Published July 3, 2009

Worst is over for plantation sector: IOI

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(PUTRAJAYA) IOI Corp, Malaysia's No 2 planter, said on Thursday that the worst was over for the plantation sector as palm oil prices have recovered from last year's slump although M&A activity would be muted.

Picking up: Palm oil prices have recovered more than 60% from a low of RM1,331 per tonne in October on surging Asian demand

Earnings of Malaysian palm oil producers plunged in the first quarter as crude palm oil prices more than halved from a year ago.

IOI, valued at US$8.37 billion, saw net profit nearly wiped out during January-March due to weak crude palm oil prices and large foreign translation losses on its US dollar borrowings.

Sime Darby, Malaysia's top planter, reported a 85 per cent drop in net profit while third-ranked Kuala Lumpur Kepong saw net profit down 52 per cent in the same period. 'It's quite obvious it will be better. The industry including ourselves expects to see much better fourth-quarter (April-June) operating results,' IOI executive director Lee Yeow Chor told Reuters at the company's headquarters in the administrative capital of Putrajaya.

Malaysia is the world's second-largest palm oil producer after Indonesia.

Crude palm oil prices hit a record RM4,486 (S$1,850) a tonne in March 2008 before collapsing at the height of the global financial meltdown and triggering speculation that distressed plantation firms starting out would sell.

But Mr Lee said the opportunities for merger and acquisition in the sector are hard to find now as the palm oil price recovery helped smaller firms hold out for better deals.

'Because the sharp price drop has not really been for a long time, the pressures on them (smaller planters), in terms of cashflow or repayment of bank borrowings is not so great.'

IOI, which owns oil palm estates in Malaysia and Indonesia, saw net profit for the third-quarter to March plunge 94 per cent to RM37.36 million from a year ago on an unrealised forex translation loss of RM232.4 million.

The sharp drop in third-quarter earnings was due mainly to 'a lot of translation adjustments' on its US dollar debt, said Mr Lee, adding that IOI expects the forex losses to reverse in the upcoming quarterly results.

'For fourth quarter with the weakening of the US dollar, from end-March of around RM3.63, we expect to have some gains in currency translation for US dollar borrowings,' said Mr Lee.

'We borrow US dollars, because it corresponds with our palm oil revenue, so that is a natural hedge between our borrowings and receipt of revenue,' he explained.

Palm oil prices have now recovered more than 60 per cent from a low of RM1,331 per tonne in October on surging Asian demand as well as tight Malaysian palm oil stock levels in the first few months of 2009.

'We have always thought that the low price level in the first quarter of this year was not a sustainable level to begin with. We have always expected the price to move up,' said Mr Lee.

'The major consuming countries, China and India, their economies have not been that badly affected by the prevailing global downturn,' he added.

Mr Lee said Malaysian palm oil production should pick up in the second half of the year due to the seasonal uptick in output as yield stress fades. He pegged June palm oil stocks at 1.5 million tonnes, an increase of 9.5 per cent from a month earlier. -- Reuters

Published July 3, 2009

Foreign investment shrinks to RM4.2b

Jan-May figure just a fraction of RM46b for whole of 2008

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(KUALA LUMPUR) Foreign investment in Malaysia has plummeted this year, Trade Minister Mustapa Mohamed said yesterday after the government announced liberalisation measures aimed at luring investors.

'Foreign direct investment for 2008 was RM46 billion (S$19 billion) and for January to May this year we have only seen RM4.2 billion,' Mr Mustapa told reporters.

Wahad Hamid, deputy head of the Malaysian Industrial Development Authority, said the investment climate was extremely tough despite a strong performance by Malaysia in the three previous years.

'Last year, total investment was about RM62 billion but this year we are only targeting half of that, about RM30 billion,' he told reporters.

Mr Mustapa said he was confident that liberalisation measures announced by Prime Minister Najib Razak this week would help bring in more funds, amid forecasts of a 5 per cent economic contraction this year.

'We are confident that investor sentiment will improve, we are encouraged by all the measures taken by the government,' Mr Mustapa said.

The liberalisation moves targeted a decades-old policy of positive discrimination for Muslim Malays, which critics say is making Malaysia uncompetitive.

Mr Najib scrapped a rule requiring initial public offerings to reserve 30 per cent of stock for Malays - who dominate the population of the multicultural nation - and dumped regulatory approval for foreign property purchases.

