Friday, July 31, 2009

Negative Bonuses For Temasek's Staff

To be fair, Temasek does have one of the fairer compensation system among "investing companies". In fact someone should recommend to Obama to adopt Temasek's bonus pool policy in his administration's attempt to revamp pay and bonuses on Wall Street.

The Straits Times: Temasek Holdings' portfolio lost more than S$40 billion in value in the last financial year, said chief executive Ho Ching yesterday. The exact figures for the 12 months to March 31 are not available yet, but the headline number indicates how the company has fared in the financial crisis. Temasek's next annual report, due out next month, will shed more light on the portfolio's performance.

In February, then Senior Minister of State (Finance and Transport) Lim Hwee Hua told Parliament that between March and November last year, Temasek had lost S$58 billion. Its portfolio value fell 31 per cent from S$185 billion to S$127 billion. It is unclear if Temasek managed to recoup any of those losses between November last year and March this year. But analysts say Ms Ho's comments yesterday indicate that even if Temasek did narrow its losses, it may not have been by much.

In a speech to the IPS Corporate Associates Lunch yesterday, Ms Ho said that Temasek had reported an amount of S$40 billion as its annual 'value-at-risk' for its financial year between April last year and March this year. This means there is a 16 per cent probability that the portfolio would drop by S$40 billion in the period, she said, adding: 'Indeed, it had turned out to be so, and more.'

Global stock markets plunged to record lows in early March, but have rallied strongly since. Nomura analysts estimated last month that Temasek had recouped a considerable amount of its losses between November and mid-May. They said the portfolio likely rebounded 13 per cent, or S$16 billion, in that time. But it is possible that most of these gains were made between March and May and will not be seen in the latest annual report.

The entire staff of Temasek Holdings are taking personal financial hits, with annual bonuses likely to be slashed in the wake of the investment firm's losses over the past year. Part of every Temasek employee's bonus goes into a pool that is paid out over a number of years rather than at the end of each year. When Temasek meets its internal performance benchmarks with higher-than-targeted returns, the pool of bonuses to be distributed grows and each employee gets a bigger slice. But when it fails to do so, employees get 'negative bonuses': They get no money from the pool, or the value of the overall pool shrinks. This compensation structure is based on a key principle of having staff 'share in the institution's performance, both for positive and negative results', said chief executive Ho Ching yesterday.

In her speech at the IPS Corporate Associates Lunch, she said: 'We share gains and pains alongside our shareholder. This is in essence having an owner's approach to our business and operations. Temasek came in below its targets last year as well as this year, which means staff get 'negative bonuses. From CEO to office attendants, all our staff were allocated negative bonuses last year, and will be allocated more negative bonuses this year,' said Ms Ho.

If Temasek achieves above-target returns, known as Wealth Added and reported in the annual Temasek Review, it will have gains to share with its staff. 'It is a tough challenge to share negative is even tougher to deliver a positive Wealth Added every year,' she said.

p/s photos: Linda Onn

Emerging Markets Bull Run To Continue?

    The sharp outperformance by emerging markets in general compared to developed markets have rankled some experts in the US. They would cite that the outperformance is unfair, that emerging markets are loaded with huge risks - yea.. thanks for the subprime fucking mess dudes ... low risk indeed.

    According to the MSCI Emerging Market Index, emerging markets stocks have gained 80% to July 27 since it reached bottom in November 2008 . High global liquidity, improvements in risk appetite, falling core markets volatility (VIX), rebounding commodity prices and relatively stable emerging markets fundamentals in comparison to past episodes of crisis are behind the recovery. Moreover, EM countries' policy response to the crisis has been relatively aggressive, planting the seeds for a positive domestic demand story.

    However downside risks remain in place due to a bleak corporate earnings outlook, worries over the real economy, revival of global risk aversion, and higher US Treasury yields. So far this year (to July 27), EM equity markets have jumped 47% YTD, while global equities have increased 12%.


