Archive for the ‘Emerging markets’ Category

HoHoHo: Relying on mgt incompetence at StanChart

In Banks, China, Emerging markets, India, Temasek on 11/10/2015 at 6:22 am

Standard Chartered has to hope that a quarter of its top brass really aren’t very good at their jobs. That is the portion of the UK-listed emerging markets bank’s 4,000 most senior staff who will find themselves surplus to requirements, Reuters reported on Oct. 9. Although StanChart could gain from a big cull, it’s a risky move.

So should HoHoHo and us S’poreans.

Will ang mohs or Indians get terminated? Not many Chinese to sack despite 50% of revenues related to China business. (Related post: StanChart is Little India)

More for HoHoHo to ponder when she returns to work

StanChart’s shares have underperformed the European peer group by 30 percentage points this year. The bank’s 7.7 percent return on equity in 2014 was unacceptable, especially as it was earned on a relatively low 10.7 percent Basel III capital ratio.

— Some bearish analysts reckon Winters should completely cover the bank’s $8.7 billion of non-performing loans to better match Asian peers like DBS. That would cost $4 billion, more than StanChart’s expected $3.1 billion of forecast 2015 pre-tax profit.

HoHoHo: StanChart’s capital shortfall

In Banks, China, Emerging markets, Temasek on 09/10/2015 at 1:08 pm

FT reported earlier today:

Goldman Sachs analysts predicted on Thursday that StanChart would face an estimated capital shortfall of $4bn in the Bank of England’s stress tests, which measure how the lender would fare in an emerging markets crisis.
But Goldman estimated that StanChart could cover this shortfall by selling its stakes in several Asian lenders and exiting low-returning clients and businesses, such as its smaller retail branch networks.

Related post: Why Little India now includes Marina Bay

But let’s be fair: When emerging mkts and commodities (StanChart has high levels of lending to the crumbling commodities sector) were fashionable 9lucrative) it was the right bank to be invested in. FYI according to Nomura 50% of its revenue is related to China.

Given  the exposure to China by HoHo Ho and GIC, ttme for Ah Loong to call Xi and offer him advice on how to fix the Chinese economy? Can lend him Tharman who is lauded in int’l circles.

Noble House: Funny this

In China, Commodities, Corporate governance, Emerging markets on 08/10/2015 at 1:38 pm

Noble House is HQed in HK, and listed in S’pore. But its new head of internal audit is based in Stamford, Connecticut in the US: huh? Given all the problems it is facing especially concerns about its accounting practices, I find it strange that the chief internal auditor is not based in its HQ, but a long way away.

The guy has good credentials as an internal audit manager but given that he’s based a lo9ng way from HQ, how is he going to manage his team? If he is employed more for his analytical skills rather than as as a hands-on mgr, why not appoint him as an adviser to the audit committee and the CEO.


Noble has appointed a new head of internal audit. In an email Noble Group CEO Yusuf Alireza said Mr Frank Russo will take charge with effect from Monday (Oct 5).

Mr Russo will be based in Stamford, Connecticut in the US and he will report directly to Mr Alireza and the audit committee.

Mr Russo was previously at GE Capital, where he served as managing director and head of audit for the Energy, Aviation and Insurance businesses. Prior to GE, he spent over eight years at Deloitte and Touche as a senior advisor for Governance, Regulatory and Risk Strategy.

China really tua kee

In China, Commodities, Emerging markets, Energy, Hong Kong on 26/09/2015 at 7:20 am

China's imports

Related post:


Why M$ fall should worry

In Currencies, Emerging markets, Malaysia on 15/09/2015 at 1:35 pm

FX reserves

The ringgit lost 20% (ine of the worse performing currencies) of its value against the dollar this year despite Bank Negara spending 29% of its FX reserves to slow the fall. If it had spent less, rinngit would have fallen a lot more.


HoHoHo: Temasek & GIC China plays

In Banks, China, Commodities, Emerging markets, GIC, Temasek on 14/09/2015 at 11:03 am

Reason for Glencore (GIC) and StanChart (HoHoHo back at work at Temasek soon) on the chart


Even small changes in demand from China’s vast economy can have a knock-on effect on prices.

As Glencore has found out to its cost.


FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015. More

NYT Dealbook last Tuesday.

MORE SIGNS OF A SHARPER SLOWDOWN IN CHINA Once the world’s workshop, China’s exports are facing their most protracted declines since the global financial crisis, Neil Gough writes in The New York Times. China’s trade slump deepened in August – an indication of a sharper industrial slowdown at home and weaker demand from overseas. Exports fell 5.5 percent in August and 1.4 percent in dollar terms in the first eight months of the year.

The country’s manufacturing sector is losing competitiveness as labor costs rise and the renminbi remains relatively strong despite its devaluation, making Chinese goods more expensive for foreign buyers.

Imports are falling even more steeply. They fell for the 10th month in a row in August, recording a drop of 14 percent by value. Economists blame the rout in commodity prices, but imports have fallen in volume too. The falling imports of industrial raw materials point to weakening domestic demand, driven by a slump in manufacturing and new housing construction.

The weak trade data weighed on markets, with Japan’s main index, the Nikkei 225, closing 2.4 percent lower. In Shanghai, stocks initially fell when the trade figures were released, but heavy buying in the afternoon set off a rally. Shares closed 2.9 percent higher – a pattern seen often in recent weeks, as China’s government appears to continue its efforts to support the slumping stock markets.

China’s leadership made the surprise decision last month to devalue the currency by about 3 percent, the renminbi’s sharpest drop in two decades. But the central bank has since intervened in the markets on a massive scale, fighting pressure to weaken the currency further by selling dollars and buying renminbi.

As a result, China is burning through foreign exchange reserves at the fastest pace yet. Reserves fell by nearly $100 billion in August alone, though they are still huge at $3.56 trillion.

Still, analysts say that the recent devaluation was most likely too modest to give China’s exports much of a boost, and that the exchange rate is still stronger than China’s slowing economic growth would otherwise support.

HoHoHo: Two brokers’ views on StanChart

In China, Emerging markets, Temasek on 10/09/2015 at 12:48 pm

From today’s FT (apologies for lifting)

With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.

A FTSE 100 rebound helped lift Standard Chartered away from its six-year low on Wednesday.

With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.

“The faster you drive into a crisis, the more you will get hit,” Bernstein said. “The speed at which the bank is hitting turbulence is dramatically different between the last crisis and this one.”

Bernstein added that, while StanChart does not need to raise cash, new chief executive Bill Winters may want to top up capital buffers by $3bn-$4bn “to give it significant leverage when the cycle turns next year”.

StanChart rose 3.2 per cent to 744p as the wider market extended its rally into a third day.

Monday’s FT (Again apologies for lifting. Promise no more after this)

shares hit a six-year low on Monday as worries grew over the depth of restructuring required under new chief executive Bill Winters.

The Asia-focused lender slid 1.7 per cent to 701.4p on reports it may cut a quarter of senior banking roles as part of a new business plan expected within the next few months.

Funding a deep restructuring would put further pressure on StanChart’s cash flow and capital ratios, which already include $49bn of commodities exposure and a further $43bn of risky Chinese and Indian debt, said analysts.

StanChart might need to raise as much as $5bn to cover bad loans, in addition to between $3bn and $4bn to boost its capital buffer to peer levels, forecast Morgan Stanley.

While the broker did not assume StanChart will need to launch a cash call, it put a one-in-five chance on China causing an Asian slowdown economic equivalent to the 1997 crisis, under which it said the shares would be worth 410p.



Sotong investors/ Some are moving on

In China, Emerging markets on 31/08/2015 at 1:43 pm

INVESTORS SEEK SIGNAL IN THE NOISE Asian markets continued to soar on Friday, on the back of a global rebound on Thursday. The fear was palpable just days ago, but by the end of Thursday, the gloom had dissipated, DealBook’s Peter Eavis reports. The Standard & Poor’s 500-stock index had climbed 6 percent from the low of Tuesday’s closeby the end of Thursday.

The positive trend continued during Asian trading on Friday. Stocks in Shanghai closed up 4.82 percent after another late-day surge, while the Nikkei 225 finished the day up about 3 percent.

Bystanders were left struggling to comprehend the gyrations. Even Wall Street pundits are seeing mixed messages.

At Tuesday’s low, a bear market – when stocks decline 20 percent or more – did not seem out of the question. But after Thursday’s performance, it seemed plausible that the six-year bull market that started in 2009 might resume.

There was, in fact, a string of positive economic data released this week. Spain’s economy is now growing at a rate of over 3 percent, while revised gross domestic product numbers showed that the United States economy grew at a 3.7 percent rate.

There are still plenty of problems that could drag down global growth. China’s leaders have intervened to shore up the stock market, promote bank lending and loosen monetary policy, but these moves could well stifle the role of market forces.

The pressure on emerging markets is unlikely to go away. Companies that have borrowed in dollars may find it harder to pay back debt as their currencies lose value against the dollar. The resulting slow growth in developing countries might squeeze demand for goods and services from the United States and Europe, dampening growth there too.

