Published September 20, 2008
China Milk, China Dairy give assurance on their products
By LYNETTE KHOO
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TWO Chinese companies listed in Singapore have come out to give assurance about the quality of their milk and milk-related products amid a melamine-tainted milk powder and ready-to-drink milk scandal in China.
YOUCAN PRODUCTS
Youcan said on Thursday that besides sending its ice-cream products for testing in China, it will also submit samples to AVA
Melamine is a chemical used to make plastics. Three companies reportedly implicated were Mengniu, Yili and Bright Dairy & Food, which dominate 70 per cent of China's packaged milk market.
China Milk Products Group, which produces raw milk, said in a filing to Singapore Exchange on Thursday that it is not affected by this issue as it does not put additives to its raw milk.
'The group also confirms it does not add melamine into its raw milk to raise protein content,' China Milk said.
To control and ensure the quality of raw milk it produces, its herd of about 21,000 dairy cows of superior breed are fed with specially blended feedstuffs formulated by its experts for different cattle groups.
China Dairy Group, which produces liquid milk and milk powder, said on Wednesday that the Chinese authorities have declared that its infant milk powder products manufactured by subsidiary Yinqiao, are safe and free from melamine.
Yinqiao is on the 'safe-list' of 87 dairy manufacturers released by the Chinese authorities.
As a precautionary measure, AVA said yesterday it is suspending the import and sale of all milk and milk products from China with immediate effect.
Retailers and importers have been instructed to recall these products.
Local food manufacturers have also been instructed to cease the use of milk and milk products from China as ingredients until AVA completes its investigations.
These new measures could hit Singapore-listed Youcan Foods International, a frozen food and ice-cream manufacturer in China, which exports ice-cream to Singapore. Some of Youcan ice-cream products use milk powder as one of its ingredients.
Youcan had on Thursday, made an announcement to SGX, assuring shareholders and consumers of its emphasis on quality control in its production processes.
Some of its ice-cream products use milk powder as an ingredient, which it sources from several suppliers.
Youcan said since the reports of tainted milk powder, it has called for a detailed safety assessment of the group's ice-cream products, especially those that are exported.
In addition to sending its ice-cream products for testing in China, it will also be submitting samples to the AVA for screening, Youcan said in its Thursday announcement.
Yesterday, S-shares recovered some grounds along with the broader market, with China Milk up 8.3 per cent to 45.5 cents, China Dairy up 8.7 per cent to 12.5 cents. Youcan was last traded at 29 cents.
Monday, 22 September 2008
Published September 20, 2008
Losing balance
US banks tumble down the charts but American capital markets keep their clout
By TEH HOOI LING
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IT'S a tectonic shift in the world of finance. Following the destruction of some US$1.2 trillion of capital in the last 20 months, the once mighty financial sector of the United States is now severely decimated. Coming to the fore are some Asian banks, which are now perched atop the list of the world's largest financial institutions.
As recently as last year, four of the world's five largest financial institutions in terms of market capitalisation were US companies.
Today only two remain - Bank of America and JPMorgan Chase - in fourth and fifth positions respectively. Citigroup used to lay claim to the title of 'the world's largest bank' as recently as last year.
Today, its market capitalisation of US$90 billion is only one-third of what it used to be in January 2007. Still, it remains among the world's 10 largest financial institutions - at ninth position - albeit with significantly higher foreign ownership.
Insurer AIG commanded a market cap of US$186 billion last year. Today, its size has been cut down to just US$36 billion.
The world's largest financial institutions at the moment are Industrial and Commercial Bank of China, worth some US$182 billion, HSBC Holdings (US$175 billion) and China Construction Bank (US$141 billion).
Does the current market upheaval mark the end of the US as the capital centre of the world?
Not likely, at least for the next few years, market observers said. 'No doubt in the last few years a lot of wealth has been created in the Middle East and Asia,' said Jan Lambregts, Rabobank's head of research in Asia. 'But the capital markets in these parts of the world are still 15 years behind the US.
'So although there is a lot of wealth, there are not a lot of quality assets to store this wealth in.' Once the problems are worked through, the money will return to the US, said Mr Lambregts. 'There's a lot of depth in the US market.'
