Umno at a crossroads

Malaysia

Umno at a crossroads
By Baradan Kuppusamy

ANALYSIS, Oct 19 — A party in continued flux since the election debacle of 2008, Umno party president Datuk Seri Najib Razak made a reminder leading up to its general assembly today that it requires a “new political model” to survive and keep leading the nation.

Umno — like what other post war Asian political parties, primarily Japan’s LDP, India’s Congress Party and Taiwan’s Kuomintang experienced — faces the need to makeover.

Those Asian parties found support eroding after starting with massive public support and legitimacy for decades. These leaders of independence or formation were focussed on social and economic development.

Not dissimilar to Umno, they stayed in power uninterrupted, and in time became conceited, arrogant and corrupted organisations developing an institutional self-interest.

While these giants have had mixed fortunes subsequently, Umno’s turn to stare into horizon for its own future has arrived and that’s why Najib says a new political model is paramount.

The old development model of politics of dispensing development dollars in return for votes is struggling, as the results of Election 2008 shows.

While the formula still holds sway in depressed rural Sabah and Sarawak, where the dollar is king in getting votes and keeping the ruling elite in line, it is rapidly expiring in Peninsular Malaysia.

In urban and semi-urban centres, the Malays who have been Umno’s bedrock of support have turned to Pakatan Rakyat’s clarion call for change.

They wanted meaningful changes — less corruption, more accountability and transparency, irrespective of race, creed or religion.

No more Malays vote Umno to be “protected” from non-Malays in urban areas.

Umno’s decline in Kedah, Selangor, Perak and Penang underlined that shift. Even in Umno’s bastions of Johore and Malacca, the winning majorities of its leaders were slashed compared to their sterling performance in 2004.

Sabah and Sarawak stuck by Umno, and which is why every budget since has emphasised Borneo with development allocations.

Like its Asian counterparts, Umno faces the old equation — how best to survive the new political paradigm where voters see development as a right and not a bequest from the political elite. Being grateful is no longer part of the modern political ethos.

Political parties that still expect “gratitude” in return for putting a bridge across the river are living in the past. Some Umno leaders know this but most are still trapped in the old "development-gratitude" paradigm.

“We not only need a New Economic Model, we might also need a New Political Model,” Najib said when launching an Umno Club for retired senior government officers at his official residence Seri Perdana on Saturday.

Najib, the Umno president, also said the strategy of “politics of development” is no longer effective.

““The reason why people are rejecting political parties that have contributed a lot over the years is because of parties that did not change. They are seen as rigid and not dynamic,” he said.

“However, if we change and are seen as a fresh and dynamic party, God willing, the people's support for us will continue into the future,” he concluded.

Najib a good track record no longer a “guarantee that that party would continue to remain in power.”

He hastened to add that any new “political model” would not change the aims Umno’s original struggle.

So there it is — recognition that development aid no longer buying political support as it use to do, that voters are less dependent and more independent and more confident that they can manage without development aid.

In the 1970s the government had even refused to tar roads in constituencies in Selangor that had voted opposition.

In 1985 Barisan/Berjaya’s Datuk Harries Salleh removed zinc, wood and cement that had been brought in as development aid during the 1985 Tambunan by-election won by Datuk Pairin Kitingan.

These are extreme examples of how the government in the past had used development aid as a tool to secure the vote.

Umno therefore is at a crossroads — development politics is not delivering in Malaysia or elsewhere in Asia — therefore a new political model is needed for Umno to win public support and legitimacy from primarily the Malays and from Malaysians.

http://www.themalaysianinsider.com/malaysia/article/umno-at-a-crossroads

Boustead gets LOI for combat vessels

Published: Monday October 18, 2010 MYT 2:31:00 PM

Boustead gets LOI for combat vessels

PETALING JAYA: Boustead Heavy Industries Corp has received a letter of intent (LOI) from the Defence Ministry to undertake the construction of six second-generation patrol vessels with comabatant capabilities.

The company said in an announcement to Bursa Malaysia that it received the letter last Friday and that the value and duration of the project were to be negotiated with the government.


http://biz.thestar.com.my/news/story.asp?file=/2010/10/18/business/20101018144019&sec=business

Public Bank posts record RM1.05b Q3 profit

Public Bank Bhd has surpassed the RM1 billion mark for the first time by recording a pre-tax profit of RM1.05 billion in the third quarter ended September 30, 2010, from RM856.51 million a year ago.

"This represents a strong growth of seven per cent as compared to the pre-tax profit of RM982 million in the second quarter of 2010," its chairman Tan Sri Dr Teh Hong Piow said in a statement today.