However, Mohammed Ariff, head of the influential Malaysian Institute of Economic Research, said the measures were poorly timed and would not bear fruit until the global economy recovers.

'The liberalisation announcements should have been made in the good times instead of now, as there would have been a lot of responses from foreign investors,' he told AFP.

Mr Ariff said that despite hopes for a recovery next year, Malaysia's economy is unlikely to really get back up on its feet until 2012.

'To me real recovery is not just positive growth but going back to the growth we are used to, of around 6 per cent, and that is way off - until 2012,' he said. -- AFP

Published July 3, 2009

Developing Asian nations to get financing

Jointly sponsored by ADB and IDB, fund aims to help build infrastructure

By PAULINE NG
IN KUALA LUMPUR

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Developing Asian and Central Asian nations looking to get Shariah-compliant infrastructure projects off the ground could soon find financing from a US$500 million Islamic private equity fund, jointly sponsored by the Asian Development Bank (ADB) and Islamic Development Bank (IDB).

Mr Razak: He says CIMB is currently working on a pipeline of deals

Both banks have committed to an initial combined total of US$250 million to the Islamic Infrastructure Fund (IIF), which would be managed and advised by CIMB Standard Strategic Asset Advisors, a joint venture between Malaysia's CIMB group and the African banking group Standard Bank.

IIF plans to raise the balance capital from global private investors, primarily from the Middle East. The fund has identified Indonesia, Kazakhstan, Malaysia and Pakistan as the main focus markets, but would also consider investments in eight other nations: Afghanistan, Azerbaijan, Bangladesh, Kyrgyz Republic, Maldives, Tajikistan, Turkmenistan, and Uzbekistan - all common member countries of the ADB and IDB.

At the launch of the fund in Kuala Lumpur yesterday, CIMB Group chief executive Nazir Razak said he was confident of appetite for the new fund, given Asian infrastructure development needs are expected to exceed US$8 trillion in the coming decade. 'The majority of private equity funds are focused on large markets such as China and India, creating a gap which we intend to fulfil by leveraging on our expertise as a focused regional player.'

The fund's indicative investment size in the equity portion of a project is between US$25 million and US$75 million, and it intends to focus on sectors such as transport, communications, utilities, water supply, sanitation and waste management, and education.

CIMB Standard is targeting to give investors returns of 10-14 per cent net. Its stated exit strategy in investee projects is four to eight years.

Mr Nazir said that CIMB Standard was currently working on a pipeline of deals, as well as on extending its physical presence to Central Asia.

Another of its private equity funds - The South East Asian Strategic Assets Fund (Seasaf) - had already invested nearly half or US$70 million of its US$150 million capital, in six investments - tolled roads, health care and resources - in Malaysia, Indonesia and The Philippines. It expects the rest to be invested in six to eight months.

The bulk of it could be in Babcock & Brown's portfolio of assets in Southeast Asia worth about US$50 million. Last week, CIMB's parent company Bumiputra-Commerce Holdings informed the stock exchange that its subsidiary, CIMB Standard Strategic Asset Advisors, had entered into an exclusivity agreement with Babcock & Brown Falcon Investment to discuss the sale of its interests in Asia Infrastructure Fund GP.

ADB's director of capital markets & financial sector division, Robert van Zweiten, noted many member countries of the IDB and ADB had less developed infrastructure than the Asian average. 'We expect the fund to help channel investments into critical infrastructure projects in the region which will in turn improve the prospects for economic growth and poverty reduction.'

Published July 3, 2009

Good governance means having no blind spots

By R SIVANITHY

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IT IS one of the uncomfortable truths about the stock market that when it comes to regulation and governance, 'blind spots' abound. Somewhat analogous to military 'no-fly zones', these no-go areas are supposedly too sensitive to discuss openly, with the result that everyone has come to believe they are best left untouched.

Yet when it comes to disclosure, governance and investor protection, shouldn't all areas come under the same scrutiny and shouldn't all the stops be pulled out to ensure the playing field is as level as possible?

One such blind spot was featured in this column two weeks ago ('Level the field by disclosing house trading volumes', BT, June 19), where it was argued that retail investors would benefit from knowing the proportion of daily volume generated by house traders, not necessarily for every single stock but at least for the top 20 most actively traded counters.

Furthermore, if an aggregate proportion is disclosed for each day's total turnover, analysts who track Singapore Exchange (SGX) can fine-tune their revenue and earnings estimates, thus improving SGX coverage and, by extension, benefiting the exchange's shareholders.

