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Indonesia does DBS shareholders a favour

In Banks, Indonesia, Temasek on 01/06/2012 at 2:38 pm

By planning to allow financial institutions a maximum of 40% in an Indon bank (applicable only to new investors), the Indon central bank has blocked Temasek’s plan to sell its 67% stake in Bank Danamon to DBS Bank where it has a controlling stake.

On a day when banks (and other blue chips) are weak in local trading (UOB -1.5% and OCBC -0.5%) fact that DBS is only -o.6% shows that investors are not upset over the failure of the deal.

One reason is that institutional investors don’t like big “strategic” deals by their investments because they usually overpay and are prone to destroy shareholder value. Here while the price is decent, the issue of lots of new shares to Temasek is dilutive to earnings.

Ah well back to the drawing board DBS mgt to find a new driver for growth. Same too for Temasek’s financial enginners. The deal would have reduced Temasek’s direct exposure to Indonesia while increasing its exposure to DBS.

How times have changed since the late 70s (Moral suasion)

In Corporate governance, Political governance, Property on 01/06/2012 at 6:39 am
Someone wrote in to Voices as follows
 
Property developers countering govt policy
 
The extra stamp duty of 10 per cent was introduced in December to curb excessive foreign investment in private residential property. This cooling measure has failed. New private home sales last month were the strongest in nearly three years.One possible reason is the increasingly common practice by property developers to absorb the extra stamp duty as part of their marketing strategy, visibly offered as a carrot to potential buyers in their advertisements of property launches.If a government policy could be circumvented this easily, then it has lost its effectiveness. The Government should make it illegal for property developers to absorb any stamp duty.
 
In the late 1970s, never mind making it illegal for property developers to absorb any stamp duty: someone would call up the developers offering this deal and tell them that what they were doing was “not in the national interest”, and please scrap the offers. Developers would listen to the polite request to behave responsibly in obeying the spirit of the law rather than the letter of the law because no developer wanted the tax authorities going thru their books if they decided to follow the letter of the law.
 
How times have changed since when I started work. For the better or the worse in this instance, I am uncertain.
 
 

What the fall of Roman empire can teach the PAP

In Economy, Political economy, Political governance on 01/06/2012 at 6:13 am

(Or “Why group feeling is so impt” or “How times have changed since the late 70s (Worth of being a S’porean)”) 

Reading the u/m, I was reminded that Ngiam Tong Dow (Sparta, Athens and the Chinese imperial exam system) and the PAP (George Yeo and his mis-readings of history, one being why Venice did better than Genoa*) have used history to preach to S’poreans

First was the widening gulf between the social classes, rich and poor. When rich and poor start to live completely different lives this leads (then as now) to the poor opting out of the state. All studies today show that society is happier when the gap between rich and poor is reduced …

Widen it and you affect the group ethos of society, and also the ability to get things done through tax.

In the Roman West real wealth lay more in land and property than in finance (though there were banks) – but in the 300s the big land-owning aristocrats who often had fantastic wealth, contributed much less money than they had in the past to defence and government.

That in turn led as it has today to a “credibility gap” between ordinary people and the bureaucrats and rich people at the top.

Other strands in the collapse of the Roman West are more difficult to quantify, but they centre on “group feeling”, the glue that keeps society working together towards common goals. Lose that and you get a kind of nervous breakdown in the social order, which leads to what archaeologists call “systems collapse”.

http://www.bbc.co.uk/news/magazine-18159752

The growing inequality in S’pore society we know and bitch about, but the loss of “group feeling” is shumething “we see through a glass, darkly”.  We sense it but we have problems articulating this loss of group feeling. Symptoms of it are often ascribed as the problem. Examples: The

– unhappinness that male FTs (like PAP MP Puthu) have a free ride here because they don’t have to do NS;

–  resentment against the PAP government because it appears to elevate FTs to a higher status than locals; 

– resentment against one LKY who called S’poreans “daft”, who needed to be “spurred”,

are symptoms of this loss of group feeling, not the problems themselves.

The government is largely to blame for this loss of group feeling thru its strategy of keeping the economy growing by using FTs to keep wage costs down because otherwise the strong S$ would make S’pore an uncompetitive economy.  Its asset enhancement policy and forcing S’poreans to leverage to their foreheads to buy property, has it made it impossible for S’pore to have low economic growth without triggering serious problems for the PAP and S’poreans. Imagine all HDB owners having -ve equity on their flats?

The sad, funny thing is that the PAP government fostered the sense of collective identity through schemes like NS to strenthen its grip on power after S’pore was ejected from M’sia. Older S’poreans like me can remember the days when the government told us that we S’poreans were special, compared to the Indons and M’sians. Look at the M’sian and Indon Chinese trying to get in. Today, according to the then PM, S’poreans are “daft”, and need “spurring” (or is it to be “spurred”?).

Oh and as the extract showed, “group feeling” is linked to wealth inequality. The bigger the gap, the less “group feeling”.

—————

*Actually, I’m surprised that he didn’t put in down to the Venetians having a more authoritarian form of republic with power centralised in the doge). A rebuttal.

How times have changed since the late 70s (Dividends)

In Financial competency, Financial planning on 31/05/2012 at 6:03 am

No this is not going to be a piece abt the governing PAP.  When I first started work, US stocks paid big dividends , and local stocks yields were “peanuts”.

iShares offers its longstanding MSCI Singapore Index Fund and more recently rolled out the MSCI Singapore Small Cap Index Fund. Both funds are heaviest in financial stocks, at 45% and 51% respectively, followed by 24% in industrials for EWS and 13% in that sector for EWSS.

Singaporean equities tend to have high dividend yields, which are somewhat reflected in EWS’ trailing yield of 2.74%. The iShares Web site shows an SEC yield of 4.14% for EWSS, but the fund is too new to have paid any actual dividends yet. This compares to a dividend yield of 2.01% for the SPDR S&P 500.

Bending low: a journalistic skill that ST teaches students?

In Humour on 30/05/2012 at 6:12 am

When I saw the photo (B7 of today’s ST) that accompanied the headline “Students pick up journalism skills at ST camp”, I did a double take.

There was a huge photo of a young person crouching low, almost kneeling (OK, OK I exaggerate, but only a bit. I tot, ”Wow, what a revealation abt what happens at ST”. Err wonder if those allegations abt “sucking or licking bums and sexual organs” are true”?

Well turns out he was crouching to take a photo. Then I tot, bit like posture needed to promote nation-building, and constructive criticism of the government.

BTW, a gd source for gossip in SPH tells me that SPH is finding it difficult to recruit young, smart S’poreans as journalists despite a starting pay of above $3,000 a month. They are too ashamed to work for SPH. So SPH is recruiting young, smart M’sian Chinese and Indians instead. Why not go for PRCs and Aryan FTs? Apparently,they don’t blend into the local scene so easily. Given the anti-FT mood, they could be the subject of the news, rather than the reporting of it.

Facebook: Not in prospectus

In Financial competency, Media on 30/05/2012 at 5:30 am

With its share price falling, time to revisit its prospectus?

http://dealbook.nytimes.com/2012/05/17/facebooks-missing-risk-factor/?nl=business&emc=edit_dlbkpm_20120517

Facebook’s enlightened self-interest approach to running its business is highly unusual in corporate America and may in fact prove impossible to sustain over the long term.

So desperate to slime WP that say this?

In Political governance on 29/05/2012 at 6:50 am

In another of his meaningless analysis pieces, NMP Eugene Tan, wrote in Today abt the PAP and WP “will need to raise their game”. As usual I was skimming thru it on the off-chance that it would contain shumething I didn’t know, something interesting, or a valuable insight. Yup, pigs would usually fly first.

Well today there was this, ”The WP would also have to demonstrate that it does not seek special treatment and condone in what I call banal acts of lawlessness.”

Waz this I tot? Turned out to be,  ”[T]he WP did not end its by-election rallies on time and overran by 10-15 minutes … extremely challenging for the police to intervene to ensure that the rules governing the issue of the rally permits are observed.”

So very petty. Being more PAP than the PAP. If the police and PAP didn’t kick up a fuss, why should anyone else?

And then this, ”Further, in launching a stinging attack on the mainstream media for being a “political tool” of the PAP’s election campaign, the WP did not adequately substantiate its case.

‘Not only was this an attempt to capitalise on the by-election victory to make political points, the WP was also effectively asking the media for nothing but favourable coverage of its party and its candidates.”

Pls leh, WP doesn’t need to substantiate because it is so self-evident that SPH’s and MediaCorp’s coverage was so slanted. My observations on ST’s photojournalism. Another annoyed blogger who juz happens to be a grass-root activist in a PAP ward. I take his presence there as showing the PAP can change, or at least one MP is open-minded.

And this is the NMP who took on two PAP MP lawyers on the issue of prime ministerial discretion to call a by-election. As I wrote then, he was so out of character then.

Trying to move on to ST? After all, today’s ST editorial is pretty decent abt the WP. I could have said most of those things myself. ST’s standards dropping?

“Hank” makes LKY, Li Ka-shing and Warren Buffett look like wimps

In Private Equity on 29/05/2012 at 5:10 am
Maurice “Hank” Greenberg, the 87- year-old former head of American International Group Inc., plans to seek investors to help him fund private-equity deals lasting a decade or more. Starr Principal Holdings LLC, said it plans to raise money from institutional investors such as sovereign-wealth funds and ultra-high-net-worth family offices, without specifying how much.
 
 
He held a 12% stake in AIG valued at about US$21 billion as of March 2006. Sold most of his AIG shares for “peanuts” after the US government took an 8o% stake in AIG during the 2008 financial crisis.
 

Unexpected bad April nos. for S’pore, Thailand: M’sia to follow

In Economy on 28/05/2012 at 7:09 am

On Friday, the Economic Development Board (EDB) said April’s manufacturing output shrank 0.3%  from a year ago, after a revised 3.1% drop in March.

This poor showing surprised economists, whose consensus forecast was for manufacturing to grow 4.1%  and could not be blamed entirely on the 7.6%  fall in volatile pharmaceuticals output. The poor showing is because of falling demand from key markets such as Europe and the US especially for electronics.

Thailand has reported a surprise fall in its exports for April because of falling demand from key markets such as Europe and the US. Shipments fell 3.7% from a year earlier. Many analysts had forecast an increase of more than 3% http://www.bbc.co.uk/news/business-18203209. Remember that Thailand has replaced S’pore as the world’s manufacturing hub for hard disks.

Expect weak manufacturing numbers for M’sia.  It too is a big manufacturer of electronics for export. And Najib is planning an election later this yr.

Hougang: Only up to a point Lucky

In Political governance on 28/05/2012 at 5:27 am

(Or “WP must walk the walk on manifesto, not juz talk the talk”)

Ah so the WP got 62.1% of the popular vote in Hougang, a 3%age point drop from what the WP’s rutting stag achieved: statistically insignificant.  As Yawning Bread put it, “Png’s vote-share was only a shade lower than the 64.8% that Yaw Shin Leong won in the general election of 2011 and hardly different from Low Thia Khiang’s 62.7% in the 2006 general election.”

So let’s move on, shall we?

I agree with Lucky Tan when he wrote, “Vote for PAP men like Desmond Choo and he will fix the little pothole in your estate but you will find yourself unable to retire and financially strained when you get sick.”

And while Png and, Low and the WP are capable of looking after Hougang as well, if not better, than the PAP, I’m not so sure if the WP will be any better when it comes to helping S’poreans retire or coping with the costs of health care, if WP comes into power by itself, or in coalition.

While I disagree with DPM Teo’s comments on Png not being gd enough to be selected as NCMP so why shld voters “gift” him a seat as MP; on Png’s  character; and that the WP took the people of Hougang for granted (WP has “Always been there”even  before Desmond put on long pants), he has some gd points abt WP’s policy flip-flops: his rant below.

In addition to the flip-flops on the benchmarking of ministerial salaries, FTs, and agreeing to the Budget (I didn’t realise all the WP MPs voted for it despite bitching abt it both before and after), the WP has quietly ditched its manifesto call to privatise public transport. In effect, it now agrees with the governing PAP that the current rojak system is the “betterest”. This flip-flop when S’poreans know that the current model ain’t working, and want something better; when the government while talking the talk on the efficency of public tpt being in the private sector*, is pumping $1.1bn and more into the system; and when the WP had tot up of an alternative, long before anyone tot there was a need.   

What else will the WP quietly ditch, and which will not be in the interest of the governing PAP to alert tell us to? Neither party wants to talk abt public tpt nationalisation. The governing PAP wants to avoid it because it would show that it had one dud of a multi-millionaire minister (Raymond Lim) and because it would show that the PAP can do dumb policies. As to why the WP doesn’t want to talk abt it, yr guess is as gd as mine? Maybe it was the price that the WP had to pay to ensure that PM called a by-election in Hougang?

 Or is it a concrete example of what Low said,”Workers’ Party will move on from this election and work together with the ruling party for the betterment of Singapore.”

Be afraid, very afraid of a WP sell-out, when it sniffs power.

So the WP should start showing us that that manifesto calls are to be adhered to or openly dropped, not quietly ditched, and that it will be more open and transparent when it comes to communicating with the public on its internal affairs. Otherwise the 2016 GE will be like the 1996 GE, when voters threw out two SDP “bums”, showing that 19991 was a false dawn. I don’t want another false dawn; I’m in my late 50s.

———————–

Excerpt from Today’s report on DPM’s rant:

Citing the issues of ministerial salaries and foreign workers, Mr Teo, who is also the PAP first assistant secretary-general, questioned the WP’s flip-flop on national issues.

He said: “The WP had previously argued for less foreign workers, but in the recent Budget debate in Parliament, it suddenly changed its mind. The WP now says we should not reduce foreign workers in several major sectors, major industries.”

Mr Teo also noted that the WP had spoken “loudly and fiercely” on ministerial salaries at the election rallies just last year. “But in Parliament this year, they quietly abandoned their position. They gave up their previous drastic proposals, they didn’t explain why,” he said.

Referring to WP chief Low Thia Khiang and party chairman Sylvia Lim, Mr Teo added: “Their top two leaders remained totally silent throughout the Parliament debate.”

Members of Parliament (MPs) from the WP had also unanimously voted for this year’s Budget and “agreed with the (Government’s) measures and programmes” for the year, said Mr Teo. “But now on the rally stage, they’re posturing, making criticisms.”

“Are they changing the tune again, doing the twists, playing their guitars, and singing songs which will give them the most appeal to the audience? But are they speaking honestly – honestly for the good of Singaporeans?”

*Despite Temasek owning 54% of SMRT, and a stat board being the single largest shareholder (12%) in ComfortDelgro.

Temasek: the gd, the bad and the ugly

In Energy, Temasek on 27/05/2012 at 9:27 am

Ang  moh financial commentator says nice things abt Temasek (Bang yr balls SDP, Chris Balding, KennethJ and TRE. I hope TRE reflects that its heloo TJS has never said the nasty things that the others have said abt our SWFs. In fact by saying that S$60bn is “small change”, he implies that they are doing a gd job. But how would he know? He was in the loop over 20 years ago.)

http://blogs.reuters.com/breakingviews/2012/05/09/temaseks-triple-personality-bodes-well-for-returns/

As I said yesterday, our SWFs didn’t do extractive industries presumably because one LKY didn’t understand “miners”, he said a few yrs ago. Gd advice: given this (credit downgrade) a few weeks ago;  and this (billionaire stalker of underperforming US cos) revealed yesterday that he had bought a 7.6% stake in Chesapeake Energy Corp and called for the natural gas producer to replace at least four directors, saying the board has failed “in a dramatic fashion” in its oversight of management).

The background and details on Temasek’s stake: http://www.tremeritus.com/2012/04/29/temasek-flops-again/

Maybe, balls-up like this resulted in Temasek last week naming Boon Sim, former global head of mergers and acquisitions at Credit Suisse Group AG, as its president for North America. He will also work closely with teams to support its interests in Latin America and Europe.

Temasek … said it expects the markets to enter a “period of stress” for the next one to two years amid the European debt crisis, adding risks to investments http://www.bloomberg.com/news/2012-05-22/temasek-says-markets-entering-period-of-stress-in-next-2-years.html.

Thai energy explorer outbids Shell in East Africa

In Energy on 26/05/2012 at 6:29 am

 The oil and natural gas exploration company Cove Energy has accepted a $1.91 billion takeover offer from PTT Exploration and Production of Thailand, which trumps a rival bid from Royal Dutch Shell.

http://dealbook.nytimes.com/2012/05/23/ptt-outbids-royal-dutch-shell-for-cove-energy/?nl=business&emc=edit_dlbkpm_20120523

Our SWFs didn’t do extractive industries presumably because one LKY didn’t understand “miners”, he said a few yrs ago, explaining why GIC didn’t go into miners in a big way to ride the commodities boom.

With ex-general, scholar at helm, NOL still underperforms Maersk

In Shipping on 25/05/2012 at 10:12 am

I was looking forward to comparing the 1Q results of NOL (world’s 6th largest container shipping co) and Maersk’s container division (largest in the world) because as a holder of a few NOL shares (“peanuts” but gd yield) I was interested in seeing how ex-defence chief Ng Yat Chung (and ex-Temasek senior MD) would perform. Mr Ng took over as CEO on I January 2012. He was made made executive director in April 2011. The retired CEO, a shipping man thru and thru, is now an adviser to the CEO.

At the time I asked, “Wonder what relevant experience he brings to the shipping co? I can only think of the experience in a managing big complex organisation. But then I couldn’t think of any reason for his becoming a senior MD at Temasek.”

Well NOL, and Maersk’s container division both came out with unexpectedly very bad sets of results, showing that the container shipping industry is in worse shape than expected with a weak global economy, expensive fuel and plenty of capacity coming on-line.

But NOL’s numbers were still worse than Maersk despite its focus on moving stuff between East Asia and the the US. Maersk also moves a lot of stuff to from East Asia Europe, in addition to the US.  As readers will know, the US economy has performed better than the European economies in 1Q 2012.

Maesrk’s revenue was up 7% to US$6.31bn, while NOL’s revenue fell 3% to US$2.38bn. As to losses, NOL lost US$254m, while Maesrk lost US$537m. Simplisticly, if Maesk had NOL’s revenue, it would have lost US$203m, i.e. 20% lower. But then along the same lines, NOL shld have made money, not lose money (US$10m) in 1Q2011.

Whatever it is, having a scholar, ex-senior MD from Temasek, and retired general as CEO of NOL, is of no benefit whatsoever when it comes to shareholder value. SIGH.

Let’s hope it’s different in the cabinet, where we have as newbies one ex-admiral and one ex-general, both of whom are scholars.

Maybe relevant, related post?

http://atans1.wordpress.com/2012/05/11/smrt-mgt-failures-what-does-it-say-abt-saf/

Will Hougang make the PAP moan the inflation blues, not joke abt it?

In Economy on 25/05/2012 at 5:41 am

(Or, “Isn’t high inflation and misrepresenting its effects a local issue, Desmond, Tharman & PM?”)

Update on 27 May: The PAP are singing the blues! Gd for you 62.1% of voting Hougangers))))

Should rich kid Tharman (he from ACS) and poor RI  boy, but now multi-millionaire, Hng Kiang (The model examplar that ministerial performance is irrelevant so long as the voters don’t get too upset?) be punished by the voters of Hougang for their tasteless jokes on inflation? Latest stats: inflation at 5.4% (even higher than March’s 5.2%)

Deputy Prime Minister Tharman had said the “average Singapore” will not be affected by the high inflation after the latest set of Consumer Price Index (CPI) figures for March was announced only http://atans1.wordpress.com/2012/05/03/telling-coc-jokes-ministerial-coc-needed/.

Minister Lim Hng Kiang when explaining in Parliament why most of  will not be ‘directly’ affected by inflation said, “The two largest contributors to CPI inflation are expected to be imputed rentals on owner-occupied accommodation and car prices. Together, they will account for more than half of the inflation this year. As the majority of resident households in Singapore own their homes, they do not actually incur rental expenditure. Likewise, the majority of resident households will not be directly affected by the rise in COE premiums as new car buyers make up a small proportion of all resident households. “

And a few years ago, when the price oil rise was leading to higher inflation, he recommended that people switch to “cheaper” brands, as if people don’t know that already.

According to Jentrified Citizen: Every average person whom I have talked to from the aunty who makes my favourite teh tarik to the taxi-driver say that they are feeling the pinch of inflation every single day. Most Singaporeans who pay their own bills would know just how hard inflation has hit them. The list of prices increase seems to get longer every day – the infamous housing and car/COE prices, the higher charges for public transportation (yes including taxis as they are a commonly used form of public transport),  petrol, car-parking, healthcare, vitamins, medicine, groceries, food and electricity and water bills.

They are not trying to be comedians, I think and hope.  Trying to be fair to them, their comments show the difficulty of representing complex arguments over policy in terms that average voters can get their heads around. Problem is that they are so out-of-touch that they end up insulting our intelligence.

But I’m sure by DPM Teo’s, extremely high standards (DPM, Png made “an honest mistake”, he is no lawyer or scholar, juz one of the “little people”, so a little inaccuracy is surely acceptable?) , they would not be men of intregity, if they were not PAP cadres and leaders.

United Engrs and Desmond Choo

In Financial competency, Humour on 24/05/2012 at 9:02 am

When a stock is at a deep discount to RNAV, there are always some hard-core lovers whose love is never returned: bit like Desmond Choo’s love for Hougang voters who rejected him decisively in 2011 and who will reject him again soon.

http://sgstockscreener.blogspot.com/2012/05/united-engineers-outperform-by-cimb.html

What I wrote abt CIMB’s love for it in 2009

http://atans1.wordpress.com/2009/12/17/the-perils-of-buying-on-nta-calculations/

United Engrs is another tan ku ku stock like Haw Par. Except that the controlling shareholder behind Haw Par is the Wee family behind UOB. Behind United Engrs is Ms Chew Gek Khim. Her track record is unproven, her bet on Straits Trading has yet to pay off. Her chief claim to fame is that she is the granddaughter of Tan Chin Tuan (Tony Tan’s uncle), a mythical figure in local business.

I mean she could turn out to be like Yaw, disappointing investors, rather than the people of Hougang.

Hougang: Random Tots & Facts

In Humour, Political governance on 24/05/2012 at 6:16 am

Wonder why Bill Ng, chairman of Hougang FC, the “Cheetahs” aka the “Hougang Hooligans” (youth team fought with SAF youth recently reinforcing club’s rowdy branding) is not endorsing either candidate? Endorse PAP and get money but lose supporters, endorse WP and Hougang Stadium will be off-limits. BTW, A S’pore family trust is part of the consortium that won the bid for Glasgow Rangers. Bill Ng’s family trust? He is part of the Ong family of stockbrokers (maternal side unfortunately for him).

