Published September 27, 2008
Stocks In Focus
Dividend yields don't tell the whole story
The figures could have been bumped up by exceptional dividend payouts in a particular year. By Jamie Lee
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THE downward spiral of share prices has created impressive dividend yield figures for some stocks on paper.
But before one runs to buy them on the assumption that they are 'defensive stocks', look harder into the headline numbers.
Some of the yield figures have been inflated by exceptional dividend payouts last year by many smaller companies. Several small firms had dished out dividends to use up their tax credits, which expired at the end of December last year.
BT compiled and ranked stocks according to their gross dividend yields - which are calculated by dividing the latest full-year dividend per share with the last-done share price.
Among the 10 top stocks based on gross dividend yields, more than half had declared exceptional dividends in 2007 due to tax credits or one-off capital reductions, including Hiap Moh Corporation, Allied Technologies, Nobel Design Holdings, Qian Hu Corporation and Miyoshi Precision.
The tax credits allowed shareholders to claim a refund for the dividend. This is calculated as the difference between an individual's tax rate and the corporate income tax rate, which stands at 18 per cent.
Hiap Moh Corporation and Allied Technologies - which both paid generous dividends last year - showed dividend yields that more than doubled.
Precision stamped metal parts firm Allied Technologies posted an interim gross cash dividend per share of 4.26 cents in 2007 to pass on its tax credits, pushing up its gross dividend yield to 122 per cent. But no dividend was declared by Allied Technologies in 2005 and 2006.
Track record
Interior designing firm Nobel Design Holdings had declared a gross interim dividend of 5.8 cents per share last year.
But based on the compiled list of dividend payouts for the firm, the only other dividend issued by Nobel Design was in 1997.
Paper trader Hiap Moh Corporation came out tops with a hefty 136.2 per cent dividend yield. It had paid a special gross dividend of six cents and a bonus gross dividend of 20.7 cents per share, on top of their final dividend of 0.5 cents for its financial year 2007 ended December.
But in this case, shareholders can take comfort in Hiap Moh's track record in paying dividends. From 2001 to 2007, the firm had paid out at least 1.25 cents in final dividend to shareholders.
The same is true for fish supplier Qian Hu, which had an exceptional payout last year. The company dished out a special interim dividend of 8.54 cents last year, but this followed a first and final dividend of 0.6 cent in 2006 and another first and final dividend of 0.5 cent in 2005.
Still, given the general lack of assurance on dividend payout from such companies, blue chips are a safer bet - albeit more expensive in absolute terms - as most analysts have pointed out.
'Investors should look at bigger companies with a dividend policy, strong earnings over the past few years,' said one analyst from a local bank.
Profits are tied to the dividend payout as the latter is dished out from the company's retained earnings. Firms which are more established typically do not need to reinvest their profits for expansion purposes and hence choose to pay them out to shareholders.
Among the blue chips, Singapore Airlines Engineering ranks top with a gross dividend yield of 8.5 per cent. Though the company said it has no dividend policy, it has been paying out dividends over the last eight years.
It paid out a total gross dividend of 20 cents. This was preceded by a total dividend payout of 12 cents in 2006 and 30 cents - comprising a final dividend of 26 cents and an interim dividend of four cents - in 2005.
Blue chips
Keppel Corporation, which has a gross dividend yield of 7.5 per cent, said that it aims to distribute up to 60 per cent of its full-year Patmi (profit after tax and minority interests) as dividends. Its unit, Keppel Land, has a dividend policy of distributing up to one-third of its net realised profits to shareholders.
Neptune Orient Lines ranks third with a dividend yield of 6.9 per cent. The company said it has a dividend policy to either pay an annual dividend of eight cents per share, or a full-year dividend of 20 per cent of net profits, whichever is higher.
Saturday, 27 September 2008
Published September 27, 2008
Markets flounder as talks on US bailout stall
Conservative Republicans propose alternative to Paulson's US$700b rescue plan
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(New York)
ANOTHER CASUALTY
Washington Mutual was shut down and its assets sold to JPMorgan Chase & Co
PRESSURE mounted on lawmakers yesterday to agree to a US$700 billion financial rescue plan after talks at the White House broke down in acrimony as the biggest bank closure in US history roiled global markets.
President George Bush said that while there were disagreements on parts of the bailout plan, legislation would be passed by Congress. 'We are going to get a package passed,' he said in a brief appearance at the White House.
US authorities on Thursday shut bank Washington Mutual, selling its assets to JPMorgan Chase & Co. Banks worldwide hoarded cash and demonstrated a growing reluctance to lend, driving rates that institutions charge to each other on loans to a record high in London on mounting uncertainty over what would be the largest financial bailout in US history.
Global money markets dried up, forcing increased injections of cash from central banks as US dollar borrowing rates remained high, particularly for three-month money.
'The markets are just caught like a deer in the headlights, watching Washington, trying to figure out what the next step is,' said Boris Schlossberg at GFT Forex in New York.
Fallout from the crisis battered shares of Wachovia Corp, the sixth-biggest US bank, which fell as much as 26 per cent.
'What you're going to see is the strong stronger, and the weak are going to die off,' William Smith, president of Smith Asset Management in New York, said of American banks.
'I'm afraid that the real economy is unravelling very quickly,' said Nigel Gault, chief US economist at Global Insight in Lexington, Massachusetts.
With negotiations in Washington descending into clashes between Republicans and Democrats, US stocks prices fell more than one per cent, shadowing losses in Asia and Europe.
Government bond yields fell as investors sought safe havens.
'The negotiations over the bailout are sapping the enthusiasm that people could have for the market,' said Rick Meckler, president of investment firm LibertyView Capital Management in New York.
Hopes for a speedy deal on the bailout plan, put together by Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke, dimmed when a group of conservative Republican lawmakers proposed an alternative plan on Thursday. The Republican opposition to the plan reflects popular dissatisfaction with Wall Street bailout.
Voter opposition calls to congressional offices are 'running 50 per cent 'no' and 50 per cent 'hell, no',' said Democrat Paul Kanjorski.
Republican Senator Richard Shelby said Mr Paulson's plan must be changed to win his party's approval and that he was willing to delay approval of any bailout plan and let markets open next week without a relief package in place.
The powerful Democratic chairman of the House Financial Services Committee, Barney Frank, described the Republican plan as 'not serious'.
House Speaker Nancy Pelosi won't push through legislation backed by a Republican administration without Republican support, he said.
'If the House Republicans continue to reject the president's approach then there is no bill.' Reuters, Bloomberg
Markets flounder as talks on US bailout stall
Conservative Republicans propose alternative to Paulson's US$700b rescue plan
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(New York)
ANOTHER CASUALTY
Washington Mutual was shut down and its assets sold to JPMorgan Chase & Co
PRESSURE mounted on lawmakers yesterday to agree to a US$700 billion financial rescue plan after talks at the White House broke down in acrimony as the biggest bank closure in US history roiled global markets.
President George Bush said that while there were disagreements on parts of the bailout plan, legislation would be passed by Congress. 'We are going to get a package passed,' he said in a brief appearance at the White House.
US authorities on Thursday shut bank Washington Mutual, selling its assets to JPMorgan Chase & Co. Banks worldwide hoarded cash and demonstrated a growing reluctance to lend, driving rates that institutions charge to each other on loans to a record high in London on mounting uncertainty over what would be the largest financial bailout in US history.
Global money markets dried up, forcing increased injections of cash from central banks as US dollar borrowing rates remained high, particularly for three-month money.
'The markets are just caught like a deer in the headlights, watching Washington, trying to figure out what the next step is,' said Boris Schlossberg at GFT Forex in New York.
Fallout from the crisis battered shares of Wachovia Corp, the sixth-biggest US bank, which fell as much as 26 per cent.
'What you're going to see is the strong stronger, and the weak are going to die off,' William Smith, president of Smith Asset Management in New York, said of American banks.
'I'm afraid that the real economy is unravelling very quickly,' said Nigel Gault, chief US economist at Global Insight in Lexington, Massachusetts.
With negotiations in Washington descending into clashes between Republicans and Democrats, US stocks prices fell more than one per cent, shadowing losses in Asia and Europe.
Government bond yields fell as investors sought safe havens.
'The negotiations over the bailout are sapping the enthusiasm that people could have for the market,' said Rick Meckler, president of investment firm LibertyView Capital Management in New York.
Hopes for a speedy deal on the bailout plan, put together by Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke, dimmed when a group of conservative Republican lawmakers proposed an alternative plan on Thursday. The Republican opposition to the plan reflects popular dissatisfaction with Wall Street bailout.
Voter opposition calls to congressional offices are 'running 50 per cent 'no' and 50 per cent 'hell, no',' said Democrat Paul Kanjorski.
Republican Senator Richard Shelby said Mr Paulson's plan must be changed to win his party's approval and that he was willing to delay approval of any bailout plan and let markets open next week without a relief package in place.
The powerful Democratic chairman of the House Financial Services Committee, Barney Frank, described the Republican plan as 'not serious'.
House Speaker Nancy Pelosi won't push through legislation backed by a Republican administration without Republican support, he said.
'If the House Republicans continue to reject the president's approach then there is no bill.' Reuters, Bloomberg
Published September 27, 2008
SingTel to gain $1b from Internet asset divestment
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BESIDES benefiting as part-owner of Singapore's new broadband network, SingTel could gain an additional $1 billion from divesting non-strategic Internet assets. As part of its winning bid, OpenNet has proposed a leasing arrangement with SingTel to tap the latter's passive Internet infrastructure such as ducts, manholes and exchange buildings.
To handle the leasing arrangement, SingTel will create a wholly owned unit called the AssetCo and transfer assets to this entity. According to SingTel Singapore CEO Allen Lew, the company will gradually divest its shareholding in the AssetCo over the next five years to meet the IDA's mandate for structural separation. The regulator prohibits Internet service providers from owning more than a 30 per cent stake in the infrastructure company tasked to build and own the new broadband highway.
Analysts estimate that SingTel's current Internet infrastructure could be worth $2.8 billion and that it could be looking to sell as much as a 70 per cent stake in the AssetCo to meet the official directive. This could translate to divestment income of more than $1 billion for SingTel in the next five years. SingTel will migrate to a leasing model by renting the infrastructure from the NetCo, Mr Lew said.
SingTel to gain $1b from Internet asset divestment
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BESIDES benefiting as part-owner of Singapore's new broadband network, SingTel could gain an additional $1 billion from divesting non-strategic Internet assets. As part of its winning bid, OpenNet has proposed a leasing arrangement with SingTel to tap the latter's passive Internet infrastructure such as ducts, manholes and exchange buildings.
To handle the leasing arrangement, SingTel will create a wholly owned unit called the AssetCo and transfer assets to this entity. According to SingTel Singapore CEO Allen Lew, the company will gradually divest its shareholding in the AssetCo over the next five years to meet the IDA's mandate for structural separation. The regulator prohibits Internet service providers from owning more than a 30 per cent stake in the infrastructure company tasked to build and own the new broadband highway.
Analysts estimate that SingTel's current Internet infrastructure could be worth $2.8 billion and that it could be looking to sell as much as a 70 per cent stake in the AssetCo to meet the official directive. This could translate to divestment income of more than $1 billion for SingTel in the next five years. SingTel will migrate to a leasing model by renting the infrastructure from the NetCo, Mr Lew said.
Published September 27, 2008
SGX will not penalise naked shorts caused by 'honest mistakes'
By LYNETTE KHOO
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BROKERS and their clients can heave a sigh of relief because honest mistakes will not suffer the hefty fines imposed on failed shares delivery. To soothe anxiety among trading representatives (TRs) here, the Singapore Exchange (SGX) clarified yesterday that it may not penalise naked shorts caused by error trades or other honest mistakes. It will consider appeals from brokers to waive penalties.
The moves followed an outcry among TRs at what they see as a high price for error trades - caused by pressing the wrong key. Failure to deliver shares by the settlement date constitutes a failed trade.
Starting Thursday, SGX imposed a penalty of 5 per cent of the value of a failed trade subject to a minimum of $1,000, on top of the current processing fee of $30 per contract. A broker who fails to deliver the shares in the buying-in market may also be liable to a penalty of $50,000 and/or barred from participating in the buying-in market.
The penalty is to be paid within five business days of notification. But SGX clarified that there are provisions to appeal against penalties. While a decision on an appeal is pending, the dealer does not have to pay a fine. The result of the appeal will be known within 10 business days of the date of notification. 'We will consider factors such as the intent of the investor who opens the sale, profile of the investor and trades, and whether the trade has any potential adverse impact on the integrity of the settlement system,' said SGX head of markets Gan Seow Ann.
The fines will go towards investor education initiatives.
Mr Gan also said that the primary intent of the new rules is not to curb short-selling per se but to deter failed share delivery - which threatens to compromise the settlement system. 'It was never meant to be a response similar to what you see in other environments, where regulators have banned short-selling,' he said, though it was easy to make such an association as the measures came just after regulators imposed short-selling curbs elsewhere. Mr Gan stressed that the measures are largely pre-emptive. 'Despite the market turbulence and all these uncertainties, trading continues to be orderly and there was no pressure on the system as far as settlement is concerned.'
On the Hong Kong bourse, naked short-selling is illegal and subject to jail terms and/or fines. The Hong Kong stock exchange (HKEx) said yesterday it also plans to increase the penalty fee for securities settlement failure.
Mr Gan said on a separate matter that SGX is looking at providing more disclosure on covered short-selling - borrowing scrip to short-sell - and is talking with brokers to work out the information available for disclosure. But SGX hopes to publish a list that is more expansive than the summary report by HKEx on borrowed scrip twice a day, which currently does not capture naked short positions that are covered intraday, he added.
SGX will not penalise naked shorts caused by 'honest mistakes'
By LYNETTE KHOO
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BROKERS and their clients can heave a sigh of relief because honest mistakes will not suffer the hefty fines imposed on failed shares delivery. To soothe anxiety among trading representatives (TRs) here, the Singapore Exchange (SGX) clarified yesterday that it may not penalise naked shorts caused by error trades or other honest mistakes. It will consider appeals from brokers to waive penalties.
The moves followed an outcry among TRs at what they see as a high price for error trades - caused by pressing the wrong key. Failure to deliver shares by the settlement date constitutes a failed trade.
Starting Thursday, SGX imposed a penalty of 5 per cent of the value of a failed trade subject to a minimum of $1,000, on top of the current processing fee of $30 per contract. A broker who fails to deliver the shares in the buying-in market may also be liable to a penalty of $50,000 and/or barred from participating in the buying-in market.
The penalty is to be paid within five business days of notification. But SGX clarified that there are provisions to appeal against penalties. While a decision on an appeal is pending, the dealer does not have to pay a fine. The result of the appeal will be known within 10 business days of the date of notification. 'We will consider factors such as the intent of the investor who opens the sale, profile of the investor and trades, and whether the trade has any potential adverse impact on the integrity of the settlement system,' said SGX head of markets Gan Seow Ann.
The fines will go towards investor education initiatives.
Mr Gan also said that the primary intent of the new rules is not to curb short-selling per se but to deter failed share delivery - which threatens to compromise the settlement system. 'It was never meant to be a response similar to what you see in other environments, where regulators have banned short-selling,' he said, though it was easy to make such an association as the measures came just after regulators imposed short-selling curbs elsewhere. Mr Gan stressed that the measures are largely pre-emptive. 'Despite the market turbulence and all these uncertainties, trading continues to be orderly and there was no pressure on the system as far as settlement is concerned.'
On the Hong Kong bourse, naked short-selling is illegal and subject to jail terms and/or fines. The Hong Kong stock exchange (HKEx) said yesterday it also plans to increase the penalty fee for securities settlement failure.
Mr Gan said on a separate matter that SGX is looking at providing more disclosure on covered short-selling - borrowing scrip to short-sell - and is talking with brokers to work out the information available for disclosure. But SGX hopes to publish a list that is more expansive than the summary report by HKEx on borrowed scrip twice a day, which currently does not capture naked short positions that are covered intraday, he added.
Published September 27, 2008
Money spinner
Formula 1 rakes in more than all EPL clubs combined
By SAMUEL EE
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IF you care to whiz around the high-speed empire that Bernie Ecclestone has built, it shouldn't surprise you to note that its tracks are paved with gold. Big numbers - always whispered but rarely confirmed - are routinely tossed about while discussing Formula One riches. It's only when you heap them atop each other that the true size of the monster emerges.
PEDAL TO THE METAL
One hot machine rounding a corner last night in a practice run opposite the Singapore Cricket Club, with the stunning City Hall in the background
Here's a simple fact to chew on. Last year, according to Formula Money, a publication which monitors the motor-racing industry's key performance data, F1's global revenues touched US$3.9 billion. In comparison, it was reported that the combined revenues for all the English Premier League clubs combined were just US$3 billion.
What's more, these numbers are poised to rise as new circuits such as Singapore come onstream. According to Formula Money, total revenue from all F1 businesses this year will hit a record US$4.7 billion. Of this, the biggest component is the US$1.6 billion spent by the team owners - up from US$1.47 billion in 2007 - thanks to the arrival of the Force India team owned by billionaire Vijay Mallya.
And here's another milestone that has just flown by. For the first time, the amount of F1 race fees collected has exceeded television rights. These so-called sanction fees have to be paid to Formula One Management for the right to stage a race. The UK-based Formula Money says race-hosting fees now bring in more money to F1's commercial rights holder than broadcasting rights.
It says that the two new races this year - Valencia and Singapore - have driven up the total to US$403.5 million, or US$23 million more than the income from TV.
Singapore is said to have paid a sanction fee of about US$35 million to US$40 million, higher than what other countries which joined the franchise earlier coughed up. There are 18 Grand Prixes for the 2008 Formula One season.
So ushering in new circuits while phasing out older ones is profitable by itself. In contrast, revenue from ticketing is said to represent less than 10 per cent of F1's kitty. The 11 teams that are part of the 2008 season are responsible for most of F1's wealth - but they are not doing too poorly themselves.
Toyota is the world's biggest car maker, so it is no surprise to learn that its racing team has the biggest budget in Formula One. According to Formula Money, Toyota Motorsports GmbH can fall back on about US$445 million in resources this season.
This includes everything from sponsorship and supplier deals to prize money and team-owner contributions. In second place is McLaren with US$433 million and Ferrari at US$415 million.
Officially, Toyota and the others refuse to confirm these numbers - for reasons of competition. 'We spend a lot on F1 - as much as Ferrari, McLaren or BMW - but we never speak about the exact value,' says Tadashi Yamashina, chairman and team principal of Panasonic Toyota Racing, the official name of Toyota's F1 unit.
