King Pie - Its Really Good!

I have to get more people to try out King Pie cause I am scared that mediocre business may force them to close shop. Although I think they are doing OK, but the rents must be killing them, hence I need to rally more people to at least try out my favourite pie shop.

Pies are not big with Malaysians. Its great with foreigners. I had plenty of meat pies in Australia, including the 4/20 and the famous kiosk in Woolloomooloo - all still pretty average. There was only one decent pie place, and that was at Pitt Street Hilton, but even that changed hands.

I must say that King Pie bakes the best pies I have ever tasted. Its the flaky outside pastry, yet there is a thin doughy part after that, and succulent, generous meat/sauces. I am there at least once if not twice a week. Now they are at Suria KLCC (just outside KFC), Tesco Mutiara Damansara and 1Utama (opposite Laksa Shack). Its always warm/hot, and they discard pies not sold after a couple of hours (really!!!).

The franchise is from South Africa and I hope it continues to well in Malaysia. Here I have to qualify that I am not an investor in King Pie (M), or dating the owner, or his/her daughter, or even know who the owners are.

Their best seller is Chicken Mushroom, but my favourite is Pepper Steak. Other pies that must be sampled include: Mutton Curry (seriously), Steak & Cheese, Spinach & Cheese ... The other item you must order is their fries. The only trouble is you have to wait 4 minutes each time cause they are microwaved the moment you order. Surprisingly, it comes out as the closest thing to the best french fries ever (I am not kidding)... What makes good french fries, cannot be too thin, it has to have some size, and because its not fried in oil, its not oily... its piping hot and a bit crunchy on the exterior (good bite feel) and soft in the middle. You can taste the "potato-ness". Its certainly the best fries in the country.

The attention to detail and ingredients selection (e.g. they only use topside beef) helps them to come up with a superior product. Give them a go!

Decoding China's Pulse

Important Chinese bigwigs at a just concluded economic conference identified five major problems in the national economy in a bid to better steer the country's economic growth in the coming year. The three-day Central Economic Work Conference that ended on Wednesday cited overheating risks, inflation pressure, a weak agriculture sector, arduous energy conservation and emission reduction tasks and prominent issues on welfare of the general public as key concerns of Chinese authorities.

It emphasized that it would be of great significance to properly guide the national economy in 2008, which is the first year for China to implement policies mapped out at the 17th National Congress of the Communist Party of China (CPC), during which the country's new leadership was selected.
China will host the Olympic Games in August next year, for which the government is going all out in preparation to guarantee the success of the major event.The meeting has also outlined policies to be adopted to ensure problems could be properly solved, such as the prevention of overheating economy and guarding against a shift from structural price rises to evident inflation.

Overheating Risks - A liquidity issue which channels itself into property and stock markets. To rein in these risks is very difficult. Beijing have been raising bank's reserve requirements and stopped banks from lending till end 2008.

Inflationary Pressures - Another liquidity issue. Can be combated by subsidy from the government or price controls.

Weak Agriculture Sector - A planning problem.

Energy Conservation & Emission Risks - Putting in measures which would eventually lead to more rules and regulations, thus increasing the cost of doing business - but a desired development.

General Public Welfare - General workers salaries not catching up fast enough with prices, and the still troublesome unemployment in more remote areas of China. Another planning issue.

We have to remind ourselves that although most of us know China intimately through their stock markets, the authorities have larger fishes to fry. Just because we view their stock marets with "importance", listed equity is still a small proportion of the real economy. If there is no overheating risks, they would certainly do nothing to stop Chinese equity markets from rising further.

Their property markets have been subdued somewhat, as these larger committments are easier to control via fiscal measures. Stock markets are more difficult to rein in as funds can move in and out.

Looking at the above factors, chances are this is only a temporary pause for the bull run because liquidity is still intact. As companies keep churning out decent results, it is likely to reignite the market's run. Raising the reserve requirement stems the banking side, but liquidity is already there. Raising bank lending rates also will hurt property side more but not stocks because the gap between deposit rates and BLR is still too wide, about 4 percentage points. Unless that gap is about 2 percentage points, only then will hikes in BLR attract real funds into deposits and away from stocks. Hence the hike in interest rate over the weekend is rather a non-event, in fact it could prompt some to re-enter the equity markets because another hike may be a few months away.

