Delving Further Into HK Equity Market

Hong Kong has been trying to court new listings as it deepens its equity market, which has been increasingly dominated by mainland China listings in recent years. Hong Kong exchanges have been putting a particular emphasis on companies from the Commonwealth of Independent States (CIS), including Russia and Kazakhstan, as well as Mongolia.

Ernst & Young notes that the Hong Kong Stock Exchange will be the top fundraising exchange in 2009, with US$17.7 billion raised, or 18.7% of the global total. In 2010, Hong Kong could raise as much as US$47 billion in IPOs.

The aluminum company Rusal was set to be the first Russian company to list in Hong Kong in December 2009, but its listing was deferred due to concerns about its outstanding debts and corporate governance issues. The Hong Kong Securities and Futures Commission granted approval in December, but the stock will trade in lots of 200,000 shares to prevent retail investors from potential losses. The FT's Lex says "regulating by a nudge and a wink" could backfire by encouraging retail investors to lever up to buy the stock.

Inflows from China and accomodative monetary policy stemming from Hong Kong's U.S. dollar peg have added to the liquidity in Hong Kong's market in 2009. Hong Kong's monetary agency has been intervening heavily in the FX markets to maintain the peg, with only some of its interventions sterilized. In H2 2009, new public offerings have picked up strongly after a credit-crisis-induced lull.

In 2008, Hong Kong outstripped the fundraising capabilities of Tokyo and Toronto and was second only to Shanghai in pre- and post-IPO fundraising. However, fundraising abilities fell sharply in 2008 and early 2009 compared to 2007. Hong Kong also attracts both local and international retail investors. The development of Hong Kong Depository Receipts (HDRs) opened up the possibility of new listings from Russian, Indian and Middle Eastern companies. In 2007, foreign investors accounted for 43% of the market turnover and foreign and domestic institutional investors accounted for 65%.

In 2009, Hong Kong's equity market has jumped sharply on expectations of improvement in economic conditions in China and a huge surge in domestic liquidity. Abundant liquidity has attracted new listings in H2 2009 and narrowed the valuation gap between shares that trade in Hong Kong and China. As liquidity conditions are likely to remain into 2010, some analysts suggest that the equity market could rally further. However, any sign of tightening could spark a correction.

A s of December 8, the Hang Seng Index has surged 95% from a four-month low on March 9 and 53% YTD. Shares in the benchmark are valued at 17.4 times estimated earnings, compared with an average of 13.7 times during the past five years. Hong Kong-listed Chinese stocks traded at a 17% premium over China-listed shares as of December 8, according to the Hang Seng China AH Premium Index. This is below the 31.5% average since 2006.

In the Hong Kong Monetary Authority’s most recent quarterly report (December 2009), the central bank said that a reversal of the region’s massive fund inflows could spark “sharp corrections” in domestic asset markets. Hong Kong's H-share market (mainland companies listed in Hong Kong) has not fallen as sharply as the mainland market. This seems to suggest that H-share investors are more optimistic than mainland investors about any coming tightening in Chinese monetary policy. However, it probably is more a reflection in the differences in liquidity between the markets. A-shares are facing liquidity constraints that H-shares should avoid.


The Hong Kong stock market has benefited from strong growth in China and a large boost in liquidity. Monetary authorities have been intervening in foreign currency markets to defend the upper bound of the Hong Kong dollar's (HKD) peg against the U.S. dollar (USD), which has required selling local currency for USD. This boost to liquidity looks to continue as the overnight bank rate remains close to zero. A return to growth in Chinese exports would help Hong Kong equities as well. In H1 2009, 16 companies listed in Hong Kong to raise a total of US$2.6 billion. An additional 19 companies planned IPOs in H2 that could raise US$23 billion. Several of these IPOs slumped on their first day of trading in September/October 2009, with China South City tumbling 30% on its debut. The long list of planned IPOs remaining in H2 may fetch lower than expected valuations as investor appetite for new shares appears to be waning.

The gap between A-shares (listed in Shanghai and Shenzen) and H-shares (listed in Hong Kong) has fallen since February 2009. As of September 22, A-shares trade at an 18% premium over H-shares, down from a 59% premium in February 2009 and high of 90% hit in early 2008. As of September 22, stocks listed in Shanghai and Shenzhen (CSI-300 index) have fallen 17.3% from their August 4 peak on concerns about liquidity. Shares in Hong Kong (Hang Seng index) have gained 4.4% over the same time frame. Mainland shares are down because of a slowdown in bank lending, tighter credit restrictions and a release of previously locked-up shares. Hong Kong is not affected by these dynamics, and its liquidity comes mostly from global funds which are not facing liquidity constraints. Citi expects the gap to widen in the last two months of 2009.

Capital controls are the main impediment to arbitrage between A-shares and H-shares. In spite of a halving of mainland share values over the eight months to July 2008, China's three markets (Shanghai, Shenzhen and Hong Kong) still account for 9.6% of the world’s total stock market capitalization (unadjusted for free float). That is well behind the US, at 30%, but puts it ahead of Japan, at 8.3%. While Hong Kong's position is secured and Shanghai is increasingly the venue for high-profile listing, Shenzhen continues to struggle to reinvent itself, for example with a new SME exchange.


p/s photos: Sharon Xu

A Blessed Christ-mass

Me doggie and I wish all readers of this blog ... a blessed Christ-mass ...

yup, she's 8.5 months old now.

Best Cigars Smoked In 2009

Now onto cigars. Whether is coincidence or not, my two picks happened to be not Cuban. That is quite surprising given that Cubans have always ranked higher in my view and is a class above the rest, and makes up the majority of my smokes (favoured labels include Bolivar and San Luis Reyes). So here goes, my two best cigars for 2009: La Gloria Cubana's Series R and ... Padron's 1964 Anniversary Series.

The first one is Padron's 1964 Anniversary Series, especially the Exclusivo Maduro. This firm box-pressed cigar has a silky black wrapper. It has a perfect draw and burn, delivering rich, peppery smoke that has a heavy nutty flavor. A medium to full-bodied cigar.

Size: 5 1/2 x 50
Cigar Shape: Robusto
Cigar Filler: Nicaragua
Cigar Binder: Nicaragua
Cigar Wrapper: Nicaragua
Country of Manufacture: Nicaragua

Hell, actually the entire range of the Anniversary series are very good.


The next cigar is La Gloria Cubana's Series R. Packed in dark mahogany, cabinet-style boxes, La Gloria Cubana Series R cigars deliver their extra-bold bouquet as soon as the box is opened. Their full-bodied flavor comes from a special blend of long Dominican and Nicaraguan filler, superb Nicaraguan binder and a wonderfully aged and extra flavorful Ecuadorian wrapper. The result is a rich, full-flavored smoke. There is a natural range for Series R as well as a Maduro range for Series R. The maduros are 8.8 out of 10 in my books but the naturals rate a 9.4/10. Go for the Number 5 and Number 6.