Overall, team sponsorship is estimated to have increased to US$836.9 million, with Ferrari leading this increase by becoming the first team with over US$200 million in sponsorship in a single year.
Sponsorship is the biggest source of revenue for an F1 team. Those logos plastered all over a Formula One car have earned the right to be there.
For example, tobacco company Marlboro reportedly pays US$50 million a year to have its name associated with a pair of scarlet cars from Scuderia Ferrari Marlboro.
Meanwhile, Dutch financial services giant ING shells out US$35 million annually to be the title sponsor of the Renault F1 team.
Add advertising and other costs and ING's tie-up with the French team since last year is at least double that figure, making it the biggest non-tobacco sponsorship deal of its kind in F1 history. The benefits are clear. An ING spokeswoman explains that F1 allows it to showcase the breadth and depth of its global presence as the No. 1 global financial services provider in the world, ranked by Fortune 500 in August 2008. Together with the 'very visible branding opportunities', F1 offers the perfect opportunity to treat ING's VIP guests to a 'seamless brand experience' that mixes business with pleasure.
Hence, the numerous high-profile corporate partnerships in F1. They include Vodafone (with McLaren), Panasonic (Toyota), Petronas (BMW), AT&T (Williams) and Red Bull (Toro Rosso), among others. Only the Honda F1 team does not have the name of a title sponsor anywhere, preferring instead to sport a livery of soothing greenery for its 'Earth Cars'.
Along with other income from merchandising and profit-sharing (teams get a performance-based share of the fees collected by the F1 administration), these sponsorship deals provide the F1 teams with big budgets to spend on their cars, drivers and staff.
Between them, the teams competing this season weigh in at just over US$3 billion in total resources. But when you consider that Formula One is the most-watched motor sport with an estimated 500 million viewers per race, it sounds like a fair price to pay.
Money spinner
Formula 1 rakes in more than all EPL clubs combined
By SAMUEL EE
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IF you care to whiz around the high-speed empire that Bernie Ecclestone has built, it shouldn't surprise you to note that its tracks are paved with gold. Big numbers - always whispered but rarely confirmed - are routinely tossed about while discussing Formula One riches. It's only when you heap them atop each other that the true size of the monster emerges.
PEDAL TO THE METAL
One hot machine rounding a corner last night in a practice run opposite the Singapore Cricket Club, with the stunning City Hall in the background
Here's a simple fact to chew on. Last year, according to Formula Money, a publication which monitors the motor-racing industry's key performance data, F1's global revenues touched US$3.9 billion. In comparison, it was reported that the combined revenues for all the English Premier League clubs combined were just US$3 billion.
What's more, these numbers are poised to rise as new circuits such as Singapore come onstream. According to Formula Money, total revenue from all F1 businesses this year will hit a record US$4.7 billion. Of this, the biggest component is the US$1.6 billion spent by the team owners - up from US$1.47 billion in 2007 - thanks to the arrival of the Force India team owned by billionaire Vijay Mallya.
And here's another milestone that has just flown by. For the first time, the amount of F1 race fees collected has exceeded television rights. These so-called sanction fees have to be paid to Formula One Management for the right to stage a race. The UK-based Formula Money says race-hosting fees now bring in more money to F1's commercial rights holder than broadcasting rights.
It says that the two new races this year - Valencia and Singapore - have driven up the total to US$403.5 million, or US$23 million more than the income from TV.
Singapore is said to have paid a sanction fee of about US$35 million to US$40 million, higher than what other countries which joined the franchise earlier coughed up. There are 18 Grand Prixes for the 2008 Formula One season.
So ushering in new circuits while phasing out older ones is profitable by itself. In contrast, revenue from ticketing is said to represent less than 10 per cent of F1's kitty. The 11 teams that are part of the 2008 season are responsible for most of F1's wealth - but they are not doing too poorly themselves.
Toyota is the world's biggest car maker, so it is no surprise to learn that its racing team has the biggest budget in Formula One. According to Formula Money, Toyota Motorsports GmbH can fall back on about US$445 million in resources this season.
This includes everything from sponsorship and supplier deals to prize money and team-owner contributions. In second place is McLaren with US$433 million and Ferrari at US$415 million.
Officially, Toyota and the others refuse to confirm these numbers - for reasons of competition. 'We spend a lot on F1 - as much as Ferrari, McLaren or BMW - but we never speak about the exact value,' says Tadashi Yamashina, chairman and team principal of Panasonic Toyota Racing, the official name of Toyota's F1 unit.
Overall, team sponsorship is estimated to have increased to US$836.9 million, with Ferrari leading this increase by becoming the first team with over US$200 million in sponsorship in a single year.
Sponsorship is the biggest source of revenue for an F1 team. Those logos plastered all over a Formula One car have earned the right to be there.
For example, tobacco company Marlboro reportedly pays US$50 million a year to have its name associated with a pair of scarlet cars from Scuderia Ferrari Marlboro.
Meanwhile, Dutch financial services giant ING shells out US$35 million annually to be the title sponsor of the Renault F1 team.
Add advertising and other costs and ING's tie-up with the French team since last year is at least double that figure, making it the biggest non-tobacco sponsorship deal of its kind in F1 history. The benefits are clear. An ING spokeswoman explains that F1 allows it to showcase the breadth and depth of its global presence as the No. 1 global financial services provider in the world, ranked by Fortune 500 in August 2008. Together with the 'very visible branding opportunities', F1 offers the perfect opportunity to treat ING's VIP guests to a 'seamless brand experience' that mixes business with pleasure.
Hence, the numerous high-profile corporate partnerships in F1. They include Vodafone (with McLaren), Panasonic (Toyota), Petronas (BMW), AT&T (Williams) and Red Bull (Toro Rosso), among others. Only the Honda F1 team does not have the name of a title sponsor anywhere, preferring instead to sport a livery of soothing greenery for its 'Earth Cars'.
Along with other income from merchandising and profit-sharing (teams get a performance-based share of the fees collected by the F1 administration), these sponsorship deals provide the F1 teams with big budgets to spend on their cars, drivers and staff.
Between them, the teams competing this season weigh in at just over US$3 billion in total resources. But when you consider that Formula One is the most-watched motor sport with an estimated 500 million viewers per race, it sounds like a fair price to pay.
Friday, 26 September 2008
Published September 26, 2008
China's super rich list longer than Japan's
But Japanese still account for 56% of people in Asia-Pac with US$1m assets
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(HONG KONG) China now has more super rich than Japan, mostly entrepreneurs benefiting from the country's surging economic growth, according to an annual survey by Merrill Lynch and Capgemini published yesterday.
Japan is still home to 56 per cent of high net worth individuals in the Asia-Pacific region, or 1.5 million Japanese with US$1 million or more in investible assets excluding their primary residence.
China, however, has more than 6,000 ultra high net worth individuals, with at least US$30 million in investible assets, compared with around 5,300 in Japan.
India and Vietnam are also seeing a fast expanding pool of wealthy residents. Like China, they saw the number of millionaires increase by more than 20 per cent last year, according to this year's Asia-Pacific Wealth Report.
The region's 2.8 million high net worth individuals account for nearly a third of the world's millionaire population.
Weak equity markets this year, aggravated by the widening global financial crisis this month, are depressing investment portfolios, although wealthy investors in the Asia-Pacific in the past 12 months have reduced their exposure to equities and real estate in favour of cash deposits and fixed-income securities.
'Looking forward, high net worth individuals (in the Asia-Pacific) are likely to reduce their investments in their domestic markets and focus more on faster growth markets with higher returns such as Latin America and Eastern Europe,' Stephen Corry, Asia-Pacific investment strategist at Merrill Lynch Global Wealth Management, told a press conference.
Financial markets are likely to remain volatile, however.
Mr Corry said it would take coordinated central bank action to restore confidence in markets, such as an interest rate cut by the European Central Bank although a Eurozone rate cut does not look forthcoming.
However, Asia's still solid economic growth should continue to boost the number of high net worth individuals by 8 per cent this year and for each of the next four years. By 2012 their wealth should reach US$13.9 trillion, up from US$9.5 trillion in 2007, the survey predicted.
Japan's millionaires have mostly inherited wealth, making them far more risk-averse than the rich in emerging economies like China and Vietnam, who tend to be first-generation wealthy and far more willing to take chances with their money, Capgemini said.
Hong Kong's 95,000 millionnaires, led by a clutch of property tycoons, have the highest average net worth in the region at U$5.4 million, compared with a global average of US$4 million. -- Reuters
China's super rich list longer than Japan's
But Japanese still account for 56% of people in Asia-Pac with US$1m assets
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(HONG KONG) China now has more super rich than Japan, mostly entrepreneurs benefiting from the country's surging economic growth, according to an annual survey by Merrill Lynch and Capgemini published yesterday.
Japan is still home to 56 per cent of high net worth individuals in the Asia-Pacific region, or 1.5 million Japanese with US$1 million or more in investible assets excluding their primary residence.
China, however, has more than 6,000 ultra high net worth individuals, with at least US$30 million in investible assets, compared with around 5,300 in Japan.
India and Vietnam are also seeing a fast expanding pool of wealthy residents. Like China, they saw the number of millionaires increase by more than 20 per cent last year, according to this year's Asia-Pacific Wealth Report.
The region's 2.8 million high net worth individuals account for nearly a third of the world's millionaire population.
Weak equity markets this year, aggravated by the widening global financial crisis this month, are depressing investment portfolios, although wealthy investors in the Asia-Pacific in the past 12 months have reduced their exposure to equities and real estate in favour of cash deposits and fixed-income securities.
'Looking forward, high net worth individuals (in the Asia-Pacific) are likely to reduce their investments in their domestic markets and focus more on faster growth markets with higher returns such as Latin America and Eastern Europe,' Stephen Corry, Asia-Pacific investment strategist at Merrill Lynch Global Wealth Management, told a press conference.
Financial markets are likely to remain volatile, however.
Mr Corry said it would take coordinated central bank action to restore confidence in markets, such as an interest rate cut by the European Central Bank although a Eurozone rate cut does not look forthcoming.
However, Asia's still solid economic growth should continue to boost the number of high net worth individuals by 8 per cent this year and for each of the next four years. By 2012 their wealth should reach US$13.9 trillion, up from US$9.5 trillion in 2007, the survey predicted.
Japan's millionaires have mostly inherited wealth, making them far more risk-averse than the rich in emerging economies like China and Vietnam, who tend to be first-generation wealthy and far more willing to take chances with their money, Capgemini said.
Hong Kong's 95,000 millionnaires, led by a clutch of property tycoons, have the highest average net worth in the region at U$5.4 million, compared with a global average of US$4 million. -- Reuters
Published September 26, 2008
Economic growth on track: Najib
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(PUTRAJAYA) Malaysia's economy is 'on track' to meet the government's growth forecast this year even as the US financial turmoil threatens global expansion, Finance Minister Najib Razak said yesterday.
'So far we are still able to achieve 5.7 per cent or 5.5 per cent growth,' Mr Najib, who is also deputy premier, said. He referred to different forecasts by the finance ministry and the central bank.
'We hope there will be no more disastrous news coming from the US affecting the global financial market,' he added.
Malaysia's government said last month that 2008 economic growth may slow to a three-year low of 5.7 per cent as exports ease and higher food and fuel prices leave consumers with less to spend.
The US housing slump that forced Lehman Brothers Holdings into bankruptcy and prompted the sale of Merrill Lynch & Co to Bank of America Corp has hurt exports from Singapore to Japan.
Prime Minister Abdullah Ahmad Badawi on Sept 17 gave Mr Najib the finance portfolio and took over the deputy premier's defence post. -- Bloomberg
Economic growth on track: Najib
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(PUTRAJAYA) Malaysia's economy is 'on track' to meet the government's growth forecast this year even as the US financial turmoil threatens global expansion, Finance Minister Najib Razak said yesterday.
'So far we are still able to achieve 5.7 per cent or 5.5 per cent growth,' Mr Najib, who is also deputy premier, said. He referred to different forecasts by the finance ministry and the central bank.
'We hope there will be no more disastrous news coming from the US affecting the global financial market,' he added.
Malaysia's government said last month that 2008 economic growth may slow to a three-year low of 5.7 per cent as exports ease and higher food and fuel prices leave consumers with less to spend.
The US housing slump that forced Lehman Brothers Holdings into bankruptcy and prompted the sale of Merrill Lynch & Co to Bank of America Corp has hurt exports from Singapore to Japan.
Prime Minister Abdullah Ahmad Badawi on Sept 17 gave Mr Najib the finance portfolio and took over the deputy premier's defence post. -- Bloomberg
Published September 26, 2008
Maybank gets sale extension from Indonesia
It says that it has verbal agreement with no limit to the extension
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(KUALA LUMPUR) Malayan Banking Bhd, Malaysia's biggest bank by assets, said that it received 'verbal' agreement from Indonesia's regulator to extend the timing for its sale of a 20 per cent stake in PT Bank Internasional Indonesia every year.
Indonesia has said that it would extend the deadline should Maybank stand to lose more than 10 per cent of its US$2.7 billion purchase of Bank Internasional, scheduled to close today. The rule imposed this year requires buyers of local companies to sell 20 per cent of the target to the market within two years.
'There's no limit to an extension,' Maybank chief executive officer Abdul Wahid Omar said after a meeting with shareholders in Kuala Lumpur yesterday. 'It will be done annually.'
The extension is crucial to the transaction, which earlier faced opposition from the Malaysian central bank on concern that Maybank would lose RM3.4 billion ringgit (S$1.4 billion) under the new rule. Investors are also concerned as Maybank's purchase price values the Indonesian bank at twice the value of its local peers.
Malaysia's central bank lifted its opposition after the Indonesian regulator offered the extension. Singapore investment company Temasek Holdings Pte, which is selling the Indonesian bank stake, said on Wednesday that Maybank informed it that the deal is scheduled to close on Sept 26, the deadline set when the agreement was signed six months ago.
'There have been various twists and turns to the transaction,' Mr Abdul Wahid said. 'Baring unforeseen circumstances, as per the agreement, we have until tomorrow to complete to the transaction. It's just another day, I suppose you will find out tomorrow. I don't want to say something and then have to reverse it.'
Maybank has raised six billion ringgit for the acquisition, including funds in Singapore dollars that are available for the payment today, he added.
Bank Internasional's shares rose 4.4 per cent to 470 rupiah in Jakarta yesterday, while Maybank was unchanged at RM6.90 in Kuala Lumpur. -- Bloomberg
Maybank gets sale extension from Indonesia
It says that it has verbal agreement with no limit to the extension
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(KUALA LUMPUR) Malayan Banking Bhd, Malaysia's biggest bank by assets, said that it received 'verbal' agreement from Indonesia's regulator to extend the timing for its sale of a 20 per cent stake in PT Bank Internasional Indonesia every year.
Indonesia has said that it would extend the deadline should Maybank stand to lose more than 10 per cent of its US$2.7 billion purchase of Bank Internasional, scheduled to close today. The rule imposed this year requires buyers of local companies to sell 20 per cent of the target to the market within two years.
'There's no limit to an extension,' Maybank chief executive officer Abdul Wahid Omar said after a meeting with shareholders in Kuala Lumpur yesterday. 'It will be done annually.'
The extension is crucial to the transaction, which earlier faced opposition from the Malaysian central bank on concern that Maybank would lose RM3.4 billion ringgit (S$1.4 billion) under the new rule. Investors are also concerned as Maybank's purchase price values the Indonesian bank at twice the value of its local peers.
Malaysia's central bank lifted its opposition after the Indonesian regulator offered the extension. Singapore investment company Temasek Holdings Pte, which is selling the Indonesian bank stake, said on Wednesday that Maybank informed it that the deal is scheduled to close on Sept 26, the deadline set when the agreement was signed six months ago.
'There have been various twists and turns to the transaction,' Mr Abdul Wahid said. 'Baring unforeseen circumstances, as per the agreement, we have until tomorrow to complete to the transaction. It's just another day, I suppose you will find out tomorrow. I don't want to say something and then have to reverse it.'
Maybank has raised six billion ringgit for the acquisition, including funds in Singapore dollars that are available for the payment today, he added.
Bank Internasional's shares rose 4.4 per cent to 470 rupiah in Jakarta yesterday, while Maybank was unchanged at RM6.90 in Kuala Lumpur. -- Bloomberg
Published September 26, 2008
Is the selling now 'genuine'?
Market weak throughout the day despite attempts at penalising short-sellers
By R SIVANITHY SENIOR CORRESPONDENT
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NOW that all the shorts have been forced to cover their positions and that short-selling is outlawed in the US, Europe and many Asian countries, does this mean that the current selling is 'genuine' in the sense that the sellers really don't want to own stocks, are looking to exit and are not the dreaded short-sellers?
If so, are the portents worse for the market than they were a week ago when there was no pressure to curb short-selling?
You'd have to agree - despite imposing its ill-conceived ban on all forms short-selling, both naked and covered, Wall Street has not been able to add to its post-Treasury bailout announcement gains, and instead has embarked on a gradual backslide that is spreading to this part of the world.
Yesterday's session was a case in point, marked by weakness throughout the day - this, despite the Singapore Exchange's (SGX) attempts at penalising short-sellers.
The Straits Times Index was soft from the opening bell and, although it showed sporadic bouts of strength - probably intraday short-covering in line with Hong Kong - the index finished 33.36 points weaker at 2,444.24.
Observers said that there were now fresh jitters over whether the US$700 billion bailout plan of the US Treasury and the Federal Reserve would be passed by Congress, at least judging by the ongoing opposition so far.
In addition, now that no fresh good news has emerged from the US in the past few days and short-sellers are probably all done covering themselves, brokers said the concern here is that the market might have to deal with fund redemptions.
Brokers also continued to complain about the SGX's recent imposition of a minimum fine of $1,000 for 'failed trades' or naked short positions detected at the end of each day - the complaint being it penalises inadvertent and ultimately innocent retail players. According to some, this has robbed the market of some liquidity because of the fear of making a mistake. Excluding foreign currency issues, turnover yesterday came to 876 million units worth $864 million, compared to $1.08 billion on Wednesday.
On the state of the US market, BCA Research said that some value investors were nibbling at stocks, and equity buyback announcements were accelerating, underscoring that the market was reasonably priced if the economy does not sink into a black hole.
'This remains a big if, given the lack of trust in the banking system and relentless erosion in housing prices. . . However, housing prices are likely to continue to be eroded for several more quarters, and the shock to consumers from the worst post-WWII housing slump will have a negative impact on sentiment and spending for some time to come. Moreover, the (Treasury bailout) plan will do little to reverse the increase in unemployment,' said BCA.