The bank's net profit grew 22.4 per cent to RM782.70 million in the third quarter from RM639.04 million a year ago.

It did not declare any dividends for the quarter.

Its revenue was RM2.877 billion versus RM2.438 billion a year ago. Earnings per share was 22.35 sen versus 18.52 sen previously.

For the nine-months ended Sept 30, it recorded a pre-tax profit of RM2.96 billion, an increase of 22 per cent from RM2.42 billion of the previous corresponding period.

Over the same period, the group recorded a net profit of RM2.20 billion, 20 per cent higher as compared to the RM1.84 billion, achieved in the corresponding period of 2009.


For the first nine months of the year, the group's overseas operations recorded a 14 per cent improvement in earnings, due mainly to the decline in loan impairment allowances.

Teh said the group's expansion plan for overseas operations remains focused on Hong Kong and Cambodia. It currently has a network of 81 branches in Hong Kong and three branches in Shenzhen in China.

Two new branches will be opened in Hong Kong with another in Cambodia in the fourth quarter of this year.

Cambodian Public Bank plc, a wholly-owned subsidiary of Public Bank, is the largest bank in Cambodia by balance sheet size and has at present 20 branches.

On its business prospects, Teh said Public Bank continues to operate in a healthy domestic operating environment due to favourable employment conditions, sustained consumer and business sentiments, as well as the accommodative policy environment promoted by Bank Negara Malaysia.

Leveraging on the strong Public Bank brand, he said the group will continue to pursue strong organic growth strategies in its leading and deposit-taking businesses, accelerate its fee-based revenue and enhance return on equity. -- Bernama

Read more: Public Bank posts record RM1.05b Q3 profit http://www.btimes.com.my/Current_News/BTIMES/articles/20101018140838/Article/index_html#ixzz12iqJFsoy

Financial planning fees war escalates

Financial planning fees war escalates
Carolyn Cummins
October 18, 2010

THE war of words over fees charged by financial planners has reached fever pitch with the newly formed NTAA Financial Planners' Association saying more should be done to reduce the costs.

In a stinging attack, Andrew Gardiner, spokesman for the NTAA FPA, said the financial planning sector should ''look seriously at reducing its fees, many of which are driven by greed and self-interest''.

The NTAA was launched late last month to work with tax agents and accountants to help their clients with superannuation advice.


It represents about 7500 accountants and tax agents and was formed in response to what it says are exorbitant fees being charged by financial planners.

The recent Cooper review recommended more restrictions be placed on accountants when offering taxation advice.

The rival Financial Planning Association of Australia has dismissed the new group, saying its formation was ''of little consequence''.

Mr Gardiner said yesterday that he was appalled by a report last week that a client with $1.5 million to invest would be hit with an upfront fee of $26,460 in the first year and annual ongoing fees of almost $10,000.

"The report stated that the example had been drawn from the Commonwealth Bank's 2008 guidelines on upfront and ongoing fees," Mr Gardiner said.

"But one would imagine that similar charges would be made by the other five financial planning institutions - NAB/MLC, Westpac/BT, ANZ/ING AMP and AXA''.

He added that while there are ''many excellent financial planners'', others appear to be ''tied to the six mega banks and their actions put the whole industry in a bad light'' and ''rob it of credibility''.

http://www.smh.com.au/business/financial-planning-fees-war-escalates-20101017-16p5t.html

Stock Picking Strategies

Playing the Stock Market is thrilling. This is why when it comes to personal finance and the accumulation of wealth, investing in stocks is perhaps one of the most talked about topics regarding these subjects. However, we all know that the Stock Market has its ups and downs which is why investors want more of the ups and less of the downs.

Let’s explore the world of stock-pricing by learning some of the most sure fire ways of finding good stocks. An investor’s aim to achieve a rate of return that is greater than that of the market’s. In order to reach this aim, an investor has to find stocks with specific criteria.

Before going further, let is be stated that there is no method or strategy that is 100% guaranteed to yield profit. Simply put, there is no sure fire way of picking stocks. It’s a common misconception especially to newbie traders that once a system works, it will always work. Remember that no system is infallible and there is no magic formula when it comes to the Stock Market.