  • July 27: "Research by Société Générale's cross asset team argues it is time to sell because the price-to-book value of emerging-market stocks is now higher than those in the developed world. The only other time this valuation measure was at a premium to that of the developed world was from mid-2006 to mid-2007. Emerging-market equities fell by two-thirds in the 12 months to the start of November 2008.
  • July 13: July 13: According to Citigroup equity strategist Geoffrey Dennis and Jason Press “The correction in regional equity markets has reached the expected 10-15 percent range.” “Although the mood has turned sour on worries over the timing of economic recovery, there is little more downside from here and expect regional markets to break out to the upside again later this summer.”
  • The MSCI Emerging Markets Index may climb to 985 by June 2010 from its closing price of 743.72 on June 18th, Jonathan Garner, Morgan Stanley’s chief Asian and emerging-market strategist, wrote in a research note. Profits will rebound 28 percent next year after a 15 percent slide in 2009, Garner wrote. That compares with his earlier forecast for a 20 percent gain in 2010 and a 25 percent drop this year.
  • June 15: Deutsche Bank AG said that Latin American stocks may drop 15 percent this summer (2009) because of increased share sales in Brazil, weaker China bank lending and the unlikelihood of a rebound in the U.S. economy in the second quarter.
  • June 2: The surge in emerging-market equities may last another six months (until the end of 2009) as faster economic growth in developing countries prompts investors to keep shifting out of lower-yielding assets. Emerging-market stocks may keep on gaining as investors shift some of the $3.8 trillion in money market funds into equities.
  • May 26: If the US economy surprises on the upside, Chinese economy surprises on the downside, or the financial sector lead global sectors, developed markets will outperform emerging markets equities.
  • May 18: Emerging-market stocks may gain an average of 20 percent this year as they rebound faster and stronger than their peers in developed countries, according to Black Rock Inc. The global economy has probably seen its worst in the past two quarters, with developing nations already starting to emerge from the recession.
  • April 21: The bulls say that this is just the beginning of a sustainable recovery in global risk appetite, supported by signs that Chinese demand is growing again and hopes that the U.S. economy is not free falling anymore. The bears say that, although the medium-term outlook for emerging markets is appealing, the prospect of a slow and painful global economic recovery will translate into bouts of selling pressure.
  • April 21: There are still significant downside risks and it will be important to differentiate between emerging markets. Asia remains best positioned and CEE and CIS are the most vulnerable.
  • April 16: "Emerging-market stocks will surge a further 39 percent this year as government spending and interest-rate cuts from China to the U.S. revive demand for developing nations’ exports", according to JPMorgan Chase & Co.
  • Regional Performance:

    Asia (ex-Japan): Asia (ex-Japan): Asian equities have outperformed mature markets in 2009 thanks to FII inflows, hopes of economic revival in H2 2009, and fiscal stimulus and liquidity measures that are finding their way into equities. These factors might be making some Asian markets expensive. Markets have gained 48% YTD as of July 27 (82% since October 2008) with China (50%), India (65%) and Indonesia (62%) as the best performers, and Vietnam (22%) and Malaysia (35%) as the worst. Sri-Lanka posted an exceptional 141% gain due to the end of the 26-year civil war, a $2.5-billion loan agreement with the International Monetary Fund and the government's positive stance on reforms and liberalization. Asian markets have recovered 56% of the losses incurred in 2008 (peak to trough, down 59%).

    Latin America: Latin American equities has outperformed the other emerging markets regional indexes by rising 55% YTD to July 27 (92% since it hit bottom in November 2008), with strong performances in Brazil (up 68% YTD) and Chile (up 55% YTD). The laggards are Argentina (up 22% YTD) and Mexico (up 27% YTD). Overall, LatAm equities market have recovered 44% of the 2008 crash (peak to trough, down 68%).

    Eastern Europe, Middle East and Africa (EMEA): EMEA equities market have gone up 36% YTD to July 27 and 69% since it reached bottom in March 2009. Russia (51% YTD), Turkey (44% YTD) and Israel (30% YTD) lead the mark, while Morocco (-0.3% YTD) and South Africa (10% YTD) have underperformed. EMEA stock markets have recovered 35% of the sharp correction induced by the global crisis (peak to trough, down 66%)

    Recent EM market Dynamics:

  • July 28: "I wouldn't want to encourage people to invest in China and India who have never invested before," cautioned Jim O'Neill, Goldman Sachs chief economist. "Wait for a correction."
  • July 28: "Investors around the world have been pouring money into emerging-market stocks faster this year than at any other comparable time on record, despite strategists' fears of a bubble. They plowed a record $35.5 billion into emerging-market stock funds in the first half, according to funds-flow research firm EPFR Global, whose data go back to 1995. By contrast, investors withdrew $61 billion from developed-market stock funds over the same period, EPFR said."
  • July 8:“Risk aversion levels have risen across the board,” said Nigel Rendell, a senior emerging-market strategist at RBC Capital Markets in London. “While sentiment is still uncertain, emerging markets generally will be weaker.”
  • June 24: Overall, regional markets are now in full correction mode. This correction is now the longest and sharpest since the impressive regional rally that began on March 2 and took MSCI Latin America 73% higher in almost exactly three months. This correction is unlikely to turn into a rout due to (1) improving global and regional growth prospects; (2) a likely trough in regional earnings over the next few months; and (3) the low cost of capital, including short rates.
  • June 18: Emerging-market stocks fell for a fifth day, the longest losing streak since January, amid concern credit losses at banks will mount. The MSCI Emerging Markets Index dropped 0.8 percent to 743.41 at 2:10 p.m. in New York, taking the benchmark measure’s five-day slump to 6 percent and trimming the gauge’s 2009 gain to 31 percent.
  • June 10: According to JPMorgan Chase & Co., Latin American equities are poised to climb at least 22 percent by the end of 2009 because shares are cheap relative to history, global investors may increase stock holdings from a near 20-year low and commodities may rally. The investment bank said that the MSCI Latin America Local Index will advance to 73,882 in 2009. The index closed at 60,256.08 on June 9th.
  • June 8: Emerging-market stocks dropped the most in two weeks as Credit Suisse Group AG advised selling Taiwan shares and speculation the Federal Reserve may raise interest rates curbed demand for higher-yielding assets. The MSCI Emerging Markets Index fell 1.9 percent to 772.25, the steepest drop since May 21.
  • June 3: Reuters found that Central and Eastern Europe lagged behind the general trend in the current stock market rallies. Despite rebounding by 30-40% over the past three months to June, CEE bourses still generated rather small turnover and rallies were patchy.
  • June 3: Sub-Saharan African markets have been among the worst performing markets in 2009 struck by domestic conditions of high government borrowing and commercial banks’ exposure to margin lending. South Africa the best performing market in the region has risen by a mere quarter. Sub Saharan Africa is experiencing a slump in private and aid inflows since the onset of the global slowdown which is a prime factor behind the underperformance of its equities.
  • June 3: In late October, EM equities hit a bottom and started to rise. Since then, the FTSE emerging markets index has outperformed the developed markets index by 48.8 per cent.