Although most brokers' reports issued yesterday were 'sells', perhaps the most interesting was a 'sell' recommendation on SGX with a $4.70 target by Citi Investment Research, which also said that the STI could fall to 1,800.
'Citi has cut Singapore GDP forecasts, now signalling a mild recession, with possible risk to the downside. History suggests that the STI can fall more than 50 per cent from the peak for prolonged downturns. So if the recession deepens, we can make a case for the STI to retrace to 1,800 (STI peak was 3,830) by mid-2009, which on a bottom-up basis is 1.1 times trailing price/book and suggests that consensus earnings may fall 30 per cent from the peak.'
Is the selling now 'genuine'?
Market weak throughout the day despite attempts at penalising short-sellers
By R SIVANITHY SENIOR CORRESPONDENT
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NOW that all the shorts have been forced to cover their positions and that short-selling is outlawed in the US, Europe and many Asian countries, does this mean that the current selling is 'genuine' in the sense that the sellers really don't want to own stocks, are looking to exit and are not the dreaded short-sellers?
If so, are the portents worse for the market than they were a week ago when there was no pressure to curb short-selling?
You'd have to agree - despite imposing its ill-conceived ban on all forms short-selling, both naked and covered, Wall Street has not been able to add to its post-Treasury bailout announcement gains, and instead has embarked on a gradual backslide that is spreading to this part of the world.
Yesterday's session was a case in point, marked by weakness throughout the day - this, despite the Singapore Exchange's (SGX) attempts at penalising short-sellers.
The Straits Times Index was soft from the opening bell and, although it showed sporadic bouts of strength - probably intraday short-covering in line with Hong Kong - the index finished 33.36 points weaker at 2,444.24.
Observers said that there were now fresh jitters over whether the US$700 billion bailout plan of the US Treasury and the Federal Reserve would be passed by Congress, at least judging by the ongoing opposition so far.
In addition, now that no fresh good news has emerged from the US in the past few days and short-sellers are probably all done covering themselves, brokers said the concern here is that the market might have to deal with fund redemptions.
Brokers also continued to complain about the SGX's recent imposition of a minimum fine of $1,000 for 'failed trades' or naked short positions detected at the end of each day - the complaint being it penalises inadvertent and ultimately innocent retail players. According to some, this has robbed the market of some liquidity because of the fear of making a mistake. Excluding foreign currency issues, turnover yesterday came to 876 million units worth $864 million, compared to $1.08 billion on Wednesday.
On the state of the US market, BCA Research said that some value investors were nibbling at stocks, and equity buyback announcements were accelerating, underscoring that the market was reasonably priced if the economy does not sink into a black hole.
'This remains a big if, given the lack of trust in the banking system and relentless erosion in housing prices. . . However, housing prices are likely to continue to be eroded for several more quarters, and the shock to consumers from the worst post-WWII housing slump will have a negative impact on sentiment and spending for some time to come. Moreover, the (Treasury bailout) plan will do little to reverse the increase in unemployment,' said BCA.
Although most brokers' reports issued yesterday were 'sells', perhaps the most interesting was a 'sell' recommendation on SGX with a $4.70 target by Citi Investment Research, which also said that the STI could fall to 1,800.
'Citi has cut Singapore GDP forecasts, now signalling a mild recession, with possible risk to the downside. History suggests that the STI can fall more than 50 per cent from the peak for prolonged downturns. So if the recession deepens, we can make a case for the STI to retrace to 1,800 (STI peak was 3,830) by mid-2009, which on a bottom-up basis is 1.1 times trailing price/book and suggests that consensus earnings may fall 30 per cent from the peak.'
Published September 26, 2008
Is real estate a real break for Thakral?
By EMILYN YAP
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MOST observers would agree that this is hardly the best time to be in the property business. With economic growth slowing, stock markets see-sawing, credit tightening and construction costs rising, even the big boys in the industry are bracing for tougher times ahead.
But against the tide of challenges, Thakral Corporation could be divesting its core consumer electronics distribution business to reposition itself in real estate.
Is this a good move and should shareholders support it?
This move will not be put to a vote when Thakral's extraordinary general meeting takes place on Oct 15. That EGM will, instead, consider the removal of Thakral's chairman, Kartar Singh Thakral, as a director. Nonetheless, shareholders should use the occasion to question management on the repositioning plans.
On the surface, Thakral looks all set for this directional change. Hong Leong Group, with a 34.42 per cent major stake, has a strong stable of property and hospitality units. Thakral could capitalise on its strengths to grow in the real estate sector.
In fact, Thakral said in its repositioning statement in May that it would 'tap into the significant expertise and deal flow of its key shareholders, who have extensive expertise in real estate and infrastructure'.
But sources tell BT that Hong Leong did not drive the move and actually prefers to strengthen Thakral in its existing business. This implies two things.
One, consumer electronics distribution may still offer earnings potential. Two, Thakral shareholders who have been counting on Hong Leong's support should now reassess the shift.
Thakral may still have a chance at excelling in real estate if it has the backing of another strong industry player. Going down its list of key shareholders, the next candidate appears to be Babcock & Brown, with an 8.93 per cent stake as at March. Part of Babcock's business involves buying property assets and bundling them into funds to earn management fees.
Unfortunately, the Australia-based Babcock seems to have its hands full with other issues. As the sub-prime crisis grew, concerns about its ability to raise funds and pay debt battered its share price to as low as A$0.76 (S$0.91) this month from more than A$26 a year ago. The company also underwent a series of board and management changes as part of a strategic review.
Shareholders would have some cause for concern if Thakral intends to rely on Babcock for support in the property business.
Asked about Babcock's stand on Thakral's repositioning, an executive at Babcock's Singapore office only said that the firm would back plans which are in its interest as a shareholder.
Some investors may welcome news of the business shift given that Thakral's performance in consumer electronics distribution has been weak.
Nevertheless, it is risky to support a complete move into real estate before Thakral reveals more details. In fact, one speculation in the market is that internal divergence on this could be why Hong Leong called for the EGM to remove Thakral's chairman.
Shareholders need more information from Thakral before they can decide if repositioning is the right move. They will have a chance to approach management for answers at the upcoming EGM, and they should seize it.
Is real estate a real break for Thakral?
By EMILYN YAP
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MOST observers would agree that this is hardly the best time to be in the property business. With economic growth slowing, stock markets see-sawing, credit tightening and construction costs rising, even the big boys in the industry are bracing for tougher times ahead.
But against the tide of challenges, Thakral Corporation could be divesting its core consumer electronics distribution business to reposition itself in real estate.
Is this a good move and should shareholders support it?
This move will not be put to a vote when Thakral's extraordinary general meeting takes place on Oct 15. That EGM will, instead, consider the removal of Thakral's chairman, Kartar Singh Thakral, as a director. Nonetheless, shareholders should use the occasion to question management on the repositioning plans.
On the surface, Thakral looks all set for this directional change. Hong Leong Group, with a 34.42 per cent major stake, has a strong stable of property and hospitality units. Thakral could capitalise on its strengths to grow in the real estate sector.
In fact, Thakral said in its repositioning statement in May that it would 'tap into the significant expertise and deal flow of its key shareholders, who have extensive expertise in real estate and infrastructure'.
But sources tell BT that Hong Leong did not drive the move and actually prefers to strengthen Thakral in its existing business. This implies two things.
One, consumer electronics distribution may still offer earnings potential. Two, Thakral shareholders who have been counting on Hong Leong's support should now reassess the shift.
Thakral may still have a chance at excelling in real estate if it has the backing of another strong industry player. Going down its list of key shareholders, the next candidate appears to be Babcock & Brown, with an 8.93 per cent stake as at March. Part of Babcock's business involves buying property assets and bundling them into funds to earn management fees.
Unfortunately, the Australia-based Babcock seems to have its hands full with other issues. As the sub-prime crisis grew, concerns about its ability to raise funds and pay debt battered its share price to as low as A$0.76 (S$0.91) this month from more than A$26 a year ago. The company also underwent a series of board and management changes as part of a strategic review.
Shareholders would have some cause for concern if Thakral intends to rely on Babcock for support in the property business.
Asked about Babcock's stand on Thakral's repositioning, an executive at Babcock's Singapore office only said that the firm would back plans which are in its interest as a shareholder.
Some investors may welcome news of the business shift given that Thakral's performance in consumer electronics distribution has been weak.
Nevertheless, it is risky to support a complete move into real estate before Thakral reveals more details. In fact, one speculation in the market is that internal divergence on this could be why Hong Leong called for the EGM to remove Thakral's chairman.
Shareholders need more information from Thakral before they can decide if repositioning is the right move. They will have a chance to approach management for answers at the upcoming EGM, and they should seize it.
Published September 26, 2008
Umno panel tries to strike a compromise
Deal suggests postponing party polls to give PM face-saving exit
By S JAYASANKARAN
IN KUALA LUMPUR
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SPECULATION is mounting that a proposed deal hammered out by the management committee of the dominant United Malays National Organisation (Umno) on Wednesday night could see the party polls postponed to June next year - with Prime Minister Abdullah Ahmad Badawi not taking part in them.
The compromise deal is expected to be offered to an emergency meeting of Umno's Supreme Council some time today. The Council has the power to defer the election - currently slated to be held in December - for another six months. Should it ratify the deal, its decision will be binding on all party members.
Whether it will be accepted by the members of the Supreme Council is another matter. When Mr Abdullah first tried it after the March 8 general election, the Council only met him half-way, agreeing to defer it to December instead of his original proposal for June next year.
Umno officials also said that feelings at the grassroots level were 'running high' against Mr Abdullah with many divisions, apparently, determined not to nominate him as party president, preferring, instead, his deputy Najib Razak. Indeed, even Mr Najib had previously said that Umno's leadership had to be decided by the divisions and not in a top-down manner which would seem to be the approach taken by the compromise route.
It is not even clear if Mr Abdullah's die-hard supporters will agree to such a proposal because it could be conditional on the premier stating well before the fact that he will not seek re-election. This would pave the way for Mr Najib to become Malaysia's sixth prime minister but such an admission would effectively make Mr Abdullah a lame duck.
It could also potentially kill off the political ambitions of Khairy Jamaluddin, Mr Abdullah's son-in-law who has openly announced his intention to go for the post of Umno Youth chief against Mukhriz Mahathir, the son of former premier Mahathir Mohamad. Mr Khairy is currently the deputy head of Umno Youth.
The most vitriolic opponents of the compromise plan are Dr Mahathir and Tengku Razaleigh Hamzah, a former finance minister who wants to challenge Mr Abdullah for Umno's presidency. Both men have repeatedly accused Mr Abdullah and Mr Najib of equating the party's interests to their own and treating Umno as their own personal fiefdom.
But Dr Mahathir is no longer an Umno member, having quit in a huff three months ago over Mr Abdullah's leadership.
And, if ratified by the Supreme Council, the compromise deal could wreck Mr Razaleigh's hopes for a shot at the top because it would almost certainly cement Mr Najib's chances.
Umno panel tries to strike a compromise
Deal suggests postponing party polls to give PM face-saving exit
By S JAYASANKARAN
IN KUALA LUMPUR
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SPECULATION is mounting that a proposed deal hammered out by the management committee of the dominant United Malays National Organisation (Umno) on Wednesday night could see the party polls postponed to June next year - with Prime Minister Abdullah Ahmad Badawi not taking part in them.
The compromise deal is expected to be offered to an emergency meeting of Umno's Supreme Council some time today. The Council has the power to defer the election - currently slated to be held in December - for another six months. Should it ratify the deal, its decision will be binding on all party members.
Whether it will be accepted by the members of the Supreme Council is another matter. When Mr Abdullah first tried it after the March 8 general election, the Council only met him half-way, agreeing to defer it to December instead of his original proposal for June next year.
Umno officials also said that feelings at the grassroots level were 'running high' against Mr Abdullah with many divisions, apparently, determined not to nominate him as party president, preferring, instead, his deputy Najib Razak. Indeed, even Mr Najib had previously said that Umno's leadership had to be decided by the divisions and not in a top-down manner which would seem to be the approach taken by the compromise route.
It is not even clear if Mr Abdullah's die-hard supporters will agree to such a proposal because it could be conditional on the premier stating well before the fact that he will not seek re-election. This would pave the way for Mr Najib to become Malaysia's sixth prime minister but such an admission would effectively make Mr Abdullah a lame duck.
It could also potentially kill off the political ambitions of Khairy Jamaluddin, Mr Abdullah's son-in-law who has openly announced his intention to go for the post of Umno Youth chief against Mukhriz Mahathir, the son of former premier Mahathir Mohamad. Mr Khairy is currently the deputy head of Umno Youth.
The most vitriolic opponents of the compromise plan are Dr Mahathir and Tengku Razaleigh Hamzah, a former finance minister who wants to challenge Mr Abdullah for Umno's presidency. Both men have repeatedly accused Mr Abdullah and Mr Najib of equating the party's interests to their own and treating Umno as their own personal fiefdom.
But Dr Mahathir is no longer an Umno member, having quit in a huff three months ago over Mr Abdullah's leadership.
And, if ratified by the Supreme Council, the compromise deal could wreck Mr Razaleigh's hopes for a shot at the top because it would almost certainly cement Mr Najib's chances.
Published September 26, 2008
TP bets on coal power
Genco opts for clean coal plant and biomass cogen on Jurong Island
By RONNIE LIM
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(SINGAPORE) Competition among the newly-divested generation companies (gencos) here is hotting up. China Huaneng-owned Tuas Power (TP) said yesterday it will build a $2 billion clean coal/biomass cogeneration plant on Jurong Island - the first here to use such fuels - to supply steam and electricity to petrochemical customers.
And next week, Japanese/French-owned Lion Power, which acquired Senoko Power this month, is scheduled to announce expansion plans.
TP president and CEO Lim Kong Puay told BT the plan to go into coal-firing was conceived around 2006 - long before TP's sale in March this year to China's largest coal-fuelled power producer.
'They are of course very supportive,' he said of the plan, which will give TP a feedstock alternative to natural gas and oil, prices of which have soared.
Construction of the stand-alone clean coal (80 per cent)/biomass (20 per cent) project, in the Tembusu sector of Jurong Island, will start next year.
When operational in 2011, the project, which will include a 20 million gallons per day desalination plant and waste-water treatment facility - will produce mainly steam, at about 900 tonnes per hour.
It will also produce 180 megawatts of electricity, half of which will be for its own consumption and the rest to be sold through the islandwide electricity grid. This will add marginally to TP's current 2,670 MW electricity capacity.
Regulator the Energy Market Authority (EMA) said yesterday it is allowing TP to import a small quantity of coal for the cogen project because gas that TP needs may not be available in 2011 when chemical plants it will supply utilities to start up.
'We will not allow any entry of coal to adversely affect and jeopardise the viability of the LNG project,' EMA said, adding that it is banning the use of coal solely for power generation or on a large scale, to avoid this affecting Singapore's planned imports of liquefied natural gas, starting in 2012.
TP said it will transport the coal in covered barges to the Tembusu cogen plant, where it will be unloaded through fully-enclosed conveyors and stored in covered silos. The 'top' ash generated will be reused, while 'bottom' ash will be recycled into value-added products such as construction materials.
The carbon-neutral biomass will reduce the plant's CO2 emissions to a level comparable with those of oil-fired plants.
The plant will enjoy 70 per cent operational efficiency versus the 50 per cent efficiency level of today's combined-cycle gas turbine plants, TP's Mr Lim said.
'This means the plant will use less resources to produce the same unit of electricity, and therefore there will be less carbon emission.'
While the plant will cost roughly 20 per cent more to build than a conventional plant, it will result in 10 per cent cheaper products, so customers can expect more competitively-priced utilities, Mr Lim said.
TP's cogen investment follows a recently announced $1 billion-plus contract to supply utilities to bio-diesel maker Neste Oil, although this will come from TP's existing Tuas plant, which it will boost with $100 million of modifications. Mr Lim said TP is negotiating more utilities deals with other investors on the island.
TP bets on coal power
Genco opts for clean coal plant and biomass cogen on Jurong Island
By RONNIE LIM
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(SINGAPORE) Competition among the newly-divested generation companies (gencos) here is hotting up. China Huaneng-owned Tuas Power (TP) said yesterday it will build a $2 billion clean coal/biomass cogeneration plant on Jurong Island - the first here to use such fuels - to supply steam and electricity to petrochemical customers.
And next week, Japanese/French-owned Lion Power, which acquired Senoko Power this month, is scheduled to announce expansion plans.
TP president and CEO Lim Kong Puay told BT the plan to go into coal-firing was conceived around 2006 - long before TP's sale in March this year to China's largest coal-fuelled power producer.
'They are of course very supportive,' he said of the plan, which will give TP a feedstock alternative to natural gas and oil, prices of which have soared.
Construction of the stand-alone clean coal (80 per cent)/biomass (20 per cent) project, in the Tembusu sector of Jurong Island, will start next year.
When operational in 2011, the project, which will include a 20 million gallons per day desalination plant and waste-water treatment facility - will produce mainly steam, at about 900 tonnes per hour.
It will also produce 180 megawatts of electricity, half of which will be for its own consumption and the rest to be sold through the islandwide electricity grid. This will add marginally to TP's current 2,670 MW electricity capacity.
Regulator the Energy Market Authority (EMA) said yesterday it is allowing TP to import a small quantity of coal for the cogen project because gas that TP needs may not be available in 2011 when chemical plants it will supply utilities to start up.
'We will not allow any entry of coal to adversely affect and jeopardise the viability of the LNG project,' EMA said, adding that it is banning the use of coal solely for power generation or on a large scale, to avoid this affecting Singapore's planned imports of liquefied natural gas, starting in 2012.
TP said it will transport the coal in covered barges to the Tembusu cogen plant, where it will be unloaded through fully-enclosed conveyors and stored in covered silos. The 'top' ash generated will be reused, while 'bottom' ash will be recycled into value-added products such as construction materials.
The carbon-neutral biomass will reduce the plant's CO2 emissions to a level comparable with those of oil-fired plants.
The plant will enjoy 70 per cent operational efficiency versus the 50 per cent efficiency level of today's combined-cycle gas turbine plants, TP's Mr Lim said.
'This means the plant will use less resources to produce the same unit of electricity, and therefore there will be less carbon emission.'
While the plant will cost roughly 20 per cent more to build than a conventional plant, it will result in 10 per cent cheaper products, so customers can expect more competitively-priced utilities, Mr Lim said.
