Published December 20, 2008
Property stocks rally on China's fiscal boost
But measures might have limited impact on reviving sales amid tough economic conditions, analysts say
By JAMIE LEE
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leePROPERTY stocks savoured a sweet respite over the last two days from the market gloom after China announced plans to boost the real estate market.
LIGHTER TAX BURDEN
The Chinese government will abolish urban real estate tax and cut the transaction tax for properties with ownership of two years or less
But the rally is likely to be short-lived, some analysts argued, noting that the measures might have a limited impact on propping up sales amid a difficult economic climate.
The Chinese government said on Wednesday that it would abolish urban real estate tax, as well as cut the transaction tax for properties with ownership of two years or less.
It added that it would encourage banks to extend credit lines to developments in the mass-market housing segment.
Bigwigs in the property market - CapitaLand and Keppel Land - saw the biggest jump among sector peers with their exposure to the mid-tier Chinese market.
Shares of property bigwig CapitaLand surged 16.6 per cent over the last two days to end at $3.30 yesterday while shares of Keppel Land jumped 20.9 per cent to finish at $1.79.
Yanlord Land Group - which targets the Chinese luxury segment - rose on the dovetails of the rally in property stocks on Thursday, rising 17.4 per cent to $1.01.
But the stock fell back 2 per cent to 99 cents yesterday, with analysts noting that these measures are not targeted at luxury players.
'As the overall policy still focuses on supporting the housing needs of the low to middle income homebuyers, high-end developers might not benefit substantially from these changes,' wrote DBS Vickers Securities analyst Carol Wu.
'While the policy environment has continued to improve, full recovery of the sector remains uncertain amid the deteriorating economic outlook,' she said, adding that excessive inventory would prompt developers to cut prices and that the property downcycle trend in China could drag on for as long as two years.
Reuters reported yesterday that an analyst from Morgan Stanley saw the sharp increases in shares of Keppel Land as 'premature and unjustifiable' as solvency and refinancing risks were non-issues for the firm.
It would take time before such fiscal measures filter down to the provinces, said Brandon Lee, an analyst from DMG & Securities.
These steps are also aimed at cushioning a fall in demand rather than to engineer sales given the expected rise in unemployment in China, said Barclays Capital economist Leong Wai Ho.
Saturday, 20 December 2008
Published December 20, 2008
Bank staff fretting over jobs, not bonuses
Uncertainty said to be particularly bad at banks in the midst of being bought over or undergoing integration
By SIOW LI SEN
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IN a departure from their Christmas tradition, workers in Singapore's financial industry are not obsessed with their bonus - if any - this year, as they feel that job security is more important.
For those employed by US and European banks, the anxiety is especially acute because the perception is that critical decisions are taken at head office, regardless of the profitability of the Asian units.
The uncertainty is said to be particularly bad for those with banks in the midst of being bought over - such as Fortis - or undergoing integration such as Bank of America and Merrill Lynch.
'The bosses (the expats) are gone and I feel quite sorry for the staff,' said one BNP Paribas banker.
But a Fortis insider said that the anxiety is 'generic' and it's business as usual.
BNP Paribas said on Thursday that it was suspending its proposed purchase of Fortis but was still interested in a deal and was examining its legal options.
The fate of local Bank of America staff remains unclear after the financial giant said that it would slash 30,000 to 35,000 jobs worldwide over the next three years.
The bank employs more than 2,300 staff across the Asia-Pacific region, but it is not known how many work at its Republic Plaza office here. It also owns investment bank Merrill Lynch - acquired in a fire-sale deal during September's financial meltdown - which has a sizeable unit here. Merrill employs about 1,500 staff, providing both front and back-end services, in Singapore.
For the past decade, senior managers of international banks on trips to Asia would laud the rapid growth of operations here and often seek to increase headcount.
But now, with bank losses running into the billions, many of these banks are cutting staff by the thousands.
While the bulk of the layoffs are in New York or London, what tends to happen in Asia is that entire departments, previously profitable but considered 'non-core', are closed, or sold off to raise cash.
Layoffs in Europe so far have been relatively low, mainly because of stronger unions there.
But given such a backdrop, job security has become the No 1 concern.
'No one's talking about bonus. You're lucky if you still have a job,' said one gloomy ING director.
Dutch-owned ING, which received 10 billion euros (S$20.4 billion) of government money in October, has closed down its aviation finance business and sold its Taiwan insurance unit. Last week, it was reported that ING would close its commodities unit in London.
Credit Suisse early this month said that it would slash 5,300 jobs or 11 per cent of its global workforce by the middle of next year as it warned of the worst quarterly performance since it started quarterly reporting in 2001.
In Asia, more jobs will be lost in Singapore than Hong Kong, said Kai Nargolwala, Credit Suisse Asia-Pacific chief executive.
'That's not surprising when you consider that we have a Hong Kong headcount of about 2,000 people and we have a Singapore headcount of about 5,000,' he said.
As for bonus payments, staff may still get some, though, not surprisingly, the amounts would be lower than in 2007.
Citi Singapore spokesman Adam Rahman said that bonuses, if any, would reflect the tough environment. 'While Citi Singapore has seen stable growth across its businesses in 2008, we will be exercising extra prudence in awarding bonus packages given the unprecedentedly challenging year for the financial industry,' he said.
Serge Forti, chief executive of BNP Paribas Wealth Management, Asia Pacific, said that bonuses will still be paid though, obviously, they would be less than before.