Wonder if voters will remember that from 1991 to polling day in 2006 GE, the PAP were not “Always there for you”. In fact, it was trying to turn Hougang into a slum whose inhabitants would repent for voting WP. Remember one’s GCT’s threats in 2006 GE campaigning?

We might as well ask the PAP to account for why, if it felt Mr Desmond Choo was such a good candidate, was he not roped into a GRC team and allowed to enter Parliament by riding the coat-tails of a cabinet minister, Ng E-Jay, Sgpolitics.net. Taz why WP was so dumb to respond in way it did to DPM Teo. Shld have left it to “inhabitants of cowboy towns”.

Anyway no harm done, even if WP “malfunctioned” Wonder if TKL, KennethJ, GSM and Lina Chiam were sacked from PAP campaign team, and they “moved on” to WP?

Hope you eaten the free teochew mui. Might no longer be available from this Sunday.

Saw ST’s photo of Png “the dummy” between Low and Sylvia in Wednesday’s ST. A gd explanation why ST has reverted to “PAP is S’pore, S’pore is PAP” mode. Writer is a grass-root activist in Taman Jurong. With a  grass-root activist like him, the PAP does not need enemies.

Three cheers for Eric Tan who came out to say that Png told him before meeting to choose NMP NCMP that he didn’t want post. Credible witness to rebut DPM Teo’s rants on Png’s untruthfulness as he bears no love for Low and other CEC members. He resigned in a huff when he was passed over as NMP NCMP. Low has admitted indirectly that he had promised Eric his support for post by admitting he changed his mind. Eric was team leader in East Coast GRC, and is a friend.

I don’t think that DPM Teo realises that his nitpicking and parsing of Png’s words shows the gap between Teo the scholar and rich kid (dad was a senior bank executive at OCBC who helped me, and who later became CEO*); and Png, the ordinary S’porean. A scholar always chooses his words carefully, like a lawyer, accountant or banker: while the non-scholar uses words more casually, like most of us “lesser mortals”.

——

*and chairman (updated)

Private equity in Asia: Chasing investors

In Private Equity on 24/05/2012 at 5:10 am

Fifty-three funds were attempting to raise a total of $22.3 billion to invest exclusively in Asia as of April 2012, according to data compiled by Preqin Ltd., a London-based research firm.

Northern ASEAN: Dark clouds threaten the sunny weather

In Emerging markets on 23/05/2012 at 7:09 am

Thailand’s recovering from late last yr’s floods. GDP up 11% Q on Q. http://www.bbc.co.uk/news/business-18141171.

But inflation is a problem that the govmin is trying hard to solve, not make sick jokes* like our finance and trade ministers (also governor and deputy governor of central bank). But then if Thais get angry, they riot, not juz bitch anonymous online abt it.

(BTW, the int’l manufacturing hub hard disk drive industry is now in Thailand http://www.bbc.com/news/technology-17299249. It was once here.)

Money will pour into Burma but the country is ill-prepared to cope with the resulting floods http://blogs.reuters.com/breakingviews/2012/05/18/myanmar-must-brace-for-post-sanctions-cash-deluge/

——–

*Because more than half of the headline inflation rate of 5.2% came from higher COEs for cars and the effect of higher market rent on houses, most S’poreans would not be affected by inflation. The vast majority of Singaporeans who already own their homes and are not buying new cars would not feel the effects of these sharp increases. And the increase in prices of daily necessities and essential services such as food and clothing have actually been much more moderate at 3% or lower.

PngGate: Nothing more than a distracting sideshow

In Political economy on 23/05/2012 at 6:37 am

Ah so, so selling one’s soul is pointless. The person who leaked the WP’s minutes of meeting which showed that Png had misrepresented when he said he had removed his name from the ballot must be banging his balls in frustration. Png and WP cocked-up in the handling of DPM’s Teo comments abt Png, but thaz abt all. I doubt this would affect the voters views, even though the constructive, nation-building media (see today’s ST) is bitching about “dishonesty”, being more PAP than DPM Teo.

I have a shrewd guess on who leaked it. His hatred of Low has perverted the character of a decent, fair chap, turning him into a “I hate Low” zombie. I wish him a speedy recovery from his fixation.

On a separate issue, what I found most interesting abt the minutes was that it showed that Eric Tan had decent support for his bid to be NCMP but that GG had more votes. So Eric had supporters on the central executive council who appreciated his hard work and wanted to recognise his efforts. And not all the WP CEC members are cold, rational, calculating machines (Let’s face it, even as Eric’s friend, I think that giving the post to GG was in WP’s long-term interest, and still do despite GG’s “C-” performance in parly), or Low’s acolytes.

Back to Png and WP. WP has “malfunctioned” again, despite, or because of, having three lawyers as MPs. I hope the WP starts repairing and oiling its machine ASAP before something serious happens like getting disqualified in an election (2001). Both in the handling of YawGate and PngGate it made silly, avoidable mistakes. WP needs to get the machine to function as it did in 2006 (Garbra Gomez’s antics notwithstanding: BTW he took responsibility for the 2001 mess-up) and 2011 GEs.

Update

Nice to hear that Eric Tan has confirmed that Png told him before meeting that he didn’t want NCMP post.

Euro crisis R perpetual securities & our local banks

In Banks, Financial competency on 22/05/2012 at 9:45 am

(or ”The next, next disaster for retail investors & DBS”)

While reading this , I saw Calvin Yeo’s reply to a question on why corporates were issuing perps

 … one reason is to diversify the sources of funding. Another reason is that the market cannot withdraw the financing facility like the bank can in a credit crunch. Investors also have generally less bargaining power than the banks, so it is harder for them to take action against the issuer or place restrictive covenants. As you see, the terms of the bond are drawn up by the issuer rather than the lender. For most loans, banks tend to be the ones giving the terms of the loan.

Another main reason is that banks don’t normally issue perpetual loans, you would have to issue perpetual bonds or preferred stocks for that.

On the issue of diversification, most European banks have been cutting back their lending outside their home markets because they are shrinking their balance sheets to meet the new capital rules. No-one wants to invest in them (on terms acceptable to the banks) because of the Euro crisis.

In Asia, the French banks (like Soc Gen, BNP and Credit Agricole) were once very big USD lenders, the currency of choice, to corporates. They have now withdrawn*. So corporates that used them, now have to find other lenders. Seems to have found a new source of suckers in the retail mkt here.

See related post on central bank’s concerns.

Asian banks (including our DBS, OCBC and UOB) are increasing their USD lending to these corporates as the European withdrawal have improved USD lending margins (the Frogs were very, very aggressive) .

Let’s hope DBS doesn’t get too aggressive in USD lending. Not concerned by OCBC’s and UOB’s increased lending (I own Haw Par shares as partly as a play into UOB). They have conservative controlling shareholders and mgt (I’m assuming the newish CEO of OCBC is as conservative as O’Connor**). Can’t say the same abt the cowboys at DBS and Temasek, though DBS’s chairman and CEO have reputations as conservative bank executives. The Bank Danamon deal shows otherwise in my view.

——

*But European banks still have lots of exposure to S’pore or rather the other way round. See chart in http://www.zerohedge.com/news/why-stability-stalwart-singapore-should-be-scared-if-feta-truly-accompli. Nothing to worry abt as most of this exposure is not to locals because it’s offshored in turn. Do remember that S’pore is a major global financial market.

**Anyway someone in OCBC is a tough taskmaster. O’Connor earlier this yr said that working in OCBC for 10 yrs felt like 40 yrs. No wonder Tony Tan and Yong Pang How (remember him?) preferred to be cabinet minister and chief justice respectively. And remember O’Connor was from Citibank, not known for its relaxed style.

Hougang: ST photo coverage

In Political governance on 22/05/2012 at 5:35 am

Don’t know whether you noticed, but ST has, in my opinion, a very subtle agenda in its photo coverage. Practically every photo of Desmond Choo shows him with “lesser mortals” (i.e. the “little people” he, and his bosses, claim he (and they and the PAP) wants to help. But when it comes to Png, the photos are a mixed bag. Quite a number show him with party leaders. There was one that showed him in the background, clearly visible, but in the foreground was Low. And to make it worse for Png, there was beside it, a big photo, of Desmond Choo with a “lesser mortal”: Png is Low’s proxy but Desmond cares for the people seems to be the message.

And on Sunday, there was a photo of Desmond, friend of the “little people”, juxtaposed with one of a “triumphalist” Png waving to WP supporters with party leaders in the background.

All in all ST is getting more subtle. Remember in 2006, it was caught “fixing” a photo on the size of the crowd at a WP rally. It was Alex Au who pointed out that the shot gave a misleading impression of the size of the crowd.

As for Today, its photos of Desmond also tend to show him as “Desmond the compassionate, caring”. But there isn’t the attempt to paint Png as a Low’s “proxy”.

Buy yen: pros & cons

In Japan on 21/05/2012 at 6:04 am

“The idea that the yen is a safe haven is about the most unsafe safe haven I’ve ever heard of. This is a country whose fiscal arithmetic makes Greece look like Switzerland,” independent strategist David Roche told CNBC.

But Eisuke Sakakibara, Japan’s former vice finance minister, also known as “Mr. Yen” said that while it was true that Japan’s government debt was 180% of gross domestic product, its household financial assets were about 240 percent of GDP.

“We will not have a financial crisis for another four-five years”.

While many “experts” say the market was likely to try to push the yen higher to test the Japanese authorities’ willingness to intervene, as the Swiss central bank did when it believed the Swiss franc’s strength was hurting exports. But Sakakibara said Japanese exporters could survive with a yen around 80 for the dollar and 100 for the euro, and only if it appreciated in the low 70s or 60s against the dollar would it become a problem.

“I don’t think it will go down to 72, but it is likely that the yen-dollar rate will go into the 70s and probably will hover around 78, 79 for a while and that wouldn’t be a major blow to the Japanese exporting companies,” he said.

“Japan is a much bigger country than Switzerland and we cannot do what Switzerland has done,” Sakakibara said, adding that intervention was unlikely to take place at the rate of 78-79 to the dollar but only if the yen goes as high as 72.

Heck, still to S$.

More bad news for Noble, Olam and Wilmar

In China, Commodities, Logistics on 21/05/2012 at 5:48 am

The FT reports that Chinese importers are requesting trading houses to defer shipments of commodities. Sometimes they have broken agreements by refusing to accept deliveries.

Commodities specifically mentioned are iron ore and thermal coal (Noble’s specialities), cotton (Olam speciality) and soyabeans (Wilmar is world’s boiggest crusher). No wonder the price of these stocks keep weakening.

BTW, until I read below, I didn’t realise Noble is a big player in coffee and cocoa (but revenue is “peanuts” compared to iron ore and energy).

http://seekingalpha.com/article/572831-commodity-trading-firms-bunge-and-noble-offer-investors-good-value

LOL: Expelling Yaw “took courage”

In Political governance on 21/05/2012 at 5:33 am

Well if that is how Low wants to spin it, then I’m putting him into the same category as Tharman and Hng Kiang who tell us that 5.2% inflation doesn’t affect us “lesser mortals” because we don’t rent apartments or buy new cars.

The WP expelled Yaw because he was becoming a liability to the WP and, in particular, to Low his mentor. That doesn’t require courage: only selfishness and self-preservation.

And he became a liability because of the cack-handled way the WP handled the allegations of his rutting. When the rumours became public instead of either coming out to say that the matter was a private one (and thereby incurring the anger of the moralists*) or saying that the WP was investigating the matter, the WP opted for stonewalling silence and evasion (Examples**). This from a party that fought a general election on the need for transparency, openness and accountability, and the need for a first-world parliament.

When the noise got extremely loud, the WP announced Yaw’s expulsion from the WP. Low explained, “[A]lmost a month had passed between the first media allegations and the WP’s decision to expel Mr Yaw Shin Leong. Mr Yaw continued to remain silent on the matter, and refused to account to the WP Central Executive Council (CEC). The WP had no choice but to invoke clause 22(a) of the WP Constitution to expel him.”

This reduced the noise considerably, as otherwise rational netizens, and the usual WP and Opposition groupies rushed to blog that the WP was “whiter than white” or at least “whiter than the PAP”. And that Low was a strategist, the equivalent of Mao, Sun Tzu, Sun Pin, Chuko Liang or Fan Li. (One of these days, I’ll blog on why Low is not a great strategist. But I’ll wait until he is riding the crest of a wave again: if the WP retains Hougang with a 70% majority.)

When ex-PAP MP Ho Kah Leong bitched in Lianhe Zaobao’s forum page that Low should take responsibility for the matter,instead of his usual silence when attacked (remember his silences in parly when asked to state his views on certain issues), Mr Silence became Mr Chatterbox, replying, “Even though I was familiar with Yaw Shin Leong’s background and I have met his family and attended his two wedding ceremonies, I have no way and no authority to inspect his private matters and personal life. I am a Member of Parliament, not a private investigator! Ho … said I should take responsibility for the Yaw … saga. May I ask how I should take responsibility?”.

Well he may not be a “private investigator”, but having worked with and mentored Yaw for many a year, he has to accept the responsibility of being partly responsible for choosing Yaw to defend Hougang for the WP. He also has to accept part of the responsibility of the WP’s stonewalling silence and evasion. Finally as leader of the WP, he has to accept responsibility (albeit partially) for a systems failure. “The Workers’ Party has a system to select its candidates,” he said, so that Yaw could become a candidate shows some flaw in the system surely? PM is right to point this out, though much gd that would do to help Desmond Choo’s campaign.

All in all, Low’s performance was less than satisfactory, and he should juz “shut up and sit down”, not try to spin it to his or WP’s advantage.

Especially as no lasting damage has been done to him or the WP. Certain ex-WP members were crowing abt Low’s imminent fall. They are now banging their balls in frustration.

They underestimated the goodwill he has from S’poreans, even from critics like me (Even I have said nice things about him). It will take a lot of mistakes to make him lose that goodwill. S’poreans will readily forgive him, or give him the benefit of the doubt. Remember, S’poreans were very forgiving of the PAP, when they perceived it as the equivalent of a bad-tempered and mean hawker who sold delicious food at very reasonable prices, while giving his enemies food poisoning that sometimes hurt accidentally an innocent customer. Even after the food ceased to delicious or good value, S’poreans supported the PAP. In economics, this is called “stickiness”. Low now has stickiness.

——-

*But the WP would be tapping a new source of voters: the New Paper recently reported that 20% of Singapore women cheat on their husbands based on a survey done recently. And as Lucky Tan said, “For husbands the number is likely to be worse – you can take the 20% and double or triple it.”

**

– “if it is rumours …” (Yaw),

– “You said yourself that these are rumours, why are you still asking me?” (Low himself), and

– “We have to think carefully about our response” (deputy treasurer of the WP, a Mr Png).

These comments left me wondering if the Law Minister had been moonlighting after his pay cut, or if MP Baey’s PR firm had been advising the WP.

I/C security: Dumb, non-answer from govmin agency

In Humour, Political governance on 20/05/2012 at 9:29 am

“The national registration identity card (NRIC) is an important document used for identification purposes. NRIC holders have the responsibility of safekeeping their NRICs and the information on it to avoid being potential victims of crime.”

What the FISH!

Same agency (or is it its predecessor?) also says that when companies etc ask for our i/c or the i/c’s number, it’s contractual, nothing to do with the government. But given that every business wants i/c number for anything (even for lucky draw) , and every security guard and dog, requires us to provide the i/c to enter “secured” premises, how can ”NRIC holders have the responsibility of safekeeping their NRICs and the information on it to avoid being potential victims of crime”, Koh Wee Sing, Head, Public & Internal Communications, Corporate Communications Division, Immigration & Checkpoints Authority, pray tell us?

Maybe he is practicising to become a PAP candidate MP at the next GE? Remember Kate Spade, and “Fool me” Foo and Puthu the FTs? And Tharman, and Hng Kiang and their tastless jokes on inflation?

Friend who was from ST and MediaCorp who joined the PR industry (Yup, he has been always working for the Dark Side despite protestations that he is an idealist and do-gooder) and while in PR worked on stat board accounts, told me that it takes 25 drafts to finalise a media release and the result is always as per first draft prepared by the stat board. What a waste of money.

SMRT: OCBC further justifies its “Hold” call

In Infrastructure on 20/05/2012 at 5:16 am

Remember that with the exception of JP Morgan and OCBC, all other brokers are calling a “sell” on SMRT. Only Morgan And OCBC were SMRT bulls.

Share price has held steady since results

As for SMRT’s share price, it has held steady despite initial selling pressure following its weak FY12 results, and has managed to outperform the FTSE STI Index over the past two and a half weeks (-0.9% vs. -5.3%). While the COI continues its public hearings, we deem the possibility of further sharp sell-offs to be remote as SMRT services and its operational cash flows remain in demand and resilient.

Maintain HOLD

We reiterate our belief that SMRT will not have difficulty addressing its higher capital outlay requirements given its existing net cash position and available MTN programme, and leave our conservative 60% PATMI dividend payout ratio estimates unchanged. Maintain HOLD with a fair value estimate of S$1.71.

http://yieldstocks.reitdata.com/2012/05/17/smrt-ocbc-3/

Hougang: PAP, scared huh?

In Humour on 19/05/2012 at 7:06 am

I juz read that the PAP has not yet announced rally dates, and that Desmond Choo said he would announce his rally dates “in due course” and he would have “as many as needed”.

Juz wondering if PAP scared that no-one will turn up, and that ST cannot help “fix” the pixs of the rally crowds.

Now this is going to cost the PAP dear. “We see ourselves as a multicultural Hougang. It’s not going to be just a Chinese place, a Teochew place, it’s a place for everyone to be in,” said Choo. The Teochews in Hougang, or so I’m told, see it as Teochew land, though they have no problems with other Chinese or races living there.

And the other dumb thing was that he said it to a Malay audience (7% of Hougang) who turned against the PAP in 2011, costing the PAP Aljunied, despite the PAP promising to make aMalay jnr minister standing in Aljunied, Parly Speaker if PAP won Aljunied.

He shld have tried an Indian audience, given the prominence that TOC has given to allegations by an ex-WP MP candidate that Sylvia Lim made an anti-Indian remark. The WP denied she made the remark and even our constructive, nation-building local media reported the denial. Not so TOC. It followed up the initial statement by said Indian by another statement where, among other things, he said that he did not accuse the WP of being racist. Right, and he is as white-skinned as a Chinese beauty from Suchou.   

Keep us entertained Desmond.

Call me: Software powers a Philippines success

In Emerging markets on 19/05/2012 at 6:22 am

(Or “Why the Philippines is the country to watch”)

Last year, with more than 600,000 call centre workers, the Philippines officially overtook India as the world’s call centre capital.

If you phone up to book a flight, buy a theatre ticket or complain that water is cascading out of your washing machine, you’re now more likely to speak to a Filipino than an Indian.

The Philippines has a number of obvious advantages when it comes to call centres. Wages are low and most Filipinos speak English in an accent which, given the American colonial influence here, is easy for US customers to understand.

Filipinos also pride themselves on being approachable and friendly – a trait which is essential for speaking to strangers on the phone every day.

But its also high tech software that plays a big part.

http://www.bbc.co.uk/news/business-18061909

But the Filipinos are ambitious. Going for Business Process Outsourcing

The Philippines may have more call centre agents, but India still has more BPO employees – and every year a great proportion of them work in the more lucrative and more skilled non-voice-based services.

Looking at the returns, it’s easy to see why the Philippines wants to follow India down this route. In 2010, India’s overall BPO revenue was $70bn, compared to just $9bn in the Philippines.

A move away from voice-based services will need more staff, more training and more hardware.

But Jojo Uligan, head of the Contact Center Association of the Philippines, is bullish about the future.

His projections show the Philippines more than doubling its BPO employees by 2016 – from about 600,000 to 1.3 million people. Take this projection with a latge pinch of salt, Filipinos love to talk big. But the trend is right.

Hougang: Why PAP’s sliming will widen its losing margin

In Humour, Political governance on 18/05/2012 at 5:46 am

(Or “Is TKL, GMS or KennethJ running the PAP’s Hougang campaign?”

PM set the tone of the PAP’s campaign by saying in his prime ministerial statement* announcing the by-election: In January this year, news surfaced of personal indiscretions by Mr Yaw … The WP first kept totally silent, then supported Mr Yaw, and then three weeks later suddenly expelled him from the party. Until now the WP has not given Singa­poreans a full and proper account of what happened, or why it acted in this way. Mr Yaw …  has said nothing, either to explain or to apologise for his behaviour, and has reportedly left the country. Both the WP and Mr Yaw have let down all those who voted for him.

He is factually correct but being factually correct will not convince any of the 65% of voters who voted WP in 2011 to vote PAP. It might even cause some of the 35% that voted PAP to vote WP. In the days before new media, with the constructive nation-building local media parroting the theme of  WP “letting down” the voters, PM’s sliming would be effective.

But this is the age of Web 2.0 and anti-PAP netizens are reminding other netizens of the  following points and netizens who are not PAP friendly (the vast majority) will likely use these as talking points when conversing with their less internet savvy parents and other relations, and friends:

– The PAP too has “black sheep” MPs who “let down” voters. These  include ex-ministers Tan Kia Gan, Wee Toon Boon and Teh Cheang Wan. Then there is a Malay MP (whose name escapes me) and Desmond Choo’s uncle (and his “inspiration”)

– Choo Wee Khiang, Desmond’s uncle is a “let down” par excellent:

  — while a PAP MP, he was suspended from his golf club for intentionally hitting a golf ball at a flight in front of his group;

  — then he said in parly there were too many Indians in little India that he needed light for which he was censured by parliament;

  — in 1999, he was charged, convicted and jailed for cheating; and

  — he is again being charged. When president of Singapore Table Tennis Association, he is alleged to have committed three counts of corruption and one count of criminal breach of trust.

(And Goh Chok Tong asked us to forgive him and “move on”? Presumably because he was a PAP MP?)

Despite this really black track record, he is a role model for Desmond, ”He has always been a source of counsel … About his past, that’s history, we look ahead. Whether that has stopped him from being an inspiration to me, never”.

–  One can reasonably make out the case that Desmond Choo’s uncle will inspire him to “attack” other golfers, make racist comments and cheat people. Perhap’s Desmond’s pledge ”to be a ‘independent and objective voice’ for residents in Parliament if elected – even if it might mean differing from the government” was inspired or counseled by uncle Choo the cheat? There is such a thing as the party whip? And that he would make sure Hougang remains intact “as long as I’m here”. How can he promise this when he is not a senior PAP leader? Now, “So do not mix up the democracy part with providing alternative voices and the real purpose of this by-election, which is that Hougang residents need somebody to take care of them.” So very much like the cheat Uncle Choo.