p/s photos: Rachel Kum

Thursday, July 30, 2009

Planning A Career In Financial Markets

Tickets sold by Ticketcharge: 03-2241-9999

Chinese Equity A Bubble In The Making?

Well, that should not even be a question, its a fact. The question should be for how long. Just because a market is considered expensive, does not mean one should get out immediately. It will be a tug of war. A bubble is usually because there is a concentration of liquidity and a flush of liquidity, as explained numerous times in this blog. Yesterday saw China markets doing a whipsaw, falling dramatically but still regaining some ground back. That is a prime example of a very strong momentum market. It will be volatile but the investors and players are not ready to leave the playground yet. Hence on rumours of possible tightening by the central bank, the markets will take that as an excuse to take profit and take some chips off the table. I don't think the China markets and HK market included will be paralysed so soon. Judging from the liquidity exhibited in recent IPOs in HK and Shanghai, this rally has some legs. Still, one has to react swiftly, in and out, its a traders' market not a buy and hold market.

    After falling 70% from its peak in late 2007, the Shanghai Composite Index is up more than 80% off its low in November 2008 and 70% for the year. China's total market cap has risen 122% in 2009 to more than 10 trillion yuan. Valuations have more than doubled from their lows in November, but are still well below their peak in January 2008. In July IPOs resumed after new rule changes were put in place.

  • July 10: The Shanghai Composite Index is up 70% in 2009, after falling 70% from the peak in late 2007. The Shenzhen index is up 87% in 2009. Trading on the first IPOs in nine months was halted after they jumped more than 20% from their opening price. The Chinese equity markets have rebounded on the back of the fiscal stimulus, expectations of a recovery in property markets and signs of improvement in domestic demand have given markets another boost
  • Some of the new loans extended during the Q1 surge in bank lending likely found their way into the equity market as investors seek better return on assets, this could imply that the lending surge is not being invested in sectors that will boost growth- and that stock market gains are vulnerable especially given that Chinese equity returns have become more correlated with global trends
  • China and other emerging markets have outperformed developed markets in 2009, suggesting that investors believe emerging markets have "decoupled" again. Another view is that emerging markets underperformed on the way down, and are over-performing on the way up—suggesting not decoupling but rather that they are performing like high-beta assets

  • Are Higher Valuations Sustainable?
  • Stocks on the Shanghai Index traded at 28.1 times earnings in early June 2009, more than double the 12.9 factor they traded at in Nov, but below their peak in Jan 2008 at 50 times earnings
  • Citi: Ample liquidity continues to push up asset prices. After strong lending growth through April, the market expects a slowdown in May/June. But May’s volume could be close to April’s (RMB591.8b), and June could see further growth, thanks to the non-seasonal pick-up in economic activities for the summer months
  • DBS: State-owned enterprises' profits track exports more closely than GDP growth, suggesting that profits will remain under stress even as domestic conditions improve. Sticky wages and increasing commodity input prices increase the pressure from the cost side. Further, because inflation is likely to pick up before corporate profits, SOE's will likely face tighter credit conditions before their balance sheets improve
  • Policy responses have boosted confidence and prevented further contractions of consumption and investment. Property, retail, and auto sales are healthy in volume terms, even if prices remain deflationary. The real impact of the stimulus will take time to filter through the economy and will show up in H2 2009
  • The Chinese equity market continues to be speculative because hedging tools are limited (deterring institutional investors) information on the companies is sparse. Level of government meddling in the market makes true transparency difficult Many retail investors (who led the boom in 2007) retreated to demand deposits
  • After a surge of IPOs in 07-08, there have been no new issues since Sept 08, when regulators feared new supply could further damage existing shares. The China Securities Regulatory Commission issued new regulations for listings on June 11 and has taken legal actions intended to ensure that Chinese markets are less prone to manipulation; IPOs are expected to resume soon
  • New listings and release of block shares could drain funds from existing shares, threatening this year’s gains. The rule changes are intended to increase access for retail investors to IPOs, and limit the valuation surges that followed flotations in 07-08
  • In an apparent attempt to reduce market volatility as new IPOs come online, the government is requiring that SOEs that have listed since 2005 transfer 10% of their shares to the social security fund, which will be subject to a 3-year lock-up period
  • In 2007, regulations intended to deflate Chinese equity markets were implemented (stamp tax raised from 0.1% to 0.3% in May 07), these were mostly reversed in 2008 when markets fell sharply (stamp tax repealed completely in Sept 08). In an attempt to boost existing shares, IPOs were suspended in Sept 08
  • The average daily volume on the Shanghai exchange has more than doubled to 13.6bn yuan in May 2009 from a low of 4.4bn yuan in Aug 2008