TP's cogen investment follows a recently announced $1 billion-plus contract to supply utilities to bio-diesel maker Neste Oil, although this will come from TP's existing Tuas plant, which it will boost with $100 million of modifications. Mr Lim said TP is negotiating more utilities deals with other investors on the island.
Published September 26, 2008
Li Ka-shing snaps up Bank of East Asia shares, halts share slide
But BEA customers continue to withdraw deposits
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(HONG KONG) Shares in Bank of East Asia rebounded yesterday after its chairman and billionaire Li Ka-shing bought up stock, while hundreds of nervous customers continued to withdraw their savings despite the lender denying rumours of its financial instability.
Rumours spread on Wednesday via text messages and word of mouth that Hong Kong's No 5 lender had run into liquidity problems, prompting thousands of customers to camp overnight outside outlets and sending its stock down as much as 11 per cent, before closing down 7 per cent. Yesterday, the stock finished up 3.4 per cent at HK$26.
Chairman David Li said that both he and the tycoon who controls Cheung Kong and Hutchison Whampoa had bought Bank of East Asia shares on Wednesday in a signal of their support.
'He is very nice. He called me and said he did not understand why people do that,' chairman David Li said.
'He said he was very confident of Bank of East Asia and he bought shares,' Mr Li told reporters on television.
Analysts said that they were confident about the bank's liquidity and financial health after talking to Bank of East Asia's chief financial officer in a conference call on Wednesday night.
'In the very worst case, China can be ready to provide any support to our banking system, and Bank of East Asia is in fact too small to fall,' said Jasmine Lai, an analyst at DBS Vickers Securities.
Despite the reassurances, hundreds of people continued to queue outside Bank of East Asia branches yesterday morning, and some slept overnight outside outlets, hoping to be the first ones in.
'I don't have confidence any more as I happen to be a victim of Lehman Brothers and suffered losses on their products,' said a woman surnamed Leung who was among a crowd waiting outside one branch, adding that she had lost HK$200,000 (S$36,540) in Lehman bonds.
Others were more sanguine. 'I wouldn't say I'm very worried, but I want to avoid any risk,' said Henry Wong, a 50-year-old accountant who queued for 10 hours the day before and another two hours yesterday morning to retrieve all his money from the bank.
Only about HK$2 billion in deposits was withdrawn on Wednesday, representing 0.7 per cent of the bank's HK$300 billion deposit base, DBS Vickers estimated.
The Hong Kong Monetary Authority said that it will provide full liquidity support to Bank of East Asia, if necessary.
The de facto central bank injected HK$3.883 billion into the territory's interbank market yesterday, the second injection in less than two weeks, to soothe credit tightness amid the global financial crisis and the deposit outflow of Bank of East Asia. -- Reuters
Li Ka-shing snaps up Bank of East Asia shares, halts share slide
But BEA customers continue to withdraw deposits
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(HONG KONG) Shares in Bank of East Asia rebounded yesterday after its chairman and billionaire Li Ka-shing bought up stock, while hundreds of nervous customers continued to withdraw their savings despite the lender denying rumours of its financial instability.
Rumours spread on Wednesday via text messages and word of mouth that Hong Kong's No 5 lender had run into liquidity problems, prompting thousands of customers to camp overnight outside outlets and sending its stock down as much as 11 per cent, before closing down 7 per cent. Yesterday, the stock finished up 3.4 per cent at HK$26.
Chairman David Li said that both he and the tycoon who controls Cheung Kong and Hutchison Whampoa had bought Bank of East Asia shares on Wednesday in a signal of their support.
'He is very nice. He called me and said he did not understand why people do that,' chairman David Li said.
'He said he was very confident of Bank of East Asia and he bought shares,' Mr Li told reporters on television.
Analysts said that they were confident about the bank's liquidity and financial health after talking to Bank of East Asia's chief financial officer in a conference call on Wednesday night.
'In the very worst case, China can be ready to provide any support to our banking system, and Bank of East Asia is in fact too small to fall,' said Jasmine Lai, an analyst at DBS Vickers Securities.
Despite the reassurances, hundreds of people continued to queue outside Bank of East Asia branches yesterday morning, and some slept overnight outside outlets, hoping to be the first ones in.
'I don't have confidence any more as I happen to be a victim of Lehman Brothers and suffered losses on their products,' said a woman surnamed Leung who was among a crowd waiting outside one branch, adding that she had lost HK$200,000 (S$36,540) in Lehman bonds.
Others were more sanguine. 'I wouldn't say I'm very worried, but I want to avoid any risk,' said Henry Wong, a 50-year-old accountant who queued for 10 hours the day before and another two hours yesterday morning to retrieve all his money from the bank.
Only about HK$2 billion in deposits was withdrawn on Wednesday, representing 0.7 per cent of the bank's HK$300 billion deposit base, DBS Vickers estimated.
The Hong Kong Monetary Authority said that it will provide full liquidity support to Bank of East Asia, if necessary.
The de facto central bank injected HK$3.883 billion into the territory's interbank market yesterday, the second injection in less than two weeks, to soothe credit tightness amid the global financial crisis and the deposit outflow of Bank of East Asia. -- Reuters
Published September 26, 2008
US rivals join forces to seal rescue deal
Bush, Obama, McCain put politics aside to ensure bailout goes through; key proposals watered down
By ANDREW MARKS
NEW YORK CORRESPONDENT
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THE present and future presidents of the United States are coming together to clear the way for the proposed US$700 billion bailout of major banking institutions that would avert the threat of a global meltdown of the financial markets.
President George Bush announced that he had invited Senator Barack Obama, the Democratic presidential candidate, and Senator John McCain, the Republican nominee for president, to come to the Oval Office to sit down with him and leaders of Congress and hammer out a bipartisan solution. This would restore liquidity to the markets and protect the economy from the disastrous fallout should the government fail to act swiftly to aid the imperilled financial firms.
Both Mr Obama and Mr McCain, who on Wednesday announced he was suspending his campaign in order to help broker a deal in Washington, have voiced support for a rescue plan that would buy up distressed securities, most of them tied to home mortgages, from US financial firms. At the same time both were being careful to reflect the growing anger among many Americans that they are being stuck with the bill for Wall Street's excesses.
'We must be sure that any rescue plan include greater oversight, and assurances that taxpayer dollars not be used to enrich the very same executives who brought about this mess,' said Mr Obama.
Senate Banking Committee chairman Christopher Dodd said late on Wednesday that while 'we're not there yet', on approving the plan, there was a 'good possibility we'll get there in a day or so'.
Early yesterday morning, Representative Barney Frank, the Democratic chairman of the House Financial Services Committee, said Democrats in the House and Senate had reached a deal among themselves on provisions that should be in the bill and planned to meet Republicans at 10 am and meet at the White House later in the day.
Stocks were rising as trading got underway in New York early yesterday, with the Dow Jones Industrials up 110 points, or 1.02 per cent, to 10,935.5, shortly after the opening bell.
The tone had been set on Wednesday night, when President Bush signalled his determination to hammer out a rescue package - warning of a long and painful recession if nothing was done.
'I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances,' Mr Bush said in his address. He went on to explain his rationale for the extraordinary bailout, which at US$700 billion would be larger than the cost of the Iraq war thus far and the most expensive in US history, dwarfing the estimated US$200 billion rescue during the savings & loan crisis of the late 1980s.
'The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down,' the president said.
Even as he spoke to the national television audience, warning that 'our entire economy is in danger', and that a 'long and painful recession' will ensue if Congress does not move swiftly to the plan, congressional Democrats and Republicans continued to meet Treasury Department officials, negotiating details of a bipartisan debt relief plan for the banks late into the night in order to bring calm to Wall Street and global financial markets.
President Bush signalled his willingness to make concessions in the plan, such as stricter controls and oversight of Treasury Secretary Henry Paulson's authority over the terms and process of the bailout, limits on executive compensation at the companies participating in the rescue plan and a provision giving taxpayers an equity stake in some of the firms so that the government might profit from the costly rescue if and when the banks return to prosperity.
Meanwhile, Wall Street endured another chaotic day on Wednesday, as Secretary Paulson and Federal Reserve chief Ben Bernanke spent hours on Capitol Hill defending the bailout plan. Investors fled from stocks and into cash and safe haven assets, briefly sending short-term interest rates below zero. The stock market seemed to take heart at the end of the trading day, however, from pronouncements by Congressional leaders that a deal on the bailout appears near.
US rivals join forces to seal rescue deal
Bush, Obama, McCain put politics aside to ensure bailout goes through; key proposals watered down
By ANDREW MARKS
NEW YORK CORRESPONDENT
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THE present and future presidents of the United States are coming together to clear the way for the proposed US$700 billion bailout of major banking institutions that would avert the threat of a global meltdown of the financial markets.
President George Bush announced that he had invited Senator Barack Obama, the Democratic presidential candidate, and Senator John McCain, the Republican nominee for president, to come to the Oval Office to sit down with him and leaders of Congress and hammer out a bipartisan solution. This would restore liquidity to the markets and protect the economy from the disastrous fallout should the government fail to act swiftly to aid the imperilled financial firms.
Both Mr Obama and Mr McCain, who on Wednesday announced he was suspending his campaign in order to help broker a deal in Washington, have voiced support for a rescue plan that would buy up distressed securities, most of them tied to home mortgages, from US financial firms. At the same time both were being careful to reflect the growing anger among many Americans that they are being stuck with the bill for Wall Street's excesses.
'We must be sure that any rescue plan include greater oversight, and assurances that taxpayer dollars not be used to enrich the very same executives who brought about this mess,' said Mr Obama.
Senate Banking Committee chairman Christopher Dodd said late on Wednesday that while 'we're not there yet', on approving the plan, there was a 'good possibility we'll get there in a day or so'.
Early yesterday morning, Representative Barney Frank, the Democratic chairman of the House Financial Services Committee, said Democrats in the House and Senate had reached a deal among themselves on provisions that should be in the bill and planned to meet Republicans at 10 am and meet at the White House later in the day.
Stocks were rising as trading got underway in New York early yesterday, with the Dow Jones Industrials up 110 points, or 1.02 per cent, to 10,935.5, shortly after the opening bell.
The tone had been set on Wednesday night, when President Bush signalled his determination to hammer out a rescue package - warning of a long and painful recession if nothing was done.
'I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances,' Mr Bush said in his address. He went on to explain his rationale for the extraordinary bailout, which at US$700 billion would be larger than the cost of the Iraq war thus far and the most expensive in US history, dwarfing the estimated US$200 billion rescue during the savings & loan crisis of the late 1980s.
'The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down,' the president said.
Even as he spoke to the national television audience, warning that 'our entire economy is in danger', and that a 'long and painful recession' will ensue if Congress does not move swiftly to the plan, congressional Democrats and Republicans continued to meet Treasury Department officials, negotiating details of a bipartisan debt relief plan for the banks late into the night in order to bring calm to Wall Street and global financial markets.
President Bush signalled his willingness to make concessions in the plan, such as stricter controls and oversight of Treasury Secretary Henry Paulson's authority over the terms and process of the bailout, limits on executive compensation at the companies participating in the rescue plan and a provision giving taxpayers an equity stake in some of the firms so that the government might profit from the costly rescue if and when the banks return to prosperity.
Meanwhile, Wall Street endured another chaotic day on Wednesday, as Secretary Paulson and Federal Reserve chief Ben Bernanke spent hours on Capitol Hill defending the bailout plan. Investors fled from stocks and into cash and safe haven assets, briefly sending short-term interest rates below zero. The stock market seemed to take heart at the end of the trading day, however, from pronouncements by Congressional leaders that a deal on the bailout appears near.
Thursday, 25 September 2008
Published September 25, 2008
M'sia's FDI outflow surpasses inflow in 2007
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIA'S foreign direct investment (FDI) outflow surpassed inflow for the first time last year, with net outflow amounting to almost RM9 billion (S$3.73 billion) as local firms accelerated cross-border acquisitions to fulfil regional dreams.
FDI outflow in 2007 surged 82 per cent to RM38 billion from 2006, according to the United Nations Conference on Trade and Development's (Unctad) World Investment Report 2008. FDI inflow was also higher, by some 39 per cent to just over RM29 billion. Since early 2000, the gap between FDI inflow and outflow has been narrowing, reaching near parity in 2006.
Economists see the increase in reverse investments as a 'healthy' development, given many sectors of the Malaysian economy have reached near-maturity or maturity and surplus domestic funds require an outlet.
They also see regional competition as a good training ground for toughening local companies. And because most of Malaysia's reverse investments were in Asean, they believe it will put the country at the forefront of the region's plans for economic integration by 2015 under the Asean Economic Community initiative.
In terms of FDI stock, the trend towards reverse investments was also reflected in a 61 per cent spike in outward stock to RM201 billion last year, from RM125 billion in 2006. In the same period, inward stock grew 42.5 per cent to RM265 billion. Inward stock refers to the value of stock acquired by foreign firms in Malaysian firms, while outward stock is the value of stock acquired by local firms in overseas companies.
The Unctad report says developing nations have significant transnational companies (TNCs) and these TNCs are becoming prominent investors in other developing economies. In the top 100 infrastructure TNC list, for example, Malaysia and Singapore each boast three companies. Malaysian giants Petronas, YTL Corporation, Genting, Telekom, Sime Darby and Maxis made the list of the top 100 non-financial TNCs from developing countries, ranked by foreign assets.
Economic Council of Malaysia member Zainal Aznam Yusoff attributes the sizeable increase in reverse investments to cross-border acquisitions, especially in the areas of finance and services such as telecommunications.
Even so, Malaysia's fall on the Inward FDI Performance Index to 71st position last year from 67th in 2006, could be a cause for concern.
Ratings Agency Malaysia chief economist Yeah Kim Leng said larger reverse investments are acceptable, but there would be a concern if domestic investments and FDI inflow declined sharply in future.
M'sia's FDI outflow surpasses inflow in 2007
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIA'S foreign direct investment (FDI) outflow surpassed inflow for the first time last year, with net outflow amounting to almost RM9 billion (S$3.73 billion) as local firms accelerated cross-border acquisitions to fulfil regional dreams.
FDI outflow in 2007 surged 82 per cent to RM38 billion from 2006, according to the United Nations Conference on Trade and Development's (Unctad) World Investment Report 2008. FDI inflow was also higher, by some 39 per cent to just over RM29 billion. Since early 2000, the gap between FDI inflow and outflow has been narrowing, reaching near parity in 2006.
Economists see the increase in reverse investments as a 'healthy' development, given many sectors of the Malaysian economy have reached near-maturity or maturity and surplus domestic funds require an outlet.
They also see regional competition as a good training ground for toughening local companies. And because most of Malaysia's reverse investments were in Asean, they believe it will put the country at the forefront of the region's plans for economic integration by 2015 under the Asean Economic Community initiative.
In terms of FDI stock, the trend towards reverse investments was also reflected in a 61 per cent spike in outward stock to RM201 billion last year, from RM125 billion in 2006. In the same period, inward stock grew 42.5 per cent to RM265 billion. Inward stock refers to the value of stock acquired by foreign firms in Malaysian firms, while outward stock is the value of stock acquired by local firms in overseas companies.
The Unctad report says developing nations have significant transnational companies (TNCs) and these TNCs are becoming prominent investors in other developing economies. In the top 100 infrastructure TNC list, for example, Malaysia and Singapore each boast three companies. Malaysian giants Petronas, YTL Corporation, Genting, Telekom, Sime Darby and Maxis made the list of the top 100 non-financial TNCs from developing countries, ranked by foreign assets.
Economic Council of Malaysia member Zainal Aznam Yusoff attributes the sizeable increase in reverse investments to cross-border acquisitions, especially in the areas of finance and services such as telecommunications.
Even so, Malaysia's fall on the Inward FDI Performance Index to 71st position last year from 67th in 2006, could be a cause for concern.
Ratings Agency Malaysia chief economist Yeah Kim Leng said larger reverse investments are acceptable, but there would be a concern if domestic investments and FDI inflow declined sharply in future.
Published September 25, 2008
Anwar plans to proceed with caution
He says opposition does not want to violate constitution
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(KUALA LUMPUR) Malaysian opposition leader Anwar Ibrahim said that he would 'proceed cautiously' in his bid to topple the government after missing a second self-imposed deadline.
Anwar: Has previously said that he had persuaded enough ruling coalition lawmakers to join his alliance to oust MrAbdullah by Sept 16
'We do not want to transgress the constitutional rules and procedures,' he told reporters yesterday, one day after the date he had demanded Prime Minister Abdullah Ahmad Badawi recall parliament for a confidence vote. Anwar had previously said that he had persuaded enough ruling coalition lawmakers to join his alliance to oust Mr Abdullah by Sept 16.
Mr Abdullah, who has resisted calls from his party to quit after leading it to its worst election result since Malaysia's independence, has called the opposition leader's claims a 'dream' and refused to recall lawmakers earlier than the scheduled Oct 13 resumption of parliament. Anwar, who needs at least 30 more lawmakers to take control of the 222-seat house, declined to set a new deadline yesterday.
'Our problem is there is no guarantee that the motion will be accepted,' he said, asking his supporters to be 'patient'.
Anwar was speaking after a court delayed for two weeks a decision to transfer his pending sex trial to a higher court. He faces a maximum prison sentence of 20 years if found guilty of having homosexual relations with a 23-year-old man, a crime in Malaysia.
Earlier this year, Malaysia's parliament speaker rejected two similar attempts for a no-confidence vote against Mr Abdullah proposed by a member of the ruling coalition and an opposition party. -- Bloomberg
Anwar plans to proceed with caution
He says opposition does not want to violate constitution
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(KUALA LUMPUR) Malaysian opposition leader Anwar Ibrahim said that he would 'proceed cautiously' in his bid to topple the government after missing a second self-imposed deadline.
Anwar: Has previously said that he had persuaded enough ruling coalition lawmakers to join his alliance to oust MrAbdullah by Sept 16
'We do not want to transgress the constitutional rules and procedures,' he told reporters yesterday, one day after the date he had demanded Prime Minister Abdullah Ahmad Badawi recall parliament for a confidence vote. Anwar had previously said that he had persuaded enough ruling coalition lawmakers to join his alliance to oust Mr Abdullah by Sept 16.
Mr Abdullah, who has resisted calls from his party to quit after leading it to its worst election result since Malaysia's independence, has called the opposition leader's claims a 'dream' and refused to recall lawmakers earlier than the scheduled Oct 13 resumption of parliament. Anwar, who needs at least 30 more lawmakers to take control of the 222-seat house, declined to set a new deadline yesterday.
