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Archive for the ‘China’ Category

Analysing Temasek’s investment in another Chinese bank

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

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

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

But is it a wise move?

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

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

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

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

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

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

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

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

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

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

Another day, another sucker

In China, Corporate governance on 21/03/2012 at 8:53 am

First it was SGX, then US exchanges, now London’s AIM the target for Chinese IPO scammers?

http://www.reuters.com/article/2012/03/14/ipo-london-china-idUSL5E8E8A2220120314?feedType=RSS&feedName=financialsSector

A Gamble Too Far? Pinoys gamble on China

In Casinos, China on 15/03/2012 at 9:45 am

The Philippines is not just ahead of other new casino markets [like South Korea, Japan and Taiwan]; it also has several key benefits over the more established ones, according to Gustino De Marco, vice-president at the Hong Kong-based brokerage BTIG and a specialist in this area.

Firstly, it has a strong domestic demand and the type of games Filipinos like to play are the high risk-high reward games such as slot machines, which give better returns to the casino operator than card tables.

Another attraction is geography, with the Philippines only a few hours flight from China, Japan and South Korea, where most high-rolling Asian gamers come from.

And while it is near China, it is not under any kind of Chinese jurisdiction. So, unlike Macau, which in recent years has had to ramp up its gambling tax and impose certain visa restrictions on Chinese gamers, the Philippines is free to offer all the incentives it can.http://www.bbc.co.uk/news/business-16753960

But is it realistic for the Filipinos to expect the Chinese authorities* and patriotic Chinese to co-operate when the Filipino government is the most hawkish of all the ASEAN nations when it comes to territotial disputes with China? The Institute of Southeast Asian Studies (a S’pore government statutory board thhin-tank) says in its inaugral ASEAN Monitor dated February 2012: Despite the weakness of its armed forces, the Philippines has assumed the role as the most outspoken of four Southeast Asian claimants against China’s assertiveness in the South China Sea. President Benigno Aquino has taken the lead in trying to rally ASEAN behind a common policy on the South China Sea, mainly to present a united front in negotiations with Beijing over acode of conduct. Defying threats from official Chinese media, Manila has encouraged the US to increase its military presence in the Philippines and supply the country with additional resources to patrol its waters … Will the Philippinegovernment maintain its hard line over the South China Sea, or prove as susceptible to China’s entreaties as some of its predecessors?

—–

*They could make travelling to the Philippines inconvenient.

Wilmar: Beneficiary of China slow-down?

In China, Economy on 13/03/2012 at 6:47 am

One reason why Wilmar had such a bad set of results was because it’s Jing Long YU (China’s biigest cooking oil brand) could not raise prices because of administrative measures imposed by the government to control inflation. Pre-tax margins in this segment more than halved.

Now that Chinese inflation has fallen to a 20-month low in February, Wilmar should be able to raise prices for this brand?

Due diligence: a cautionary tale

In China on 29/02/2012 at 6:42 am

The fraud at Puda Coal, a Chinese company traded in the United States, was spelled out in documents that were publicly available months before the company raised $100 million from investors, but it appears no one bothered to look, writes Floyd Norris of The New York Times.

http://www.nytimes.com/2012/02/24/business/sec-charges-reveal-fraud-in-chinese-company.html?_r=2&ref=business&nl=business&emc=dlbka35

More chillingly is that the the Chinese authorities are making it more difficult to inspect publicly-filed documents, often informing the filers who are asking for filings.

So play, play in China at yr own risk. Like having unprotected sex.

China Sky shows how impotent SGX is when it comes to China stocks. Can only reprimand directors. I tot it damned funny that the CEO (and a major shareholder) could juz resign like that,

Don’t underestimate the US

In China on 22/02/2012 at 6:04 am

This is another of an occassional series on why Chinese chauvinists and Cina Tua Kee lovers should be careful about crowing of the coming hegemony of China, and the fall of the US.

A US company is a major beneficiary of the Chinese love of eating fried chicken.

The US-based company that owns the KFC fast food chain has again reported solid growth figures fuelled by demand in China despite increasing food and labour costs in China. Revenue from Yum’s restaurants in China fell 2.4% to 19.7% in the last quarter from the year before, due to wage inflation of 20% and an 8% rise in commodity prices. The company says the Chinese market is crucial to its success.

“We opened a record 656 new restaurants and delivered extraordinary same-store sales growth of 19%,” said David C. Novak, chairman and CEO of Yum! Brands.

“Clearly our KFC and Pizza Hut brands in China continued to strengthen their category-leading positions.”

Yum! Brands has reported better-than-expected profits for the fourth quarter of 2011, jumping 30% from the same period last year. Net income for the three months ending in December was US$356m.

FBI in US, SIAS, SGX here

In China, Corporate governance on 02/02/2012 at 8:49 am

FBI investigating adviser on Chinese reverse mergers following a spate of problems with these listcos. No such luck here for investors here in S-Chips, despite the well documented problems. Investors only got SIAS and SGX.

http://dealbook.nytimes.com/2012/01/27/f-b-i-searches-offices-of-n-y-adviser-on-chinese-reverse-mergers/?nl=business&emc=dlbkpma1

I mean even HK securities authority seems to be more active in taking action against Chinese listcos (see bit towards end of article).

http://www.bloomberg.com/news/2012-01-30/hong-kong-s-tiger-court-fight-tests-regulator-s-offshore-reach.html

Metro: Share price of 0.695 includes 0.36 of net cash

In China, Property on 30/01/2012 at 5:40 am

DMG & Partners Securities on 27 December 2011, issued a “Buy” call on Metro Holdings. As the price remains unchanged at 0.695 (despite a strong market); and given that less the net cash, the stock is only trading at 0.335;  and a yield of almost 3% (historical), it’s something worth exploring despite it being a China play, and a property one at that.

(Background: Metro was founded in 1957 as a department store operator and became a household name. It diversified into property development in the 1990s and was one of the early investors in China’s real estate market, thereby missing the bullet of being a retailer here.)

It has since built up a portfolio of prime commercial properties in Tier-1 cities in Shanghai, Beijing and Guangzhou, as well as several property projects and joint ventures in Tier-2 and Tier-3 cities. Key properties that the group owns include Metro City and EC Mall in Beijing, Metro City and Metro Tower in Shanghai and GIE Tower in Guangzhou.

Leveraging on the group’s retail experience, Metro has chalked up an impressive track record as a mall operator and investor in China. To date, all its property ventures have been profitable, with past divestments making gains of 5-25 per cent premium over book value.

Over the past five years, shareholders’ equity compounded at a CAGR of 9 per cent. This was achieved without the use of excessive leverage given management’s conservative style. Its strong balance sheet (net cash of 36 cents) allows it to deploy capital opportunistically. The ability to recycle capital and profits into new projects has been a hallmark of Metro’s management.

The company is in the midst of selling its 50 per cent stake in Metro City Beijing for 1.25 billion yuan (S$247.5 million), a 50 per cent premium over its latest valuation. Should the deal go through, Metro will be able to book a pretax profit of $87.4 million. We estimate this will lift book NAV by nine cents/share.

On our estimates, the stock has an RNAV of $1.02 billion, or $1.23/share, after netting out liabilities. At current price, the stock is trading at a steep discount of 45 per cent to RNAV. Our target price for the stock is $0.86, based on a 30 per cent discount to RNAV.

Shan Gao Huang-di Yuan (“The mountains are high and the emperor is far away”)

In China, Corporate governance on 16/01/2012 at 6:01 am

It was SGX managers that were keen on China listings in the late 1990s and early noughties. They got their mult—million bonuses, but minority shareholders in many S-Chips got the worms. Now SGX has all kind of rules to try to ensure good corporate governance. But as this shows, the mgt of a Chinese co listed on NASDAQ, doesn’t care a damned abt US laws, confirming the experience of investors here on the attitude of the management of S-Chips to S’pore laws and SGX’s rules.

If ChinaCast again loses in the Delaware courts, the question is, what will it do afterward? The Chinese company could simply refuse to honor the court’s order. It has no assets in the United States, so it could easily ignore any monetary fine. However, it is listed in the United States and is subject to S.E.C. supervision; such an act is likely to crater its stock price. The likelihood of such a response is low, but it appears that ChinaCast’s current management is going to fight this coup to the bitter end. Expect more maneuvering by all parties involved.

There is a wider lesson here. It is hard to know the real facts in this case given the murky nature and distance of the events, but whatever the truth is, investing in companies based in a foreign country is risky not only because the rule of law is weaker, but also because of cultural differences.

Foreign companies are not as familiar with United States practices and laws governing domestic corporations. They are sometimes more willing to push the envelope, either out of cultural inexperience or simple ignorance. ChinaCast itself appears to have been a bit behind the ball in getting good advice.

 Sigh. Taz the scandal, not PM and ministers earning millions. But SGX listing cos that are difficult for S’pore-based investors to monitor, and police.

China’s collapse ‘will bring economic crisis to climax in 2012’

In China, Temasek on 15/01/2012 at 5:56 am

But it’s sunshine from 2013 onwards, if you still got the money.

A looming hard landing in China will bring the financial and economic crisis of the past five years to a climax in 2012, one of the City of London’s leading analysts has warned.

Albert Edwards, head of strategy at Société Générale and one of the UK’s leading “bears”, said the next 12 months would be the “final year of pain and disappointment”.

http://www.guardian.co.uk/business/2012/jan/11/china-economic-collapse-global-crisis

SDP, KennethJ and the usual grumblers will have a field day if this guy is right (he has a good track record, this last few yrs) what with Temasek’s and its TLCs’ (Think DBS, CapitaLand, KepLand), and other GLCs’ (Ascendas for example)  big bets on China.