Beijing still have many fiscal measures it could implement if things really get out of hand - such as raising transaction fees or even taxing capital gains. These measures are not likely to be implemented till maybe the all time highs have been breached again. Hence on balance, the bull run should continue soon and things should be "safe" at least till it nears their all time highs. China dolls, come to papa ...

GOOD TRADING BUYS

( but watch those expiring in 2-3 months time, and get out when time to expiry is near)

CCCC-C3 0.23

CCCC-C4 0.16

China Life-C3 0.17

China Life-C4 0.48

China Merchant-C1 0.12

CNOOC-C1 0.36

Chalco-C1 0.14

China Construction Bank-C1 0.12

Shenhua-C1 0.37

STRONG BUYS

China Mobile-C5 0.51

China Coal-C1 0.13

ICBC-C4 0.23

Petrochina-C4 0.43

Sinopec-C2 0.17

Sinopec-C3 0.15

Extended Hols Eliminated in China

As mainland visitors tend to visit Hong Kong in large numbers during the so-called Golden Weeks, the move by China's State Coulcil to reduce the long May Day vacation to just one day, will not be a welcomed move. The State Council on Friday decided to cut the three-day long May Day Golden Week holiday to one day, despite most respondents in a nationwide survey objecting to the proposal during last month's nine-day consultation period.

Not only will the May Day holiday be shortened, but the council is also considering reducing the three-day National Day holiday as well to one day. About 80 percent of the respondents rejected the plan according to China News Agency.

In order to encourage more consumer spending, the May Day holiday has been a three-day vacation since 2000. However, on November 9 the government announced a proposal to shorten the May Day holiday. Under the plan, the May Day holiday will be reduced to one day, and the Tomb-Sweeping Festival, Dragon Boat Festival and the Mid-Autumn Festival will be added to the national holiday calendar. The total number of annual public holidays will increase by one day to 11.

The Spring Festival and the National Day Golden Weeks will both remain three days long. Late Friday, the Xinhua News Agency reported the State Council had "principally" approved the proposal during a standing committee meeting, and it is pending revision before an official announcement. Though the intention is noble, but one must remember that the majority of people working in Beijing, Shanghai and Shenzhen are from other parts of China. They really look forward to the extended holidays to go home for holidays. The move will not be popular. This will also affect HK retail and tourism adversely as many will take the opportunity during the May Week and National Day week to travel to HK. Though officially, the top brass in HK will not be saying that that is a bad move - there will be great dissatisfaction among the business crowd in HK. This will also piss off most mainland Chinese - wait for more displeasure. Pretty bad and illogical move by China, those in the State council could face a hard time in the days ahead.

Best Racing Day

Followers of horse racing should now regard the HK International Invitational races as probably the best one day program in the world, with mega prizemoney stakes to boot. This is still the best competitive field yet. Not to mention the cream of the best jockeys in the world also riding.

HK SPRINT 1200m Group One HK$12,000,000

1 ABSOLUTE CHAMPION (3) B PREBBLE 7-1
2 BENBAUN (2) P SMULLEN 15-1
3 SACRED KINGDOM (6) G MOSSE 2.25-1
4 MARCHAND D'OR (5) D BONILLA 31-1
5 SCINTILLATION (7) E SAINT-MARTIN 41-1
6 TIZA (11) C SOUMILLON 76-1
7 DESERT LORD (9) N CALLAN 61-1
8 WHY BE (13) N CALLOW 51-1
9 ROYAL DELIGHT (4) S DYE 21-1
10 SUNNY SING (1) D BEADMAN 31-1
11 SUNNY POWER (10) Y T CHENG 28-1
12 GREEN BIRDIE (8) L DETTORI 29-1
3 MISS ANDRETTI (12) C NEWITT 4-1

Comment: Probably the most competitive race among the 4 with the untouchable Miss Andretti from OZ. However, the fact that the horse has drawn a ridiculous barrier even things out enormously for the probably favourite Sacred Kingdom. The dark horse would be Royal Delight which broke the course record in his last start, a vastly improved horse. A repeat of that performance will bring in the longshot. Absolute Champion does not look like the horse it was last year, and may be now suited to 1400m or 1600m. Finally a horse bring invited from Malaysia/S'pore in the kampung champ Why Be - its probably 4 lengths better than the top horses running in both countries at set weights over 1200m - a bad barrier is nothing and should see Why Be at least leading till round the bend, and thats all she wrote.