But, this does not mean that you cannot profit from picking stocks. A lot of people have done so and continue to make a living out of investing in stocks. Stock picking is an art rather than a science and the reason for this are as follows:

• A company’s over all financial health is not measured by profits alone. There are other factors that contribute to a company’s financial standing. Profit can be easily measured but how do you put monetary value on a company’s reputation? There are quantitative values that you can work with, but what about qualitative factors such as staff, competitive advantage and even environment? Building a system to measure all of this is simply impossible.
• The Stock Market is not only driven by companies, they are also run by people. Humans are the basic force that powers the volatile world of the Stock Market. And because of the human factor, stocks do not always do what you intend for them to do. People are driven by a wide array of emotions like confidence and fear which need to be factored into the whole formula.
• The tangible and intangible forces that are put to play in the world of stocks are simply too unpredictable to rely on a single fool proof system. There are too many factors that affect and interact with each other which make the Stock Market an exciting and dangerous world to be in.

At the end of the day, there is no scientific way of picking the right stock. Most people pick stocks by “gut feeling” or as a “best guess”. There are a lot of theories that abound, and sometimes two opposing theories will work at a certain time. If you want to pick stocks consider some personal preferences like time frame, risk tolerance and how much you are willing to risk (money wise) and devote (time wise) to picking and investing in stocks.

With everything said you might be asking why would invest in stock anyway? Think of it this way: Microsoft had its IPO in 1986. If you invested and had simply held on to that investment, your return would have been 35000% by 2004. In other words, your $15,000 investment would have become $5.25 million in 18 years later! It’s phenomena like that which has had investors always searching for the “next Microsoft.”

Read more: http://thestockmarketwatch.com/learn-stock-market/stock-picking-strategies-introduction/#ixzz12cjn5iuR

Know the best Stock Market Investment Strategy of all times

The best stock market investment strategy is to give your self time to learn the process of investment. To learn the details of the stock market investment strategy one needs to be patient. Successful investors are like scholars and it takes time to become a scholar. this article aims at providing stock market investment strategy tips to its readers by listing below top three (3) steps of investment.

Stock Market Investment Strategy one (1) – start Investing form today

Best investment tip that can be given to a budding investor is that the stock investment is learnt best while implementing. Encountering mistakes and learning form ones bad decisions is the best stock market investment strategy. Staring the journey of investment with a plan is ideal. Setting up goals, organizing resources for investing and setting up time bound targets are basics of stock market investment strategy. the most common form of investment plan is linked to retirement form job. Suppose a man is 35 years of age and he wants to retire in next 20 years, then he must know how much ($) he shall have before retirement.

Stock Market Investment Strategy two (2) – know the business before buying its stock and keep your self informed about other investment options available.

Taking a course on financial investment is not such a bad idea. But of course not many will agree with me and rather my advice will go to deaf ears. So better I will share something which is more practical and usable. Before one starts investing in stocks it is important to know about what alternative investment options are available in the market. in order to set up a fool-proof stock market investment strategy it is most important to know what other options. until an investors know about other options he can never appreciate the magnitude and dignity of stock market investment. I can tell you there are majority of people who are in this business of stock market investment without even knowing the basics of investment. These are the people who have made this stock market investment strategy look more like a gambling than a profession. I will still repeat, investment are a profession of scholars and this is the reason why so many mediocre claim to know stock market investment. in reality, to invest like a champion investor, stock market investment strategy shall be developed only after one knows the key concept of business. and the best way to learn business is to read the financial statements of companies. Tell me how many so called investors have ever read a balance sheet and income statements of a company before buying its stocks. if one asks them about the importance of cash flow in evaluating the value of stocks they will give a blank mysterious look. But this is the difference between a champion investors and part time stock traders. Investors read financial reports for investing and traders reads morning dailies for some quick tips. Knowing a business before buying its stocks is the best stock market investment strategy.

Stock Market Investment Strategy Three (3) – Be a disciplined investor.

A disciplined, focused and a long term investor has been observed to outperform the market better than even the qualified investors. a disciplined investor can also be the one who has continuously invested in the diversified mutual fund. his value addition to investment in only limited to starting a systematic invent plan (SIP) and rest in done by the fund manager. a disciplined investor is also the one who keeps an eye on each and every market dips more than 15% and is prompt enough to pump his money in.

Conclusion

The best stock market investment strategy is to keep the process of investment as simple as possible. Invest with a strategy that complements your personality. if you are one who does not believing in taking lot of risks in life, then you are one to invest in blue chip companies. if you are more dynamic and has some spare money, then you can invest in mid cap stocks and funds. these stocks are very volatile, but if invested for long term then it may give above average returns.

http://forex-trading-store.com/investments/know-the-best-stock-market-investment-strategy-of-all-times.html

Behavioural Finance (Summarized)

http://turtleinvestor888.blogspot.com/2010/10/behavioral-finance-summarized.html

How to Avoid the 7 Most Common Investor Mistakes And Build Steady Profits No Matter What the Markets Do

Investor Mistakes  

How to Avoid the 7 Most Common Investor Mistakes And Build Steady Profits No Matter What the Markets Do


One of the most least understood truths of investing is this: Success in the game of investing depends more on not making investor mistakes than it does on picking big winners. Period.

