Friday, September 30, 2011
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Monday, September 12, 2011
M’sia won’t go bankrupt, says Awang Adek
Friday June 4, 2010
KOTA BAHARU: Malaysia will not go bankrupt in 2019 even if a subsidy totalling RM74bil a year is continued, said Deputy Finance Minister, Senator Datuk Dr Awang Adek Hussein.
He said the country’s economy would not be as bad as it had been portrayed such as not being able to repay its debts should the Government continue its subsidy programme.
The move to cut subsidy was aimed at reducing the country’s deficit rate and ensuring a more stable financial standing for the country, he said after delivering a speech at Universiti Sains Malaysia, Kubang Kerian get-together session here yesterday.
Awang Adek was commenting on the statement by Minister in the Prime Minister’s Department, Datuk Seri Idris Jala, that the country could go bankrupt if the provision of subsidy to the rakyat is continued.
According to Jala, who is also the Prime Minister Department’s Performance Management and Delivery Unit chief executive officer, bankruptcy was possible as Malaysia’s debt was expected to rise to 100% of the gross domestic product in 2019 if the provision of subsidy continues. — Bernama
http://biz.thestar.com.my/news/story.asp?file=/2010/6/4/business/6400949&sec=business
KOTA BAHARU: Malaysia will not go bankrupt in 2019 even if a subsidy totalling RM74bil a year is continued, said Deputy Finance Minister, Senator Datuk Dr Awang Adek Hussein.
He said the country’s economy would not be as bad as it had been portrayed such as not being able to repay its debts should the Government continue its subsidy programme.
The move to cut subsidy was aimed at reducing the country’s deficit rate and ensuring a more stable financial standing for the country, he said after delivering a speech at Universiti Sains Malaysia, Kubang Kerian get-together session here yesterday.
Awang Adek was commenting on the statement by Minister in the Prime Minister’s Department, Datuk Seri Idris Jala, that the country could go bankrupt if the provision of subsidy to the rakyat is continued.
According to Jala, who is also the Prime Minister Department’s Performance Management and Delivery Unit chief executive officer, bankruptcy was possible as Malaysia’s debt was expected to rise to 100% of the gross domestic product in 2019 if the provision of subsidy continues. — Bernama
http://biz.thestar.com.my/news/story.asp?file=/2010/6/4/business/6400949&sec=business
Friday June 11, 2010
Khazanah makes formal offer for Parkway
By TEE LIN SAY
linsay@thestar.com.my
But the S’pore firm’s shares closed above the offered S$3.78 a share yesterday
PETALING JAYA: Khazanah Nasional Bhd formally made an offer to shareholders to acquire 313 million shares of Singapore’s Parkway Holdings at S$3.78 per share. However, Parkway’s share price rose above Khazanah’s offer price yesterday, closing at a 52-week high of S$3.87, amid speculation that a counter bid for Parkway could be in the offing.
Parkway’s shares are up 32% year-to-date and are trading at forward price earnings ratio of 27 times its financial year 2010 earnings, according to Bloomberg data.
Still, that may not stop India’s Fortis Healthcare Ltd from mounting a counter bid for Parkway.
Khazanah last week said its partial general offer for Parkway, which will cost it S$1.8bil (US$835mil), was to bring its shareholding in Parkway to 51.1% from 23%.
In March, Fortis surfaced as Parkway’s single largest shareholder when it bought 23.9% of Parkway from US private equity firm TPG for S$959mil (US$678mil). It subsequently upped that stake to 25.3%. Fortis then appointed its representatives to the chairmanship of Parkway and took three other board seats. Khazanah only has two seats on Parkway’s board.
It has been speculated that Khazanah’s intention is to oust Fortis from controlling Parkway.
Yesterday, Bloomberg reported that Fortis said it was keeping its options open with regard to its strategy on Parkway.
Earlier this week, Fortis said it would be raising US$585mil by issuing securities. Speculation is rife that Fortis is doing this to fund a possible counter bid for Parkway.
A Singapore-based analyst who tracks Parkway feels that Parkway investors may be receptive to Khazanah’s offer.
“In the absence of other catalysts, I think Parkway shareholders should be happy. Parkway’s share price has not appreciated like that in the last two years. This offer also came when markets are tanking, so there is excitement,” she said.
On the issue of Fortis counter-bidding Khazanah, analysts remain uncertain.
“Fortis may not necessarily be building up their war chest to counter-bid Khazanah. Fortis has many other businesses and they have many other things they want to do. Would they also want to put so much money in one asset?” asked another Singapore-based analyst who tracks Parkway.
Fortis is one of the largest hospital chains in India, and its strategic stake in Parkway makes it one of the leading players in Asia.
Its stake in Parkway enables Fortis to establish a Pan-Asian presence increasing its network to 62 hospitals with combined bed strength of over 10,000.
Khazanah, on the other hand, had clearly stated that healthcare was one of its core investment areas. The government investment arm already owns 60% in Pantai Medical Group and a 67.5% stake in private medical college International Medical University.
It also has 12.2% in India’s Apollo Hospitals Ltd, India’s largest private hospital group. Interestingly, Apollo and Fortis are arch-rivals in India, according to news reports.
“Both Fortis and Khazanah want Parkway because it is a valuable franchise. They are not buying it for goodwill. I think some shareholders realise that healthcare is becoming a big play, so will want exposure to this asset. However, they may also decide to accept Khazanah’s offer or any other counter bid as the price looks attractive. These investors can always buy more Parkway shares later, if the price settles down after this tussle,” said one of the Singapore-based analysts.
Khazanah makes formal offer for Parkway
By TEE LIN SAY
linsay@thestar.com.my
But the S’pore firm’s shares closed above the offered S$3.78 a share yesterday
PETALING JAYA: Khazanah Nasional Bhd formally made an offer to shareholders to acquire 313 million shares of Singapore’s Parkway Holdings at S$3.78 per share. However, Parkway’s share price rose above Khazanah’s offer price yesterday, closing at a 52-week high of S$3.87, amid speculation that a counter bid for Parkway could be in the offing.
Parkway’s shares are up 32% year-to-date and are trading at forward price earnings ratio of 27 times its financial year 2010 earnings, according to Bloomberg data.
Still, that may not stop India’s Fortis Healthcare Ltd from mounting a counter bid for Parkway.
Khazanah last week said its partial general offer for Parkway, which will cost it S$1.8bil (US$835mil), was to bring its shareholding in Parkway to 51.1% from 23%.
In March, Fortis surfaced as Parkway’s single largest shareholder when it bought 23.9% of Parkway from US private equity firm TPG for S$959mil (US$678mil). It subsequently upped that stake to 25.3%. Fortis then appointed its representatives to the chairmanship of Parkway and took three other board seats. Khazanah only has two seats on Parkway’s board.
It has been speculated that Khazanah’s intention is to oust Fortis from controlling Parkway.
Yesterday, Bloomberg reported that Fortis said it was keeping its options open with regard to its strategy on Parkway.
Earlier this week, Fortis said it would be raising US$585mil by issuing securities. Speculation is rife that Fortis is doing this to fund a possible counter bid for Parkway.
A Singapore-based analyst who tracks Parkway feels that Parkway investors may be receptive to Khazanah’s offer.
“In the absence of other catalysts, I think Parkway shareholders should be happy. Parkway’s share price has not appreciated like that in the last two years. This offer also came when markets are tanking, so there is excitement,” she said.
On the issue of Fortis counter-bidding Khazanah, analysts remain uncertain.
“Fortis may not necessarily be building up their war chest to counter-bid Khazanah. Fortis has many other businesses and they have many other things they want to do. Would they also want to put so much money in one asset?” asked another Singapore-based analyst who tracks Parkway.
Fortis is one of the largest hospital chains in India, and its strategic stake in Parkway makes it one of the leading players in Asia.
Its stake in Parkway enables Fortis to establish a Pan-Asian presence increasing its network to 62 hospitals with combined bed strength of over 10,000.
Khazanah, on the other hand, had clearly stated that healthcare was one of its core investment areas. The government investment arm already owns 60% in Pantai Medical Group and a 67.5% stake in private medical college International Medical University.
It also has 12.2% in India’s Apollo Hospitals Ltd, India’s largest private hospital group. Interestingly, Apollo and Fortis are arch-rivals in India, according to news reports.
“Both Fortis and Khazanah want Parkway because it is a valuable franchise. They are not buying it for goodwill. I think some shareholders realise that healthcare is becoming a big play, so will want exposure to this asset. However, they may also decide to accept Khazanah’s offer or any other counter bid as the price looks attractive. These investors can always buy more Parkway shares later, if the price settles down after this tussle,” said one of the Singapore-based analysts.
Friday June 11, 2010
Khazanah makes formal offer for Parkway
By TEE LIN SAY
linsay@thestar.com.my
But the S’pore firm’s shares closed above the offered S$3.78 a share yesterday
PETALING JAYA: Khazanah Nasional Bhd formally made an offer to shareholders to acquire 313 million shares of Singapore’s Parkway Holdings at S$3.78 per share. However, Parkway’s share price rose above Khazanah’s offer price yesterday, closing at a 52-week high of S$3.87, amid speculation that a counter bid for Parkway could be in the offing.
Parkway’s shares are up 32% year-to-date and are trading at forward price earnings ratio of 27 times its financial year 2010 earnings, according to Bloomberg data.
Still, that may not stop India’s Fortis Healthcare Ltd from mounting a counter bid for Parkway.
Khazanah last week said its partial general offer for Parkway, which will cost it S$1.8bil (US$835mil), was to bring its shareholding in Parkway to 51.1% from 23%.
In March, Fortis surfaced as Parkway’s single largest shareholder when it bought 23.9% of Parkway from US private equity firm TPG for S$959mil (US$678mil). It subsequently upped that stake to 25.3%. Fortis then appointed its representatives to the chairmanship of Parkway and took three other board seats. Khazanah only has two seats on Parkway’s board.
It has been speculated that Khazanah’s intention is to oust Fortis from controlling Parkway.
Yesterday, Bloomberg reported that Fortis said it was keeping its options open with regard to its strategy on Parkway.
Earlier this week, Fortis said it would be raising US$585mil by issuing securities. Speculation is rife that Fortis is doing this to fund a possible counter bid for Parkway.
A Singapore-based analyst who tracks Parkway feels that Parkway investors may be receptive to Khazanah’s offer.
“In the absence of other catalysts, I think Parkway shareholders should be happy. Parkway’s share price has not appreciated like that in the last two years. This offer also came when markets are tanking, so there is excitement,” she said.
On the issue of Fortis counter-bidding Khazanah, analysts remain uncertain.
“Fortis may not necessarily be building up their war chest to counter-bid Khazanah. Fortis has many other businesses and they have many other things they want to do. Would they also want to put so much money in one asset?” asked another Singapore-based analyst who tracks Parkway.
Fortis is one of the largest hospital chains in India, and its strategic stake in Parkway makes it one of the leading players in Asia.
Its stake in Parkway enables Fortis to establish a Pan-Asian presence increasing its network to 62 hospitals with combined bed strength of over 10,000.
Khazanah, on the other hand, had clearly stated that healthcare was one of its core investment areas. The government investment arm already owns 60% in Pantai Medical Group and a 67.5% stake in private medical college International Medical University.
It also has 12.2% in India’s Apollo Hospitals Ltd, India’s largest private hospital group. Interestingly, Apollo and Fortis are arch-rivals in India, according to news reports.
“Both Fortis and Khazanah want Parkway because it is a valuable franchise. They are not buying it for goodwill. I think some shareholders realise that healthcare is becoming a big play, so will want exposure to this asset. However, they may also decide to accept Khazanah’s offer or any other counter bid as the price looks attractive. These investors can always buy more Parkway shares later, if the price settles down after this tussle,” said one of the Singapore-based analysts.
Khazanah makes formal offer for Parkway
By TEE LIN SAY
linsay@thestar.com.my
But the S’pore firm’s shares closed above the offered S$3.78 a share yesterday
PETALING JAYA: Khazanah Nasional Bhd formally made an offer to shareholders to acquire 313 million shares of Singapore’s Parkway Holdings at S$3.78 per share. However, Parkway’s share price rose above Khazanah’s offer price yesterday, closing at a 52-week high of S$3.87, amid speculation that a counter bid for Parkway could be in the offing.
Parkway’s shares are up 32% year-to-date and are trading at forward price earnings ratio of 27 times its financial year 2010 earnings, according to Bloomberg data.
Still, that may not stop India’s Fortis Healthcare Ltd from mounting a counter bid for Parkway.
Khazanah last week said its partial general offer for Parkway, which will cost it S$1.8bil (US$835mil), was to bring its shareholding in Parkway to 51.1% from 23%.
In March, Fortis surfaced as Parkway’s single largest shareholder when it bought 23.9% of Parkway from US private equity firm TPG for S$959mil (US$678mil). It subsequently upped that stake to 25.3%. Fortis then appointed its representatives to the chairmanship of Parkway and took three other board seats. Khazanah only has two seats on Parkway’s board.
It has been speculated that Khazanah’s intention is to oust Fortis from controlling Parkway.
Yesterday, Bloomberg reported that Fortis said it was keeping its options open with regard to its strategy on Parkway.
Earlier this week, Fortis said it would be raising US$585mil by issuing securities. Speculation is rife that Fortis is doing this to fund a possible counter bid for Parkway.
A Singapore-based analyst who tracks Parkway feels that Parkway investors may be receptive to Khazanah’s offer.
“In the absence of other catalysts, I think Parkway shareholders should be happy. Parkway’s share price has not appreciated like that in the last two years. This offer also came when markets are tanking, so there is excitement,” she said.
On the issue of Fortis counter-bidding Khazanah, analysts remain uncertain.
“Fortis may not necessarily be building up their war chest to counter-bid Khazanah. Fortis has many other businesses and they have many other things they want to do. Would they also want to put so much money in one asset?” asked another Singapore-based analyst who tracks Parkway.
Fortis is one of the largest hospital chains in India, and its strategic stake in Parkway makes it one of the leading players in Asia.
Its stake in Parkway enables Fortis to establish a Pan-Asian presence increasing its network to 62 hospitals with combined bed strength of over 10,000.
Khazanah, on the other hand, had clearly stated that healthcare was one of its core investment areas. The government investment arm already owns 60% in Pantai Medical Group and a 67.5% stake in private medical college International Medical University.
It also has 12.2% in India’s Apollo Hospitals Ltd, India’s largest private hospital group. Interestingly, Apollo and Fortis are arch-rivals in India, according to news reports.
“Both Fortis and Khazanah want Parkway because it is a valuable franchise. They are not buying it for goodwill. I think some shareholders realise that healthcare is becoming a big play, so will want exposure to this asset. However, they may also decide to accept Khazanah’s offer or any other counter bid as the price looks attractive. These investors can always buy more Parkway shares later, if the price settles down after this tussle,” said one of the Singapore-based analysts.
Prinsip meritokrasi bantu usahawan bumiputera
KUALA LUMPUR 10 Jun - Tan Sri Muhyiddin Yassin berkata, kerajaan hanya akan membantu usahawan bumiputera yang benar-benar menunjukkan keupayaan untuk bersaing sepanjang tempoh Rancangan Malaysia Kesepuluh (RMK-10) dilaksanakan.
Timbalan Perdana Menteri berkata, langkah itu sejajar dengan keutamaan RMK-10 yang menjadikan prinsip meritokrasi sebagai syarat paling utama dalam menjayakan agenda pembangunan bumiputera.
Beliau berkata, berbanding sebelum ini usaha untuk memajukan agenda bumiputera tidak memberi penekanan terhadap langkah tersebut hingga menyebabkan berlaku ketirisan serta 'ali baba'.