– Raymond Lim, when he was transport minister, let down all those S’poreans and FTs who rely on the public transport systems especially MRT users.

– Mah Bow Tan, when he was HDB minister, let down young S’poreans who wanted her very own affordable HDB flat.

– the then DPM Wong, who let down S’poreans, over the escape and failure to recapture a terrorist suspect.

Add to that, remember the PAP’s boast that the “PAP and the state are one”? (Or shumething like that). Well two senior ranking Home Team members were investigated (results pending) by the Corrupt Practices Investigation Bureau for corruption and “cheating” on their wives. And what abt the ex-principal, scholar-teacher, ex-stat board lawyer and naval officer charged with sexual misconduct with a minor?

All in all, being negative abt WP, Low and Yaw doesn’t seem to be a gd idea.

Anyway, the campaign seems to be run by the likes ofTan Kin Lian, KennethJ, Goh Meng Seng, George Yeo and Lina Chiam. It is so dysfunctional and incompetent.

Examples:

– Early last week, CNA reported, “Prime Minister Lee Hsien Loong has said the Hougang by-election should not distract the country from focusing on national priorities and building an inclusive Singapore.”

But then, The by-election in Hougang is strictly about choosing the MP who can best help its residents solve their problems, said Deputy Prime Minister Tharman …‘This by-election is a local election,’ he stressed at a press conference held to introduce PAP candidate Desmond Choo, ST reported last Friday.

Is Tharman saying that the voters of Hougang should not think about “national priorities and building an inclusive Singapore” i.e. national issues when voting?

– Then we had this https://www.facebook.com/#!/photo.php?fbid=419238791433672&set=a.317075431650009.80936.315021665188719&type=1&theater

– And Desmond Choo telling us he didn’t want PAP big-shots campaigning for him, when they were flanking him at a media conference. The latest is that he said he would readily welcome support from his party’s senior leadership. Make up yr mind boy!

He also seems to have altered his appearance. Get a photo of Yaw and compare it to a recent one of Desmond: to my eyes Desmond has adopted Yaw’s glasses and hairstyle. Trying to get the gals, Desmond? Wife only god for cooking?

Finally what could the other DPM be thinking when he suggested, imitating, an old opposition witticism that voters should vote PAP because then they will get both the WP and PAP helping them. Is he implying that if the PAP loses, the PAP will no longer be “Always Here” for the voters of Hougang. Or did he run out of things to joke about? Or out of something original to say?

LKY must be frustrated at the way the campaign is being run.  Things were better run when he was the PM.

BTW, wondering where’s the ISD arrests? So asking for the ISA to be abolished is a distraction.

———

*Err isn’t it unprime ministerial to use an official government statement to try to slime people that oppose the governing PAP?

.

Reits R financial engineering

In Financial competency, Property, Reits on 17/05/2012 at 10:52 am

Reits have a new tool to juice up returns: perpetual securitiesor perps. Could “leverage up” without “debt”. Shld not technically use the word “bonds” even though they are effectively bonds.

http://www.todayonline.com/Business/Property/EDC120504-0000036/Perpetual-bonds–A-boon-to-Singapore-REITs

Could be burps if shumething goes wrong.

The central bank is worried that retail investors may not understand perps*. I’m worried reit managers may be seduced by investment bankers to use perps indiscrimately. Us investors get shafted. So invest in reits where the sponsor is big, stodgy and conservative (like F&N, or AMP), and has a big stake in reit.  If sponsor doesn’t meet the first criteria, think long and hard. I did in case of LMRT, and bot in.

Update: Comments on ST article abt central babk’s stance.

———————————–

*Bankers said MAS officials had voiced their concerns over retail holdings of perpetual bonds during at least two informal meetings in recent weeks.

The central bank’s scrutiny is preliminary and there is no suggestion of any wrongdoing on the part of the banks or companies involved in the recent flurry of perpetual bond issues. But the discussions show that the regulator is worried individual investors may be taking on too much risk without a full understanding of the product.

http://www.todayonline.com/Business/EDC120515-0000049/Perpetual-bond-rush-causes-alarm-in-Spore

MIIF & FCT: Useful updates

In China, Property, Reits on 17/05/2012 at 6:51 am

Never summed up the courage to buy MIIF because although it is a China infrastructure play, yirld is super, and MIIF is net cash, its underlying investments are up to their eyebrows in debt: could affect MIIF’s payouts, NAV and price. But chk out for yrself  http://www.investmentmoats.com/money-management/dividend-investing/amfraser-have-some-seriously-optimistic-cash-flow-projections-for-miif/

For the working stiffs who got cashflow from day jobs. Not for retiree who gambled his cashflow.

 CIMB likes Frasers Commercial Trust I own shume.

Update: DBSV likes FCT too http://sreit.reitdata.com/2012/05/18/fcot-dbsv-3/

What a sick joke on Olam

In Commodities on 16/05/2012 at 3:12 pm

Stock has collapsed today because analysts warned of cuts to full-year estimates after the commodity trader reported disappointing earnings  (Q3 net profit falls 22.5%  to S$98.7 million) and warned of a weak outlook.

The sick joke is that 0ut of 24 analysts tracking Olam, 18 had a buy or strong buy rating, four rated it a hold and only two had a sell rating, according to Thomson Reuters data as of Tuesday (yesterday).

Two examples of how ST covers FTs

In Media, Uncategorized on 16/05/2012 at 6:03 am

(Or “Why misbehaving FTs should be glad that they are still alive” or “Yaacob’s “Three steps” to Heaven”: Analysing Step 3″)

Is this what Yaacob wants the constructive, nation-building local media to teach bloggers: FTs are never ever in the wrong?

Sorry, some background first.

There are three steps that Yaacob wants taken to tame “cowboy towns”:

Step 1: “The Internet community creates a code of conduct for responsible online behaviour”

Step 2: “Citizens set up websites that offer constructive viewpoint” i.e. he said that the best way to go is to encourage other sites to emerge, “that can continue to offer constructive ideas and useful suggestions”.

Step 3: “Major media cos could help set the right tone online”

(I’ve covered Steps 1 and 2 here and here’s my analysis of step 3. Yes I promised it yonks ago, but my examples would have been historical. Theses examples are contemporary.) 

In the space of about a week, ST carried two sets of stories where FTs were portrayed as being in the right despite evidence to the contrary. (Note I’ll be linking to non-ST reports because ST is behind a pay wall.) 

First, even though M’sian TV showed (a M’sian friend told me)  a video of FTs from S’pore misbehaving, before being beaten up for their pains, not shown, ST never carried that version. It had earlier reported the following : report from M’sian Star copied bt TRE http://www.tremeritus.com/2012/05/12/sg-expats-claim-assault-by-bodyguards-of-royalty-off-johor-island/

Then there is the report on an accident where the PRC driver of a Ferrari, a taxi driver and a taxi passenger died. The ST story seemed to me to defend the Ferrari driver and flaunted his weath. I’m not the only one.

So this is what Yaacob wants from a Coc?

Apart from ST’s reporting which shows that the constructive, nation-building local media’s objectivity when covering FTs, the Johor incident shows that some ang moh FTs are so used to misbehaving here and getting away with it (remember the Suntec incident?) that they do the same when they visit M’sia. They think they can get way with annoying Johor royalty because they think ang moh tua kee. They shld be glad that they are still alive to tell us their tall stories.

Felda’s cornerstone investor: Louis Dreyfus

In Commodities on 15/05/2012 at 10:34 am

Commodities group Louis Dreyfus has agreed to take a minority stake in Malaysian palm oil firm Felda, it said on Monday, conditional on a successful June stock market float for Felda. The amount could be US$150m.

http://www.reuters.com/article/2012/05/14/us-dreyfus-felda-idUSBRE84D0XG20120514

Louis Dreyfus Commodities told FT it was planning to take part in the wave of consolidation among agribusinesses, unveiling a US$7bn warchest, underpinned by cashflow and the trader’s first access to capital markets in its 160-year history. It is likely to raise US$500m in bonds soon.

The farm commodities trading giant, which earlier this month agreed to buy US sugar refiner Imperial Sugar for US$203m including debt, said it was to spend US$7bn building assets and buying companies, following investment of $4.9bn in the 2006-11 timespan.

It plans to move from middleman to a vertically integrated trading house: like Wilmar. Seems to be the fashion. Olam is doing this too.

Update on !7 May 2012:

Fidelity and Hong Kong-based Value Partners Group have agreed to become cornerstone investors of Felda Global Ventures Holdings’ US$3.3 billion (S$4.2 billion) initial public offering (IPO) in Malaysia, the Edge daily reported yesterday, citing unnamed financial executives involved in the listing.

Other cornerstone investors include Malaysian tycoons Quek Leng Chan and Chua Ma Yu, pension fund Employees Provident Fund and state-owned asset manager Permodalan Nasional, the report cited the executives as saying.

OCBC: KPI for new CEO?

In Banks, Corporate governance on 15/05/2012 at 8:33 am

OCBC Bank was recently named as the world’s strongest bank for the second straight year by Bloomberg Markets Magazine. (The ranking featured 78 global banks with at least US$100 billion in total assets.They were assessed based on factors such as their Tier 1 capital ratio, loan-to-deposit ratio, ratio of non-performing assets to total assets and their efficiency ratio, which compares costs with revenues.)

OCBC said the bank’s strength is partly built on its “disciplined credit management practices and robust risk management capabilities”.

If I were the controlling shareholder of OCBC, I’d be very upset at this ranking because what it means is that OCBC is not making its assets work: it has too much capital. I’d tell the board that the most impt KPI should be that OCBC drops out of the top 10 on the list.

It can be done. UOB was at seventh place, down from sixth last year, while DBS fell three spots to eighth this year.

UBS and DBS are doing the right thing. Their core market (like that of OCBC) is S’pore and it’s a safe, boring, stable market where margins are only so-so. So not much capital is needed, if one sticks to the basics of banking, and not try to be a hedgie.

As to the right amount of capital, look at StanChart at no.12. It operates in a wide range of emerging markets, some in unstable parts of the world like West Africa and so needs to have capital lying around. If S’porean banks have abt the same level of capital, they should still be safe.

SMRT: “Cowboys” were right

In Corporate governance, Infrastructure on 14/05/2012 at 8:52 am

Since the trains started breaking down towards the end of last yr, bloggers and posters (not I) have been attacking SMRT for putting profits before safety, and disregarding the engineers’ advice (though without having a clue abt the said advice). Yacoob’s exemplar for the new media, the constructive, nation-building media were deafening in their silence on this national issue. I was silent because I was trying to figure out if I shld go buy some SMRT shares.

Well, based on the comments by the chairman, Koh Yong Gua, reported by ST and ST’s headline on an inside page, the inhabitants of cowboy towns were correct. (Explain that Yacoob and DPM Teo.)

“SMRT to refocus on its engineers” read the headline. This implied that SMRT had lost its focus on engineers somewhere along the line, assuming it once had such a focus.

Mr Koh said that “SMRT will be repositioned an engineering company”, begging the question “What was its earlier positioning?”. Retailer, property developer, financial engineer, or cash cow for Temasek? Since SMRT was listed in 2000, Temasek has received $694.3m in dividends (I’ve including the dividend declared recently).

The promotion of Mr Khoo Hean Siang in March 2011 to COO was meant to show the importance of engineers, he said. The previous COO who was “removed” was not a technical person. Wonder what was he? Ex-SAF officer or financial man? With the CEO a retailer, it surprises me that until 2011, the COO was not a technical man. And that board meetings did not include a very senior engineer in attendance.

Actually, I think Mr Koh still hasn’t got it. SMRT is not an engineering company. It is a company whose main business is moving large numbers of people around S’pore safely, and in reasonable comfort (most of the time). By focusing on engineers and positioning SMRT as an engineering company, he could be laying the seeds for a serious problem somewhere along the track. Investors in the West have found that companies dominated by engineers tend to goldplate processes and systems. Siemens, Rolls-Royce, Westinghouse, Boeing, Airbus and even GE, had to be run by non-engineers before shareholders benefitted.  

Commuters may say so what? So long as it is safer and doesn’t breakdown, power to the engineers. The problem is that goldplating is expensive, and eventually someone has to pay. This is likely to be the commuter (via fare increases) or his avatar or alter ego the taxpayer.

I was planning to buy into a rights issue when one is annced, as I expect. But given the positioning as an “engineering company” and its “refocus on its engineers”, I think I’ll give the stock a miss for the time being. But never ever bet against Temasek when it comes to a local company.

Related post:

http://atans1.wordpress.com/2012/05/06/smrt-quiet-re-nationalisation/

SIA: All the fault of previous CEO?

In Airlines on 13/05/2012 at 2:28 pm

In a posting on SIA’s results, someone in Oz who seems to know the airline biz laid the blame on the previous CEO. I reproduce it because although I know bugger-all abt the airline biz, I know poster was right abt the property sale (can’t remember the dollar values though):

Chew Choon Seng, the previous SIA CEO from 2003 to 2010,sold the SIA building in Singapore for $250 mil, and the new owner sold it away for $550 mil barely 6 months later. He gave ground handling subsidiary SATS to shareholders as an in-specie dividend, thus making millions in the process through this special dividend and losing control of ground handling in his hub.

He barely ordered any aircraft and kept shrinking the airline, in the name of protecting “yields” that he wanted but could never achieve. He introduced an enormous and absolutely space-inefficient business class, and has the lowest density 77W of any airline, as well as the lowest density A380 of any airline (for the all upper-deck business class A380 configuration)

He cut route after route, and refused to acknowledge Emirates as a competitor (which SIA has only done like, yesterday presumably)

Initially, SIA thought they could charge a price premium for those enormous seats, but today they are among the cheapest network carriers out of Australia and Europe in business class. Low density and low fares = disaster for yields

The only thing protecting SIA today is their strong balance sheet, and the fact that they’re sitting on billions of dollars in cash (which they don’t seem to be doing anything with) and no debt – but that was a result of the hard work of the management before Chew Choon Seng.

And the sad thing is, he inherited an airline in 2003 which was unrivalled in terms of profitability, network and inflight product. (Who had heard of Emirates in 2003). The Singapore economy has been booming for the last decade, and tourist arrivals have surged beyond belief. Labour relations in the airline are healthy, their cost base WAS very competitive (without the low density aircraft), and they operate a single hub operation which, compared to QF and other legacy carriers, should theoretically make their operations far more efficient.

They have also had a surging local currency, which should have helped their fuel prices in SGD. (Do note that from 2002 till today, AUD:SGD has been stuck in a 1.20-1.30 range, not withstanding a few months after the Lehman Brothers collapse, so the SGD basically has risen in tandem with the AUD against the USD for the last decade)

And yet SIA has shrunk through the last 10 years. It’s not like they can blame any catastrophe other than themselves for the dismal financial performance last year.

MediaCorp’s weird move

In S'pore Inc on 12/05/2012 at 6:29 am

More than 300,000 titles are on offer at ilovebooks.com, a MediaCorp digital initiative.

The online store offers books in 50 categories for download.

It’s the first Singapore bookstore to sell e-books internationally.

Philippines not safe for PRC nationals warns China

In Casinos, China on 12/05/2012 at 6:26 am

China told its citizens on Thurday  they were not safe in the Philippines and its state media warned of war, as a month-long row over rival claims in the South China Sea continued.

Chinese travel agencies announced they had suspended tours to the Philippines, under government orders, and the embassy in Manila advised its nationals already in the country to stay indoors ahead of protests on Friday. Five hundred protested outside the Chinese embassy, in the event.

And the Philippines wants Chinese gamblers to visit Manila, and the Chinese to invest in the country. What a joke!  Want Chinese money but intent on upsetting China. Filipinos are not realists.

SMRT mgt failures: What does it say abt SAF?

In Infrastructure on 11/05/2012 at 10:19 am

“The experts questioned having the bus bridging services ply a route mirroring the entire train line as this may not be the most effective way to move people. They suggested that the bus bridging services should ferry commuters to one to three stations, or to the next working station.”

Huh? Having been lucky enough not to kanna caught in one of these disruptions (my 87-yr old mum on her only second MRT outing was at a station when a disruption occured), I’m surprised to learn that this wasn’t done or that it isn’t now SOP?

Given that it is a well-known fact, I believe, that retired SAF officers are given senior jobs at SMRT (presumably because they have the experience of managing large and complex organisations), I’m surprised that foreign experts recommended the following “fairly common sense and not rocket science” command and control procedures:

http://www.todayonline.com/Singapore/EDC120510-0000079/Foreign-experts-give-tips-at-SMRT-inquiry

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1200227/1/.html

We need genuine Talents to help us run our public transport systems, not ex-SAF officers, M’sian PRs or PRC bus drivers that we have been getting. And no “ang moh tua kee” attitude when getting Talents please. Hongkies, Japs, Taiwanese and Koreans who speak Inglish should be considered. No PRCs because China’s MRT systems are very new.

As to our defence, are we spending money foolishly on hardware, when what we need are a few good men? The government should be worried. It’s not us “lesser” citizens are at risk. It’s the FTs and rich S’poreans who need protection. An Indonesian pirate chief after reading of SMRT’s failures despite employing retired SAF colonels, may be tempted to raid Sentosa Cove, plunder it and kidnap people.

Remind yrself, not us PM

In Economy, Political economy, Political governance on 11/05/2012 at 5:10 am

(Or “Is PM on the same channel as S’poreans?”)

“Prime Minister Lee Hsien Loong has said the Hougang by-election should not distract the country from focusing on national priorities and building an inclusive Singapore,” CNA reports.

Either this is the latest of PM’s tasteless jokes in his attempt to outdo Tharman as the cabinet’s and PAP’s mgt committee’s stand-up comic, or it shows us that he doesn’t even bother to glance thru the nation-building constructive local media.

Because if he does, he would realise that “national priorities and building an inclusive Singapore” are at the top of most voters’ concerns: the state of the economy and public transport infrastructure, and of family finances. Examples:

– a MRT system that does not breakdown almost every other day,

– less crowded trains and buses,

– lower inflation (even the crown prince of jokers says the latest inflation number is ”a high figure” though he quickly quipped that it didn’t affect most of us “lesser mortals” (my words not his),

– how to earn more money,

– how to afford to own a HDB flat on $2,000 a month,

– how to buy a van (what with escalating COE prices), or

– worrying that ”Our system of integration doesn’t work. Why? Because before we were able to integrate those who were received on our territory, others arrived. Having taken in too many people, we paralysed our system of integration.”

A worrying tot has juz struck me. What if his (and the PAP’s) ”national priorities and building an inclusive Singapore” are different from us “lesser mortals”? He wants faster economic growth via becoming a low-cost producer as “national priorities”, while “building an inclusive Singapore” means treating FTs better than locals?

Solution to SIA’s problem of higher fuel costs

In Airlines on 10/05/2012 at 11:32 am

US airline buys an oil refinery. Taz thinking out of the box.

Pros and cons

http://www.economist.com/blogs/gulliver/2012/05/delta-air-lines

It’s not as though SIA doesn’t have the cash.

How to make better investment decisions

In Financial competency, Financial planning on 09/05/2012 at 7:06 pm

Think thru the issues in a language in which you are competent but not fluent.

http://www.economist.com/blogs/johnson/2012/05/foreign-languages-and-thinking

The tendency to take risky, irrational bets to avoid losses nearly disappeared for those tested the foreign language …

Mr Kahneman … posits two general systems of thinking:  System 1, intuitive and quick, good for most purposes, but prone to those pesky cognitive traps; and System 2, deliberative and slow, better at higher reasoning but effortful to activate and keep active. The brain, which minimises effort where it can, leans on System 1 wherever possible. But modern life presents many problems better suited to System 2. 

The hypothesis behind the “foreign-language effect” is that speaking the foreign language activates System 2 in advance of tackling the tricky questions … Another possible result might have been that using the foreign language tires the brain, and that this fatigue might make people more, not less, prone to mistakes. Mr Kahneman, after all, describes “ego depletion” leading to bad choices in other studies. But in this study, the effect of priming System 2 appears to have been stronger than any fatigue effect.

Vietnam: Getting fashionable again & Yaw’s there

In Vietnam on 09/05/2012 at 6:59 pm

So Yaw, the mystery man from Hougang is reported to be in Hanoi. Pity his Mrs because I hear that the gals in Hanoi are pretty horny.

Seriously, if the report in ST is true, he is smart to try his hand there. Vietnam is back on the radar of int’l investors, and Hanoi, is a less competitive, less int’l place than Ho Chi Minh City. Gd place for someone savvy like Yaw.

While until recently, non-manufacturing investors (like “paper” investors, and those who invest in property) have been giving Vietnam a miss because of inflation, problems in the banking sector, and a downturn in property, Vietnam’s economy has continued to grow by about 6% a year. Largely because of manufacturing: 41% of the economy.

MNCs who make things love the country. Vietnam is Nike’s biggest production centre, Intel has a major chip facility. HP has plants here. Samsung will invest US$1.5 billion in an information technology complex that will bring in 30 more related companies. Nokia is investing about US$300 million in a plant for mobile phones.

No wonder, Singapore’s four joint industrial parks in Vietnam have draw investments worth some US$5.3 billion since the first one started in 1996. Per hectare, the parks now attract US$6 million in investments, nearly twice higher than the national average of US$3.5 million.

And no wonder, Sembcorp Industries recently announced that it has obtained approval to proceed with a $337.82 million industrial park and 1,200-megawatt power plant.A Vietnamese-Singapore joint venture involving Sembcorp will develop the industrial park in Quang Ngai Province in central Vietnam, Sembcorp said.

The Vietnam-Singapore Industrial Park Quang Ngai will comprise a 600-hectare industrial park as well as a 520-hectare site zoned for commercial and residential development. The park will be the Sembcorp-led consortium’s fifth in the country.

Why the other investors are returning to Vietnam:

 http://www.todayonline.com/Commentary/EDC120503-0000002/Vietnam-bounces-back,-for-now

 http://www.todayonline.com/Commentary/EDC120504-0000004/Driving-the-Vietnam-growth-train

DPM Teo & GG (or WP): gentle reminders for next week

In Humour, Political governance on 08/05/2012 at 7:23 pm

DPM Teo has been busy in April, what with opening a temporary carpark in Hougang, praising Desmond Choo (assumed PAP candidate there), talking abt the dangers of the internet, and pushing onto us the task of integrating FTs onto us, despite many of us wanting first-world FTs, not the garbage we’ve been getting in ever increasing truck loads, I’d tot I’d remind him of shumething he said in March concerning violent, ang moh FTs.