  • Sectoral Outlook
  • Citi: Consumer-facing sectors could benefit from policy shifts that would help boost domestic consumption. Auto sector profits trail sales growth, banking sector profits down y/y but show q/q momentum, cement and food/beverage sectors should outperform, and insurance sector looks positive
  • UOB: A pick-up in demand in H2 2009 should benefit energy producers. Dropping property inventories and the massive reduction in equity ratio requirement (20% from 35%) for new ordinary residential projects will boost the property sector, in turn boosting demand for steel and aluminum, as well as energy
  • Planned massive infrastructure spending on the mobile network over the next 3 years should boost the telecommunications sector. Export-oriented industries (steel, shipbuilding, coal), despite stimulus spending, are reliant on a pickup in global demand
  • Fidelity: railways, materials and the property companies may benefit from stimulus efforts. Industry leaders may benefit from consolidation. The large scale railway expansion should also boost demand for steel and cement. Conversely financial services and energy companies place more challenges ahead
  • Domestic retail sales continue to grow on the back of government subsidy programs and the wealth-effect of rising asset prices, however exports remain in contraction.
  • Chinese oil demand returned to positive growth in April, and Chinese oil firms were able to use favorable credit conditions to purchase assets abroad when oil prices were depressed

p/s photos: Suzanne Sae

Wednesday, July 29, 2009

Temasek's Team Under Ho Ching

I guess in an attempt to deflect criticism that it is a one-woman team, the cynical me would try to see through the "approved media blitz" via The Straits Times on the Temasek's senior management team. See how easy it is to twist words and intentions. It can be an exercise in transparency or propoganda to rebuild goodwill.

1 Charles Ong
Senior managing director and chief strategist

Formerly Temasek's chief investment officer in charge of overseeing all investment decisions, he became chief strategist in December 2006 while Temasek was grappling with the fallout from its takeover of Shin Corp earlier that year. Mr Ong, formerly with Lazard Freres & Co in New York, joined Temasek in 2002.

2 Tow Heng Tan
Senior managing director and chief investment officer

A chartered accountant, Mr Tow took over as chief investment officer after Mr Ong's replacement, Mr Jimmy Phoon, quit in 2007. Mr Tow also sits on the boards of Keppel Corp and ComfortDelGro, and was formerly senior director of DBS Vickers Securities.

3 Gan Chee Yen
Senior managing director and co-chief investment officer

The former director of finance for Singapore Technologies, Mr Gan joined Temasek in 2003 and heads the transportation and logistics investment group. He has served on the board of other companies, including Neptune Orient Lines.

4 Manish Kejriwal
Senior managing director, investment, international and India

A former partner at McKinsey and Company, Mr Kejriwal holds an MBA from Harvard University and was named a Baker Scholar, the top academic honour at Harvard Business School. He joined Temasek in 2004 and is in charge of investments in India and in financial services.

5 Cheo Hock Kuan
Senior managing director, corporate development and special projects

She joined Temasek in 2002 from Singapore Technologies, where she was head of executive resources and corporate human resources. A former military officer, she now oversees leadership dynamics, board governance and compensation for executives and board members, among other things. She is also a director of Fullerton Financial Holdings.

6 Leong Wai Leng
Chief financial officer, senior managing director (corporate development)

Appointed Temasek's first chief financial officer in 2006, she studied engineering at Cambridge University. She moved to Temasek after leaving Raffles Holdings - where she was the deputy chief executive and chief executive of Raffles International- after Raffles sold its hotel business.

7 Goh Yong Siang

Managing director, international and strategic relations

The former chief of the Singapore Air Force, Mr Goh retired in 1998 and went to work in the United States, first as president of ST Engineering and then in private equity. He was a partner in and chief executive of a Dallas, Texas-based charter airline, Patriot Air, which filed for bankruptcy less than two years after it was formed. Mr Goh joined Temasek in 2006 and was asked to head the Thai office that Temasek opened following the Shin Corp debacle.

