DBS: What the new chairman should be looking at III

Cross -selling is the holy grail of banks with diverse business or product limes, and big branch networks.

So DBS with an extensive  network of 81 branches and more than 900 ATMs in Singapore, including those belonging to POSB, want to do more cross-selling. The relatively newish CEO has spoken of the need to improve cross-selling and said DBS should offer a wider suite of products, including appropriate investment products, and sell more mortgages and unsecured loans.

DBS ‘s customers can only hope management have learnt the lessons of HN5 Notes. DBS issued and arranged HN5 Notes, selling in 2007  a total of $103.7 million worth of HN5 to 1,083 “Treasures” and “Emerging Affluence” retail clients. (This refers to clients with more than $200,000 (for “Treasures”) and $80,000 (for “Emerging Affluence”) assets respectively under management by DBS although the “Emerging Affluence” definition also takes into consideration the client’s income and occupation.)

The collapse of Lehman Brothers made the notes worthless. DBS offered only  $7.6 million in compensation to 22.8% out of the 1000 odd investors. The compensation amounted to 7.3% of the amount that was invested.These sums were peanuty compared to the amounts that MayBank and Hong Leong Finance paid to minibonders.  Some investors are suing.

And in HK, DBS said in a statement in October last year that 4,700 investors would their entire investment of $241-million in the Constellation 253 notes. They have not been compensated en-mass like the Hongkie minibonders who got 60% of the principal back, with the possibility of more. Again some are suing.

Shareholders can only hope that next time DBS successful cross sells, affluent customers don’t get made poor .  True the notes made money for DBS, but at what cost to its reputation?

Up to you, chairman to make sure that when DBS cross-sells, customers tbenefit too. Or at least don’t get demoted from “Treasures” or “Emerging Affluence” to paupers or “the newly poor”.

I hope he remembers that the “holy grail”, though often sighted (tat’s the claim) has never been found. And that its search led to the demise of Camelot as Arthur’s knights focused on the search of the grail, rather than the defence of the realm. Must be a lesson somewhere in all of this for DBS, if not Citi.

Oh and I hope that a Singaporean chairman of an Asian bank realises the incongruity of following a European myth, which the “holy grail” is rather than an Asian truth. The holy grail is the cup that supposedly Jesus drank from at the “last supper”, before his execution on Good Friday.

DBS: What the new chairman should be looking at II

He should ensure that any acquisition in Indonesia, India, Malaysia and Thailand,  the countries where DBS says it would look for acquisition opportunities is disciplined in terms of valuation, strategic fit and execution.  Investors still remember the Dao Heng fiasco, overpaying and having to take billion dollar impairement charge. And the purchase of POSB was not such a gd deal as anti-government subversives like to imply that it is.

Better still he shld relook at the rationale for these M&A activities.

DBS is  Singapore and Hong Kong centric. But, in February, it said it was aiming to have 30 per cent of its revenue from South and South-east Asia, excluding Singapore, 30 per cent from Greater China and 40 per cent from Singapore within five years.

Morgan Stanley estimates that DBS would have to grow at a compounded annual growth rate of 40 per cent a year in South and South-east Asia to achieve its stated target in that region i.e. it would have to grow via acquisitions.

BTW last Friday BT reported that DBS’s CEO had said DBS had identified unnamed acquisition targets in Indonesia which shld worry investors.

Previous post on topic

https://atans1.wordpress.com/2010/03/24/dbs-what-the-new-chairman-shld-be-looking-at/

He shld be relooking at FT policy — both in principle and execution.

Sino-E: Where’s the $14m?

In the middle of March, BT reported that the CEO declined to comment on the S$14 million cash reserves the group’s former executive directors claimed to have kept in a Xiamen bank, saying: “We haven’t sent the auditors in yet, so I don’t want to make any comments on the cash as that could be quite misleading.”

Have the auditors gone in yet? And if not, when? Sin0-E shld be telling its shareholders.

[Update on 18 April 2010 — Co says money is there and that it has been secured]

As a group of managers have asked for the opportunity to subscribe for 20% or more of the group’s issued paid-up capital in the form of new shares, shareholders could be reassured that there is value in Sin0-E, something that the CEO was quick to point out. But they should worry that this request was tied to a pledge of support to the new directors.

A polite threat?

Innovation needs lousy infrastructure?

Noticed that our “nation-building” and “constructive” MSM has gone quiet on innovation when ministers talk bugger-all on the topic? Remember when innovation was the theme, juz recently? https://atans1.wordpress.com/2010/02/06/want-more-creativity-let-the-dark-side-in/

Seriously, given the S’pore’s govt penchant for building state-of-the-art infrastructure, could this be a reason why we have problems in the “innovation space”.

That lousy infrastructure = innovation.

The Economist’s Babbage blogged, “It’s well established that America, on a number of different measures of internet speed, availability and penetration, tends to rank about 15th. Yet YouTube, Twitter and the iTunes store are all American innovations, all from a time when America was already falling behind on speed and access. Which leads me to a question: is it possible that the limitations of America’s internet infrastructure actually spur innovation? The delivery of Flash-encoded video — as on YouTube — is a cleverly efficient use of bandwidth. If America could pipe 100 HD channels into every home, would there have been a YouTube?”

http://www.economist.com/blogs/babbage/2010/03/infrastructure_and_innovation

Genting S’pore: Help needed?

Genting S’pore’s share price has declined since this was posted https://atans1.wordpress.com/2010/01/08/genting-spore-did-you-know/

Trumpets pls.

Seriously what with the problems at the UA theme park (favourite ride suspended) and the Tom Jones concert (he sang two songs), and bearing in mind the original name of Sentosa, Blakang Mati (“behind death”), Gentings would be prudent in calling in a bomoh* to “buang sui” and a fung shui master to check out the alignments. If mgt decides to be rational, who knows what may happen next: a super rich punter breaking the bank?

The losses could be horrendous. I was in a super VIP room (friend invited me to see how the super rich live) and the money changing hands would make a S’pore cabinet minister feel a pauper.

And thinking abt it, mgt should bring in the medicine men or shamans (the politically correct term) from its related N American casino operations. Redskins are its partners there.

Remember you read this prediction of big losses, if the shamans are not called in, here first.

Update

*I’ve seen a bomoh ensure that rain did not spoil the Sultan of Pahang’s (and my) enjoyment of a high-goal polo match. The rain fell everywhere except on the polo field and the spectators’ stand. It was awesome.

MU: Red Knights turn pale?

The Red Knights consortium has revealed it is not planning to make a bid for Manchester United before the end of this season.

“I goofed,”US$12 trillion man

His company, BlackRock, controls or monitors more than US$12 trillion (GIC and Temasek have, at best, an estimated US$700 billion), yet he admits he and his team made mistakes during the recent crisis.

