Euro crisis biggest test - Merkel
May 20, 2010 - 7:03AM
Germany rocks world markets
Germany's ban on risky trading sent ripples of shock through the markets, stunning investors and sending the euro back down to a four-year low.
Chancellor Angela Merkel has called for a radical overhaul of Europe's fiscal rules along German lines, warning of "incalculable consequences" for the European Union if the euro were to fail.
Defending Germany's part in a near trillion US dollar package to prevent the troubles of debt-ridden Greece spreading to the rest of Europe, she said the single currency was facing an "existential test" as it plunges on the markets.
"The current crisis facing the euro is the biggest test Europe has faced in decades, even since the Treaty of Rome was signed in 1957," she said in a speech in parliament on Wednesday, referring to the treaty that created the European Union.
"This test is existential and it must be overcome ... if the euro fails, then Europe fails," she said, facing frequent heckling and jeers from opposition parties.
"The euro is in danger. If we do not avert this danger, then the consequences are incalculable and the consequences for the whole of Europe are also incalculable," she cautioned.
To overcome the turmoil that has battered the euro, the German chancellor proposed a "new stability culture" in Europe.
"We need a comprehensive overhaul of the Stability and Growth Pact," the rules stating that EU countries should keep budget deficits below three per cent of gross domestic product (GDP) and debt below 60 per cent of GDP.
"The rules must be geared to the strongest, not to the weakest ... our (German) stability culture is tried and tested."
German Finance Minister Wolfgang Schaeuble will on Friday propose a raft of measures to tighten the rules at a meeting with EU president Herman Van Rompuy.
Merkel said that European funds could be withheld from fiscal sinners and voting rights withdrawn. She also said that an "ordered sovereign insolvency procedure" needed to be established in Europe.
She confirmed a decision made on Tuesday by Germany's securities market regulator to ban so-called naked short-selling in the shares of 10 financial institutions and eurozone government bonds.
Naked short-selling is when investors sell securities they do not own and have not even borrowed, hoping to be able to buy them back later at a lower price, thereby earning a profit.
She said the ban would be in place until Europe-wide regulations were agreed, prompting scorn from market players.
Saying that Merkel had "thrown her toys from the pram" in a fit of pique, Howard Wheeldon from BGC partners in London said she appeared "determined to undermine the euro and the euro economy at this particularly difficult time.
"It seems to me that all the German chancellor has managed to do by this affront to market integrity is succeed in fuelling more fears that the European sovereign debt crisis may just be even worse than it looks," he said.
The euro hit a new four-year low against the dollar after the move was announced.
Merkel also reiterated that she would campaign at the Group of 20 leading industrial powers for an international tax on the financial markets.
Schaeuble later told a parliamentary committee: "If we can get that through on the global level, then good. That would be ideal. If that does not work, then we must look to the Europe (European Union)."
"And if we have a problem with Britain, then I think we should try it with the eurozone," he added.
Frank-Walter Steinmeier, parliamentary head of the opposition Social Democrats, attacked Merkel for her conduct in the crisis, branding her "powerless and helpless."
Germany's parliament is expected to vote Friday on the country's share of the 750 billion euros ($A1.06 trillion) eurozone bailout package, which could be as much as 150 billion euros ($A211.83 billion).
Merkel's party has a clear majority in the parliament, meaning the package is certain to pass.
AFP
Thursday 20 May 2010
Singapore's GDP rockets 39% as Asian trade soars
Singapore's GDP rockets 39% as Asian trade soars
May 20, 2010 - 12:26PM
Singapore's economy expanded at a faster pace than initially estimated last quarter as rising global demand boosted manufacturing and the opening of the island's first casino spurred tourism.
Gross domestic product grew an annualised 38.6 per cent from the previous three months in the first quarter, compared with an April estimate of 32.1 per cent, the trade ministry said in a statement today. That was more than the 33.4 per cent increase economists were expecting.
From a year ago, the economy expanded by 15.5 per cent, the highest quarterly growth on record. Singapore's economy shrank by 1.3 per cent last year, revised data shows after a previously reported contraction of 2 per cent.
Officials said the strong rebound from its worst-ever recession last year will be helped by a broad-based recovery in the United States and buoyant growth in large Asian economies such as China.
"The data from Singapore and around the region underscore that so far, the rebound in exports and production has been much better than what people have been expecting," said David Cohen of Action Economics.
Mr Cohen predicts the economy could grow up to 10 per cent this year, above the government's forecast of 7-9 per cent and notwithstanding the risks from the debt troubles in Europe.
Bubble risks
However, the government warned of risks from asset price bubbles in Asia and the fallout from Europe's debt crisis.
If asset prices correct too sharply in China, it could have "negative spillover'' effects on regional economies, Ravi Menon, permanent secretary at the trade ministry, told reporters in Singapore today.
"Should investor sentiments wane or if more monetary tightening measures are introduced, sharp asset price corrections could follow,'' the ministry said. "If these risks materialise, they could affect the global recovery and negatively impact Singapore.''
Singapore private home prices rose 5.6 per cent in the first quarter from the last three months of 2009 despite government policies such as higher down payment requirements for mortgages.
Ong Chong Tee, deputy managing director at the Monetary Authority of Singapore, the city-state's central bank, indicated the government will use administrative rather than broad measures to curb runaway property prices.
"It is much better not to use monetary policy, which is a blunt instrument, but to use much more targeted, preventive, administrative or even fiscal measures to address this," he said.
Japan, Malaysia
Growth is also accelerating in other parts of Asia. Japan said today its economy expanded at the fastest pace in three quarters in the period ended March 31 as an export-led recovery spreads to consumer and business spending. Neighboring Malaysia last week reported a first-quarter expansion that was the quickest in a decade.
Singapore's non-oil domestic exports will probably gain between 15 per cent and 17 per cent in 2010, from a previous projection of as much as 12 per cent, the trade promotion agency said today.
Singapore's government expects the economy to grow as much as 9 per cent this year.
The Monetary Authority of Singapore, which uses the currency instead of interest rates to conduct monetary policy, said April 14 it will "re-centre the exchange rate policy band at the prevailing level'' of the Singapore dollar, shifting to a stronger range for the currency to trade in. The central bank guides the Singapore dollar against a basket of currencies within an undisclosed band.
The Singapore dollar, which rose as much as 1.2 per cent on the day the new currency stance was announced, has since weakened amid the European debt crisis. It traded at $US1.3977 against its US counterpart in early trade, falling 2.1 per cent this month.
Manufacturing and tourism
Manufacturing, which accounts for about a quarter of Singapore's economy, climbed 32.9 per cent from a year earlier last quarter, after gaining 2.2 per cent in the three months through December. That compares with the April estimate of 30 per cent.
Singapore's visitor arrivals are surging as resorts run by Las Vegas Sands Corp. and Genting Singapore Plc attract tourists to their roulette tables, shops and hotels. The Singapore Tourism Board expects to lure as many as 12.5 million visitors this year.
The island's services industry grew 10.9 per cent last quarter from a year earlier, after climbing a revised 3.7 per cent in the previous three months. The construction industry gained 13.7 per cent, compared with a revised 11.5 per cent increase in the fourth quarter.
Bloomberg News, Reuters
May 20, 2010 - 12:26PM
Singapore's economy expanded at a faster pace than initially estimated last quarter as rising global demand boosted manufacturing and the opening of the island's first casino spurred tourism.
Gross domestic product grew an annualised 38.6 per cent from the previous three months in the first quarter, compared with an April estimate of 32.1 per cent, the trade ministry said in a statement today. That was more than the 33.4 per cent increase economists were expecting.
From a year ago, the economy expanded by 15.5 per cent, the highest quarterly growth on record. Singapore's economy shrank by 1.3 per cent last year, revised data shows after a previously reported contraction of 2 per cent.
Officials said the strong rebound from its worst-ever recession last year will be helped by a broad-based recovery in the United States and buoyant growth in large Asian economies such as China.
"The data from Singapore and around the region underscore that so far, the rebound in exports and production has been much better than what people have been expecting," said David Cohen of Action Economics.
Mr Cohen predicts the economy could grow up to 10 per cent this year, above the government's forecast of 7-9 per cent and notwithstanding the risks from the debt troubles in Europe.
Bubble risks
However, the government warned of risks from asset price bubbles in Asia and the fallout from Europe's debt crisis.
If asset prices correct too sharply in China, it could have "negative spillover'' effects on regional economies, Ravi Menon, permanent secretary at the trade ministry, told reporters in Singapore today.
"Should investor sentiments wane or if more monetary tightening measures are introduced, sharp asset price corrections could follow,'' the ministry said. "If these risks materialise, they could affect the global recovery and negatively impact Singapore.''
Singapore private home prices rose 5.6 per cent in the first quarter from the last three months of 2009 despite government policies such as higher down payment requirements for mortgages.
Ong Chong Tee, deputy managing director at the Monetary Authority of Singapore, the city-state's central bank, indicated the government will use administrative rather than broad measures to curb runaway property prices.
"It is much better not to use monetary policy, which is a blunt instrument, but to use much more targeted, preventive, administrative or even fiscal measures to address this," he said.
Japan, Malaysia
Growth is also accelerating in other parts of Asia. Japan said today its economy expanded at the fastest pace in three quarters in the period ended March 31 as an export-led recovery spreads to consumer and business spending. Neighboring Malaysia last week reported a first-quarter expansion that was the quickest in a decade.
Singapore's non-oil domestic exports will probably gain between 15 per cent and 17 per cent in 2010, from a previous projection of as much as 12 per cent, the trade promotion agency said today.
Singapore's government expects the economy to grow as much as 9 per cent this year.
The Monetary Authority of Singapore, which uses the currency instead of interest rates to conduct monetary policy, said April 14 it will "re-centre the exchange rate policy band at the prevailing level'' of the Singapore dollar, shifting to a stronger range for the currency to trade in. The central bank guides the Singapore dollar against a basket of currencies within an undisclosed band.
The Singapore dollar, which rose as much as 1.2 per cent on the day the new currency stance was announced, has since weakened amid the European debt crisis. It traded at $US1.3977 against its US counterpart in early trade, falling 2.1 per cent this month.
Manufacturing and tourism
Manufacturing, which accounts for about a quarter of Singapore's economy, climbed 32.9 per cent from a year earlier last quarter, after gaining 2.2 per cent in the three months through December. That compares with the April estimate of 30 per cent.
Singapore's visitor arrivals are surging as resorts run by Las Vegas Sands Corp. and Genting Singapore Plc attract tourists to their roulette tables, shops and hotels. The Singapore Tourism Board expects to lure as many as 12.5 million visitors this year.
The island's services industry grew 10.9 per cent last quarter from a year earlier, after climbing a revised 3.7 per cent in the previous three months. The construction industry gained 13.7 per cent, compared with a revised 11.5 per cent increase in the fourth quarter.
Bloomberg News, Reuters
Dutch Lady sees higher revenue, profit this year
Dutch Lady sees higher revenue, profit this year
By Vasantha GanesanPublished: 2010/05/20
DUTCH Lady Milk Industries Bhd (3026) expects to grow both revenue and net profit this year and to possibly pay as much dividend as it did in 2009.
In the year to December 31 2009, Dutch Lady posted a record net profit of RM60.4 million on the back of RM691.85 million in revenue.
The dairy manufacturer also paid a gross dividend of 86 sen per share in 2009, which translates to RM42 million in total.
Recently appointed managing director Sebastian Van Den Berg said the improving economy will be reflected in consumer behaviour and spending trend which he expects will contribute to the dairy market growth.
Moreover, the company will raise its advertisement and promotion budget this year to push sales.
"We will increase it by 20 per cent this year," Van Den Berg said a press conference following its annual general meeting in Petaling Jaya, Selangor, yesterday.
Dutch Lady saw its net profit jump by 41.6 per cent in 2009 compared with the previous year, supported largely by favourable skimmed milk powder price.
However, the price of the commodity, the main dairy raw material, is currently rising.
Van Den Berg expects the commodity's price to increase to over US$3,000 (RM9,720) per tonne this year compared with US$2,100 (RM6,804) in the fourth quarter of 2009.
The stronger ringgit will help cushion an increase as imports will be cheaper. Dutch Lady imports 95 per cent of its dairy needs.
Dutch Lady does not expect to raise the price of its products at least until August 2010.
"We are not sure yet. We will try our utmost best not to. But I can't promise that there will be no price increase ... not before August (at least)," he said.
Dutch Lady has forward purchased its skimmed milk needs that will last it until August or September this year.
