Archive for April, 2010|Monthly archive page

Our SWFs: What our MPs are not asking II

In GIC, Investments, Temasek on 30/04/2010 at 9:52 am

Do they even know that, Norway’s finance ministry will tighten risk controls over the country’s sovereign wealth fund but has rejected calls for an end to active management?

The scope for active management of the NKr2,757bn US$456bn) oil fund will be limited  after criticism of its performance during the financial crisis.

Norway has been reviewing its investment strategy since the fund lost 23 per cent of its value in 2008, doing worse than the decline in the benchmark portfolio against which it is measured. Initial calls for a shift to passive management have become more muted as the fund recovered most of the previous year’s losses in 2009 and outperformed the benchmark by 4.1 percentage points.

However, the report proposed the scope for active management, measured in terms of expected tracking error from the benchmark, should be reduced from its upper limit of 1.5 percentage points to 1 point.

Other proposals included limits to leverage and tighter regulation of risk concentration.

The fund, officially known as the government pension fund, recorded a return on investment of 25.6 per cent in 2009, the best in its 13-year history, on the back of its worst performance the year before.

As the Norway Fund went into the crisis underweiged equities, it used the opportunity to load up on equities last yr.

Our MPs should be asking ministers why S’pore is not following the Norwegians?

Fat chance as they never asked these the questions in this posting.



In Marchm Carl Heinz Daube, the head of Germany’s formidable debt management agency, travelled to China and Singapore for a meeting with two of the world’s biggest investors – as part of an attempt to tap a new pool of investors, such as sovereign wealth funds – who might be willing to buy German government bonds.

Sumething that the FT said “that would have seemed almost unimaginable – or unnecessary – five years ago.”


Juz when you tot it was safe II

In Emerging markets on 30/04/2010 at 5:20 am

Another emerging market bear. GMO’s founder Jeremy Grantham has a good track record*.  He called the recent crisis correctly in a timely manner. FT reports:

His candidates for potential bubbles are emerging markets and commodities. The former is a no-brainer: “it’s correct; they will have better GDP [growth]”. He does not think valuations will go as high as in Japan or on internet stocks, but a 50 per cent premium is possible. “Let’s say the market at 15 [price/earnings ratio] and these guys at 22.5.”

Should investors try to grab a piece of that, or steer clear? Mr Grantham would personally like to join in, “as an individual”. But he is not certain it is a good policy. The question is, “if you want to buy bargains, when do you knowingly overpay a bit, because you see a queue of people outside ready to buy?

“We haven’t settled that internally. We like the idea of exclusively playing the long-term winning bets. Why mess around with the secondary considerations?”

The question is even harder to answer with regard to commodities. The story here is “we’re running out of everything” but it is a long-run story beyond the time horizon of most clients. Investors can probably make money, “but the tricky problem is overpaying upfront. The price has shifted.Those with a genuine 10-20-year horizon “should own people who own the resources”, because there is no money in processing, only in ownership.

*His record:

His  GMO forecasts rank asset classes in order of expected real return, and Mr Grantham is particularly pleased with the 10-year forecast ending December 2009.

This had US Reits (real estate investment trusts) at the top of the list followed by emerging market equities, and the S&P 500 at the bottom in 11th place. In the event, emerging market equities did best, returning 8.1 per cent a year after inflation (the forecast was 7.8 per cent), Reits were third with 7.4 per cent (10.0 per cent), and the S&P was last with -3.5 per cent (-1.9 per cent). The ranking of the assets in between was almost spot on. The probability of getting that right by chance was 1 in 550,000, says Mr Grantham.

Just when you tot it was safe

In China, Economy, Emerging markets, India, Indonesia on 29/04/2010 at 5:18 am

Thinking of starting to  invest seriously in emerging markets? Standard Chartered warns of bubble in emerging markets. Extract from Guardian article:

Gerard Lyons, chief economist at Standard Chartered, said Asia was the main recipient of western capital, but there was also evidence of speculative activity in Latin America, Eastern Europe and Africa.

A combination of a prolonged period of low interest rates in the west and strong growth in emerging markets meant the money would continue to flow in. “The size of the flows could become more significant,” he added. “There is a significant risk, even though it is a consequence of economic success.”

The report noted that many countries did not have the capacity to absorb the capital inflows, with the result that the money boosted share and property prices, adding to inflationary pressures.

“The longer it takes to address this, the bigger the problem will be. Just as excess liquidity contributed to problems in the western developed economies ahead of the financial crisis, excess liquidity has the potential to cause fresh economic and financial problems across the emerging world.”

Massive flows of capital from emerging economies, especially those in Asia, helped to inflate the asset bubbles in the west that led to the financial crash of 2007. Standard Chartered said global liquidity flows had now reversed, with emerging economies now on the receiving end. Recipients included countries with current account surpluses such as China, and those running current account deficits such as Vietnam and India.

Lyons said China was the emerging economy investors were looking at for signs of trouble. “China is not a bubble economy but it is an economy with bubbles.” But he added that the problem was not confined to Asia, and that hedge funds were now looking at “frontier markets” in Africa.

While emerging markets needed foreign direct investment to help them grow, Standard Chartered said the influx of hot money was a big worry. “Although hot money is regarded as temporary, it persists until the incentive to speculate is eliminated.”

Oh and there is the Greek crisis. 2008, here we come again?

SGX: Cynical investors?

In Uncategorized on 27/04/2010 at 1:57 pm

Several large multinational companies based in Europe or North America are considering listing in Singapore after insurer Prudential of the UK, SGX said on Monday.

“We have already had inquiries from [other] large global firms based in the western hemisphere … It’s not really surprising because these people want global exposure …  If you are looking at a pure China exchange you will probably want to list in Shanghai or Hong Kong. But if you are looking at a more pan-Asian exposure, I think Singapore would probably be in very good shape.”

SGX declined to name any of the western companies that had approached it.

Err market obviously does not believe SGX as at the lunch break today, SGX shares are down 1.3%. Either that or market believes that these listings will not materalise, or if they do, will not make a difference.

Try harder SGX and fail harder. Misquoting Beckett.

However, he said the Pru’s decision to list in Singapore alongside Hong Kong and London was being watched “very closely” by other large western companies whose revenues in Asia were rising rapidly.

DBS: How to get M’sian exposure

In Banks on 27/04/2010 at 5:22 am

A flaw in DBS’s Asian strategy is the lack of  something decent in Malaysia: how can one be a leading regional bank without a sizeable Malaysian operation. As Citi, HSBC, and Standard Chartered; and OCBC and UOB know, banking in Malaysia is very, very profitable.