HK VASE 2400m Group One HK$14,000,000

1 DYLAN THOMAS (7) J MURTAGH 2.5-1
2 QUIJANO (1) A STARKE 14-1
3 RED ROCKS (8) L DETTORI 11-1
4 DOCTOR DINO (4) O PESLIER 10-1
5 BUSSONI (6) C SOUMILLON 26-1
6 EGERTON (3) T MUNDRY 41-1
7 VITAL KING (9) B PREBBLE 9-1
8 ARCH REBEL (10) F BERRY 71-1
9 KOCAB (2) S PASQUIER 41-1
10 VIVA MACAU (13) D BEADMAN 12-1
11 HAWKES BAY (11) G MOSSE 31-1
12 EVER BRIGHT (5) O DOLEUZE 18-1
13 MACLEYA (12) R MOORE 21-1

Comment: A one horse race? The appearance of Dylan Thomas, Europe's Horse of the Year, almost took all the interest from other fancied runners. There is always a niggling doubt about foreign invaders being acclimitised soon enough to get back their condition. The horse was worked hard every day, which may indicate that the horse is still not within top condition yet. Hence I am willing to back the under-rated Vital King by another very under-rated NZ trainer Paul O'Sullivan as the horse will finish very well as Paul seems to have been targeting this race for the horse in its last 2 starts.

HK MILE 1600m Group One HK$16,000,000

1 KONGO RIKISHIO (1) S FUJITA 3-1
2 SPIRITO DEL VENTO (13) O PESLIER 21-1
3 THE DUKE (3) G BOSS 25-1
4 ABLE ONE (2)M KINANE 15-1
5 AL QASI (10) R MOORE 56-1
6 FLORAL PEGASUS (11) G MOSSE 11-1
7 GOOD BA BA (6) O DOLEUZE 7-1
8 JOYFUL WINNER (7) D BEADMAN 17-1
9 DOWN TOWN (4) D WHYTE 11-1
10 EXCELLENT ART (5) J MURTAGH 6-1
11 CREACHADOIR (12) L DETTORI 22-1
12 VISIONARIO (8) N CALLAN 36-1
13 DARJINA (9) C SOUMILLON 5-1

Comment: Probably the best race in terms of a large number of fancied runners. The Japanese Kongo R will try to lead all the way. Excellent Art is a lucky but over rated horse. I would stake a bet on the improving Spirito Del Vento to finish all over Kongo R. If Downtown can settle well at the paddock and not take the lead till the last 400m, its a decent chance.

HK CUP 2000m Group One HK$20,000,000

1 RAMONTI (4) L DETTORI 11-1
2 VENGEANCE OF RAIN (7) A DELPECH 10-1
3 VIVA PATACA (3) M KINANE 1.4-1
4 SHADOW GATE (2) K TANAKA 17-1
5 ART TRADER (1) D BEADMAN 20-1
6 ROYAL PRINCE (6) B PREBBLE 13-1
7MUSICAL WAY (5) R THOMAS 45-1

Comment: The presence of Viva Pataca scared most of the internationals and locals away, hence the very small field. Haphazard pace is likely in this small field as there are no clear leaders. Royal Prince is a good longshot as I expect Tony Cruz to have the horse ripe for an all the way lead performance. Viva Pataca may/may not cut him down in the end. Vengeance of Rain looks to be past his peak.

The Detective - Another Gem

HK/Asia filmakers have grown up considerably, and there are certainly a lot more great filmakers now. The Pang brothers, or rather Oxide Pang, gave us another great one in The Detective - a murder mystery. The setting in Bangkok was excellent and background music enchanting and relevant. You get drawn in more and more into the mystery with Aaron Kwok delivering another sublime performance (he should really stop singing). Liu Kai Chi the under rated veteran was excellent as well.