On dividends, the group has announced a gross dividend of 45 sen per share. The remaining quantum will be announced later based on the performance of the company.
In the first quarter to March 31 2010, Dutch Lady saw net profit swell to RM20.81 million from RM8.75 million in the corresponding period of 2009.
Dutch Lady shares climbed 16 sen before closing at RM12.46 at the end of trading yesterday.
Read more: Dutch Lady sees higher revenue, profit this year http://www.btimes.com.my/Current_News/BTIMES/articles/agmdutch/Article/#ixzz0oQOWiqkY
RM26.3b market cap lost over 4 days
RM26.3b market cap lost over 4 days
Written by Surin Murugiah
Thursday, 20 May 2010 00:02
KUALA LUMPUR: A combination of weakness on Wall Street, the European debt crisis, worries of tighter financial regulation and negative news flow from one of the larger companies on Bursa Malaysia Securities drove the FBM KLCI to its steepest decline on May 19 since March 30, 2009.
The lingering uncertainty over the global economic well-being also resulted in the FBM KLCI losing 38.69 points over the last four trading days, and wiping off RM26.27 billion in overall market capitalisation on Bursa Securities.
On May 19, Asian markets fell while European indices, worried by the effectiveness of the measures adopted in Europe to arrest the debt crisis as well as Germany’s decision to ban naked short-selling on selected stocks, mostly opened lower.
At the close on May 19, Singapore’s Straits Times Index fell 2.45% to 2,774.54, Hong Kong’s Hang Seng Index lost 1.83% to 19,578.98, Japan’s Nikkei 225 fell 0.54% to 10,186.84, the South Korean Kospi fell 0.8% to 1,630.08, Taiwan’s Taiex Index fell 0.34% to 7,559.16, and the Shanghai Composite Index shed 0.27% to 2,587.81.
On the local front, the FBM KLCI declined for the fourth consecutive trading day and fell 1.65% or 21.94 points to 1,308.23, the biggest single day drop since March 30 last year when it fell 1.82%.
Trading volume was 781.53 million shares valued at RM1.4 billion. Losers thumped gainers by 689 to 135, while 175 counters traded unchanged.
Crude palm oil futures for the third month delivery fell RM10 per tonne to RM2,435 while crude oil fell US$1.14 (RM3.71) per barrel to US$68.27 as at 6.30pm.
The top eight laggards on the 30-stock FBM KLCI accounted for 16.52 points of the index’s decline, while PPB GROUP BHD [], whose 18.4% associate company Wilmar International’s Indonesian subsidiaries had been reported to be under probe for alleged unlawful value-added tax-restitution claims, saw RM1.21 billion erased from its market capitalisation.
PPB fell 5.79% or RM1.02 to RM16.60, the sharpest decline since Oct 24, 2008 when it fell 6.71%. Its market capitalisation fell to RM19.68 billion from RM20.89 billion.
Among the losers, IOI CORPORATION BHD [] fell 26 sen to RM5; CIMB Group Holdings Bhd 17 sen to RM7.04, PUBLIC BANK BHD [] 16 sen to RM11.78, AMMB HOLDINGS BHD [] 14 sen to RM4.86, GENTING BHD [] 12 sen to RM6.77, MALAYAN BANKING BHD [] nine sen to RM7.49, while SIME DARBY BHD [] lost eight sen to RM8.18.
Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi said fundamentals were not really that good, adding that stripping out inventory re-stocking (IRS), 8% out of Malaysia’s 1Q10 10.1% gross domestic product year-on-year growth was due to the IRS.
He pointed out the negative news flow, including Sime Darby’s cost overruns, the reports on Wilmar, as well as Wah Seong Corp’s Socotherm bid setback had affected market sentiment.
“Markets in the world are falling like nine-pins. Asia is down about 2.5% today. The FBM KLCI broke the 1,315 support level; this means we will see 1,300 very soon, maybe by May 20,’ he said, adding that markets might be turbulent for the next few months.
Lee said risks were high and rewards meagre, and advocated that investors sell most stocks and step aside, adding it was better to have more cash.
Inter-Pacific Research Sdn Bhd head Anthony Dass said the eurozone debt crisis would not leave Asia unscathed, and thus could force financial institutions to be more cautious in their lending, raise financial volatility in the financial market and hurt export demand.
“We fear the low interest–free environment in euro will feed into Asia, compounding liquidity issues that will flare asset prices. For countries like Malaysia, the widening fiscal gap may alleviate short-term pressure,” he said.
MIDF Research head Zulkifi Hamzah said it was difficult to quantify the extent to which local factors accounted for the lacklustre market condition now.
“The BN’s loss of its Sibu parliamentary seat may be unexpected, but political risk for Malaysia had been elevated since the last general election and swings in by-elections should no longer be surprising,” he said.
“Several instances of corporate misadventure such as Sime’s substantial provision and the latest being Wilmar’s predicament in Indonesia which affected PPB’s share price also contributed to the drag on the market.
“Otherwise, earnings for the quarter ended March are decent, with some significant surprises, especially that of Maybank,” he said.
However, he said putting things into perspective, the decline in FBM KLCI was nowhere near as severe as it had been made out to be.
“From the year’s high of 1,346.92, the FBM KLCI has given back less than 3%. If it is a correction, then it can be considered a healthy one and is an opportunity to accumulate.
“The fact remains that the strength of the ringgit reflects the fundamentals of the economy and the weak spots in the world today are in the West, and not Asia,” he said.
http://www.theedgemalaysia.com/business-news/166427-rm263b-market-cap-lost-over-4-days.html
Written by Surin Murugiah
Thursday, 20 May 2010 00:02
KUALA LUMPUR: A combination of weakness on Wall Street, the European debt crisis, worries of tighter financial regulation and negative news flow from one of the larger companies on Bursa Malaysia Securities drove the FBM KLCI to its steepest decline on May 19 since March 30, 2009.
The lingering uncertainty over the global economic well-being also resulted in the FBM KLCI losing 38.69 points over the last four trading days, and wiping off RM26.27 billion in overall market capitalisation on Bursa Securities.
On May 19, Asian markets fell while European indices, worried by the effectiveness of the measures adopted in Europe to arrest the debt crisis as well as Germany’s decision to ban naked short-selling on selected stocks, mostly opened lower.
At the close on May 19, Singapore’s Straits Times Index fell 2.45% to 2,774.54, Hong Kong’s Hang Seng Index lost 1.83% to 19,578.98, Japan’s Nikkei 225 fell 0.54% to 10,186.84, the South Korean Kospi fell 0.8% to 1,630.08, Taiwan’s Taiex Index fell 0.34% to 7,559.16, and the Shanghai Composite Index shed 0.27% to 2,587.81.
On the local front, the FBM KLCI declined for the fourth consecutive trading day and fell 1.65% or 21.94 points to 1,308.23, the biggest single day drop since March 30 last year when it fell 1.82%.
Trading volume was 781.53 million shares valued at RM1.4 billion. Losers thumped gainers by 689 to 135, while 175 counters traded unchanged.
Crude palm oil futures for the third month delivery fell RM10 per tonne to RM2,435 while crude oil fell US$1.14 (RM3.71) per barrel to US$68.27 as at 6.30pm.
The top eight laggards on the 30-stock FBM KLCI accounted for 16.52 points of the index’s decline, while PPB GROUP BHD [], whose 18.4% associate company Wilmar International’s Indonesian subsidiaries had been reported to be under probe for alleged unlawful value-added tax-restitution claims, saw RM1.21 billion erased from its market capitalisation.
PPB fell 5.79% or RM1.02 to RM16.60, the sharpest decline since Oct 24, 2008 when it fell 6.71%. Its market capitalisation fell to RM19.68 billion from RM20.89 billion.
Among the losers, IOI CORPORATION BHD [] fell 26 sen to RM5; CIMB Group Holdings Bhd 17 sen to RM7.04, PUBLIC BANK BHD [] 16 sen to RM11.78, AMMB HOLDINGS BHD [] 14 sen to RM4.86, GENTING BHD [] 12 sen to RM6.77, MALAYAN BANKING BHD [] nine sen to RM7.49, while SIME DARBY BHD [] lost eight sen to RM8.18.
Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi said fundamentals were not really that good, adding that stripping out inventory re-stocking (IRS), 8% out of Malaysia’s 1Q10 10.1% gross domestic product year-on-year growth was due to the IRS.
He pointed out the negative news flow, including Sime Darby’s cost overruns, the reports on Wilmar, as well as Wah Seong Corp’s Socotherm bid setback had affected market sentiment.
“Markets in the world are falling like nine-pins. Asia is down about 2.5% today. The FBM KLCI broke the 1,315 support level; this means we will see 1,300 very soon, maybe by May 20,’ he said, adding that markets might be turbulent for the next few months.
Lee said risks were high and rewards meagre, and advocated that investors sell most stocks and step aside, adding it was better to have more cash.
Inter-Pacific Research Sdn Bhd head Anthony Dass said the eurozone debt crisis would not leave Asia unscathed, and thus could force financial institutions to be more cautious in their lending, raise financial volatility in the financial market and hurt export demand.
“We fear the low interest–free environment in euro will feed into Asia, compounding liquidity issues that will flare asset prices. For countries like Malaysia, the widening fiscal gap may alleviate short-term pressure,” he said.
MIDF Research head Zulkifi Hamzah said it was difficult to quantify the extent to which local factors accounted for the lacklustre market condition now.
“The BN’s loss of its Sibu parliamentary seat may be unexpected, but political risk for Malaysia had been elevated since the last general election and swings in by-elections should no longer be surprising,” he said.
“Several instances of corporate misadventure such as Sime’s substantial provision and the latest being Wilmar’s predicament in Indonesia which affected PPB’s share price also contributed to the drag on the market.
“Otherwise, earnings for the quarter ended March are decent, with some significant surprises, especially that of Maybank,” he said.
However, he said putting things into perspective, the decline in FBM KLCI was nowhere near as severe as it had been made out to be.
“From the year’s high of 1,346.92, the FBM KLCI has given back less than 3%. If it is a correction, then it can be considered a healthy one and is an opportunity to accumulate.
“The fact remains that the strength of the ringgit reflects the fundamentals of the economy and the weak spots in the world today are in the West, and not Asia,” he said.
http://www.theedgemalaysia.com/business-news/166427-rm263b-market-cap-lost-over-4-days.html
Dutch Lady sees substantial growth, eye on raw material prices
"Dutch Lady Malaysia posted strong financial performances despite the challenges being presented through softer consumer demand, competitive pricing factors, rising raw material prices, escalating labour costs and many other incidentals," van den Berg told reporters after yesterday's meeting.
For FY09, the shareholders of Dutch Lady would be eligible for dividends - normal and special - amounting to $42 million. The final dividends stand at 10 sen per share less tax and five sen per share tax exempt and are expected to be paid in July.
A special interim dividend of 30 sen per share less tax, amounting to RM14.4 million, is also payable in July.
----
Dutch Lady sees substantial growth, eye on raw material prices
Tags: Bas van den Berg | Dutch Lady Milk Industries Bhd
Written by The Edge Financial Daily
Wednesday, 19 May 2010 23:26
KUALA LUMPUR: DUTCH LADY MILK INDUSTRIES BHD [] expects the dairy market to show substantial growth this year although challenges will remain, particularly in further increases in dairy raw material prices.
"In line with the positive outlook of the Malaysian economy, for 2010, we expect the dairy market to show substantial growth. Consumer confidence is catching up and this will be reflected in consumer behaviour. At the same time, 2010 promises to be a challenging year due to world dairy raw material prices.
"We have seen significant increases in (prices of) raw materials in the past six months, and based on the current outlook, we expect further price hikes this year," Dutch Lady Malaysia's managing director Bas van den Berg said in a statement on Wednesday, May 19 that was issued in conjunction with the company's AGM here.
For its first quarter ended March 31, 2010, the results of which were announced on Tuesday, Dutch Lady Malaysia posted a 139% rise in net profit to RM20.8 million from RM8.7 million a year earlier, while gross profit rose 40.3% to RM64.4 million. Pre-tax profit rose 122% to RM28.2 million from RM12.7 million.
Dutch Lady Malaysia said it posted its highest earnings ever in its 47th year corporate history as a public-listed company for its financial year ended Dec 31, 2009 (FY09), with a 42% rise in pre-tax profit to RM82.4 million from RM57.8 million in the previous year, while net profit rose 41.7% to RM60.4 million from RM42.6 million.
Revenue fell 2.7% to RM691.8 million from RM711.6 million due to lower selling prices coupled with softer consumer spending.
