Economist Shayne Heffernan
explains why the hope for QE3 is futile
QE3 will make no difference to
the USA Economy, companies in the US are already sitting on a record cash
hoard, adding to the cash with QE3 would run the risk of introducing inflation
in to a high unemployment environment, a disaster for people and corporations.
American economists are so used
to studying the US economy as a seamless whole that they don’t want to accept
it has structural problems, because for them, structural problems are a
developing countries’ issue. Yet in a globalizing world, every country has to
undergo some structural changes. The emerging economies, noticeably China,
India and Brazil, are changing the global economic landscape.
Among all the changes, the
reallocation of jobs poses the most serious challenge to developed countries.
Products that used to be made in developed countries are now being produced in
emerging economies at much lower costs. As a result, developed countries might
have lost forever the chance to create low-end jobs.
The Main reasons why there will
be no QE3 are
We are too close to the
Presidential Election for the Fed to intervene in the Economy
Low interest rates do not matter
if banks are not lending to consumers and small businesses, and corporations
that are able to borrow money will not lend or invest it. What ould be more
effective is to make life easier for small business by dropping regulations and
barriers to entry. Removing the rules imposed on banks under the ridiculous
Volcker and Dodd-Frank legislation would also help.
The greatest beneficiaries of the
lowest rate policy are the corporations that need money the least, so how does
that help?
Lower interest rates do not
provide a sufficient reward to lenders for taking on riskier loans and home
mortgages. Therefore home mortgages, consumer loans and small-business loans
may be easier to get if rates were higher. Obama’s war on Banks has not built a
great economy, it has reduced the level of activity and risk banks are willing
to take, small business is one of those risks.
By keeping short-term interest
rates pegged near zero and pushing long-term rates below 2%, the FED is
advertising that it has no faith in the recovery. If it does not have faith in
the economy, they why should anyone else have confidence? It confuses me no-end
that when the economy is so bad that QE3 seems justified that the market would
rally, why? If the economy is in such a state that intervention is needed that
is not an environment to invest in at all.
The current slow recovery has
lasted more than three years. Therefore, one can expect the economy to enter a
new recession sometime within the next one to two years. If that happens, the
FED must have resources to fight it, firing off a QE3 now would put the future
at risk.
QE3 would only add to the cash
hoards of corporations, without making a dent in economic growth or
unemployment.
The best thing the FED can do for
now is sit on the sideline and wait for the actions it has taken in the past to
have their full effect. Doing nothing is sometimes the best action of all.
What they could do is work to
increase the pressure on Europe to reach a final outcome, not an endless
political round about, if that means Europe collapses then, OK.
Thailand
Raimon Land Plc (RML) will turn a
profit this year after several consecutive years of losses.
The Stock Exchange of
Thailand-listed developer expects to realise annual revenue of at least 7
billion baht from 2012-14.
Chief executive Hubert Viriot
said the company had a sales backlog of 18.3 billion baht as of the end of
June, to be realised from the second half of this year until 2014, mainly from
its large, often-delayed condominium project, The River.
About 11 billion baht of the
backlog sales are from The River, which started transfers in June.
One-third are from 185 Rajadamri,
10% from Zire Wongamat and, in Pattaya, 5% from Unixx and Northpoint.
In order to realise revenue in
2015, Raimon Land needs to launch new projects this year.
It is looking for 1 billion baht
worth of land in the Rama IX-Ratchadaphisek and Ekamai areas.
One of the two new projects will
be launched in December with a project value of 2-3 billion baht.
“Our plan is to develop
middle-market and high-end projects within 200 metres of BTS and MRT stations
at prices ranging from 90,000 to 150,000 baht a square metre or 2-10 million
baht a unit,” said Mr Viriot.
Raimon Land will use its Unixx
brand for projects with unit prices of 2-5 million baht or 100,000 baht per sq
m on average, and The Lofts brand for projects with unit prices of 5-15 million
baht or 150,000 baht per sq m. Company research showed 18,957 condominium units
at 34 projects were launched in Bangkok in the first half of this year.
Some 47% were mid-priced or 2-5
million baht.
Low-end development or units
priced less than 2 million baht dominate launches on the outskirts,
representing 48% of the total.
To date, 61% of these new
launches were sold.