You should really try to catch this movie. Some of Oxide's previous work include The Eye, Bangkok Dangerous, Forest of Death and Ab-normal Beauty. Even though Aaron lost to Leung Chiu Wai, I still think Aaron's acting was better and has more depth. Can't really give the story away as it peels away like an onion, its intoxicatingly addictive.

Ooops!!! Big Wok!!!



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UPDATED
Seng: "In most corporate exercises, where there is a choice between a share-swap or cash option, the automatic default option — if a shareholder fails to choose or reply — is usually the share-swap one. ". I note with interest that the recent LIONDIV/Parkson restructuring gave shareholders 1.3 ACB shares as default, instead of automatically cashing out shareholders. It's true it's not directly comparable since LIONDIV still exist, whereas previous coy dissappear, but that should be no reason to not give shares isn't it? Perhaps someone can explain to me why it must be automatic cashing out, as I still don't understand. It's true SD is much more complex restructuring, involving 9 companies, but that means having 9 different multiples - one for each company potentially, maybe not (cf 1.3 x for ACB), but why automatic cashing out? I am puzzled....

Dali - My additional point is that Synergy Drive was a unique proposition, and that the GAP btw the px fixing for cashing out till the actual conclusion of the exercise was very substantial. SD directors and the lawyers should be AWARE that the mkt px has moved substantially prior to the suspension of Sime Darby - to me that is a material change of underlying factors. The mgmt and lawyers should be aware that there has been a MATERIAL CHANGE, and should warrant some form of redress. If the pre suspension px of SD was 7.00 or even 7.50, one can argue that the default/elect options would be deem as FAIR. Owing to the material change, one can easily predict the dire consequences ahead, and should have acted to minimise the impact to the detriment of shareholders.

In developed mkts, the board will appoint an independent advisor for minority shareholders, and I am sure the independent advisor would have suggested AGAINST the default for cash option esp when the presuspension px is almost double the cash option. I hope the SC and Bursa will implement new guidelines for future transactions.

Final point, if the affected shareholders really wanted the cash option, they could have sold anytime during the week leading up to the suspension and got nearly double the 6.46! What does that tell... that they are still holding the old Sime Darby shares for the 6.46??? Who in the world would do that? Yes, the blame largely lies with the affected shareholders, but some blame must accrue to the way the deal was structured, and failing to "act" when there has been such a material change in the crucial terms and conditions.

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Yes, Sime Darby is the world's largest plantation company now. However there has been a GRAVE INJUSTICE inadvertently committed by the company & its related advisors / registrar. Let's listen in to a conversation between an auntie and her remisier a few days back:

Aunty: Ah May ah..., my Sime Darby now trading again aah??
Remisier: Yes, it touched RM12.00 just now.
Aunty: Waaah ... so good one... lucky I hold for 3 years never sell ... thats why la... people should stick to blue chips, cannot lose one... Can you sell my 3,000 Sime Darby now ... I think I will use the money to visit my old friends in Australia..
Remisier: OK, .... let me check your account.... eh, Aunty you have no Sime Darby in your CDS account, only left 2 lots of Mems Technology...
Aunty: WHAAATTTT.... (and faints..)

Now repeat that conversation a few hundred times over across all brokerages in the country. You think the Hinduraf and Yellow Power protest marches were aggressive... wait till these affected investors bang on Sime Darby's doors.

The Problem - The circular and announcement by SD clearly stated that if you do not elect, you automatically by default will receive 6.46 in cash. We all know the pre-suspension price of SD, nearly double that cash amount. Those who ignored or did nothing automatically got cash instead of new Synergy Drive shares.

The Legality Side - Lawyers will advise that you should not allow default clause to receive shares, but to allow default clauses to receive cash is OK. I can understand where they are coming from - and legal thinking along those lines, can we enforce that those who did not turn up to vote in the upcoming elections will automatically be an extra Vote for BN? IT IS SO OBVIOUS that the deal favours to take up the new shares by a very wide margin. It is also probable that there will be some who will fail to follow up on these type of "exercises" maybe through their ignorance or genuine mistakes. That being the case, I don't think it is legally or morally wrong to put in the clause that in default they will receive shares. What is the law and legal system there to do - to ensure justice and fairness, both not evident here.

