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Showing posts from November, 2010

And Now for the States

State governments are drowning for two reasons: 1) obligations to public employees; 2) the state share of medicare and medicaid spending. Most states are now beginning to confront the public employee problem by reigning in the some of the worst abuses of overly lavish pay and benefits (teachers top the list, by the way).

Only Republican Governor Bob McDonnell of Virginia has opted to pour on more lavish benefits for public employees and leave the taxpayer to pick up the tab, but he is an outlier. Governor Christie of New Jersey has led the charge to begin to curb the enormous pay and benefits of public employees. Other Governors, Democratic and Republican, are following Christie's lead. Even President Obama has entered the fray by freezing public employee pay for two years in a symbolic gesture toward sanity.

But, there is much to be done. California's off-balance sheet pension liabilities are estimated to exceed $ 1.5 Trillion (those numbers are not in the budget, which …

Europe and All That

First Greece, then Ireland. Now all eyes turn to Portugal, Spain, and Italy. Little noticed is that neither and France and Germany are likely to survive some type of default on their own sovereign debt. A combination of bad economics, a bad economy, and the tide of demographics will sink both France and Germany in time.

The idea that you can paper over the problems in the PIIGS (the new name for Portugal, Ireland, Italy, Greece and Spain) is ludicrous. Much of the PIIGS sovereign debt is held in German and French banks. Merkel and Sarcozy think no one knows this, I suppose.

But, in fact, the world markets know everything. Just watch bond yields on European sovereign debt. The are beginning the slow, inevitable surge toward infinity. (You reach infinity when the bonds are completely worthless.

Europe has no real shot other than defaulting and the sooner the better. Ireland will probably be the first. They will renounce their guarantee of bank bondholders and that will begin a t…

New Incentives Plan for Oil and Gas‏

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The government has endorsed a new plan of tax incentives proposed by Petronas which will be incorporated in the Petroleum Income Tax Act, Prime Minister said today.
“By lowering risks and increasing the rewards for investment, this initiative will potentially lead to additional petroleum-generated revenue of more than RM50 billion for Malaysia over the next 20 years” he said when announcing 9 new developments and Entry Point Projects of the Economic Transformation Program.

Najib said there would be a notional trade-off of about RM8 billion in the form of revenue foregone from investment tax allowances, reduced tax and the export duty waiver for marginal fields.
The 5 new incentives are:- Investment tax allowance of capital expenditure.Reducing tax rate from 38% to 25% for marginal oil field developmentAccelerated capital allowance of up to 5 years from 10 years.Qualifying exploration expenditure transfer between non-contiguous petroleum agreements with the same pa…

QSR shares is "flying", because KFC is "frying"?

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Yet, another lesson could be learned in Bursa Malaysia last week. In the midst of series of corporate activities happening, how could you left out QSR Brands Bhd and its jewel KFC Holdings (M) Bhd (QSR holds 50.6% of KFCH)?

Below is the important date and announcements made:-
19th Nov : QSR received a take-over proposal, but in preliminary stage (closing at RM5.76)
20th Nov : Halim Saad was said proposed to take-over QSR at RM5.60 per share only
21th Nov : QSR shares dive 6.4% to RM5.39
25th Nov : US private equity fund Carlyle Group make an RM6.20 offer for QSR shares

For me, there are some very strange things happening, especially on the timing of announcements.
Halim's real announcement was made on Saturday (20th Nov) on Bursa Malaysia website. Saturday?Halim's offer price is lower than the previous closing price.Another offer came few days later, which commands a much higher premium. What does this reflect?
Would someone trying to "goreng" the shares of QSR and KFC?

If I k…

UnEthical "Ipoh Bean Sprout Chicken Rice" Restaurant... Beware!!!

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Beware, especially KL people. There is a famous "Ipoh bean sprout chicken rice" which do business in its own way - unethical. And, for your information, this restaurant have many outlets in KL. I am wondering how it can expand so rapid with the experience of mine as below:-
The story...
Last night, I went for dinner at this outlet in Puchong. Here is my order: One white chicken rice. And, I stressed that I want the "normal" one.One Ipoh chicken Hor Fun.However, it turned out as following: One famous "farm chicken" which cost RM1 more.One Ipoh chicken Hor Fun with beef balls (sure more expensive la...).When I confront with the waitress, who took my order. She said: "Oh... We have changed the menu , and we only have Ipoh chicken Hor Fun with beef-balls or fish-balls. Since we do not have fish balls already, I just give you beef-balls today."

