Tuesday, March 29, 2011
Sunday, March 20, 2011
Jimmy Choo Wants to Buy Back Brand He Co-founded 15 Years Ago
Sunday March 20, 2011
By WONG CHUN WAI and TEE LIN SAY
linsay@thestar.com.my
KUALA LUMPUR: Datuk Jimmy Choo, whose haute couture shoes are coveted by royalty and many world famous women, has hired London-listed broking firm Daniel Stewart to help him on a potential £500mil (RM2.4bil) bid to buy back the company he co-founded 15 years ago.
The current owner, TowerBrook Capital Partners, recently announced its intention to sell the acclaimed Jimmy Choo fashion brand and hired investment banks Goldman Sachs Group Inc and Morgan Stanley to find a buyer.
In 2001, the London-based Malaysian-born designer sold his 50% stake to his business partner, British Vogue accessories editor Tamara Mellon. Her company now sells the high-end Jimmy Choo fashion footwear worldwide.
The shoe master: Jimmy Choo posing with a picture of one of his creations at a hotel during a visit to Hong Kong recently. — AFP
After his brand was sold, Choo started producing custom-made shoes from his shop in Connaught Street, London
Major shareholder and chief executive of Daniel Stewart, Adam Wilson, who was recently in Kuala Lumpur, confirmed that his broking firm was interested in the bid to buy back the brand.
He is now building a syndicate to raise capital for the bid and has seen interested parties who are very keen on funding the brand for Choo.
“Jimmy Choo is a world leading luxury goods brand and it is no surprise that Asian investors want to gain exposure to its unique space within the luxury goods market.
“It would be great for Malaysia to invest in its own world renowned icon,” said Wilson, who met the designer through his (Wilson’s) wife.
Choo had made the christening shoes for their daughter some seven years ago.
“Yes, Adam is acting on my behalf to buy back the brand,” Choo told The Star in a phone interview.
This is the first time Choo and Wilson have commented publicly on their bid to the press.
Choo is believed to be seeking legal advice from Matrix, the law firm owned by Cherie Blair, wife of former British prime minister Tony Blair.
It is understood the interested parties from Daniel Stewart see huge growth potential in taking an established brand like Jimmy Choo, and expanding it to the world’s largest market – Asia, particularly in China, where there is a growing number of rich customers.
“With Jimmy back with the brand, it will be well set for future growth both in China and across the region,” Wilson said, adding that about 80% of the world’s population had been forecast to live in Asia by 2020.
Choo, however, faces stiff competition.
It is understood that there are some 10 bidders eyeing the brand, including Moet Hennessy Louis Vuitton SA (LVMH).
LVMH owns Louis Vuitton luggage and Veuve Clicquot champagne.
The group, owned by France’s richest man Bernard Arnault, is on an acquisition trail, having acquired Italian watchmaker Bulgari for said £3.2bil (RM15.8bil) last week.
http://thestar.com.my/news/story.asp?file=/2011/3/20/nation/8309618&sec=nation
By WONG CHUN WAI and TEE LIN SAY
linsay@thestar.com.my
KUALA LUMPUR: Datuk Jimmy Choo, whose haute couture shoes are coveted by royalty and many world famous women, has hired London-listed broking firm Daniel Stewart to help him on a potential £500mil (RM2.4bil) bid to buy back the company he co-founded 15 years ago.
The current owner, TowerBrook Capital Partners, recently announced its intention to sell the acclaimed Jimmy Choo fashion brand and hired investment banks Goldman Sachs Group Inc and Morgan Stanley to find a buyer.
In 2001, the London-based Malaysian-born designer sold his 50% stake to his business partner, British Vogue accessories editor Tamara Mellon. Her company now sells the high-end Jimmy Choo fashion footwear worldwide.
The shoe master: Jimmy Choo posing with a picture of one of his creations at a hotel during a visit to Hong Kong recently. — AFP
After his brand was sold, Choo started producing custom-made shoes from his shop in Connaught Street, London
Major shareholder and chief executive of Daniel Stewart, Adam Wilson, who was recently in Kuala Lumpur, confirmed that his broking firm was interested in the bid to buy back the brand.
He is now building a syndicate to raise capital for the bid and has seen interested parties who are very keen on funding the brand for Choo.
“Jimmy Choo is a world leading luxury goods brand and it is no surprise that Asian investors want to gain exposure to its unique space within the luxury goods market.
“It would be great for Malaysia to invest in its own world renowned icon,” said Wilson, who met the designer through his (Wilson’s) wife.
Choo had made the christening shoes for their daughter some seven years ago.
“Yes, Adam is acting on my behalf to buy back the brand,” Choo told The Star in a phone interview.
This is the first time Choo and Wilson have commented publicly on their bid to the press.
Choo is believed to be seeking legal advice from Matrix, the law firm owned by Cherie Blair, wife of former British prime minister Tony Blair.
It is understood the interested parties from Daniel Stewart see huge growth potential in taking an established brand like Jimmy Choo, and expanding it to the world’s largest market – Asia, particularly in China, where there is a growing number of rich customers.
“With Jimmy back with the brand, it will be well set for future growth both in China and across the region,” Wilson said, adding that about 80% of the world’s population had been forecast to live in Asia by 2020.
Choo, however, faces stiff competition.
It is understood that there are some 10 bidders eyeing the brand, including Moet Hennessy Louis Vuitton SA (LVMH).
LVMH owns Louis Vuitton luggage and Veuve Clicquot champagne.
The group, owned by France’s richest man Bernard Arnault, is on an acquisition trail, having acquired Italian watchmaker Bulgari for said £3.2bil (RM15.8bil) last week.
http://thestar.com.my/news/story.asp?file=/2011/3/20/nation/8309618&sec=nation
Saturday, March 19, 2011
Wednesday, March 16, 2011
Auto, Aviation Firms Most Affected by Quake, Impact on M'sia Seen to Be Minimal
Wednesday March 16, 2011
By TEE LIN SAY
linsay@thestar.com.my
PETALING JAYA: Automotive and aviation companies will be most affected by the earthquake in Japan, analysts say.
However, as long as there is no prolonged disruptions in the workflow or a delay in deliveries, the impact on Malaysian companies should be minimal.
Japanese auto companies operating here are likely to be affected as they source either car parts or completely built up (CBU) units from Japan.
“As the yen is likely to strengthen on the back of the repatriation of funds, the stronger yen will also result in higher import costs and raw materials for auto players.
A Japanese car undergoing inspection before being sent for spray painting at an assembly plant in Shah Alam. An analyst says Japanese auto makers that source either car parts or CBU units from Japan will be most affected by the aftermath of the March 11 earthquake in the land of the rising sun.
“Auto players like Proton and Perodua get their parts from local suppliers. Many of the completely knocked down (CKD) parts are now sourced from Thailand and Indonesia,” said an auto analyst.
She added that Toyota would be most affected, as its CBU units were sourced from Japan. She said the impact on Tan Chong Motor Holdings Bhd was mitigated because the company obtained its manufacturing parts from other countries.
A spokesperson for UMW Toyota Motor Sdn Bhd said there were no interruptions to supply for the Toyota and Lexus models.
“Sales and order taking will continue as usual. Delivery schedules to all customers are not affected presently,”
In Japan, world's largest carmaker Toyota Motor Corp has temporarily suspended production at all plants, including those of its subsidiaries from March 14 until today.
Nissan, Japan's second-largest carmaker, stopped work at its four plants until today, and two other plants until Friday.
“Further decision will be made after that as Nissan continues to assess the extent of damage to its facilities and equipment as well as parts suppliers.
“There is no immediate negative impact on our business as we hold inventory in both CKD and CBU forms,” said Edaran Tan Chong Motor Sdn Bhd executive director Datuk Dr Ang Bon Beng.
Meanwhile, Honda Malaysia managing director and chief executive officer Yoichiro Ueno said its inventory for the four CKD models of Accord, CR-V, Civic, City, and the other four CBU models in Malaysia were sufficient for the next one to two months.
On the aviation front, travellers may avoid going to Japan for the time being on fears of radioactive leaks.