'Our problem is there is no guarantee that the motion will be accepted,' he said, asking his supporters to be 'patient'.
Anwar was speaking after a court delayed for two weeks a decision to transfer his pending sex trial to a higher court. He faces a maximum prison sentence of 20 years if found guilty of having homosexual relations with a 23-year-old man, a crime in Malaysia.
Earlier this year, Malaysia's parliament speaker rejected two similar attempts for a no-confidence vote against Mr Abdullah proposed by a member of the ruling coalition and an opposition party. -- Bloomberg
Published September 25, 2008
New Mahathir broadside could boost Razaleigh
Dr M blasts Abdullah and Najib, deems their 'private deals' as 'unsatisfactory'
By S JAYASANKARAN
IN KUALA LUMPUR
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IN a move that could help Tengku Razaleigh Hamzah bid for Malaysian leadership, former prime minister Mahathir Mohamad has launched one of his strongest attacks yet against the leadership of the United Malays National Organisation (Umno).
Expressing amazement at recent developments in Umno's Supreme Council, Dr Mahathir deplored 'private deals' between Prime Minister Abdullah Badawi and his deputy Najib Razak as 'unsatisfactory'.
'By the time Abdullah meets Najib, he would have been briefed by his family on what to say,' Dr Mahathir wrote in his Internet blog yesterday.
'And Najib, being Najib, would then accept Abdullah's solution to the problem. Najib would have the task of selling the solution to the Supreme Council. By doing so, Najib would go down further in the estimation of council members and the public when Najib's behaviour is leaked.'
Dr Mahathir predicted that Mr Najib would not get his wish for a peaceful transition. 'There has never been a president of Umno who is as much disliked and even hated by the people as Abdullah,' said the former premier. 'Malays, Chinese, Indians . . . the ordinary people all want Abdullah to go - the sooner the better.'
Dr Mahathir's outburst is the latest in a long line of ferocious attacks going back two years. It comes at a critical point for the embattled Mr Abdullah, who could face a party revolt amid calls for him to go much earlier than his previously announced June 2010 handover to Mr Najib.
Dr Mahathir's tart comments could also bolster former finance minister Tengku Razaleigh's chances in his seemingly quixotic quest to obtain enough nominations to challenge Mr Abdullah for Umno's presidency and, with it, the prime ministership.
The 72-year-old Kelantan prince faces an uphill battle getting the 58 nominations he needs to challenge Mr Abdullah, largely because he has been out of government for 21 years and a whole generation of Umno members do not know or care about his contributions to the nation.
But if Mr Najib, 55, maintains support for Mr Abdullah and refuses to challenge him, Tengku Razaleigh could get support from frustrated Umno divisions desperate for a change at the top and a firm hand on the rudder.
As if sensing the country's dark mood, Tengku Razaleigh issued an epistle- like statement to all Malaysians on Monday, urging them 'to come together in this dangerous situation' because Umno and the government 'are no longer viable'.
He said the government now commands much less support than it did after the March 8 general election, but rather than share the public's urgency for change, the present office- holders had 'redoubled efforts to frustrate renewal, cut off reform, and silence criticism'.
Tengku Razaleigh blasted Mr Abdullah's transition plan as a 'fantasy which rides roughshod over the party's constitution and the rights of its members'.
In many ways, the prince's statement echoes Dr Mahathir's sentiments. 'This brazen attempt to treat public office and party trust as a private bequest between two individuals - one of whom wishes to hold office beyond his democratic mandate, the other to ascend without one - and the continuing effort to force-feed the country with this notion, fools no one,' said the prince. And there is no mistaking the individuals he was referring to.
New Mahathir broadside could boost Razaleigh
Dr M blasts Abdullah and Najib, deems their 'private deals' as 'unsatisfactory'
By S JAYASANKARAN
IN KUALA LUMPUR
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IN a move that could help Tengku Razaleigh Hamzah bid for Malaysian leadership, former prime minister Mahathir Mohamad has launched one of his strongest attacks yet against the leadership of the United Malays National Organisation (Umno).
Expressing amazement at recent developments in Umno's Supreme Council, Dr Mahathir deplored 'private deals' between Prime Minister Abdullah Badawi and his deputy Najib Razak as 'unsatisfactory'.
'By the time Abdullah meets Najib, he would have been briefed by his family on what to say,' Dr Mahathir wrote in his Internet blog yesterday.
'And Najib, being Najib, would then accept Abdullah's solution to the problem. Najib would have the task of selling the solution to the Supreme Council. By doing so, Najib would go down further in the estimation of council members and the public when Najib's behaviour is leaked.'
Dr Mahathir predicted that Mr Najib would not get his wish for a peaceful transition. 'There has never been a president of Umno who is as much disliked and even hated by the people as Abdullah,' said the former premier. 'Malays, Chinese, Indians . . . the ordinary people all want Abdullah to go - the sooner the better.'
Dr Mahathir's outburst is the latest in a long line of ferocious attacks going back two years. It comes at a critical point for the embattled Mr Abdullah, who could face a party revolt amid calls for him to go much earlier than his previously announced June 2010 handover to Mr Najib.
Dr Mahathir's tart comments could also bolster former finance minister Tengku Razaleigh's chances in his seemingly quixotic quest to obtain enough nominations to challenge Mr Abdullah for Umno's presidency and, with it, the prime ministership.
The 72-year-old Kelantan prince faces an uphill battle getting the 58 nominations he needs to challenge Mr Abdullah, largely because he has been out of government for 21 years and a whole generation of Umno members do not know or care about his contributions to the nation.
But if Mr Najib, 55, maintains support for Mr Abdullah and refuses to challenge him, Tengku Razaleigh could get support from frustrated Umno divisions desperate for a change at the top and a firm hand on the rudder.
As if sensing the country's dark mood, Tengku Razaleigh issued an epistle- like statement to all Malaysians on Monday, urging them 'to come together in this dangerous situation' because Umno and the government 'are no longer viable'.
He said the government now commands much less support than it did after the March 8 general election, but rather than share the public's urgency for change, the present office- holders had 'redoubled efforts to frustrate renewal, cut off reform, and silence criticism'.
Tengku Razaleigh blasted Mr Abdullah's transition plan as a 'fantasy which rides roughshod over the party's constitution and the rights of its members'.
In many ways, the prince's statement echoes Dr Mahathir's sentiments. 'This brazen attempt to treat public office and party trust as a private bequest between two individuals - one of whom wishes to hold office beyond his democratic mandate, the other to ascend without one - and the continuing effort to force-feed the country with this notion, fools no one,' said the prince. And there is no mistaking the individuals he was referring to.
Published September 25, 2008
Yanlord shares hit by graft trial of China ex-official
Allegations include accused buying apartment at deep discount
By LYNETTE KHOO
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SHARES of Yanlord Group went into a tailspin yesterday, hurt by market rumours linking it to a corruption trial in Shanghai involving a former Chinese official.
Following a request by Yanlord, share trading was halted at 2 pm, pending an announcement in response to the market talk. But the stock had by then plummeted as low as 99 cents before ending the morning session at $1.04, down 22 cents or 17.5 per cent.
According to a China magazine, Caijing, the group allegedly allowed a former Shanghai official - currently on trial for suspected corruption - to buy an apartment at a price substantially below market levels.
Caijing said in an online report that Yanlord allegedly allowed Kang Huijun, former deputy chief of the Pudong district in Shanghai, to buy a luxury apartment at Yanlord Riverside Garden in the prosperous Lujiazui area, at a steeply discounted price of 8,300 yuan (S$1,719) per square metre in 2001, at a time when the prevailing market price was 11,000-12,000 yuan per sq m.
In 2006, Yanlord allegedly bought back the apartment from Kang at a price of 8,300 yuan per sq m and later sold him a larger apartment measuring over 300 sq m at the same price. The gap between purchase price and market price totalled about 4.89 million yuan, according to Caijing.
Kang was reportedly detained in November last year because of allegations that he used his position to help Yanlord secure land use rights to several plots of land in Pudong. He has been accused of taking bribes worth a combined 5.99 million yuan in six separate instances and was alleged to have 11.84 million yuan of personal property of unexplained origin.
The official was also the general manager of Lujiazui Group, a government company that is in charge of developing the Lujiazui financial district in Pudong. Kang was also said to be accused of helping Yanlord to gain permission for blocks SB4-1, 2, 3 and 4 as well as SB5-1 and 2 in Pudong.
The Shanghai Daily reported earlier yesterday that government prosecutors alleged that the former deputy chief of Shanghai's Pudong district accepted a 189 sq m apartment at the Yanlord Gardens complex in exchange for help in securing land development rights.
Besides the Yanlord case, Kang also allegedly received bribes from staff and friends in exchange for offering employment or providing other 'inappropriate' assistance, Caijing said.
Yanlord shares hit by graft trial of China ex-official
Allegations include accused buying apartment at deep discount
By LYNETTE KHOO
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SHARES of Yanlord Group went into a tailspin yesterday, hurt by market rumours linking it to a corruption trial in Shanghai involving a former Chinese official.
Following a request by Yanlord, share trading was halted at 2 pm, pending an announcement in response to the market talk. But the stock had by then plummeted as low as 99 cents before ending the morning session at $1.04, down 22 cents or 17.5 per cent.
According to a China magazine, Caijing, the group allegedly allowed a former Shanghai official - currently on trial for suspected corruption - to buy an apartment at a price substantially below market levels.
Caijing said in an online report that Yanlord allegedly allowed Kang Huijun, former deputy chief of the Pudong district in Shanghai, to buy a luxury apartment at Yanlord Riverside Garden in the prosperous Lujiazui area, at a steeply discounted price of 8,300 yuan (S$1,719) per square metre in 2001, at a time when the prevailing market price was 11,000-12,000 yuan per sq m.
In 2006, Yanlord allegedly bought back the apartment from Kang at a price of 8,300 yuan per sq m and later sold him a larger apartment measuring over 300 sq m at the same price. The gap between purchase price and market price totalled about 4.89 million yuan, according to Caijing.
Kang was reportedly detained in November last year because of allegations that he used his position to help Yanlord secure land use rights to several plots of land in Pudong. He has been accused of taking bribes worth a combined 5.99 million yuan in six separate instances and was alleged to have 11.84 million yuan of personal property of unexplained origin.
The official was also the general manager of Lujiazui Group, a government company that is in charge of developing the Lujiazui financial district in Pudong. Kang was also said to be accused of helping Yanlord to gain permission for blocks SB4-1, 2, 3 and 4 as well as SB5-1 and 2 in Pudong.
The Shanghai Daily reported earlier yesterday that government prosecutors alleged that the former deputy chief of Shanghai's Pudong district accepted a 189 sq m apartment at the Yanlord Gardens complex in exchange for help in securing land development rights.
Besides the Yanlord case, Kang also allegedly received bribes from staff and friends in exchange for offering employment or providing other 'inappropriate' assistance, Caijing said.
Published September 25, 2008
Australand could have handled rights better
By TEH HOOI LING
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GOOD corporate governance is about treating and working for all shareholders as equally as possible, not the box-ticking way that corporate governance can oftentimes degenerate to, says veteran investor Hugh Young of Aberdeen Asset Management.
As with all good corporate governance manuals, the spirit and intention should outweigh the letter of the law.
It is hence disappointing to see what Australand, a majority-owned subsidiary of CapitaLand - the region's biggest property group and a Temasek-linked company which had won numerous good corporate governance awards - did recently.
In late July, Australand, a property group in Australia which is listed both in Singapore and Australia, announced a one-for-one rights issue. The application price for the rights was A$0.60. That's a significant 38.5 per cent discount to the stock's closing price of A$0.975 just prior to the rights issue announcement.
The rights offer to institutional investors was to close in end-July and for retail investors early this month.
In the offer document, Lui Chong Chee, Australand's chairman, began his letter to security holders as follows: 'On behalf of the Board of Australand, I am pleased to provide you with the details of an opportunity to increase your holding of Australand Stapled Securities by participating in a 1-for-1 (rights) issue.'
He added that the issue would raise A$557 million (S$666 million), with CapitaLand undertaking to subscribe to its full entitlement of about A$302 million. The proceeds would be used to recapitalise and strengthen Austra- land's balance sheet in these uncertain market and assist to fund its development pipeline including the measured expansion into Asia with its joint venture partner CapitaLand.
Mr Lui concluded by saying: 'The directors of Australand are unanimous in commending this entitlement offer to you.'
But the catch was: retail investors outside Australia and New Zealand were not entitled to the entitlement!
Rights issue at a deeply discounted price is of course dilutive to the existing shareholders. Take the example of a shareholder who owns 10 shares or 10 per cent of a $100 company. His stake is worth $10, with each share having a market value of $1. If the company were to offer a 1-for-1 rights issue at 60 cents each, and the above shareholder did not take up that offer, his stake in the company will be diluted to just over 5 per cent, and his 10 shares will have a market value of just $8.10. It is worse if his rights entitlement was allotted to others.
So denying any shareholders his right to subscribe to additional shares in a company at below market price is grossly unfair, and a blatant disregard of basic shareholder right. And to put it simply, bad corporate governance. There is even less excuse given the company has a legal listing status here in Singapore.
The reason for not offering the rights issue to Singapore and other overseas retail investors is far from satisfactory. In response to an email from an aggrieved Singaporean shareholder, a representative of Australand said: 'Our general counsel has advised me that the law has changed in Singapore since our last capital raising and it is therefore more difficult, time consuming and expensive for Australand to meet these new requirements and make the offer available to Singaporean resident retail security holders. The same situation applies for retail security holders living elsewhere in the world, other than Australia and New Zealand.'
Yes, Australand sought shareholders' approval in an extraordinary general meeting prior to the exercise. They followed the rules. But as with the Australian Securities Exchange listing rules and all good corporate governance manuals, the spirit and intention should outweigh the letter of the law.
It is perhaps a little consolation that the share price of Australand has since fallen below A$0.60 each and retail shareholders who really wanted to maintain their stake at the pre-rights level can do so at an even lower cost than those who subscribed to the rights issue earlier.
Still it could just have been trading at a higher price and retail investors here would be done a disservice.
For a company of its pedegree, Australand definitely could have handled the exercise better.
Australand could have handled rights better
By TEH HOOI LING
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GOOD corporate governance is about treating and working for all shareholders as equally as possible, not the box-ticking way that corporate governance can oftentimes degenerate to, says veteran investor Hugh Young of Aberdeen Asset Management.
As with all good corporate governance manuals, the spirit and intention should outweigh the letter of the law.
It is hence disappointing to see what Australand, a majority-owned subsidiary of CapitaLand - the region's biggest property group and a Temasek-linked company which had won numerous good corporate governance awards - did recently.
In late July, Australand, a property group in Australia which is listed both in Singapore and Australia, announced a one-for-one rights issue. The application price for the rights was A$0.60. That's a significant 38.5 per cent discount to the stock's closing price of A$0.975 just prior to the rights issue announcement.
The rights offer to institutional investors was to close in end-July and for retail investors early this month.
In the offer document, Lui Chong Chee, Australand's chairman, began his letter to security holders as follows: 'On behalf of the Board of Australand, I am pleased to provide you with the details of an opportunity to increase your holding of Australand Stapled Securities by participating in a 1-for-1 (rights) issue.'
He added that the issue would raise A$557 million (S$666 million), with CapitaLand undertaking to subscribe to its full entitlement of about A$302 million. The proceeds would be used to recapitalise and strengthen Austra- land's balance sheet in these uncertain market and assist to fund its development pipeline including the measured expansion into Asia with its joint venture partner CapitaLand.
Mr Lui concluded by saying: 'The directors of Australand are unanimous in commending this entitlement offer to you.'
But the catch was: retail investors outside Australia and New Zealand were not entitled to the entitlement!
Rights issue at a deeply discounted price is of course dilutive to the existing shareholders. Take the example of a shareholder who owns 10 shares or 10 per cent of a $100 company. His stake is worth $10, with each share having a market value of $1. If the company were to offer a 1-for-1 rights issue at 60 cents each, and the above shareholder did not take up that offer, his stake in the company will be diluted to just over 5 per cent, and his 10 shares will have a market value of just $8.10. It is worse if his rights entitlement was allotted to others.
So denying any shareholders his right to subscribe to additional shares in a company at below market price is grossly unfair, and a blatant disregard of basic shareholder right. And to put it simply, bad corporate governance. There is even less excuse given the company has a legal listing status here in Singapore.
The reason for not offering the rights issue to Singapore and other overseas retail investors is far from satisfactory. In response to an email from an aggrieved Singaporean shareholder, a representative of Australand said: 'Our general counsel has advised me that the law has changed in Singapore since our last capital raising and it is therefore more difficult, time consuming and expensive for Australand to meet these new requirements and make the offer available to Singaporean resident retail security holders. The same situation applies for retail security holders living elsewhere in the world, other than Australia and New Zealand.'
Yes, Australand sought shareholders' approval in an extraordinary general meeting prior to the exercise. They followed the rules. But as with the Australian Securities Exchange listing rules and all good corporate governance manuals, the spirit and intention should outweigh the letter of the law.
It is perhaps a little consolation that the share price of Australand has since fallen below A$0.60 each and retail shareholders who really wanted to maintain their stake at the pre-rights level can do so at an even lower cost than those who subscribed to the rights issue earlier.
Still it could just have been trading at a higher price and retail investors here would be done a disservice.
For a company of its pedegree, Australand definitely could have handled the exercise better.
Published September 25, 2008
MAS cracks whip to get fair deal for investors
Regulator hauls in banks and brokers, may tighten up the rules
By SIOW LI SEN
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(SINGAPORE) Financial institutions (FI) have been ordered to appoint an independent party to investigate complaints of mis-selling complex products to retail consumers amid growing unhappiness from investors who have lost money.
The Monetary Authority of Singapore (MAS) also said that it may tighten regulations on the selling of complex investment products.
The regulator yesterday hauled in banks, brokers and Hong Leong Finance to tell them to move swiftly to handle complaints from investors and to ensure fairness.
'In consultation with MAS, FIs that have sold the DBS High Notes 5, Lehman Minibonds and Merrill Lynch Jubilee Series 3 LinkEarner Notes have decided to appoint independent parties to oversee their complaints handling processes and investigations into any mis-selling of these products,' the MAS said late last night.
'The independent party is intended to assure investors that their complaints will be heard, documented and reviewed fairly and swiftly.'
Over half a billion dollars worth of these products were sold over the last two years to thousands of people.
MAS has also asked DBS Bank to appoint an independent party to review the computation of the payout to investors of the DBS High Notes 5.
DBS is the arranger, issuer, calculating agent and trustee of the notes.
