Stocks will be seriously overvalued if the SET Index reaches 760 points, the Securities Analysts Association warned yesterday, while the market got a downฌgrade from overweight to neutral by MFC Asset Management.
The SET Index has rallied about 90 per cent from the year's trough at about 380 points and it would have doubled at 760, SAA secretarygenฌeral Sombat Narawuttichai said.
At that point, it would risk a steep correction from profittaking, he said.
Even at 700 the SET exceeds its fundamental value based on pricetoearnings (P/E) and discounted cashflow analyses.
The economy can support the SET at only 630-650, some analysts have said.
About 40 per cent of all market securities are overvalued, 50 per cent are undervalued and 10 per cent are in line with their fundamentals.
Thai shares have jumped 61 per cent so far this year, underperforming the Asian region.
Vietnam's Ho Chi Minh Stock Index has gained 84 per cent, Jakarta Composite Index 81 per cent and India's Sensex 74 per cent.
Even though the SAA and MFC Asset Management said the SET Index over 700 points is overvalued, Asia Plus Securities CEO Kongkiat Opaswongkarn and ING Funds (Thailand) managing director Maris Tarab recently estimated that shares would reach 800 within this year.
Sombat said 91 per cent of analysts responding to the SAA's survey were moderately confident in the government's Strong Thailand economic stimulus package, and 9 per cent were highly confident.
Altogether 23 securities analysts answered the questionnaire after the SAA and analysts met Finance Minister Korn Chatikavanich on September 11.
About threefourths of the respondents have medium confidence and the others have high confidence.
Four per cent of the respondents are not confident that the government's investment scheme can go on until 2012 as planned regardless of political changes, 43 per cent have low confidence, 48 per cent have medium confidence and the rest have high confidence.
The analysts agreed unanimously that construction and building material companies would benefit from the scheme but some stocks were overvalued.
After meeting with Korn, some analysts started preparing to upgrade the country's 2010 gross domestic product forecast by about 1 percentage point from the SAA's current consensus of 3 per cent.
Supakorn Soontornkit, senior executive vice president of MFC, told reporters that his company downgraded the stock market as it exceeds his company's base and bestcase scenario for 2009 at 675 and 720 points, respectively.
"I expect that funds flow will continue and shortterm investors can still pile up on stocks but they must be prudent. The SET Index will not reach the 800 level. However, it will not fall below 700 points," he said.
MFC forecasts the SET at 680 in the worstcase, 750 in the basecase and 820 in the bestcase scenarios for next year.
His company recommends investing in three to four-year debt instruments offering coupon rates of 3.54 per cent but avoiding putting money in shorter debt instruฌments as yields are going up.
It is also slightly overweight on commodities and real estate investment trusts.
Pichit Akrathit, president of MFC Asset Management, said his company is marketing the I-Emerging 10 Fund until Monday.
The fund's policy is to invest in equities, debt instruments and deposits in emerging countries worldwide, depending on market conditions.
MFC plans to launch a property fund investing in an office building in Bangkok as well as the Thailand Creativity Fund, investing in innoฌvative businesses.
Friday, September 25, 2009
BIG QUESTIONS THAT NEED QUICK ANSWERS
World leaders will meet at the G-20 Summit with time running out to prevent the recession worsening
The G-20 Summit in Pittsburgh, which will begin today and end on Friday, opens up an opportunity for world leaders to find a way out of the current financial mess. Prime Minister Abhisit Vejjajiva is also participating in this summit, as chair of the Association of Southeast Asia Nations.
Five months ago, the world was reeling under unprecedented financial turmoil. Many were predicting that an economic depression was on the horizon, after decades of global imbalances and financial bubbles. A concerted action by the G-20 helped stave off the crisis, with some US$12 trillion having been poured into the global economy and financial system to prevent a systemic collapse.
High on the agenda of the G-20 - the member countries of which control about 85 per cent of the world's gross domestic product - is a joint economic programme to arrest the recession, coordination efforts on financial policy to prevent another crisis, how to curb bank executives' pay to prevent them from taking excessive risks, and an exit strategy from the government intervention into the economies.
There are dilemmas facing the G-20 leaders. The fiscal stimulus programmes may prevent economies from weakening any further, but they have created enormous burdens on public-sector debt. The loose monetary policy to assist banks and corporations in resuming their business might ignite fears of inflation. When is the appropriate time for the G-20 to exit from its heavy-handed involvement in the global economy and global financial system so that the private sector can take charge again?
There are signs that the global recession is fading. But most G-20 leaders, and the International Monetary Fund, are not rushing to bet on that. Gordon Brown, the UK prime minister, said it is premature to conclude that the recession is over, and it is still necessary for the UK to continue its fiscal stimulus programme. US President Barack Obama said unemployment in the US will continue to worsen over the next couple of months. Canada is pledging a fiscal stimulus package equivalent to about 4 per cent of its gross domestic product, just to keep the economy humming. It has called for the G-20 to continue the fiscal programmes to help lift the world out of the recession.
Most interesting will be how China plays its cards at the summit. China would like to have a greater say in the International Monetary Fund. It has said it is willing to subscribe to the tune of $50 billion in the IMF's $500 billion recapitalisation programme, to increase its lending capacity to needy countries facing balance of payments crises. The US and the European Union, however, are still cautious over China's attempt to exert its newfound influence in the international financial institutions.
Moreover, China also wants to reform the IMF away from its current make-up, which has been around since the end of World War II. Along with Brazil, India and Russia, China has called for the international monetary system to steer away from the US dollar as the predominant reserve currency. China is relying on a two-track strategy on this front. It would like the role of the Special Drawing Rights - a currency unit of the IMF - to play a greater role in global financial transactions. At the same time, it is boosting the role of its renminbi, gradually taking steps to liberalise its financial system to allow greater convertibility of the currency.
These are the big issues that the G-20 leaders will have to address to prevent this recession from deepening and the financial turmoil from getting any further out of control. If the global economy is to face a double dip, it will be difficult for them to pull it out of trouble a second time, given the massive resources they have already poured in to support it.
Moreover, if the G-20 leaders do not have the courage to rein in control over the financial services, which have gone out of control, financial turmoil will return to haunt us all again.
The G-20 Summit in Pittsburgh, which will begin today and end on Friday, opens up an opportunity for world leaders to find a way out of the current financial mess. Prime Minister Abhisit Vejjajiva is also participating in this summit, as chair of the Association of Southeast Asia Nations.
Five months ago, the world was reeling under unprecedented financial turmoil. Many were predicting that an economic depression was on the horizon, after decades of global imbalances and financial bubbles. A concerted action by the G-20 helped stave off the crisis, with some US$12 trillion having been poured into the global economy and financial system to prevent a systemic collapse.
High on the agenda of the G-20 - the member countries of which control about 85 per cent of the world's gross domestic product - is a joint economic programme to arrest the recession, coordination efforts on financial policy to prevent another crisis, how to curb bank executives' pay to prevent them from taking excessive risks, and an exit strategy from the government intervention into the economies.
There are dilemmas facing the G-20 leaders. The fiscal stimulus programmes may prevent economies from weakening any further, but they have created enormous burdens on public-sector debt. The loose monetary policy to assist banks and corporations in resuming their business might ignite fears of inflation. When is the appropriate time for the G-20 to exit from its heavy-handed involvement in the global economy and global financial system so that the private sector can take charge again?
