's candidacy for Umno president.
Dr Mahathir, who remains influential in Umno, could be crucial in getting enough nominations for Tengku Razaleigh to challenge Mr Abdullah. Some tough battles loom ahead.
Malaysia army weighs in on racial slur saga
It calls for govt action against those who incite hatred among the races
By S JAYASANKARAN IN KUALA LUMPUR
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IN an unusual break from military protocol, the chief of Malaysia's armed forces called on the government yesterday to take stern action against anyone inciting racial hatred.
Describing it as a 'national security threat', Abdul Aziz Zainal said: 'Racial issues are the most feared by the security forces, as it can lead to chaos.'
It was a startling statement coming from the military, given that it has rarely strayed into the civilian and political arena.
The nuance was not lost on former trade minister Rafidah Aziz, the head of the women's wing of the dominant United Malays National Organisation (Umno).
'When the top brass of the army talks like that, it means it's very serious,' she said in an appeal to politicians of all stripes to refrain from hurling derogatory comments at one another.
The latest statements underscore the heightened political tension in Malaysia amid growing racial bickering between component parties of the governing Barisan Nasional (BN), or National Front, coalition.
Ironically, the Opposition led by Anwar Ibrahim has little to do with the furore - all the accusations are being hurled by BN members. Even so, tension has been catalysed by fears that Anwar could topple the government by inducing mass defections from the BN.
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Meanwhile, Prime Minister Abdullah Badawi made a stand of sorts yesterday when he told reporters that Umno's supreme council would take 'immediate stern action' against Ahmad Ismail, the Umno division chief at the centre of a racial storm in Penang.
Mr Abdullah revealed this after a BN Supreme Council meeting at which the two Chinese-based BN parties - Gerakan and the Malaysian Chinese Association - had asked for Mr Ahmad to be punished for calling the Chinese 'squatters' and 'immigrants' during a recent by-election. Mr Abdullah said that the BN 'totally rejected Mr Ahmad's statements'.
Despite orders from the Umno leadership, Mr Ahmad refused to apologise. Instead, he compounded the matter by likening Malaysian Chinese to American Jews 'who not only dominate economically but want to dominate politically'.
'Consider this a warning from the Malays,' he said in an outburst on Monday night. 'The patience of the Malays has a limit. Do not push us against the wall for we will be forced to turn back and push the Chinese for our own survival.'
Following this, the Penang units of Gerakan and the MCA announced the severance 'of all ties' with Umno Penang.
In a separate development that may not bode well for beleaguered PM Abdullah, former premier Mahathir Mohamad will return to Umno, the party he quit in a huff three months ago. According to Sanusi Junid, a close Mahathir ally, the former leader will endorse Tengku Razaleigh Hamzah's candidacy for Umno president.
Dr Mahathir, who remains influential in Umno, could be crucial in getting enough nominations for Tengku Razaleigh to challenge Mr Abdullah. Some tough battles loom ahead.
Published September 10, 2008
Time for Hong Leong to share its ideas
By EMILYN YAP
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SOME say patience is a virtue, but Hong Leong Group seems to have waited long enough.
Having invested in Thakral Corporation for years with no sign of sterling returns, the group has raised the pressure in its attempt to oust Thakral founder and chairman Kartar Singh Thakral from the board.
While Hong Leong has not given reasons for the move, Thakral's patchy performance could have forced its hand. The consumer electronics distribution business incurred a net loss of $6.3 million for H1 2008.
While it did score net profits of $5.5 million for the year ended Dec 31, 2007, earnings for 2006 were again $19.2 million deep in the red.
Such results would not be pleasing to Hong Leong, which certainly saw enough potential in Thakral to first invest in it in 2005.
Upping its stake gradually, Hong Leong even attempted a takeover of Thakral in 2006 which eventually fell through.
Some might say that Hong Leong is too quick to dismiss Thakral's ability to turn around. After all, it has managed to come out of bad times (including in 1999 when it reportedly incurred a $220 million foreign exchange loss).
There should also be little doubt about a founder's determination to keep his legacy going. As Mr Singh told BT on Monday, 'the company is repositioning its principal business, and I would like to see it through'.
Still, in the corporate world where time is money, three years must seem like a long time to Hong Leong and it has decided to seek a sweeping leadership change.
We can keep guessing, but the market will remain none the wiser about Hong Leong's motivations until it is ready to speak. Besides, other Thakral shareholders will need more information before they can pick a side.
For instance, how would any management change affect Thakral's plans to shift its business into real estate? With its experience and credentials, Hong Leong does look better equipped to lead the charge in this field than the Thakrals.
But one would also wonder why it would want additional exposure to real estate when it already has successful units such as City Developments in its stable.
Also: should Mr Singh leave the board, who would replace him and would the other two members of the Thakral family stay on?
For now, it is not clear how other Thakral shareholders are interpreting Hong Leong's move. There is little activity in the Thakral counter so far - the shares have stayed at four cents since Monday - so they could be waiting for more news.
This is where Hong Leong should come in, by sharing its motivations and strategies for Thakral with the market. At a time when it needs shareholder support, good reasons and strong plans would help it win votes. In such a case, patience may not be a virtue - and silence is certainly not golden.
Time for Hong Leong to share its ideas
By EMILYN YAP
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SOME say patience is a virtue, but Hong Leong Group seems to have waited long enough.
Having invested in Thakral Corporation for years with no sign of sterling returns, the group has raised the pressure in its attempt to oust Thakral founder and chairman Kartar Singh Thakral from the board.
While Hong Leong has not given reasons for the move, Thakral's patchy performance could have forced its hand. The consumer electronics distribution business incurred a net loss of $6.3 million for H1 2008.
While it did score net profits of $5.5 million for the year ended Dec 31, 2007, earnings for 2006 were again $19.2 million deep in the red.
Such results would not be pleasing to Hong Leong, which certainly saw enough potential in Thakral to first invest in it in 2005.
Upping its stake gradually, Hong Leong even attempted a takeover of Thakral in 2006 which eventually fell through.
Some might say that Hong Leong is too quick to dismiss Thakral's ability to turn around. After all, it has managed to come out of bad times (including in 1999 when it reportedly incurred a $220 million foreign exchange loss).
There should also be little doubt about a founder's determination to keep his legacy going. As Mr Singh told BT on Monday, 'the company is repositioning its principal business, and I would like to see it through'.
Still, in the corporate world where time is money, three years must seem like a long time to Hong Leong and it has decided to seek a sweeping leadership change.
We can keep guessing, but the market will remain none the wiser about Hong Leong's motivations until it is ready to speak. Besides, other Thakral shareholders will need more information before they can pick a side.
For instance, how would any management change affect Thakral's plans to shift its business into real estate? With its experience and credentials, Hong Leong does look better equipped to lead the charge in this field than the Thakrals.
But one would also wonder why it would want additional exposure to real estate when it already has successful units such as City Developments in its stable.
Also: should Mr Singh leave the board, who would replace him and would the other two members of the Thakral family stay on?
For now, it is not clear how other Thakral shareholders are interpreting Hong Leong's move. There is little activity in the Thakral counter so far - the shares have stayed at four cents since Monday - so they could be waiting for more news.
This is where Hong Leong should come in, by sharing its motivations and strategies for Thakral with the market. At a time when it needs shareholder support, good reasons and strong plans would help it win votes. In such a case, patience may not be a virtue - and silence is certainly not golden.
Published September 10, 2008
SPH buys Shareinvestor.com
It will pay up to $18m if financial portal meets targets
By CONRAD TAN
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(SINGAPORE) Singapore Press Holdings (SPH) will buy online financial portal Shareinvestor.com for up to $18 million as part of its efforts to broaden its Internet-based financial services, the publishing company said yesterday.