After charging the bill, I complain to the manager. Because, this is not the first-time I visit the restaurant, …

New Fund: Public Islamic Infrastructure Bond Fund

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Public Islamic Infrastructure Bond Fund is an Islamic bond fund that seeks to provide annual income to investors through investments in sukuk of companies in the infrastructure sector.
The fund allows investors to access the sukuk market, which is usually inaccessible to the average investor as it is a market for institutions where the standard transaction lot is RM5 million. Sukuk issued by companies in the infrastructure sector are generally underpinned by predictable cash flows and stable income stream over the respective issuer's concession period. Example, companies with power plant concessionaires, telecommunication service providers, toll-road concessionaires and port operators.
The fund invests up to 98% of its NAV in a portfolio of sukuk of companies involved in the infrastructure sector and the balance of its assets in Islamic money market instruments. To achieve increased diversification, the fund may invest up to 25% of its NAV in foreign sukuk, which includes Singapore,…

New Fund: Public Islamic Alpha-40 Growth Fund

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Public Islamic Alpha-40 Growth Fund is an Islamic equity fund that seeks to achieve capital growth by investing up to a maximum of 40 selected Shariah-compliant blue chip stocks, index stocks and growth stocks listed primarily on Bursa Securities and regional markets.

The fund adopts a more focused investment strategy and is able to achieve potentially higher returns over the mid to long term as it concentrates its investment in a portfolio of not more than 40 stocks. Currently, 88% of securities listed on local bourse are Shariah-compliant representing about two-thirds of Bursa Malaysia's market capitalization.
The equity exposure will generally range from 75% to 98% of its NAV. To achieve increased diversification, the fund may invest up to 30% of its NAV in selected foreign markets, which include Singapore, Taiwan, South Korea, Japan, Australia, New Zealand, Hong Kong, China, Thailand, Indonesia, Philippines and other markets.

Source: Public Mutual

When would asset bubbles in Emerging Market "Burst"?

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Do you discounted the possibilities of asset bubbles in Emerging Market?
Even though our governments, including China, saying that asset bubbles is under-controlled for almost one year now, yet, investors are not comfortable with the record breaking prices.
Investors are encountering high prices in properties, commodities, resources, and of course, shares market in emerging markets. People are investing, buying, spending, and borrowing to an extent that would caused asset bubbles in various sectors. Return, the only thing in mind... Meanwhile, investors are chasing for returns to beat the market at large, and to avoid being left behind. This "Kiasu" behavior are only pouring oils on fire. Yet, returns is the only thing in mind, and those "kiasu" investors are winning the game to date. For those who does not participate in the game were blaming them for causing the high property prices, undermining their affordability to own a house. When did the bubbles st…

Tax Benefits of Unit Trusts YOU Must Know

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Due to Malaysian Government's efforts to promote unit trusts, most of the income received by unit trusts will be exempt from income tax. Basically, the income of unit trust may consist of dividends, interest or profit and gain from sale of investments and returns on bonds. Then, the income is assessed and charged to tax separately from the income of unit holders, which was governed by the Income Tax Act


Gains on disposal of investments by unit trust will not be subject to income tax. The only exception is where the investments represent real properties which could be subject to real property gains tax (RPGT).
Exempt Income
Interest and discount derived by unit trusts from the following types of investments is exempt from income tax:
Securities or bonds issued or guaranteed by the Government
Debentures, other than convertible loan stocks, approved by the Securities Commission
Bon Simpanan Malaysia issued by Bank Negara Malaysia
Interest paid or credited by any bank or financial instituti…

Time dotCom needs more TIME?

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After 2 days of suspension and an announcement, Time dotCom (TdC) slides 18% to RM0.63 today. In conjunction with that, TIME - the mother of TdC - also join-in to close down 16% to RM0.435.
Actually, what is so bad about the announcement? Prior to the outcome, both counters jump up in anticipating of good news. Anyway, it looks like investors are jumping blindly before this.
The announcement by TdC:- Buy Global Transit Communications (GTC) for RM106 million, the wholesale Internet service and back haul providerBuy Global Transit Ltd (GTL) for RM105 million, which owns 10% of trans-Pacific submarine cableBuy AIMS Group for RM128 million, owner of network-neutral data centers in the regionCapital repayment of 2 sens-a-shareTo finance the acquisitions, TdC will pay RM90.9mil cash and the rest in new shares. The deal was expected to enhance TdC's earnings straight away, transforming TdC into a regional telco player, and over-taking other competitors.
Why still falls after such a good news…

Relitigating the Last Two Years

When the election was over, President Obama said that voters "do not want to relitigate the last two years." Wrong.