Are we confident that this call will be heeded? Not at all; it was first made more than three years ago (a BT commentary on Feb 8, 2006, titled 'Proprietary trading creates false market?'). It didn't lead to any changes back then, so there's no reason to expect a different reaction now.

Also, everyone 'knows' that you can't disclose this kind of sensitive information. Why, imagine how it would look if it were to emerge that maybe half (or more?) of daily volume is generated by dealers trading on behalf of their firms and who either pay zero or minimal brokerage? We can't have that now, can we?

Another thing everyone 'knows' about is odd movements in the major indices which sometimes occur in the final seconds of trading - sometimes, though not always, on low volume.

Given that movements in the index can exert significant influence on sentiment, it stands to reason that such oddities have to be examined and the findings revealed for public consumption. Yet, this has never been done.

What typically happens is this: first, there's outrage at how blatant the index rigging was; second, brokers and the press speculate on who was responsible or why it was done; third, the exchange may or may not make some kind of holding statement; and fourth, the passage of time results in the episode being forgotten - at least until the next time it happens.

This calls to mind a related area where 'knowing' is widespread but action is lacking: the familiar exchange between SGX and companies whose shares exhibit sudden, unusual movements.

From the public's viewpoint, the process is now so familiar that it borders on the tiresome: SGX asks the companies why their shares are in sudden play; the replies are almost always 'sorry, we have no idea'; and, like the index-rigging example, the incident is then swiftly forgotten.

Assuming companies are really ignorant, surely it's logical to ask why the presumption of guilt should begin and end with companies? Why not query the brokers who executed the orders to explain their actions? You could even take this a step further and argue that the investing public would be better served if the exchange then published the findings of these queries. After all, if we accept that 'material information' is any price-sensitive data, then it would be logical to assume that anyone suddenly buying or selling at prices vastly removed from the prevailing market price must possess material information that may not be publicly available, and so should be queried.

Granted, it isn't practical to look at all odd price movements, but it could be done selectively, such as when it results in a large shift in the main index.

Yet, ask anyone in the finance industry whether brokers who execute odd, index-influencing trades should be queried and the findings published, and the answer is usually 'no'. Why? Well, because no one else does it, it's too time-consuming and, besides, it might be a deterrent to foreign houses who rely on opacity and the occasional bit of jiggery-pokery to make money. And, as everyone 'knows', you can't offend the foreign houses, can you?

There's more, but suffice to say that if the spirit of true and full disclosure is adhered to, then no stone should be left unturned in the quest to provide useful information to the investing public. Hedge fund activity, short-selling positions, the real names behind nominee accounts, proprietary desk volume, reasons for index rigging - these are just some of the areas which everyone 'knows' about but for which no remedial action has ever been forthcoming. Maybe it's time all this changed, all blind spots were arrested - and 'knowing' got translated into doing.

Published July 3, 2009

Keppel unit delivers ice-class rescue vessel

By VINCENT WEE

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KEPPEL Corporation's shipbuilding unit, Keppel Singmarine, yesterday delivered a multi-purpose duty rescue vessel to Lukoil-Kaliningradmorneft (Lukoil) - the fifth it has delivered to the services and marketing unit of major Russian oil company Lukoil Oil Company since 2003.

The 60-tonne bollard pull vessel, Kogalym, was jointly designed by Keppel's ship design and development arm Marine Technology Development (MTD), and its consultants, Robert Allan. The ice-class vessel will be deployed in the Caspian Sea region to perform supply duty and rescue operations in temperatures as low as minus 20° Celsius and ice thickness of up to 70cm.

Lukoil has been working with the yard to build vessels that meet the stringent requirements to operate in its fields, where conditions are extremely harsh.

Over the last four years, Lukoil has entrusted Keppel Singmarine with several specialised shipbuilding projects such as Asia's first icebreakers, two ice-class anchor handling tug/supply vessels and a floating storage and offloading vessel, which is being completed by sister yard Caspian Shipyard Company in the Caspian Sea.

'Through the successful delivery of Kogalym and several other important projects, we have developed a good understanding of Lukoil's operating requirements, be it in the Caspian Sea or Arctic regions,' said Keppel Singmarine executive director Hoe Eng Hock.

'In the process, we have also honed our expertise in designing, engineering and constructing advanced ice-capable vessels.'