In Pattaya, 14,309 condominium
units at 31 projects were launched in the first half from 31 projects.
Beachfront condos accounted for
only 19%, with starting prices of more than 5 million baht.
Some 22% were sea-view projects,
priced mainly from 2-5 million baht.
Most (59%) were inland, targeting
budgets of less than 2 million baht.
To date, 55% of these new units
have been sold.
Raimon Land has five projects on
hand _ two in Bangkok and three in Pattaya.
It posted a second-quarter net
profit of 101 million baht compared with a net loss of 49 million in the same
period last year.
The good performance was due
largely to a 528% increase in revenue to 1.12 billion baht and an increase in
gross margin to 33% from 29%.
First-half net profit was 30.7
million baht compared with a net loss of 84.6 million in the same period last
year, on revenue of 1.32 billion baht, up by 106% year-on-year.
As of June 30, the company;s
accumulative loss was 628 million baht, which it said will be cleared this
year.
Singapore and Vietnam
Singapore and Vietnam signed
three agreements on Wednesday, paving the way for closer bilateral cooperation
in areas such as finance and public administration.
This comes as the Vietnam
Communist Party’s General Secretary, Nguyen Phu Trong’s three-day official
visit to Singapore begins on Wednesday.
Mr Trong and Prime Minister Lee
Hsien Loong witnessed the signing of the agreements at the Istana.
Vietnam will send senior
officials to Singapore for study visits and attend executive education
programmes on development in areas like urban planning and transport
management.
Earlier, both leaders exchanged
views on international issues and agreed on the importance of achieving peace,
stability and development in the region.
Mr Lee said both countries
cooperate closely at all levels.
Mr Lee said: “Economic and
business links continue to deepen. Bilateral trade in the first seven months of
this year rose 13 per cent year-on-year to almost S$10 billion. “Singapore is
also Vietnam’s fourth largest foreign investor, with projects in electronics,
housing, healthcare, ports and other areas.”
“Our Connectivity Framework
Agreement is now in its seventh year. It is an excellent platform to further
our economic cooperation, including between our private sectors,” added Mr Lee.
Singapore and Vietnam mark 40
years of diplomatic relations next year.
Both countries are working
towards signing a Strategic Partnership agreement, which will open up more
areas for cooperation.
Trai Thien USA Inc (PINK:TRTH)
Trai Thien USA is a fast-growing
Vietnam-based dry bulk shipping company operating a 21,990 DWT fleet comprised
of six geared bulk vessels specializing in providing ocean transportation
services for raw material input items such as coal, ore, grain, lumber, cement,
steel and fertilizer throughout the Southeast Asia region.
After China, the primary sources
of future bulk demand are India, Brazil and Vietnam. The region contains three
of the four global BRICs (Brazil, Russia, India, China), seen by economists as
the future growth leaders in the world economy.
The Asia Pacific region accounts
for 60% of the world’s population and almost 70% of world sea-borne trade in
bulk commodities.
In order to meet anticipated
continued growth in demand from an expanding base of overseas and domestic
Vietnamese customers, as well as to expand the geographic regions that it can
service to include potentially more profitable routes in East and South Asia.
The Company’s Vietnam-based
operations are located in Ho Chi Minh City, which together with the surrounding
areas, accounts for more than seventy percent of Vietnam’s total annual cargo
traffic.
Pink Sheets TRTH
Revenue Growth 148%
Target Price 2013 $3.40
HCM Rating Strong Buy
Financial Highlights
The emerging economies of the
Asia Pacific (ASEAN) region will continue their growth pattern despite the
continuing financial crisis in Europe according to the Asian Development Bank.
Free Trade Agreements including
ASEAN, AFTA, CAFTA, ASEAN +3 will more than triple regional trade.
Year-end 2011 revenues increased
over 20.9% as compared to the previous fiscal year, from $12,232,991 in 2010 to
$14,794,939 in 2011.
Income from Operations increased
over 148% from 2010 to 2011, from $1,051,543 to $2,615,000
Net Income increased from a loss
of $539,452 in fiscal 2010 to a positive $1,377,391 in 2011.
The Company is operating a 21,990
DWT fleet comprised of six geared bulk vessels specialized in providing ocean
transportation services for raw material input items such as coal, ore, grain,
lumber, cement, steel and fertilizer throughout the Southeast Asia region.
