Monday March 15, 2010

China shipping fasteners to Europe via M’sia to avoid duty

By DAVID TAN

davidtan@thestar.com.my

GEORGE TOWN: Domestic mild-steel (or carbon-steel) fastener manufacturers are facing intense competition in Europe from China-made mild-steel fasteners shipped via Malaysia to avoid an anti-dumping duty imposed by the European Union (EU).

China-made fasteners have been slapped with an anti-dumping duty rate of an average 87.3% imposed by the EU since February 2009.

Chin Well Holdings Bhd senior manager Richard Yeap Soon Thong told StarBiz that since then, the selling price of Chin Well’s mild-steel fasteners in Europe had to be lowered by at least 20% to compete against China-made fasteners.

“This eats into our profit margin. Otherwise, we could have marked up our pricing by 20% to 30% per tonne. The competition from Chinese fasteners has pressured Chin Well to lower its selling price of fasteners per tonne to RM4,000 and RM5,000,” he said.

Richard Yeap Soon Thong

Some local and foreign manufacturing companies are providing re-packing services for China-made fasteners and shipping them out with their generalised system of preferences (GSP) and made-in-Malaysia certificate of origin documents which enable them to enter Europe with respective duties of 1.2% and 3.7%.

“The profit to be obtained from such re-packing and shipping services is high, about 7% of the invoice for each shipment of container, which is about US$20,000 or about RM80,000.

“In the country presently, there are only six major steel fastener producers, of which four specialises in manufacturing mild-steel fasteners, producing collectively 4,000 tonnes to 5,000 tonnes of fasteners monthly.

“Since China was hit by the anti-dumping duty from EU, Malaysia’s monthly export of fasteners to the EU has increased substantially by about four to five times.

“This is the feedback we got from our distributors and wholesalers in Europe,” Yeap said.

In 2009 Malaysia exported 99,000 tonnes of all types of fasteners, comprising screws, bolts, nuts, coach screws, screw hooks, rivets, and cotter-pins, compared to 55,000 tonnes in 2008, according to data obtained from the Ministry of International Trade and Industry (Miti).

“We have informed and updated Miti on the matter, lest Malaysia is also slapped with anti-dumping duty from the EU. The Miti office from Penang has recently informed us that they are working with the EU Anti-Fraud Office (OLAF), the port authorities, and the customs to check the abuse,” he added.

ED Fastening Sdn Bhd managing director T.W. Teh said as a result of of the situation, the company had suffered a sizable loss of market share in Europe.

“Our revenue for 2009, due to price competition and loss of market share in Europe, has dropped to about RM5mil, otherwise the it could easily be 50% more,” he said, adding that Europe generated about 35% of the company’s revenue.

The European Anti-Fraud Office (OLAF) customs unit head, David Murphy, said in an on-line news report on Feb 9 that millions of euros worth of China-made goods were being fraudulently passed off as Malaysian-made by using the Port Klang Free Zone trans-shipment hub, where imported Chinese goods were transferred to another container and re-exported using the invoice of a Malaysian company.

“Some firms also use false documents to obtain certificate of origin, which declares that the goods are of Malaysian origin. OLAF is working closely with Miti to tackle the problem that also exists at other major trans-shipment hubs such as the Jebel Ali free zone in Dubai and Singapore,” Murphy said.

He added that the real risk to Malaysia was that commercial action might be taken by the EU against Malaysian companies, thereby affecting legitimate manufacturers.

When contacted, Miti, in a statement, said the ministry was scrutinising the applications for the export of fasteners to the EU.

“All exporters were required to provide additional documentation including letter of indemnity from the exporter for non involvement in transhipment or import-export activity using GSP form A in the Free Trade and Industrial Zone.

“The ministry also carried out on-site verification visits to the fasteners’ manufacturers premises to verify their capability and capacity of producing fasteners for export market.

“We are also work closely with other Malaysian authorities such as customs, port authorities, and free zone authorities to ensure there is no transhipment of fasteners from China,” it said.

The Miti statement also noted that “in a statement dated Feb 9, OLAF said it was highly satisfied with the cooperation from Miti and other government authorities relating to the evasion of anti-dumping duties.”

Malaysian Iron and Steel Industry Federation (Misif) president, Chow Chong Long, acknowledges the occurance of such transhipment cases due to the liberalisation of trade.

“We have tried in the past to obtain the monthly figures of steel products coming in and going out of the country from the Department of Statistics Malaysia. The figures would help us detect whether there is excess of steel products being brought in and leaving the country given our present capacity and allow us to follow up with the Government to take timely and appropriate action.

Chow added that “the Government should look into ways on how it can get Misif access quickly the latest data on the export and import of steel products into Malaysia.”

“The problem is that the Department of Statistics Malaysia is always three months late with its data,” he said.

The Federation of Malaysian Manufacturers’ northern region chairman, Datuk O.K. Lee, said Malaysian manufacturers should tap into their capabilities to produce high-value added products to compete against China-made goods and not resort to providing such re-packing and transhipment services that could undermine the country’s image.

http://biz.thestar.com.my/news/story.asp?file=/2010/3/15/business/5836383&sec=business

Understanding The Stock Market

The stock market is where the shares in companies are bought and sold, providing

• companies options to access capital, and 
• investors opportunities to own a share of the company and enjoy potential gains from the company’s future performance.

The stock market offers people the ability to generate a separate income stream apart from their daily jobs, or income streams which are superior to those from traditional savings deposits. But before you even think about buying and selling shares, you must know the fundamentals of the stock market and of trading.

First time investors can become confused because of the terminology that is used to describe various market functions. These don’t take long to learn. Click here for your basic share trading terms. Incidentally, one common confusion is over the terms ‘ stocks’ and ‘shares’. Actually, they both mean the same thing and can be used interchangeably.