There are signs that the global recession is fading. But most G-20 leaders, and the International Monetary Fund, are not rushing to bet on that. Gordon Brown, the UK prime minister, said it is premature to conclude that the recession is over, and it is still necessary for the UK to continue its fiscal stimulus programme. US President Barack Obama said unemployment in the US will continue to worsen over the next couple of months. Canada is pledging a fiscal stimulus package equivalent to about 4 per cent of its gross domestic product, just to keep the economy humming. It has called for the G-20 to continue the fiscal programmes to help lift the world out of the recession.
Most interesting will be how China plays its cards at the summit. China would like to have a greater say in the International Monetary Fund. It has said it is willing to subscribe to the tune of $50 billion in the IMF's $500 billion recapitalisation programme, to increase its lending capacity to needy countries facing balance of payments crises. The US and the European Union, however, are still cautious over China's attempt to exert its newfound influence in the international financial institutions.
Moreover, China also wants to reform the IMF away from its current make-up, which has been around since the end of World War II. Along with Brazil, India and Russia, China has called for the international monetary system to steer away from the US dollar as the predominant reserve currency. China is relying on a two-track strategy on this front. It would like the role of the Special Drawing Rights - a currency unit of the IMF - to play a greater role in global financial transactions. At the same time, it is boosting the role of its renminbi, gradually taking steps to liberalise its financial system to allow greater convertibility of the currency.
These are the big issues that the G-20 leaders will have to address to prevent this recession from deepening and the financial turmoil from getting any further out of control. If the global economy is to face a double dip, it will be difficult for them to pull it out of trouble a second time, given the massive resources they have already poured in to support it.
Moreover, if the G-20 leaders do not have the courage to rein in control over the financial services, which have gone out of control, financial turmoil will return to haunt us all again.
CRISIS NOT BEHIND US, SAYS IMF
The G-20 summit will kick off today in Pittsburgh with the leaders pledging to hold on to government stimulus measures to avoid interrupting the economic recovery because the cirsis is not over yet.
The agenda at the September 24-25 summit includes possible curbs on financial industry pay, joint economic policies anad whether to start winding down stimulus spending.
However, British Prime Minister Cordon Brown indicated that the global economy had yet to ffel the biggest impact of the government-led spending programmes to stimulate demand and reiterated concerns about removing them too early.
"The stimulus that we have still got to give the world economy is greater than the stimulus we have already thad," Brpwm said. "What we want to do is safefuard a recovery from a recession we feared would develop into a depression."
Politicians in Britain are calling for the government to put the brakes on spending and to fucus on curbing the budget deficit that next year will exceed 12 per cent of gross domestic product, the most in the Group of 20.
But International Monetary Fund Manageing Director Dominique Strauss-Kahn called on leaders from the G-20 nations to maintain efforts to pull the world economy out of a recession, warning that the crisis is not over yet.
"This recovery will be rather sluggish, at an average lower than growth we had befor the crisis," Strauss-Kahn said in an interview in Washington. "It's too early to say the crisis is behind us."
The IMF chief also urged policy-makers to seize the opportunity to address imbalances in trade and investment flows blamed for contributing to the credit collapse.
Giving China a bigger role in the fund will help bolster cooperation, he said, as policy-mamers seek agreement to pare US borrowing and buttress domestic demand in nations with trade surpluses.
Brown is seeking support for a formal series of meetings among world leaders to coordinate economic policies and tackle problems ranging from trade imblances to bonus pay earned by bankers.
Brown said economic recovery was not yet guaranteed, addomg tp cp,,emts from IS President Barack Obama, who this week said the unemployment rate "could even get a little bit worse, over the next couple of months".
French Finance Minister Christine Lagarde, who will also be in the Pennsylvania city along with President Nicolas Sarkozy, echoed those sentiments.
The G-20 needs to "give a very strong signal that they will continue the stimulus plans", Largarde said on France Inter radio. "We've stopped the free-fall, but we must continue to underpin the economy."
The UK and the US are proposing similar measures to get national governments to steer economic policy so that futhure imbalances can be worked out before they damage the system.
At the same time, Beijing is pressing for a bigger voice in the IMF and says G-20 leaders should start making good on promises to give developing countries more IMF votes.
A deputy governor of China's central bank proposed the creation of a multinational sovereign wealth fund to help developing countries, in a report released ahead of the G-20 summit.
"Considerations can be [given] to setting up a "suprasovereign wealth investment fund' to help channel captital inflow into the developing would so that these countries can serve as new engines in global recovery," said the official.
The agenda at the September 24-25 summit includes possible curbs on financial industry pay, joint economic policies anad whether to start winding down stimulus spending.
However, British Prime Minister Cordon Brown indicated that the global economy had yet to ffel the biggest impact of the government-led spending programmes to stimulate demand and reiterated concerns about removing them too early.
"The stimulus that we have still got to give the world economy is greater than the stimulus we have already thad," Brpwm said. "What we want to do is safefuard a recovery from a recession we feared would develop into a depression."
Politicians in Britain are calling for the government to put the brakes on spending and to fucus on curbing the budget deficit that next year will exceed 12 per cent of gross domestic product, the most in the Group of 20.
But International Monetary Fund Manageing Director Dominique Strauss-Kahn called on leaders from the G-20 nations to maintain efforts to pull the world economy out of a recession, warning that the crisis is not over yet.
"This recovery will be rather sluggish, at an average lower than growth we had befor the crisis," Strauss-Kahn said in an interview in Washington. "It's too early to say the crisis is behind us."
The IMF chief also urged policy-makers to seize the opportunity to address imbalances in trade and investment flows blamed for contributing to the credit collapse.
Giving China a bigger role in the fund will help bolster cooperation, he said, as policy-mamers seek agreement to pare US borrowing and buttress domestic demand in nations with trade surpluses.
Brown is seeking support for a formal series of meetings among world leaders to coordinate economic policies and tackle problems ranging from trade imblances to bonus pay earned by bankers.
Brown said economic recovery was not yet guaranteed, addomg tp cp,,emts from IS President Barack Obama, who this week said the unemployment rate "could even get a little bit worse, over the next couple of months".
French Finance Minister Christine Lagarde, who will also be in the Pennsylvania city along with President Nicolas Sarkozy, echoed those sentiments.
The G-20 needs to "give a very strong signal that they will continue the stimulus plans", Largarde said on France Inter radio. "We've stopped the free-fall, but we must continue to underpin the economy."
The UK and the US are proposing similar measures to get national governments to steer economic policy so that futhure imbalances can be worked out before they damage the system.
At the same time, Beijing is pressing for a bigger voice in the IMF and says G-20 leaders should start making good on promises to give developing countries more IMF votes.
A deputy governor of China's central bank proposed the creation of a multinational sovereign wealth fund to help developing countries, in a report released ahead of the G-20 summit.
"Considerations can be [given] to setting up a "suprasovereign wealth investment fund' to help channel captital inflow into the developing would so that these countries can serve as new engines in global recovery," said the official.
Funds stabilise as "vanished" cash returns
Thailand's fund industry has returned to normal, with net assets under management industry-wide projected to exceed 1.82 trillion baht in 2010, according to Pichit Akrathit, the president of MFC Asset Management.
The figure would represent a 3.73%increase from the 1.75 trillion baht now managed by local funds, and is based on a 2010 target for the Stock Exchange of Thailand index of 820 points.
Portfolio assets held by the asset management industry would fall to around 1.804 trillion baht assuming the SET index stayed at around 750 points in 2010.
he index closed yesterday at 730.52 points, up 6.15, in trade worth 32.5 billion baht.
Dr Pichit said that from August to November 2008,130 billion baht in assets vanished from the local fund industry.
