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
Saturday, May 7, 2011
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
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