Here is one piece of evidence in support of that argument. Year to date, the turmoil in the US markets sent shivers across the world and wiped out a whopping US$17 trillion from global equities.
But curiously, the US - despite being in the eye of the storm - accounted for only 19 per cent of that loss of shareholders' wealth, figures from Bloomberg showed. It was the emerging markets like China and India, and to a lesser extent Europe, that suffered the brunt of the drubbing.
And according to Merrill Lynch, emerging markets' long-only equity funds saw almost US$30 billions of outflow in the past 15 weeks alone. There was outflow across all regions and most countries this week. US equity funds, on the other hand, saw a hefty US$50 billion inflow during the same period.
Michael Petronella, president of Dow Jones Indexes who was in town yesterday, shares the same view. 'I don't think just because the crisis began in the US, it signals the end of its dominance in the capital markets. We've had other capital market disruptions in other parts of the world. This isn't the first time, and it will not be the last.
'Yes, a lot of wealth has been destroyed. But a tremendous amount of capital has been created in the last few years as well. This is just a correction of that. We had the Internet boom and the housing boom which created a lot of capital and destroyed a lot of capital as well.
'If you look at the long-term growth chart and you normalise it, it probably doesn't look too bad.
'Just like indexes, we have to do rebalancing every now and then. The world is just rebalancing itself,' he said.
Well perhaps in the short to medium term, the rebalancing will still see Wall Street continuing to be the world's money magnet. But ultimately, the centre of gravity will steadily shift east, predicts veteran fund manager Hugh Young of Aberdeen Asset Management, as the capital markets in these parts of the world develop and mature.
Meanwhile in the aftermath of the current crisis, an increasing portion of US financial institutions has fallen into foreign hands. Will there be a nationalistic backlash sometime in the future?
Noted Mr Lambregts: 'Until recently, there was a lot of debate about the motives of sovereign wealth funds. There's a whole lot less criticism now. People realise that the capital from these funds is required.'
The criticisms may resurface in the future, but he reckoned that as long as the foreign holdings are in the 10 to 20 per cent range, there won't be any big outcry.
Thus far, Asians financial banks have virtually moved up the ranks simply by staying put. And there are now some concerns that with the world economy slowing and asset prices falling, the write-offs will be coming for Asian banks, especially those from the China. For one thing, the behemoths in China have not gone through a down-cycle in their current form. Questions have to be asked on how they will handle it, observers said.
As for Singapore banks, UOB now ranks as the 80th largest bank in the world, according to Bloomberg's ranking. That's up some 20 spots from just a month ago. DBS is in the 86th position and OCBC in 107th.
Kim Eng, however, in a report yesterday warned that while it admires Singapore banks' superior asset quality and balance sheet strength, a drastic slowdown in earnings momentum is unavoidable. The banks' stock prices could fall by a further 18 per cent over the next 12 months in its worst case scenario, it added.
One thing is for sure, the write-downs and the cut-down in size of Asian financial outfits will not be of the magnitude seen in the US. Although things are still in a flux, a new landscape is emerging.
Losing balance
US banks tumble down the charts but American capital markets keep their clout
By TEH HOOI LING
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IT'S a tectonic shift in the world of finance. Following the destruction of some US$1.2 trillion of capital in the last 20 months, the once mighty financial sector of the United States is now severely decimated. Coming to the fore are some Asian banks, which are now perched atop the list of the world's largest financial institutions.
As recently as last year, four of the world's five largest financial institutions in terms of market capitalisation were US companies.
Today only two remain - Bank of America and JPMorgan Chase - in fourth and fifth positions respectively. Citigroup used to lay claim to the title of 'the world's largest bank' as recently as last year.
Today, its market capitalisation of US$90 billion is only one-third of what it used to be in January 2007. Still, it remains among the world's 10 largest financial institutions - at ninth position - albeit with significantly higher foreign ownership.
Insurer AIG commanded a market cap of US$186 billion last year. Today, its size has been cut down to just US$36 billion.
The world's largest financial institutions at the moment are Industrial and Commercial Bank of China, worth some US$182 billion, HSBC Holdings (US$175 billion) and China Construction Bank (US$141 billion).
Does the current market upheaval mark the end of the US as the capital centre of the world?
