atans1

Archive for May, 2010|Monthly archive page

Value in bilingualism: a long life

In Uncategorized on 31/05/2010 at 7:24 am

Want to be as active and long-lived as MM? Learn a second language.

Another example of unintended consequences? When one LKY forced us to learn a second language, bet you he never tot it would make S’poreans smarter and live longer, the latter buggering up the CPF system . Which would in turn make his government unpopular because of the liberalimmigration policy that is demonised by subversives as “FTs are best”.

Immigrants are  needed to do the work that the now smart S’poreans think is beneath them; to make up for those smarter S’poreans who wonder waz so gd abt hard work; and to keep the economy red hot to make up for the long living S’poreans.

China: a problem S’pore doesn’t have

In China, Economy, GIC, Temasek on 31/05/2010 at 6:03 am

It’s labour unrest . Add another entry to the list of worries for the global economy and financial markets: labor unrest in China – NYT

I sure hope Temasek andits TLCs who have big bets in China have taken this into account. Remember, we don’t do”labour unrest” here.

http://atans1.wordpress.com/2010/02/08/tlcs-in-china-groupthink-or-mastermind-at-work/

http://atans1.wordpress.com/2010/02/09/why-my-obsession-with-tlcs-in-china/

Err time for Lim Say Swee to lecture the Chinese leaders on what they can learn from MM Lee and him on how to keep the workers docile?

Why S’poreans should miss Chips

In Corporate governance, Temasek on 31/05/2010 at 5:38 am

Temasek last week annced a new president and portfolio team head.  We shld be glad that Temasek did not succumb to its flagship bank’s “FTs are best whether they perform or not”.

But let’s get serious. Let’s use this annc of personnel changes to reflect on why the departure of one Goodyear Chips could affect us.

Many moons ago (February I think)  BT carried an article that backhandedly criticised Chip Goodyear saying that despite his sudden, unexplained departure from Temasek, he is still in demand from the corporate worl.  (Can you see the spin for Temasek in this SPH publication, whose chairman is executive director of GIC?)

And well he should be in demand.

When he was hired to be CFO of Melbourne-based miner BHP in 1999, the “Big Australian” had lost its way.  In the 1990s, it made a series of ill-conceived acquisitions and failed projects (err sounds like you-know whom’s recent record of Shin, Merrill Lynch, ABC Learning and Barclays), amid historically low commodity prices.

The then former investment banker (he was a CFO at another miner) was one half of an all-American dynamic duo (Sorry, I’m a Batman fan). The other was CEO Paul Anderson, who came from Duke Energy.

In their first two years, BHP got rid of 2,000 employees and A$6.9bn worth of assets. They then merged BHP with Billiton, creating the world’s biggest miner. And best of all the merger worked, a rarity in M&A.

A key legacy of his stint as CEO, analysts say, is the financial discipline he brought to BHP. He ensured it grew fast enough to capitalise on the commodities boom while avoiding the ill-conceived spending of the past; and all the while,  returning cash to shareholders. A tradition that has continued.

Shortly after he took charge as CEO,  it was announced that BHP would increase its capital management programme by more than four times to US$13bn, beginning with a US$2.5bn off-market return in Australia.

With the Singapore government tapping the reserves, someone with a track record of returning  cash to shareholders while growing the portfolio is needed.

There is no Singaporean with these skills.

And as to the disagreement with the board, maybe he wanted to do big deals, while the board had already decided Temasek should become a hedgie.

And maybe his deals would have been in the extractive industry (mining and oil & gas). Remember MM had said GIC would not invest in mining ventures, because he didn’t understand mining? Though now that Temasek is dipping its toes in mining and oil & gas, Chips and the recently departed Michael Dee (ex-Morgan Stanley’s MD in oil town Houston) would be missed.

Test yr analytical skills

In Uncategorized on 30/05/2010 at 5:24 am

Citi lost money in 2009. Goldman Sachs made tonnes of it.

But a Citi bonus could be worth more. Why? Clue: big part of bonus is in shares.

If you got the reasoning right, you got it in you to be a successful investor. You think thru the issues.

English Footie: providing Asian casinos with competition

In Uncategorized on 29/05/2010 at 6:26 am

In season 2009/2010, there was betting in Asia on 250 Blue Square Conference matches – the fifth tier of English football – and on 190 English youth and academy games. (BBC Online report)

If us Asians can bet on 5th division matches, can you imagine the betting volumes on EPL, and  European Champs and Europa leagues?

How IskandarLand may look like?

In Malaysia on 28/05/2010 at 1:57 pm

An abandoned project in Inner Mongolia.

As is traditional whenever there is a new M’sian PM, there is a love fest wayang between the two countries for the media and public. Then reality sets in.

Both leaders also discussed bilateral co-operation in the joint iconic project in Iskandar Malaysia.

They agreed that Khazanah Nasional and Temasek Holdings will form a 50-50 joint venture company to undertake the development of the iconic wellness township project in Iskandar Malaysia.

The project will involve the participation of private sectors from both countries.

Both leaders said they look forward to the launching of the project within a year.

Let’s hope this doesn’t become another Soochow Park fiasco. I remain sceptical abt the Iskandar project because it seems more of the same, “Buy land from us because we are doing great things” that emerges from Johore every few yrs.

I do not get the impression (and I’ve attended several high-powered seminars) that the Malaysians are spending money putting up the core buildings. Contrast this with what S’pore usually does when it builds industrial parks in S’pore.

S’pore is going abt developing a data park, which shows the difference between how S’pore does things from Iskandar.  S’pore is planning to put up six buildings (120,000 square metres) and allowing companies that want to build facilities to do so. Iskandar from all that I’ve seen wants to sell/lease land for companies to develop the banking. wellness, IT and education hubs.  The only places in Iskandar Land that does this is in places where MMC (a M’sian listco) is building logistics hub:  Senai  (air) and Tanjung Pelepas (sea).

When will the Malaysians learn that since the Dubai crisis, the selling land/ leasing model doesn’t work any more?

Get serious, do what S’pore Inc does successfully in S’pore,Vietnam (SembCorp’s projects) and India (Ascendas’ projects).But money where yr mouth is.

 

Investing geniuses turn chumps?

In Uncategorized on 28/05/2010 at 7:23 am

No not our local MSM admitting that Temasek and GIC goofed badly. Remember the media orgasms when the chumps (sorry champs) bot into Merrill Lynch, UBS and Citi?

Several of the investors that spotted early the opportunities the subprime market offered, then started buying US banks early last year when Temasek was selling BOA and Barclays, now are looking fallible.

If I were carrying an ad for GIC and Temasek (I’m not, but wish I were) it would be, “The line between success and failure is very thin.”

Seriously, a top banking analyst believes that US banks are cheap. So these investors may be right three times in a row.

Major indices since March 2009

In Uncategorized on 27/05/2010 at 5:53 am

A pix is worth a thousand words.

Just looking at markets you’d think, and you’d probably be right, that things are better than they were a year ago, but looking a bit dicier than they were a month ago.

Why Wall Street is jittery over Greece?

In Economy on 27/05/2010 at 5:24 am

Wall Street has been very volatile because of concerns about Greece and the implications for the Eurozone. Why?

There are reports that AIG (nationalised by US government) could be liable for credit default swaps it wrote with European banks. Juz as Germans are not amused that they are subsidising corrupt Greek civil servants and tax-evading doctors, all with hedonistic life styles,  Americans will not be pleased that their money (via AIG) is going to save European banks.

There could be other credit default swaps written by banks like fat, lazy, last in class, last to get sex Citi.

But there is a bigger macro issue. FT reports that Nearly half of the S&P 500’s revenue now comes from abroad and almost 30 per cent from Europe, compared with only 12 per cent of US output from gross exports, a fact that boosted dollar earnings substantially in recent years. That effect may soon go into reverse, however, as the euro takes a tumble and China faces pressure to revalue the renminbi.