Predicting a sharp slowdown in activity in the world’s fastest-growing emerging economy, Edwards said: “There is a likelihood of a China hard landing this year. It is hard to think 2013 and onwards will be any worse than this year if China hard-lands.”

http://www.guardian.co.uk/business/2012/jan/11/china-economic-collapse-global-crisis

DBS bullish on China infrastructure play MIIF

In China, Infrastructure on 29/11/2011 at 6:19 am

In a note dated 25 November 2011, DBS is bullish on MIIF. Interesting as there is current net cash of about S$115 m and  prospective yield of about 10.5% assuming mgt is correct. My previous post in January this year https://atans1.wordpress.com/2011/01/11/miif-unnoticed-china-play/ reflects my concerns about this stock. But it could be I’m wrong, and DBS is correct. Anyway, nearly a year has passed.

International Infrastructure Fund (MIIF) is now leaner, fitter and wholly Asia-focused … MIIF has divested its non-Asian assets, and repaid corporate level loans with the sale proceeds … a cleaner balance sheet with current net cash of about $115 million.

The sale of stakes in other funds also eliminated the black-box problem (assets with limited financial visibility) and the fund now focuses purely on key Asian infrastructure assets.

MIIF’s three key investments

Taiwan Broadband Communications (TBC), the third largest cable TV network in Taiwan;

— Hua Nan Expressway (HNE), a 31 km urban toll road in Guangzhou, China; and

— Changshu Xinghua Port (CXP), a multipurpose port in the Yangtze River Delta region of China.

We visited these …  impressed by the management and operations … fairly confident of steady organic dividend growth from CXP and TBC, though traffic growth at HNE could face some near-term roadblocks. MIIF [has] used its surplus cash (from the sale of prior investments) to increase its stake in TBC from 20 per cent to 47.5 per cent …  higher dividend receipts from TBC.

MIIF paid out a three-cent dividend for FY2010. After restructuring its portfolio, MIIF is now guiding for a dividend per share of 5.5 cents for FY2011, based on expected cash flow generation plus existing cash reserves (2.75 cents already declared for H1 2011). We expect this is achievable and given the healthy implied yield of close to 10.5 per cent at current prices, we are reinstating coverage with a ‘buy’ call and TP of S$0.64, based on a discounted cash flow valuation of underlying assets. The share buyback programme … provides further support …

Temasek: Where things can go wrong.

In China, Temasek on 19/10/2011 at 6:44 am

Credit Suisse analyst Sanjay Jain said in a report last week that he thinks that up to 12%  of all of China’s outstanding loans may go bad and non-performing loans may likely account for all of the banks’ equity. Current NPL ratios hover at around 1% or the top Chinese banks.

Ops a daisy. As Temasek has major (and so far very profitable) stakes in two of China’s top four bank, Bank of China (4%) and Construction Bank of China (7%), predictions such as this (and Credit Suisse is not alone, just the latest and most pessimistic) should worry S’poreans.

As Temasek got the initial substantial stakes at bargain prices (courtesy of the Chinese government), selling part or all these stakes requires Chinese approval. At a time when the Chinese government is supporting the shares of the major four banks, such approval is unlikely.

Not another debacle like Shin, ABC Learning, Merrill Lynch or Barclays in the making?

Temasek the hedge fund?

In Banks, China, Temasek on 01/09/2011 at 8:29 am

A consortium that includes Temasek and its wholly owned hedge fund Seatown Holdings has acquired a 5% stake in China Construction Bank it was reported on 30 August 2011

It had unloaded a portion of its own stake in the Chinese lender about a month ago, when, by my calculations, the price of CCB shares was  abt 10% higher. And given that it bought the latest batch of shares at a discount, Temask could have made 20% on the sale and repurchase.

Gd trade.

Description of trades

http://www.nytimes.com/reuters/2011/08/30/business/business-us-bankofamerica-ccb.html?nl=business&emc=dlbka32

China: Not immune to Western slowdown?

In China, Economy on 24/08/2011 at 8:31 am

China, the world’s biggest exporter and second biggest economy, is still booming. Its GDP is expanding at about 9% a year and since the 2008 financial crisis, China has helped keep the global economyfrom falling in a recession. But, as the BBC’s  Damian Grammaticas reports, China may not be immune if there is a new slowdown in the US and Europe.

http://www.bbc.co.uk/news/world-asia-pacific-14578083

S’poreans have two reasons to be interest in the issue. We depend on global growth and Temasek itself, TLCs, other GLCs (like Ascendas) and GIC have big bets on China.

When China plays fail in US

In China, Corporate governance on 30/07/2011 at 7:02 am

The shareholders of dud China plays are increasingly filing class-action lawsuits against the companies, auditors and even the investment banks. The auditors and banks have deep pockets. http://dealbook.nytimes.com/2011/07/26/chinese-reverse-merger-companies-draw-lawsuits/

Too bad for investors in S-Chips that class-action law suits are difficult to undertake here. So the banks are auditors are safe from law suits.

A problem S’pore & China share

In China, Economy on 12/07/2011 at 7:08 am

In an image entitled Live At The High Place, the photographer and performance artist Li Wei stands at the base of an inverted human pyramid in front of the Sanlitun Village shopping centre in Beijing. On his shoulders are balanced four people; on theirs, six more. The human sculpture portrays the impact of China’s one-child policy – as a generation of only children, now adults, contemplate looking after increasing numbers of older relatives. BBC report

In S’pore it was a two-child policy and “babies are for graduate mums only” (OK I exaggerate on the latter, but you know what I mean) but the effect is still the same.

To solve this goof-up, the government then introduced the FT policy, except that FTs turned out in many cases to be Foreign Trash (they are veerry cheap) rather than the Foreign Talents. Now we are waiting to see how this FT balls-up will be solved. What with Tharman supervising the manpower ministry, I am reasonably optimistic something will be done that will satisfy the people. Especially since at least 40% of the  voters are angry with the FT policy in its present form.

China play: when due diligence is not enough

In China, Corporate governance on 27/06/2011 at 9:54 am

The hedgie who made a fortune shorting subprime mortgages, and who made money buying BoA when one Temasek was selling, recently lost US$100m over a China play despite doing serious due diligence. http://dealbook.nytimes.com/2011/06/24/paulson-speaks-out-on-sino-forest/?nl=business&emc=dlbkpma21

If such an investor with all his resources and acumen, can still get snookered, what makes the ordinary retail investor here think he can do better?

Ignore S-Chips? They can ruin yr finances.

Experts differ on prospects for China; but we got big bets on China

In China, Temasek on 20/06/2011 at 9:36 am

Some see serious trouble ahead, some see the troubles as to be expected in a rapidly expanding economy, and are notb that serious. http://www.bbc.co.uk/news/business-13802453

And do remember Temasek has big bets on China.

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

https://atans1.wordpress.com/2010/09/03/sporeans-temasek-may-have-a-problem/

So does GIC.

S-Chips: Sumething SIAS could do

In China, Corporate governance on 11/06/2011 at 4:45 pm

SIAS is, as usual, calling for more measures to safeguard investors’ interesting following yet another S-Chip fiasco.

SIAS has a research department. Why can’t it do what Muddy Waters Research is doing? This US firm has issued damning reports on five Chinese cos listed in the US. He approaches each case like an investigation, sifting through corporate registration documents and even hiring private investigators to pose as potential business partners.

Perennial Retail Trust: the case against

In China, Property, Reits on 03/06/2011 at 10:36 am

In today’s ST, Perennial China Retail Trust took out a full-page ad in colour in ST to extol the IPO’s merits.

Two pages away, ST carried a story headlined ” CapitaLand’s share dip linked to China”. In juz slightly smaller type face, the headline went on, “Poor showing due to concerns over firm’s greater exposure, vulnerability to policy changes”.

If I were Perennial, I’d ask ST for a refund. This headline sums up the thesis why this is an IPO to avoid.

DBS bullish on Hutch Port at US$0.95

In China, Infrastructure on 02/06/2011 at 6:29 am

Find it difficult to poke holes in DBS’ analysis. But note DBS was one of the IPO mgr and that HPH is trading below its IPO price of US$1.01. DBS says:

Firm prospects over the short and medium term. We like HPH Trust for its stable and growing earnings profile, which we believe will be driven by continued rising trade volumes into and out of the Pearl River Delta region, translating into an annual growth of 10 per cent in distributions to unit-holders for the next few years.

HPH Trust is due to report its interim results by mid-August, and we are expecting a distribution per unit (DPU) of about 1.8 US cents to be declared.

Maintain ‘buy’ and US$1.15 TP. Given that HPH Trust seems to be well on its way to meeting our projections in FY2011 and FY2012, current FY2011 and FY2012 yields look very attractive at 6.6 per cent and 7.2 per cent, respectively; expect DPU compound annual growth rate of 10 per cent up to 2013.

Our target price implies a total return potential in excess of 30 per cent at current prices. Among Singapore-listed Reits, business trusts and high yield plays, HPH Trust offers one of the highest combinations of yield and DPU growth.
BUY

Yet another reason to avoid S-Chips

In China on 16/05/2011 at 10:07 am

This story tells how Yahoo may have been taken for a ride in China: Yahoo is upset with its Chinese partner Alibaba over the latter’s transfer of a major internet asset to its chief executive.

If a major MNC, with its legions of lawyers, accountants and executives, can end up in this type of situation, wouldn’t it be better for retail investors to avoid S-Chips as a matter of principle?