"Kerajaan tidak mahu menggunakan cara lama seperti sebelum ini yang mana kita lihat ia tidak banyak memberi kesan. Akhirnya kita membuat keputusan untuk bersandarkan pada prinsip meritokrasi.
"Kerajaan mendapati di kalangan pengusaha bumiputera, ada antara mereka yang berkemampuan dan boleh menjadi usahawan yang berjaya.
"Dengan kata lain mereka mempunyai merit. Usahawan seperti ini akan kita dokong sehingga mereka menjadi pemain yang berjaya," katanya kepada pemberita selepas pembentangan RMK-10 oleh Perdana Menteri, Datuk Seri Najib Tun Razak di Dewan Rakyat hari ini.
Beliau berkata demikian ketika ditanya mengenai pengekalan sasaran 30 peratus pemilikan ekuiti korporat bumiputera dan ekonomi di peringkat makro dalam RMK-10.
Menjawab satu soalan, Muhyiddin berkata, setiap usahawan bumiputera yang akan dibantu selepas ini tertakluk pada kriteria serta syarat ditetapkan.
"Ada kriteria tertentu tetapi yang penting mesti ada daya keusahawanan, kemahiran serta mempunyai rekod baik yang baik. Bukannya ali baba,'' tambahnya.
Mengenai majlis peringkat tertinggi untuk merancang, menyelaras dan memantau pelaksanaan agenda pembangunan bumiputera yang akan dipengerusikan oleh Perdana Menteri, beliau berkata, ia bakal melancarkan lagi proses pembangunan tersebut.
Dalam pada itu, beliau berkata, langkah kerajaan meneruskan perjuangan untuk meneruskan agenda tersebut merupakan bukti bahawa kerajaan prihatin dengan pencapaian golongan bumiputera khususnya dalam bidang ekonomi.
"Ini jelas menunjukkan bahawa Perdana Menteri peka dengan pandangan-pandangan daripada masyarakat bumiputera. Kita ambil kira keperluan ini dalam usaha mengurangkan jurang antara pembangunan masyarakat bumiputera dan bukan bumiputera," tambahnya.
KUALA LUMPUR 10 Jun - Tan Sri Muhyiddin Yassin berkata, kerajaan hanya akan membantu usahawan bumiputera yang benar-benar menunjukkan keupayaan untuk bersaing sepanjang tempoh Rancangan Malaysia Kesepuluh (RMK-10) dilaksanakan.
Timbalan Perdana Menteri berkata, langkah itu sejajar dengan keutamaan RMK-10 yang menjadikan prinsip meritokrasi sebagai syarat paling utama dalam menjayakan agenda pembangunan bumiputera.
Beliau berkata, berbanding sebelum ini usaha untuk memajukan agenda bumiputera tidak memberi penekanan terhadap langkah tersebut hingga menyebabkan berlaku ketirisan serta 'ali baba'.
"Kerajaan tidak mahu menggunakan cara lama seperti sebelum ini yang mana kita lihat ia tidak banyak memberi kesan. Akhirnya kita membuat keputusan untuk bersandarkan pada prinsip meritokrasi.
"Kerajaan mendapati di kalangan pengusaha bumiputera, ada antara mereka yang berkemampuan dan boleh menjadi usahawan yang berjaya.
"Dengan kata lain mereka mempunyai merit. Usahawan seperti ini akan kita dokong sehingga mereka menjadi pemain yang berjaya," katanya kepada pemberita selepas pembentangan RMK-10 oleh Perdana Menteri, Datuk Seri Najib Tun Razak di Dewan Rakyat hari ini.
Beliau berkata demikian ketika ditanya mengenai pengekalan sasaran 30 peratus pemilikan ekuiti korporat bumiputera dan ekonomi di peringkat makro dalam RMK-10.
Menjawab satu soalan, Muhyiddin berkata, setiap usahawan bumiputera yang akan dibantu selepas ini tertakluk pada kriteria serta syarat ditetapkan.
"Ada kriteria tertentu tetapi yang penting mesti ada daya keusahawanan, kemahiran serta mempunyai rekod baik yang baik. Bukannya ali baba,'' tambahnya.
Mengenai majlis peringkat tertinggi untuk merancang, menyelaras dan memantau pelaksanaan agenda pembangunan bumiputera yang akan dipengerusikan oleh Perdana Menteri, beliau berkata, ia bakal melancarkan lagi proses pembangunan tersebut.
Dalam pada itu, beliau berkata, langkah kerajaan meneruskan perjuangan untuk meneruskan agenda tersebut merupakan bukti bahawa kerajaan prihatin dengan pencapaian golongan bumiputera khususnya dalam bidang ekonomi.
"Ini jelas menunjukkan bahawa Perdana Menteri peka dengan pandangan-pandangan daripada masyarakat bumiputera. Kita ambil kira keperluan ini dalam usaha mengurangkan jurang antara pembangunan masyarakat bumiputera dan bukan bumiputera," tambahnya.
GDP growth in 2010 exceeded 6%, hints PM
Published: Thursday February 17, 2011 MYT 11:11:00 AM
Updated: Thursday February 17, 2011 MYT 1:07:01 PM
KUALA LUMPUR: Prime Minister Datuk Seri Najib Tun Razak hinted Thursday that the country's Gross Domestic Product (GDP) growth for 2010 may exceed 6%.
The official GDP figures will be announced Friday, he told reporters after officiating a programme to enhance Dewan Negara's activities, at Parliament House here.
Asked if Malaysia was capable of recording double-digit growth in future, Najib, who is also Finance Minister, said: "No, we cannot. Because you must remember that the Malaysian economy is much bigger than it was 20 years ago.
"As we approach to become a matured economy, we cannot get double-digit (growth) but we can get reasonably high. And, I think 6% is considered a very creditable performance.
"We have to be realistic. No developed nation can achieve double-digit."
He also said the country was on track to achieve Vision 2020. - Bernama
http://thestar.com.my/news/story.asp?file=/2011/2/17/nation/20110217112102&sec=nation
Updated: Thursday February 17, 2011 MYT 1:07:01 PM
KUALA LUMPUR: Prime Minister Datuk Seri Najib Tun Razak hinted Thursday that the country's Gross Domestic Product (GDP) growth for 2010 may exceed 6%.
The official GDP figures will be announced Friday, he told reporters after officiating a programme to enhance Dewan Negara's activities, at Parliament House here.
Asked if Malaysia was capable of recording double-digit growth in future, Najib, who is also Finance Minister, said: "No, we cannot. Because you must remember that the Malaysian economy is much bigger than it was 20 years ago.
"As we approach to become a matured economy, we cannot get double-digit (growth) but we can get reasonably high. And, I think 6% is considered a very creditable performance.
"We have to be realistic. No developed nation can achieve double-digit."
He also said the country was on track to achieve Vision 2020. - Bernama
http://thestar.com.my/news/story.asp?file=/2011/2/17/nation/20110217112102&sec=nation
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Govt Likely to Keep Price of RON 95 Petrol Stable
Wednesday May 11, 2011
By JAGDEV SINGH SIDHU
jagdev@thestar.com.my
KUALA LUMPUR: The increase in the price of sugar signalled the resumption of the subsidy rationalisation programme many thought was put on hold given the inflationary pressures felt by countries globally.
Economists said although prices for selected goods might rise, they expected the key determinant of inflation - the price of RON 95 petrol - to remain stable as efforts to keep a lid on inflation.
“It will be on a gradual basis,” said CIMB Investment Bank Bhd head of economics Lee Heng Guie on the subsidy rationalisation programme.
The price of coarse and fine sugar increased by 20 sen to RM2.30 per kilo yesterday, reducing the Government's subsidy for sugar to RM116.6mil from RM400mil per year.
If the Government maintains the price of RON 95, it will mean it is concerned about inflationary pressure, according to an economist
The increase yesterday was the first for this year but the fourth overall since the Government's subsidy rationalisation programme was put into effect. Sugar prices saw three increases last year of 20 sen in January, 25 sen in July and 20 sen in December.
Economists feel the move to cut subsidies was still needed given the use of such interventionist policy to keep prices and cost low during a time when inflation has become a thorn in the flesh for many countries.
Inflation in Malaysia hit 3% in March but was among the lowest in Asia where it had been the focus of many central banks. Interest rates have been raised in a number of Asian countries in recent months to stave off inflationary pressures.
For Malaysia, the consequence of cutting the subsidy on sugar and letting prices go up is not expected to have a direct impact on inflation.
Sugar is a constituent in the basket of goods which inflation is calculated from but does not have a big weightage.
Economists, however, wondered if the secondary effect from the higher price of sugar would filter through to a larger food segment should retailers and restaurants push up the price of drinks.
Economists said the willingness of the Government to keep RON 95 prices constant was commendable as fuel and energy costs will have a bigger impact on the rate of inflation.
“If the Government maintains the price of RON 95, it will mean it is concerned about inflationary pressure,” said Affin Investment Bank Bhd economist Alan Tan.
The price of RON 95 petrol, which is the preferred choice of fuel among motorists, have been kept steady at RM1.90 a litre in recent months despite global crude oil prices punching well above US$100 per barrel.
The Government has nonetheless matched the price of RON 97 petrol with that of international crude oil prices. The Government raised the price of RON 97 petrol by 20 sen a litre to RM2.90 a litre on May 5
http://biz.thestar.com.my/news/story.asp?file=/2011/5/11/business/8657461&sec=business
By JAGDEV SINGH SIDHU
jagdev@thestar.com.my
KUALA LUMPUR: The increase in the price of sugar signalled the resumption of the subsidy rationalisation programme many thought was put on hold given the inflationary pressures felt by countries globally.
Economists said although prices for selected goods might rise, they expected the key determinant of inflation - the price of RON 95 petrol - to remain stable as efforts to keep a lid on inflation.
“It will be on a gradual basis,” said CIMB Investment Bank Bhd head of economics Lee Heng Guie on the subsidy rationalisation programme.
The price of coarse and fine sugar increased by 20 sen to RM2.30 per kilo yesterday, reducing the Government's subsidy for sugar to RM116.6mil from RM400mil per year.
If the Government maintains the price of RON 95, it will mean it is concerned about inflationary pressure, according to an economist
The increase yesterday was the first for this year but the fourth overall since the Government's subsidy rationalisation programme was put into effect. Sugar prices saw three increases last year of 20 sen in January, 25 sen in July and 20 sen in December.
Economists feel the move to cut subsidies was still needed given the use of such interventionist policy to keep prices and cost low during a time when inflation has become a thorn in the flesh for many countries.
Inflation in Malaysia hit 3% in March but was among the lowest in Asia where it had been the focus of many central banks. Interest rates have been raised in a number of Asian countries in recent months to stave off inflationary pressures.
For Malaysia, the consequence of cutting the subsidy on sugar and letting prices go up is not expected to have a direct impact on inflation.
Sugar is a constituent in the basket of goods which inflation is calculated from but does not have a big weightage.
Economists, however, wondered if the secondary effect from the higher price of sugar would filter through to a larger food segment should retailers and restaurants push up the price of drinks.
Economists said the willingness of the Government to keep RON 95 prices constant was commendable as fuel and energy costs will have a bigger impact on the rate of inflation.
“If the Government maintains the price of RON 95, it will mean it is concerned about inflationary pressure,” said Affin Investment Bank Bhd economist Alan Tan.
The price of RON 95 petrol, which is the preferred choice of fuel among motorists, have been kept steady at RM1.90 a litre in recent months despite global crude oil prices punching well above US$100 per barrel.
The Government has nonetheless matched the price of RON 97 petrol with that of international crude oil prices. The Government raised the price of RON 97 petrol by 20 sen a litre to RM2.90 a litre on May 5
http://biz.thestar.com.my/news/story.asp?file=/2011/5/11/business/8657461&sec=business
Ringgit Higher on Strong Buying Interest
Published: 2011/05/11
The ringgit was traded higher against the US dollar in the early session today on strong buying interest for the domestic currency, dealers said.
At 9.04am, the ringgit was quoted at 2.9780/9811 per US dollar compared with 2.9880/9911 at yesterday's close.
The uptrend was in line with other Asian currencies as sentiments in the region were boosted by some positive earnings report from Japan and firming commodity prices, he said.
One dealer said the ringgit was also riding on the weakening of the greenback across the board.
Against other major currencies, the ringgit was traded higher.
The ringgit appreciated against the Singapore dollar to 2.4204/4248 from 2.4230/4274 yesterday, was higher against the British pound to 4.8741/8801 from 4.8899/8958 on Tuesday and rose against the euro to 4.2886/2934 from 4.2893/2949 yesterday.
However, the ringgit weakened against the Japanese yen to 3.6815/6863 from 3.7031/7083 yesterday. - Bernama
Read more: Ringgit higher on strong buying interest http://www.btimes.com.my/Current_News/BTIMES/articles/20110511102114/Article/index_html#ixzz1M19KWcP1
The ringgit was traded higher against the US dollar in the early session today on strong buying interest for the domestic currency, dealers said.
At 9.04am, the ringgit was quoted at 2.9780/9811 per US dollar compared with 2.9880/9911 at yesterday's close.
The uptrend was in line with other Asian currencies as sentiments in the region were boosted by some positive earnings report from Japan and firming commodity prices, he said.
One dealer said the ringgit was also riding on the weakening of the greenback across the board.
Against other major currencies, the ringgit was traded higher.
The ringgit appreciated against the Singapore dollar to 2.4204/4248 from 2.4230/4274 yesterday, was higher against the British pound to 4.8741/8801 from 4.8899/8958 on Tuesday and rose against the euro to 4.2886/2934 from 4.2893/2949 yesterday.
However, the ringgit weakened against the Japanese yen to 3.6815/6863 from 3.7031/7083 yesterday. - Bernama
Read more: Ringgit higher on strong buying interest http://www.btimes.com.my/Current_News/BTIMES/articles/20110511102114/Article/index_html#ixzz1M19KWcP1
Saturday, May 7, 2011
Takaful optimistic of sustaining 12pc growth
By Zurinna Raja Adam
Published: 2011/05/06
KUALA LUMPUR: Syarikat Takaful Malaysia Bhd (Takaful Malaysia) is optimistic of sustaining its average growth of between 12 per cent and 15 per cent this year, despite increased competition due to Bank Negara Malaysia issuing new takaful licences to four financial institutions in September last year.
Group managing director Datuk Hassan Kamil said Takaful Malaysia is a pioneer in the business and its objective has always been clear - to promote Islamic insurance.
"The new licences were given to players that are focused on conventional side. We have always been dedicated to takaful and that is our competitive edge," he said after the group's annual general meeting here yesterday.
Hassan said he is confident that its 15 per cent Mudharabah payment rate for group family takaful product will continue to propel the country's oldest takaful group to make further inroads in the industry.
Malaysia's takaful industry still lags behind its conventional peers in terms of total insurance market penetration and share. It is understood that the penetration rate for takaful industry in Malaysia is around 10 per cent, compared with 40 per cent for conventional insurance.
"We will launch at least two new products this year, namely investment-linked and retirement scheme products. We also aim to increase our agents to 2,000 by end of the year from about 1,000 now," he added.
Takaful Malaysia currently has about one million policy holders and it aims to increase its customer base by another 25 per cent by end of the year.
The group's assets stand at RM4.9 billion at group level against RM4.4 billion as at June 2009.
Hassan said Takaful Malaysia is currently not in talks with any foreign parties for a strategic tie-up but will gauge if potential partners are able to provide value added services to the company.
For the 18 months ended December 31 2010, the company posted RM57.7 million in net profit or a 42.7 per cent jump against RM40.5 million during the same period the year before.