AIA takeover is nuts, PRU shareholders advised

In GIC, Insurance, Temasek on 26/05/2010 at 6:45 am

RiskMetrics, an international share proxy advisory service, issued a critical assessment of the AIA takeover bid, saying while a deal had “a sensible strategic rationale”, Prudential was paying a heavy price.

FT reported that RiskMetrics said Prudential was paying US$35.5bn for a company with US$1.6bn in post-tax operating profits.

“For this to work, profits have to grow substantially beyond the expected cost synergies. Our analysis indicates that Prudential needs very high growth rates at AIA to only meet a reasonable return on invested capital, something that seems a stretch when managing a difficult integration process.”

Let me know when our local media report this story.

BTW GIC’s interest in this stock shows that its analysis is different: it is willing to forgo jam today for  jam tomorrow (maybe).  Hmm must be MM’s 30-yr view at work. Wonder who is right.  Remember shortly after he last said this , Temasek sold its BOA stock, just before the market recovered. GIC held on to its UBS and Citi investments.

DBS: Another FT goof

In Banks, Temasek on 26/05/2010 at 5:53 am

Now it’s the Islamic Bank of Asia. Reading between the lines of the MSM spin, clear that its Islamic bank foray ran into serious problems. It now wants to focus on investment banking and become more active in private equity while remaining committed to growing its Islamic banking franchise in this region. And cutting back on financing because of losses when financing Gulf cos.

Sounds a bit like Aztech and Novena: having failed in what they were doing, they tried something new. “So easy meh?”

Why can’t Temasek exercise its prerogatives as controlling shareholder and get rid of the FTs. I mean the locals at CapitaLand are doing a gd job in Islamic financing. Juz being an FT doesn’t mean the right to “Fail, try again, fail harder” ; misuse of a misquote of Samuel Beckett.

Temasek itself is hiring locals in senior positions, ignoring the “FT is best policy” .

OK maybe I’m hard on the FTs at DBS http://atans1.wordpress.com/2010/05/14/dbs-how-to-solve-the-ft-problem/

But at the very least, they do not have the luck that Napoleon expected his generals to have. He expected his generals to be brave, competent and leaders as given in his meritocratic army: but luck was different.

Backgrounder on Islamic Bank of Asia

DBS owns 50 per cent plus one share in IB Asia’s capital of US$500 million.

The rest was contributed by investors from the Gulf Cooperation Council countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

IB Asia said at the time [of its establishment] that it would offer commercial banking, corporate finance and capital market and private banking services, acting as a bridge for capital flows between Asia and the Middle East. (From BT)

Founding CEO retired last December. I’m not sure before or after Dubai World declared a debt moratorium causing problems for other Gulf companies.

PRU/AIA: What our MSM is not reporting

In Uncategorized on 25/05/2010 at 7:38 am

FT headline reads, “AIA chief in threat to quit over Pru deal”.

As today Pru shares start trading, one can only assume that our “nation-building”, “constructive” MSM is at it again.

Why Greece matters to S’pore II

In Economy on 25/05/2010 at 7:20 am

UBS’s chart on emerging market exposure to the economy of the euro area

S’pore has abt 12-13% of its external merchandise trade with EU. M’sia has slightly more. And if affects KL, it affects us. Double whammy.


Leveraged ETFs

In ETFs on 25/05/2010 at 6:45 am

A leveraged ETF seeks to deliver a daily return that is a multiple of the return of the underlying index while an inverse ETF provides the opposite performance to the benchmark.

As these instruments reset every day, an investor who maintains a position for more a single day may find his exposure to potential losses if the market turns against him is larger than anticipated due to the effects of compounding.

Regulators have expressed their concerns about the suitability of leveraged and inverse for retail investors, particularly in volatile markets.

ProShares, which offers 19 leveraged and inverse ETFs benchmarked to a variety of regions and countries ,has a “Facts and Fallacies about Leveraged Funds”page on its website.

If you are investing in an ETF because you want to invest in a low-cost index fund (Warren Buffett thinks that most investors shld do so; and so does Tan Kin Lian and his Fisca), make sure you are not investing in leveraged and inverse ETFs.Invest only only in ETFs that are cash-based i.e. that do not use derivatives to track the indices.

Midas: Here be value?

In China, Economy on 24/05/2010 at 4:29 am

[Update on 31 May 2010 -- Midas wins S$234m  Shanghai metro contract.]

Brokers’ reports say that S-Chip Midas will be beneficiary of China’s rail expansion.

How big is this expansion, sometime back FT reported:  Bank of China, the country’s third-largest lender by assets, will invest $1.1bn in a railway line as Beijing encourages state-controlled financial institutions to help pay for the world’s most ambitious rail network expansion .

BoC said it would buy a 14.5 per cent stake in a new railway operator that will build a line to transport coal from inland Shanxi province to Shandong province on the eastern seaboard.

The announcement came one month after the bank said it would invest nearly $900m in a state company that is building the high-speed rail line between Shanghai and Beijing.

China is expected to account for well over half of all global rail investment this year, with an estimated Rmb824bn ($120bn) budgeted for 2010 alone.

“Apart from the US interstate expansion in the 1950s and 1960s or the US railway build-out in the early 19th century there has never been anything like this,” according to John Scales, transport co-ordinator at the World Bank office in Beijing.

S=US$

Silly me

In Uncategorized on 23/05/2010 at 6:21 am

This blog should be called the “Sceptical Investor” not the “Cynical Investor”. Apparently the cynic is gullible by nature (hence his protective distrust i.e. closing his mind), but not the sceptic. The reason: the sceptic keeps on asking questions.

http://www.fisca.sg/financial_education?mode=PostView&bmi=347664

Gold & Green: Why not reaching European Finals hurts

In Uncategorized on 22/05/2010 at 3:48 pm

Winning the Uefa Champions League tomorrow nite will be worth 120m euros (US$151m) to the winner, research by the competition’s sponsor, Mastercard, suggests.

The loser will gain 70m euros.

Bang balls MU and Liverpool owners. That money would have come in handy what with the debts they have.

Why we are no Silicon Valley

In Economy on 22/05/2010 at 5:34 am

The recipes of other cities for creating the next Silicon Valley usually leave out a few main ingredients. Richard Florida, who wrote “The Rise of the Creative Class” and studies why certain cities foster creativity, cites three crucial factors: talented people and a high quality of life that keeps them around, technological expertise, and an open-mindedness about new ways of doing things, which often comes from a strong counterculture: extract from NYT on Boulder Colorado,.

We could do the first two like we do “instant” trees” or citizens: but a strong counterculture? Not that long ago, the government had problems with people with long hair. Today, it (and to be fair, society) has problems with drugs (long term imprisonment for users and sometimes death), alternative life-styles (read buggery and free love), and liberal democracy.

BTW, an ex-MIcrosoft strategist and now VC, earlier this week, was saying (according to Today)  that the Silicon Valley model was not for S’pore. He advocated something that sounded like that could have come out of USSR’s infamous five- year plans.

The way forward, especially for relatively small countries with financial transparency and access to “good capital”, is to pursue innovation mega-projects, he said.

In Singapore’s context, an official body could serve as “prime contractor” mapping the vision, plans, standards and project management for such a project.

It could then hire “sub-contractors” to take care of aspects like inventions, and products and services.

How would this approach differ from previous forays like the Economic Development Board’s efforts to create an innovation hub here?

The key difference is in not allowing companies to come in and integrate “at the company’s discretion”, said Mr Jung.

One of the last innovation mega- projects that Singapore tried to drive, and where “a lot of external people” were brought in, was the broadband information superhighway project. That was in the ’90s, when Mr Jung was with Microsoft.

He said the tech giant had sent a group to look at participating in the project.