“At the mention of these blunders*, Fink, who has been sprawled in his chair, suddenly stiffens. His voice takes on a harsh tone that is leavened only by his visible anxiety. “When you manage money, you are going to make mistakes. You are not going to be 100 percent perfect. Our job is to minimize those problems, to cauterize them,” Fink says, his voice rising. “We’re not perfect, and I’ve never said to anyone that we are going to be perfect. Our investors had all the information we did and they did their own due diligence.” He exhales deeply. “Our real-estate division is struggling because of bad performance, and we’re making changes. I don’t care if the whole industry blew up, our job is to do better than the industry, and we didn’t in real estate,” he says. “I am not making excuses. I lose sleep over these problems.” The Stuyvesant Town loss was “an embarrassment,” he says. Then his voice drops to a whisper. “I mean, my mother gets her pension from calpers.””

If you want to know about one of the heroes of the recent crisis, read this Vanity Fair article. Warning — runs to over eight pages.

*His blunders — “There was the strong backing of Lehman Brothers’ management as the bank was imploding, kicked off by BlackRock’s purchase of a large block of Lehman stock at $28 a share, three months before the firm went bankrupt. And shortly after Bear Stearns collapsed, Fink advised investors to put their money into riskier, high-yield debt, just before that market tanked. BlackRock … also contributed its share to the toxic-asset morass—with close to $8 billion of collateralized-debt-obligation deals that defaulted in 2007 and 2008.”

‘But BlackRock’s most public and costly mistake—for its clients, at least—was its purchase of the iconic Manhattan housing complex Stuyvesant Town and Peter Cooper Village, a $5.4 billion deal that went into default in early January.” Remember GIC is an investor in this too. https://atans1.wordpress.com/2010/01/27/gic-ny-loss-us100m-more/https://atans1.wordpress.com/2010/01/24/gics-us675m-loss-juz-be-the-beginning/

BTW Temasek’s comments when it was criticised for losing money over BoA/ Merrill Lynch. If anyone has seen Gic’s comments over its Stuyvesant or UBS loss let me know.  Not seen any on its website.

Rubbish: Homeownership encourages gd citizenship

Robert Schiller (the man who called the dotcom bust and the recent US housing crisis spot on) argues in the US context that homeownership is not as beneficial to a country as it many thinks it is — the American belief that homeownership encourages pride and good citizenship and, ultimately, preservation of liberty. These attitudes are enduring.

He cites Switzerland: Switzerland, for example, is a country with strong patriotism, a fighting spirit of national defense, a commitment to freedom and tolerance, and a low crime rate. Yet its homeownership rate is just 34.6 percent, versus 66.2 percent for the United States, according to the two countries’ 2000 censuses.

Time for the government to rethink its homeownership policy?

Swiss national identity doesn’t depend on homeownership. Instead, Riccarda Torriani, a historian at the Swiss Federal Department of Foreign Affairs, links the country’s sense of identity to such things as its system of direct democracy, which enforces popular participation in government; the idea that its citizens are frontier people (living in or near the rugged Alps); and a history of collective courage in defense of freedom, even when outnumbered.

Update on 27th March 2010

Been asked what has this post to be with value investing or being cynical.

Answer: Question periodically the underlying assumptions of  any piece of “conventional wisdom”. Juz because a genius like MM thinks that something is correct,doesn’t mean that the underlying circumstances may have changed since he made the initial decision. Take the “Stop at two policy”. Circumstances changed, and the policy shld have reversed earlier.

SingTel: Gd new, bad news

“Bharti has tied up US$7.5bn of loans through Standard Chartered, Barclays and a roster of other international banks to fund its $10.7bn bid, which includes $1.7bn of Zain debt. The State Bank of India has also promised up to $1bn more to cover associated deal costs. At a reported interest rate of 2 percentage points over Libor, Bharti is being charged less than many investment grade companies would expect to pay”, FT reports.

So Bharti is on track in its purchase of  Zain. And SingTel will have exposure to Africa.

https://atans1.wordpress.com/2010/02/17/singtel-during-the-hols/

The bad news is that Thailand’s government will present a plan in two months to “create a level playing field” for telecom firms, including possible compensation for changes to concessions, said Prime Minister Abhisit Vejjajiva.

Prosecutors will also make a decision on whether to seek damages over royalty payments to state-run TOT from Advanced Info Service, Thailand’s biggest mobile phone company that was owned by  former PM  Thaksin Shinawatra via Shin.

But SingTel and Temasek will be comforted that the Finance Minister said: “Whether there will be retroactive pursuit of fees forgone by the government from the company is unlikely. I don’t feel that it would be fair to go after shareholders of these companies for adjustments in the concessions that were made by the previous owner.” Remember AIS is an associate of SingTel and Temask has a 79% economic interest in Shin that is AIS’s controlling shareholder.

https://atans1.wordpress.com/2010/03/14/singtel-collateral-damage-from-shin/

The concession of True Corp, Thailand’s third-biggest mobile operator, is set to expire in 2013. AIS’s expires in 2015 and Total Access’ in 2018. Each firm negotiated amendments to the original concessions, which the government’s legal advisory body said in 2007 failed to comply with the law.

Update

More bad news: SingTel’s and StarHub’s joint bid for World Cup footie has been rejected. Footie fans will know who to blame if SingTel doesn’t cough up more (don’t see why StarHub would). If it does, it will lose money. Peanuty amounts but still money.

Makes me ashamed to be from RI. The CEO is an RI gal. RI boys don’t do such dumb things, only RI gals.

SingTel: Local talent policy not working

Err been receiving phone calls from irate footie fans telling me that SingTel shows that local talent can juz be as crappy as foreign talent.

They point out that SingTel’s EPL bid has resulted in them having two box-sets, paying two subs, and maybe no world cup footie.

And they point out that the CEO is from RI. Err I can only say I never liked the gals in RI policy. They lowered standards.

Temasek: on the telco trail again

Other than Shin, Temasek’s track record when buying stakes in Asian telcos has been very gd.  The Indosat stake was sold in 2008 for a gain of a not peatnuty S$223 million.

So as a S’pores (remember that the CEO says that Temasek belongs to us), I’m glad to see that Temasek has in the last few weeks taken stakes in two other SE Asian telcos.

Singapore Technologies Telemedia (ST Telemedia) acquired a 33% stake in Malaysian 3G operator U Mobile, the two companies said in a joint statement last Monday week.  ST Telemedia (a 100% Temasek subsidiary) is  paying 625 million ringgit (US$189 million or  S$263 million) for its stake in U Mobile. U Mobile is the smallest M’sian telco.

And in the previous week, ST Telemedia announced it was buying a 10%  stake in VNPT Global, a subsidiary of Vietnam public telecommunications group VNPT. A VNPT official said the deal was valued at 20 billion dong, a peanuty S$1.5million (thereabouts) as Mrs SM might have put it (she didn’t)

Comparing SGX to HKSx cont’d

Today our MSM told us that according to Ernst & Young, “public offerings (IPOs) in Singapore have raised nearly S$500m so far this quarter”. This works out to US$356.5m.

In January,  UC Rusal had an IPO worth US$2.2bn in HK.

Taz putting things into perspective.