If this happened, central banks like the Federal Reserve could step in to stimulate economies. But their intervention can create uncertainty over the long term as investors wonder whether stock and bond prices are rising because of central bank stimulus and worry about what will happen once that support is pulled away. Analysts see problems in the underlying economy that they say central bank stimulus, or quantitative easing, cannot fix.

When nobody knows when the stimulus will end, markets move unpredictably, as investors find different ways to interpret pronouncements from central bankers.

The one reassurance is that in recent history, short-lived stock market corrections that have not turned into bear markets typically have not stopped businesses from investing and people from spending.


James B. Stewart: Top Money Managers Take Their Losses, and Move On Fund investors are looking for opportunities in global stock markets, where share prices have been battered in recent days.

HoHoHo: StanChart has another problem

In Banks, China, Emerging markets, Temasek on 27/08/2015 at 1:42 pm

StanChart is expected to call for a rights issue by yr end. But mkt turmoil will make this difficult and expensive.

FT reports

“StanChart has been one of the hardest hit by the market turmoil. Shares in the bank, which is listed in London but specialises in Asia, the Middle East and Africa, have fallen a quarter this month and are down two-thirds in the past two years.

‘One investment banker said worries about slowing Asian growth and falling commodity prices risked creating “a perfect storm” for StanChart that would make it “much tougher to sell new shares” to investors.”

Note that FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10% of HSBC’s came from China proper.

And that “from trading at more than double its tangible book value, its market value is now a third less than its assets, a discount even to big victims of the financial crisis, such as Royal Bank of Scotland.”


HoHoHo, StanChart got wrong CEO?

In Banks, Emerging markets, Temasek on 24/07/2015 at 1:04 pm

But first, shumething from the respected Terry Xu of TOC

Standard Chartered Shakes Up Management Structure The British bank will be organized around three business lines, and top managers will report directly to the new chief executive, William T. Winters.

Did the recruiters at Standard Chartered and Credit Suisse get their dossiers mixed up?

Bill Winters is beginning his tenure as the new boss of the London-based emerging market lender at around the same time that Tidjane Thiam takes charge of the Swiss bank. Both are capable financial executives, but their experiences seem uncannily to better suit the other’s job. That they’ve wound up where they did, rather than where their resumes would suggest they should have, may say more about where the institutions they lead are headed.

Winters, who on July 19 reshaped StanChart’s management structure so that the heads of its major business units now report to him directly rather than to deputy Mike Rees, made his career leading JPMorgan’s investment bank in London … This would appear to eminently qualify him to run Credit Suisse. Its investment bank – stronger in the United States than elsewhere – competes directly with JPMorgan. And its private bank needs to more aggressively poach the very rich folks that Renshaw Bay, the firm he founded, calls customers.

Instead, $48 billion Credit Suisse got an insurance executive, French-educated Ivorian Thiam. True, he showed an affinity for deals as chief executive of Prudential, the UK insurer: an aborted attempt to snatch American International Group’s Asian operations was particularly bold. Private banking arguably should be run more like insurance than investment banking or trading.

Similar thinking prevailed when Barclays named a retail banker to the helm three years ago. But the British lender let Antony Jenkins go on July 8 partly because it needs someone capable of making an investment bank hum.

Though Credit Suisse may not be pre-eminent in Asia, Thiam’s experience there could help rectify that. Of course, that’s the region where $39 billion StanChart is strongest. And Africa, where Thiam was born, is one of StanChart’s prime growth areas. By contrast, Winters’ orientation has been to developed markets – places his bank shows zero interest in pursuing.

HSBC’s 1979 gift keeps paying for itself

In Banks, China, Emerging markets, Hong Kong, Uncategorized on 01/07/2015 at 1:33 pm

Li ka-shing accounted for 70% of HSBC’s global M&A advisory work in 2015 according to the FT.

HSBC sold him its stake in Hutchison Whampoa at a very special “For you only” price in 1979. This gave him face and showed that HSBC was aligning itself with the Chinese tycoons not the ang moh houses like Jardines. The then Oz CEO of Hutch said he could have gotten a better price for the stake. He was told by HSBC to mind his own business because he was an employee. HSBC had hired him to turn round Hutch which he.

Long term greed.

Shareholders need to find a new Sandberg and Purvis combination, with John Bond assisting. We know the damage (think sub-prime and Safra) that Bond can do when not supervised by adults. But I’m to harsh. During his tenure, HSBC had a one-for-one bonus and the ex-bonus share price almost reached the cum price. And there was a deeply discounted share issue to pay for the losses in the US.

But at the very least we need a  home-grown John Cryan*. Off with Gulliver’s head.

Gulliver sucks, like Anshu Jain and has to go. Capital markets investment bankers are not usually rational, cold and deep thinkers

As Lex rightly pointed out a few weeks ago, Hongkong Bank is trying to cut fat and grow muscle. Us sporty fatties know that this is real hard work and often fails. Taz why we are still fatties. Gulliver failed to trim fat and is lousy at PR (When Blatter said he couldn’t be expected to know everything at FIFA, I tot of Gulliver’s remarks on managing HSBC.). And now he wants to cut fat and grow muscle?

Failed in cutting costs and now wants to do something even hardEer? Pigs are likely to fly first. Or i’ll lose some serious fat and put some muscle.

He’d likely cut muscle and grow fat. Maybe expansion into the industrial heartland that is the Pearl Delta estuary isn’t the greatest idea? “Poll shows 25% of foreign businesses plan China job cuts,” is the top FT headline on my PC screen.


*And if there’s no-one homegrown do what the Germans did, go find someone and put the chap in charge of the board’s audit committee. Great hands-on experience and sreep learning curve.

I always believe that in most cases there is always someone inhouse in a company with a strong corporate culture who can do the CEO’s job: the problem is finding the guy and the board having the balls to appoint the “unknown”.

Yellow peril horde avoided

In China, Emerging markets, ETFs, Financial competency, Financial planning, Uncategorized on 18/06/2015 at 3:37 pm

These charts from FT tell in charts what the NYT Dealbook describes in words below:



CHINA MOVES CLOSER TO INCLUSION IN MSCI INDEX Though MSCI decided on Tuesday that it would hold off on adding Chinese domestic shares to its emerging market index, China is moving closer to joining the global benchmark, Neil Gough writes in DealBook. In its decision, the index company cited concerns over China’s cumbersome investment quotas, restrictions on money flows, and questions over the legal status of foreign shareholders. But MSCI said that in the coming months it would work with China’s main securities regulator to address the company’s concerns and that it may make a special decision to include Chinese stocks, also known as A-shares, in its benchmarks before the next scheduled annual review, which takes place a year from now. “It is clear from MSCI’s announcement today that it is only a matter of time before A-shares are added to global indexes,” Louis Lu, a portfolio manager at CSOP Asset Management, which invests in mainland shares, said in an email.

“The decision – and the waiting period – reflects the changing face of China’s financial system,” Mr. Gough writes. Over the last two years, the country has embarked on a series of overhauls to the financial system, but foreigners remain wary because they continue to face challenges in gaining access to the Chinese markets. Mr. Lu said that the delay by MSCI is likely to motivate the Chinese government to “accelerate the opening of its capital markets and provide greater accessibility to international investors in the near term to increase the chance of inclusion as soon as possible.” If China can assuage MSCI’s concerns, analysts estimate that the country is likely to see several billion dollars of new investment pour in initially, with that figure rising to more than $200 billion over time.

Think Indonesia is still the next big thing?

In Commodities, Corporate governance, Emerging markets, Indonesia on 14/06/2015 at 6:08 am

Rothschild Exits Investment in Indonesian Coal The British financier Nathaniel Rothschild’s five-year foray into Indonesia’s coal sector has come to an end after his investment vehicle, NRH Holdings, agreed to sell its 17.2 percent stake in Asia Resource Minerals, the London-listed company formerly known as Bumi, for 23.2 million pounds, or $35.3 million.

NYT Dealbook

It would be “the first and last time” he would get involved in Indonesia. He described the Asian country as “ungovernable”.

As the FT reported, he ended his quest to regain control of the miner, which he founded along with Indonesia’s Bakrie family in 2010, when the company was known as Bumi. He is estimated to have lost about £80m through the investment.

Instead he has agreed to sell his shares to an investor group backed by another Indonesian family, the Widjajas. Their £135m bid is now being backed by Asia Resource’s board. The company was once worth £3bn.

Widjajas 1 Jewish boy 0

Bakries 0 Jewish boy 0

Even M’sian successful tycoons have serious problems navigating Indonesian corporate jungles: think AirAsia.


HSBC: Desperately seeking home-grown John Cryan

In Banks, China, Corporate governance, Emerging markets, Hong Kong on 11/06/2015 at 10:19 am

As a long suffering Hongkong Bank shareholder (But to be fair, I was there when John Bond called a bonus issue and the share price post bonus issue almost reached the pre bonus share price and I was there when the bank called for a massive deeply discounted during the crisis rights issue), who is the inhouse John Cryan*?

John Cryan the incoming UBS boss is rational, cold, deep thinker and no show-off(NYT Dealbook).

Hongkong Bank needs a rational, cold, deep thinker who is not accident-prone.