A UBS spokeswoman told BT that 'compensation levels this year will, in part, be dictated by the profitability of the firm as well as the competitive environment'.
RBS, which expanded its operations in Asia following its ABN Amro Bank acquisition, said that final decisions on bonuses would be taken following the year-end results, once the performance of individual businesses is known.
'We are also mindful that we have 170,000 staff, very many of whom have done an outstanding job for us and need to be properly incentivised to keep doing that, and so it's making sure that that balance is responsibly taken,' said RBS group chief executive Steven Hester.
Bonuses were good at Maybank whose financial year-end is June. A Maybank spokeswoman said that bonuses for the financial year ended June 2008 was better than a year ago.
Among local banks, United Overseas Bank said that it would pay bonuses, taking into account the full year's performance. 'These are typically paid at the end of March the following year after the accounts are finalised.'
OCBC Bank spokeswoman Koh Ching Ching said that the bank would 'take into consideration the current economic conditions, the bank's overall performance and the individual employee's performance in our decision for bonus payout'.
DBS Group Holdings last month said that top managers and other staff would take home less pay this year due to lower bonuses, but their basic pay has not been cut.
Bank staff fretting over jobs, not bonuses
Uncertainty said to be particularly bad at banks in the midst of being bought over or undergoing integration
By SIOW LI SEN
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IN a departure from their Christmas tradition, workers in Singapore's financial industry are not obsessed with their bonus - if any - this year, as they feel that job security is more important.
For those employed by US and European banks, the anxiety is especially acute because the perception is that critical decisions are taken at head office, regardless of the profitability of the Asian units.
The uncertainty is said to be particularly bad for those with banks in the midst of being bought over - such as Fortis - or undergoing integration such as Bank of America and Merrill Lynch.
'The bosses (the expats) are gone and I feel quite sorry for the staff,' said one BNP Paribas banker.
But a Fortis insider said that the anxiety is 'generic' and it's business as usual.
BNP Paribas said on Thursday that it was suspending its proposed purchase of Fortis but was still interested in a deal and was examining its legal options.
The fate of local Bank of America staff remains unclear after the financial giant said that it would slash 30,000 to 35,000 jobs worldwide over the next three years.
The bank employs more than 2,300 staff across the Asia-Pacific region, but it is not known how many work at its Republic Plaza office here. It also owns investment bank Merrill Lynch - acquired in a fire-sale deal during September's financial meltdown - which has a sizeable unit here. Merrill employs about 1,500 staff, providing both front and back-end services, in Singapore.
For the past decade, senior managers of international banks on trips to Asia would laud the rapid growth of operations here and often seek to increase headcount.
But now, with bank losses running into the billions, many of these banks are cutting staff by the thousands.
While the bulk of the layoffs are in New York or London, what tends to happen in Asia is that entire departments, previously profitable but considered 'non-core', are closed, or sold off to raise cash.
Layoffs in Europe so far have been relatively low, mainly because of stronger unions there.
But given such a backdrop, job security has become the No 1 concern.
'No one's talking about bonus. You're lucky if you still have a job,' said one gloomy ING director.
Dutch-owned ING, which received 10 billion euros (S$20.4 billion) of government money in October, has closed down its aviation finance business and sold its Taiwan insurance unit. Last week, it was reported that ING would close its commodities unit in London.
Credit Suisse early this month said that it would slash 5,300 jobs or 11 per cent of its global workforce by the middle of next year as it warned of the worst quarterly performance since it started quarterly reporting in 2001.
In Asia, more jobs will be lost in Singapore than Hong Kong, said Kai Nargolwala, Credit Suisse Asia-Pacific chief executive.
'That's not surprising when you consider that we have a Hong Kong headcount of about 2,000 people and we have a Singapore headcount of about 5,000,' he said.
As for bonus payments, staff may still get some, though, not surprisingly, the amounts would be lower than in 2007.
Citi Singapore spokesman Adam Rahman said that bonuses, if any, would reflect the tough environment. 'While Citi Singapore has seen stable growth across its businesses in 2008, we will be exercising extra prudence in awarding bonus packages given the unprecedentedly challenging year for the financial industry,' he said.
Serge Forti, chief executive of BNP Paribas Wealth Management, Asia Pacific, said that bonuses will still be paid though, obviously, they would be less than before.
A UBS spokeswoman told BT that 'compensation levels this year will, in part, be dictated by the profitability of the firm as well as the competitive environment'.
RBS, which expanded its operations in Asia following its ABN Amro Bank acquisition, said that final decisions on bonuses would be taken following the year-end results, once the performance of individual businesses is known.
'We are also mindful that we have 170,000 staff, very many of whom have done an outstanding job for us and need to be properly incentivised to keep doing that, and so it's making sure that that balance is responsibly taken,' said RBS group chief executive Steven Hester.
Bonuses were good at Maybank whose financial year-end is June. A Maybank spokeswoman said that bonuses for the financial year ended June 2008 was better than a year ago.
Among local banks, United Overseas Bank said that it would pay bonuses, taking into account the full year's performance. 'These are typically paid at the end of March the following year after the accounts are finalised.'
OCBC Bank spokeswoman Koh Ching Ching said that the bank would 'take into consideration the current economic conditions, the bank's overall performance and the individual employee's performance in our decision for bonus payout'.
DBS Group Holdings last month said that top managers and other staff would take home less pay this year due to lower bonuses, but their basic pay has not been cut.