Related post

https://atans1.wordpress.com/2010/03/10/obvious-why-the-pru-chose-hkex-over-sgx-bt/

DBS: What the new chairman shld be looking at

CIMB is regarded as having overtaken DBS in the race to become a leading bank in the region according to Ranu Dayal of  Boston Consulting, BT reported a few days ago, though DBS remains the biggest South-east Asian bank by market capitalisation.

Hey whaz this?

CIMB is from M’sia, a country that is not as meritocratic as S’pore according to the then SM and PM  in the 1990s, now MM and SM respectively. While SM cocks things up regularly (for example, in the 1990s and early noughties, when he was PM, S’pore got complacent and productivity fell), MM gets most things right.

So how come CIMB overtakes our national banking champ (err shld it be chump?). Makes me ashamed to be a S’porean. I mean the meritocratic policy is in this region “uniquely S’porean”

Wait a minute, DBS has had Foreign Talents as CEOs and senior executives since the late 1990s. Could this be the problem? The FT policy trumps the meritocratic policy.

I am surprised that anti-government subversives are not using DBS to show up the government.  Given the track record of DBS,  one could reasonably argue that the FT policy is rubbish — overpaying for Dao Heng so much so that DBS had to take an impairement charge of over S$1 billion; making its Treasured clients (they are only S’poreans, not “countrymen”) poorer (HN5 notes); and running down the expensively acquired POSB brand before realising its potential and spending $ rebuilding the brand.

And the SDP and friends can reasonably cite CapitaLand, another TLC, as an example where FTs are scarce, but where locals do well at managing a TLC. The CEO is a local and so are many senior executves. It is the leading regional property company (by reputation and market cap) and a big player in China. More than can be said of FT-laden, spastic DBS.

Of course, one could argue that there is no casual relationship between bad performance and being FT-laden,and gd performance and being local-led.  And that one FT- laden bank does taint other FT-led companies. So look at the other listed TLCs — Keppel, KepLand, SembCorp, SIA, SATS, ST Technologies, SIA Engr, SingTel, Starhub, M1 and NOL. And judge for yrself.

Back to DBS, yesterday BT had an article speculating what the incoming chairman could do for shareholders. Well he could relook the FT policy at DBS: is the policy flawed or just that the wrong FTs were recruited? Too many people from Citi, the bank that the US government had to rescue? As a HSBC shareholder and customer, I can attest to the damage that these ex-Citbankers did before they moved on.

Update on 25 March 2010

Footie fans (FTs and those who hate RI, I assume) insist I post this to show that locals can be as rubbishy as FTs.

https://atans1.wordpress.com/2010/03/25/singtel-local-talent-policy-not-working/

Local banks: Underperforming their regional peers

Our local banks were thrashed by Malaysian, Thai and Indonesian banks when measured by relative total shareholder return (RTSR) of mid-cap banks over the last five years according to a  Boston Consulting Group (BCG) report.

OCBC was 11th, with a 2.4 per cent RTSR while UOB with 0.4 per cent RTSR was 18th. In the previous five year period 2004-2008, OCBC and UOB were placed 24th and 23rd respectively. They have improved.

DBS has a negative RTSR. It was ranked 35 over the five-year 2005-2009 period with an RTSR of minus 4.6 per cent. Previously, DBS ranked 49 out of 50 in the mid-cap bank category. Still bottom of the class but our national champ. Or shld it be our national chump?

“The rankings were for the biggest 100 banks as measured by capitalisation for which a five-year RTSR could be calculated; they were then split into two categories – large-cap and mid-cap. RTSR measures total shareholder return based on the change in share price and that includes gains from reinvesting dividends adjusted to the performance of the local stock market,” BT reported.

The following table is taken from BT.

New SGX ETFs for Indon and China exposure

Investors can now gain exposure to shares listed on the Indonesia stock exchange and on the Shanghai and Shenzhen exchanges.

Two Mondays ago, db x-trackers listed an  ETF tracking the MSCI Indonesia index on SGX. The ETF is Ucits III compliant. This means it is a product  that can be sold to EU retail investors because it meets European regulatory requirements on risk management and operational procedures.

It has also launched an ETF on  CSI 300, an index of leading Chinese stocks. This is also Ucits III compliant.

db x-trackers says its  management fee is only 0.5%.

db x-trackers must be concerned abt the liquidity of these new ETFs because it took out an ad in ST telling people abt these products last friday.

Our neighbour, the new Brazil?

While Singaporeans (government and people and MSM) are looking to China and India as drivers for growth, we may be ignoring  the new Brazil on our doorstep.

Obama’s trip to Indonesia scheduled this weekend (and now delayed until June because he needs to twist arms over the healthcare bill) was being hailed by the governments of Indonesia and the US ” as a momentous opportunity to cement their relationship on security, trade and military issues”.  More to the point, Indonesia is South East Asia’s largest economy and growing (it was one of the few countries including China and Brazil that had +ve growth in 2009): meaning American firms want to come in.

So keen are the Americans and others to do business that the Indonesia’s political situation are glossed out, or given an optimistic spin.

“The Indonesian parliament voted to pursue a criminal investigation of the vice-president and finance minister, both pro-market reformists, in connection with a bank bail-out in November 2008. Given that the campaign to investigate was led by tycoon Aburizal Bakrie – whose group was denied a government bail-out weeks earlier – …. the kind of  stuff used to send investors scurrying back to core holdings, ” FT reported sometime back.

“Political unrest, after all, might threaten President Susilo Bambang Yudhoyono’s programme of fiscal and institutional reforms, lengthening the odds on a Brazil-style scenario of stronger currency, more moderate inflation and booming consumption that would lift the country to investment-grade status. But the results of the vote did not weigh one bit on asset prices on Thursday.”

Equity portfolio inflows have been as strong as that of any other emerging economy. “The rupiah is the eighth best-performing of 26 emerging market currencies this year, having ranked fourth last year,” FT reported.

Looks like investors have faith in the long term prospects of Indonesia and will take things like demonstrations, corruption, and bomb blasts in their stride.

“The country now has many of the hallmarks of stability that mature markets lack: strong real growth, a relatively contained and modest budget deficit, increasing foreign direct investment and rising foreign exchange reserves. ”

Let’s hope so. After all Indonesia, like Argentina and Brazil, until recently, have been always countries of the future. But it never happened because of bad government. Indonesia could still turn out to be another Argentina. And note that I was a bull on Indonesia. A bull that in the 1998 crisis, had his balls crushed.

And let’s hope S’pore can manage its ties with this prickly neighbour to our mutual advantage. But I’m not a “S’pore is always wrong” S’porean, blaming everything on our government. The Indonesian army has form in bullying its people and invading neighbours: Aceh, Sulawesi, East Timor, West Papua, Malaysia.  Remember the Indonesian army planted bombs here in the 1960s?

But then remember the golden age for S’pore was in the late 70s, and 80s when Indonesia was booming under MM’s mate, Suharto. Whatever one may think of both men, they were pragmatists to the mutual advantage of both countries, minor problems notwithstanding.

BTW, the coming week’s posts will have a regional theme.