The funds have since returned over the past four months, he said, adding that there was a 60% correlation between the SET and net asset values for the fund industry.
Local stocks also still have room to move upward, even with the more than 60% gain posted by the SET for the year to date.
Dr Pichit noted that over the past year, foreign investors had injected 40 billion baht in funds into local stocks,representing just 20% of the total outflows seen during the global crisis.
He added that Thailand's financial system had also shown signs of growing maturity, with fund assets now accounting for 27.8% of total bank deposits compared with 20% before the global financial crisis.
By the end of 2010, total net assets held by local funds is projected to rise to 28.8% of bank deposits.
Narongchai Akrasanee, the chairman of MFC Asset Management, agreed that global financial markets have largely normalised.
"Still, there remains a number of risk factors that deserve close monitoring,including the extent of financial losses post-crisis and the speed in which the real sector recovers," he said.
Supakorn Soontornkit, a senior executive vice-president at MFC Asset Management, cautioned that local stocks could see a short-term correction on profit-taking that could push the index to 680 to 700 points.
MFC plans to launch several new funds over the next few months, including a commercial property fund now in the filing process with the Securities and Exchange Commission.
The company also expects to see progress under the Thailand Creativity Fund,a new fund to be placed with institutional investors and emphasising investments in innovative companies.
The figure would represent a 3.73%increase from the 1.75 trillion baht now managed by local funds, and is based on a 2010 target for the Stock Exchange of Thailand index of 820 points.
Portfolio assets held by the asset management industry would fall to around 1.804 trillion baht assuming the SET index stayed at around 750 points in 2010.
he index closed yesterday at 730.52 points, up 6.15, in trade worth 32.5 billion baht.
Dr Pichit said that from August to November 2008,130 billion baht in assets vanished from the local fund industry.
The funds have since returned over the past four months, he said, adding that there was a 60% correlation between the SET and net asset values for the fund industry.
Local stocks also still have room to move upward, even with the more than 60% gain posted by the SET for the year to date.
Dr Pichit noted that over the past year, foreign investors had injected 40 billion baht in funds into local stocks,representing just 20% of the total outflows seen during the global crisis.
He added that Thailand's financial system had also shown signs of growing maturity, with fund assets now accounting for 27.8% of total bank deposits compared with 20% before the global financial crisis.
By the end of 2010, total net assets held by local funds is projected to rise to 28.8% of bank deposits.
Narongchai Akrasanee, the chairman of MFC Asset Management, agreed that global financial markets have largely normalised.
"Still, there remains a number of risk factors that deserve close monitoring,including the extent of financial losses post-crisis and the speed in which the real sector recovers," he said.
Supakorn Soontornkit, a senior executive vice-president at MFC Asset Management, cautioned that local stocks could see a short-term correction on profit-taking that could push the index to 680 to 700 points.
MFC plans to launch several new funds over the next few months, including a commercial property fund now in the filing process with the Securities and Exchange Commission.
The company also expects to see progress under the Thailand Creativity Fund,a new fund to be placed with institutional investors and emphasising investments in innovative companies.
SCIB SHARE PRICE TO BE DECIDED EARLY NEXT YEAR
Siam City Bank has said its major shareholder, the Financial Institutions Development Fund, will be able to decide the bank's share price for potential buyers of its stake by early next year.The FIDF, which holds about 47 per cent of SCIB's shares, has been engaged in the process of selling its stake for years and is expected to conclude the sale once the price is set. The share sale is therefore now likely to be concluded by the midฌdle of next year.
"The FIDF expects it will get a financial advisฌer by October 22. It will have the adviser study all the information for about three to four weeks. Then, it will submit a prospectus to potential SCIB share buyers within another two weeks. So, we expect that we will know the final [share] price early next year," Chaiwat Utaiwan, presiฌdent and CEO of SCIB, said over the weekend.
Currently, the FIDF holds 47.58 per cent of SCIB, which is the seventhlargest bank in Thailand.
Early last week, the FIDF's board approved the hiring of a financial advisor in order to suggest strategy and a sharesale plan for SCIB. The adviser is expected to be appointed on October 22.
The Bank of Thailand said the entire process for the SCIB share sale was likely to be concluded within the second quarter of next year.
The share sale has attracted many buyers, including Thanachart Group, whose subฌsidiary Thanachart Bank's major shareholder is Canada's Scotia Bank. Other potential buyers include the Industrial and Commercial Bank of China, HSBC and Barclays.
Chaiwat added that once the FIDF submitted a prospectus to buyers, they would send their letฌters of intent to buy SCIB shares to the fund and propose their pricing.
The financial adviser and the FIDF will then consider the responses and allow buyers to conฌduct due diligence. The FIDF and the Finance Ministry will make the final decision on the purchaser.
SCIB has more than 400 branches with banking business licences and conducts universal banking via subsidiaries, includฌing insurance, life insurance, leasฌing and securities.
As of the end of June, SCIB's assets were accounted at Bt414 bilฌlion for separatฌed statement and Bt420 bilฌlion for consoliฌdated stateฌment. The bank's lending stood at Bt279 billion and deposits at Bt334 billion.
Chaiwat said the bank would not be able to extend credit as targeted this year at Bt18 bilฌlion, which would have repฌresented annual growth of 6 per cent. New lendฌing will instead be in the range of Bt8 billion to Bt15 billion.
He added that the bank had approved some large credits, but many corporate customers and small and mediumsized enterprise clients had not taken up their credit lines. In addition, these corporate and SME customers are repaying their existing debts.
He expects the bank's lending growth for next year to either expand slightly from this year or remain flat, as it is currently under the process of a change in major shareholder. The change would affect the bank's organisation as well as business strategy and lendฌing growth, he said.
"The bank will not be able to extend credit as targeted this year at Bt18 billion, which would have represented annual growl of 6 per cent. New lending will instead be in the range of Bt8 billion to Bt15 billion."
"The FIDF expects it will get a financial advisฌer by October 22. It will have the adviser study all the information for about three to four weeks. Then, it will submit a prospectus to potential SCIB share buyers within another two weeks. So, we expect that we will know the final [share] price early next year," Chaiwat Utaiwan, presiฌdent and CEO of SCIB, said over the weekend.
Currently, the FIDF holds 47.58 per cent of SCIB, which is the seventhlargest bank in Thailand.
Early last week, the FIDF's board approved the hiring of a financial advisor in order to suggest strategy and a sharesale plan for SCIB. The adviser is expected to be appointed on October 22.
The Bank of Thailand said the entire process for the SCIB share sale was likely to be concluded within the second quarter of next year.
The share sale has attracted many buyers, including Thanachart Group, whose subฌsidiary Thanachart Bank's major shareholder is Canada's Scotia Bank. Other potential buyers include the Industrial and Commercial Bank of China, HSBC and Barclays.
Chaiwat added that once the FIDF submitted a prospectus to buyers, they would send their letฌters of intent to buy SCIB shares to the fund and propose their pricing.
The financial adviser and the FIDF will then consider the responses and allow buyers to conฌduct due diligence. The FIDF and the Finance Ministry will make the final decision on the purchaser.
SCIB has more than 400 branches with banking business licences and conducts universal banking via subsidiaries, includฌing insurance, life insurance, leasฌing and securities.
As of the end of June, SCIB's assets were accounted at Bt414 bilฌlion for separatฌed statement and Bt420 bilฌlion for consoliฌdated stateฌment. The bank's lending stood at Bt279 billion and deposits at Bt334 billion.