Published December 20, 2008
Size of the DPS behemoth
10,450 sold & uncompleted private homes under the DPS now; analysts worried about those getting TOP in 2010-11
By UMA SHANKARI
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SOME 10,450 sold and uncompleted private homes are now under the deferred payment scheme (DPS), according to official data released yesterday.
Of the amount, close to half - 4,560 units - will be completed in 2009, while another 2,540 homes will be completed in 2010, the Urban Redevelopment Authority (URA) said. Under the DPS, which was introduced by the government in October 1997 and withdrawn in October 2007, the bulk of the purchase price of a property is due only after a project obtains its temporary occupation permit (TOP).
The data was welcomed by both analysts and the Real Estate Developers' Association of Singapore (Redas). Over the past several months, many market watchers and analysts have been estimating how big an impact the DPS will have on developers' cashflow and earnings if buyers default on their homes as TOP approaches.
'I think it provides a clearer picture as to the extent of the problem,' said Citigroup's head of Singapore equity research, Chua Hak Bin. 'And it is good that the government acted to stop the system when it did. If not, things would have got a lot worse.'
Said Redas: 'URA data, together with data compiled by Redas, helps to allay concerns that speculators may repudiate their DPS purchases at below-market prices as the completion date nears.' In its statement, Redas highlighted 10 projects - including City Developments' The Sail and Keppel Land's Park Infinia - where the DPS was offered but full payment was still made to the developers once TOP was obtained.
For now, the real area of concern is thought to be the 2,540 units under the DPS that will obtain TOP in 2010.
Redas also said that while units may be affected by market sentiments, sales contracts cannot be repudiated easily.
URA's data proves that the DPS scheme was 'very popular', Citigroup's Dr Chua said. To arrive at its numbers, URA did a survey among property developers of uncompleted DPS-approved projects. In total, developers of 605 projects, comprising 72,384 units, were granted approval to offer the DPS. Of this amount, there were 18,208 sold but uncompleted units as at end-November this year. And of this figure, 10,450 (57 per cent) were still under the DPS.
The fact that the bulk of DPS units will be completed in 2009 is cause for some concern, analysts said. '2009 is going to be a tough year for the economy, and there are 4,650 units under the DPS that will be completed,' said Ku Swee Yong, director of marketing and business development at Savills Singapore.
But assuming a three-year construction period, a large proportion of the units that will obtain TOP in 2009 were probably launched and sold in 2006 and early 2007, at prices that are relatively lower than today's level or the expected level in 2009. So even if the property market continues to weaken in 2009, the owners of these 4,560 units could still lease out the homes or sell them, analysts said. However, if developers had offered the DPS to many sub-purchasers when the original purchasers sub-sell the units, then defaults could be expected.
But for now, the real area of concern is thought to be the 2,540 units under the DPS that will obtain TOP in 2010. Of this number, 1,270 of the units are located in the core central region (CCR), which includes Sentosa and Marina Bay.
'Generally, I'm more concerned over the units which will receive TOP in 2010-2011, which could have been purchased in 2007 at the peak of the property market,' said DMG & Partners Securities analyst Brandon Lee.
And while developers have the legal right to pursue buyers who walk away from their deals, it could be harder to do this when it comes to foreigners, said Knight Frank managing director Tan Tiong Cheng.
Normally, about 75-90 per cent of uncompleted private residential units will be bought by Singaporeans, said DMG's Mr Lee. But in 2007, the proportion fell to 63-68 per cent, with the remaining purchases made by PRs, foreigners and companies. 'We see this segment as the most likely to return their units,' he said. His back-of-the-envelope figure puts the amount expected to be returned as possibly somewhere between 20-30 per cent.
URA said that it provided the data to enable the public to make a better assessment of the private housing market. 'This information was provided by developers in confidence and with the understanding that data for individual projects would not be released to the public. Hence URA is only releasing aggregated data and not data for individual projects,' the government agency said.
'Conducting a survey of developers of all uncompleted DPS-approved projects requires a lot of time and resources from the developers as well as the government. Given that the number of uncompleted units sold under DPS is likely to decline as projects are completed over time, we will monitor the situation and consider whether there is a need to conduct further surveys in future,' URA said in response to a query from BT.
Size of the DPS behemoth
10,450 sold & uncompleted private homes under the DPS now; analysts worried about those getting TOP in 2010-11
By UMA SHANKARI
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SOME 10,450 sold and uncompleted private homes are now under the deferred payment scheme (DPS), according to official data released yesterday.
Of the amount, close to half - 4,560 units - will be completed in 2009, while another 2,540 homes will be completed in 2010, the Urban Redevelopment Authority (URA) said. Under the DPS, which was introduced by the government in October 1997 and withdrawn in October 2007, the bulk of the purchase price of a property is due only after a project obtains its temporary occupation permit (TOP).
The data was welcomed by both analysts and the Real Estate Developers' Association of Singapore (Redas). Over the past several months, many market watchers and analysts have been estimating how big an impact the DPS will have on developers' cashflow and earnings if buyers default on their homes as TOP approaches.
'I think it provides a clearer picture as to the extent of the problem,' said Citigroup's head of Singapore equity research, Chua Hak Bin. 'And it is good that the government acted to stop the system when it did. If not, things would have got a lot worse.'
Said Redas: 'URA data, together with data compiled by Redas, helps to allay concerns that speculators may repudiate their DPS purchases at below-market prices as the completion date nears.' In its statement, Redas highlighted 10 projects - including City Developments' The Sail and Keppel Land's Park Infinia - where the DPS was offered but full payment was still made to the developers once TOP was obtained.