SPH, which publishes The Business Times, said that it has agreed to acquire all the shares of Shareinvestor.com Holdings from its existing owners for between $12 million and $18 million in cash.
The exact sum payable will depend on whether Shareinvestor.com and its subsidiaries hit certain targets for their 2008 and 2009 financial years.
Under the terms of the agreement, the overall purchase price may be reduced if the targets are not achieved, SPH said in a statement yesterday.
The existing owners of Shareinvestor.com include the Lexicon Group, a Singapore-listed magazine publisher, which owns a 27.7 per cent stake in the company.
The other owners are individuals, comprising its founder and chairman Michael Leong, chief executive Christopher Lee, group IT director Lim Dau Hee and five others.
Lexicon - or Panpac Media.com, as it was then known - first bought its stake in Shareinvestor.com in February 2002. It paid $1.1 million in an all-share deal for 1.85 million Shareinvestor.com shares, or what was then a 25 per cent stake, valuing the company at $4.4 million.
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In a statement yesterday, Lexicon said that it expects to make a net gain of about $3.7 million from the sale of its stake, based on the maximum $4.92 million it will get if Shareinvestor.com meets all the targets set out in the agreement.
In March 2004, Shareinvestor.com explored listing on the Singapore Exchange, according to a statement at the time by Lexicon. Shareinvestor.com hired OCBC Bank as issue manager, but ultimately did not go public.
The acquisition by SPH - through subsidiary SPH Interactive - is subject to 'satisfactory due diligence findings' and other approvals, SPH said. Lexicon's shareholders will also have to agree to the sale of its stake.
SPH said that it will fund the purchase from internal resources and the deal will not have a material impact on its earnings or assets for its current financial year, which ends next August.
Founded in 1999, Shareinvestor.com provides financial market news and commentary, data feeds and analytical software and other services for stock trading - some free and others on a subscription basis. It operates in Singapore, Malaysia and Thailand and has more than 7,000 paying subscribers, according to its website.
It also provides online investor relations services for companies in the region, including StarHub, Noble Group and Cosco Corp here, through another website it operates, Listedcompany.com.
It has paid-up capital of $5.9 million.
SPH buys Shareinvestor.com
It will pay up to $18m if financial portal meets targets
By CONRAD TAN
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(SINGAPORE) Singapore Press Holdings (SPH) will buy online financial portal Shareinvestor.com for up to $18 million as part of its efforts to broaden its Internet-based financial services, the publishing company said yesterday.
SPH, which publishes The Business Times, said that it has agreed to acquire all the shares of Shareinvestor.com Holdings from its existing owners for between $12 million and $18 million in cash.
The exact sum payable will depend on whether Shareinvestor.com and its subsidiaries hit certain targets for their 2008 and 2009 financial years.
Under the terms of the agreement, the overall purchase price may be reduced if the targets are not achieved, SPH said in a statement yesterday.
The existing owners of Shareinvestor.com include the Lexicon Group, a Singapore-listed magazine publisher, which owns a 27.7 per cent stake in the company.
The other owners are individuals, comprising its founder and chairman Michael Leong, chief executive Christopher Lee, group IT director Lim Dau Hee and five others.
Lexicon - or Panpac Media.com, as it was then known - first bought its stake in Shareinvestor.com in February 2002. It paid $1.1 million in an all-share deal for 1.85 million Shareinvestor.com shares, or what was then a 25 per cent stake, valuing the company at $4.4 million.
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In a statement yesterday, Lexicon said that it expects to make a net gain of about $3.7 million from the sale of its stake, based on the maximum $4.92 million it will get if Shareinvestor.com meets all the targets set out in the agreement.
In March 2004, Shareinvestor.com explored listing on the Singapore Exchange, according to a statement at the time by Lexicon. Shareinvestor.com hired OCBC Bank as issue manager, but ultimately did not go public.
The acquisition by SPH - through subsidiary SPH Interactive - is subject to 'satisfactory due diligence findings' and other approvals, SPH said. Lexicon's shareholders will also have to agree to the sale of its stake.
SPH said that it will fund the purchase from internal resources and the deal will not have a material impact on its earnings or assets for its current financial year, which ends next August.
Founded in 1999, Shareinvestor.com provides financial market news and commentary, data feeds and analytical software and other services for stock trading - some free and others on a subscription basis. It operates in Singapore, Malaysia and Thailand and has more than 7,000 paying subscribers, according to its website.
It also provides online investor relations services for companies in the region, including StarHub, Noble Group and Cosco Corp here, through another website it operates, Listedcompany.com.
It has paid-up capital of $5.9 million.
Published September 10, 2008
Court orders Thai PM to step down over TV cooking show
Caretaker PM appointed but Samak's party may re-elect him later
By GREG LOWE
IN BANGKOK
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PRIME Minister Samak Sundaravej was forced to resign yesterday for violating the Thai Constitution, over payments he received for hosting TV cooking programmes.
The Thai Constitutional Court's unanimous verdict found the payments breached Article 267 of the 2007 charter, which bans ministers from holding outside economic interests.
'His (Prime Minister Samak's) premiership is over, and the term of the Cabinet has also expired,' Constitutional Court Judge Chat Chawakorn was reported as saying. Mr Samak's party said, however, that it would vote him back as prime minister again.
Mr Samak said previously that he had sought legal counsel before appearing on the two TV shows, and that any monies received were to reimburse travel expenses and did not constitute payment. The court ruled otherwise, ordering him to step down immediately. Thai constitutional law also states that his Cabinet must resign, but it will remain in place until a new prime minister is elected by Parliament within the next 30 days.
Deputy Prime Minister Somchai Wongsawat has been appointed as caretaker-Prime Minister for the interim process.
The ruling will not address the problems that lay at the root of Thailand's current political turmoil, political observers said.
'It is unlikely to solve any of the underlying problems of the current crisis as it appears that the (Mr Samak's) People's Power Party coalition has said it will vote him in as prime minister again. The law does not prevent this,' said Ismael Wolf, a Bangkok-based political and security analyst with PSA Asia.
PPP has a number of options open to it, including re-selecting Mr Samak, electing a new PM or calling a snap election.
Such a move would enrage the right-wing anti-government People's Alliance for Democracy (PAD), which has occupied Government House for more than two weeks, demanding the prime minister's resignation and the dissolution of Parliament.
The PAD is likely to use the court's decision as a rallying point for its campaign, according to Mr Wolf. Though Bangkok's streets are likely to remain safe despite earlier fears of violent clashes between pro- and anti-government supporters, he said. 'From a security point of view, there is nothing that indicates an escalation of violence in Bangkok. In fact, there has been no violence since last week,' he said.
While rifts between pro- and anti-government alliances are becoming increasingly polarised, recent polls revealed that Bangkokians are losing patience with the current situation, as the deadlock between the PAD and the PPP continues to slow Thailand's already sluggish economy.
International observers are also likely to be bemused by the fact that Prime Minister Samak's short time as a TV chef achieved what months of PAD protests, and allegations of corruption, cronyism and economic mismanagement could not.
'It's farcical, really,' said Mr Wolf. 'That he was taken down for appearing on a cooking programme may seem absurd to international observers.'
Court orders Thai PM to step down over TV cooking show
Caretaker PM appointed but Samak's party may re-elect him later
By GREG LOWE
IN BANGKOK
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PRIME Minister Samak Sundaravej was forced to resign yesterday for violating the Thai Constitution, over payments he received for hosting TV cooking programmes.
The Thai Constitutional Court's unanimous verdict found the payments breached Article 267 of the 2007 charter, which bans ministers from holding outside economic interests.
'His (Prime Minister Samak's) premiership is over, and the term of the Cabinet has also expired,' Constitutional Court Judge Chat Chawakorn was reported as saying. Mr Samak's party said, however, that it would vote him back as prime minister again.