DBS’s FTs blotched a takeover bid for OUB about 10 years back, which would have given it a sizeable retail and SME presence in Malaysia: something that OCBC and UOB have. UOB took over OUB and in the process enlarged its Malaysian presence.  And the no FTs,  hereditary principle looked better than the FT policy.

So, DBS should look at taking over OCBC because of its sizeable Malaysian banking business: 25% of pre-tax profit in FY2009.

Now the rest of OCBC’s banking operations don’t fit into DBS because of the overlap in Singapore, HK, China, Indonesia and Thailand. Both banks have crummy operations in the last three countries, while in HK, DBS has a sizeable operation while OCBC has a small operation. As for life insurance, DBS has eschewed the bankassurance model that OCBC has adopted via its control of GE Life. So unless the FTs now want to do bankassurance, it has to sell the 87% of GE Life that OCBC has.

So one alternative is for DBS should bid for OCBC, retain its Malaysian operations and sell off its banking operations in Singapore and Asian other countries  to ANZ Bank. As for the GE stake, if ANZ Bank is not interested, try MetLife and Zurich.

Or persuade ANZ Bank and an insurer to make a three-way bid, with the intention of dismembering OCBC ala what happened to ABN Ambro when RBS, Fortis and Santander bid for and dismembered ABN Ambro. True RBS and Fortis promptly went bust and had to be nationalised, but history does not necessarily repeat itself. And if ANZ Bank wants GE Life, make a two-party bid.

OCBC: Value to be unlocked II

In Banks on 26/04/2010 at 4:37 am

Sometime in March, I analysed how valuable GE Life is to OCBC based on the price that Prudential is paying for AIA. I said  (now revised post to take account of the embedded valued -EV – revealed in the just released 2009 annual report) that the value to OCBC of its GE stake (based on the AIA valuation that the Prudential is working on) is S$3.15  share or S$10.5 billion in total.

But I doubted that the value would be unlocked given that without GE Life OCBC would be only an SME bank its pretensions in private banking and investment banking notwithstanding.

But given the rumours that OCBC is on ANZ Bank’s target list, who knows except the controlling shareholder of OCBC whether value will be unlocked.

Tomorrow I will discuss why DBS should organise a consortium to takeover and dismember OCBC.

Why I love footie

In Uncategorized on 25/04/2010 at 5:11 am

Dreams can come true, even if the money is not there. Underdogs can go far.

Bankrupt Pompey makes it to FA Cup final again.

Look at Fulham: can still reach Europa Cup Final (Update 1 May 2010: Fulham makes it to Europa Cup Final)

And Everton.  With a bit of luck could still pip ‘Pool  for last place in Europa League (Update 2 May: no longer possible). But if  ‘Pool wins Cup… Bang balls Toffees. But seriously ten years ago, the Toffees were struggling to make 40 points by season’s end. Now survival in EPL  is no longer an issue.  This season bit unlucky in early part of season with injuries.

Casinos: High rollers? You must be kidding?

In Uncategorized on 24/04/2010 at 6:19 pm

The casino at Marina Sands opened yesterday. Both casinos are now operational.

When the casino projects were launched several years ago, the government, Sands and Gentings were spinning that the casinos were for high rollers. They were not interested in the mass market. The government has since gone silent but the casinos are still spinning that.

But then how come Resorts World announced that it was partnering Air Asia to bring in the punters. I’m wondering what kind of high rollers fly budget airlines?

And last week Tuesday, BT reported that Marina Sands is partnering 12  M’sian coach operators “in an effort to attract more tourists to its integrated resort which opens later this month.” “Coach prices will range between $55 and $110 (return).”

Err this the high roller traffic Sands boasting about? Sounds like the grind (small punters) market to this punter.

And it would seem the patrons are locals. A recent report by Bank of America Merrill Lynch (BoAML) estimates that about 50-60%  of the casino patrons at Resorts World Sentosa (RWS) are Singaporean. BoAML also believes that the casino attracts between 20,000-25,000 visitors on weekdays (with more on weekends).

Vincent Khoo, an analyst at UOB KayHian (Malaysia), says there has been noticeably lower visitor arrivals to Genting Highlands from Singapore since RWS opened.

Apart from Macau, casinos are set to pop up all over Asia: in Taiwan, Vietnam, and the Philippines. “One market that will have to play close attention to growth of new markets in Asia is Australia, which currently sees a large number of tourists from the likes of Taiwan, Korea, China, and India visit its casinos,” says Warwick Bartlett, GBGC chief executive reported BT. “The real test is whether these new properties will satisfy demand that is currently not being met, or if they are simply shifting the same gamblers and their money around different venues.”

Applied to S’pore, can it attract the OZ-bound punters? And get the Indians, Taiwanese, Koreans and Chinese to come here?

And if you want a holiday around Melbourne, I know a gd package deal. So long as you are willing to spend S$10,000 in a casino, you can get airline tickets for two, a five-star hotel room, and a limo to and from the airport. A top race horse trainer I know thinks it value for money. He says he and his wife spend that much when they visit their children in Melbourne. And as he added, “And I could get lucky”.

Update 28 April 2010

At least we known Marina Sands will not use a budget airline to fly punters from the  Middle East. Sands has a wide-body aeroplane. (Update on 6 May: this aircraft is based at Senai in Johor because Changi is a lot more expensiveaccording to someone senior at the former.)

How can you trust these people?

In Uncategorized on 24/04/2010 at 5:19 am

On Friday, the US Senate released over 500 exhibits scrutinizing the role S.& P and the ratings agency Moody’s Investors Service played in the 2008 financial crisis.

In 2004, well before the risks embedded in Wall Street’s bets on subprime mortgages became widely known, employees at Standard & Poor’s, the credit rating agency, were feeling pressure to expand the business.

One employee warned in internal e-mail that the company would lose business if it failed to give high enough ratings to collateralized debt obligations, the investments that later emerged at the heart of the financial crisis.

“We are meeting with your group this week to discuss adjusting criteria for rating C.D.O.s of real estate assets this week because of the ongoing threat of losing deals,” the e-mail said. “Lose the C.D.O. and lose the base business — a self reinforcing loop.”

In June 2005, an S.& P. employee warned that tampering “with criteria to ‘get the deal’ is putting the entire S.& P. franchise at risk — it’s a bad idea.”