For now, the real area of concern is thought to be the 2,540 units under the DPS that will obtain TOP in 2010.
Redas also said that while units may be affected by market sentiments, sales contracts cannot be repudiated easily.
URA's data proves that the DPS scheme was 'very popular', Citigroup's Dr Chua said. To arrive at its numbers, URA did a survey among property developers of uncompleted DPS-approved projects. In total, developers of 605 projects, comprising 72,384 units, were granted approval to offer the DPS. Of this amount, there were 18,208 sold but uncompleted units as at end-November this year. And of this figure, 10,450 (57 per cent) were still under the DPS.
The fact that the bulk of DPS units will be completed in 2009 is cause for some concern, analysts said. '2009 is going to be a tough year for the economy, and there are 4,650 units under the DPS that will be completed,' said Ku Swee Yong, director of marketing and business development at Savills Singapore.
But assuming a three-year construction period, a large proportion of the units that will obtain TOP in 2009 were probably launched and sold in 2006 and early 2007, at prices that are relatively lower than today's level or the expected level in 2009. So even if the property market continues to weaken in 2009, the owners of these 4,560 units could still lease out the homes or sell them, analysts said. However, if developers had offered the DPS to many sub-purchasers when the original purchasers sub-sell the units, then defaults could be expected.
But for now, the real area of concern is thought to be the 2,540 units under the DPS that will obtain TOP in 2010. Of this number, 1,270 of the units are located in the core central region (CCR), which includes Sentosa and Marina Bay.
'Generally, I'm more concerned over the units which will receive TOP in 2010-2011, which could have been purchased in 2007 at the peak of the property market,' said DMG & Partners Securities analyst Brandon Lee.
And while developers have the legal right to pursue buyers who walk away from their deals, it could be harder to do this when it comes to foreigners, said Knight Frank managing director Tan Tiong Cheng.
Normally, about 75-90 per cent of uncompleted private residential units will be bought by Singaporeans, said DMG's Mr Lee. But in 2007, the proportion fell to 63-68 per cent, with the remaining purchases made by PRs, foreigners and companies. 'We see this segment as the most likely to return their units,' he said. His back-of-the-envelope figure puts the amount expected to be returned as possibly somewhere between 20-30 per cent.
URA said that it provided the data to enable the public to make a better assessment of the private housing market. 'This information was provided by developers in confidence and with the understanding that data for individual projects would not be released to the public. Hence URA is only releasing aggregated data and not data for individual projects,' the government agency said.
'Conducting a survey of developers of all uncompleted DPS-approved projects requires a lot of time and resources from the developers as well as the government. Given that the number of uncompleted units sold under DPS is likely to decline as projects are completed over time, we will monitor the situation and consider whether there is a need to conduct further surveys in future,' URA said in response to a query from BT.
Friday, 19 December 2008
Published December 19, 2008
Most serious loss from blowouts is that of trust
By SIOW LI SEN
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A DISCLOSURE by the insurance arm of OCBC Bank on Wednesday on its exposure to Wall Street fraudster Bernard Madoff ended with the assurance that it 'will have no material impact on the group'.
Great Eastern Holdings (GEH), 87 per cent owned by OCBC, said that its exposure of about $64 million represents 0.14 per cent of the group's total assets of $45 billion as at Sept 30, 2008. But GEH also said that unit Lion Fairfield, acting as an agent, has sold about US$45 million of the Fairfield Sentry fund through private banking channels to accredited investors. Fairfield Sentry fund is reported to have placed US$7.3 billion solely with Madoff who was arrested last week in what US prosecutors said was a US$50 billion Ponzi scheme to defraud investors.
Retail investors who invested in the LionGlobal Flexi Fund too will suffer some loss. The LionGlobal Flexi Fund, which is sold to retail investors, has an investment of about $350,000 in the Fairfield Sentry fund. This investment represents less than 1.5 per cent of the LionGlobal Flexi Fund's portfolio as at Dec 11, 2008. Similar statements of 'no material impact' have also been made by some of the 10 financial institutions (FI) which sold the failed Lehman-linked products. Almost 10,000 retail investors bought products linked to now-bankrupt US investment bank Lehman Brothers, amounting to $501 million.
While the exposure is regarded as insignificant when placed against the billions of dollars of assets of the various FIs, the negative fallout is severe.
Since September when Lehman Brothers went bankrupt, the FIs have had to devote expensive management resources on complaints of mis-selling, answer to the regulator and repair their tarnished reputations.
The Monetary Authority of Singapore (MAS), also on Wednesday, revealed that it is interviewing senior managers of the 10 FIs as part of its investigations into the claims of mis-selling. The regulator, which has been pressing for the rapid conclusion into complaints of investors, said that all the FIs have teams working long hours to meet its review targets. In some cases, these teams comprise 100 to 120 case officers, the MAS said. That's a lot of people, who otherwise could be engaged in more productive work.
In addition, a whole battery of external consultants have been hired to advise on the issues. They include senior accountants and senior lawyers, including one of the most feared litigators in town, Davinder Singh, senior counsel and chief executive of Drew & Napier. All have to be paid for.
This has not included the legal challenges which the FIs will find themselves facing from some deep-pocketed aggrieved investors.
The most serious impact from these financial blowouts is arguably the loss of trust and confidence in our FIs, and probably the hardest to restore.