Last night DBS said that it will be appointing independent external consultants to review complaint handling and the final credit event redemption amount for High Notes 5.
MAS also said that it has asked HSBC Trustee to expedite the resolution of the issues relating to the Lehman Minibonds and the Merrill Lynch Notes.
These structured products went bust following the bankruptcy filing of US-based Lehman Brothers last week.
There has been growing outrage from investors who said they were told by the sales people of FIs that the structured products were safe. Some also feel frustrated at what they perceive as the lack of action in helping them seek compensation. Others have said that they feel helpless when it comes to confronting a big bank and do not have the money to hire lawyers to fight their case.
Last night, an estimated 100 people met outside the National Library to discuss the sending of a petition to the MAS. Ninety-five of them have already signed up.
MAS spokeswoman Angelina Fernandez, when asked about the petition, said: 'We will meet with whoever wants to meet us, we will hear them out.'
Tan Kin Lian, former chief executive of NTUC Income, has said that he hopes MAS will help investors take legal action against FIs who were guilty of mis-selling. Till last night, some 350 people have signed up on Mr Tan's blog to discuss taking collective action.
MAS said that it will also fast track mediation with the industry body which handles consumer grievances.
MAS will work with Financial Industry Disputes Resolution Centre (Fidrec), the independent parties and the FIs so that documentation from the FIs' review process can be used, should investors choose to seek mediation and adjudication with Fidrec.
Essentially it means investors who lodge their complaints at the FIs can get a hearing at Fidrec without going through another round of lodging a complaint.
It is understood that the MAS is leaning on the FIs to ascertain the amount of compensation investors may get if their complaints are valid. Under the rules, the maximum amount an adjudication can award is $50,000.
The MAS has the power to punish FIs for breaching regulations but not to force them to compensate investors.
Shane Tregillis, MAS deputy managing director, Market Conduct, said, 'MAS will ensure that FIs must have a rigorous process in place for handling customers' complaints and that legitimate grievances are dealt with expeditiously. While MAS cannot order FIs to pay compensation, we are committed to ensuring a fair resolution process for all affected investors'.
MAS will use the outcome of this process to consider what FIs need to do to strengthen internal processes and controls, and if a review of existing regulations is required, it said.
MAS cracks whip to get fair deal for investors
Regulator hauls in banks and brokers, may tighten up the rules
By SIOW LI SEN
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(SINGAPORE) Financial institutions (FI) have been ordered to appoint an independent party to investigate complaints of mis-selling complex products to retail consumers amid growing unhappiness from investors who have lost money.
The Monetary Authority of Singapore (MAS) also said that it may tighten regulations on the selling of complex investment products.
The regulator yesterday hauled in banks, brokers and Hong Leong Finance to tell them to move swiftly to handle complaints from investors and to ensure fairness.
'In consultation with MAS, FIs that have sold the DBS High Notes 5, Lehman Minibonds and Merrill Lynch Jubilee Series 3 LinkEarner Notes have decided to appoint independent parties to oversee their complaints handling processes and investigations into any mis-selling of these products,' the MAS said late last night.
'The independent party is intended to assure investors that their complaints will be heard, documented and reviewed fairly and swiftly.'
Over half a billion dollars worth of these products were sold over the last two years to thousands of people.
MAS has also asked DBS Bank to appoint an independent party to review the computation of the payout to investors of the DBS High Notes 5.
DBS is the arranger, issuer, calculating agent and trustee of the notes.
Last night DBS said that it will be appointing independent external consultants to review complaint handling and the final credit event redemption amount for High Notes 5.
MAS also said that it has asked HSBC Trustee to expedite the resolution of the issues relating to the Lehman Minibonds and the Merrill Lynch Notes.
These structured products went bust following the bankruptcy filing of US-based Lehman Brothers last week.
There has been growing outrage from investors who said they were told by the sales people of FIs that the structured products were safe. Some also feel frustrated at what they perceive as the lack of action in helping them seek compensation. Others have said that they feel helpless when it comes to confronting a big bank and do not have the money to hire lawyers to fight their case.
Last night, an estimated 100 people met outside the National Library to discuss the sending of a petition to the MAS. Ninety-five of them have already signed up.
MAS spokeswoman Angelina Fernandez, when asked about the petition, said: 'We will meet with whoever wants to meet us, we will hear them out.'
Tan Kin Lian, former chief executive of NTUC Income, has said that he hopes MAS will help investors take legal action against FIs who were guilty of mis-selling. Till last night, some 350 people have signed up on Mr Tan's blog to discuss taking collective action.
MAS said that it will also fast track mediation with the industry body which handles consumer grievances.
MAS will work with Financial Industry Disputes Resolution Centre (Fidrec), the independent parties and the FIs so that documentation from the FIs' review process can be used, should investors choose to seek mediation and adjudication with Fidrec.
Essentially it means investors who lodge their complaints at the FIs can get a hearing at Fidrec without going through another round of lodging a complaint.
It is understood that the MAS is leaning on the FIs to ascertain the amount of compensation investors may get if their complaints are valid. Under the rules, the maximum amount an adjudication can award is $50,000.
The MAS has the power to punish FIs for breaching regulations but not to force them to compensate investors.
Shane Tregillis, MAS deputy managing director, Market Conduct, said, 'MAS will ensure that FIs must have a rigorous process in place for handling customers' complaints and that legitimate grievances are dealt with expeditiously. While MAS cannot order FIs to pay compensation, we are committed to ensuring a fair resolution process for all affected investors'.
MAS will use the outcome of this process to consider what FIs need to do to strengthen internal processes and controls, and if a review of existing regulations is required, it said.
Published September 25, 2008
Buffett plunks down US$5b for Goldman
Some in Street see it as a gold-plated vote of confidence
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(NEW YORK) Warren Buffett's Berkshire Hathaway Inc will invest US$5 billion in Goldman Sachs Group Inc, in a major boost for the Wall Street bank from perhaps the world's best- known investor.
'It's a vote of confidence which is gold plated,' said Michael Holland, a money manager at Holland & Co in New York. 'You don't get better than this.'
Shares of Goldman rose 8.1 per cent after the announcement, while Standard & Poor's 500 futures SPc1 gained 15 points.
Goldman also announced plans to sell 40.65 million shares at US$123 each. Goldman, which managed its own offering, said it has an option to sell an additional 6.10 million shares to handle excess demand.
Mr Buffett is adding Goldman to a portfolio of investments at Berkshire that includes large stakes in a handful of major US commercial banks.
Mr Buffett also said that he would consider buying some units from American International Group Inc (AIG), the insurer bailed out by the US government.
Mr Buffett said he expressed interest in buying parts of AIG over the Sept 13-14 weekend, when regulators and financial industry executives were holding emergency talks on problems that included the fate of Lehman Brothers Holdings Inc, which filed for bankruptcy protection on Sept 15.
On Sunday, Goldman won Federal Reserve approval to become a bank holding company, giving it easier access to financing and adding to speculation it might buy another bank.
This came after many investors questioned its business model amid this month's market turmoil, causing shares to fall 50 per cent from their record set last Oct 31.
'Goldman Sachs is an exceptional institution,' Mr Buffett said in a statement. 'It has an unrivalled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance.'
Mr Buffett is the second- richest American according to Forbes magazine, and built Berkshire into a US$199 billion conglomerate by investing in undervalued companies with strong management.
He was not available for immediate comment, according to Debbie Bosanek, who works in his Omaha, Nebraska office.
Lloyd Blankfein, Goldman's chief executive, in a statement noted Mr Buffett's 'long-standing relationship' with the company, and called the investment 'a strong validation of our client franchise and future prospects. This investment will further bolster our strong capitalisation and liquidity position'.
Berkshire will buy US$5 billion of Goldman perpetual preferred stock that carries a 10 per cent dividend.
It also will receive warrants to buy US$5 billion of common stock, or 43.5 million shares, at US$115 per share, within five years, which could give it a roughly 9 per cent stake in Goldman. Last week, Goldman said it averaged 448.3 million common shares in the quarter ended Aug 29.
Goldman said on Sunday it intends to expand its deposit base by buying deposits from other banks, including those in distress.
The investment is Mr Buffett's second major purchase in a week. On Thursday, Berkshire's MidAmerican Energy Holdings Co affiliate agreed to buy power supplier Constellation Energy Group Inc for US$4.7 billion.
Despite his disdain for investment banking excess, Mr Buffett has publicly praised Goldman investment banker Byron Trott, who helped arrange Berkshire's US$4.5 billion purchase in March of a majority stake in industrial conglomerate Marmon Holdings Inc from Chicago's Pritzker family. -- Reuters
Buffett plunks down US$5b for Goldman
Some in Street see it as a gold-plated vote of confidence
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(NEW YORK) Warren Buffett's Berkshire Hathaway Inc will invest US$5 billion in Goldman Sachs Group Inc, in a major boost for the Wall Street bank from perhaps the world's best- known investor.
'It's a vote of confidence which is gold plated,' said Michael Holland, a money manager at Holland & Co in New York. 'You don't get better than this.'
Shares of Goldman rose 8.1 per cent after the announcement, while Standard & Poor's 500 futures SPc1 gained 15 points.
Goldman also announced plans to sell 40.65 million shares at US$123 each. Goldman, which managed its own offering, said it has an option to sell an additional 6.10 million shares to handle excess demand.
Mr Buffett is adding Goldman to a portfolio of investments at Berkshire that includes large stakes in a handful of major US commercial banks.
Mr Buffett also said that he would consider buying some units from American International Group Inc (AIG), the insurer bailed out by the US government.
Mr Buffett said he expressed interest in buying parts of AIG over the Sept 13-14 weekend, when regulators and financial industry executives were holding emergency talks on problems that included the fate of Lehman Brothers Holdings Inc, which filed for bankruptcy protection on Sept 15.
On Sunday, Goldman won Federal Reserve approval to become a bank holding company, giving it easier access to financing and adding to speculation it might buy another bank.
This came after many investors questioned its business model amid this month's market turmoil, causing shares to fall 50 per cent from their record set last Oct 31.
'Goldman Sachs is an exceptional institution,' Mr Buffett said in a statement. 'It has an unrivalled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance.'
Mr Buffett is the second- richest American according to Forbes magazine, and built Berkshire into a US$199 billion conglomerate by investing in undervalued companies with strong management.
He was not available for immediate comment, according to Debbie Bosanek, who works in his Omaha, Nebraska office.
Lloyd Blankfein, Goldman's chief executive, in a statement noted Mr Buffett's 'long-standing relationship' with the company, and called the investment 'a strong validation of our client franchise and future prospects. This investment will further bolster our strong capitalisation and liquidity position'.
Berkshire will buy US$5 billion of Goldman perpetual preferred stock that carries a 10 per cent dividend.
It also will receive warrants to buy US$5 billion of common stock, or 43.5 million shares, at US$115 per share, within five years, which could give it a roughly 9 per cent stake in Goldman. Last week, Goldman said it averaged 448.3 million common shares in the quarter ended Aug 29.
Goldman said on Sunday it intends to expand its deposit base by buying deposits from other banks, including those in distress.
The investment is Mr Buffett's second major purchase in a week. On Thursday, Berkshire's MidAmerican Energy Holdings Co affiliate agreed to buy power supplier Constellation Energy Group Inc for US$4.7 billion.
Despite his disdain for investment banking excess, Mr Buffett has publicly praised Goldman investment banker Byron Trott, who helped arrange Berkshire's US$4.5 billion purchase in March of a majority stake in industrial conglomerate Marmon Holdings Inc from Chicago's Pritzker family. -- Reuters
Published September 25, 2008
FBI probes 4 firms at heart of crisis
Investigators looking for possible accounting misstatements by AIG, Lehman, Fannie, Freddie
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(WASHINGTON) US authorities are investigating Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc and American International Group Inc as part of a probe into the collapse of the sub-prime-mortgage market, a senior law-enforcement official said.
The four companies are among 26 that the Federal Bureau of Investigation is reviewing for possible accounting misstatements. The official, who asked to remain unidentified, said the investigations are preliminary.
The FBI has come under pressure to hold companies responsible as the loan crisis has rocked Wall Street and led to the biggest housing slump since the Depression. Financial companies worldwide have reported more than US$500 billion in losses and writedowns stemming from the sub- prime collapse.
Housing lenders Freddie Mac and Fannie Mae, as well as insurer AIG were all taken over by the government earlier this month. Lehman filed for bankruptcy. The crisis has led the Bush administration to ask Congress to approve a US$700 billion bailout for the financial industry.
James Lockhart, the director of the Federal Housing Finance Agency, tossed out both Fannie Mae's and Freddie Mac's boards and top management, including former Fannie chief Daniel Mudd and Richard Syron at Freddie, as part of the restructuring.
Freddie Mac spokesman Doug Duvall declined to comment on the FBI investigation. Fannie Mae spokesman Brian Faith wasn't immediately available for comment. AIG spokesman Nick Ashooh declined to comment as did Mark Lane, a spokesman for Lehman.
The investigations of Fannie Mae and Freddie Mac were recently opened, said the official. The agency had already been looking into allegations concerning Lehman and AIG.
The Securities and Exchange Commission is also investigating the companies for civil violations.
People familiar with the matter have said earlier that other companies under FBI investigation include IndyMac Bancorp Inc and Countrywide Financial Corp, which has since been bought by Bank of America Corp.
FBI director Robert Mueller, testifying in Congress last week, pledged to 'pursue these cases as far up the corporate chain as necessary to ensure those responsible receive the justice they deserve.'
Fannie and Freddie, as well as AIG, already restated their books earlier this decade and corrected billions of dollars in accounting errors.
Fannie Mae paid a record US$400 million fine to the SEC and its regulator in 2006 to settle charges that executives fraudulently used 'cookie jar' reserves and other accounting gimmicks to hide US$10.3 billion in losses from 2002 through 2004 and maximise bonuses.
Freddie paid US$125 million in fines in 2003 and restated earnings from 2000 through 2002 after it replaced long-time auditor Arthur Andersen and discovered errors related to derivatives. Regulators accused the company of manipulating its accounting to push of some US$5 billion in earnings to future quarters.
Freddie ousted chief executive Leland Brendsel in June 2003 and Fannie's Franklin Raines left in December 2004.
The Federal Housing Finance Agency, which regulates the government-sponsored mortgage companies, seized control of both companies earlier this month after outside examiners found more accounting problems and said their capital cushion was low. -- Bloomberg
FBI probes 4 firms at heart of crisis
Investigators looking for possible accounting misstatements by AIG, Lehman, Fannie, Freddie
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(WASHINGTON) US authorities are investigating Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc and American International Group Inc as part of a probe into the collapse of the sub-prime-mortgage market, a senior law-enforcement official said.
The four companies are among 26 that the Federal Bureau of Investigation is reviewing for possible accounting misstatements. The official, who asked to remain unidentified, said the investigations are preliminary.
The FBI has come under pressure to hold companies responsible as the loan crisis has rocked Wall Street and led to the biggest housing slump since the Depression. Financial companies worldwide have reported more than US$500 billion in losses and writedowns stemming from the sub- prime collapse.
Housing lenders Freddie Mac and Fannie Mae, as well as insurer AIG were all taken over by the government earlier this month. Lehman filed for bankruptcy. The crisis has led the Bush administration to ask Congress to approve a US$700 billion bailout for the financial industry.
James Lockhart, the director of the Federal Housing Finance Agency, tossed out both Fannie Mae's and Freddie Mac's boards and top management, including former Fannie chief Daniel Mudd and Richard Syron at Freddie, as part of the restructuring.
Freddie Mac spokesman Doug Duvall declined to comment on the FBI investigation. Fannie Mae spokesman Brian Faith wasn't immediately available for comment. AIG spokesman Nick Ashooh declined to comment as did Mark Lane, a spokesman for Lehman.
The investigations of Fannie Mae and Freddie Mac were recently opened, said the official. The agency had already been looking into allegations concerning Lehman and AIG.
The Securities and Exchange Commission is also investigating the companies for civil violations.
People familiar with the matter have said earlier that other companies under FBI investigation include IndyMac Bancorp Inc and Countrywide Financial Corp, which has since been bought by Bank of America Corp.
FBI director Robert Mueller, testifying in Congress last week, pledged to 'pursue these cases as far up the corporate chain as necessary to ensure those responsible receive the justice they deserve.'
Fannie and Freddie, as well as AIG, already restated their books earlier this decade and corrected billions of dollars in accounting errors.
Fannie Mae paid a record US$400 million fine to the SEC and its regulator in 2006 to settle charges that executives fraudulently used 'cookie jar' reserves and other accounting gimmicks to hide US$10.3 billion in losses from 2002 through 2004 and maximise bonuses.
Freddie paid US$125 million in fines in 2003 and restated earnings from 2000 through 2002 after it replaced long-time auditor Arthur Andersen and discovered errors related to derivatives. Regulators accused the company of manipulating its accounting to push of some US$5 billion in earnings to future quarters.
Freddie ousted chief executive Leland Brendsel in June 2003 and Fannie's Franklin Raines left in December 2004.
The Federal Housing Finance Agency, which regulates the government-sponsored mortgage companies, seized control of both companies earlier this month after outside examiners found more accounting problems and said their capital cushion was low. -- Bloomberg
Wednesday, 24 September 2008
Published September 24, 2008
Malaysia widens ban on China milk products
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(KUALA LUMPUR) Malaysia has widened its ban on Chinese dairy products to include candies, chocolates and all foods containing milk, a top official said yesterday. Noraini Mohamad Othman, director of the health ministry's food safety and quality division, said scores of officials have been deployed nationwide to enforce the ban on foods from China, an important trading partner.
'All food products with Chinese milk are banned,' she said. '(Health officials) are also on the ground to seal the sale of the products,' Ms Noraini said, adding the ministry was urging manufacturers to carry out voluntary recalls. Ms Noraini said Malaysia has banned Chinese milk and infant formula since the 1990s because of foot and mouth disease in cattle, and those measures were reaffirmed in a health ministry directive on the weekend.
The expanded ban comes after neighbouring Singapore found the potentially deadly chemical melamine in the popular White Rabbit Creamy Candy from China, she said. Around 53,000 Chinese infants have become sick after drinking formula laced with melamine. Four children in China have died. Melamine can cause kidney stones and lead to kidney failure. -- AFP
Malaysia widens ban on China milk products
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(KUALA LUMPUR) Malaysia has widened its ban on Chinese dairy products to include candies, chocolates and all foods containing milk, a top official said yesterday. Noraini Mohamad Othman, director of the health ministry's food safety and quality division, said scores of officials have been deployed nationwide to enforce the ban on foods from China, an important trading partner.