The HCM Trade Forecast is
predicting that world trade will grow by 73% in the next 15 years, with
merchandise trade volumes in 2025 hitting $43.6trillion compared to today’s
$27.2trillion.
Investing in Tra Thien
ASEAN +3 is the Association of
Southeast Asian Nations (ASEAN), the People’s Republic of China (including Hong
Kong), Japan, and South Korea. Home to 600 million people, ASEAN has a combined
gross domestic product (GDP) of US$1.8 trillion with total trade valued at $2
trillion among the countries.
ASEAN is set to explode as an
economic force in 2015 as financial, trade and investment rules become
integrated and seamless. ASEAN last year secured $78.5 billion in investments.
Regional trade also increased by 32.9 percent to more than $2 trillion and Trai
Thien is well positioned to capitalize on the growing Inter-ASEAN +3 trade.
ASEAN is beefing up various
frameworks for cooperation and development within the region and with its
trading partners, in preparation for regional economic integration by 2015.
The changing trade barriers have
seen fast paced growth in agricultural and mineral exports around the region,
these changes have already reflected themselves on the books at Trai Thien USA
as revenue has almost tripled in the last year.
The Trai Thien fleet has the
distinct advantage of having been designed to suit the region, while huge Dry
Bulk Carriers service many areas. Most of the trade in agriculture and minerals
is done from ports in ASEAN that cannot accommodate the large ships, nor can
the large ships be loaded and unloaded at these smaller ports due to the lack
of stevedoring infrastructure.
Trai Thien smaller fleet can service
these ports directly, removing the additional costs of trans-shipping and
adding savings in terms of cash and time to purchasers.
Based on corporate and market
growth and given a conservative set of ratios in our financial model, we see
Trai Thien trading over $3.40 in 2013.
The Fleet
Fleet of highly versatile geared
bulkers with average capacity of 3,700 DWT and average age of 3 years.
Optimal payload capacity for
growing small and medium production sector that dominates economic activity
throughout the region.
Focus on dry bulk commodities
such as forestry products, grains, cement, steel, ore and coal.
Vessels equipped with deck-side
cranes which provide flexibility in cargo handling and accessing and servicing
underdeveloped, lower cost secondary ports throughout the region.
Draft efficiency and deck-side
gears reduce dependency on major ports and reduce risk exposure to growing
operational inefficiencies affecting them.
In order to meet anticipated
continued growth in demand from an expanding base of overseas and domestic
Vietnamese customers, as well as to expand the geographic regions that it can
service to include potentially more profitable routes in East and South Asia,
Trai Thien has made deposits to acquire six larger 7600 DWT capacity
new-buildings, which depending on the company’s ability to meet additional
capital resource requirements, are expected to be delivered in 2011 and 2012.
Depending on the ability to raise
approximately $50m in external funding required to cover outstanding balances
due on vessels in construction, for which there is no assurance, the Company
will focus on what it believes to be more profitable 7000-8000 DWT vessels in
order to meet growing demand for larger payload capacities while still
maintaining an ability to broadly access the secondary coastal and river ports
that characterize the trade.
Located in Ho Chi Minh City, the
economic heart of Vietnam’s trade and transportation activity.
ASEAN satellite market benefits
from geographic proximity to major world economic activity drivers China and
India.
Trai Thien and China
Our research indicates that
rising trade in ASEAN +3 will propel the ASEAN trade bloc of Southeast Asia
nations to become China’s largest trading partner by 2015.
The China Council for the
Promotion of International Trade said the 2010 ASEAN-China Free Trade Agreement
removed trade barriers, and that the value of imports and exports between China
and ASEAN states could surpass $500 billion within three years.
As China moves away from its
dependency on export markets and encourages more trade with countries with
which it has signed FTAs, the value of goods moving between the ASEAN bloc and
China is forecast to increase at a faster rate than imports and exports between
China and its more established trade partners.
“Thanks to zero tariffs,
preferential trade policies and geographic advantages, both the increasing
speed and scale of that trade will be in the forefront globally and ASEAN will
become China’s No. 1 trading partner by 2015,” said Zhang Wei, vice chairman of
the China Council for the Promotion of International Trade.