Of course, finding a neglected small-cap stock and riding it to the stratosphere is exhilarating.  And nothing compares to the pure satisfaction of the hunt. (My comment: HaiO!! and Latexx!!)  But, as anyone who’s been around the financial markets for a long time will tell you, it just doesn’t happen very often. 

The real pros understand that success comes from sidestepping the traps-specifically, the mistakes that lure the unwary investor into unrecoverable disasters. 

Day in and day out, these pros follow a disciplined approach. They’re not swayed by talking heads and self-appointed market pundits who babble on about the next big thing. They’re confident in their ability to stay out of trouble and ride through the rough spots as they wait for the next good opportunity.

Click here to take a look at some of the top investor mistakes.

“Seven Deadly Sins of Investing.” 
http://www.investmentu.com/resources/investormistakes.html

Investor Mistake #1: Following the “Saturday Morning Hero” Will Lead to the Promised Land of Investing

Investor Mistake #2: A Few Weeks Is Long Enough to Wait for Huge Profits

Investor Mistake #3: You Should Only Buy Soaring Stocks, Using “Insider Knowledge”

Investor Mistake # 4: Wall Street’s Wizards Will Hit Home Runs for You

Investor Mistake # 5: There’s Always Another Tech Run-Up Just Around the Corner

Investor Mistake # 6: If You Listen to Enough Televised Investing Reports, You’ll Learn Something Profitable

Investor Mistake #7: Watching the Markets and Predicting Them Is the Key to High Returns

US is currency war's 'tomb maker': economist

October 14, 2010 - 1:27PM

 

The United States fired the first shot in the currency war and the rest of the world must be on guard for its deliberate strategy to devalue the US dollar, a Chinese economist says.

In a front-page commentary in the overseas edition of the People's Daily, Li Xiangyang today described the United States as the conflict's "first maker of tomb figures", a Chinese idiom that means someone who creates a bad precedent.

Li, head of the Asia department at the Chinese Academy of Social Sciences, a top government think tank, said continued intervention in currency markets by developed economies would deal a blow to global economic recovery.

Chinese leaders have warned before that loose monetary policies in the United States pose a serious challenge for emerging markets, but rarely in such strident language, a window onto the rising anger in Beijing.

"The dollar's depreciation may appear to be market-driven. In reality, it is a depreciation coloured by very strong, deliberate actions," Li said in the paper, which serves as the chief mouthpiece of China's ruling Communist Party.

The overseas edition of the People's Daily is a smaller offshoot of the domestic edition.

Li said the Federal Reserve's announcement that it might soon launch another round of quantitative easing by buying bonds and other financial assets had been the key factor pulling down the dollar.

The motives were plain enough, he said.

Without a weaker dollar, the United States would have no hope of meeting President Barack Obama's goal to double exports in five years, Li said.

Dollar depreciation will also serve longer-term interests by generating inflation and easing the debt burden that the financial crisis dumped on the US government.

"If the global financial crisis was about nationalising private debt, then in the post-crisis period the urgent need of the United States is to internationalise its national debt," he said.

Reuters

Singapore's surprise currency shift

Singapore's surprise currency shift
October 14, 2010 - 1:59PM

Singapore unexpectedly signaled it will allow faster currency gains to curb inflation even as the economy shrank, with slowing global growth hurting demand for drugs and electronics. The local dollar rose to a record.

The Monetary Authority of Singapore said today it will steepen and widen the currency's trading band while continuing to seek a ``modest and gradual appreciation.'' Gross domestic product shrank at a 19.8 per cent annual rate in the third quarter from the previous three months after climbing a revised 27.3 per cent in April to June, a separate report showed.

``The implication is that Singapore is less worried about growth and more worried about upside risks to inflation,'' said Robert Prior-Wandesforde, head of Southeast Asian economics at Credit Suisse Group AG in Singapore.

The decision follows pressure from the US and Europe on emerging-market nations to let their exchange rates appreciate to help rebalance demand in the global economy. It also comes as China, the country blamed by US Treasury Secretary Timothy F. Geithner this week for prompting other countries to restrain their currencies, starts allowing faster gains in the yuan.

Singapore's dependence on overseas trade, with non-oil exports equivalent to more than half of GDP, makes it vulnerable to swings in global growth.