In March,  in parliament to a question from “Kate Spade” (the real people’s princess, not that NSP, TJS groupie gal who was from RP and who is looking to move on from NSP, not her boy friend: I mean tin looks ordinary, Nicole has star quality), he told us very upset S’poreans that Home Team was conducting an internal investigation on why two violent ang moh FTS who beat up two S’poreans badly in 2010 were allowed to post “peanuts” in bail; and why the police investigation took so long? They took the opportunity to cock a snook at S’pore by moving on.

He said the investigation would be completed in April, and implied that we would told the conclusions.

As it’s now May and parly sits next week, he should be abt to tell us abt the conclusions. And if the investigation has yet to be concluded, why not?

Tot he might need reminding as he seems to be trying hard to join Tharman, Sailor Lui, $8 Khaw and PM, as a teller of jokes in bad taste.

And I hope Gerald Giam (the apprentice who overthrew his si-fu Eric Tan) remembers that the WP called for the nationalisation of the bus and MRT systems in its 2011 GE manifesto, and that he wrote this on nationalising the public tpt system in July 2011.

If neither he nor any other WP MP raises this issue in parly next week, or explains why the WP has changed its mind of nationalisation (despite the apparent failure of the government’s model and the voters’ disgust with the government on this issue), the WP should have the decency to take down the manifesto from the WP website. First, the WP changed its benchmark that the WP wanted ministerial salaries to be referenced to, and now this. Said manifesto isn’t worth the paper it is written on even before the WP comes into power.  In first-world democracies, manifesto promises are ditched after the party wins power, not before: another WP first? Other firsts https://www.facebook.com/#!/photo.php?fbid=449379458422514&set=at.281804541846674.87911.280285461998582.555162557&type=1&theater

Tharman has a point

In Humour, Political governance on 08/05/2012 at 7:11 pm

 Sometime ago, when defending the constructive, nation-building local media against comments that it was pro-government, he said that he tot he didn’t get much favours (my words not his) from the media. Well I laughed at this. I tot it was one of his stand-up routines.

He has a point or at least he did not misrepresented the facts in this instance. Tharman, last week, told us high COE prices doesn’t have an impact on us “lesser mortals” because the vast majority of  us don’t buy new cars. Netizens well and truly roughed him up. And this is what our constructive, nation-building BT reported on Monday:

Rising COE premiums put brakes on business
Some firms put expansion plans on hold as lorries and vans become more expensive

Soaring certificate of entitlement (COE) premiums are bearing down on businesses and forcing them to put the brakes on growth.

Since the start of the year, the workhorses of the road – lorries, vans and motorcycles – have become more expensive at a staggering rate, derailing the expansion plans of vehicle-reliant firms.

Category C premiums – which are for goods vehicles and buses – are now pushing $58,000, up 49 per cent from the start of this year. A year ago, the premium was just below $24,000.

Supply chain firm Sin-Freight International had planned to scrap two of its existing lorries to buy two new lorries with more tonnage, but the stratospheric COE premiums have put paid to its plans.

If this isn’t BT telling Tharman off, I don’t know what is?

Next time, Tharman tells us that he will soon have a head of hair, we’d better believe him, rather than put it down to his ambition to be a stand-up comic.

Ascendas India: DBS is bullish

In India, Property, Reits on 08/05/2012 at 6:06 pm

http://sreit.reitdata.com/2012/05/02/a-itrust-dbsv/ (Ya I know technically it’s not a Reit, but it looks like one.)

So am I. )))). BTW, the Indian rupee has strengthened after the government said on Monday that it would delay proposed laws targeting tax avoidance by one year.

But five things wrong with the Indian economy.

Gd Reit table

In Property, Reits on 07/05/2012 at 7:06 pm

http://mystocksinvesting.com/wp-content/uploads/2012/05/Singapore-undervalued-REIT-stock-comparison-5-May-2012.png

Thanks to complier.

Lippo Reit: OCBC is bullish, but Indon economy is slowing

In Indonesia, Property, Reits on 07/05/2012 at 6:25 pm

http://sreit.reitdata.com/2012/05/02/lmir-ocbc-14/

So am I. But Indonesia’s economy grew at its slowest pace in 18 months amid a slowdown in exports as demand from key markets such as the US, Europe, China and India weakened.

Worse, the Indonesian rupiah has fallen 8% against the US dollar in the last twelve months: a weak currency may hurt the purchasing power of domestic consumers and dent demand. Remember domestic consumption accounts for nearly 60% of its economy. http://www.bbc.co.uk/news/business-17980123

Other analysis, info on LMIRT:

http://s-reitinvestmentblog.blogspot.com/2012/05/analysis-of-lmir.html

http://diyvalueinvesting.blogspot.com/2012/04/lmir-q1fy2012.html

SMRT: Quiet re-nationalisation

In Infrastructure, Political governance, Temasek on 06/05/2012 at 7:34 pm

(Or “SMRT: Has the government and WP switched positions on the quiet)

On Friday, SMRT reversed its recent losses and was up 0.9% to 1.65. It was at 1.81 juz on 24 April.

Interestingly among the slew of brokers’ reports calling it a “sell”, “nationalisation” seems to be a dirty word, never raised except by two honourable brokers. Only Citigroup was willing to hint at re-nationalisation, “We’d even dare conjecture a Government-led end game, while only Kim Eng suggested that “selective nationalisation” is already taking shape, “A hybrid model, where the Government comes in to inject money, is perhaps the best model possible under the circumstances … like selective nationalisation where the Government pumps in money in certain areas … being done already – take for example, the Government co-paying for the buses to help operators expand the fleet.”

UBS said SMRT is highly likely to move to a new rail-network financing framework where it would pay the government for an operating lease instead of owning train assets,

And only Citigroup is willing to hint at, “We sense more drastic actions are needed, perhaps raising capital to shore up finances.” In simple English, it says a rights issue is possible. Everyone else was silent on this pink elephant in the room.

I think a rights issue is very highly probable.

Let’s go thru some numbers. At Friday’s close, the mkt cap of SMRT was $2.49bn., of which $1.35bn can be attributed to Temasek (It owns 54.3% of SMRT).

Now SMRT has plans to spend $900m over the next eight years and it wants LTA (i.e. the taxpayer) to share the cost. What if the government tells SMRT that it shld fund two-thirds of the cost because the Commission of Inquiry finds that SMRT was not maintaining the tracks properly. (I’m assuming the COI makes this finding based on the way the inquiry is going).

To fund this $600m, SMRT’s directors call for a deeply discounted rights issue to raise $600m (about 24.1% of SMRT’s mkt cap as of Friday). Add to that they say that dividends will have to be cut drastically*, and that Temasek has agreed to underwrite any shares that minority shareholders refuse to take up. Temasek will say that its decision to support the rights issue is a “commercial decision” of a long-term shareholder. Right, and pigs can fly, a leopard can change its spots, KennethJ and TJS can stop boasting, Chiam can renew the SPP’s leadership, and Yaacob can tame the internet tsunami by building a CoC flood wall.

In such a scenario, Temasek could end up with 75-80% of SMRT, as many minority shareholders decline to take up their shares because of the reduced dividend payments.

Ain’t this partial re-nationalisation? And Temasek can have its cake and eat it too, depending on whether the other shareholders subscribe to the rights. Since SMRT was listed in 2000, Temasek has received $694.3m in dividends (I’m including the dividend declared recently). A $600m rights issue and assuming it has to take up all the rights shares still leaves Temasek $94.3m ahead. Might as well make it $700m rights call then, shall we?

Ain’t nationalisation of the public tpt system in the WP’s manifesto (I’ve blogged on this and that the transport minister parrots his predecessors’ defence of the rojak “for profits” system). Lucky Tan has this video of my friend Eric Tan then a WP member (and treasurer) talking abt nationalisation at the last GE. So the silence of the WP which I’ve raised before) is strange, and in the longer term worrying (No can trust its manifesto promises, why shld voters trust the WP?).

So I hope in the May session of parly, GG for one can raise the issue of nationalisation and put the government on the defensive. Why GG? In July last yr, he wrote this on nationalising the public tpt system. This was after Eric Tan had left WP in a huff, so the call for nationalisation of the public tpt system did not end when Eric Tan left.

If the WP remains silent on nationalisation of the public tpt system, it would remind me of a Sherlock Holmes mystery:

Detective: “Is there any other point to which you would wish to draw my attention?”

Holmes: “To the curious incident of the dog in the night-time.”

Gregory: “The dog did nothing in the night-time.”

Holmes: “That was the curious incident.”

BTW, OCBC (a ex-bull on SMRT) is still relatively bullish. It downgraded SMRT to hold from “buy“ and lowered its target price to S$1.71 from S$2.04, citing weaker-than-expected earnings for 2012 because it estimated that SMRT’s capital expenditure in 2013 will rise to S$500 million due to higher expenses needed for upgrading its assets.

CIMB cut its target price from $1.68 to $1.50, suggesting a switch to ComfortDelGro to maintain an exposure to the land transport sector. Deutsche cut its target price to $1.61 from $1.75 while J P Morgan downgraded the stock from “overweight” to “neutral” with a target price of $1.60. Phillips cut its target price to $1.33, maintaining its “sell” call. I suspect Phillips is right. A rights issue will be priced at around the $1.33 level.

I’d buy some shares then. Never bet against Temasek when it comes to a local counter.

——

*”Some [analysts] expect SMRT to cut its dividend payout from 70-80 per cent of profits historically to at least 60 per cent.” (BT). What if this was reduced to 25%?

LKY isn’t always wrong

In Humour on 06/05/2012 at 6:13 pm

Being bilingual ‘boosts brain power’ Learning a second language can boost brain power, scientists believe.

http://www.bbc.co.uk/news/health-17892521

My serious and sad point is that netizens of cowboy towns instinctively think he is wrong, juz the opposite of the constructive, nation-building media who refuse to believe that he can ever be wrong, until he comes out to say he is wrong.

The truth is somewhere in between. Although he cannot be compared to Mao (juz as S’pore cannot be compared to China), what the Chinese Communist Party says of Mao can be applied to LKY: he got more things right than wrong.

Don’t buy bonds, buy stocks that pay gd dividends

In Financial competency on 05/05/2012 at 6:25 pm

Don’t buy bonds. Don’t focus solely on dividend yield, and avoid highly leveraged firms is the message that BlackRock gave investors a few weeks ago when it spooke to BT. Relevant exceprts from BT article from yonks ago I rediscovered.

Michael Steinhardt, whose hedge funds returned more than 20% a year for almost three decades, also doesn’t believe in bonds

“Bonds are no place to be,” Steinhardt, 71, who is now chairman of New York-based WisdomTree Investments Inc., said in an interview today on Bloomberg Television’s “Money Moves” with Carol Massar. “Equities are cheap by historic standards. Equities that pay high dividends relative to bonds, relative to the stock market, I think that’s a good place to be.”

http://www.bloomberg.com/news/2012-04-12/wisdomtree-s-steinhardt-says-bonds-are-no-place-to-be-.html

And so does Abby Joseph Cohen, senior U.S. investment strategist at Goldman Sachs. In mid-April, she  said equities will give better returns than bonds in the mid-to-long term as companies look to emerging markets for growth.

“You need to go back to the late 1950s to see a situation which equities were priced as attractively as they are now relative to bonds,” she said in a Bloomberg Radio interview. “1958-1959 was a period in which investors were very concerned about the economy and the yields on many equities exceeded the yields on fixed income at that point and — as you know — we moved into a multidecade bull market in equities.”

——————-

HIGH dividend yields should not be the sole focus in assessing equity returns over time, said Stuart Reeve, managing director and portfolio manager at BlackRock.

According to Mr Reeve, data collated over the last 31 years has indicated that more than 90 per cent of long-term equity returns can be jointly attributed to both dividend yield and dividend growth drive.

Generating long-term equity returns successfully thus requires identifying companies with attractive yields that are competitively advantaged and have the ability to sustain business growth.

To ensure a company is able to invest and grow its business, Mr Reeve stressed the need to factor in cost and cash available to a company to fund these developments.

‘That is so often a question that people do not ask in this space. What is the cost of growth? In different industries, it is different,’ he emphasised.

‘In a more stable industry, where the rate of change of the industry dynamic is not significant and not very fast, and you are competitively advantaged, your cost of growth tends to be relatively low.’

Identifying a company with low growth costs has its merits as it enables the company to reinvest and grow its business, with the company better positioned to commit some of that cash back to shareholders in the form of a dividend stream.

Investors should also exercise patience in order for results to materialise.

‘You must be willing to buy these investments at fair value and let the yield and growth compound for you and deliver great returns with lower volatility over medium to long-term horizons,’ said Mr Reeve.

Investors should also steer clear from companies which are leveraged to the tilt, he cautioned, citing the significant correlation between high leverage and cuts to dividends.

The focus on equity investment comes on the back of BlackRock chief executive Larry Fink’s message urging investors to scrap the inadequate 60/40 portfolio mix of stocks and bonds.

Mr Fink personally advocated a 100 per cent investment in equities owing to valuations and higher returns than bonds.

‘Virtually every investor has to find ways to achieve better returns than they’ll get in cash or government bonds for the foreseeable future,’ said Mr Fink. [ BTW, Kapito, a co-founder and president of the firm, told CNN Money last month that he has about 70% of his investment portfolio in dividend-paying global stocks. ]

BlackRock, the world’s largest asset manager with assets under management totalling US$3.51 trillion as at Dec 31, 2011, has increasingly set its sights on growing in Asia.

The Philippines: Other side

In Emerging markets on 04/05/2012 at 6:17 pm

Last Saturday, I blogged that it’s day in the sun may finally be coming.

Hopefully, for the poor, that day will become soon. These pixs brought back memories (I was a stockbroker in Manila in1996-1997, living off the fat of the land) of how poor the poor are in the Philippines, and how the rich and poor live literally beside one another.

If the government wants to make sure of the PAP retaining power, one gd way would be to organise school trips to the slums of Manila, and then lecture the impressionable minds abt the perils of too much democracy. Yes, of course taz a dumb way of summarising the reasons for the poverty there, but the young wouldn’t know.

Why Tin Pei Ling will be happy this weekend

In Humour on 03/05/2012 at 7:13 pm

Pity Tin Pei Ling. She’s an MP without a cushy day job unlike the NTUC MPs. In fact she doesn’t have a job at all. She is a full-time MP, the only full-time PAP MP. And we know she doesn’t use her MP’s allowance for anything personal: she tells us so. She has to dip into her savings for her transport costs, she tells us. Err whers’s hubbie’s pin allowance?

And we know she has a taste for Kate Spade goods.

So as today’s ST carried an ad for a Kate Spade sale (up to 70% off) on Friday and the weekend, Ms Tin should be happy. She can go shopping for Kate Spade products without a public backlash.. She can explain her purchases away by saying, “Big discount at cheap sale”.  As to money, waz the point of marrying a much older man who is paid well?

Telling coc jokes: Ministerial CoC needed

In Humour, Internet, Political governance on 03/05/2012 at 7:10 pm

Based on the remarks of the PM and the two DPMs the last few days, I think Yaacob would find S’poreans receptive to a Ministerial CoC (Code of Conduct) on the telling of jokes in bad taste.

I ranted earlier on DPM Teo’s joke on more openness and passing the burden of integrating FTs to us S’poreans who never asked for them in the first place.

Well that was the start of the bad-joke telling session.

We then had Tharman telling us that although inflation rose by about 5.2% (“a high figure” said he) in March 2012, this did not mean that the average Singaporean will feel this “high inflation” because more than half of the headline inflation rate of 5.2% came from higher COEs for cars and the effect of higher market rent on houses. The vast majority of Singaporeans who already own their homes and are not buying new cars would not feel the effects of these sharp increases. And the increase in prices of daily necessities and essential services such as food and clothing have actually been much more moderate at 3% or lower.

Well he got well and truly beaten up for this tasteless joke because among other things, high COE prices affect those who need to buy vans and lorries to transport goods. Their costs go up and guess who pays?

And this isn’t the first time he tried to tell bad jokes. Remember the one about someone earning less than a $1000 a month being able to afford to a 30-yr HDB mortgage, or the one that low-income Singaporeans may be able to receive between $3.97 to $5.10 in government benefits for every dollar paid in taxes over a life time. We found out that it all depends on the assumptions made, and anyway in the case of benefits, much of it was paid into the CPF account, while a recipient had to pay his taxes upfront in cash. What abt the time value of the money, minister?

Then the PM joined in. He told the joke about the need for wages to be driven by higher productivity. I mean how could productivity go up with 80,000 immigrants a year being imported to keep wages down? Or even the planned only 25,000?

And what abt this spotted by Donaldson Tan and reported on his FB page, “MBS raised demand for unskilled labour in the hospitality sector, resulting in wage growth for everyone in the hospitality sector while Labour Chief asserted that wage growth must be backed by productivity gain. There is no productivity gain in the PM’s example.”?

The PM also said, “Singaporeans will always be our priority”: “Whether it was adjusting the supply of foreign workers or the pursuit of economic growth, he said the Government seeks to maximise the advantages for its citizens, and to provide them with jobs and a share of the nation’s success.” (ST report)

Huh? Hey who waz it who allowed in 80,000 FTs a year to keep wages down, without expanding the public housing and transport infrastructure?

And before I forget his office said that only “good quality” people are allowed to immigrate? What abt the hooker-looking, violent, cheating, unrepentent shop assistant, and the hawkers that became PRs? Not exactly ”good quality” migrants are they? Honest mistakes?

Now this was one bad joke too far.

Yaacob’s Code of Conduct for the internet is not needed because S’pore has the penal code and laws on sedition, contempt of court, criminal and civil defamation and incitement to religious hatred that can be used to repress curb the excesses of netizens like the unemployed chap behind “Fabrications abt the PAP”.

But let’s trade. What about a CoC for ministers to get ministers to stop telling cock jokes, in exchange for a CoC in which bloggers become less anti the governing PAP?

Kee Chui.

 .

Temasek: Rebalancing its Chinese bank portfolio

In Banks, China, Temasek on 03/05/2012 at 6:04 pm

Last month, Temasek bought US$2.3bn worth of shares in Industrial and Commercial Bank of China (ICBC), taking its overall stake in the bank to 1.3%. I commented that it was increasing its bet on the big Chinese banks (it owned big stakes in three of them) when the mood on them was getting bearish.

Well it is now sell US$2.4bn worth of its shares in Bank of China and China Construction Bank.

So overall, it is reducing its stakes in BoC and CCB (locking in some profits: it got into these at very attractive prices as a cornerstone pre-IPO investor) while adding a stake in ICBC to the mix at a slight discount to the market.

Update on 4 May 2012 at 3.10pm: More details http://www.bloomberg.com/news/2012-05-02/temasek-selling-2-4-billion-in-boc-china-construction.html

SMRT: Dividend of 5.7 cents but price down another 2 cents

In Infrastructure on 02/05/2012 at 7:22 pm

From the day last week when SMRT annced its eight-year $900m programme to upgrade many infrastructural and systems components on the North-South and East-West lines would exceed what it had spent on repairs and maintenance in the past 10 years, and

– no details on how the cost will be co-shared with the Land Transport Authority (to be negotiated); and

– no details on many parts of the upgrading programme,

till Monday, its share price fell 7.2% from 1.81 to 1.68. It then annced its results (not gd as expected) and today closed at 1.66 down another 1.2%. It went as low as 1.63. All this despite paying a dividend of 5.7cents a share or 3.4% of Monday’s close. (Mkt was closed on 1 May.)

Starting to look interesting as a dividend stock with recovery prospects. Time to analyse results in detail.

Mean of me, but I can’t resist reposting OCBC’s note dated 9 April when stock was at 1.74 and OCBC reiterated its ”buy” call.  

————–

OCBC report on SMRT dated 9 April 2012

Strong selling pressure as anticipated by more than half of the street failed to materialise with the counter trading tightly range-bound for slightly more than two months.

During this period, SMRT has also kept to a lower profile with the announcement of work completion from its Internal Investigation Team as the only major development.

Ahead of the upcoming earnings release at the end of the month, we continue to stress that SMRT is likely to see an upswing in fuel costs, following the run-up in prices as well as the additional train runs commissioned in the face of higher ridership and public pressure.

Coupled with higher staff costs related to seasonal merit increments and additional headcount to meet service requirements, we are likely to see the weakest quarterly performance for FY2012.

In terms of fallout from the December 2011 service disruptions, we do not expect any incremental costs at this juncture as the more important inquiry by the Committee of Inquiry (COI) has yet to be completed.

While SMRT’s FY2012 results are likely to stay uninspiring, the counter’s attractiveness as a dividend play remains its key selling point. SMRT’s management has maintained and reiterated its commitment to maintain its dividend payout policy.

Although its prospects going forward will be challenging – COI findings, no fare increments – SMRT’s ‘customer’ base is still growing.

Ridership levels continue to grow especially with support from the current trend in COE prices, while rental and advertising yields are naturally competitive given the high foot traffic locations of their stations.

With this backdrop and earnings support and stabilisation in SMRT’s price, we continue to call for an attractive entry point for SMRT.

Maintain ‘buy’ at an unchanged fair value estimate of $2.04.

Integrating FTs: It’s our problem now cont’d

In Infrastructure, Political economy, Political governance on 02/05/2012 at 5:50 am

Remember a few days ago I ranted abt the comment by DPM Teo* that, “Singapore needs to pay extra attention to facilitating the new immigrants who are ready to sink roots here, so that they integrate into society more quickly … urged Singaporeans to do their part to make newcomers feel welcome, and to help them imbibe the values that have made Singapore strong as a society”? It was the fault of the governing PAP, so it should fix it, not pass it on to us.

Well this morning, while scanning thru BBC Online, the following comment by France’s president leapt at me,  ”Our system of integration doesn’t work. Why? Because before we were able to integrate those who were received on our territory, others arrived. Having taken in too many people, we paralysed our system of integration.”

In view of DPM’s Teo  passing-the-parcel, our problematic MRT system, crowded buses, and expensive public housing one could say that his words describe what has happened here.

——————————

*I think he is one of our “betterest” ministers along with Tharman, Khaw and VivianB (so long as you keep him away from the poor and needy and give him engineering tasks). Gan, Chan and Tan seem to be coming along nicely.

Sex with a minor: Some more equal than others?

In Political governance on 01/05/2012 at 7:19 pm

(Or “Is there a class distinction when it comes to sex with a minor?” Or “One sex law for the educated & well-off, another for ‘lesser mortals’?”

Prior to 48Gate, a number of people have been prosecuted and found guilty of having paid a minor to have sex with them. The “defence” of “didn’t know” didn’t work: there was a case reported in the media last week that did not get anyone upset at the failure of this “defence”. And neither did the “defence of “she’s a prostitute”: men were jailed for having sex with underaged Vietnamese prostitutes. No-one was saying it was unfair. All the men charged and found guilty were ‘lesser mortals”: no lawyers, financial professionals, senior civil servants or managers, or scholars. Juz labourers, hawkers technicians and junior white-collar workers.