Read more: Takaful optimistic of sustaining 12pc growth http://www.btimes.com.my/Current_News/BTIMES/articles/takiy/Article/#ixzz1LYlSLTQc
Published: 2011/05/06
KUALA LUMPUR: Syarikat Takaful Malaysia Bhd (Takaful Malaysia) is optimistic of sustaining its average growth of between 12 per cent and 15 per cent this year, despite increased competition due to Bank Negara Malaysia issuing new takaful licences to four financial institutions in September last year.
Group managing director Datuk Hassan Kamil said Takaful Malaysia is a pioneer in the business and its objective has always been clear - to promote Islamic insurance.
"The new licences were given to players that are focused on conventional side. We have always been dedicated to takaful and that is our competitive edge," he said after the group's annual general meeting here yesterday.
Hassan said he is confident that its 15 per cent Mudharabah payment rate for group family takaful product will continue to propel the country's oldest takaful group to make further inroads in the industry.
Malaysia's takaful industry still lags behind its conventional peers in terms of total insurance market penetration and share. It is understood that the penetration rate for takaful industry in Malaysia is around 10 per cent, compared with 40 per cent for conventional insurance.
"We will launch at least two new products this year, namely investment-linked and retirement scheme products. We also aim to increase our agents to 2,000 by end of the year from about 1,000 now," he added.
Takaful Malaysia currently has about one million policy holders and it aims to increase its customer base by another 25 per cent by end of the year.
The group's assets stand at RM4.9 billion at group level against RM4.4 billion as at June 2009.
Hassan said Takaful Malaysia is currently not in talks with any foreign parties for a strategic tie-up but will gauge if potential partners are able to provide value added services to the company.
For the 18 months ended December 31 2010, the company posted RM57.7 million in net profit or a 42.7 per cent jump against RM40.5 million during the same period the year before.
Read more: Takaful optimistic of sustaining 12pc growth http://www.btimes.com.my/Current_News/BTIMES/articles/takiy/Article/#ixzz1LYlSLTQc
Need for a refocus of transformation agenda
Friday May 6, 2011
KUALA LUMPUR: Budget 2012 may see a shift in emphasis to reforms under the New Economic Model (NEM) as opposed to the emphasis given to the National Key Economic Areas (NKEAs) projects under the current budget.
RAM Holdings Bhd group chief economist Dr Yeah Kim Leng said there would be some finetuning in the transformation agenda as results from the implementation of the Economic Transformation Programme (ETP) became clearer.
“We should expect a shift to more foundation-building, especially transformational, measures and incentives that are fiscal and financial in nature,” he told a media briefing yesterday following a pre-Budget 2012 roundtable discussion among members of the Economic Council working group.
Yeah said the country’s economy was underperforming and stepping up implementation of NEM measures would ensure the economy move in the right direction, especially in luring more private-sector investments from locals and foreigners, which was a key strategy in lifting growth.
The ETP incorporates the NEM, which was announced by Prime Minister Datuk Seri Najib Razak last year, and the NKEAs, which included entry point projects identified for quicker implementation.
“There’s increasing consensus that we need to refocus the transformation agenda on the real stuff, which is to rebuild our competitive foundations,” Yeah said, adding that this was also the sentiment of the working group whose members included senior officials from both the public and private sectors.
On Wednesday, the Asian Development Bank said in a report titled “Asia 2050” that Malaysia had the potential to become one of seven economies that would drive growth in the region in the next 40 years but faced challenges if the country along with peers did not upgrade human capital as well as strengthen governance and institutional capacity.
“I think the Government does have a good sense of what the current concerns are over the implementation (of the NEM) measures,” Yeah said.
Investors, which had been sceptical of the pace of cross-cutting reforms under the NEM so far, could expect a more concerted budget that would help accelerate the transformation process, he said.
Yeah said if these concerns were addressed, then it would go a long way in building and reaffirming confidence in the public sector as the facilitator of the reforms. “We need to shift to a new business-friendly environment that actually leverages on all the key findings and challenges that have been covered in both the World Bank as well as other studies that have highlighted these concerns.”
Yeah said the gradual lowering of subsidies for fuel were some of the structural reforms that investors were looking for as spending could be directed at activities with greater multiplier effects while the remaining subsidies could be finetuned to target those who needed it.
“However, these kind of reforms will be more difficult to implement and we do expect a more gradual rolling-back of subsidies,” he said.
Meanwhile, Deputy Finance Minister Datuk Donald Lim Siang Chai said in Pasir Gudang that further reductions in the corporate and individual taxes would be included Budget 2012, which is expected to be tabled at Parliament on Oct 7. He said the reductions could be made once the implementation of the long-awaited goods and service tax (GST) took place in the country.
“There are more than 225 countries in the world that have already implemented the GST and Malaysia will have to do it sooner or later,’’ he told a press conference yesterday.
Lim said with the GST in place, the Government was hoping to reduce the country’s deficit level at 5% currently to between 2.8% and 3% by 2015.
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/8616841&sec=business
KUALA LUMPUR: Budget 2012 may see a shift in emphasis to reforms under the New Economic Model (NEM) as opposed to the emphasis given to the National Key Economic Areas (NKEAs) projects under the current budget.
RAM Holdings Bhd group chief economist Dr Yeah Kim Leng said there would be some finetuning in the transformation agenda as results from the implementation of the Economic Transformation Programme (ETP) became clearer.
“We should expect a shift to more foundation-building, especially transformational, measures and incentives that are fiscal and financial in nature,” he told a media briefing yesterday following a pre-Budget 2012 roundtable discussion among members of the Economic Council working group.
Yeah said the country’s economy was underperforming and stepping up implementation of NEM measures would ensure the economy move in the right direction, especially in luring more private-sector investments from locals and foreigners, which was a key strategy in lifting growth.
The ETP incorporates the NEM, which was announced by Prime Minister Datuk Seri Najib Razak last year, and the NKEAs, which included entry point projects identified for quicker implementation.
“There’s increasing consensus that we need to refocus the transformation agenda on the real stuff, which is to rebuild our competitive foundations,” Yeah said, adding that this was also the sentiment of the working group whose members included senior officials from both the public and private sectors.
On Wednesday, the Asian Development Bank said in a report titled “Asia 2050” that Malaysia had the potential to become one of seven economies that would drive growth in the region in the next 40 years but faced challenges if the country along with peers did not upgrade human capital as well as strengthen governance and institutional capacity.
“I think the Government does have a good sense of what the current concerns are over the implementation (of the NEM) measures,” Yeah said.
Investors, which had been sceptical of the pace of cross-cutting reforms under the NEM so far, could expect a more concerted budget that would help accelerate the transformation process, he said.
Yeah said if these concerns were addressed, then it would go a long way in building and reaffirming confidence in the public sector as the facilitator of the reforms. “We need to shift to a new business-friendly environment that actually leverages on all the key findings and challenges that have been covered in both the World Bank as well as other studies that have highlighted these concerns.”
Yeah said the gradual lowering of subsidies for fuel were some of the structural reforms that investors were looking for as spending could be directed at activities with greater multiplier effects while the remaining subsidies could be finetuned to target those who needed it.
“However, these kind of reforms will be more difficult to implement and we do expect a more gradual rolling-back of subsidies,” he said.
Meanwhile, Deputy Finance Minister Datuk Donald Lim Siang Chai said in Pasir Gudang that further reductions in the corporate and individual taxes would be included Budget 2012, which is expected to be tabled at Parliament on Oct 7. He said the reductions could be made once the implementation of the long-awaited goods and service tax (GST) took place in the country.
“There are more than 225 countries in the world that have already implemented the GST and Malaysia will have to do it sooner or later,’’ he told a press conference yesterday.
Lim said with the GST in place, the Government was hoping to reduce the country’s deficit level at 5% currently to between 2.8% and 3% by 2015.
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/8616841&sec=business
Bank Negara Raises Key Interest Rate
Friday May 6, 2011
By FINTAN NG
fintan@thestar.com.my
PETALING JAYA: Bank Negara raised the overnight policy rate (OPR) by 25 basis points to 3% and increased the statutory reserve requirement (SRR) by 1 percentage point to 3%, a move that took most by surprise.
The OPR, the benchmark interest rate commercial banks use to calculate their base lending rates for loans, was last raised in July last year.
The central bank hiked the SRR by 100 basis points to 3% effective May 16 as a pre-emptive measure following the build-up of liquidity in the financial system.
“With the economy firmly on a steady growth path, the monetary policy committee decided to adjust the degree of monetary accommodation,” said the central bank in a statement yesterday.
“At the current OPR level, the stance of monetary policy remains supportive of growth. The future stance of monetary policy will depend on the assessment of the risk to growth and inflation prospects.”
Bank Negara acknowledged inflation, which has increased globally on account of higher energy and food prices, has inched up too in Malaysia and has now hit 3% in March to average 2.8% for the first quarter of 2011.
“Global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year,” the central bank said.
However, it noted that despite higher inflationary pressure, latest indicators pointed towards continued strengthening of private investment and sustained private consumption expenditure in the first quarter.
“Growth will be underpinned by the firm expansion of domestic demand. Sustained employment conditions and income growth is expected to provide support to private consumption, while private investment is projected to strengthen amid the improved investment environment,” it added.
In a separate statement, the central bank said the decision to raise the SRR was undertaken as a pre-emptive measure to manage the significant build-up of liquidity, which could result in financial imbalances and create risks to financial stability.
Economists, who were divided over whether the OPR would be raised, told StarBiz that the central bank was sending out a message that inflation was now the concern instead of growth.
AmResearch Sdn Bhd senior economist Manokaran Mottain said policymakers were sending out the message that they were vigilant.
“They're acknowledging that inflation is putting pressure on the economy,” he said, adding that market consensus was for the OPR to remain unchanged with a Bloomberg survey showing that seven out of 16 economists expected the hike, with the rest expecting the OPR to remain the same.
Nevertheless, economists agreed with the central bank that the rate hikes were still supportive of growth with domestic demand now the focus.
CIMB Investment Bank Bhd head of economics Lee Heng Guie said there was likely to be another 25-basis point hike in the OPR in July but this, judging from the language of the Monetary Policy Committee statement, “will depend on risks to growth and inflationary prospects”.
Meanwhile Affin Investment Bank Bhd economist Alan Tan said the decision to raise the OPR was “a close call” as a lot of brokers expected interest rates to remain unchanged due to the strengthening ringgit.
“Going forward, the central bank is signalling that rising inflation will be of concern and that growth will come from domestic demand as external demand weakens,” he said.
Tan expects another 25-basis point hike before year-end as the central bank moved in tandem with regional peers in normalising interest rates and managing capital flows.
“The normalisation of the rates is important because the US Federal Reserve has indicated that there may be a hike in rates next year and if policymakers here keep rates low for a prolonged period, there's a risk of a capital outflow,” he said.
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/8618523&sec=business
By FINTAN NG
fintan@thestar.com.my
PETALING JAYA: Bank Negara raised the overnight policy rate (OPR) by 25 basis points to 3% and increased the statutory reserve requirement (SRR) by 1 percentage point to 3%, a move that took most by surprise.
The OPR, the benchmark interest rate commercial banks use to calculate their base lending rates for loans, was last raised in July last year.
The central bank hiked the SRR by 100 basis points to 3% effective May 16 as a pre-emptive measure following the build-up of liquidity in the financial system.
“With the economy firmly on a steady growth path, the monetary policy committee decided to adjust the degree of monetary accommodation,” said the central bank in a statement yesterday.
“At the current OPR level, the stance of monetary policy remains supportive of growth. The future stance of monetary policy will depend on the assessment of the risk to growth and inflation prospects.”
Bank Negara acknowledged inflation, which has increased globally on account of higher energy and food prices, has inched up too in Malaysia and has now hit 3% in March to average 2.8% for the first quarter of 2011.
“Global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year,” the central bank said.
However, it noted that despite higher inflationary pressure, latest indicators pointed towards continued strengthening of private investment and sustained private consumption expenditure in the first quarter.
“Growth will be underpinned by the firm expansion of domestic demand. Sustained employment conditions and income growth is expected to provide support to private consumption, while private investment is projected to strengthen amid the improved investment environment,” it added.
In a separate statement, the central bank said the decision to raise the SRR was undertaken as a pre-emptive measure to manage the significant build-up of liquidity, which could result in financial imbalances and create risks to financial stability.
Economists, who were divided over whether the OPR would be raised, told StarBiz that the central bank was sending out a message that inflation was now the concern instead of growth.
AmResearch Sdn Bhd senior economist Manokaran Mottain said policymakers were sending out the message that they were vigilant.
“They're acknowledging that inflation is putting pressure on the economy,” he said, adding that market consensus was for the OPR to remain unchanged with a Bloomberg survey showing that seven out of 16 economists expected the hike, with the rest expecting the OPR to remain the same.
Nevertheless, economists agreed with the central bank that the rate hikes were still supportive of growth with domestic demand now the focus.
CIMB Investment Bank Bhd head of economics Lee Heng Guie said there was likely to be another 25-basis point hike in the OPR in July but this, judging from the language of the Monetary Policy Committee statement, “will depend on risks to growth and inflationary prospects”.
Meanwhile Affin Investment Bank Bhd economist Alan Tan said the decision to raise the OPR was “a close call” as a lot of brokers expected interest rates to remain unchanged due to the strengthening ringgit.
“Going forward, the central bank is signalling that rising inflation will be of concern and that growth will come from domestic demand as external demand weakens,” he said.
Tan expects another 25-basis point hike before year-end as the central bank moved in tandem with regional peers in normalising interest rates and managing capital flows.
“The normalisation of the rates is important because the US Federal Reserve has indicated that there may be a hike in rates next year and if policymakers here keep rates low for a prolonged period, there's a risk of a capital outflow,” he said.
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/8618523&sec=business
Oil price improves slightly to US$100.23 in Asia Friday(update)
Published: Friday May 6, 2011 MYT 7:34:00 AM
Updated: Friday May 6, 2011 MYT 2:59:03 PM
SINGAPORE: Oil prices inched above $100 a barrel Friday in Asia, consolidating after a sharp drop in the previous session amid investor concern a weak U.S. jobs market may undermine crude demand.
Benchmark crude for June delivery was up 43 cents at $100.23 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. In London, Brent crude for June delivery was up $1.10 to $111.90 a barrel on the ICE Futures exchange.
The contract plunged $9.44 to settle at $99.80 on Thursday because of signs U.S. economic growth is slowing. The Labor Department said that first-time claims for unemployment benefits rose to 474,000 last week, the highest level in eight months.
Investors will be closely watching the government's non-farm payroll numbers scheduled to be released later Friday. Economists forecast that employers added 185,000 workers in April and the unemployment rate is expected to remain unchanged at 8.8 percent.
Oil has retreated after gaining 35 percent from February to reach $114 last week. Other commodities that had jumped in recent months, such as gold and silver, have also seen steep declines this week.
"Downward momentum has accelerated during the past couple of days due to disappointing economic releases," Ritterbusch and Associates said in a report.
A stronger dollar, which makes oil more expensive for investors with other currencies, also helped push crude prices down.
Some analysts expect oil to resume its rise as political unrest in the Middle East and North Africa could spread and threaten to disrupt crude supplies in the oil-rich region.
"Those geopolitical risks have not disappeared," said Victor Shum, an analyst with energy consultancy Purvin & Gertz in Singapore. "I think the up trend over the long term is still in tact, and what we saw yesterday was a big bump in the road."