As Japanese tourists accounted for 1.7% of tourist arrivals in 2010, CIMB Research expects a more visible impact on the services and tourism sectors as the Japanese might not be travelling abroad given the dampened consumer sentiment.
A spokesperson for AirAsia X said the airline had not cancelled any of its flights.
“We believe it's important that we commence services to help those who wish to leave Japan, especially Malaysian students there,” said a spokesperson.
“However, our business model is such that most guests have already booked flights in advance. AirAsia X is providing a few options for those who booked before March 11 and travel dates before April 10,” said the spokesperson.
The spokesperson said passengers had the option of either postponing their flights within one calendar month from the original date of travel or apply for a credit shell.
A credit shell is an account created for AirAsia X guests allowing them to use the credit in the account to pay for other future bookings. It is valid for three months.
On the whole, the operations of Malaysian companies are not directly affected by the earthquake in Japan.
“Companies may conserve cash and the overseas units of Japanese companies may send money back home.
“However, over the longer term, we believe Asia including Malaysia may benefit from the diversion of production facilities from Japan as part of the global supply chain risk management,” said CIMB Research head of economics Lee Heng Guie.
He said a 1% decline in Japan's gross domestic product could shave 0.2% point off Malaysia's GDP growth, which could be compensated by other trading partners and the internal growth engine.
Japan is Malaysia's third largest trading partner.
It accounted for 10.4% of Malaysia's exports and 12.6% of Malaysia's imports in 2010.
The major export items were liquefied natural gas, electronics and electrical products, chemical and chemical products, palm oil and crude oil.
Japan is the second largest foreign investor in Malaysia, accounting for 13.9% of total approved foreign manufacturing investments last year.
Meanwhile AP reported from Detroit that two Japanese automakers are scaling back production at North American plants as they assess their ability to get parts from Japan after that country's devastating earthquake and tsunami.
Subaru of America said Tuesday it has suspended overtime at its only North American plant in Lafayette, Indiana. Toyota Motor Corp. also said it was suspending overtime and Saturday production at its 10 plants in the region.
So far, other Japanese automakers say their North American plants are unaffected. Nissan Motor Co., Honda Motor Co., Mitsubishi Motors and Mazda Motor Corp. all say they have not changed their production plans.
But that could change if lingering damage from the earthquake prevents parts shipments. Mitsubishi, for example, has enough parts on hand or en route to operate its Illinois assembly plant through April 3, spokesman Dan Irwin said.
"The situation is fluid, so we continue to monitor our supply chain and logistics," he said.
In Japan, auto companies have shut down production for the rest of the week as they assess damage to plants, ports and roads.
While Japanese automakers with North American plants use locally-based suppliers for many of their parts, others still come from Japan. The U.S. imported $12 billion worth of auto parts from Japan in 2010, from spark plugs to engines, according to the Original Equipment Suppliers Association.
Dave Andrea, the trade group's senior vice president of industry analysis and economics, said some parts had been in short supply prior to the earthquake, including semiconductors, precision bearings and tires. He estimated that most automakers have a three- to four-week inventory of parts in the pipeline.
"Once those start to dry out, that's where you see the shortages in the assembly plants," Andrea said.
Companies can ill afford those shortages. Subaru spokesman Michael McHale said the Indiana plant had been running on overtime because of strong sales of its vehicles. The Outback wagon, which is made at the plant, is currently at a 30-day supply. A 60-day supply is considered ideal.
McHale said he didn't know when overtime will be restored at the plant, which produced 150,000 vehicles last year, or 55 percent of the Subarus sold in the U.S. The plant also makes the Tribeca wagon and Legacy sedan.
Toyota, meanwhile, said the restrictions on overtime and Saturday shifts were designed to conserve Japanese-made parts. About 75 percent of the parts in North American-built Toyotas are supplied locally, but the rest come from Japan.
Toyota spokesman Mike Goss wouldn't specify which parts come are imported, but said the company typically has a two- to three-week supply of them.
Now supplies are uncertain.
"There's some pipeline of parts from Japan to the United States and we're trying not to burn through that too quickly," Goss said.
Latest business news from AP-Wire
http://biz.thestar.com.my/news/story.asp?file=/2011/3/16/business/8274433&sec=business
By TEE LIN SAY
linsay@thestar.com.my
PETALING JAYA: Automotive and aviation companies will be most affected by the earthquake in Japan, analysts say.
However, as long as there is no prolonged disruptions in the workflow or a delay in deliveries, the impact on Malaysian companies should be minimal.
Japanese auto companies operating here are likely to be affected as they source either car parts or completely built up (CBU) units from Japan.
“As the yen is likely to strengthen on the back of the repatriation of funds, the stronger yen will also result in higher import costs and raw materials for auto players.
A Japanese car undergoing inspection before being sent for spray painting at an assembly plant in Shah Alam. An analyst says Japanese auto makers that source either car parts or CBU units from Japan will be most affected by the aftermath of the March 11 earthquake in the land of the rising sun.
“Auto players like Proton and Perodua get their parts from local suppliers. Many of the completely knocked down (CKD) parts are now sourced from Thailand and Indonesia,” said an auto analyst.
She added that Toyota would be most affected, as its CBU units were sourced from Japan. She said the impact on Tan Chong Motor Holdings Bhd was mitigated because the company obtained its manufacturing parts from other countries.
A spokesperson for UMW Toyota Motor Sdn Bhd said there were no interruptions to supply for the Toyota and Lexus models.
“Sales and order taking will continue as usual. Delivery schedules to all customers are not affected presently,”
In Japan, world's largest carmaker Toyota Motor Corp has temporarily suspended production at all plants, including those of its subsidiaries from March 14 until today.
Nissan, Japan's second-largest carmaker, stopped work at its four plants until today, and two other plants until Friday.
“Further decision will be made after that as Nissan continues to assess the extent of damage to its facilities and equipment as well as parts suppliers.
“There is no immediate negative impact on our business as we hold inventory in both CKD and CBU forms,” said Edaran Tan Chong Motor Sdn Bhd executive director Datuk Dr Ang Bon Beng.
Meanwhile, Honda Malaysia managing director and chief executive officer Yoichiro Ueno said its inventory for the four CKD models of Accord, CR-V, Civic, City, and the other four CBU models in Malaysia were sufficient for the next one to two months.
On the aviation front, travellers may avoid going to Japan for the time being on fears of radioactive leaks.
As Japanese tourists accounted for 1.7% of tourist arrivals in 2010, CIMB Research expects a more visible impact on the services and tourism sectors as the Japanese might not be travelling abroad given the dampened consumer sentiment.
A spokesperson for AirAsia X said the airline had not cancelled any of its flights.
“We believe it's important that we commence services to help those who wish to leave Japan, especially Malaysian students there,” said a spokesperson.
“However, our business model is such that most guests have already booked flights in advance. AirAsia X is providing a few options for those who booked before March 11 and travel dates before April 10,” said the spokesperson.
The spokesperson said passengers had the option of either postponing their flights within one calendar month from the original date of travel or apply for a credit shell.
A credit shell is an account created for AirAsia X guests allowing them to use the credit in the account to pay for other future bookings. It is valid for three months.
On the whole, the operations of Malaysian companies are not directly affected by the earthquake in Japan.
“Companies may conserve cash and the overseas units of Japanese companies may send money back home.
“However, over the longer term, we believe Asia including Malaysia may benefit from the diversion of production facilities from Japan as part of the global supply chain risk management,” said CIMB Research head of economics Lee Heng Guie.
He said a 1% decline in Japan's gross domestic product could shave 0.2% point off Malaysia's GDP growth, which could be compensated by other trading partners and the internal growth engine.
Japan is Malaysia's third largest trading partner.
It accounted for 10.4% of Malaysia's exports and 12.6% of Malaysia's imports in 2010.
The major export items were liquefied natural gas, electronics and electrical products, chemical and chemical products, palm oil and crude oil.
Japan is the second largest foreign investor in Malaysia, accounting for 13.9% of total approved foreign manufacturing investments last year.
Meanwhile AP reported from Detroit that two Japanese automakers are scaling back production at North American plants as they assess their ability to get parts from Japan after that country's devastating earthquake and tsunami.