Stop worrying, start buying

In China, Investments on 15/05/2011 at 9:45 am

Jim O’Neill, chairman of Goldman Sachs Asset Management, said investors should shed their pessimism and stop hoarding cash amid prospects for a global stock rally that could start in China.

Bloomberg story. Note Goldman is setting up a yuan-denominated fund to invest in China.

Another US China bull

In China on 01/05/2011 at 6:30 am

A private equity boss prefers China to US.

Remember Warren Buffett is bullish on China but remains committed to investing in the US.

Gd reasons to continue avoiding S-Chips

In China, Corporate governance, Uncategorized on 18/04/2011 at 12:07 pm

SGX has mandated that S-Chips introduce new measures that could give them more control over their mainland-based legal representative or top executives.

But “constructive”, “nation-building” Today reports that there practical problems.

“If you don’t have the cooperation of the legal rep, then you might not be able to go through the whole procedure and then to effect the removal of the legal rep because you can foresee that the legal rep will not give full cooperation in helping you to remove himself,” said Mr Lin Song, co-head of international China practice group at law firm KhattarWong.

The lawyer was referring to the paperwork involved in effecting the removal of the Chinese-backed legal representative. Company transactions become binding only when they bear the firm’s corporate seal and the power to affix this seal is vested only in the legal representative.

“The issue is more on the execution level even though you might have in the articles of association all these provisions when you really need to remove the legal rep … you may face difficulty,” Mr Lin said.

“For example, the listed company might be required to present the local authority a stamp registration form and other documents which might require the legal rep to sign,” he added.

Mr Robson Lee, partner at Shook Lin & Bok LLP, echoed the same sentiment that the SGX ruling might not be enough to clip the wings of Chinese-backed executives.

Mr Lee, who also sits as a director for S-chip firm Youcan Food International, said there are practical enforcement difficulties to ensure compliance by the executive management that are based in China.

“It would be better to put in place the necessary legal provisions in the articles of association to give the board of the listed company the legal right to intervene when things go wrong,” he said.

Article

Will MAS ever say this?

In China on 31/03/2011 at 6:39 am

Martin Wheatley, the outgoing head of Hong Kong’s securities market regulator, said today that sponsors’ due diligence of initial public offerings has been “inadequate” at times.

“In many cases, sponsors are spread too thinly in terms of the number of deals they’re bringing to the market at any one time”.

Hong Kong’s regulator may make sponsors of IPOs in the city liable for statements in their clients’ prospectuses to prevent fraud of locally listed Chinese companies.

Bloomberg story

Never ever heard any MAS official say there was anything wrong with sponsors’ due diligence despite some new listcos coming out with profit warnings shortly after being listed.

I’ve been told that MAS does not inspect sponsors to ensure that they are following “best practices”.  It is left to SGX. A few years ago, a then prominent IPO sponsor was “suspended” from bringing new listings to market.

The HK proposal to make sponsors of IPOs in the city liable for statements in their clients’ prospectuses is a gd one, and should be adopted to prevent fraud in listing S-Chips.

How can independent director of troubled S-Chip resign?

In China, Corporate governance on 28/03/2011 at 1:35 pm

Hongwei’s independent director Ji Yicheng has resigned saying,”personal reasons, heavy workload”.  If the director of a troubled listco can quit when the listco gets into trouble,  then what is corporate governance all abt? Such an action is making a mockery of the responsibilities of being an independent director

The SGX must do something to prevent an independent director of a troubled S-Chip, indeed any troubled listco, from resigning. Such a resignation must have the approval of SGX.

The directores at the time the company got into into trouble must sort out the mess.  They cannot be allowed to “move on”.

.

CapitaLand: The peril of being a China play?

In China, Property on 25/03/2011 at 7:17 am

CapitaLand is trading below its FY2010 NAV per share of S$3.32. This has not been seen since September 2009 to May 2010. CapitaLand is currently in a position of balance sheet strength (FY2010: S$7.2 billion cash, 0.18 net gearing), and has balanced exposure to diversified property segments across different geographical regions. DBS Sec

Moreover, the market has assigned no value to any accretion from an expected S$6 billion in capital deployment this year. We update assumptions and maintain a ‘buy’ rating with a fair value of S$4.05 at parity to RNAV.

Me: Nothing to do with balance sheet strength or profitability. Investors are concerned with its large China exposure. And I hear hedgies are shorting it as a proxy bet against Chinese property.

Go buy an island

In China on 03/03/2011 at 8:32 am

What with the uncertainty in Libya and the coming GE, time to take a break from trying to find gd investments, here and overseas.

Go do sumething more productive? Like fishing? Or buy a Chinese island?

Two more reasons to avoid S-Chips

In China on 01/03/2011 at 7:04 am

Two S-Chips have been suspended because of audit problems.

What more dangers lurk in the S-Chip swamp? Whatever the case, those Ozzies who don’t want ASX to be taken over by SGX have two more reasons.

China Water Play: and its not an S-Chip

In China, Infrastructure on 08/02/2011 at 9:44 am

United Envirotech is owned by local blue chip UEL

OCBC likes the stock despite revising its value downwards by 5% to 0.65. When report was issued on 2 February, the stock had closed at 0.455. Read the rest of this entry »

Don’t enter the dragon

In China, Corporate governance on 27/01/2011 at 5:20 am

To avoid being shafted.

I was reading these Shanghai Asia related letters to the press a couple of weeks was and preening myself myself for giving Shanghai Asia a miss several yrs ago. What attracted me then was that the company was making foil paper for cigarette manufacturers. And the Chinese were (and are) smoking all the way to hell.

But fast forward to today and this business is being sold at an unattractive price. Minority shareholders are rightly upset but can’t do anything because the controlling shareholder supports the deal.

I gave it a miss because S-Chips were then in the Wild, Wild West when it came to corporate governance. They still are it seems, notwithstanding the efforts of SGX and the SIAS, the shareholders’ champ, to assure us that S-Chips are well regulated.

Even Chinese companies listed in the US are considered dodgy by this widely followed writer on all things investments.

So let’s give S-Chips that have everything in China except a few independepent directors here a miss, shall we?

China: Not selling US treasuries

In China on 23/01/2011 at 6:47 am

Juz buying via London

If S’pore is as close to China as MM, PM, SM and other ministers, and our “constructive, nation building” media say they are, surprised that the Chinese do not do it via S’pore.

China: Link between weak currency and inflation

In China, Economy on 22/01/2011 at 6:06 am

A gd explanation from a biased economist. He wants to use tariffs to “fix” China.

[I]nflation is the market’s way of undoing currency manipulation. China has been using a weak currency to keep its wages and prices low in dollar terms; market forces have responded by pushing those wages and prices up, eroding that artificial competitive advantage. Some estimates I’ve heard suggest that at current rates of inflation, Chinese undervaluation could be gone in two or three years — not soon enough, but sooner than many expected. Read the rest of this entry »

China: What we don’t hear from our MSM

In China, Economy, GIC, Temasek on 21/01/2011 at 5:16 am

In their new book, “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise” (John Wiley & Sons), Carl E. Walter and Fraser J.T. Howie paint a troubling portrait of China’s economy and its financial system. Despite the nation’s mind-boggling growth and images of gleaming skyscrapers and luxury cars, the authors say China’s growth model is flawed and fragile, and they warn about substantial risks accumulating in its banking system.

Q&A

Backgrounder: S’pore Inc has big bets on China

The iPAD is Chinese

In China on 18/01/2011 at 5:36 am

According to a report by a pair of economists out of the Asian Development Bank Institute, the success of Apple’s iPhone plays a major role in contributing to the USA’s trade deficit with China. The Wall Street Journal (login required) explains that while sales of the iPhone show around a billion trade surplus with China on paper as of 2009, the actual figure is a lot less because the iPhone is only assembled in China, not designed there. While the wholesale price of an iPhone is 8.96, the value of the only truly “Chinese” part is assembly, valued at .50 per unit. But because the iPhone ships from inside China, the entire value gets added into the trade figures, thus showing the billion trade surplus. If the numbers actually accounted for the true value coming out of China, the surplus for 2009 would have been about million instead — meaning in reality there is an almost billion trade deficit just from the iPhone alone.

The iPHONE is Japanese

Suzhou IPO: Missing from media reports

In China, Infrastructure, Media on 14/01/2011 at 5:49 am

The local media reported that the company managing Suzhou Industrial Park (SIP) could be slated for an initial public offering (IPO) of at least 4.5 billion yuan ($883.3 million), going by conservative estimates.

The project started off with Singapore taking a dominant 65 per cent stake and the Chinese taking the minority interest of 35 per cent. But its shareholding reform in 2001 saw this structure reversed with China taking the majority 65 per cent. Singapore’s interest has since been pared down to 28 per cent following capital injection by new investors.

MM in 2004 listed out four success indicators for the SIP. They are attracting businesses and investments; urban planning and development; ‘software’ transfer; and finally, a public listing. (Extracts from BT, but others too covered story)

Funny none of them reminds us that S’pore Inc invested US$147m in the park as of 2000, and that the losses then were US$90m. Sumething ST reported years ago.

Could it be because the 28% S’pore Inc owns could be worth US$153m (after dilution)? Financially S’pore Inc could have made some money (US$6m), not taking into account its share of the US$90m accumulated loss. If the loss is taken into account, it would have lost US$52m.

Either way a marginal gain or loss (I’m assuming S’pore Inc didn’t invest more), taking into account, if true, the goodwill that our teaching “tai kor” would have generated among the Chinese, something our ministers and our media constantly like to remind us of.

And S’porean self-haters (many on the internet) would be banging their balls in frustration that S’pore Inc didn’t lose big time. Though they would be consoled a lot of ministers and senior civil servants spent plenty of time on this project.