Published December 19, 2008
Major shareholder plans bid for Westcomb Financial
Asiasons' all-share offer prices target at its current $32.3m market value
By JAMIE LEE
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ASIASONS Capital, formerly known as Integra2000, has unveiled plans to take over Westcomb Financial Group through an all-share offer, pricing the target company at exactly its current market value of $32.3 million.
The offeror - which owns 24.72 per cent of the company - said yesterday that it intends to acquire the remaining shares that it does not already own at 18 cents apiece, which is also the price that Westcomb shares closed at yesterday.
This will be paid through a share issue of Asiasons Capital at 14 cents per share, working out to 1.2857 Asiasons shares for each Westcomb share. Asiasons, whose stock last traded also at 14 cents, plans to make the pre-conditional voluntary offer through wholly owned Asiasons Investment.
Asiasons expects to issue up to about 173.8 million new Asiasons shares, representing 16.7 per cent of its enlarged issue share capital.
Asiasons had earlier gone under the knife to transform its business from an IT company into an asset investment firm. The Catalist-listed company said that Westcomb was a 'strategic fit' that would allow the latter to tap on Asiasons' regional network in Singapore, Malaysia, Hong Kong and parts of China to broker deals and secure funding.
'(Asiasons) will also be able to tap onto the (Westcomb)'s expertise in corporate finance and research to enhance their private equity investment capabilities,' the company said.
Asiasons said that it plans to 'preserve the listing status' of Westcomb and would retain the management team, adding that it has no intention to introduce major business changes.
Shares of thinly traded Westcomb have fallen 28 per cent since the start of this year, compared with a near 50 per cent slump in the Straits Times Index.
The stock trades at a price-to-book (P/B) ratio of 0.81 times, which is higher than the two bigger brokering players, Kim Eng Holdings and UOB-Kay Hian.
Kim Eng trades at 0.63 times its P/B, while Singapore's largest brokerage UOB-Kay Hian trades at 0.74 times, Reuters data showed.
Westcomb, which was listed in 2004, was once the king of the initial public offering (IPO) markets, but took a hit in credibility after regulators served a temporary ban to issue IPOs.
In late 2005, the Singapore Exchange had stopped the company from issuing new IPOs for three months and called for the company to improve their levels of due diligence.
This was said to follow some concerns over the performance of the IPOs that it brought in, some of which issued profit warnings soon after they went public.
From early 2007, the brokerage also spent more than a year fighting, and eventually winning a lawsuit against a former remisier. The latter claimed that the firm had tried to poach clients and denied him of his commission.
Westcomb told BT this year that it was planning to raise a new fund of $50-$100 million with its partners, as part of its effort to diversify into the private equity business.
Published December 19, 2008
Sime clears hurdle to buy 51% of IJN
Takeover to ease funding of hospital, ensure market pay for doctors: Najib
By PAULINE NG
IN KUALA LUMPUR
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STATE-CONTROLLED plantations and automotive group Sime Darby yesterday said that it had received approval from the government for its proposed acquisition of a majority stake in IJN, Malaysia's leading heart hospital.
Sime Darby's statement came after the country's Deputy Prime Minister Najib Razak said earlier in the day that the government would not object to Sime buying a stake in IJN Holdings, which operates the hospital.
'Sime Darby . . . received approval-in-principle from the Government of Malaysia on the proposed acquisition of a 51 per cent equity stake in IJN,' the company said in a statement issued late yesterday.
Mr Najib said that as long as the National Heart Institute continued to cater to the needs of the poor, the government had no objection in principle to Sime Darby's proposal to take a stake in IJN, the Malay acronym that it is known by.
'We are in the process of finalising the matter with the Ministry of Health although in principle we have no objection to the proposal,' he told the media yesterday.
Sime had confirmed its interest in IJN to the stock exchange on Wednesday, stating that it had written to the government to express an interest in acquiring a stake in IJN Holdings - in which the Ministry of Finance (MOF) holds a 99.99 per cent stake. However, Sime did not reveal the stake or price that it was contemplating.
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Mr Najib rationalised that the proposed takeover of the one-stop heart specialist centre by Sime would make it easier for the hospital to obtain funding plus ensuring that its doctors were paid salaries that reflected market rates.
Few are convinced, with the proposal raising fears of a renewed intent on the government's part to privatise public assets.
'IJN is corporatised and the doctors, although drawn from the public hospitals, enjoy a better salary scale,' said a doctor who did not want to be named.
'Why is funding an issue,' he asked, pointing to MOF's ownership of IJN Holdings compared with other government hospitals which come under the Health Ministry.
Indeed, IJN's website said that it has treated over a million patients since its formation in 1992 and its expansion 'has been so remarkable, we achieved our goal of being financially self-sustaining within a year of operation'.
Mr Najib said that the government was examining IJN's role if ownership was transferred. He acknowledged that IJN was an important social programme as its rates are cheaper than most private hospitals and, the poor and civil servants only pay nominal charges. This is because the government subsidises the bulk of IJN patients' treatment.
Officials in the Health Ministry are said to be against the move, given that IJN is already recognised as a premier heart specialist centre, and did not see why Sime Darby, which already owns two medical groups and a nursing school, should be allowed to leverage it to further its own healthcare ambitions at the expense of the public.
Even the Malaysian Chinese Association - a major component of the ruling government - has said that it hopes that IJN would not be privatised.
Given the poor record of privatisation of government assets in Malaysia with little benefit to the people to speak of, there are grave suspicions that, warranties of good faith notwithstanding, IJN's fee structure would eventually be increased should the private sector take control.