Article from NYT Times.

China: Command & Control

In China, Economy, Property, Temasek on 23/04/2010 at 5:15 am

As the loan officers for a regional branch of a major Chinese bank were preparing to issue more loans their computer screens froze. It was not a system failure due to Vista problems, rather the bank’s intranet network had been deliberately shut down to stop new loans being made. Full article

The purpose of the above is to illustrate that if the authorities feel the need to control the property market, they can be ruthless.

China must tackle its property bubble for the sake of economic health and social stability, even if the market feels some short-term pain in the process, an official financial newspaper said on Thursday.

Monetary tightening, along with steps to control housing demand and expand supply, are the right policy choices for the government, the China Securities Journal said.

The front-page commentary adds to the impression that officials are determined to make a success of their latest crackdown on property speculation. Previous attempts to cool prices have been tempered by a fear of over-tightening because the property sector is a pillar of the economy. Reuters/ NYT report

So investors in S’pore property counters with big exposures in China, be warned.

I’m sure Temasek and its group cos are aware of how brutal the Chinese authorities can be.

But based on the Merrill Lynch/ BoA fiascos, who knows?

Bullish on S’pore property: Deutsche Bank

In Property on 22/04/2010 at 5:09 am

For the residential market, we see news flow and activity this year dominated by the highend segment. Unlike the mass- to mid-segments, where prices have rebounded to peak levels, high-end prices are still around 5-150% below peak and demand should be supported by the improving economic outlook, low interest rates and rising foreigner participation. We expect modest growth for the low-end segment (+3%), with government policy more restrictive and pent-up demand largely consumed, and a larger 6-12% upside for high-end prices. With declining inventory levels, most developers are actively looking to restock,resulting in fairly aggressive bids for recent GLS land tenders. With more sites to be made available for the 2H10 GLS, we expect bidding to be more rational and potentially more NAV accretive.

Its pick in the residential sector: Allgreen for its exposure to the upper- and mid–residential segment.

The difficulty of spotting a bubble

In Property on 21/04/2010 at 3:54 am

A professor has to climb Oz’s highest mountain because he bet Oz residential property prices would fall 40%: it went up 20%. Could have worse. He could have sold his hse. Economists are divided whether Oz residential property is a bubble

He was one of those that called the credit crisis of 2008 about right, like Robert Schiller. So he is no nutter.

With escalating prices in a recession and prices expected to fly because economic recovery is strong, S’poreans should remember what he said, When people can no longer handle the debt, or when the debt stops growing, prices will come down, and we will face the same deleveraging crisis as in America.

Is S’pore residential property in bubble?

In Property on 20/04/2010 at 10:19 am

Morgan Stanley doesn’t seem to think so. In a recent report it wrote:

Speculative activity seems low compared with previous cycles, with sub-sales at only 13% of total sales vs. 18% in previous up-cycles. Foreign demand has so far been dominated by Indonesian,Malaysian, mainland Chinese and Indian buyers, and a return of more broad-based foreign demand could see prices spike higher. Most important, the en bloc market could return by 2011, as developers’ landbanks start to run down.

US$100 oil in 2016: US Army

In Energy on 20/04/2010 at 5:29 am

The US Army is working on assumption that in 2016, the price of oil will be US$100.

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command …

Connected post

“We are short entities that are selling into China”

In China, Property on 19/04/2010 at 5:19 am
BI: So when do you see the bubble bursting for China?

Motivating the elite: learning from N Korea

In Corporate governance, GIC, Temasek on 18/04/2010 at 10:41 am

Maybe MM Lee shld take a lesson from N Korea, even though S’pore is not N Korea

No not execute* the GIC and Temask executives whose judgement lost us billions and made MM look no longer like a sage that he undoubtedly is, but an ordinary mortal that is stupid. He had defended the bank investments saying they were for 30-yrs. Now we know that it might take that long to recoup our principal in UBS; and that Temasek sold out of BoA while a top hedgie was buying.

But he could do something to those who goof up, so that others are more careful of messing-up. Even if those who goofed do not deserve to be punished.

What about caning them? So that the executives in GIC, Temasek , TLCs and GLCs will buck up. My friend heard him say at a lunch some years back of “Lining up some people and giving them six of the best [cane them]”. He was speaking at a lunch in his honour when he last visited KL. My friend was seated beside him, or so my friend claims. But my friend has been known to tell fibs.

If caning sounds outrageous in a civilised place, in the mid-18th century, the British court-martialled and executed an admiral for failing to “do his utmost”. It was meant “to encourage the rest”**. As the admiral executed was the son of an admiral, all naval officers (aristocrats, gentry or upper middle, the lot of them) knew that, if it could happened to a lord and an admiral’s son, it could happen to any of them.

A naval historian wrote that the execution forged “a culture of aggressive determination which set British officers apart from their foreign contemporaries, and which in time gave them a steadily mounting psychological ascendancy”.

For the rest of the 18th century and the whole of the 19th century, Britannia ruled the waves.

BTW the admiral had reason and justice on his side (just like the SWF executives, I’m sure): little gd it did him. And little gd should it do the executives. There are more important things that justice and fair play for individuals when matters of state or profit are concerned.

Hmm, maybe the N Koreans know their British history, better than MM, a Cambridge man.

*They executed the finance chief who messed up a currency reform resulting in protests and a climb-down by a government that is usually brutal towards protestors.

** Another reason was to appease public opinion. People were upset that as a result of his actions (very reasonable), a fortress was lost.

Our PM was right about multi-tasking?

In Uncategorized on 18/04/2010 at 5:43 am

In the last GE, our leader said he couldn’t look after S’poreans’ interests (sounds like he thinks he is our dad) if he had to spend time fixing the opposition the electorate had voted in. The Men in Blue (aka Workers’ Party) had a field day pointing out that he was admitting he could not multi-task.

Turns out he was being honest about his abilities, unlike the Blue Clones of the Men in White.

An inability to deal with more than two things at a time may be “hard-wired” into our brain, research suggests.

When we try to do two things at once, each half of the brain focuses on a separate task, French scientists say.

This division of labour could explain why we find it so difficult to multi-task, they report in the journal Science.

It might also explain why people are prone to make irrational decisions when choosing from a long list of items.

Lead author Dr Etienne Koechlin told the BBC: “You can cook and at the same time talk on the phone but you cannot really do a third task such as trying to read a newspaper.