Gulliver sucks, like Anshu Jain and has to go. Capital markets investment bankers are not usually rational, cold and deep thinkers

As Lex rightly points out, Hongkong Bank is trying to cut fat and grow muscle. Us sporty fatties know that this is real hard work and often fails. Taz why we are still fatties. Gulliver failed to trim fat and is lousy at PR (When Blatter said he couldn’t be expected to know everything at FIFA, I tot of Gulliver’s remarks on managing HSBC.). And now he wants to cut fat and grow muscle?

Failed in cutting costs and now wants to do something EVEN hardER? Pigs are likely to fly first.

He’d likely cut muscle and grow fat. Maybe expansion into the industrial heartland that is the Pearl Delta estuary isn’t the greatest idea? “Poll shows 25% of foreign businesses plan China job cuts,” is the top FT headline on my PC screen.


*And if there’s no-one homegrown do what the Germans did, go find someone and put the chap in charge of the board’s audit committee. Great hands-on experience and sreep learning curve.

I always believe that in most cases there is always someone inhouse in a company with a strong corporate culture who can do the CEO’s job: the problem is finding the guy and the board having the balls to appoint the “unknown”.

HSBC should return to its roots

In Banks, China, Emerging markets, Hong Kong on 09/06/2015 at 1:28 pm

No not as a narco-bank for the modern day equvalent of the Jardines, Mathesons and Sassons who were the drug barons of the early 19th century smuggling opium into China

It should remember that the HS stands for Hongkong and Shanghai and that it was once known as Hongkong Bank (when it was kicked out of China)

HSBC should focus on its jewel in the East

Here’s a good idea that (almost certainly) will not be announced by HSBC at its big strategy day on Tuesday: split the bank in two, and let only the Asian business base itself in Hong Kong.

UBS analyst John-Paul Crutchley is the author of the inspired demerger idea, which starts by arguing that “taking the accumulated baggage of the last three decades home may not be the best course of action”.

Baggage may seem a harsh description of the non-Asian parts of HSBC, including its UK retail banking operation, but Crutchley reckons the Hong Kong Asia-Pacific bank accounts for 80% of HSBC’s market valuation while deploying less than half the equity. It is the jewel. Indeed, the analyst reckons HSBC’s share price could be twice the current 619p if the group had decided in the 1980s to stick with its Asian franchise and not pursue all the deals and acquisitions elsewhere.

That observation illustrates the fact that HSBC management’s head-scratching over where to base the bank is something of a sideshow. Dodging the full impact of the UK bank levy by redomiciling the whole shebang to Hong Kong might save $1bn a year. But, even if one assumes such a saving is worth $12bn in today’s money, that’s only the equivalent of 44p on the share price. The bigger question is: what’s the best way to manage this vast sprawling group?

A demerger is not a cure-all but it would deliver a few advantages. The Hong Kong end could concentrate on combating increased competition from Chinese banks. Rump HSBC could be more vigorous in allocating capital to the parts of the business generating better returns. And, since regulators are piling heavier capital and compliance costs on very big global banks, both bits might benefit from being part of smaller organisations.

It’s an idea HSBC is highly unlikely to adopt. But a dose of bold thinking is arguably exactly what it needs to awaken a slumbering share price. Flogging the Brazilian and Turkish operations – Tuesday’s likely highlights – probably won’t be enough to excite shareholders.

From Guardian

StanChart has Middle Eastern personnel problems

In Banks, Emerging markets, Temasek on 04/06/2015 at 12:04 pm

Standard Chartered Said to See Exodus in Mideast Operations The high-profile departures at Standard Chartered include the global head of Islamic banking, the chief executive for the United Arab Emirates and the chief executive for Bahrain, Bloomberg News reports, citing people with knowledge of the matter.

(From over a week ago)

Ho, Ho, Ho, StanChart should do this too

In Banks, Emerging markets, Temasek on 03/06/2015 at 2:10 pm

Up to 20,000 people (8% of current work force) could be sacked at HSBC as the chief executive attempts to pacify investors by reducing costs to improve profits (see below): Us shareholders getting shirty.

Temasek, Aberdeen and other major shareholders should tell StanChart to cut its headcount. Although an ang moh bank, many of its senior and middle managers are “countrymen”, especially here in S’pore (Brits and Hongkies don’t love FTs that much). Ask presedential candidate Tan Jee Say and PAP FT MP Ms Foo: They had Indian FTs ahead, behind and beside them. Rumour has it that Indian FTs sacked both for non-performance, replacing them with less experienced and qualified “countrymen”.

The chief executive of HSBC, Stuart Gulliver, is expected to signal next week that thousands of jobs are to be cut when he outlines his latest strategy for the global banking business, according to reports.

After he took the helm in 2011, Gulliver outlined the need for 25,000 job cuts from a global workforce that then stood at 296,000. The annual report for 2014 puts the current number of employees at 266,000, or 257,600 full-time equivalents.

Another 10,000-20,000 cuts are reported to be on the cards as Gulliver attempts to pacify investors by reducing costs in an effort to bolster profitability. He is also expected to use the strategy day on 9 June to provide an update on plans to further retrench internationally, including from Brazil and Turkey.

StanChart: Ho, Ho, Ho on a wing and a prayer

In Banks, Emerging markets, Temasek on 20/05/2015 at 1:21 pm

Last yr when Temasek gave a media presentation on its results, the question on StanChart elicited a BS reply but which when viewed today tells a lot about Temasek’s strategy in dealing with dogs with fleas: “Everything will be alright in the long term”. Err remember Keynes said in the long run, we are all dead.

QUESTION: Could you give us some comments on how do you see StanChart performing in your portfolio because over the last few years, especially in the last year and a half and looking at the outlook as well, they seem to be finding it quite challenging and there was a profit warning as well. What is your plan for StanChart? Do you think that… is that something that you would like to exit in the long term or you would treat StanChart as another Olam where you could actually try to take over?

RS: So look, it’s obviously not fair for us to comment on individual companies but all I would say is that yes, a lot of our stocks go through volatility. Standard Chartered is an emerging markets bank and like all emerging markets banks, the stock over the last year has been quite volatile. We, however, see ourselves as long term investors, short term volatility doesn’t concern us. We look at our investments over a longer term and use our value test to decide whether what we do with those stocks and we remain as an active investor always engaged with the companies.

Brit hedgies bearish on Asia/ Khong kanna wait longer?

In Emerging markets, Property on 28/04/2015 at 6:09 am

From yesterday’s Lombard column in FT

Bearish hedgies have confined themselves to shorting shares in Asia-focused fund managers …

Crispin Odey is chief among Mayfair’s prophets of doom. The pioneering hedge fund manager expects collapsing eastern markets to tip the world back into recession. He has accordingly sold 6.4 per cent of Ashmore and 1.5 per cent of Aberdeen in expectation of their shares dropping. About 16 per cent and 8.6 per cent of these fund managers’ free floats have been sold short, according to Markit.

,,, Aberdeen, for example, is a skilled Asian fund manager in the view of pundit Mark Dampier of Hargreaves Lansdown. Short sellers probably just think Martin Gilbert’s group specialises in a product so dangerous that it would be transported in lead-lined vessels if it were a physical commodity.

Shares in asset managers offer geared exposure to the markets in which they specialise. Their overheads stay the same, at least temporarily, even as their assets balloon or deflate in response to fluctuating stock prices and fund flows. Bears are presumably shorting Asian stock index futures too, though less visibly.

If the bears are right, Khong and Blackstone may have to wait to receive their rewards from Sentosa


“Blackstone seems to look for distressed assets and deep value,” said Vikrant Pandey, an analyst with UOB Kay-Hian Pte in Singapore. “In the U.S. it lapped up mass market apartments for their rental yields and deep value. In Singapore the luxury segment is offering deep value compared to mass market.


In Currencies, Emerging markets on 23/04/2015 at 1:26 pm

Ang mohs lose interest in emerging markets i.e. Asean. We’ll suffer the consequences given that our listcos often seen as safe proxies for investments in these places.

Once seen as a necessity in portfolios, investments in emerging markets have lately become less appealing because of messy politics and staggering economies, DealBook’s Landon Thomas Jr. writes. The dollar’s upward climb and the growing acceptance that the Federal Reserve will soon increase interest rates are also causing concern. Now, emerging-market currencies are suffering the consequences. The Turkish lira and the Brazilian real have touched multiyear lows against the dollar and the Russian ruble remains volatile. The Mexican peso and the Indian rupee are also under pressure.

In Brazil, allegations of kickbacks and bribes at Petrobras, the country’s energy giant, threaten to derail the economy, Mr. Thomas writes. In Russia, a war with Ukraine and President Vladimir V. Putin’s erratic ways ‒ along with a collapse in the price of oil ‒ have rattled investors. In Turkey, the country’s president has added to existing currency jitters by suggesting that the head of the Turkish central bank is beholden to foreign speculators because he has not lowered interest rates fast enough. And analysts say there are deeper vulnerabilities in these and other emerging markets that will become more acute as the dollar continues to race ahead.