Currency climbs

The island's currency rose 0.8 per cent to $S1.2932 per US dollar as of 10:37 a.m. local time. It earlier reached $S1.2893, the strongest since 1981 when Bloomberg began compiling the data, and has gained 8.4 per cent this year, making it the third-best performing currency in Asia excluding Japan. Today's climb of as much as 1.06 per cent was the biggest since June 21.

The Australian dollar was buying $S1.285 in recent trading.

Yuan forwards were near a two-year high today. Twelve-month non-deliverable forwards were at 6.4510 per US dollar, reflecting bets the currency will strengthen about 3.3 per cent from the spot rate over the next year, according to data compiled by Bloomberg. The forward contracts have risen 1.5 per cent this month.

The Monetary Authority of Singapore uses the currency rather than a benchmark interest rate as its main tool to manage inflation. All but one of 14 economists in a Bloomberg survey had expected the central bank to forgo a more aggressive strengthening in the Singapore dollar, a decision that may have helped support overseas sales by manufacturers including Hi-P International Ltd.

``Singapore is the most vulnerable Asian country to the slowdown in the global trade cycle,'' Prior-Wandesforde said. ``The widening of the band initially will be seen as hawkish but longer-term may actually be used in a more dovish direction as and when the economy slows quite sharply.''

Property curbs

At its April monetary policy review, Singapore's central bank said it would shift the local dollar to a stronger range to trade in and sought an appreciation thereafter, the first such combined move in its history.

Singapore in August announced measures to cool the property market, including increasing down payments for second mortgages and imposing a stamp duty on property held for less than three years to curb speculation.

``Domestic cost pressures are rising, given the high level of resource utilization in the economy and tight labor market in particular, as well as the diminishing boost from the cyclical uplift in productivity seen earlier this year,'' the central bank said today. ``The balance of risks is weighted towards inflation going forward.''

Korea holds

The steeper slope will allow a faster pace of appreciation while the wider band will address the increased volatility in the market, said Kit Wei Zheng, a Singapore-based economist at Citigroup Inc. He said today's policy change was ``effectively a form of monetary tightening and reflects concerns about domestic inflation.''

In contrast, the Bank of Korea left borrowing costs unchanged for a third straight month today as an appreciating won threatens export growth in Asia's fourth-largest economy.

Singapore's inflation accelerated to an 18-month high of 3.3 per cent in August. The central bank forecasts price gains may quicken to about 4 per cent by the end of 2010 and ``stay high'' in the first half of 2011, it said today.

The island's policy move contrasts with Asian nations from Thailand to Japan, which have taken steps in the past month to cool an appreciation in their currencies that is threatening exports. Japan intervened last month to ease gains in the yen and Thailand said this week it will remove a 15 per cent tax exemption for foreigners on income from domestic bonds, joining South Korea and Brazil in seeking to slow inflows as capital floods into emerging and Asian economies.

Singapore's GDP rose a record 18.3 per cent in the first half, the trade ministry said. Prime Minister Lee Hsien Loong has said the economy may ``moderate'' in the coming months, citing risks from Europe and the US

``Singapore is typically a bellwether for the region's export outlook and it is the first to show cracks as global growth slows,'' Alvin Liew, an economist at Standard Chartered Plc in Singapore, said before the report. Threats to Asian growth include ``the fading impact of stimulus packages, stubbornly high unemployment rates and austerity measures that are likely to crimp consumption in the West,'' he said.

Manufacturing cools

Singapore's economy grew 10.3 per cent in the third quarter from a year earlier, compared with a revised 19.6 per cent expansion in the previous three months, the government said. The median forecast in a Bloomberg News survey of 24 economists was for a 10.8 per cent gain. The 19.8 per cent annual rate of contraction last quarter from the previous three months compares with the median forecast for a 15.7 per cent decline among 19 economists surveyed.

Manufacturing, which accounts for about a quarter of Singapore's economy, climbed 12.1 per cent from a year earlier in the three months through September, after surging a revised 46.1 per cent in the second quarter.

The construction industry gained 6.7 per cent, while services grew 10.2 per cent. The city's two casino resorts run by Genting Singapore Plc and Las Vegas Sands Corp. have attracted millions to its gaming centers, while employment growth is boosting spending at malls and restaurants.

The government reiterated its prediction for GDP to rise 13 per cent to 15 per cent in 2010. That pace would put Singapore in the running to be the world's fastest-growing nation in 2010.

Bloomberg News

Making investors more savvy

Making investors more savvy
Anneli Knight
October 13, 2010

The Australian Securities Exchange is expanding its range of free online courses, giving investors and financial advisers the tools to extend their knowledge base on a range of technical products.