The Role of Bursa Malaysia


You can only invest in stocks through a stock exchange, an organized marketplace where stocks are bought and sold under strict rules, regulations and guidelines. The Malaysian stock exchange is called Bursa Malaysia. Bursa Malaysia has over 1,000 listed companies offering a wide range of investment choices to local and global investors. Companies are either listed on Bursa Malaysia Securities Main Market or ACE Market.


Raising Capital on the Stock Market


The Stock Market was created by companies wishing to raise capital for their business. When someone says they have a listed company they mean listed on Bursa Malaysia. All companies need cash to take advantage of growth opportunities. Many start-up companies however find themselves short of capital to fund expansion. One way to acquire this cash is to publicly float the company. This involves selling part of the company to private individual and institutional investors who are then able to freely exchange these stocks on an open market. Purchasing stocks in a company that is listed on the stock market is done through an Initial Public Offering or IPO.

Once an IPO has been issued, you can contact the company (phone, fax or email) for a copy of the Prospectus and complete the application to apply for an allocation of shares. Or you can wait until the company is floated and buy shares on the open market. Besides Bursa Malaysia, stock brokers will also have information regarding Initial Public Offerings.

Companies that are already listed can also raise additional money on the stock market by offering existing stockholders the opportunity to buy more stocks in the company. For example, a listed company wanting to raise additional capital might issue one new share at 5sen each for every three shares an existing investor owns.

When you buy shares, you are buying a share in that company and so you own a percentage of that company. When the company makes a profit, you share in that profit in the form of a dividend. Typically, the number of shares that have been issued multiplied by the share price gives us how much a company is worth.


http://edividend.bursamalaysia.com/website/bm/bursa_basics/investing_basics/understanding.html

Mid-Week Comment March 10: Asian REITs outperform

Mid-Week Comment March 10: Asian REITs outperform

WRITTEN BY GOOLA WARDEN
THURSDAY, 11 MARCH 2010 10:08


SO FAR, Asian stock markets have been going nowhere this year. Year-on-year though, the STI has almost doubled, the S&P500 is up 69%, and the FTSE All-World Index up 75% in US$ terms. Not surprising then that after such a performance, markets are taking a breather.

It is also not surprising that analysts are now recommending REITs over developers as investors shift their attention to yield. That is not to say that REITs have underperformed stocks. In a recent report, Ernst & Young points out that Asian REITs as a group have outperformed in terms of total returns. Singapore and Hong Kong REITs posted 85.6% and 64.5% returns respectively in 2009 with Malaysia (38.6%) and South Korea (28.4%) also performing strongly. Returns for Japan’s REITs grew just 6.68%, with Australia’s REITs performing slightly better at 10.4% growth in returns in the same full-year period. The largest single REIT market in the world, the United States, witnessed almost 28% returns.

In a report dated March 8, DBS Group Research points out that Singapore’s property sector is becoming increasingly segmented because of government policy. The recent measures are aimed at keeping public housing affordable.

“The policy road ahead is likely to remain focused on the mass-end of the housing market,” the report states. “We believe these rule changes were widely anticipated, given the frequent allusions by key political figures in recent months, on the need to address issues of affordability and social cohesion in the public housing arena,” says DBS. “This is likely to filter up to greater pricing resistance in the mass-end private housing segment, in line with our call to place bets on the high-end developers instead.” Its favourite plays in the property market are Ho Bee Investment and Wheelock Properties because of their focus on the high-end, and diversified players such as Capitaland and United Overseas Land.

DBS also prefers REITs such as CDL Hospitality Trusts, Ascott Residence Trust and CapitaMall Trust to developers.

CHART VIEW: BLUE CHIPS COULD DRIVE STI HIGHER
This week, the STI (2,862) has managed to move above its 50-day moving average at 2,812. The 21-day RSI has broken above a resistance and its equilibrium line, indicating that near term, prices are set to rise. Quarterly momentum is turning up from its equilibrium line, and the DIs have turned positive. Resistance stays at the 2,900-2,913 range. Volume has picked up a trifle, but remains below the levels when the market peaked in January.

Instinctively, if the STI attempts to break out, it will do it with the help of index stocks. The stronger ones are Sembcorp Marine, Sembcorp Industries, Neptune Orient Lines, the Jardine group of companies, Singapore Airlines and Singapore Telecommunications. SIA ($15.94) has moved up by $1 since the start of the month, and has been an important contributor to the STI’s strength. Technically, it is emerging from a bull flag, and looks set to move above $16. But, after such a strong surge, a pull-back should not be unexpected.

Singtel ($3.15), on the other hand, peaked last July, and has been entrenched within a trading range for the past six months. If it breaks out — and indicators are strengthening — it could well re-test the $3.50 level. That in turn would trigger the STI’s own break above 2,900, indicating a new upside target.

http://www.theedgesingapore.com/blog-heads/goola-warden/13373-mid-week-comment-march-10-asian-reits-outperform.html

India’s Fortis Healthcare to acquire 24% stake in Parkway Holdings for $959m

India’s Fortis Healthcare to acquire 24% stake in Parkway Holdings for $959m

WRITTEN BY THE EDGE
THURSDAY, 11 MARCH 2010 18:28

Fortis Healthcare, India’s fastest-growing healthcare company, has announced the acquisition of a 23.9% strategic stake in healthcare service provider Parkway Holdings from TPG Capital (formerly Texas Pacific Group).

Parkway has a network of 16 hospitals having 3,400 beds spread over six countries, including India. The deal size is estimated to be about US$685.3 million ($959.4 million).

Fortis has entered into a definitive agreement with TPG Capital, one of the world’s leading private investment firms, to acquire its 23.9% stake in Parkway.

Fortis intends to seek four seats on the board of directors of Parkway and also to nominate Malvinder Mohan Singh (current Chairman of Fortis Healthcare) as the Chairman of the Board of Directors of Parkway.

http://www.theedgesingapore.com/the-daily-edge/business/13410-indias-fortis-healthcare-to-acquire-24-stake-in-parkway-holdings-for-959m.html

Though risky, one of the advantages of the stock market is that it can be used for various purposes.