The chattering classes and netizens ignored the cases.

But once “elites” are involved, the chattering classes and netizens rushed to defend them against the system. What an irony: the “elites” need to be protected against the unfairness and stupidity of the law. Presumably, the lesser mortals had accept the system.

The self-styled “Voice of the People”(err ”Voice of the Elites”?) , Tan Kin Lian, has compared having sex unknowingly with a minor to baking a cake without knowing that some of the ingredients are dangerous. Well I never. And there are on his site posts from one or more of the accused: home away from home for the accused? Maybe TKL should borrow TOC’s unofficial motto of “Giving Voice to the Voiceless”**. I mean if anyone is voiceless, it is the now 46 accused and the two who pleaded guilty.

TKL, the posts, and others argue that the consequences for the accused whether they are found guilty or not, is disproportionate to what they are alleged to have done. And hence the Attorney-General should not prosecute them given that the minor in question is a “hardcore” prostitute, or so a lawyer for some of the accused claims (But he would say that wouldn’t he?). On disproportionate consequences, I agree. But why didn’t these bleeding hearts, do-gooders argue this when some men were charged with having sex with FT minors who happened to be prostitutes?

On not prosecuting, somewhere here, I’ve said if in the AG’s view there is sufficient evidence to convict, the AG has to prosecute: to show the system is fair to everyone***. And see this****, which I came across in a comment to a post by Lucky Tan. I agree with the anonymous commenter. 

The nine weeks the ex-principal got, and the judge’s explanation of the sentence and the rationale of the law should dismay the accused (including this utterly self-centred chap, who for his self-centredness and self-pity, both beyond parody, deserves getting the maximum jail sentence of seven years and a big, big fine to boot*) and their champion.

While Senior District Judge See Kee Oon noted that Lee chose to plead guilty at the first available opportunity [so if plead not guilty, then found guilty, be afraid very afraid] and showed clear and unequivocal remorse {go for acting classes, and practice crying in front of the mirror], Lee had allowed himself to be misled regarding the girl’s age. Given the circumstances, Lee’s suspicion ought to have been aroused and he should have asked for proof of her age, the judge said. “Had she refused to show identification, he should have walked away,” the judge added. From Today report.

Also, he had ”consciously chosen to procure services under anonymity of the Internet”, said the judge.

In passing sentence, the judge stressed the need to “reinforce a message of deterrence”. The judge highlighted the girl’s age and stressed that the law was put in place to protect the young and vulnerable … lacked maturity and was entitled to legal protection … Any “presumed willingness” on her part had no mitigating value.

According to a ST report the said judge also said that the law regards the underage prostitute as the victim because she is underage and therefore deemed as incapable of having the capacity for mature judgement and discernment of an adult … “What the victim had done may be considered immoral by certain standards. However, this must be weighed against the morality of those whose demand for such services makes this a lucrative trade.”

Spot on I say.

But let’s not condemn the ex-principal. The judge said he committed the offence outside the scope of duties as an educator and did not abuse or exploit his position.

I wish him and his wife well. Because “There but for the grace of God goes I”.

————-

*”It is my personal lack of control of my own moral standards and my weak resistance to distractions that led me to my mistake,” the ex-principal stated. The self-pitying moaner should reflect on this.

**And TOC’s silence on this mater is deafening. Next time it covers shumething controversial and says it is doing so because the issue is widely reported and because it is in the public interest (like the NS status of Tony Tan’s sons), I’ll raise this silence of TOC on MinorGate.

***The silence of the wimmin and feminist groups is also deafening. They should be commending the AG and police loudly. Perhaps, they only ever want to criticise the police and AG?

****Because there are elites among these 48 of them, including a former primary school principal, a former secondary school teacher, former high ranking financial executives and wealthy individuals, peoples get excited and interested about the fairness of the case.

Does this mean that ordinary peoples should get harsher punishment than the elites and the riches for committing the same offence?

Does this mean that ordinary peoples have no careers, no life when compared to the riches and the elites?

This shows that the society has to grow up to treat everyone, whether you are ordinary, poor, rich or elite, fairly with the same respect and same expectation.

Well said Sir or Mam.

Why the rich live in exclusive areas like Sentosa Cove or Districts 9, 10

In Humour, Property on 01/05/2012 at 5:27 am

They want to make sure that they do not break God’s order Love Thy Neighbour http://front.moveon.org/three-words-in-the-bible-that-some-people-totally-ignore/?rc=daily.share&id=40399-20042274-0D2I6Wx

After all, being wealth shows that God favours them.

 

Property: Rich Indons buying in London

In Indonesia, Property on 30/04/2012 at 7:17 pm

More wealthy Indonesians are looking to buy a second home in London, while interest in Singapore has waned, according to Property Report, a real estate magazine, citing a study by global property consultancy Knight Frank, earlier this month.

“Interest from Indonesian-based purchasers in London property increased by over 100 per cent last year … Indonesia moved up two places last year in Knight Frank’s rankings of Asian buyers in London, from 11th in 2010 to ninth position… weakening of the British pound against the rupiah has made the idea of buying property in London more attractive to wealthy Indonesians”.

Even though Singapore remains the No 1 destination for Indonesian property investors, the Republic’s recently-introduced additional buyer’s stamp duty was having a “cooling effect”, the report said.

BTW, lots more Muslims and rich people there. The Arabs love London, so do the Russian rich.

Knight Frank also said Singapore remains the favourite for the Indonesians, “Indonesians are among the top-three property buyers in Singapore after China and Malaysia. Last year, Indonesians bought 1,714 properties in Singapore. In the first quarter of this year, the number was 137″.

“We estimate that Indonesians spent 1.5 trillion rupiah (S$204.5 million) on property in Singapore (last year)”.

Integrating FTs: It’s our problem now/ News management

In Political governance on 29/04/2012 at 10:01 am

As readers may have noticed (a friend already has) that I’m getting less critical of the governing PAP. I told him (a Quitter done gd overseas) that after Raymond Lim “resigned” shumething is being done abt public tpt, there is more help from the poor by “Kee Chui” Chan (unlike the grudging, belittling efforts of VivianB, his predecessor), something (other than denial) is being done in public housing and flood control, got rid of a policy that incentivised civil servants to “make money” from us, and at least the govmin is “talking the talk” in immigration. I’m not too fussed abt the attempts to control us bloggers. Now if shumeone like Shanmugam was put in charge, I’d be a bit more concerned. But Yaacob (the minister who presided over two once in 50-yrs floods in two months) is the guy in charge of taming the internet deluge.  Yes inflation is a problem but I’m sure Tharman will solve it.

Besides I’ve been brought up to recognise when a person corrects his mistakes, even if he refuses to acknowledge them. Well the governing PAP is correcting some of its mistakes, even if it refuses to acknowledge that it can goof.

But I’m very annoyed that  Deputy Prime Minister Teo Chee Hean said according to a CNA report that“Singapore needs to remain open and to welcome diversity … Mr Teo said Singapore needs to pay extra attention to facilitating the new immigrants who are ready to sink roots here, so that they integrate into society more quickly … urged Singaporeans to do their part to make newcomers feel welcome, and to help them imbibe the values that have made Singapore strong as a society.”

Hey minister and governing PAP, it’s yr problem. Fix it. S’poreans did not ask the government to liberalise immigration. It was govmin policy to liberalise immigration so as to force feed GDP growth with cheap labour and to compensate for the refusal of S’poreans to breed like rabbits. GDP growth has been gd, but the benefits did not accrue to retirees like me (OK I exaggerate, I’ve benefited from increasing listco and reits payouts, and gd, low-cost service from FTs) or ordinary S’poreans who faced stagnant wages but escalating property costs, ever-increasing public transport fares on ever more crowded, and dangerous buses and trains).

On a totally unrelated topic, the CNA report that contained the above has been re-edited re-written and expanded to almost focus on ”Social media is a double-edged sword: DPM Teo” as the headline now reads. The previous headline had the word “open” in it. The only mention of immigration now is, “Another driving force – immigration. Mr Teo said Singapore needs to pay “extra attention” to new immigrants who are ready to sink their roots here. He urged Singaporeans to play their part in making new citizens feel more welcome.”

Wonder why the constructive, nation-building did this?

The Philippines: Its time has come finally?

In Emerging markets, Temasek on 28/04/2012 at 10:25 am

With even my dogs knowing abt the Indonesian story, while investors are getting excited about Cambodia and Burma, rightly, and rediscovering Vietnam (later abt it in the week), the Philippines has been quietly (a surprise as Filipinos tend to be excitable, boastful and noisy) getting things right.  

But some investors are aware and reaping the benefits. Last yr, the Philippines stk market was the 7th best performer (and I think tops, 2.% rise, in Asia: yup was a bad yr overall for Asian and global mkts), and so far this yr it is among the top 10 globally, up more than 20%.

The Philippines, after years of indebtedness, is a net creditor.
the country is getting its fiscal house in order. … The deficit has narrowed from a worrying 5-6 per cent a decade ago to a manageable 2 per cent …
the political situation is vastly improved. (The FT (recently) via Today.

Remember that Brazil is finally becoming the powerhouse it always had the potential to be after almost 100 yrs of disappointing investors regularly. But then Argentina has gone the other way. Bulls can only hope that Filipinos are more like Brazilians, even though they like the Argies have Spanish blood, rather than Portugese blood)

BTW, Temasek is Filipino-lite. When it was unfashionable to own shares in the Indonesia, it had major stakes in Danamon (now being sold to DBS) and BII (sold at very high valuation to sucker MayBank) and in Indosat (sold at nice profit). It doesn’t own anything direct in the Philippines: no banks, no telcos.

Local banks presence is pretty light in the Philippines when compared to Indonesia. DBS has a 21.4% stake in BPI via its 40% stake in Ayala DBS where Ayala has the majority 60% stake. UOB seems to have a 2% stake in BDO Unibank which has juz called a massive US$1bn rights issue. OCBC doesn’t seem to have a presence in the Philippines. All three local banks have subsidiaries in Indonesia.

Singtel has major investments in the Philippines (via Globe 47% which it controls together with Ayala 32%) and in Indonesia. Global is the second largest telco in the Philippines.

Temasek’s Chinese banks have an unending appetite for capital

In Banks, China, Temasek on 27/04/2012 at 6:54 pm

Regular readers will know that Temasek’s investments in Bank of China and China Construction Bank are great investments. It came in as a pre-IPO cornerstone investor and unlike the Western banks that had similar status had not sold out. Gd friend of China. It trades out and in of these stocks to make realised profits. But these trading profits are peanuts as the trading positions are peanuts in relation to its holdings in these banks

And that it recently bot Goldman Sach’s remaining stake in ICBC, at a slight discount to its mkt price. 

As this article explains these banks have an unending appetite for capital because they are “squeezed for capital”. So Temasek has to be willing to cough up more of our money if it wants to avoid being diluted when rights issues are called.

SMRT: Reality hits shareholders

In Infrastructure on 26/04/2012 at 7:47 pm

SMRT is down another 2% today closing at 1.70 (-o.o35). It was down 4% yesterday (Wednesday) closing at 1.735 (-0.075)

Well with Tuesday’s announcement that SMRT’s eight-year $900m programme to upgrade many infrastructural and systems components on the North-South and East-West lines would exceed what it had spent on repairs and maintenance in the past 10 years, and

– no details on how the cost will be co-shared with the Land Transport Authority (to be negotiated); and

– no details on many parts of the upgrading programme,

the sell-offs were to be expected.

What was surprising was that the stock was trading 1.81 on Tuesday  As I mentioned here last week, I was surprised that the stock had not fallen after the most recent problems on the Circle Line. In fact the stock had gone up since 9 April , when OCBC called a buy at 1.74. This despite the ongoing inquiry had yet to allocate blame, and no announcements (then) of spending plans to maintain and upgrade the system so that it would be fit for purpose.

Mkt in SMRT shares was not efficient.

Yaacob’s “Three steps” to Heaven”: Analysing Steps 1 & 2

In Internet, Media, Political governance on 26/04/2012 at 7:25 pm

(Or “Doc’s cure Part I: a purgative)

PAP’s Heaven that is. Hell to us netizens. OK, let’s not exaggerate, more like Purgatory.

Sorry, Back to the headline. There are three steps that Yaacob wants taken to tame “cowboy towns”:

Step 1: “The Internet community creates a code of conduct for responsible online behaviour”

Step 2: “Citizens set up websites that offer constructive viewpoint” i.e. he said that the best way to go is to encourage other sites to emerge, “that can continue to offer constructive ideas and useful suggestions”.

Step 3: “Major media cos could help set the right tone online”

Step 1 has been well covered by netizens since he articulated it many moons ago. All I will add to the noise is this analysis

– If the government tries to regulate us bloggers, it’ll do more harm than good, for the government itself, the PAP and for S’pore. The government and PAP are no good in designing social systems: even the CCP in China acknowledges it cannot be the only social architect, it is only one of the players, albeit the one that can throw other players into jail.  The PAP government has a further problem given government’s desire for a knowledge-based economy, but with knowledge and the economy increasingly dependent on access and the use of the internet, it can no longer control the information S’poreans get. The internet and, in particular, social media have created a level of transparency never ever seen before in S’pore. Even taking into account the lack of publicly available government data, people can still research complicated issues with a few clicks of a mouse. The PAP government can no longer control the agenda or the framework within which discussions take place.

Even manufacturing is becoming social: read the Economist, the magazine where the government got its ideas for COEs, and CBD charges, among other “screw the poor” ideas.

– In the context of the other two steps, it is totally irrelevant. It has nothing to do with getting citizens to set up websites “that offer constructive viewpoints” or” with the local media helping readers to “separate the wheat from the chaff”.

– And even after asserting that the internet should grow as a platform for “serious discussion”, Dr Yaacob said a site cannot be stopped “just because we disagree with it”. There’s “nothing wrong” with ”more sites available that offer alternative views, but as long as they are constructive … based on proper analysis”.

On Step 2, “Citizens set up websites that offer constructive viewpoint”, my first tot was, “Err whatever happened to FTs, that ministers so treasure? They don’t do “constructive” websites? Or are they banned from doing “constructive websites” but allowed to do ”unconstructive” websites (citizens are discouraged from doing these sites)? Or are FTs banned totally from setting up websites on S’pore? Or all websites?”. If the last “wah lan” what kind of FTs do we want? Only goodie-two shoes (as defined by the PAP) like ”No NS for me” from Msian-born Puthu or “Food is gd is M’sia” from Msian-born Ms Foo”. Incidentally, both became PAP MPs.

And he is talking rubbish, “If there are no good online sites or platforms that offer good views, people will naturally gravitate toward those that are popular and available.” Well people will always gravitate to sites that support their point of view. Ask the watchers of Fox TV in the US. And to “yellow culture” websites that promote decadent lifestyles.

But my biggest grouse with him on Step 2, is that what are “good” and “constructive” websites with ”proper analysis” to  enable “serious discussion” and “useful ideas”, are defined by the PAP government. It’s the usual “setting the agenda”, framing the issue game that the government is always playing.

And it’s clear that by saying the local media can help readers to “separate the wheat from the chaff … our major companies, which have an established presence, can set the right tone online as well, with good practices of information sharing and moderation on the various online platforms”, his definitions of “good”, “constructive”, “proper analysis”, “useful ideas” and  ”serious discussion” are the same definitions used by the PAP government to describe its ideal mainstream media, and the local media when it describes itself. He only left out “nation-building”*.

As this post is getting too long, I leave for next week examples of what I speculate are the practices he wants our “citizen”, “constructive” websites to learn from the local media: publishing misleading photos or rewriting letters-to-the-editor  to misrepresent the views of the writers?

For now, I’ll leave you with some light relief, “[T]o disagree with the Government is not a crime, but let’s put it on a rational objective footing. The Government has never shied away from that and that is something we look forward to, so that the Internet community can add to the discourse.” Wonder if the late JBK, Dr Chee or TOC would agree?

——-

* Actually he didn’t The Jakarta Post reported that he “noted that Singapore’s media model is one based on forging consensus and facilitating nation-building, in which social cohesion is preserved while empowering people to make informed decisions as a society.”

Not another excuse to promote S-Reits?

In Financial competency, Property, Reits on 25/04/2012 at 6:37 pm

(Or “S-Reits: Is an amber light flashing?”)

Regular readers will know that I’m up to my eyeballs in Reits (AMP, Fraser, Lippo and Ascendas India, ya I know AI is a biz trust, but it’s a Reit except in form). Greedy for the yield, what with inflation at above 5%. And no high salary to fall back on. In fact no salary at all. (((

Generally Reits are up 10% in 1Q, and taz without taking into account the payouts! So I’m not complaining.

But I’m getting concerned abt future total returns (price + payouts) when the expected appreciation of the S$* is given as a reason to buy Reits. “If they [investors] expect the dollar to appreciate … there will be more interest in Singapore-dollar-denominated assets … Reits that are listed in Singapore and traded in Singapore dollars will benefit as well,”  someone senior from SIAS Research was quoted by MediaCorp as saying recently. And remember that SIAS is the self-proclaimed watch dog for retail investors!

WTF, ever heard that quite a number of Reits are diversified geographically, or are exposed to a specific country like India, China or Indonesia? If a Reit has oversea income, that income would be “reduced” when translated into an appreciating Singapore dollar.

Anyway, as of last week, DBS Vickers liked Mapletree Logistics Trust, Ascendas India Trust and Frasers Commercial Trust. These were Reits to accumulate ahead of payout declarations because it expected the payouts to exceed mkt expectations.

CIMB favoured CapitaMall Trust and Frasers Centrepoint Trust for their retail exposure and strong growth potential. And OCBC prefered industrial REITS, which offer yields in excess of 8% to outperform.

But do remember that unlike companies, Reits have by law to payout out 90% of their income. There is no such thing as keeping something for “a rainy day”. Something that “dividend stocks” like Haw Par, SPH or F&N do. With a Reit, if income drops, the payout drops and the share price will drop to reflect the reduced payout.

As a Reit investor, you got to sell when the going gets good, or be prepared to hold it through down-cycles and be prepared to cough up monies then for rights issues to shore up the financials.  Net-net, could use up the payouts you got in gd times.  

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*Following the recent announcement by the central bank to allow the Singapore dollar to appreciate at a faster pace.

Sex & the State

In Political governance on 24/04/2012 at 7:19 pm

(Or “What MinorGate tells us abt the “system” netizens love to hate)

Ignoring the personal tragedies of disproportionate consequences for the accused even if they are acquitted, and the sordid details, there are some important facts that we should take note of.

Among the scion of a rich family, an expat ang moh ex-banker from UBS, professionals from the finance industry, an executive director of a company, and senior managers are a former school principal, a former head of strategic planning at the Police Training Command, a former senior lawyer for Singapore’s environmental agency, a scholar-teacher and a naval officer. What it means is that senior public officials can afford to pay between $450 and $750 for one session of sex (the alleged range of fees).

So it is clear that salaries in the public sector are now comparable with that of the private sector. No need to worry about talents leaving public service for more money in the private sector.

(BTW, wonder if the senior officials used cheap hotels or were using the expensive hotels, including Marina Bay Sands, and M Hotel. If the latter, the WP and Lina Chiam should be asking questions in parliament abt whether the salaries being paid to senior officials and officers are excessive.)

Next, as this under-age sex case comes less than three months after Singapore removed its chief of civil defence and replaced the head of its police anti-drug unit in an investigation by the anti-corruption watchdog of “serious personal misconduct”, as “public” servants constitute 13% of the cases brought in MinorGate, and as there are rumours that an ex-senior, high-flying SAF officer, will also be charged, one can reasonably, mischievously and sardonically wonder if there is a hunger among senior public officials for illicit sex?

And given that these officials do not seem to have a hunger to make money illegally, maybe high public sector salaries to make sense. And maybe the Pyramid Club (where the elite of the public servants relax) should arrange sex sessions for members so that senior public servants don’t feel that they have to hunt for sex?

Seriously, the government should be concerned that these senior public officials seem to have an attitude to sex that is not reflective of the wider public mood. The public seems to be more puritanical than these officials, when it comes to sex: cheating on the wife, and using prostitutes are not acceptable behaviour. If the public starts getting the idea that there are many more senior public officials who are cavalier abt sexual morals, there will be a serious loss in the moral authority of the government.  

So the HR people in the public sector should be seriously thinking of conducting courses for scholars and other high-flying senior officials on how they should behave sexually. And perhaps provide confidential counselling sessions for those who have trouble controlling their urges?

The government should also be concerned abt the loss of talent and the money wasted on educating and training these scholars and the others.

Now something nice to say abt the “system”.

The “PAP and government are bastards and always wrong” brigade are at it again. They rant and rage that the men charged, shouldn’t have been charged because the charged men didn’t know. (Obviously, they are gullible enough to believe the men’s defence. Don’t they realise that the men would say this, wouldn’t they?)

And that anyway the consequences for the men whatever happens to them is out of proportion to the charges. Very true this.

But if charges had not been brought, with only the pimp being prosecuted, these same people would be ranting and raging “cover up” because the “rich and famous”, an ang moh FT banker, scholars, and other senior government people were involved. “The system is corrupt,” would be a cry we would read in TOC and TRE, and SgDaily and S’pore Surf would be chock-a-block with links carrying the same message. And Yacoob would have another excuse to call us netizens “irresponsible” and other nasty names.

As it is, there are the usual anonymous defamatory allegations on, for example, TRE, that the gal is well-connected. And all because it is the law that she cannot be named publicly, because at the time she was allegedly having sex with the accused, she was still a minor. The authorities have no discretion on the matter of naming the girl.

The government, the police and the Attorney-General* deserve some credit for allowing the law to run its course so that justice is not only done, but seen to be done? A lot of credit in my opinion.

—————–

*There is a gd public policy reason for prosecuting all the alleged cases of paid sex with the gal, even if it is proven that the gal is a “hard core prostitute”. It is to ensure that the “excuse” of “I didn’t know” is never ever available in any such a case. Otherwise, every Ah Beng, Brudder or Countryman will claim “Didn’t know” as an excuse when making representations to the AG not to prosecute, and then bitch, moan and rant that he isn’t well-connected enough when the AG decides to prosecute.

BTW, ever tot that the gal has mental health problems? We juz don’t know, and shouldn’t rush to condemn her on media reports, and the statements of lawyers representing some of charged men.

Corporate governance: Better value elsewhere in region?