Chaiwat said the bank would not be able to extend credit as targeted this year at Bt18 bilฌlion, which would have repฌresented annual growth of 6 per cent. New lendฌing will instead be in the range of Bt8 billion to Bt15 billion.
He added that the bank had approved some large credits, but many corporate customers and small and mediumsized enterprise clients had not taken up their credit lines. In addition, these corporate and SME customers are repaying their existing debts.
He expects the bank's lending growth for next year to either expand slightly from this year or remain flat, as it is currently under the process of a change in major shareholder. The change would affect the bank's organisation as well as business strategy and lendฌing growth, he said.
"The bank will not be able to extend credit as targeted this year at Bt18 billion, which would have represented annual growl of 6 per cent. New lending will instead be in the range of Bt8 billion to Bt15 billion."
CHINA INVESTS $850M IN COMMODITIES TRADER NOBLE
China's sovereign wealth fund is buying a US$850-million (Bt28.6-billion) stake in Noble Group, one of Asia's biggest trading houses, to expand its commodities investments.
China Investment Corp (CIC), which manages a portion of Beijing's $2 trillion in foreign currency reserves, will own 12.91 per cent of Noble after the deal, Hong Kong-based Noble said in a statement.
Chinese companies, flush with cash from the country's economic boom, are investing abroad in mining, oil, agricultural commodities and other resources in hopes of profiting from future increases in demand.
Noble and CIC plan to jointly invest in infrastructure assets and supply chain management related to Noble's agricultural activities, the statement said. Noble's assets range from Australian iron mines to Brazilian sugar mills and cocoa processing in Africa.
Noble, whose shares are traded in Singapore, reported $36 billion in 2008 revenues but profit has been hurt by the decline in commodities prices, falling 33 per cent in the quarter ending on June 30 from a year earlier.
Among its other recent resource deals, CIC paid $1.5 billion in July for a 17-per-cent stake in Canadian mining Teck Resources LTd.
ON THE NET:
www.thisisnoble.com
China Investment Crop will own 12.91% of Noble. Noble's assets range from Australian iron mines to Brazilian sugar mills and cocoa processing in Africa.
China Investment Corp (CIC), which manages a portion of Beijing's $2 trillion in foreign currency reserves, will own 12.91 per cent of Noble after the deal, Hong Kong-based Noble said in a statement.
Chinese companies, flush with cash from the country's economic boom, are investing abroad in mining, oil, agricultural commodities and other resources in hopes of profiting from future increases in demand.
Noble and CIC plan to jointly invest in infrastructure assets and supply chain management related to Noble's agricultural activities, the statement said. Noble's assets range from Australian iron mines to Brazilian sugar mills and cocoa processing in Africa.
Noble, whose shares are traded in Singapore, reported $36 billion in 2008 revenues but profit has been hurt by the decline in commodities prices, falling 33 per cent in the quarter ending on June 30 from a year earlier.
Among its other recent resource deals, CIC paid $1.5 billion in July for a 17-per-cent stake in Canadian mining Teck Resources LTd.
ON THE NET:
www.thisisnoble.com
China Investment Crop will own 12.91% of Noble. Noble's assets range from Australian iron mines to Brazilian sugar mills and cocoa processing in Africa.
Tuesday, September 22, 2009
CHINA MAY BUY GOLD OFFERED BY IMF
China may purchase some of the 403.3 metric tonnes of gold being offered by the International Monetary Fund, Market News International reported yesterday, citing two unidentified government sources.
China will consider the purchase to diversify its reserves if the price is right and the potential return relatively high, the report said, citing one of the sources.
There is no indication China is seeking to buy all of the gold on offer, it said, citing no one.
The IMF board approved the sales, valued at about US$13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks," according to a statement issued last Friday.
An official at the People's Bank of China declined to comment.
China, the world's biggest gold producer, has increased reserves by 76 per cent to 1,054 tonnes since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.
China's foreign reserves, the world's largest, rose 9.1 per cent in the second quarter, climbing a record $178 billion, and totalled $2.13 trillion on June 30, according to the central bank. The bullion sales can occur any time, the IMF said. Selling directly to central banks, which have not yet expressed interest, would be faster, according to the IMF.
Bullion for immediate delivery declined as much as 1.2 per cent in Singapore to a low of $995.97 an ounce, the first day it traded below $1,000 since September 15.
It was priced at $999.30 ounce late afternoon in Singapore.
China may double the ratio of its gold holdings to its foreign-currency reserves over five years, Sun Zhaoxue, chairman of the China Gold Association, said on May 15.
The association "hopes" China will increase gold holdings to 3 per cent of foreign currency reserves in five years from 1.4 per cent now, Sun added.
China will consider the purchase to diversify its reserves if the price is right and the potential return relatively high, the report said, citing one of the sources.
There is no indication China is seeking to buy all of the gold on offer, it said, citing no one.
The IMF board approved the sales, valued at about US$13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks," according to a statement issued last Friday.
An official at the People's Bank of China declined to comment.
China, the world's biggest gold producer, has increased reserves by 76 per cent to 1,054 tonnes since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.
China's foreign reserves, the world's largest, rose 9.1 per cent in the second quarter, climbing a record $178 billion, and totalled $2.13 trillion on June 30, according to the central bank. The bullion sales can occur any time, the IMF said. Selling directly to central banks, which have not yet expressed interest, would be faster, according to the IMF.
Bullion for immediate delivery declined as much as 1.2 per cent in Singapore to a low of $995.97 an ounce, the first day it traded below $1,000 since September 15.
It was priced at $999.30 ounce late afternoon in Singapore.
China may double the ratio of its gold holdings to its foreign-currency reserves over five years, Sun Zhaoxue, chairman of the China Gold Association, said on May 15.
The association "hopes" China will increase gold holdings to 3 per cent of foreign currency reserves in five years from 1.4 per cent now, Sun added.
GOLD READY TO HIT HISTORIC HIGHS
Despite the news that the International Monetary Fund would sell more than 400 metric tonnes of gold, local fund managers believe global gold prices could still stand above US$1,000 an ounce and would soon rise to a new historic high.
Gold prices yesterday declined to under US$1,000 an ounce for the first time since September 15.
They said several central banks have reduced exposure to the US dollar as a reserve currency, while more institutional investors have shifted more of their portfolios to gold.
Yesterday, gold declined, further cooling a rally that sent prices above $1,000 an ounce this month, after the IMF approved bullion sales and as a rebound by the dollar curbed demand for an inflation hedge, according to Bloomberg.
The IMF's executive board approved sales of 403.3 metric tonnes valued at about $13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks".
"I don't think it will affect the market too much," Jonathan Barratt, managing director at Commodity Broking Services, said on Monday. "It will either go to central banks or they might actually auction it off."
Morgan Stanley also said the IMF's approval to sell gold is not a "material threat to current prices" and kept its 2010 gold forecast at $1,000 an ounce, according to an emailed report yesterday.
Immediatedelivery bullion yesterday lost as much as $11.63, or 1.2 per cent, to $995.97 an ounce and traded at $1,000.20 by midmorning. The metal, which fell below $1,000 for the first time since September 15, added 0.2 per cent last week, a fifth gain.
The US Dollar Index, a gauge of the greenback against six major currencies, extended gains, climbing as much as 0.2 per cent. Some traders buy gold to preserve purchasing power when the US currency weakens. On Friday, gold prices in New York were at US$1,010.3 an ounce.
