Published November 14, 2008
Fear grips Wall St as Treasury changes tack
US government abandons original bailout plan to leave investors baffled, markets battered
By ANDREW MARKS
NEW YORK CORRESPONDENT
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THE bear tightened its grip to choking point on Wall Street on Wednesday, sending major stockmarket indexes tumbling more than 4 per cent as the US Treasury Department announced an abrupt shift in focus of its US$700 billion bailout effort for American financial companies.
The government's new plan - which will include offering non-bank consumer lenders access to the emergency funding and US$50 billion of the bailout funds for a direct lending programme to consumers to be run by the Federal Reserve - set off turmoil in the stock market. It came on the heels of bad news from the corporate sector, as Macy's and Best Buy announced worse-than-expected earnings and reduced outlooks for 2009.
The numbers on Wednesday put a grim exclamation point on a third consecutive day of losses that have sunk the major indexes nearly 10 per cent. The Dow Jones Industrial Average lost 411.30 points, or 4.7 per cent, to 8331.24; and the S&P 500 gave back 46.65 points, or 5.2 per cent, to 852.30. The Nasdaq slid 81.69 points, or 5.2 per cent, to 1,499.21.
Asian stocks also tumbled following Treasury Secretary Henry Paulson's announcement. Tokyo plunged 5.1 per cent, Hong Kong also lost 5.1 per cent and Sydney tumbled almost 6 per cent.
Yesterday, stocks opened modestly higher, as investors were pulled between buying into a deeply oversold market, and pushed away by more bad news coming from economic data and company outlooks. The Dow Jones Industrials initially climbed 25 points, or 0.29 per cent, in the first minutes of trading, while the market digested the latest jobless claims numbers, which were above 500,000 for the first time in seven years.
Weaker-than-expected guidance from Intel as well as from retail bellwether Wal-Mart - which followed even gloomier outlooks for the fourth quarter and the coming year from Macy's and Best Buy on Wednesday - was also weighing on investors and defeating the market's attempt to bounce back. At 10am in New York, the Dow had reversed course, losing 20.5 points, or 0.24 per cent, to 8,262.
'I think we're set up for another oversold rally by the afternoon, but once again it won't be anywhere near enough of a bounceback to regain the losses of the last few days, or even of Wednesday,' said SG Cowen trader John O'Donough. 'That's just a sign that we remain in the grips of a bear market - a lot of volatility, but the trend keeps pointing down,' he said.
Mr Paulson's announcement - that the government was completely abandoning its original strategy of utilising the US$700 billion bailout package to buy banks' toxic mortgage assets in favour of one aimed more at directly helping consumers instead of the financial companies - rattled Wall Street.
The new strategy came in response to the banks' continued unwillingness to lend money despite massive injections of capital from the Treasury Department, which thus far amounts to US$290 billion.
'The appearance of a lack of certainty on the part of Paulson is adding to the pressure of relentless bad news on earnings,' said Jim Awad, managing director of Zephyr Management. 'On Wednesday, we saw investors voicing their worry that despite the massive government interventions to prop up the banks, the credit markets are still frozen for the most part,' he said.
Deepening the short- term gloom, said analysts, is the sense that the worst could be yet to come. 'The Obama bounce has faded given poor economic news, weak corporate earnings guidance and new worries around various events such as auto industry bailouts, and Chinese and Russian concerns,' noted Citigroup chief investment strategist Tobias Levkovich.
The sense that financial companies remain imperilled was not helped by published reports that American Express, which on Monday became a bank-holding company and thus eligible for funds from the Federal Reserve, was attempting to get US$3.5 billion in capital injection from the government.
'We're not at panic levels yet, but we're close,' said Mr Levkovich, who believes that stocks have yet to reach their bottom.
'People are having to ask themselves how much worse things are going to get in the economy if the system they thought was at least being repaired enough to start things going again appears to be nearly as fragile as it was a month ago,' said Mr Awad.
Monday, 17 November 2008
Thursday, 13 November 2008
Published November 13, 2008
SingTel sees job cuts as a last resort
Q2 net profit down 12%; group looking to redeployment to cut operating costs
By WINSTON CHAI
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(SINGAPORE) Singapore Telecommunications' quarterly profit may have skidded to a three-year low, but it will look to redeployment instead of retrenchment to cut operating costs.
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| Waiting for profits: SingTel's net income from Singapore operations fell as a result of higher marketing costs and subsidies associated with the Apple iPhone 3G |
'Certainly, job cuts will be something that we see as a last resort,' said SingTel CEO Chua Sock Koong.
The group yesterday reported a 12.1 per cent fall in net profit to $868 million for its second quarter ended Sept 30, from $988 million a year earlier. Basic earnings per share slipped 12.2 per cent to 5.45 cents, while revenue eased 5.3 per cent to $3.89 billion.
With its second-quarter earnings having been dented by plunging regional currencies and higher handset subsidies, SingTel has already frozen hiring and is also cutting down on discretionary spending such as advertising expenditure in Singapore and Australia. But instead of cutting manpower, it could use reassignments to glean more savings.
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'As a business, we continue to review the operating efficiencies of each of our businesses to ensure we deliver a high quality of service to our customers. As part of this efficiency drive, there could be redeployment of headcount across the different businesses,' Ms Chua told reporters at the group's Q2 results briefing yesterday.
Her assurance of job security should provide some welcome relief for SingTel's pool of 11,130 employees here following its recent profit warnings and the announcement of 900 jobs cut by another local corporate titan, DBS Group Holdings, last week.
