Archive for the ‘Indonesia’ Category

Oil: Neither too hot nor too cold

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

Juz like Goldilock’s porridge.

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

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

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

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

BTW looks like Temasek goofed in selling Orchard Energy

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


DBS: What the new chairman should be looking at II

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

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

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

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

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

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

Previous post on topic

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

New SGX ETFs for Indon and China exposure

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

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

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

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

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

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

Our neighbour, the new Brazil?

In Indonesia on 20/03/2010 at 5:24 pm

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

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

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

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

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

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

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

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

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

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

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

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