'All food products with Chinese milk are banned,' she said. '(Health officials) are also on the ground to seal the sale of the products,' Ms Noraini said, adding the ministry was urging manufacturers to carry out voluntary recalls. Ms Noraini said Malaysia has banned Chinese milk and infant formula since the 1990s because of foot and mouth disease in cattle, and those measures were reaffirmed in a health ministry directive on the weekend.
The expanded ban comes after neighbouring Singapore found the potentially deadly chemical melamine in the popular White Rabbit Creamy Candy from China, she said. Around 53,000 Chinese infants have become sick after drinking formula laced with melamine. Four children in China have died. Melamine can cause kidney stones and lead to kidney failure. -- AFP
Published September 24, 2008
Opposition starts transfer of power talks with govt
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(KUALA LUMPUR) Malaysia's Opposition said yesterday that it has begun negotiations with the ruling coalition over a transition of power, after it claimed to have signed up enough defectors to topple the government.
Prime Minister Abdullah Ahmad Badawi has refused to meet with Opposition leader Anwar Ibrahim but officials said that contacts are being made through intermediaries.
'There is initial contact between our middleman and Mr Abdullah's middleman,' said Tian Chia, information chief of Mr Anwar's Keadilan party.
'Our intention in holding them is for a transition of power to the Opposition but I cannot speak for the other side,' he told AFP. 'So far it looks good and we will wait to see what happens.'
Mr Chua said that contact was made initially during the weekend and that more than one meeting had taken place.
Mr Anwar said earlier this month that he had the support of more than 31 lawmakers from the ruling coalition but refused to release the list of names until PM Abdullah agreed to a meeting.
The premier dismissed Mr Anwar's claims as bluff and has shown no sign of stepping down even as he faces another challenge from cabinet ministers who have called on him to quit before his scheduled departure in 2010.
PM Abdullah has been fighting for his political life since a March general election handed the Opposition unprecedented gains and plunged the coalition into disarray.
Ruling party insiders say that he is now under intense pressure to quit by the end of the year. -- AFP
Opposition starts transfer of power talks with govt
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(KUALA LUMPUR) Malaysia's Opposition said yesterday that it has begun negotiations with the ruling coalition over a transition of power, after it claimed to have signed up enough defectors to topple the government.
Prime Minister Abdullah Ahmad Badawi has refused to meet with Opposition leader Anwar Ibrahim but officials said that contacts are being made through intermediaries.
'There is initial contact between our middleman and Mr Abdullah's middleman,' said Tian Chia, information chief of Mr Anwar's Keadilan party.
'Our intention in holding them is for a transition of power to the Opposition but I cannot speak for the other side,' he told AFP. 'So far it looks good and we will wait to see what happens.'
Mr Chua said that contact was made initially during the weekend and that more than one meeting had taken place.
Mr Anwar said earlier this month that he had the support of more than 31 lawmakers from the ruling coalition but refused to release the list of names until PM Abdullah agreed to a meeting.
The premier dismissed Mr Anwar's claims as bluff and has shown no sign of stepping down even as he faces another challenge from cabinet ministers who have called on him to quit before his scheduled departure in 2010.
PM Abdullah has been fighting for his political life since a March general election handed the Opposition unprecedented gains and plunged the coalition into disarray.
Ruling party insiders say that he is now under intense pressure to quit by the end of the year. -- AFP
Published September 24, 2008
Blogger detained under ISA for 2 yrs
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(KUALA LUMPUR) Malaysia's most prominent blogger has been ordered to spend two years in detention under internal security laws after being accused of insulting Islam, his wife said yesterday.
Raja Petra: Has been accused of insulting Islam and inciting hate in his website articles on Islam
Raja Petra Kamaruddin, a government critic and founder of the Malaysia Today website, has been sent to the Kamunting detention centre in northern Perak state on the order of the Home Minister, his wife Marina Lee Abdullah told AFP.
His arrest earlier this month was part of a crackdown amid a political crisis in Malaysia, as Prime Minister Abdullah Badawi faces calls to quit from within his Cabinet and a mounting challenge by the Opposition.
'(Police) said my husband has been sent to Kamunting this morning and that he will remain there for two years with no trial. This is the worst news I can receive but we will keep fighting for his release,' Ms Marina said.
Raja Petra's lawyer Amarjit Sidhu said the government had pulled a 'mean, dirty trick' by issuing the detention order the night before a scheduled court hearing yesterday to secure his release.
'The government can now hide behind a veil of secrecy because they do not have to disclose reasons for detaining him,' he told AFP.
Raja Petra was detained under the tough Internal Security Act (ISA) for allegedly 'insulting Islam and publishing articles on his website, which has tarnished the country's leadership to the point of causing confusion among the people', his wife said.
He was also accused of inciting hate in his articles on Islam - a serious offence in predominantly Muslim Malaysia.
Raja Petra is best known for his articles on politics, and has already been charged with sedition and defamation for linking Deputy Prime Minister Najib Razak and his wife to the sensational murder of a Mongolian woman.
Raja Petra was rounded up earlier this month along with an opposition lawmaker and a journalist but the other two were quickly released.
Their arrests triggered the resignation of Zaid Ibrahim, a Cabinet minister in charge of legal affairs, as well as calls from within the ruling coalition for the security law to be abolished.
Meanwhile, Samy Vellu, president of the Malaysian Indian Congress, the third largest party in the ruling National Front coalition, urged the government to free five activists held under the ISA since last December.
Mr Samy met Prime Minister Abdullah yesterday to discuss the releases amid mounting pressure for their freedom from within the Indian leader's party.
'We have full faith and trust in the Prime Minister and we believe that he will do something (positive) on this matter,' he said.
The five, including a newly sworn-in state lawmaker, were held under the ISA after enraging the government in November by mounting a mass rally alleging discrimination against minority ethnic Indians. -- AFP
Blogger detained under ISA for 2 yrs
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(KUALA LUMPUR) Malaysia's most prominent blogger has been ordered to spend two years in detention under internal security laws after being accused of insulting Islam, his wife said yesterday.
Raja Petra: Has been accused of insulting Islam and inciting hate in his website articles on Islam
Raja Petra Kamaruddin, a government critic and founder of the Malaysia Today website, has been sent to the Kamunting detention centre in northern Perak state on the order of the Home Minister, his wife Marina Lee Abdullah told AFP.
His arrest earlier this month was part of a crackdown amid a political crisis in Malaysia, as Prime Minister Abdullah Badawi faces calls to quit from within his Cabinet and a mounting challenge by the Opposition.
'(Police) said my husband has been sent to Kamunting this morning and that he will remain there for two years with no trial. This is the worst news I can receive but we will keep fighting for his release,' Ms Marina said.
Raja Petra's lawyer Amarjit Sidhu said the government had pulled a 'mean, dirty trick' by issuing the detention order the night before a scheduled court hearing yesterday to secure his release.
'The government can now hide behind a veil of secrecy because they do not have to disclose reasons for detaining him,' he told AFP.
Raja Petra was detained under the tough Internal Security Act (ISA) for allegedly 'insulting Islam and publishing articles on his website, which has tarnished the country's leadership to the point of causing confusion among the people', his wife said.
He was also accused of inciting hate in his articles on Islam - a serious offence in predominantly Muslim Malaysia.
Raja Petra is best known for his articles on politics, and has already been charged with sedition and defamation for linking Deputy Prime Minister Najib Razak and his wife to the sensational murder of a Mongolian woman.
Raja Petra was rounded up earlier this month along with an opposition lawmaker and a journalist but the other two were quickly released.
Their arrests triggered the resignation of Zaid Ibrahim, a Cabinet minister in charge of legal affairs, as well as calls from within the ruling coalition for the security law to be abolished.
Meanwhile, Samy Vellu, president of the Malaysian Indian Congress, the third largest party in the ruling National Front coalition, urged the government to free five activists held under the ISA since last December.
Mr Samy met Prime Minister Abdullah yesterday to discuss the releases amid mounting pressure for their freedom from within the Indian leader's party.
'We have full faith and trust in the Prime Minister and we believe that he will do something (positive) on this matter,' he said.
The five, including a newly sworn-in state lawmaker, were held under the ISA after enraging the government in November by mounting a mass rally alleging discrimination against minority ethnic Indians. -- AFP
Published September 24, 2008
M'sia current account surplus up 56% in Q2
But portfolio investments swing to a net outflow of RM24b from Q1
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIA'S current account surplus continued to expand strongly in the second quarter of this year, growing almost 56 per cent to RM37 billion (S$15.31 billion) on higher commodity prices. But a blip in the rosy picture was a strong reversal of portfolio investments - a net outflow of RM24 billion in Q2 versus a net inflow of just over RM21 billion in Q1.
Economists say that the current account surplus is likely to narrow in the coming months, due to falling commodity prices. They also foresee a larger outflow from the financial account as more portfolio funds are withdrawn from Malaysia on concern that the ringgit would continue to depreciate, and a possible slowdown in foreign direct investment given the softer economy and political intrigue. Local investors are also expected to increasingly transfer money abroad.
An economist, who did not want to be named, said that there is no cause for concern yet despite the drop in the financial account - it registered a net outflow of RM12.3 billion in Q2 versus an inflow of almost RM26 billion Q1 - unless there is a huge fall in the Q3.
'The current account surplus is still strong despite the outflow of capital,' he said, noting the current account trend is 'a reflection of investors' mood and commodity prices'.
The surplus is sufficiently large to provide support to the economy. But falling commodity prices - crude oil and crude palm oil are down from their peaks - are anticipated to result in a narrower current account surplus in Q3.
Even so, Malaysia's international reserves were a comfortable RM388 billion at mid-September - enough to finance nine months of retained imports.
But in the two-and-a-half-month period from June to mid-September, more than RM20 billion was erased from the reserves, partly because of the weaker ringgit, but also due to portfolio fund outflows.
Economists expect Q3 data to reflect continued portfolio outflows, a trend that can be seen in stockmarket activity. There are also signs that foreign firms are accelerating the repatriation of profits. Multinationals either plan to reinvest less because of economic and political uncertainty or want to transfer funds out in anticipation that the ringgit would not gain in value.
M'sia current account surplus up 56% in Q2
But portfolio investments swing to a net outflow of RM24b from Q1
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIA'S current account surplus continued to expand strongly in the second quarter of this year, growing almost 56 per cent to RM37 billion (S$15.31 billion) on higher commodity prices. But a blip in the rosy picture was a strong reversal of portfolio investments - a net outflow of RM24 billion in Q2 versus a net inflow of just over RM21 billion in Q1.
Economists say that the current account surplus is likely to narrow in the coming months, due to falling commodity prices. They also foresee a larger outflow from the financial account as more portfolio funds are withdrawn from Malaysia on concern that the ringgit would continue to depreciate, and a possible slowdown in foreign direct investment given the softer economy and political intrigue. Local investors are also expected to increasingly transfer money abroad.
An economist, who did not want to be named, said that there is no cause for concern yet despite the drop in the financial account - it registered a net outflow of RM12.3 billion in Q2 versus an inflow of almost RM26 billion Q1 - unless there is a huge fall in the Q3.
'The current account surplus is still strong despite the outflow of capital,' he said, noting the current account trend is 'a reflection of investors' mood and commodity prices'.
The surplus is sufficiently large to provide support to the economy. But falling commodity prices - crude oil and crude palm oil are down from their peaks - are anticipated to result in a narrower current account surplus in Q3.
Even so, Malaysia's international reserves were a comfortable RM388 billion at mid-September - enough to finance nine months of retained imports.
But in the two-and-a-half-month period from June to mid-September, more than RM20 billion was erased from the reserves, partly because of the weaker ringgit, but also due to portfolio fund outflows.
Economists expect Q3 data to reflect continued portfolio outflows, a trend that can be seen in stockmarket activity. There are also signs that foreign firms are accelerating the repatriation of profits. Multinationals either plan to reinvest less because of economic and political uncertainty or want to transfer funds out in anticipation that the ringgit would not gain in value.
Published September 24, 2008
Fresh hope in trying times
By SIOW LI SEN
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SEPT 15, 2008 will be marked as the starting day of the worst crisis for the many denizens of Suntec City, Raffles Place and Shenton Way. But that did not stop the staff of Royal Bank of Scotland (RBS) at One Raffles Quay in celebrating the launch of their rebranded royal-preferred banking in Singapore. Credit crunch or not, business must go on.
At a press conference, senior RBS managers downplayed the impact which the latest developments rocking the financial markets might have on their bank's expansion plans in Asia, in particular Singapore.
Although they did warn of challenging headwinds and that growth has to be brought down, they said Asia will still be an important engine for RBS.
Since buying ABN Amro last year, which meant taking over its retail and wholesale banking businesses (the private bank and asset management went to Fortis), RBS has wasted no time in integrating its operations with the Dutch bank and putting in place plans to grow its Asia operations.
RBS expects Asia to contribute 10 per cent to group revenues by 2010, up from 2.33 per cent now. In Singapore, this will partly come from opening two more branches by end-2009, bringing RBS' network to seven. RBS intends to hire 25 per cent more staff, mainly in sales, as it hopes to expand its offerings to affluent customers, defined as those with $200,000 in assets.
On the corporate side, RBS will be able to offer clients more 'powerful' services from the merged entity, they said.
It is undoubtedly good news that even as one bank (Lehman Brothers) fails and another (Merrill Lynch) gets sold off, there are those such as RBS which are gung-ho and ready for more action.
All this means more pressure on the three local banks - DBS Bank, United Overseas Bank and OCBC Bank - and the other foreign banks.
RBS may not be able to eat into their market share, but for sure it will try - and this typically means cutting prices, and offering freebies to lure customers.
If the others want to protect their customer bases, then it will lead to a round of price cuts and sliding margins.
Singapore is a rich market for banks. On the consumer side, Singapore has emerged as the market with the greatest concentration of 'millionaire' households - defined as those with assets under management of at least US$1 million. They account for an 'astounding' 10.6 per cent of all households here, said Boston Consulting Group in a report this month.
Despite the impressive statistic, Singapore is a small market in absolute terms and it is likely to result in smaller profits for all the banks as they slug it out to attract customers, especially in trying times such as these.
Corporates are relatively under-leveraged, though the economic slowdown will put many under pressure.
As the slide in prices continues, those heavily exposed to the property market - individuals as well as companies - will contribute to more defaults and bankruptcies.
One optimistic reading is that with some of the biggest banks out of the picture, and also the tightening of credit, pricing power will return to the market.
Banking for the next several years, at least until the volatility settles, will return to basics - collecting deposits and making loans - rather than structuring complex products which nobody understands, and earning fat fees for doing so.
Bankers may even revert to what they were before - stuffy and boring - rather than glamorous.
Fresh hope in trying times
By SIOW LI SEN
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SEPT 15, 2008 will be marked as the starting day of the worst crisis for the many denizens of Suntec City, Raffles Place and Shenton Way. But that did not stop the staff of Royal Bank of Scotland (RBS) at One Raffles Quay in celebrating the launch of their rebranded royal-preferred banking in Singapore. Credit crunch or not, business must go on.
At a press conference, senior RBS managers downplayed the impact which the latest developments rocking the financial markets might have on their bank's expansion plans in Asia, in particular Singapore.
Although they did warn of challenging headwinds and that growth has to be brought down, they said Asia will still be an important engine for RBS.
Since buying ABN Amro last year, which meant taking over its retail and wholesale banking businesses (the private bank and asset management went to Fortis), RBS has wasted no time in integrating its operations with the Dutch bank and putting in place plans to grow its Asia operations.
RBS expects Asia to contribute 10 per cent to group revenues by 2010, up from 2.33 per cent now. In Singapore, this will partly come from opening two more branches by end-2009, bringing RBS' network to seven. RBS intends to hire 25 per cent more staff, mainly in sales, as it hopes to expand its offerings to affluent customers, defined as those with $200,000 in assets.
On the corporate side, RBS will be able to offer clients more 'powerful' services from the merged entity, they said.
It is undoubtedly good news that even as one bank (Lehman Brothers) fails and another (Merrill Lynch) gets sold off, there are those such as RBS which are gung-ho and ready for more action.
All this means more pressure on the three local banks - DBS Bank, United Overseas Bank and OCBC Bank - and the other foreign banks.
RBS may not be able to eat into their market share, but for sure it will try - and this typically means cutting prices, and offering freebies to lure customers.
If the others want to protect their customer bases, then it will lead to a round of price cuts and sliding margins.
Singapore is a rich market for banks. On the consumer side, Singapore has emerged as the market with the greatest concentration of 'millionaire' households - defined as those with assets under management of at least US$1 million. They account for an 'astounding' 10.6 per cent of all households here, said Boston Consulting Group in a report this month.
Despite the impressive statistic, Singapore is a small market in absolute terms and it is likely to result in smaller profits for all the banks as they slug it out to attract customers, especially in trying times such as these.
Corporates are relatively under-leveraged, though the economic slowdown will put many under pressure.
As the slide in prices continues, those heavily exposed to the property market - individuals as well as companies - will contribute to more defaults and bankruptcies.
One optimistic reading is that with some of the biggest banks out of the picture, and also the tightening of credit, pricing power will return to the market.
Banking for the next several years, at least until the volatility settles, will return to basics - collecting deposits and making loans - rather than structuring complex products which nobody understands, and earning fat fees for doing so.
Bankers may even revert to what they were before - stuffy and boring - rather than glamorous.
Published September 24, 2008
Move to help Lehman 'victims' gathers pace
MAS asks banks to see what can be done for Minibond, High Notes investors
By SIOW LI SEN
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(SINGAPORE) Efforts are underway to see if anything can be done to help angry investors, who claim that they were misled into buying the now worthless Lehman structured products.
Picking up the pieces: MAS says it is 'in close contact with financial institutions that sold or issued structured products linked to Lehman, and has asked them to expedite their assessments of how investors will be affected'
The Monetary Authority of Singapore (MAS) is believed also to be involved in heavy-duty discussions with the financial institutions (FI) that were involved in selling the Minibonds and High Notes arranged by Lehman Brothers, which went bankrupt last week.
'MAS is in close contact with the FIs that sold or issued structured products which are linked to Lehman Brothers, and has asked them to expedite their assessments of how investors will be affected,' an MAS spokeswoman said last night.
As a regulator, MAS can punish FIs if there is evidence of a breach in regulations though it cannot force them to pay compensation.
Meanwhile, banks worried about their liability have begun consulting lawyers. A number of law firms including Wong Partnership, Drew & Napier and KhattarWong are acting for the nine banks, brokers and Hong Leong Finance, which had sold the structured products.