Stock Market Strategy

What do you know about the stock market business? Do you find yourself accounted enough with the information related to the stock market to start gambling? In the case, you are, we might only give you our congratulations and wish good luck and nice profit there. However, if you find it would be important for you to account yourself with some interesting facts related the stock market business we might be helpful for you. Any way, we consider it is significant to understand the fact that disproves some unauthentic information.

People all over the world are talking about the great risk that we are under when we involve our assets into the stock market gambling. There were gossips that people all over the world lost huge amounts of money in the stock exchange business. It means that the people who have heard this resist involve money at the stock market. To be honest, the great deal of potential investors keeps their assets in the bank account thinking that it is the most safety place for them. Moreover, we would not dispute as for the fact that the stock market business is the risky one. Nevertheless, you should remember the fact that your bank account would never bring as much money as the stock market might do.

Any way, you should also be well accounted with the information that the lost as well as wins at the stock market gambling depends on the proper organization the speculations. What might you do for it? The only thing that depends on you is to make the proper investment. In the other words, you should observe and discover all possible information that characterizes the stock exchange you are going to deal with.

Whatever, you think it would be of great value for you to account yourself with the portfolio of the definite stock market. The portfolio of the stock exchange, you are going to deal with as the any other portfolio, includes all needed information that might be helpful for you to make the final decision. Nevertheless, there are the plenty of additional particularities of the stock market, which are common for the every single stock exchange. We are talking about the stability, dividends, visibility and the international exposure of the definite stock exchange. However, you might take into consideration the fact that relate the education and experience of brokers that are gambling at the very stock exchange before you would invest your money in it.

Frankly speaking, the brokers are the person directly responsible for the profit and benefit of the stock market. The only broker might deal with the speculations at the stock exchange and make you win or lose additional funds.

One of the advantages of the stock market is that it can be used for various purposes. Even the people who are involved into retirement investing consider the investments into the stock market activity to be a great investment tool.



http://usabestloans.com/finance/stock-market-strategy-11/

What is the first thing you think of when considering how to pass on your wealth?

Inheritance When a young successful professional from telecom background lost his life in an accident leaving behind his wife (home-maker ) and three children between four and 10 years of age, apart from the severe emotional shock, the family went through immense trauma since the deceased had not put in place any succession plan. While, the man had left behind substantial wealth, enough to secure their financial future, the family still needed to grapple with multiple challenges—how to consolidate scattered assets? Who will manage the assets for the children until they reach the age of majority? How to ensure that inheritance is not squandered away but is protected for the family’s long-term benefit? So, what is the first thing you think of when considering how to pass on your wealth? For most Indians, it’s probably a Will. Of course, that is the most traditional method but is it the right choice for you? What are the alternatives? And what are the advantages and disadvantages? Let’s consider the various options. The succession planning tools most often favoured in India are the Will, Personal Holding Company (PHC) and Trust. Apart from these, options such as life insurance and setting up a foundation are also used internationally. Will and Probate Where does a Will rank among all these choices? You should look at it as being the minimum measure you need to take. A Will is a legal document that describes how your assets should be distributed in the event of your death.  However, the actual distribution is controlled by a lengthy legal process called Probate. Derived from the Latin meaning to “prove the Will,” Probate can be cumbersome, time-consuming , in certain cases expensive and emotionally traumatic during a family’s time of grief and vulnerability. A further drawback is that your assets not only have to be made available for public inspection but they are also frozen and cannot be utilised, pending Probate. Revocable Living Trust Given the disadvantages of a Will and considering how important a well thought-out succession plan is, you should also evaluate other options. For instance, an increasingly popular alternative among those with substantial wealth is a “Living Trust” . Living Trust is often called a Revocable Living Trust.  As the name suggests, it can be revoked or amended by the person creating it (settlor) at any time while the settlor is still alive and remains competent. Importantly, when you set up a Living Trust, it manages and administers your wealth both during your lifetime as well as beyond. In other words, there’s no need whatsoever for Probate from the courts since your assets continue to be held within the Trust. Eliminating the Probate formality implies that your family privacy is maintained and administration procedures are minimised so no extensive time lag and no additional costs. Going back to the above case, had the gentleman formed a Trust, his family would have at least been absolved of the nightmare of collating the scattered assets and the accompanying administration. While there are many benefits to be derived from a Living Trust, there are also a few drawbacks. Though most of these are minor and should not discourage you, it helps to be completely informed of the disadvantages so that you can structure it appropriately.

Living Trust

Since a Living Trust does not come under direct court supervision, a trustee who fails to act in the best interests of your beneficiaries may, in some cases, be able to take personal advantage. In addition, the cost of preparing a Living Trust could, in some cases, be higher than the cost of preparing a Will.

However, this depends on the particular estate plan and the difference in cost may not be significant if the estate plan is complex. Refinancing, especially of property held in a Living Trust, can be slightly difficult, though it is not impossible and is more of a minor complication that can slow things down.

Perhaps the most important decision for you to consider in a Living Trust is your choice of trustee to act in your place. The trustee may be your spouse, adult child, other relatives, family friends, business associates or a professional fiduciary, such as a bank or trust company. Whoever you decide, it should be someone who will follow through on your wishes in an impartial manner and without compromise so that your wealth legacy endures for generations to come.

http://economictimes.indiatimes.com/quickiearticleshow/5681798.cms

An appraiser’s approach in determining his opinion of value for a privately owned company.

Art and science

guest commentary by David Potts
This commentary, admittedly, is somewhat clinical, but it is important if you want to understand how to increase the value of your business, our theme for the next few weeks. Today we will outline an appraiser’s approach in determining his opinion of value for a privately owned company.

Valuing a business is both art and science. 

• It is science in that an appraiser uses mathematical formulas and tried and true methods in appraising a business' value. 
• It is art in that it takes judgment and experience to apply these formulas and methods correctly. 
• An appraiser also has to be a bit of a fortuneteller because the value of a company is determined by the future economic benefits derived from owning the business. 
• The past is used only as a guide to the future.