“But there wasn’t a prime contractor. There was no one really driving that vision,” he said.

Going down the innovation mega -project path – which could range from healthcare to education to alternative energy – would be “a lower risk way of bringing lots of technology in, and probably seeing it actually succeed,” he said.

“So I’d like to see Singapore really try that. I think it’ll be interesting.”

Edward Jung claimed that  from his interaction with officials in local institutions, … said there seems to have been a rethink about pursuing this model [Silicon Valley].

Temasek: Ignoring MM? III

In Uncategorized on 21/05/2010 at 5:23 am

Guess we now know why MM’s views on mining was ignored on this deal http://atans1.wordpress.com/2010/05/17/temasek-mm-lee-being-ignored-ii/ Demand is red hot for shale gas: investments in shale gas than for it. Note $ below means US$

The sovereign wealth funds of China and South Korea are set to lead a $900m investment in a leading US producer of natural gas from shale rock, becoming the latest Asia-based groups to focus on the sector.

The talks follow last week’s disclosure that Temasek, the Singapore state investment fund, and Hopu Investment Management, a Beijing-based firm, had acquired $600m of its convertible preferred stock …

CIC and KIC are each expected to acquire about $300m worth of preferred stock, with the remainder purchased by Hopu, Seatown, an affiliate of Temasek, and a Japanese industrial group. CIC and KIC could not be reached for comment.

China Investment Corporation and Korea Investment Corp are in advanced negotiations to join a consortium planning to acquire convertible preferred stock in New York-listed Chesapeake Energy, according to people familiar with the matter.

[Update on 27 May 2010

Err could be an investment fiasco in the making. Private equity firm KKR has sold an oil shale company to Shell. Shell is paying US$4.7bn. KKR bot a  substantial stake in this co  for US$350m 11 mths ago.]

BTW, MM keeps telling Japan that they need to follow S’pore’s example and allow in FTs.

Well the Japanese have a better solution: they prefer robots over bringing in FTs. Solves three problems: the lack of menial workers, the need to integrate foreigners into Japanese society, and keeps Japan at the cutting edge of innovation.

MM is the sage from Telok Blangah but maybe the wise men (lesser than sages) in Japan make up by being collectively wiser?

Is this market efficient? Or is there value?

In Emerging markets on 20/05/2010 at 7:56 am

I don’t track Thailand so I was surprised to see this chart in the FT. I tot that with the events there, foreigners would be breaking down the walls in an attempt to exit the country.

Where to from here?

FT went on to say, Investors do not wish to pull out of one of the most open and investor-friendly of east Asia’s fast-growing economies, where the government has, within the past month, raised its 2010 GDP increase forecast from a range of 3.3-5.3 per cent to 4.3-5.8 per cent.

In a note published on Beyond Brics, the Financial Times’s emerging markets hub, Standard Chartered Bank said the baht had been “remarkably stable during the political turmoil”, because the market had largely accounted for the unrest, and economic fundamentals were “relatively solid” in view of Thailand’s big foreign exchange reserves, substantial current account surplus and economic growth.

Could we see a delayed reaction? Or are those still in there the value investors. Time to check out the place?

Casinos: Considered views

In Casinos on 20/05/2010 at 5:21 am

We don’t get this type of stuff from our “constructive or “nation building” MSM nor from our often emotional socio-political websites. I don’t blame the latter because they are reacting to the BS that SPH and MediaCorp copy down from somewhere.

Example: last Saturday BT wrote, “Teething problems aside, the government has given the assurance that Singapore’s two new integrated resorts – casinos and all – are ‘off to a flying start’ so far.” But no evidence was cited. It was summarising what cabinet minister Vivian was saying.  But yesterday, MediaCorp’s free sheet reported rhat junior minister Isawaran had said that it was too early to judge success of the IRs.

The views of the Economist

[T]he Marina Bay Sands casino … is a striking addition to the Singapore skyline. It also symbolises an interesting, and potentially risky, new phase in the city-state’s highly successful government-led industrial policy.

The government has identified tourism as having big potential for growth, and offering visitors the opportunity to gamble is seen as a crucial part of its plan … Yet whereas Singapore’s government has been unreservedly enthusiastic in its attempts to attract other industries, ranging from biotech to hedge funds, it clearly has mixed feelings about its pursuit of the gambling dollar. It can scarcely bring itself to utter the word casino, preferring instead to describe its new attractions as “integrated resorts”

[Eg CNA reported There will be no compromise to the government’s concept of an Integrated Resort (IR) – that allows only a small proportion for gambling … when the IRs are fully open, gaming areas will take up less than 3 per cent of the Gross Floor Area for Marina Bay Sands and less than 5 per cent for Resorts World Sentosa …both IRs have, in fact, opened significant non-gaming facilities … junior minister S Iswaran, said in answer to a question in Parliament.

The recent travails of those rival resorts [Macau and Las Vegas] are a reminder that the gambling industry is risky not only for punters but also for investors and the places that host it …

For Singapore, the immediate opportunity is to give the many business people who visit a reason to stay for the weekend rather than leave as soon as their work is done. Hitherto there has been little fun to be had other than hitting Orchard Road’s glitzy shopping malls.

The view from the NYT.

It’s all about attracting conventions, trade shows and other big-tent events.

But Singapore will face tough competition. The Hong Kong Tourism Board got a budget of 150 million Hong Kong dollars from the government to increase promotions for meetings and conventions in the next five years. The board has set up an office to provide one-stop professional support to event organizers and enhance overseas promotions.

And Macau too according to the article.


Casinos: Vietnam too

In Casinos, Vietnam on 19/05/2010 at 5:16 am

More competition for our IRs and remember Taiwan, Cambodia and the Philippines want their slice of the cash too.

Developers set sights on Vietnam gambling strip

A Canadian development group, backed by Philip Falcone’s Harbinger Capital Partners, has appointed an MGM Mirage executive to run the first Las Vegas-style casino in Vietnam, in the latest sign of gaming expansion in Asia.

Vietnam has been targeted by developers looking to replicate the success of Macao, which attracted billions of dollars of investment from the casino industry.

Vietnam has only issued one gaming licence and plans to make a resort casino the centrepiece of the US$4.2bn Ho Tram strip resort complex on beachfront land 130 kilometers from Ho Chi Minh City.

Asian Coast Development Limited of Canada won the licence and has appointed Lloyd Nathan, the president of MGM Mirage global gaming development, as chief executive. ACDL and MGM Mirage have struck a deal to name the new property the MGM Grand Ho Tram.

“The Ho Tram project represents one of the most compelling investment opportunities in the integrated casino resort industry,” said Mr Falcone, chief executive of Harbinger, which is ACDL’s largest investor.

Mr Nathan has led MGM Mirage’s overseas efforts during a period of international expansion for the group and other gaming operators. “The Ho Tram Strip is set to become the pre-eminent gaming and leisure destination in south-east Asia,” he said, adding that Vietnam was developing a “positive regulatory framework and competitive tax structure”.

Jean Chrétien, the former Canadian prime minister, and an adviser of ACDL, played a key role in putting the Vietnam project together, Mr Nathan said.

Like its rivals, MGM Mirage,has been keen to find new international markets to sustain its growth after the recession and the economic slowdown hit returns in its home US market.

FT report in late April.

Frontier Markets: Do they offer value?

In China, Emerging markets on 18/05/2010 at 5:52 am

Where is the dividing line between frontier and emerging markets? “It’s not very clear,” said emerging markets specialist Mark Mobius of Templeton. “Generally speaking, frontier markets are those that are relatively small and illiquid and have been pretty much ignored up to now.

‘Cambodia or Sri Lanka would be examples, along with Vietnam and Pakistan. But then you have other markets, like those in the Middle East which have not traditionally been part of emerging markets, such as Kuwait, Abu Dhabi and Dubai.”