Mr Samak said previously that he had sought legal counsel before appearing on the two TV shows, and that any monies received were to reimburse travel expenses and did not constitute payment. The court ruled otherwise, ordering him to step down immediately. Thai constitutional law also states that his Cabinet must resign, but it will remain in place until a new prime minister is elected by Parliament within the next 30 days.
Deputy Prime Minister Somchai Wongsawat has been appointed as caretaker-Prime Minister for the interim process.
The ruling will not address the problems that lay at the root of Thailand's current political turmoil, political observers said.
'It is unlikely to solve any of the underlying problems of the current crisis as it appears that the (Mr Samak's) People's Power Party coalition has said it will vote him in as prime minister again. The law does not prevent this,' said Ismael Wolf, a Bangkok-based political and security analyst with PSA Asia.
PPP has a number of options open to it, including re-selecting Mr Samak, electing a new PM or calling a snap election.
Such a move would enrage the right-wing anti-government People's Alliance for Democracy (PAD), which has occupied Government House for more than two weeks, demanding the prime minister's resignation and the dissolution of Parliament.
The PAD is likely to use the court's decision as a rallying point for its campaign, according to Mr Wolf. Though Bangkok's streets are likely to remain safe despite earlier fears of violent clashes between pro- and anti-government supporters, he said. 'From a security point of view, there is nothing that indicates an escalation of violence in Bangkok. In fact, there has been no violence since last week,' he said.
While rifts between pro- and anti-government alliances are becoming increasingly polarised, recent polls revealed that Bangkokians are losing patience with the current situation, as the deadlock between the PAD and the PPP continues to slow Thailand's already sluggish economy.
International observers are also likely to be bemused by the fact that Prime Minister Samak's short time as a TV chef achieved what months of PAD protests, and allegations of corruption, cronyism and economic mismanagement could not.
'It's farcical, really,' said Mr Wolf. 'That he was taken down for appearing on a cooking programme may seem absurd to international observers.'
Published September 10, 2008
HDB upgraders come out to play in quiet market
Their share of private home purchases rises, that of foreigners falls
By KALPANA RASHIWALA
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(SINGAPORE) When the property market is hot, foreign buyers are in action. When it quietens, HDB upgraders take the spotlight.
HDB upgraders' share of private home purchases rose to 34 per cent in Q2 2008 from just 28 per cent share in Q1 2008. This is the highest quarterly figure in at least three years, according to DTZ's analysis of caveats captured by Urban Redevelopment Authority's Realis system.
The number of private homes bought by those with HDB addresses also increased 35 per cent quarter-on-quarter to 1,199, outpacing a 3 per cent increase over the same period in the number of private homes picked up by those with private addresses.
In absolute terms in Q2, HDB upgraders picked up the most number of units in The Verve in the Balestier area - 36 - followed by 32 at Stadia at Yio Chu Kang Road in the primary market (from developers). Proportionately, The Quartz was the most popular with 86 per cent of its buyers being upgraders.
Developers are targeting this segment. 'Developers have been pricing launches at more realistic prices and some developers have arranged for banks to offer attractive mortgage schemes for buyers,' said DTZ executive director Ong Choon Fah.
Meanwhile, the buyers of 97 of the 169 primary market transactions of private apartments/condos below 1,000 sq ft and costing at most $1,000 psf in Q2 had HDB addresses. 'This could be partly due to singles who are staying with parents in HDB flats purchasing for either investment or owner-occupation,' DTZ said.
HDB upgraders have also been more active in Q2 in the secondary market, where prices have dropped by as much as 10-12 per cent in Q2 2008 over Q1 2008 in some instances, Mrs Ong said.
The number of private apartments/condos changing hands in the subsale market bought by those with HDB addresses increased 52 per cent Q-on-Q to 152 deals in Q2 2008.
'HDB upgraders can more easily upgrade to private properties as HDB resale flat prices are still rising, while prices for some private properties have fallen,' DTZ said.
The median price for private apartments/condos picked up by HDB upgraders in the subsale market declined 8 per cent Q-on-Q to $871 psf in Q2 this year.
Subsales - often seen as a reflection of speculative activity - refer to secondary market deals in projects that have yet to receive their Certificates of Statutory Completion.
The total number of subsales for non-landed private homes rose 25 per cent quarter-on-quarter to 493 in Q2 2008. They made up about 17 per cent share of transactions of non-landed private homes in Q2.
'This is high considering that there's very little speculation now compared with last year. Rather, the subsale activity in Q2 seems to have been fuelled by those who'd bought units in the past few years unloading their investments as their units reach or near completion,' DTZ said.
The median subsale price (of non-landed private homes) continued to fall by 5 per cent quarter-on-quarter to $1,052 psf in Q2 after sliding 8 per cent in Q1 and 4 per cent in Q4 2007. 'This was due to fewer high-end units being transacted in the subsale market as well as slight price corrections. Owners are now more realistic in asking prices,' DTZ said.
Median subsale prices of Citylights and The Sail @ Marina Bay were $1,100 psf and $1,810 psf respectively in Q2 2008, down about 2 and 14 per cent respectively from Q1.
Meanwhile, the number of private homes acquired by foreigners (including permanent residents) rose 3 per cent Q-on-Q to 913 in Q2. Foreigners bought 26 per cent of total private homes in the quarter, down slightly from a 28 per cent share in Q1.
DTZ senior director Chua Chor Hoon observed that 'when private property prices are high, there are more foreigners as they are attracted by the growth story. When private property prices are low, there are more purchasers with HDB addresses as it's a good opportunity to upgrade at more affordable levels.
'The price gap between HDB resale flats and private properties is also narrower, so the outlay is smaller for HDB upgraders who can use the sale proceeds from their HDB flats to pay off part of the private property purchase price.'
HDB upgraders come out to play in quiet market
Their share of private home purchases rises, that of foreigners falls
By KALPANA RASHIWALA
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(SINGAPORE) When the property market is hot, foreign buyers are in action. When it quietens, HDB upgraders take the spotlight.
HDB upgraders' share of private home purchases rose to 34 per cent in Q2 2008 from just 28 per cent share in Q1 2008. This is the highest quarterly figure in at least three years, according to DTZ's analysis of caveats captured by Urban Redevelopment Authority's Realis system.
The number of private homes bought by those with HDB addresses also increased 35 per cent quarter-on-quarter to 1,199, outpacing a 3 per cent increase over the same period in the number of private homes picked up by those with private addresses.
In absolute terms in Q2, HDB upgraders picked up the most number of units in The Verve in the Balestier area - 36 - followed by 32 at Stadia at Yio Chu Kang Road in the primary market (from developers). Proportionately, The Quartz was the most popular with 86 per cent of its buyers being upgraders.
Developers are targeting this segment. 'Developers have been pricing launches at more realistic prices and some developers have arranged for banks to offer attractive mortgage schemes for buyers,' said DTZ executive director Ong Choon Fah.
Meanwhile, the buyers of 97 of the 169 primary market transactions of private apartments/condos below 1,000 sq ft and costing at most $1,000 psf in Q2 had HDB addresses. 'This could be partly due to singles who are staying with parents in HDB flats purchasing for either investment or owner-occupation,' DTZ said.
HDB upgraders have also been more active in Q2 in the secondary market, where prices have dropped by as much as 10-12 per cent in Q2 2008 over Q1 2008 in some instances, Mrs Ong said.
The number of private apartments/condos changing hands in the subsale market bought by those with HDB addresses increased 52 per cent Q-on-Q to 152 deals in Q2 2008.
'HDB upgraders can more easily upgrade to private properties as HDB resale flat prices are still rising, while prices for some private properties have fallen,' DTZ said.