The Sufferers - Its not just the aunties and uncles, many foreign investors are affected as well. Custodians also got whacked by their clients. Clients who manage 1,000 companies in their portfolio may have missed the circular as well.

Remisiers/Dealers - Good ones would have inform their clients and reminded them what to do. If they didn't, well, you should change your remisier.

Actual Gainers & Losers - Well if you got a cheque for your old Sime Darby shares, that's your losses. The gainers are the new shareholders in Sime Darby, as the company need not fork out as many new shares vis-a-vis the cash portion. The dilution effect is less. But to SD's bottomline, its all negligible, but the losses to the real shareholders are very real indeed.

Sime Darby - While the PR dept can trumpet all they like that they made the proper announcements and laid out the rules. There are no rules governing equitable performance by the management or doing the right thing. These are not strangers, they ARE your long suffering shareholders who stood by the company through thick and thin - and this is what they get? Is this managing with shareholders' interests as the top priority? Can do better right??? Can do so much better!!!

Level Of Care - SD, their lawyers, the merchant bankers and the registrar cannot and should not hide behind prepared text and legality to excuse themselves from the debacle. Only an IDIOT would have selected to receive cash. Yes, some of the fault can be ascribed to the shareholders who did not follow up on their part. But, as I have mentioned above, SD's management, the lawyers and registrar all had a role in this as well.

Solution - Give them all shares in the new SD, take back their cheques. If you need to hold an AGM to do this, do it. Then, being the biggest plantation company in the world may actually mean something the next time you say that you have the shareholders' interests at heart.

Charity & Good Charity!
An Important Diversion

There is charity and there is good charity - hmmm ... Good Charity, sounds like a wonderful name for a horse. There are those that say that any charity is good. Are you one of those who draw a line between certain causes, that they have to be deserving enough first? If an able man in his 30s were to beg for coins, is that deserving? Or a one-legged man in his 60s more deserving?

Why does it have to be that we "mark people and causes" for charity? Because we have limited funds? When people find out that they have been cheated by certain causes or people pretending to be beggars - are you pissed off? But why ... why should any of us be pissed off?? Why bother being charitable in the first place? Is it the reputation, or does the act itself makes you feel good?

Some say that it does not matter what your motivations are, as long as there are donated funds. Charity is charity, whether you are donating to enhance your reputation, or because there are others who will see you in a different light, or you are just a kind soul - all funds into charity are good funds.

Our own persuasions and motivations will be dealt with by some higher forces, its not for us to make the calls or prejudge. While any charity is good, we can and should aspire to higher grounds. Just give, out of the goodness of your soul - do not be bothered if that beggar deserves it, do not qualify your charity - do your parents love you only if you behave in a certain way? Even if the unfortunate soul were to be only pretending, its OK ... we have to think "what if he's not", and not be overly pessimistic.

Just remember the goodness that comes to each of us when we ourselves are down, and when we don't really deserve kindness. Be a channel of goodness, not a guarded hoarder. There are billions of misdeeds in the world that needs correcting - we are not supposed to do all ... Bloom Where You Are Planted ... charity and goodness does not mean to strangers only, but first to the friends and family ... its absurd if we were to treat strangers better than the ones we love.

But anyway, back to Good Charity ... the affluent Hong Kong Jockey Club has decided to create 2,500 new jobs in the troubled area of Tin Shui Wai in HK. The Hong Kong Jockey Club announced that it would complement its new telebet centre with training and volunteer services and set up the "HKJC Telebet Centre cum Volunteers and Training Centre" in Tin Shui Wai. It is hoped that the new centre will help revitalise Tin Shui Wai and gradually give local residents a chance to establish new community networks. HKJC's 800-strong C.A.R.E.@hkjc volunteer team would set up a base at the new Centre, and the new workforce at Tin Shui Wai centre would in due course join the volunteer team themselves. HKJC said "We believe that volunteer work is a part of holistic people development, and our ultimate aim is to form a strong volunteer force in the district to promote the spirit of helping others to become self-sustaining ... We hope this task force can help other needy people through their own experience, so as to promote community care and ensure a self-sustaining, harmonious and proactive life for everyone."