Subaru of America said Tuesday it has suspended overtime at its only North American plant in Lafayette, Indiana. Toyota Motor Corp. also said it was suspending overtime and Saturday production at its 10 plants in the region.
So far, other Japanese automakers say their North American plants are unaffected. Nissan Motor Co., Honda Motor Co., Mitsubishi Motors and Mazda Motor Corp. all say they have not changed their production plans.
But that could change if lingering damage from the earthquake prevents parts shipments. Mitsubishi, for example, has enough parts on hand or en route to operate its Illinois assembly plant through April 3, spokesman Dan Irwin said.
"The situation is fluid, so we continue to monitor our supply chain and logistics," he said.
In Japan, auto companies have shut down production for the rest of the week as they assess damage to plants, ports and roads.
While Japanese automakers with North American plants use locally-based suppliers for many of their parts, others still come from Japan. The U.S. imported $12 billion worth of auto parts from Japan in 2010, from spark plugs to engines, according to the Original Equipment Suppliers Association.
Dave Andrea, the trade group's senior vice president of industry analysis and economics, said some parts had been in short supply prior to the earthquake, including semiconductors, precision bearings and tires. He estimated that most automakers have a three- to four-week inventory of parts in the pipeline.
"Once those start to dry out, that's where you see the shortages in the assembly plants," Andrea said.
Companies can ill afford those shortages. Subaru spokesman Michael McHale said the Indiana plant had been running on overtime because of strong sales of its vehicles. The Outback wagon, which is made at the plant, is currently at a 30-day supply. A 60-day supply is considered ideal.
McHale said he didn't know when overtime will be restored at the plant, which produced 150,000 vehicles last year, or 55 percent of the Subarus sold in the U.S. The plant also makes the Tribeca wagon and Legacy sedan.
Toyota, meanwhile, said the restrictions on overtime and Saturday shifts were designed to conserve Japanese-made parts. About 75 percent of the parts in North American-built Toyotas are supplied locally, but the rest come from Japan.
Toyota spokesman Mike Goss wouldn't specify which parts come are imported, but said the company typically has a two- to three-week supply of them.
Now supplies are uncertain.
"There's some pipeline of parts from Japan to the United States and we're trying not to burn through that too quickly," Goss said.
Latest business news from AP-Wire
http://biz.thestar.com.my/news/story.asp?file=/2011/3/16/business/8274433&sec=business
Japan Disaster Another Worry for Global Economy
Published: Wednesday March 16, 2011 MYT 8:47:00 AM
NEW YORK: Japan's earthquake and nuclear crises have put pressure on the already fragile global economy, squeezed supplies of goods from computer chips to auto parts and raised fears of higher interest rates.
The disaster frightened financial markets in Tokyo and on Wall Street on Tuesday. Japan's Nikkei average lost 10 percent, and the Dow Jones industrials fell so quickly after the opening bell that the stock exchange invoked a special rule to reduce volatility.
Yet the damage to the U.S. and world economies is expected to be relatively moderate and short-lived. Oil prices are falling, helping drivers around the world. And the reconstruction expected along Japan's northeastern coast could even provide a jolt of economic growth.
A weaker Japanese economy could help ease global commodity prices because Japan is a major importer of fuel, agricultural products and other raw materials, notes Mark Zandi, chief economist at Moody's Analytics. Oil prices fell more than $4 to $97.18 a barrel Tuesday because of expectations that quake damage will slow Japan's economy and reduce its demand for energy.
Even "assuming a drastic scenario," Bank of America economist Ethan Harris estimates, the disaster would shave just 0.1 percentage point off global economic growth - to 4.2 percent this year.
"Japan has not been an engine of global or Asian growth for some time," says Nariman Behravesh, chief economist at IHS Global Insight. "This means that the impact of much lower Japanese growth on the world economy will be probably limited and small."
Japan is only half as important to the world's economy as it was during its last major disaster, the 1995 Kobe earthquake. And the area hit hardest by Friday's quake accounts for only about half as much economic output as the area damaged by the Kobe quake, the Organization for Economic Cooperation and Development estimates.
Japan proved resilient after the Kobe quake. Manufacturers returned to normal production levels within 15 months, according to investment group CLSA Asia-Pacific Markets. Four in every five shops were back open in a year and a half. All told, Japan's comeback defied dire warnings that it would take a decade to rebuild.
Autos and auto parts make up more than one-third of U.S. imports from Japan. As a result, shutdowns of Japanese auto factories could disrupt production at U.S. plants owned by Japanese automakers.
At the same time, some U.S. auto parts makers could benefit if Japanese plants in the United States substitute U.S. parts for those they usually get from Japan, Behravesh says.
A big wild card is the fate of Japan's damaged nuclear power plants. The Fukushima Dai-ichi plant, the center of the concern, let off a burst of radiation on Tuesday. Radiation levels in the surrounding area subsided by evening, but unease in Japan did not.
"If the nuclear crisis turns into a full-blown catastrophe, then the negative effect on growth this year will be much larger," IHS' Behravesh says.
Another unknown is the impact of the disruptions to Japan's power supplies. Behravesh estimates about 10 percent of Japan's electricity generation could be off line for several months. If so, that would disrupt steel, auto and other production.
Investors fear that Japan will struggle to finance reconstruction, which is expected to cost the government at least $200 billion. The Japanese government's debt is already an alarming 225 percent of the country's economic output.
Some worry that Japan will sell some of its vast holdings of U.S. government debt to raise money. Doing so would push the prices of U.S. Treasury bonds down and yields up, raising U.S. interest rates.
But Treasury Secretary Timothy Geithner on Tuesday dismissed the fears of a Japanese fire sale of Treasury debt.
"Japan is a very rich country and has a high savings rate," he said. It "has the capacity to deal not just with the humanitarian challenge but also the reconstruction challenge they face ahead."
What's more, the Bank of Japan has been buying Treasurys and other assets as it pumps money into the financial system to restore calm.
For now, though, the latest quake, the resulting tsunami and the threat of contamination from a damaged nuclear plant have spooked financial markets. Investors are fretting about the effects on companies around the world. Japan, the world's third-largest economy, accounts for about 10 percent of U.S. exports.
The Dow Jones industrials rebounded after starting the day down almost 300 points. They closed down 137 points, or 1.1 percent. The futures markets, which can indicate whether stocks will rise and fall, looked so pessimistic before the opening bell on Wall Street that the stock exchange invoked a special rule designed to ease volatility.
Stocks plunged 5 percent in Germany and 4 percent in France. And in Japan, the benchmark Nikkei average lost more than 10 percent of its value in a matter of hours.
The quake damaged roads, ports, airports and factories in Japan, disrupting the shipment of goods in and out. The disaster blindsided multinational companies that were bracing for trouble in their transportation lines on the other side of the world - at the Suez Canal or elsewhere in the Middle East where protests are destabilizing countries from Bahrain to Libya, says Patrick Burnson, executive editor of Supply Chain Management.
It's shut down auto and auto parts factories. Analysts at Tong Yang Securities in South Korea "do not expect production to normalize anytime soon" in Japan. Even plants that stay open may have to wait for parts to arrive, a problem made worse because so many factories follow just-in-time supply management and keep few parts on hand.
Car plants in Thailand could have a harder time getting steel, much of which is imported from Japan.
Japan is a major supplier of NAND flash memory chips, commonly used in portable electronics. Japan-based Toshiba Corp., a big maker of the chips, was among the technology companies that temporarily closed facilities.
Prices for the chips jumped 10 percent from before the earthquake to Monday and another 3 percent Tuesday, according to Jim Handy, a director at Objective Analysis and an expert on the electronics and semiconductor industries.
The "wafers" that are key building blocks of computer chips are also commonly made in Japan. A shortage could pinch big buyers such as Intel Corp., the world's biggest semiconductor company, and Texas Instruments Inc. - though one firm, Barclays Capital, believes Texas Instruments has enough in stock to get by. Supplies are lean of capacitors and other electronics used in cellphones, which are also often made in Japan. Nokia Corp. relies heavily on Japan for those electronics.