By his definition, we have three around us: Cambodia, Sri Lanka and Vietnam.

Interested in Cambodia and Laos?

Frontier Investment and Development Partners says that investment in China’s neighbours has become an option for those interested in China itself, reports the FT. FIDP claims to be a private equity investor.

FIDP, which has offices in Singapore, Cambodia and Mongolia, has launched its Cambodia and Laos fund, and is due to start investing its first $50m (£32m, €37m) by July. The fund is “an extended China play”, designed to profit from exports to China as well as the shift of investor interest from west to east. It will focus largely on agriculture and infrastructure, seeking to benefit from China’s continued demand for raw materials and its desire for food security and the need to improve transportation links for trade

Both Cambodia and Laos boast swathes of undeveloped land and untapped reserves of resources. The discovery of oil reserves off the south-west coast of Cambodia has yet to be quantified and the potential for Laos to become a major source of hydropower using the Mekong river has also not yet been utilised. But … these countries are primed for rapid growth.

And as roads are built and an unbroken rail network is created across the region, the proximity to China of countries such as Cambodia and Laos will provide them with an additional advantage over commodity exporters further afield.

China has provided large sums towards developing infrastructure and transportation links in both countries. In March, a Chinese delegation to Cambodia pledged to expand commercial ties between the two countries, including an agreement between telecommunication companies Chinese Huawei Technologies and Cambodia’s CamGSM.


Temasek: MM Lee being ignored? II

In Energy, Mining, Temasek on 17/05/2010 at 10:39 am

No not again. Temasek does another natural resources deal, it was reported last week.

Temasek and Hopu Investment Management, a Beijing-based firm, are to spend more than US$1bn to acquire a stake in New York-listed Chesapeake Energy; a US producer of natural gas from shale rock. They follow other foreign investors into the sector.

They  agreed to buy US$600m of convertible preferred stock and have an additional 30-day option to acquire a further US$500m of the stock, which they are “highly likely” to exercise alongside other investors. Bloomberg reports.

Cynics must be wrong to continue believing that the government (and MM lee in particular) controls the decision-making process at Temasek.  Temasek has the independence to do the wrong things. Bit surprising that Temasek’s PR machine does not highlight this. Are there subversives in the PR department that want to hide the truth of the relationship between Temasek and the government from the public. Friends of SDP and Dr Chee?

But still, one would have tot Temasek would listen to someone whom Time magazine rates as among the 100 most influential  persons in the world. Sigh, reminds me that somewhere in the bible there is something about a prophet being without honour in his own home.

http://atans1.wordpress.com/2010/04/05/temasek-mm-lee-being-ignored/

Let’s hope that the Fates do not punish the hubris of Temasek’s management. We lose.

BTW three mining deals you may not be aware of

It agreed to buy a peanutty US$50 million stake in the January share sale in Hong Kong by SouthGobi Energy Resources Ltd., a coal producer operating in Mongolia.

It provided funding for Niko Resources Ltd.’s $300 million acquisition of Black Gold Energy LLC. Temasek bought the C$310 million convertible bonds issued by Niko, the Calgary-based oil and natural-gas explorer said in a statement on Dec. 30.

And it bought 382,000 additional shares in  Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, in the first quarter, according to a recent filing with the SEC. Based on a closing price of US$70.24, that additional investment was worth about US$27 million, “peanuts”.

Update 18/5/10

According to a Reuters report, it has also recently bot C$500 million in Inmet Mining and a peanutty US$50 million in Platmin over the past two months.

*

Directors: Don’t play play, be diligent

In Corporate governance on 17/05/2010 at 5:21 am
Directors cannot “abdicate their responsibilities under the pretext of delegation” to other directors with specialised knowledge. The law will hold them responsible even if an issue falls outside of their area of expertise.

This was the message the High Court gave last week when it doubled the one-year disqualification order imposed on Mr Ong Chow Hong for failing to use reasonable diligence in the discharge of his duties when he was a director of then-listed company Airocean Group in 2005.

The SGX had halted trading of Airocean shares and asked for clarification on a media report that said the CEO was being investigated by the Corrupt Practices Investigation Bureau.

A directors’ meeting was convened but Mr Ong missed it to attend a golf function. Airocean sent out a “misleading” public statement later that night, which led to three other directors being charged. Their cases are still before the courts.

Appeal Judge V K Rajah said Mr Ong, had “committed nothing short of a serious lapse in entirely abdicating his corporate responsibilities … One would think that any competent director would immediately comprehend the pressing urgency and significance of (the SGX’s) query and the critical need to respond accurately and promptly.”

“The gravamen of the charge here is that the appellant consciously abdicated from his responsibilities; he never asked to see the draft announcement before it was released to the public, and was quite content to delegate his responsibilities to another director.”

Justice Rajah said the public must be protected against all errant directors “by an uncompromising reaffirmation of the expected exemplary standards of corporate governance”, referring to the court’s discretion to impose disqualification orders that would be “sufficient to deter serious lapses in corporate behaviour”.

During the appeal hearing, Justice Rajah noted that the law “does not impose the obligation for directors to get it right all the time but it requires directors to exercise due diligence, that you must participate if called upon”.

Directors have to “bring to bear their own judgment” in evaluating advice received from professionals and not “seek shelter behind other specialised directors” even if they are not experts in that issue of concern.

StanChart: Who would have tot?

In Banks, Emerging markets, Temasek on 16/05/2010 at 6:21 am

Standard Chartered expects Indian profits to exceed HK for the first time next year, Richard Meddings, finance director, told the Financial Times. Hard to believe as HK is its core market.

But then StanChart executives, including Peter Sands, the group’s CEO, were in Mumbai to announce that the bank had obtained regulatory approval to become the first foreign company to list on an Indian stock exchange.

So a little cynicism is in order?

Seriously, Temasek with 19% of StanChart, must be commended for investing in a bank that now has as its two major markets, HK/China and India. Makes up for that FT dominated mongrel, DBS. Time to strip DBS to a local retail bank, and rename it POSB? Who needs one Asian champ and one Asian chump?

Update

When you think about it,  Temask’s banking strategy (Asian prong: stakes in two major Chinese banks, StanChart, and in Asian banks in Indonesia, M’sia, Pakistan etc) worked. Where it went wrong badly was in its Western investment banking  strategy buying into Merrill Lynch and Barclays and cutting its losses when the hedgies were buying.)

Moral of story, something Dr Goh could have warned them against: “Ang Moh tua kee” strategy does not work.

Gold & Green: Waz the point?

In Uncategorized on 15/05/2010 at 11:04 am

The Red Knights have said that they will not overpay for MU. The group of wealthy businessmen is believed to value the club at no more than £1bn … talks with potential investors “have reinforced our belief it is wrong to offer above fair value”. BBC story

So waz the point of continuing with their plans to bid for MU.? The Glazers have already reportedly rejected a £1.5bn bid from some Arabs. http://atans1.wordpress.com/2010/05/08/gold-green-glazers-give-finger-to-fans/

But at least the Red Knights are spending their own money, unlike, one can reasonably assume on what has been made public, the independent directors of Sino-Environment who went around making sure the corporate governance boxes were ticked while the company was collapsing around them.

Sino-E: Expectations raised then dashed in three weeks

In China, Corporate governance, Uncategorized on 15/05/2010 at 5:19 am

It was less than a month ago that Sino-Environment annced that S$14 million had been “secured”. http://atans1.wordpress.com/2010/03/29/sino-e-wheres-the-14m/ and implied that things were looking up

So it must have come as a shock to shareholders that the CEO had quit and the company is in interim judical mgt.

Were the independent directors doing the right thing earlier this year? http://atans1.wordpress.com/2010/01/10/sino-e-where-are-the-managers-doc/

Or were they intent on making sure they could not be sued?http://atans1.wordpress.com/2010/01/03/sini-e-the-plot-thickens/

Hopefully someone will explain to the shareholders how within the space of less than a month expectations were raised and then dashed. Though I doubt it.