In other Nymex trading in June contracts, heating oil rose 3.3 cents to $2.92 a gallon and gasoline gained 3.4 cents to $3.13 a gallon. Natural gas futures were down 0.3 cent at $4.26 per 1,000 cubic feet. - AP
Earlier report
Oil plunges 9% to US$100 per barrel
NEW YORK: Oil plunged nearly 9 percent to settle below US$100 per barrel. Investors who had ridden a months-long rally fled the market Thursday because of concerns about weakening demand for fuel in the U.S.
The decline of $9.44 per barrel, or 8.6 percent, brings the week's loss for oil to $14.13, or 12.4 percent. Other commodities like silver and cotton have plunged as well.
Oil rose 35 percent from mid-February through the end of April. As it climbed above $100, economists warned that high fuel prices were taking a toll on the U.S. economy. Gasoline demand starting falling in March as motorists paid more at the pump; that trend was reinforced by industry and government studies released this week. On Thursday, worries about the job market ahead of Friday's key employment report added to concerns about fuel demand.
"More and more people were saying that oil was just too high," said Michael Lynch, president of Strategic Energy & Economic Research. "That got a lot of investors ready to run for the door. That's what they're doing now."
A higher dollar also contributed to Thursday's sell-off. Benchmark West Texas Intermediate crude for June settled at $99.80 per barrel on the New York Mercantile Exchange. That's the lowest settlement since March 16. Oil last had a one-day percentage decline this big on April 20, 2009. Back then a barrel of oil cost less than half as much as it does now.
Analysts also said the lack of any terrorist retaliation of the killing of Osama bin Laden eased concerns about the safety of the world's oil fields.
Oil and other commodities have been on a roll since around Labor Day, when the Federal Reserve indicated it would take more steps to boost the U.S. economy. The Fed's announced a plan to buy back $600 billion in Treasury bonds. The move effectively lowered interest rates but also weakened the dollar and unleashed inflation fears. Investors poured that extra money into oil, precious and base metals and grains.
This year, uprisings in Libya and the Middle East gave a further lift to energy markets.
This week investors have reversed those bets on commodities and locked in profits.
The plunge in oil may be enough to keep pump prices from reaching a national average of $4 per gallon. Retail gasoline has surged 30 percent this year. It's risen for 44 consecutive days to $3.985 per gallon.
Fred Rozell, retail pricing director at Oil Price Information Service, a private research and consulting firm, said the national average probably won't get to $4 per gallon.
"I wouldn't be surprised if we dropped to about $3.50 by the middle of June," Rozell said.
Expensive fuel bills can crimp customers' spending habits. Earlier in the week, reports from MasterCard SpendingPulse and the Energy Department showed that Americans bought less gas in the final week of April.
On Thursday, some retailers warned that soaring gasoline prices are starting to cut into the spending power of lower-income customers who were already on tight budgets. Also, the government said that the number of people applying for unemployment benefits reached an eight-month high. Distress in the job market depresses gasoline demand, analysts say, because large numbers of Americans drive to work.
"Commuters are the bedrock of gasoline demand," Cameron Hanover analyst Peter Beutel said. When people lose jobs, "you're killing the best part of that demand - the part that will always be there as long as someone has a job."
Companies feel the squeeze of high oil prices as well. Four of the nation's top airlines combined to lose $1 billion in the first quarter, largely because of the high price of jet fuel.
Other energy futures fell sharply as well. Heating oil fell 25.61 cents to settle at $2.8869 per gallon and gasoline futures lost 22.71 cents to settle at $3.0954 per gallon. Natural gas gave up 31.3 cents to settle at $4.331 per 1,000 cubic feet.
In London, Brent crude lost $10.39 to settle at $110.80 per barrel on the ICE Futures exchange.
The U.S. dollar rose strongly against the euro Thursday after the European Central Bank's president declined to signal that interest rates would rise again next month. Oil, which is traded in dollars, tends to fall as the greenback rises and makes crude barrels more expensive for investors holding foreign money. - AP
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/20110506074431&sec=business
Updated: Friday May 6, 2011 MYT 2:59:03 PM
SINGAPORE: Oil prices inched above $100 a barrel Friday in Asia, consolidating after a sharp drop in the previous session amid investor concern a weak U.S. jobs market may undermine crude demand.
Benchmark crude for June delivery was up 43 cents at $100.23 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. In London, Brent crude for June delivery was up $1.10 to $111.90 a barrel on the ICE Futures exchange.
The contract plunged $9.44 to settle at $99.80 on Thursday because of signs U.S. economic growth is slowing. The Labor Department said that first-time claims for unemployment benefits rose to 474,000 last week, the highest level in eight months.
Investors will be closely watching the government's non-farm payroll numbers scheduled to be released later Friday. Economists forecast that employers added 185,000 workers in April and the unemployment rate is expected to remain unchanged at 8.8 percent.
Oil has retreated after gaining 35 percent from February to reach $114 last week. Other commodities that had jumped in recent months, such as gold and silver, have also seen steep declines this week.
"Downward momentum has accelerated during the past couple of days due to disappointing economic releases," Ritterbusch and Associates said in a report.
A stronger dollar, which makes oil more expensive for investors with other currencies, also helped push crude prices down.
Some analysts expect oil to resume its rise as political unrest in the Middle East and North Africa could spread and threaten to disrupt crude supplies in the oil-rich region.
"Those geopolitical risks have not disappeared," said Victor Shum, an analyst with energy consultancy Purvin & Gertz in Singapore. "I think the up trend over the long term is still in tact, and what we saw yesterday was a big bump in the road."
In other Nymex trading in June contracts, heating oil rose 3.3 cents to $2.92 a gallon and gasoline gained 3.4 cents to $3.13 a gallon. Natural gas futures were down 0.3 cent at $4.26 per 1,000 cubic feet. - AP
Earlier report
Oil plunges 9% to US$100 per barrel
NEW YORK: Oil plunged nearly 9 percent to settle below US$100 per barrel. Investors who had ridden a months-long rally fled the market Thursday because of concerns about weakening demand for fuel in the U.S.
The decline of $9.44 per barrel, or 8.6 percent, brings the week's loss for oil to $14.13, or 12.4 percent. Other commodities like silver and cotton have plunged as well.
Oil rose 35 percent from mid-February through the end of April. As it climbed above $100, economists warned that high fuel prices were taking a toll on the U.S. economy. Gasoline demand starting falling in March as motorists paid more at the pump; that trend was reinforced by industry and government studies released this week. On Thursday, worries about the job market ahead of Friday's key employment report added to concerns about fuel demand.
"More and more people were saying that oil was just too high," said Michael Lynch, president of Strategic Energy & Economic Research. "That got a lot of investors ready to run for the door. That's what they're doing now."
A higher dollar also contributed to Thursday's sell-off. Benchmark West Texas Intermediate crude for June settled at $99.80 per barrel on the New York Mercantile Exchange. That's the lowest settlement since March 16. Oil last had a one-day percentage decline this big on April 20, 2009. Back then a barrel of oil cost less than half as much as it does now.
Analysts also said the lack of any terrorist retaliation of the killing of Osama bin Laden eased concerns about the safety of the world's oil fields.
Oil and other commodities have been on a roll since around Labor Day, when the Federal Reserve indicated it would take more steps to boost the U.S. economy. The Fed's announced a plan to buy back $600 billion in Treasury bonds. The move effectively lowered interest rates but also weakened the dollar and unleashed inflation fears. Investors poured that extra money into oil, precious and base metals and grains.
This year, uprisings in Libya and the Middle East gave a further lift to energy markets.
This week investors have reversed those bets on commodities and locked in profits.
The plunge in oil may be enough to keep pump prices from reaching a national average of $4 per gallon. Retail gasoline has surged 30 percent this year. It's risen for 44 consecutive days to $3.985 per gallon.
Fred Rozell, retail pricing director at Oil Price Information Service, a private research and consulting firm, said the national average probably won't get to $4 per gallon.
"I wouldn't be surprised if we dropped to about $3.50 by the middle of June," Rozell said.
Expensive fuel bills can crimp customers' spending habits. Earlier in the week, reports from MasterCard SpendingPulse and the Energy Department showed that Americans bought less gas in the final week of April.
On Thursday, some retailers warned that soaring gasoline prices are starting to cut into the spending power of lower-income customers who were already on tight budgets. Also, the government said that the number of people applying for unemployment benefits reached an eight-month high. Distress in the job market depresses gasoline demand, analysts say, because large numbers of Americans drive to work.
"Commuters are the bedrock of gasoline demand," Cameron Hanover analyst Peter Beutel said. When people lose jobs, "you're killing the best part of that demand - the part that will always be there as long as someone has a job."
Companies feel the squeeze of high oil prices as well. Four of the nation's top airlines combined to lose $1 billion in the first quarter, largely because of the high price of jet fuel.
Other energy futures fell sharply as well. Heating oil fell 25.61 cents to settle at $2.8869 per gallon and gasoline futures lost 22.71 cents to settle at $3.0954 per gallon. Natural gas gave up 31.3 cents to settle at $4.331 per 1,000 cubic feet.
In London, Brent crude lost $10.39 to settle at $110.80 per barrel on the ICE Futures exchange.
The U.S. dollar rose strongly against the euro Thursday after the European Central Bank's president declined to signal that interest rates would rise again next month. Oil, which is traded in dollars, tends to fall as the greenback rises and makes crude barrels more expensive for investors holding foreign money. - AP
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/20110506074431&sec=business
EPF to buy Rubber Research Institute land for RM3bil
Friday May 6, 2011
By YAP LENG KUEN
lengkuen@thestar.com.my
PETALING JAYA: The acquisition of the 3,000 acres of Rubber Research Institute Malaysia (RRIM) land in Sungai Buloh is expected to cost RM3bil, sources said.
The signing between the purchaser, the Employees Provident Fund (EPF), and the Government is expected to be held in the near future, the sources said, adding that the development project would be carried out for the next 10 to 15 years.
“It will be a mixed development with commercial and a focus on affordable housing,'' a source told StarBiz.
According to the sources, the EPF will have a master plan where it will allocate a few parcels and allow property developers to bid for those parcels; some parcels will be operated on a joint-venture basis while others may be sold outright via bids.
“It will be systematically and properly done,'' said the source.
The EPF has formed a company under Kwasa Land Sdn Bhd to be the master developer for the RRIM land in Sungai Buloh.
The former head of property investment at the EPF, Mohamad Lotfy Mohamad Noh, has been appointed the managing director of Kwasa.
The development, which is estimated at RM10bil, is likely to feature a big linear park, green lungs, open spaces, walkways and water bodies. It will incorporate information technology and data infrastructure (MSC city status) and urban transportation integration.
This development will also house the depot for the upcoming mass rapid transit system. Dubbed the new hub of the Klang Valley, the development is expected to attract RM5bil in investments.
The EPF aims to increase the contribution from property to 5% from 2% currently. Under its gross investment income, property and miscellaneous income last year rose to RM103.18mil from RM87.85mil the previous year. Total gross investment income last year reached RM24.06bil from RM17.22bil previously.
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/8620011&sec=business
By YAP LENG KUEN
lengkuen@thestar.com.my
PETALING JAYA: The acquisition of the 3,000 acres of Rubber Research Institute Malaysia (RRIM) land in Sungai Buloh is expected to cost RM3bil, sources said.
The signing between the purchaser, the Employees Provident Fund (EPF), and the Government is expected to be held in the near future, the sources said, adding that the development project would be carried out for the next 10 to 15 years.
“It will be a mixed development with commercial and a focus on affordable housing,'' a source told StarBiz.
According to the sources, the EPF will have a master plan where it will allocate a few parcels and allow property developers to bid for those parcels; some parcels will be operated on a joint-venture basis while others may be sold outright via bids.
“It will be systematically and properly done,'' said the source.
The EPF has formed a company under Kwasa Land Sdn Bhd to be the master developer for the RRIM land in Sungai Buloh.
The former head of property investment at the EPF, Mohamad Lotfy Mohamad Noh, has been appointed the managing director of Kwasa.
The development, which is estimated at RM10bil, is likely to feature a big linear park, green lungs, open spaces, walkways and water bodies. It will incorporate information technology and data infrastructure (MSC city status) and urban transportation integration.
This development will also house the depot for the upcoming mass rapid transit system. Dubbed the new hub of the Klang Valley, the development is expected to attract RM5bil in investments.
The EPF aims to increase the contribution from property to 5% from 2% currently. Under its gross investment income, property and miscellaneous income last year rose to RM103.18mil from RM87.85mil the previous year. Total gross investment income last year reached RM24.06bil from RM17.22bil previously.
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/8620011&sec=business
Nod unlikely for private firm in RHB
Monday April 25, 2011
By YAP LENG KUEN
lengkuen@thestar.com.my
Lack of synergy, EON Bank-Primus affair likely to influence Bank Negara decision
PETALING JAYA: Bank Negara is believed not likely to approve the entry of a private equity firm into RHB Capital Bhd, the fourth largest banking group, following the troubled history of Hong-Kong based Primus Pacific Partners at EON Bank.
“There is no synergy between private equity and banks,'' said a source.
Reuters reported last week that the Carlyle group and TPG Capital were making a joint-bid for a US$1.5bil stake in RHB Capital.
Primus is currently embroiled in a court battle in which Ng Wing Fai of Primus, which owns 20.2% of EON Capital Bhd, is challenging the other directors on their decision to table the takeover bid (which Primus considers undervalued) from Hong Leong Bank to shareholders.
The court judgement will be made known by the end of this month.
EON Capital has been rocked by a series of disgreements among shareholders with Ng and Rin Kei Mei ending on opposing sides and issues with Bank Negara such as non-subscription of bonds by Primus.
Abu Dhabi Commercial Bank (ADCB), the 25% investor in RHB Capital, has engaged Goldman Sachs and Bank of America-Merrill Lynch to run the action for the sale of its stake.
TPG has an Indonesian arm, TP Nusantara which currently owns 59.7% of Bank Tabungan Pensiun Nasional; TPG plays an active role in the management of the bank which has done well since the purchase in 2008, said HwangDBS Vickers Research senior analyst Lim Sue Lin.
“If that is true, TPG may like RHB for its value and sustainable business model,'' she said, noting that over the last three to four years, the banking group had been able to grow on its own with a proven business model.
Analysts will not discount the possibility that CIMB may be interested in the stake in RHB although they see duplication within the two banking groups.
“Any consolidation will be more for size,'' said a senior analyst, adding that a merger between CIMB and RHB would create the fourth largest bank in Asean by assets.
However, analysts caution that there could be another round of voluntary separation scheme (VSS) should CIMB merge with RHB.
CIMB has voiced its ambition of being among the top three banks in South-East Asia by market capitalisation, positions currently held by Singapore banks DBS, OCBC and UOB.
“If it happens, the benefits are likely at the consumer banking level,'' said another senior analyst, adding that RHB has higher retail deposits and CIMB will be able to leverage on the “Easy'' banking concept based on lower costs, speed of approval and convenience.
RHB has hired 500 new staff for its 150 Easy outlets, targeted to reach 270 by year-end.
Some analysts recall that Maybank was said to be keen on RHB a few years back but are unsure of its interest now,
However, one analyst opined that Maybank might need more time to digest its expensive acquisition of Bank Internasional Indonesia which has yet to contribute strongly to group results.
Analysts are keenly watching for developments in the reported interests of DBS owned by Singapore's Temasek which, in turn, holds 14.8% of Alliance Financial Group (AFG) and Australia and New Zealand Banking Group (ANZ) which owns 24% of AMMB.
So far, foreign banks like ADCB and Bank of East Asia are holding 25% each in RHB Capital and Affin respectively while ANZ's investment is up to 25% in AMMB.
While the limit on foreign shareholding in local banking groups is 30%, there has yet to be a precedent, an analyst observed.