The median price for private apartments/condos picked up by HDB upgraders in the subsale market declined 8 per cent Q-on-Q to $871 psf in Q2 this year.
Subsales - often seen as a reflection of speculative activity - refer to secondary market deals in projects that have yet to receive their Certificates of Statutory Completion.
The total number of subsales for non-landed private homes rose 25 per cent quarter-on-quarter to 493 in Q2 2008. They made up about 17 per cent share of transactions of non-landed private homes in Q2.
'This is high considering that there's very little speculation now compared with last year. Rather, the subsale activity in Q2 seems to have been fuelled by those who'd bought units in the past few years unloading their investments as their units reach or near completion,' DTZ said.
The median subsale price (of non-landed private homes) continued to fall by 5 per cent quarter-on-quarter to $1,052 psf in Q2 after sliding 8 per cent in Q1 and 4 per cent in Q4 2007. 'This was due to fewer high-end units being transacted in the subsale market as well as slight price corrections. Owners are now more realistic in asking prices,' DTZ said.
Median subsale prices of Citylights and The Sail @ Marina Bay were $1,100 psf and $1,810 psf respectively in Q2 2008, down about 2 and 14 per cent respectively from Q1.
Meanwhile, the number of private homes acquired by foreigners (including permanent residents) rose 3 per cent Q-on-Q to 913 in Q2. Foreigners bought 26 per cent of total private homes in the quarter, down slightly from a 28 per cent share in Q1.
DTZ senior director Chua Chor Hoon observed that 'when private property prices are high, there are more foreigners as they are attracted by the growth story. When private property prices are low, there are more purchasers with HDB addresses as it's a good opportunity to upgrade at more affordable levels.
'The price gap between HDB resale flats and private properties is also narrower, so the outlay is smaller for HDB upgraders who can use the sale proceeds from their HDB flats to pay off part of the private property purchase price.'
Tuesday, 9 September 2008
Published September 9, 2008
IDA gives SingTel partial relief from 'dominant licensee' rules
It will enjoy regulatory reprieve for 3 of 6 services in its second request
By WINSTON CHAI
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SINGAPORE Telecom's claim that it no longer has a competitive edge in major business telephony segments is not holding up fully under regulatory scrutiny, with the Government denying most of its requests to be unshackled from the strict regulations that come with its market dominance.
Regulations allow for fairer competition by dictating how a dominant licensee should deal with other service providers.
The Infocomm Development Authority of Singapore (IDA) has decided not to grant SingTel full exemption from 'dominant licensee' obligations across all the market segments.
Under the Singapore Telecom Competition Code, SingTel is subject to a stringent set of operating rules in markets where it is deemed dominant.
These regulations allow for fairer competition by dictating how a dominant licensee should deal with other service providers, such as mandating SingTel to open its infrastructure to others at government-approved prices and conditions.
In October last year, the island's largest telco submitted two requests to IDA for regulatory relief from such conditions in two business markets.
The first was for customers who spend more than $250,000 a year on telecom services, while the second was made up of six business-related phone and Internet offerings.
IDA reached its preliminary decision on SingTel's request after seeking public feedback and factoring in the dissenting views of rival operators M1 and StarHub.
'If IDA were to grant SingTel's request in its entirety, SingTel would be relieved from dominant licensee regulation for all telecommunication services that it provides to government and business customers who spend at least $250,000 per year on telecommunication services,' the regulator said.
Full exemption would mean that SingTel was correspondingly freed from current market stipulations for most of the services it provides to businesses with a telecommunications budget of under $250,000, it said. 'IDA declines to grant SingTel's request in its entirety.'
However, SingTel will enjoy regulatory reprieve for three of the six services it detailed in its second request.
IDA said that the markets for providing backhaul and terrestrial international private leased circuits have become 'increasingly competitive' and the dominant licensee obligations will no longer apply to SingTel for these segments.
In addition, IDA will continue to exempt SingTel in the area of international managed data services. However, 'ex post regulation' will still apply in these three markets to provide an avenue for legal redress should the operator be accused of abusing its market position.
The regulatory pardon, however, will not be extended to the remaining three Singapore-centric services - local leased circuit (LLC), business local telephony service and local managed data services.
SingTel has the most extensive underground data network in Singapore and also has fixed-line phone connections to almost all residential and office buildings.
'IDA has determined that SingTel continues to possess significant market power in the retail LLC market and, therefore, continued application of dominant licensee regulation to services provided in this market is necessary to protect end users, and to promote and preserve competition,' the regulator said.
'IDA has further concluded that, because effective competition has not yet taken root in the business local telephone service, LLC and local managed data services markets, IDA should not grant at this time any exemption in those markets.'
The regulator is seeking views on its preliminary decision. Industry players have until Sept 23 to respond.
A SingTel spokesman said: 'We do not agree with the IDA assessment and will respond to its preliminary decision. The telecommunications market in Singapore is characterised by domestic, regional and global service providers with extensive local and international capacity investments.'
M1 declined to comment on the issue. But StarHub spokesman Michael Sim said that the company fully supports IDA's decision to deny SingTel's exemption request for telecommunications provided to customers who spend more than $250,000 a year.
'We don't believe this market is yet competitive,' he said, adding that StarHub is reviewing IDA's assessment on SingTel's second request.
IDA gives SingTel partial relief from 'dominant licensee' rules
It will enjoy regulatory reprieve for 3 of 6 services in its second request
By WINSTON CHAI
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SINGAPORE Telecom's claim that it no longer has a competitive edge in major business telephony segments is not holding up fully under regulatory scrutiny, with the Government denying most of its requests to be unshackled from the strict regulations that come with its market dominance.
Regulations allow for fairer competition by dictating how a dominant licensee should deal with other service providers.
The Infocomm Development Authority of Singapore (IDA) has decided not to grant SingTel full exemption from 'dominant licensee' obligations across all the market segments.
Under the Singapore Telecom Competition Code, SingTel is subject to a stringent set of operating rules in markets where it is deemed dominant.
These regulations allow for fairer competition by dictating how a dominant licensee should deal with other service providers, such as mandating SingTel to open its infrastructure to others at government-approved prices and conditions.
In October last year, the island's largest telco submitted two requests to IDA for regulatory relief from such conditions in two business markets.
The first was for customers who spend more than $250,000 a year on telecom services, while the second was made up of six business-related phone and Internet offerings.
IDA reached its preliminary decision on SingTel's request after seeking public feedback and factoring in the dissenting views of rival operators M1 and StarHub.
'If IDA were to grant SingTel's request in its entirety, SingTel would be relieved from dominant licensee regulation for all telecommunication services that it provides to government and business customers who spend at least $250,000 per year on telecommunication services,' the regulator said.
Full exemption would mean that SingTel was correspondingly freed from current market stipulations for most of the services it provides to businesses with a telecommunications budget of under $250,000, it said. 'IDA declines to grant SingTel's request in its entirety.'
However, SingTel will enjoy regulatory reprieve for three of the six services it detailed in its second request.
IDA said that the markets for providing backhaul and terrestrial international private leased circuits have become 'increasingly competitive' and the dominant licensee obligations will no longer apply to SingTel for these segments.
In addition, IDA will continue to exempt SingTel in the area of international managed data services. However, 'ex post regulation' will still apply in these three markets to provide an avenue for legal redress should the operator be accused of abusing its market position.
The regulatory pardon, however, will not be extended to the remaining three Singapore-centric services - local leased circuit (LLC), business local telephony service and local managed data services.
SingTel has the most extensive underground data network in Singapore and also has fixed-line phone connections to almost all residential and office buildings.
'IDA has determined that SingTel continues to possess significant market power in the retail LLC market and, therefore, continued application of dominant licensee regulation to services provided in this market is necessary to protect end users, and to promote and preserve competition,' the regulator said.