So as there been have constitutional changes to allow more opposition MPs, has he and the MIW Clones aka Men in Blue worked out something that will avoid him having to multi-task. The behaviour of the WP MPs could be evidence of a deal. Until he was not renominated, Siew Kum Hong did most of the questioning and probing. Fat good it did him to be a point man.

Oh for days when one Harry Lee was PM. He could arrest the opposition, grow the economy, make S’poreans happy by making them work harder, advise US presidents to stay the course in Vietnam, and play a round of golf at the same time.

Err what has this posting to do with investing? Nothing.

What has it to do with cynicism? Everything. Have a gd Sunday.

EPL: Where are the Brits?

In Uncategorized on 17/04/2010 at 1:42 pm

Another season, and still no major trophy for Arsenal. Try again, next season.  Starting to look like Newcastle, Everton and Spurs. Great past but forgettable present and future.

Meanwhile a shareholder puts 15% of Arsenal on the market officially via an investment bank, Blackstone: a Yankee. Red Knights has Nomura. Only Reds is buying British: Barclays has a mandate to find a new owner. Even here the boss is American.

‘Pol: Lingering death?

In Uncategorized on 17/04/2010 at 4:12 am

One was the worse kept footie secrets is out.  The present owners want out of  ‘Pol after saddling it with massive debts, not winning the EPL, and now playing for the foreseeable future in the Europa League, Europe’s second tier competition. Article. Pls read the bit in bold below on the chances of a sale.

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

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

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

Small- hearted Evertonians will be pleased that No Europe for Everton is coupled with ‘Pol playing in Europa League next season and ownership instability.

Little people are responsible for crisis

In Uncategorized on 16/04/2010 at 7:26 am

Sounds so PAPish. Strange this by a Guardian man. It’s a socialist newspaper. It would be correct to say that the need to invest money set aside to pay workers’ pensions have helped to fuel bubbles, but it is wrong to blame the workers. Just like it is wrong of some PAP MPs and ministers to blame the plight of the poor on themselves.

The real villains of the piece are the California teacher, the BT engineer and the German car worker. They have promised themselves an affluent retirement. Even lower paid workers in final salary schemes want a retirement income they can only afford if they bet on every rising asset, wherever it appears in the world.

These investors, along with the massive oil-rich sovereign wealth funds (think of the $330bn Norwegian pension fund and United Arab Emirates $750bn fund), are seeking the best returns they can and will stop at almost nothing to win big. …

Why is the California teacher at fault? Because they have an asset – a promise to pay a fixed and generous retirement package – and instructed fund managers to seek the best returns possible to meet a deficit in the pension scheme. Whether they understand the implications or not, they have effectively agreed to fund managers like Gross shunning their own government’s debt in favour of richer pickings elsewhere. They agree to fund managers telling employers to freeze pay and cut pension contributions to younger workers. They pay lip service to corporate governance while they demand extra dividends and asset price growth so they can cash-out before retirement.

These savers have racked up trillions of dollars over the last 30 years and own much of the wealth created during that period. Their power is vast. They own the homes, the stock markets and they lent their cash to the banks, governments and companies and as we know to our cost, there were plenty of them.

Now that such savers have lost money in the crash, they are desperate to regain their winnings.

Temask: Profitable holdings require more $

In Banks, China, Temasek on 14/04/2010 at 8:13 am

Err the SDP and its new media allies will spin this as: “Profitable investments — requires more money. Waz happening Temasek?”

As you will be aware Temasek has stakes in two Chinese banks; 4% in Bank of China, and 6% of  China Construction Bank Corporation. These stakes are profitable.

But Temasek would need to invest more if it wants to maintain the size of its stake because they need a lot more capital.

China’s four biggest publicly traded banks (Industrial and Commercial Bank of China, Bank of Communications , Bank of China, China Construction Bank ) could face a combined capital shortfall of at least Rmb480bn (US$70bn) over the next five years, according to the president of Industrial and Commercial Bank of China, reports the FT.

All these banks have announced plans in the past month to raise fresh capital after orders to lend liberally last year. But the total amounts they plan to raise fall far short of the five-year estimate of Yang Kaisheng, ICBC president.

Poor Temasek: nothing satisfies critics gunning for you.

Sino-E: Could this happen?

In China, Corporate governance on 14/04/2010 at 6:04 am

If this can happen to a UK listco, which is part of the Hong Leong Gp, could happen to Sino-E or any other S-Chip that has or had management or corporate governance problems.  SIAS and SGX should ask listcos what steps they have taken to prevent sumething similar happening to them in China? FT reports

Millennium & Copthorne, the hotel group, underscored the challenges for western companies operating in China on Monday after it revealed that a former employee at one of its joint ventures there had allegedly sold $48m (£31m) of the venture’s assets without M&C’s permission.

The company said the employee, Cheung Ping Kwong, sold the assets – which included a hotel and development land – in spite of a Chinese newspaper advertisement issued by the joint venture warning that he had been removed from his position at the group and was not authorised to sell the holdings.

OCBC: Close down the investment bank?

In Banks on 13/04/2010 at 5:22 am

Anthony Soh is suing OCBC Bank. He claims in court that  said serious breaches on the part of OCBC Bank were behind his failed takeover bid for Singapore-listed Jade Technologies in April 2008 because  the bank failed in its duty to advise him.

He says OCBC did not advise that a financial resources confirmation letter he had provided was insufficient for the purpose, and also did not verify the authenticity of the letter until it was too late.

The bank also did not review the terms of a share lending agreement that he had signed with an Oz broker. Millions of Jade shares lent to the brokerage were seized by its creditors when it failed and Dr Soh was forced to withdraw the offer because of his diminished holdings.

If he can prove his allegations, it would be interesting to see OCBC’s defence. What he claims OCBC failed to do would be par for the course stuff for M&A experts, or so I’ve been told.

The failed and clownish bid resulted in  the Securities Industry Council, which later investigated the issue, censured Dr Soh and OCBC for breaches of the takeover code.

Dr Soh was banned from making any takeover offers in Singapore or sitting on the board of any Singapore-listed company for five years, while OCBC and an Allen & Gledhill lawyer voluntarily abstained from takeover work for six months.

DBS for all my rants abt its FT policy trumping S’pore’s meritocratic policy shows that the FTs didn’t ruin the investment bank. Unlike OCBC’s and UOB’s investment banks, DBS’s investment bank has not caused any problems for DBS. UOB’s investment bank was caught out when it tried avoid an undersubcription of an IPO. Prosecutions and convictions followed.