"Across the globe, 2009 proved to be a most challenging period as companies, industries and even governments grappled to stay afloat during one of the worst economic recessions in recent decades.
"Dutch Lady Malaysia posted strong financial performances despite the challenges being presented through softer consumer demand, competitive pricing factors, rising raw material prices, escalating labour costs and many other incidentals," van den Berg told reporters after yesterday's meeting.
For FY09, its shareholders would be eligible for dividends — normal and special — amounting to RM42 million. The final dividends stand at 10 sen per share less tax and five sen per share tax exempt and are expected to be paid in July.
A special interim dividend of 30 sen per share less tax, amounting to RM14.4 million, is also payable in July.
"Coupled with intense market competition and the company's mission I presented earlier, we will definitely be looking closely at the raw material price development," said van den Berg.
Earlier at the AGM, its shareholders were also briefed on the e-dividend service wherein cash dividends will be deposited straight into their respective bank accounts instead of via the traditional cheques.
http://www.theedgemalaysia.com/business-news/166425-dutch-lady-sees-substantial-growth-eye-on-raw-material-prices.html
For FY09, the shareholders of Dutch Lady would be eligible for dividends - normal and special - amounting to $42 million. The final dividends stand at 10 sen per share less tax and five sen per share tax exempt and are expected to be paid in July.
A special interim dividend of 30 sen per share less tax, amounting to RM14.4 million, is also payable in July.
----
Dutch Lady sees substantial growth, eye on raw material prices
Tags: Bas van den Berg | Dutch Lady Milk Industries Bhd
Written by The Edge Financial Daily
Wednesday, 19 May 2010 23:26
KUALA LUMPUR: DUTCH LADY MILK INDUSTRIES BHD [] expects the dairy market to show substantial growth this year although challenges will remain, particularly in further increases in dairy raw material prices.
"In line with the positive outlook of the Malaysian economy, for 2010, we expect the dairy market to show substantial growth. Consumer confidence is catching up and this will be reflected in consumer behaviour. At the same time, 2010 promises to be a challenging year due to world dairy raw material prices.
"We have seen significant increases in (prices of) raw materials in the past six months, and based on the current outlook, we expect further price hikes this year," Dutch Lady Malaysia's managing director Bas van den Berg said in a statement on Wednesday, May 19 that was issued in conjunction with the company's AGM here.
For its first quarter ended March 31, 2010, the results of which were announced on Tuesday, Dutch Lady Malaysia posted a 139% rise in net profit to RM20.8 million from RM8.7 million a year earlier, while gross profit rose 40.3% to RM64.4 million. Pre-tax profit rose 122% to RM28.2 million from RM12.7 million.
Dutch Lady Malaysia said it posted its highest earnings ever in its 47th year corporate history as a public-listed company for its financial year ended Dec 31, 2009 (FY09), with a 42% rise in pre-tax profit to RM82.4 million from RM57.8 million in the previous year, while net profit rose 41.7% to RM60.4 million from RM42.6 million.
Revenue fell 2.7% to RM691.8 million from RM711.6 million due to lower selling prices coupled with softer consumer spending.
"Across the globe, 2009 proved to be a most challenging period as companies, industries and even governments grappled to stay afloat during one of the worst economic recessions in recent decades.
"Dutch Lady Malaysia posted strong financial performances despite the challenges being presented through softer consumer demand, competitive pricing factors, rising raw material prices, escalating labour costs and many other incidentals," van den Berg told reporters after yesterday's meeting.
For FY09, its shareholders would be eligible for dividends — normal and special — amounting to RM42 million. The final dividends stand at 10 sen per share less tax and five sen per share tax exempt and are expected to be paid in July.
A special interim dividend of 30 sen per share less tax, amounting to RM14.4 million, is also payable in July.
"Coupled with intense market competition and the company's mission I presented earlier, we will definitely be looking closely at the raw material price development," said van den Berg.
Earlier at the AGM, its shareholders were also briefed on the e-dividend service wherein cash dividends will be deposited straight into their respective bank accounts instead of via the traditional cheques.
http://www.theedgemalaysia.com/business-news/166425-dutch-lady-sees-substantial-growth-eye-on-raw-material-prices.html
A quick look at Mieco (19.5.2010)
A quick look at Mieco (19.5.2010)
http://spreadsheets.google.com/pub?key=tz7RWE_u6IqoXzZIK5kBx9A&output=html
Wednesday 19 May 2010
Greece gets $18bn from EU; to repay debt
Greece gets $18bn from EU; to repay debt
REUTERS, May 19, 2010, 12.03am IST
ATHENS: Greece received a 14.5 billion euro ($18 billion) loan from the European Union on Tuesday and can now repay its immediate debt, but still faces a mammoth task to claw its way out of recession.
Concerns that other EU countries such as Portugal and Spain could follow Greece and need aid from the bloc have hit the euro, while investors are still watching Athens to see whether its austerity plan will stave off the risk of default. The EU and IMF agreed at the beginning of the month to lend Greece 110 billion euros ($137 billion) over three years to help it pay billions in expiring debt after being shut out of financial markets by the high cost of borrowing.
With 5.5 billion euros already delivered by the IMF, Greece has now received the first 20-billion euro tranche of the loans, the Greek finance ministry said in a statement. Athens now can and will repay an 8.5 billion 10-year euro bond which matures on Wednesday, a government official said. "Greece no longer has the liquidity anxiety, it will not need to go to markets to borrow to pay salaries and pensions," EFG Eurobank economist Gikas Hardouvelis said. Greece will be paying interest of around 5%, well below current market yields of well over 7% for Greece's 3-year bonds.
Though it has gained a breathing space, Greece must now convince markets it can rein in its deficits so that it can eventually start borrowing again. "The programme has been designed so that Greece is able to stay away from the financial markets through the end of 2011 and the first quarter of 2012. We don't expect that to be the case, we want to come back to markets much sooner," finance minister George Papaconstantinou said in Brussels.
Socialist Prime Minister George Papandreou's government has already implemented sizeable public sector wage cuts and raised taxes in return for the EU/IMF bailout.
REUTERS, May 19, 2010, 12.03am IST
ATHENS: Greece received a 14.5 billion euro ($18 billion) loan from the European Union on Tuesday and can now repay its immediate debt, but still faces a mammoth task to claw its way out of recession.
Concerns that other EU countries such as Portugal and Spain could follow Greece and need aid from the bloc have hit the euro, while investors are still watching Athens to see whether its austerity plan will stave off the risk of default. The EU and IMF agreed at the beginning of the month to lend Greece 110 billion euros ($137 billion) over three years to help it pay billions in expiring debt after being shut out of financial markets by the high cost of borrowing.
With 5.5 billion euros already delivered by the IMF, Greece has now received the first 20-billion euro tranche of the loans, the Greek finance ministry said in a statement. Athens now can and will repay an 8.5 billion 10-year euro bond which matures on Wednesday, a government official said. "Greece no longer has the liquidity anxiety, it will not need to go to markets to borrow to pay salaries and pensions," EFG Eurobank economist Gikas Hardouvelis said. Greece will be paying interest of around 5%, well below current market yields of well over 7% for Greece's 3-year bonds.
Though it has gained a breathing space, Greece must now convince markets it can rein in its deficits so that it can eventually start borrowing again. "The programme has been designed so that Greece is able to stay away from the financial markets through the end of 2011 and the first quarter of 2012. We don't expect that to be the case, we want to come back to markets much sooner," finance minister George Papaconstantinou said in Brussels.
Socialist Prime Minister George Papandreou's government has already implemented sizeable public sector wage cuts and raised taxes in return for the EU/IMF bailout.
Stocks fall, euro at 4-yr low, oil dips
Stocks fall, euro at 4-yr low, oil dips
NEW YORK: Stocks fell for a third day on Monday on growing concerns that Europe's debt problems will hamper a global rebound. The Dow Jones industrial average fell about 80 points in late morning trading. The Dow fell 81.4 points, or 0.8%, to 10,538.6. It has fallen seven of the last nine days.
Stocks fell after the euro, which is used by 16 countries in Europe, fell to a four-year low. Investors are questioning whether steep budget cuts in countries including Greece, Spain and Portugal will hinder an economic recovery in Europe and in turn, the US traders are also concerned that loan defaults could ripple through to banks in stronger countries like Germany and France.
The austerity measures are required under a nearly $1 trillion bailout programme the European Union and International Monetary Fund agreed to last week. The rescue package provides access to cheap loans for European countries facing mounting debt problems.
The euro fell to as low as $1.223 early Monday before moving higher. The plunging euro has been driving trading around the globe in recent days. The weakness in the euro has helped boost the value of safe-haven investments like the dollar, Treasuries and gold. It has also driven commodities like oil lower.
Oil fell below $70 a barrel for the first time since February. Oil is priced in dollars so a stronger dollar deters investment in oil. Crude oil fell $1.76 to $69.8 per barrel on the New York Mercantile Exchange. That hit shares of energy companies.
A disappointing report on regional manufacturing from the New York Federal Reserve weighed on sentiment. A forecast from home-improvement retailer Lowe's Cos also fell short of expectations. The questions about Europe overshadowed other news and dominated trading. Investors in the US who had been growing more confident about a rebound in this country now are questioning whether the problems in Europe will disrupt a recovery.
http://timesofindia.indiatimes.com/Biz/International-Business/Stocks-fall-euro-at-4-yr-low-oil-dips/articleshow/5942500.cms
How to play China’s growth - buy fertiliser
From
May 19, 2010
How to play China’s growth - buy fertiliser
Golman Sach's 14 principles that outline the firm’s best practices.
Our clients' interests always come first.
Our experience shows that if we serve our clients well, our own success will follow.
Our assets are our people, capital and reputation.
If any of these is ever diminished, the last is the most difficult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.
Our goal is to provide superior returns to our shareholders. Profitability is critical to achieving superior returns, building our capital, and attracting and keeping our best people. Significant employee stock ownership aligns the interests of our employees and our shareholders.
We take great pride in the professional quality of our work.
We have an uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.
We stress creativity and imagination in everything we do. While recognizing that the old way may still be the best way, we constantly strive to find a better solution to a client's problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.
We make an unusual effort to identify and recruit the very best person for every job.
Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.
We offer our people the opportunity to move ahead more rapidly than is possible at most other places.
Advancement depends on merit and we have yet to find the limits to the responsibility our best people are able to assume. For us to be successful, our men and women must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.
We stress teamwork in everything we do.
While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the firm and its clients.
The dedication of our people to the firm and the intense effort they give their jobs are greater than one finds in most other organizations. We think that this is an important part of our success.
We consider our size an asset that we try hard to preserve.
We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.
We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs. We know that the world of finance will not stand still and that complacency can lead to extinction.
We regularly receive confidential information as part of our normal client relationships.
To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.
Our business is highly competitive, and we aggressively seek to expand our client relationships.
However, we must always be fair competitors and must never denigrate other firms.
Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.
When new hires begin working at Goldman, they are told to follow 14 principles that outline the firm’s best practices. “Our clients’ interests always come first” is principle No. 1. The 14th principle is: “Integrity and honesty are at the heart of our business.”
But some former insiders, who requested anonymity because of concerns about retribution from the firm, say Goldman has a 15th, unwritten principle that employees openly discuss.
It urges Goldman workers to embrace conflicts and argues that they are evidence of a healthy tension between the firm and its customers. If you are not embracing conflicts, the argument holds, you are not being aggressive enough in generating business.
http://www2.goldmansachs.com/our-firm/our-people/business-principles.html
Related:
Clients Worried About Goldman’s Dueling Goals
Our experience shows that if we serve our clients well, our own success will follow.
Our assets are our people, capital and reputation.
If any of these is ever diminished, the last is the most difficult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.
Our goal is to provide superior returns to our shareholders. Profitability is critical to achieving superior returns, building our capital, and attracting and keeping our best people. Significant employee stock ownership aligns the interests of our employees and our shareholders.
We take great pride in the professional quality of our work.
We have an uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.
We stress creativity and imagination in everything we do. While recognizing that the old way may still be the best way, we constantly strive to find a better solution to a client's problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.
We make an unusual effort to identify and recruit the very best person for every job.
Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.
We offer our people the opportunity to move ahead more rapidly than is possible at most other places.
Advancement depends on merit and we have yet to find the limits to the responsibility our best people are able to assume. For us to be successful, our men and women must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.
We stress teamwork in everything we do.
While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the firm and its clients.
The dedication of our people to the firm and the intense effort they give their jobs are greater than one finds in most other organizations. We think that this is an important part of our success.