For the domestic market, gold bar prices early yesterday were quoted at Bt15,900 per baht weight for buying and Bt16,000 for selling, while gold ornaments were quoted at Bt15,675.44 for buying and Bt16,400 for selling.
Gold bar prices were at 2:40pm changed to Bt15,850 for buying and Bt15,950 for selling, while gold ornament prices were changed to Bt15,614.80 for buying and Bt16,350 for selling.
Gold has jumped 14 per cent so far this year on speculation that inflation will accelerate as the US economy emerges from the worst recession since the Great Depression. The precious metal rose 0.2 per cent last week, the fifth straight weekly gain and the longest streak since November 2007.
Bullion has jumped around 30 per cent since the collapse of Lehman Brothers last year.
Paisarn Krutdamrongchai, a senior executive of TMB Asset Management, pointed out that global gold prices still stand above $1,000 as several institutional investors have reduced their holdings of US treasuries, as they believe the US dollar would weaken. And they have turned to investing more via gold funds to diversify risks.
Prapas Tonpibulsak, CEO of Ayudhya Fund Management, believes global gold prices could set a new peak above the record high reached last year at $1,034 an ounce.
Most institutional investors and central banks view the US dollar as depreciating further, so several central banks have reduced their US dollar holdings.
Fund managers have also shifted their funds away from US treasuries, which are likely to provide skimpier returns than commodities and gold.
The stock market rally over the past year has made some riskaverse investors shift to bullion.
Jitti Tangsithpakdi, president of the Gold Traders Association, said the news report of the IMF selling gold, which would curb the global gold rally, is only a report with no grounds.
He said the IMF's gold sale needs approval from the US Congress and more than 100 member countries. The IMF is also under a sales quota of not more than 500 metric tonnes of gold per year.
"I can tell you that this is only a news report released by speculators. I believe that gold will reach its new high within a short period," he said.
Gold prices yesterday declined to under US$1,000 an ounce for the first time since September 15.
They said several central banks have reduced exposure to the US dollar as a reserve currency, while more institutional investors have shifted more of their portfolios to gold.
Yesterday, gold declined, further cooling a rally that sent prices above $1,000 an ounce this month, after the IMF approved bullion sales and as a rebound by the dollar curbed demand for an inflation hedge, according to Bloomberg.
The IMF's executive board approved sales of 403.3 metric tonnes valued at about $13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks".
"I don't think it will affect the market too much," Jonathan Barratt, managing director at Commodity Broking Services, said on Monday. "It will either go to central banks or they might actually auction it off."
Morgan Stanley also said the IMF's approval to sell gold is not a "material threat to current prices" and kept its 2010 gold forecast at $1,000 an ounce, according to an emailed report yesterday.
Immediatedelivery bullion yesterday lost as much as $11.63, or 1.2 per cent, to $995.97 an ounce and traded at $1,000.20 by midmorning. The metal, which fell below $1,000 for the first time since September 15, added 0.2 per cent last week, a fifth gain.
The US Dollar Index, a gauge of the greenback against six major currencies, extended gains, climbing as much as 0.2 per cent. Some traders buy gold to preserve purchasing power when the US currency weakens. On Friday, gold prices in New York were at US$1,010.3 an ounce.
For the domestic market, gold bar prices early yesterday were quoted at Bt15,900 per baht weight for buying and Bt16,000 for selling, while gold ornaments were quoted at Bt15,675.44 for buying and Bt16,400 for selling.
Gold bar prices were at 2:40pm changed to Bt15,850 for buying and Bt15,950 for selling, while gold ornament prices were changed to Bt15,614.80 for buying and Bt16,350 for selling.
Gold has jumped 14 per cent so far this year on speculation that inflation will accelerate as the US economy emerges from the worst recession since the Great Depression. The precious metal rose 0.2 per cent last week, the fifth straight weekly gain and the longest streak since November 2007.
Bullion has jumped around 30 per cent since the collapse of Lehman Brothers last year.
Paisarn Krutdamrongchai, a senior executive of TMB Asset Management, pointed out that global gold prices still stand above $1,000 as several institutional investors have reduced their holdings of US treasuries, as they believe the US dollar would weaken. And they have turned to investing more via gold funds to diversify risks.
Prapas Tonpibulsak, CEO of Ayudhya Fund Management, believes global gold prices could set a new peak above the record high reached last year at $1,034 an ounce.
Most institutional investors and central banks view the US dollar as depreciating further, so several central banks have reduced their US dollar holdings.
Fund managers have also shifted their funds away from US treasuries, which are likely to provide skimpier returns than commodities and gold.
The stock market rally over the past year has made some riskaverse investors shift to bullion.
Jitti Tangsithpakdi, president of the Gold Traders Association, said the news report of the IMF selling gold, which would curb the global gold rally, is only a report with no grounds.
He said the IMF's gold sale needs approval from the US Congress and more than 100 member countries. The IMF is also under a sales quota of not more than 500 metric tonnes of gold per year.
"I can tell you that this is only a news report released by speculators. I believe that gold will reach its new high within a short period," he said.
TMBAM focuses on product quality
TMB Asset Management will focus on improving product quality, boosting its provident fund clients and achieving greater synergy with parent TMB Bank.
Somjin Sornpaisarn, who left One Asset Management to become chief executive of TMBAM effective Sept 1, said the firm would continue to build on its reputation as a leading passive fund manager.
"TMBAM has an outstanding and strong reputation as a passive fund management company.
We have a full range of domestic and foreign investment funds. With quality products that are easy to understand and effective service, we have been able to maintain good relations with sales agents," he said.
TMBAM would build up its provident fund offerings. The company currently offers seven types of funds for employees to choose based on their risk appetite,said Mr Somjin.
TMBAM manages provident fund assets for 46,000 workers at 329 companies.
More than half of the members have opted for "Employee Choice" programmes, a classification that allows employees to shift contributions between funds depending on their investment outlook.
The firm's third key strategy is to boost its ties with TMB Bank, which also has a major shareholding in ING Funds, he said.
"[TMBAM] has a specific personality,with different competencies and philosophies. We still can stand on our own and compete.
TMB Bank has two asset management companies under its umbrella, and it might look as if there is a conflict if looking from each firm. But if looking from the customers' view, there is no conflict," he said.
Mr Somjin declined to comment about whether ING, the largest shareholder in TMB Bank, wants to merge the two fund companies.
TMBAM deputy managing director Paisal Krutdumrongchai said five of the company's Korean bond funds are nearing maturity, involving assets of 9 billion baht.
It was uncertain whether the funds would be rolled over, considering that Korean interest rates have begun to fall and opportunities in other countries for sovereign debt are limited, he said.
Mr Paisal recommended that investors allocate 10% of their portfolio to gold,and gradually build up their holdings in equities.
TMBAM currently has 133.9 billion baht in assets under management, of which 64.85 billion was held in fixedincome funds and 42 billion in foreign investment funds. Equity funds had just 7.8 billion baht in assets, with provident funds 3.55 billion, retirement mutual funds 3.38 billion and long-term equity 4.49 billion.
Somjin Sornpaisarn, who left One Asset Management to become chief executive of TMBAM effective Sept 1, said the firm would continue to build on its reputation as a leading passive fund manager.
"TMBAM has an outstanding and strong reputation as a passive fund management company.
We have a full range of domestic and foreign investment funds. With quality products that are easy to understand and effective service, we have been able to maintain good relations with sales agents," he said.
TMBAM would build up its provident fund offerings. The company currently offers seven types of funds for employees to choose based on their risk appetite,said Mr Somjin.