'IDA has further concluded that, because effective competition has not yet taken root in the business local telephone service, LLC and local managed data services markets, IDA should not grant at this time any exemption in those markets.'
The regulator is seeking views on its preliminary decision. Industry players have until Sept 23 to respond.
A SingTel spokesman said: 'We do not agree with the IDA assessment and will respond to its preliminary decision. The telecommunications market in Singapore is characterised by domestic, regional and global service providers with extensive local and international capacity investments.'
M1 declined to comment on the issue. But StarHub spokesman Michael Sim said that the company fully supports IDA's decision to deny SingTel's exemption request for telecommunications provided to customers who spend more than $250,000 a year.
'We don't believe this market is yet competitive,' he said, adding that StarHub is reviewing IDA's assessment on SingTel's second request.
Published September 9, 2008
SembMarine unit bags rig job worth US$425m
The 2 rigs, of Pacific Class 375 design, are set for delivery in 2010, 2011
By VINCENT WEE
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SEMBCORP Marine unit PPL Shipyard's proprietary Pacific Class 375 drilling rig continues to attract customers as it yesterday signed a US$425 million contract with Egyptian Offshore Drilling Company (EODC) for two of the jackups for delivery in 2010 and 2011.
Majestic giant: The Pacific Class 375 rig is equipped to drill high pressure and high temperature wells at 30,000 feet whilst operating in 375 feet of water
The first unit is scheduled to be delivered at the end of the fourth quarter of 2010 while the second unit will be delivered by end of the first quarter of 2011. On their respective deliveries, the rigs will be contracted to EODC for their offshore operations in Egypt.
The pair of high performance jack-up rigs will be built based on the Pacific Class 375 design and will be equipped to drill high pressure and high temperature wells at 30,000 feet whilst operating in 375 feet of water. They will have accommodation with full catering and amenities for 120 people.
'We are pleased that EODC has entrusted PPL Shipyard with the construction of its two offshore drilling units for its joint venture company. We envisage that EODC will increase their fleet in the near future in view of the demand for offshore drilling off Egypt. To date, a total of 26 units of Pacific Class 375 has been ordered with 13 units delivered and 13 units currently under various stages of construction with deliveries till 2011,' said PPL senior general manager Tan Kim Yung.
Another major Egyptian national oil company, Egyptian Drilling Company - a joint venture with AP Moller-Maersk - has previously also ordered two of the same Pacific Class 375 rigs. They are scheduled for delivery next year and in 2010.
Gradually declining oil production and the prospect of becoming a net oil importer has boosted exploration activities in the main Gulf of Suez and Nile Delta concessions in the last few years.
The contract is not expected to have any material impact on the net tangible assets and earnings per share of Sembcorp Marine for the year ending Dec 31, 2008. This latest deal brings SembMarine's net order book to $10.2 billion.
SembMarine stock closed 21 cents higher at $3.44 yesterday.
SembMarine unit bags rig job worth US$425m
The 2 rigs, of Pacific Class 375 design, are set for delivery in 2010, 2011
By VINCENT WEE
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SEMBCORP Marine unit PPL Shipyard's proprietary Pacific Class 375 drilling rig continues to attract customers as it yesterday signed a US$425 million contract with Egyptian Offshore Drilling Company (EODC) for two of the jackups for delivery in 2010 and 2011.
Majestic giant: The Pacific Class 375 rig is equipped to drill high pressure and high temperature wells at 30,000 feet whilst operating in 375 feet of water
The first unit is scheduled to be delivered at the end of the fourth quarter of 2010 while the second unit will be delivered by end of the first quarter of 2011. On their respective deliveries, the rigs will be contracted to EODC for their offshore operations in Egypt.
The pair of high performance jack-up rigs will be built based on the Pacific Class 375 design and will be equipped to drill high pressure and high temperature wells at 30,000 feet whilst operating in 375 feet of water. They will have accommodation with full catering and amenities for 120 people.
'We are pleased that EODC has entrusted PPL Shipyard with the construction of its two offshore drilling units for its joint venture company. We envisage that EODC will increase their fleet in the near future in view of the demand for offshore drilling off Egypt. To date, a total of 26 units of Pacific Class 375 has been ordered with 13 units delivered and 13 units currently under various stages of construction with deliveries till 2011,' said PPL senior general manager Tan Kim Yung.
Another major Egyptian national oil company, Egyptian Drilling Company - a joint venture with AP Moller-Maersk - has previously also ordered two of the same Pacific Class 375 rigs. They are scheduled for delivery next year and in 2010.
Gradually declining oil production and the prospect of becoming a net oil importer has boosted exploration activities in the main Gulf of Suez and Nile Delta concessions in the last few years.
The contract is not expected to have any material impact on the net tangible assets and earnings per share of Sembcorp Marine for the year ending Dec 31, 2008. This latest deal brings SembMarine's net order book to $10.2 billion.
SembMarine stock closed 21 cents higher at $3.44 yesterday.
Published September 9, 2008
Why so reticent in forecast for Greater China, DBS?
By SIOW LI SEN
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LAST Friday, DBS met reporters from Hong Kong, Taiwan and Singapore in Taipei as part of the official launch of DBS Taiwan - the latest addition to South-east Asia's largest bank. For about an hour, the reporters grilled chief executive Richard Stanley and chairman Koh Boon Hwee on the expected contribution from DBS Taiwan as well as how the group's Greater China market is doing.
These are, after all, pertinent questions. DBS has invested some NT$4 billion (S$180 million) in DBS Taiwan - not an insignificant amount. DBS disclosed ambitious targets for DBS Taiwan: a doubling of revenues, assets and customer size in three years' time, and to become among the top five foreign banks there. The group bought the former Bowa Bank in February and DBS Taiwan currently ranks No 7 or 8 among the more than 20 foreign banks in Taiwan.
Shareholders would want to know when a return can be expected. After all, to add more customers and revenues is probably the easiest part of the plan. Banking is like a lot of other businesses; cut prices and you get the customer. It's being able to turn a profit after spending big on marketing campaigns, dishing out freebies and zero-interest- rate loans that is the tough part.
But Mr Stanley declined to give any indication of when and how much Taiwan or Greater China would contribute to the group. He refused to be drawn into speculation in any way, not even rough percentages. DBS Taiwan general manager Jerry Chen did say that the bank could be profitable next year but he let on that that would depend on the amount of investment put in.
It was only after one journalist had asked about the 10-year time frame set by former DBS vice-chairman Frank Wong for Greater China to become profitable that Mr Stanley disclosed that China had already become profitable. But again no figures of any kind. Why the reticence? Is the situation so dire that he did not want to be caught out down the road for the wrong outlook?
According to the latest BT-UniSIM quarterly survey of business activity, business sales and profits in Singapore took a big hit in the second quarter amid a sharp economic slowdown, and GDP growth in the third quarter of this year could slow further to 1.4 per cent.
The survey of 138 local and foreign companies found that all the indicators for Q2 were down from a year ago.
In particular, the business prospects net balance - the difference between the proportion of companies that expect better times and that of those expecting worse - plunged 81 points to negative 25 per cent from Q2 last year. This was also lower than the minus 17 per cent seen a quarter ago.
DBS chairman Mr Koh, however, sees opportunities amid the gloom. 'The best time to expand, if I take a contrarian view, is when things appear most difficult,' he said. 'The lending capacity of many international banks is curtailed; the opportunities present themselves to many Asian banks, not just DBS,' he said.
Back in 2003, Jackson Tai, Mr Stanley's predecessor, said something similar. Mr Tai said opportunities abound and 'we're seeing foreign banks abandoning Asia'.
Last Friday, Mr Koh let on that in addition to Taiwan, DBS is expanding its presence in China, India, Indonesia and Vietnam at a time when the global credit squeeze is impacting Asia, with equity and property markets all in retreat.