First quarter 2012 trade between
China and the ASEAN nations — Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam — increased 9.2
percent year-over-year. That is compared with a 2.6 percent gain in trade
between China and the U.S. and a 1.6 percent decline in trade between China and
the EU.
That growth followed the 24
percent increase in trade between ASEAN and China last year when the ASEAN bloc
surpassed Japan to become China’s third-largest trade partner after the EU and
the U.S.
Trai Thien is located at the
geographic centre of ASEAN +3 and is perfectly placed to capture increasing market
share in a rapidly growing market.
Indonesia
PT Garuda Indonesia is reporting
significant financial progress in the first seven months of the year due to a
16 percent increase in passenger numbers.
The airline announced on Tuesday
that non-consolidated revenue, which excludes subsidiary results except for low
cost carrier Citilink, were US$1.7 billion in the seven-month period ending in
July, up 13.7 percent increase from $1.49 billion in the same period last year.
The profit report reverses the $2
million net loss booked at the end of the first half.
The increase was supported by a
higher number of passengers served by the airlines in the January-to-July
period, 10.02 million, up 16 percent from 8.64 million in the same period last
year.
The growth in passenger numbers
was backed by increase in flight frequency to 73,469 in the first seven months
of the year, up 12 percent to from 65,486 in the same period last year.
“Our operations are very
positive. However, we are seeing lower on-time performance due to increasingly
crowded airports,” Garuda president director Emirsyah Satar said.
Garuda’s on-time performance rate
was 84.8 percent at the end of July, down from 87.2 percent at the end of July
last year.
“We are expecting that there will
be quick investment in developing airports so that more planes will be able to
take off and land,” Emirsyah said.
Despite more frequent flights,
Garuda kept its operating expenses down to $1.66 billion in the January-to-July
period, up only 11 percent from $1.49 billion in the same period last year.
Garuda booked net profits of
$30.7 million in the first seven months of the year, up a whopping 187 percent
surge from $10.7 million in the same period last year.
The airline typically expects
better results in the second half of the year, according to Emirsyah.
“We don’t know what will happen
in the future. However, we have seen that second half is usually better than
the first half because we will serve more passengers, including flights for haj
pilgrims,” Emirsyah said.
Garuda’s consolidated financial
performance for the first half showed a net loss of $2 million.
Given that its subsidiaries
usually report positive performance, Garuda finance director Handrito Hardjono
said that the airline would likely have a similar positive report at the end of
the third quarter.
Garuda’s fleet comprised 95
planes at the end of the first half. According to Emirsyah, the company was
expecting the delivery of 10 new aircraft by year end for a total fleet of 105
aircraft.
As part of expansion plans,
Emirsyah said that Garuda would likely boost its fleet to 244 planes by the end
of 2015, up from a previously announced goal of 194 planes.
The additional aircraft to be
procured will reportedly be French-made turboprop ATR 72 aircraft or
Canadian-made Bombardier Q400 turboprop aircraft.
“We remain evaluating the ATR and
Q400. We will order around 50 units and hope that we can complete the plan by
the year end. The turboprops will be operated by Citilink, hopefully next
year,” Emirsyah said.
According to Emirsyah, a
turboprop — which usually serve short-range routes and carry around 70
passengers — would cost about $20 million per aircraft.
Malaysia
KLCI index lost 0.46 points or
0.03% on Wednesday. The Finance Index increased 0.49% to 14438.3 points, the
Properties Index dropped 0.11% to 1014.86 points and the Plantation Index down
0.56% to 8327.38 points. The market traded within a range of 7.46 points
between an intra-day high of 1616.47 and a low of 1609.01 during the session.
Actively traded stocks include
INGENS, AIRASIA, SCOMI, UEMLAND, SIME, MAYBANK, NICORP, INGENS-WA, OLYMPIA and
DIGI. Trading volume decreased to 804.44 mil shares worth RM1601.75 mil as
compared to Tuesday’s 961.10 mil shares worth RM1789.42 mil.
Leading Movers were CIMB (+12 sen
to RM7.40), DIGI (+11 sen to RM4.93), PETCHEM (+3 sen to RM6.42), UMW (+9 sen
to RM10.08) and IHH (+3 sen to RM3.12). Lagging Movers were AIRASIA (-17 sen to
RM3.02), IOICORP (-7 sen to RM5.00), TENAGA (-8 sen to RM6.55), TM (-1 sen to
RM5.96) and SIME (-5 sen to RM9.75). Market breadth was positive with 409
gainers as compared to 292 losers.