The voters voted to encourage those who were opposed to Obama policies to reverse them. That's what relitigating the last two years is all about.

The White House says it is time to move forward constructively. That is not what the voters seemed to favor in exit polls. They favored rolling back government, repealing Obamacare, and extending the Bush tax cuts for everyone. In short, they were completely anti-Obama.

Let the relitigation begin this week with the convening of the "lame duck" Congress!

Would Steel sector ‘Stealing’ the show next?

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Pre and Post-Budget 2011, you like it or not, construction sector was the main beneficiary. Judging from the share price, construction stocks are almost fully valued now, with less upside space. Gamuda, IJM, MRCB, HSL, with the latest gainers of AZRB and Muhibbah, opportunities seems disappearing in construction counters.


Next wave is STEEL?

If you missed the construction boat, another boat is coming your way. Do not worry.
What people forget was the chain effect of mega construction projects.
What would construction sector needs? Can you construct without cement? Can you construct without steel?



Investors have two choices now – cement and steel. Since there are only 3 cement stocks, namely LMCement, YTL Cement and Tasek, which was not so attractive right now, we better focus on steel related stocks.


So, forget about the already construction rally and focus on steel counters instead, on the following reasons:-

Spur by local mega construction projects, such as LRT extensions and Warisan Merde…

Embarassment in Asia

President Obama's Asian trips is a catastrophe. Obama has managed to reduce America's role to whining, finger pointing, ineffective posturing. Not a single world leader agreed with any of the President's agenda, so, in that sense, Obama forged a consensus -- of opposition to Obama. Looks like world leaders hare the same view as average American voters -- Obama's policies are the problem, not the solution.

You wonder if this President is ever going to figure out why Americans have lost faith in his presidency and why world leaders no longer have any respect for him and his sidekick Tim Geithner.

This is truly an embarassing moment in history for a once great economic power.

Maybank is going to 'EAT' OSK?

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Financial Daily recently reported that Maybank is going to take-over OSK Holdings Bhd as Maybank was said to be continuously seeking opportunities. Although, both Maybank and OSK reply to Bursa Malaysia's query, both parties have neither denied nor confirmed the opportunities. And now, let us look at the possible acquisition.

What makes OSK attractive?

Good track record of rapid growth, which offers a wide spectrum of financial, advisory and investment services.
Already operating in Malaysia, Singapore, Hong Kong and Shanghai.
One of the pioneers in local broking industry with 450 remisiers and 300 company dealer's.
What's in-store for Maybank?

Maybank had explicitly wanted to expand regionally, especially on investment banking services.
Regional equities broking was always in Maybank's radar.
And, main weakness of Maybank now was its fund management arm, in which, OSK is famous of.
If this is true, Maybank is heading in a right direction, by 'eating' OSK, to compliment…

Why you should DUMP YTL-e, and, BUY YTL-Power now?

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After successfully riding on the mini Bull market of KLCI, YTL-e is the star performer of YTL group of companies. From around RM0.80, charging upwards to RM1.70 now, YTL-e was the Top Gainer of October. However, Finance Malaysia (FM) is wondering what the reason was behind.

First, people are crazy of YTL-e because of its impending WiMax broadband services to be rolling out this coming 18th November
And, the above is the only reason. Nothing else.
Why should you DUMP YTL-enow?

The business of WiMax 4G is under YTL Communications, which is a wholly own subsidiary of YTL Power.
Meaning, the success of the project would benefit YTL Power, not YTL-e.
Why should you BUY YTL-Powernow?

As mentioned, YTL Power is the ultimate owner of the WiMax broadband business.
Management of YTL hints that their service would be the most competitive and attractive in Malaysia.
YTL Power pays very good dividends annually.
YTL Power is a laggard among blue-chip counters.
Then, what was there for YTL-e?

The WiMax license …

New Fund: AmIslamic Greater China Fund

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The fund aims to grow the value of the investment in the Longer Term by investing in a portfolio of Shariah-compliant equities with exposure to the Greater China region namely in China, Hong Kong, Taiwan markets, as well as companies on Approved Equity Markets with business dealings in China.