So where does a business appraiser start his analysis. 

• First he must know the date for which the company is to be valued. 
• Observations of the values of stocks on the New York Stock Exchange demonstrate that the value of a company changes through time based on market forces. 
• This is true for both publicly traded companies and privately owned companies. 
• So a static date must be determined.

Next, the definition of value must be determined. 

• We will limit our discussion to fair market value as defined by the Internal Revenue Service in Revenue Ruling 59-60 which states the fair market value of an item of property is "the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of relevant facts." 
• From the appraiser's point of view the willing buyer and willing seller are hypothetical people. They are the people that make up the “market.” 
• It's the appraiser’s challenge to interpret the market. 
• People who buy and sell business interests are the market makers.

An appraiser considers three approaches in his analysis to determine a company's fair market value. These approaches are referred to as

• the market approach, 
• the income approach, and 
• the asset approach. 

There are different methods under each of these approaches, so think of an approach as the underlying principles or theory supporting the method.

The market approach is simple to understand — deceptively simple. 

• Anybody who's ever bought or sold a house understands how the market approach works. If you want to know the value of a house you want to buy or sell, you compare it to a house that is already sold to arrive at your opinion of value. It works the same way for a business. 
• The idea behind the market approach is that the fair market value of the business can be determined by reference to a guideline company for which the value is known. It is just a lot easier to compare houses than businesses. 
• However once you have determined that you have found a comparable company, you simply take a multiple of the price to a parameter of the comparable company and apply it to the subject company to determine its value. 
• The parameter on which the multiple is based is normally something such as sales, earnings, or book value — e.g. price to earnings or the PE ration.

The asset approach indicates the value of the business by determining the fair market value of its assets and subtracting its liabilities. 

• From the appraiser's point of view assets include balance sheet assets and off balance sheet assets, tangible assets as well as intangible assets. 
• Liabilities include income tax on the unrealized gains between the fair market value of the assets and their income tax basis. 
• Because of the difficulty of valuing intangible assets such as goodwill and the expense of appraising individual assets, is generally more feasible to use the market approach or the income approach to value an operating company.

The income approach is based on the time value of money, the risk of the investment, and the expected rate of inflation. 

• The three primary valuation methods based on the income approach are the discounted cash flow method, the capitalized cash flow method, and the excess cash flow method. 
• These methods are based on determining a future benefit stream, generally cash flow. I'll discuss these methods in more depth in the future. 
• Just keep in mind that the value of a business indicated by the income approach is (restated a bit differently than above) based on the cash flow a business can generate, the growth rate of the business, and the discount rate. 
• The discount rate reflects the rate of return required to attract buyer’s to a business with its level of perceived risk.

An appraiser may use one or all three approaches in arriving at his opinion in the value of a privately owned company. 

• If he uses more than one approach he must reconcile the different values reached using the different approaches. 
• Adjustments also may have to be made to recognize other ownership characteristics — e.g., whether the interest being valued is a control interest or a minority interest and/or whether there are restrictions on the transfer of an ownership interest. Many things can affect the value of the company. 

In future commentaries we will discuss ways to increase the value of your company in less clinical terms. But an understanding of the valuation approaches discussed above will give our discussions context and structure to understand why choices you make in your business can increase your business’ value and your wealth.

David Potts is a certified public accountant also accredited in business valuation. Owner of Potts & Company, Certified Public Accountants for more than 25 years, his practice focuses on small and medium size businesses and their owners in the areas of taxation, accounting and bookkeeping, business valuation and business advisory services. He is a Fort Smith native and a graduate of the University of Arkansas. You can follow more of his thoughts atThePottsReport.com. Although every effort is made to provide you accurate and timely tax information, it is general in nature and not specific to your facts and circumstances. Consult a qualified tax professional to discuss your particular case.


http://www.thecitywire.com/index.php?q=node/8963

Saturday March 13, 2010

Getting the right balance, vibrancy and diversity

WHO are the investors that we should be targeting?
Yusli: I think we need to have a good balance. At some point for the past few years, a third of our stock market investors was foreign, a third was local retail, and a third local institutions, and that was quite a good balance.
But today, more than 50% of our stock market investors are local institutions. That, to me, has gone a bit too far to one side. We need to bring the balanced equation back.
Besides a good mix of foreign and local investors, we also need to have a good mix of investors with different strategies – short-term and long-term.

There’s excess liquidity in the banking system, but these are not going into the capital market, even though some of the big caps do offer better returns compared with fixed deposits. So, maybe we should be targeting domestic funds – retail and institutional – to invest in our own market?

Yusli: Bursa Malaysia is working closely with the participating organisations such as brokers and remisiers to tap into retail money. Increasingly, we are now seeing more domestic retail investors trading through the Internet, which is in line with the global trend.
On top of that, I hope there will be further liberalisation in terms of licensing for retail sector to bring about more competition that will result in more products being offered to Malaysian retail investors. I think Malaysian consumers deserve to have a full range of products and services that consumers in other parts of the world are getting.

Most of our retail investors are not that sophisticated. So, maybe we need to provide them with some form of protection, especially when the market is subject to manipulation, among others. What’s your opinion?

Yusli: We take these issues very seriously. Investor protection and corporate governance issues are very high on our priority list. We have a special team that constantly monitors all the trading activities in the market, and we’re quick to query the companies when we suspect some unusual market activities.

Could the lack of interest in the local market be due to the lack of good quality, investable companies around?