We consider our size an asset that we try hard to preserve.
We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.
We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs. We know that the world of finance will not stand still and that complacency can lead to extinction.
We regularly receive confidential information as part of our normal client relationships.
To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.
Our business is highly competitive, and we aggressively seek to expand our client relationships.
However, we must always be fair competitors and must never denigrate other firms.
Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.
When new hires begin working at Goldman, they are told to follow 14 principles that outline the firm’s best practices. “Our clients’ interests always come first” is principle No. 1. The 14th principle is: “Integrity and honesty are at the heart of our business.”
But some former insiders, who requested anonymity because of concerns about retribution from the firm, say Goldman has a 15th, unwritten principle that employees openly discuss.
It urges Goldman workers to embrace conflicts and argues that they are evidence of a healthy tension between the firm and its customers. If you are not embracing conflicts, the argument holds, you are not being aggressive enough in generating business.
http://www2.goldmansachs.com/our-firm/our-people/business-principles.html
Related:
Clients Worried About Goldman’s Dueling Goals
Clients Worried About Goldman’s Dueling Goals
Clients Worried About Goldman’s Dueling Goals
By GRETCHEN MORGENSON and LOUISE STORY
Published: May 18, 2010
Questions have been raised that go to the heart of this institution’s most fundamental value: how we treat our clients.” — Lloyd C. Blankfein, Goldman Sachs’s C.E.O., at the firm’s annual meeting in May
As the housing crisis mounted in early 2007, Goldman Sachs was busy selling risky, mortgage-related securities issued by its longtime client, Washington Mutual, a major bank based in Seattle.
Although Goldman had decided months earlier that the mortgage market was headed for a fall, it continued to sell the WaMu securities to investors. While Goldman put its imprimatur on that offering, traders in the same Goldman unit were not so sanguine about WaMu’s prospects: they were betting that the value of WaMu’s stock and other securities would decline.
Goldman’s wager against its customer’s stock — a position known as a “short” — was large enough that it would have generated at least $10 million in profits if WaMu collapsed, according to documents recently released by Congress. And by mid-May, Goldman’s bet against other WaMu securities had made Goldman $2.5 million, the documents show.
WaMu eventually did collapse under the weight of souring mortgage loans; federal regulators seized it in September 2008, making it the biggest bank failure in American history.
Goldman’s bets against WaMu, wagers that took place even as it helped WaMu feed a housing frenzy that Goldman had already lost faith in, are examples of conflicting roles that trouble its critics and some former clients. While Goldman has legions of satisfied customers and maintains that it puts its clients first, it also sometimes appears to work against the interests of those same clients when opportunities to make trading profits off their financial troubles arise.
Goldman’s access to client information can also give its traders an advantage that many of the firm’s competitors lack. And because betting against a company’s shares or its debt can create an atmosphere of doubt about a company’s financial standing, Goldman because of its size and its position in the market can help make the success of some of its wagers faits accomplis.
Lucas van Praag, a Goldman spokesman, declined to say how much the firm earned on its bets against WaMu’s stock. He said his firm lost money on its bets against the other WaMu securities. In an e-mail reply to questions for this article, he said there was nothing improper about Goldman’s wagers against any of its clients. “Shorting stock or buying credit protection in order to manage exposures are typical tools to help a firm reduce its risk.”
WaMu is not the only Goldman client the firm bet against as the mortgage disaster gained steam. Documents released by the Senate Permanent Subcommittee on Investigations show that Goldman’s mortgage unit also wagered against Bear Stearns and Countrywide Financial, two longstanding clients of the firm. These documents are only related to the mortgage unit and it is unknown what other bets the rest of the firm made.
Goldman also bet against the American International Group, which insured Goldman’s mortgage bonds, and National City, a Cleveland bank the firm had advised on a sale of a big subprime mortgage lender to Merrill Lynch.
While no one has accused Goldman of anything illegal involving WaMu, National City, A.I.G. or the other clients it bet against, potential conflicts inherent in Wall Street’s business model are at the core of many of the investigations that state and federal authorities are conducting. Transactions entered into as the mortgage market fizzled may turn out to have been perfectly legal. Nevertheless, they have raised concerns among investors and analysts about the extent to which a variety of Wall Street firms put their own interests ahead of their clients’.
“Now it’s all about the score. Just make the score, do the deal. Move on to the next one. That’s the trader culture,” said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University and former counsel to the Federal Reserve Board. “Their business model has completely blurred the difference between executing trades on behalf of customers versus executing trades for themselves. It’s a huge problem.”
Goldman has come under particularly intense scrutiny on such issues since the financial and economic downturn began gathering momentum in 2007, in part because it has done so well, in part because of the power it wields in Washington and on Wall Street, and in part because regulators have taken a keen interest in its dealings.
The Securities and Exchange Commission filed a civil fraud suit against the firm last month, contending that it misled clients who bought a mortgage security that the regulators said was intended to fail. Goldman has said it did nothing wrong and is fighting the case. Legislators in Washington are also considering financial reforms that limit potential conflicts of interest in the way that firms like Goldman trade and invest their own money.
Still, Goldman’s many hats — trader, adviser, underwriter, matchmaker of buyers and sellers, and salesperson — has left some clients feeling bruised or so wary that they have sometimes avoided doing business with the bank.
During the early stages of the mortgage crisis, Goldman seems to have unnerved WaMu’s former chief executive, Kerry K. Killinger, according to an e-mail message that Congressional investigators released.
In that message, Mr. Killinger noted that he had avoided retaining Goldman’s investment bankers in the fall of 2007 because he was concerned about how the firm would use knowledge it gleaned from that relationship. He pointed out that Goldman was “shorting mortgages big time” even while it had been advising Countrywide, a major mortgage lender.
“I don’t trust Goldy on this,” he wrote. “They are smart, but this is swimming with the sharks.”
One of Mr. Killinger’s lieutenants at Washington Mutual felt the same way. “We always need to worry a little about Goldman,” that person wrote in an e-mail message, “because we need them more than they need us and the firm is run by traders.”
Mr. Killinger does not appear to have known that Goldman was selling short his company’s shares. His lawyer did not respond to requests for comment. But because Bear Stearns, National City, Countrywide and WaMu all were hammered by the mortgage crisis, any bets Goldman made against each of those firm’s shares were likely to have been profitable.
Even though Goldman had frequently shorted the shares of other firms, it, along with another bank, Morgan Stanley, successfully lobbied the S.E.C. in 2008, at the height of the mortgage collapse, to forbid traders from shorting financial shares, sparing its own stock.
CONFLICT OF PRINCIPLES
As Trading Arm Grows, a Clash of Purpose
When new hires begin working at Goldman, they are told to follow 14 principles that outline the firm’s best practices. “Our clients’ interests always come first” is principle No. 1. The 14th principle is: “Integrity and honesty are at the heart of our business.”
But some former insiders, who requested anonymity because of concerns about retribution from the firm, say Goldman has a 15th, unwritten principle that employees openly discuss.
It urges Goldman workers to embrace conflicts and argues that they are evidence of a healthy tension between the firm and its customers. If you are not embracing conflicts, the argument holds, you are not being aggressive enough in generating business.
Mr. van Praag said the firm was “unaware” of this 15th principle, adding that “any business in any industry, has potential conflicts and we all have an obligation to manage them effectively.”
But a former Goldman partner, who spoke on condition of anonymity, said that the company’s view of customers had changed in recent years. Under Lloyd C. Blankfein, Goldman’s chief executive, and a cadre of top lieutenants who have ramped up the firm’s trading operation, conflict avoidance had shifted to conflict management, this person said. Along the way, he said, the firm’s executives have come to see customers more as competitors they trade against than as clients.
In fact, Mr. Blankfein and Goldman are quick to remind critics that Wall Street deals with sophisticated investors, who they say can protect themselves. At the bank’s shareholder meeting earlier this month, Mr. Blankfein said, “We deal with the most demanding and, in some cases, cynical clients.”
Even Goldman’s mortgage department compliance training manual from 2007 acknowledges the challenges posed by the firm’s clients-come-first rule. Loyalty to customers “is not always straightforward” given the multiple financial hats Goldman wears in the market, the manual notes.
In addition, the manual explains how Goldman uses information harvested from clients who discuss the market, indicate interest in securities or leave orders consisting of “pretrade information.” The manual notes that Goldman also can deploy information it receives from a wide range of other sources, including data providers, other brokerage firms and securities exchanges.
“We continuously make markets and take risk based on a unique window on the market which is a mosaic constructed of all of the pieces of data received,” the manual said.
Mr. van Praag, the Goldman spokesman, said that the “manual recognizes that like many businesses, and certainly all our competitors, we serve multiple clients. In the process of serving multiple clients we receive information from multiple sources.”
“This policy and the excerpt cited from the training manual simply reflects the fact that we have a diverse client base and give our sales people and traders appropriate guidance,” he added.
CREATIVE DESTRUCTION
Fostering a Market Then Abandoning It
Even now, two years after a dispute with Goldman, C. Talbot Heppenstall Jr. gets miffed talking about the firm.
As treasurer at the University of Pittsburgh Medical Center, a leading nonprofit health care institution, Mr. Heppenstall had once been pleased with Goldman’s work on the enterprise’s behalf.
Beginning in 2002, Goldman had advised officials at U.P.M.C. to raise funds by issuing auction-rate securities. Auction-rate securities are stock or debt instruments with interest rates that reset regularly (usually weekly) in auctions overseen by the brokerage firms that sell them. Municipalities, student loan companies, mutual funds, hospitals and museums all used the securities to raise operating funds.
Goldman had helped to develop the auction-rate market and advised many clients to issue them, getting an annual fee for sponsoring the auctions. Between 2002 and 2008, U.P.M.C. issued $400 million; Goldman underwrote $160 million, while Morgan Stanley and UBS sold the rest.
But in the fall of 2007, as the credit crisis deepened, investors began exiting the $330 billion market, causing interest rates on the securities to drift upward. By mid-January 2008, U.P.M.C. was concerned about the viability of the market and asked Goldman if the hospital should get out. Stay the course, Goldman advised U.P.M.C. in a letter, a copy of which Mr. Heppenstall read to a reporter.
On Feb. 12, less than a month after that letter, Goldman withdrew from the market — the first Wall Street firm to do so, according to a Federal Reserve report. Other firms quickly followed suit.
With the market in disarray, the interest rates that U.P.M.C. and other issuers had to pay investors skyrocketed. Rather than pay the rates, U.P.M.C. decided to redeem the securities.
Although Goldman had fled the market, it refused to allow a redemption to proceed, Mr. Heppenstall said, warning that its contract with the hospital barred U.P.M.C. from buying back the securities for at least another month.
U.P.M.C. had to continue paying lofty interest rates — as well as Goldman’s fees, even though the firm was no longer sponsoring the auctions, according to Mr. Heppenstall.
Goldman had been U.P.M.C.’s investment banker for about six years, Mr. Heppenstall noted in an interview, but this incident marked the end of that relationship. He said that the other Wall Street firms that had underwritten U.P.M.C.’s auction-rate securities, Morgan Stanley and UBS, had allowed it to redeem them. Goldman was the only firm that did not.
“This conflict was the last straw in our relationship with Goldman Sachs and we no longer do any business with them,” he said.
Mr. van Praag, the Goldman spokesman, declined in his e-mail message to respond in detail to U.P.M.C.’s complaints, other than to say that a contract is a contract and that governed how Goldman interacted with the hospital.
“The legal agreements that governed U.P.M.C.’s A.R.S. securities did not allow U.P.M.C. to bid for its own securities in the auctions,” he said.
MUNI MANAGEMENT
Brokering State Debt and Advising Against It
A state assemblyman in New Jersey named Gary S. Schaer also has had unsettling encounters with Goldman.
Mr. Schaer, who heads the New Jersey Assembly’s Financial Institutions and Insurance Committee, said he became wary in 2008 when he learned that Goldman, one of the state’s main investment bankers, was encouraging speculators to bet against New Jersey’s debt in the derivatives market. (At the time, a former Goldman chief executive, Jon Corzine, was New Jersey’s governor).
Goldman had managed $4.2 billion in debt issuance for the state since 2004, receiving fees for arranging those deals.
A 59-page collection of trading ideas that Goldman put together in 2008, and which was reviewed by The New York Times, shows the firm recommending that customers buy insurance to protect themselves against a debt default by New Jersey. In addition to New Jersey, Goldman advocated placing bets against the debt of eight other states in the trading book. Goldman also underwrote debt for all but two of those states in 2008, according to Thomson Reuters.