But while currencies have been volatile, capital flows out of emerging markets have not yet approached the levels of a year ago. According to the Institute of International Finance, the trade group for global banks, global flows into emerging markets nearly halved last month, to $12 billion from $23 billion, with money flowing out of Brazil, Ukraine and Thailand and into Indonesia and India. Since the beginning of the year, investors in the world’s largest emerging-markets investment vehicle, the $38 billion Oppenheimer developing markets fund, have withdrawn just $400 million ‒ an amount by no means indicative of investor panic.

StanChart: New CEO (“inspired choice”*) lacks Asian experience

In Banks, Emerging markets, Telecoms on 03/03/2015 at 1:14 pm

But this lack of Asian experience shows that the directors think that the main priorities for the bank are to shore up capital (rights issue coming) and mending ties with US regulators. He has great credentials for these tasks. Temasek seems to agree. it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”

(*Btw, “inspired choice” is FT’s description)

Still the lack of Asian experience could become a major issue because there is expected to be an exodus of experienced managers. He may find replacements but changes will be disruptive if not problematic.

STANDARD CHARTERED OVERHAULS LEADERSHIP The British bank Standard Chartered responded on Thursday to shareholders’ calls for change, announcing a sweeping management overhaul including the departure of its chief executive, its chairman, the head of Asian markets and several directors, Jenny Anderson and Chad Bray write in DealBook. In a move that surprised many, it named William T. Winters, the 53-year-old former head of JPMorgan Chase’s investment bank ‒ who was once seen as a candidate to succeed Jamie Dimon ‒ to take the helm.

Mr. Winters, who will join the bank on May 1 and become chief executive in June, will succeed Peter Sands, one of the longest-serving chief executives in British finance. He will receive a base salary of 1.15 million pounds, or about $1.8 million, as well as a pension and other benefits. As the bank’s leader, Mr. Winters will not have it easy. The bank has been hurt in recent years by regulatory fines and investigations and by its focus on emerging markets. It has slashed thousands of jobs, closed its stock trading and underwriting unit and is looking to cut $400 million in costs. Impairments for bad loans, including in the mining sector, have soared.

But Mr. Winters, an American, appears up to the task. In a call with reporters, John W. Peace, the chairman, said that Mr. Winters had “great respect among regulators, clients and the market” and a solid understanding of the global regulatory environment. Temasek Holdings, which owns almost 18 percent of Standard Chartered, declined to comment on whether it had pressed for management changes. But it said that it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”

NYT’s Dealbook

Related article:


Short S$ long Rupee, US$/ Strong Asean currencies

In Currencies, Emerging markets, India on 23/02/2015 at 12:50 pm

Morgan Stanley is recommending going long on the US dollar against the Singapore dollar, the Thai baht and the South Korean won and a long position in the rupee against the Singapore

Of course MS’s assumption is that US raises rates. Didn’t happen lasy yr when that was conventional wisdom.

But India looks pretty good: As Rivals Falter, India’s Economy Is Surging Ahead Long considered a laggard, India is seeing a lift in its stock market as multinational companies look to expand operations there or start new ones, The New York Times reports.

And according to Credit Suisse, India is a major bet for global EM managers these days. Funds on average hold over 15% of their portfolios in Indian companies, double the benchmark weighting. Gd for them: in USD terms, India’s up 41%

The Indian rupee, the Philippine peso, Thai baht and Taiwanese dollar have strengthened against the US dollar, making repayment of dollar debt easier in these places.

Btw, still long Ascendas India Trust.

HSBC, Superman and another Cina superhero

In Banks, Emerging markets, Hong Kong on 04/02/2015 at 2:10 pm

(Or “HSBC and the right Chinese tycoons”)

HSBC is traditionally Li’s go-to bank for financing deals with its dominant local presence and a dedicated team to cover Li’s companies earned US$136 million in fees.Goldman Sachs has emerged as Li’s favored bank, pulling in an estimated $220 million in fees from Li’s two main companies Hutchison Whampoa and Cheung Kong Holdings since 2000.

Do remember that HSBC’s fees are on top of the interest it gets on its loans to these cos.

HSBC sold him Wharf once upon a time (the ang moh MD of wharf was angry as he said he could have arranged a better price) and both never looked back.

Which reminds me of the man who laid the foundation that made HSBC a global bank. Lee Quo-wei, the former chairman of Hong Kong’s Hang Seng Bank Ltd died on 12th August 2013, age 95

After joining Hang Seng Bank in 1946, Mr Lee was among those who transformed Hang Seng into the second-largest Hong Kong-based lender from a money-changing shop founded 13 years earlier. He helped Hang Seng end a bank run in 1965 with a capital injection from Hongkong & Shanghai Banking Corp, now HSBC. Four years later he was part of the team that created the Hang Seng Index.

Mr Lee was appointed executive chairman of Hang Seng Bank in 1983, according to a statement from current chairman Raymond Ch’ien. He retired in 1998, becoming honorary chairman and later honorary senior adviser.

If Hongkong Bank did not buy Hang Seng (at a good price from Hongkong Bank’s perspective, Mr Lee used to say to HSBC’s ang moh executives), HSBC, would not have become so entrenched into the HK economy. Look at StanChart and taz the best HSBC would have become.

As a shareholder of HSBC, I thank him.

Btw, It may be hard to imagine but once upon a time Bangkok Bank, OCBC were the rising banks while StanChart and HSBC were seen as the relics (albeit still powerful and rich) of colonialism.

2015: FT thinks PinoyLand safe haven

In Emerging markets on 04/01/2015 at 9:55 am

An Indian FT loves PinoyLand. Why doesn’t he relocate to Manila instead of living here? Maybe no goons with guns here, no traffic jams?

Where can investors hide if emerging markets get into trouble? 

In Asia, the country that comes closest to a sanctuary is the Philippines. Growth is rapid, and government finances are in much better shape than before. In a 2015 beauty pageant, the Philippines might lose out to some larger economies which could reap a reform-led bounty. Still, India and Indonesia are risky bets, while South Korea is flirting with deflation.

But he has a point:

More on why emerging markets can get into trouble in 2015

Emerging markets follow the biblical rule of seven lean years followed by seven rich ones, according to Harvard University economist Jeffrey Frankel. Every fifteen years, a crisis erupts.

By that measure, a rout is almost due. Developing economies have seen six years of brisk credit growth, fuelled by cheap global money. Private and public debt has ballooned. Since the end of 2007, the surge has been 90 percent of GDP in China, 30 percent in Brazil, and 40 percent in the Czech Republic.

These types of excesses typically stop abruptly. Seven years of frenzied petrodollar recycling in Latin America ended with a debt debacle in 1982. A seven-year boom preceded the 1997 Asian crisis. The trigger for the next rout could be an uncontrolled rise in U.S. bond yields, leading to an exodus of capital from developing nations.


The big picture: Two things to worry about in 2015

In Banks, Emerging markets on 19/12/2014 at 1:26 pm

TEST FOR POST-CRISIS BANKING SYSTEM The market turmoil this week will test Washington’s efforts over the last five years to bolster the financial system, Peter Eavis reports in DealBook. Investors are stampeding out of risky markets, dumping junk bonds issued by American energy companies that have borrowed heavily to exploit the shale oil boom. A steep slide in the price of oil could now cause some of the companies to default, analysts say. But the most dangerous pain is occurring abroad, particularly in Russia, which is dealing with a currency crisis.

“Such difficulties echo the crisis that buffeted markets in the developing world in 1998, when Russia actually defaulted on debt denominated in rubles,” Mr. Eavis writes. Back then, contagion made its way onto Wall Street through an enormous hedge fund called Long-Term Capital Management that nearly collapsed after making bets way beyond its means. “The parallels with 1998 have led investors and regulators to ask if any similarly dangerous weak points exist today. And if they do, the question is whether the big banks are sturdy enough to bear the shocks,” Mr. Eavis writes.

For the moment, many specialists say the system is sufficiently girded. For one, the big banks today rely less on borrowed money to finance their trading and lending. And the Wall Street banks are not lending as much money to hedge funds and other investors to make highly speculative bets. Still, the big banks continue to rely on billions of dollars in short-term loans that could dry up in a panic. And some investors are concerned about geopolitical risks undermining economic confidence. The plunging oil price, for instance, could create even harder economic times for countries like Russia and Iran. But low oil prices might also constrain governments that have stoked instability.


BOND INVESTORS SKITTISH OVER EMERGING MARKETS The biggest energy companies in some of the biggest emerging markets ‒ Petrobras in Brazil, Pemex in Mexico, Gazprom in Russia ‒ sold billions of dollars of bonds to investors eager to capitalize on the high interest rates. But as the price of oil tumbles and local currencies plunge in value, those bonds are looking shaky, Landon Thomas Jr. writes in DealBook. Concerns are now mounting that their troubles will unleash a new wave of market contagion as big funds unload their stocks, bonds and other investments in these countries, Mr. Thomas writes.

The steep slide in the Russian ruble ‒ and the collapse of the country’s bond and stock markets ‒ has already rattled investors, driving a sell-off in Mexico and Brazil. Like Russia, these countries also relied on cheap money to bankroll their energy investments and fund their growth. Economists have also warned of broader economic ripples if big, state-run companies like Petrobras and Gazprom are cut off from the bond market and lack alternative financing options. The bond yields of all three companies, which move in the opposite direction of their underlying price, have surged in recent days.