“If ANZ were to acquire a stake in RHB, it would need to merge AMMB with RHB,'' said Lim in a research note last Friday.
Noting that ANZ has expressed its interest to take a larger stake in AMMB, “even though the threshold for foreign shareholding remains capped at 30%, total returns as a shareholder would be larger for ANZ in an enlarged AMMB-RHB Capital scenario,'' said Lim.
Should DBS buy the RHB stake, it is unclear if AFG will be merged with RHB or Temasek will sell off its stake in AFG, as investors can only hold one banking licence.
Hwang DBS said in its regional industry focus that Malaysian banks were currently preferred over those in Thailand and Indonesia, with excitement driven by mergers and acquisitions.
“The target banks will benefit from input the potential stakeholders could bring to the table to improve standalone value propositions,'' said Lim in the report dated April 14.
According to Hwang DBS, the AMMB-ANZ alliance has proven to be the most successful foreign strategic shareholding tie-up to date.
It noted that the new management had implemented new risk management and risk scoring systems; made AMMB more flexible to adjust to interest rate hikes; improved its deposit franchise (particularly low cost deposits) and created additional sources of revenue flows from treasury and derivatives.
“These initiatives led AMMB's net profit to grow from RM670mil in financial year (FY) 2008 (when ANZ became shareholder) to RM1.1bil in FY10,” the report said.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/25/business/8541425&sec=business
By YAP LENG KUEN
lengkuen@thestar.com.my
Lack of synergy, EON Bank-Primus affair likely to influence Bank Negara decision
PETALING JAYA: Bank Negara is believed not likely to approve the entry of a private equity firm into RHB Capital Bhd, the fourth largest banking group, following the troubled history of Hong-Kong based Primus Pacific Partners at EON Bank.
“There is no synergy between private equity and banks,'' said a source.
Reuters reported last week that the Carlyle group and TPG Capital were making a joint-bid for a US$1.5bil stake in RHB Capital.
Primus is currently embroiled in a court battle in which Ng Wing Fai of Primus, which owns 20.2% of EON Capital Bhd, is challenging the other directors on their decision to table the takeover bid (which Primus considers undervalued) from Hong Leong Bank to shareholders.
The court judgement will be made known by the end of this month.
EON Capital has been rocked by a series of disgreements among shareholders with Ng and Rin Kei Mei ending on opposing sides and issues with Bank Negara such as non-subscription of bonds by Primus.
Abu Dhabi Commercial Bank (ADCB), the 25% investor in RHB Capital, has engaged Goldman Sachs and Bank of America-Merrill Lynch to run the action for the sale of its stake.
TPG has an Indonesian arm, TP Nusantara which currently owns 59.7% of Bank Tabungan Pensiun Nasional; TPG plays an active role in the management of the bank which has done well since the purchase in 2008, said HwangDBS Vickers Research senior analyst Lim Sue Lin.
“If that is true, TPG may like RHB for its value and sustainable business model,'' she said, noting that over the last three to four years, the banking group had been able to grow on its own with a proven business model.
Analysts will not discount the possibility that CIMB may be interested in the stake in RHB although they see duplication within the two banking groups.
“Any consolidation will be more for size,'' said a senior analyst, adding that a merger between CIMB and RHB would create the fourth largest bank in Asean by assets.
However, analysts caution that there could be another round of voluntary separation scheme (VSS) should CIMB merge with RHB.
CIMB has voiced its ambition of being among the top three banks in South-East Asia by market capitalisation, positions currently held by Singapore banks DBS, OCBC and UOB.
“If it happens, the benefits are likely at the consumer banking level,'' said another senior analyst, adding that RHB has higher retail deposits and CIMB will be able to leverage on the “Easy'' banking concept based on lower costs, speed of approval and convenience.
RHB has hired 500 new staff for its 150 Easy outlets, targeted to reach 270 by year-end.
Some analysts recall that Maybank was said to be keen on RHB a few years back but are unsure of its interest now,
However, one analyst opined that Maybank might need more time to digest its expensive acquisition of Bank Internasional Indonesia which has yet to contribute strongly to group results.
Analysts are keenly watching for developments in the reported interests of DBS owned by Singapore's Temasek which, in turn, holds 14.8% of Alliance Financial Group (AFG) and Australia and New Zealand Banking Group (ANZ) which owns 24% of AMMB.
So far, foreign banks like ADCB and Bank of East Asia are holding 25% each in RHB Capital and Affin respectively while ANZ's investment is up to 25% in AMMB.
While the limit on foreign shareholding in local banking groups is 30%, there has yet to be a precedent, an analyst observed.
“If ANZ were to acquire a stake in RHB, it would need to merge AMMB with RHB,'' said Lim in a research note last Friday.
Noting that ANZ has expressed its interest to take a larger stake in AMMB, “even though the threshold for foreign shareholding remains capped at 30%, total returns as a shareholder would be larger for ANZ in an enlarged AMMB-RHB Capital scenario,'' said Lim.
Should DBS buy the RHB stake, it is unclear if AFG will be merged with RHB or Temasek will sell off its stake in AFG, as investors can only hold one banking licence.
Hwang DBS said in its regional industry focus that Malaysian banks were currently preferred over those in Thailand and Indonesia, with excitement driven by mergers and acquisitions.
“The target banks will benefit from input the potential stakeholders could bring to the table to improve standalone value propositions,'' said Lim in the report dated April 14.
According to Hwang DBS, the AMMB-ANZ alliance has proven to be the most successful foreign strategic shareholding tie-up to date.
It noted that the new management had implemented new risk management and risk scoring systems; made AMMB more flexible to adjust to interest rate hikes; improved its deposit franchise (particularly low cost deposits) and created additional sources of revenue flows from treasury and derivatives.
“These initiatives led AMMB's net profit to grow from RM670mil in financial year (FY) 2008 (when ANZ became shareholder) to RM1.1bil in FY10,” the report said.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/25/business/8541425&sec=business
Stronger-ringgit winners
Monday April 25, 2011
By DAVID TAN
davidtan@thestar.com.my
Consumer goods retailers, manufacturers are benefiting from the impact
GEORGE TOWN: The strong ringgit has positive impact on local consumer products retailers and brand-name manufacturers' earnings and sales both directly and indirectly.
Pensonic managing director Dixon Chew told StarBiz that a strong ringgit meant that the cost of importing raw materials was reduced, which helped offset the rising price of raw materials.
“Thus, we are able to manufacture more cost effectively and at the same time maintain the competitive pricing of our products without adversely affecting our margins.
Chew said this could be one of the reasons why its electronic and electrical kitchen appliances' sales continued to be strong after the Chinese New Year.
Star Electronics managing director Joseph Hon said the company's margins had improved due to the promotions and incentives given by the manufacturers of consumer electronic and electrical products.
“Since they are now able to lower their production cost due to stronger ringgit, we also have been getting more attractive incentives and promotions which translate into improved margins. For the first three months of this year, our net profit improved by about 15% compared with same corresponding period a year ago.
Hon said the company would establish three more outlets in the northern region to strengthen its market share in the second half of 2011, which would increase the number of outlets in the north to 22 from 19 at present.
The recently released Business Monitor International Malaysia Retail Report forecasts that total retail sales will grow from RM168.72bil (US$47.90bil) in 2011 to RM284bil (US$80.63bil) by 2015. In 2010, the total retail sales in Malaysia was RM153.76bil.
Courts MalaysiaSdn Bhd country director Chris Yong said the company planned to spend about RM11mil this year on store expansion and refurbishment.
The Germany-based GFK report had forecast a 7% growth for the Malaysia retail segment this year, but Courts anticipated a much faster rate.
OCBC Bank (Malaysia) Bhd emerging business head Wong Chee Seng said for the first quarter of 2011, the bank achieved a high double-digit percentage growth in small and medium enterprises (SMEs) loans against the previous corresponding period.
“Retail businesses are more likely to be affected by domestic market developmentssuch as the gradual uplifting ofgovernment subsidies onoil pricesand other commodities, and costlier financing due torising interest ratesduring the course of 2011,” he said.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/25/business/8525839&sec=business
By DAVID TAN
davidtan@thestar.com.my
Consumer goods retailers, manufacturers are benefiting from the impact
GEORGE TOWN: The strong ringgit has positive impact on local consumer products retailers and brand-name manufacturers' earnings and sales both directly and indirectly.
Pensonic managing director Dixon Chew told StarBiz that a strong ringgit meant that the cost of importing raw materials was reduced, which helped offset the rising price of raw materials.
“Thus, we are able to manufacture more cost effectively and at the same time maintain the competitive pricing of our products without adversely affecting our margins.
Chew said this could be one of the reasons why its electronic and electrical kitchen appliances' sales continued to be strong after the Chinese New Year.
Star Electronics managing director Joseph Hon said the company's margins had improved due to the promotions and incentives given by the manufacturers of consumer electronic and electrical products.
“Since they are now able to lower their production cost due to stronger ringgit, we also have been getting more attractive incentives and promotions which translate into improved margins. For the first three months of this year, our net profit improved by about 15% compared with same corresponding period a year ago.
Hon said the company would establish three more outlets in the northern region to strengthen its market share in the second half of 2011, which would increase the number of outlets in the north to 22 from 19 at present.
The recently released Business Monitor International Malaysia Retail Report forecasts that total retail sales will grow from RM168.72bil (US$47.90bil) in 2011 to RM284bil (US$80.63bil) by 2015. In 2010, the total retail sales in Malaysia was RM153.76bil.
Courts MalaysiaSdn Bhd country director Chris Yong said the company planned to spend about RM11mil this year on store expansion and refurbishment.
The Germany-based GFK report had forecast a 7% growth for the Malaysia retail segment this year, but Courts anticipated a much faster rate.
OCBC Bank (Malaysia) Bhd emerging business head Wong Chee Seng said for the first quarter of 2011, the bank achieved a high double-digit percentage growth in small and medium enterprises (SMEs) loans against the previous corresponding period.
“Retail businesses are more likely to be affected by domestic market developmentssuch as the gradual uplifting ofgovernment subsidies onoil pricesand other commodities, and costlier financing due torising interest ratesduring the course of 2011,” he said.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/25/business/8525839&sec=business
Govt targets more domestic investments
Monday April 25, 2011
By DAVID TAN
davidtan@thestar.com.my
It will make up 50% of spending for manufacturing sector
GEORGE TOWN: The Government is targeting some 50% of the total investment for the manufacturing sector this year to come from within the country, compared with 38.3% in 2010.
“The contribution from domestic investment cannot be ignored, although foreign investment is crucial,” International Trade and Industry Minister Datuk Seri Mustapa Mohamed told StarBiz in an interview.
Earlier, Mustapa officiated the ground-breaking ceremony for Aviatron (M) Sdn Bhd, a subsidiary of Singapore Aerospace Manufacturing.
Mustapa said key domestic investments this year include Pensonic Holdings Bhd's RM250mil manufacturing hub and international distribution network of electrical home appliances, QAV Technologies Sdn Bhd's RM130mil light-emitting diode (LED) testing and validation centre, and Asia Media's RM500mil development of the first digital live-transit broadcasting infrastructure in Malaysia.
As for non-manufacturing sector, the key domestic investment is the RM9.6bil by a consortium of companies comprising Prism Crystal Enterprises Ltd, Karambunai Corp Bhd and Petaling Tin Bhd for Karambunai Integrated Resort City.
“Last year, the domestic investment was 38.3% of the total RM47.2bil registered for the manufacturing sector.
“Of the total RM6.8bil approved investments for the manufacturing sector from January to February 2011, about 64.7% or RM4.4bil were domestic investments while the remaining 35.3% of RM2.4bil was foreign,” Mustapa said.
This year, the Government expects to approve about RM55bil worth of investment for the manufacturing sector, up from RM47.2bil in 2010.
The total investment the Government is targeting this year is around RM83bil.
Mustapa said the RM130mil investment by QAV Technologies in Penang, for example, would spur Penang transformation into a light-emitting diode (LED) certification and testing hub.
“With the investment by QAV, multinational corporations and local companies involved in solid state lighting business would no longer need to send their products abroad for testing and validation.
“As such services would be available in Penang, this would save foreign and local LED companies here in operational costs. It will also attract more LED investments into Penang,” he said.
Formed in 2002, QAV specialises in environmental testing, test equipment customisation and test technology development. It is the first company outside the United States to be certified by American National Standards Institute to perform such testing and certification.
QAV's investment comes under the Government's Economic Transformation Programme (ETP).
http://biz.thestar.com.my/news/story.asp?file=/2011/4/25/business/8533849&sec=business
By DAVID TAN
davidtan@thestar.com.my
It will make up 50% of spending for manufacturing sector
GEORGE TOWN: The Government is targeting some 50% of the total investment for the manufacturing sector this year to come from within the country, compared with 38.3% in 2010.
“The contribution from domestic investment cannot be ignored, although foreign investment is crucial,” International Trade and Industry Minister Datuk Seri Mustapa Mohamed told StarBiz in an interview.
Earlier, Mustapa officiated the ground-breaking ceremony for Aviatron (M) Sdn Bhd, a subsidiary of Singapore Aerospace Manufacturing.
Mustapa said key domestic investments this year include Pensonic Holdings Bhd's RM250mil manufacturing hub and international distribution network of electrical home appliances, QAV Technologies Sdn Bhd's RM130mil light-emitting diode (LED) testing and validation centre, and Asia Media's RM500mil development of the first digital live-transit broadcasting infrastructure in Malaysia.
As for non-manufacturing sector, the key domestic investment is the RM9.6bil by a consortium of companies comprising Prism Crystal Enterprises Ltd, Karambunai Corp Bhd and Petaling Tin Bhd for Karambunai Integrated Resort City.
“Last year, the domestic investment was 38.3% of the total RM47.2bil registered for the manufacturing sector.
“Of the total RM6.8bil approved investments for the manufacturing sector from January to February 2011, about 64.7% or RM4.4bil were domestic investments while the remaining 35.3% of RM2.4bil was foreign,” Mustapa said.
This year, the Government expects to approve about RM55bil worth of investment for the manufacturing sector, up from RM47.2bil in 2010.
The total investment the Government is targeting this year is around RM83bil.
Mustapa said the RM130mil investment by QAV Technologies in Penang, for example, would spur Penang transformation into a light-emitting diode (LED) certification and testing hub.
“With the investment by QAV, multinational corporations and local companies involved in solid state lighting business would no longer need to send their products abroad for testing and validation.
“As such services would be available in Penang, this would save foreign and local LED companies here in operational costs. It will also attract more LED investments into Penang,” he said.
Formed in 2002, QAV specialises in environmental testing, test equipment customisation and test technology development. It is the first company outside the United States to be certified by American National Standards Institute to perform such testing and certification.
QAV's investment comes under the Government's Economic Transformation Programme (ETP).
http://biz.thestar.com.my/news/story.asp?file=/2011/4/25/business/8533849&sec=business
Good News For Consumers As Currency Hits 13-year High
Monday April 25, 2011
By ISABELLE LAI
isabellelai@thestar.com.my
PETALING JAYA: Malaysians can look forward to paying less for imported goods with the ringgit strengthening to its highest level in 13 years.
Economists expect the ringgit to steadily appreciate against the US dollar with several predicting the local currency would strengthen to between 2.95 and 2.90 against the greenback in the coming months.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the ringgit was projected to hit 2.93 against US$1.
As of the last trading day, the exchange rate stood at RM3.01 to US$1. It reached a 13-year high of 3.0290 on Feb 4.
This is the strongest level the ringgit has been at since the 1997/98 Asian financial crisis, when it was pegged to the US dollar. Dr Yeah said the strengthening of the ringgit went hand-in-hand with the weakening US dollar.