DBS: How to solve the FT problem

In Banks, Corporate governance on 14/05/2010 at 11:30 am

Do what MM suggests, or worse (from perspective of the underperforming FTs) what the British navy in the early 18th century did,  to those who mess up http://atans1.wordpress.com/2010/04/18/motivating-the-elite-learning-from-n-korea/

DBS: FTs balls up cont’d

In Banks on 14/05/2010 at 10:46 am

[Update on 14 July 2010 -- What DBS's system failure shows http://atans1.wordpress.com/2010/07/14/dbs-what-the-systems-failure-report-shows/]

Much has been written by those who think the FT policy is wrong. What I find strange is that they do not write about what has happened at DBS. I have blogged on this before http://atans1.wordpress.com/2010/03/24/dbs-what-the-new-chairman-shld-be-looking-at/ and http://atans1.wordpress.com/2010/03/31/dbs-what-the-new-chairman-should-be-looking-at-iii/

And here I continue (feeling grumpy today) giving more  examples of where the FTs went wrong, quoting in italics BT (that nation-building, constructive, newspaper). I give no dates of when the articles were written as I’ve taken them from various articles over the last two months. I think DBS must have been doing a PR exercise building up its relatively new CEO.

But in doing so, BT inadvertently reminded us of DBS’s missteps that can be blamed on the FTs. Either that or there are “subversives” at BT that the ISD have failed to root out (Or are there subversives at the the ISD too?). If you think I’m as mad as a Paki conspiracy theorist, remember ST was rebuked by the government for its AWARE coverage. It was too pro smelly, hairy feminists and pinkos for many of us, and the government rebuke showed us that we were right.

Bet wrongly on Chola

An analysis by BT shows DBS is likely to have suffered a heavy loss on its investment in Chola. At 3.76 billion rupees (S$118 million), the sale price was $29 million below DBS’s total investment of $147 million in Chola since late 2005, based on data from the two companies’ past annual reports.

Bad acquisition strategy

Could DBS’s minority stakes in banks in Thailand and the Philippines – also a legacy of past forays abroad – be the next to go?”

‘As a general rule, minority stakes are not attractive,’ DBS chief executive Piyush Gupta told Reuters in an interview in Hong Kong on March 25. ‘The only reason you would want a minority stake is, really, if you think you have a pathway to control the big strategic agenda around it.’

It is not yet clear if he will apply this thinking only to new acquisitions. But if he is serious about refocusing DBS on its core strengths, then its bank holdings in Thailand and the Philippines are suitable candidates for divestment.

In 1998, DBS bought controlling stakes in banks in both countries – 50.3 per cent of Thai Danu Bank and 60 per cent of Bank of Southeast Asia in the Philippines. …

In 2001, DBS’s Philippine subsidiary was absorbed into Bank of the Philippines Islands, in which DBS now has a 20.3 per cent stake. In 2004, its Thai unit merged with the Industrial Finance Corporation of Thailand and Thai Military Bank to form TMB Bank, leaving DBS with a stake of just 16.1 per cent in the new entity. Subsequent share issues by TMB have diluted DBS’s stake in the bank to just 7 per cent.

Ignoring connecting with S’poreans

POSB’s latest campaign – already dubbed by one wit as the baby-account war – hopes to recover some lost ground after it let slip the so-called baby bonus accounts to rivals OCBC Bank and Standard Chartered Bank.

DBS lost this group of customers in 2008 when its bid failed to retain the Children Development Accounts (CDA). The baby bonus accounts are a no-brainer yearly addition of 40,000 new customers – roughly the number of babies born here each year. OCBC and Stanchart won the right to offer CDAs after the government called a tender in 2008. POSB had been handling the CDAs since the government launched it in 2001 as part of the effort to raise the fertility rate.

‘To be honest, the CDA is a great government scheme – it’s a pity we don’t have it,’ said Rajan Raju, head of DBS Bank’s consumer banking yesterday.

It’s not just babies, POSB is going after schoolkids and the baby boomers too and it’s all part of an overall strategy to live up to its community bank tag, said Mr Raju.

‘We’re coming back to the community in many ways. We’re proud that we’re neighbours first and bankers second,’ he said.

Only an FT could have made this mistake

POSB’s latest strategy is the latest phase of a journey since the bank was acquired by DBS some 12 years ago, he said.

Sceptics would say DBS has so far ‘wasted’ the acquisition which gave it the biggest deposit base of all banks here.

DBS is looking to make POSB a holistic bank that provides more than just basic banking services, to offer savings, investments and growth products, said Mr Raju.

Most or 92 per cent of respondents in a 2006 survey are satisfied with POSB’s service. But given that it has 3.5 million customers, that would still leave 280,000 with issues.

Many complaints are to do with its long queues, which is being tackled.

By year end, the group will have more than 1,000 ATMs compared to the 967 now, Mr Raju said.

Its ATMs are the most heavily used in the world, according to vendor NCR, he said. Monthly usage for the most popular ATMs is more than 40,000 versus less than 10,000 at other machines, said Mr Raju.

POSB understands what customers want, which is simple products that people can understand and sign up for, he said. ‘We have very little fine print, what you see is what you get.’

‘At this point, people remain risk averse,’ said Mr Raju. ‘They come to POSB to find protection and investment products.’

Late into mobile banking

DBS Bank and POSB customers can now perform transactions on their mobile phones.

DBS has finally joined rivals OCBC Bank, Citibank and Standard Chartered Bank in offering banking via the mobile phone, a popular facility among young professionals.  The service, called mBanking, allows customers to review their banking and credit card accounts, transfer funds and pay bills.

But  do they have any valuables after HN5 Notes?

[A] premium safe deposit centre for DBS Treasures members. Occupying two levels, it offers high-net-worth clients exclusive surroundings to store and indulge in their valuables. Gourmet coffee and sparkling water are served free of charge. And the washrooms are laid out with Molton Brown hand wash and lotions.

AIA deal: Why big Pru shareholders upset

In China, Insurance on 14/05/2010 at 5:16 am

“You sell billions of cheap stuff to buy billions of expensive stuff,” James Clunie, manager of the 1.5 billion- pound Scottish Widows fund, said in an interview in Edinburgh on May 7. “It’s a bad deal. It doesn’t look sensible,” reported the FT.

He was referring to fact that Pru is trading at around 1 x Embedded Value* and in return Pru is buying AIA for 1.69 X EV, when AIA’s two major markets S’pore and HK are not inmature insurance markets .  The Pru is paying in their view for blue skies in China, where AIA has a presence but nothing to shout about unlike the big Chinese insurers who are trading at 2 X EV.

He is not the only one upset. The largest single shareholder with 12%, Capital Mgt is upset. One of its fund mgrs has set up a site advocating that someone pls bid for Pru and split it up.

Warren Buffett if he had been a Pru shareholder would agree with them.  “You simply can’t exchange an undervalued stock for a fully-valued one without hurting your shareholders,” he recently said. And he had earlier criticised Kraft for placing out its shares at lower prices than it had earlier bot back shares, in order to finance the Cadbury takeover, illustrating the problem companies face when buying back in what in retrospect is a bear market. http://atans1.wordpress.com/2010/03/03/buybacks-problematic-in-bear-markets/

*“Embedded value” (the sum of net assets plus the current value of future profits from existing policies) assumes that an insurer will write no more new business, nor make any gains on its investments. That is why most recent deals in mature markets have been completed at about 1.2 times – a small premium for control, for cost synergies, and for growth potential. The 1.69 times that the UK insurer is proposing to pay seems bullish, given that AIA’s two biggest markets by gross written premiums are Hong Kong and Singapore, already overrun by agents. FT

Our SWFs: Learning from the Arabs III

In GIC, Temasek on 13/05/2010 at 6:16 am

A new person helps, after a bad performance patch, even if the those replaced cannot be faulted.