Best Wine Tasted In 2009 - Luis Felipe Dona Bernarda

Well, its not just one wine but rather a series. Luis Felipe Edwards wines are wonderful. They started in 1976 and are from Chile. Don't just go and grab any Luis Felipe wines. They have been producing various collection, to name a few Bebibilidad, Hilltop, Gran Reserva ... but the best has to be the Dona Bernarda. The wine was aged in French oak for 18 months. The 2004, 2005, 2006 and 2007 from Colchagua Valley are unbeatable in value and drink-ability. Frankly, the year of production is pretty consistent year in year out. Never been disappointed with my 3 different bottles this year.

=

Remember the bottle has the face of a woman on it.

Doña Bernarda was made since 1997. They skipped the vintage 1998 because they didn't reach the required quality. It had more than 85 % of Cab. Sauvignon until 1999. From 2000 they don't state the variety on the label, since it is a blend from different ones. It has been always mainly Cab. Sauvignon, but we they have used Malbec, Cab. Franc, Petit Verdot and Carmenere.

Technical Data: 65% Cabernet Sauvignon, 30% Petite Verdot, 5% Cabernet Franc. Aged 18 months in French new oak barrels.

Description:Deep dark red color, This wine shows pleasant aromas and flavors of dried plum, blackberry and violets, followed by chocolate and mocha notes from its aging in oak barrels. A full-bodied wine yet a very soft mouth, with a great length.

The wine must be allowed to breathe for at least 30 minutes. ... ripe and shall I say delicious, so much so that you can almost eat it. Sigh .. I know I am partial to distinctive and "loud" wines rather than the subtle French wines, but what to do.

Best Album In 2009 - Rebecca Pan's My Indie Music

For the last few days of 2009, I shall be featuring things I really enjoyed for the year of 2009. I will be featuring the best wine I tasted for the year, the best cigars I smoked, the best film, etc... First off the block, the best music album for the year, in any language, is Rebecca Pan's (Poon Tik Wah) project (its a project as she was instrumental in conceptualising, but only sang a few of the songs) My Dream, My Way, My Indie Music.



What was so enticing was the concept. Rebecca, a hugely popular singer in her younger days, and still lives and breathes music in her blood. I think she is 79 by now. Its hard to see someone in her 70s still getting enough support to put out an album, but it must be due to her passion that made it happened.

The album is full of exciting indie music performers, which she must have invited (and they must have accepted gleefully). All except one guest artiste, Eason Chan is there as well and he certainly is not an indie artiste, delivering a heart stopping and fun Chinese Blues.



I doubt you can get the album in Malaysia, sigh... thanks guys, for broadening our appreciation of great music, these bloody record shops and chains ought to be cut down to size. When they filter what we can buy, they basically filter what we can listen to. They can say that its a smallish market to bring in independent music artistes, then we will all end up buying and listening to over-promoted, over-hyped, over-marketed albums only.

Rebecca has appeared in Days of Being Wild and In The Mood For Love, both stylised movies by Wong Kar Wai. I brought that up because her music would always fit in brilliantly in any Wong Kar Wai movies - its moody and reflective in her ballads, spirited and sunshiny in her fast tempo numbers, and always sung with passion.

Rebecca basically had the entourage reprising some of her famous songs albeit with a refreshing treatment. The CD comes with a hardcover 88 page book, with glorious photos of her yesteryears, describing the backdrop for each song, and interspersed with photos of the indie stars who are part of the album. Its a brilliant concept, hard to execute well.

Some of those who appeared in the album: PixelToy, Ketchup, Chet Lam, my little airport, at17 and Pancakes. The songs are done in English and/or Mandarin to great effect. The melodious songs have been recrafted and are vibrant to the ears.


(yes, that's her, Rebecca Pan on the album cover, a photo in her heydays... )

Nee Nee Wo Wo by PixelToy was cheery and fun. Chet Lam was devastatingly intimate singing Essence of Love and I've Seen You In My Dreams, the latter a touching duet with Rebecca and easily the best song in the album. Rebecca showed why she is a legend by also singing in French, J'attendrai and the haunting mandarin version of Siboney Amor.

I have been listening to the album at least a couple of times a week for the past 2 months and I am not tired of it at all. Its infectious and full of heart. Easily the best album I have listened to in 2009. The only bad track was by my little airport singing the English hit I Wonder Why, seriously, I could have sung better. Try and buy it when you are in HK, or get someone to buy it for you, or buy it online.

"Nee Nee Wo Wo" (1961) by PixelToy
"Solid Gold Rickshaw" (1967) by Ketchup
"Essence of Love" (1966) by Chet Lam
"Mágica Luna" (1961) by the pancakes
"Bengawan Solo" (1962) by at17
"I've Seen You in My Dreams" (1974) by Rebecca Pan & Chet Lam
"The Protest" (1974) by Gayamyan
"I Wonder Why" (1968) by my little airport
"J'attendrai" (1961) by Rebecca Pan
"Chinese Blues" (1962) by Eason Chan
"My Hong Kong" (1965) by Rebecca Pan & HK Indies
"Siboney Amor" (2009) by Rebecca Pan

The Impending USC Rusal's Time Bomb, SFC Should Wash Its Hands Clean

Readers of this blog will know how much I frown on the proposal to list Rusal on HKSE. Well, they rejected the first proposal, then Rusal went to appoint two prominent HK figures onto its board. After repeated attempts, the world's largest aluminum maker Rusal was allowed to put forward its Hong Kong flotation plan under the prerequisite that the deal should not have a public offering tranche.

To ensure that retail investors would not put themselves at risk to heavily indebted Rusal in the secondary market, the SFC also boosted the board lot size which may result in an entry price of as much as HK$1 million per lot.

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Bloomberg: Rusal has said it plans to sell a 10 percent stake to help repay $17 billion of borrowings. The share offering will be led by Zurich-based Credit Suisse Group AG and BNP Paribas SA of Paris, with banks from BOC International Holdings Ltd. to VTB Group also helping to manage the sale.

The exchange’s listing committee withheld approval for Rusal’s IPO application at a meeting on Nov. 26 and asked the company for more information, including details on its debt restructuring. Earlier this month, Rusal signed an accord with creditors in Russia’s largest corporate debt restructuring.

A subsequent review by the exchange, on Dec. 7, again failed to approve Rusal’s bid. The bourse asked the company to explain how it would repay a $4.5 billion loan from Russian state-owned lender Vnesheconombank.

The loan will be refinanced by OAO Sberbank, the Financial Times reported last week, citing unidentified people.

Sberbank, VTB

Rusal was rushing to secure approval in Hong Kong before the end of the year to avoid redrafting its 1,000-page IPO prospectus, which would delay the share sale until April, the FT also said, citing an unidentified Hong Kong exchange official.

The company’s borrowings almost doubled last year after Rusal bought 25 percent of Moscow-based OAO GMK Norlisk Nickel, Russia’s biggest mining company, for $7 billion in cash and a 14 percent Rusal stake. Commodity prices subsequently collapsed, with aluminum tumbling 36 percent in 2008 on the London Metal Exchange.

Rusal had a net loss of $6 billion last year, Vedomosti newspaper reported in October. The company was forced to take the $4.5 billion loan from Vnesheconombank in October 2008, the biggest state-led bailout of any Russian company.