The head of ASX investor education, Tony Hunter, says the recent launch of the online course on interest rate securities and the impending launch of the exchange traded funds course, provide investors with information about how to diversify their portfolios.

While the ASX shares course has remained the most popular, Hunter says investors have been seeking information on a broader range of investment products since the global financial crisis.
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''Because of what's happened over the last couple of years, people are less confident about the markets,'' he says. ''They're going back and learning more. It's better to learn before you've invested rather than after you've invested. Unless you understand your products you're not going to get a proper sense of its risks and its benefits.''

It is important to build your knowledge base, Hunter says. ''You need to understand [how the financial products work] before you talk to an adviser so you can ask your adviser proper questions. And if you don't have an adviser, it's even more important because you're your own adviser, so you need to be briefed.''

The ASX has been building its stable of online courses, which now includes shares, options, warrants, ASX-listed CFDs, instalments and futures and, most recently, interest rate securities.

Each course is broken down into a series of 20-minute modules, which can be taken anonymously with no registration required.

The modules have been designed with maximum flexibility so they will suit people of all ages and different levels of comfort within the online environment, Hunter says.

''It is common knowledge that especially younger people tend to surf around - they'll try to work it out themselves before they go back to instructions. A lot of people don't like to be told: 'You start here and finish here.'''

The more technical courses - such as interest rate securities and instalment warrants - have also been useful for financial advisers, Hunter says.

The ASX is encouraging advisers to take these courses and link their clients to them, so they can see what the end user is learning.

The free courses are funded by the ASX development fund for education and Hunter says the organisation made the decision to invest heavily in its online education resources rather than on face-to-face courses so the information is more accessible nationally, including to those in remote and regional areas, and people can take the courses at any time that is convenient to them.

They have had particularly high access levels late at night and during the Christmas holiday period, Hunter says.

The courses are created in-house by the ASX education team and are reviewed by legal and product experts before their launch.

Each module is broken down to include essential pieces of information, with interactive learning exercises and quizzes to reinforce key points.

''The web is a really different way of learning to reading a book,'' Hunter says. ''You really need to have far less content and make it clean, uncluttered and pithy. Once the slides were done, I spent most of my time working out what we can take out rather than what we can leave in.''

In addition to these online courses, the ASX investor education area provides downloadable podcasts of the free education seminars it holds in Melbourne and Sydney each month.

The ASX courses and details of the monthly investor hour seminars are at:
asx.com.au/resources/education.
http://www.asx.com.au/resources/personal_investors/index.htm
http://www.asx.com.au/resources/education/classes/shares/course_09/index.html



http://www.smh.com.au/money/investing/making-investors-more-savvy-20101012-16gon.html

How manufacturing declines impoverish the majority of the working population

Making a big mistake
John Legge
October 15, 2010

To accept the decline of manufacturing in Australia is to ignore history and threatens to condemn our workers to a low-wage future.

THE Treasury ''red book'' advises the Gillard government to suppress manufacturing in order to balance the growth of the mining industry. Many economists, including at least two members of the federal cabinet, don't need excuses to applaud the decline of manufacturing in Australia: they consider the move of manufacturing to low-wage countries inevitable and that the sooner the process is complete the better.

Few economists study history, and fewer realise how critical manufacturing industry was and is in creating a relatively just and harmonious Australian society. Before the rise of manufacturing the major occupations were farm labourer and domestic servant: hard work for little pay. Manufacturing provided jobs for ordinary people with ordinary backgrounds and modest educational achievements.

It paid vastly better than farm labouring or domestic service, and diligent workers who were prepared to accept responsibility could earn middle-class wages as leading hands and foremen. Even production-line workers in some industries could earn middle-class wages: high wages made the discipline and boredom of production-line work tolerable.


Complex manufacturing offers opportunities for men and women with no more than high school education to earn real middle-class wages because they are going to be responsible for expensive precision machinery and the production of complex, valuable products. Most of the simple, repetitive tasks have been automated; humans are used where skill and judgment are needed. Adam Smith famously visited a pin factory (or on some accounts read about a pin factory and described it as if he had visited it). Few economists have crossed a factory threshold since; most seem to believe that nothing has changed since 1776.

Economists have noticed that as manufacturing declines, the majority of the working population gets relatively poorer (or in the case of the US, absolutely poorer) while well-educated professionals continue to enjoy rising living standards. Most economists draw the conclusion that it is the higher educational level achieved by these professional workers that accounts for their higher incomes. They argue that better educational opportunities and higher school retention rates will halt the increase in inequality.

Unfortunately, the orthodox explanation is, at best, oversimplified.