Mr. Schaer complained to Mr. Blankfein in a letter in December 2008. A response came back from Kevin Willens, a managing director in Goldman’s public finance unit; he argued that Goldman maintained impermeable barriers between its unit that had helped New Jersey raise debt and another unit that was urging investors to bet against the state’s ability to repay that debt. Mr. Schaer replied that he doubted the barriers were impenetrable.
“New Jersey taxpayers cannot be expected to pay tens of millions of dollars in investment banking fees while another department of the very same firm — albeit one clearly and strategically walled off — actively or aggressively advocates the sale of the very same or similar bonds in the aftermath,” Mr. Schaer wrote.
Mr. Schaer said in an interview that he tried to get regulations passed to prevent banks from playing such dual roles in state finances, but has made little headway.
“I hope the federal government will undertake this problem, and it is a problem,” he said. “It’s unrealistic to think the wall — no matter how thick or how tall — will be effective.”
Goldman’s many financial roles have raised concerns well beyond the state level. Over the years, it has played the role of adviser and fund-raiser for a diverse range of countries, while occasionally drawing criticism for simultaneously betting against the ability of some countries, like Russia, to repay their debts.
TRADING MATRIX
As Client Positions Sour, Goldman Defends Own
Goldman’s powerful and nimble trading desk has become a reliable fountain of profits for the firm. But it has also instilled fear among some clients who say they believe, as Mr. Killinger and others at Washington Mutual did, that Goldman trades against the interests of some of its clients.
Trading desks make big bets using the firm’s and clients’ money. Goldman’s trading operation has grown so pivotal and influential that many analysts say the firm as a whole now operates more like a hedge fund than an investment bank — another benchmark of the firm’s internal evolution that can create new friction with clients.
For example, if Goldman makes a proprietary bet in a particular market, as it did in early 2007 when it amassed a huge wager against mortgages, what stops it from positioning itself against clients who operate in that market?
Bear Stearns, a now defunct investment bank, is a case in point.
With the housing crisis gathering steam in March 2007, Goldman created and sold to clients a $1 billion package of mortgage-related securities called Timberwolf. Within months, investors lost 80 percent of their money as Timberwolf plummeted.
Bear bought a $300 million slice of Timberwolf through some of its funds, and the investment was disastrous. The funds collapsed under the weight of Timberwolf and other errant investments, beginning a downward spiral for Bear itself that ended a year later with the firm forced into the arms of JPMorgan Chase to prevent a bankruptcy.
Goldman, however, benefited from the problems its securities helped to create, Congressional documents show. Around the same time that Bear was investing in Timberwolf, Goldman was placing a bet that Bear’s shares would fall. Goldman’s short position in Bear was large enough that it would have generated as much as $33 million in profits if Bear collapsed, according to the documents.
Mr. van Praag, a Goldman spokesman, declined in the e-mail message to say how much the firm earned on those bets or whether they were still on when Bear finally collapsed.
Goldman was busy with other clients as well during 2007, including Thornburg Mortgage, a high-end lender. Goldman was one of 22 financial companies that lent money to Thornburg; it was using about $200 million of a Goldman credit line backed by mortgage loans.
In August 2007, Goldman was the first firm to begin aggressively marking down the value of Thornburg assets used as collateral for the loan. Goldman said the assets were not valuable enough to repay the loan if Thornburg defaulted. Goldman demanded more cash to shore up the account.
According to five people briefed on the relationship who requested anonymity because they didn’t want to damage continuing business relationships, Goldman told Thornburg that the request was justified because the value of similar mortgages traded by other parties had been priced at lower levels. But Goldman, according to two people with knowledge of the situation, had not actually seen such trades.
Thornburg officials, however, pushed back on Goldman’s request, questioning the values the firm put on Thornburg’s portfolio. “When we tried to negotiate price, they argued that they were aware of transactions that were not broadly known on the Street,” said a former Thornburg employee briefed on the talks with Goldman. “That was their justification for why they were marking us down as aggressively as they were — that they were aware of things that others were not.”
Even as Goldman pressured Thornburg for cash, a Goldman banker pitched Thornburg to hire the firm to help it raise new funds. Thornburg turned elsewhere.
Thornburg wasn’t the only firm Goldman pressured this way. It made similar demands — using similar arguments — of A.I.G., the insurer that stood behind many of Goldman’s mortgage securities. Ultimately, Goldman’s demands drained the insurer of so much cash that a hobbled A.I.G. required a taxpayer bailout in September 2008. Meanwhile, Goldman had been buying protection against a possible debt default by A.I.G. at the same time that it was pressuring A.I.G. to pay it additional cash. Because Goldman’s own cash demands were weakening A.I.G., Goldman had a front-row seat to the distress the company was experiencing — giving Goldman added insight that buying default insurance on A.I.G. was probably a shrewd investment.
Although Goldman’s financial insight derived from proprietary dealings with A.I.G., and included facts that others in the market most likely didn’t have, Mr. van Praag, the Goldman spokesman, said that his firm was not capitalizing on nonpublic information.
Like A.I.G., Thornburg found that arguing with Goldman was fruitless, because the firm had favorable contracts with Thornburg governing disputes. So Thornburg accepted Goldman’s valuations, but then established credit lines with other banks.
Although Goldman lost a customer, its mortgage unit had gained a victory: the firm could cite the valuations that Thornburg accepted as proper pricing for mortgage securities when it got into similar disputes with other clients.
“If they could move our positions, they could then argue with A.I.G. or some of their other big positions that our marks were where the market was,” the former Thornburg employee said. “They could have this sort of client arbitrage going on.”
Mr. van Praag, the Goldman spokesman, said his firm’s dispute with Thornburg was about differing standards for valuing collateral, nothing more.
“We are a ‘mark to market’ institution and we mark our positions on a daily basis to reflect what we believe is the current value for a security if we decided to sell it,” he said. “Those marks are verified by our controllers department, which is independent from the securities division.”
Goldman said that the mortgage collapse and Thornburg’s financial problems vindicate the posture it took on how to value Thornburg’s collateral. “Subsequent events clearly indicated that our marks were accurate and realistic,” Mr. van Praag said.
Indeed, soon after Goldman demanded more funds from Thornburg, analysts began downgrading its shares on news of the collateral calls. Beaten down by the broader mortgage collapse, Thornburg filed for bankruptcy protection on May 1, 2009.
A version of this article appeared in print on May 19, 2010, on page A1 of the New York edition.
http://www.nytimes.com/2010/05/19/business/19client.html?ref=business&pagewanted=all
By GRETCHEN MORGENSON and LOUISE STORY
Published: May 18, 2010
Questions have been raised that go to the heart of this institution’s most fundamental value: how we treat our clients.” — Lloyd C. Blankfein, Goldman Sachs’s C.E.O., at the firm’s annual meeting in May
As the housing crisis mounted in early 2007, Goldman Sachs was busy selling risky, mortgage-related securities issued by its longtime client, Washington Mutual, a major bank based in Seattle.
Although Goldman had decided months earlier that the mortgage market was headed for a fall, it continued to sell the WaMu securities to investors. While Goldman put its imprimatur on that offering, traders in the same Goldman unit were not so sanguine about WaMu’s prospects: they were betting that the value of WaMu’s stock and other securities would decline.
Goldman’s wager against its customer’s stock — a position known as a “short” — was large enough that it would have generated at least $10 million in profits if WaMu collapsed, according to documents recently released by Congress. And by mid-May, Goldman’s bet against other WaMu securities had made Goldman $2.5 million, the documents show.
WaMu eventually did collapse under the weight of souring mortgage loans; federal regulators seized it in September 2008, making it the biggest bank failure in American history.
Goldman’s bets against WaMu, wagers that took place even as it helped WaMu feed a housing frenzy that Goldman had already lost faith in, are examples of conflicting roles that trouble its critics and some former clients. While Goldman has legions of satisfied customers and maintains that it puts its clients first, it also sometimes appears to work against the interests of those same clients when opportunities to make trading profits off their financial troubles arise.
Goldman’s access to client information can also give its traders an advantage that many of the firm’s competitors lack. And because betting against a company’s shares or its debt can create an atmosphere of doubt about a company’s financial standing, Goldman because of its size and its position in the market can help make the success of some of its wagers faits accomplis.
Lucas van Praag, a Goldman spokesman, declined to say how much the firm earned on its bets against WaMu’s stock. He said his firm lost money on its bets against the other WaMu securities. In an e-mail reply to questions for this article, he said there was nothing improper about Goldman’s wagers against any of its clients. “Shorting stock or buying credit protection in order to manage exposures are typical tools to help a firm reduce its risk.”
WaMu is not the only Goldman client the firm bet against as the mortgage disaster gained steam. Documents released by the Senate Permanent Subcommittee on Investigations show that Goldman’s mortgage unit also wagered against Bear Stearns and Countrywide Financial, two longstanding clients of the firm. These documents are only related to the mortgage unit and it is unknown what other bets the rest of the firm made.
Goldman also bet against the American International Group, which insured Goldman’s mortgage bonds, and National City, a Cleveland bank the firm had advised on a sale of a big subprime mortgage lender to Merrill Lynch.
While no one has accused Goldman of anything illegal involving WaMu, National City, A.I.G. or the other clients it bet against, potential conflicts inherent in Wall Street’s business model are at the core of many of the investigations that state and federal authorities are conducting. Transactions entered into as the mortgage market fizzled may turn out to have been perfectly legal. Nevertheless, they have raised concerns among investors and analysts about the extent to which a variety of Wall Street firms put their own interests ahead of their clients’.
“Now it’s all about the score. Just make the score, do the deal. Move on to the next one. That’s the trader culture,” said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University and former counsel to the Federal Reserve Board. “Their business model has completely blurred the difference between executing trades on behalf of customers versus executing trades for themselves. It’s a huge problem.”
Goldman has come under particularly intense scrutiny on such issues since the financial and economic downturn began gathering momentum in 2007, in part because it has done so well, in part because of the power it wields in Washington and on Wall Street, and in part because regulators have taken a keen interest in its dealings.
The Securities and Exchange Commission filed a civil fraud suit against the firm last month, contending that it misled clients who bought a mortgage security that the regulators said was intended to fail. Goldman has said it did nothing wrong and is fighting the case. Legislators in Washington are also considering financial reforms that limit potential conflicts of interest in the way that firms like Goldman trade and invest their own money.
Still, Goldman’s many hats — trader, adviser, underwriter, matchmaker of buyers and sellers, and salesperson — has left some clients feeling bruised or so wary that they have sometimes avoided doing business with the bank.
During the early stages of the mortgage crisis, Goldman seems to have unnerved WaMu’s former chief executive, Kerry K. Killinger, according to an e-mail message that Congressional investigators released.
In that message, Mr. Killinger noted that he had avoided retaining Goldman’s investment bankers in the fall of 2007 because he was concerned about how the firm would use knowledge it gleaned from that relationship. He pointed out that Goldman was “shorting mortgages big time” even while it had been advising Countrywide, a major mortgage lender.
“I don’t trust Goldy on this,” he wrote. “They are smart, but this is swimming with the sharks.”
One of Mr. Killinger’s lieutenants at Washington Mutual felt the same way. “We always need to worry a little about Goldman,” that person wrote in an e-mail message, “because we need them more than they need us and the firm is run by traders.”
Mr. Killinger does not appear to have known that Goldman was selling short his company’s shares. His lawyer did not respond to requests for comment. But because Bear Stearns, National City, Countrywide and WaMu all were hammered by the mortgage crisis, any bets Goldman made against each of those firm’s shares were likely to have been profitable.
Even though Goldman had frequently shorted the shares of other firms, it, along with another bank, Morgan Stanley, successfully lobbied the S.E.C. in 2008, at the height of the mortgage collapse, to forbid traders from shorting financial shares, sparing its own stock.
CONFLICT OF PRINCIPLES
As Trading Arm Grows, a Clash of Purpose
When new hires begin working at Goldman, they are told to follow 14 principles that outline the firm’s best practices. “Our clients’ interests always come first” is principle No. 1. The 14th principle is: “Integrity and honesty are at the heart of our business.”
But some former insiders, who requested anonymity because of concerns about retribution from the firm, say Goldman has a 15th, unwritten principle that employees openly discuss.
It urges Goldman workers to embrace conflicts and argues that they are evidence of a healthy tension between the firm and its customers. If you are not embracing conflicts, the argument holds, you are not being aggressive enough in generating business.