So it’s very strange that our “constructive, nation building” media did not report this triumph of S’pore Inc? Or am I missing sumething?

But then our media is not first world class, only fourth world class. Everything must be “betterest”. Another example

The economy did 14.7%, highest in Asia. This was trumpeted by our MSM last week.

If our stock market was tops (or near) in Asia, there would be the usually trumpets.

But our mkt as measured by STI only did 10.1%. Read the rest of this entry »

MIIF: Unnoticed China play

In China, Infrastructure on 11/01/2011 at 5:45 am

Macquarie Int’l Infrastructure Fund has transformed itself into a China play with infrastructure assets in China and Taiwan. In 2010, it sold all kinds of investments like nursing homes in Canada.

It promises to be a Asian infrastructure play.

It’s latest presentation (Nov 2010) says it has 37cents in cash, RNAV of 80 cents a share, and no borrowings at MIIF level. But if it’s share of its investments borrowings are included gearing is 57%. Taz the catch.

Got to find out how its investments are valued and its plans for its cash.

Let you know. Wary as MIIF has been a dog with fleas. And if one annualises its Sept dividend payment, it yields abt 5%. Bit low for trust that was promising gd payouts at IPO time.

MIIF prior to the restructuring showed the problems of the model that Temasek and CitySpring mgt aped. Macquarie group was a pioneer of the model of using lots of debt to buy boring utility assets, and then spinning the assets off into trusts. Investors got income, Macquarie got fees at every level. Then the economic crisis struck and all lost out.

Poor China: screwed again

In China, Economy on 09/01/2011 at 5:38 am

China is being shafted again.

China lends money to the US so that Americans can buy Chinese gds. It’s the biggest holder of US govmin bonds, losing billions yearly.

Now it’s lending to EU countries so that EU can buy Chinese. Article China’s support appears aimed at curbing losses on its growing financial investments in Europe, as well as helping to thwart a deeper downturn in an economic bloc that has overtaken the United States as China’s largest trading partner.

All this lending doesn’t reflect that china is the financial hegemon

Lord Keynes said, “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.” The quotation means that if someone owes a large amount of money, the borrower too is at risk.

GLP: Third time lucky

In China, Corporate governance, Logistics on 20/12/2010 at 5:26 am

If you can’t get yr excuses right first time, try and try again.

Finally Global Logistic Properties (GLP) got it right. As I blogged earlier it got its nickers in a twist when explaining why  its prospectus did not disclose a non-compete agreement https://atans1.wordpress.com/2010/12/16/glps-non-actionimplications-for-sgxs-bid-for-asx-spore-inc/

Last Wednesday BT reported,”[it] did not specifically disclose information about a non-compete arrangement with ProLogis because it didn’t see the US-based firm as a real threat to its business, sources close to GLP told the media yesterday … GLP had looked into whether ProLogis was likely to re-enter the Chinese market when the non-compete clause expires next February, and felt that the chance was ‘remote’ … it would be hard for ProLogis to restart its mainland China business, as it had sold all its assets and brand name in the country to GLP … They may still have a large operation elsewhere in the world. They may still have a large market cap. But they have no presence in Asia – that’s it,’ said the source on why the non-compete information was not material.

This reasoning I can buy. And it would seem, so does the market. On Friday it was +0.14 to 2.26. It was trading at 2.18 the day before BT had an article abt its non-disclosure. It then fell.

Why did it take so long to come up with a decent explanation  It wrote twice to the media spouting gibberish. Hope it Read the rest of this entry »

HSBC: Returning to its Chinese roots

In Banks, China on 18/12/2010 at 7:03 am

Remember the “S” stands for “Shanghai” and “H” for Hongkong.

Growth in China has averaged around 10 percent a year for the last decade and shows little sign of slowing. As trade flows with the rest of the world increase — HSBC says they will reach $5 trillion by 2015, which means growth of 13 percent a year — more of China’s cross-border trade will be settled in yuan.

On paper, HSBC is well placed to take a good chunk of business in that yuan-denominated trade. It is often one of the first foreign entities to win key licenses in China. It was the first to settle a cross-border yuan trade last year, the first to handle a yuan-denominated interest rate swap in Hong Kong in October, and it became the first international bank to complete yuan settlements in six continents with a deal in Brazil last month. … Read the rest of this entry »

GLP: Foreign brokers love it

In China, Logistics on 30/11/2010 at 5:21 am

Global Logistic Properties (GLP), got  ‘buy’ calls from 4  brokers (3 foreign) last week. It is a “buy” because it is leading provider of logistics facilities in China.

It owns logistics facilities in China and Japan – Asia’s two largest economies – and may expand into other economies (GLP says it is ‘building the leading distribution facility platform in Asia) in the region, stands to benefit from Asia’s strong economic growth. In particular, rise of consumer spending in China will boost profits.

Citi has a target price of $2.78 for GLP. It noted that yields from the sector are typically higher than those from the retail and prime office property segments in fast-developing China, and that the logistics space does not face the high policy risks that GLP’s residential peers are exposed to.

Nomura has a $2.58 price target for the stock. UBS, has a $2.65 price target for the stock.

In addition to these points, DBS says: We derive an RNAV of $2.76 using a sum-of-the-parts analysis that captures the value of its underlying assets as well as potential re-investment opportunities from balance sheet deployment. Our TP of $2.76 is pegged at parity to RNAV. Key risks to investment stem from regulatory and policy as well as global economic conditions.

BTW GIC is its single-largest shareholder.

The touch of Midas

In China on 29/11/2010 at 5:45 am

I mentioned Midas Holdings earlier in the year.https://atans1.wordpress.com/2010/05/24/midas-here-be-value/. Then DMG & Parners and Kim Eng were recommending it, if I recall correctly. Looks like it is an S-Chip that proved sceptics wrong.

A CIMB Research dated  Nov 24 has rated it an “Outperform”.

MIDAS plans to expand its aluminium extrusion capacity further to 70,000 tonnes (+40 per cent) by H1 FY12 after its recent capacity expansion. Coupled with strong results from its metro train maker associated company, we see better earnings growth ahead. As a result, we raise our net profit forecasts for FY10-12 by 1-11 per cent. Our TP rises accordingly from $1.14 to $1.26, still based on 15 times CY12 PE, in line with peers. We see stock catalysts from sizeable contract wins in FY11 from Chinese train makers. Maintain ‘outperform’.

Midas has announced plans to add 20,000 tonnes of capacity by H1 FY12 that would bring its total extrusion capacity to 70,000 tonnes. It may locate the new production lines outside its current plant for strategic reasons, and we see southern Chinese cities as possible locations. In view of its expansion plans, we lift our FY12 average production capacity assumption to 60,000 tonnes.

I hear Kim Eng, DMG & Partners, UOB KH are also recommending the stock.

Chinese officials to people: Don’t panic

In China on 24/11/2010 at 7:06 am

China’s main economic planning agency has moved to reassure people who fear inflation is getting out of control.

But the Shanghai stock market was down on Monday and Tuesday on fears of more measures to control  inflation  especially that of food. The market fell almost 2% on Tuesday.

The BBC Online article continued: The National Development and Reform Commission (NDRC) said in a statement that the country had “the capacity” to keep prices in check.

There is particular concern about food price inflation, amid suggestions that some people are hoarding commodities.

But the NDRC said the government had adequate reserves of foodstuffs like poultry, eggs and grain to meet needs.

Food prices jumped 10.1% in October from a year earlier, increasing the overall inflation rate to 4.4%, well above the government’s 3% target.

An oil bull still?

In China, Energy on 23/11/2010 at 12:14 pm

Hedge funds cut bullish bets on oil by the most in almost three months amid speculation fallout from the Irish debt crisis and China’s efforts to curb inflation will slow economic growth, sapping demand for fuel.

The funds and other large speculators reduced so-called long positions, or wagers on rising prices, by 15 percent in the seven days ended Nov. 16, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report, released Nov. 19. It was the first drop in four weeks and the largest decline since the seven days ended Aug. 24.

Bloomberg story

And remember that if China uses its energy resources as efficiently as the West and Japan

https://atans1.wordpress.com/2010/09/28/whither-the-price-of-oil/

Global food prices: not time to panic yet!

In China, Commodities on 21/11/2010 at 6:07 am

Still lower than 1980 levels as this chart shows

But big macs are getting more expensive in China. The US policy of QE2 is forcing up the real value of the yuan (via the price of gds, services and food). The more the Chinese defend the exchange rate to prevent the Yuan from appreciating in norminal terms, the more the real value of yuan rises.

The US is still the hegemon.

HSBC’s view of emerging mkts

In Africa, China, Economy, Emerging markets on 09/11/2010 at 6:04 am

Mkts are flying what with Aug- Oct passing without a mkt collapse and the Fed pumping money into the system. Time to join the party. I’ve sat on the sidelines so far this yr, so I’ll sit on my hands a bit longer. Must admit its hard not to want to do something.

The CEO of HSBC, said late last week, there were likely to be “some bumps in the road ahead” in developing countries, especially in China. Reminder: HSBC generates most of its earnings growth in Asia.

“Our latest data from emerging markets points to a slowdown in the rate of recovery,” he said in a statement. But the bank added that it still expected growth in the region to outpace that of the developed world for the foreseeable future.

He gave a positive outlook for the rest of the year, saying that “the global economy is in better shape than many expected a year ago.” But that “while fears of a double dip in the West may be overplayed, the passage from downturn to upturn is clearly taking longer than previous cycles.”