Published July 3, 2009

SembMarine bags another rig contract

The US$237m deal for a rig is second from SeaDragon Offshore since April

By VINCENT WEE

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SEMBCORP Marine subsidiary Jurong Shipyard has secured a second contract to complete a semi-submersible rig for SeaDragon Offshore unit Oban B. The contract is worth US$237.3 million, excluding owner-supplied equipment.

Top job: Jurong Shipyard will turn this hull, built in a Russian yard, into one of the world's most advanced harsh-environment ultra-deepwater semi-submersible rigs

SembMarine secured a US$247 million contract for a similar rig in April.

'We thank SeaDragon again for its trust and commitment to work with Jurong after the first contract was signed in April,' said Jurong Shipyard's offshore division senior general manager Don Lee.

The first unit is a fast-track job scheduled for delivery by the end of next year, as it was signed up for a five-year charter with Mexico's Pemex.

The second rig does not have a charter secured yet. But reports last year suggested there may be parties interested in buying it from SeaDragon.

The six-column bare-deck hull, built in a Russian yard, arrived early last month. Jurong will turn it into one of the world's most advanced harsh-environment ultra-deepwater semis.

The rig, scheduled for delivery by end-June 2011, will be able to operate in water up to 10,000 feet, with a maximum drilling depth of 30,000 feet. Its ability to operate in all conditions will give it multi-region flexibility to operate worldwide.

'We are delighted to be working with the world-class team at Jurong on this second project, which we are confident will result in a first-class asset for charter in 2011,' said Oban B's technical director George Sutherland.

Jurong's Mr Lee said: 'These two state-of-the-art semi-submersible rigs will complement the range of semi-submersibles that Jurong is building and demonstrates our versatility in undertaking projects with diverse complexities.'

'We are pleased that, despite challenges due to the economic downturn and the credit crunch, our order book continues to strengthen,' he added.

SembMarine expects positive contributions to earnings from the latest contract for FY 2010 and FY 2011.

The rig builder's shares closed four cents lower at $2.71 yesterday.

Published July 3, 2009

LATEST US DATA

US jobless rate hits 26-year high of 9.5%

467,000 jobs lost in June, pointing to US economy's bumpy recovery ahead

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(WASHINGTON) Employers cut a larger-than-expected 467,000 jobs in June, driving the US unemployment rate up to a 26-year high of 9.5 per cent, suggesting that the economy's road to recovery will be bumpy.

Longer queue: Jobless rate expected to hit 10% this year, rising further next year, before falling back

The Labor Department report, released yesterday, showed that even as the recession flashes signs of easing, companies likely will want to keep a lid on costs and be wary of hiring until they feel certain the economy is on a solid ground.

Christina Romer, chairman of the White House Council of Economic Advisers, described the losses as 'worse than expected.'

'This is certainly a setback,' Ms Romer said. 'What we've been seeing over the last several months is moderating job losses, and that's what you get first before you see new jobs created.'

June's payroll reductions were deeper than the 363,000 that economists expected.

However, the rise in the unemployment rate from 9.4 per cent in May wasn't as sharp as the expected 9.6 per cent. Still, many economists predict the jobless rate will hit 10 per cent this year, and keep rising into next year, before falling back. All told, 14.7 million Americans were unemployed in June.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.5 per cent in June, the highest on records dating to 1994.

Since the recession began in December 2007, the economy has lost a net total of 6.5 million jobs.

As the downturn bites into sales and profits, companies have turned to layoffs and other cost-cutting measures to survive. Those include holding down workers' hours and freezing or cutting pay. The average work week in June fell to 33 hours, the lowest on records dating to 1964.

Layoffs in May turned out to be smaller, 322,000, versus the 345,000 first reported. But job cuts in April were deeper - 519,000 versus 504,000, according to government data.

Even with the higher pace of job cuts in June, the report indicates that the worst of the layoffs have passed. The deepest job cuts of the recession came in January, when 741,000 jobs vanished, the most in any month since 1949.

And there was some other encouraging job news yesterday. In a separate report, the department said the number of newly laid-off workers filing applications for unemployment benefits fell last week to 614,000, in line with economists' predictions. The number of people continuing to draw benefits unexpectedly dropped to 6.7 million.

Still, job losses last month were widespread. Professional and business services slashed 118,000 jobs, more than double the 48,000 cut in May. Manufacturers cut 136,000, down from 156,000.