Cheah: Well, there are many good-quality companies in the country. Some of them are not listed, but for some of those listed ones, you can hardly see any action. They are very solid, but they just want to remain quiet and stay in the comfort zone, perhaps because they are family-controlled and are not interested to do anything else. So there are very few corporate exercises.
Chin: There are some good companies around, but some of these stocks are just not “monetisable” for the broker to justify covering because their trading volume is too low. For the brokers, a counter has to trade above a certain level (that is, at least US$1mil a day for CLSA) for it to be monetisable and worthy of our time and resources.
Yusli: Some companies are a good deal, while some may have business models that are more volatile. But just as we need different traders to play our market, we also need to have a variety of companies to cater to their varying appetite, and this could create market vibrancy.
I think that’s just what’s missing today. There’s no vibrancy in our market. We need to create vibrancy because that will bring in more liquidity.
I’d like to see more corporate activities such as major IPOs and mergers and acquisitions because these will create interest and attract attention to the market.
And as part of our effort to create market vibrancy, Bursa Malaysia has already put in place the infrastructure, including direct market access or DMA, for investors to engage in more sophisticated form of trade such as shorting, but we don’t see people using them very much.
The problem is many of our investors seem to be very comfortable doing just plain vanilla trading, while the whole world has gone sophisticated with facilities like dark pools and multilateral trading facilities.

Does having foreign listings help promote vibrancy in our market?

Yusli: At the moment, we have only a handful of foreign listings in our market. Over time, we’ll have more.
Foreign listings provide diversity, especially for Malaysians who are reluctant to trade overseas, the opportunity to invest in a foreign company. But foreign listings are still a new thing for most Malaysian, so there are still some reservation over trading in those stocks.

The perception is that not-so-good companies are being listed here because they can’t get listed elsewhere.

Cheah: I think Malaysians are just not familiar with these foreign listings. Singapore, for instance, also went through a tough initial period when they wanted to introduce listings of China-based companies.
Here, we check on the companies before they are listed, and the SC also interviewed them to ensure that they are good companies. I believe the market will gradually get used to it.
Yusli: As you’ve seen, one of these foreign companies has actually produced very good results. Again, go back to the fundamentals, and the fundamentals of these foreign listings are indeed strong. Our investment bankers have done their due diligence. They are not going to bring bad companies to list here.

From Times Online

March 14, 2010

Difficult year ahead for China admits Premier Wen Jiabao

China faces a difficult year as it works to maintain economic growth and spur development, but it would not be bullied into boosting the value of its currency, Premier Wen Jiabao said today.

In a wide-ranging press conference at the end of China's annual session of parliament, Mr Wen said Beijing was not ready to withdraw stimulus measures put in place in late 2008 to pull the world's third-largest economy out of the crisis, and denied criticism that China is keeping its currency undervalued in order to boost exports.

He also said that he would not allow the US to push China on the issues of China and Tibet, and claimed he was snubbed at last year's Copenhagen climate change summit.

Keeping the yuan stable was "an important contribution" to global recovery from the economic downturn, Mr Wen told hundreds of reporters gathered at the Great Hall of the People for his only formal press conference of the year.

Related Links

• China economy grows at slowest pace in 15 years

• Chinese exports fall at fastest pace in 13 years

"This year is going to be the most complicated year for the economy," he said.

"We will maintain the continuity and stability of our macroeconomic policies," he said, adding that as circumstances change, Beijing would make every effort to make its policies "more flexible".

During the two hour press conference, Premier Wen also repeated China's stance that a recent dip in relations with the United States was entirely the fault of Washington for allowing the Dalai Lama to visit the U.S. and approving the sale of arms to Taiwan.

"The responsibility does not lie with the Chinese side, but the United States," Mr Wen said. "We hope the U.S. will face the issue squarely ... so as to restore and improve China-US relations."

Speaking just after the country's annual legislative session ended with the approval of a budget that extends job-creation and welfare programs to deal with a rapidly expanding rich-poor gap, Mr Wen said

China had to be wary of a "double dip" recession this year as it sought to balance growth, economic structural adjustments and inflation expectations. 

China "must have firm confidence" in dealing with any economic problems, he said. "The only way out and hope when facing difficulties lie in our own efforts," he said during the televised news conference

China, the world's third-largest economy, escaped the worst of the global financial crisis by ordering $1.4 trillion in bank lending and government stimulus.

Although economic growth bounced back to 10.7 percent in the final quarter of 2009, authorities say the global outlook is still uncertain, amid worries that the torrent of lending is adding to inflation and fueling a dangerous bubble in stock and real estate prices. 

When asked if China would play a bigger role in international affairs, Mr Wen said China was still a developing country and was focused on improving living standards across the country. 

He said the government would reform its controversial exchange rate controls but will keep its currency "basically stable." He gave no indication when Beijing might allow its yuan to rise against the US dollar — a move sought by Washington and other trading partners.

Critics say the yuan is kept undervalued, giving China's exporters an unfair price advantage and swelling its trade surplus. China has allowed a roughly 20 percent rise in the currency's value against the dollar since 2005, but re-imposed tight control after the global financial crisis hit.

Related Links

• China economy grows at slowest pace in 15 years

• Chinese exports fall at fastest pace in 13 years

Beijing has more than $800 billion of its foreign reserves invested in U.S. Treasury securities, and Mr Wen said the value of the U.S. dollar was a "big concern." He said he wanted to see the United States "take concrete steps to reassure investors," but gave no details of what Beijing wanted done.

Mr Wen promised to increase imports to promote trade and appealed to other nations to oppose what he said was rising global protectionism. He complained that some countries were trying to boost exports by weakening their currencies, but did not name any. 

The budget passed by the congress called for a 10 percent rise in spending to fuel the economic recovery, with more money for low-cost housing, pensions, and other social programs for the country's 1.3 billion people.

The priorities extend Mr Wen and President Hu Jintao's years long efforts to spread the benefits of economic growth more broadly across a rapidly changing society. This year, inflation is a looming challenge, with housing prices soaring and worrying rises in food prices that consume as much as 40 percent of household incomes. 

Mr Wen said inflation is a serious concern, along with endemic corruption and a yawning gap between rich and poor that leaves millions of migrant workers and farmers without basic government aid. 