Chinese companies are bracing themselves for losses and delays from disruptions in shipments of high-end electronics and auto components from Japan and some are looking for import replacements from South Korea or Taiwan, according to the International Business Daily, the official paper of China's Commerce Ministry.
Some analysts note that companies and consumers that now buy Japanese products can often find alternatives made elsewhere.
"What is made in Japan now has lots of competitive alternatives that didn't exist 25 years ago," says Peter Morici, a professor at the University of Maryland and a former director at the U.S. International Trade Commission. "If there aren't as many Camrys in the country this year as there might have been, you might have a couple hundred thousand additional Ford customers. If those people have good experiences with those cars, it could change buying patterns for life."
David Rea, an economist with Capital Economics in London, said, "You'll have Japan's competitors - largely South Korea and Taiwan, who are in high end manufacturing, and China as well - come in and undercut Japanese businesses experiencing disruption from the earthquake."
If Japan's infrastructure doesn't get rebuilt quickly enough, Japanese companies may transfer production overseas to pick up the slack, Rea added.
The reconstruction of Japan's northeastern coast might also provide business opportunities for foreign countries. Malaysian timber, for instance, will likely be needed to rebuild homes and other buildings. IHS predicts that the quake will "ultimately boost" U.S. exports to Japan. - AP
Latest business news from AP-Wire
http://biz.thestar.com.my/news/story.asp?file=/2011/3/16/business/20110316085719&sec=business
NEW YORK: Japan's earthquake and nuclear crises have put pressure on the already fragile global economy, squeezed supplies of goods from computer chips to auto parts and raised fears of higher interest rates.
The disaster frightened financial markets in Tokyo and on Wall Street on Tuesday. Japan's Nikkei average lost 10 percent, and the Dow Jones industrials fell so quickly after the opening bell that the stock exchange invoked a special rule to reduce volatility.
Yet the damage to the U.S. and world economies is expected to be relatively moderate and short-lived. Oil prices are falling, helping drivers around the world. And the reconstruction expected along Japan's northeastern coast could even provide a jolt of economic growth.
A weaker Japanese economy could help ease global commodity prices because Japan is a major importer of fuel, agricultural products and other raw materials, notes Mark Zandi, chief economist at Moody's Analytics. Oil prices fell more than $4 to $97.18 a barrel Tuesday because of expectations that quake damage will slow Japan's economy and reduce its demand for energy.
Even "assuming a drastic scenario," Bank of America economist Ethan Harris estimates, the disaster would shave just 0.1 percentage point off global economic growth - to 4.2 percent this year.
"Japan has not been an engine of global or Asian growth for some time," says Nariman Behravesh, chief economist at IHS Global Insight. "This means that the impact of much lower Japanese growth on the world economy will be probably limited and small."
Japan is only half as important to the world's economy as it was during its last major disaster, the 1995 Kobe earthquake. And the area hit hardest by Friday's quake accounts for only about half as much economic output as the area damaged by the Kobe quake, the Organization for Economic Cooperation and Development estimates.
Japan proved resilient after the Kobe quake. Manufacturers returned to normal production levels within 15 months, according to investment group CLSA Asia-Pacific Markets. Four in every five shops were back open in a year and a half. All told, Japan's comeback defied dire warnings that it would take a decade to rebuild.
Autos and auto parts make up more than one-third of U.S. imports from Japan. As a result, shutdowns of Japanese auto factories could disrupt production at U.S. plants owned by Japanese automakers.
At the same time, some U.S. auto parts makers could benefit if Japanese plants in the United States substitute U.S. parts for those they usually get from Japan, Behravesh says.
A big wild card is the fate of Japan's damaged nuclear power plants. The Fukushima Dai-ichi plant, the center of the concern, let off a burst of radiation on Tuesday. Radiation levels in the surrounding area subsided by evening, but unease in Japan did not.
"If the nuclear crisis turns into a full-blown catastrophe, then the negative effect on growth this year will be much larger," IHS' Behravesh says.
Another unknown is the impact of the disruptions to Japan's power supplies. Behravesh estimates about 10 percent of Japan's electricity generation could be off line for several months. If so, that would disrupt steel, auto and other production.
Investors fear that Japan will struggle to finance reconstruction, which is expected to cost the government at least $200 billion. The Japanese government's debt is already an alarming 225 percent of the country's economic output.
Some worry that Japan will sell some of its vast holdings of U.S. government debt to raise money. Doing so would push the prices of U.S. Treasury bonds down and yields up, raising U.S. interest rates.
But Treasury Secretary Timothy Geithner on Tuesday dismissed the fears of a Japanese fire sale of Treasury debt.
"Japan is a very rich country and has a high savings rate," he said. It "has the capacity to deal not just with the humanitarian challenge but also the reconstruction challenge they face ahead."
What's more, the Bank of Japan has been buying Treasurys and other assets as it pumps money into the financial system to restore calm.
For now, though, the latest quake, the resulting tsunami and the threat of contamination from a damaged nuclear plant have spooked financial markets. Investors are fretting about the effects on companies around the world. Japan, the world's third-largest economy, accounts for about 10 percent of U.S. exports.
The Dow Jones industrials rebounded after starting the day down almost 300 points. They closed down 137 points, or 1.1 percent. The futures markets, which can indicate whether stocks will rise and fall, looked so pessimistic before the opening bell on Wall Street that the stock exchange invoked a special rule designed to ease volatility.
Stocks plunged 5 percent in Germany and 4 percent in France. And in Japan, the benchmark Nikkei average lost more than 10 percent of its value in a matter of hours.
The quake damaged roads, ports, airports and factories in Japan, disrupting the shipment of goods in and out. The disaster blindsided multinational companies that were bracing for trouble in their transportation lines on the other side of the world - at the Suez Canal or elsewhere in the Middle East where protests are destabilizing countries from Bahrain to Libya, says Patrick Burnson, executive editor of Supply Chain Management.
It's shut down auto and auto parts factories. Analysts at Tong Yang Securities in South Korea "do not expect production to normalize anytime soon" in Japan. Even plants that stay open may have to wait for parts to arrive, a problem made worse because so many factories follow just-in-time supply management and keep few parts on hand.
Car plants in Thailand could have a harder time getting steel, much of which is imported from Japan.
Japan is a major supplier of NAND flash memory chips, commonly used in portable electronics. Japan-based Toshiba Corp., a big maker of the chips, was among the technology companies that temporarily closed facilities.
Prices for the chips jumped 10 percent from before the earthquake to Monday and another 3 percent Tuesday, according to Jim Handy, a director at Objective Analysis and an expert on the electronics and semiconductor industries.
The "wafers" that are key building blocks of computer chips are also commonly made in Japan. A shortage could pinch big buyers such as Intel Corp., the world's biggest semiconductor company, and Texas Instruments Inc. - though one firm, Barclays Capital, believes Texas Instruments has enough in stock to get by. Supplies are lean of capacitors and other electronics used in cellphones, which are also often made in Japan. Nokia Corp. relies heavily on Japan for those electronics.
Chinese companies are bracing themselves for losses and delays from disruptions in shipments of high-end electronics and auto components from Japan and some are looking for import replacements from South Korea or Taiwan, according to the International Business Daily, the official paper of China's Commerce Ministry.
Some analysts note that companies and consumers that now buy Japanese products can often find alternatives made elsewhere.
"What is made in Japan now has lots of competitive alternatives that didn't exist 25 years ago," says Peter Morici, a professor at the University of Maryland and a former director at the U.S. International Trade Commission. "If there aren't as many Camrys in the country this year as there might have been, you might have a couple hundred thousand additional Ford customers. If those people have good experiences with those cars, it could change buying patterns for life."
David Rea, an economist with Capital Economics in London, said, "You'll have Japan's competitors - largely South Korea and Taiwan, who are in high end manufacturing, and China as well - come in and undercut Japanese businesses experiencing disruption from the earthquake."
If Japan's infrastructure doesn't get rebuilt quickly enough, Japanese companies may transfer production overseas to pick up the slack, Rea added.