Construction companies got rid of 79,000 jobs, up from 48,000 the previous month. Retailers eliminated 21,000, up from 17,600. Financial activities cut 27,000, following 30,000 in May.

The government cut 52,000 jobs, up from 10,000 the previous month. Leisure and hospitality cut 18,000 jobs, erasing a gain of the same size in May.

One of the few industries adding jobs: education and health services.

With the weakness in the job market, workers didn't see any wage gains in June. Average hourly earnings were flat at US$18.53.

The worst crises in the housing, credit and financial markets since the 1930s have plunged the country into the longest recession since World War II.

Many think the jobless rate could rise as high as 10.7 per cent by the second quarter of next year before it starts to make a slow descent. Some think the rate will top out at 11 per cent.

The post-World War II high was 10.8 per cent at the end of 1982, when the country had suffered through a severe recession.

An elevated unemployment rate could become a political liability for President Barack Obama when congressional elections are held next year. Mr Obama's Democratic Party holds a majority in both chambers of Congress. -- AP, Bloomberg

Published July 3, 2009

Aviva Building, Cecil House may change hands in $101m deal

Buyers expected to build apartments on adjoining sites

By KALPANA RASHIWALA

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(SINGAPORE) YI Kai Group and Fission Group, the duo that recently paid $71 million for VTB Building in Robinson Road, are said to have joined forces to buy Aviva Building in Cecil Street and next-door Cecil House from insurer Aviva for a total of $101 million.

Potential: Aviva Building (above) and Cecil House may have potential for an additional 20,000 sq ft of GFA each

Aviva is understood to be selling the assets that it considers 'non-core'.

Market watchers reckon Fission and Yi Kai hope to redevelop all three CBD office blocks they have snapped up lately into residential projects - subject to official approval.

The three sites are zoned for commercial use with an 11.2-plus plot ratio and 35-storey maximum height, according to the Urban Redevelopment Authority's Master Plan (MP) 2008.

In October last year, URA lifted its ban on converting office blocks in the Central Area to other uses.

Aviva and VTB buildings are freehold. Cecil House is on a site with a remaining lease of 71 years.

Analysts suggest that Yi Kai and Fission's plans to redevelop the Cecil House plot into apartments will be subject to getting a lease top-up to 99 years from the state. 'Otherwise, they may redevelop the property to a new office block,' a market watcher suggested.

BT understands the freehold Aviva Building is being sold for about $65 million, which translates to roughly $960 per sq ft of existing net lettable area (NLA).

Based on the site's 11.2-plus plot ratio under MP 2008, the unit land price works out to about $590 psf of potential gross floor area (GFA), excluding any development charge (DC) that may be payable.

Cecil House was priced at $36 million or about $710 psf of NLA in the sale to Yi Kai and Fission.

It is believed there is untapped potential to develop a further 20,000 sq ft GFA each for the Cecil House and Aviva Building plots.

The earlier sale of VTB Building for $71 million worked out to $1,061 psf of NLA and a unit land price of about $700 psf per plot ratio - based on an 11.2 plot ratio and assuming no DC is payable.

Jones Lang LaSalle's director of investment sales Stella Hoh is understood to have brokered the sale of Aviva Building and Cecil House. JLL is also the marketing agent for two office floors at Parkway Parade that Aviva is looking to sell.

BT understands both buildings are currently almost 100 per cent occupied. Aviva uses about 60 per cent of Aviva Building.

Published July 3, 2009

Recession may end, but recovery still not in sight

Singapore may technically climb out of a recession but stay in a rut, the numbers suggest

By ANNA TEO

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(SINGAPORE) Now that the economy is believed to have touched bottom, data watchers are on the lookout for signs that it is headed up, and not still floundering. So it's no surprise that May's manufacturing uptick has spurred talk that Singapore could soon well be 'technically' out of recession - in or from the second quarter just past, in fact.

The surprise 2 per cent rise in manufacturing output in May - the second straight month of growth following April's revised 0.4 per cent figure - no doubt adds to the sense of budding turnaround here. And if the pace is sustained in June, the payoff should certainly show up in the Q2 manufacturing and overall GDP figures.

But to infer from the May boost an end to recession - imminent or 'already' - is probably a tad hopeful. The qualifying asterisks behind the May output figure, to begin with, are glaringly obvious.

First off, the 2 per cent growth came courtesy of (as usual) the highly volatile pharmaceutical industry, which grew close to 140 per cent in May (and 80 per cent in April). Excluding the biomedical cluster - the only cluster that grew in May - total industrial output shrank about 18 per cent in the month.