The debt issued by Petrobras, Pemex and Gazprom can be found in the portfolios of bond investors worldwide, including BlackRock, Pimco and Franklin Templeton. Now investors are realizing just how risky these bonds are. Pimco’s Emerging Market Corporate Bond Fund, for instance, has seen its performance sag and investors withdraw their cash. The fund’s assets now stand at $496 million, compared with $1.5 billion in late 2013, suggesting it can’t weather too much more.


Big StanChart shareholder still likes stock

In Banks, Emerging markets, Temasek on 02/12/2014 at 4:17 pm

The second biggest shareholder in Standard Chartered (after Temasek with around 27%) is standing by the embattled Asia-focused bank, continuing to buy the stock and insisting that nothing is “fundamentally wrong” with the company.

Martin Gilbert, chief executive of Aberdeen Asset Management PLC, said that funds run by his company have been “buyers of the stock in a fairly modest way,” despite a series of profit warnings that have sent Standard Chartered’s share price down 33% this year.

“We do not think there is anything fundamentally wrong with the bank,” said Mr. Gilbert, during a call to discuss Aberdeen’s results. He said that revenue growth had slowed but added that he would prefer the bank’s existing management team, headed by chief executive Peter Sands, to “sort it out” rather than looking for a replacement: “They have to really get on with it, I would say, and have a look at the costs.”

Aberdeen owns 7% of the bank, according to Factset, and, as of Oct. 31 2014, that had not changed since last year. Some Aberdeen funds have “topped up” their positions this month however, according to an Aberdeen spokesman.

The value of Standard Chartered shares held by the emerging markets-focused fund manager slid from a peak of $5.1 billion in February last year to $2.6 billion in October, according to Factset data. Part of that was due to an 8% reduction in the size of Aberdeen’s stake at the end of last year, but most was due to the bank’s falling share price.

Temasek is one of the shareholders pressing for a change of mgt, other reports claim.


StanChart directors to push for chief’s succession plan

In Banks, China, Corporate governance, Emerging markets, Hong Kong, Temasek on 01/11/2014 at 11:06 am

Above is FT’s headline for today.

Ho, Aberdeen, Blackrock and L&G baring their fangs? TRE ranters and other anti-PAP paper activists, pls note that Temasek has been pushing for a succession plan for some time.

Standard Chartered data

But they can rejoice ’cause  sharesclosed at £9.39 on Friday – down from £18 less than two years ago.

They will be celebrating.



Lousy set of results from StanChart

In Banks, China, Corporate governance, Emerging markets, Hong Kong, Temasek on 29/10/2014 at 2:23 pm

Standard Chartered has announced a 16% fall in operating profit because of a restructuring of its South Korean business and an increase in bad loans.

The Asia-focused lender said pre-tax profits fell to $1.5bn (£930m) in the July-to-September quarter compared to the same period a year ago.

Standard Chartered also warned full-year earnings would fall because of weak trading activity.

FT reports that some of the major shareholders have been pressing for the CEO to be sacked if things don’t improve soon. It also reports that Temasek  is “pressing for a clear plan of succession”.

Standard Chartered data



Problems at Temasek’s StanChart & DBS/ OCBC ovepaid for HK bank?

In Banks, China, Emerging markets, Hong Kong, Temasek on 30/06/2014 at 4:50 am

Standard Chartered has said first-half operating profits will be 20% lower than a year earlier, blaming a slump in income from its financial markets business.

The warning comes only three months after the Asia-focused lender reported its first fall in annual profits for a decade.

The UK bank had been expected to show a modest bounce-back this year.

But it said tougher regulations and low market volatility had hurt revenues.

Standard Chartered said its interest rate and foreign exchange trading had been particularly hit.

Chirantan Barua, an analyst at Bernsteinm said: “Cyclical headwinds are yet to arrive in full force in the bank’s two key markets – Hong Kong and Singapore. Not that Korea or India is out of the woods either.

“Pack that in with a challenging and uncertain capital regime that won’t be resolved until the end of the year and you have a great deal of uncertainty around the stock.”

StanChart shows the peril of investing in a stock listed overseas overseas that operates internationally. When profits were gd, sterling was weak against all major currencies. When sterling is strong, profits no gd. Note the value of sterling is irrelevant to the underlying profits or losses of  most of bank’s international operations.


ON AN afternoon in early summer a prospective customer walked into the gleaming new branch established in Shanghai’s free-trade zone by DBS, a Singaporean bank that, like many of its international rivals, has long touted China’s great promise for its business. The lobby was empty, save for a guard playing a video game. A log showed that the branch was attracting just two or three visitors a day. DBS remains optimistic about China and says that most of its free-trade-zone transactions are routed through other locations. But the torpid atmosphere at the branch points to foreign banks’ struggle to crack open the Chinese market.


To be fair to DBS its New Citizen CEO is not like the FT CEO of OCBC who may have blundered.

OCBC is offering to buy Wing Hang Bank’s shares for 125 Hong Kong dollars (US$16.12) each, in a big bet on China’s sustained economic growth. OCBC hopes the deal will springboard its growth into mainland China through the Hong Kong bank’s cross-border operations, and give it a foothold in Macau.

OCBC and Wing Hang Bank, one of Hong Kong’s last remaining family-owned lenders, began discussions on a possible deal late last year, and in January entered exclusive talks (after ANZ and UOB balked at the family’s asking price), which were extended twice as they argued over price.

The most recent comparable transaction (and bargaining benchmark for the family), the 2013 sale of Chong Hing Bank, went for 2.35 times book value including the value of a special dividend related to Chong Hing’s real estate. Accounting for the increase Wing Hang ascribes to the value of its property, the OCBC offer is closer to 2 times book value, a discount, compared to the Chong Hing deal, considering Wing Hang’s return on equity averaged 11.3% for the past three years, versus 7.8% for Chong Hing, according to Capital IQ.

Still OCBC shareholders were not that happy and its share price suffered.

What is unknown is the value of Wing Hang’s Hong Kong real estate, on some of the busiest shopping streets in the world. These could be worth even more than the bank says. A government index of Hong Kong retail properties has risen 400% over the past decade. Yet the company’s revaluation over the acquisition cost of the property is less than 100%.

If enough of Wing Hang’s minority shareholders refuse the price on offer, however, OCBC might prefer to raise it or offer* or bear the cost of maintaining the Wing Hang listing, and the cost of failing to fully integrate the bank.

Update at 6’00am: Here’s someone who thinks OCBC got sold a dog.

Wing Hang gives it greater opportunity to finance trade between China and other parts of Asia such as Malaysia and Indonesia, where it already has a foothold. Wing Hang’s strong funding base – loans were just 73 percent of deposits at the end of last year – is another advantage, as is its ability to capitalise on the yuan’s growing international popularity. About 17 percent of Wing Hang’s deposits are currently in the Chinese currency.

Nevertheless, the purchase brings risks to OCBC investors. China’s economic slowdown is creating credit wobbles, while Hong Kong’s property boom is bound to have led to some lending excesses. Meanwhile, rising interest rates in the United States could reverse the cheap deposits that have flowed into both Hong Kong and Singapore in recent years. Shareholders, who will probably be asked to help finance the purchase, may pay a high short-term price for OCBC’s long-term China ambition.


*OCBC has said the bid, a 50% premium to the then stock price, is generous.

BT: Comparing apples to oranges again?

In Emerging markets, Indonesia, Malaysia, Vietnam on 28/12/2013 at 7:27 am

(Or “Anti-PAP bloggers share LKY’s Hardest Truth)

Schroders plc and Baring Asset Management Ltd are avoiding Singapore stocks, the cheapest in South-east Asia, as slower economic growth in the region and cuts to Federal Reserve stimulus drive capital outflows.

The fund managers expect property to lead declines in Singapore amid a real-estate slump and the prospect of higher interest rates. The Straits Times Index was the worst-performing developed market in 2013, dropping 9.5 per cent since Fed chairman Ben Bernanke said in May that bond purchases may be reduced on signs of sustainable US recovery.

Surprised constructive nation-building (but mathematically challenged) BT reported things this way.

In US$ terms, among the bigger Asean stock mkts, only the M’sian stk mkt was better than us. Taz not saying much as only M’sia index ended in positive territory (juz) juz before hols

M’sia:          +3.2%

S’pore:          -6.0

Thailand:     -8.5

Indonesia:   -23.0

Got subversives in BT meh?

In the minnow Asean mkts Vietnam  was +24%, while Manila was +3.4% according to the MSCI indices.

Next yr is not going to be a gd yr for Asean countries, so the fact that Schroders and Barings are “avoiding” S’pore is no big deal for anti-PAP bloggers to brag about. Don’t know about you, but I get the sense that some of them hate the PAP so much that they end up cheering and being cheerful when S’pore tanks, for whatever reason. Looks like they agree with one LKY that S’pore and the PAP are one. They may hate him but they accept his premise?

Asean round-up returns next yr, god willing.