Russia’s two biggest banks, OAO Sberbank and VTB, both state-controlled, will buy shares in the IPO alongside state-run VEB, RIA Novosti reported this month, citing Russian President Medvedev's chief economic aide.

The stakes Sberbank and VTB will buy won’t be significant enough to require approval from the lenders’ supervisory boards, Arkady Dvorkovich told reporters in Moscow, according to RIA.

Rusal is also in talks with potential investors including China Investment Corp., the nation’s sovereign wealth fund, and Singapore’s Temasek Holdings Pte, the Hong Kong Economic Journal said in October.

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What a very silly ruling by SFC. Either you allow the listing or you don't. You cannot be seen to be protecting the small investors by suddenly making this one company with a huge board lot. By doing so, SFC has over--stepped its jurisdiction. Its role is to regulate, ensure all required market information are properly disclosed and disseminated. If you think a company is not fit to be listed, then don't approve. If you approve, then let the market players decided to buy or sell the stock. You do not go around trying to steer certain investors away by changing board lots - its like saying that Rusal gets the OK to list but hint, hint, its very dangerous.

It is not the SFC role to say this is a good or bad company. Its like our Securities Commission - can you imagine if the SC were to come out and say Company A is looking to be going into PN17 in 6 months time - well, you can't say that. SC can only put a company into PN17 when it has failed certain financial conditions.

If Rusal is deemed fit to list, then there should not be any contraints UNTIL they have breached the "regulatory conditions". You don't pre-empt these things. Its very very bad. I wonder who the fuck is inside the SFC committee - you must be able to distinguish your roles and your capacities clearly, regulate and enforce, you are not a research house. You cannot "flag" a company as "suspicious" even before its listing, and yet still allow it to be listed!

As long as there are proper disclosures, and there are a lot in an IPO, why should Hong Kong retail investors and even individuals who could participate in the institutional tranche be discriminated against? The world's largest aluminum maker is seeking US$2 billion (HK$15.6 billion) from a dual listing in the SAR and Paris. Whether to conduct a retail public offering should be a matter of choice for all listing applicants.

The SFC's unprecedented move is "bizarre" as "the general public can buy the shares in the secondary market, so excluding them from the primary offering does nothing to protect them. The SFC should stick to the principles of a disclosure-based market. Market watchers are worried that the regulator's action could set a bad precedent, hurting Hong Kong's image as an international financial center.

SFC concerns over Rusal is factually correct as I think Rusal is a dubious company, but its not their jurisdiction. They can only approve or reject the listing. Since "pressure" has mounted for them to approve Rusal's IPO, they should just leave it at that. Buyers beware!

p/s photo: Goto Makino

China Banks' Risk Profile

The bulk of market capitalisation in Asian equity is in bank stocks. China has been leading the way, and the banks' health should be monitored closely. We know of the rampant bank lending that has been on going for the past 12 months. Now we need to know the extent of the potential bad debts and how that would play out in 2010. We already know that bad debts for credit cards have already doubled year on year and that is an ominous sign.

China's banks posted strong profit growth in Q3 2009 as new lending continued to surge. The jump in new lending meant that non-performing loans decreased as a percentage of assets. Regulators started to tighten lending standards in Q3, which along with the need to meet new capital adequacy requirements, could eat into profits. However, a shift toward longer-term loans and of savers into demand deposits may increase the net-interest margin for banks, which fell through Q3 2009 due to lower interest rates.

Capital Adequacy Ratios

Fitch warned that due to "major ongoing weaknesses in loan classification and disclosure of off-balance-sheet exposures" China's banks' capital positions are probably worse than they appear. The banks have used an increasing amount of off-balance-sheet transactions to bundle loans and sell them to investors, which represents a "growing pool of hidden credit risk." These transactions free up space on the banks' balance sheets so that they can increase their lending without lowering their capital adequacy ratios.

China’s Banking Regulatory Commission denied reports that it would raise the minimum capital ratios to 13% in 2010 from 10-11% now, but it said that banks would need to develop “medium-to-long-term plans” to replenish capital after the lending binge of 2009. As of September, all of the largest banks except the Bank of China had capital ratios over 12%. The shift toward longer-term loans from Q2 2009 has boosted the net interest margins of China’s banks, but the loans also come with higher risk weightings, pushing down their capital ratios. In order to maintain their 12% capital adequacy ratios, China’s 11 largest listed banks would need to raise an additional RMB368 billion (US$43 billion) in capital, according to calculations by BNP. Core capital adequacy ratios at the banks fell to 8.9% at the end of September 2009, from over 10% at the end of 2008.

In August 2009, the WSJ reported that the China Banking Regulatory Commission was considering a ruling that subordinated debt held by other banks would no longer count as supplementary capital. Estimates suggested that as much as 51% of subordinated debt issued by banks (RMB210.0 billion in H1 2009, three times the total amount for 2008) was held by other banks. In October, regulators issued a ruling that was significantly easier for banks to meet: Only subordinated debt acquired after July 1, 2009 would need to be deducted from Tier-2 capital. This will make it more difficult to replenish capital by issuing subordinated debt but does not require significant changes as a result of the ruling.

When the government recapitalized the banks in the late 1990s, it formed asset management companies (AMCs) to purchase non-performing loans from the banks, which were funded through bonds held by the banks. The AMCs have had very low recovery rates on the NPLs, and their bonds may have to be rolled over or written off. The government opted to allow at least one of the recapitalization bonds that allowed China's banks to become commercial enterprises to be rolled over for another decade. A US$36.2 billion bond held by Cinda Asset Management was to come due at the end of September, but was rolled over for another ten years. Writing off the principle due would have cost CCB more than half of its net assets, and the remaining bonds, which come due in 2009/10, are expected to be rolled over as well.

From October 2009, insurance companies will be allowed to invest in the property market. This will allow state-owned banks to transfer underperforming commercial property holdings to insurers at book value, and insurance companies will not have to write down the property values because they will be booked as long-term assets. This lets insurance companies diversify their assets to better match the duration of their liabilities but also protects banks' balance sheets.

Central Huijin, a division of China's sovereign wealth fund, said that it would continue to buy shares in China's three largest banks to reassure investors and stabilize their share prices.

How Much Will Non-Performing Loans Increase?

The increase in NPLs may come in mid to late 2010 given that they tend to peak 12-18 months after a credit boom. However, the revival in property markets and increase in mid- to longer-term loans may limit the deterioration of assets.

The surge in NPLs would be limited to RMB400 billion (US$58.5 billion) in 2010, but another RMB250 billion (US$36.6 billion) in NPLs could emerge in 2011. If credit is tightened more in 2010, NPLs would jump higher.

The Banking Regulatory Committee is raising minimum capital adequacy requirements from 8% in 2008 to 11% by 2010, but the PBoC controls the reserve requirements, blunting the regulators’ ability to control loan growth.