Mr Stanley even offered that some may wonder if he had stepped into a perfect storm by joining DBS in May at such a challenging time, but he feels that the long-term growth of Asia is on track.
Describing the current financial turmoil as the 'worst crisis I have seen', he said the underlying momentum of Asian economies would help mitigate the spreading global credit woes.
Let's hope it's not the perfect storm. In the movie about the October 1991 storm of the century, the fishing crew of six did not make it.
Why so reticent in forecast for Greater China, DBS?
By SIOW LI SEN
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LAST Friday, DBS met reporters from Hong Kong, Taiwan and Singapore in Taipei as part of the official launch of DBS Taiwan - the latest addition to South-east Asia's largest bank. For about an hour, the reporters grilled chief executive Richard Stanley and chairman Koh Boon Hwee on the expected contribution from DBS Taiwan as well as how the group's Greater China market is doing.
These are, after all, pertinent questions. DBS has invested some NT$4 billion (S$180 million) in DBS Taiwan - not an insignificant amount. DBS disclosed ambitious targets for DBS Taiwan: a doubling of revenues, assets and customer size in three years' time, and to become among the top five foreign banks there. The group bought the former Bowa Bank in February and DBS Taiwan currently ranks No 7 or 8 among the more than 20 foreign banks in Taiwan.
Shareholders would want to know when a return can be expected. After all, to add more customers and revenues is probably the easiest part of the plan. Banking is like a lot of other businesses; cut prices and you get the customer. It's being able to turn a profit after spending big on marketing campaigns, dishing out freebies and zero-interest- rate loans that is the tough part.
But Mr Stanley declined to give any indication of when and how much Taiwan or Greater China would contribute to the group. He refused to be drawn into speculation in any way, not even rough percentages. DBS Taiwan general manager Jerry Chen did say that the bank could be profitable next year but he let on that that would depend on the amount of investment put in.
It was only after one journalist had asked about the 10-year time frame set by former DBS vice-chairman Frank Wong for Greater China to become profitable that Mr Stanley disclosed that China had already become profitable. But again no figures of any kind. Why the reticence? Is the situation so dire that he did not want to be caught out down the road for the wrong outlook?
According to the latest BT-UniSIM quarterly survey of business activity, business sales and profits in Singapore took a big hit in the second quarter amid a sharp economic slowdown, and GDP growth in the third quarter of this year could slow further to 1.4 per cent.
The survey of 138 local and foreign companies found that all the indicators for Q2 were down from a year ago.
In particular, the business prospects net balance - the difference between the proportion of companies that expect better times and that of those expecting worse - plunged 81 points to negative 25 per cent from Q2 last year. This was also lower than the minus 17 per cent seen a quarter ago.
DBS chairman Mr Koh, however, sees opportunities amid the gloom. 'The best time to expand, if I take a contrarian view, is when things appear most difficult,' he said. 'The lending capacity of many international banks is curtailed; the opportunities present themselves to many Asian banks, not just DBS,' he said.
Back in 2003, Jackson Tai, Mr Stanley's predecessor, said something similar. Mr Tai said opportunities abound and 'we're seeing foreign banks abandoning Asia'.
Last Friday, Mr Koh let on that in addition to Taiwan, DBS is expanding its presence in China, India, Indonesia and Vietnam at a time when the global credit squeeze is impacting Asia, with equity and property markets all in retreat.
Mr Stanley even offered that some may wonder if he had stepped into a perfect storm by joining DBS in May at such a challenging time, but he feels that the long-term growth of Asia is on track.
Describing the current financial turmoil as the 'worst crisis I have seen', he said the underlying momentum of Asian economies would help mitigate the spreading global credit woes.
Let's hope it's not the perfect storm. In the movie about the October 1991 storm of the century, the fishing crew of six did not make it.
Published September 9, 2008
M'sian lawmakers head for Taiwan
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(KUALA LUMPUR) Dozens of lawmakers from the ruling coalition left yesterday for Taiwan on an educational tour, in an apparent bid to prevent them from joining an opposition push to topple the government.
Eight-day tour: MPs gathering at the Kuala Lumpur International Airport yesterday. The ruling party denies the trip has anything to do with Sept 16
The opposition led by Anwar Ibrahim, who has vowed to unseat the coalition by Sept 16, said the trip was an attempt to 'corral and seclude' parliamentarians amid the high-stakes negotiations.
Prime Minister Abdullah Ahmad Badawi, whose ruling party leads the Barisan Nasional (National Front) coalition, has vowed to thwart Anwar's plan to secure the 30 lawmakers he needs to form a new administration.
'Some National Front leaders are getting cold feet and more than a touch of panic,' said Lim Kit Siang from the Democratic Action Party, which is part of the three-member opposition alliance.
'All in all, it is a national shame that the MPs should be treated like delinquent children who have to be packed off overseas and secluded from mischief, treating the National Front MPs as no better than chattel,' he added.
But Tiong King Sing, chairman of the government backbenchers' club that organised the hastily arranged tour, defended it as an educational programme.
'It is not a forced trip. We are going to Taiwan to obtain some ideas on how to bolster our agriculture output. It has nothing to do with September 16.
'They can do what they want to do on that date,' he said.
Mr Tiong said 50 MPs were participating in the eight-day tour, and that dozens had left yesterday. The Star newspaper said in an SMS alert that 41 had departed.
There are a total of 140 coalition lawmakers in parliament, and most of the would-be defectors were believed to be from the East Malaysia states of Sabah and Sarawak on Borneo island.
Anwar said he was on track to meet the deadline, though political observers have expressed scepticism he can recruit enough defectors by that date.
The 61-year-old opposition leader said government attempts to compel lawmakers to leave the country would not work.
'We have seen some very positive signs, but we have also seen the desperate acts by the government, threats and using institutions to discourage them,' he said in Jakarta. -- AFP
M'sian lawmakers head for Taiwan
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(KUALA LUMPUR) Dozens of lawmakers from the ruling coalition left yesterday for Taiwan on an educational tour, in an apparent bid to prevent them from joining an opposition push to topple the government.
Eight-day tour: MPs gathering at the Kuala Lumpur International Airport yesterday. The ruling party denies the trip has anything to do with Sept 16
The opposition led by Anwar Ibrahim, who has vowed to unseat the coalition by Sept 16, said the trip was an attempt to 'corral and seclude' parliamentarians amid the high-stakes negotiations.
Prime Minister Abdullah Ahmad Badawi, whose ruling party leads the Barisan Nasional (National Front) coalition, has vowed to thwart Anwar's plan to secure the 30 lawmakers he needs to form a new administration.
'Some National Front leaders are getting cold feet and more than a touch of panic,' said Lim Kit Siang from the Democratic Action Party, which is part of the three-member opposition alliance.
'All in all, it is a national shame that the MPs should be treated like delinquent children who have to be packed off overseas and secluded from mischief, treating the National Front MPs as no better than chattel,' he added.
But Tiong King Sing, chairman of the government backbenchers' club that organised the hastily arranged tour, defended it as an educational programme.
'It is not a forced trip. We are going to Taiwan to obtain some ideas on how to bolster our agriculture output. It has nothing to do with September 16.
'They can do what they want to do on that date,' he said.
Mr Tiong said 50 MPs were participating in the eight-day tour, and that dozens had left yesterday. The Star newspaper said in an SMS alert that 41 had departed.
There are a total of 140 coalition lawmakers in parliament, and most of the would-be defectors were believed to be from the East Malaysia states of Sabah and Sarawak on Borneo island.
Anwar said he was on track to meet the deadline, though political observers have expressed scepticism he can recruit enough defectors by that date.
The 61-year-old opposition leader said government attempts to compel lawmakers to leave the country would not work.