Sino-E: More $ down the drain?

In China, Corporate governance on 12/04/2010 at 5:03 am

Can’t understand why Sino-Environment spends $ on advisers* in connection with the proposed restructuring of the Company’s 4% convertible bonds due 2013 issued in an aggregate principal amountof S$149 million (the “Bonds”) and its debt obligations.

When it terminated nTan Corporate Advisory in March as the independent financial adviser (IFA ) to the Company, the board said, “In line with the Company’s cost-cutting measures, the Company has terminated the appointment of the IFA with effect from 18 February 2010. The Company’s newlyappointed chief executive officer, Mr Sam Chong Keen, will undertake the task of negotiating and liaising with the Company’s bondholders.”

I think the board owes the shareholders an explanation for this change of mind. And I hope SIAS or SGX will ask the board for an explanation. Though something tells me that nothing will happen.  Poor shareholders, they might reasonably think that  directors are spending shareholders’ money to ensure that the board doesn’t get sued.

Or that the board thinks CEO is not up to job?

*Ernst & Young Solutions LLP (“E&Y”) is the financial adviser. “E&Y’s scope of work will include, among other things:

(a) advising and assisting the Group on suitable options for discussion with the holders of the Bonds (the “Bondholders”) and providing assistance on the development of a comprehensive debtrestructuring plan of the Company’s existing borrowings and liaising and negotiating with the Bondholders in connection with the debt restructuring exercise; and

(b) undertaking a business and financial analysis on certain related matters.”

“The Company has also appointed Stamford Law Corporation as its legal adviser to act for the Group in relation to matters arising from the debt restructuring.”

Gold & Green: Present model not sustainable

In Uncategorized on 11/04/2010 at 9:48 am

In weekly meetings at the London offices of financial adviser Nomura, the Knights are in the process of deciding whether 50 investors will contribute £10m each, or a slightly lower number will provide more funds per head, but still bringing in £500m.

A further £250m will be found by issuing securities to United’s estimated 3.8 million supporters in the UK. The Knights also plan to retain the outstanding £500m bond issued by the club this year in order to reach the £1.25bn valuation.

Manchester United insists that it is not for sale, but experts see it differently.

“It will be [for sale] – everything’s always for sale,” said Philip Long, a partner at PKF, an accountancy firm that has been involved in football deals. “The model at the moment isn’t profitable unless they sell players. The club can’t continue making the losses it’s made.”

How true if it has another bad season like this one assuming it comes in second to Chelsea. Even if it wins EPL so what? Knocked out of FA Cup before the Q-finals, and the Champs League at Q-Final.  Taz a lot of dough.

Guardian article

Innovation: Takes a British insurer to sell motor insc here online

In Uncategorized on 11/04/2010 at 4:48 am

Aviva’s move to sell motor insurance (followed in few mths time by home and travel insurance)  here marks a return to Asia for the UK insurer, which exited general insurance (except for some inconsequential exceptions)  when it sold its general insurance operations in Asia in 2004 to Mitsui Sumitomo Insurance. Aviva’s non-competition agreement with Mitsui Sumitomo, which was part of that deal, expired this year.

More to the point, the  Pru’s hubristic Asian ambitions, should have played a part in the decision to return.

Although new to Singapore, online insurance is established in Western markets. For instance, 60 per cent of motor insurance in the UK is bought online according to BT.

As FT reports,”Parts of Asia boast some of the highest internet penetration rates in the world, and managing an online operation beats teams of agents – Aviva has had to add precisely one extra member of staff. It is cheaper, too. By eliminating 15-17 per cent commission rates, Aviva can hand customers cheaper contracts and cream off more profit itself to boot [Aviva talks of pricing its products 7% below existing rates]. Whether Singapore will be fertile ground remains to be seen. The motor insurance market, worth about US$700bn, is saturated with two-thirds of the business shared by one domestic* and two international players. But as a platform for online Asian growth this looks just the ticket.”

*NTUC Income

Great excuse for telco to buy bank stake

In China, Investments, Telecoms, Temasek on 10/04/2010 at 5:07 am

Some time back, China Mobile agreed to buy 20%  of Shanghai Pudong Development Bank for 39.8 billion renminbi (US$5.8 billion) to expand its electronic payment business.

The reason for the telco to buy such a big stake in a bank:  China Mobile and Pudong Bank will form a strategic alliance to offer wireless finance services including mobile bank cards and payment services, according to a statement  filed with the HKSx.

Wonder if  the corporate communications departments of TLCs, M1, SingTel and Starhub have filed away this excuse. Their company might need to adapt it if it ever has to buy a stake in a bank in the Temasek stable.


In late March according to a Reuters report, Bank of China, China’s fourth largest bank, said it was in talks with Temasek, to set up a rural business bank in China. The bank under discussion would have 40-60 branches, President Li Lihui told reporters at a media briefing to discuss Bank of China’s 2009 results

Now wouldn’t such a bank need wireless expertise and don’t StarHub and SingTel love to do dumb things? Fooie fans still don’t know if we will get World Cup coverage.

Nine Masts

In Uncategorized on 09/04/2010 at 7:09 am

Nine Masts, a new hedge fund, is named after the treasure junks said to be used by Zheng He on his expeditions to Southeast Asia, South Asia, Arabia and East Africa in the 15th century.

The ex-Asia head of Deutsche Bank AG’s Saba proprietary trading desk is planning a hedge fund seeking to profit from mispricing of securities in Asia’s equity and credit markets. Hong Kong-based Nine Masts Capital intends to start the relative-value capital structure arbitrage fund in the second quarter.

Gd luck to him and his fellow shipmates . I hope they realise that there are maritime scholars who doubt the existence of junks with nine masts because they say such vessels can easily sink in storms, and difficult to manoeuvre even in calm seas.

Endangered in US, coming to SGX

In Uncategorized on 08/04/2010 at 7:25 am

Special purpose acquisition companies, a product of  boom-time financial engineering, are in danger of becoming extinct in the US. According to SPAC Analytics,  there are only seven left. Compare this to the boom year of 2007 when 66 SPACs went public raising US$12 billion.

But SGX wants them here.

A special purpose acquisition company (SPAC) is an investment vehicle that allows  investors to invest in private equity type transactions via a listed vehicle. SPACs have no operations but are listed with the intention of merging with or acquiring a company with the proceeds of the SPAC’s IPO. The stock exchanges that allow SPACs have rules to ensure that the SPAC returns most of IPO proceeds to investors if  the SPAC fails to do a deal within a fixed period. Shareholders of the SPAC also have to approve the deals.