EPL’s dirty tax secret

The EPL is trying to to broker a deal with the UK tax authorities on behalf of its clubs and players to protect their sponsorship deals and prevent the loss of up to £100m ($156m) in taxes.

The tax people are investigating many of the deals struck between clubs and the “image-rights” companies set up by players to enhance and protect their public profile. Clubs are paying some money into image-rights companies that tend to be based offshore and are therefore out of reach of tax officials.  Players in return are accepting lower wages, and thus pay lower income tax.  Win-win for both sides but not the tax authorities.

Apparently the authorities have raided some clubs.

S’pore is not N Korea

Recently The Reform Party’s Sec Gen told Reuters that in the private sector, “heads would have rolled” over the billion dollar losses that Temasek and GIC lost. He should know — he was a hedgie. Of course he did not mean to be taken literally.

Today the NYT reported that there are unconfirmed reports that N Korea’s finance chief had been executed by firing squad. He had been in charge of a currency reform programme that ended up with public protests, and some changes to the programme by the government.  Things unknown there.

Executives at Temasek and GIC must be glad that the S’pore government is more tolerant of failure. It also shows that comparisons between the two governments are wrong. LKY is right when he says that it is wrong to compare the two countries.

Moving share prices: analysts or new info?

This extract from FT’s Lex is a must read.

Research by hedge fund GLG, which tracked share price movements before and after broker announcements, does show a connection between recommendations and a stock’s subsequent performance.

It found that when an average stock burdened with a consensus “sell” recommendation is given a “buy” rating, the underperforming price turns round and, after 100 days, the stock can be expected to outperform the market by about 2 per cent. And when a large broker issues the recommendation, the effect is almost half as much again.

For example, K+S, the German chemical maker and previously a consensus “sell”, was upgraded to “buy” in January by Bank of America Merrill Lynch and its share price jumped 12 per cent. Of course, many other factors influence share prices, but on average this effect is repeated.

Proving causality, though, is difficult. Typically, a broker issues a recommendation immediately after the company announces news such as earnings figures or a landmark acquisition. It is almost impossible to determine how much of the subsequent share price movement is due to the broker’s advice and how much would have occurred anyway based on the news. “

Perils of buying on NTA II

It was reported in Today that ” Minority shareholders of Lion Asiapac are making another push for the company to pay out special dividends. Previous calls for such distribution were ignored.”

‘Mr Mano Sabnani, a Lion Asiapac shareholder, said: “The company has got more money than it needs. It can easily pay out 20 cents a share and still have a big cash hoard for new businesses.

‘Shareholders had previously petitioned Lion Asiapac’s chairman Othman Wok, calling for the distribution of special dividends to boost the stock price, which is trading at a heavily-discounted 33 cents to its cash value of 47 cents.”

The problem is that the company is a subsidiary of Lion Group, a M’sian listco, which means that Lion Group has the votes to block any such resolution.

Buying on a deep discount to NTA only works if the value investor can see some catalyst that will unlock value. Where there is a controlling shareholder or shareholders, this catalyst often does not exist. Witness Haw Par https://atans1.wordpress.com/2009/12/11/hidden-tiger/,

Chemoil https://atans1.wordpress.com/2009/12/16/when-a-controlling-stake-goes-at-a-massive-discount/ and

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

And bear in mind that such a discount could also be a sign that investors are concerned that the cash or assets  could be used up in unprofitable businesses, rather than given back to shareholders. Again where there is a controlling shareholder or shareholders, this is more likely to happen.  Not because the shareholder wants to screw the others but often because his time horizon is very, very long.  And he has other reasons for his holdings say sentimentality.

Chinese dot.com companies listed on Nasdaq were trading below their net cash positions after the dot.com bust. Investors rightly assumed that they would not see the cash.The cash would be used to fund internet ventures etc. Anything else except be returned to shareholders. They were right.

OCBC: Reward for avoiding balls-up?

OCBC Bank granted chairman Cheong Choong Kong more than 230,000 share options – the most he has received since being appointed chairman in July 2003.

Could this I wonder be for avoiding the investment mess-ups that happened at SIA when he was CEO? Make no mistake, he was a vv gd CEO: operationally. SIA went from “strength to strength” as the cliché goes.

But during his tenure, there were two big investment mess-ups — buying into Virgin Atlantic at a very gd price for one Richard Branson (at a time when he needed money) and Air NZ. Air NZ went bankrupt (mainly because of the crisis that hit the airline industry post 9/11) and it could have been worse. SIA wanted to increase its stake sometime before before 9/11 but was blocked by the NZ government because Air NZ was a “strategic asset”. While the Air NZ investment was only a peanuty S$403m, the 49% stake in Virgin cost £600m (US$960m).

But maybe OCBC shld have waited. The purchase of ING’s Asian private banking business could come to haunt OCBC. A few days before this deal was annced, ING sold its European biz, at a fraction of the multiple that it got for Asia. Only time will tell if the growth in Asian wealth and OCBC’s ability to grow the private banking biz will justify the hefty premium that OCBC paid.

It paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m. This compares with the 2.3% measure paid by Julius Baer for ING’s Swiss assets which is in line with another European purchase by an American private equity group of a smallish private banking outfit — RHJI’s purchase of Kleinworth Benson from Commerzbank.

But to be fair to OCBC and its chairman, HSBC is rumoured to have also bid US$1.46bn but was unwilling to give an assurance that there would not be staff layoffs. OCBC was willing.

Update 22 April 2010

The media have reported that OCBC’s inhouse prvate banking team is unhappy, with resignations etc being made.

UBS: GIC’s Shin?

Oh dear.  “The Swiss banking giant UBS has stepped up its lobbying to pass a treaty with the United States that would resolve a dispute over tax-evading clients, amid signs that the deal is running into trouble in [the Swiss] Parliament,” NYT.  Reminder: if the US goes after UBS, UBS could go the way of Arthur Anderssen, the auditing firm that died because of its misdeeds.  Then we might never recover our investment.

Looks like UBS is becoming GIC’s Shin — the losses, fallout and bad publicity of this investment (like Shin for Temasek) go on and on.

The latest on Shin is that Thai Prime Minister Abhisit Vejjajiva has appeared on national television to reject a demand from demonstrators that he resign by midday and call elections. In response the demonstrators are stepping up the tempo. So far, there is no violence.

Our SWFs: What our MPs are not asking

In the US, there is growing concern that public pension funds are taking excessive risk to meet their targeted returns. —NYT article.

Our MPs should be asking ministers about the risks our SWFs are taking relative to their returns, not easily batted away questions on losses. In the context of the portfolios, the losses are as Mrs SM could have said (but didn’t),”Peanuts”, and as any CFAer could tell you, “Look at total portfolio return, not individual items”.

And asking if they are aware that Norway’s SWF commissioned a report by three business-school academics—Andrew Ang, William Goetzmann and Stephen Schaefer from Columbia, Yale and London respectively – that found that taking the recent crash into account, the fund’s performance was essentially indistinguishable from that of a passively managed index fund.