8 Simon Israel
Executive director since 2006

Mr Israel is the chairman of the Singapore Tourism Board and sits on several other company boards, including SingTel, NOL and Fullerton Financial Holdings. A Singaporean, Mr Israel was previously Danone Group's Asia-Pacific chairman and spent 22 years with the Sara Lee Corporation.

9 Hiew Yoon Khong
Senior managing director, special projects

Previously CFO of CapitaLand and CEO of its commercial and financial units, Mr Hiew joined Temasek in 2003 and is now also the executive director and CEO of Mapletree Investments. Prior to that, he was managing director of Temasek's private equity investment funds portfolio.

10 Ng Yat Chung
Managing director, corporate

Less than four months after stepping down as Chief of Defence Force in 2007, Mr Ng joined Temasek in the newly-created position of managing director of portfolio management. A Cambridge University graduate, Mr Ng was also previously Chief of Army.

11 Michael Dee
Senior managing director, international

Formerly a Morgan Stanley investment banker and regional head, Mr Dee was recruited to join Temasek's newly-formed international division last year. He advised Temasek-backed Singapore Power when it bought the Australian business of energy giant TXU for $3.7 billion in 2004.

12 Vijay Parekh
Senior managing director, special projects

After 18 years with American Express, Mr Parekh joined Temasek in 2005 and became a director of Fullerton Financial Holdings in October 2006.

13 Jimmy Phoon
Senior managing director, strategy

Mr Phoon joined Temasek in 1999 but resigned in September 2007, less than a year after he was made chief investment officer following the Shin Corp incident. Formerly from Standard Chartered Merchant Bank Asia, Mr Phoon rejoined Temasek on Nov 1 last year.

p/s photos: Moe Oshikiri

Tuesday, July 28, 2009

Marketocracy Portfolio Updated

For the period ended 31 March 2009, my Marketocracy fund beat 97.8% of the participants. Thankfully, the record for the period ended 30 June 2009 saw my fund improving further to beat 99.5% of the participating funds.

The last 3 months saw S&P500 rising by 13.71%, my fund rose by 23.99%.
The last 6 months saw S&P500 rising by 19.29%, my fund rose by 77.88%.

Sigh... I should really get back to fund mgmt ... ok head hunters, email me at

Rankings Report for salvadordali's Mutual Fund July 27, 2009
left curve my fund rankings right curve

For the six month period ending June 30, 2009 your fund outperformed 99.5% of the other funds on our site.

price history right curve

[download spreadsheet]

graph of fund vs. market indexes
SMF m100 S&P 500 DJIA Nasdaq

left curve recent returns vs. major indexes right curve

Beating Today YTD
0.71% 58.73%
S&P 500 -0.21% 10.02%
DOW -0.22% 3.61%
Nasdaq -0.40% 24.66%

recent returns right curve

Last Week 3.99%
Last Month 5.91%
Last 3 Months 23.99%
Last 6 Months 74.88%

Last Week 4.16%
Last Month 8.85%
Last 3 Months 13.71%
Last 6 Months 19.29%

Last Week -0.16%
Last Month -2.95%
Last 3 Months 10.28%
Last 6 Months 55.59%

left curve alpha/beta vs. S&P500 right curve

Alpha 45.75%
Beta 1.22
R-Squared 0.81

left curve turnover right curve

Last Month 21.90%
Last 3 Months 82.87%
Last 6 Months 298.38%
Last 12 Months 371.48%

Symbol Price Shares Portion of Fund Inception Return
BAC $13.02 6,000 6.78% 28.77%
STT $49.25 2,000 8.57% 42.52%
ACTG $8.10 12,000 8.45% 36.81%
MGM $7.81 14,000 9.47% 21.77%
F $6.99 20,000 12.10% 17.38%

BDD $10.15 11,000 9.71% 13.35%
QSII $54.85 1,500 7.17% 11.52%
LVLT $1.70 40,000 5.91% 10.78%
WFR $18.63 6,000 9.66% 5.69%
SXE $30.69 3,000 8.00% 4.67%
JEC $43.02 1,500 5.59% 2.92%
STAR $23.88 3,500 7.27% -0.07%

p/s photo: Chrissie Chau

The New Compensation For Investment Bankers?

This will be a good point of discussion during the Financial Markets Career talk. The present global financial crisis may actually result in some changes in how salaries and bonuses are to be paid. The following are the latest information from Royal Bank of Scotland. Base salaries for 1st- 3rd years bumped by $10K. Their starting pay now will be:
1st year base: $70k
2nd year base: $80k
3rd year base: $90k

3rd years promoted to Associate: Base: $100K- no signing bonus

Numbers out today for Global Banking and Markets. All bonuses are 100% deferred- over 3 years, subject to clawbacks. Terms still not defined.