Reiterating its guidance last week, SingTel said its profitability took a hit in Q2 as the Sing dollar's sustained appreciation against major regional currencies crimped contributions from all its foreign units.
The company derives nearly 60 per cent of its earnings from overseas through wholly-owned Australian operator Optus, as well as regional associates in India, Bangladesh, Indonesia, Pakistan, the Philippines and Thailand.
Contribution from Optus shrank with the Australian dollar dropping against the Singapore dollar this year. Other currencies such as the Indian rupee, Thai baht and Philippine peso also fell, lowering earnings from associated companies such as India's Bharti, AIS in Thailand, and Globe in the Philippines.
During the quarter, profitability was further dampened by losses from Warid Telecom. SingTel's Pakistani investment suffered a wider-than-expected pre- tax loss of $41 million, with the group's share of pre-tax operating losses at $24 million, but this was mitigated by a one-time foreign exchange gain of $67 million following a capital reduction in SingTel's Australian unit.
'We're still in the phase of rolling out networks (in Pakistan). There has also been a reduction in consumer spending (there) as a result of the financial crisis,' Ms Chua explained.
As a result, pre-tax profit contributions from the firm's six regional associates plunged 26 per cent during the quarter.
Profits from Optus remained flat in Q2 while net income from Singapore operations fell 4.8 per cent as a result of higher marketing costs and subsidies associated with the iPhone 3G.
The Republic's largest operator was given first dibs at selling Apple's second-generation touchscreen handset in Singapore on Aug 22. Optus launched it a month earlier as part of a non-exclusive arrangement. Hefty subsidies for the iPhone 3G slashed Ebitda (earnings before interest, tax, depreciation and amortisation) in both countries by nearly $71 million, according to SingTel.
'We are confident that iPhone customers will deliver growth and value,' Ms Chua reiterated, adding that the Arpu (average revenue per user) from iPhone owners is 1.5 times higher than other post-paid mobile customers.
SingTel has collectively sold more than 170,000 units of iPhone 3G to date in Singapore, Australia, India and the Philippines.
In Singapore, the much- hyped device lifted SingTel's post-paid subscriber base by 45,000 from July to September - twice as many as rivals StarHub and MobileOne. Revenue also grew across all its local business lines, with its cellular and Internet units both chalking up double-digit gains.
'Overall, Singapore and Optus delivered good numbers. Associates' contribution was weak mainly due to currencies, and the extent of losses at Pakistan investment Warid took us by surprise,' Macquarie Research said in a research note.
For the first half of its financial year, SingTel's net profit dropped 8.8 per cent to $1.74 billion while operating revenue rose 5.6 per cent to $7.67 billion. Stable free cash flow for the group - defined as operating cash including associate dividends less cash capex - stayed at about $1.7 billion for H1 FY09. Net debt gearing ratio increased 1.6 percentage points to 25.8 per cent on the back of additional bank borrowings.
SingTel has declared an interim dividend of 5.6 cents for the six months ended Sept 30, unchanged from 2007.
Looking ahead to the full year, SingTel still expects its operating revenue and Ebitda in its two core markets - Singapore and Australia - to grow but pre-tax earnings from its regional associates are set to be lower compared to last year.
'The weaker Australian dollar will have an adverse impact on the earnings for the group. What will hit it further is the lacklustre performance of its regional associates. Telekomsel, in particular, saw pre-tax profit slump 40 per cent to S$113 million (in Q2),' noted Terence Wong, co-head of research at DMG & Partners.
SingTel shares closed 1.3 per cent higher at $2.38 yesterday.
Published November 13, 2008
KL tweaks long-standing 30% bumi equity rule
Move intended to keep capital market competitive and progressive: Najib
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(KUALA LUMPUR) The government yesterday relaxed the 30 per cent bumiputra equity ownership for companies wanting to be listed but have yet to fulfil the quota.
Deputy Prime Minister Najib Razak said the relaxation, which would take effect immediately, was to ensure that the Malaysian capital investment market stays progressive and competitive.
He said that the companies concerned had to take specific steps and, under the reorganisation, needed to heed the conditions of the National Development Policy while continuing to offer the shares to institutions and bumiputra investors approved by the Ministry of International Trade and Industry.
He said, however, that the shares that were not subscribed could be offered to other bumiputras as part of the share voting process.
'I wish to stress that the 30 per cent bumiputra equity participation at the point of listing will continue to be enforced. However, there will be a slight change in terms of the methodology,' he told reporters after visiting the Securities Commission.
'This means that more individual bumiputras could apply for the shares concerned. If the shares offered to individual bumiputras are still not fully subscribed, then the company concerned is deemed to have fulfilled the 30 per cent bumiputra equity,' he said.
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Asked whether this move would jeopardise the 30 per cent bumiputra equity, he said the action would allow other bumiputra individuals to participate and take up the public balloting.
'There are two tiers. After the two cuts, if the shares are still not taken up, it is only fair to allow the companies to be listed. Otherwise there will be a huge uncertainty for them,' he said.
Meanwhile, Securities Commission chairman Zarinah Anwar said to date, seven companies had not fulfilled the share ownership conditions.
She said the companies concerned had met the Securities Commission and had been given time to fulfil the condition.
'The share prices of these companies today have gone below their IPO pricing. Of course, it does not make sense then to compel bumiputras to subscribe as they will be able to buy the shares cheaper from the market,' she said. -- Bernama
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