"These are enough to affect social stability, and even (affect) the consolidation of state power," he said.
Speaking of his perceived snub at Copenhagen in November, when China was blamed by some for undermining efforts to reach a binding he was criticized for skipping a meeting of top leaders attended by President Barack Obama, Mr Wen said he was never formally notified of the event and had sent Vice Foreign Minister He Yafei to register a protest. Wen said no explanation had been given about the failure to issue a formal invitation.

"So far no one has given us any explanation about this and it still is a mystery," he said.

http://business.timesonline.co.uk/tol/business/economics/article7061436.ece?token=null&offset=0&page=1

Sterling's recent storm risks intensifying

After rallying to $1.70 in recent weeks, sterling faces new and potentially severe headwinds, writes Ian Campbell.

 

Published: 5:51AM BST 12 Aug 2009

The UK's sanguine summer has suddenly turned unsettled. Not for the first time it was the Bank of England that changed the weather. Its decision last Thursday to print another £50bn has clobbered the previously resurgent pound, which fell by 3pc against the dollar in just two trading sessions. The storms could soon get worse.

The central bank's response to the pound's immediate fall is likely to be: "Oh dear, what a pity, never mind". Spencer Dale, the bank's chief economist, described the exchange rate in June as a "key channel through which the monetary easing may be transmitted". The weaker pound favours exports, tourism – and inflation. The UK's 1.8pc inflation rate is far away from the deflation in the US, the eurozone, Japan and even fast-growing China. Rising prices keep real interest rates low, even negative. That's impossible if deflation gets a grip.

The bank's now £175bn quantitative easing (QE) scheme is intended to be mildly inflationary, as that stimulates GDP growth. But if growth doesn't revive, QE, in the context of the huge fiscal deficit, could prove counterproductive. The government's financing projections call for borrowing of £348bn this fiscal year and next. The danger is that this is beyond what the market will tolerate.

The dollar was undermined earlier this year when the US Federal Reserve committed itself to buying $300bn of government debt. That was just 2pc of US GDP, far less than the BoE's purchases, mainly of government bonds, worth 13pc of GDP.

It would be surprising if the pound did not fall further. Sterling could easily return to its $1.40 lows of earlier this year. That would help the UK economy to revive. But if anxiety about the UK's finances were to turn to panic, the drop could become dangerously steep.

If emergency fiscal measures are required, the central bank could also be forced into an embarrassing change of course.

http://www.telegraph.co.uk/finance/currency/6011675/Sterlings-recent-storm-risks-intensifying.html

Japan is unloved, under-owned and most importantly undervalued

Five of the top 10 performers out of 1,965 unit trusts this year so far are Japan funds, but the sector is shunned by investors.

 

By Ian Cowie
Published: 10:18PM GMT 11 Mar 2010

Now here's a funny thing. Five of the top 10 performers out of 1,965 unit trusts this year so far are Japan funds, but the sector is shunned by investors. While individual savings accounts (Isas) as a whole enjoyed their biggest-ever inflow last month, investors took £503,000 more out of Japan Isas than they paid in.

Not that this mismatch between very short-term returns and popularity should come as any surprise. As the graph on this page demonstrates, the Nikkei 225 index has been stuck in a 20-year sulk while the FTSE 100 has powered ahead. 

But that has not prevented some fund managers making handsome profits in Japan, due to shrewd stock-picking and the way the yen has strengthened against the pound. Now some contrarians claim the currency is set to unravel and this will be the long-awaited key to rekindle the profitability of Japan's exporters.

This is a counter-intuitive and complex strategy based on Japan's new government, soaring debt (much worse as a percentage of gross domestic product than that of Britain or Greece), its ageing population and collapsing savings ratio. 

After so many false dawns over the past two decades, could things really be looking up in the land of the rising sun? Could the world's second-biggest economy see share prices rise from their current level, three quarters lower than their peak in 1990? 

All things considered, this was an interesting time to go and see for myself. My host in Tokyo, Chris Taylor, fund manager of Neptune Japan Opportunities, a UK-based open-ended investment company, has taken big bets here and won before. In 2008 he shorted the country's banks before they hit the buffers and delivered returns of more than 80pc to sterling investors, during a year in which the Nikkei fell by 40pc.

But swimming against the tide is not easy and hedging the yen backfired last year when this fund could only edge forward by 7pc. Even so, Mr Taylor remains the top performer in Japan over three and five years. He is not alone in favouring this country as the next opportunity to demonstrate that the best way to make big profits is to buy before the herd arrive.

Gartmore recently launched a Japan Absolute Return fund and GLG, PSigma, Skandia and Threadneedle are all increasing their exposure to Japan.

Tom Becket, chief investment officer at PSigma, said: "Investors have chosen to ignore Japan's geographic location on the dragon's doorstep, which allows huge opportunities for Japanese companies to benefit from Asian growth.

"One of the key investment lessons of the past few years is that you make the serious cash by betting against the rest. Japan is unloved, unfashionable, under-researched, under-owned and – most importantly – undervalued." 

Similarly, Ian Burden, head of the Japan desk at Threadneedle, claims: "Although a weaker yen would reduce returns for an unhedged overseas investor, it would provide further earnings leverage to our expectations for the export sector, while moving the domestic economy towards recovery."

http://www.telegraph.co.uk/finance/personalfinance/comment/iancowie/7424374/Japan-is-unloved-under-owned-and-most-importantly-undervalued.html

How to profit from the plunging pound

Our currency is being hammered, but for those planning to exchange sterling into euros or dollars there are ways to avoid the pain – or even make money.

 

By Emma Simon
Published: 12:11PM GMT 05 Mar 2010

Photo: HOWARD McWILLIAM

 
Fears about Britain's public finances mean the pound has lost about a third of its value against the euro and a fifth against the US dollar during the past three years, creating misery for holidaymakers, retired expats and those with property abroad.