To achieve the investment objective, the fund will invests a minimum 85% of the fund's NAV in a portfolio of Shariah-compliant equities with exposure to the Greater China region. AmIslamic is partnering with Hamon Investment Management Limited, the sub-investment manager who is responsible for the asset allocation and stock selection for the portfolio based on the following style:- Performing active bottom-up stock selection
Picking securities without the constrain of market capitalization
Growth or value styles which depends on the changing economic cycles and market conditions
The fund is suitable for an investor seeking:-

Investment exposure to the fast growing Greater China region
Capital growt…

Obama is Confused

Obama's comments leading up to the G20 meetings this week show a serious confusion about why America is stuggling. As usual, Obama blames someone else. This time Obama's targets are other countries with high levels of exports to the US and substantial positive trade balances with the US. He thinks they should stop doing this. Why? Americans are buying, so why should they stop selling to them.

What Obama does not understand is the reason why Americans buy and do not save. The reason is simple. Americans assume that government will take care of them in their old age through social security and medicare, so why save? Why not live for today and let future generations fund your old age? That's the Obama way.

The result is Americans borrow from abroad, don't save and consume like crazy. The only way to stop this is to dismantle social security and medicare.

China doesn't have social security or medicare nor do any important countries that are currently experienc…

Migration of Immigration Department…

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Recently, I went to Immigration Department pertaining my passport. Thinking that I am very smart, I did the following before heading there:-
Log in to www.imi.gov.my
Pay attention to latest announcement (1 Jam 1 Passport !!!)
Pay attention to the operating hours
Locate the destinations with maps also

Without any doubt, I started my Passport journey hoping to get my things done smoothly. First, I reached to Wangsa Maju branch on 7.40am. To my surprise, the security guard told me that the system was down for the whole-day. Yes, early morning they already know it was down whole-day!!!
Without arguing, I head to Putrajaya – headquarter of Immigration Department of Malaysia. According to the map provided on its website, I reached there. While on my way to get my queuing number, there was no "passport" button for me to press, the official there told me to go to another place. Reason being the passport operation was moved to Precint 15.

Only Passport service moved there?
Where is Precint…

MCA is largest shareholder of TheStar

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The Star reported that MCA had announced that it has bought a 42.4% stake in Star Publications (M) Bhd for RM1.28bil, or RM4.09 a share, from its wholly-owned subsidiary Huaren Holdings Sdn Bhd and is in the process of maintaining its beneficial interests in Star.


MCA said: "The transfer is effected for the purpose of reorganizing MCA's investments, whereby Huaren Holdings will divest its passive investment in Star and increase focus on its investments in unquoted shares and other assets, in order to achieve greater management efficiency and provide maximum return to stakeholders"
Finance Malaysia: In fact, this is only a change of hands (from Huaren to MCA). This is an ongoing process being intended by both parties to streamline its operations. Prior to this, Huaren had also disposed its entire 3.6% stake in Media Chinese International Ltd (MCIL). MCIL which controlled 4 Chinese dailies - Sin Chew Daily, Nanyang Siang Pau, China Press, and Guang Ming Daily, became a hot de…

Why UEM Land acquires Sunrise?

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About the offer…
On 4th November 2010, UEM Land Bhd plans to take control of Sunrise Bhd in a RM1.4bil deal. Shareholders of Sunrise are given 2 options:
UEM Land to acquire Sunrise shares at RM2.80 via the issuance of UEM Land shares at RM2.10 each, orSunrise shareholders get 2.80 redeemable convertible preference shares (RCPS) for every one offer share.
Why Sunrise?
Reasons given by UEM Land were:
Leveraging on Sunrise Group's robust financial strengths and prospectsAccelerate UEM Land's own business expansionTo secure new development projectsAnd, to create another Capital Land (Singapore state-own company which is one of Asia's biggest property developers)
After the deal is completed… UEM Group's shareholding in UEM Land will fall to around 60%Major shareholder of Sunrise will have stake of around 9% in UEM LandSunrise will be delisted from Bursa MalaysiaBut, the brand name of Sunrise will be retainedCreating an enlarged group with combined asset base of over RM5bn

Finan…

Maybe "No" is the Right Answer

Paul Krugman, one of many NY Times partisan Democrats masquerading as a columnist, has once more asked: "What would they have done different?" How about doing nothing?