FT Dragon Beat: If 1/6 of the RMB20 trillion in bank lending to be issued from 2008 to 2010 goes sour, then the government's liability would be RMB3.3 trillion, which is about the same as all the nonperforming loans recognized so far.


p/s photo: Freida Pinto

CGI With A Soul, Avatar Stuns the Eye, Seduces the Heart

It takes a lot for me to really like CGI ladened movies. I have to qualify that I am one of the few who hated the Star Wars numer-olgy series. I like animation cause it does not pretend to be anything but cartoons even with better CGI. I tolerate the Transformers cause its action, but it has no soul. I am not a keen sci-fi fan as well, except when it has a good heart, like Close Encounters of The Third Kind and Contact. I loved The Matrix series, it is SF, CGI and a very deep story to tell. Hence after all the hullabaloo over the $230m James Cameron spent on the movie Avatar, and taking more than a decade to make, I seriously wanted him to succeed since it obviously is a work of passion as he is filthy rich already from Titanic.

Cameron made sure the story is there first and foremost, and its a great story. Any great movie story teller, like Spielberg will know that you want the audience to identofy and empathise with the main characters, and Cameron does that very well. Both the real world and the world of Pandora moved in and out brilliantly. The CGI was outstanding, the details, the wings flapping, surrounding sounds and every yips and shrieks and rustle of leaves were there. The alien world was well thought out, and I especially loved the long ponytail which acts as a USB port of sorts - what a wonderful concept.



The movie is grand and ambitious and yet it touches on issues of mother nature, devastation, displacement, culture, belief systems, ... and yet making obvious statements such as "if we want what they have, they become our enemy". In that sense it is also a movie for our times, its a "green" movie in many ways. It more than entertain like a normal movie, the visuals leave you in awe... I can't wait to see in again in 3D and maybe even IMAX.

James Cameron has turned one man's dream of the movies into a trippy joy ride about the end of life -- our moviegoing life included -- as we know it.

-- Manohla Dargis, New York Times

Avatar is an entertainment to be not just seen but absorbed on a molecular level; it's as close to a full-body experience as we'll get until they invent the holo-suits. Cameron aims for sheer wonderment, and he delivers.

-- Ty Burr, Boston Globe

For all the grandeur and technical virtuosity of the mythical 3-D universe Cameron labored for years to perfect, his characters are one-dimensional, rarely saying anything unexpected. But for much of the movie, that hardly matters.

-- Claudia Puig, USA Today

James Cameron's Avatar is the most beautiful film I've seen in years.

-- David Denby, New Yorker

It extends the possibilities of what movies can do. Cameron's talent may just be as big as his dreams.

-- Peter Travers, Rolling Stone

Genting Singapore In Cairo - Some Perspective Please

Genting Singapore said on Tuesday that one of its subsidiaries has been selected as the new operator of a casino in Egypt. The firm said Genting Casinos, an indirect wholly-owned unit of Genting UK, has entered into a casino concession agreement with Misr Hotels. Genting UK has been awarded the casino concession for The Nile Ritz Carlton Hotel in Cairo for an initial period of 10 years. It plans to open the new operation under the brand "Crockfords on the Nile".

The move is part of Genting's strategy to expand its casino resort network. It will also strengthen and develop Genting UK's position in the premium market through its key high-end London casino clubs, Crockfords, Colony and Maxims.

The Nile Hotel, located on the banks of the Nile and in the heart of the Egyptian capital of Cairo, will undergo a major refurbishment. The hotel is considered one of the iconic developments in Cairo which has contributed to the Egyptian travel industry since it first opened in 1958.

Renovation work is expected to be completed in early 2012. Genting said the Casino concession agreement is not expected to have any material impact on its earnings in the current financial year.

My Take: If my readers can remember, in September last year I went to Cairo and had a zen moment with my camel boy. Anyway, yes, I did visit the casino as I was just as surprised as anyone that there were casinos in Cairo.

There are about 25 casinos in Cairo already. Each casino has to be within an "approved hotel", usually only one floor or a section of one floor.

All casinos in Cairo are not open to Egyptians but only to tourists, and naturally those of Islamic faith are prohibited as well. Let me tell you that the actual number of people playing there were very few. You almost can have the table all to yourself, and I am not kidding.

Hence all the casinos have less than 10 tables and less than 20 slot machines. The actual impact of having one at Nile Ritz Carlton Hotel is that it will be glitzy, but let me assure you that at any one time you will find less than 20 people playing and you can probably only put in 20 tables max. Anymore tables will just be a waste.

One of the bigger casinos in Cairo is Inter-Casino at the Ramses Hilton Hotel. It has 18 tables and 42 slots. Another is Casino Royal at Movenpick Jolie Ville Resort (yes, Movenpick) with 16 table games and the biggest number of slot machines at 154. The other big one is Taba Hilton & Casino with 19 table games and 76 slot.

Hence people should not be overly excited with the Cairo project, not when there are already 25 operators, and all catering to tourists. This is like adding two gaming tables at Resorts World, seriously folks. The problem is not with Ritz Carlton or Genting, its the number of tourists that actually visit Cairo, and spread that out to over 25 casinos in the one city - that's the problem.

Yes, being with Nile Ritz Carlton is probably the grandest of the lot, and on the Nile some more. But, do you know how many 5-6 star hotels there are on the Nile already - Four Season Cairo Nile Plaza, Intercontinental City Stars, Sheraton, Sofitel, etc... Its just another one.


p/s photo: Fiona Xie

Asian Equities In 2010 - A Survey Of Views & My Take

Will the Rally Continue or Will a Correction Follow?

Citi expects 9-14% increase in Asian equities in 2010, with North Asia (especially Korea and Taiwan) outperforming South Asia. Asset market returns slow as a recovery takes hold, as returns underperform expected earnings increases. Technology and bank earnings are outperforming other sectors. The U.S. dollar and U.S. interest rate normalization pose the greatest risks to Asian market liquidity.

DBS expects index returns of at least 16%, based on expected 27% earnings growth for 2010 and 16% for 2011, keeping valuations neutral. The low global interest rate environment, expectations of Asian currency appreciation could push markets further. Sectors benefiting from stronger Chinese consumption should outperform and the energy sector is supported by government investment. DBS is overweight China, Taiwan and Singapore, Neutral on India, Hong Kong and Korea while underweight Malaysia, Indonesia and Thailand. U.S. rate normalization is a risk. Taiwan and Singapore have biggest chance for earnings upgrades as expectations have not yet returned to pre-crisis levels given the depth of the economic correction.

Upsides: Better-than-expected earnings reports, relatively healthier macroeconomic fundamentals, aggressive fiscal stimulus spending, capital inflows and ample liquidity will have positive impact. Equities are also attractive for foreign investors relative to debt markets amid increasing bond issuance.

Downsides: Foreign Institutional Investors concerned about the U.S. economic recovery and global liquidity might resort to profit-taking. Risk about asset bubbles, tightening measures by central banks and rising valuations might affect both domestic and foreign investors.

Analyst Johnna Chau, Citi: "Stocks do well when faced with upward revisions" of earnings. South Korea and Taiwan, and sectors like technology, consumer discretionary and materials remain attractive.

Analyst Joanne Goh, DBS: Following the strong rally since March 2009, profit taking may lead to a correction (though not severe) due to worries over high valuations, withdrawal of stimulus measures and asset bubbles. Possible macro policy changes in China might bring some volatility in Hong Kong and China. But export-oriented countries with high industrial and technology exposure (Singapore, Thailand, Korea and Taiwan) will benefit during the course of synchronized global recovery.