But last week the pace of this decline accelerated, prompting fears of a sterling crisis. By midweek the pound was worth just $1.50, its lowest level for 10 months. It also lost value against the euro – which has been struggling itself in recent months. This volatility has resulted in the the pound dropping to €1.11 in a matter of weeks.

 

Related Articles

• Savings rates fall

• Pound under pressure as opinion polls narrow

• Wild sterling fluctuations cost expat pensioners billions

• Investors 'panic buy' other currencies as sterling slides

• Britons in US pay £300 more for every $1,500

These falls have been partly caused by speculation that there will be a hung Parliament, delaying Britain's economic recovery. And while uncertainty remains, there is the chance that the pound could fall further.
Mark Bodega, marketing director at HiFX, the currency broker, said: "While no one can predict where the markets will end up, one thing we can be sure of in the coming months is no let up on volatility."

But whether you are looking to invest overseas, transfer money abroad, or go on holiday later this year, there are steps you can take now to minimise the risks that the currency markets may move against you. Bolder investors may even want to follow in the footsteps of George Soros – who bet against the pound in 1992 – and try to make money from our weaker currency.

BOOST SPENDING MONEY

The recent dive in the value of the pound will affect those due to travel abroad soon. According to Travelex, those heading to Europe will now get €22.17 less when exchanging £500, compared with the same time last month, the equivalent of a guided bus tour of Paris. Those travelling to the US will be $53.32 short when exchanging £500 compared with early February, the price of two main meals at LA's Chateau Marmont.
But David Swann, a currency strategist at Travelex, says: "Compared to a year ago, British travellers aren't faring too badly. Those travelling to the States are actually getting a slightly better exchange rate, while holidaymakers buying euros get just €13.74 less [again on £500]."

But travellers got a lot more bang for their bucks in 2007, before the credit crunch hit. Those switching £500 into euros got an additional €185.94 compared with today, while those changing money into dollars pocketed an extra $230.89.

Bob Atkinson, a travel expert with Moneysupermarket.com, said: "Even if you think the pound will weaken further, keep an eye on short-term movements; if there is a slight rally then you may want to use the opportunity to buy euros for the summer." But he also urges holidaymakers to ensure they don't pay over the odds on commission or charges: "Those who search out the best deal will get almost 10pc more spending money than those who simply leave it to the last minute and change their money at the airport." 

The cheapest deals are invariably the prepaid cards offered by the companies such as FairFX and Caxton FX, according to Mr Atkinson. He said: "Check whether there is any fee to take out a card and what fees, if any, are levied each time you reload the card."

Buy currency online, he advised, from either Travelex or Thomas Cook. "Online exchange rates are usually far more competitive than those offered at a bank or bureau de change." Even if you have left it to the last minute, it is possible to order online, and pick up the money at the airport, usually for no extra charge. 

Check what charges are levied on debit and credit cards. If you are not travelling abroad until summer, apply now for one of the cheaper debit or credit cards available. Santander's Zero card and Nationwide's debit card remain two of the better options.

DON'T SAVE IN STERLING

Savers can open a euro or dollar-denominated account instead and will benefit if the pound weakens further against these currencies. (Although they lose out if it strengthens.)

These accounts are particularly useful for those who travel frequently or receive or make regular payments in another currency. Holding money in euros (or dollars) means customers don't have to pay frequent foreign exchange fees each time they travel, and it also helps protect them from currency fluctuations. For example, if you receive monthly rental payments in euros from a property, banking this in a euro account leaves you free to convert it back into sterling when exchange rates are more favourable. 

Cater Allen offers one account that allows customers to switch money between dollar, euro and sterling sub-accounts, at no cost. Most require a minimum deposit of at least £5,000. Historically, the interest rates paid on such accounts has been low, but given the rock-bottom rates paid on most British savings account today, this is less of a cost today.

According to Moneyfacts.co.uk, the top-paying euro accounts include Anglo Irish Bank (paying 2.25pc on £10,000) and Halifax International (paying 1.35pc, again on £10,000). Most dollar-based accounts pay less than 1pc – the only exceptions being Anglo Irish Bank (1.5pc) and Irish Permanent (1.5pc on a 30-day notice account).

REALISE OVERSEAS GAINS

The weak pound has increased the costs of maintaining a property abroad, but it does help those selling. Mr Bodega said HiFX has seen a significant increase in people selling overseas assets, repatriating to Britain and converting gains back into sterling.

In total, HiFX says it has seen a 180pc increase in the number of euro-to-sterling transactions in the past six months, and an 111pc increase in the number of dollar-to-sterling transactions.

TAKE A BET ON CURRENCY MARKETS

Opening a euro or dollar account leaves you exposed to movements in the currency markets, which can work for or against you. But losses and gains are limited: provided your bank remains solvent, the money deposited is safe, although its value may fluctuate.

Those who want to take a more aggressive position on currency markets can do so via spread betting or "contracts for difference". For currency trades, most private investors use spread betting, as there is no capital gains tax to pay on profits.

Spread betting allows you to take a stake on future price movements, be it in currencies, stock markets, bond prices or even sports results.

A firm such as City Index will give a spread bet price on a currency market, such as the sterling/dollar pair of $1.5040-$1.5043. If you thought that the sterling/dollar rate would increase, you would buy the spread price, or if you believed that the sterling would weaken, you could place a sell bet. These are "pound per point" bets, so if you place a buy bet with a stake of £2, you will make £2 for every point the pound rises above your entry level.

If the market moves against you, you will pay £2 for every point it moves in the wrong direction. The spread price will track the underlying exchange price of the sterling/dollar currency pair. Given the volatility of currency markets, it is not hard to see how people can ether make money quickly or owe significant sums.
These are also leveraged bets, as investors only put down a "margin trade", which may be just 1pc of their exposed position. This can mean bigger gains, but also magnified losses. 

But spread betting isn't just used to speculate. It can also be used as a hedging tool to protect investors against currency markets moving against them. Joshua Raymond of City Index says: "If you were looking to buy a house in Spain for €300,000 and money was due to transfer on April 1, this would cost you about £271,500 at today's exchange rate.