And if comparing with the preceding month is a better indicator of recent pace, May's overall output was down from April's, albeit by a small 1.6 per cent in seasonally-adjusted terms.

More telling perhaps, beyond industrial output, the all-important exports still do not convincingly spell recovery, even if, as economists have noted, exports have lately shown better 'improvement' than output.

Sure, non-oil domestic exports (NODX) have continued to improve: April's 19 per cent decline was followed by a 12 per cent decrease in May. And in adjusted month-on-month terms, NODX grew 5.6 per cent in May, following a 1.4 per cent slide in April.

But if NODX seem to have turned around, another key indicator - non-oil retained imports of intermediate goods (NORI) - suggests only that demand in the months ahead remains weak.

While NORI (the retained 'intermediate goods' presumably get consumed in domestic production) is said to be a coincident indicator for NODX, the two series have diverged of late: indeed, NORI fell for a third straight month in May on an adjusted basis, after a small pick-up in February. And apart from Taiwan and South Korea, Singapore's non-oil exports to the top 10 markets continued to fall in May.

Also, with no firm sign as yet of any rebound in the US economy any time soon, forecasts of any sustained export and GDP recovery here - out of the trenches, that is - are probably optimistic or wishful thinking.

In any case, even if Q2 sees a return to positive GDP pace in Singapore - as may well be likely for the quarter-on-quarter numbers, though probably not the year-on-year figures yet - that would mark at best a tenuous rebound, until at least another positive quarter or two is in hand. After all, a 'technical' recession is called only after two straight quarters of economic decline.

And even then, just as output and exports had already been weak last year well before the GDP data pronounced recession after Q3 2008, a technical end to recession would not necessarily spell full recovery in industries and sectors big and small across the economy at large. You may get businesses asking: 'The recession is over - but where's the recovery?'

Published July 2, 2009

CIMB to revise 2009 ROE upwards

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(KUALA LUMPUR) Malaysia's No 2 lender CIMB Bank may have been too conservative when it set a return on equity (ROE) target of 12.5 per cent for 2009 and looks set to revise it when it publishes its first-half results.

Greater clarity in outlook: CEO Nazir expects merger and acquisition activity to pick up in the second half

'We may have been a little bit bearish. Based on our first-half results, we will then revise that ROE target,' chief executive officer Nazir Razak told Reuters in an interview on Tuesday.

CIMB Bank, South-east Asia's fifth-largest bank by assets, has an asset base of RM226.9 billion (S$93.5 billion) and a market value of about RM32.6 billion.

Mr Nazir, the son of Malaysia's second prime minister and the younger brother of its current one, grew CIMB to become Malaysia's second-largest bank via a series of acquisitions over the last few years.

State-controlled Maybank, which has RM308.8 billion in assets, is the country's largest lender.

Mr Nazir said that he does not foresee the bank making any more big acquisitions over the next few years.

'We have charted our path for the medium term. We are happy with the platform we have,' Mr Nazir said, adding that the bank could consider a bolt-on acquisition such as a brokerage operation in, for example, Thailand.

'We are very busy with creating value and getting the return from the enlarged platform,' said Mr Nazir, referring to the bank's recent acquisitions in Thailand and Indonesia.

Mr Nazir was instrumental in CIMB's 2005 acquisition of Singapore stockbroking firm GK Goh Securities Pte Ltd and the merger a year later with Southern Bank, a mid-sized Malaysian bank.

Last year, CIMB beat its bigger rivals, including HSBC Holdings plc and Standard Chartered Bank, to win the bid for a controlling stake in Thailand's BankThai.

The Malaysian bank also has a small presence in Indonesia through Bank CIMB Niaga.

Khazanah Nasional, the investment arm of the Malaysian government, is the largest shareholder of the bank with a 20 per cent stake.

The Employees Provident Fund, the largest pension fund in the country, controls another 15.4 per cent.

Mr Nazir said that he expects merger and acquisition activity to pick up in the second half of the year after a lacklustre first half.

'I think there is greater clarity in outlook now,' he said.

The bank's balance sheet remains healthy and does not see the need for new capital raising, he added.

'We redeemed US$300 million in sub-debt recently and replaced it with some hybrids on the holding company,' he said.

'That was just the replacement, so net-net despite the completion of various transactions, I think our capital position is very comfortable.' - Reuters