Not likely, at least for the next few years, market observers said. 'No doubt in the last few years a lot of wealth has been created in the Middle East and Asia,' said Jan Lambregts, Rabobank's head of research in Asia. 'But the capital markets in these parts of the world are still 15 years behind the US.
'So although there is a lot of wealth, there are not a lot of quality assets to store this wealth in.' Once the problems are worked through, the money will return to the US, said Mr Lambregts. 'There's a lot of depth in the US market.'
Here is one piece of evidence in support of that argument. Year to date, the turmoil in the US markets sent shivers across the world and wiped out a whopping US$17 trillion from global equities.
But curiously, the US - despite being in the eye of the storm - accounted for only 19 per cent of that loss of shareholders' wealth, figures from Bloomberg showed. It was the emerging markets like China and India, and to a lesser extent Europe, that suffered the brunt of the drubbing.
And according to Merrill Lynch, emerging markets' long-only equity funds saw almost US$30 billions of outflow in the past 15 weeks alone. There was outflow across all regions and most countries this week. US equity funds, on the other hand, saw a hefty US$50 billion inflow during the same period.
Michael Petronella, president of Dow Jones Indexes who was in town yesterday, shares the same view. 'I don't think just because the crisis began in the US, it signals the end of its dominance in the capital markets. We've had other capital market disruptions in other parts of the world. This isn't the first time, and it will not be the last.
'Yes, a lot of wealth has been destroyed. But a tremendous amount of capital has been created in the last few years as well. This is just a correction of that. We had the Internet boom and the housing boom which created a lot of capital and destroyed a lot of capital as well.
'If you look at the long-term growth chart and you normalise it, it probably doesn't look too bad.
'Just like indexes, we have to do rebalancing every now and then. The world is just rebalancing itself,' he said.
Well perhaps in the short to medium term, the rebalancing will still see Wall Street continuing to be the world's money magnet. But ultimately, the centre of gravity will steadily shift east, predicts veteran fund manager Hugh Young of Aberdeen Asset Management, as the capital markets in these parts of the world develop and mature.
Meanwhile in the aftermath of the current crisis, an increasing portion of US financial institutions has fallen into foreign hands. Will there be a nationalistic backlash sometime in the future?
Noted Mr Lambregts: 'Until recently, there was a lot of debate about the motives of sovereign wealth funds. There's a whole lot less criticism now. People realise that the capital from these funds is required.'
The criticisms may resurface in the future, but he reckoned that as long as the foreign holdings are in the 10 to 20 per cent range, there won't be any big outcry.
Thus far, Asians financial banks have virtually moved up the ranks simply by staying put. And there are now some concerns that with the world economy slowing and asset prices falling, the write-offs will be coming for Asian banks, especially those from the China. For one thing, the behemoths in China have not gone through a down-cycle in their current form. Questions have to be asked on how they will handle it, observers said.
As for Singapore banks, UOB now ranks as the 80th largest bank in the world, according to Bloomberg's ranking. That's up some 20 spots from just a month ago. DBS is in the 86th position and OCBC in 107th.
Kim Eng, however, in a report yesterday warned that while it admires Singapore banks' superior asset quality and balance sheet strength, a drastic slowdown in earnings momentum is unavoidable. The banks' stock prices could fall by a further 18 per cent over the next 12 months in its worst case scenario, it added.
One thing is for sure, the write-downs and the cut-down in size of Asian financial outfits will not be of the magnitude seen in the US. Although things are still in a flux, a new landscape is emerging.
Thursday, 18 September 2008
Published September 19, 2008
M'sian banks untouched by sub-prime woes
By PAULINE NG
IN KUALA LUMPUR
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DECENT net margins on conventional banking business likely shielded Malaysian financial institutions from material exposure to the global sub-prime implosion. At least, that's what bankers and analysts say.
While now-disgraced US financial institutions were busily building up their over-exposure to toxic sub-prime-backed structured paper, Malaysian institutions were busy repairing balance sheets muddied after the Asian Financial Crisis of the late 1990s and concentrating on traditional lending rather than complex derivatives.