Published December 19, 2008
Orderly bankruptcy for carmakers possible: White House
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(WASHINGTON) The Bush administration is seriously considering 'orderly' bankruptcy as a way of dealing with the desperately ailing US car industry.
Said White House press secretary Dana Perino yesterday: 'There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about.'
President George W Bush, asked about a car rescue plan during an appearance before a private group, said that he had not decided what he would do. But he, like Ms Perino, spoke of the idea of bankruptcies organised by the federal government as a possible way to go.
'Under normal circumstances, no question, bankruptcy court is the best way to work through credit and debt and restructuring,' he said. 'These aren't normal circumstances. That's the problem.'
Ms Perino said: 'The president is not going to allow a disorderly collapse of the companies. A disorderly collapse would be something very chaotic that is a shock to the system.'
She said that the White House was close to a decision and emphasised that there were still several possible approaches to assisting the carmakers, such as short-term loans out of a US$700 billion Wall Street rescue fund. -- AP
Published December 19, 2008
Madoff's wife under investigation
Evidence suggests she may have helped track payments
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(NEW YORK) Ruth Madoff, the 67-year-old wife of alleged fraud mastermind Bernard Madoff, is being investigated by US regulators over whether she helped maintain secret records used in a US$50 billion Ponzi scheme, a person familiar with the matter said.
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| Madoff: Bail hearing postponed again and he's now subject to electronic monitoring and a 7pm curfew |
The Securities and Exchange Commission, combing through files at Madoff's New York firm, found evidence that Ruth Madoff may have helped track payments, the person said, declining to be identified because the inquiry isn't public. Two people with knowledge of the probe said on Dec 14 that the agency is also examining why her name appears on related transactions.
'She's not charged with anything,' said Ira 'Ike' Sorkin, a New York attorney at Dickstein Shapiro LLP, which represents the couple. 'The SEC has not sought to freeze her assets. She's under no bail conditions.'
Authorities haven't accused Ruth Madoff of wrongdoing.
US Magistrate Judge Gabriel Gorenstein, who is overseeing criminal proceedings against her husband, on Wednesday ordered the couple to surrender their passports. Bernard Madoff's wife and brother, Peter, were the only people willing to sign a US$10 million bond to secure his release. Ruth Madoff is seeking to hire her own lawyer, a person familiar with the matter said.
Bernard Madoff, 70, was arrested on Dec 11 and charged with a single count of securities fraud. In court documents, prosecutors and the SEC, he had said that his investment advisory business was 'all just one big lie'.
The couple appeared in court on Wednesday to sign documents to give up homes in Montauk, New York, and Palm Beach, Florida, if Bernard Madoff flees. His bail hearing was postponed a second time in as many days and he is now subject to electronic monitoring and a 7 pm curfew.
Ruth Madoff, who also has a master's of science degree in nutrition from New York University, co-edited a cookbook in 1996 called The Great Chefs of America Cook Kosher. The book contains recipes for kosher dishes by well-known chefs, such as Daniel Boulud and Wolfgang Puck.
In another development, Fairfield Greenwich Group, the fund whose clients stand to lose US$7.5 billion in Madoff's alleged Ponzi scheme, is considering suing its accountants, PricewaterhouseCoopers (PwC), for failing to detect the fraud, the Financial Times reported on its website.
The fund, which is currently the biggest known loser in the Madoff scandal through its investments in Bernard L Madoff Investment Securities, is considering the move after an auditor was named in a case brought by another victim, the paper said.
PwC and Fairfield could not be immediately reached for comment by Reuters. -- Bloomberg, Reuters
Published December 19, 2008
Japan to go down zero-rate road again
BOJ expected to cut rate today while it seeks to rein in power of yen
By ANTHONY ROWLEY
IN TOKYO
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THE Bank of Japan appears set to cut interest rates today, returning in effect to the zero rate policy it pursued from 2000 to 2006 to counter deflation and to stabilise the Japanese financial system.
This time, Japan will join the US, where the Federal Reserve cut rates this week to near zero, and probably Britain where Bank of England deputy governor Charles Bean said yesterday that zero rates were possible.
Official warnings meanwhile grew louder in Japan yesterday of intervention by the BOJ in foreign exchange markets to stem the surge in the value of the yen, which yesterday hit a new 13-year high of near 87 yen to the US dollar. But such intervention could be neutralised by a tsunami of private capital now flowing back into Japan, analysts warned.
'We have conducted currency intervention in the past, and we will take appropriate measures, which includes that (option),' Japan's Chief Cabinet Secretary Takeo Kawamura said yesterday.
Japan's leading motor vehicle and electronics makers have already seen their profits savaged by the strength of the yen and yesterday chairman of the Japan Automobile Manufacturers Association Satoshi Aoki called for measures to restore stability in foreign exchange markets.
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Japan has conducted intervention (via the Bank of Japan, acting as agent for the Ministry of Finance) on numerous occasions in the past when the yen was subjected to sudden and sharp appreciation. But some economists say that such a move now by Japan could trigger competitive currency devaluations elsewhere in Asia and beyond.
The BOJ's Policy Board will end its latest two-day meeting around midday today and is expected to announce a cut in the central bank's short-term overnight policy lending rate from its current level of 0.3 per cent to 0.1 per cent. This is in effect a zero interest rate level as dealers say it is difficult to hold the rate at precisely zero.
Such a move is not expected to have any measurable impact on Japan's economy, which is officially in recession and which is expected to continue contracting well into next year. But it would have the symbolic effect of signalling Japan's solidarity with monetary authorities that are pushing rates down to zero to counter deepening economic recession.