And what is the experience of Temasek and GIC in this passive versus active debate.

I don’t expect PAP MPs (hey they can be disciplined for being difficult and anyway there is such a thing as loyalty) or Chiam (he is sick) to make life difficult for ministers. But where is Low (Waiting for pension?), or Sylvia (Waiting to be given Low’s seat?);  and NMPs for?

Or for that matter the SDP? I don’t incude RP or KJ  because to do the economic analysis they are doing (and put it into understandable language)  is not easy, so let’s cut them some slack.

Miss Siew Kum Hong. His ideas of human rights did not only encompass gay and feminist issues like “anal sex is OK”, but also, what the Chinese Communist Party rightly includes as a human right, “economic rights”.  He gave a great speech on CPF and asked the right qns on our SWFs.

SingTel: Collateral damage from Shin?

Pro-Thaksin demonstrators  have reach Bangkok ahead of a  rally today (Sunday). The government has deployed about 40,000 security personnel. The Internal Security Act has also been invoked, giving the military extra powers to impose curfews and restrict numbers at gatherings.The last major protests, in April last year, turned violent, with two deaths and dozens of people injured.

This protest comes after the Supreme Court ruled that former PM Thaksin Shinawatra’s family should be stripped of more than half a contested US$2.3 billion. The court said US$1.4 billion of the assets were gained illegally through conflict of interest when Mr Thaksin was prime minister. The funds were frozen after Mr Thaksin’s elected government was overthrown in a military coup in 2006.

He, who is living abroad, has denied any wrongdoing.

The Economist reported two issues ago: “The court’s verdict exposes Mr Thaksin and his family to a range of civil and criminal charges. Prosecutors may go after members of his cabinet and officials accused of helping Shin Corp. The government can also try to claw back lost revenue from Shin Corp, and particularly its lucrative mobile-phone unit, AIS.”

Readers will be aware that SingTel has a 21.4%  stake in AIS.  No wonder Shin’s executive chairman and acting president Somprasong Boonyachai said to BT two weeks ago (juz after the court’s verdict) that Temasek could divest its stake in Shin Corp if the right buyer comes along.

Maybe Temasek is prepared to cut loss? It lost abt US$4.6 billion on Merrill Lynch so a loss of  around US$655 million (assuming that its interest in Shin is only 42%, and not the 79%  economic interest that some analysts have calculated) would be “Peanuts” as Mrs SM might have put it, though she did not.  I mean waz US$655 million when you dropped US$4.6 billion?

Time to call John Paulson? He is the hedgie who bot BoA (that bot ML) when Temasek was selling.

But on Friday that same Thai said Temasek had no plans to sell its stakes in Shin or in satellite unit Thaicom.  Either he is the Thai version of Gopalan Nair or Temasek has changed its mind in two weeks

Anyway, the repercussions  of the Shin deal go on and on https://atans1.wordpress.com/2010/03/06/better-at-destabilising-than-investing/

BTW a conspiracy theorist or one who practices the art of guessing what is going on behind the scenes: dietrologia in Italian, literally “behindologypoint”, has argued that the Shin purchase was a gd deal that went wrong because of the coup.

A Pakistani (you know how mad they can be) of my acquaintance has connected  the dots between these three indisputable facts

1 When Thaksin was PM he had proposed spending 1.7 trillion baht between 2006 and 2010 (then US$47 billion) on mass transit systems, water pipelines, communications technology and other projects to boost the economy and improve the country’s infrastructure.

2 TLCs have the expertise to do these projects.

3 Thaksin has been found by the Thai courts to be venal.

My mad Paki wonders aloud if someone might have tot of the billions of $ that TLCs could from the Thai government win if Shin was bot at a more than fair price? Note that the price was so fair to shareholders that brokers recommend that they sell to the consortium

I told him S’pore Inc. does not bribe: if we did we would be more successful than Taiwanese and Hongkies in China. He pointed out that S’poreans learn from their mistakes.

Update 15 March 4.30 am

Tens of thousands of Thai opposition supporters have rallied in Bangkok  and gave Prime Minister Abhisit Vejjajiva until Monday afternoon to call fresh polls. They vowed to demonstrate across the capital if he refuses to do so. The government insists it will not stand down and has tightened security.

MU, Gold & Green: Takeover Maths

The Red Knights are getting serious. They have appointed Dawson from Nomura to advise them.

“Dawson has been one of London’s most prominent corporate advisers for 25 years. And Nomura is Japan’s leading investment bank, by a margin. So what will Dawson actually do? Well his first priority is to interview the 50 odd wealthy individuals who’ve indicated to the Knights that they’d provide funds for a bid – to see if money really will follow mouth,” Preston from BBC http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/03/man_utd_the_takeover_maths.html

The fact that someone of Dawson’s standing is willing to advise the Red Knights adds more credibility to the bid.

Now if only someone would start a campaign to boycott attending MU games until the Glazers sell out. But that might be construed as blackmail.

Earlier posts

https://atans1.wordpress.com/2010/03/03/mu-not-for-sale/

https://atans1.wordpress.com/2010/02/28/mu-green-gold-not-red-white/

Skt mkts: Nothing to celebrate in March 2011

Global stock markets  hit  their lows on March 9, 2009. Since then the MSCI World Index is up 71% . The rally is one year old.

Although FTSE 100 is hitting new highs (demand for commodities esp from China) , most other indices have seized since November 2009: reflecting  a weakish economic recovery and serious concerns about the future (double dip recession, inflation, countries defaulting etc etc).

According to the people at Deutsche Bank, historically, a fantastic 12 months in the stock market has usually been followed by a “nothing to write home about period”: an average 3% decline since 1940 in the United States.

So it’s time to be cautious. Buy dividend stocks. I suggested it in Dec 2009 https://atans1.wordpress.com/2009/12/31/investment-strategy-for-2010/

Sumething ST guy suggested recently.  So trumpets pls.

Back to the serious stuff. Today’s FT Lex pointed out that almost no new wagga came into the market: “… hardly anyone brought new funds to the rally and most leading indices remain below their peaks. In the US, for example, only a net $12bn was committed to equity mutual funds and ETFs over the whole of 2009, according to TrimTabs data, with only international equities receiving net inflows. Likewise professional money managers have only increased stock weightings again recently.”

And it concludes, “A year ago missing the bottom was the fear. After the mother of all rebounds, is the opposite fear niggling minds this weekend?”

Understanding the mentality of China bulls

Reading this, I think I can understand the thinking of CapitaLand and other China property bulls. “Everyone agrees China is in the middle of a spectacular real estate boom. The question is whether it is in the middle of a rapidly growing real estate bubble.”

There’s serious money to be made in the short-term.

And a very reputable economist and China watcher, Nicholas R. Lardy at the Peterson Institute for International Economics in Washington, say the housing boom is being propelled by a huge urbanization push that is creating premium-priced houses. He is not the only economist to say this. And CapLand said this yesterday.

So if China is a core market, you really don’t have a choice. You got to double, triple yr bets, and pray hard that you get out in time.