Of Malaysia's nine banking groups, only the two largest are likely to have the risk appetite for the complicated debt swaps. And if they had any sub-prime-related exposure, it would be small. 'The rest of us are unlikely to have these exotic risks,' said a banker at a smaller banks.
Malaysian banks can still derive net interest margins of 2.5 to 3 per cent - unlike in the US, where the ultra-competitive scene means banks have to eke out the slimmest of margins. This means Malaysian banks don't have to try all that hard to make money, says Standard & Poor's equity analyst Alex Chia.
'No Malaysian bank has reported any material exposure to the sub-prime mess and nothing has jumped out in past quarters,' he said. 'If there were any material exposure, it would have shown up by now. But generally, there was no motivation to take such risks.'
Earlier this year, Malaysia's biggest financial group Maybank revealed it had indirect sub-prime exposure of US$35 million - the only local bank to have reported any exposure.
Lack of direct exposure notwithstanding, the issue of exposure because of counterparty risks is less clear. Counterparty risk is the risk associated with the financial stability of a party entered into contract with.
In the US, credit default swap counterparty risk is a growing concern to many institutions, given the domino effect the unwinding of such debts has had on the markets.
Because of the opaqueness of such swaps it is difficult to quantify the risks. For example, a bank may transact with another bank without exposure to such swaps, but the second bank may have dealings with another bank with significant exposure.
'It's a very, very big circle you're talking about, and it's a million-dollar question I can't answer,' a banker said on whether Malaysian banks could be exposed in such a manner.
Few believe local banks have such exposure, but the sceptics point to Lehman Brothers' denial in July last year of sub-prime-related losses. By this week the 158-year-old firm was filing for bankruptcy.
Bank Negara Malaysia is monitoring the situation. Governor Zeti Akhtar Aziz this week said there is no need to inject any liquidity into the financial market as it is able to withstand any shocks that might arise from sub-prime losses.
M'sian banks untouched by sub-prime woes
By PAULINE NG
IN KUALA LUMPUR
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DECENT net margins on conventional banking business likely shielded Malaysian financial institutions from material exposure to the global sub-prime implosion. At least, that's what bankers and analysts say.
While now-disgraced US financial institutions were busily building up their over-exposure to toxic sub-prime-backed structured paper, Malaysian institutions were busy repairing balance sheets muddied after the Asian Financial Crisis of the late 1990s and concentrating on traditional lending rather than complex derivatives.
Of Malaysia's nine banking groups, only the two largest are likely to have the risk appetite for the complicated debt swaps. And if they had any sub-prime-related exposure, it would be small. 'The rest of us are unlikely to have these exotic risks,' said a banker at a smaller banks.
Malaysian banks can still derive net interest margins of 2.5 to 3 per cent - unlike in the US, where the ultra-competitive scene means banks have to eke out the slimmest of margins. This means Malaysian banks don't have to try all that hard to make money, says Standard & Poor's equity analyst Alex Chia.
'No Malaysian bank has reported any material exposure to the sub-prime mess and nothing has jumped out in past quarters,' he said. 'If there were any material exposure, it would have shown up by now. But generally, there was no motivation to take such risks.'
Earlier this year, Malaysia's biggest financial group Maybank revealed it had indirect sub-prime exposure of US$35 million - the only local bank to have reported any exposure.
Lack of direct exposure notwithstanding, the issue of exposure because of counterparty risks is less clear. Counterparty risk is the risk associated with the financial stability of a party entered into contract with.
In the US, credit default swap counterparty risk is a growing concern to many institutions, given the domino effect the unwinding of such debts has had on the markets.
Because of the opaqueness of such swaps it is difficult to quantify the risks. For example, a bank may transact with another bank without exposure to such swaps, but the second bank may have dealings with another bank with significant exposure.
'It's a very, very big circle you're talking about, and it's a million-dollar question I can't answer,' a banker said on whether Malaysian banks could be exposed in such a manner.
Few believe local banks have such exposure, but the sceptics point to Lehman Brothers' denial in July last year of sub-prime-related losses. By this week the 158-year-old firm was filing for bankruptcy.
Bank Negara Malaysia is monitoring the situation. Governor Zeti Akhtar Aziz this week said there is no need to inject any liquidity into the financial market as it is able to withstand any shocks that might arise from sub-prime losses.
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