Bonus Ranges:
1st year: $40k-$50k
2nd year: $50k-$60k
3rd year: $60k- $70k

What that means is that these bonuses are declared only and can be clawed back within a certain period if performance of the unit or company does not match up to predefined criteria.

Example, a second year RBS employee may be on $80,000 a year ... I think their year end is June, so the declared bonus for this employee may be $55,000. The terms are not clear yet but if there is a clawback, it will mean that the employee won't get to see the bonus for a certain period, say 2 years. Within that 2 years, the employee's performance, his/her department's performance and/or company's overall performance must match up to predefined criteria - then and only then will the employee get his/her $55,000 bonus. That amount may be lesser if any of the predetermined criteria were to be not attained.

p/s photos: Kou Shibasaki

Monday, July 27, 2009

A Wonderful Tribute Site To Yasmin Ahmad

A wonderful site just created by some admirers of Yasmin Ahmad. You can watch her movies and commercials, and read the multitudes of tributes pouring in in her memory.

I Don't Chat Online, Pls Note

Here is a warning to all readers. I used to chat online at Fusioninvestor and sometimes at CPCB, but I have stopped for two months already. There are imposters using the "Dali" nick to chat. I have stopped visiting chat boxes for over 2 months. Anyone using that nick is screwing with you all. You can cross out the guy at Bursa-Chat for sure.

Foreign Funds Flow

Suddenly foreign media is picking up on a surge in the flow of funds into Asian markets. Any truth in that?

Foreign fund managers are banking heavily on an Asian earnings upturn and continual growth in China to drive market momentum forward. Following a lull, a sudden leap on Wall Street has boosted foreign investor interest in Asian markets. The psychology of the markets has changed from the fear of losing money to a fear of losing opportunities.

According to EPFR Global fund research, US$137.5 billion flowed out of money market funds and almost a fifth went into Asian and other emerging market funds in the second quarter. The trend has continued in recent weeks, although the size of inflows is subsiding. MSCI Asia ex-Japan rose by 34 per cent year-to- date to July 24 and emerging by 46 per cent in US dollars, but lower gains in euro and sterling. Credit Suisse said there are several positive fundamental factors which support foreign investment in Asia.

Asia is expected to lead the global recovery due to its low leverage and financial flexibility to pump-prime economies. Second, China and India are growth engines. Third, emerging Asia is projected to deliver an average earnings recovery of 33 per cent in 2010, according to the Institutional Brokers Estimate System. Finally, company directors are signaling earnings upgrades.

Recovery leaders include companies which benefit from the massive fiscal stimulus packages in China and selected Asian countries, and technology companies with the largest potential earnings rebound. Credit Suisse advises that the collapse in Asian and global trade was a function of falling final demand and liquidation of bloated inventories.

The Asian stockmarket boom has been a boon to fund managers who had a dreadful time between 2007 and spring of 2009. Over twelve months, MSCI ex-Japan is still down 26 per cent in US dollars. Thus, the 2009 rebound has only profited investors who entered the market this year and reduced the pain of others.

Jason McCay and Richard Evans who manage the Martin Currie Asia Fund, a hedge fund, are focusing on companies that concentrate on the domestic markets. They increased exposure to Chinese banks and have purchased residential Chinese developer Guangzhou R&F Properties. Bullish on coal, they have bought Bumi Resources in Indonesia and have also invested in the Indian property sector through Unitech. They are concerned, however that the market surge has been caused by a surplus of liquidity. 'Valuations are no longer cheap and many companies are already pricing in a meaningful recovery in profits.'

Aberdeen Asia Pacific Fund contends that equities 'appear to have run ahead of earnings and economic fundamentals and a pullback would be healthy.' Longer-term, Asia's sounder economic fundamentals will enable it to bounce back more strongly than the West'. Top stocks include OCBC, Jardine Strategic Holding, Samsung Electronics, China Mobile and Singapore Telecommunications and Singapore Technologies.

Andrew Beal, fund manager of Henderson Asia Pacific Capital Growth, notes that aggressive government policies, loose monetary conditions and a steady improvement in economic activity have all helped to drive markets higher since March. Taking a long-term view, he says there is growing awareness among Asian governments over-reliance on exports to the West has become a structural weakness. It needs to be addressed by stimulating domestic consumption.


I do think stock prices have run a bit ahead of fundamentals. I do think the worst of the global crisis is behind us, although I do think Central & Eastern Europe still has some ways to go. Why are markets so inherently bullish now? You still get the majority of "experts" claiming that things are a bit too much, and yet they still keep running. Not just in Asia but look at the US equity markets in recent weeks.

I believe the answer lies in the massive liquidity on the sidelines. The massive liquidity stem from the government printing presses and various fiscal stimulus programs. Now that risk aversion has subsided somewhat, now that the bigger US banks seem to be on better footing, investors are more willing to place their bets ... no more bloody T-bills.