Relevant posts

https://atans1.wordpress.com/2010/02/03/capland-what-price-the-mega-china-deal/

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

HKEx: Plan B when Shanghai overtakes it

Sounds (see below) bit like SGX’s strategy of playing second fiddle (although perish the tot of SGX admitting that it is  pursuing second tier status).

And it doesn’t need a Plan B, yet. Note that Prudential said that has made its application to the exchange for an introduction and said it would not offer any new ordinary shares. It had previous said it would apply for a dual listing after it stakeover of AIA. French cosmetics group L’Occitane is getting ready for an IPO in Hong Kong next month in a move that highlights rising consumer demand in Asia for luxury goods. It  could raise up to US$700m to bankroll its Asian expansion plans.And FT reports further, “A successful listing could re-ignite interest among other European luxury goods companies, including Prada and Ferragamo, which abandoned Hong Kong IPO plans ahead of the global downturn.”

Contrast this with SGX. It has now only started marketing to the Ruskies. Let’s hope some decent R-Chips come our way.Thinking of S-Chips: Sino-E and friends, I have my doubts.

From Reuters Breakingviews:

The Hong Kong Stock Exchange is the world’s second-biggest by market capitalization. Call it the China factor. Yet as the mainland’s own exchanges get bigger, Hong Kong can’t count on winning prize listings forever. It’s time for a Plan B.

Hong Kong has long been the destination for public offerings of China’s state-owned companies, because mainland rivals were deemed too small. But now, China wants to develop an international financial center on the mainland. Even Hong Kong stalwarts, like the lenders HSBC and Standard Chartered, plan to issue shares over the border. The next big bank to list, Agricultural Bank of China, may eschew Hong Kong altogether.

Hong Kong can’t get away from its Chinese roots. Efforts at diversification from Chinese public offerings have had little success. In 2009, mainland enterprises still accounted for more than 82 percent of all public offering money raised. The failure of the American International Group’s Asian life insurer, A.I.A., to go through with a planned listing may cut Hong Kong’s pipeline in half.

Charles Li, the exchange’s new chief executive — and a mainlander — says the exchange seeks to position itself against competition from London, New York and Shanghai by doing things that others can’t do. One way would be to focus less on initial public offerings and more on other businesses, like derivatives. As China’s own capital market deepens, the need for more sophisticated products will increase.

The real gold mine, though, could be for Hong Kong to focus on becoming China’s offshore renminbi capital. China is keen to push the renminbi internationalization agenda, but progress has been slow, mainly because of a lack of products for investment. Trading renminbi bonds offshore could be a good start. Stocks priced in renminbi could follow.

Hong Kong would need Beijing’s approval, and might have to accept a future without blockbuster public offerings. But better a partner than a rival.

ROB COX and WEI GU

Earlier posting on Shanghai’s ambitions https://atans1.wordpress.com/2010/03/01/spore-hk-have-competition/

Obvious why the Pru chose HKEx over SGX, BT

I could not stop laughing when I read : “Prudential’s surprise announcement that it will list in Hong Kong, following its US$35.5 billion decision to buy over rival AIG’s Asian operations, has led market watchers here to wonder why the UK life assurance giant did not pick Singapore instead for its secondary listing.”

Come off it BT.  Isn’t it blinding obvious why the Pru chose HKEx?

You reported a few days ago that last year, HKEx was the global leader in new listings, raising more than US$30 billion worth in 73 IPOs. SGX’s 23 new listings raised US$2.35 billion, based on Bloomberg data.  And according to an Ernst & Young study, Singapore was falling behind Kuala Lumpur and Sao Paulo in terms of capital raised from IPOs up to November last year.

So isn’t it blinding obvious why the Pru chose HKEx?

OK you reached the above answer finally, but was there even a need for the article? I mean the only market watcher quoted was a retiree, small investor who often talks rubbish.

Oh and since I’m bashing BT, a few weeks ago, ST and BT reported that according to DBS, a S$ billion listing was coming SGX’s way. We now know that  China Real Estate Opportunities, one of the biggest companies on London’s AIM, may abandon its UK listing to be quoted in Singapore. I don’t know anything of this company, but I do know of some strange goings on at a couple of other China-related companies listed on AIM.

I sure hope these type of shenanigans remain out of S’pore. But looking at Sino-E and friends, I am not optimistic.

Update 2 May 2010

Pru is now doing a secondary listing on SGX, in addition to its HK primary listing. Rumour has alleged that GIC, an underwriter of Pru’s coming rights issue, persuaded Pru to this. Note that more Pru shareholders want to kill the deal on the ground that a champion dog  is buying a mongrel.

Standard Chartered: more copycating of HSBC

Now that Standard Chartered has followed HSBC in saying that it wants to get a China listing–  just  after  its CEO  said it will donate his bonus to charity, ala HSBC’s CEO — maybe it will announce that it wants to buy a bank in China: what HSBC was reported as planning.

Some people are surprised that Temasek did not quash the bonus plan. You can only guess why they tot Temasek would be upset. But remember Temasek says it does not interfere with its investee cos’ commercial decisions.

Two gd investments tips from NYT blogger

On how to handle possible overconfidence.

And why he advocates  “Slow and steady always wins the race”.

OCBC: More on GE Life

OCBC mgt could also try MetLife of the US. Metlife is buying AIA’s sister company, Alico, from AIA for a reported US$15.5 billion.

Alico has Asian insurance operations in Japan, Pakistan, Bangladesh and Nepal. Yes thaz all.  Buying GE Life can add S’pore, M’sia, Brunei, Indonesia and China (the last two admittedly smallish, but still better than Nepal or Pakistan. Both are almost failed states.)

And Zurich Financial Services Group which together with Axa and Allianz according to Reuters are the European insurers looking for a bigger slice of Asia’s high-growth markets considering  unsolicited bids for ING’s Asian businesses

Reuters reports further that, “Analysts say the AIG sale supports the valuation of ING’s businesses and that ING will be able to exit insurance at book value of around 16 billion euros  or more before the end of 2013, by when it must sell the business … UBS research analysts put proceeds of a divestment of the Asian business at 5.6 billion euros [US$7.6 billion]… ‘ING’s Asian business is not the likes of AIA, but it is good. I thought we could see some unsolicited bids even before the Prudential deal was announced,’ said a second investment banker who asked not to be named.

“ING, splitting off its global insurance operations as part of a restructuring deal mandated by the European Union, has made clear since late October that it preferred an IPO rather than a trade sale for the insurance unit … made no secret of the intense trade interest in the business, with chief executive Jan Hommen famously saying he had to use ‘hands and feet’ to count all the suitors who had called him.”

I doubt Axa would be interested in GE Life or ING Asia as it is in the midst of trying to privatise Axa Pacific which is listed in Oz Land.  The latest bid by NBA is worth US$12 billion. NBA will keep the Oz operations, and sell to Axa the Asian operations.

OCBC: Value to be unlocked, cash returned to shareholders

[Note on 26 April 2010 11.30 am, this piece was updated as the 2009 annual report was made available on website]

If OCBC mgt wants to unlock value and return cash to shareholders, this is how to do it.