The reconstruction of Japan's northeastern coast might also provide business opportunities for foreign countries. Malaysian timber, for instance, will likely be needed to rebuild homes and other buildings. IHS predicts that the quake will "ultimately boost" U.S. exports to Japan. - AP
Latest business news from AP-Wire
http://biz.thestar.com.my/news/story.asp?file=/2011/3/16/business/20110316085719&sec=business
EPF Dividend Growth Challenge
By Rupinder SinghPublished: 2011/03/14Share8 PDF
The Employees Provident Fund (EPF) will find it tough to consistently pay high dividends as uncertainty over the prospects of major economies could have a big bearing on open economies like Malaysia, economists said.
They expect the EPF dividend payment to ease to around 4 per cent to 5 per cent this year, from nearly 6 per cent in 2010.
Malaysia Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias said as external trade and portfolio flows influence financial market performance, the Malaysian financial market could experience some knee-jerk reactions if risk aversion starts to escalate.
Nor Zahidi Alias said he would not be surprised if the present market correction continues in the next few months, especially when the overall sentiment is soured by the still struggling European economies and persistently high unemployment in the US.
"Such developments will no doubt have negative repercussions on Malaysia's external sector. Therefore, paying consistently high dividends will be challenging not only for the EPF, but also for other asset managers," he said.
Among the macro factors that will affect EPF's performance in 2011 are the country's gross domestic (GDP) growth, inflation, oil prices, interest rates and ringgit exchange rates.
"Based on the moderate gross domestic product (GDP) growth anticipated at between 5 per cent and 6 per cent this year, we expect EPF's dividend payout to also ease to the 5 per cent average level," RAM Holdings group chief economist Dr Yeah Kim Leng said.
Over the last 10 years, EPF's dividend payout ranged between 4.25 per cent and 5.8 per cent annually with an average of 5 per cent. The highest dividend rate ever paid was 8.5 per cent in 1983 and 1986.
Last year, EPF's top-of-the-range payout of 5.8 per cent corresponds to a strong rebound of the economy where the GDP expanded 7.2 per cent following a contraction of 1.7 per cent during the global financial turmoil in 2009.
EPF's major challenge, Yeah said, is to find investible instruments for the RM10 billion-RM12 billion net contributions that it will receive this year.
Besides that, he said, the pension fund would find it hard enhancing or rebalancing its portfolio towards safe and higher yielding asset classes to achieve the highest possible returns without compromising its mandate of capital preservation.
EPF is one of Asia's largest pension funds with a total asset of RM440.5 billion as at December 31 last year.
Allianz Life Insurance Malaysia Bhd chief investment officer Esther Ong estimates EPF dividend payout to be between 4 per cent and 5 per cent this term.
She said it may not be easy for EPF to sustain its performance this year unless some gains earned in better years previously are being used for distribution this year.
Ong believes that due to a more challenging macro environment, higher rates are expected for the bond portfolio.
"Meanwhile, we anticipate a more moderate return from equities given rising inflationary risks and the more moderate economic recovery path could result in lower earnings growth compared to last year," she noted.
In retrospect, equities were the largest contributor to the EPF's gross investment income in 2010, representing 45.45 per cent of its total gross investment income.
A total of RM10.94 billion was earned by EPF from equities last year, reflecting a significant 125.69 per cent increase from RM4.85 billion earned in 2009.
Read more: Dividend growth challenge http://www.btimes.com.my/Current_News/BTIMES/articles/epf08/Article/index_html#ixzz1GYCmNOOA
The Employees Provident Fund (EPF) will find it tough to consistently pay high dividends as uncertainty over the prospects of major economies could have a big bearing on open economies like Malaysia, economists said.
They expect the EPF dividend payment to ease to around 4 per cent to 5 per cent this year, from nearly 6 per cent in 2010.
Malaysia Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias said as external trade and portfolio flows influence financial market performance, the Malaysian financial market could experience some knee-jerk reactions if risk aversion starts to escalate.
Nor Zahidi Alias said he would not be surprised if the present market correction continues in the next few months, especially when the overall sentiment is soured by the still struggling European economies and persistently high unemployment in the US.
"Such developments will no doubt have negative repercussions on Malaysia's external sector. Therefore, paying consistently high dividends will be challenging not only for the EPF, but also for other asset managers," he said.
Among the macro factors that will affect EPF's performance in 2011 are the country's gross domestic (GDP) growth, inflation, oil prices, interest rates and ringgit exchange rates.
"Based on the moderate gross domestic product (GDP) growth anticipated at between 5 per cent and 6 per cent this year, we expect EPF's dividend payout to also ease to the 5 per cent average level," RAM Holdings group chief economist Dr Yeah Kim Leng said.
Over the last 10 years, EPF's dividend payout ranged between 4.25 per cent and 5.8 per cent annually with an average of 5 per cent. The highest dividend rate ever paid was 8.5 per cent in 1983 and 1986.
Last year, EPF's top-of-the-range payout of 5.8 per cent corresponds to a strong rebound of the economy where the GDP expanded 7.2 per cent following a contraction of 1.7 per cent during the global financial turmoil in 2009.
EPF's major challenge, Yeah said, is to find investible instruments for the RM10 billion-RM12 billion net contributions that it will receive this year.
Besides that, he said, the pension fund would find it hard enhancing or rebalancing its portfolio towards safe and higher yielding asset classes to achieve the highest possible returns without compromising its mandate of capital preservation.
EPF is one of Asia's largest pension funds with a total asset of RM440.5 billion as at December 31 last year.
Allianz Life Insurance Malaysia Bhd chief investment officer Esther Ong estimates EPF dividend payout to be between 4 per cent and 5 per cent this term.
She said it may not be easy for EPF to sustain its performance this year unless some gains earned in better years previously are being used for distribution this year.
Ong believes that due to a more challenging macro environment, higher rates are expected for the bond portfolio.
"Meanwhile, we anticipate a more moderate return from equities given rising inflationary risks and the more moderate economic recovery path could result in lower earnings growth compared to last year," she noted.
In retrospect, equities were the largest contributor to the EPF's gross investment income in 2010, representing 45.45 per cent of its total gross investment income.
A total of RM10.94 billion was earned by EPF from equities last year, reflecting a significant 125.69 per cent increase from RM4.85 billion earned in 2009.
Read more: Dividend growth challenge http://www.btimes.com.my/Current_News/BTIMES/articles/epf08/Article/index_html#ixzz1GYCmNOOA
SRR, Rate Moves Within Expectation: MIDF
Published: 2011/03/14
Bank Negara Malaysia (BNM)'s decision to hold the overnight policy rate (OPR) at 2.75 per cent and raise the statutory reserve (SRR) requirement by 100 basis point (bps) to two per cent is within market expectation, says MIDF Research.
With the latest move, between RM6 billion and RM7 billion in surplus will be absorbed from the financial system.
In a statement today, MIDF Research foresees the central bank would hold the OPR at 2.75 per cent in the second quarter but raise the policy rate by 25 bps in the third and fourth quarter, bringing the cumulative OPR hike to 3.25 per cent this year.
" Looking ahead in calendar year 2012, we expect BNM to raise OPR by another 25 bps in the first calender year 2012 and thereafter hold rates to the rest of 2012 at 3.5 per cent," it said.
It added inflationary pressure, arising from rising commodity prices and crude oil, was expected to have a knock-on effect on domestic inflation through cost-push pressure. -- Bernama
Read more: SRR, rate moves within expectation: MIDF http://www.btimes.com.my/Current_News/BTIMES/articles/20110314122344/Article/index_html#ixzz1GYCALXy9
Bank Negara Malaysia (BNM)'s decision to hold the overnight policy rate (OPR) at 2.75 per cent and raise the statutory reserve (SRR) requirement by 100 basis point (bps) to two per cent is within market expectation, says MIDF Research.
With the latest move, between RM6 billion and RM7 billion in surplus will be absorbed from the financial system.
In a statement today, MIDF Research foresees the central bank would hold the OPR at 2.75 per cent in the second quarter but raise the policy rate by 25 bps in the third and fourth quarter, bringing the cumulative OPR hike to 3.25 per cent this year.
" Looking ahead in calendar year 2012, we expect BNM to raise OPR by another 25 bps in the first calender year 2012 and thereafter hold rates to the rest of 2012 at 3.5 per cent," it said.