'We have seen some very positive signs, but we have also seen the desperate acts by the government, threats and using institutions to discourage them,' he said in Jakarta. -- AFP
Published September 9, 2008
Technical fault hits KL derivatives trade
Half a day's trading lost; stock, bond markets unaffected
By PAULINE NG IN KUALA LUMPUR
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THE Malaysian stock exchange continues to be plagued by systems issues, its derivatives market losing half a day's trade yesterday after the bourse detected a technical problem in the morning.
The 'connectivity' glitch did not affect the exchange's equity or electronic bond trading systems, and was resolved before the second session, which appears to have proceeded smoothly. But the second bugbear comes a mere two months after a multi-hardware failure in the exchange's core trading system resulted in the loss of a whole day's securities trading, and is certain to lead to further questions on the integrity of its platforms.
'We encountered a system connectivity problem this morning between our derivatives trading engine and all the derivatives brokers' trading front end systems. After resolving the connectivity problem, the exchange then undertook steps to ensure data integrity. Our system is now ready for trading in the afternoon session,' Bursa Malaysia chief executive Yusli Mohamed Yusoff said in a statement before the second session.
Dealers said they suspected a mock trial run conducted over the weekend for the equity trading system might have affected the derivatives system.
'It's hell of a nuisance,' a dealer at a local stockbroking house fumed, pointing out the problem had arisen at the 'wrong' time. Because of the bailout in the US of mortgage lenders Freddie Mac and Fannie Mae over the weekend, regional markets had rallied strongly yesterday.
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'Those short can't cover their positions,' he told BT when contacted in the morning. Trading on the local bourse was dull, however, with the market ending only half a per cent higher.
Only a handful of products are traded on the derivatives market, the most popular being the KLCI futures contracts and crude palm oil (CPO) contracts. A new product, US$ denominated CPO contracts, was launched only a few days back.
Dealers described the volume of trade for the KLCI futures and CPO contracts as 'decent', the latter averaging 7,000 to 10,000 contracts a day, adding the system called Bursa Trade had been functioning fine since November 2006 when it was first used.
Although the equity and derivatives systems are separate, dealers said they are expected to be eventually merged, to allow trades to be executed from the same terminal rather than two separate ones. Mock tests continue to be held for the transfer of the equity market to Bursa Trade, but this next phase has encountered numerous problems and integration issues.
The exchange had previously said it is aiming to resolve this issue by November and to transfer equity trading to the new system.
Its chief information officer Yew Kim Keong had resigned after the July meltdown, which was exacerbated by the failure of the back-up system to kick in.
It is not clear what the precise cause of yesterday's problem is. In April, the NYSE Euronext and Bursa announced the introduction of an advanced direct market access platform for the local derivatives market based on technology provided by NYSE Euronext Advanced Trading Solutions.
Technical fault hits KL derivatives trade
Half a day's trading lost; stock, bond markets unaffected
By PAULINE NG IN KUALA LUMPUR
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THE Malaysian stock exchange continues to be plagued by systems issues, its derivatives market losing half a day's trade yesterday after the bourse detected a technical problem in the morning.
The 'connectivity' glitch did not affect the exchange's equity or electronic bond trading systems, and was resolved before the second session, which appears to have proceeded smoothly. But the second bugbear comes a mere two months after a multi-hardware failure in the exchange's core trading system resulted in the loss of a whole day's securities trading, and is certain to lead to further questions on the integrity of its platforms.
'We encountered a system connectivity problem this morning between our derivatives trading engine and all the derivatives brokers' trading front end systems. After resolving the connectivity problem, the exchange then undertook steps to ensure data integrity. Our system is now ready for trading in the afternoon session,' Bursa Malaysia chief executive Yusli Mohamed Yusoff said in a statement before the second session.
Dealers said they suspected a mock trial run conducted over the weekend for the equity trading system might have affected the derivatives system.
'It's hell of a nuisance,' a dealer at a local stockbroking house fumed, pointing out the problem had arisen at the 'wrong' time. Because of the bailout in the US of mortgage lenders Freddie Mac and Fannie Mae over the weekend, regional markets had rallied strongly yesterday.
0 ? blnMac = true:blnMac = false;
if (blnMac == true) {
document.write('');
}
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src='http://ads.asia1.com.sg/js.ng/Params.richmedia=yes&site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250'>
'Those short can't cover their positions,' he told BT when contacted in the morning. Trading on the local bourse was dull, however, with the market ending only half a per cent higher.
Only a handful of products are traded on the derivatives market, the most popular being the KLCI futures contracts and crude palm oil (CPO) contracts. A new product, US$ denominated CPO contracts, was launched only a few days back.
Dealers described the volume of trade for the KLCI futures and CPO contracts as 'decent', the latter averaging 7,000 to 10,000 contracts a day, adding the system called Bursa Trade had been functioning fine since November 2006 when it was first used.
Although the equity and derivatives systems are separate, dealers said they are expected to be eventually merged, to allow trades to be executed from the same terminal rather than two separate ones. Mock tests continue to be held for the transfer of the equity market to Bursa Trade, but this next phase has encountered numerous problems and integration issues.
The exchange had previously said it is aiming to resolve this issue by November and to transfer equity trading to the new system.
Its chief information officer Yew Kim Keong had resigned after the July meltdown, which was exacerbated by the failure of the back-up system to kick in.
It is not clear what the precise cause of yesterday's problem is. In April, the NYSE Euronext and Bursa announced the introduction of an advanced direct market access platform for the local derivatives market based on technology provided by NYSE Euronext Advanced Trading Solutions.
Published September 9, 2008
PM Abdullah's leadership again in doubt
Order to apologise over 'squatter' outcry rebuffed by Umno division head
By S JAYASANKARAN IN KUALA LUMPUR
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A STUNNING rebuff to Prime Minister Abdullah Ahmad Badawi by politicians from the United Malays National Organisation in his own home state of Penang has once again raised questions about the threat to his leadership.
Mr Ahmad: Refuses to apologise for alleged gaffe, saying he was quoted out of context
As chief of Penang Umno, Mr Abdullah had ordered division head Ahmad Ismail to apologise for sparking an outcry when he gave a speech during the run-up to the Permatang Pauh by-election.
Mr Ahmad was accused of racist sentiments by Chinese politicians from the ruling National Front for allegedly saying that the Chinese were simply 'squatters' in Malaysia.
As the outcry mounted, Deputy Prime Minister Najib Razak sought to defuse the tension by apologising, on Umno's behalf, to the Chinese community.
Last week, Mr Ahmad broke his silence. He said that he had been quoted out of context and refused to apologise. Much to the prime minister's chagrin, however, the rebellious Mr Ahmad was backed by 13 of the 14 Umno division leaders in Penang. Subsequently, the prime minister backed off, saying that there was, indeed, no need for Mr Ahmad to apologise, and urging all quarters to 'cool it'.
The rebuke by Penang Umno warlords to Mr Abdullah, who is also Umno president, has fuelled speculation that the premier may be facing mounting challenges to stay on until June 2010, after which he has promised to hand over power to Mr Najib. But the premier's retreat is understandable: he faces party polls in December and a revolt by his home state will almost surely doom his presidential candidacy.
But the episode also reinforces the notion that Umno, and the Front component parties, continues to bicker over petty race issues instead of getting on with matters of governance.
Writing in his blog over the weekend, former prime minister Mahathir Mohamad analysed it succinctly. Dr Mahathir debunked the popular notion that the March 8 general elections indicated a shifting away from race-based politics.
Instead, it was the result of 'disgust' by National Front supporters for the leadership of Mr Abdullah.
Dr Mahathir made it clear that he did not condone Mr Ahmad's statement. 'But I feel disgust at the inability of the present Malay leadership to manage racialism.