Better education means nothing in the job market if the jobs for well-educated people aren't there. Much, possibly most, of the employment in modern manufacturing enterprises isn't on the shop floor at all. Manufacturers need engineers, designers, programmers, marketers and accountants; the robots need maintenance and setting up; specialist craftsmen must make the tools and dies that the production machines use. Software has become incredibly important: a single modern car has more computer power in it that was available to the Apollo mission to the moon.

Some economists seem to believe that only the physical part of the manufacturing process will be moved to China: the professional tasks will continue to be performed by Australians in Australia. These views can only come from a fundamental misunderstanding of the way manufacturing industry works. It also assumes that the Chinese are incapable of training their own engineers, designers and programmers. Finally, the idea that China's apparent cost advantages will continue requires the assumption that Chinese workers are prepared to spend their working lives making goods that they cannot afford themselves.

None of these assumptions is supported by facts. While Australia spent the Howard years cutting higher education and loading young engineers and scientists with penal HECS debts, the Chinese poured public money into education at all levels. China now produces more engineering and science graduates annually than the number of graduates Australian universities produce each year in every discipline.

Chinese workers are no longer prepared to work long hours for low pay in order to make toys for Westerners. Foxconn, the Chinese company that makes iPhones and iPads among many other familiar products, has raised production-line wages by half over the past year and the process is not going to stop. The Chinese regime is oppressive by Australian standards but Chinese workers are not slaves: they can and do switch jobs when offered improved pay and conditions. As wages rise, Chinese companies will automate more; and, with more sophisticated machinery and higher responsibilities, wages will rise still further.

The low wages favouring China for manufacturing are transient; the created competitive advantages of a skilled workforce backed up by an experienced cadre of engineers, scientists and marketers are permanent.

Australia's mining boom is transient, as all booms are; but should we destroy our manufacturing industry, the loss of competitive strength will be almost impossible to reverse. Do we really want Chinese pundits in a few years' time promoting Australia as a country with a docile, low-wage workforce prepared to do work that Chinese workers disdain?

John Legge is a Melbourne-based educator, author and consultant.

http://www.smh.com.au/business/making-a-big-mistake-20101014-16ly7.html

Top Glove targets 10% annual growth in net profit and revenue

Top Glove targets 10% annual growth in net profit and revenue


Written by Daniel Khoo
Tuesday, 12 October 2010 11:46


KUALA LUMPUR: Top Glove Corp Bhd targets net profit and revenue to grow by 10%, says chairman Tan Sri Lim Wee Chai.

He said demand for latex gloves would continue to remain strong on the back of increased healthcare awareness and threats of diseases.

"We've had profit CAGR of more than 50% in the past two years but it is almost impossible to grow at that rate anymore," Lim said at a briefing for analysts and the media on Tuesday, Oct 12.

The company is on track to increase its annual capacity to 41.25 billion pieces of gloves from 33.75 billion pieces presently after its new factories are opened by August 2011.

http://www.theedgemalaysia.com/business-news/175136-top-glove-targets-10-annual-growth-in-net-profit-and-revenue.html

Rubber gloves closer to the bottom, value emerging

Rubber gloves closer to the bottom, value emerging

Written by Financial Daily

Tuesday, 12 October 2010 11:53

Rubber gloves Upgrade to neutral from underweight: Following our downgrade on Sept 15, glove stocks fell by as much as 11% to 22% and then rebounded by 2% to 24% in the past one or two weeks. In this report, we examine the floor values, using worst case growth assumptions over 2011/13. We upgrade Kossan to a “buy” with unchanged target price (TP) of RM3.60 but maintain ratings for Top Glove (“sell”, revised TP RM4.90) and Hartalega (“hold”, unchanged TP RM5.40). To derive our rock bottom discounted cash flow (DCF) valuations, we have lowered our already conservative assumptions to a worst case scenario of slower global new demand growth and lower market share increment. Subsequently, our worst case DCF valuations could be cut by 13% to 22% to: Top Glove: RM4.72, Hartalega: RM5.03 and Kossan: RM3.17. Both Hartalega and Kossan are already trading at our worst case scenario valuations. However, we see a potential 10% to 12% downside to Top Glove’s share price. While we believe our base case fundamentals remain intact, the market could potentially look at trough valuations before glovemakers can deliver their fundamental results. We are now buyers of Kossan because: (i) its share price has fallen 16% below our TP and is already at our worst case valuation; (ii) trading at a forward PER of seven times, Kossan is the cheapest big-cap glovemaker with comparable qualities; and (iii) its share price underperformance of 3% relative to Top Glove is unjustifiable, given that its EPS growth going forward is stronger than Top Glove’s, coupled with more production in the increasingly sought-after nitrile segment. No change to our earnings forecasts and TP. We maintain Top Glove at “sell” because the company posted very weak 4QFY10 results last week (pretax profit: -47% year-on-year, -49% quarter-on-quarter) and is likely to see earnings contract next year. We cut our FY11/13 EPS by 8% to 9% and TP to RM4.90 from RM5.40. We continue to peg a 10% discount on our new RM5.40 DCF valuation (previously RM6) as we expect its earnings before interest, tax, depreciation and amortisation margin to revert to pre-Brazil/H1N1 levels of 15%. Based on our revised earnings forecasts, the stock now trades at relatively pricey valuation of 14 times CY11 PER (against its five-year historical average of 12 times and peers of five to 10 times) on a sector lowest three-year net profit CAGR of 4%. Our “hold” call on Hartalega remains, as the company appears to be more invincible than its peers with share price outperformance of 19%. Nevertheless, we would only be inclined to upgrade the stock when the oversupply situation has eased, likely in the next three months. No change to our earnings forecasts and TP. — Maybank IB Bhd Research, Oct 11 This article appeared in The Edge Financial Daily, October 12, 2010.