HSBC said pretax profit in the third quarter was “well ahead” of the period a year earlier, as reserves for bad loans reached its lowest quarterly level since early 2007. Its lending business in the United States accounted for the biggest share of improvements. Business in October was “in line with third-quarter trends,” HSBC said. HSBC does not give detailed earnings figures on a quarterly basis.

The investment banking unit of HSBC also reported a drop in trading. HSBC said performance of the business was “robust although trading activity was lower.”

China plays on S&P 500

In China on 04/11/2010 at 5:26 am

The Economist has constructed a “Sinodependency index”, comprising 22 members of America’s S&P 500 stockmarket index with a high proportion of revenues in China. The index is weighted by the firms’ market capitalisation and the share of their revenues they get from China. It includes Intel and Qualcomm, both chipmakers; Yum! Brands, which owns KFC and other restaurant chains; Boeing, which makes aircraft; and Corning, a glassmaker. The index outperformed the broader S&P 500 by 10% in 2009, when China’s economy outpaced America’s by over 11 percentage points. But it reconverged in April, as the Chinese government grappled with a nascent housing bubble.

I’ll try to get the names of other companies on this index.

China plays: Impact of interest rate rise

In China on 25/10/2010 at 5:25 am

China  announced an unexpected increase of its key interest rates by 0.25 percentage point last week.

Local stockbroker DMG says

Some of the corporates we follow will be positively impacted by the interest rate hike:

There should be a net positive impact on China Essence Group (unrated) with higher borrowing costs likely to be more than offset by savings from US dollar- and Hong Kong dollar-denominated debts. China Essence is a potato starch manufacturer and derives most of its revenue from China’s domestic market. Interest-rate and foreign-exchange risks pertain mainly to its 690 million yuan (S$135 million) in outstanding debts, consisting of a US$50 million short-term bank loan; 90 million yuan in working capital loans; and HK$250 million (S$42 million) in zero-coupon convertible bonds due in December 2011 (with repayable amount at HK$378 million). With a significantly smaller yuan-denominated debt, we see net positive foreign exchange impact on weaker USD and HKD.

Read the rest of this entry »

The Chinese see value in Africa

In Africa, China on 19/10/2010 at 5:19 am

The Chinese (people and state-owned enterprises (SOEs)) are flocking to Angola in darkest Africa. The latter are there for the natural resources that China needs, the former because they see the personal opportunities that they see the SOEs drive into China will bring them. Smart people, the Chinese.

So shouldn’t S’porean entrepreneurs and companies (TLCs, GLCs, and SWFs included) head for Africa? Rather than head for China, or Asia as the govmin keeps encouraging us to do? True Asia esp China waz the place to do in the 80s and 90s and early noughties, but if the Jews of Asia are moving on out of their country into Africa, shouldn’t we?

And admiral Cheng Ho was there in the 15th century.

Are our ministers on auto-pilot mode, or is there something they dislike abt Africans?

BTW when I was a student in London in the late 1970s, I got a lot of stick from African students. They tot one LKY was a racist. I argued that he was simply stating facts. This stance cost me dear: I wasn’t invited to partake of raw stakes of lion, zebra or antelope meat. I love steak tartar.

China: Great Morgan Stanley chartbook

In China on 04/10/2010 at 12:22 pm

Via www.hedgeanalyst.com.

Thanks guys.

Whither the price of oil?

In China, Energy on 28/09/2010 at 5:50 am

A stupid question. Upwards and onwards. Juz look at the small cap stocks in S’pore’s offshore marine industry.

But consider this fact reported in “The Squeeze”, Tom Bowyer’s book on the recent history of the oil industry.  China requires three times more oil and gas to manufacture the same item than US or Europe. The equivalent of 16m barrels of oil are wasted every day.

All this means is that if China can get more energy efficient, it can increase output, using less oil.

I’m an energy bull, but this statistic has me wondering if I shld be less bullish.

China Black Swan risks quantified

In Banks, China on 14/09/2010 at 5:27 am

Morgan Stanley’s Qing Wang created a new tracking concept, the China Macro Risk Radar (CMRR). The  goal is to provide a framework to asses and monitor risk events of low to moderate probability (high probability events already have their own standing at the firm and are singled out in client calls) and high impact.

As part of its inaugural edition, MS has assigned 10 risk events to four different categories on the CMRR – each risk event is assessed according to six aspects, including its description, content, potential impact, likelihood, timeframe, and evolving direction. The top 10 event  that shld concern investors  can be summarized along the following four verticals:

Risk Category A: Macroeconomic

Risk Event 1: Massive NPLs

Risk Event 2: Local Governments Default

Risk Event 3: Economic Hard Landing

Risk Category B: Policy and Regulatory Changes

Risk Event 4: Rapid Wage Increase

Risk Event 5: Introduction of Property Tax

Risk Event 6: Resource Tax Reform

Risk Category C: Financial Market Shocks

Risk Event 7: Property Bubble Burst

Risk Event 8: Commodity Prices Spike

Risk Category D: External Shocks

Risk Event 9: European Sovereign Debt Crisis Redux

Risk Event 10: Trade Protectionism

A visual summary

S’poreans, Temasek may have a problem

In Banks, China, Temasek on 03/09/2010 at 6:52 am

Of the 90 publicly listed Chinese property developers listed on the Shanghai and Shenzhen stock exchanges, almost two-thirds of them reported negative operating cash flows for the first half of 2010.

This makes clear why the Chinese authorities had earlier asked the banks to use a 60% haircut in estimating residential property  losses.https://atans1.wordpress.com/2010/08/11/temasek-what-abt-these-chinese-property-charts/

Looks like trouble for the Chinese property developers and banks may be coming sooner than later, and for China bank bull Temasek. A repeat of Merrill Lynch and Barclays?

Remember Temasek owns 4% of Bank of China; and 6% of  China Construction Bank. And StanChart is a cornerstone investor  in Agricultural Bank of China with abt 1% paying US$500m for this privilege). Temasek owns 18% of StanChart.

And what about CapLand and KepLand, with their biggish exposure to Chinese residential properties?

Sigh

Dogs? Temasek’s Chinese bank investments

In Banks, China, Temasek on 26/08/2010 at 5:15 am

Might sound dumb to ask given that the Chinese banks that Temasek invests in are some of the largest in the world, and given that China’s economy is growing like the bean stalk in the story Jack and the Bean Stalk.  But then Shin, Merrill Lynch and ABC Learning were “no brainers”.

State agency Central Huijin Investments did something strange recently. It has controlling stakes in nearly all of China’s largest banks, including China Construction Bank (6% owned by Temasek), Agricultural Bank of China (StanChart is a cornerstone investor with abt 1% paying US$500m for this privilege) and Bank of China (4% by Temasek) . Temasek owns 18% of StanChart.

Huijin just raised Rmb40bn (US$5.9bn) as part of  a Rmb187.5bn fund raisng. The aim of raising the Rmb187.5bn is to recapitalise  Chinese banks it controlled.

Sounds prudent given the explosive loan growth rates of the banks brought about by Chinese attempts to stimulate the economy.

But this is the weird bit: the state-controlled banks were estimated to have bought more than 80% of Huijin’s first bond issue, on orders from their shareholder. If this is repeated, this means the Chinese banks are lending money to their controlling shareholder so that the shareholder can buy shares in them.  No new cash is invested by the controlling shareholder.

Sounds something that only Wall Street cowboys would dream of doing.

Except that the Wall Street cowboys would be in jail for pulling off this stunt, unless of course, if a Texan is president.

China: Rerun of US Sub Prime? Part II

In Banks, China on 13/08/2010 at 5:25 am

Chinese banks have been ordered to account for around Rmb2,300bn ($340bn) in off-balance sheet loans in a move that could put some lenders under serious stress and require another large round of capital-raising, reports FT.

Lenders must put all loans sold or transferred to lightly regulated Chinese trust companies back on their books by the end of 2011. And must stop using “informal securitisation” to evade regulatory requirements.

Trying to ensure that banks don’t do what Citi, Merrill Lynch and other US banks were doing? Concealing their leverage albeit legally.

Reminder: Other big problematic numbers are loans to local governments, more than US$230bn of which are considered to be at serious risk of default, and real estate exposure, which accounts for roughly one-tenth of the big banks’ corporate loan books. FT

We live in interesting times.

China: Rerun of US Sub Prime? Part I

In China, Property on 12/08/2010 at 5:43 am

In 2009,  banks were ordered to increase their loan books by a third.  The result has been a sharp rise  in real estate prices and the pace of construction.

A recent National Bureau of Economic Research paper, “Evaluating Conditions in Major Chinese Housing Markets”, notes that Beijing land prices have nearly tripled since early 2008. Land sales have become the main source of income for local governments.

Some Rmb10,000bn (£946bn, €1,129bn, $1,475bn) of bank loans have been made local government infrastructure projects. Meanwhile, Chinese banks are repackaging their loans and selling them on to investors, says Fitch.

Sounds a bit too close to what was happening in US, where everything depended on rising house prices.

We shall see if the results are the same.

Temasek, CapLand: What abt these Chinese property charts?

In China, Property, Temasek on 11/08/2010 at 5:15 am

Courtesy of this blog. And look at the money supply charts too.

No wonder China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 6o% in the hardest-hit markets. Banks were instructed to include worst-case scenarios of prices dropping 50- 60% in cities where they have risen excessively. Previous stress tests carried out in the past year assumed home-price declines of as much as 30%.

Expectations seem to be for a sharp decline in Chinese property prices over the next two years, with some, and perhaps significant, impact on Chinese banks.