It added inflationary pressure, arising from rising commodity prices and crude oil, was expected to have a knock-on effect on domestic inflation through cost-push pressure. -- Bernama
Read more: SRR, rate moves within expectation: MIDF http://www.btimes.com.my/Current_News/BTIMES/articles/20110314122344/Article/index_html#ixzz1GYCALXy9
Foreign Investors Selling Down Shares: MIDF
Published: 2011/03/14
Bursa Malaysia's total market capitalisation held by foreign investors, is estimated to be about 21.5 per cent currently, assuming a net foreign selldown of about RM4 billion since the beginning of the year.
The percentage of its total market capitalisation held by foreign investors was 21.9 per cent at the end of December, MIDF Research said in a note today.
It said foreign investors have been selling down local shares since January, after a bullish start to the year.
Local institutions continued to prop up the market while retailers were still relatively heavy net sellers, MIDF said, adding, gross purchase by local institutions amounted to RM4.5 billion last week, similar to that of the previous week.
"Risk aversion is creeping back into the market. There is too much uncertainty in the world currently for equity investors to be even remotely aggressive," it said. "Locally, the market's volatility appears to be increasing by the day," it added. -- Bernama
Read more: Foreign investors selling down shares: MIDF http://www.btimes.com.my/Current_News/BTIMES/articles/20110314121658/Article/index_html#ixzz1GYBeGN00
Bursa Malaysia's total market capitalisation held by foreign investors, is estimated to be about 21.5 per cent currently, assuming a net foreign selldown of about RM4 billion since the beginning of the year.
The percentage of its total market capitalisation held by foreign investors was 21.9 per cent at the end of December, MIDF Research said in a note today.
It said foreign investors have been selling down local shares since January, after a bullish start to the year.
Local institutions continued to prop up the market while retailers were still relatively heavy net sellers, MIDF said, adding, gross purchase by local institutions amounted to RM4.5 billion last week, similar to that of the previous week.
"Risk aversion is creeping back into the market. There is too much uncertainty in the world currently for equity investors to be even remotely aggressive," it said. "Locally, the market's volatility appears to be increasing by the day," it added. -- Bernama
Read more: Foreign investors selling down shares: MIDF http://www.btimes.com.my/Current_News/BTIMES/articles/20110314121658/Article/index_html#ixzz1GYBeGN00
Saturday, March 12, 2011
MyInvest: Tsunami Hits Individual Investment Portfolio
MyInvest: Tsunami Hits Individual Investment Portfolio: "Many investors began to worry after the disaster in Japan yesterday 11 March 2011.Most of Asian markets, which were lower throughout the day..."
Tsunami Hits Global Equity Markets
Saturday March 12, 2011
By JEEVA ARULAMPALAM
jeeva@thestar.com.my
PETALING JAYA: A severe earthquake and tsunami that hit Japan late yesterday afternoon was the latest shock to send tremors throughout global equity markets, a day after many of them reeled from a sell off on Thursday.
Asian markets, which were lower throughout the day on concerns of political unrest in the Middle East, reacted to Japan’s 8.9 magnitude earthquake in the last hours of trading, accelerating losses.
Meanwhile, equity markets in Europe opened in the red, as the world now waits to assess the damage Japan’s earthquake would have on the global economy and markets. (See Page 15)
Global equity markets will remain volatile next week, as the latest incident adds to a series of incidents that will continue to spook investors, which included the political unrest in the Middle East and the resurfacing of euro-zone fiscal woes.
As at press time, a tsunami alert had been issued for New Zealand, the Philippines, Indonesia, Papua New Guinea and Hawaii.
Japan’s Nikkei 225 index closed lower by 1.72% yesterday, hitting a five-week low. Macquarie Group Ltd said in a research report issued yesterday that “inevitably there will be microeconomic disruptions” although the impact would be lower than that of the last major earthquake, Kobe, that hit Japan in 1995. Japanese stocks fell 8% in the week after that quake.
“Despite the scale of the disaster (yesterday), it is hard to find much evidence in the macroeconomic data of the effects of the Kobe earthquake. Industrial production dipped 2.6% month-on-month in January 1995 and then bounced 2.2% in February and a further 1% in March. Gross domestic product growth was 3.4% quarter-on-quarter annualised in first quarter of 1995,” the report said.
Macquarie added that the Japanese currency did not move significantly at the time, although it rose in subsequent months to a peak of just past ¥80 per US dollar in mid-April, but this did not seem to be related to the Kobe earthquake (there was significant trade tension with the US at the time).
“Significant yen repatriation that could push the currency higher and, at an extreme, disrupt global markets, looks unlikely,” it said.
The yen appreciated against all 16 of its most actively traded peers yesterday, with it trading at ¥82.23 per US dollar against its previous close of ¥82.98.
Other regional bourses also extended losses yesterday, with the South Korea’s Kopsi losing 1.31% to 1,955.54 points, Singapore’s STI down 1.04% to 3,043.49 points and Hong Kong’s Hang Seng Index shedding 1.55% to 23,249.78.
US stocks were also expected to extend their losses as US stock-index futures fell.
Crude oil futures for April traded on the New York Mercantile Exchange saw its prices fall below US$100 per barrel for the first time since early this month as the earthquake forced refiners to shutdown processing plants in Japan.
Meanwhile, the benchmark FTSE Bursa Malaysia KLCI fell 1.40% yesterday, its largest single day fall in over two weeks, driven by heavy selling in selected banking, plantation and telecommunication stocks.
The local benchmark index lost 21.29 points to end at 1,495.62 points yesterday, with losers crushing gainers at 678 to 118 and some 207 stocks remaining unchanged. Turnover was 1.02 billion shares done valued at RM1.85bil. The index hit an intraday low of 1,494.13 points.
Analysts said the sentiment on the local and regional bourses were reflective of the sell down in US equities on Thursday.
Among the banking stocks that were heavily traded yesterday include CIMB Group Holdings Bhd, which shed 6 sen to RM7.98, Malayan Banking Bhd lost 9 sen to RM8.71 and AMMB Holdings Bhd fell 10 sen to RM6.36.
IOI Corp Bhd, Sime Darby Bhd, Axiata Group Bhd, Maxis Bhd and Telekom Malaysia Bhd saw large volumes change hands yesterday. Petronas Chemicals Group Bhd, which fell 16 sen to RM6.56 with 27.2 million stocks traded, also dragged down the index.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/12/business/8238343&sec=business
By JEEVA ARULAMPALAM
jeeva@thestar.com.my
PETALING JAYA: A severe earthquake and tsunami that hit Japan late yesterday afternoon was the latest shock to send tremors throughout global equity markets, a day after many of them reeled from a sell off on Thursday.
Asian markets, which were lower throughout the day on concerns of political unrest in the Middle East, reacted to Japan’s 8.9 magnitude earthquake in the last hours of trading, accelerating losses.
Meanwhile, equity markets in Europe opened in the red, as the world now waits to assess the damage Japan’s earthquake would have on the global economy and markets. (See Page 15)
Global equity markets will remain volatile next week, as the latest incident adds to a series of incidents that will continue to spook investors, which included the political unrest in the Middle East and the resurfacing of euro-zone fiscal woes.
As at press time, a tsunami alert had been issued for New Zealand, the Philippines, Indonesia, Papua New Guinea and Hawaii.
Japan’s Nikkei 225 index closed lower by 1.72% yesterday, hitting a five-week low. Macquarie Group Ltd said in a research report issued yesterday that “inevitably there will be microeconomic disruptions” although the impact would be lower than that of the last major earthquake, Kobe, that hit Japan in 1995. Japanese stocks fell 8% in the week after that quake.
“Despite the scale of the disaster (yesterday), it is hard to find much evidence in the macroeconomic data of the effects of the Kobe earthquake. Industrial production dipped 2.6% month-on-month in January 1995 and then bounced 2.2% in February and a further 1% in March. Gross domestic product growth was 3.4% quarter-on-quarter annualised in first quarter of 1995,” the report said.
Macquarie added that the Japanese currency did not move significantly at the time, although it rose in subsequent months to a peak of just past ¥80 per US dollar in mid-April, but this did not seem to be related to the Kobe earthquake (there was significant trade tension with the US at the time).