' It is degrading for the second highest government leader to be apologising for every instance of improper behaviour by Umno members. The person who should apologise should be the culprit himself.'
PM Abdullah's leadership again in doubt
Order to apologise over 'squatter' outcry rebuffed by Umno division head
By S JAYASANKARAN IN KUALA LUMPUR
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A STUNNING rebuff to Prime Minister Abdullah Ahmad Badawi by politicians from the United Malays National Organisation in his own home state of Penang has once again raised questions about the threat to his leadership.
Mr Ahmad: Refuses to apologise for alleged gaffe, saying he was quoted out of context
As chief of Penang Umno, Mr Abdullah had ordered division head Ahmad Ismail to apologise for sparking an outcry when he gave a speech during the run-up to the Permatang Pauh by-election.
Mr Ahmad was accused of racist sentiments by Chinese politicians from the ruling National Front for allegedly saying that the Chinese were simply 'squatters' in Malaysia.
As the outcry mounted, Deputy Prime Minister Najib Razak sought to defuse the tension by apologising, on Umno's behalf, to the Chinese community.
Last week, Mr Ahmad broke his silence. He said that he had been quoted out of context and refused to apologise. Much to the prime minister's chagrin, however, the rebellious Mr Ahmad was backed by 13 of the 14 Umno division leaders in Penang. Subsequently, the prime minister backed off, saying that there was, indeed, no need for Mr Ahmad to apologise, and urging all quarters to 'cool it'.
The rebuke by Penang Umno warlords to Mr Abdullah, who is also Umno president, has fuelled speculation that the premier may be facing mounting challenges to stay on until June 2010, after which he has promised to hand over power to Mr Najib. But the premier's retreat is understandable: he faces party polls in December and a revolt by his home state will almost surely doom his presidential candidacy.
But the episode also reinforces the notion that Umno, and the Front component parties, continues to bicker over petty race issues instead of getting on with matters of governance.
Writing in his blog over the weekend, former prime minister Mahathir Mohamad analysed it succinctly. Dr Mahathir debunked the popular notion that the March 8 general elections indicated a shifting away from race-based politics.
Instead, it was the result of 'disgust' by National Front supporters for the leadership of Mr Abdullah.
Dr Mahathir made it clear that he did not condone Mr Ahmad's statement. 'But I feel disgust at the inability of the present Malay leadership to manage racialism.
' It is degrading for the second highest government leader to be apologising for every instance of improper behaviour by Umno members. The person who should apologise should be the culprit himself.'
Monday, 8 September 2008
Published September 8, 2008
Combine high-yield and high-beta stocks
Lehman offers this strategy to investors seeking security but eyeing upturn gains
By EMILYN YAP
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FOR investors who want protection in today's volatile market, but also some exposure to catch a possible upturn, a portfolio combining high-yield and high-beta stocks as Lehman Brothers recommends may be what they need.
Stock gazing: With rising input costs and softening external demand, expectations of earnings growth also remain too optimistic which could lead to more downgrades
The portfolio is part of several market strategies suggested by the research house in a report dated last Friday, prepared by Singapore and South-east Asia equity research head Lim Jit Soon and his team.
Under the theme 'More Downside, Stay Defensive', the report points to more weakness in the local market for the rest of the year amid global economic headwinds and more earnings downgrades.
Lehman regional economist Rob Subbaraman cut his Singapore GDP forecast for 2008 to 3.2 per cent from 4.3 per cent. This latest estimate is lower than the government's forecast of 4-5 per cent.
With rising input costs and softening external demand, expectations of earnings growth also remain too optimistic, says the report. This could lead to more downgrades.
ST Engg, Keppel Corp and Suntec Reit are top picks from the conglomerates and Reits sectors.
'We believe the market will continue to consolidate at lower levels going into 2H08, and perhaps also into early 2009,' the report notes, adding that the Straits Times Index (STI) could reach 2,500 by year-end. The STI closed at 2,574.21 last Friday, more than 20 per cent down from a year ago.
In such an environment, Lehman recommends a portfolio which can 'behave like a convertible bond - protected on the downside with good dividend support, but have upside when market sentiment improves'.
This portfolio comprises eight counters - ST Engineering (ST Engg), Keppel Corp, Suntec Real Estate Investment Trust (Reit), United Overseas Bank (UOB), StarHub, Singapore Press Holdings (SPH), Singapore Exchange (SGX) and CapitaLand.
ST Engg, Keppel Corp and Suntec Reit are top picks from the conglomerates and Reits sectors, both favoured by Lehman for resilient earnings and high dividend yields.
The research house also finds strong defensive plays in UOB, StarHub and SPH, although it is neutral on banks, telcos and media companies as a whole.
'We believe there is value in complementing a high-yield defensive portfolio with higher-beta stocks that have been sold down sharply, but which could recover sharply when sentiment improves,' explains the report. For this purpose, SGX and CapitaLand are added to the portfolio.
Although CapitaLand is part of the suggested portfolio, Lehman recommends avoiding developers in general. The report notes that poor economic conditions and increased supply could undermine capital values and rents across the residential and office sectors.
Lehman also suggests that investors avoid the transport and technology sectors.
Combine high-yield and high-beta stocks
Lehman offers this strategy to investors seeking security but eyeing upturn gains
By EMILYN YAP
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FOR investors who want protection in today's volatile market, but also some exposure to catch a possible upturn, a portfolio combining high-yield and high-beta stocks as Lehman Brothers recommends may be what they need.
Stock gazing: With rising input costs and softening external demand, expectations of earnings growth also remain too optimistic which could lead to more downgrades
The portfolio is part of several market strategies suggested by the research house in a report dated last Friday, prepared by Singapore and South-east Asia equity research head Lim Jit Soon and his team.
Under the theme 'More Downside, Stay Defensive', the report points to more weakness in the local market for the rest of the year amid global economic headwinds and more earnings downgrades.
Lehman regional economist Rob Subbaraman cut his Singapore GDP forecast for 2008 to 3.2 per cent from 4.3 per cent. This latest estimate is lower than the government's forecast of 4-5 per cent.
With rising input costs and softening external demand, expectations of earnings growth also remain too optimistic, says the report. This could lead to more downgrades.
ST Engg, Keppel Corp and Suntec Reit are top picks from the conglomerates and Reits sectors.
'We believe the market will continue to consolidate at lower levels going into 2H08, and perhaps also into early 2009,' the report notes, adding that the Straits Times Index (STI) could reach 2,500 by year-end. The STI closed at 2,574.21 last Friday, more than 20 per cent down from a year ago.
In such an environment, Lehman recommends a portfolio which can 'behave like a convertible bond - protected on the downside with good dividend support, but have upside when market sentiment improves'.
This portfolio comprises eight counters - ST Engineering (ST Engg), Keppel Corp, Suntec Real Estate Investment Trust (Reit), United Overseas Bank (UOB), StarHub, Singapore Press Holdings (SPH), Singapore Exchange (SGX) and CapitaLand.
ST Engg, Keppel Corp and Suntec Reit are top picks from the conglomerates and Reits sectors, both favoured by Lehman for resilient earnings and high dividend yields.
The research house also finds strong defensive plays in UOB, StarHub and SPH, although it is neutral on banks, telcos and media companies as a whole.
'We believe there is value in complementing a high-yield defensive portfolio with higher-beta stocks that have been sold down sharply, but which could recover sharply when sentiment improves,' explains the report. For this purpose, SGX and CapitaLand are added to the portfolio.
Although CapitaLand is part of the suggested portfolio, Lehman recommends avoiding developers in general. The report notes that poor economic conditions and increased supply could undermine capital values and rents across the residential and office sectors.
Lehman also suggests that investors avoid the transport and technology sectors.
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