Snippets, Snides & Snipes
22 - 26 May 2006

Oops, UEM World & UEM Builder
Following the news on Penang Bridge project (and maybe the expose on Disneyland Nusajaya), both shares decided to surge over the last 20 minutes yesterday. Before anyone here thinks that I would have the clout or resources to move shares up or down, let me assure you that I only blog on what I know, what I hear or interesting information that fall upon my ears. I will only blog if what I write somehow adds value or has some commentary / analysis. Investors who act on information in my blog do so on their own initiative - you will not give me a share of your gains, and neither should you bitch to me about your losses.

More Talk On HK's Peg
Chief Executive Donald Tsang have reiterated that the yuan will need to be fully convertible before HK considers replacing its currency peg to the US dollar. The Hong Kong dollar was trading at 7.7562 versus its US counterpart Thursday afternoon. Hong Kong has fixed its currency to the US dollar since 1983 and allows it to trade in a band between 7.75 and 7.85. Chances are very very low that HK would repeg to the yuan, but chances are high that HK will repeg to a basket of currencies (including the yuan). Its not a matter of IF HK repegs, its a matter of WHEN HK repegs. I hope there are enough smart people in HKMA to know that when they repeg, DON'T LEAVE THE CURRENCY PEGGED TO THE USD, its no longer relevant. By being pegged to the dollar, their monetary policies basically is governed by the US to a large extent. To compete and navigate in a global market place of today, you need flexibility to adjust and monitor your currency with a view to competition, industry changes and domestic demand. To be continually pegged to the US dollar is to be at the mercy of the US monetary policies. The financial implosion in Asia in 1997-2003 should be sufficient evidence of the need to be more flexible. The basket of currencies should naturally include HK's major trading partners - a hypothetical ratio could be: 25% US dollar, 20% yuan, 10% Japanese yen, 25% Euro, 20% Asean currencies. That is a more stable platform for HK to work on.

The Smartest Guys In The Room Are Going To Prison
To me, Ken Lay and Jeff Skilling deserve to go to jail, not so much for the the wrong things they did, but for the audacity in doing it. The blatant manipulation is naively head strong and ill conceived. To be a brilliant "manipulator", the tracks and things they concocted were a bit dumb. If you are going to be a thief, try to be brilliant at it, if not, you deserve the slammer for being mediocre .... but ballsy I must add.

Vonage - Should Never Have Been Listed In The First Place
Vonage, an ISP in the US fell 10% from its IPO price on first day of trading, and has gradually edged lower to be off 25% since. The investment bankers have a lot to answer for in bringing the deal to the public. Supposed to sell 25% of the company - Deutsche Bank, UBS and Citigroup only managed to sell 23%. The company even acknowledged that it may never make any money in the highly competitive VOIP... ever. The company spent huge sums advertising in the Super Bowl and used bucket shop tactics to win customers.The company burned through US$190 million in cash from operations in 2005, and another US$150 million in investing activity in the same year. What’s more worrisome is that the company is unable to sustain pricing control in the market, as Skype, the cable companies and the telcos all roll out competively priced products. And consumers are notoriously fickle in having zero loyalty to telcom service providers, switching long distance carriers and local providers as soon as they get a good deal. The growing commoditisation of phone services basically puts a lid on any spin-doctors for the stock. Its not the institutional investor who got burnt this time, this deal was largely placed out to retail with many institutions already shying away weeks leading up to the doomed IPO. The US$531 million raised was the worst US market debut in more than 2 years. The company pushed to get sold off after Sype was sold to eBay for US$4.1 billion but there were no takers for their asking price.