StanChart losing its shine

In Banks, Emerging markets, Temasek on 22/12/2013 at 7:08 am

Standard Chartered had a bad start to the hols. Last Monday, its shares fell sharply on the possibility that it might call for a rights issue in the wake of weakish results. They’ve since recovered but there was another sharp fall on Fridaty, albeit from a much recovered position.

It has also been forced to strip its finance boss of his responsibilities to oversee the lender’s risk division following pressure from the Bank of England.

Richard Meddings, who has been group finance director of Standard Chartered since November 2006, had to hand over governance responsibility of risk to Peter Sands after the Prudential Regulation Authority said it was concerned with Meddings holding two conflicting roles, according to news reports.

In particular, the PRA, the Bank of England’s financial watchdog, was concerned with the potential conflict between Meddings’ finance responsibility and his duty to oversee risk operations.

All this against the background that it is no longer  an ang moh favourite because emerging markets are no longer in fashion. Their economies are slowing while the Western economies are recovering. And the wall of money is returning to the West.

BTW, those readers of TRE who bitch that Temasek lost money on StanChart and say that I didn’t know this fact are daft: all they needed to do is to google up StanChart’s 10 yr price. But if anyone wants to see the numbers: here’s why.


Time to buy emerging mkts?

In Emerging markets on 12/07/2013 at 5:45 pm

Not yet according to JPMorgan

Burma: Think small, think basic

In Emerging markets on 15/09/2012 at 6:12 am

“What Myanmar needs now are more 7-11s, not more Walmarts,” said Lex Rieffel, a senior fellow at the Brookings Institution. He was quoted by FT.

Garments, footwear, frozen seafood and other food products were among Burma’s main exports to the west until sanctions 10 to 15 years ago. Expect foreigners (think Chinese) to invest in these labour intensive businesses for a start.
A Chinese bizlady told the BBC: “In my factory in China, the salary of workers has been increasing steadily over the last few years,” she told me during her recent visit to Bangladesh to look for opportunities here.”It has reached around $400 to $500 (£250 – £315) a month per worker. If I continue to produce there, our business will disappear.”In Bangladesh the average monthly salary for garments workers is only around $70 to $100. If I produce here, price is much more competitive.”

She can now scout out Burma, next door.

Finally for this week, Myanmar launched its first debit cards on Friday, giving customers the chance to use plastic for shopping, dining and travel for the first time in the latest leap forward for its cash-dominated economy.

Why not to expect recovery anytime soon

In Economy, Emerging markets on 05/09/2012 at 7:48 am

(Or “Kishore Mahbubani’s thesis about Asian power proven wrong again”)

It seems likely the long-term recessionary scenario as described by Mr Taylor, Mr Reinhart, and Mr Rogoff is what economies in the West are now experiencing. Within developed markets, the financial sector occupies a larger proportion of the general economy than ever before. In the 1990s and 2000s, the level of private debt on bank balance sheets far outweighed that held by sovereigns, despite a simultaneous increase in sovereign debt levels. Given the greater severity of recession Taylor concludes is likely following a period of both private and public debt accumulation, the damaging effects could go on for some time.  Warning: very chim

Let’s see if the BRICs and other Asian economies can save S’pore from a recession or slow down like what a certain PAP apologist is implying about the days of ang moh and Jap tua kee are over: now China, India and Asian (ex Japan) tua kee. He got his balls blown-off over Standard Chartered!

Antidote to Mark Mobius’ optimism on Europe etc

In Emerging markets, Vietnam on 21/06/2012 at 9:24 am

For the last two years, Mr. Grant, a managing director based in Florida at a regional investment bank, has been predicting the bankruptcy of Greece and a cascade of chaos across the global economy, attracting quite a following on Wall Street in the process.

“Greece will be forced to return to the drachma and devalue, and the default will cause bank runs and money flowing into Germany and the United States as the only viable safe haven bets,” he declared the day before Sunday’s Greek elections, irrespective of which party would win. “Greece will default because there is no other choice regardless of anyone’s politics.”

This recession will hurt emerging markets (Mark Mobius is bullish on them especially Vietnam, a great favourite). And our nation-building constructive media are full of doom and gloom for S’pore if the Eurozone breaks up. Err whatever happened to the scolding that a PAP apologist, Kishore Mahbubani, gave the Lady for visiting Europe implying that she should have visited Asian countries first (he forget she visited Thailand). Well Asia may be rising but Europe is still very, very important. Anyway, he should realise that there is such a thing as gratitude, despite this, “Gratitude is a disease of dogs that is not transmittable to humans”. It was said by a French investment banker after he was ousted from chairmanship of Italian insurer with which he was associated for over 40 years.

Without European support of her cause, she would most likely be dead now. Asian countries didn’t care about her or her cause.

See who’s bullish on Europe

In Emerging markets, Vietnam on 19/06/2012 at 7:26 pm

Emerging market guru and value investor Mark Mobius thinks Europe will emerge from its debt crisis intact and stronger than ever.

He believes emerging markets offer the best opportunities for investors. “The average growth this year will be five percent, compared to less than one percent in developed countries. They represent 34 percent of the world’s market capitalization and most people have very little, if anything, in emerging markets”.

His favorite developing economies are Vietnam and Nigeria

This guy is shorting China & emerging markets

In China, Emerging markets on 14/06/2012 at 7:11 am

And a bull on US retailers.

And he has outperformed his peers!

IPO: Healthcare & Indian themes

In Emerging markets, India, Malaysia on 05/06/2012 at 6:51 am

(Or “The Achars are coming”)

First, there is IHH expected to list in July. Intetegrated Healthcare Holdings is the healthcare arm of Malaysia’s state investor. Its assets include Turkish hospital group, Singapore’s Parkway Holdings, India’s Apollo Hospitals Enterprise and Malaysia’s Pantai Hospitals and International Medical University. It presses all the right buttons: Turkey, India, M’sia and S’pore.

The listing of IHH in Singapore and Malaysia is expected to be the fourth-biggest initial public offering in S’pore’s history and Malaysia’s second-largest this year after the planned listing of Malaysian plantation group Felda Global Venture Holdings.

International Financial Corp, part of the World Bank Group, is planning to take part in the planned US$1.5 billion listing of IHH. Another cornerstone investor is the Pru’s Asian funds arm. UK’s Pru or the US Pru. I’m sure GIC or Temasek will be another cornerstone investor.

For those interested in Indian healthcare and yield there will be  Religare Health Trust. India’s Fortis Healthcare, which is seeking to expand its clinical operations and cut debt, plans to raise about 20bn rupees (S$459m) by listing its hospital business in Singapore. Its listing is expected to be later than that of IHH.

“We are looking at this listing to de-leverage the balance sheet,” its CEO said anning the IPO last week. Fortis, which has about 15 hospitals and clinics that are part of this business, has a consolidated net debt of 50bn rupees, the CEO said. The company is looking to add about 2,500 hospital beds in three to four years, he added. Fortis, India’s No 2 hospitals chain after Apollo Hospitals Enterprise, said consolidated net profit jumped 41.34%  to 415.4bn in its fiscal fourth quarter ended March.

Religare Health Trust has a mandate to invest in medical and healthcare assets and services in Asia, Australasia and emerging markets.

The IPO would be the second by an Indian company in Singapore after Indiabulls Properties Investment Trust raised US$165m (S$210.8m) in 2009. This has been a dog of a stock.

Reliance Communications is also planning to raise US$1 billion through a Singapore listing of its undersea cable business.


Philippines: Reasons for optimism and scepticism

In Emerging markets on 02/06/2012 at 10:41 am

(Or “Why CIMB is buying a bank in the Philippines”)

Brokers have upgraded their full-year economic growth forecast for the Philippines after the government announced a surprising 6.4% growth in the first quarter (better than other countries in the region)

Example– Nomura now expects the economy to expand by 5.1% this year from an earlier 4.6%.

“[First quarter] GDP soared to 6.4%… beating expectations. This was led by high public sector spending and still-robust private consumption …  We upgrade our 2012 GDP growth forecast to 5.1% from 4.6% as we believe these drivers will not only persist, but will also be augmented by faster increases in private investment owing to on-going reforms.”

Nomura noted that the country is also expected to improve its position in an annual competitiveness ranking, “The Philippines has fallen two spots to 43rd due to a weak ranking in the economic performance criterion, which we think is related to last year’s under spending by the government.”

As the Economist wrote a few weeks ago: Future prospects are indeed enticing: besides the unexploited mineral resources, business-process outsourcing is booming, already employing some 600,000 people. Remittances from all those Filipinos overseas have remained strong through economic crises. As costs rise in China, the Philippines is among places manufacturers eye as an alternative. Tourism has huge potential, recognised by the government’s nicely pitched campaign: “It’s more fun in the Philippines.”

The government has also started making some important reforms. In an effort to raise its revenues—at present a paltry 12% of GDP—it wants to jack up “sin” taxes on alcohol and tobacco. The bill enacting this made important progress in May when it passed a House of Representatives committee—a triumph over powerful tobacco and alcohol lobbies. It still has to pass the full House and the Senate, however.