Mr. van Praag said the firm was “unaware” of this 15th principle, adding that “any business in any industry, has potential conflicts and we all have an obligation to manage them effectively.”
But a former Goldman partner, who spoke on condition of anonymity, said that the company’s view of customers had changed in recent years. Under Lloyd C. Blankfein, Goldman’s chief executive, and a cadre of top lieutenants who have ramped up the firm’s trading operation, conflict avoidance had shifted to conflict management, this person said. Along the way, he said, the firm’s executives have come to see customers more as competitors they trade against than as clients.
In fact, Mr. Blankfein and Goldman are quick to remind critics that Wall Street deals with sophisticated investors, who they say can protect themselves. At the bank’s shareholder meeting earlier this month, Mr. Blankfein said, “We deal with the most demanding and, in some cases, cynical clients.”
Even Goldman’s mortgage department compliance training manual from 2007 acknowledges the challenges posed by the firm’s clients-come-first rule. Loyalty to customers “is not always straightforward” given the multiple financial hats Goldman wears in the market, the manual notes.
In addition, the manual explains how Goldman uses information harvested from clients who discuss the market, indicate interest in securities or leave orders consisting of “pretrade information.” The manual notes that Goldman also can deploy information it receives from a wide range of other sources, including data providers, other brokerage firms and securities exchanges.
“We continuously make markets and take risk based on a unique window on the market which is a mosaic constructed of all of the pieces of data received,” the manual said.
Mr. van Praag, the Goldman spokesman, said that the “manual recognizes that like many businesses, and certainly all our competitors, we serve multiple clients. In the process of serving multiple clients we receive information from multiple sources.”
“This policy and the excerpt cited from the training manual simply reflects the fact that we have a diverse client base and give our sales people and traders appropriate guidance,” he added.
CREATIVE DESTRUCTION
Fostering a Market Then Abandoning It
Even now, two years after a dispute with Goldman, C. Talbot Heppenstall Jr. gets miffed talking about the firm.
As treasurer at the University of Pittsburgh Medical Center, a leading nonprofit health care institution, Mr. Heppenstall had once been pleased with Goldman’s work on the enterprise’s behalf.
Beginning in 2002, Goldman had advised officials at U.P.M.C. to raise funds by issuing auction-rate securities. Auction-rate securities are stock or debt instruments with interest rates that reset regularly (usually weekly) in auctions overseen by the brokerage firms that sell them. Municipalities, student loan companies, mutual funds, hospitals and museums all used the securities to raise operating funds.
Goldman had helped to develop the auction-rate market and advised many clients to issue them, getting an annual fee for sponsoring the auctions. Between 2002 and 2008, U.P.M.C. issued $400 million; Goldman underwrote $160 million, while Morgan Stanley and UBS sold the rest.
But in the fall of 2007, as the credit crisis deepened, investors began exiting the $330 billion market, causing interest rates on the securities to drift upward. By mid-January 2008, U.P.M.C. was concerned about the viability of the market and asked Goldman if the hospital should get out. Stay the course, Goldman advised U.P.M.C. in a letter, a copy of which Mr. Heppenstall read to a reporter.
On Feb. 12, less than a month after that letter, Goldman withdrew from the market — the first Wall Street firm to do so, according to a Federal Reserve report. Other firms quickly followed suit.
With the market in disarray, the interest rates that U.P.M.C. and other issuers had to pay investors skyrocketed. Rather than pay the rates, U.P.M.C. decided to redeem the securities.
Although Goldman had fled the market, it refused to allow a redemption to proceed, Mr. Heppenstall said, warning that its contract with the hospital barred U.P.M.C. from buying back the securities for at least another month.
U.P.M.C. had to continue paying lofty interest rates — as well as Goldman’s fees, even though the firm was no longer sponsoring the auctions, according to Mr. Heppenstall.
Goldman had been U.P.M.C.’s investment banker for about six years, Mr. Heppenstall noted in an interview, but this incident marked the end of that relationship. He said that the other Wall Street firms that had underwritten U.P.M.C.’s auction-rate securities, Morgan Stanley and UBS, had allowed it to redeem them. Goldman was the only firm that did not.
“This conflict was the last straw in our relationship with Goldman Sachs and we no longer do any business with them,” he said.
Mr. van Praag, the Goldman spokesman, declined in his e-mail message to respond in detail to U.P.M.C.’s complaints, other than to say that a contract is a contract and that governed how Goldman interacted with the hospital.
“The legal agreements that governed U.P.M.C.’s A.R.S. securities did not allow U.P.M.C. to bid for its own securities in the auctions,” he said.
MUNI MANAGEMENT
Brokering State Debt and Advising Against It
A state assemblyman in New Jersey named Gary S. Schaer also has had unsettling encounters with Goldman.
Mr. Schaer, who heads the New Jersey Assembly’s Financial Institutions and Insurance Committee, said he became wary in 2008 when he learned that Goldman, one of the state’s main investment bankers, was encouraging speculators to bet against New Jersey’s debt in the derivatives market. (At the time, a former Goldman chief executive, Jon Corzine, was New Jersey’s governor).
Goldman had managed $4.2 billion in debt issuance for the state since 2004, receiving fees for arranging those deals.
A 59-page collection of trading ideas that Goldman put together in 2008, and which was reviewed by The New York Times, shows the firm recommending that customers buy insurance to protect themselves against a debt default by New Jersey. In addition to New Jersey, Goldman advocated placing bets against the debt of eight other states in the trading book. Goldman also underwrote debt for all but two of those states in 2008, according to Thomson Reuters.
Mr. Schaer complained to Mr. Blankfein in a letter in December 2008. A response came back from Kevin Willens, a managing director in Goldman’s public finance unit; he argued that Goldman maintained impermeable barriers between its unit that had helped New Jersey raise debt and another unit that was urging investors to bet against the state’s ability to repay that debt. Mr. Schaer replied that he doubted the barriers were impenetrable.
“New Jersey taxpayers cannot be expected to pay tens of millions of dollars in investment banking fees while another department of the very same firm — albeit one clearly and strategically walled off — actively or aggressively advocates the sale of the very same or similar bonds in the aftermath,” Mr. Schaer wrote.
Mr. Schaer said in an interview that he tried to get regulations passed to prevent banks from playing such dual roles in state finances, but has made little headway.
“I hope the federal government will undertake this problem, and it is a problem,” he said. “It’s unrealistic to think the wall — no matter how thick or how tall — will be effective.”
Goldman’s many financial roles have raised concerns well beyond the state level. Over the years, it has played the role of adviser and fund-raiser for a diverse range of countries, while occasionally drawing criticism for simultaneously betting against the ability of some countries, like Russia, to repay their debts.
TRADING MATRIX
As Client Positions Sour, Goldman Defends Own
Goldman’s powerful and nimble trading desk has become a reliable fountain of profits for the firm. But it has also instilled fear among some clients who say they believe, as Mr. Killinger and others at Washington Mutual did, that Goldman trades against the interests of some of its clients.
Trading desks make big bets using the firm’s and clients’ money. Goldman’s trading operation has grown so pivotal and influential that many analysts say the firm as a whole now operates more like a hedge fund than an investment bank — another benchmark of the firm’s internal evolution that can create new friction with clients.
For example, if Goldman makes a proprietary bet in a particular market, as it did in early 2007 when it amassed a huge wager against mortgages, what stops it from positioning itself against clients who operate in that market?
Bear Stearns, a now defunct investment bank, is a case in point.
With the housing crisis gathering steam in March 2007, Goldman created and sold to clients a $1 billion package of mortgage-related securities called Timberwolf. Within months, investors lost 80 percent of their money as Timberwolf plummeted.
Bear bought a $300 million slice of Timberwolf through some of its funds, and the investment was disastrous. The funds collapsed under the weight of Timberwolf and other errant investments, beginning a downward spiral for Bear itself that ended a year later with the firm forced into the arms of JPMorgan Chase to prevent a bankruptcy.
Goldman, however, benefited from the problems its securities helped to create, Congressional documents show. Around the same time that Bear was investing in Timberwolf, Goldman was placing a bet that Bear’s shares would fall. Goldman’s short position in Bear was large enough that it would have generated as much as $33 million in profits if Bear collapsed, according to the documents.
Mr. van Praag, a Goldman spokesman, declined in the e-mail message to say how much the firm earned on those bets or whether they were still on when Bear finally collapsed.
Goldman was busy with other clients as well during 2007, including Thornburg Mortgage, a high-end lender. Goldman was one of 22 financial companies that lent money to Thornburg; it was using about $200 million of a Goldman credit line backed by mortgage loans.
In August 2007, Goldman was the first firm to begin aggressively marking down the value of Thornburg assets used as collateral for the loan. Goldman said the assets were not valuable enough to repay the loan if Thornburg defaulted. Goldman demanded more cash to shore up the account.
According to five people briefed on the relationship who requested anonymity because they didn’t want to damage continuing business relationships, Goldman told Thornburg that the request was justified because the value of similar mortgages traded by other parties had been priced at lower levels. But Goldman, according to two people with knowledge of the situation, had not actually seen such trades.
Thornburg officials, however, pushed back on Goldman’s request, questioning the values the firm put on Thornburg’s portfolio. “When we tried to negotiate price, they argued that they were aware of transactions that were not broadly known on the Street,” said a former Thornburg employee briefed on the talks with Goldman. “That was their justification for why they were marking us down as aggressively as they were — that they were aware of things that others were not.”
Even as Goldman pressured Thornburg for cash, a Goldman banker pitched Thornburg to hire the firm to help it raise new funds. Thornburg turned elsewhere.
Thornburg wasn’t the only firm Goldman pressured this way. It made similar demands — using similar arguments — of A.I.G., the insurer that stood behind many of Goldman’s mortgage securities. Ultimately, Goldman’s demands drained the insurer of so much cash that a hobbled A.I.G. required a taxpayer bailout in September 2008. Meanwhile, Goldman had been buying protection against a possible debt default by A.I.G. at the same time that it was pressuring A.I.G. to pay it additional cash. Because Goldman’s own cash demands were weakening A.I.G., Goldman had a front-row seat to the distress the company was experiencing — giving Goldman added insight that buying default insurance on A.I.G. was probably a shrewd investment.
Although Goldman’s financial insight derived from proprietary dealings with A.I.G., and included facts that others in the market most likely didn’t have, Mr. van Praag, the Goldman spokesman, said that his firm was not capitalizing on nonpublic information.
Like A.I.G., Thornburg found that arguing with Goldman was fruitless, because the firm had favorable contracts with Thornburg governing disputes. So Thornburg accepted Goldman’s valuations, but then established credit lines with other banks.
Although Goldman lost a customer, its mortgage unit had gained a victory: the firm could cite the valuations that Thornburg accepted as proper pricing for mortgage securities when it got into similar disputes with other clients.
“If they could move our positions, they could then argue with A.I.G. or some of their other big positions that our marks were where the market was,” the former Thornburg employee said. “They could have this sort of client arbitrage going on.”
Mr. van Praag, the Goldman spokesman, said his firm’s dispute with Thornburg was about differing standards for valuing collateral, nothing more.
“We are a ‘mark to market’ institution and we mark our positions on a daily basis to reflect what we believe is the current value for a security if we decided to sell it,” he said. “Those marks are verified by our controllers department, which is independent from the securities division.”
Goldman said that the mortgage collapse and Thornburg’s financial problems vindicate the posture it took on how to value Thornburg’s collateral. “Subsequent events clearly indicated that our marks were accurate and realistic,” Mr. van Praag said.
Indeed, soon after Goldman demanded more funds from Thornburg, analysts began downgrading its shares on news of the collateral calls. Beaten down by the broader mortgage collapse, Thornburg filed for bankruptcy protection on May 1, 2009.
A version of this article appeared in print on May 19, 2010, on page A1 of the New York edition.
http://www.nytimes.com/2010/05/19/business/19client.html?ref=business&pagewanted=all
PPB falls on tax fraud allegations against Wilmar subsidiaries
PPB falls on tax fraud allegations against Wilmar subsidiaries
Written by Surin Murugiah
Wednesday, 19 May 2010 09:47
KUALA LUMPUR: PPB GROUP BHD [] in early trade on Wednesday, May 19 after its related company Singapore-listed Wilmar International's Indonesian subsidiaries were investigated for unlawful tax claims.
At 9.30am, it was down 42 sen to RM17.20 wiith 96,200 shares done.
PPB holds a 18.34% stake in Wilmar.
The Jakarta Post in Indonesia reported that some Indonesian subsidiaries of Wilmar are under probe for alleged unlawful value-added tax-restitution claims made by those subsidiaries in Indonesia.