Some time back it was reported that Temasek had emerged as one of the top 10 acquirers in the Greater China region,

after doing six deals worth US$1.47 billion since 2005. According to a market M&A report commissioned by Deloitte, Temasek is ranked No 9 – after Morgan Stanley and Goldman Sachs, which are No 7 and No 8 respectively. The report Read the rest of this entry »

Temasek: China banks’ loans

In Banks, China, Temasek on 31/07/2010 at 7:14 am

Chinese banks may struggle to recoup about 23%  of the Rmb7,700bn (US$1,100bn) they’ve lent to finance local government infrastructure projects . reports Bloomberg quoting “a person with knowledge of data collected by the nation’s regulator”.

The estimate implies US$261bn of debt will go bad, almost five times the US$53.5bn the nation’s five largest banks are raising to replenish capital. Remember Temasek owns 4% of Bank of China and 6% of China Construction Bank, both of which have raised more capital from shareholders.  And 18% -owned StanChart  invested $500 million in Agricultural Bank of China’s recent IPO.

If the estimate proves even a bit correct, Temasek will be having to invest more in the next few years  to avoid dilution.

Related post

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

China: No premium for A shares

In China on 30/07/2010 at 5:36 am

Mainland Chinese investors traditionally had to pay a huge premium for shares listed domestically over what those same shares trade for in Hong Kong. The premium has disappeared. Why?

Prices in Shanghai and Shenzhen have fallen by 22% and 15% respectively this year, making the mainland one of the world’s worst-performing markets. In Hong Kong prices of shares in the same companies have fallen far less. Outsiders appear more willing to believe China’s growth story than the Chinese.

Investors no longer have funds. .Of the US$19bn raised recently by Agricultural Bank of China, more than half came from other Chinese state-owned organisations. Every other big bank is raising more capital. Chinese companies raised $54 billion in equity in the first half of this year (before the AgBank listing) and another $80 billion in debt, according to Dealogic.

The moves to liberalise the yuan could play a part.

But Chinese companies are still trying to list.

Singapore’s Economy — Clouds a’plenty

In China, Economy on 16/07/2010 at 5:48 am

Strange tot in light of broker upgrades as reported in BT

But the boss of Rio Tinto (one of the three cos that supplies China with iron ore)  is  concerned that the global economy is very volatile). He is concerned about a slow down in China. But if Intel’s more optimistic view is correct, let the gd times roll on.  Article on the contrasting view of both companies.

And if the economy is so strong,why the slowdown in house sales in June and the slight dip in retail sales? Article reporting this news.

GE: Opportunities beyond China

In China, Temasek on 07/07/2010 at 5:31 am

Jeffrey Immelt, General Electric’s chief executive, has launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals.

He warned that the world’s largest manufacturing company was exploring better prospects elsewhere in resource-rich countries, which did not want to be “colonised” by Chinese investors. “I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.” Mr Immelt acknowledged the importance of the Chinese market, which contributed $5.3bn to the group’s revenues last year — FT.

But US$5.3 bn is a peanutty 3% of 2009 revenues, and China will always need natural resources, so his plan to do without China is credible, unlike Google’s*.

Hmm maybe, China-fixated Temasek and its TLCs can learn from this? In their case, diversify away from China without losing the opportunity cost of not investing direct in China. Get what I mean?

Temasek Gp are big in China

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

Mentality of China bulls

https://atans1.wordpress.com/2010/03/12/understanding-the-mentality-of-china-bulls/

*But Google has a cunning plan to use Android to soften losses on search in China. Never count Google out.


China: a problem S’pore doesn’t have

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

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

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

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

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

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

Midas: Here be value?

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

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

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

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

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

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

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

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

S=US$

Frontier Markets: Do they offer value?

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

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

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

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

Interested in Cambodia and Laos?

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

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

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

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

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


Sino-E: Expectations raised then dashed in three weeks

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

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

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

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

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

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

AIA deal: Why big Pru shareholders upset

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

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

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

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

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

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

Temasek: Update on its China bank investments

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

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

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

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

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

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

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

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

Full article from NYT.

Update

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

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?

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.

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

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

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

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


“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?

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.

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.”

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.

Why?

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.

DBS: What the new chairman should be looking at II

In Banks, China, Corporate governance, India, Indonesia on 30/03/2010 at 6:04 am

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 Accounting, China, Corporate governance on 29/03/2010 at 5:08 am

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?

New SGX ETFs for Indon and China exposure

In China, Economy, ETFs, Indonesia on 22/03/2010 at 5:21 am

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.

Understanding the mentality of China bulls

In China, Economy, Property, Temasek on 12/03/2010 at 5:23 am

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/

Where shld Standard Chartered base its CEO?

In China, India, Temasek on 04/03/2010 at 5:28 am

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.

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

In Accounting, China, Corporate governance on 02/03/2010 at 5:38 am

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-Chips: A warning on the prospectus?

In China on 26/02/2010 at 5:56 am

SIAS presient was reported in Wednesday’s ST as saying, “If ever a China company is listed in S’pore which has got business in China, management in China and money in China — please think 100 times before you put your money into the company.”

This should have been put on the prospectus of all S-Chips. But don’t you think it is too much to ask SGX to make this warning mandatory? It needs new listings, even tiny ones. At a time when there is talk of a billion dollar China co wanting to list here, HK is preparing for a US$20bn listing of AIG’s Asian life insurance operations. It could come as early as April this year.

But maybe responsible IPO managers should include this in bold lettering on the cover of future S-Chips IPOs?  And with the appropriate changes, for any IPO where only the listing is here?

Sino-E’s board are powerless/ SIAS needs to growl louder

In Accounting, China, Corporate governance on 25/02/2010 at 5:31 am

I’ve always wondered why SIAS had been quiet on the lack of news from Sino-E’s board on what was being done to protect the assets and business of the company. I had tot that maybe company had quietly assured SIAS that things were in motion but that publicity could cause problems.

So I was surprised to read in Wednesday’s papers that SIAS had gone public on Tuesday, saying it had asked asked questions since December, but had been ignored. ST also reported that Sino-E had responded in a sense. No wonder it didn’t earlier reply or inform shareholders, the news is not reassuring. Bugger-all has been done other than reconstituting the board and appointing a CEO. Production has ceased, and the cash has not been secured.

Though to be fair, the board is S’pore-based, while business, assets are in a faraway district in a faraway province from Beijing or Shanghai in China.  And the board could could argue that since the shares are still suspended, there was no need to upset shareholders with the bad news.

Let’s hope that SIAS has learnt that a nicely, nicely approach could be taken as a sign of weakness and impotence.  More and louder growls, pls. If nec, howls pls. Wolves are feared: lap dogs and toothless mutts are not.  As MM has said, S’poreans needed to be spurred.

Temasek: the significance of Seatown

In China, Investment banking, Temasek on 22/02/2010 at 3:45 am

Seatown is Temask’s new toy: an absolute return fund. But with a reported US$3 billion available for playing in the pen:in the context of Temasek’s reported US$120 billion in assets, and the world’s biggest hedgies http://hedgefundblogman.blogspot.com/2009/08/top-100-largest-hedge-funds.html, US$3 billion is”Peanuts,” as Mrs Goh Chok Tong might say. Seatown doesn’t even make it to list of 100 biggest hedgies: the smallest of which manages US$4 billion +

So what is Seatown’s significance?

Since Ho Ching became its CEO, Temasek has done a series of big deals, taking controlling or strategic stakes in high profile companies like Shin, Merrill Lynch, Barclays, ABC Learning, Bank of China, China Construction Bank , Hana, ICICI Bank, NIB Bank, PT Bank Danamon Indonesia, and Standard Chartered.

Some were real dogs, others were good performers, and the balance were average performers.% of those still in its portfolio.

But whatever they were, the size of the investments meant that they could not be done discreetly. When things went badly, S’poreans knew, and knew whom they blamed.

It could be that Temasek will slow down Buffett-size deals, using Seatown to do lots of smallish deals that will not appear on the radar, and depending on rapid turnover (i.e trading) to make $. And if Seatown comes a cropper, US$3 billion is a rounding error. But if it does well, financial engineering will magnify its returns: supposing if Temasek funds Seatown from the proceeds of its recent bond issues, the cost of the capital could be “peanuts”, leading to great returns when calculated using the cost of these bonds. Or so I’ve been advised by the same people who tell me that SingTel should have taken an impairment charge (at least A$3 billion) for Optus and SIA for Virgin Atlantic (sum unknown but sure to be in billions whether in US$ or sterling).  And no they are not members of SDP, they are accountants’ accountants.

Moral of the story: don’t do a Buffett, unless you got a brain to match. Scholars, SAF generals, or FTs from top biz schools do not a Buffett make.

Maybe Temasek thinks that a Soros or John Paulson can appear from one of these  scholars, SAF generals, or FTs from top biz schools, though based on the exit from BoA (that bought ML), “Dream on baby”. John Paulson was buying as Temasek was selling.

And maybe the Chinese can teach Singapore Inc something. FT reports: “China Investment Corp, Beijing’s sovereign wealth fund, has agreed to invest $1.5bn in the private equity secondary market through custom accounts with three of the biggest specialists in buying second-hand buy-out and venture capital fund interests.

‘Lexington Partners, Goldman Sachs and Pantheon Ventures have each agreed to manage $500m for CIC through special accounts, which are to be kept separate from their main funds … The move is the biggest injection of capital into the secondary market.”

“It underlines how CIC is using its size to win special terms from private equity groups, including lower fees and transfer of knowledge on specialist markets … The era of big public pension funds and sovereign wealth funds accepting the same terms as smaller investors is over,” David Rubenstein, founder of the Carlyle Group, said.”