Copper reaches 2-year high, then dips

October 15, 2010 - 7:10AM

Copper touched its highest in more than two years on Thursday, underpinned by a softer dollar and expectations of renewed demand from emerging markets, but it dipped as pausing equity markets helped temper gains.

Benchmark copper eased back from a 27-month peak of $US8490 a tonne to close at $US8400 a tonne, versus Wednesday's close of $US8362 a tonne.

"Metals track equities... and given the rally we've had over the last few weeks, it wouldn't be a surprise if metals paused for breath at the moment," Societe Generale analyst David Wilson said.
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"But I still think there is enough momentum to still see new highs."

European shares slipped while US stocks were little changed on Thursday.

Copper has rallied by around 40 per cent since hitting a low in June and is only about $US500 away from an all-time high of $US8940 a tonne struck in July 2008.

The talk of quantitative easing in the United States to give a boost to the world's largest economy has been knocking down the dollar and benefiting commodities. On Thursday the dollar's tumble against a basket of currencies sparked a rally across major commodities such as gold and base metals.

"The (softer) dollar is massively supportive and it's expected to continue to weaken through the first half of the next year, and that will remain a supportive factor," Wilson said.

Fundamentally the market remains tight for metals such as copper and tin with miners struggling to keep up with demand from developing markets in particular.

"Emerging markets have been proven to be more than capable of being the locomotive when it comes from commodity demand," said David Thurtell of Citi.

"People are wondering why copper is above $US8000 when the US, UK, Europe, Japan are still in a hole, but the bigger picture is a pretty strong emerging market."

China, the world's top consumer of base metals, will release its third quarter and September economic indicators next week, which are expected to show growth continues at a robust pace of 9.5 per cent.

US data showed rising food and energy prices pushed inflation at the wholesale level up twice as fast as expected last month. Initial jobless claims rose to a higher than expected 462,000 last week.

Tin continues to print historic highs amid dwindling supply from the world's top exporter Indonesia due to heavy rains that have disrupted production and dwindling grades of ore.

"The production problems in Indonesia, the world's second largest producer and largest exporter of tin, are increasing," Commerzbank said in a note.

Indonesia's state miner PT Timah Tbk accounted for over 40 per cent of Indonesia's total tin production last year, it said.

"The company has... stopped its tin sales on the spot market for now and is currently trying to negotiate new supply contracts with its long-term customers. This should mean further headroom for tin prices in the near term, despite the new record high of over $US27,000 a tonne," Commerzbank said.

The latest LME data showed that tin stocks held in LME-bonded warehouses rose by 135 tonnes net today, but they remain close to their lowest in almost one and a half years.

Three month tin closed at $US26,950 per tonne, having printed a new high of $US27,338.50 earlier.

Energy-intensive metal aluminium hit its highest since April at $US2459 per tonne before closing at $US2410 per tonne versus $US2417 on Wednesday's close.

Zinc, used in galvanising, closed at $US2415 per tonne, against a $US2410 close on Wednesday, having rallied to $US2444 also its highest in nearly six months earlier.

Sister metal lead was untraded at the close but bid at $US2411 versus $US2435 per tonne at Wednesday's close. It printed its highest since January at $US2473 earlier.

Nickel, used in stainless steel, closed at $US24,305 per tonne against a $US24,400 close on Wednesday.

Reuters