FT's Lex: In the past, Asia's stock market performance was highly correlated with that of western counterparts. However, Asian equities may plot a more "independent course" backed by less leveraged economy, better capitalized banking sector, huge FX reserves and healthier fiscal position.

EIU: Given the region's ultimate reliance on exports to the U.S. and EU, investor sentiment will remain susceptible to economic setbacks in those markets.

Background

As of end April 2009, market capitalization of Asian Pacific markets (US$10.2 trillion) had exceeded that of European markets (US$9.3 trillion, including Africa and the Middle East) as Asian stock prices soared at a faster pace than the European ones.

Banks remain the single largest sector in Asian equity markets. However, financials' share has decreased to 20.1% as of June 2009 from 43% in 1975. In opposite, the share of cyclicals has risen to 38.7% (including basic materials, industrials, oil & gas, and technology) from 18% (industrials) in 1975.

2008 Review: The peak-to-trough decline in Asian equities in 2008 of more than 70% for some markets, surpassed the 60% fall in local currency terms during the 1998 Asian financial crisis. Sustained outflows from offshore Asian funds took the total net redemptions during January-October 2008 to a record high such that all money that had flown in during 2007 flowed out.

Market Integration: The correlation between U.S. and Asian markets picked up sharply in H2 2008 (peaking in mid-October 2008). However, average correlations for emerging Asian equity markets are generally higher between the region's markets than with U.S. markets.

Government intervention: Amid the global credit crisis and capital outflows in Q4 2008, several countries including Taiwan, Pakistan, Vietnam, Thailand intervened in the stock market by narrowing the trading band, introducing stabilization fund to contain volatility, banning short-selling, and directing government funds to buy shares.

10-year government bond yield as of September 7, 2009: Indonesia: 10.6%, Vietnam: 10.0%, the Philippines: 7.9%, South Korea: 5.4%, Malaysia: 4.2%, Thailand: 3.7%, China: 3.5%, Hong Kong: 2.4%, Singapore: 2.5%, Japan: 1.4%.

ADB: Most government bond yield curves in the region have steepened and have shifted upward through early-July in 2009, due to surging liquidity as governments issue new debt to finance fiscal stimulus, expectations of future inflationary pressures from increasing liquidity and improving expectation of economic recovery.

Many governments seeking to sell bonds to foreign investors including India, Malaysia, Indonesia, Vietnam, Philippines have been met with a tepid response so far due to global factors (risk aversion in EMs in general, credit crunch, flight to safety to U.S. treasuries) and domestic factors (narrowing interest rate differential with the U.S. due to ongoing policy rate cuts by Asian central banks, slowing growth).

Rising government bond issues will pose challenges to companies turning to local markets for refinancing and raising new funds as firms already face tight access to credit in domestic and foreign capital markets.

Analyst Michael E. Love, Moody's: In developed economies, such as Japan, Korea, Australia and New Zealand, yields on the benchmark 10-year notes have risen as government's tap debt markets to fund fiscal deficits. In emerging markets, yields have varied from country by country, with government borrowing, monetary easing and capital inflows exerting different effects. In Indonesia, the yield on the 10-year note has trended downward as the stock market has surged and the central bank has given strong hints more rate cuts are forthcoming. In Malaysia, Thailand and India, where central banks have less room to cut rates, yields have trended up.

During late 2008 and early 2009, heightened global risk aversion and investor redemption from emerging markets have sparked capital outflows from Asia and hence currency depreciation. Since March 2009, however, all major Asian currencies are on an appreciating path, backed by capital inflows, improving liquidity conditions, the weakening U.S. dollar (USD) and sustainable trade balances. However, appreciation has been contained by central bank intervention, undoing the reduction in global imbalances during the crisis and reducing hopes that Asia will give up its currency policy to rebalance domestic and global growth.

The YTD currency performance as of October 13, 2009: The best-performers-> Thailand: 4.23%, India: 4.89%, South Korea: 7.36%, Indonesia: 19.81%, New Zealand: 27.54%, Australia: 28.69%. Currencies showing modest gains-> China: 0.03%, Japan: 1.01%, Taiwan: 1.61%, Malaysia: 1.86%, the Philippines: 2.10%, Singapore: 2.68%. The worst-performers-> Pakistan: -4.94%, Vietnam: -2.07%, Hong Kong: -0.01%.

Surging equity inflows: Global risk appetite has led to buoyant FII inflows into the Asian equity markets with YTD net inflows of US$14.4 billion as of June 24, 2009, significantly up from US$10.8 billion in H1 2009 and US$9.6 billion in H2 2008 (EPFR via WSJ). Rising but attractive valuations, faster economic rebound and aggressive fiscal and monetary stimulus policies have supported the rally. But any fading of global risk appetite or correction in global equity markets pose risk to Asian currencies.

Revival of global carry trade: Attractive yields and appreciation pressure on currencies offer attractive carry trade opportunities in Asia. This is supported by increasing local and foreign currency bond issues by governments to finance the rising fiscal deficits.

Economist Johanna Chau, Citi: Expecting that risk appetites sustain and the U.S. dollar remains weak in the near-term, Asian currencies will continue to appreciate, with "inflation/asset price cycle now moving higher."

Easing external balances: Asian export growth is still in negative territory though export drop has been easing since March 2009. Imports are contracting more than exports in some countries, containing risks to the trade balances. In some countries, export recovery might lag the recovery in imports and commodity prices, putting pressure on the trade balances.

Improving liquidity conditions: The USD liquidity has improved considerably in most countries compared to late 2008. Countries have access to the bilateral and Chiang Mai currency swap agreements as well as aid from bilateral and multilateral agencies and international groups.

FT: The real concern for Asia is weak USD, not a weak Chinese renminbi, as it reduces demand for Asian exports. Commodity exporting countries like Australia and Indonesia and tech exporters like Taiwan and South Korea have actually benefited from a weaker renminbi due to increasing demand from China. Manufacturing-based countries, including Malaysia and the Philippines, competing directly with China are at risk.

Analyst Philip Wee, DBS: Asian currencies will continue to appreciate, as the magnitude of capital inflows is greater than the size of central banks' interventions.

The central banks might use non-monetary measures to contain currency appreciation. Countries like Taiwan, New Zealand, Japan and South Korea have already implemented or hinted at measures to limit capital inflows and control currency conversion by firms and households.

Continued intervention is raising liquidity in Asian economies, leading to asset bubbles and inflationary pressures -- a replay of the 2003-07 cycle. The impossible trinity and inadequate sterilization will challenge the monetary policy as central banks will be forced to tighten liquidity and raise rates despite weak private and export demand.

Bloomberg: Raising interest rates to contain inflation will make the currencies even more attractive for carry-trades.

EIU: Due to weak exports, Asia will allow only a "modest" appreciation of the currencies especially as Chinese renminbi remains effectively pegged to the U.S. dollar. Allowing currency appreciation will help central banks tighten the monetary policy, reduce export-dependence and hence global imbalances.