Ahmad al-Sayed became chief executive of Qatar Holding in October 2008.  And it has tried  to take advantage of the financial crisis by picking up stakes in Barclays, Credit Suisse, Porsche, Volkswagen and Canary Wharf Group. And now buying the whole of Harrods.

Qatar Holding is the prime vehicle for strategic and direct investments by Qatar and is a division of the Qatar Investment Authority, founded in 2005 to diversify the emirate’s assets away from oil and gas.

Related post

Suggestion on how to motivate GIC, Temask staffers

http://atans1.wordpress.com/2010/04/18/motivating-the-elite-learning-from-n-korea/

Our SWFs: Learning from the Arabs II

In GIC, Temasek on 12/05/2010 at 12:29 pm

What the Qataris are planning to do with Harrods shows an “adding value” mindset, rather than a passive attitude

FT reports: Qatar Holding is considering whether to launch a flagship Harrods outlet in Shanghai following its £1.5bn purchase of the London department store this weekend.

Trying to replicate the success of Harrods’ Knightsbridge store overseas is one of four areas now up for discussion as part of Qatar Holding’s three-month strategic review of the business.

Ahmad al-Sayed, chief executive of Qatar Holding, will also investigate developing a luxury online store, expanding the Harrods brand beyond teddy bears and souvenirs for the mass market, and giving the London flagship store a makeover in order to expand the selling space.

Of course owning all of a private investment helps. Maybe Temasek should be more aggressive in pursuing non-listed companies.

Our SWFs: Learn from the Arabs?

In GIC, Temasek on 12/05/2010 at 5:39 am

Ahmad al-Sayed, chief executive of Qatar Holding, told the Financial Times that the acquisition of Harrods was part of a strategy to acquire “prestigious top-performing businesses and to buy them at the right point in the cycle”.

Qatar Holding is the primary vehicle for Qater’s strategic and direct investments. It is an arm of Qatar Investment Authority (QIA), which was founded in 2005 to strengthen its economy by diversifying into new asset classes.

Temasek’s investment strategy centres around four themes:

• Transforming Economies

- We invest in industry sectors that correlate with the economic transformation of the country

• Growing Middle Income Populations

- We find opportunities in companies and industries whose growth is fuelled by the increasing purchasing power of middle income populations

• Deepening Comparative Advantages

- We tap the potential of competitively-positioned companies

• Emerging Champions

- We identify companies proving to be best-in-class, be it regionally or globally.

GIC simply says, The group strives to achieve good long-term returns on assets under our management, to preserve and enhance Singapore’s reserves.

Note nothing about trying to time investments. Maybe thaz why they messed up big-time on Merrill Lynch, Citi and UBS. Even MM admitted that much saying they went into too early into financials.

Now Qatar’s  track record is not that great either: but at least it sets out a benchmark on which it can be judged.And it shows it is aware of the importance of timing.

BTW a lot of Buffett’s skill is in knowing when to be greedy.

GIC’s strategy is

Joint footie bid: Dog that didn’t bark?

In Media, Telecoms on 11/05/2010 at 10:01 am

Kinda strange that the authorities here have outsourced to FIFA and its commercial agent S’pore’s competition law when it comes to the media . How come the StarHub and SingTel joint bid was allowed by the competition authority? Or is it the anti-competition authority?

Although SingTel and StarHub were planning for a joint bid, Fifa eventually awarded them individual non-exclusive broadcast rights instead, the telcos revealed.

Joint bids are frowned upon as it could set a precedence for other broadcasters to follow suit and thin the coffers from media licensing.

(Part of BT report)

Update

Was told by two eminent persons, one lawyer and another an economist, that many sectors or industries are exempted from the competition laws. They have unprintable views on these exemptions.

Media is exempted from the act, and comes under the purview of Media Development Authority. A third person, not so eminent, in fact downright obscure and usually unreliable, tells me that MDA does not do anti-competition. Witness  its refusal to step in when StarHub had EPL exclusively. Only the row over the price SingTel paid, got it thinking how to have proper competition policies.


Why Greece matters to S’pore

In Economy on 10/05/2010 at 5:14 am

It is certain that the Greek crisis will undermine aggregate demand and, therefore, trade flows – directly and, more importantly from a global perspective, by imparting an additional fiscal drag to other European countries.

This will strengthen the structural headwinds that are already weakening what has been a robust global cyclical recovery. It will also complicate the much needed handoff from temporary drivers of growth (government stimulus and inventories) to more sustainable ones (components of private final demand).

This is most consequential for countries that export heavily to the eurozone. Some are neighbouring countries, such as Norway, Sweden, Switzerland and the UK. Others are further away, such as Singapore* and Russia.

The writer is chief executive and co-chief investment officer of Pimco, Mohamed El-Erian. This is part of a longer commentary published in the FT.

*Background on trade between EU and S’pore from EU websites

The ASEAN countries together are the EU’s third largest trading partner outside Europe, with annual bilateral trade in goods and services of some € 175 billion. Almost a third of this trade takes place between the EU and Singapore (€ 55 billion) which makes Singapore by far the EU’s most important trading partner in South East Asia. The EU and Singapore also have strong investment ties; the bilateral stock of investment has reached € 100 billion in 2007.

n 2006 the EU was Singapore’s 2nd largest trading partner after Malaysia. The EU accounts for 11.3% of Singapore’s total external trade, purchasing 11.1% of Singapore’s exports and providing 11.4% of its imports. These figures put the EU ahead of the US, China and other ASEAN members (except Malaysia). In 2006 EU-Singapore overall merchandise trade amounted to S$91.2 billion, a 40% increase from its 2003 level of S$65.1 billion.

Value in investing in agribusiness here?

In Uncategorized on 09/05/2010 at 11:59 am

“You can get into vegetable or meat, but because of the land scarcity issue, and because we’re surrounded by the sea, I strongly felt fishery was the best business to get into.

Mr Cheng focuses on groupers – a fish he says offers the best returns – importing them as babies from Indonesia and Malaysia for just over a dollar each.

He then grows them for 12 to 18 months before selling them for $15 per kg – about the weight of one fish”.

“The growth rate of groupers is slower than the rest, which means you have to invest a lot more, so most farmers choose not to grow them,” he says.

“The fish is high in demand, but there is less supply, so the prices will always be high. In 2008, it reached almost $20 per kilogram.

“I reckon the price will go higher because as Asians, as Chinese, we always believe that grouper is a lucky fish.”

Singapore currently produces less than 5% of the food it consumes.

… the government wants to encourage entrepreneurs … to venture into farming so that the country can be more self-sufficient.

Goals set out by the Agri-Food and Veterinary Authority of Singapore include raising local production of fish to meet 15% of domestic demand from the current 4%.

Eggs and leafy vegetables are among other foods on its target list for production growth.

To meet these goals, the government launched a $3.5m Food Fund initiative in December, aimed “at strengthening our strategies of food diversification and local farming to ensure a resilient supply for food for Singapore”.

BBC Online report.

EPL: Reds are in the red again

In Uncategorized on 09/05/2010 at 6:50 am

Liverpool’s parent company posted a loss of £54.9m for the year ended on 31 July 2009 as debt interest payments and severance costs hit hard.

The loss was 34% worse than 2008’s figure as £40.1m went on servicing the club’s £351.4m debt to Royal Bank of Scotland (RBS) and US firm Wachovia.

Pay-offs to senior staff, including former chief executive Rick Parry, accounted for a further £4.3m.

BBC Sport understands that Parry’s severance package was £3m.