“Significant yen repatriation that could push the currency higher and, at an extreme, disrupt global markets, looks unlikely,” it said.
The yen appreciated against all 16 of its most actively traded peers yesterday, with it trading at ¥82.23 per US dollar against its previous close of ¥82.98.
Other regional bourses also extended losses yesterday, with the South Korea’s Kopsi losing 1.31% to 1,955.54 points, Singapore’s STI down 1.04% to 3,043.49 points and Hong Kong’s Hang Seng Index shedding 1.55% to 23,249.78.
US stocks were also expected to extend their losses as US stock-index futures fell.
Crude oil futures for April traded on the New York Mercantile Exchange saw its prices fall below US$100 per barrel for the first time since early this month as the earthquake forced refiners to shutdown processing plants in Japan.
Meanwhile, the benchmark FTSE Bursa Malaysia KLCI fell 1.40% yesterday, its largest single day fall in over two weeks, driven by heavy selling in selected banking, plantation and telecommunication stocks.
The local benchmark index lost 21.29 points to end at 1,495.62 points yesterday, with losers crushing gainers at 678 to 118 and some 207 stocks remaining unchanged. Turnover was 1.02 billion shares done valued at RM1.85bil. The index hit an intraday low of 1,494.13 points.
Analysts said the sentiment on the local and regional bourses were reflective of the sell down in US equities on Thursday.
Among the banking stocks that were heavily traded yesterday include CIMB Group Holdings Bhd, which shed 6 sen to RM7.98, Malayan Banking Bhd lost 9 sen to RM8.71 and AMMB Holdings Bhd fell 10 sen to RM6.36.
IOI Corp Bhd, Sime Darby Bhd, Axiata Group Bhd, Maxis Bhd and Telekom Malaysia Bhd saw large volumes change hands yesterday. Petronas Chemicals Group Bhd, which fell 16 sen to RM6.56 with 27.2 million stocks traded, also dragged down the index.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/12/business/8238343&sec=business
New Residential Property Prices to Go Up 13% In Malaysia
Friday March 11, 2011
By SHARIDAN M. ALI
sharidan@thestar.com.my
KUALA LUMPUR: The average prices of newly developed residential property this year is expected to grow by 13% against last year in line with the increase in raw materials cost, according to a survey by Real Estate & Housing Developers' Association Malaysia (Rehda).
The survey showed that the average terrace house in Malaysia last year had gone up to RM176,590 in the third quarter from RM168,667 in the first quarter.
High-rise property price in the same timeline had gone up to RM165,530 each from RM163,300.
Rehda president Datuk Seri Michael Yam said since a year ago, raw materials prices such as steel and cement had increased significantly.
“Generally, the majority of the survey respondents are optimistic of the property market for the next six months as the overall sentiments governing the market are positive,” he said at a media briefing yesterday.
Meanwhile, for new properties in the Klang Valley, Rehda national treasurer Teh Boon Ghee said they might rise around 15% this year.
“But, it is also interesting to look at this price increase from a different angle as 88% of the transactions in 2009 were from the secondary market and only the remaining 12% came from new development. The 13% and 15% expected increase only applies to new homes while the momentum for secondary market is slower than that,” he said.
On the new home loan guideline by the Government under My First Home Scheme, Yam said although Rehda supported the move, it would be challenging to develop houses priced between RM100,000 and RM220,000 in the Klang Valley and Penang.
“In these developed urban areas, it would be impossible to develop anything below RM200,000.
“This is because the land costs in these areas are very high. The land component out of the total development cost in these areas may be around 40% to 50%,'' he said.
For comparison, the land cost per sq ft in Sungai Petani is RM1.30, Cyberjaya RM36 while in Kuala Lumpur, it could be as high as RM2,000.
But due to the new guidelines, Yam said developers might have to relook at their unit size if the development was in the Klang Valley.
“At the average price of about RM400 per sq ft, they can develop a 500 sq ft studio unit or a one-bedroom apartment. This is actually the trend in most developed cities around the world. But to enable developers to embark on this, the Government must encourage local authorities to review their Planning Act as it is now based on number of units per acre.
“Let's say, the authority allows a developer to build only 50 units per acre. Would it build 50 units of 500 sq ft houses or 50 units of 2,000 sq ft houses?” he said.
The survey were answered by 135 or 14% out of 972 Rehda members that comprises of housing and property development companies from all 12 states in Peninsular Malaysia.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/11/business/8233530&sec=business
By SHARIDAN M. ALI
sharidan@thestar.com.my
KUALA LUMPUR: The average prices of newly developed residential property this year is expected to grow by 13% against last year in line with the increase in raw materials cost, according to a survey by Real Estate & Housing Developers' Association Malaysia (Rehda).
The survey showed that the average terrace house in Malaysia last year had gone up to RM176,590 in the third quarter from RM168,667 in the first quarter.
High-rise property price in the same timeline had gone up to RM165,530 each from RM163,300.
Rehda president Datuk Seri Michael Yam said since a year ago, raw materials prices such as steel and cement had increased significantly.
“Generally, the majority of the survey respondents are optimistic of the property market for the next six months as the overall sentiments governing the market are positive,” he said at a media briefing yesterday.
Meanwhile, for new properties in the Klang Valley, Rehda national treasurer Teh Boon Ghee said they might rise around 15% this year.
“But, it is also interesting to look at this price increase from a different angle as 88% of the transactions in 2009 were from the secondary market and only the remaining 12% came from new development. The 13% and 15% expected increase only applies to new homes while the momentum for secondary market is slower than that,” he said.
On the new home loan guideline by the Government under My First Home Scheme, Yam said although Rehda supported the move, it would be challenging to develop houses priced between RM100,000 and RM220,000 in the Klang Valley and Penang.
“In these developed urban areas, it would be impossible to develop anything below RM200,000.
“This is because the land costs in these areas are very high. The land component out of the total development cost in these areas may be around 40% to 50%,'' he said.
For comparison, the land cost per sq ft in Sungai Petani is RM1.30, Cyberjaya RM36 while in Kuala Lumpur, it could be as high as RM2,000.
But due to the new guidelines, Yam said developers might have to relook at their unit size if the development was in the Klang Valley.
“At the average price of about RM400 per sq ft, they can develop a 500 sq ft studio unit or a one-bedroom apartment. This is actually the trend in most developed cities around the world. But to enable developers to embark on this, the Government must encourage local authorities to review their Planning Act as it is now based on number of units per acre.
“Let's say, the authority allows a developer to build only 50 units per acre. Would it build 50 units of 500 sq ft houses or 50 units of 2,000 sq ft houses?” he said.
The survey were answered by 135 or 14% out of 972 Rehda members that comprises of housing and property development companies from all 12 states in Peninsular Malaysia.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/11/business/8233530&sec=business
MAS Hedge Down on Unclear Economy
Friday March 11, 2011
By JEEVA ARULAMPALAM
jeeva@thestar.com.my
Higher entry cost also reason for cut in fuel hedge to 25%
PETALING JAYA: Uncertainty in the economic recovery and higher fuel hedging entry cost are some of the reasons why Malaysia Airlines (MAS) drastically reduced its fuel hedging levels this year to 25% from 60% last year.
“The hedging range in the airline industry has been lower since 2008 due to the uncertainty in economic recovery, fuel price volatility and the higher fuel hedging entry cost,” MAS chief financial officer Mohd Azha Abdul Jalil told StarBiz in an email response.
He said the national carrier continued to practice competitive hedging with 25% of its fuel requirements this year hedged at US$88 a barrel (West Texas Intermediate and cash basis).
“This is in line with our peers. With travellers becoming more accustomed to fuel surcharge, it is now a common instrument in the industry to partially manage the rising fuel costs,” he said.
MAS planes are parked at the tarmac of the KL International Airport. The national carrier’s fuel hedge levels are said to be in line with its benchmarked peers, with current hedge levels ranging from 17% to 35%. — AFP
MAS' fuel hedge levels are said to be in line with its benchmarked peers, with current hedge levels ranging from 17% to 35%.