A stronger ringgit, he said, meant imported goods would be cheaper while boosting overseas purchasing power and savings on overseas education and travelling.
However, he said the strength of the ringgit should also be measured against other currencies such as the euro, British pound and Australian dollar.
While the ringgit had strengthened against the euro and pound, it remains weaker to the Australian dollar.
“European countries have suffered from the global financial crisis and their recovery is still weak.
“Australia's economy has experienced strong growth from its strong rise in commodity exports.
“Therefore, the strengthening ringgit is not as alarming when compared to the basket of currencies,” he said.
Although a strong ringgit will benefit many Malaysians, he cautioned that exporters and manufacturers would face strong pressure to adjust.
“They will need to improve productivity and efficiency in order to maintain their competitiveness.
“If they are able to adjust and upgrade themselves, then it will be very healthy for the country,” he said.
MIDF Research economics head Anthony Dass said the coming months would see more flow of funds into Malaysia as well as a strengthening ringgit.
“It will help contain the inflation of imported prices. Food prices won't go up so much, so that gives us some comfort,” he said.
The ringgit was valued at RM2.50 per US$1 prior to the Asian financial crisis.
http://thestar.com.my/news/story.asp?file=/2011/4/25/nation/8547049&sec=nation
By ISABELLE LAI
isabellelai@thestar.com.my
PETALING JAYA: Malaysians can look forward to paying less for imported goods with the ringgit strengthening to its highest level in 13 years.
Economists expect the ringgit to steadily appreciate against the US dollar with several predicting the local currency would strengthen to between 2.95 and 2.90 against the greenback in the coming months.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the ringgit was projected to hit 2.93 against US$1.
As of the last trading day, the exchange rate stood at RM3.01 to US$1. It reached a 13-year high of 3.0290 on Feb 4.
This is the strongest level the ringgit has been at since the 1997/98 Asian financial crisis, when it was pegged to the US dollar. Dr Yeah said the strengthening of the ringgit went hand-in-hand with the weakening US dollar.
A stronger ringgit, he said, meant imported goods would be cheaper while boosting overseas purchasing power and savings on overseas education and travelling.
However, he said the strength of the ringgit should also be measured against other currencies such as the euro, British pound and Australian dollar.
While the ringgit had strengthened against the euro and pound, it remains weaker to the Australian dollar.
“European countries have suffered from the global financial crisis and their recovery is still weak.
“Australia's economy has experienced strong growth from its strong rise in commodity exports.
“Therefore, the strengthening ringgit is not as alarming when compared to the basket of currencies,” he said.
Although a strong ringgit will benefit many Malaysians, he cautioned that exporters and manufacturers would face strong pressure to adjust.
“They will need to improve productivity and efficiency in order to maintain their competitiveness.
“If they are able to adjust and upgrade themselves, then it will be very healthy for the country,” he said.
MIDF Research economics head Anthony Dass said the coming months would see more flow of funds into Malaysia as well as a strengthening ringgit.
“It will help contain the inflation of imported prices. Food prices won't go up so much, so that gives us some comfort,” he said.
The ringgit was valued at RM2.50 per US$1 prior to the Asian financial crisis.
http://thestar.com.my/news/story.asp?file=/2011/4/25/nation/8547049&sec=nation
Saturday, April 23, 2011
Bursa should work towards being the LSE for Islamic finance
Saturday April 23, 2011
IN response to the article entitled Should Bursa woo another,' on April 16, please allow me to add colour and put the Bursa Malaysia stock exchange merger suggestion in possibly a more enlightened prospective.
The question to answer is why would, say, London Stock Exchange (LSE) or another G-20 country stock exchange want to merge/acquire Bursa Malaysia? Is Bursa like Doha Stock Exchange (DSE), whereby, in 2008, NYSE Euronext beat out LSE and Deutsche Bourse for 25% in DSE? Today, does Bursa, part of FTSE Advance Emerging Market, have enough liquidity, velocity, volume, listing, reputation, etc, to provide value to LSE?
Concurrently, does Bursa want to be a small fish in the very big LSE pond? Why would Bursa want to offer itself from a position of, not weakness, but inequality? But, would Bursa want to bid for ASX after failure of the SGX bid?
The arguments for common platform, back-office integration, economies of scale may make more sense when the marriage is between emerging market exchanges, especially Bursa's budding state-of-the-art technology platforms, products, and clearing. For an advanced emerging market, Bursa has solid regulatory framework, sound governance, confidence building investor protection and has better weathered the global financial crisis than some of the Gulf Cooperation Council (GCC) markets and countries.
If Bursa is to be part of a stock exchange acquisition/merger, then it should look at selected OIC countries. This type of transaction may be part of the Islamic Development Bank's (IDB) mandate to facilitate intra-OIC trade and investment flows to 25% by 2015, to build size. Obviously, the host country national agenda's poison pill' defence will also be offered by the target exchanges, but, at times, it's merely a strategy for a higher asking price.
Exchanges in countries such as Pakistan, Kazakhstan, Turkey, Egypt, Nigeria, UAE (DFM or ADX) or even Saudi Arabia may be the ideal internationalisation for Bursa. These countries are early, emerging or established Islamic finance hubs and the linkage to Bursa allows them to compress the learning curve, from products to regulations.
For example, Bursa has been championing the Asean link and Organisation of Islamic Conference (OIC) countries are looking to establish a similar link.
Bursa may eventually become the LSE' to some of these exchanges. It may just avoid sentiments (capital) colonisation, often used under rubric of national interest in the Muslim world. Thereafter, Bursa can approach the likes of LSE for a merger of equals!
As the architect of the Halal Food Index, I suggested Saudi, Ankara, Malaysia and Indonesia (SAMI). Malaysia's leadership in Islamic finance fits in perfectly well with the initial internationalisation into the Muslim world.
If the proposal for merger encounters the commonly heard national interest defense, then, as a plan B, Bursa should consider leading a SAMI common platform, it may be easier than the present efforts for a GCC or OIC platform.
Furthermore, Malaysian blue chips CIMB, Maybank, Petronas, Proton, and Sime Darby probably have greater presence and recognition in the Muslim world than US, France, or UK, hence, building critical mass by starting with lower hanging fruits.'
Malaysia is contributing and leading the US$1 trillion Islamic finance market and the US$640bil halal food market. These two inter-related areas are not only building the national agenda of a halal-eco' system, but, will have additional capital allotted as part of the Capital Market Plan 2 (CMP2).
Malaysia is a successful sukuk story, not only for listings, liquidity (v. GCC) but also handling of defaults, on Islamic REITs and ETFs, on Islamic stock brokering, and so on.
The launch of SAMI Halal Food Index by former Prime Minister Tun Abdullah Ahmad Badawi during the World Halal Forum, in Kuala Lumpur, was a no-brainer, as (1) the country was a natural place and (2) there are 95 Bursa-listed companies in the index.
Positioning “halal” as a new asset class with its launch pad in Malaysia created waves in all mainstream media and has resonated in countries where the “halal” term may be on the way to become google.' A seeded halal equity food fund launching off the SAMI index, the world's first, is a good story for roadshows in, say, the GCC, where, say, sovereign wealth and other type of funds are spending moneys to address the national food security issues. However, there are challenges Bursa needs to overcome if a meaningful amount of international investors, presently less than 25%, are to arrive on the Malaysian shores. Many countries, including G-7 members, are vying for the petro-liquidity of the GCC. Malaysia needs to do more than the informative' road shows and one-on-one investor relations.
The speakers on the road shows may showcase Malaysia as an ideal Islamic and conventional investment destination for the ASEAN region, but the reality of illiquidity, too few investment instruments, etc, presents a “by-pass” of Malaysia into Singapore or Indonesia. For example, GLiCs' holdings of major companies have reduced company liquidity, and, for international investors, liquidity is a paramount precondition for investing in emerging markets.
Liquidity begets liquidity,' hence, liquid markets are the investment banker's calling cards for IPOs!
Furthermore, whatever happened to the “talked up” BNP's Easy ETF of 2010? Why is CIMB's Asean 40 and Xinhua 25, both UCITS 3 compliant, prospering better in neighbouring Singapore? Why was the Sabana REIT listed in Singapore?
Are these issues related to lack of education and market awareness? Do the regulators need to do more? Will CMP2 overcome some of these challenges to address the investment leakage' to neighbouring countries?
Bursa Malaysia needs to work from a position of informed strength, like Islamic finance, not opt for sentimental merger for the sake of flavor of the month' or jumping on the bandwagon of G-20 stock exchange mergers. Bursa is an important stakeholder of a country poised to be a G-20 country in the future, but it must strategically and tactically position itself about size, platforms, products, and yields.
That's the lyrics of a musical serenade' to all international investors.
Rushdi Siddiqui
Global Head, Islamic Finance & OIC Countries
http://biz.thestar.com.my/news/story.asp?file=/2011/4/23/business/8506552&sec=business
IN response to the article entitled Should Bursa woo another,' on April 16, please allow me to add colour and put the Bursa Malaysia stock exchange merger suggestion in possibly a more enlightened prospective.
The question to answer is why would, say, London Stock Exchange (LSE) or another G-20 country stock exchange want to merge/acquire Bursa Malaysia? Is Bursa like Doha Stock Exchange (DSE), whereby, in 2008, NYSE Euronext beat out LSE and Deutsche Bourse for 25% in DSE? Today, does Bursa, part of FTSE Advance Emerging Market, have enough liquidity, velocity, volume, listing, reputation, etc, to provide value to LSE?
Concurrently, does Bursa want to be a small fish in the very big LSE pond? Why would Bursa want to offer itself from a position of, not weakness, but inequality? But, would Bursa want to bid for ASX after failure of the SGX bid?
The arguments for common platform, back-office integration, economies of scale may make more sense when the marriage is between emerging market exchanges, especially Bursa's budding state-of-the-art technology platforms, products, and clearing. For an advanced emerging market, Bursa has solid regulatory framework, sound governance, confidence building investor protection and has better weathered the global financial crisis than some of the Gulf Cooperation Council (GCC) markets and countries.
If Bursa is to be part of a stock exchange acquisition/merger, then it should look at selected OIC countries. This type of transaction may be part of the Islamic Development Bank's (IDB) mandate to facilitate intra-OIC trade and investment flows to 25% by 2015, to build size. Obviously, the host country national agenda's poison pill' defence will also be offered by the target exchanges, but, at times, it's merely a strategy for a higher asking price.
Exchanges in countries such as Pakistan, Kazakhstan, Turkey, Egypt, Nigeria, UAE (DFM or ADX) or even Saudi Arabia may be the ideal internationalisation for Bursa. These countries are early, emerging or established Islamic finance hubs and the linkage to Bursa allows them to compress the learning curve, from products to regulations.
For example, Bursa has been championing the Asean link and Organisation of Islamic Conference (OIC) countries are looking to establish a similar link.
Bursa may eventually become the LSE' to some of these exchanges. It may just avoid sentiments (capital) colonisation, often used under rubric of national interest in the Muslim world. Thereafter, Bursa can approach the likes of LSE for a merger of equals!
As the architect of the Halal Food Index, I suggested Saudi, Ankara, Malaysia and Indonesia (SAMI). Malaysia's leadership in Islamic finance fits in perfectly well with the initial internationalisation into the Muslim world.
If the proposal for merger encounters the commonly heard national interest defense, then, as a plan B, Bursa should consider leading a SAMI common platform, it may be easier than the present efforts for a GCC or OIC platform.
Furthermore, Malaysian blue chips CIMB, Maybank, Petronas, Proton, and Sime Darby probably have greater presence and recognition in the Muslim world than US, France, or UK, hence, building critical mass by starting with lower hanging fruits.'
Malaysia is contributing and leading the US$1 trillion Islamic finance market and the US$640bil halal food market. These two inter-related areas are not only building the national agenda of a halal-eco' system, but, will have additional capital allotted as part of the Capital Market Plan 2 (CMP2).
Malaysia is a successful sukuk story, not only for listings, liquidity (v. GCC) but also handling of defaults, on Islamic REITs and ETFs, on Islamic stock brokering, and so on.
The launch of SAMI Halal Food Index by former Prime Minister Tun Abdullah Ahmad Badawi during the World Halal Forum, in Kuala Lumpur, was a no-brainer, as (1) the country was a natural place and (2) there are 95 Bursa-listed companies in the index.
Positioning “halal” as a new asset class with its launch pad in Malaysia created waves in all mainstream media and has resonated in countries where the “halal” term may be on the way to become google.' A seeded halal equity food fund launching off the SAMI index, the world's first, is a good story for roadshows in, say, the GCC, where, say, sovereign wealth and other type of funds are spending moneys to address the national food security issues. However, there are challenges Bursa needs to overcome if a meaningful amount of international investors, presently less than 25%, are to arrive on the Malaysian shores. Many countries, including G-7 members, are vying for the petro-liquidity of the GCC. Malaysia needs to do more than the informative' road shows and one-on-one investor relations.
The speakers on the road shows may showcase Malaysia as an ideal Islamic and conventional investment destination for the ASEAN region, but the reality of illiquidity, too few investment instruments, etc, presents a “by-pass” of Malaysia into Singapore or Indonesia. For example, GLiCs' holdings of major companies have reduced company liquidity, and, for international investors, liquidity is a paramount precondition for investing in emerging markets.
Liquidity begets liquidity,' hence, liquid markets are the investment banker's calling cards for IPOs!
Furthermore, whatever happened to the “talked up” BNP's Easy ETF of 2010? Why is CIMB's Asean 40 and Xinhua 25, both UCITS 3 compliant, prospering better in neighbouring Singapore? Why was the Sabana REIT listed in Singapore?
Are these issues related to lack of education and market awareness? Do the regulators need to do more? Will CMP2 overcome some of these challenges to address the investment leakage' to neighbouring countries?
Bursa Malaysia needs to work from a position of informed strength, like Islamic finance, not opt for sentimental merger for the sake of flavor of the month' or jumping on the bandwagon of G-20 stock exchange mergers. Bursa is an important stakeholder of a country poised to be a G-20 country in the future, but it must strategically and tactically position itself about size, platforms, products, and yields.
That's the lyrics of a musical serenade' to all international investors.
Rushdi Siddiqui
Global Head, Islamic Finance & OIC Countries
http://biz.thestar.com.my/news/story.asp?file=/2011/4/23/business/8506552&sec=business
Big Companies, Stolen Ideas
Saturday April 23, 2011
GOVERNANCE MATTER
By SHIREEN MUHIUDEEN
Shireen Muhiudeen exposes how some big unscrupulous companies are stealing ideas from smaller companies.
IN our reviews of various public-listed companies (PLCs) across the region, one issue has cropped up again and again: The appropriating of a small company's ideas by a much bigger company.
The law protects all fruits of the human imagination from songs to sketches and sonnets but not ideas. You cannot own an idea, and this is why big companies can exploit smaller ones, which tend to be more innovative and enterprising because that is the only way they can survive.
Typically, before Company B can value a business transaction by Company A, Company B has to ask Company A to give it a Request For Proposal (RFP). Generally, Company A will do so as long as Company B signs the usual Non-Disclosure Agreement (NDA).
Now, quite often, if the company demanding information is larger than the company disclosing it, the former will keep asking for more and more data from the latter, on the pretext that it is just doing due diligence.
The smaller company will then end up giving the larger one all the ideas it has in the hope that that will seal their business deal.
In this way, the larger company gets to know all it wants about the smaller company's knowhow. Worse, the larger company claims that as its own.
This is a cheap means for the larger company to expand its own business model. In fact, when we spoke to one such large company, it said that it “reviewed” all applications by small and medium enterprises (SMEs), paying particular attention to any ideas or opportunities that the company could exploit for its own ends!