This sum – twice what Keith Edelman received when he left the chief executive job at Arsenal – will raise eyebrows on Merseyside as it was Parry who introduced Tom Hicks and George Gillett Jnr to the club and pushed for their eventual takeover in 2007.

He would come to regret this decision as the American duo’s ownership has proved to be deeply unpopular with fans and Parry was ultimately forced out of the club in February 2009. He had been in charge for over 10 years.

Full story.

No wonder the woeful duo want out. No Champs League next season and if Fulham win Europa Cup, no Europe at all.

Innovation: By order of the govt

In Uncategorized on 09/05/2010 at 5:14 am

No not our Biopolis but what Russia’s answer to Silicon Valley.

But it could describe S’pore’s attempts to do innovation

Gold & Green: Glazers give finger to fans

In Uncategorized on 08/05/2010 at 5:02 am

The revelation [that the Glazers had turned down a £1.5bn bid by an Arab consortium late last year] represents depressing news for those fans who have been campaigning for the Glazers’ removal and had hoped that the hostility shown towards the Americans would help to persuade them to sever their ties with the club. More than 150,000 people have joined the Manchester United Supporters’ Trust, the group co-ordinating the anti-Glazer movement, and the protests have become increasingly voluble since the release of a bond prospectus in January that laid bare the Glazers’ business model.

The Glazer family are said to be unmoved by the animosity and thick-skinned enough not to allow it to affect their planning. They are described as enjoying the prestige of being associated with a winning team. That paints a bleak picture for the former United director Jim O’Neill, now the chief economist at Goldman Sachs, who had been hoping to move into power at Old Trafford via the Red Knights, the group of “high net value individuals” that also includes the former Football League chairman Keith Harris.

An offer from the Red Knights is anticipated in the coming weeks but, even if it is substantially higher than the £800m initially discussed, the Glazers will reject it out of hand and offer no indication of a price that might tempt them to consider a sale. This could be seen as a negotiating tactic, but the Glazers’ message is “thanks but no thanks”.

..the Glazers are already thinking far enough ahead to be talking about refinancing their debts in 2017. They accept they could have been more open with the supporters and are aware of the misgivings about the £700m worth of debts they have brought to the club. They also hope to be at Old Trafford more next season. Avi Glazer has been a regular visitor but his brother Bryan has found it harder because his children are younger.

Full story from Guardian.

Value investing: Ask the right question stupid

In Investments on 07/05/2010 at 5:16 am

Those who consult Kwan Im and other deities, know that asking the right question is the key to a successful consultation.

Likewise in business, asking the correct question is the key to success. Google did, Yahoo didn’t.

In the mid-nineties, Yahoo! tried to figure this [what web search is] out by asking of every website “where does this belong?” They created categories, then had an actual live human look at each site and make a judgment, like a librarian. … But the web grew exponentially, and there weren’t exponentially more librarians for hire. Google beat Yahoo! by asking a different question: instead of “where does this belong”, they asked “who linked here?” A link became a proxy for a human decision; to link to something is to decide that it’s in some way relevant. Google reads links as human intent i.e. web search is an attempt to figure out what people want, not what librarians say where something belongs.

So in investing prior to and during the recent crisis, Buffett (“Is there value?”), Paulson (“Is sub-prime over-valued”) asked the right questions, GIC, Temasek and many others didn’t.

Temasek: Another banking success

In Banks, Emerging markets, Temasek on 06/05/2010 at 3:41 am

Temasek owns 19% of Standard Chartered. Standard Chartered has said that it made record profits and income in the first three months of 2010.The London-based bank, which operates mainly in Asia, said that it “remains in excellent shape”.

It  did not release profit figures for the quarter, but the remarks in its trading update point to a strong 2010. “Overall, the group has had a very strong start to the year, despite margin headwinds and increasing competitive pressures”.

In the first half of 2009, Standard’s profits were a record US$2.84bn (£1.86bn), suggesting profits for the first quarter of that year of about $1.4bn.

The  comment that it had “a record quarter in terms of both profit and income” for 2010 indicate it could beat these figures when it reports half-year results later in the year.

Wholesale banking, which includes advisory, trade finance and other investment banking business, saw client income rise by more than 20% on the first quarter of 2009 and contributed more than 80% of wholesale income, the bank said in its statement.

Wholesale banking has driven Standard Chartered’s growth in recent years and accounted for over 80% of group profit last year.

How can property prices come down?

In Banks, Economy, Property on 05/05/2010 at 5:48 pm

Plenty of ranting and raving on socio-political blogs blaming everything on the PAP for the rise in HDB flats. I’m sure the slowdown in the building of flats, coupled with the faster flow of FTs  had something to do with the present price rises.

But a more important factor must be the willingness of the banks to lend. As BT reported last Saturday

BANK lending rose in March for the fifth straight month, as the economic outlook and business sentiment continued to improve, encouraging businesses and consumers to borrow and banks to lend.

Total Singapore-dollar bank lending here rose 0.5 per cent, or $1.54 billion, in March to $286.3 billion at the end of the month, driven by improvements in both business and consumer lending, the latest estimates from the Monetary Authority of Singapore show.

Compared to a year ago, bank lending was up 5.8 per cent, the fastest expansion since April last year.

The latest business expectations surveys published yesterday showed that firms in both the services and manufacturing sectors expect the business environment to improve further in the six months to end-September, compared to the previous half year. Within financial services, banks and finance companies were the most positive on the business outlook …

Consumer loans, which have grown steadily throughout the financial crisis and economic downturn, mainly due to housing loans, expanded another 0.8 per cent, or some $1 billion, in March to $131.2 billion.

Housing and bridging loans, were again the driving force for the growth, rising 1.4 per cent, or $1.3 billion, over the month to $95 billion at the end of March

Overall, for the first three months of the year, bank lending grew 1.8 per cent, or $5 billion. Though smaller than the 2 per cent expansion in the fourth quarter of last year, the slower pace of growth in overall loans masks a recovery in loans to businesses, which expanded one per cent over the quarter, even as the growth in consumer loans slowed…

With renewed competition among the banks, particularly in the Singapore home loans segment, the banks’ net interest margins – which measure how profitable their lending activities are after deducting funding costs – are likely to have been squeezed in the first few months of the year, analysts said this week. That means the banks would need to increase the volume of loans they make, to keep their net interest income from falling.

So banks will continue to lend for housing and the rants will continue.  And when the banks stop lending, and prices fall, the rants will be abt govmin allowing the value of  HDB flats to fall, conveniently forgetting that flats are now easier for young couples to buy. Just like now the ranters conveniently do not mention that the escalating prices means older S’poreans can cash out and downgrade, or move on to other countries.

But don’t spare yr tears for the PAP: by making property prices the benchmark on how well they are doing for S’poreans, they are riding a mad beast that they cannot control. Either way they lose. Dr Goh Keng Swee and his dream team would have told them not to be sold stupid


Temasek: Update on its China bank investments

In Banks, China, Temasek on 05/05/2010 at 5:49 am

As readers will be aware Temasek has strategic stakes in Bank of China (4%) and China Construction Bank (6%), two of the four biggest Chinese banks.

These investments have done well, but need cash because of the loans they were directed to make last year, when China wanted domestic demand to make up for weak exports. http://atans1.wordpress.com/2010/04/14/temask-profitable-holdings-require-more/

China Construction Bank has announced a plan to boost a balance sheet that has been eroded by a year-long lending binge. The world’s second-largest lender by market value, plans to raise up to Rmb75 billion (US$11 billion) from a rights issue which, if successful, will be the largest offering of its kind in Asia.

CCB will offer 0.7 rights share for every 10 existing A- and H-shares. The price will be no more than Rmb4.50 per rights share, according to a stock exchange filing on Thursday night last week.

Under the plan, approximately 16.36 billion new shares will be issued, of which 15.7 billion will be Hong Kong-listed H-shares directed to overseas investors. Only 630 million are Shanghai-listed A-shares earmarked for mainland investors. The proposal is pending shareholder and regulatory approvals.