Over half-a-billion dollars worth of these products were sold over the last two years. But investors may find it more difficult to get legal recourse as they would have signed iron- clad contracts.
In Hong Kong, a lawmaker is leading the charge on behalf of investors there who too have lost HK$12.7 billion (S$2.3 billion) in Lehman Minibonds. Albert Ho, chairman of the Democratic Party and a lawyer, told the media that investors will meet Hong Kong's Consumer Council tomorrow to see if they can get legal and financial assistance to try and recoup their losses.
Meanwhile, in Singapore, Tan Kin Lian, former NTUC Income chief executive, is trying to arrange a meeting with aggrieved investors to discuss taking collective action.
'I've not decided what to do for them yet,' he said last night.
There are several aspects to consider. 'It'll be pretty messy because the products were bought from different people. How to pull it off?' said Martin Lee, who had bought $10,000 worth of Minibonds.
'Banks are going to say 'look at the contracts',' said Subhas Anandan, president of the Association of Criminal Lawyers of Singapore. 'If a lot of investors came forward and there is some sort of pattern - despite the contract - it may help,' said Mr Anandan.
Lawyers say investors can band together and collect fees from everyone to take representative action - similar to the Raffles Town Club case, where 5,000 members each paid $300 to sue for compensation.
But that involves a lot of work, said Alan Lee, who spent more than four years getting members together to fight the Raffles Town Club case.
MAS has said investors can bring their complaints to the Financial Industry Disputes Resolution Centre. From 2005 to 2007, out of 130 cases which were adjudicated, 25 monetary awards were in favour of consumers.
Some banks told BT they are working hard to help investors.
DBS spokeswoman Karen Ngui said the bank 'has devoted additional resources to deal with customer concerns and we are treating this matter with the priority and importance it deserves'.
Move to help Lehman 'victims' gathers pace
MAS asks banks to see what can be done for Minibond, High Notes investors
By SIOW LI SEN
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(SINGAPORE) Efforts are underway to see if anything can be done to help angry investors, who claim that they were misled into buying the now worthless Lehman structured products.
Picking up the pieces: MAS says it is 'in close contact with financial institutions that sold or issued structured products linked to Lehman, and has asked them to expedite their assessments of how investors will be affected'
The Monetary Authority of Singapore (MAS) is believed also to be involved in heavy-duty discussions with the financial institutions (FI) that were involved in selling the Minibonds and High Notes arranged by Lehman Brothers, which went bankrupt last week.
'MAS is in close contact with the FIs that sold or issued structured products which are linked to Lehman Brothers, and has asked them to expedite their assessments of how investors will be affected,' an MAS spokeswoman said last night.
As a regulator, MAS can punish FIs if there is evidence of a breach in regulations though it cannot force them to pay compensation.
Meanwhile, banks worried about their liability have begun consulting lawyers. A number of law firms including Wong Partnership, Drew & Napier and KhattarWong are acting for the nine banks, brokers and Hong Leong Finance, which had sold the structured products.
Over half-a-billion dollars worth of these products were sold over the last two years. But investors may find it more difficult to get legal recourse as they would have signed iron- clad contracts.
In Hong Kong, a lawmaker is leading the charge on behalf of investors there who too have lost HK$12.7 billion (S$2.3 billion) in Lehman Minibonds. Albert Ho, chairman of the Democratic Party and a lawyer, told the media that investors will meet Hong Kong's Consumer Council tomorrow to see if they can get legal and financial assistance to try and recoup their losses.
Meanwhile, in Singapore, Tan Kin Lian, former NTUC Income chief executive, is trying to arrange a meeting with aggrieved investors to discuss taking collective action.
'I've not decided what to do for them yet,' he said last night.
There are several aspects to consider. 'It'll be pretty messy because the products were bought from different people. How to pull it off?' said Martin Lee, who had bought $10,000 worth of Minibonds.
'Banks are going to say 'look at the contracts',' said Subhas Anandan, president of the Association of Criminal Lawyers of Singapore. 'If a lot of investors came forward and there is some sort of pattern - despite the contract - it may help,' said Mr Anandan.
Lawyers say investors can band together and collect fees from everyone to take representative action - similar to the Raffles Town Club case, where 5,000 members each paid $300 to sue for compensation.
But that involves a lot of work, said Alan Lee, who spent more than four years getting members together to fight the Raffles Town Club case.
MAS has said investors can bring their complaints to the Financial Industry Disputes Resolution Centre. From 2005 to 2007, out of 130 cases which were adjudicated, 25 monetary awards were in favour of consumers.
Some banks told BT they are working hard to help investors.
DBS spokeswoman Karen Ngui said the bank 'has devoted additional resources to deal with customer concerns and we are treating this matter with the priority and importance it deserves'.
Published September 24, 2008
COMMENTARY
SGX short-selling measures fall short
Regulator hasn't addressed the heart of the short-selling equation: the quantities and names of scrip lent to short-sellers
By RSIVANITHY
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AFTER resisting for years suggestions made in this newspaper to improve transparency relating to short-selling and the buying-in market (BT, Nov 16, 2004, 'Revive cash market to run in tandem with buying-in'; April 24, 2007, 'Time for exchange to relook buying-in process'; and June 18, 2007, 'Being fairer to investors'), the Singapore Exchange (SGX) on Monday finally caved in - not to calls from the media but presumably to pressure from the public to accompany other exchanges that have banned 'naked' short-selling.
Thankfully, SGX has at least stayed true to its long-time position that no outright ban is needed as long as the deterrents are sufficient. And news that there will be daily disclosure of outstanding short positions and the buying-in list is welcome.
However, in trying to demonstrate solidarity with its peers around the globe, SGX has acted too hastily, in imposing a minimum $1,000 fine on failed trades which have to be bought-in later.
Worse, it appears from buying-in figures released under the new measures that naked short-selling is not a problem in the local market - which in turn means that the focus should really have been on disclosure of covered positions. Unfortunately, this was not addressed.
Let's consider, first, the official reluctance to outlaw shorting. This is a controversial stand given that other countries are in effect making shorting temporarily illegal.
But, on balance, it is the correct approach since in a free market, there should be minimal regulatory interference to bias prices in any particular direction. Still, recognising that the sale of something not owned can raise moral and ethical issues, the exchange has always had in place a set of rules aimed at deterring the activity via punitive buying-in costs.
That this system is actually working well in discouraging naked shorts can be seen from the list of bought-in stocks yesterday that was published on SGX's website. These were for positions left uncovered (or naked) on Wednesday, Sept 17, when the Straits Times Index plunged 42 points to 2,419 and when $1.4 billion was traded.
Yesterday's buying-in, however, involved only 45 counters excluding warrants, with the smallest buying-in quantity being 320 shares of M1 and the largest being 138,147 shares of China Hongxing Sports. Can such small quantities be reasonably said to have aggravated the drop that day? Also, buying-in on Monday, which was for naked shorts on Tuesday, Sept 16 - when the STI dropped 25 points and the market traded $1.6 billion - amounted to only $7.4 million, of which $4.2 million came from one stock (China Hongxing Sports).
In other words, naked shorts accounted for less than 0.5 per cent of turnover that day - again, insignificant.
Unnecessary move
This means that buying-in details released by SGX so far confirm that naked short-selling cannot be a major factor in aggravating the market's declines and that the exchange's deterrent mechanism is functioning properly.
(Of course, intra-day shorting could aggravate a downward slide but these sellers have to buy before 5pm, and in so doing provide support before the end of the day.)
The final proof came yesterday when, despite the new measures, the STI plunged 67 points or 2.7 per cent to 2,476.
All of this suggests that the latest move to fine naked shorts at least 5 per cent of their trades subject to a $1,000 minimum is clearly an overreaction and not necessary. None of the figures above suggests an intent to systematically engineer a collapse, so the parties that will end up being penalised will most probably be inadvertent, innocent retail investors.
Moreover, SGX has not addressed the heart of the short-selling equation: the quantities and names of scrip that have been lent to those seeking to short the market.
Known as 'covered' shorts, information relating to these positions would be just as useful to the public as releasing the list of stocks to be bought-in every day.
Hong Kong recognises this and, twice a day, its exchange releases a report summarising the stocks which have been borrowed and the quantities lent.
Here, SGX and several other houses offer scrip borrowing and lending (SBL). The exchange should compile data on outstanding positions from all SBL providers and publish this information as soon as possible after the market closes every day.
This was not addressed in the Monday announcement; instead, all energies were aimed at the insignificant naked shorts.
You'd have to say that insofar as the intention was to enhance disclosure and help investors' decision- making, SGX's Monday move to fine naked shorts has not only missed the mark, it has also fallen short.
COMMENTARY
SGX short-selling measures fall short
Regulator hasn't addressed the heart of the short-selling equation: the quantities and names of scrip lent to short-sellers
By RSIVANITHY
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AFTER resisting for years suggestions made in this newspaper to improve transparency relating to short-selling and the buying-in market (BT, Nov 16, 2004, 'Revive cash market to run in tandem with buying-in'; April 24, 2007, 'Time for exchange to relook buying-in process'; and June 18, 2007, 'Being fairer to investors'), the Singapore Exchange (SGX) on Monday finally caved in - not to calls from the media but presumably to pressure from the public to accompany other exchanges that have banned 'naked' short-selling.
Thankfully, SGX has at least stayed true to its long-time position that no outright ban is needed as long as the deterrents are sufficient. And news that there will be daily disclosure of outstanding short positions and the buying-in list is welcome.
However, in trying to demonstrate solidarity with its peers around the globe, SGX has acted too hastily, in imposing a minimum $1,000 fine on failed trades which have to be bought-in later.
Worse, it appears from buying-in figures released under the new measures that naked short-selling is not a problem in the local market - which in turn means that the focus should really have been on disclosure of covered positions. Unfortunately, this was not addressed.
Let's consider, first, the official reluctance to outlaw shorting. This is a controversial stand given that other countries are in effect making shorting temporarily illegal.
But, on balance, it is the correct approach since in a free market, there should be minimal regulatory interference to bias prices in any particular direction. Still, recognising that the sale of something not owned can raise moral and ethical issues, the exchange has always had in place a set of rules aimed at deterring the activity via punitive buying-in costs.
That this system is actually working well in discouraging naked shorts can be seen from the list of bought-in stocks yesterday that was published on SGX's website. These were for positions left uncovered (or naked) on Wednesday, Sept 17, when the Straits Times Index plunged 42 points to 2,419 and when $1.4 billion was traded.
Yesterday's buying-in, however, involved only 45 counters excluding warrants, with the smallest buying-in quantity being 320 shares of M1 and the largest being 138,147 shares of China Hongxing Sports. Can such small quantities be reasonably said to have aggravated the drop that day? Also, buying-in on Monday, which was for naked shorts on Tuesday, Sept 16 - when the STI dropped 25 points and the market traded $1.6 billion - amounted to only $7.4 million, of which $4.2 million came from one stock (China Hongxing Sports).
In other words, naked shorts accounted for less than 0.5 per cent of turnover that day - again, insignificant.
Unnecessary move
This means that buying-in details released by SGX so far confirm that naked short-selling cannot be a major factor in aggravating the market's declines and that the exchange's deterrent mechanism is functioning properly.
(Of course, intra-day shorting could aggravate a downward slide but these sellers have to buy before 5pm, and in so doing provide support before the end of the day.)
The final proof came yesterday when, despite the new measures, the STI plunged 67 points or 2.7 per cent to 2,476.
All of this suggests that the latest move to fine naked shorts at least 5 per cent of their trades subject to a $1,000 minimum is clearly an overreaction and not necessary. None of the figures above suggests an intent to systematically engineer a collapse, so the parties that will end up being penalised will most probably be inadvertent, innocent retail investors.
Moreover, SGX has not addressed the heart of the short-selling equation: the quantities and names of scrip that have been lent to those seeking to short the market.
Known as 'covered' shorts, information relating to these positions would be just as useful to the public as releasing the list of stocks to be bought-in every day.
Hong Kong recognises this and, twice a day, its exchange releases a report summarising the stocks which have been borrowed and the quantities lent.
Here, SGX and several other houses offer scrip borrowing and lending (SBL). The exchange should compile data on outstanding positions from all SBL providers and publish this information as soon as possible after the market closes every day.
This was not addressed in the Monday announcement; instead, all energies were aimed at the insignificant naked shorts.
You'd have to say that insofar as the intention was to enhance disclosure and help investors' decision- making, SGX's Monday move to fine naked shorts has not only missed the mark, it has also fallen short.
Published September 24, 2008
Paulson minces no words to get second 'bazooka'
US Treasury chief works to head off opposition to bailout plan in Senate testimony
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(WASHINGTON) US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke yesterday urged Congress to act swiftly to put in place a US$700 billion financial system bailout, warning delay would put the economy at risk.
Testifying before a sometimes-sceptical Senate Banking Committee, they said financial markets were in serious stress and needed to be stabilised quickly by cleansing them of illiquid assets.
In his opening statement, Mr Paulson praised Congress for its previous actions, which gave the Treasury new powers to take over mortgage-finance companies Fannie Mae and Freddie Mac.
'To the comments made about Fannie and Freddie and a bazooka, you all can be darn glad you gave us the bazooka, because we needed it,' Mr Paulson told the panel. In July, Mr Paulson referred to the authority to take over Fannie and Freddie as having a 'bazooka' to stabilise mortgage markets.
Mr Paulson said the new powers he sought were essential for the US to deal with a housing crisis.
He wants lawmakers to approve a massive war chest, funded by taxpayers, to buy distressed debt from financial institutions to try to keep credit markets from choking up.
Lawmakers have vowed to move without delay, but also are insisting on changes. These include more protection for taxpayers and limits on compensation for executives of firms that would be offloading their bad assets onto the government.
'Action by Congress is urgently required to stabilise the situation and avert what could otherwise be very serious consequences for our financial markets and our economy,' Mr Bernanke said.
A rising tide of US home foreclosures and loan defaults has spawned the greatest financial crisis since the Great Depression and, after a series of emergency actions to bolster individual financial firms, US authorities say they must now try to save the system as a whole.
Mr Paulson said the broader economy was under threat and said it was essential to move decisively beyond the case-by-case approach followed in the government takeover of Fannie and Freddie and the bailout of insurer American International Group.
'We saw market turmoil reach a new level last week, and spill over into the rest of the economy,' Mr Paulson said. 'We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil.'
White House spokesman Tony Fratto, asked what would happen if the bailout plan cannot be put in place this week, replied: 'You should think of that as unthinkable.'
Analysts said it appeared Mr Paulson and Mr Bernanke were trying to head off opposition to the bailout plan in Congress by stressing the dire consequences of failing to move quickly.
'The policy war on the financial crisis is as much about the psychological impact as about real intervention. It's no surprise, therefore, that the engineers behind the bank remedy plan are calling for fast implementation,' said Lena Komileva, G7 market economist at Tullet Prebon in London.
Mr Paulson said there was 'bipartisan consensus' for a quick legislative solution to the crisis and he urged Congress to 'avoid slowing it down with other provisions that are unrelated or don't have broad support'. However, he and Mr Bernanke provided few clues as to how they view separate add-on provisions suggested by lawmakers.
In addition to curbing executive pay and adding more safeguards for taxpayers, congressional Democrats also want to add assistance for homeowners facing foreclosure.
Mr Bernanke said financial market stress was worsening and said that heightened the urgency of a bailout plan. 'If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse,' he said. 'At this juncture, in light of the fast-moving developments, it is essential to deal with the crisis at hand.' - Reuters, Bloomberg
Paulson minces no words to get second 'bazooka'
US Treasury chief works to head off opposition to bailout plan in Senate testimony
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(WASHINGTON) US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke yesterday urged Congress to act swiftly to put in place a US$700 billion financial system bailout, warning delay would put the economy at risk.
Testifying before a sometimes-sceptical Senate Banking Committee, they said financial markets were in serious stress and needed to be stabilised quickly by cleansing them of illiquid assets.
In his opening statement, Mr Paulson praised Congress for its previous actions, which gave the Treasury new powers to take over mortgage-finance companies Fannie Mae and Freddie Mac.
'To the comments made about Fannie and Freddie and a bazooka, you all can be darn glad you gave us the bazooka, because we needed it,' Mr Paulson told the panel. In July, Mr Paulson referred to the authority to take over Fannie and Freddie as having a 'bazooka' to stabilise mortgage markets.
Mr Paulson said the new powers he sought were essential for the US to deal with a housing crisis.
He wants lawmakers to approve a massive war chest, funded by taxpayers, to buy distressed debt from financial institutions to try to keep credit markets from choking up.
Lawmakers have vowed to move without delay, but also are insisting on changes. These include more protection for taxpayers and limits on compensation for executives of firms that would be offloading their bad assets onto the government.
'Action by Congress is urgently required to stabilise the situation and avert what could otherwise be very serious consequences for our financial markets and our economy,' Mr Bernanke said.
A rising tide of US home foreclosures and loan defaults has spawned the greatest financial crisis since the Great Depression and, after a series of emergency actions to bolster individual financial firms, US authorities say they must now try to save the system as a whole.
Mr Paulson said the broader economy was under threat and said it was essential to move decisively beyond the case-by-case approach followed in the government takeover of Fannie and Freddie and the bailout of insurer American International Group.
'We saw market turmoil reach a new level last week, and spill over into the rest of the economy,' Mr Paulson said. 'We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil.'
White House spokesman Tony Fratto, asked what would happen if the bailout plan cannot be put in place this week, replied: 'You should think of that as unthinkable.'
Analysts said it appeared Mr Paulson and Mr Bernanke were trying to head off opposition to the bailout plan in Congress by stressing the dire consequences of failing to move quickly.
'The policy war on the financial crisis is as much about the psychological impact as about real intervention. It's no surprise, therefore, that the engineers behind the bank remedy plan are calling for fast implementation,' said Lena Komileva, G7 market economist at Tullet Prebon in London.
Mr Paulson said there was 'bipartisan consensus' for a quick legislative solution to the crisis and he urged Congress to 'avoid slowing it down with other provisions that are unrelated or don't have broad support'. However, he and Mr Bernanke provided few clues as to how they view separate add-on provisions suggested by lawmakers.
In addition to curbing executive pay and adding more safeguards for taxpayers, congressional Democrats also want to add assistance for homeowners facing foreclosure.
Mr Bernanke said financial market stress was worsening and said that heightened the urgency of a bailout plan. 'If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse,' he said. 'At this juncture, in light of the fast-moving developments, it is essential to deal with the crisis at hand.' - Reuters, Bloomberg
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