Business ethics
Legally, it is not doing anything wrong. But siphoning another's ideas under the guise of doing due diligence goes against every grain of business ethics.
Recently, we reviewed a company that had a big business plan to tap global funds, using an idea that it presented as its own. The thing is, we knew of a smaller company that had presented exactly that idea to a PLC some six years ago.
We had followed every development in that negotiation, from the signing of the NDA right up to the excuses given by the PLC as to why the evaluation process was taking so long.
That smaller company has since taken the PLC to court, alleging the breach of a condition precedent contained in a subscription and shareholders agreement, as well as a failure to fulfill its obligations.
But, in trying to get justice, it is the smaller company that suffers the most; it cannot forge ahead because it is being weighed down by long legal proceedings, to say nothing of how much it has to spend for lawyers to argue its case.
When asked about the smaller company's grievances, the PLC brushed off all queries and said, “Oh, these are just small, insignificant issues”, implying that they would not affect its own business model. Shouldn't they, though? If the PLC is selling itself with ideas siphoned off another company, what does such siphoning say of the sustainability of its business model?
This big and not so beautiful PLC goes ahead and launches its “latest” ideas while daring the smaller company that came up with these ideas to send it a cease-and-desist letter. It can be so arrogant because it knows only too well that it has much deeper pockets than the aggrieved company and so will simply push the latter over the edge with mounting legal fees.
Currently, the law gives recourse to aggrieved smaller companies based on what they have actually lost to the bigger companies. But surely it should be based on what smaller companies could have earned but for the idea-siphoning?
From this, it is evident that bigger companies are taking advantage of the current disconnect between how much the courts will make them cough up and how much smaller companies really suffer financially from someone else using their good ideas.
Stamina
This means that it is still cheaper for big companies just to use a smaller one's ideas, even if that smaller player takes them to court for doing so.
Not surprisingly, bigger companies tend to operate in this manner because smaller companies simply do not have the stamina and finances to protect their good work.
This is often the case even if the law is overwhelmingly in the smaller company's favour. The smaller company simply cannot afford the very long time taken for justice to be done.
But something, clearly, needs to be done for fairness. Now, directors of companies are required to declare in their annual reports that “they are responsible for all information and representations contained in the financial statements” and that “the financial statements have been prepared in conformity with generally accepted accounting principles” and that “the reflected amounts are based on the best estimates and informed judgment of the management with an appropriate consideration as to materiality”.
This being the case, perhaps there should also be a statement to the effect that they have not infringed another company's intellectual property, have not settled out of court or that they have no pending legal proceedings regarding the use of another's ideas.
As Malaysia gears itself up to be a full-blown knowledge-based, or K-economy, it becomes critical to protect SMEs, especially in the telecoms sector where this is very prevalent. If the law does not ring-fence their rights, they will be forced to look beyond Malaysia to flourish.
Shireen Muhiudeen is managing director of Corston-Smith Asset Management in Malaysia, a fund management company that makes investment decisions based on corporate governance
http://biz.thestar.com.my/news/story.asp?file=/2011/4/23/business/8505184&sec=business
GOVERNANCE MATTER
By SHIREEN MUHIUDEEN
Shireen Muhiudeen exposes how some big unscrupulous companies are stealing ideas from smaller companies.
IN our reviews of various public-listed companies (PLCs) across the region, one issue has cropped up again and again: The appropriating of a small company's ideas by a much bigger company.
The law protects all fruits of the human imagination from songs to sketches and sonnets but not ideas. You cannot own an idea, and this is why big companies can exploit smaller ones, which tend to be more innovative and enterprising because that is the only way they can survive.
Typically, before Company B can value a business transaction by Company A, Company B has to ask Company A to give it a Request For Proposal (RFP). Generally, Company A will do so as long as Company B signs the usual Non-Disclosure Agreement (NDA).
Now, quite often, if the company demanding information is larger than the company disclosing it, the former will keep asking for more and more data from the latter, on the pretext that it is just doing due diligence.
The smaller company will then end up giving the larger one all the ideas it has in the hope that that will seal their business deal.
In this way, the larger company gets to know all it wants about the smaller company's knowhow. Worse, the larger company claims that as its own.
This is a cheap means for the larger company to expand its own business model. In fact, when we spoke to one such large company, it said that it “reviewed” all applications by small and medium enterprises (SMEs), paying particular attention to any ideas or opportunities that the company could exploit for its own ends!
Business ethics
Legally, it is not doing anything wrong. But siphoning another's ideas under the guise of doing due diligence goes against every grain of business ethics.
Recently, we reviewed a company that had a big business plan to tap global funds, using an idea that it presented as its own. The thing is, we knew of a smaller company that had presented exactly that idea to a PLC some six years ago.
We had followed every development in that negotiation, from the signing of the NDA right up to the excuses given by the PLC as to why the evaluation process was taking so long.
That smaller company has since taken the PLC to court, alleging the breach of a condition precedent contained in a subscription and shareholders agreement, as well as a failure to fulfill its obligations.
But, in trying to get justice, it is the smaller company that suffers the most; it cannot forge ahead because it is being weighed down by long legal proceedings, to say nothing of how much it has to spend for lawyers to argue its case.
When asked about the smaller company's grievances, the PLC brushed off all queries and said, “Oh, these are just small, insignificant issues”, implying that they would not affect its own business model. Shouldn't they, though? If the PLC is selling itself with ideas siphoned off another company, what does such siphoning say of the sustainability of its business model?
This big and not so beautiful PLC goes ahead and launches its “latest” ideas while daring the smaller company that came up with these ideas to send it a cease-and-desist letter. It can be so arrogant because it knows only too well that it has much deeper pockets than the aggrieved company and so will simply push the latter over the edge with mounting legal fees.
Currently, the law gives recourse to aggrieved smaller companies based on what they have actually lost to the bigger companies. But surely it should be based on what smaller companies could have earned but for the idea-siphoning?
From this, it is evident that bigger companies are taking advantage of the current disconnect between how much the courts will make them cough up and how much smaller companies really suffer financially from someone else using their good ideas.
Stamina
This means that it is still cheaper for big companies just to use a smaller one's ideas, even if that smaller player takes them to court for doing so.
Not surprisingly, bigger companies tend to operate in this manner because smaller companies simply do not have the stamina and finances to protect their good work.
This is often the case even if the law is overwhelmingly in the smaller company's favour. The smaller company simply cannot afford the very long time taken for justice to be done.
But something, clearly, needs to be done for fairness. Now, directors of companies are required to declare in their annual reports that “they are responsible for all information and representations contained in the financial statements” and that “the financial statements have been prepared in conformity with generally accepted accounting principles” and that “the reflected amounts are based on the best estimates and informed judgment of the management with an appropriate consideration as to materiality”.
This being the case, perhaps there should also be a statement to the effect that they have not infringed another company's intellectual property, have not settled out of court or that they have no pending legal proceedings regarding the use of another's ideas.
As Malaysia gears itself up to be a full-blown knowledge-based, or K-economy, it becomes critical to protect SMEs, especially in the telecoms sector where this is very prevalent. If the law does not ring-fence their rights, they will be forced to look beyond Malaysia to flourish.
Shireen Muhiudeen is managing director of Corston-Smith Asset Management in Malaysia, a fund management company that makes investment decisions based on corporate governance
http://biz.thestar.com.my/news/story.asp?file=/2011/4/23/business/8505184&sec=business
Friday, April 22, 2011
MDeC confident of further MSC growth
Thursday April 21, 2011
By EDY SARIF
edy@thestar.com.my
CEO: ICT will play big part in drive to develop nation’s high-value economy
KUALA LUMPUR: Multimedia Development Corp (MDeC) expects to sees further growth in the third phase of the development of the Multimedia Super Corridor (MSC) that is set to run from this year to 2020.
Chief executive officer Datuk Badlisham Ghazali said during this critical phase, MDeC would help the MSC to develop Malaysia's high-value economy by continuing to drive the uptake of information and communication technology (ICT).
He said the first four years of the MSC Malaysia Phase 3 plan aimed to see MSC companies achieve a 21% increase in gross domestic product (GDP sum of good and services produced) contribution to RM42bil. This compares with the RM34.57bil it recorded in Phase 2 which ran from 2004 to 2010.
Badlisham said at the end of the four years (end-2015), MSC companies' revenues were expected to increase to RM142bil from the RM103.8bil recorded in Phase 2. A 75% increase in exports to RM58bil from RM33bil and a 47% increase in job creation to 160,000 from the 111,367 in the previous phase are expected.
“We want ICT to be more pervasive with a wider economic footprint. Our strategies in the three main clusters of creative multimedia, shared services outsourcing and InfoTech have been realigned to put stronger emphasis on wealth creation and high-value investments,” he said.
Badlisham added that MDeC was very confident going forward into the MSC Malaysia Phase 3 as it had gained above its target in Phase 2.
“Phase 2 is about creating economies of scale while Phase 3 is focused on empowering the rakyat, further enabling the Government and enhancing the ICT sector towards achieving the goal of an innovative, high-income and developed nation by 2020 in line with the New Economic Model,”he said.
Other core initiatives under Phase 3 include the establishment of two new cybercities each year and completing the Innovative Digital Economy framework by the second half of this year.
MDeC is an organisation that directs and oversees MSC Malaysia, the national ICT development initiative, by advising the Government on legislation and policies, developing industry-specific practices and setting the standards for multimedia and digital operations.
The group is also responsible for promoting MSC locally and globally, while providing strategic support to MSC Malaysia's status companies.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/21/business/8522114&sec=business
By EDY SARIF
edy@thestar.com.my
CEO: ICT will play big part in drive to develop nation’s high-value economy
KUALA LUMPUR: Multimedia Development Corp (MDeC) expects to sees further growth in the third phase of the development of the Multimedia Super Corridor (MSC) that is set to run from this year to 2020.
Chief executive officer Datuk Badlisham Ghazali said during this critical phase, MDeC would help the MSC to develop Malaysia's high-value economy by continuing to drive the uptake of information and communication technology (ICT).
He said the first four years of the MSC Malaysia Phase 3 plan aimed to see MSC companies achieve a 21% increase in gross domestic product (GDP sum of good and services produced) contribution to RM42bil. This compares with the RM34.57bil it recorded in Phase 2 which ran from 2004 to 2010.
Badlisham said at the end of the four years (end-2015), MSC companies' revenues were expected to increase to RM142bil from the RM103.8bil recorded in Phase 2. A 75% increase in exports to RM58bil from RM33bil and a 47% increase in job creation to 160,000 from the 111,367 in the previous phase are expected.
“We want ICT to be more pervasive with a wider economic footprint. Our strategies in the three main clusters of creative multimedia, shared services outsourcing and InfoTech have been realigned to put stronger emphasis on wealth creation and high-value investments,” he said.
Badlisham added that MDeC was very confident going forward into the MSC Malaysia Phase 3 as it had gained above its target in Phase 2.
“Phase 2 is about creating economies of scale while Phase 3 is focused on empowering the rakyat, further enabling the Government and enhancing the ICT sector towards achieving the goal of an innovative, high-income and developed nation by 2020 in line with the New Economic Model,”he said.
Other core initiatives under Phase 3 include the establishment of two new cybercities each year and completing the Innovative Digital Economy framework by the second half of this year.
MDeC is an organisation that directs and oversees MSC Malaysia, the national ICT development initiative, by advising the Government on legislation and policies, developing industry-specific practices and setting the standards for multimedia and digital operations.
The group is also responsible for promoting MSC locally and globally, while providing strategic support to MSC Malaysia's status companies.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/21/business/8522114&sec=business
More M&As on the horizon for larger banks
Wednesday April 20, 2011
Plain Speaking - By Yap Leng Kuen
THE banking mergers and acquisitions (M&As) scene is coming alive again with deals expected in the next one to two years. Bankers reckon that this time, it could be fuelled not so much by the smaller but the larger to mid-sized banks.
The stronger groups, mainly Maybank and CIMB, are likely to come under the radar of investors as they forge ahead in their respective core strengths and possibly look for tie-ups to enhance that.
Both banks have made known their ambitions for a strong regional presence; Maybank's recent acquisition of Kim Eng Securities and expansion in Indonesia via Bank Internasional Indonesia are steps in that direction while CIMB has stated its intention to become the top three bank in South-East Asia by market capitalisation and asset size.
Their names have cropped up recently as potential bidders for Abu Dhabi Commercial Bank's (ADCB) 25% stake in RHB Capital Bhd.
ADCB has engaged Goldman Sachs to look into a possible divestment of its stake in RHB Capital which it bought for RM7.20 per share or RM3.9bil in mid-2008.
CIMB, with its growing contributions from the Indonesian operations as well as treasury and investment banking, is seen as a prime candidate for an M&A with RHB which is especially well-known for its strong consumer banking franchise. CIMB has been trying to grow its consumer banking through a previous M&A with Southern Bank; further steps to boost the group in that direction are expected.
It is noted that CIMB and RHB have a common shareholder - Khazanah Nasional Bhd.
In drawing up an M&A strategy, factors such as size and scale are important but equally vital are aspects such as strategic fit and synergies.
We should not assume that just because certain banks are among the smallest, therefore, they should be the first to be merged or swallowed.
In this respect, banks like Affin may just continue to operate as a boutique bank.
The AmBank group, which has struck a strategic partnership with the Australia New Zealand banking group, may be in one of the sweetest spots.
Contrary to common speculations that it may be eyeing an M&A with RHB, the AmBank group may just go ahead with ANZ as its strong partner not just in Malaysia but also the region.
EON Bank, the subject of a takeover bid by Hong Leong Bank and court battle among the directors, will know its fate with regards to the court judgement at end of this month.
Ng Wing Fai of Primus Pacific Partners is challenging the other directors on their decision to table the Hong Leong bid to shareholders,
In the midst of this possible M&A scenario, all eyes turn to Public Bank which has a similar customer base with that of Hong Leong.
Will there be any moves among these two retail and SME strongholds?
Alliance Bank may be sitting pretty on its own now but it is widely regarded to be the potential doorway for DBS Bank of Singapore as they have a common shareholder in Temasek Holdings Ltd.
Langkah Bahagia Sdn Bhd, which holds a 14.8% stake in Alliance Financial Group Bhd (AFG), is said to be looking for a buyer of its stake, held through Vertical Theme Sdn Bhd.
It cannot be confirmed but many believe that stake could be sold to Temasek, Singapore's investment arm.
Vertical Theme has a 29% stake in AFG while Temasek has a 49% stake in the former. Temasek also has a 27.8% stake in the DBS group.
Associate editor Yap Leng Kuen believes the next round of bank mergers could be expensive but focussed on value creation.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/20/business/8514173&sec=business
Plain Speaking - By Yap Leng Kuen
THE banking mergers and acquisitions (M&As) scene is coming alive again with deals expected in the next one to two years. Bankers reckon that this time, it could be fuelled not so much by the smaller but the larger to mid-sized banks.
The stronger groups, mainly Maybank and CIMB, are likely to come under the radar of investors as they forge ahead in their respective core strengths and possibly look for tie-ups to enhance that.
Both banks have made known their ambitions for a strong regional presence; Maybank's recent acquisition of Kim Eng Securities and expansion in Indonesia via Bank Internasional Indonesia are steps in that direction while CIMB has stated its intention to become the top three bank in South-East Asia by market capitalisation and asset size.
Their names have cropped up recently as potential bidders for Abu Dhabi Commercial Bank's (ADCB) 25% stake in RHB Capital Bhd.
ADCB has engaged Goldman Sachs to look into a possible divestment of its stake in RHB Capital which it bought for RM7.20 per share or RM3.9bil in mid-2008.