In Corporate governance, Economy on 23/04/2012 at 7:24 pm

Chart shows that the authorities are pricing S’pore out of fees to themselves, and to the accountants, lawyers etc based here by making S’pore more expensive than HK when it comes to charging cos fees to set-up and maintain here. HK is the leading Asian centre for registrating and maintaining offshore companies outside of the “Sunny places for shady people” to misquote Somerset Maugham.

And S’pore non-executive directors are well paid and do less work vis-a-vis our neighbours.

Non-executive directors (NEDs) in Singapore got the second-highest pay when compared with directors in Malaysia, Indonesia and Thailand, a report by Hay Group showed yesterday. Those in Indonesia were better than S’porean NEDs.

But boards in Singapore also meet the least often, and hold the least number of committee meetings compared with their regional peers.

The management consultancy analysed data collected from 200 large companies in the four countries from 2008 to 2010.

The results showed that at the median level, NEDs from large companies in Singapore were paid US$75,300 in 2010, second to those in Indonesia, who took home US$178,600.

By comparison, NEDs in Thailand and Malaysia received US$46,600 and US$46,300 respectively.

In Indonesia, NEDs take home a substantially higher pay because state-owned companies and some private companies stipulate their pay to NEDs as a percentage of the president-director’s compensation for both the salary and bonus portions. These which are supposedly linked to performance – already made up about four-fifths of NEDs’ pay.

Most of the remuneration for NEDs in Singapore, Thailand and Malaysia is made up of a flat fee, not performance-linked.

The salary of NEDs in the region have been heading higher over the past few years.

In Singapore, the increase was 9% in both 2009 and 2010, while in Malaysia, the NED pay rose 17% in 2009 and 3% in 2010.

In Indonesia, the increase was% 13% and 10% respectively in 2009 and 2010. In Thailand, the NED pay rose 14% in both years.

Thai companies held the most number of board meetings between 2008 and 2010, on a median level. In 2010, an average of nine board meetings were called by the 48 Thai companies reviewed.

Singapore fared the worst, with the 50 companies calling just five board meetings each in 2010. Malaysia’s top companies held six meetings, while those in Indonesia conducted seven.

Indonesian companies also had their audit committees meet more than 10 times a year between 2008 and 2010, which is significantly more often than in Singapore – at four times a year – and Malaysia, at five times a year.

As audit committees have a heavier responsibility than other committees, in Singapore, the chairman and members of the audit committee get higher annual retainers than those in other committees. Thai cos also do something similar

The median tenure of independent directors is the highest in Singapore, which stands at seven years. Malaysia follows with six years, Indonesia is at four-and-a-half years and Thailand has a median tenure of three years.

Proposed revisions to Singapore’s Code of Corporate Governance note that companies must explain the reasons that a director who has served more than nine years on the board is still deemed independent.

Hay Group’s review showed that 62% of the top companies in Singapore have at least one independent director who has served more than nine years on their board.

S-Chips are not the only Chinese junk exports, ask the US and HK

In China, Hong Kong on 23/04/2012 at 6:44 pm

The 180 Chinese companies that went public around the world since the beginning of 2010 are trading at an average of 21%  below their IPO prices, Bloomberg News reports.

In Singapore, the third-biggest market for such listings after Hong Kong and New York, eight Chinese companies that went public in 2010 have declined an average of 47 percent from their offer prices, the data show. That compares with a drop of 15 percent for the 23 non-Chinese firms that had IPOs in 2010.

And trading volumes are shrinking. In the last 12 months, trading volumes in S-Chips have halved. [Update on 24 April 2012 at 7.20pm]

But HK and the US are doing something. Regulators in Hong Kong are set to propose rules that would make banks liable for faulty IPO documents, Reuters reports. And earlier today, Hong Kong’s securities regulator fined a brokerage firm and revoked its corporate finance licence. Mega Capital (Asia) has been fined HK$42m (US$5.4mfor “inadequate and sub-standard” diligence work and “failure to act independently”. The firm was the sole adviser to Hontex International, which had raised HK$1bn via a share sale in 2009. BBC Online

In the US, the SEC and FBI have been investigating people allegedly involved in fraud in China-based companies listed on US exchanges. Latest [25 April 2012] SEC investigations and analysis of the complicated structure that overseas listed Chinese cos (including S-Chips) have to adopt to list overseas which makes malpractice easier..

Err waz happening here? We are told by an SGX non-executive director that SGX is “a private club” despite it regulatory role. He said this recently when representing SGX in court as SGX’s lawyer in a case involving a S–Chip. Article 14 analyses the case.

When will this happen to a S-Chip?

In China, Corporate governance on 22/04/2012 at 7:20 pm

It may be a tiny Chinese educational company worth a little over $200 million. But the ChinaCast Education Corporation has found itself embroiled in a battle worthy of a John Grisham novel.

Its ousted chief executive, Ron Chan, has been accused of aiding in the disappearance of ChinaCast’s chops — ornate corporate seals that are needed to approve everything from paychecks to contracts.

And recently more than a dozen men claiming an association with Mr. Chan burst into the company’s Shanghai office twice, violently carting off several computers from the finance department, according to a United States regulatory filing.

http://dealbook.nytimes.com/2012/04/19/battle-over-a-chinese-company-turns-physical/?src=dlbksb

No wonder S-chips are finding it difficult to get people to be non-executive or independent directors.  And the row between China Sky’s former independent director Yeap Wai Kong and SGX doesn’t help. He took SGX to court in an attempt to quash its public reprimand issued against him in December 2011. The court is hearing the case.

What Tin Pei Ling could teach Dr Lam

In Political governance on 22/04/2012 at 7:06 pm

(Or “PAP MP calls for welfare for poor, ill PRs: What abt locals?”) 

After the Ministry of Health (MOH) announced a general reduction of healthcare subsidies for PRs*, the chairman of the GPC for Health, Dr Lam Pin Min publicly said that some PRs may still need further help to adjust to the changes. Dr Lam hoped that the MOH can set up a special fund to help PRs who cannot afford their medical bills and have nowhere to turn to for support.

While Singapore PRs should be glad that there is at least one Singapore MP looking after their interests despite them not having the vote, Dr Lam is peeing on the wrong tree.

He shld know that in S’pore, self-help (including help from family, relations and friends) and, if that fails, aid from charities is what S’poreans in trouble are conditioned to do. The government has always said welfare should be the last resort, not the automatic default. If this is true for true blue S’poreans, why should PRs be any different? PRs tua kee, is it Dr Lam?

When one Tin Pei Ling found out that there were poor, elderly S’poreans in her ward who were having problems paying their SingHealth medical bills, did she stomp her foot, and demand that the government give more subsidies?

No. She somehow raised a $150,000 fund to help “squeezed” elderly constituents with their SingHealth medical bills.

If Dr Lam is genuinely concerned abt the plight of poor, ill PRs, he should learn from Tin. Don’t ask the for government handouts, but go raise the money for a fund that will help PRs pay their SingHealth medical bills.

BTW, I’m wondering why Sengkang West SMC doesn’t have any “squeezed” elderly constituents who need help with their SingHealth medical bills? I do know that the area’s polyclinic is chock-a-block, which shows that residents can afford to use SingHealth.

Or is it juz that he doesn’t care about the voters in his SMC? They will always a PAP MP, no matter what.

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*With the adjustment, the subsidy for PRs in most income bands will be revised to about half the corresponding subsidy that Singapore citizens receive.

Burma: Wake up S’pore

In Emerging markets, Political economy, Political governance, S'pore Inc on 22/04/2012 at 6:39 am

Japan has agreed to write off more than US$3.7bn of debt owed by Burma and to resume development aid.  The leaders of both countries  also agreed to plan a special economic zone near Rangoon.  This could give Japanese firms a head start in winning business in what is seen as one of Asia’s last frontier markets.

Hey could have been S’pore planing a SEZ with Burma! We are “old friends” of Burma. And GLCs and TLCs got experience of building biz parks in Vietnam and China. Come on Georgie Boy. Go broke deals between S’porean cos and Burmese ones and the government. Too comfortable, what with big fat pension? Or planning to reform PAP? Or planning to be president?

(Ya aware that three postings in row abt Northern ASEAN countries. But taz where the biz and investment opportunities are coming from in this region.)

Pru eyeing Thai insurance assets

In Uncategorized on 21/04/2012 at 9:29 am

British insurer Prudential Plc  is thinking of bidding for the insurance business of Thailand’s Thanachart Bank, Reuters and the FT report, in a abt US$500 million (310 million sterling) deal. The Pru wants to expand further into SE Asia but has only 2% of the Thai market, unlike Indonesia where it has extensive operations.. It has not tried to do a major deal since shareholders aborted a US435bn bid for AIA in early 2011.

The Thanachart Bank unit, which is set to be auctioned, is expected to include life and non-life assets as well as a bancassurance arrangement. Some Japanese and European insurers are also expected to participate in the process.

Note ING , which is in the process of selling its Asia insurance and asset management businesses, also has assets in Thailand that are up for sale.

Cambodia: 10 IPOs a yr?

In Emerging markets on 21/04/2012 at 9:09 am

State-owned Phnom Penh Water Supply Authority (PPWSA) started trading on April 18, while Telecom Cambodia and Sihanoukville Autonomous Port are preparing to go public.

“Cambodia is going to be a very attractive market as investors benefit from the nation’s economic development. Many inquiries are being placed for possible listings … dozens of companies will list their shares within five years. Listings of five-to-10 companies are possible a year.”

http://www.bloomberg.com/news/2012-04-12/cambodia-may-lure-up-to-10-ipos-a-year-korea-bourse-says.html

BBC report http://www.bbc.co.uk/news/business-17738351

ANZ Bank attractive to Chinese strategic buyer?

In Banks, China on 20/04/2012 at 7:24 pm

An Australian who recently retired as head of Standard Chartered’s business in China believes there’s a strong chance of a major Chinese lender picking up a cornerstone stake in one of Oz’s big four banks within a few years. The Age carried an interview with Mike Pratt, , who says it’s “highly possible” that a major Chinese player will take a stake of up to 15%  in a major Australian bank this decade”.

ANZ Bank would make the most sense, given its super-regional bank strategy. Commonwealth Bank is increasing its presence in Asia but is nowhere as regional as ANZ Bank.

Westpac (a portmanteau of “Western-Pacific”) despite its name, and National Australia Bank both focus on Oz after misadventures abroad.

S’porean hedgie runs into choppy waters

In Financial competency on 20/04/2012 at 6:33 pm

Dymon Asia Macro Fund — which tries to profit from macroeconomic trends by punting on bonds, currencies, stocks and commodities — has lost about 2% this year. A Eurekahedge Pte index that tracks macro funds in Asia gained 1% through March, after returning 0.6%  in 2011.  So Dymon is recruiting a former head of SAC(another hedgie)’s, Asian office, to manage risk mgt and operations so that the Yong, the founder and boss of Dymon, can focus on making money again.

http://www.bloomberg.com/news/2012-04-16/former-sac-capital-asia-head-to-join-dymon-hedge-fund.html

Yong’s background: true blue S’porean. Let’s wish him well.

http://atans1.wordpress.com/?s=Dymon

Seeing the funny side of SMRT’s woes (Part II)

In Infrastructure, Political governance on 19/04/2012 at 7:19 pm

(Part I)

I also had a laugh when despite Second Solicitor-General Lionel Yee pointing out from the start that the inquiry looking into the December 2011 breakdowns ”is not an adversarial proceeding but a fact-finding one”, the lawyers for LTA and SMRT put the blame on each other’s client.

(Leading to a Voice to comment, “Since it has been stated upfront that the proceedings are non-adversarial, why is there a need to hire expensive senior counsel, some at the expense of taxpayers? … SMRT Corp and the Land Transport Authority must have competent senior officials who are capable of assisting the COI with the investigations.”)

I can understand SMRT wanting to evade responsibility for commercial reasons. It could be fined heavily, and made to spend more on maintenance, depriving it of revenue to pay management bonuses and shareholder dividends. But should be so be so aggressive trying to pin the blame on SMRT. Scared of showing LTA was less than competent?

LTA’s lawyer Andrew Yeo, from Allen & Gledhill, took issue with the SMRT’s maintenance regime which could be improved, although it was “comprehensive and satisfactory”.

Citing a report by the transport operator’s internal investigation team, Mr Yeo said: “SMRT’s maintenance expenditure and manpower headcount for the maintenance of trains and trackways has not been increasing in recent years, at the same rate as the increase in kilometres travelled per train,” said Mr Yeo.

According to Mr Yeo, SMRT records showed that there has been a reduction in the number of wheel-profiling works between 2009 and last year even though there has been an increase in incidents of wheel defects over the same period. He also said that SMRT’s maintenance budget had not kept pace with the increasing ridership.

SMRT also “could do better” in terms of record-keeping, especially in the tracking of defects. “That would in turn enable any lapses or deficiencies in maintenance work to be easily detected and rectified,” Mr Yeo added.

Mr Yeo’s comments drew a response from SMRT’s lawyer Cavinder Bull. The Senior Counsel from Drew & Napier asked: “Whose duty is it to do what?”

He pointed out that the infrastructure was technically owned by the LTA. Also, any modifications to the infrastructure “must be submitted to the LTA for their review and approval”, Mr Bull said.

Alluding to findings from a team of experts, Mr Bull said that the SMRT has acted with “appropriate due diligence” in terms of its maintenance and engineering regimes.

Mr Bull added that any wheel defects or third rail gauge variation – which may have contributed to the higher vibrations, which in turn may have contributed to the dislodgement of claws – “did not occur due to a lack of maintenance”.

In fact, he said, the SMRT’s maintenance regime has been more stringent than what is recommended by the manufacturers: The various checks on the third rail are done every three or six months, which is more than the yearly inspection which manufacturers recommended.

Mr Bull also stressed that the dislodgement of the multiple claws which led to the breakdowns was caused by “a rare confluence of factors, none of which individually could have resulted in the incidents”.

Reiterating that it was not the SMRT’s intent “to shirk its responsibilities”, Mr Bull said that after discussions with the LTA, SMRT intends to change all the claws to “fifth generation” ones, which are installed on the Circle Line, as well as the Changi Airport and Boon Lay Extensions. Today article

Seeing the funny side of SMRT’s woes (Part I)

In Humour, Infrastructure on 19/04/2012 at 7:10 pm

With

– a foreign wire, AFP, reporting, “Services were disrupted along a new multi-billion-dollar Singapore metro line on Wednesday, the third straight day of rush-hour delays for the city-state’s gleaming train system”; and

– ST

—— pointing out, “No fewer than five disruptions took place within a week since last Friday, with all of them affecting rush-hour commuters”; and

—— “Statistically, this frequency far exceed the average one-per-week disruption that lasted more than 10 minutes between April 2010 and March last year, and the 0.6-per-week average recorded between 2007 to mid-2009″,

I couldn’t help but wonder if OCBC would change its mind on SMRT because on 9 April, OCBC issued a BUY call  on SMRT which was then trading at 1.74. BTW it closed at 1.81 today, so the recent problems have not affected the share price, another laugh there

—————

OCBC report on SMRT dated 9 April 2012

Strong selling pressure as anticipated by more than half of the street failed to materialise with the counter trading tightly range-bound for slightly more than two months.

During this period, SMRT has also kept to a lower profile with the announcement of work completion from its Internal Investigation Team as the only major development.

Ahead of the upcoming earnings release at the end of the month, we continue to stress that SMRT is likely to see an upswing in fuel costs, following the run-up in prices as well as the additional train runs commissioned in the face of higher ridership and public pressure.

Coupled with higher staff costs related to seasonal merit increments and additional headcount to meet service requirements, we are likely to see the weakest quarterly performance for FY2012.

In terms of fallout from the December 2011 service disruptions, we do not expect any incremental costs at this juncture as the more important inquiry by the Committee of Inquiry (COI) has yet to be completed.

While SMRT’s FY2012 results are likely to stay uninspiring, the counter’s attractiveness as a dividend play remains its key selling point. SMRT’s management has maintained and reiterated its commitment to maintain its dividend payout policy.

Although its prospects going forward will be challenging – COI findings, no fare increments – SMRT’s ‘customer’ base is still growing.

Ridership levels continue to grow especially with support from the current trend in COE prices, while rental and advertising yields are naturally competitive given the high foot traffic locations of their stations.

With this backdrop and earnings support and stabilisation in SMRT’s price, we continue to call for an attractive entry point for SMRT.

Maintain ‘buy’ at an unchanged fair value estimate of $2.04.

Mandarin Ngiam on “elitism”, “social divide”, education etc

In Political economy, Political governance on 19/04/2012 at 6:58 pm

(or “Analysing Ngiam Tong Dow’s March 2012 speech (Part II)”)

As I wrote in Part I, because Professor Lim Chong Yah’s “shock therapy” proposal is a variation of what was implemented the early 1980s (until the 1985 recession: neutral article on the recession and one blaming it on the original “shock therapy”), when one Ngiam Tong Dow* was Permanent Secretary in the Ministry of Trade and Industry, I thought it would be interesting to reread a speech Ngiam made in March because MTI had once upon a time analysed the problem of severe manpower shortages and the economy’s increasing reliance on lowly paid foreign workers. Its solution was to restructure the economy by raising wages substantially to dampen employers’ demand for lowly paid workers, what Professor Lim is recommending.)

The speech is long and can be broken down into a sociopolitical analysis of S’pore, and an economic analysis of S’pore.

 This post reports and comments on the sociopolitical aspect of his speech**. In Part I, I did the same on the economic part of the speech.

—————————

Colonial system

Although this appears in mid-speech, it’s a good introduction to his sociopolitical thoughts.

“When Sir Stamford Raffles founded Singapore in 1819, his town planner demarcated the town into several ethnic enclaves. Kampong Glam (Malays/Arabs), Chinatown (Hokkiens, Cantonese, Teochews), Little India (Tamils), and Tanglin (Europeans). Empress Place on the left bank at the mouth of Singapore River was the administrative and civic centre. The British governor presided from the Istana … Each racial group was free to conduct their own trades, practice their own religions, set up their own schools, and largely married within their own race and ethnic group. The colonial government provided the overarching framework of law and order and schooling in the English medium.

‘Being a British colony, the language of administration was English. Access to English medium schools was open to all races. English became the lingua franca acceptable to all the races as none has any
in-built advantage over the other.”

Differences in the body politic

He talked of the difference between his generation of undergraduates at the then University of Malaya (NUS today) and those of today, “Except for the few activists of the University Socialist Club, my contemporaries at university were politically passive but not naive. In the political environment … we thought it prudent to keep our thoughts to ourselves.”

(So they were not sheep, just cautious, crafty mouse-deer of Malayan folklore?)

But “NUS undergraduates today are more articulate. They have courage of their own convictions,expressing their views vigorously at tutorials or the cafeteria.” (But are they wiser than Ngiam and his contemporaries, or just more noisy? “Remember “Still waters run deep” and “Empty vessels make the most noise”.)

He pointed out that the PM “has to deal with an electorate that is vastly different from … his father’s generation”. “The command politics of his father no longer works … PM has … to appeal to reason”. What surprised me was his comment that Lee Kuan Yew “appealed to emotions”. What I respect abt LKY’s speeches from that era are their simplicity and internal logic.

Uniquely S’porean

“[C]an Singapore be considered a democratic state?”. His answer was it can’t. “We are not a theocratic state like the Vatican or present day Iran. We are … not ideological states like North Korea, Cuba or China.”

He compared the western concept of democracy (“government of the people, by the people, for the people”) with that of the Chinese imperial system, “China’s emperors had to gain the consent of the people to earn the mandate of heaven to rule.” He seems to imply they are somewhat similar.

A difference is that losing heaven’s mandate often involved some form of violence. Mind you, in places like Nigeria, Kenya, the Philippines, Thailand, Bangladesh and India, democracy often involves violence.

He went on to say, “In my view the core purpose of government is to raise the livelihood of the people.” and says, “The PAP won the mandate to govern because it delivered jobs and housing”, pointing out that the PAP has “won every one of the seven general elections since independence in 1965.” Can’t argue with these points.

“There are two competing strands in our body politic.”

“ The first strand is meritocracy. It is modelled on the Chinese imperial scholar system where the best minds compete in nationwide examinations presided over by the emperor himself. The Singapore President Scholar is akin to the Chinese Imperial Scholar.

‘Both systems aim at identifying the best talent to serve the country.” What he missed out is that the Chinese intellectuals and activists (admittedly they usually had some form of Western education often via Christian missionaries) who wanted to reform and modernise the Chinese system in the late 19th and early 20th century criticised the imperial examination system for producing people who were only good in memorising the set examination texts (Classics like the Analects of Confucius). These “modernisers” argued that rule by these scholars under the Manchus led to the decline of China as a military, economic and scientific superpower, repeatedly being bullied and humiliated by the Western powers and Japan. The facts seem to support this analysis.

If the Chinese system was meritocracy at work, give me something else, please. Enlightened nepotism or Plato’s philosopher king, anyone?

Also selection by examinations should not be the only criteria of identifying “the best talent to serve the country”. What abt execution of duties? Or courage or integrity? Or manners? Or even sexual restraint?

“The second strand relates to the system of selecting leaders. It is modelled on Plato’s Republic [where] peers select their own leaders until the philosopher king emerges. As the first among equals, he is accountable to no one but himself. Over time, peer selection breeds a leadership that becomes complacent. Though our state is rooted in meritocracy, we must beware of the dead hand of peer selection. Elitism creeps in imperceptibly.”

He gave an example,“The recommendation by the ministerial salaries review committee to peg ministerial salaries to the median income of the top 1,000 income earners reflects an elitist mindset which is troubling. If the primary purpose of government is to raise the livelihood of the people, a better statistical measure of livelihood would be the median income of all workers, not just the top 1,000 income earners or the MX9 salary scale of the Civil Service.”

He pointed out the WP shares this elitism, “Curiously, both the government and the Workers Party accept that ministerial salaries be pegged to high income earners rather than the median of the work force, which is [US]$3,070 a month as at June 2011.” (WP is close clone of the PAP?)

He said that bonuses for the Cabinet should be pegged to increases in the median income of the work force, rather than the GDP.

Social divide

Much later in the speech, after talking about the economic situation here (covered in Part I), he returned to the theme of the social divide caused by the “widening income gap”.

“In 2012, what will be the threat to social stability? …Future social unrest will arise not from racial or religious differences [He had reminded that even though from its founding 1819 to when Singapore was granted self-government in 1959), S'pore's races lived lives of passive co-existence, S'poreans witnessed the three racial riots in the 1950s-60s] but from the growing class divide caused by widening income gaps.”

‘The top 1,000 earn million-dollar annual salaries while the rest a monthly median income of US$3,070. The gap is untenable. In the past, equal opportunities in education have provided the social mobility to enable the bright boy from a poor family to make good … The spread of private tuition has changed the [level] educational playingfield.”