Outsource to the best, using wagga to get good terms.

But then the S’pore govmin is as mercantilist as the French.

Sino-Environment: Still waiting for reassurance or bad news

In China, Corporate governance on 21/02/2010 at 6:02 am

Just before CNY, Sino-Environment annced that one of the directors had become CEO.

Well and gd that co has a CEO.

But if I were a Sino-E investor, I still want to know the state of the businesses, whether the assets are still there, and  if the assets are being looked after properly. In short whether the new board is in control on the ground in China.

On this silence.

CapLand: Time to buy?

In China, Property, Temasek on 20/02/2010 at 6:52 am

I read in the media yesterday that Credit Suisse analysts are saying that China’s property stocks, trading at the cheapest level among Asian peers, may be “worth another look”. Today reports that they “have underperformed the MSCI China Index by almost 30 per cent since July and are trading at a 7-per-cent discount relative to the region based on a model that values companies’ net assets and return on equity,” quoting Credit Suisse.

As CapitaLand’s 11% fall from its January highs can be attributed to its mega China deal coming just before China tightened its credit policies; since the US$2.2bn deal giving it seven sites located in Shanghai, Kunshan and Tianjin, takes the group’s Chinese portfolio to 36% of assets from 28%; and since it wants to increase its China exposure to 45% of assets:  Shouldn’t CapitaLand be on the buy list of China- property bulls?

Why my “obsession” with TLCs in China

In China, Investments, Temasek on 09/02/2010 at 5:12 am

No, I’m not a member or covert supporter of Dr Chee’s SDP, always looking to run-down S’pore.

I try to be a “special situations” investor: looking for situations where the conventional wisdom is wrong. At present, the conventional wisdom on China is “Short-term bear, long-term bull”. So CapitaLand is punished by the market for their US$2.2 billion deal while, the seller, OOIL’s share price is stable in a weak market.

But CapitaLand and DBS already big in China, want to be bigger: and KepLand are rumoured to be thinking of doing a big( S$186 million) property deal. Temasek have big direct investments too. They are big investors in several private equity funds and have big holdings in two Chinese banks: 4% of Bank of China and 6% of China Construction Bank*.

They are going against the consensus view that the least one can do is to be cautious in China.

If the listed TLCs get China right, they could be 20-baggers.  Hence my interest in whether they are right. As for Temasek getting it right, Temasek, as its CEO says, belongs to us S’poreans.

——————————————————

Additional tots — 15 Feb 2010

But what are the odds of them getting it right?

Adam Smith (the economist. not the great US financial commentator of the 80s) wrote, “the chance of gain is by every man more or less overvalued”.

This more or less explains why great investors (defined here to include traders) like Buffett, Soros, Paul Johnson, Jim Rogers, Peter Lynch, Anthony Bolton and the old Kuwait Investment Office are so rare. They are better at judging the odds of getting things right.

And why the smart people in Temasek and GIC make mistakes. They are just like the other ordinary smart people managing money in SWFs, endowments, collective funds, pension funds, insurance companies and other institutional investors.

And why the smart people in CapLand and KepLand could be wrong. They could be like the smart managers in Time Warner that decided to merge Time Warner with AOL, or the managers at Sembcorp when they decided to go into property and Delifrance.

———————————————

Incidentally, a BBC Online article examines what is driving the  Chinese property market:

Demand for housing

Louis Kuijs, an economist at the World Bank in Beijing, says China still needed more houses, despite several years of fast-paced building, “In a rapidly growing country like China that still has a low stock of housing, there is a fundamental demand for new homes.”

Developers looking for sites

“In Beijing the search is still on for new sites for development.”

People still buying hses as an investment

One man  says he has accepted an offer to relocate. He already has two apartments in Beijing and he is going to use the compensation to buy a third.

Full BBC online article

CapLand (and KeplLand?) could be right abt China.

*’We work really closely with Sasac, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of frankly defaulting loans already in China that no one is doing anything about,’

Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference last week. ‘At some point, there’s going to be a reckoning for that.’ — quote from BT.


TLCs in China: Groupthink or Mastermind at work?

In China, Property, Temasek on 08/02/2010 at 5:32 am

“The property investment arm of Morgan Stanley is in final talks to sell a Chinese apartment complex to a unit of Singapore’s Keppel Land … The overall value of the luxury apartment property is estimated at about 900 million yuan (S$186 million) and Morgan Stanley has owned it for about five years,” from a BT report last week.

So KepLand are super bullish on China, just like fellow-TLC CapitaLand.

And DBS is  ranked among the top three foreign banks, in terms of assets (2009 KPMG Research China Banking Industry), said DBS CEO Piyush Gupta. The bank expects to open 12 more branches over the next five years in China, he added. It currently has eight branches and seven sub-branches in eight cities across China.

One wonders if  groupthink is at work in the Temasek group. In addition to the investments of these two property companies, and DBS, Temasek are big in China.  They are big investors in several private equity funds and have big holdings in two Chinese banks: 4% of Bank of China and 6% of China Construction Bank.

Talk of a mega bet on China if all these are aggregated.

Or could there be a mastermind directing that investments be made in China? Temasek and the government have consistently denied that the government direct Temasek’s actions and that Temasek direct the actions of the companies where they have controlling interests.

Still the many S’poreans (I’m not one of them) who are  conspiracy theorists  or who practice the art of guessing what is going on behind the scenes — dietrologia in Italian, literally “behindologypoint” –would say, “They would say that, wouldn’t they?

And point to three pieces of “evidence” that there is a controlling brain that wants to bet big in China.

One is that in the late 1990s, when the government exhorted Singapore cos to go abroad, SingTel and DBS made very expensive acquisitions in Ozland and HK respectively.

Then there is MM Lee’s remark when asked why he intervened in an SIA dispute between its mgt and pilots. He is reported to have said,”We own it,” or words to that effect.

Finally, PM, SM, MM and other cabinet ministers are bullish on China.

CapLand: What price the mega China deal?

In China, Property, Temasek on 03/02/2010 at 6:19 am

The ace, veteran journalist from MediaCorp’s freesheet praises CapitaLand for the US$2.2 billion ($3.09 billion)  purchase of Orient Overseas Development Ltd’s (OODL’s)  assets comprising  seven sites totalling 1.48 million square metres in Shanghai, Kunshan and Tianjin. OODL is the Chinese property arm of  HK-listed OOIL, controlled by the family of former Hong Kong chief executive Tung Chee Hwa.

We are told of why it is a gd deal despite the subsequent curbs on property speculation by Chinese authorities (“a blessing in disguise”)  and how CapLand’s CEO won a high stakes poker game by refusing to bid higher.

Gee wiz, the CEO sounds like some super hero in action.

The problem with this analysis  is the share price of CapLand, down 13% from its high when the deal was announced and close to its  October lows in last year.  Meanwhile OODL’s parent is trading a lot higher than its October 2009 price, and the fall in HK, has affected it slightly.

Conclusion: mkt thinks CapLand got its timing wrong https://atans1.wordpress.com/2010/01/21/capland-but-is-he-lucky/

And trumpets pls https://atans1.wordpress.com/2010/01/19/capland-getting-it-very-right-or-very-wrong/

On a more serious note, the ace journalist had to concede that ” despite CapitaLand’s connections in China, it doesn’t wield the same clout as the Tung family in that country … The Orient land bank was acquired over some time, noted a China property source. He pointed out that on its own, CapitaLand wouldn’t probably have been able to accumulate this prime parcel on its own.”

Waz this? I tot we had MM Lee, the adviser to Chinese leaders? And didn’t S’pore Inc pay a treasure in Suzchou etc to be an “old friend of China”?  Or is all these nothing but spin from our MSM? Or the fantasy of the S’pore government?

Sino-E: Waz up Doc? Again

In China, Corporate governance on 29/01/2010 at 5:45 am

Since https://atans1.wordpress.com/2010/01/10/sino-e-where-are-the-managers-doc/ there is no news on appointment of on-the-ground managers, or reassurance that the assets and business are being looked after properly by China-based managers.

Board, if you are helpless, say so leh? No shame telling shareholders that with you in S’pore and assets and business in a far away province in distant China. Even the Chinese emperors admitted that there were parts of China where they could do bugger-all.

Temasek and China’s Bad Loans

In China, Economy, Temasek on 24/01/2010 at 5:16 am

Temasek has big holdings in two Chinese banks: 4% of Bank of China and 6% of China Construction Bank.

So this is worrying: “For the banks themselves, the lending splurge threatens to undo significant progress made in recent years in reducing ratios of problem loans to total lending.” Part of of an IHT article.

It goes on:

“A decade ago, Chinese banks staggered under a load of bad debt, reported by the Bank of China at nearly 40 percent of their total lending in 1999. In 2000, the nonperforming loan rate for the major commercial banks in China stood at 29 percent, according to official statistics and in the view of many Western analysts who questioned Chinese accounting standards, it was probably far higher. Nonperforming loans are defined as those on which repayments are more than three months in arrears.

‘The government vowed to bring the rate down to 15 percent by 2005, and by the end of 2007 it had dropped below 7 percent. One factor behind this reduction was the need for Chinese banks to attract investment from private and foreign sources.

‘This steep decline to single-digit levels would seem to tell a heroic tale of a banking system that solved its problems, but not all analysts take it at face value. Skeptics say the cleanup was largely based on sleight of hand, involving specially established asset management companies, speculative bonds and fuzzy government guarantees that together did little more than kick the problem down the road.

‘Even the least cynical analysts acknowledged that lower ratios partially reflected the dilution of bad loans in a vast sea of new lending, some of which would go bad but was still too recent to register as nonperforming.