Analysts said the news were negative as it could be detrimental to the group’s reputation among investors. The group, however, has categorically denied the allegations.
http://www.theedgemalaysia.com/business-news/166326-ppb-falls-after-tax-fraud-allegations-vs-wilmar-intl-.html
Written by Surin Murugiah
Wednesday, 19 May 2010 09:47
KUALA LUMPUR: PPB GROUP BHD [] in early trade on Wednesday, May 19 after its related company Singapore-listed Wilmar International's Indonesian subsidiaries were investigated for unlawful tax claims.
At 9.30am, it was down 42 sen to RM17.20 wiith 96,200 shares done.
PPB holds a 18.34% stake in Wilmar.
The Jakarta Post in Indonesia reported that some Indonesian subsidiaries of Wilmar are under probe for alleged unlawful value-added tax-restitution claims made by those subsidiaries in Indonesia.
Analysts said the news were negative as it could be detrimental to the group’s reputation among investors. The group, however, has categorically denied the allegations.
http://www.theedgemalaysia.com/business-news/166326-ppb-falls-after-tax-fraud-allegations-vs-wilmar-intl-.html
Laggards Maybank, RHBCap more attractive after rate hike
Laggards Maybank, RHBCap more attractive after rate hike
Written by Loong Tse Min & Daniel Khoo
Monday, 17 May 2010 10:54
KUALA LUMPUR: Banks have started to raise interest rates after Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25 basis points (bps) and big capitalised laggards could be the unexpected beneficiaries, analysts said.
Banks which were considered fully valued and less exciting due to their smaller share of the investment banking market, will now look attractive with an expected growth in net interest margins (NIM) of 10bps.
HwangDBS Vickers Research said other banks, which were laggards, would also benefit include Malayan Banking Bhd and RHB Capital Bhd. It said these banks would also benefit as proxies to economic growth after the first-quarter gross domestic product (GDP) grew at a sizzling 10.1%.
Last Thursday, BNM raised the OPR by 25bps to 2.5%, the second rate increase since March 4 and this has prompted several banks to hike their rates, effective this week.
Last Friday, Malayan Banking Bhd said it would revise upwards its deposit and base lending rate (BLR) from tomorrow with 25bps each. Maybank Islamic Bhd’s base financing rate (BFR) will similarly be increased by 25bps to 6.05%.
Other banks which are raising their rates are CIMB Bank, CIMB Islamic Bank and Bank Islam Malaysia Bhd.
HwangDBS said the OPR hike was positive for most banks as BLR-based loans tend to be re-priced within a week of a rate hike, while deposit rates take longer to adjust due to the various time buckets.
“Our sensitivity analysis shows that every 25bps hike in OPR would raise lending yields by 17bps and increase cost of funds by 7bps, thus widening NIM by 10bps and boosting earnings by 6.5%, on average,” it said.
HwangDBS said Maybank was a good proxy to the higher GDP and OPR hike expectations. It expects Maybank’s loan portfolio to expand 12%-15% from 2010 to 2012 compared with the industry average of 8% to 9%.
“Maybank and RHBCap are high conviction picks and we have buy call and target prices of RM9.10 and RM7.30, respectively,” it said.
The research house said the Alliance Financial Group, with 84% variable rate loans in its portfolio, would be the biggest winner while AMMB Holdings Bhd would be least affected due to its high proportion of fixed rate loans (57%).
AmBank Group’s chief financial officer and deputy group managing director Ashok Ramamurthy said there may be potential for RM15 million to RM20 million of revenue in the next 12 months which would be lost through “margin compression” due to the rising interest rate environment — which would make borrowing costs more expensive.
“Most banks around the world try to borrow short and lend long. And when they do that in a rising interest rate environment, there will be margin compressions. Margin compressions will be capped at RM50 million, 1.5% of our current revenues; but our actual exposure is much smaller, about one third of that,” Ashok said.
“So when you talk about our earnings guidance with profit growth of 16%-20% next year, that is after taking into account any potential impact from rising interest rates — that’s the net growth,” he added.
Maybank’s president and CEO Datuk Seri Abdul Wahid Omar said with inflation expected to rise to 2.3%, and with OPR increasing to 2.5%, the country was now experiencing positive real interest rates (after deducting inflation from interest rate figures).
He said interest rates were currently “not too high nor too low” and that it was accommodative and conducive for business and growth in the economy.
On the possibility of more OPR hikes, HwangDBS expects the rate to rise by another 50bps to 3% by the fourth quarter.
However, CIMB head of economics research Lee Heng Guie said BNM was neutral on the next rate move.
“Based on BNM’s policy statement, it is quite neutral, given the continued uncertainty of external factrors such as Greece’s sovereign debt crisis. We do expect rate change to move at a measured pace,” said Lee.
AmResearch senior economist Manokaran Mottian said the 25bps hike was a preemptive move by BNM. The central bank’s 25bps hike in March had been vindicated by the strong first-quarter GDP data.
Meanwhile, RHB Banking Group will raise the BLR for RHB Bank Bhd and the BFR for RHB Islamic from 5.8% to 6.05% from Wednesday. The new fixed deposit rates will be
This article appeared in The Edge Financial Daily, May 17, 2010.
Written by Loong Tse Min & Daniel Khoo
Monday, 17 May 2010 10:54
KUALA LUMPUR: Banks have started to raise interest rates after Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25 basis points (bps) and big capitalised laggards could be the unexpected beneficiaries, analysts said.
Banks which were considered fully valued and less exciting due to their smaller share of the investment banking market, will now look attractive with an expected growth in net interest margins (NIM) of 10bps.
HwangDBS Vickers Research said other banks, which were laggards, would also benefit include Malayan Banking Bhd and RHB Capital Bhd. It said these banks would also benefit as proxies to economic growth after the first-quarter gross domestic product (GDP) grew at a sizzling 10.1%.
Last Thursday, BNM raised the OPR by 25bps to 2.5%, the second rate increase since March 4 and this has prompted several banks to hike their rates, effective this week.
Last Friday, Malayan Banking Bhd said it would revise upwards its deposit and base lending rate (BLR) from tomorrow with 25bps each. Maybank Islamic Bhd’s base financing rate (BFR) will similarly be increased by 25bps to 6.05%.
Other banks which are raising their rates are CIMB Bank, CIMB Islamic Bank and Bank Islam Malaysia Bhd.
HwangDBS said the OPR hike was positive for most banks as BLR-based loans tend to be re-priced within a week of a rate hike, while deposit rates take longer to adjust due to the various time buckets.
“Our sensitivity analysis shows that every 25bps hike in OPR would raise lending yields by 17bps and increase cost of funds by 7bps, thus widening NIM by 10bps and boosting earnings by 6.5%, on average,” it said.
HwangDBS said Maybank was a good proxy to the higher GDP and OPR hike expectations. It expects Maybank’s loan portfolio to expand 12%-15% from 2010 to 2012 compared with the industry average of 8% to 9%.
“Maybank and RHBCap are high conviction picks and we have buy call and target prices of RM9.10 and RM7.30, respectively,” it said.
The research house said the Alliance Financial Group, with 84% variable rate loans in its portfolio, would be the biggest winner while AMMB Holdings Bhd would be least affected due to its high proportion of fixed rate loans (57%).
AmBank Group’s chief financial officer and deputy group managing director Ashok Ramamurthy said there may be potential for RM15 million to RM20 million of revenue in the next 12 months which would be lost through “margin compression” due to the rising interest rate environment — which would make borrowing costs more expensive.
“Most banks around the world try to borrow short and lend long. And when they do that in a rising interest rate environment, there will be margin compressions. Margin compressions will be capped at RM50 million, 1.5% of our current revenues; but our actual exposure is much smaller, about one third of that,” Ashok said.
“So when you talk about our earnings guidance with profit growth of 16%-20% next year, that is after taking into account any potential impact from rising interest rates — that’s the net growth,” he added.
Maybank’s president and CEO Datuk Seri Abdul Wahid Omar said with inflation expected to rise to 2.3%, and with OPR increasing to 2.5%, the country was now experiencing positive real interest rates (after deducting inflation from interest rate figures).
He said interest rates were currently “not too high nor too low” and that it was accommodative and conducive for business and growth in the economy.
On the possibility of more OPR hikes, HwangDBS expects the rate to rise by another 50bps to 3% by the fourth quarter.
However, CIMB head of economics research Lee Heng Guie said BNM was neutral on the next rate move.
“Based on BNM’s policy statement, it is quite neutral, given the continued uncertainty of external factrors such as Greece’s sovereign debt crisis. We do expect rate change to move at a measured pace,” said Lee.
AmResearch senior economist Manokaran Mottian said the 25bps hike was a preemptive move by BNM. The central bank’s 25bps hike in March had been vindicated by the strong first-quarter GDP data.
Meanwhile, RHB Banking Group will raise the BLR for RHB Bank Bhd and the BFR for RHB Islamic from 5.8% to 6.05% from Wednesday. The new fixed deposit rates will be
- 2.5% (for one to five months, previously 2.25% for one to 11 months),
- 2.7% (six to 11 months),
- 3% for 12 months (from 2.6%) and
- 3.1% (13 to 35 months).
This article appeared in The Edge Financial Daily, May 17, 2010.
Professor tells investors to sell shares and bonds
Professor tells investors to sell shares and bonds
The New York University professor, Nassim Taleb, who made his name predicting the credit crunch, has told investors to dump equities and government bonds and buy 'hard assets'.
By James Phillips, citywire.co.uk
Published: 10:55PM BST 18 May 2010
The New York University professor, Nassim Taleb, who made his name predicting the credit crunch, has told investors to dump equities and government bonds and buy 'hard assets'.
He has poured scorn on the economic recovery, claiming that the global economy is in worse shape than it was during the subprime crisis and warns that the US could yet lurch into a Greek-style meltdown.
In an interview with Bloomberg TV, Taleb said the fragility in the banking system that he spotted in 2007 is still there and the bail-out of the financial sector has encouraged bankers to continue their 'casino' operations by increasing moral hazard.
"Look at all of the money they made with our backing- it is like they spat in our faces," he said.
His main concern is that the transferal of debt from the private to the public sector has seen the risks within the financial system increase and 'take a much more vicious form.'
Western governments have been issuing record levels of debt to keep the recovery afloat, but Taleb says that it is inevitable that at some point they will struggle to find buyers of these assets.
"It is clearer than ever that we are going to have a failed auction [of government bonds here in the US that will cause contagion," he said. "There will not be enough buyers of Treasuries and the government will have to print money and before you know it you wake up with hyperinflation without having had any inflation."
So how should investors position their portfolios for such a doomsday scenario? Taleb, who made millions betting against financials during the credit crunch, recommends investors dump long-term government bonds and only hold short-dated debt. He also warns against viewing the dollar as a hedge against the ailing euro, pointing out that both currencies face the same underlying problems.
He dismisses the stockmarket, which would be expected to perform badly in a period of hyperinflation, completely,
"I recommend not thinking about the stockmarket," he said. "It is a big hoax that has disappointed people over the last decade making their retirement plans, thinking it would appreciate."
"Use it as something to play with for entertainment and nothing more."
He favours moving into hard assets and advises investors to build exposure to a basket of metals rather than try and second guess which individual hard commodity will outperform. He also likes agricultural land, but said avoid 'speculative real estate'.
Taleb is certainly a controversial figure in investment circles, but he is always intriguing and even if you do not agree with his outlook, he is difficult to ignore.
http://www.telegraph.co.uk/finance/personalfinance/investing/7737050/Professor-tells-investors-to-sell-shares-and-bonds.html
The New York University professor, Nassim Taleb, who made his name predicting the credit crunch, has told investors to dump equities and government bonds and buy 'hard assets'.
By James Phillips, citywire.co.uk
Published: 10:55PM BST 18 May 2010
The New York University professor, Nassim Taleb, who made his name predicting the credit crunch, has told investors to dump equities and government bonds and buy 'hard assets'.
He has poured scorn on the economic recovery, claiming that the global economy is in worse shape than it was during the subprime crisis and warns that the US could yet lurch into a Greek-style meltdown.
In an interview with Bloomberg TV, Taleb said the fragility in the banking system that he spotted in 2007 is still there and the bail-out of the financial sector has encouraged bankers to continue their 'casino' operations by increasing moral hazard.
"Look at all of the money they made with our backing- it is like they spat in our faces," he said.
His main concern is that the transferal of debt from the private to the public sector has seen the risks within the financial system increase and 'take a much more vicious form.'