SGX’s proposals are as follows:

Introduction of SPACs to the Listing Regime

SPACs are shell companies with no prior operating history, seeking an IPO to raise funds for the purpose of using these proceeds to acquire as-yetundetermined operating businesses (“business combination”). SGX has formulated a separate listing framework with safeguards for the introduction of such listed vehicles. Some of the proposed requirements for SPACs are set out below.

(a) Shareholding spread

At least 25% of a SPAC’s total number of issued shares must be held by at least 300 public shareholders.

(b) Quantitative criteria

In order to be listed, a SPAC must have a minimum market capitalisation of S$150 million based on the issue price and post-invitation issued share capital.

(c) IPO proceeds

A SPAC can only hold its assets in cash or cash equivalent short-term securities of at least A-2 rating (or equivalent) until completion of a business combination that meets SGX’s requirements.

Furthermore, at least 95% of the IPO proceeds must be placed in an escrow account to safeguard the assets of the SPAC, and such escrow amount and any interest thereon cannot be drawn down except for the purpose of the business combination.

(d) Issue of securities to founding shareholders

The equity interests which can be given to a SPAC’s founding shareholders without an equity contribution equivalent to that of public shareholders, will be capped at 10% of the SPAC’s post-invitation issued share capital.

A SPAC’s founding shareholders will be required to subscribe for shares amounting to at least 2% of the SPAC’s post-invitation issued share capital and/or purchase warrants amounting to 2% of the IPO proceeds.

(e) Business combination

The value of a business combination should amount to at least 80% of the net asset value of a SPAC (excluding any amount held in the escrow account representing deferred underwriting fees).

The business combination must be approved by a majority of votes cast by independent shareholders at a general meeting. For the purpose of voting on the business combination, the founding shareholders and their associates are not considered as independent.

Each independent shareholder voting against the business combination shall have the right to redeem his shares for a pro-rata share of the cash in escrow, provided that the business combination is approved and completed. If independent shareholders holding more than 40% shareholding interests choose to convert their shares into cash, the SPAC may not proceed with the business combination.

Where key executives resign prior to the completion of the business combination, the SPAC’s directors shall have the authority to review and determine an appropriate course of action, including liquidation of the SPAC.

A SPAC must complete a business combination that meets SGX’s requirements within three years. Otherwise, the SPAC will be liquidated and its assets distributed to shareholders. Founding shareholders and their associates are to waive their right to participate in the liquidation distribution in respect of all equity securities owned or acquired by them prior to or pursuant to the IPO.

Baker & McKenzie

But you did lose money, didn’t you, Osim?

In Uncategorized on 07/04/2010 at 5:49 am

But you did lose money didn’t you? And share prices collapsed? A case of positive thinking carried too far. Or are the PR BEers trying too hard. A balls-up is a balls-up. Clean up the mess (which Osim did) and move on (which it doesn’t seem to want to do).

Although its acquisition of American retailer Brookstone in 2005 did not generate the results it expected, the company came out of the whole episode ‘enriched’, says OSIM founder and CEO Ron Sim.

‘I’m actually enriched and empowered with this experience,’ Mr Sim tells BT. ‘I actually won a lot of things. I would say today, nobody else has such an experience like us – a first-hand experience of a leveraged buyout, a first-hand experience of turning a financial engineering buyout into an effective company. So if you look deep, actually we are all enriched.’ (Excerpt from BT article.)

Gee what next, Mr Sim? Santa Claus or the tooth fairy will turn that loss into a financial profit? Maybe in Bizzaro Universe. Not in this.

STI ETFs — Are there values there?

In ETFs on 06/04/2010 at 5:30 am

(Note that the Jardines Group makes up about 15% of the STI Index and since the article was written in 2010, Jardine C&C and Dairy Farm joined the index, the latter only last yr: November 17 2019)

The Straits Times Index (STI) is traditionally taken as the barometer of the S’pore stock market and the two ETFs that track it are the most liquid of the ETFs.

But should the STI and the two ETFs be as popular as they should be?

The reason is the presence of the Jardine Matheson, Jardine Strategic and Hongkong Land in the STI, which do not reflect the S’pore economy although apologists point to the operations of Cycle & Carriage Cold Storage, Guardian and Giant embedded within JM. While not peanuts, they are tiny in the Jardines scheme of things.  And, to boot,  they are illiquid and tightly held via cross holdings.

In theory, this means that the STI can be manipulated by judicious buying or selling of these counters. I stress “in theory” because there is no evidence that the STI has been manipulated by the trading  of these three counters.

Sometime back, BT wrote,”The STI’s guardians last week defended Jardine’s inclusion using reasoning that went something like this: ‘we have a set of criteria for index inclusion that Jardine meets, so they’re included’.”

BT went on to to say, “Conveniently omitted is what those criteria are; more interesting is the question of why it is that Jardine Matheson, Jardine Strategic and Hongkong Land, which are in the STI, are not in the more widely-followed MSCI Singapore Free Index*?”. Add to that the FT S’pore Index.

*Widely followed by the pros but not the retail punters. The ETF based on this is illiquid, as it is expensive in dollar terms.

Temasek: MM Lee being ignored?

In GIC, Temasek on 05/04/2010 at 6:04 am

Bit strange this. Last week, two mining deals involving Temasek were annced*.

Strange because MM Lee said several years back that GIC would not invest in mining entures, because he didn’t understand mining. OK I know he is chairman of GIC but has no post in Temasek but remember Deng Xiao Ping had no official post in the CCP or government when many of the reforms were carried out.

So is Temasek ignoring MM’s sagacity at its, and our peril? Remember a few yrs back, he said SIA shld divest itself of SIA Engr. SIA told the world that SIA Engr and SATS were core to its strategy. Last yr, it divested its stake in SATS via a dividend-in-specie.

Things can go badly wrong, when MM’s sagacity is ignored. Juz like when Temasek divested itself of its BoA stake just as market was turning. Remember MM had defended Temasek’s purchase of Merrill Lynch as one for 30 years. Who was the wiser? MM or the pros at Temasek?

Anyway, don’t the instances where MM is ignored by Temasek and its TLCs show the lie that Dr Chee, his SDP and their local new media and foreign media allies are propogating: that MM is still the puppet master and that the PM and his cabinet his toys.

If Temasek and TLCs don’t listen to him, why shld the cabinet? Why indeed shld anyone?