What Japanese authorities appear to be hoping for through a combination of cutting rates and launching a unilateral dollar-buying operation in foreign exchange markets is to deter speculation in the yen and to re-ignite the so-called yen carry trades which had pushed the yen down to very low levels until recently.
These carry trades, which involved hordes of Japanese and other speculators selling yen and buying assets denominated in higher yielding currencies and areas - thereby pushing the yen down - have reversed in the face of the story that has swept through global financial markets and some analysts doubt they can be re-ignited in the current climate of fear and volatility.
Recently, Japanese portfolio investors have begun to sell foreign assets and repatriate capital. This appears to be an actor behind the rise of the yen, in spite of the fact that foreign investors have been selling Japanese assets.
The Nikkei 2225 stock average (up some 0.6 per cent yesterday to 8,667.23) appears stable despite selling by foreign investors, indicating that Japanese investors feel safe now with yen assets, analysts say.
Thursday, 18 December 2008
Published December 18, 2008
Sime Darby eyes stake in hospital operator IJN
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(KUALA LUMPUR) Malaysian plantations-to-automotive conglomerate Sime Darby said yesterday that it is interested in a stake in IJN Holdings Sdn Bhd, the operator of the country's top heart hospital.
Sime Darby is waiting for the government's response to its written expression of interest, the company said in a statement.
'The proposed investment will be subject to, among others, satisfactory due diligence by the company and the approval of the relevant authorities,' it said in response to a news report on the acquisition.
The stake sale has been backed by the Finance Ministry, which owns the hospital, but officials from the Health Ministry are less keen on the sale, The Edge Financial Daily reported, citing sources.
'They do not agree to this sale unless there is a safety net for the poor and the underprivileged,' the newspaper quoted a source as saying.
State-controlled Sime, the world's top palm oil producer by planted area, also has interests in the Malaysian health care industry. It owns the Sime Darby Medical Centre, a private hospital in the Subang Jaya suburb near Kuala Lumpur. -- Reuters
Published December 18, 2008
Proton ex-partner sues for breach of contract
Abdullah says it needs a foreign alliance to remain competitive
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(KUALA LUMPUR) Malaysia's leader has said that national carmaker Proton, criticised for shoddy workmanship and poor after- sales service, should tie up with a strong foreign partner in a joint venture to remain competitive.
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| Pressing need to drive sales: Proton improved its domestic market share to 33per cent so far this year, from 24per cent last year, but its exports remained weak |
The comments by Prime Minister Abdullah Ahmad Badawi came amid news yesterday that Proton has been sued by its former Chinese joint venture partner, Goldstar Heavy Industrial Co Ltd, for one billion yuan (S$215.6 million) in compensation for breach of contract.
Mr Abdullah indicated in an interview with AP that Proton should be willing to give majority control to a partner in a joint venture if necessary but refused to be drawn on specifics.
Asked if a foreign partner can hold a majority 51 per cent stake, he said: 'It doesn't matter as long as Proton, the mother company, is entirely ours.'
'This (joint venture) is our investment in collaboration with another company. We will (find) what is the best arrangement which will be entirely commercial,' he said.
Pressured by dwindling sales and growing competition as Malaysia liberalises its car market, state-owned Proton began searching for a new foreign partner after Japan's Mitsubishi Motors Corp bailed out as a major shareholder in 2004 due to its own financial problems.
Alliance talks with Germany's Volkswagen AG and General Motors Corp failed due to the government's reluctance to cede control of Proton - seen as a national icon.
Mr Abdullah declined to comment on speculation that Proton has revived alliance talks with Volkswagen, saying that it is up to Proton to find the best suitor before it reports to the government.
Some analysts have warned that it will be tough for Proton to penetrate global markets or gain new technology without a strong foreign partner, particularly amid a global economic slump.
Proton improved its domestic market share to 33 per cent so far this year, from 24 per cent last year, after introducing several cheap models but its exports remained weak.
The company has said that it aims to boost sales by selling within China through a tie-up with Jinhua Youngman Automobile Manufacturing Co Ltd.
Proton said yesterday that it had terminated its contract with Goldstar after the Chinese firm failed to get a manufacturing licence over a period of three years.
'Goldstar's failure has frustrated Proton's initiatives to get the joint venture to start producing cars in China,' the company said in a statement.
The termination of the contract led to the US$146 million compensation suit filed by Goldstar in China last month.
Proton said that it had begun arbitration proceedings against Goldstar and also obtained an anti-suit injunction in Singapore to prevent the Chinese firm from starting or continuing with any other court proceedings.
The recent legal suit by Goldstar is violating the agreed arbitration process and the anti-suit injunction, it said. -- AP
Published December 18, 2008
Straits Asia shares dive on mining law change
Fear of Indonesia's new law having impact on company
By LYNETTE KHOO
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MARKET jitters stemming from Indonesia's new mining law sent shares of Straits Asia Resources reeling yesterday.
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| Risky: Some investors see Straits Asia as the most vulnerable among Singapore-listed groups with links to the Indonesian mining sector |
The stock of Straits Asia, which owns and operates two mines in Indonesia, slumped 10.8 per cent to close at 83 cents, with some 43 million shares traded, as some investors saw the company as the most vulnerable among Singapore-listed groups with links to the Indonesian mining sector.
The new mining law - passed by the Indonesian government after three years of deliberation - requires companies to acquire a mining licence from local governments and obtain new permits for each mining stage from exploration to production.