When recessions begin, politicians look for quick fixes, sometimes called "stimulus plans." Republicans look for quick fixes; Democrats look for quick fixes. In Economics, we have a subject called "Macroeconomics," which is supposed to provide guidance to the correct macroeconomic policy. What Macroeconomics is, in truth, is a collection of random fairy tales and simplistic equations, that bear little resemblance to hard science. When you ask someone, "do you favor spending increases or tax cuts," the answer you get tells you the political party of the person doing the answering. Some science!

The cold hard truth is there is no specific government policy known to be helpful in moving the economy from recession to recovery. Doing nothing may well have been the right answer in …

70% Loan to Value

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On 3rd November 2010, Bank Negara Malaysia wishes to announce with immediate effect the implementation of a maximum loan-to-value (LTV) ratio of 70%, which will be applicable to the 3rd house financing facility onwards taken out by a borrower.

Financing facilities for purchase of the 1st and 2nd homes are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policies.
Why? The measure aims to support a stable and sustainable property market, and promote the continued affordability of homes for the general public. 

At the national level, residential property prices have increased steadily in tandem with economic development and the rise in income levels.  This aggregate growth trend remains largely manageable and has not deviated from the long term trend in residential property prices.  In the more recent period, however, specific…

Bernanke Has Lost It

QE2 is a disastrous mistake and will only inflate asset and commodity prices and provide a major impetus to future inflation. Bernanke is misreading his mentor, Milton Friedman. Today's Wall Street Journal has an excellent article by Alan Meltzer, one of Friedman's most famous disciples, laying out exactly why Friedman would not have agreed with Bernanke's current path.

QE2 is the announced future purchases of $ 600 billion of treasuries by the Federal Reserve. This would be a major expansion in the money supply. The dollar, of course, will collapse with this kind of money creation and economic policy makers around the world are looking toward imposing capital controls to try to offset Bernanke's policies. They view this as a trade war of epic proportions.

Ironically, Bernanke is too worried about the economy. Economies recover on their own when government gets out of the way, witness the 19th century in American. The period from the civil war until 1914 was the f…

Finally

It looks like the business community may finally begin to get some relief from the oppressive taxes, regulations, and rhetoric that has flowed constantly from the first two years of the Obama regime. The historic repudiation of the Obama program sets the stage for possible progress on reducing the obstructions to economic recovery that have been put in place by the Democratic Congress and President Obama.

Watching Obama's press conference yesterday, I was struck by how little Obama understands about the economy and how little he understands about the average American. His view that voters "don't want to relitigate the past two years" completely misreads the November 2nd landslide for the Republicans. In fact, the voters do want to relitigate the past two years. They are demanding it. That's what the tea party movement is all about.

If Obama continues to misread the electorate and stand in the way of economic recovery, then we must wait until the Fall of 201…

New Listing: Petronas Chemicals Group

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After the successful listing of MMHE, Petronas is going ahead with the listing of another subsidiary - Petronas Chemicals Group Bhd (PCG). The IPO, which could raise as much as RM13.02bn (US$4.2bn), would be the largest in Southeast Asia, according to term sheet.

Below is the summary of the IPO: PCG is one of the leading integrated petrochemicals producers in Southeast Asia region, with 45% of revenue derived locally.Better profit margin in rising crude oil environment as prices of raw material was supplied by Petronas.The management has earmarked to 50% payout of its earnings, which translates to a dividend yield of about 4%.
Valuations... At retail price of RM5.05, the historical price-earnings ratio (PER) works out to be about 16 times.

Upon listing... EPF and Kumplan Wang Persaraan will be cornerstone investors.To expand its business and synergistic-growth acquisitions for the next 5 years.To consolidate its petrochemicals activities to increase the efficiency and profitability of its o…

Questions created by PTPTN

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Today, it marks a historic milestone for my PTPTN's loan. After waiting for a year since the day government announced that it will reduce the interest rate from 3% to 1%, all the borrowers' wish finally came true.
I am very pleased with the announcement, though, it should be more effective. Understandably, there are thousands of borrowers who had taken up the education loan. However, did PTPTN file and store those record in a systematic way? If so, why would it take so long?
Right after the announcement, many of us (loan takers) curiously thinking about the procedure, terms and conditions applies, and of course, when would it started. Then, I believe many of us can't wait anymore, and take the first step by ringing up to inquire about the issue.
Personally, I did called. Surprisingly, the official politely told us that NOT everyone are entitle for the reduced 1% interest rate. The term was: "Qualified borrowers is meant for those who regularly repay the loan for the past…