But it remains sceptical: In fact, the Aquino administration has little concrete to show for its two years in power. The centrepiece of its programme, public-private partnerships to tackle the inadequate infrastructure which is such a hindrance to all the nation’s economic hopes, is only now stuttering to life after just one of the ten projects scheduled for approval last year saw contracts awarded. The pursuit of Mrs Arroyo and the chief justice is a distraction as well as a mission. Securing Mr Corona’s conviction might entail so many promises to senators that the point of the exercise—enhancing the government’s clean image—is lost.

Well CIMB for one is bullish. In early May, CIMB  agreed to buy just under 6o% of the Philippines’ Bank of Commerce (BOC) for 12.2 billion pesos (M$881 million) in cash, a move analysts said gives it early mover advantage in a market with high-growth banking potential.

It got in into Indonesia on the cheap in 2002 before the ang mohs rediscovered Indonesia yet again. It bot into the government’s recapitalisation of a major local bank (Bank Niaga)  that was nationalised after the 1997/1998 financial crisis. 

The PBOC could be an encore.

Northern ASEAN: Dark clouds threaten the sunny weather

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

Thailand’s recovering from late last yr’s floods. GDP up 11% Q on Q.

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

(BTW, the int’l manufacturing hub hard disk drive industry is now in Thailand It was once here.)

Money will pour into Burma but the country is ill-prepared to cope with the resulting floods


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

Call me: Software powers a Philippines success

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

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

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

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

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

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

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

But the Filipinos are ambitious. Going for Business Process Outsourcing

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

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

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

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

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

The Philippines: Other side

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

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

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

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

The Philippines: Its time has come finally?

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

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

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

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

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

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

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

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

Burma: Wake up S’pore

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

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

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

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

Cambodia: 10 IPOs a yr?

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

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

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

BBC report

Burma: Stock exchange coming/ Cambodia: Starting soon

In Emerging markets on 12/04/2012 at 7:23 pm

Burma is to get a new stock exchange, after the Tokyo Stock Exchange and Daiwa Securities received preliminary approval to help set one up.

Meanwhile, Cambodian brokers and wannabe investors, and foreign investors are preparing for the country’s first ever IPO.

Templeton on Burma, Cambodia, Indonesia and Thailand

In Emerging markets, Indonesia, Vietnam on 05/04/2012 at 7:14 am
Investors should be cautious when pursuing the opportunities for growth present in Myanmar and Cambodia, Southeast Asia’s frontier markets, Templeton Asset Management Ltd says, according to a Bloomberg report.

While Myanmar’s natural resources of oil, gas and minerals are positive factors, there are “areas of concern”, Templeton portfolio manager Dennis Lim wrote in a note last week on chairman Mark Mobius’s blog.

Although Cambodia is “ideally located” to benefit from trade with Thailand, Vietnam and Laos, investors need to study corporate governance standards, he said.

“Weaknesses we’re especially mindful of in Myanmar are lack of a proper legal structure, the lack of a well developed banking system, and the lack of solid foreign exchange operations. In Cambodia, I would caution potential investors to monitor corporate governance standards to ensure investors are treated fairly.”

In Cambodia, state- owned Phnom Penh Water Supply Authority will have its IPO next month, making it the first to be traded on the stock exchange that opened last July without a single listed company.

The Cambodian government has said it wants to spur economic development by selling off state- owned companies and encouraging private enterprises to expand with new funding.

Mr Mobius, who oversees more than US$50 billion in emerging-market assets as executive chairman of Templeton Emerging Markets Group, has said he’s watching the Cambodian railroad industry “with particular interest'”

Indonesia, whose natural resources include timber and coal, can benefit from increasing global demand for commodities as emerging markets invest in infrastructure, Mr Lim said. Thailand, which suffered its worst floods in almost 70 years in 2011, will have a sound economic recovery and has “positive'” long-term fundamentals, he said.

“For value investors like us, current valuations in Thailand generally remain attractive, though the potential growth obstacles do bear ongoing scrutiny”. He cited agriculture, tourism and offshore gas as drivers of growth.

Interesting, no mention of Vietnam which is now in the dog house because of high inflation and other problems.

Singapore’s stock exchange is a conduit through which Templeton can access new markets because of listings by some companies from the frontier economies, he notes.

Rushing to do biz, invest in Burma?

In Emerging markets on 01/04/2012 at 11:02 am

Better read this first.  [W]hat has been achieved so far in reforming the country in such a short period of time rests on the trust established between the slight, bespectacled former general and the charismatic daughter of Aung San, the country’s liberation hero.

Banyan goes on to point out that both of them are not in best of health and that the Burmese president has many enemies who want to push the clock back.

Cambodia: The Final Frontier

In Emerging markets on 22/03/2012 at 7:26 am

Cambodia will start trading on its stock exchange in April. It opened in July 2011 but there were no stocks to trade.

Indonesia: More private equity funds are a’coming

In Emerging markets, Indonesia, Private Equity on 05/03/2012 at 5:19 am

Also, buyers from Singapore completed the largest number of transactions as Indonesia witnessed a record year for M&A activity.The 12-month M&A activity for Indonesia ended 31 Jan, 2012, saw 78 transactions worth a total of US$9 billion being recorded, with Singapore-based companies completing nine transactions worth US$372 million, according to global risk management company Kroll and M&A intelligence service mergermarket.

The nine transactions completed by Singapore-based buyers were in a diverse range of industries, highlighting the investment potential in Indonesia. Two transactions were in the energy sector, the rest of the deals were in transportation, consumer food, real estate, construction, financial services, internet and e-commerce, and in other services.

Japan was the most prominent country in the South-east Asian nation’s M&A activity in terms of value and volume, with US$1.1 billion across six deals. The largest Japanese transaction of the year was Mitsui Sumitomo Insurance’s US$827 million, 50% stake acquisition in life insurance provider PT Asuransi Jiwa Sinarmas (Sinarmas Life Insurance), according to the report.

Deals by Asia-Pacific buyers accounted for 72% \of Indonesia’s M&A deal count while 28% of bidders were from outside Asia, with US bidders completing the most transactions,

 Indonesia is expected to see continued strong M&A activity, particularly in the technology, media and telecommunications, financial services, energy and mining & utilities sectors.

But there are problems as highlighted by a corporate governance spat: Indonesian tycoons versus Nat Rothschild.

“Investing in emerging markets is always challenging for investors. Indonesia in particular requires deep local insight into the market and potential target companies, as various reforms continue to raise both opportunities and challenges for potential bidders,” said Kroll.

“Many investors interested in Indonesia tend to seek help from local third-party advisers or partners to assist with administrative functions during a transaction. However these intermediaries may not necessarily have sufficient understanding of global anti-corruption legislation. Overlooking such legislation can lead to costly violations for investors in their home markets … investors also need to be aware of other operational pitfalls that may impact their business such as the state of local infrastructure and the integrity of business partners. These risks often vary according to sector.”

Strikes could also be a problem despite the consumer boom.

Its booming economy also masks its problems with politcal governance and corruption. This is what ISEAS* says about the country in its inaugral ASEAN Monitor dated February 2012


Indonesia is in a period defined simultaneously by stasis and stability. It has yet to move into the next phase of its democratic consolidation, and it is unlikely to do so in 2012.

In fact, several indicators suggest an overall deterioration in earlier democratic achievements. First, the country’s judiciary and police are — and most likely will remain — notoriouslyunpredictable in upholding the rule oflaw. Second, large sections of the bureaucracy are in disarray; they will continue to perform poorly for theforeseeable future. Third, Indonesia’s main political parties have fallen increasingly into internal turmoil over positions of influence and finances.

Those problems and frictions are boundto persist in several important parties in the coming months.

Externally, Indonesia is expected continue playing a fairly minor role despite being the dominant power inSoutheast Asia. This is largely because of the strong emphasis on purely domestic political issues. As the next generalelection and the presidential electionapproach in 2014, all of Indonesia’s political parties will become increasinglypreoccupied with preparations for the polls and the selection of candidates. It must be remembered that an anti-porn bill was introduced in 2008, just before the general election the following year.

The coming months will tell if there is to be a similar populist legislative measure to win conservative votes this time. Overall, it is unlikely that Indonesia’s status as a stable yet static democracy will change substantially during 2012.

Key points: The current consumer boom in Indonesia will continue to mask its problems with corruption. And though Indonesia is less likely to be adversely affected by a global economic slowdownthan other regional countries, will global risk aversion stem the investment inflows it has enjoyed in recent years? Read the rest of this entry »

Citi’s a US bank in name only

In Banks, Emerging markets, GIC, Temasek on 19/03/2011 at 6:04 am

More than 50% of its profits come from emerging markets juz when emerging markets are losing their attractiveness to global investors.

Given Cit’s record of losing serious money by jumping into markets late (think sub-prime, and lending to finance LBOs, US property (in the 80s) and Latin America (in the 80s too), S,poreans should be concerned., given GIC’s 5%(?) odd stake in Citi,


The Fed notified financial institutions that passed a second round of stress tests that they can begin returning money to their shareholders, The results are confidential but already some US banks are saying they will raise dividends this year. Among them are Citi rivals JPMorgan and Wells Fargo. Citi says that only in 2012, will it consider raising its dividends, It got a lousy rating?