Western governments have been issuing record levels of debt to keep the recovery afloat, but Taleb says that it is inevitable that at some point they will struggle to find buyers of these assets.
"It is clearer than ever that we are going to have a failed auction [of government bonds here in the US that will cause contagion," he said. "There will not be enough buyers of Treasuries and the government will have to print money and before you know it you wake up with hyperinflation without having had any inflation."
So how should investors position their portfolios for such a doomsday scenario? Taleb, who made millions betting against financials during the credit crunch, recommends investors dump long-term government bonds and only hold short-dated debt. He also warns against viewing the dollar as a hedge against the ailing euro, pointing out that both currencies face the same underlying problems.
He dismisses the stockmarket, which would be expected to perform badly in a period of hyperinflation, completely,
"I recommend not thinking about the stockmarket," he said. "It is a big hoax that has disappointed people over the last decade making their retirement plans, thinking it would appreciate."
"Use it as something to play with for entertainment and nothing more."
He favours moving into hard assets and advises investors to build exposure to a basket of metals rather than try and second guess which individual hard commodity will outperform. He also likes agricultural land, but said avoid 'speculative real estate'.
Taleb is certainly a controversial figure in investment circles, but he is always intriguing and even if you do not agree with his outlook, he is difficult to ignore.
http://www.telegraph.co.uk/finance/personalfinance/investing/7737050/Professor-tells-investors-to-sell-shares-and-bonds.html
Should losses cause worry?
The Star Online
Wednesday May 19, 2010
Should losses cause worry?
PERSONAL INVESTING
By OOI KOK HWA
MANY long-term investors always look for companies that can provide consistent growth in earnings and, more importantly, stable growth in earnings. They dislike companies that appear to be “accident-prone” and have “extraordinary” losses every year or every few years.
Given that they will hold on to their investments for a very long period of time, their key returns from the companies will be highly dependent on the dividend payments.
If a company always shows high “extraordinary” losses every few years, long-term investors may not want to invest in this company since it cannot pay stable dividend payments. Nevertheless, some may still buy the company for trading rather than for long-term investment.
An earnings surprise occurs when there is a material difference between expected and actual financial results. In this article, we will look into earnings surprise as a result of unexpected huge losses incurred.
There are two main types of “extraordinary” losses:
Charles W. Mulford and Eugene E. Comiskey, in their book entitled Financial Warnings, defined non-recurring items as revenues or gains and expenses or losses that are not reasonably consistent contributors to financial results, either in terms of their presence or their amount. Examples of non-recurring items are
In 2009, as a result of low asset prices, a lot of companies reported high impairment losses on their assets. Even though high losses incurred from non-recurring items can affect the dividend payments and write off a portion of shareholders’ funds, most analysts will exclude the above losses in their earnings forecast as they are more concerned with the losses from their normal business operations.
In the computation of intrinsic value, analysts will look into the earnings power of the companies – the companies’ abilities to generate future earnings.
Analysts are less concerned with non-recurring items as the companies are not expected to incur this type of losses every year. For example, if a company incurs huge losses due to the disposal of certain assets, analysts are less worried as the company will not dispose of its assets every year. Furthermore, asset disposal is not part of its normal business operations.
Companies cannot avoid incurring losses from non-recurring items, which might be due to
However, based on our analysis, companies that tend to show frequent losses from non-recurring items in almost every financial year are normally fundamentally unhealthy. The quality of their management is almost always in doubt.
Some companies may claim that they cannot avoid incurring these losses. However, they are unable to provide a satisfactory explanation on why their competitors do not seem to be similarly affected but are instead able to show consistent growth in earnings despite difficult business cycles or environment.
As mentioned earlier, analysts are more concerned with the losses incurred as a result of the normal business operations. If a company incurs high losses due to
If it seems to be the only one that shows losses while its competitors have been performing well, we need to investigate the causes behind these losses and the effect on the bottomline of the company.
It is very important to take note of the subsequent corrective actions suggested by the companies to overcome the issues involved. Besides, we need to check the possibility of the company repeating the same mistake in the near future.
In short, besides focusing on generating higher sales and profits, the company needs to pay attention to risk management on cost control and take the necessary steps to hedge against business risks.
Companies need to understand that investors look for stability and predictability in future earnings.
● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
Wednesday May 19, 2010
Should losses cause worry?
PERSONAL INVESTING
By OOI KOK HWA
MANY long-term investors always look for companies that can provide consistent growth in earnings and, more importantly, stable growth in earnings. They dislike companies that appear to be “accident-prone” and have “extraordinary” losses every year or every few years.
Given that they will hold on to their investments for a very long period of time, their key returns from the companies will be highly dependent on the dividend payments.
If a company always shows high “extraordinary” losses every few years, long-term investors may not want to invest in this company since it cannot pay stable dividend payments. Nevertheless, some may still buy the company for trading rather than for long-term investment.
An earnings surprise occurs when there is a material difference between expected and actual financial results. In this article, we will look into earnings surprise as a result of unexpected huge losses incurred.
There are two main types of “extraordinary” losses:
- one is related to the recurring items or due to their normal business operations;
- the other to non-recurring items.
Charles W. Mulford and Eugene E. Comiskey, in their book entitled Financial Warnings, defined non-recurring items as revenues or gains and expenses or losses that are not reasonably consistent contributors to financial results, either in terms of their presence or their amount. Examples of non-recurring items are
- gains and losses on asset sales,
- foreign currency and debt retirement gains and losses,
- foreign currency gains and losses as well as
- the costs incurred in restructuring activities.
In 2009, as a result of low asset prices, a lot of companies reported high impairment losses on their assets. Even though high losses incurred from non-recurring items can affect the dividend payments and write off a portion of shareholders’ funds, most analysts will exclude the above losses in their earnings forecast as they are more concerned with the losses from their normal business operations.
In the computation of intrinsic value, analysts will look into the earnings power of the companies – the companies’ abilities to generate future earnings.
Analysts are less concerned with non-recurring items as the companies are not expected to incur this type of losses every year. For example, if a company incurs huge losses due to the disposal of certain assets, analysts are less worried as the company will not dispose of its assets every year. Furthermore, asset disposal is not part of its normal business operations.
Companies cannot avoid incurring losses from non-recurring items, which might be due to
- changes in economic situation or
- changes in business cycles,
- changes in accounting treatments or
- some unforeseen events.
However, based on our analysis, companies that tend to show frequent losses from non-recurring items in almost every financial year are normally fundamentally unhealthy. The quality of their management is almost always in doubt.
Some companies may claim that they cannot avoid incurring these losses. However, they are unable to provide a satisfactory explanation on why their competitors do not seem to be similarly affected but are instead able to show consistent growth in earnings despite difficult business cycles or environment.
As mentioned earlier, analysts are more concerned with the losses incurred as a result of the normal business operations. If a company incurs high losses due to
- cost overrun on certain projects,
- sharp drop in revenue or
- sudden increase in operating costs,
- the overall country economic situation,
- industry specific or
- only unique to that particular company.
If it seems to be the only one that shows losses while its competitors have been performing well, we need to investigate the causes behind these losses and the effect on the bottomline of the company.
It is very important to take note of the subsequent corrective actions suggested by the companies to overcome the issues involved. Besides, we need to check the possibility of the company repeating the same mistake in the near future.
In short, besides focusing on generating higher sales and profits, the company needs to pay attention to risk management on cost control and take the necessary steps to hedge against business risks.
Companies need to understand that investors look for stability and predictability in future earnings.
● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
Wilmar shares fall as Jakarta Globe reports tax probe
Written by Bloomberg
Wednesday, 19 May 2010 12:06
Wilmar International, the world’s biggest palm-oil trader, fell by the most in 18 months in Singapore trading after the Jakarta Globe said its parent was being investigated in Indonesia.
The parent faces a probe for possible tax fraud involving as much 3.6 trillion rupiah ($548 million), the Jakarta Globe said yesterday, citing documents provided by lawmaker Bambang Soesatyo. Wilmar said the tax claims by media reports, which it didn’t identify, were “untrue and unsubstantiated.”
“This is likely a misunderstanding between Wilmar and the tax authorities,” Credit Suisse Group AG analyst Tan Ting Min wrote in a report today. “We believe that Wilmar’s share price will underperform until the issue is cleared up, which could take months.” Tan downgraded the stock to “underperform” from “neutral.”
Wilmar fell as much as 8.7%, the worst drop since November 2008, to $5.65, and traded at $5.80 at 10:59 a.m. in Singapore. The decline of Singapore’s second-largest stock by market value helped dragged the benchmark index down 1.7%.
“The company is fully confident that its subsidiaries are and have at all times been in full compliance with all relevant Indonesian value-added tax laws,” Wilmar said in a statement yesterday to the Singapore exchange. Its units exported more than US$3 billion ($4.18 billion) worth of palm oil in the last three fiscal years, entitling them to claim 10% value-added tax paid on the cost of the sales, it said.
CHINESE CONCERNS
Wilmar is the largest exporter of palm oil from Indonesia. The company is also the biggest provider of cooking oil in China, with the nation accounting for 55% of sales last year.
“What is more detrimental is the reputational damage to the group,” an AmResearch Sdn. report said. “We wonder if the Chinese government would start scrutinizing Wilmar’s tax payments and accounts due to the allegations in Indonesia.”
CIMB Investment Bank Bhd. analyst Ivy Ng cut her 12-month target to $7.85 from $8.40 “to account for potential weak near-term sentiment” and as the earnings forecast could be reduced by 22% in the “worst-case scenario” of the company returning US$385 million to the government for tax refunds received in the past three years.
http://www.theedgesingapore.com/the-daily-edge/business/15899-wilmar-shares-fall-as-jakarta-globe-reports-tax-probe-update.html
Wednesday, 19 May 2010 12:06
Wilmar International, the world’s biggest palm-oil trader, fell by the most in 18 months in Singapore trading after the Jakarta Globe said its parent was being investigated in Indonesia.
The parent faces a probe for possible tax fraud involving as much 3.6 trillion rupiah ($548 million), the Jakarta Globe said yesterday, citing documents provided by lawmaker Bambang Soesatyo. Wilmar said the tax claims by media reports, which it didn’t identify, were “untrue and unsubstantiated.”
“This is likely a misunderstanding between Wilmar and the tax authorities,” Credit Suisse Group AG analyst Tan Ting Min wrote in a report today. “We believe that Wilmar’s share price will underperform until the issue is cleared up, which could take months.” Tan downgraded the stock to “underperform” from “neutral.”
Wilmar fell as much as 8.7%, the worst drop since November 2008, to $5.65, and traded at $5.80 at 10:59 a.m. in Singapore. The decline of Singapore’s second-largest stock by market value helped dragged the benchmark index down 1.7%.
“The company is fully confident that its subsidiaries are and have at all times been in full compliance with all relevant Indonesian value-added tax laws,” Wilmar said in a statement yesterday to the Singapore exchange. Its units exported more than US$3 billion ($4.18 billion) worth of palm oil in the last three fiscal years, entitling them to claim 10% value-added tax paid on the cost of the sales, it said.
CHINESE CONCERNS
Wilmar is the largest exporter of palm oil from Indonesia. The company is also the biggest provider of cooking oil in China, with the nation accounting for 55% of sales last year.
“What is more detrimental is the reputational damage to the group,” an AmResearch Sdn. report said. “We wonder if the Chinese government would start scrutinizing Wilmar’s tax payments and accounts due to the allegations in Indonesia.”
CIMB Investment Bank Bhd. analyst Ivy Ng cut her 12-month target to $7.85 from $8.40 “to account for potential weak near-term sentiment” and as the earnings forecast could be reduced by 22% in the “worst-case scenario” of the company returning US$385 million to the government for tax refunds received in the past three years.
http://www.theedgesingapore.com/the-daily-edge/business/15899-wilmar-shares-fall-as-jakarta-globe-reports-tax-probe-update.html
A quick look at Berkshire Hathaway (18.5.2010)
5 Years Chart
1 Year Chart
A quick look at Berkshire Hathaway (18.5.2010)
http://spreadsheets.google.com/pub?key=t9N2GnBsVP0AVw8rAIxfDsw&output=html
Berkshire Hathaway vs 5108.KL
5 Years Chart
1 Year Chart
1 Year Chart
A quick look at Berkshire Hathaway (18.5.2010)
http://spreadsheets.google.com/pub?key=t9N2GnBsVP0AVw8rAIxfDsw&output=html
Berkshire Hathaway vs 5108.KL
5 Years Chart
1 Year Chart
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