But if the pound weakens over the next month – say it goes back to be worth just €1.0250 again – this investor will have to find an extra £21,189 to complete the deal.

"To combat this, you can make an FX spread bet to cover this difference," Mr Raymond said.
If you take a short position on the pound, any profits made should cover the extra payments due on the mortgage deal. If the market moves against you and the pound rises, you have lost money on the spread bet, but will need less money to complete the housing transaction.



http://www.telegraph.co.uk/finance/personalfinance/investing/7375451/Sterling-how-to-profit-from-the-plunging-pound.html

Should You Keep Investing in a Sinking Market?

Should You Keep Investing in a Sinking Market?

By BestStockTradesBlog

Sure, it’s been a rocky year in the markets—to say the least.  It is so hard to for anyone to hide from the perpetual bad news, so in times like this, it’s easy to let our emotions cloud our good judgment.  Despite the erratic movements of the global markets lately, many of us continue, with great discipline, to plow money into our current savings programs, whether through brokerage accounts or our 401k plans.  But, is this the right thing to do?  Or, are we simply throwing good money after bad?

Everybody loves investing when the market is up because we often see immediate returns on our investments.  When the markets are down, however, our fears tend to paralyze our inclination to keep investing new dollars.  Psychologically and emotionally, nothing is more depressing than seeing your money evaporate.  But if you invest regularly and have some time before retirement, bear markets can be quite a blessing.  

Upward Bias

If history is any indication, we can safely assume that the stock market is expected to yield positive long term returns over time.  Does this happen every year?  Of course not; performance will vary by time period and asset class, and there will always be bad years mixed in with good years.  That’s just the way markets work. The best time to buy, or keep buying, is when the market is in the toilet. For the past few decades, every time the market took a significant fall, investors who bought on the dips were soon were rewarded with a profitable bounce.  Let’s look at the numbers a little closer, using several indexes as benchmarks.  The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market, the Morgan Stanley EAFE index (Europe, Australia, and Far East) is a proxy of for large caps in the foreign developed markets, and the The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.

                                      Returns 1980 –  2007                          
                 
                    Russell 3000         MSCI EAFE          Russell 2000
1980                  32.59                       24.43                    38.57
1981                  (4.44)                       (1.03)                      2.00
1982                  20.66                       (0.86)                    24.88
1983                  22.68                       24.61                    29.09
1984                    3.43                         7.86                     (7.28)
1985                 32.13                        56.72                    31.07
1986                 16.71                        69.94                    5.70
1987                   1.94                        24.93                    (8.78)
1988                 17.82                        28.59                    24.91
1989                 29.31                       10.80                     16.24
1990                 (5.06)                      (23.20)                  (19.52)
1991                 33.32                       12.50                    46.04
1992                   9.69                      (11.85)                   18.42
1993                 10.88                       32.94                    18.89
1994                 (0.25)                        8.06                     (1.82)
1995                 36.83                       11.55                    28.45
1996                 21.84                         6.36                    16.54
1997                 31.79                         2.06                    22.38
1998                 24.13                       20.33                    (2.56)
1999                 20.89                       27.30                    21.26
2000                  (7.46)                    (13.96)                   (3.03)
2001                (11.46)                    (21.21)                    2.49
2002                (21.55)                    (15.66)                 (20.48)
2003                 31.04                       39.17                   47.25
2004                 11.95                       20.70                   18.32
2005                   6.12                       14.02                      4.55
2006                 15.72                       26.86                    18.37
2007                   5.14                       11.63                     (1.56)

The data depicted tells a story, the years that follow a market downturn can be quite lucrative, often wiping away any losses experienced in the preceding period.

One of the worst sustained bear markets of the past half century occurred during between the late 1960’s and early1980’s.  Yet, had you continued to invest on a regular basis during that dark period, you would have set up your portfolio for a long and prosperous run shortly thereafter. Once the market turned around in the early 1980s, investors who stayed the course enjoyed exceptional returns over the following 15 year period.  Using the Dow Jones Industrial Average as a proxy,
from 1975 to 2006, there were 23 positive years and 9 negative years. If you were to take a simple average of the yearly returns over this time period, you would come up with an average return of 10.83%.  

Still not convinced?  Let’s look at the crash of 1987.  An investor who bought into the market right after the crash of 1987 would have fared very well over the next 24 months. From its low in the fall of 1987, the Dow moved up 56% by the end of 1989.  See, if daily market returns are random (and they are), market timing is a flip of the coin. Investors who attempt to predict market drops are just as likely to avoid them as to miss out on strong return periods.  That is why it would be a mistake to sell out of the market or cut back on your investments during slow times. Because once a market bottoms out, the returns on the bounce can be exceptional, and the market can turn around quite rapidly, which we can never predict in advance.

Dollar Cost Averaging

One of the most effective ways to invest, in particular when the markets are down is dollar cost averaging.  Dollar-cost averaging is an effective wealth-building strategy that involves investing a fixed amount of money at regular intervals over a long period. This type of systematic investment program is used by anyone participating in their company’s 401k or 403b retirement plan.  

In “bullish” markets you buy fewer shares per dollar invested because of the higher cost per share. But, when the markets are down (or bearish), it’s quite the opposite.  You purchase a greater of number of shares per dollar invested because you are buying positions at (presumably) cheaper prices. The blended average of these purchases (high and low) becomes your average cost basis.

So what should you do in a bear market? You do nothing different!  If you’re a long-term investor you do the same thing in a bear market that you would in a bull market, keep investing.

None of us have the clairvoyance to predict market returns.  And those that claim they can are full of hot air.  So the best thing that we can do now, and always, is follow a reasonable investing strategy structured upon our past experience, our common sense, and our reasonable expectations for the future.

http://beststocktradesblog.com/should-you-keep-investing-in-a-sinking-market/