CIMB, with its growing contributions from the Indonesian operations as well as treasury and investment banking, is seen as a prime candidate for an M&A with RHB which is especially well-known for its strong consumer banking franchise. CIMB has been trying to grow its consumer banking through a previous M&A with Southern Bank; further steps to boost the group in that direction are expected.
It is noted that CIMB and RHB have a common shareholder - Khazanah Nasional Bhd.
In drawing up an M&A strategy, factors such as size and scale are important but equally vital are aspects such as strategic fit and synergies.
We should not assume that just because certain banks are among the smallest, therefore, they should be the first to be merged or swallowed.
In this respect, banks like Affin may just continue to operate as a boutique bank.
The AmBank group, which has struck a strategic partnership with the Australia New Zealand banking group, may be in one of the sweetest spots.
Contrary to common speculations that it may be eyeing an M&A with RHB, the AmBank group may just go ahead with ANZ as its strong partner not just in Malaysia but also the region.
EON Bank, the subject of a takeover bid by Hong Leong Bank and court battle among the directors, will know its fate with regards to the court judgement at end of this month.
Ng Wing Fai of Primus Pacific Partners is challenging the other directors on their decision to table the Hong Leong bid to shareholders,
In the midst of this possible M&A scenario, all eyes turn to Public Bank which has a similar customer base with that of Hong Leong.
Will there be any moves among these two retail and SME strongholds?
Alliance Bank may be sitting pretty on its own now but it is widely regarded to be the potential doorway for DBS Bank of Singapore as they have a common shareholder in Temasek Holdings Ltd.
Langkah Bahagia Sdn Bhd, which holds a 14.8% stake in Alliance Financial Group Bhd (AFG), is said to be looking for a buyer of its stake, held through Vertical Theme Sdn Bhd.
It cannot be confirmed but many believe that stake could be sold to Temasek, Singapore's investment arm.
Vertical Theme has a 29% stake in AFG while Temasek has a 49% stake in the former. Temasek also has a 27.8% stake in the DBS group.
Associate editor Yap Leng Kuen believes the next round of bank mergers could be expensive but focussed on value creation.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/20/business/8514173&sec=business
Are there too many banks in Malaysia?
Wednesday April 20, 2011
IN reference to the article titled “Catalyst for banking merger” by Risen Jayaseelan that appeared in StarBiz on April 12, I would like to question the view that there are too many banks in Malaysia.
If the view is based on balance-sheet strength, then it is an outdated view. Look at the Western banks such as Citi Group, RBS, Lloyds and many more. Did their big balance sheet help them to weather the credit issues? Or did it make it more difficult for them to achieve their return-on-equity targets, thus possibly driving the banks into more risky behaviour?
One could also argue that big banks are “riskier” than smaller banks because of heavier systemic risks the larger banks pose. The recommendation from Britain’s Independent Commission on Banking (Vickers Commission) does seem to confirm this and suggests additional capital buffers for large banks.
To quote The Economist, “On capital, the commission reckons that the minimum that systemically important banks should set aside as buffers ought to rise to 10% from the 7% proposed by Basel III”.
Credit issues should be addressed by transparency, proper controls by the central banks and ultimately, having competent people in the banks. Mergers for “balance sheet reasons” only make sense if the strong ones merges or acquires the weak ones to eliminate the weakest links in the banking system.
There is nothing wrong with having healthy small and medium-sized banks. They offer more choices for their customers. At the same time, there can be the bigger banks in the country with regional aspirations.
Mergers and acquisitions (M&As) for banks should be driven by cost synergies, better opportunities and competition. In other words, M&As should be driven by market forces and not by unfounded calls by non-stakeholders of the banks.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/20/business/8515405&sec=business
IN reference to the article titled “Catalyst for banking merger” by Risen Jayaseelan that appeared in StarBiz on April 12, I would like to question the view that there are too many banks in Malaysia.
If the view is based on balance-sheet strength, then it is an outdated view. Look at the Western banks such as Citi Group, RBS, Lloyds and many more. Did their big balance sheet help them to weather the credit issues? Or did it make it more difficult for them to achieve their return-on-equity targets, thus possibly driving the banks into more risky behaviour?
One could also argue that big banks are “riskier” than smaller banks because of heavier systemic risks the larger banks pose. The recommendation from Britain’s Independent Commission on Banking (Vickers Commission) does seem to confirm this and suggests additional capital buffers for large banks.
To quote The Economist, “On capital, the commission reckons that the minimum that systemically important banks should set aside as buffers ought to rise to 10% from the 7% proposed by Basel III”.
Credit issues should be addressed by transparency, proper controls by the central banks and ultimately, having competent people in the banks. Mergers for “balance sheet reasons” only make sense if the strong ones merges or acquires the weak ones to eliminate the weakest links in the banking system.
There is nothing wrong with having healthy small and medium-sized banks. They offer more choices for their customers. At the same time, there can be the bigger banks in the country with regional aspirations.
Mergers and acquisitions (M&As) for banks should be driven by cost synergies, better opportunities and competition. In other words, M&As should be driven by market forces and not by unfounded calls by non-stakeholders of the banks.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/20/business/8515405&sec=business
Wednesday, April 20, 2011
Saturday, April 16, 2011
S'pore Allows Stronger Currency to Slow Inflation
Published: Thursday April 14, 2011 MYT 10:48:00 AM
SINGAPORE: Singapore will allow its currency to strengthen in a bid to ease inflationary pressures sparked by robust economic growth and rising energy and food costs, the central bank said Thursday.
The Monetary Authority of Singapore said in a biannual policy statement that it will re-center its exchange rate policy band upward while leaving the slope and width of the band unchanged.
Meanwhile, gross domestic product jumped a seasonally adjusted annualized 24 percent in the January-to-March period from the previous quarter, the Trade and Industry Ministry said separately Thursday.
"The key tipping point for the more aggressive policy shift was the strong performance of first quarter GDP," said Wai Ho Leong, an analyst with Barclays Capital in Singapore. Leong estimated the central bank revalued the currency band between 1 percent and 1.5 percent.
Central bankers across Asia have tightened monetary policy this year, mostly through higher lending rates, as soaring commodity prices and solid economic growth threaten to spur inflation.
The Singaporean dollar has gained about 2 percent so far this year to a record SG$1.25 per U.S. dollar after strengthening 9.3 percent last year. Singapore's central bank uses its currency exchange rate policy, rather than interest rates, to regulate monetary liquidity and inflation.
The central bank left unchanged its 2011 inflation forecast of between 3 percent and 4 percent. Consumer prices rose 5 percent in the 12 months through February.
"Global oil and food prices have increased and will remain high," the central bank said. "Headline inflation is forecast to stay elevated. Domestic cost and price pressures will remain firm."
The central bank adjusted its trading band twice last year to allow the currency to strengthen. Policymakers have said recently that they will use a stronger Singaporean dollar to combat inflation, but don't want to strengthen the currency too much because that could undermine the city-state's export competitiveness.
Singapore's economy, which relies on manufacturing, finance and tourism, jumped a record 14.5 percent last year.
Last quarter on a seasonally adjusted annualized basis, manufacturing surged 80 percent, construction gained 15 percent and services increased 8.4 percent, the ministry said.
"This is significantly higher than what the market had expected and once again underlined the strong economic fundamentals of this small open economy," Singapore's DBS bank said.
The economy grew a seasonally adjusted annualized 3.9 percent in the fourth quarter.
Compared with the same period a year earlier, the economy grew 8.5 percent in the first quarter after expanding 12 percent in the fourth, the ministry said.
The central bank said the economy will likely grow this year "at the upper end" of the government's forecast of between 4 percent and 6 percent.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/14/business/20110414105510&sec=business
SINGAPORE: Singapore will allow its currency to strengthen in a bid to ease inflationary pressures sparked by robust economic growth and rising energy and food costs, the central bank said Thursday.
The Monetary Authority of Singapore said in a biannual policy statement that it will re-center its exchange rate policy band upward while leaving the slope and width of the band unchanged.
Meanwhile, gross domestic product jumped a seasonally adjusted annualized 24 percent in the January-to-March period from the previous quarter, the Trade and Industry Ministry said separately Thursday.
"The key tipping point for the more aggressive policy shift was the strong performance of first quarter GDP," said Wai Ho Leong, an analyst with Barclays Capital in Singapore. Leong estimated the central bank revalued the currency band between 1 percent and 1.5 percent.
Central bankers across Asia have tightened monetary policy this year, mostly through higher lending rates, as soaring commodity prices and solid economic growth threaten to spur inflation.
The Singaporean dollar has gained about 2 percent so far this year to a record SG$1.25 per U.S. dollar after strengthening 9.3 percent last year. Singapore's central bank uses its currency exchange rate policy, rather than interest rates, to regulate monetary liquidity and inflation.
The central bank left unchanged its 2011 inflation forecast of between 3 percent and 4 percent. Consumer prices rose 5 percent in the 12 months through February.
"Global oil and food prices have increased and will remain high," the central bank said. "Headline inflation is forecast to stay elevated. Domestic cost and price pressures will remain firm."
The central bank adjusted its trading band twice last year to allow the currency to strengthen. Policymakers have said recently that they will use a stronger Singaporean dollar to combat inflation, but don't want to strengthen the currency too much because that could undermine the city-state's export competitiveness.
Singapore's economy, which relies on manufacturing, finance and tourism, jumped a record 14.5 percent last year.
Last quarter on a seasonally adjusted annualized basis, manufacturing surged 80 percent, construction gained 15 percent and services increased 8.4 percent, the ministry said.
"This is significantly higher than what the market had expected and once again underlined the strong economic fundamentals of this small open economy," Singapore's DBS bank said.
The economy grew a seasonally adjusted annualized 3.9 percent in the fourth quarter.
Compared with the same period a year earlier, the economy grew 8.5 percent in the first quarter after expanding 12 percent in the fourth, the ministry said.
The central bank said the economy will likely grow this year "at the upper end" of the government's forecast of between 4 percent and 6 percent.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/14/business/20110414105510&sec=business
Govt May Buy Water Bonds
Thursday April 14, 2011
By YAP LENG KUEN
lengkuen@thestar.com.my
Special purpose vehicle or PAAB believed to be on standby
PETALING JAYA: Amid strong concerns voiced by water bondholders in the financial sector, the Federal Government is believed to be planning a special purpose vehicle or getting Pengurusan Asset Air Bhd (PAAB) to buy over the bonds for which some are running into an event of default.
The Finance Ministry, after receiving urgent feedback from the bondholders that include banks, the Employees Provident Fund and Great Eastern, is likely to use the time tested method of setting up a vehicle like Pengurusan Danaharta Nasional to take over the bonds, sources said.
(Danaharta is the national asset company that was set up following the 1997 Asian financial crisis to take over ailing assets).
Facilities at PAAB are also on standby; PAAB has a coffer of RM40bil, half of which is government guaranteed. After spending RM4bil to buy over water assets in three states, PAAB still has a deep pocket.
Puncak Niaga Holdings Bhd is calling for a bondholders' meeting “to seek certain waivers'' following the recent downgrades by Malaysian Rating Corp which had resulted in the rating of some of Puncak's debt to fall below the minimum required under their respective trust deeds.
“While the current rating prevails, an event of default exists on some of the group's debt wherein the revised rating is below the minimum level. If allowed to remain, further action (if any) by the respective bondholders could result in a default on the group's debt obligations,'' said Puncak, which issued RM546.88mil of redeemable unconvertible junior notes.
Analysts pointed out that the first principal payments of Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) bonds were coming up in July; already, the water treatment operator's cashflow is affected as Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) had recently reduced its monthly payment to these operators to 42% of invoiced amounts from 45%.
“The Federal Government's stepping in will be a stop-gap measure,'' said a water sector analyst.
“Puncak will get to restructure its debt repayment profile by stretching the payment of interest over a longer period and possibly saving on costs via the issue of government papers, However, longer tenure bonds still command higher interest.''
The valuation of the bonds will be the next issue to be ironed out among the parties, as bond yields have changed over time, thus affecting the value of the bonds.
“A give-and-take approach should be adopted among all parties,'' opined the analyst.
The Federal Government's helping hand at this juncture may be a relief to Puncak but, on the flip side, analysts view this as giving the Government a leverage on the water industry.
This means that Puncak will probably not be able to ask for excessive compensation if they want to give up the water concession.
While the debt problem of water-related companies may be solved, the worry is that the equity side may be more complicated. The equity portion is owned by the concessionaires and shareholders which are fragmented between federal and state governments.
The two major issues confronting equity owners are the stalemate over control in distribution and sale of water and fragmented shareholding structure between state and federal governments.
Due to the continuing disagreements, the cashflow of Puncak will still be affected as the mismatch persists between payment upstream, based on pre-agreed rates, and revenue, based on existing capped rates.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/14/business/8478564&sec=business
By YAP LENG KUEN
lengkuen@thestar.com.my
Special purpose vehicle or PAAB believed to be on standby
PETALING JAYA: Amid strong concerns voiced by water bondholders in the financial sector, the Federal Government is believed to be planning a special purpose vehicle or getting Pengurusan Asset Air Bhd (PAAB) to buy over the bonds for which some are running into an event of default.
The Finance Ministry, after receiving urgent feedback from the bondholders that include banks, the Employees Provident Fund and Great Eastern, is likely to use the time tested method of setting up a vehicle like Pengurusan Danaharta Nasional to take over the bonds, sources said.
(Danaharta is the national asset company that was set up following the 1997 Asian financial crisis to take over ailing assets).
Facilities at PAAB are also on standby; PAAB has a coffer of RM40bil, half of which is government guaranteed. After spending RM4bil to buy over water assets in three states, PAAB still has a deep pocket.
Puncak Niaga Holdings Bhd is calling for a bondholders' meeting “to seek certain waivers'' following the recent downgrades by Malaysian Rating Corp which had resulted in the rating of some of Puncak's debt to fall below the minimum required under their respective trust deeds.
“While the current rating prevails, an event of default exists on some of the group's debt wherein the revised rating is below the minimum level. If allowed to remain, further action (if any) by the respective bondholders could result in a default on the group's debt obligations,'' said Puncak, which issued RM546.88mil of redeemable unconvertible junior notes.
Analysts pointed out that the first principal payments of Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) bonds were coming up in July; already, the water treatment operator's cashflow is affected as Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) had recently reduced its monthly payment to these operators to 42% of invoiced amounts from 45%.
“The Federal Government's stepping in will be a stop-gap measure,'' said a water sector analyst.
“Puncak will get to restructure its debt repayment profile by stretching the payment of interest over a longer period and possibly saving on costs via the issue of government papers, However, longer tenure bonds still command higher interest.''
The valuation of the bonds will be the next issue to be ironed out among the parties, as bond yields have changed over time, thus affecting the value of the bonds.
“A give-and-take approach should be adopted among all parties,'' opined the analyst.
The Federal Government's helping hand at this juncture may be a relief to Puncak but, on the flip side, analysts view this as giving the Government a leverage on the water industry.
This means that Puncak will probably not be able to ask for excessive compensation if they want to give up the water concession.
While the debt problem of water-related companies may be solved, the worry is that the equity side may be more complicated. The equity portion is owned by the concessionaires and shareholders which are fragmented between federal and state governments.
The two major issues confronting equity owners are the stalemate over control in distribution and sale of water and fragmented shareholding structure between state and federal governments.
Due to the continuing disagreements, the cashflow of Puncak will still be affected as the mismatch persists between payment upstream, based on pre-agreed rates, and revenue, based on existing capped rates.
http://biz.thestar.com.my/news/story.asp?file=/2011/4/14/business/8478564&sec=business
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