ADB: East Asian currencies would continue to strengthen over time, but near-term outlook is highly uncertain. This is because global investors do not seem to regain pre-crisis level of the risk appetite and economic indicators in the region are still fragile. Comparing current levels of real effective exchange rates with historical averages of the past 20 years, Taiwan dollar, South Korean won and Malaysian ringgit have the greatest potential for appreciation.

My Take (which will be elaborated in my later postings): 2010 will still be good for equities in general, including Asian equities. I still see rates being kept low in developed nations, in particular the US, EU, Japan and UK. I also see USD being in a controlled weakening phase (even though you might hear otherwise whenever Obama, Geithner or the Fed try to calm the markets). That is the crux for 2010, weaker USD, which will underpin upside for US stocks, which in turn will rub off well on other markets. However, 2010 will not see as strong a performance as 2009. I still see 20% on average for Asian markets, i.e. FBM KLCI target of 1,500. Malaysia should be the outperformer in 2010 compared to other Asian markets as pressure will mount on ringgit to appreciate, causing surges of hot money into the markets. That needs to be watched diligently by Bank Negara or else we will have a recurring bubble.



p/s photos: Ishihara Atsumi

Can Tiger Surpass Nicklaus' Record?

Finally, a good sports topic for all to discuss over lunch and drinks. Many business people love golf. I just love to play bad golf (if you know what I mean). Paul Kedrosky's site has an interesting piece on Tiger's ability to surpass Nicklaus' majors record. That has been a fantastic hypothetical topic, particularly in light of Tiger's shenanigans:

So, Tiger Woods is going to take an “indefinite” amount of time off from golf. Assuming that sooner rather than later Woods comes back to the sport he has dominated for more than a decade – I’m guessing he is back by this year’s Master’s or U.S. Open -- let’s ask the question he likely cares about most: Will Tiger win more major tournaments in what’s left of his career than his idol Jack Nicklaus did in his?

To refresh your memory, Tiger, who is about to turn 34 years old, has won 14 major tournaments; Jack Nicklaus won 18 majors in his career. Woods has to win five more, for a total of 19, to beat Nicklaus. Given the pace at which Tiger has won major tournaments in the past that might seem an easy task – there are 4 major tournaments a year, and he can probably be competitive into his early 40s.

I’m not so sure though. First, Woods is 34. Admittedly, 34 today isn’t what 34 was in 1974 when Jack was Tiger’s age. Players today are stronger, fitter and generally have better self-awareness and knowledge of their swing. And yes, even though Nicklaus won most of his tournaments when he was younger than Tiger is now, Nicklaus did win 6 more majors after turning 34. To that way of thinking, Tiger has an edge on Nicklaus and should squeak through, even if he misses a year here.

But I’m not convinced. There are at least four reasons to think Tiger won’t surpass Nicklaus' major wins record:

1. Tiger is increasingly rusty. He missed most of 2008, and played unevenly through chunks of 2009, even if he was close in the majors. That rustiness will only get worse with age and with this latest layoff. By way of comparison, while Nicklaus had hip and back health issues, he was never away from golf in his prime for long stretches the way Tiger has been in his – and Nicklaus still saw a serious decline in his competitiveness and dominance after hitting his mid-30s.
2. Tiger is roughed-up. His knee is just one example of how he is not the same player physically he was a few years ago. The modern power game takes an immense toll on a player’s body, making the higher level of fitness a wash, at best, compared to players of prior generations who didn’t subject their spines to such violent and twisting centrifugal forces.
3. Tiger is less focused. Nicklaus wasn’t the same player after he got married and had kids, and he didn’t have the off-course drama that now accompanies Woods. The same thing will happen to Woods, doubly so as he puts more pressure on himself to win knowing that it is actuarially certain he has had more looks at majors already in his career than he will be offered in future.
4. Tiger plays a tougher field. The field is bigger, closer to parity, and more global now than it was in Nicklaus’ era. There are simply too many wonderful players, most of them younger than Tiger, many who hit it further than he does, and are coming on strong.

So, I don’t think Woods will do it. He may win a few more majors – he is sufficiently talented that he can win on desire, despite a messed-up mind and a faltering body – but I don’t believe he will ever again be the dominant player he once was. Through mistakes, frailties (both physical and emotional), and more than a little bad luck, I think it’s highly unlikely Woods will win enough majors to pass Jack Nicklaus’ record of 18.

Another way to compare players is to look at major tournaments won per year by Nicklaus and Woods before and after turning 34 (to pick Woods’ imminent age). Before turning 34 Woods won a major at the record rate of 1.1/yr; the pre-34 Nicklaus won at the rate of 0.9/yr, which is equally impressive. But after turning 34 Nicklaus’ success rate tumbled to 0.5/yr. Assuming something similar happens to Woods, which is probable as he ages, winning another 5 majors could take ten years or more, making him 44 before he passed Nicklaus. I don’t see it.

My Take: Tiger will easily surpass the 18 or 19 majors because, dollar for dollar, Tiger's playing at a time when pro golfers are so much better than say during Nicklaus' time. His 14 majors were won over a stretch where there are so many brilliant players. It is very difficult to dominate a game like golf, it is much easier to dominate a game like badminton, squash or even tennis, because when you are a little bit better than the rest, you will dominate .. you only have to beat one opponent each round for 5 or six rounds, then you win the major. In golf, you have to be a lot better because 50 other players are playing at the same time, an you have to outperform all 50 by the end of 4 days. Relatively speaking, if you can win one or two majors in your lifetime, you are extremely good already. Tiger has already won 14, possibly against much tougher competition than Nicklaus ever did faced.

Can the current personal problems kill his game? Probably not because his will to win is so strong. His desire to perform may be attributable to his testosterone level, which unfortunately also equates to his high libido (sex drive). Hence unlike John Daly's vices (drinking problem) which are self-destructive, Tiger's problems stems from his natural hormonal make up. Maybe now, he can channel all his testosterone to just playing winning golf.

You may drive longer than Tiger, but everybody knows its the critical short game that puts you ahead of the pack. You see him on the greens, he stalks the greens, he stares the whole thing down, he blocks out everything and is intensely focused. C'mon, who's your daddy, you little hole in the ground!!!

The one danger I can see is the "intensity" of his drives, which may bring about more muscle wear and tear. That's the only thing that can hobble Tiger. I may not agree with his personal lifestyle choices but he is still the best golfer we have ever seen.


p/s photos: Manish Kelkar

This Week At NBT!

Live Vicariously

Does Malaysia have a music scene? If you have to ask, then we''ll have to make front-row reservations for you at No Black Tie this week. For at No Black Tie, we pride ourselves in bringing a diverse range of musicians to our stage and giving them tip-top acoustics, in ensuring that the resulting musical experience is a priceless, unforgettable one.

Just this week we have both aspiring and veteran musicians take the stage. Come and be awed by the sheer talent and preservation of our up-and-coming musicians like Amanda Imani and DieHard. Between Amanda's soulful repertoire and DieHard's eagerness to entertain, we promise two nights of pleasure.