He said that during his school days in the 1950s (and mine too in the early 1970s), “only the academically weak students of rich parents take remedial tuition … Today, any parent who can afford the fees will send their children not for remedial but enhancement classes to give their children a head-start”.

This means that, “Though there will still be the exceptional individual who triumphs against all odds, more and more of our state scholars will come from upper, middle income families with professional parents.”

“There is no easy answer to the problem of an uneven playing field in our schools.”

His solution? “The challenge is to level up, not to level down. One suggestion I have is to make classes for academically weaker children smaller. The student-teacher ratio should be more favourable than in brighter classes so that the teacher can give more personal attention to each student, which is what private tuition is all about.”

He acknowledged that the government is doing something about the income gap, “The 2012 budget is politically adroit, replete with spending proposals which basically are income transfers from the taxpayer to the poorly paid, the disadvantaged and the aged.” But there is a hint of criticism, “Income transfers are palliatives, temporary reliefs to abate rising social discontent.”

Fostering entrepreneurs

He said that spending money to expand the then industrial training centres fostered entrepreneurs,

“[O]ur ITC [Industrial Training Centres, the precursor of today's Institutes of Technical Education] trainees with barely O levels went on to start their own factories producing parts and components for MNCs.” (Bit of an exaggeration this. These entrepreneurs included teachers who were recruited to be managers, then moving on. In the 1960s and 1970s, MNCs recruited teachers because the workers were young and inexperienced, and teachers were experienced supervisors of the young. But the teacher-managers who moved on were often the non-graduates.)

Higher education not compatible with entrepreneurship

“It is hard to find the university graduate who becomes a successful entrepreneur. The prevailing reward system drives our graduates to become bureaucrats/managers both in government and business. White collar jobs pay better than blue collar jobs”

Overeducating

I’ll end with this remark, “[W]hy our concentration on engineering and science-based education is not yielding dividends in productivity and innovation. Instead, the employment share of low-wage, low-skilled personal services is rising. Are we overeducating our children? This is a heretical thought contrary to all my basic EDB instincts. In EDB, our article of faith is that the higher the education level, the more rewarding will our jobs become.”

He tried to answer this issue when he talked of S’pore’s reliance on “low-wage, low-skilled foreign labour to drive economic growth” and why S’pore should be“raising total factor productivity” a priority. I covered these in Part I.

————–

*Ngiam was in the 1980s one of Lee Kuan Yew’s and Goh Keng Swee’s most trusted civil servants and if anyone, could be called a co-driver of S’pore’s drive from third world to first world, it would be he.

**The quotes are taken from a transcription published in BT.

ComfortDelgro: Int’l value investor kept selling

In Infrastructure on 18/04/2012 at 6:59 pm

Obviously it is not impressed with ComfortDelgro getting $733m or 67% of the $1.1bn package despite paying the state only 20% in dividends over the years*

Silchester International Investors LLP sold 21.49m shares in Comfortdelgro Corporation on March 30 at an estimated price of $1.56 each. This reduced its holdings by 15% to 123.893m shares (5.92%).

It had sold 42.62m shares from Nov 8 to Dec 12, 2011 at estimated prices of $1.425 to $1.44 each and 63.37 million shares from October 2009 to February 2011 at estimated prices of $1.62 to $1.54 each. Overall, the fund manager’s stake is down by 127.48m shares or 51% since October 2009.

Note the 13% rise in the share price since the second half of December 2011 from $1.385.

——

*The S’pore Labour Foundation (a statutory board affiliated to the NTUC which has 12%) has received dividends of roughly $150.46m from FY2003 to FY2010 (Comfort and Delgro merged in 2003, and SLF had a stake in Comfort.

Why S’porean bid for Rangers might fail

In Footie, Humour on 18/04/2012 at 5:56 pm

(Or “Is Bill Ng a “fit and proper person” to own Rangers?”)

Bill Ng, who is fronting a S’porean consortium’s bid for troubled Glasgow Rangers, is right to be wary of the syndicate  being tipped by the media as the front-runner to win the bid for Rangers

As footie fans will know, Scottish footie is very nationalistic. There are also very serious undertones of sectarianism, racism (interesting distinction between racism and racial discrimination discussed here) and violence. So last yr’s brawl involving Hougang United and Bill Ng’s subsequent comments could count against the consortium because it could give rabid nationalists and racists an excuse to demand rejection of the bid on the ground that Bill Ng would not be a ”fit and proper” owner of Rangers despite the tradition of violence among the club’s fans.

In May last yr, match officials were forced to abandon the tie between hosts Hougang United and defending champions Etoile FC before kick-off, after players from both teams started fighting during the warm-up session. Witnesses MediaCorp spoke to said the scenes resembled a gang fight, with players chasing each other and some rushing onto the terraces.

Bill Ng, the chairman of Hougang, said he was angry and would conduct an internal investigation.

Anyway, for bringing the game into disrepute both clubs were fined S$10,000, with S$5,000 suspended so long as they steer clear of trouble this year. They were also docked five points each.

Ng said Hougang would not let the matter rest, claiming the fine imposed on the club and points deducted were unfair. The “evidence … is not concrete” and the FAS disciplinary committee failed to take into account the actions of club officials to diffuse the matter. He also grumbled that the disciplinary actions would make it difficult to attract new sponsors.

Hell’s bells, whatever the provocation, his players were brawling. Surely that is wrong?

Related post

http://atans1.wordpress.com/2012/

Billy Boy to own Rangers?

In Footie, Humour on 17/04/2012 at 6:54 pm

(Or “S’poreans Boleh: Hougang boy can own a part of Scottish history”)

So the S’pore consortium fronted by one Bill Ng*, chairman of footie team Hougang Hooligans  (Does the team have WP as a sponsor? PAP not likely to sponsor a team that fights on the field?) is now the favourite to win the bid for Rangers.

The Blue Knights consortium seeking to gain control of Rangers says it is “stepping back” from the process. It was the orginal favourite. The group led by former club director Paul Murray says it cannot compete with Bill Ng’s consortium.

Ticketus, the firm whose money financed Craig Whyte’s takeover, with funding set against revenue from future season ticket sales at Ibrox, has been working alongside the Blue Knights but has also opened talks with Ng.

And the Blue Knights claim its Singapore-based rival had made the offer of a “substantially” better deal.

http://www.bbc.co.uk/sport/0/football/17736718

BTW, Bill Ng shld make up his mind whether he was a Rangers fan from his school days; or only became a fan abt 10 years ago. He has told reporters both these conflicting versions.

————————

*When he was in stockbroking, he was known as “Brudder Bill” or “Billy Boy” or “Billy the Kid”. When an ex-employer heard that he is reputed to be worth US$80m, he laughed and said he might remind Bill that he, Bill, had debts to settle, and to touch Bill for a loan, “He’s worth a lot more and I”. He also added, “Everyone’s now in private equity” when he heard Bill claimed to be in private equity.

Analysing Temasek’s investment in another Chinese bank

In Banks, China, Financial competency, Temasek on 16/04/2012 at 7:06 pm

Temasek has agreed to buy Goldman Sachs’s shares in the Industrial and Commercial Bank of China (ICBC), the world’s largest bank. It will buy US$2.3bn worth of ICBC shares, taking its stake to 1.3% in the bank.

In an interview with Reuters at the end of March, Ho Ching’s presumed successor-in-training, Temasek’s head of portfolio management,acknowledged the heavy allocation to financials, but noted that it holds four very good banks: Bank of China, China Construction Bank, DBS Group and Standard Chartered. Well it has added ICBC to this list, and at a price close to the market price, unlike the stakes in the other two Chinese banks where it got a “special” price as a pre-IPO cornerstone investor.

But is it a wise move?

True, since the lows last October of the Chinese and HK stock markets, the shares of the four leading Chinese banks (including Bank of China, China Construction Bank and ICBC) have gone up by more than half, easily outperforming the broader market.

But since March, prices have been off (but masked by general market falls) because of concerns abt China’s growth, bad loans and comments by the  Chinese PM, Wen Jiabao, who hinted  of breaking the monopoly state-owned lenders have enjoyed in China’s banking sector. (The sector is dominated by four big state-owned banks and Temasek now has significant stakes in three of them.)

Mr Wen said that their monopoly was hurting businesses in the country, as they had few options to raise capital.

“Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital,” he was quoted as saying by China National Radio. “That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly.”

The lack of easy availability of capital has often been cited as threat to growth of small and medium-sized businesses in China. There have been fears that some of these businesses, seen as key to China’s growth, may turn to unofficial sectors for capital, increasing their borrowing costs substantially

But Temasek could be betting on, “Wen has one year left [in his term].” This was said by an unnamed Chinese state banker quoted by Reuters. “This is a task for the next generation of leaders. It cannot be accomplished within one year.”

But the banker could be wrong, Wen could be telling us what has been agreed upon between his generation and the next generation of leaders.

Remember, It took a beating on its finance industry holdings after the 2008 crisis, losing about $5 billion in stakes held in Barclays and Merrill Lynch, now part of Bank of America. It has since trimmed its financial holdings by 4 percentage points to 36 percent of the portfolio. Last month, it sold a 1.4 percent stake in India’s No.2 lender ICICI Bank. From said Reuters reported.

And of the remaining two “very good banks” where Temasek has significant stakes, DBS has juz decided to buy Temasek’s stake in Bank Danamon. Management will now be preoccupied with getting the deal approved by the Indonesian authorities, then integrating the bank into DBS. Before this deal, management had finally got to grips with DBS’s operational problems. The danger is that the focus on the Danamon deal may lead to backsliding in the area of operatons.

The genuine jewel is StanChart, but by global standards, it is “peanuts”.

Analysing Ngiam Tong Dow’s March 2012 speech (Part I)

In Economy, Political economy, Political governance on 15/04/2012 at 6:56 pm

Given that Professor Lim Chong Yah’s “shock therapy” proposal is a variation of what was implemented the early 1980s (until the 1985 recession: neutral article on the recession and one blaming it on the original “shock therapy”), when one Ngiam Tong Dow* was Permanent Secretary in the Ministry of Trade and Industry, I thought it would be interesting to reread a speech Ngiam made in March because MTI had once upon a time analysed the problem of severe manpower shortages and the economy’s increasing reliance on lowly paid foreign workers. Its solution was to restructure the economy by raising wages substantially to dampen employers’ demand for lowly paid workers, what Professor Lim is recommending.)  

Rereading Ngiam’s speech, I don’t think he would agree with Dr Lim’s proposal because Ngiam says, “Rising productivity enables workers to be paid more. Inflation sets in only when wages are raised without any increase in productivity.” So productivity comes first, then wages rise as a consequence. Dr Lim would go back to the 1980s plan of raising wages to force up productivity.

(BTW, the government, especially Tharman, keeps “talking the talk” of raising productivity, despite not walking the walk. I’m sceptical of its announced plans to cut the “FTs are betterest” policy until I see how it is being implemented.)

The speech is long and can be divided into an economic analysis of S’pore and a sociopolitical analysis of S’pore,

In this post (Part I), I report and comment on the economic part of the speech**. In Part II (later this week), I will report and comment on the sociopolitical aspects of his speech.

——————————————–

Evolution of the policy of importing cheap foreign labour

“Singaporeans of my generation remember vividly the slums, joblessness, dirt and disease of the 1950s. Through dint of hard work and discipline, we moved rapidly from a labour to a skill-intensive economy. By the early 1970s, we achieved full employment with an unemployment rate of 3 per cent.

‘In the early 1970s when we achieved full employment, some of us in the EDB began to ask the question about the critical size of populations. We did some desktop research and found that there were several industrialised European countries with population size of around 5-6 million. These were Israel, Norway, Sweden and Finland. Our town planners went to work and concluded that Singapore with a land area of 670 square kilometres can comfortably accommodate a population of 5-6 million … we allowed in one million foreigners in the last decade.”

He went on, to give another reason for the FT policy, “As our births fell below replacement levels, we resorted to immigration as an instrument to top up the babies that young Singaporean couples are not having. There are also elements of political re-engineering. Submerged in our immigration policies is the belief that to maintain racial harmony, we need to keep the current population balance constant.”

He challenged the premise that S’pore needs a bigger population pointing out that

– “Singapore is already straining at the seams with a current resident population of five million … The economic assumption is that we can increase our GDP if we can accommodate more people … even doubling our population to 10 million people will not make things better. More likely, a larger population can only make matters worse.”

– “[C]omputer technology has made many manual operations in production obsolete. The key is to produce more with less manpower.”

Knowledge-based economy

“The great challenge … is that we have reached the limits of our skill-based model of growth. Singapore has to move from a skill to a knowledge-based economy. The products and services … are characterised by high technological content. To position ourselves for such an economy, Singapore devotes the greater part of our national budget to education and training.”

“When I was in school in the 1950s, only three out my O level class of 40 went on to university. Today, 30 per cent of a primary school cohort enrol in tertiary education. Raising our average educational level from primary to post-secondary should make a world of difference for our international competitiveness.”

“Our higher education levels and superior infrastructure enable us to compete in knowledge-based industries and services.”

Productivity

“I observe with some dismay that the manufacturing share of our GDP dropped from a high of 30 per cent in the 1980s to 20 per cent currently.”

“Our total factor productivity should be rising not stagnating. In my view, productivity and real wages of the bottom 20 per cent of our work force have not risen because our labour policies allow employers easy access to low wage foreign labour.”

He explains that for S’pore as a whole, there are costs to this easy access to cheap foreign labour, “If we add the cost of housing, transportation, health and other social services which employers have to provide for their foreign work force, they may be better off training and equipping their Singaporean employees to raise their productivity. Rising productivity enables workers to be paid more. Inflation sets in only when wages are raised without any increase in productivity.”

“Productivity can only be raised when CEOs … take direct charge of the production process. They have to be hands on, not resorting to outsourcing. Productivity should be the key KPI (key performance indicator) for the award of bonuses to CEOs and management.”

“Like any other country in the world, Singapore now competes in a global economy. In such an economy, importing cheap foreign labour is no longer a viable strategy. It is a dead end.”

“We have to grow through raising productivity, not higher headcount. We need to be smart enough to produce more with less. Our higher education levels and superior infrastructure enable us to compete in knowledge-based industries and services. We transformed ourselves in the 1970s from a labour to a skill-intensive economy.”

But he accepted that “raising total factor productivity .. is not easy. A Japanese scholar pointed out … that the optimum rate of productivity increase achieved by [Japan] averaged 4 per cent annually … Japanese are one of the most diligent people in the world.”

Why importing cheap labour is not the solution – it’s a race to the bottom

“Singapore now competes in a global economy. In such an economy, importing cheap foreign labour is no longer a viable strategy.  It is a dead end.”

“In a global economy, you will be competing not only with friends and classmates but with the best and brightest of your generation in India, China, Brazil, Russia and Eastern Europe. University graduates in China and India are willing to work for a tenth of what our young engineers and scientists expect. If we fail to raise our total factor productivity, Singapore would just be an also-ran in the race to be a knowledge-based economy. The window to raise total factor productivity through application of knowledge and training is fast closing with the opening up of India, China and Indonesia. Singapore has lost two decades relying on low-wage, low-skilled foreign labour to drive economic growth.”

What can help

– “Our managers and administrators are among the best paid in the world. They will have to get off their high horse and personally lead the drive for higher productivity. Outsourcing is a bad word in my vocabulary. Companies and government ministries should figure out how to train their staff and redesign jobs and processes to achieve more with less.”

– “[I]nterest free loans should be given to enterprises with clear roadmaps to re-equip and raise the productivity of their workers.

What he is against

“Grants should not be given to management (consultants) to do a job they are already paid to do.”

‘I am against job credits in any form because they are simply wage subsidies which do not raise productivity in any way. My personal observation is that job credits simply add to the bottom line for payment of bonuses to management who do not have to lift a finger to raise the productivity of their enterprises.” Based on this, I suspect he would also be against having a minimum-wage.

“The 2012 budget is politically adroit, replete with spending proposals which basically are income transfers from the taxpayer to the poorly paid, the disadvantaged and the aged. Income transfers are palliatives, temporary reliefs to abate rising social discontent. They do not help to raise productivity.”

Final warning

“We failed to bite the bullet in the 1980s to restructure our economy. There may be no second chance the next time around.”

————————-

*Ngiam was in the 1980s one of Lee Kuan Yew’s and Goh Keng Swee’s most trusted civil servants and if anyone, could be called a co-driver of S’pore’s drive from third world to first world, it would be he.

**The quotes are taken from a transcription published in BT.

S’pore’s average wage relative to other countries

In Economy, Hong Kong, Humour on 15/04/2012 at 9:23 am

S’pore’s average wage is juz behind Germany’s and juz ahead of Australia. HK is a long way below us. So Gordon Lee and David See (TOC contributors) stop talking BS when comparing S’pore to HK. Lots of things wrong with S’pore but there is a difference between facts and rubbish. (Funny that TOC use their stuff when TOC has contributors of the quality of Ghui and Uncle Leong.)

 http://www.bbc.co.uk/news/magazine-17543356

Funny also the our mainstream constructive, nation-building doesn’t report how well S’pore ranks globally. Cock-up or subversion by friends of Gordon and David in the newsrooms of our constructive, nation-building media? ISD should investigate.

M’sia dominates global sukuk issuance mkt

In Malaysia on 14/04/2012 at 6:21 pm

It had 68.8% share of the US$84.4bn of sukuks issued (sukuk is a form of Islamic bond) in 2011  And Islamic banking assets make up around a quarter of the country’s total. Given Indonesia’s tiny share of this mkt (3.7%), and Indonesia’s growing stature as a major emerging economy in Asia and the world, the sukuk market can only grow, making KL a future major global centre along the lines of Zurich, Edinburgh, or Boston i.e. a global centre of one type or a related group financial products.   

http://www.economist.com/blogs/graphicdetail/2012/04/focus-2

Indonesia: Showing its strength globally

In Indonesia on 14/04/2012 at 10:36 am

Indonesia is the world’s 11th biggest grocery market by revenue, ahead of Spain but behind Italy. BRICs occupy all but the second position and third that is held by US and Japan in the top six.  By 2015, the BRICs (Brazil, Russia, India and China) will have pushed Japan out of the top five slots, leaving America as the only remaining rich country in the top five.

http://www.economist.com/blogs/graphicdetail/2012/04/daily-chart-3

David Cameron, the UK’s PM, announced a £326m deal to sell 11 Airbus A330 aircraft to airline Garuda Indonesia when he was in Indonesia in Indonesia on his trade tour of East and South East Asia.

In February, Lion Air confirmed a deal, announced last year, to buy 230 Boeing planes worth US$22.4bn.The order is the biggest in Boeing’s history

The Indonesian airline in February also placed an order for 27 ATR aircraft for its regional subsidiary Wings Air, in a plan to service the country’s smaller airports.The deal, valued at US$610m, would make Wings Air one of the largest operators of such aircraft. One of the big contributors to Indonesian air travel growth is likely to be travel between smaller cities and airports in the country’s various islands. And increased spending by authorities in infrastructure development would also help boost demand.

F&N: Trading at deep discount to RNAV says DBS

In Property on 13/04/2012 at 6:07 pm

As the shares closed at  6.74 today, I tot readers might be interested in DBS’s continued call to buy F&N.

My problem with this stock is that there doesn’t seem to be any plans to reshuffle the portfolio of assets (Asia Pacific Breweries, F&N Berhad, Times Publishing, properties and a few other things) to extract more shareholder value. It’s more of the same. But dividend is sustainable, yielding abt 2.7% (trailing). Better than leaving money in the bank.

DBS Group Research | Mar 30

Close: $6.70

 … announced that its wholly owned subsidiary, FCL (China) Pte Ltd, is proposing to privatise its 56.17 per cent-owned, Hong Kong-listed entity, Frasers Property (China) Ltd (FPC). The proposed privatisation will be undertaken jointly with Riverbook Group Ltd, a wholly owned subsidiary of Ascendas Land International Pte Ltd. Riverbook is also the second largest shareholder of FPC with a 17.16 per cent stake. The main assets of FPC include the 157,610 sq m Vision Shenzhen Business Park and Shanshui Four Seasons in Shanghai with 737,000 sqm earmarked for residential/commercial uses.

We believe that the rationale for this exercise is that the current traded price does not reflect its value as FPC is trading at a 43 per cent discount to its NAV.

Furthermore, FPC’s trading value is relatively low at less than HK$1 million a day. The privatisation is likely to provide more flexibility for the major shareholders to extract value, in our view.

We continue to see value in F&N, as it is trading at a 24 per cent discount to our RNAV ($9.02), with the potential to progressively unlock value over the longer term – Asia Pacific Breweries, F&N Berhad, Times Publishing, properties, etc. In the meantime, the group’s earnings will benefit from the strong performance of its brewery unit, stable investment property earnings, coupled with about S$1.7 billion in unrecognised property development sales in Singapore. We believe its low landbank and partnership strategy for land tenders will better insulate it from policy risks in this uncertain market.

Burma: Stock exchange coming/ Cambodia: Starting soon

In Emerging markets on 12/04/2012 at 7:23 pm

Burma is to get a new stock exchange, after the Tokyo Stock Exchange and Daiwa Securities received preliminary approval to help set one up.

http://www.bbc.co.uk/news/business-17673773

Meanwhile, Cambodian brokers and wannabe investors, and foreign investors are preparing for the country’s first ever IPO.

http://www.bloomberg.com/news/2012-03-18/cambodia-embracing-capitalism-with-first-ipo-since-khmer-rouge.html

PAP in Hougang: Young blood, old ideas

In Political governance on 12/04/2012 at 6:40 pm

(Or Why let’s go eat Teochew mui in Hougang”)

So, Desmond Choo is a “very good man”,  DPM Teo Chee Hean said. Err waz a DPM doing making a speech an opening ceremony of the temporary car park in Hougang. Surely he has more impt things to do?

I analysed shumetime back that in Aljunied, the PAP is focusing its renewal efforts on bringing in fighting fit and enthusiatic geriatrics to replace tired, worn-out younger leaders http://atans1.wordpress.com/2012/03/28/pap-in-aljunied-grc-no-room-for-young-blood/. As to their ideas, we will have to wait to see if they got new ideas to win back Aljunied.

But the potents For Aljunied are no good based on waz happening in Hougang. In Hougang, despite having a team led by 30-something unionist Desmond Choo, the PAP are not trying anything new. Desmond Choo and his PAP PA activists are focusing on serving Teochew mui at two temples every sunday.  http://www.tremeritus.com/2012/03/20/free-porridge-breakfast-at-hougang-every-sunday-morning/.