TMBAM manages provident fund assets for 46,000 workers at 329 companies.
More than half of the members have opted for "Employee Choice" programmes, a classification that allows employees to shift contributions between funds depending on their investment outlook.
The firm's third key strategy is to boost its ties with TMB Bank, which also has a major shareholding in ING Funds, he said.
"[TMBAM] has a specific personality,with different competencies and philosophies. We still can stand on our own and compete.
TMB Bank has two asset management companies under its umbrella, and it might look as if there is a conflict if looking from each firm. But if looking from the customers' view, there is no conflict," he said.
Mr Somjin declined to comment about whether ING, the largest shareholder in TMB Bank, wants to merge the two fund companies.
TMBAM deputy managing director Paisal Krutdumrongchai said five of the company's Korean bond funds are nearing maturity, involving assets of 9 billion baht.
It was uncertain whether the funds would be rolled over, considering that Korean interest rates have begun to fall and opportunities in other countries for sovereign debt are limited, he said.
Mr Paisal recommended that investors allocate 10% of their portfolio to gold,and gradually build up their holdings in equities.
TMBAM currently has 133.9 billion baht in assets under management, of which 64.85 billion was held in fixedincome funds and 42 billion in foreign investment funds. Equity funds had just 7.8 billion baht in assets, with provident funds 3.55 billion, retirement mutual funds 3.38 billion and long-term equity 4.49 billion.
ING to clarify TU case to investors
ING Funds plans to call a meeting of investors in the TU Dome Residential Complex Property Fund (TU-PF) next month to clarify the recent sanctions imposed against it by securities regulators.
The Securities and Exchange Commission fined ING Funds 1.9 million baht and placed its president, Maris Tarab, on probation for three years for fiduciary violations related to ING's management of the TU-PF fund.
Mr Maris, who was also personally fined 231,750 baht, said he wanted to clarify events openly.
"I have received many questions. I want to clarify the situation for unitholders, both regarding my own actions,as well as the fund itself," he said.
Mr Maris acknowledged that the case would make him more "cautious" in the future, as well as more meticulous in detailing what actions must receive regulatory or investor approval to avoid potential conflicts.
"In the past, we see that the alleged wrongdoing that supposedly occurred really is a matter for interpretation," he said.
The TU-PF fund was launched in 2006 to invest in dormitories and serviced apartments to be built on land owned by Thammasat University's Rangsit campus. The fund would lease the property from Thammasat for 30 years after construction of the facilities was complete.
The SEC faulted Mr Maris and ING for authorising payments to the lessor and building contractor without seeking approval from unitholders, as well as for approving payments to the contractor prior to the registration of the lease or completion of the buildings.
Mr Maris said the serviced apartments and dormitory were expected to be completed in November.
He added that for ING, future property funds would be established only for fully completed projects, rather than launched as pre-financing for construction.
For the TU-PF Fund, Mr Maris insisted that the basic investment remained sound, as demand for living quarters at the Thammasat campus would increase steadily.
Rents in the area now stand at 10,000 baht per unit, compared with projections of 7,500 baht when the fund was established. ING estimates that the TU-PF fund should generate annual returns of upwards of 12% over the 30-year lease.
The fund's lease area covers more than 12 rai near the Thammasat Rangsit campus and includes a 12-storey serviced apartment building, parking facilities and three 10-storey dormitory buildings already opened for use. The area also includes a "lifestyle shopping centre"with 15,000 square metres of retail space and parking for more than 400 vehicles.
Nitima Kiatwateeratana, managing director of CIEN Co, the marketing manager of the shopping complex, projected occupancy of 60% by 2010, with 10%growth per year afterwards.
Rental rates at the shopping centre range from 400 to 600 baht per square metre per month, with rates projected to rise by 5% per year.
TU-PF units last traded on the SET on Aug 25, when they closed at 9.40 baht.
The Securities and Exchange Commission fined ING Funds 1.9 million baht and placed its president, Maris Tarab, on probation for three years for fiduciary violations related to ING's management of the TU-PF fund.
Mr Maris, who was also personally fined 231,750 baht, said he wanted to clarify events openly.
"I have received many questions. I want to clarify the situation for unitholders, both regarding my own actions,as well as the fund itself," he said.
Mr Maris acknowledged that the case would make him more "cautious" in the future, as well as more meticulous in detailing what actions must receive regulatory or investor approval to avoid potential conflicts.
"In the past, we see that the alleged wrongdoing that supposedly occurred really is a matter for interpretation," he said.
The TU-PF fund was launched in 2006 to invest in dormitories and serviced apartments to be built on land owned by Thammasat University's Rangsit campus. The fund would lease the property from Thammasat for 30 years after construction of the facilities was complete.
The SEC faulted Mr Maris and ING for authorising payments to the lessor and building contractor without seeking approval from unitholders, as well as for approving payments to the contractor prior to the registration of the lease or completion of the buildings.
Mr Maris said the serviced apartments and dormitory were expected to be completed in November.
He added that for ING, future property funds would be established only for fully completed projects, rather than launched as pre-financing for construction.
For the TU-PF Fund, Mr Maris insisted that the basic investment remained sound, as demand for living quarters at the Thammasat campus would increase steadily.
Rents in the area now stand at 10,000 baht per unit, compared with projections of 7,500 baht when the fund was established. ING estimates that the TU-PF fund should generate annual returns of upwards of 12% over the 30-year lease.
The fund's lease area covers more than 12 rai near the Thammasat Rangsit campus and includes a 12-storey serviced apartment building, parking facilities and three 10-storey dormitory buildings already opened for use. The area also includes a "lifestyle shopping centre"with 15,000 square metres of retail space and parking for more than 400 vehicles.
Nitima Kiatwateeratana, managing director of CIEN Co, the marketing manager of the shopping complex, projected occupancy of 60% by 2010, with 10%growth per year afterwards.
Rental rates at the shopping centre range from 400 to 600 baht per square metre per month, with rates projected to rise by 5% per year.
TU-PF units last traded on the SET on Aug 25, when they closed at 9.40 baht.
Sunday, September 20, 2009
RIVAL PENSION SAVINGS SCHEMES FOR THE POOR
Two new national pension schemes aimed mostly at the poor are being discussed. But the Office of the Social Security Fund says the government has not paid its contribution of about Bt21 billion to that fund.
Somchai Sujjapongse, director general of the Fiscal Policy Office, said yesterday the Finance Ministry planned to submit a national pension bill to the Cabinet for approval after the ministry completes public hearings, which should happen by the end of this month.
The new fund would be designed to provide financial support for people excluded from the existing government pension system. Most are poor and farmers, estimated to be about 24 to 25 million in number, Somchai said at the first public hearing on the issue yesterday. The government plans to establish the fund next year and expects to welcome members on a voluntary basis by the middle of next year, Somchai said.
Eligible members would be those working in the informal sector and aged between 20 to 60 years. The minimum contribution to the fund would be Bt100 per month and the maximum Bt1,000. The government would contribute Bt50 for people from 20 to 29 years old, Bt80 for those 30 to 49 years old and Bt100 for those 50 years and up. After a member turned 60 years, he or she saving Bt100 monthly would receive a pension worth about Bt2,000 per month.
In response to a ministry survey, most people said they could contribute up to Bt800 a month to the fund. Somchai estimates that the government may need to pay Bt25 billion in the first year and the fund size may be Bt50 billion.
The National Economic and Social Advisory Council (NESAC) is proposing a different version of the same idea, called the "National Savings Fund for Population Ages", which would require the government to contribute only 10 per cent of each member's account.