Bank of China  announced plans to sell U$5.8 billion worth of convertible bonds sometime back and we shall see if it needs more cash*.

AND Chinese banks, flush from record profits that were bolstered by a yearlong lending binge, are expected to face a business slowdown as Beijing tries to slow lending to keep the economy from overheating.

Full article from NYT.

Update

Industrial and Commercial Bank of China, the world’s largest bank by market value, and Bank of China, the country’s third largest lender by assets, are reconsidering previously announced plans to sell convertible bonds and new shares in Shanghai and Hong Kong, according to analysts and Chinese media reports. The banks might be under pressure from to sell shares through a rights issue to existing large shareholders and by selling more shares in Hong Kong than in Shanghai, as a means of stabilising the Shanghai market.

SGX: Private equity to the rescue?

In Uncategorized on 04/05/2010 at 5:16 am

Last week tuesday, we reported SGX’s boast that MNCs wanted to list here.

SGX had also (FT reported) said that it was also expecting a flow of listing applications for Asian companies controlled by western private equity firms.

“We are getting more inquiries all the time,” he said. “Many of the private equity firms . . . need to find an exit. It has been three or four years since many of these investments, so now is a logical time for them [to come to the market] … Singapore had identified “a strong pipeline” of potential initial public offerings from China.

Add to that, the Special Purpose Acquisition Companies’ (SPACS’) IPOs that SGX wants to attract here, and one reasonably suspect that private equity is being looked upon as SGX’s saviour from the mediocrity of a second class exchange http://atans1.wordpress.com/2010/03/10/obvious-why-the-pru-chose-hkex-over-sgx-bt/

A special purpose acquisition company (SPAC) is an investment vehicle that allows  investors to invest in private equity type transactions via a listed vehicle. SPACs have no operations but are listed with the intention of merging with or acquiring a company with the proceeds of the SPAC’s IPO. http://atans1.wordpress.com/2010/04/08/endangered-in-us-coming-to-sgx/

Note in the US, SPACs have been used to buy Chinese and Indian businesses, allowing them to get listed in the US.

Is GE Life fairly valued?

In Uncategorized on 03/05/2010 at 4:40 am

Based on friday’s closing price of $15.66,  GE Life is trading at  1.18x 2009 ‘s  Embedded Value (the sum of net assets plus the current value of future profits from existing policies) of $13.167 a share. I have argued that based on what PRU is paying for AIA, GE Life’s value should be unlocked by OCBC http://atans1.wordpress.com/2010/04/26/ocbc-value-to-be-unlocked-ii/

According to FT’s Lex, when an insurer is sold at  EV, this means it is assumed it will write no more new business, nor make any gains on its investments.  That is why most recent deals in mature markets have been completed at about 1.2 times – a small premium for control, for cost synergies, and for growth potential. The 1.69 times that the UK insurer is proposing to pay seems bullish, given that AIA’s two biggest markets by gross written premiums are Hong Kong and Singapore, already overrun by agents.

Then there’s the question of what the new owner will be allowed by regulators to keep. Some of the licences AIA holds were acquired decades ago, under old rules on foreign ownership. Factor in forced disposals, likely to be at multiples below 1.69, and the effective price for the remnants could become even higher. Korea Life, another insurer talking up an Asian growth story, recently went public at one times embedded value. Japan’s Daiichi Mutual, ditto, went at 0.6 times.

So if FT is right, the Pru is overpaying for AIA, and by implication GE Life at $15.66, is priced about right at about 1.18x EV. And that I talked nonsense about how much it was worth to OCBC, if sold.  If Pru’s shareholders vote against the deal, I talked rubbish.


Value investing at its best

In GIC, Temasek, Uncategorized on 02/05/2010 at 7:05 am

Buffett has a big stake in Goldman Sachs and the recent problems there had “experts” saying that he must have lost serious money. But no: the fall is gd for him, “Heads he wins, tails he still wins”.

FT reports:

In a surprising turn however, Mr Buffett, also explained that the travails at Goldman had been specific net positive for Berkshire, which bought $5bn of preferred shares paying a 10 per cent coupon at the heart of the credit crisis when Goldman was in need of additional funds.

Despite the roller coaster share price ride, Mr Buffett said that the headline challenges facing Goldman made it less likely that the bank would call its preferred shares. Those earn Berkshire almost $500m a year. If it the shares were called Berkshire would get $5.5bn back, but could only deposit that in low interest accounts earnings less than $20m a year.

“Every day that Goldman does not call our preferred is money in the bank,” Mr Buffett said. “Our preferred is paying $15 per second … so as we sit here… tick tick tick … its $15 in the bank. I don’t want those ticks to go away.”

If only the FTs, scholars and ex-SAF generals were quarter as gd, GIC and Temasek could make better returns, giving government more money to help the needy. They should realise, as FT’s Lex says, Funny how “once in a lifetime” opportunities roll around every few years or so.

Footie: Did you know?

In Uncategorized on 02/05/2010 at 5:36 am

Political divisions in Lebanon are  so deep and tensions are so high that football fans are not allowed to attend matches.The authorities fear that clashes between supporters of opposing teams could spill onto the streets and soon escalate into armed warfare.

Goldman Sachs, an investment bank, was considering buying ‘Pol.

That they developed a business model – however sketchy and premature Goldman Sachs would like us to think it was – based on the development of Liverpool’s new stadium should give hope to the club’s long-suffering supporters

..  it is revealing that a deal put together by a bank of that stature – and after so many failed attempts to resolve the financial problems at the club – still fell down because the price Hicks and Gillett were asking was too high.

SWFs’ big equities bets underperform

In GIC, Investments, Temasek, Uncategorized on 01/05/2010 at 6:16 am

Companies do badly after foreign sovereign wealth funds buy their shares, according to”Sovereign Wealth Fund Investment Patterns and Performance” by Bernardo Bortolotti, Veljko Fotak and William Megginson, reports the FT.

When an SWF invests, the target company’s share price often jumps in the days surrounding the investment, the research found, but over the following year or two, the share price significantly underperforms its peer group.

SWFs usually take significant stakes in companies – the median stake, according to the research, is 8%, the average 14% – and frequently buy the shares directly from the companies rather than on the open market. After two years, the average investment had lagged its peers by 10%.

“They’re giving cash to the companies and taking a large passive stake. All the literature shows this is a bad idea,” said Prof Megginson. The exception that proves the rule is the Norwegian Government Pension Fund, which makes small scale investments in publicly traded shares.

When its results are stripped out of the data, the negative impact of SWF investment looks worse, with an average underperformance of 13.55%.

The findings support the academics’ “Constrained Foreign Investor Hypothesis”, which predicts that foreign investors, particularly SWFs, will find it difficult to hold directors of companies to account because political considerations make them reluctant to antagonise management.

Political concerns may also deter them from selling shares in companies that are not performing according to expectations, removing another possible feedback mechanism that might improve the management of a company.

The underperformance that follows such passive ownership is a problem for other shareholders as well, said MrPeter Butler, chief executive of Governance for Owners.

“It’s the free-rider problem. SWFs are relying on other shareholders [being engaged owners] and holding directors to account. Either they get something for nothing, or nobody does it and the shareholders suffer,” Mr Butler said.

The new research will likely cause some debate, particularly as it flatly contradicts other studies that showed companies benefiting from SWF investment. Nuno Fernandes, professor of finance at IMD and a Lamfalussy research fellow of the European Central Bank, recently published a paper showing SWF investments led to a significant outperformance by the company. Prof Fernandes reported that further research led him to conclude SWFs were actually very good at monitoring companies where they had invested, as well as opening up new markets for the companies and helping them lower the cost of capital.

So Temasek and GIC be warned.

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