MAS entered into various fuel hedging contracts for three years from 2009 to 2011 with many contracts priced around US$100 a barrel, after oil prices skyrocketed to a high of US$147 per barrel in mid-2008. However, spot oil prices began tumbling drastically in late 2008 and early 2009, causing MAS to make “paper losses” of some RM3.8bil as at Jan 1, 2009 for its three-year contracts collectively.
Effectively, the actual loss experienced by the airline will only be realised when these various contracts expire and at the price of oil then.
Since oil prices have been on an uptrend after collapsing in late 2008, MAS has narrowed its paper losses for its existing fuel contracts.
Based on its financial statements to Bursa Malaysia, the airline's gain on fuel hedging contracts for financial years ended 2009 and 2010 amounted to RM1.15bil and RM194.6mil respectively. This is representative of contracts that had expired and the fair value of existing contracts, as required under financial reporting standard 139.
The airline has been pro-actively restructuring its 2011 fuel hedges since last year to bring down the hedge levels (from 40% to 25%) as well as the hedging price (from US$100 to US$88 a barrel).
Now that spot oil prices have hit new highs in over two years and driven jet fuel prices to US$134.7 per barrel due to political unrest in Libya, analysts said that MAS would definitely benefit from higher hedging levels.
“No doubt, MAS would gain from higher levels of fuel hedging in the current environment but it is difficult for them to gauge how much to hedge and at what price, unless MAS has a strong treasury team to do this,” said an analyst with a foreign research house.
A local bank-backed analyst said that it was difficult to predict the potential gains from the airline's fuel hedges against the higher fuel costs it would pay at pump prices.
However, analysts said that a lower hedging level would work best for MAS now so that it was not over-hedged and considering the unpredictability of oil price volatility.
Reuters reported in January that top global airlines such as Cathay Pacific, Singapore Airlines and Qantas Airways are staying away from further hedging jet fuel purchases as these airlines have withstood prices far higher than the current levels and as the industry has not quickly forgotten Japan Airlines' bankruptcy, triggered by wrong bets on crude prices.
Meanwhile, budget carrier AirAsia Bhd has hedged some 21% for up to the second quarter of this year at an average US$92.31 per barrel (fixed swap West Texas Intermediate).
“While the budget carrier has hedged up to April, it has more room for flexibility in its hedging policy as higher fuel costs can be offset by its growing ancillary income,” said a foreign research analyst. “For example, the sale of insurance policies would be a clean profit for the airline if no claims are made.”
AirAsia has said that every RM1 per passenger spent provides about US$1 per barrel of buffer.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/11/business/8222990&sec=business
By JEEVA ARULAMPALAM
jeeva@thestar.com.my
Higher entry cost also reason for cut in fuel hedge to 25%
PETALING JAYA: Uncertainty in the economic recovery and higher fuel hedging entry cost are some of the reasons why Malaysia Airlines (MAS) drastically reduced its fuel hedging levels this year to 25% from 60% last year.
“The hedging range in the airline industry has been lower since 2008 due to the uncertainty in economic recovery, fuel price volatility and the higher fuel hedging entry cost,” MAS chief financial officer Mohd Azha Abdul Jalil told StarBiz in an email response.
He said the national carrier continued to practice competitive hedging with 25% of its fuel requirements this year hedged at US$88 a barrel (West Texas Intermediate and cash basis).
“This is in line with our peers. With travellers becoming more accustomed to fuel surcharge, it is now a common instrument in the industry to partially manage the rising fuel costs,” he said.
MAS planes are parked at the tarmac of the KL International Airport. The national carrier’s fuel hedge levels are said to be in line with its benchmarked peers, with current hedge levels ranging from 17% to 35%. — AFP
MAS' fuel hedge levels are said to be in line with its benchmarked peers, with current hedge levels ranging from 17% to 35%.
MAS entered into various fuel hedging contracts for three years from 2009 to 2011 with many contracts priced around US$100 a barrel, after oil prices skyrocketed to a high of US$147 per barrel in mid-2008. However, spot oil prices began tumbling drastically in late 2008 and early 2009, causing MAS to make “paper losses” of some RM3.8bil as at Jan 1, 2009 for its three-year contracts collectively.
Effectively, the actual loss experienced by the airline will only be realised when these various contracts expire and at the price of oil then.
Since oil prices have been on an uptrend after collapsing in late 2008, MAS has narrowed its paper losses for its existing fuel contracts.
Based on its financial statements to Bursa Malaysia, the airline's gain on fuel hedging contracts for financial years ended 2009 and 2010 amounted to RM1.15bil and RM194.6mil respectively. This is representative of contracts that had expired and the fair value of existing contracts, as required under financial reporting standard 139.
The airline has been pro-actively restructuring its 2011 fuel hedges since last year to bring down the hedge levels (from 40% to 25%) as well as the hedging price (from US$100 to US$88 a barrel).
Now that spot oil prices have hit new highs in over two years and driven jet fuel prices to US$134.7 per barrel due to political unrest in Libya, analysts said that MAS would definitely benefit from higher hedging levels.
“No doubt, MAS would gain from higher levels of fuel hedging in the current environment but it is difficult for them to gauge how much to hedge and at what price, unless MAS has a strong treasury team to do this,” said an analyst with a foreign research house.
A local bank-backed analyst said that it was difficult to predict the potential gains from the airline's fuel hedges against the higher fuel costs it would pay at pump prices.
However, analysts said that a lower hedging level would work best for MAS now so that it was not over-hedged and considering the unpredictability of oil price volatility.
Reuters reported in January that top global airlines such as Cathay Pacific, Singapore Airlines and Qantas Airways are staying away from further hedging jet fuel purchases as these airlines have withstood prices far higher than the current levels and as the industry has not quickly forgotten Japan Airlines' bankruptcy, triggered by wrong bets on crude prices.
Meanwhile, budget carrier AirAsia Bhd has hedged some 21% for up to the second quarter of this year at an average US$92.31 per barrel (fixed swap West Texas Intermediate).
“While the budget carrier has hedged up to April, it has more room for flexibility in its hedging policy as higher fuel costs can be offset by its growing ancillary income,” said a foreign research analyst. “For example, the sale of insurance policies would be a clean profit for the airline if no claims are made.”
AirAsia has said that every RM1 per passenger spent provides about US$1 per barrel of buffer.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/11/business/8222990&sec=business
Saturday, March 5, 2011
EPF Can’t Own More than 45% of RHB Cap
Friday March 4, 2011
PETALING JAYA: Bank Negara has not allowed the Employees Provident Fund (EPF) board to hold more than 45% of the paid-up share capital of RHB Capital Bhd.
In a note to Bursa yesterday, RHB Cap said that RHB Investment Bank Bhd and CIMB Investment Bank Bhd, on its (RHB Cap’s) behalf, said that Bank Negara was not able to consider the EPF’s application via a letter dated Feb 25.
“Accordingly, EPF’s irrevocable undertaking to subscribe under the rights issue shall be for a minimum of 45% of the total rights shares,” it said.
RHB Cap had proposed to acquire 80% of PT Bank Mestika Dharman for RM1.16bil and also a proposed put and call option for 9% of Bank Mestika.
RHB Cap also proposed a renounceable rights issue of new shares of RM1 each in RHB Cap to raise about RM1.3bil.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/4/business/8187259&sec=business
PETALING JAYA: Bank Negara has not allowed the Employees Provident Fund (EPF) board to hold more than 45% of the paid-up share capital of RHB Capital Bhd.
In a note to Bursa yesterday, RHB Cap said that RHB Investment Bank Bhd and CIMB Investment Bank Bhd, on its (RHB Cap’s) behalf, said that Bank Negara was not able to consider the EPF’s application via a letter dated Feb 25.
“Accordingly, EPF’s irrevocable undertaking to subscribe under the rights issue shall be for a minimum of 45% of the total rights shares,” it said.
RHB Cap had proposed to acquire 80% of PT Bank Mestika Dharman for RM1.16bil and also a proposed put and call option for 9% of Bank Mestika.
RHB Cap also proposed a renounceable rights issue of new shares of RM1 each in RHB Cap to raise about RM1.3bil.
http://biz.thestar.com.my/news/story.asp?file=/2011/3/4/business/8187259&sec=business
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