Then there are The Solianos, Rozz and Jamie Wilson — all musicians deeply rooted in the legacy of many of the world's music royalty. Come and live vicariously through these music powerhouses. Catch a glimpse of life on the road with musicians like The Eagles and Steely Dan with Jamie Wilson. Feel the invigorating heat of Broadway's stage lights with Rozz and discover Alfonso Soliano's legacy between the notes of The Solianos' performance.

If music is what feelings sound like, then we invite you to indulge in your emotions with your favourite tipple at No Black Tie. For reservations, please call 03- 2142-3737 after 5 pm.

Cheers,
No Black Tie


DECEMBER 14/MONDAY
9.30pm rm30
AMANDA IMANI is tipped to be the next sensation at the tender age of 18. Blessed with a melodious yet husky voice — and coupled with her warm persona and versatility be it on the piano or guitar — her performances are impactful. A believer that her songs are the vehicle in which she shares life experiences, hopes and imagination, her music breathes life into cultures and engages the spirit of humanity. Come, drink in her talent, and be awed.

DECEMBER 15/TUESDAY
9.30pm rm30
THE SOLIANOS: Irene Soliano (v), Tristano (p), Valentino (b), Rizal Soliano.

It has been said that a family that eats together stays together. For the Solianos whose primary bond is music, playing together is also a reminder of the gift that runs in the family and of the musical lineage that traces back to their late father Alfonso Soliano, who is widely regarded as the grandfather of Malaysian jazz. The Solianos’ brand of music is sure to capture the imagination of all jazz lovers.

DECEMBER 16/WEDNESDAY
9.30pm rm30
Bruce Willis' movies aside, DIEHARD is a portmanteau for Deo (guitar) and Hardy Arbi (vocals). Like music lovers everywhere, Deo and Hardy are guys with day jobs. Instead of relegating their insatiable passion for music to the dark recesses of their private lives, Deo and Hardy have took to the stage. Hardy, 35 is a trainer by profession, has passion for singing since young but is finally brave enough to give it a shot. While Deo, 20, is an aspiring musicians pursuing a Diploma of Business for the Music Industry at the International College of Music. Fusing the sweet pickings of the guitar and robust vocals, DIEHARD promises a night of ballads, RnB, jazz groove and perhaps a little funk.

DECEMBER 18/FRIDAY
10.30pm rm40
If you're looking to share the evening with a musician who's lived the life of the musician on the road, then meet JAMIE WILSON. Born in Australia Jamie studied classical guitar as a child and made his first formal appearance at the age of 16 at the Sydney Opera House. By his merit alone, Jamie was invited to the prestigious G.I.T. Musicians Institute in Hollywood, California before he went on to play with the famous ‘China Club’ alongside music legends, Joe Walsh ( The Eagles), Jeff Baxter (Steely Dan and Doobie Brothers), Tim Bogart (Jeff Beck Group) and Clarence Clemens (Bruce Springsteen’s E Street Band). Returning to Australia he joined rock legend Jimmy Barnes on his national tour, followed by tours with Australia’s music royalty, guitar maestro Tommy Emmanuel, Ian Moss, Richard Clapton and many others culminating in sharing the stage with American legend and Grammy winner Steve Miller.

DECEMBER 19/SATURDAY
10.30pm rm40
Boy, can ROZZ sing. A performer that defies anything generic, Rozz's stage appearances are often vigorous and engaging. Trained as a classical vocalist by Anne Ridgeworth from the early age of 4, Rozz has since dedicated himself to the study of music and theatre. His education and career as a performance artist eventually landed him at the epicenter of the actors' domain: New York City, where he was featured in various on and off-Broadway productions. Come and experience Rozz's spectacular show.

Address

17, Jalan Mesui
Off Jalan Nagasari
50200 Kuala Lumpur

Map

Crouching Tiger, Hidden Swedish Meatball

I was in New York when the Tiger story broke, at first most people thought that it was a genuine accident and the media was making too much fuss over it. It was unbelievable how many channels were covering the news ~ hypothesis ~ pure gossip ~ speculation ~ridiculous claims ... and what was stunning was all of that generally turned out to be very close to the truth. OMG, even WSJ has it as a front page story.

Tiger Woods is a phenom as a golfer. It seems no one can touch him. When I was playing poker in Sydney Star City, we all got to talking about Tiger Woods making an appearance in Melbourne for a big golf competition. Funnily two of them paid A$650 for a 4 day package to go to the course, mainly to see Tiger play... and one of them was the croupier! The prize money for the winner of that tournament was around A$1m I think ... Tiger was reportedly paid A$3m as an appearance fee. Many may choke with that kind of fee just for appearing, but organisers do make that sum back easily with the added crowd wanting to see him play, the additional media coverage and enthusiasm from sponsors and advertisers.

Most people respect Tiger as easily the best golfer ... ever. Try as you may the trash media has never found much dirt in his personal life. Many thought he just played golf, went home, hit balls as practice for another few hours, go to the gym, does not drink ... where does he get the time to do any philandering? Well, I guess when you really want to, you find the time.

Tiger's will to win may be attributable to a high level of testosterone, somebody should check his level, probably higher than normal. But higher testosterone = higher libido and sex drive = recipe for shenanigans.

As in any newsworthy event that captures the imagination, lewd, silly, disrespectful jokes would spring up like daisies on a pile of manure. Enjoy .... (btw, Tiger, you are still OK in my books ... you at least showed me you are just a guy, fallible and human after all ... after all you didn't fucked with me, go and manage your private affairs and learn to be better and more responsible, cheers.. kop khun kaap). Btw, the wife's name is Elin.

• The police asked Tiger's wife how many times she hit him. "I can't remember," Elin said, "just put me down for a 5."
• PING has a new set of irons called Elins. They're clubs you can beat Tiger with.
• What does Tiger Woods have in common with a baby seal? They've both been clubbed by a Norwegian. (Of course, Elin is actually Swedish. But poetic license is allowed in jokes.)

There are jokes about the affair rumors:

• Did you hear Tiger changed his name to Cheetah?
• Tiger's other women aren't misstresses. They're provisionals.
• Did you hear Nike's new motto? Just do me.

And jokes about Tiger's car crash started surfacing within minutes of the initial reports of the accident, including these:

• Tiger crashed into a fire hydrant and a tree. He couldn't decide between a wood and an iron.
• What's the difference between a car and a golf ball? Tiger can drive a golf ball 400 yards.
• Tiger Woods is so rich that he owns lots of expensive cars. Now he has a hole-in-one.
• Tiger has a new movie coming out. It's called Crouching Tiger, Hidden Hydrant.

• Stephen Colbert: "Tiger always gives 110 percent. That is why he gave 100 percent to his wife and still had 10 percent left over for his alleged mistress."
• Conan O'Brien: "One of the women who claims she slept with Tiger Woods says they never talked about golf while having sex. However, contractually Tiger was obligated to talk about Nike, Gatorade and American Express."

How do you tell Tiger Woods ball's from the other golfer's ... HIS HAS TEETH MARKS ON THEM,,,,,,,

What is the difference between tiger woods and santa? Answer: Santa only has three Ho's!