Naturally in such a situation liquidity would seek out the most liquid of assets. While bashed down property prices in the US might look attractive, its liquidity and gestation period may require a bit more patience. Most investors probably think its a better whack to trade the markets than to buy a depressed property now as you might have some time to wait out the property cycle. Even though many might be getting a bargain in the US property markets, getting a decent rental is another thing, getting a paying tenant that won't turn into a non-paying tenant quickly is another problem. All said, equity seems to be the only channel for these funds to trickle in.

In Malaysia, do not be fooled by the huge surge in the new index since launching because the index is very very skewed. Take the top 10 stocks and see their performance over the last 2 weeks and you will know what I mean. There has been a strategy to make the new index "look good", yes... there might have been some rebalancing by indexed funds as well ... but ... So, local equity market has not been as bullish as the new index would want you to be thinking. Its a rotational market, not entirely convincing... just look at weekly turnover value week by week for the last 6 weeks, you will find a distinctive trend... and you should be able to draw your own conclusions.

p/s photos: Fiona Xie

Sunday, July 26, 2009

Yasmin Ahmad's A National Treasure

KUALA LUMPUR, July 26 – Yasmin Ahmad left a legacy of her works in the film and advertisement arenas, thriving on the themes of love, family ties and comedy against the backdrop of multiracial Malaysia. Born in Bukit Treh, Muar, Johor on July 1 1958, Yasmin, who graduated in psychology from Newcastle University, United Kingdom, had won local and international creativity awards.

She began her career as a copywriter with Ogilvy & Mather before joining Leo Burnnett as joint creative director in 1993 and rose to become its creative executive director until her death. She was married to Abdullah Tan Yew Leong.

Her creativity could be seen in many Petronas’ commercials and evoked emotion of the viewers, especially during the Aidilfitri celebration which would certainly be missed by viewers this year.

In the film industry, Yasmin, however, drew much controversy in view of her openness and boldness in analysing social issues. She has been targeted by critics since her first movie, “Rabun” was screened in 2003 followed by “Sepet” (2004), “Gubra” (2006), “Mukhsin” (2006), “Muallaf” (2008) and Talentime (2009).

But she also earned rave reviews for “Sepet” which won the Best Film Award and the Best Original Screenplay Award at the Malaysian Film Festival 2005. “Sepet” also bagged several international awards, namely the Asian Film Award at the Tokyo International Film Festival 2005, the Grand Prix Award at the Creteil International Women’s Film Festival in the same year. “Gubra” won the Best Screenplay award at the Malaysian Film Festival 2006. “Muhsin” won the Generation kplus – Best Feature Film and the Deutsches Kinderhilfswerk Grand Prix award at the Berlin International Film Festival. “Mukhsin” also won the Best Asean Film at the Cinemanila International Film Festival 2007. “Muallaf” won the Asian Film Award – Special Mention at the Tokyo International Film Festival 2008.

While leaving indelible marks at home, Yasmin’s movies gained international recognition as they were shown in Berlin, San Francisco, Singapore and at the Cannes Film Festival. – Bernama

Saturday, July 25, 2009

Topic For Daydreaming

As usual, daydreaming, and I was wondering if somebody offered me a US$600,000 salary p.a., guarantee this, guarantee that... and a solid bonus/contract for 5 years... where would I most like to live & work if they said I could work anywhere???? What a wonderful daydreaming topic...

Of course it won't be an easy decision. I will have to take into account the distance to HK, KL & Sydney (my 3 most frequented places for holidays / friends / family). Then I have to take into account the weather patterns. How will I get around, public transport, taxis, chauffeur driven, drive on my own, etc... The cultural outlets and lifestyle. The crime rate and the people.

My final list of the places I most want to live & work (with the above package):

1) Sydney - The mildest 4 seasons you could ever come across, brilliant harbor city living, great food, great Chinese food, decent live gigs and theater, excellent coffee places, very good racing and sporting programmes, tons of weekend driving activity, 6 hour drive to the snowy mountains, close to Malaysia and HK. Will stay by the harbor@ McMahons Point or by the beach @ Coogee.

2) Tokyo - The summer's really bad, very hot and humid (worse than Malaysia if you can believe that) but can easily skip for short holidays to the Philippines, Korea, OZ or back to Malaysia. Will hire part time translator / language teacher or get a multi lingual gf. It is still relatively OK to get around knowing only English. Definitely stay @ Roppongi. Great to explore, great food, learn the language, regular visits to Kyoto and Sapporo. Very decent live jazz gigs. Hop to HK easily. Hope they have the full US/OZ cable channels.

3) Zurich - When I was there years back, this looked like heaven on earth. Its a great place to stroll, sit in a park and watch the world drifts past you. The best place to smoke a really nice cigar. Very picturesque and the weather's not too bad. Even the ducks, swans and dogs in public are very well behaved!!?? A good point to do short trips to other European cities. Trips back to Asia-Pacific would be a bitch.