Manochai Sudjit, a member of the research team that conducted the study for NESAC, said the government might face budget constraints if it chose the Finance Ministry's proposal.
A high contribution from the government might also encourage people to abandon their community savings scheme to join the national pension fund. The community savings scheme should be preserved, Manochai said at separate seminar hosted by the NESAC. He also said that the ages of eligible member should be lowered to 16 years old.
Somchai Sujjapongse, director general of the Fiscal Policy Office, said yesterday the Finance Ministry planned to submit a national pension bill to the Cabinet for approval after the ministry completes public hearings, which should happen by the end of this month.
The new fund would be designed to provide financial support for people excluded from the existing government pension system. Most are poor and farmers, estimated to be about 24 to 25 million in number, Somchai said at the first public hearing on the issue yesterday. The government plans to establish the fund next year and expects to welcome members on a voluntary basis by the middle of next year, Somchai said.
Eligible members would be those working in the informal sector and aged between 20 to 60 years. The minimum contribution to the fund would be Bt100 per month and the maximum Bt1,000. The government would contribute Bt50 for people from 20 to 29 years old, Bt80 for those 30 to 49 years old and Bt100 for those 50 years and up. After a member turned 60 years, he or she saving Bt100 monthly would receive a pension worth about Bt2,000 per month.
In response to a ministry survey, most people said they could contribute up to Bt800 a month to the fund. Somchai estimates that the government may need to pay Bt25 billion in the first year and the fund size may be Bt50 billion.
The National Economic and Social Advisory Council (NESAC) is proposing a different version of the same idea, called the "National Savings Fund for Population Ages", which would require the government to contribute only 10 per cent of each member's account.
Manochai Sudjit, a member of the research team that conducted the study for NESAC, said the government might face budget constraints if it chose the Finance Ministry's proposal.
A high contribution from the government might also encourage people to abandon their community savings scheme to join the national pension fund. The community savings scheme should be preserved, Manochai said at separate seminar hosted by the NESAC. He also said that the ages of eligible member should be lowered to 16 years old.
FUNDS EASING BACK INTO CHINA
Fund managers recommend investors to gradually invest in China's stock market after its key index has fallen more than 20 per cent since August.
A fund manager from TMB Asset Management who asked not to be named said the movement of the Shanghai Composite Index, which is widely used by fund managers as a benchmark in China's equity market, has been very volatile over the past few months. The market return has fallen more than 20 per cent from the yeartodate return of 87 per cent earlier to 68 per cent as of yesterday.
"China's stock market is in its correction period after it surged hugely during the first seven months of the year. That made its stock prices stay above the fundamental level. There was profittaking for all of August," he said.
He added that TMB Asset Management has recommended its customers to gradually sell shares in China as the market has rallied significantly.
However, the recent correction was partly due to capital outflow into the US stock market as investors believe all the negative news has already been absorbed, while US stocks are not so expensive.
But after the US stocks rallied and started to be too expensive, capital flows would start to go back to China again. China's GDP growth this year is expected to be around 8 per cent, while some economists forecast the Mainland GDP growth will reach 10 per cent or double digits next year.
A senior government researcher was quoted by Bloomberg as saying that China's economic growth may quicken to 10 per cent or more in the fourth quarter because of stimulus spending and a recovery in exports, said Chen Dongqi.
"Economic growth may accelerate from the third quarter until the first quarter," Chen, a researcher at the country's top planning agency, the National Development and Reform Commission, said at a conference in Shanghai yesterday. He sees "doubledigit growth because of the stimulus plan, recovering exports and domestic consumption."
The world's thirdbiggest economy will expand 9.9 percent in the fourth quarter from a year earlier and 10 percent in the first three months of 2010 as the recovery strengthens, according to a Bloomberg News survey of economists last month. Premier Wen Jiabao said last Friday that China "cannot and will not" pull back from stimulus measures.
The fund manager also added that investors should start gradually investing in the China market to diversify investment risk. After the correction, there will be a chance to generate return.
Another fund manager, from Primavest Asset Management, said the correction in the China market was a good opportunity to invest, but investors are strongly recommended to diversify their investments rather than putting all their money into China. The mainland, he said, still needs economic drive from the world economy.
In addition, there is also risk that China's performance could affect the market
The investment should also be gradual. In a 100 per-cent investment portfolio, 5-10 per cent should be allocated to China. As of July, most funds investing in China generated satisfactory returns. The return of the TMB China Equity Index Fund was at 85.08 per cent, while Tisco China India Dividend Fund generated 56.49 per cent. Tisco China India Retirement Fund got 52.32 per cent, while UOB Smart Greater China recorded 43.11 per cent of return. Manulife Strength-Emering Eastern Europe FIF got 43.25 per cent of return. Also as of July, funds that invest in Asia focusing in China also record good return.
PrimaVest-AllianzGI BRIC Stars recorded 58.79 per cent of return, while MFC Invest Asian Equity recorded 58.22 per cent. SCB Asian Emerging Markets Open End could generate 62.12 per cent, while ING Thai BRIC 40 Fund got 39.04 per cent of return, while Asset Plus BRIC got 39.84 per cent. Aberdeen Asia Pacific Equity recorded 43.19 per cent of return, ING Thai All Asia Equity Fund got 13.36 per cent of return.
A fund manager from TMB Asset Management who asked not to be named said the movement of the Shanghai Composite Index, which is widely used by fund managers as a benchmark in China's equity market, has been very volatile over the past few months. The market return has fallen more than 20 per cent from the yeartodate return of 87 per cent earlier to 68 per cent as of yesterday.
"China's stock market is in its correction period after it surged hugely during the first seven months of the year. That made its stock prices stay above the fundamental level. There was profittaking for all of August," he said.
He added that TMB Asset Management has recommended its customers to gradually sell shares in China as the market has rallied significantly.
However, the recent correction was partly due to capital outflow into the US stock market as investors believe all the negative news has already been absorbed, while US stocks are not so expensive.
But after the US stocks rallied and started to be too expensive, capital flows would start to go back to China again. China's GDP growth this year is expected to be around 8 per cent, while some economists forecast the Mainland GDP growth will reach 10 per cent or double digits next year.
A senior government researcher was quoted by Bloomberg as saying that China's economic growth may quicken to 10 per cent or more in the fourth quarter because of stimulus spending and a recovery in exports, said Chen Dongqi.
"Economic growth may accelerate from the third quarter until the first quarter," Chen, a researcher at the country's top planning agency, the National Development and Reform Commission, said at a conference in Shanghai yesterday. He sees "doubledigit growth because of the stimulus plan, recovering exports and domestic consumption."
The world's thirdbiggest economy will expand 9.9 percent in the fourth quarter from a year earlier and 10 percent in the first three months of 2010 as the recovery strengthens, according to a Bloomberg News survey of economists last month. Premier Wen Jiabao said last Friday that China "cannot and will not" pull back from stimulus measures.
The fund manager also added that investors should start gradually investing in the China market to diversify investment risk. After the correction, there will be a chance to generate return.
Another fund manager, from Primavest Asset Management, said the correction in the China market was a good opportunity to invest, but investors are strongly recommended to diversify their investments rather than putting all their money into China. The mainland, he said, still needs economic drive from the world economy.