Tiger Woods was leaving the house, his wife asked him where are you going,,, He said,,,,, I wont be long honey,,,, I'm only going to do 3 holes today,,,,,

Once you have white, you never go black.

MOL Buys Friendster

Wow! What a deal ... but maybe 5 years too late??!! At a time where everybody is Facebooking or migrating to Facebook, it is hard to see real long term values in having Friendster.

WSJ: Vincent Tan reached a deal to acquire Friendster Inc., a social-networking site that retains a big following in South Asia but has been eclipsed globally by rivals such as Facebook Inc. and MySpace. Tan is buying 100% of Friendster, which is based in Mountain View, Calif., through his online-payments business, MOL Global Pte. Ltd., which is based in Malaysia.

Financial terms of the deal weren't disclosed. MOL is buying Friendster from a group of investors including venture capital firms Kleiner Perkins Caufield & Byers, Benchmark Capital, DAG Ventures and IDG Ventures.

Friendster, whose site launched in 2003, blazed a trail for social networking—the idea of connecting with other Internet users via Web profiles. But as the company struggled with performance issues, many users ditched it in favor of newer alternatives.

Friendster said more than 75 million of its 115 million registered users are in Asia and more than 90% of its daily traffic comes from the region. It is especially popular in Malaysia, the Philippines and Indonesia. But over the past year sites such as Facebook and MySpace have surpassed Friendster in the Asian-Pacific region, according to data from research firm comScore. MySpace is owned by News Corp., which also owns The Wall Street Journal.

"The new combined entity gives Friendster the kind of financial backing, retail distribution, and e-commerce infrastructure that will enable us to accelerate our strategy and create a locally relevant, fun experience for our users in Asia, both on and offline," said Friendster Chief Executive Richard Kimber in a prepared statement.

MOL's principal shareholder is Mr. Tan, who is chairman and chief executive of Berjaya Corp., a diversified Malaysian conglomerate. Attempts to reach a representative for Berjaya were unsuccessful.

A former insurance-company employee, Mr. Tan has built his business empire since the 1980s, when he won the right to operate the McDonald's franchise in Malaysia. He became close to then-Prime Minister Mahathir Mohamad and branched out into gambling, tourism, property and telecommunications.

Today, Berjaya has annual revenue of $1.8 billion and its interests include Starbucks and 7-Eleven franchises, a local English-language newspaper and major property developments.

MOL, which handles 60 million payment transactions a year, plans to merge its operations with Friendster to create an Asia-wide content, distribution and commerce network. MOL provides systems to collect payments for content and services, such as online games and music, movies and video.

"We are creating a unique company that will be well positioned to provide content to a huge, regional user base, here in Southeast Asia," said Ganesh Kumar Bangah, chief executive of MOL in a statement.

Mr. Bangah will become the group chief executive of the combined entity while Mr. Kimber will become the nonexecutive chairman.

Nor Badron, a spokesman at Friendster, said the company will continue to maintain its headquarters in the U.S. "There is currently no plan to move Friendster's headquarters to Malaysia. We will continue to operate at all our existing offices," he said.

Friendster currently has sales offices in Malaysia, the Philippines and Singapore.

p/s photos: Anjori Alagh

SGX Cracks The Whip

One may think that there are plenty of shenanigans in Malaysia, but they are just as rampant even in Singapore stock market. There are many small penny stocks that are being played like there is no tomorrow. Controlling share blocks change hands frequently causing many to speculate on "new order of business" or causes investors to bet on personalities, or mavericks as we like to all them. There are also problems with some foreign listings. The new rules by SGX are necessary.

One of the more important development would be the need to disclose on shares being collateralised by the controlling shareholder - we all know what that will mean. It may also hit some Malaysian company owners who have pledged their shares in Singapore in exchange for lines of credit - they certainly will not want that information to be in the public. Can you guess which Malaysian companies will be affected? I know a few but to put them up would be unethical, so do your own research and be careful. In fact some may already be "affected".

Business Times Singapore: Errant directors of listed companies may come under greater scrutiny from the Singapore Exchange (SGX), which could object to their appointment and rap them publicly.

Proposed new rules also have more safeguards against poor governance for listings with large overseas operations. They demand more disclosure over possible changes in control of companies due to share pledges for loans. In a consultation paper issued yesterday, SGX said that when companies become the subject of an investigation of “irregularities or other wrongdoing”, they may require approval to appoint directors, chief executives (CEOs) and chief financial officers (CFOs).

Controlling shareholders under investigation may be prevented from installing a proxy after being booted out from the company.

SGX also seeks to cement its right to censure publicly or object to the appointment of key executive officers or directors if they have breached regulations or have “refused to cooperate with the regulators”.

The moves will make directors and executives of public listed companies more conscious of their duties, said Lee Suet Fern, managing partner of Stamford Law Corporation. “There was otherwise a lacuna where errant directors and executives who had caused breaches of our rules but had not actually committed a crime, could continue unscathed.”

An outgoing CFO must also confirm with SGX that there are no irregularities or material differences in opinion with the board or management. This could act as a whistle-blowing mechanism. The regulator also wants companies to ensure that an independent director (ID) is sitting on the board at all times. In 2006, now-delisted retailer Robinson saw all its IDs quit after a board tussle.

For foreign listings, or companies with “offshore principal subsidiaries”, at least one ID who is staying in Singapore should be on the board. One market watcher cautioned that this might put too much burden on IDs and deter some from sitting on the board. If foreign listings are being audited by overseas auditors, new rules may require such companies to have a joint sign-off with a Singapore accounting firm for the accounts, as mentioned by then-CEO Hsieh Fu Hua in August.

Hsieh added then that controlling shareholders may soon need to disclosure their share pledges to the public, an issue that had been magnified by the recent slew of S-Chips’ CEOs losing their controlling stake to debtors after they defaulted on loans.

Under the proposal, shareholders must publicise their pledged shares when the total stake is at least 30 per cent, when an enforcement may cause a breach of loan covenants by the company, or when the controlling shareholder is the single-largest one and has pledged at least half of his stake.

“It becomes a company matter and not a personal matter in such cases and I believe the shareholders’ right to know far outweigh the privacy concerns,” said Mak Yuen Teen, co-director of the Corporate Governance and Financial Reporting Centre at NUS.

In addition, SGX proposes to ban the transfer of shares in a company that is under trading suspension. It wants controlling shareholders and their associates to have their shares custodised with the Central Depository or a depository agent who has made arrangements with SGX to restrict transfers of shares during suspension.

Newly listed companies have also been asked by SGX to consider engaging a governance adviser for two years after their initial public offering. In some instances, SGX may ask the company to appoint an adviser. The consultation paper will be available for feedback until Jan 15.

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In a bid to increase market transparency, the Singapore Exchange (SGX) has said that it is making it compulsory for brokers to mark all short-sell orders. A short-sell order is defined as any sell order where the seller does not own the quantity of shares sold at the time of placing the order. SGX said it will institute this policy of marking short-sell orders in the first half of 2010 in consultation with the Monetary Authority of Singapore (MAS). In addition, statistics of aggregate short-selling activity for each individual security will be published daily.


p/s photos: Luna Maya