Abterra, which sources for coal in Indonesia, does not conduct mining activities there.
Manhatten Resources CEO and managing director Ho Soo Ching told BT that the new mining law will not affect his company as it is not directly involved in mining. The group provides logistics, mining equipment and other support services to the coal mining and oil and gas industries in Indonesia.
Further denting sentiment on Straits Asia was a rating downgrade from Credit Suisse on the stock from 'neutral' to 'underperform'. It cited increasing regulatory and operating risks.
Credit Suisse also cut its target price to 80 cents from $1.20.
The brokerage noted that the regulatory changes could raise the risks of higher costs from royalties paid to the local government or potentially require all foreign investors, including Straits Asia, to partially divest their ownership in mines.
'While some uncertainties with respect to the language, intent and potential legal challenges to the new mining law remain, we are quite concerned over inclusion of certain provisions in the new law requiring existing mining concessions to be in compliance within one year from the promulgation of the new law,' Credit Suisse analyst Haider Ali said in a report yesterday.
He noted that the new regulation potentially allows the Indonesian government to unilaterally change terms and conditions of any existing mining concession.
'There is material risk in our opinion, especially in view of upcoming parliamentary and presidential elections,' he said.
A dealer with a European brokerage thought otherwise, saying he does not expect the new mining law to affect existing mining operations.
Earlier this month, Straits Asia's major shareholder, Straits Resources, said it is making a strategic review of its 47 per cent stake in the company after receiving unsolicited approaches from several parties on the possibility of acquiring the stake.
Published December 18, 2008
SIA has the wherewithal to ride the storm
By VEN SREENIVASAN
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THE conventional wisdom, until now, has been that premium carriers such as Singapore Airlines (SIA) will be able to ride out the current economic slowdown better than their lesser rivals.
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Earlier this week, SIA announced that its passenger numbers slid 6.1 per cent last month to 1.54 million - its biggest slump in traffic since August 2003, when traffic declined by 7.6 per cent in the wake of the Severe Acute Respiratory Syndrome (Sars). At 78.1 per cent, its passenger load factor is still above its breakeven level of some 72 per cent.
Cargo remains a headache for the carrier - which is the world's largest player in cargo - with the latest monthly load factor of 60.3 per cent still significantly below its 63 per cent break-even level.
No breakdown was given, but what would have been interesting is SIA's premium load numbers.
Premium seat revenue accounts for about 40 per cent of SIA's total top line. And conventional wisdom had it that this segment is relatively resilient to the fluctuations in economic conditions.
But the magnitude and ferocity with which the global financial crisis has hit the global economy has turned conventional wisdom on its head.
According to the International Air Transport Association (Iata), premium traffic sank 8 per cent in September - a third straight monthly fall. One can make an educated guess, given the state of global financial markets, that things have become worse over the past two months.
And there are no clear skies to be seen yet.
Last week, Iata projected full-year industry loss of US$5 billion in 2008, and another US$2.5 billion of red ink next year. Iata also noted that weakness in travel markets lasted three years in previous recessions.
'We do not expect a return to traffic growth above 4 per cent until 2011,' it noted. 'Economic forecasts imply that airline traffic will remain below the previous trend over the medium term, with passenger travel forecast to be 9 per cent lower by 2016 than pre-crisis industry forecasts.'
In short, don't expect a recovery in air travel demand until 2011. And when it does happen, the growth will be significantly muted.
The challenges showed up in SIA's first-half earnings when it reported a net profit slide of almost 27 per cent to $682 million, from $931.9 million for the April-September 2007 period.
Iata expects Asia-Pacific carriers to double their losses from US$500 million in 2008 to US$1.1 billion in 2009.
While few expect SIA to be among the loss-making carriers, the real question is how badly will it be hit by the financial firestorm?
As JPMorgan noted, SIA's earnings have been less volatile than its peers due to its more flexible cost structure and earnings contributions from subsidiaries Singapore Airport Terminal Services (SATS) and SIA Engineering.
'Net profit CAGR (compounded annual growth rate ) has been 8 per cent for the past 22 years, and SIA has never incurred a loss,' the report noted, adding that its average 15-year ROE (return on equity) was 11 per cent.
However, other investment houses, including Citi, take a more bearish view, especially on its cargo business
'As the world's 4th-largest international air-freight carrier, a lengthy period of weak trade suggests growing overcapacity concerns for SIA Cargo, which contributed 21 per cent of group revenues but just 6 per cent of operating profit in FY Mar 08,' Citi said in its Dec 15 report. It added that the prospect of cargo price-fixing allegations by New Zealand regulators adds to SIA's concerns.
Indeed, the challenges SIA faces are serious.
But the company has the wherewithal to ride the storm.
It has already committed itself to reducing capacity even if it means (in the words of CEO Chew Choon Seng) 'parking planes in the desert'. No precise numbers were offered, but most analysts reckon the reduction has to be at least 5 per cent.
SIA also has unique strengths in an industry better known for its myriad weaknesses and excesses.
With over $5 billion in cash, free cash flow of some $3 billion and no debt, it has a fearsome financial arsenal which gives it options which its rivals can only dream about.
The company also has a cost structure which is one of the most flexible for any premium legacy carrier. Add to this a savvy management team which has been through the figurative baptism of fire from the lessons of the 2003 Sars pandemic-induced crisis.
Yes, the challenges are real and serious. But so are the opportunities that come from being a premier player, hubbed at the centre of one the most vibrant aviation markets in the world.
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