Investors everywhere are
unreasonably nervous about the ability of lawmakers to undo the $600 billion in
tax increases and spending cuts that are set to begin in January; those
changes, if they go into effect, could send the U.S. economy into a recession,
that will not happen, we will hear a lot of politics, no economics, and the
debt ceiling will be lifted or the USA will go in to default if the taxes come,
money will flee to Asia, the last bastion of democracy and capitalism.
I do not expect a US default any
time soon, the loss of economic power in the USA will be with a whimper, not a
bang. Dollars will be printed in ever increasing amounts, standards of living
will fall and taxes will increase, it is not all Obama:2016, it will happen
because politicians in western countries only look to the end of their term in
office, not the long term benefit to the country.
For over a decade the US
Government has invaded the civil liberties of citizens and lowered their
standard of living, printing money pays the bills, a low dollar policy helps
trade balances, but the future generations will pay a hefty price for this
economic folly.
A string of economic indicators
next week, which includes a key reading of the manufacturing sector on Monday,
culminates with the November jobs report on Friday.
Our own research shows that there
is no winning in the fiscal cliff debate. Obama wins, the debt ceiling is
lifted again, more money is printed and the value of Gold increases. If Boeher
wins, and there is a reprieve in tax hikes, more money will come back in to the
market and, Gold will go up, the last thing I would want to be left holding is
a bag of US Dollars.
The US Dollar is in a precarious
position right now, The Fed is pumping it out at a record rate, the Government
is spending it at a record rate and companies have more cash than ever before.
Politicians have reduced the Debt
Ceiling to a simple political football, if the USA does not raise the debt
ceiling the US Government would go in to default, I do not want a bag of US
Dollars if that happens. Most likely a deal will be reached, more US Dollars
will be printed, and again, I do not want a bag of US Dollars if that happens.
So the best place to be buying
equities, and to live of course, is Asia.
Economist and Hedge Fund Manager
Shayne Heffernan of www.livetradingnews.com takes a look at Olam International
Vs Muddy Waters, Bekasi Fajar, Ayala Corp, FGVH, Bangkok Bank
Singapore
My thoughts on Olam
Sunny Verghese seems to be on the
right path, and remember, big brother Temasek is right behind him, he did buy
some Olam stock last week as I suggested he might, not enough, and he has not
convinced his financiers to come to market yet, this has to be his number one
priority.
Olam’s CEO conceded yesterday
that the firm might have to tone down the very thing that defines it – its
hard-driving expansion – if it wants to be less of a target for short-sellers
like Muddy Waters’ Carson Block.
“We will take stock and see
whether we need to slow down, decelerate, recalibrate. We’re convinced that
we’ve got a great strategy . . . but we might recalibrate . . . the pace at
which we are doing things,” Mr Verghese told The Business Times yesterday.
Olam International Ltd is under
attack from short sellers but the company looks to be holding on OK, I do not
think Olam is the new Enron, and if we were to extend the theory of pre booked
profits that is being spouted by the short sellers then every insurance company
in the world is in bankruptcy and so are most of the banks.
Olam will survive this, and
considering how much short selling would have been generated, and the net short
position the company may bounce back over $2.00SGD and give the short sellers a
nasty, but well deserved shock.
“There is no substance in their
broad allegations,” Olam said today in a statement, promising a fuller response
in due course. “We will clear our name and hold Muddy Waters accountable for
their damaging actions.”
But instead of fighting the short
sellers CEO Sunny Verghese needs to reach in to his pockets, rally his friends
and burn the short sellers, it is not our opinion that the short sellers are
well heeled enough to withstand much of an attack, there are plenty of rumors
about the financial state of the short seller and Muddy Waters may be looking
for a big winner here to salvage themselves.
Certainly I hope it is the case,
it would be a shame for the reputation Singapore has built to be destroyed by
the rumor and innuendo of Muddy Waters.
Sunny Verghese, here is the check
list of what you need to do now.
1. Get some funds together, reach
out to your financiers.
2. Prepare a detailed statement
of financial standing.
3. Distribute that to Brokers,
Banks, Hedge Funds and Bond Traders.
4. Make the Statement available
to the public.
5. Buy the debt and the equities.
Based on volume I would estimate
the short position averages around $1.90SGD, the brokers acting on behalf of
the short seller would have a safety margin of around 30% so the stock needs to
run to $2.34 to rid the company of the short seller.
The average short away from the
short seller looks to be around 1.68SGD, so they will become buyers at the
$1.86SGD point.
This will be an interesting week.
How the fight is shaping up.
Sunny Verghese
Strengths
Has a good history
Should have access to capital
Weakness
Poor reaction to the claims
against him
Over 2 years of falling stock
prices
Carson Block
Strengths
Has done this better than anyone
before
Has market followers that short
and aid the position
Weakness
May not have access to capital
A break of $2.34 would put him
out of the game
Indonesia
Daiwa House Industry, a Japanese
property company, agreed to buy a 10 percent stake of Bekasi Fajar Industrial
Estate from Argo Manunggal Land Development, in a move that will allow Daiwa to
help develop the estate and boost infrastructure.
Krishna Daswara, corporate
secretary of Bekasi Fajar, said the deal was completed on Friday.
He would not disclose the value
of the agreement.
A 10 percent stake of Bekasi
Fajar is valued at around Rp 639 billion ($66.5 million), using the company’s
total market capitalization of Rp 6.37 trillion on Friday. Krishna would not
confirm the Jakarta Globe calculation.
The company’s stock jumped on
Friday as a result of the news. It closed 9.1 percent higher at Rp 720 on the
local market.