— It will invest US$100 million in Platmin, a South Africa-based platinum miner. This will be in the form of convertible debt in the company. Temasek can convert all the debt into common shares at US$1.215 or about S$1.70 a piece when it matures on December 31 this year. It will then hold less than 20 percent of shares in Platmin.


— Temasek will buy about US$490 million ($685 million) of subscription receipts from Inmet Mining.The Toronto-based diversified miner said Temasek’s Ellington Investments unit will buy some 9.2 million subscription receipts, which will each be bought at about C$54 ($75). Proceeds will be held in escrow pending exchange of the receipts for Inmet common shares. The receipts will be exchanged for the 9.2 million shares, representing a 14.16 per cent stake in Inmet on a non-diluted basis. Inmet will use the money from the deal to develop the Cobre Panama copper project and for general corporate purposes.

Innovation: We shld be New Yorkers

In Uncategorized on 04/04/2010 at 5:35 am

Interesting NYT article on how NY differentiates itself from Silicon Valley as a tech centre.

S’pore could learn from NY given that we want our economy to be like of NY and London: a global hub of finance, commodities trading, corporate HQ, media and culture. And a magnet for foreign talent. Silicon Valley doesn’t bother. It does what it feels like doing: it’s up to others to imitate it.

Note that these businesses are local, not MNCs. They provide services to big American cos and MNCs.

Helping to give New York an edge is a broader shift in the types of innovation that are gathering speed in the technology industry, says Dale Jorgenson, an economics professor at Harvard. The infrastructure for mobile communications and computing is now all in place, he says, so the next opportunities lie in developing new services using that technology.

“They will be behind the next boom in the industry,” he says.

Of course, services can be developed anywhere. But because so many industries now grappling with the Internet are based in New York, the city is finding surer footing among its peers as a thriving tech hub.

“Book publishing, advertising, media and even the fashion industry are all located in New York. These are the main industries that are being reshaped and redefined by technology and the Internet,” says AnnaLee Saxenian, a professor at the University of California, Berkeley, who studies regional economics and technology entrepreneurship.

To get a vivid snapshot of this new generation of Web innovation, one needs to look no further than the portfolio of Fred Wilson, co-founder of Union Square Ventures and a force within the New York start-up scene. Run through a list of Web darlings here — Boxee, software that pipes video from the Internet to a television; Tumblr, a microblogging platform; and Foursquare, a mobile social network — and Union Square is an investor.

“The software business has morphed into the Internet business,” Mr. Wilson says. “Ten years ago, maybe 80 percent of software was being built for enterprise. Now, it’s being written for consumers and is more media-centric than ever. And, historically, those have been New York’s strongest sectors.”

Champions for New York’s continued evolution as a hotbed for digital innovation say that the proximity to industries ripe for innovation helps draw companies in those fields.

Kevin Ryan, former chief executive of the ad company DoubleClick and founder of Gilt Groupe, a Web site that offers discounted luxury goods, knows the importance of having prospective customers in his backyard. “We need to be here because the people we’re hiring are coming from Saks and Dolce & Gabbana, and they are all in New York,” he said.

Gold & Green: There will still be debt

In Uncategorized on 03/04/2010 at 7:21 am

According to well-placed sources, the favoured option is now for a £1.2bn bid working in two phases.

Having decided to retain the £500m bond recently used to refinance the Glazers’ debts, the Knights are discussing a plan whereby two thirds of the remaining £700m would be raised from 30-40 super rich United supporters. The final third would come from fundraising among ordinary fans. If necessary, the Knights say they will borrow money to complete the bid.

In phase two – once the club was secured – a general share offer would be launched allowing supporters the chance to own a stake in their club.

Once this structure is agreed, Nomura will begin the process – perhaps as early as next week – of asking the 30 or 40 wealthy Knights to commit their cash.

Full post from BBC Online

Value in China stocks: Indexation guru

In ETFs, Investments on 03/04/2010 at 3:53 am

Princeton University economist Burton Malkiel, the author of  “A Random Walk Down Wall Street”, a book that introduced many to the idea of investing via indexed-linked funds, sees value in Chinese shares, he tells the FT.

The FTSE-Xinhua index of the 25 largest Chinese stocks quoted in Hong Kong (”H” shares) is different [from the Shanghai “A” shares which he thinks overvalued], he says. This year, while the Shanghai has gained 53.8 per cent, the FTSE Xinhua is up 6.8 per cent – less than the S&P 500.

A “matched pair” study – comparing oil company CNOOC with ExxonMobil, its equivalent in the S&P, and so on – shows that FTSE-Xinhua price/earnings multiples are higher than in the S&P. But their rate of earnings growth is also higher. Crucially, their “PEG ratio” (the earnings multiple divided by the growth rate) is actually lower. So, Malkiel says, Chinese “H” shares are “moderately priced” compared to the S&P.

That is why he is buying China. But Malkiel is not selling his principles. He recommends investing in “H” shares via exchange-traded funds tied to the index – and not backing anyone who says they can beat the market. (Note there is an ETF traded here that tracks  the FTSE-Xinhua index of the 25 largest Chinese stocks quoted in Hong Kong (”H” shares): DBXT FTChina25.)

Bubble or collapse in China?

He would not be surprised if China took a near-term hit. But long term, he believes it is the place to be … He is concerned about asset bubbles forming in real estate, banking, and in the stock market. “This is bound to occur wherever economies grow fast, and China’s expansion over the past decade has been unprecedented in the history of industrialisation.”

But will the economy collapse if any of these asset bubbles burst? “Absolutely not,” says Mr Malkiel. “They will correct, and restart because of the strength of the underlying story and the country’s extraordinary balance sheet.”

He does not think the country can continue to rely on export-led growth for both geopolitical and economic reasons.

“China potentially has the largest consumer market in the world, but its consumption is less than 40 per cent of GDP, a ratio that has not changed over the past decade. In the US, the ratio is about 70 per cent.”

But key reasons for low consumption remain extant: people need to save because there are virtually no government safety nets; and the one-child policy makes it difficult for children to adequately care for their parents.

The divide between the Haves and the Have Nots is what most worries Mr Malkiel. “There are seismic gaps in China between rich and poor, especially seen in the affluent east versus the impoverished central and western regions.”

This has already led to some unrest. Potential instability is a great danger. “But that’s why the government is developing infrastructure, education and a nascent social safety net,” he says.