4) HK - Despite the pollution levels, HK is still the most exciting Asian city (provided you are rich... its not so nice if you are not rich). The best racing available in the world. Cantonese food and culture at its best and most varied. Though HK people do speak in cantonese way too loud, I can get used to it. Probably stay in serviced apartment in Causway Bay, or if I am good at driving/have a chauffeur I would stay in Stanley. Great food, produce and choice in supermarts. Hop/skip to cities in China and KL/Sydney are not too far away too.

5) New York - Yea, even though it out there in nowhere land, its right up there as the place to be. If it was more central and close to Asia, NY would have been my #1. The best place for theater. Food is adventurous, great book shops, melting pot of cultures. Most vibrant financial center.

6) Bangkok - Yea baby, will hire part time translator / language teacher or get a multi lingual gf. Its a wonderful city to explore, and when you grasp the language, you get absorbed into their culture and way of life even more. Gentle people with flowers in their hair ... less stressful (as long as you don't get stuck in their traffic jams).

Paris - Too far, and too snooty
Melbourne - Weather is horrendous, people too sports crazy, great food and theater though
Vancouver - Too close to North Pole
Barcelona - Great to visit, not to stay too long
Singapore - Too structured
Auckland - Too windy, no life after 8pm
Amsterdam - Too small, you certainly cannot smoke pot every day
London - Too far, miserable weather, great theater, food is getting better

p/s Kelly Lin

A Good Lesson in History & Etymology

Its a wonder that we use phrases so often but do not know why or how they came about. Below are some wonderful historical context on some of these phrases. Its good to know. Etymology has never been more fun.

Cost An Arm & A Leg
In George Washington's days, there were no cameras. One's image was either sculpted or painted. Some paintings of George Washington showed him standing behind a desk with one arm behind his back while others showed both legs and both arms. Prices charged by painters were not based on how many people were to be painted, but by how many limbs were to be painted. Arms and legs are 'limbs,' therefore painting them would cost the buyer more. Hence the expression, 'Okay, but it'll cost you an arm and a leg.' (Artists know hands and arms are more difficult to paint)

Big Wig
As incredible as it sounds, men and women took baths only twice a year (May and October) Women kept their hair covered, while men shaved their heads (because of lice and bugs) and wore wigs. Wealthy men could afford good wigs made from wool. They couldn't wash t he wigs, so to clean them they would carve out a loaf of bread, put the wig in the shell, and bake it for 30 minutes. The heat would make the wig big and fluffy, hence the term 'big wig.' Today we often use the term 'here comes the Big Wig' because someone appears to be or is powerful and wealthy.

In the late 1700's, many houses consisted of a large room with only one chair. Commonly, a long wide board folded down from the wall, and was used for dining. The 'head of the household' always sat in the chair while everyone else ate sitting on the floor. Occasionally a guest, who was usually a man, would be invited to sit in this chair during a meal. To sit in the chair meant you were important and in charge. They called the one sitting in the chair the 'chair man.' Today in business, we use the expression or title 'Chairman' or 'Chairman of the Board..'

Losing Face
Personal hygiene left much room for improvement. As a result, many women and men had developed acne scars by adulthood. The women would spread bee's wax over their facial skin to smooth out their complexions. When they were speaking to each other, if a woman began to stare at another woman's face she was told, 'mind your own bee's wax.' Should the woman smile, the wax would crack, hence the term 'crack a smile'. In addition, when they sat too close to the fire, the wax would melt . . . Therefore, the expression 'losing face.'

Straight Laced
Ladies wore corsets, which would lace up in the front. A proper and dignified woman, as in 'straight laced'. . Wore a tightly tied lace.

Not Playing With A Full Deck
Common entertainment included playing cards. However, there was a tax levied when purchasing playing cards but only applicable to the 'Ace of Spades.' To avoid paying the tax, people would purchase 51 cards instead. Yet, since most games require 52 cards, these people were thought to be stupid or dumb because they weren't 'playing with a full deck.'

Early politicians required feedback from the public to determine what the people considered important. Since there were no telephones, TV's or radios, the politicians sent their assistants to local taverns, pubs, and bars. They were told to 'go sip some ale' and listen to people's conversations and political concerns.. Many assistants were dispatched at different times. 'You go sip here' and 'You go sip there.' The two words 'go sip' were eventually combined when referring to the local opinion and, thus we have the term 'gossip.'

Mind Your P's & Qs
At local taverns, pubs, and bars, people drank from pint and quart-sized containers. A bar maid's job was to keep an eye on the customers and keep the drinks coming. She had to pay close attention and remember who was drinking in 'pints' and who was drinking in 'quarts,' hence the term 'minding your'P's and Q's '

p/s photos: Reon Kadena