After the transaction, shares of
Argo Manunggal Land will be reduced to 69.7 percent from the existing standing
at 79.7 percent.
Argo Manunggal Land is unit a
Argo Manunggal Group, which also controls property company Alam Sutera Realty,
a house property developer. Alam Sutera has projects in Serpong, Banten and in
Sentul, near Bogor.
Bekasi Fajar manages and operates
an industrial estate in Bekasi, to the east of Jakarta.
The industrial estates of Bekasi
Fajar are home to manufacturing plants belonging to Astra International, the
country’s largest automotive distributor, and its subsidiaries Toyota Astra
Motor and Astra Daihatsu Motor.
Hitachi Construction Machinery
Indonesia and Nutrifood Indonesia also operate plants at the estate.
Net income of Bekasi Fajar rose
more than 250 percent to Rp 301 billion in the first nine months this year from
the same period last year, while its revenue jumped to Rp 662 billion in the
period from Rp 351 billion last year.
Bakasi Fajar made a stellar debut
in April this year, raising Rp 300 billion from the sale of its 20 percent
stake during its initial public offering.
Shares of the company have more
than quadrupled from its IPO price at Rp 170 apiece.
Philippines
Ayala Corp is cashed up and ready
to expand on many fronts.
Ayala Corp. has issued P10
billion worth of medium-term corporate bonds to bankroll the conglomerate’s
continued expansion nationwide.
The 7-year notes were priced at
5.45 percent a year, 98 basis points above the three-day average 7-year PDST
benchmark. The company said its book-building process indicated a strong demand
for the bond with orders accounting for about 170 percent of the issue size.
“Ayala is raising funds for its
capital requirements to enable the company to realize opportunities for expansion
both through organic growth of its existing business lines as well as
value-accretive acquisitions,” the company said in a disclosure.
Just recently, the company
entered into an agreement with DBS Bank Ltd. to acquire part of the common
shares held by DBS in Ayala-subsidiary Bank of the Philippine Islands for P25.6
billion.
“It is also pursuing a robust
pipeline of projects in the power and transport infrastructure sectors as it
looks to build a platform for long-term growth,” the firm said.
Ayala said it had always been a
consistent and innovative issuer in the domestic capital market over the past
few years, raising more than P70 billion from the capital market since 2004.
Last May, the company issued a
P10-billion, 15-year bond in the market, which was the longest-listed bond
placed by any Philippine corporation. Ayala said it has pioneered investment
products in the local market that provided the broader investing public,
particularly retail investors, with alternative investments.
Appointed as underwriters to sell
the bonds to the public were BPI Capital, BDO Capital and Investments, First
Metro Investments, HSBC, ING Bank, RCBC Capital, SB Capital and Standard
Chartered Bank.
The company expects to list the
bonds on the Philippine Dealing and Exchange System (PDEx) on November 23.
Earlier this week, Ayala
announced that the Zobel family’s flagship holding firm posted a consolidated
net income of P8.7 billion for the January-to-September period, or 19-percent
higher than that of the same period last year.
Core net income, which excludes
the impact of the accelerated depreciation from its telco unit and revaluation
gains realized by its international property unit last year, reached P9.3
billion, representing a 31-percent year-on-year increase.
Malaysia
This was a poor IPO and it will
be a few years before it is worth buying, long term the prospects are good, but
for now it is heavily overpriced.
Felda Global Ventures Holdings
Bhd (FGVH) will expand its plantation land bank, improve the productivity of
its current assets, look at growth in the Asean region for its mid-stream
businesses and address the age profile of its oil palm trees in its ambition to
grow annual revenue by eight-fold by end-2020.
Group president Datuk Sabri Ahmad
said that this year, the group was spending RM270mil to replant trees.
“We aim to replant at least
15,000 ha per year. This is a continuous process, and in the first three years,
the age profile of our trees should be addressed. There will be significant
growth after that as we increase the yield profile and efficiency,” he said at
a briefing.
Sabri said about 30% of the
group’s planted area had young and immature trees, which utilised “new planting
material and eventually, this will give us best in class in terms of OER (oil
extraction rate).”
Within the Asean region, Sabri
said FGVH was working with a group in Myanmar for rubber plantations. “The
first phase is a rubber processing facility. We are negotiating for a 30,000 ha
concession in Myanmar.”
He also said FGVH was looking at
starting a packing plant in Myanmar by June next year, as well as opportunities
in Mindanao, the Philippines. “For Mindanao, we are waiting for the peace
process to settle down.”
Sabri said the group had started
work on 15,000 ha in a greenfield area in West Kalimantan. “We are also looking
at a brownfield in the same area, maybe about 30,000 ha.”
On acquisitions, Sabri said the
group had “robust protocols to address new investments carefully to ensure we
get assets that are a strategic fit.”
Sabri also said FGVH would look
at West Africa and explore the replication of the Felda model in working with
poor farmers. The Felda Land Development Authority (Felda) was a statutory body
founded in 1956 to alleviate poverty among rural Malays via a land resettlement
scheme.
FGVH yesterday announced to Bursa
Malaysia that its revenue for the third quarter doubled from RM1.88bil in 2011
to RM3.77bil in 2012 but net profit fell 40% to RM245mil this year.
Thailand
Bangkok Bank is going to be a big
winner over the next decade.
Bangkok Bank says that in two
years the so-called CLMV (Cambodia, Laos, Myanmar, Vietnam) countries could be
more important to Thailand as trading partners than the US, though Thailand
also has no choice but to let lower-labour-cost production shift to these
countries and to concentrate on higher value production such as cars and
services.
“We are entering the same sort of
exciting time as when the US starting building its railroads to the west,” he
says.
Business & Investment Opportunities
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