For those in the dark, Tin Shui Wai is a depressed area populated by the working class mainly. There is also a substantial proportion of people living there who are the newer migrants. Livelihood has been affected because of more than frequent family tragedies and people finding it hard to make ends meet. The prevailing mood and reputation caused many to "blacklist" the area and the people living there as "unfortunate, unlucky, depressing, down-trodden..."

Hence I applaud HKJC's move as it was very swift and prompt. Its good when "charity" can do a more "effective good", but that is not Good Charity, that's effective Charity. Good Charity are any acts that comes from the goodness of your hearts, with no expectation of reward. Of course charity is not just in monetary terms. Don't know why, but its probably just the time of the year to talk about these things. Writing a business blog can sometimes cloud our ways and motivations to certain objectives & life's drection - good to be reminded. Happy birthday J-man!

Something's Rotting With CIC

China Investment Corporation, the US$200 billion sovereign wealth fund set up by the Chinese government in September, was a much touted sovereign wealth fund. Initially CIC has been allocated US$200 billion, a still small portion of its US$1.4 trillion reserves.

While many thought that CIC would begin to solicit stakes in big foreign companies, including myself, their subsequent moves indicate something stinky. CIC initial US$3 billion investment into Blackstone caused me to praise their astuteness in strategy as that would allow CIC to be privy to the major deals flowing across the desk of Blackstone, and thus allowing CIC the choice to invest alongside with Blackstone. It would also limit the bad press portraying CIC as the aggressor in major M&A activities.

However, how CIC deployed the rest of the funds revealed more than they intended. A third of China Investment's portfolio is to be invested in Central Huijin Investment Company, a purchaser of bad loans from the Chinese banks, and another third will recapitalize China Agricultural Bank and China Development Bank, to shape them up for privatization.

This lends further evidence that there is still a mountain of bad debts residing in many unlisted state-controlled units. Those banks already listed, and those with major foreign banks as substantial shareholders, are those with healthier balance sheet - however, a major correction in the China stock markets and/or property side will also put a lot of stress on these so called "healthy listed banks" loans portfolio.

But thats not the major point, the main thing is that CIC would be entrusted to "recapitalise" institutions related to the hidden bad debts still residing in unlisted companies. I have mentioned before that the main reason why Beijing is slow to allow the yuan to appreciate is that its financial system is still at a nascent stage. The trade surpluses and booming stock market are only a portion of the real economy - and they need to "clean up" the underside while things are still good. Beijing is buying time - let's hope that they can do that while the stocks, property and trade surpluses are still bullish. Cause if not, the weight of bad debts will turn insurmountable almost overnight.

More Whispers On Shenhua

Shenhua Energy, the world's second-largest coal company, could raise almost US$80 billion to spend buying mines, power plants and ports to feed China's growing demand for energy. The mining company is in preliminary talks to invest in Indonesia (Adaro, read below) and is studying targets in Australia and Mongolia, president Ling Wen said on Friday. Shenhua has been forced to move a lot faster in its M&A strategy thanks to BHP Billiton's audacious bid for Rio Tinto. The $US134 billion unsolicited takeover bid for Rio Tinto Group by BHP Billiton, the world's biggest mining company, may accelerate those plans. There are only so many decent sized mines left to acquire that would help make a difference to Shenhua over the longer term. After all, it IS the world's second largest coal company, and wants to at least stay there if not improve further.

"It's very important to use not only organic growth but also mergers and acquisitions to make our enterprise larger, better and more profitable," Mr Ling said in an interview in Beijing. "We have huge room to make some acquisitions."

China Shenhua would be able to finance takeovers because its parent, state-owned Shenhua Group, owns a 74%. China Shenhua would be able to liberate $US78.5 billion by selling new shares and diluting its parent's stake to just over 50 per cent. China, the largest energy consumer after the US, burns coal to generate almost 80 per cent of its power. The Government estimates energy demand will rise about 4 per cent annually to the equivalent of 2.7 billion tonnes of coal by 2010. China's gross domestic product grew 11.5 per cent in the third quarter.