First by reading the FT. “Prudential, trading at roughly 1 times embedded value, appears to be overpaying by offering 1.7 times EV for a business [AIG]with lower-quality profits. The valuation appears less outlandish, however, when compared with prevailing multiples in Asian markets of about 1.7-1.8 times”. EV means embedded value.

At its present share price (S$15.90), OCBC’s GE Life is trading 21% above its 2009 embedded value because GE LIfe’s free float is tiny: OCBC has 87% of GE Life.

At 1.7 X EV share price shld be 22.35 or 41% up.

And in 2009, AIA had 5% growth at operating level. Based on GE’s annced results, GE’ s is several times that. So given GE life’s smallish size and profitability, 2 X EV would be fair (even taking into account its very weakish presence in China: but then it is building up mkt share in Indonesia) .   At 2 X embedded value, share price is almost $26.30 — 65% up.

OCBC mgt:  Time to call, Allianz or Aviva? Or Temasek? That bull on Asian financial stocks.

After all, OCBC  can keep the bankassurance model (OCBC retains exclusivity in branch selling insurance where it has a decent branch network) ), and can buy shares in an insurance co that is buying GE Life (to participate in growth of insc biz). And remember OCBC has no access to GE Life’s cash flow. It can only equity account GE Life.

The sale would bring in around S$10.5 billion in cash to OCBC or $3.15 a share.

But I doubt whether mgt or the controlling shareholder would want to do this deal. The downside is that OCBC would shrink and be smaller than DBS once shorn of GE Life. Its engine of growth would be gone and it would be a takeover target. So long term, one could argue that deal would be bad for OCBC.

Still if I were the OCBC Lees, $2.8 billion(assuming all the proceeds are paid out)  is not to be sneered at.

Wondering why writing abt this fantasy deal? Showing off that my CF skills as gd as my writing skills. Hoping that sumeone will contact me offering me some freelance analytical work instead of word spinning work. Here’s hoping!

La Liga: “We love the English model”

While S’poreans rant online about the presence of FTs, Francisco Roca Perez, La Liga’s chief executive, said he intended to encourage non-Spanish investors to look on La Liga clubs as an alternative to the EPL.  This move is aimed at shoring up the precarious finances of many La Liga clubs.

This is despite Real remaining the world’s richest club and Barce taking second place, ahead of MU who drop to third. Arsenal, Chelsea and Liverpool are fifth, sixth and seventh respectively.  The dominance of the EPL is despite the weakness of sterling against the euro.

The richest footie clubs.

Temasek: Lost its balls? Or wings clipped?

The three banks (Credit Suisse, HSBC and JPMorgan Cazenove) supporting Prudential’s $35.5bn bid for AIA  said on Thursday that the soveriegn wealth funds of Qatar (Qatar Holding LLC) and S’pore (GIC) have agreed to underwrite a significant portion of the US$20bn rights issue.

Bit surprised that given its record of big (and successful) bets on Asian banks (unlike on Western banks), Temasek isn’t an underwriter.  Or maybe, it had its wings clipped? Or lost its nerve? Only time will tell us why.

Reminder: The Pru needs to raise the cash from its shareholders to fund most of of the deal. The group will also issue to AIG US$5.5bn of stock, US$3bn of convertible notes and US$2bn of preferred shares.

BTW, among the 30 -odd bank underwriters, Standard Chartered and United Overseas Bank are co-lead managers, while DBS is a mere co-manager.

Better at destabilising than investing?

Reading the local MSM last week on Thailand’s supreme court ruling that former PM Thaksin Shinawatra’s family should be stripped of more than half a contested US$2.3bn fortune* had me wondering if senior Temasek staffers involved in that deal missed their true vocation.

It was his family’s decision to sell its shares in one of Thailand’s biggest telecom groups, Shin Corp, to a Temasek-led consortium that led to his downfall. So one way of looking at things is that the decision by Temasek to lead a consortium to buy Shin was the cause of his troubles.

The early 2006 sale netted his family and friends US$1.9bn, angering many urban, educated Thais: the Thaksins had avoided paying tax and had sold a strategic asset to another country.

There were street demonstrations and he called a snap general election for April 2006. But the main opposition parties boycotted the polls and many voters chose to register a “no vote”.

Faced with the threat of further protests, he stepped down for a few weeks, but returned to office in May. In September that year, the military seized power while the prime minister was out of the country.

I’m  sure that the Temasek executives who made the decision to invest in Shin would easily get top jobs in the “black ops” section of the CIA, KGB or MI6.  Overthrowing an unfriendly government is hard enough to do (ask the CIA about Castro and Chavez) but overthowing a friendly government can only be done by geniuses.

After all they failed as Buffetts: an ST article kindly reminded readers that Temasek paid 49.25 baht for each Shin share and the present share price is about 28.   The offer price was so gd that brokers advised their clients to tender their shares. The Temasek-led consortium ended up with so many shares, that Shin shld have been delisted.  For some unknown reason it wasn’t.

And they failed as hedgies. John Paulson was buying BoA, just as Temasek was selling out. In BoA and Barclays with hindsight,  Temasek sold around “maximum pessimism” ,  losing an estimated U$4.6 billion

And Temasek’s Seatown wants to be a hedgie?https://atans1.wordpress.com/2010/02/22/temasek-the-significance-of-seatown/

Talking of kids with toys using our money.

So working for the CIA might be best for Singapore, and the world. Obama needs help in Iran, Afganistan and Pakistan against some pesky Muslims.

And thinking abt it, they can also put on their CVs  how they made S’poreans angry with their government, and doubting its competency and compassion.

Many S’poreans are angry at the Shin, ML, and Barclays losses, and the growing perception here that the losses are a sign that the S’pore government “does” and tolerates  incompetency, within the government and state agencies.

Worse the govmin cannot answer the critics of its welfare policies that it is being prudent. These subversives (from PAP perspective) can answer back,”Prudence, what prudence losing a few billions here and a few billions there?”

——

*because the court said US$1.4bn  of the assets were gained illegally through conflict of interest when Mr Thaksin was prime minister (The funds were frozen after Mr Thaksin’s elected government was overthrown in a military coup in 2006),

Significance of EU FTA talks on wealth mgt here

It was widely reported that S’pore and the EU will  start talks next Monday on a free trade agreement.

What was not reported (or if it was, I missed it) is that the EU had made the start of talks conditional on S’pore joining the likes of HK and Dubai in providing certain  info on the  financial transactions of EU citizens.  S’pore had said “Bugger off” (OK in a polite way) as it wanted to make sure that clients of private banks (esp those of Swiss banks) had the confidence of secrecy from EU eyes.

It is reasonable to assume that S’pore has changed its stance given that the West has become more assertive abt info from places like Switzerland, rather than the EU accepting S’pores “Bugger off” stance. Note,  last yr S’pore agreed to abide by the OECD code on info to ensure that it was removed from the OECD’s grey list of offshore centres.