And I now know why the executive director of GIC is looking to increase US exposure. Read the rest of this entry »

BRICs are the the top four EPL clubs

In Emerging markets on 08/03/2011 at 9:44 am

The boss of PR, advertising and market research conglomerate, WPP, Martin Sorell has an interesting take on how the world economy can be compared to English footie.

“The world continues to move at very different speeds, both geographically and functionally. By means of explanation, perhaps an English football analogy is helpful.

“First, The Premier League consists of the BRICs (Brazil, Russia, India and China) and the Next 11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, Vietnam) or CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa), along with new media (personal computer driven, mobile, video content, social networks).

“Second, The Championship, the United States, because of its size, immigrant, entrepreneurial culture and human and natural resources, along with an economically well-run and high value-added manufacturing export-led Germany and free-to-air television; third, League One, Western Europe, primarily the United Kingdom, France, Italy and Spain, along with newspapers and magazines; last, League Two, Japan, which has been stagnant for almost twenty years. Perhaps the United Kingdom, with its Coalition Government’s emphasis on deficit reduction and long-term growth will gain promotion to The Championship?”

Emerging Mkts: Americans are losing interest

In Emerging markets on 28/02/2011 at 9:14 am


They are scared of the political risks as inflation becomes a problem in  emerging economies. And anyway, it’s time to take some winnings off the table.

One way to get mkt to recover?

In Emerging markets on 12/01/2011 at 11:44 am

Rioting by investors worked in this case. Mkt up 15%.

Fearing further widespread protests, the government … relaxed rules for the banks and for individual investors so that they could borrow more money against shares.

Market falls, investors riot

In Emerging markets on 11/01/2011 at 5:22 am

Police have baton-charged investors in the capital of Bangladesh after the country’s stock market saw its biggest one-day fall in its 55-year history.

Trading on the Dhaka Stock Exchange index was halted after it fell by 660 points, or 9.25%, in less than an hour.

The benchmark index had climbed by 80% in 2010 but has since recorded some sharp falls in the past month.

BBC Online article

Forget emerging mkts, buy US?

In Emerging markets on 10/01/2011 at 5:12 am

“Ten years ago, we probably had less than 20 percent exposure to the U.S. Now it’s in excess of 40 percent,” said Cindy Sweeting, a manager of the $16.7 billion fund [Templeton Growth Fund], which can invest in companies located anywhere in the world. “Many U.S. companies are well positioned globally, and valuations are about as attractive as they have been in a decade.”

Four American giants — Microsoft, Oracle, Amgen and Pfizer — were among the fund’s top five holdings as of Nov. 30. The fifth is Accenture, the consulting company that operates widely in the United States ….

NYT on why buy American.

A worrying combination

In Commodities, Emerging markets, Energy on 17/12/2010 at 5:35 am

A strong oil price and a strengthening US$.


StanChart: Shares fall 6% in 2 days

In Banks, Emerging markets, Temasek on 13/12/2010 at 5:17 am

StanChart shares have fallen 6% since last Thursday when it told the market that costs were rising and wholesale banking revenues weak.

For StanChart, growth is proving costly. The British bank with a strong focus on Asian emerging markets said last Thursday that it had another record year to look forward to, predicting further growth in its pre-tax profit for both the consumer and banking wings of its business. However, such growth comes at a high price, and costs for the bank have been growing faster than it would ordinarily allow.

Its finance director said the bank would try to slow cost growth next year until it draws level with income growth once again.

Reminder: Temasek has 19% of StanChart and the bank is one of its best picks ever.

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.”

StanChart a takeover target?

In Banks, Emerging markets, Temasek on 22/09/2010 at 5:24 am

(Updated on 13 October)

No not Temasek as predator. Remember it has 18% of StanChart.

But what abt JP Morgan? Top FT reporter Francesco Guerrera analyses

The international conundrum is more complex. JPMorgan earns some 75 per cent of its revenues in the US, a slow-growing, developed country. By contrast, Citi derives some 40 per cent of its revenues from Latin America and Asia, emerging economies with a bright future that are also HSBC’s stomping ground.

Those lenders’ competitive advantage is their ability to offer boring-but-lucrative commercial banking and cash management services to thousands of companies.

JPMorgan has a deep commercial banking network in the US – its most profitable business – but lags overseas.

The bank already works with more than 2,000 foreign companies but Mr Dimon would love to get that number to nearer 4,000 and do more with each of them.

To this end, JPMorgan is adding 250 bankers and $50bn in extra lending to lure foreign companies. But that could take decades and the bank might want to shorten the wait with bolt-on acquisitions (as its investment bank did with Britain’s Cazenove and RBS Sempra).

The recent moves by Heidi Miller, a veteran executive, to lead the international effort, and Doug Braunstein, a takeover specialist, to the role of finance chief, certainly point in that direction.

But, as my GPS intones when I get lost, “there is a better way” – in theory at least – and it leads to Standard Chartered.

A well-run, commercial and retail bank with strongholds in Asia, Latin America and Africa, StanChart could be the answer to Mr Dimon’s problems.

It would not come cheap – its valuation is well above JPMorgan’s – and a bid by Mr Dimon would trigger a war with HSBC and China’s ICBC, among others.

But JPMorgan’s good health affords its chief the luxury of time.

On 12 October 2010, StanChart was up 2% on rumours that JP Chase would bid.

Vietnam: There be value?

In Emerging markets, Vietnam on 19/07/2010 at 7:42 am

Vietnam is a hot market among investors in frontier markets. It has a growing, and hard working and cheap work force, a large domestic market, and is liberalising its economic policies, welcoming foreign investors. Manufacturers are seeing it as a place to supplement or complement their China operations.Deficits are relatively modest, and it has not been in international financial markets long enough yet to rack up any serious i.o.u.’s.

But locals don’t trust the government.

What makes them nervous is the suspicion that the governing Communist Party will do anything to hit its economic growth target before a party congress early next year, even if that means letting inflation get out of control.

They are buying US$ and gold whenever they can.

So many dollars have been scooped up, in fact, that the country’s central bank, the State Bank of Vietnam, is at risk of running out, analysts warn. Any shock, like a double-dip global recession that hurts exports or foreign investment, and Vietnam could find itself without enough dollars to pay for crucial imports like fuel, they say.

“The question mark at this point is whether the dollars will come in,” said Ngiam Ai Ling, director of Asian sovereign ratings at Fitch Ratings in Singapore, which warned in March that it might cut Vietnam’s rating, already below what the agency deems investment grade.

NYT article on this and other problems, as well as what’s gd abt Vietnam.

Cambodia: There be value?

In Emerging markets, Temasek on 17/07/2010 at 7:20 am

Representatives of large US corporations, including General Electric, Johnson and Johnson and JPMorgan visited Cambodia to discuss the potential for future investment.

Few mths back, I heard Temasek is sniffing around too.

Note there is no stock market here yet.  One was supposed to start last year.

Tesco replaces Carrefour in S’pore?

In Emerging markets on 14/07/2010 at 6:31 am

The FT reports that Carrefour is planning to pull out of Thailand, M’sia and S’pore.

The pull-out is in its early stages. Carrefour is talking to bankers but has yet to decide how to proceed and, according to one person familiar with the situation, there have been no serious discussions yet with potential buyers …

Tesco, the UK retailer, is regarded as the most likely trade bidder for the Malaysia and Singapore assets, but Dairy Farm, the Singapore-listed retailer and Aeon, the Japanese retail group, could be interested.

Potential private equity bidders include CVC and Navis Capital, the Malaysia-based group. NTUC Fairprice of Singapore, which runs a supermarket chain, is seen as a potential buyer for the Singapore and Malaysia businesses, if they were to be sold separately.

Tesco is also a top contender for Thailand as is France’s Casino group. These two chains are the biggest in the country. Neither would comment.

Indonesia: Value investor bullish

In Emerging markets, Indonesia on 07/06/2010 at 5:17 am

Obama did it again. The  “Canceller-in-chief”,  has again postponed  his trip to Indonesia.  If I were an Ondonesian, I’d be upset. Waz so difficult abt vistiing the Gulf, do a tv special, explain that you have already postponed one trip to Indonesia,, and that a second postponement is an insult to the the new Brazil?

And Indonesia is impt — Mark Mobius says so.

Indonesia has a “good” outlook due to its resources and large population, putting the nation in a favorable position to attract investment, Templeton Asset Management Ltd.’s Mark Mobius said.

“Overall we have a positive take on investment opportunities there,” Mobius, who oversees about $34 billion in emerging markets as Templeton Asset Management’s Singapore-based executive chairman, wrote in his blog dated yesterday. “Indonesia has a young, growing population and Jakarta, the capital of Indonesia, is expected to be the largest city in the world within two decades.”

Full article from Bloomberg.

Is this market efficient? Or is there value?

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

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

Where to from here?

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

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

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

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.

StanChart: Who would have tot?

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

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

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

So a little cynicism is in order?

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


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

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

Temasek: Another banking success

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

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

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

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

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

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

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

Juz when you tot it was safe II

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

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

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

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

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

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

*His record:

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

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

Just when you tot it was safe

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

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

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

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

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

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

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

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

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

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


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