The price of shares in China Shenhua, which ranks behind St Louis-based Peabody Energy in coal sales, have more than doubled this year, outpacing the 43 per cent advance in the benchmark Hang Seng Index. The parent's stake dropped from 81% after the company raised 66.6 billion yuan in a Shanghai share sale in October. The stock has fallen 7% since then.

Next Hottie - Kian Joo

Well, the bidding has reached frenetic pace for Kian Joo's 35% controlling stake. The grapevine has it that Mega First was an early bidder but soon dropped out. Tin can manufacturer Can-One then came into the picture to buy the 153.87m block.

Apparently the price was being bidded higher than the purported RM250m. Bearing in mind that the new owner will probably have to collect more or even make a general offer as well, its going to be a lot more than RM250m (share price of around RM1.55).

Anthony See was known to have submitted a bid himself, however it looks like the race now has left only two bidders. One an American company and the other a Japanese company, and both are willing to work with one of the brothers. The key thing is pricing, apparently bidding is already past the RM2.20 mark. This may give Kian Joo shares a bit more upswing as the battle heads to a conclusion.

China Dolls' Whspers

Following up on how China Mobile surged on corporate developments, players of Chinese H-shares covereds would be disadvantaged for failing to keep in tune with the latest whispers. Here are some of the latest whispers with respect to those H-shares covereds on KLSE.

ICBC & Bank of China - The company is rumoured to be making a bid for a stake in Swiss investment banking giant UBS. This is similar to the troubles Citigroup and Bear Stearns found themselves to be in. Looks like UBS would also be needing some form of capital injection. While the two banks are the rumoured aggressors, a deal with ICBC is more likely than with Bank of China.

Shenhua - The company had been invited to take a small stake in Adaro prior to its listing in Jakarta next year to raise US$750m but Shenhua declined to take that up. Apparently Shenhua is very interested but would like a bigger stake. Shenhua is rumoured to be persuading Adaro to shelve their listing plan and instead allow Shenhua to take up a bigger stake. Adaro is controlled by several investors including Edwin Soeryadjaya, son of the founder of the Indonesian car firm Astra International, and entrepreneur Sandiaga Uno. Indonesian laws encouraging corporate transparency provide a tax break on capital gains earned when a stake is sold through a stock offering. Regulations limiting foreign ownership in the country's coal firms to 49 per cent are also waived if the acquisition takes place through a share sale. Shenhua is cashed up and looking for acquisitions after raising US$9 billion from an initial offering in Shanghai in September and has long had Indonesia in its sights. Shenhua, which listed in Hong Kong two years ago, has also indicated it was looking at acquisition targets in Australia and Mongolia. To control Adaro, Shenhua may have to fork up US$4 billion.

OK! Now Is Safe To Get Back Into Certain Markets!!!

Recent postings have avoided highlighting stocks of any kind as the markets were averse to equities in general. The only bright spot, HK/China, even had a difficult few weeks. However, there are sufficient signs that its OK to re-enter certain equity markets.

Global liquidity is still there. A good indicator is to examine the flow of funds in/out of certain fund types. The data on fund flows from the Investment Company Institute for October showed that global equity funds showed inflows of US$14.97 billion, compared to an outflow of US$3.71 billion from US equity funds. For all of 2007, global funds have recorded inflows of US$123.7 billion, compared with US$20.9 billion in outflows for U.S. funds. This further strengthen the funds away from US assets.

Much of the outflow from US equity funds was probably due to a hedge against a persistently weakening USD. As for China, the fears over inflation and out of control CPI seem to be properly discounted. We know for a fact that liquidity is still ample globally - they have to go somewhere. However, not all markets present the 10%-20% upside necessary for foreign funds to park their assets. If we were to reassess the global equity picture, we need places where: currency outlook is still positive; stock markets can see a 10%-20% upside over the next 6 months; and a reflating economy. With that in mind the best markets would be:

1) HK

2) Brazil & Colombia

3) Japan

4) China

5) South Korea

6) Vietnam

7) Thailand

At present levels, it is very difficult to see markets such as Australia, Canada, the US and Malaysia to register a 10%-20% gain from current levels.

