Published May 20, 2009

GIC sticking with its Citi, UBS investments

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(SINGAPORE) Singapore state investor Temasek's brief love affair with Wall Street banks has ended in tears, but the country's biggest sovereign wealth fund GIC is still sticking with its bets.

The Government of Singapore Investment Corp (GIC), which has ploughed billions into Citigroup and UBS, told Reuters that it was holding on to its investments.

'GIC is a long-term investor and will continue with its investments in Citigroup and UBS,' a GIC spokeswoman said yesterday. GIC is one of the world's largest sovereign wealth funds.

Last week, Singapore's other state investor, Temasek, said that it had sold a 3 per cent stake in Bank of America at a hefty loss of over US$3 billion, stoking investor concerns that GIC and other sovereign funds might follow suit.

Singapore's two funds have suffered from the global market turmoil, with GIC's portfolio falling 25 per cent from a peak estimated at US$300 billion while Temasek's assets declined by 31 per cent during March to November last year.

Cash-rich sovereign wealth funds were thrust in the limelight in financial markets after high profile investments in ailing Western banks in recent years, but are now licking their wounds as the financial crisis hammered stocks.

After being hit by paper losses, GIC agreed to convert its preferred Citi shares at US$3.25 a share in February, compared with an original price of US$26.35 a share. But its investment is now in the black as Citi shares were up to almost US$4 in early Tuesday trading in New York.

'If you look at Citi, it turned out to be pretty good for them,' said a banker who has advised sovereign wealth funds on M&A deals. The biggest fear over Citi earlier this year was a forced nationalisation, but analysts said those risks may have subsided. 'We think that the broad nationalisation concerns are behind us,' BlackRock's CIO Bob Doll told reporters in Singapore on Monday.

GIC's second major Western bank investment was UBS, which has a big regional private banking business in Singapore and plays an important role to cement the city-state's goal of becoming Asia's premier wealth centre.

'In the general financial malaise, SWFs are still one of the few remaining sources of capital willing to take on risk and opportunity amid the debris of depressed asset markets and lame banks,' Jan Randolph at IHS Global Insight said in a report this month on wealth funds. -- Reuters

Published May 19, 2009

Maybank Islamic not eyeing strategic partner

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(KUALA LUMPUR) Maybank Islamic, Asia-Pacific's largest syariah bank, is not currently seeking a strategic partner, its acting chief said yesterday, after earlier talk that it would merge with the country's No 2 Islamic bank.

'Not at the moment ... not at entity level,' acting CEO Ibrahim Hassan told reporters, when asked if the bank was seeking a strategic partner.

Mr Ibrahim said Maybank Islamic, a unit of Malayan Banking, is only interested in partnerships for specific business products such as the joint issue of credit cards.

He said the launch of two new Islamic financial products yesterday would secure RM2 billion (S$825 million) in deposits within one year and RM4 billion in deposits in the financial year to June 2010.

Malaysian financial group BIMB Holdings Bhd in February denied that it was in talks to merge its syariah banking subsidiary Bank Islam with Maybank Islamic.

Talk of a Maybank Islamic-Bank Islam merger came as several other banks in the rapidly growing sector said they were seeking acquisition opportunities to boost their size - although a global economic slump could put a brake on expansion plans.

The US$1 trillion Islamic banking industry lacks lenders.

Saudi's Al Rajhi Bank, which says it is the world's top Islamic bank, has a market capitalisation of US$27.7 billion, compared with Bank of America's US$68 billion. -- Reuters

Published May 19, 2009

Merger a sign of KL fabricators' consolidation?

Rationale could be similar to 2000-2002 bank mergers: report

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(KUALA LUMPUR) The sale of Ramunia Fabricators Sdn Bhd to Sime Darby Engineering Sdn Bhd (SDE) may spark a major consolidation involving government-linked companies (GLCs) in oil and gas offshore fabrication, says a report in Malaysia's Business Times, citing industry sources.

The GLCs include SDE, Ramunia Fabricators, Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE), which is a subsidiary of MISC Bhd, and UMW Holdings Bhd, which is re-examining an earlier ambition to be the main force in the fabrication sector.

The Malaysian business paper said it has learnt that officials from one of the GLCs recently held talks with Petroliam Nasional Bhd (Petronas) to discuss the possibility of a consolidation to create a major fabrication entity in the country that can be competitive globally.

It was also in view of looming pressure led by falling oil prices, which is hurting the profit margin of oil and gas services providers and fabricators, a source told the Malaysian paper.

Oil prices are currently hovering around US$58 a barrel compared with a high US$147 last year.

'The consolidation by the (GLC) fabricators will not weaken their financial strength, but achieve economies of scale and higher productivity. It may happen this year or next. We have seen the first move by SDE over Ramunia Fabricators and are waiting for the next step,' the source said.

The source said the rationale for consolidation may be similar to the bank mergers in 2000-2002, which was to ensure that the domestic banking institutions could withstand pressures and challenges arising from globalisation and an increasingly competitive environment.

The move was in line with the government's policy of not to bail out weak companies, but to rationalise businesses towards higher productivity.

The paper quoted the source as saying that the current 'dry spell' in the fabrication industry - judging from the slowdown in the number of contracts awarded to fabricators and the absence of major awards to be contracted out to the companies at least until the year-end - would allow time for the GLCs to restructure and re-examine their synergy.

So far this year, there have been no major awards to engineering companies by Petronas or its production-sharing contractors for offshore facilities, with the exception of the Kebabangan Cluster gas project offshore Sabah.

'It makes sense to have a bigger group involved in fabrication to support Petronas and its activities in India and the Middle East. Petronas is developing a few major projects in offshore Africa, Australia and Turkmenistan. The GLCs will become more profitable by working together,' the source said.

There are seven fabricators in the country licensed by Petronas: MMHE, Boustead Penang Shipyard Sdn Bhd, state-owned Brooke Dockyard and Engineering Works Corp (BDEWC), Kencana HL Sdn Bhd of Kencana Petroleum Bhd, and Oilfab Sdn Bhd, a unit of OilCorp Bhd.

The Malaysian business paper had reported that Sarawak-based oil and gas firm Dayang Enterprise Holdings Bhd was considering buying BDEWC in a move to win more oil and gas contracts in Sabah and Sarawak.

It was learnt that Sime Darby, Naim Cendera Holdings Bhd and Shapadu Sdn Bhd were also interested, but nothing materialised.