‘Yet such doubts and qualifications notwithstanding, few deny that some degree of bad debt reduction was genuine and that overall loan quality among Chinese banks has improved from the worst of times.

‘Now, however, new concerns are emerging over the state of Chinese banks and their balance sheets. Zhou Xiaochuan, governor of the People’s Bank of China, the country’s central bank, spoke publicly of such worries in early January, and hinted at a lending slowdown.

‘Large credit flows, “will not only go against the objective of economic structural adjustment, but will also pose bank lending quality risks,” Mr. Zhou said in a magazine interview.”

Note that the Bank of China said on Friday that it plans to sell up to Rmb40bn ($5.86bn) of convertible bonds toto boost its capital base and allow it to meet stricter regulatory and capital requirements following.In 2009,  Chinese banks lent a total of Rmb9,600bn, more than double the volume of new loans made in 2008.

Note also that the announcement came just after the authorities acted to check  surging loan growth by ordering some banks, including Bank of China, to temporarily suspend the granting of new loans.

As you will be aware, Beijing is worried about rising inflationary pressures and the  quality of new loans, the by-products of its expansionist economic policies.

Update 25/1/09

BOC  told analysts it may raise additional capital by selling new shares in Hong Kong, in addition to the U$5.9bn Chinese convertible bond sale.
.

CapLand: “But is he lucky”?

In China, Property, Temasek on 21/01/2010 at 6:50 am

Napoleon had many good officers. So when he was appointing generals, he asked, “But is he lucky?”. He knew the importance of chance in his success and at his last battle, Waterloo, his luck ran out. But as one of the generals who defeated him said, “It was a near-run thing”.

The question buyers of CapLand on Tuesday should be asking is whether the mgt of CapitaLand are lucky? Two days after anncing a US$2.2bn China property deal, https://atans1.wordpress.com/2010/01/19/capland-getting-it-very-right-or-very-wrong/the Chinese authorities ordered a serious of credit tightening measures including ordering some commercial banks to stop lending for the rest of January. Global equity markets fell.

CapLand mgt could be lucky. Markets have a habit of shrugging off China fears. Remember the recent falls and recoveries?

But for the moment the seller’s mgt must be considered “lucky”.

Global diversification via one blue chip

In China, India, Investments on 20/01/2010 at 6:14 am

Tony Tan, deputy chairman of GIC is optimistic about Asia’s prospects and expects it to enter a ‘Golden Age’ in the next decade.

So if you believe him (remember MM Lee, GIC’s chairman, talked of something similar just before the global credit crunch and subsequent global recession), what to buy leh?

Just as CapitaLand is a “no-brainer” China play, maybe  this is “no brainer” for dummies to get global exposure?

“[W]ill continue to outgrow America over the coming years. Already 60% of its sales are overseas, and its bridgehead into China and India looks more robust than most.”

Of course you could buy an ETF that invests in a global index.

CapLand: Getting it very right or very wrong

In China, Economy, Property, Temasek on 19/01/2010 at 7:15 am

CapitaLand is obviously not a bear on China.

CapitaLand has done a deal in China spending more than the  S$2.7bn (US$1.9bn)  it raised in November through an IPO of CapitaMalls Asia, its shopping centres subsidiary. (I had tot then lowering China exposure was the unstatedreason for the IPO.)

It bought for US$2.2bn seven sites located in Shanghai, Kunshan and Tianjin, taking the group’s Chinese portfolio to 36% of assets from 28%. It wants to increase its China exposure from 28% of assets to 45%. Hong Kong’s Orient Overseas International  shipping group was the seller.

Funnily, this at a time when even the Chinese government is talking of a property bubble in China what with residential prices in the 70 main cities accelerated in November to the fastest pace in 18 months.

“Qi Ji, China’s vice-minister of housing and urban-rural development, has told the Financial Times that house prices have reached levels that were “obviously too high”, particularly in large coastal cities,” reports the FT.

Yes, yes:  I know CapitaLand is into commercial space, offices and malls (Apartments are tagged on on the top). But recent US experience shows that the damage in the residential sector can affect the commercial sector.

Note that China super bull, Jim Rogers, is avoiding recommending property to investors: in 2008 he was negative about Chinese property.

Hedgies, make a bet that CapitaLand is wrong?

Why mkts recovered so quickly

In China, Economy on 16/01/2010 at 5:25 am

The reason why China’s action was a two-day wonder at most (except for penny stock punters — Catalyst index was down 6% on Friday): the tightening was “peanuts”. So markets decided to resume the “drugs, sex and rock-and-roll” partying; all aided by alcohol: “Kum pei, Bottoms up, Mud in yr eye”? Shades of Charles Prince’s infamous July 2007 quote? “As long as the music is playing, you’ve got to get up and dance. We’re still dancing.” the then CEO of Citi told the FT. The response at the time.

And yes, I know the Western markets took a fall on Friday. But let’s see what China does on Monday, not the decadent bourgeois West.

A week is a long time

In China, Investments on 14/01/2010 at 5:41 am

The “future’s bright” buying we saw  in the S’pore mkt in the first week of 2010 has turned to “no future” selling, since Tuesday. Looks like the penny-stock syndicates may have got their timing wrong.  Watch out for forced selling as punters ignore margin calls.

Blame the Chinese government for spooking global mkts.

To recap:

— China increased the amount banks must set aside as reserves in the clearest sign yet that the central bank is trying to tighten monetary conditions amid mounting concerns of overheating and inflation as a result of the credit boom.

— The central bank also raised interest rates modestly in the inter-bank market on Tuesday for the second time in less than a week.

Trumpets pls for my 2010 strategy: ” Look for strong balance sheets and dividends that will compensate if brokers’ optimism turn to be wrong.” https://atans1.wordpress.com/2009/12/31/investment-strategy-for-2010/

We could be going back to the future. In 1993, America discovered emerging Asian mkts. Come Jan 1994, these mkts were expected to continue flying. Then Greenspan started raising US rates.

Funds started selling and mkts went down and quiet. This time it could the emerging hegemon that causes investors and brokers to  reassess their bullishness.

New reason to be a China bear?

In China on 13/01/2010 at 6:30 am

Came across this scary tot. What can happen as a consequence of 30 million Chinese males having problems finding wimmin.

Sino-E — Where are the managers, Doc?

In China, Corporate governance on 10/01/2010 at 11:01 am

If I were a small shareholder, I’d need some more information on what is happening.

Following last Sunday’s announcement that the three executive directors (EDs) had resigned, the independent directors (IDs), by then the only remaining directors, said mid-week they had made three new board appointments and re-appointed the former financial controller.  Two were IDs and one was a non-executive.

But till time of this post, nothing has been heard about who is managing the company in the absence of the CEO or any ED in China. And if no one is managing, who will manage it and when? Waz the point of all these directors based here? Everything of value is in China.

The IDs should be telling shareholders what they are doing to ensure that the assets of the company are not plundered or the business is not misrun in the absence of the EDs. If there are already gd managers on the ground, shareholders should be told. If there are none, why were there no plans for managers to replace the EDs? After all the IDs were seeking to remove the then  EDs.  And when will the new managers are expected to be in place? Shareholders need this information.

Surprised

  • SIAS not publicly commented on this;
  • SGX not publicly querying company; or
  • none of the usual corporate governance pundits are even raising this issue.

But who knows, maybe behind the scenes? Somehow I doubt it.

Is all this corporate governance activity by the two IDs and talk by others, Wayang or shadow puppetry in its most sophisticated form?

A small shareholder might very well think that. I couldn’t possibly comment

Sino-E: Even IDs are in the dark

In China, Corporate governance on 05/01/2010 at 6:20 am

After the Chinese police refused to proceed against the chairman as requested by the independent directors, the three executive directors  resigned, leaving no-one to run the company. This mass resignations seems to be taunting the IDs as they are resigning after a favourable police decision. They had refused to resign for months and the IDs had to get a court order to call for an EGM to remove the EDs.

Adding insult to injury, the company said IDs “will continue to keep shareholders updated of all material developments”.

Err … But when BT asked the IDs for comments, they said that they are seeking to clarify the situation before issuing any response. As at the time of this posting, no annc has been made by the IDs.

They must be confused and worried because with the EDs resignation, no-one is managing the company. And some workers are threatening to strike over the IDs actions. And they could be sued by the chairman and shareholders.

Great way to start 2010.

They have the responsibilities and powers of directors but are powerless in reality. The co’s assets are in a far away province of a far away China. Taz the reality.

Sini-E: The plot thickens

In China, Corporate governance on 03/01/2010 at 5:29 am

Recently I had pointed out that the independent directors, despite getting a court order, had done nothing to call the EGM to sack the executive directors. I speculated that maybe they had found out that the EDs had the votes   https://atans1.wordpress.com/2009/12/31/sino-enviro-waz-up-doc/ .

Well there is now an annc on company’s site saying that that the chairman had been cleared by the Chinese police of allegations made against him by the IDs.

Ouch! This is not good news for the IDs. It undermines the allegations that they are making against the EDs. As the Chinese docs are dated 25 Dec, maybe they knew about it and hence did not call EGM.

If I were an ID, I’d be concerned about the chairman suing, whether I have the appropriate insurance policy, and whether PwC can be sued. I”m sure PwC are consulting their lawyers and checking their insurance policies.

Wonder what SIAS will now say? They have been supportive of the IDs actions.

All goes to show: Taking an IDship in a company listed in one country, domiciled in another with assets in a third where there are problems with the rule of law is not to be taken lightly. It, like investing, in such a company can be the stuff of nightmares.

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