Cost Of Living Survey 2007

Excerpt: ECA’s Cost of Living Survey is carried out twice a year comparing a basket of 128 consumer goods and services commonly purchased by expatriates in over 300 locations worldwide. Multinational companies use the results to help compensate their internationally mobile staff. Living costs for expatriates are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on expatriate remuneration packages. Some people may be surprised to see African locations in the top ten. However, ECA’s cost of living survey compares like-for-like goods and services, certain items and brands typically purchased by expatriates, which are not readily available locally, can be very expensive. In addition, the commodity boom in recent years has led to considerable currency appreciations in commodity-exporting markets, such as Angola, making it an increasingly expensive location for expatriates.

Seoul maintains its position as the most expensive city in Asia for expatriates, moving from 8th to 7th in the global ranking over the past twelve months. During the same period, Tokyo, Asia’s second most costly city, dropped out of the top ten for the first time moving from 10th to 13th. Depreciation of the yen against most other currencies, coupled with low inflation, has significantly reduced living costs for foreigners in Tokyo, Yokohama and Kobe in recent years. Several other Asian cities have fallen in the ranking, including Taipei which has fallen six places. This is largely explained by the weakness of the US dollar to which their currencies are linked. The region’s biggest fall was in Indonesia with Jakarta dropping 11 places to 153rd position. However, with a large number of Asian cities experiencing higher rates of prices increases than elsewhere in the world, locations in the region have, in general, moved up the rankings.

A 6% overall rise in the cost of goods and services typically purchased by expatriates has meant that despite the weakening Hong Kong dollar Hong Kong’s position in the ranking has remained steady and is still the fifth most expensive location in the region and ranked 79th worldwide. The recent rise in GST in Singapore from 5% to 7% has contributed to pushing up living costs in Singapore, which has risen 10 places in the ranking since 2006. This, together with no change in Hong Kong’s position, means that the gap is closing between the two locations. As living costs in other locations in the region catch up, the need for companies to provide higher cost of living allowances when moving people to Hong Kong rather than elsewhere in Asia, has been eroded over the past 12 months.

Most Expensive Cities Globally (Last Year's Position)

1 (2) Luanda, Angola

2 (3) Oslo, Norway

3 (4) Moscow, Russia

6 (5) Kinshasa, Congo

7 (8) Seoul, Korea

9 (11) Geneva, Switzerland

10 (17) London, UK

13 (10) Tokyo, Japan

23 (54) Istanbul, Turkey

48 (28) Manhattan New York, USA

Asia's Most Expensive Cities (Global Ranking)

1 (7) Seoul

2 (13) Tokyo

5 (79) HK

6 (94) Taipei

7 (95) Beijing

8 (100) Shanghai

9 (122) Singapore

11 (153) Jakarta

18 (168) Bangkok

24 (177) Mumbai

25 (178) New Delhi

29 (191) Manila

32 (195) Hanoi

33 (197) Kuala Lumpur

35 (203) Karachi

36 (204) Ho Chi Minh City

My Comments: Should we be happy or sad that Malaysia is so "cheap"? I see three main reasons why Malaysia is cheap:

a) Subsidised products - The country puts in a lot of subsidy in many essential necessities, but more importantly the government subsidises a lot in oil & gas products as well. This helps to translate into a lower COL for all, albeit unecessarily subsidising the profits of many manufacturers and MNCs. Naturally, when these products' prices surge (like they have been doing for the past 2 years), the subsidy budget will become unmanageable. The government has to look deeper into the opportunity cost of such deep subsidy plans. We also need to put in place a timeline to trim the subsidy for all companies operating in Malaysia - they must be forced to compete with fuel and electricity at normalised prices.

b) Foreign Workforce - Malaysia enjoys near full employment, however the country has some 2 million official foreign workers and probably another 2 million in the country working illegally. The foreign work force is a significant factor in depressing wages and keeping prices in check. They also free up a sizable percentage of the local workforce to other areas of employment.

c) Its In The Real Estate (the biggest reason for low COL figure) - Malaysia has one of the cheapest real estate market in Asia, and real estate is a huge component of overall cost structure for any businesses. Translate that down the line for all products and services, you get an effectively lower COL for Malaysia.