Where shld Standard Chartered base its CEO?

Last sat ST reported that analysts were saying  that Standard Chartered will be forced to relocate its CEO into Asia in imitation of HSBC.

If it does, it will be a test of Temasek protestations that it does not interfere with the commercial decisions of its investee companies. Remember it is the single largest shareholder in SC (195 ), and all the other big shareholders are “peanuts” as Mrs SM might put it.

The logical place for the CEO is to base himself in HK, SC’s biggest market and which is part of China: it and HSBC are targeting China as the biggest driver for growth.

But could Temasek or its shareholder resist the temptation to have  SC’s CEO here. Singapore is way behind HK in IPOs, hedge fund HQs (Soros prefers HK as his Asia HQ), fund mgt,   and in wealth mgt where S’pore wants to be a global player, the head so HSBC and JP Morgan’s private bank are basing themselves in HK, or thaz what reports are saying.

Already the private bank’s  and PE’s global HQs of SC are here, giving SC  the perfect excuse for relocating its CEO here.And S’pore’s nearer India, another big driver for SC’s future growth. As  to HK and China, he can fly there on SIA, not Cathay, of course.

And relocating here will give our MSM the excuse they need to exult the merits of this government before the expected early general elections.  Hard for the MSM to laud the government given the growing inability of ministers to avoid contradicting one another.

Note the news that SC’s CEO will also donate his bonus to charity, came only after it was reported that HSBC’s CEO would donate his. SC is always playing catch up to HSBC. At one time they were the same size, but one is a global player, the other is 19% owned by Temasek. But then OCBC was once on par with HSBC.

I’m a shareholder of HSBC for over 25 yrs.

BTW the relative sizes of both and how both had a gd crisis:

“The ranking three years ago and for most of the preceding few years saw HSBC as the biggest bank, Barclays and Royal Bank of Scotland chasing its tail, Lloyds some way behind that and Standard Chartered as the enthusiastic, fast-growing puppy.

‘Today HSBC isn’t just the biggest British bank. Its market value of more than £120bn is more than that of all the other four added together. It’s in a league of its own.”

“Today the market value of Standard Chartered, at an almost unbelievable £32bn, is only £2bn less than Lloyds’ and £5bn less than Barclays. And it is £11bn more than RBS (although that’s to ignore all the “B” shares that RBS has flogged to taxpayers).”

Excerpt from http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/03/the_new_banking_hierarchy.html

and if you want to read why HSBC and SC did so well a gd read.

Why MU fans and S’poreans are the same

The Glazers say MU not for sale as the Red Knights make their move.

A group of financiers – dubbed the “Red Knights” – have met for the first time to discuss taking over MU. They are no lightweights. “Keith Harris, the football financier and chairman of Seymour Pierce investment bank who brought in Roman Abramovich to run Chelsea; and Paul Marshall of Marshall Wace, the hedge fund”. And Jim O’Neill Goldman Sach’s economist: the man who coined the term “BRIC economies”.

MU’s owners are now facing a two-pronged attack over their control of the club with the Manchester United Supporters’ Trust (MUST) running a vocal campaign to bring about a change of ownership. MUST have 53,520 members and recently started working with a PR firm that worked on  Obama’s presidential election campaign.

Their “Green and Gold” campaign has seen supporters don the colours of Newton Heath – the club was renamed Manchester United in 1902 – with plenty of green and gold scarves in evidence at Sunday’s Carling Cup final.

The City financiers insist that their initiative is about changing the owners and that they have complete confidence in chief executive David Gill and manager Sir Alex Ferguson.

The “Red Knights” group also accepts that any takeover would have to be agreed by the Glazers, but that the club’s American owners cannot prevent them from putting forward a proposal. The financiers are also understood to want supporters to play a key role in their campaign.

BTW MU fans are worse than S’porean voters who go online and criticise the PAP govmin: no gratitude for what has been achieved. In the case of MU, look at trophy room during the time Glazers in charge http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/03/can_an_investment_banker_and_a.html

Buybacks: problematic in bear markets

Based on filings with SGX in the last week of February, “the buybacks among listed firms surged last week, after very low activity for three straight weeks. A total of six companies posted 17 repurchases worth $2.1 million. The number of transactions was more than the seven repurchases from Feb 1 to 19. Among the stocks that recorded significant buybacks last week were KTL Global, HTL International, and InnoTek”, reports BT.

The theory is that a company buys back its shares when it thinks the market is undervaluing the shares.  But buying in a bear market can cause problems especially since bear markets can only be recognised in hindsight.

In a bear market, buybacks become a bad tool of creating shareholder value, and can cause management problems if they want to issue  new shares to fund an investment.

One Warren Buffett said a few months ago, ” What we know with certainty, however, is that Kraft stock, at its current price of $27, is a very expensive “currency” to be used in an acquisition. In 2007, in fact, Kraft spent $3.6 billion to repurchase shares at about $33 per share, presumably because the directors and management thought the shares to be worth more.

‘Does the board now believe those purchases were a mistake and that Kraft’s true value is only the current price of $27 per share – and that it is therefore fine to structure a major acquisition based upon that price? Would the directors use stock as merger currency if the price were, say, $20 per share? Surely the true business value of what is given is as important as the true business value of what is received when an acquisition is being evaluated. We hope all shareholders will use this yardstick in deciding how to vote.”

S-Chips: putting their cash into S’pore banks

The ST suggested that S-Chips should deposit their cash in in DBS, OCBC or UOB and not Chinese banks.  This could reassure investors that the S-Chips’  cash were safe.  This would in turn help the shares to trade above their net cash per share.

Err might not be a gd idea. Forget about the practical reasons like

— the companies not having the cash they claim they have; or

— withdrawing the cash after depositing it for reporting purposes and deposting it again just before the next reporting date. To prevent this the banks would need clear mandates to report such actions, and manpower and systems to track such movements.

It could be that the investors are (or will be) concerned that the cash could be used up in unprofitable businesses. Chinese dot.com companies listed on Nasdaq were trading below their net cash positions after the dot.com bust. Investors rightly assumed that they would not see the cash.The cash would be used to fund internet ventures etc. Anything else except be returned to shareholders.

They were right.

S’pore & HK have competition

Shanghai wants  to rival New York and London in the next decade. “Shanghai is benchmarking itself aggressively toward New York in terms of being a financial capital”.

It is unlikely to be in that league a decade from now, but it sure means that HK and S’pore face a formidable rival.

Do not be surprised if S’pore becomes the hub for SE Asia while HK becomes a hub for Southern China, rather remain second tier global players.  This is not to say that this is a bad thing. Think of places like Zurich and Sydney.

Some gd news for S’pore.  FT reports,”Aureos Capital, the private equity group specialising in emerging markets, has said the UK’s high cost base and rising taxes were a factor in its decision to move several senior executives from London to Singapore.

‘The move by Aureos, which is opening a new Asian head office in Singapore, is an early indication that the UK’s increasing tax, regulation and cost burdens may be pushing private equity groups to move operations overseas.”