Philippines
Tycoon George Ty’s GT Capital
Holdings Inc. acquired on Wednesday a total of 66.15 million shares of the
Global Business Power Corp. (GBPC), worth an estimated P2.32 billion.
In a disclosure to the Philippine
Stock Exchange on Wednesday, GT Capital said the shares it acquired from the
Global Business Holdings Inc., which represented 12 percent of GBPC’s
outstanding capital stock, were priced at a fixed P35.13 per share.
This acquisition has raised GT
Capital’s direct holdings in GBPC to 51 percent.
GBPC is a joint venture among
several companies whose main players are Global Business Holdings Inc. and
First Metro Investments Corp., a subsidiary of the Metropolitan Bank and Trust
Co. and a member of the Metrobank Group of Companies.
At present, GBPC has claimed to
be the leading independent power provider in the Visayas, with a combined total
capacity of 633 megawatts of power supplied to the Visayas region.
GBPC president Arthur N. Aguilar
earlier said the company has been mulling to go public in 2013, upon the
firming up of its expansion plans in both Visayas and Mindanao, should there be
favorable market conditions by then.
These projects included the
proposed 82-megawatt facility in Toledo, Cebu, whose capacity will be fully
used by the copper mines of Carmen Copper Corp., a subsidiary of the Atlas
Consolidated Mining and Development Corp. This project is being undertaken by
Toledo Power Corp.
The other project, being
undertaken by the Panay Energy Development Corp. (PEDC), is the expansion of
the existing 164-MW coal plant in Iloilo by another 82 MW.
These two proposed power
facilities by the GBPC, Aguilar had said, might help address the need for
additional capacity in the Visayas grid by 2015 and 2016.
Mindanao, meanwhile, has “always
been an interest” for GPBC, which is now eyeing to build its first power
facility in the electricity-starved island.
While declining to cite specific
details, Aguilar said they have been looking at a greenfield coal-fired power
plant, should they decide to push through with the project.
Yesterday in Asia
Tokyo surged 1.73 percent,
or 152.58 points, to 8,959.96 with better-than-expected July economic data
helping to lift sentiment, while Seoul jumped 1.56 percent, or 30.03 points, to
1,950.03.
Sydney was 0.82 percent higher,
adding 35.5 points to 4,361.3, Hong Kong jumped 1.10 percent, or 217.51 points,
to 20,075.39 and Shanghai added 0.28 percent, or 6.00 points, to 2,126.55.
Singapore closed up
0.44 percent, or 13.26 points, at 3,029.66.
United Overseas Bank gained 1.88
percent to Sg$19.47 and Keppel Corp. advanced 0.99 percent to Sg$11.26.
Taipei rose 1.14 percent,
or 85.32 points, to 7,570.45.
Leading smartphone maker HTC
surged 6.46 percent to Tw$280.0 while Hon Hai Precision added 2.88 percent to
Tw$93.0.
Manila closed 0.41 percent
higher, adding 21.05 points to 5,207.10.
Philippine Long Distance
Telephone rose 0.94 percent to 2,798 pesos and SM Investments ended 0.14
percent up at 722 pesos, while Ayala Corp. gained 0.48 percent to 423 pesos.
Wellington rose 1.20
percent, or 44.76 points, to 3,789.72.
Fletcher Building gained 1.5
percent to NZ$6.72 and Telecom was flat at NZ$2.51.
Jakarta added 0.45 percent,
or 18.74 points, to 4,174.10.
Kuala Lumpur was flat,
edging down 0.46 points to 1,613.78.
AirAsia dived 5.3 percent to 3.02
ringgit while UEM Land Holdings shed 4.1 percent to 1.64 ringgit. CIMB Group
rose 1.7 percent to close at 7.40 ringgit.
Bangkok added 0.93 percent,
or 11.64 points, to 1,259.96.
Mumbai added 0.82 percent,
or 147.08 points, to 18,000.03, in the highest closing level for the markets
since February 23.
SpiceJet rose 7.12 percent to
31.6 rupees and rival Jet Airways rose 5.04 percent to 353.4 rupees.
Business & Investment Opportunities
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