The regular attendees of these temples are older and less-educated Te0chew speakers. The younger voters don’t do temples. If anything going by the latest stats, they are likely to attend churches, like the one Yaw attended (More opportunities to meet sexual partners in churches, going by Yaw’s alleged affairs?) And I’m sure they prefer bland, tastless Western fast food to high quality Teochew mui.

What is even sillier for the PAP is that these older S’poreans have been the main-stay of Low’s support since 1991. Lest one forget, Hougang and the surrounding areas like Ponngol, Cheng San and Aljunied, were once staunch Barisan Socialist territory.

So the PAP is now reduced feeding the hand that has been biting it all these years?

Never mind, it ain’t the PAP’s money. It’s tax-payers money.  Remember the funding for the People’s Association comes from the taxes we pay. So us oldies from other parts of S’pore who want to eat good quality Teochew mui (this is PA/ PAP stuff after all) can catch a cab (ST reported a lady who took a cab to eat there: doesn’t fare cost more than the free porridge? But then S’poreans are suckers for “free” or “subsidised” stuff), or take public transport, or drive to Hougang.

With an enemy like Desmond Choo, Low can afford to relax. If need be, he can remind voters that Desmond’s uncle (someone who he has admitted to as inspiring him) was a PAP MP and convicted cheat who continues getting into trouble with the law: he is facing a corruption charge.

The only thing that can cause Low a problem is if Yaw comes out to say that Low knew of his sexual habits before anointing him as Low’s successor in Hougang. Remember Low has denied knowing anything about Yaw’s personal life, despite anointing him as a his suceesor after mentoring him for many a year. People who don’t like Low are saying that they have heard people claiming to know Low say that Low said he knew of Yaw’s staggish behaviour long before anointing him as his successor.

But so far, none of Low’s enemies have dared openly to accuse him of lying. Two of them, I know, are banging their balls in silent frustration, that they can’t bring him down. Only Yaw can do it.

Advantage Low and WP in Hougang.

Desmond Choo was thrashed badly by Yaw Shin Leung in the 2011 GE. Geeky looking stag head-butted a he-man looking eununch

And all indications are that he is limbering up to take on Low Thia Khiang’s nominee  in a rematch. And that he will be thrashed again even if the NSP or Tan Jee Say or KennethJ try to score points with the PAP by giving voters a wider choice of candidates. Indications are that the NSP Old Guard cannot find a candidate willing to lose his or her  deposit even if the Old Guard towkays pay for all the election expenses (including said deposit). Apparently even one Goh Meng Seng has passed up this opportunity for some cheap publicity (bit of a surprise there), even though he gallantly volunteered Nicole Seah for the task.

NSP Old Guard: don’t make fools of yrselves by taking on Low in Hougang, unless you can pay Yaw to rat on Low. Maybe you and Desmond Choo can make Yaw an offer he cannot refuse? And Tan Jee Say and KennethJ control yr personal obsessions for cheap publicity stunts. It ain’t worth the effort, shumething even GMS realises.

True, the WP has no God-given right to Hougang, but neither have any of you chaps. The WP deserves to fight the PAP unhindered because the WP and Low have been serving the people there since 1991.  Where were the NSP Old Guard, TJS and KennethJ then?

As this post is already too long by half, I’ll leave for another day (later rather than sooner) my tots on Tan Cheng Bok’s speculation that a possible strategy for PM Lee would be to call for a by-election in his Ang Mo Kio GRC together with Hougang single member constituency. “This will be very interesting as the politics of voting will change, especially if PM promises the people of Hougang that Hougang will be part of his Town Council.”

Role Reversal for Bank of America and Citigroup

In Banks, GIC, Temasek on 11/04/2012 at 7:22 pm

Going into the earnings season, these two big banks have reversed roles: Bank of America, which last year faced concerns about its health, has rallied this year, while Citigroup now confronts doubts.

NEW YORK TIMES

For the record:

– Temasek dumped its stake in BoA in 2009 when hedgies were buying, losing, it is estimated US$4.6bn;

– GIC is now sitting on paper losses on its remaining stake in Citi (stake was profitable last July, see link below); and

– one LKY said in 2008 that these (and UBS, where GIC still has unrealised losses) were beyond long-term investments. There were 30-year investments.

Internet: Chinese media sounds like Yacoob & friends

In Internet, Political governance on 10/04/2012 at 7:35 pm

Below are relevant extracts from a BBC Online article on how the Chinese state-controlled media analyse the “problems” the internet  pose to society’s stability.

The country’s push against internet rumours continued on Tuesday. Beijing Times says a guild of online media operators has appealed for “law-abiding operations” among internet firms.

A commentary in Shanghai Morning Post insists that the introduction of “real name” rules for online forums and micro-blogging sites is the “cure” to the problem*, citing similar examples from Western countries.

A second editorial in the Southern Metropolis Daily says it is a shared responsibility of the public and the government to boycott the spread of rumours, while a commentary in the People’s Daily claims in its headline that “tolerating rumours is not a quality of democracy”.

The Global Times’ bilingual editorial also take the chance to lash out at the power of the internet.

“The perception projected by internet opinions is quite far from the real situation. For example, online opinion holds that grassroots livelihoods are a mess in China,” says the editorial.

“In addition, it states that reform has come to a standstill and public anger has boiled over to the extent that China could descend into chaos any time.”

*Reminder: Tan Kin Lian, the People’s Voice, who lost his deposit in last year’s presedential candidate advocates similar rules here on posting on the internet.

Related rant:

http://www.tremeritus.com/2012/04/07/yaacob-well-supervise-and-guide-the-process-of-developing-a-code-of-conduct-on-the-internet/

Rising electricity prices: Tell us the truth

In Economy, Energy, Political governance on 10/04/2012 at 7:01 pm

Article 14 has got it absolutely right last week  http://article14.blogspot.com/2012/04/electricity-prices-go-up-because-of.html. He is right to point out that SP Services explanation of why electricity prices have to rise (that the price of natural gas is going up) is absolutely rubbish. World prices of natural gas have collapsed as Article 14 pointed out.

The explanation is simple, but I suspect it is an explanation that SP Services and the government want to “hide” from ordinary S’poreans who don’t follow energy prices and trends, or the evolution of the energy industry over the decades. The sad but funny reason is that there is no selfish or self-serving reason to “hide” anything.

Here’s an opportunity for the PM (“working together”) or Tharman (“I think it’s important for us to retain a relationship of trust between whoever is the elected government and the people”) to show that they are “walking the walk’ of “engaging” us.

As it’s the economics and evolution of the natural gas market that make us pay more for natural gas while prices keep going down, this should not affect perceptions of the government by reasonable (the majority) of S’poreans.

Over a week ago, the NYT reported,  the price of one million Btu of natural gas fell below US$2.20 for the first time since 2002, while oil prices slipped a little but remained above US$100 a barrel. The last time natural gas was this inexpensive, oil cost about US$20 a barrel.

Unlike the oil market*, the natural gas market, is not a global, nor an efficient one (outside of the US). (I’ll explain this in detail later using S’pore and Qatar as examples).There is only a limited global trade in gas (the S’pore government is trying to encourage such trade with the building of a gas terminal), which can be transported in tankers, but mostly gas must move in pipelines over land in Europe and North America, the biggest users of energy. Example: natural gas prices have been rising in Britain this year even as they have been falling in the US.

Supply has soared in the US because of increased production from hydraulic fracturing (a newish technology), but demand in the US cannot change rapidly. Power plants that can burn gas or oil were shifted to gas long ago. And a relatively mild winter in the US has reduced demand. There is now a glut there.

S’pore, as readers, will know gets its supply of gas from gas fields in Indonesia and Malaysia. The energy MNCs who developed these kind of fields did not develop these fields until they were assured that there were assured long-term buyers of the gas (This is still true today). There are a lot of upfront costs and the lead period from the time the fields are being developed to the first shipment of gas to the customer are measured in decades. Example: gas was discovered in Qatar in large quantities in the 1980s. It became a major exporter only in the early to mid-noughties. It took that long to build the facilities to ship the gas to places like Japan and South Korea, taking into account the time to negotiate the contracts.

Then there is the issue of pricing. Until very recently, natural gas contracts were priced off the price of oil because they were often found together, and both were scarce.

When the gas contracts for S’pore were negotiated all those many years, the price of the gas that S’pore pays was priced off the price of oil. Hence one reason of the paradox of us paying higher prices for gas when the price of gas is at a 10-year low. Another reason is that S’pore is locked into long-term contracts, and another is that until the gas terminal is operational  in the second quarter of 2013, we can’t get gas from another source. BTW, the plans for a gas terminal show that the government can get things right.

Now S’poreans are not the only people who got “screwed” by the breakdown between the price of gas and oil. KKR and TPG, giant and successful US private equity investors invested billions of their investors’ funds in TXU. One of the things they were betting on was that gas prices would be priced-off oil prices for the foreeable future. Err now even Buffett has lost money buying TXU bonds.

So why don’t we get told the truth of why we are paying higher prices when the price of natural gas has collapsed, when the answer has nothing to do with government or its agencies incompetency?

One reason could be that the PR people in these organisations are still stuck in the pre-internet model of news management. They believe and advise that “news” can be manipulated to fool the people all of the time.

More seriously, the government and its agencies may want us to think that their value (and high salaries of the senior staff) lie in making the right long-term decisions all of the time.

They should realise that S’poreans are no longer dependent on the government, its agencies and the constructive, nation-building local media for facts and analysis.

And that S’poreans have realised that long-term decisions don’t always result in benefits for S’poreans. We know that already because of the FTs, and public housing and transport problems, the result of long-term planning and decisions.

In the case of gas, it was (and still is outside the US) a rational decision to buy on long-term contracts gas that is priced off oil. It’s not a balls-up on the lines of the FT, and public housing and transport policies which has the government throwing money at the public housing and transport systems, and telling us that it’s changing its “FTs are betterest” policy.

Finally, market expectations are that this time next year, oil prices are expected to be almost where they are now, while natural gas prices are forecast to have risen more than 50%. What a great time then to shout about the competency of the government, when telling us that electricity prices are relatively stable? 

My point is that facts are changing, what may look bad for the government one day, may look good another day, depending on the facts. It shouldn’t “hide” the truth (especially when the truth doesn’t discredit the government) if it wants S’poreans to regain trust in the government.

————–

*Oil moves around the world in tankers that can be diverted from one destination to another in response to shifts in demand. A sharp change in demand or supply in any place is likely to show up in prices everywhere. Oil prices can also be affected by geopolitical concerns. Example: oil prices have risen on worries that Israel might attack Iran, leading to a drastic reduction in Iranian oil exports.

S’pore is tops, but MSM does not report it

In Economy, Political economy on 09/04/2012 at 6:06 pm

Analysts Maplecroft rates five countries at the “extreme” level of risk for the pandemic spread of influenza, with Singapore top, followed by the UK, South Korea, the Netherlands and Germany.

Singapore is rated the highest for the speed at which influenza could spread, because of its dense population (all those FTs?) and its status as a global travel hub.

BBC article.

WP: No longer believes in public tpt nationalisation

In Political governance on 08/04/2012 at 6:59 pm

This week, one of the topics to be debated in parliament will be the public transport system especially the government’s plans to inject $1.1bn into the bus system.

In its 2011 General Election Manifesto the WP wrote: Instead of public transport being provided by profit-oriented companies, all public transport including the MRT & public buses servicing major routes should be brought under a National Transport Corporation, a public body, to ensure a smooth integration of the overall national transport network and to avoid unnecessary duplication of services and overheads incurred by multiple operators.

In simple English, the WP manifesto called for the nationalisation of the MRT and bus systems.

But, I’ve been reliably told, that the WP will not be calling for the nationalisation of the public transport system in the debate on public transport this week. It will keep silent on its manifesto call.

If my source (a WP member in gd standing) is correct, and I hope he is wrong, one can only wonder if the WP has forgotten its manifesto call on the nationalisation of public transport (see somewhere here) or changed its mind on public transport nationalisation? And then one can wonder why the forgetfulness or change, when the facts and public mood seem to favour nationalisation.

Granted, at the time, there was very little mainstream (to be expected) or new media (more surprising this) attention, and very little public interest (not surprising, given the lack of awareness on this call) on this issue. But things are different now.

There have been several major failures of the MRT system, resulting in chaos, and public anger.

With $1.1bn of tax-payers’ money going into the bus system (two-thirds or 67% of it, $733m, going into ComfortDelgro where the state has a shareholding that is “peanuts”*), there are many voices wondering why private shareholders should benefit from a public good?

Example: Since housing and transport are both necessities of life, and public transport is the only choice of the lower-income group, it is not unjustifiable to commit resources to keep the cost of public transport low … government spending on public transport is a form of income redistribution …

The key concern in the S$1.1-billion package to purchase and operate buses is not that it subsidises public transport per se but whether public funds could benefit a small group of shareholders, to whom bus companies are ultimately accountable.

This is what the Government will need to account to taxpayers.

Even BT, part of the nation-building, constructive media had this to say, The public transport model has come under scrutiny ever since a $1.1 billion package was announced by the government to supplement the existing privately run bus fleet with 550 buses.

How has the government responded?

The minister responsible for throwing $1.1bn at the problem can only parrot repeat what his predecessors used to say, Our current model leaves the operations of trains and buses to commercial entities as we believe the long term public interest is best served this way. The profit incentive drives the operators towards higher efficiency and productivity, which keeps costs as low as possible . . . Otherwise, if the system is inefficiently run, the public will ultimately pay for the higher operating costs, either through higher fares, or greater government subsidies.

He should be asked in parliament this week why despite the “higher efficency and productivity” (“which keeps costs as low as possible”) of the private companies, commuters keep paying more and more while getting worse and worse service, so much so that the government has to subsidise the companies to improve bus service quality.  The minister’s The profit incentive drives the operators towards higher efficiency and productivity, which keeps costs as low as possible, can and should be challenged.

So the WP has plenty of ammunition to rubbish the government’s public transport policy And remind the government and the voters that it called for nationalisation last year. But it seems it will not call for nationalisation.

Parliament is the best place to debate the issue and the WP should not let this opportunity be missed especially as it called for nationalisation in its election manifesto. If it does not raise this issue, S’poreans must hope that PAP newbie FT MP, Puthucheary (“No NS for me”) will raise the issue. He had suggested in the last session of parliament that nationalisation might be a gd option.

There should be a more selfish, self-serving reason for the WP to use this opportunity to call for nationalisation.  If  the WP doesn’t believe in its own manifesto or keeps quiet when it changes its mind on a manifesto issue, why should, we, the voters believe in the WP?

The PAP pointed out earlier this year (rightly) that the WP’s benchmark for ministers’ salaries had changed from the poor (in said manifesto) to a civil service senior grade (Gerald Giam in parliament). The WP could not rebut the PAP charge.

The voters who voted for the WP believed its call for the need of a co-driver, to keep the PAP honest and competent. If voters cannot believe in the PAP and the WP, what should the voters do? Vote SDP?

The WP might want to be reminded that in countries with first-world parliaments, the election manifesto is a very important document, not something to be chucked away after a general election. If the WP does not call for nationalisation of the public transport system in parliament this week, it should remove the link on the front page of its website to its manifesto.

*Using back-of-the envelope calculations and figures in annual reports, since it was listed SMRT (over a decade ago) has paid $562.79m in dividends to Temasek (which owns 74%), and ComfortDelgro has paid the S’pore Labour Foundation (a statutory board affiliated to the NTUC which has 12%) dividends of roughly $150.46m since 2003 (Comfort and Delgro merged in 2003, and SLF had a stake in Comfort). The amount that ended up with the government was $713.25m, with SMRT contributing 79%. But ComfortDelgro is the main beneficiary of the $1.1bn bus plan, given that, at present, SBS Transit (a listed co 75% owned by ComfortDelgro) provides most of the buses. ComfortDelgro is getting $733m or 67% of the $1.1bn package.

Related rant

http://atans1.wordpress.com/2012/03/09/wp-does-do-original-thinking-pap/

 

Err Temasek can do savvy deals too

In Indonesia, Temasek on 08/04/2012 at 7:36 am

TRE’s and TOC’s readers, and other S’porean netizens may not realise it, but Temasek doesn’t always lose money on its overseas investments.

In 2008, just before the financial crisis, Temasek sold its majority stake in BII for a price that put a value of the Indonesia bank of 4.6 times book value. The  sucker buyer was MayBank of M’sia. It paid Temasek US$1.13bn. NYT article. MayBank later justified its cock-up by pointing out that around the same time, HSBC paid around the same price (book value wise) for another Indon bank. Critics pointed out that in the context of MayBank’s financials, the amount was a big a sum while HSBC’s purchase was “peanuts” relative to HSBC’s financials.

Analysts now say that MayBank’s plans to sell a stake in BII for the same price as it paid Temasek is unrealistic.

Well the price that DBS is paying Temasek for its majority stake in Bank Danamon works out to be 2.6 times book value, and is considered reasonable but pricey. The premium over book has dropped substantially. But it is a gd deal.

And going back in history, Temasek got a great deal when it sold its PosBank stake to DBS. Foreign broker analysts (though not local broker analysts and our constructive, nation-building media) were grumbling that Temasek was getting DBS shares at a big discount to DBS’s fair value. FTR, no foreign analyst is arguing that Temasek is getting DBS shares at a big discount to its fair value in the Bank Danamon deal.

Moral of these examples: Temasek can do savvy deals with M’sians and DBS. Nothing to do with fact that DBS is controlled by Temasek. It’s that DBS likes to do “strategic” deals and, there are studies (dispued) which show that because strategic deals involve paying over the odds, shareholder value is destroyed in the process.

And consider this too.  RRJ and Temasek have been big backers of the trend to use natural gas. Last year they put US$250m into Nasdaq-listed Clean Energy Fuels, a US-based group that provides natural gas fuel for transportation at gas stations in the US at a saving of US$2 a gallon.

That transaction, which closed in January or February this year, has already more than doubled in value.  

And this looks pretty savvy too. Singapore state investor Temasek Holdings and private equity firm RRJ Capital bought nearly half of the shares in the $1.34 billion offering by PetroChina Co’s unit Kunlun Energy Co Ltd, two sources with direct knowledge of the deal said on Tuesday. $=US$

Kunlun Energy and Clean Energy Fuels have a similar mandate and RRJ hopes to bring the two together, according to one report. BTW RRJ is founded by a Malaysian Chinese.

Bang yr balls in frustration Ho Ching detractors, and all haters of the S’pore government and its agencies. Temasek can do savvy deals if M’sians are involved. Either as suckers buyers or as co-investors.

Jokes aside, remember the lines from “If”

If you can meet with Triumph and Disaster
And treat those two impostors just the same;

Well in investing, as in other aspects of life, the line between success and failure is very, very narrow.

Examples:

 KKR and TPG, giant US private equity investors invested billions of their investors’ funds in TXU. One of the things they were betting on was that natutal gas prices would be priced-off oil prices for the foreeable future. Err now even Buffett has lost money buying TXU bonds. The problem is that recent  technological developments mean that natural gas can be extracted from shale, decoupling its price from that of oil. Natural gas is no longer a scarce commodity.

Now all three have extremely gd track records as savvy investors. BTW Temasek’s Merrill Lynch deals would be like this deal. The conventional wisdom was that the deals were risky but that the prices paid reflected the risk and that in all probability the deals would work out for the investors.

Now the conventional wisdom was that the investors got things wrong* . But as FT’s Lex reports:

They paid too much. That was the consensus when 3G Capital took Burger King private in 2010 for a total enterprise value of $4bn, or nine times trailing earning before interest, taxes, depreciation and amortisation. How did things go? Well, Justice Holdings has just paid $1.4bn and will get 26 per cent of Burger King’s common shares in return. This now puts the enterprise value of Burger King at $8bn – an ev/ebitda multiple of 16 times (14 times if you follow Burger King’s practice of excluding restructuring and other costs). By comparison, the multiples for global powerhouses McDonald’s and Yum Brands are 11 and 14 times. Arcos Dorados, the largest Latin American McDonald’s franchisee, trades at 12 times.

3G’s partners put $1.2bn of cash into the original deal and borrowed the remainder of the price. They also paid themselves a near $400m dividend last year, thank you very much. If they had sold the whole company at the price Justice has paid, 3G would have more than doubled its money in a year and a half. Over the same period, McDonald’s and Yum shares have returned 38 per cent and 64 per cent, respectively. Consensus now: would you like fries with that, gentlemen.

*Bit like Temasek’s Shin deal. Brokers were telling their clients with shares in Shin to tender the shares. They would never see such a price again. But our nation-building, constructive media failed to report these views here.

Why India is no longer flavour of the season

In India, Telecoms on 07/04/2012 at 7:31 am

Why MNCs and  int’l investors are giving India a miss while still liking the other “I”: Indonesia.

Seven international trade associations have written to Indian Prime Minister Manmohan Singh criticising a new tax proposal under which even 50-year-old corporate deals could be scrutinised.

The proposals were announced as part of India’s federal budget last month.

The associations warned that the firms they represent could reconsider their business ventures in India.

http://www.bbc.co.uk/news/world-asia-india-17581212

And the cancellation of telecoms’ licences doesn’t help.

http://www.bbc.co.uk/news/world-asia-india-17621257

Why UOB is “betterest”?

In Banks, Corporate governance on 06/04/2012 at 7:41 am

Bank results down 4%, CEO’s salary down 18%.

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1193445/1/.html

Own shares in Haw Par which has stake in UOB.

Link between changes in PR rules & ministerial salaries?

In Financial competency, Property, Wit on 06/04/2012 at 6:39 am

The move to scrap one avenue for rich foreigners to fast-track their permanent residency applications by parking large sums of money here will have little impact on the Republic’s economy, analysts noted.

In fact, an analyst went as far as to describe the Financial Investor Scheme (FIS) – started in 2004 – as having “outlived its usefulness. http://www.todayonline.com/Singapore/EDC120405-0000087/Scheme-for-rich-foreigners-outlived-usefulness

The devil whispered in my ear, “What this means is that there will be less people applying for leave to buy houses in District 10, and less demand for places in Sentosa Cove, and super high end luxury apartments. Remember there is a group of S’poreans who have had their salaries cut by about half. Less competition for them now when it comes to buying luxury-end properties?”

“Perish the tot,” the angel of the Lord said. “These are the people who introduced GRCs.”

“My point exactly,” said the MU supporter.

Angel of the Lord, “Since 2010, these businessmen, have not been allowed to include the cost of buying a private home as part of their required investment.”

MU supporter, “The pigs knew they were going to have to cut their salaries. Pre-emptive move to ensure they are not affected by the cut in salaries.”

Angel, “OMG! What can I say? You may have a point!”

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