He contends that a purchasing power-adjusted gross domestic product weighting, which adjusts for the renminbi’s significant undervaluation by this measure, suggests equity exposure of between 6 and 12 per cent.

So how does he (and his clients) invest in China?

As chief investment officer of China-focused AlphaShares, he is certainly helping investors find their way into the mainland. He has crafted a series of indices, some of which are trading as ETFs, that provide specific sector exposure (infrastructure, consumer, technology and real estate) and market exposure (all cap and small cap).

But his firm has also developed a set of private actively managed funds. These include a China-linked fund, which invests in non-Chinese companies that are directly benefiting from China’s growth, and an enhanced index fund – a broad-market fund with an enhanced weighting of small and value stocks. A buy-write fund aims to exploit Chinese market equity volatility by going long the highly liquid FTSE Xinhua 25 Index and writing options against it to pick up premium income. AlphaShares may take these funds public.

Mr Malkiel squares this active management with his long-term embrace of passive investing by citing the inherent inefficiencies in the way the Chinese market functions and is tracked. He believes unprecedented growth, trifurcated shares [mainland, Hong Kong and foreign classes], and volatility present special opportunities that cannot be captured through traditional indices.

Finally, it should be no surprise, he is a bull on emerging markets, and equities in general.

For a 40-something US investor with a family, he is recommending a portfolio with 80 per cent equity exposure. And he thinks half of that should be foreign stocks. He believes long-term investors will be best served with half of this international exposure being in emerging markets such as Brazil, India, and China.

He remains a believer that passive exchange traded funds are the most efficient means of gaining market exposure around the globe. His recommended 50 per cent US exposure is close to the MSCI All-Country World Index weighting of 44 per cent. However, he deviates significantly in his exposure to so-called EAFE countries, the developed world ex-US and Canada. He recommends 25 per cent EAFE exposure versus the global weighting of almost 41 per cent, in the belief that Europe and Japan will not experience significant growth in the coming years.

He departs from market-cap benchmarking even more materially in recommending 25 per cent equity exposure to emerging markets, twice the All-World Index’s weighting.

Mr Malkiel justifies this by citing a perceived fundamental shift in growth away from developed to emerging markets. “My portfolio strategy remains passive, I’m not picking stocks,” he says. “I’m adjusting for economic realities. And we see the need for such investment modification in China where a low free float [on which most indices are based] undercounts China by at least a factor of four.”

Connected post

Value in Japan?

In Investments on 02/04/2010 at 5:58 am

Been reading that quiet a few reputable strategists and fund mgrs are saying that Japan’s the place to be.They include Byron Wien of Blackstone Advisory Services and Edinburgh-based Martin Currie.

Two related reasons are the  large sums of cash held in Japanese bank deposits and the changing attitudes of depositors towards equity investments. This cash could set the stage for a domestic stock rally.  True these are old arguments, but they could finally happen this time. After all the Japanese have elected a non-LDP government. The LDP had been in power since the late 1950s except for a few months in the 1980s.

Another reason is managements’ new focus improving corporate governance and return on equity.  The focus used to be on market share and everybody except shareholders.

Then there are  the strong balance sheets of companies. Japan is also exporting more to China and the rest of Asia, and less to the US.

Finally there is issue of relative valuations. FT reports,”Michael Katz of Glenrock Global Capital Partners says he likes Japan on a relative basis. The market is priced for “every known calamity” and clearly is not a momentum play for those looking to make a quick buck.

‘For those seeking value, if not Japan, what?” he asks. “Look around the world today and you’d find countries that depend on government largesse to keep themselves going. Stock markets are in their own little world. ””

Err last bull point puts me off: when someone talks of relative values, I tend to rush to the toilet.

Good Easter break.

Oil: Neither too hot nor too cold

In Economy, Indonesia, Temasek on 01/04/2010 at 7:22 am

Juz like Goldilock’s porridge.

Since August last year, oil prices have stabilised in the US$70 to US$83 range and according to this NYT articleEconomists and government officials say that if prices remain in that band, it could benefit the world economy, the future security of energy supplies and even the environment. The price is high enough to drive investment in future oil production and in supplies of alternative energy, they note, but low enough that consumers can bear it.

“It’s a sweet spot,” said Kenneth S. Rogoff, a Harvard professor of international finance. “It’s not too low that it’s crushing demand for renewable energy sources or causing debt and fiscal crises in oil-exporting countries. And it’s not so high that it’s driving African countries deeper into poverty and threatening the recovery in the U.S. and Europe.”

So for us value investors, the issue is avoiding being complacent because, For all the good that stable prices can do, however, no one is willing to predict they will last forever.

“Demand will change; supply will change,” said Christof Rühl, chief economist of BP, the oil company. “The world changes all the time.”

BTW looks like Temasek goofed in selling Orchard Energy

But the buyer, RH Petrogas, is having difficulties completing the deal because the Indonesian authorities are insisting a transfer of an oil interest needs their approval.

One up on HK — thanks to MM

In Uncategorized on 01/04/2010 at 5:39 am

This NYT article tells us of the growing air pollution problems in HK, even when China’s major cities are improving the quality of the air in their cities.

Our air is better than that of HK’s. And do remember that MM was a greenie even before the term was invented. S’pore has so many trees because of the green campaign when he was PM.

Perils of buying on NTA III

In Corporate governance, Investments on 01/04/2010 at 5:20 am

Today, five companies no longer are listed after posting losses for five straight years: General Magnetics, Chuan Soon Huat Industrial, ASA Group, Fastech Synergy and Ionics EMS.

These delistings show yet again the danger of buying on NTA.

One, even if a firm has the cash for a buyout, most shareholders will not benefit. Ionics EMS’s exit offer of 1.5 cents per share, for example, was a 23.86 per cent discount to the 12-month volume-weighted average price (VWAP).

And as BT reported on tuesday, “With most of the companies experiencing drastic sell-offs since the de-listing notice was issued on March 2, their counters’ last-traded prices have fallen significantly below net asset value (NAV). General Magnetics’ case is the most vivid, with a $0.19 NAV per share against its last-traded price of $0.085.”

And as BT pointed out,  “Should VWAP feature more prominently than NAV in determining the exit offer, the price may end up being ridiculously low and shareholders of the five companies that face de-listing may find the options to stay or to go are not really options at all.”

But some gd news for value investors:  the investors in Lion Asiapac have gotten something — 15 cents a share via special dividend. Gd for them and great that they stood up and shouted for the money. And all without that self-proclaimed small shareholders’ champ.SIAS