In addition, there is also risk that China's performance could affect the market
The investment should also be gradual. In a 100 per-cent investment portfolio, 5-10 per cent should be allocated to China. As of July, most funds investing in China generated satisfactory returns. The return of the TMB China Equity Index Fund was at 85.08 per cent, while Tisco China India Dividend Fund generated 56.49 per cent. Tisco China India Retirement Fund got 52.32 per cent, while UOB Smart Greater China recorded 43.11 per cent of return. Manulife Strength-Emering Eastern Europe FIF got 43.25 per cent of return. Also as of July, funds that invest in Asia focusing in China also record good return.
PrimaVest-AllianzGI BRIC Stars recorded 58.79 per cent of return, while MFC Invest Asian Equity recorded 58.22 per cent. SCB Asian Emerging Markets Open End could generate 62.12 per cent, while ING Thai BRIC 40 Fund got 39.04 per cent of return, while Asset Plus BRIC got 39.84 per cent. Aberdeen Asia Pacific Equity recorded 43.19 per cent of return, ING Thai All Asia Equity Fund got 13.36 per cent of return.
Temasek profit tumbles
The Singapore state investment firm Temasek Holdings said yesterday that its net profit plunged 67%to S$6 billion (US$4.25 billion) in the year to March.
Net profit fell from the record $18 billion achieved in the financial year ending March 2008 as a result of the global financial crisis.
The value of its worldwide investment portfolio also fell 30% to $130 billion as of end-March from $185 billion the previous financial year.
Temasek chief executive Ho Ching said at a news conference the firm was building up liquidity to prepare for a possible downturn.
"However, we did not anticipate the speed and ferocity of the worst financial crisis since the Great Depression," said Ho, wife of Singapore Prime Minister Lee Hsien Loong.
"Looking ahead, we believe the worst of the global meltdown risks are behind us. While there are some 'green shoots'of growth, some structural risks still remain for the medium term."
Chairman S. Dhanabalan said in the company's annual report that the profit drop "reflected the generally weaker operating performances of our portfolio companies as well as realised gains and losses from our divestments during the year."
Temasek's investments were hammered by the financial and economic crisis that led global markets to plummet in the second half of last year.
Some of its losses came from investments in Western financial companies that were in need of a capital injection as the economic crisis unfolded following the collapse of US investment bank Lehman Brothers.
It took a stake in the Wall Street icon Merrill Lynch but when the US firm was bought by Bank of America, Temasek divested its interest. It also bought into British lender Barclays but later also offloaded that stake.
It is estimated Temasek lost more than US$5.4 billion from the sale of its holdings in the two lenders, according to sources quoted by Dow Jones Newswires.
Temasek made its divestments just as markets began to recover earlier this year.
In July, the company rescinded the appointment of US businessman Charles Goodyear as its new chief executive due to differences over strategy.
Goodyear would have been the first foreigner to run the once-secretive sovereign wealth fund and his appointment just a few months ago was hailed as part of an effort to transform Temasek into a truly global enterprise.
Ho, a former civil servant who ran state-linked firms, will stay on as CEO and executive director of the firm, which manages a global portfolio invested in a range of sectors including airlines, resources and consumer products.
Net profit fell from the record $18 billion achieved in the financial year ending March 2008 as a result of the global financial crisis.
The value of its worldwide investment portfolio also fell 30% to $130 billion as of end-March from $185 billion the previous financial year.
Temasek chief executive Ho Ching said at a news conference the firm was building up liquidity to prepare for a possible downturn.
"However, we did not anticipate the speed and ferocity of the worst financial crisis since the Great Depression," said Ho, wife of Singapore Prime Minister Lee Hsien Loong.
"Looking ahead, we believe the worst of the global meltdown risks are behind us. While there are some 'green shoots'of growth, some structural risks still remain for the medium term."
Chairman S. Dhanabalan said in the company's annual report that the profit drop "reflected the generally weaker operating performances of our portfolio companies as well as realised gains and losses from our divestments during the year."
Temasek's investments were hammered by the financial and economic crisis that led global markets to plummet in the second half of last year.
Some of its losses came from investments in Western financial companies that were in need of a capital injection as the economic crisis unfolded following the collapse of US investment bank Lehman Brothers.
It took a stake in the Wall Street icon Merrill Lynch but when the US firm was bought by Bank of America, Temasek divested its interest. It also bought into British lender Barclays but later also offloaded that stake.
It is estimated Temasek lost more than US$5.4 billion from the sale of its holdings in the two lenders, according to sources quoted by Dow Jones Newswires.
Temasek made its divestments just as markets began to recover earlier this year.
In July, the company rescinded the appointment of US businessman Charles Goodyear as its new chief executive due to differences over strategy.
Goodyear would have been the first foreigner to run the once-secretive sovereign wealth fund and his appointment just a few months ago was hailed as part of an effort to transform Temasek into a truly global enterprise.
Ho, a former civil servant who ran state-linked firms, will stay on as CEO and executive director of the firm, which manages a global portfolio invested in a range of sectors including airlines, resources and consumer products.
Friday, September 18, 2009
PUBLIC HEARING, HOUSE DEBATE AWAIT NEW PENSION SCHEME
The National Pension Fund, the country's new savings vehicle for workers not covered by the Social Security Fund and Government Pension Fund, would need to overcome several challenges before it could be implemented as planned early next year, Kasikorn Research Centre said recently.
After the Finance Ministry approved the draft of the National Pension Fund bill last month, the bill would be discussed at a public hearing tomorrow before being submitted to Parliament for deliberation.
The NPF is designed to provide welfare support and retirement funds for workers who are ineligible to join the GPF and SSF. They number 24 million25 million, representing about 70 per cent of total labour force. The new fund would also support public savings.
According to KResearch, the NPF faces several hurdles. First, whether the membership would be large enough. Regarding the government's estimate, if these informal workers subscribe in the first year of the fund, the initial fund size would be Bt40 billionBt50 billion.
Participation would be voluntary with a minimum contribution of Bt100 a month plus optional contributions of Bt100-Bt1,000. The government also would have the obligation to support the NPF with about Bt20 billion per year.
However, if there are too few members due to a lack of interest or lack of understanding about the benefits they would get from the fund, the size and growth of the fund would be small.
They might not have regular income, so they might not contribute in some months. The authorities should prepare some clear guidelines about compromising on the contribution continuity of members, the research house said.
The NPF is likely to set certain investment policies such as choosing lowrisk assets to ensure that members would get their benefits and also guarantee the contribution from the government.
This must also include a minimum return, which should be no less than oneyear deposit rates, or 0.651.0 per cent as of September 7, according to the average rates of four large banks.
Another concern is the criteria that the NPF would use to select the asset management companies to manage its investments. The NPF's investment policy committee would likely consider each fund manager's track record in operating results. Their management fees and charges for other services would also be considered.
Thus, the number of asset management firms working for the NPF would be fixed for competition and comparison among them as to which would benefit the members the most.
After the Finance Ministry approved the draft of the National Pension Fund bill last month, the bill would be discussed at a public hearing tomorrow before being submitted to Parliament for deliberation.
The NPF is designed to provide welfare support and retirement funds for workers who are ineligible to join the GPF and SSF. They number 24 million25 million, representing about 70 per cent of total labour force. The new fund would also support public savings.
According to KResearch, the NPF faces several hurdles. First, whether the membership would be large enough. Regarding the government's estimate, if these informal workers subscribe in the first year of the fund, the initial fund size would be Bt40 billionBt50 billion.
Participation would be voluntary with a minimum contribution of Bt100 a month plus optional contributions of Bt100-Bt1,000. The government also would have the obligation to support the NPF with about Bt20 billion per year.
However, if there are too few members due to a lack of interest or lack of understanding about the benefits they would get from the fund, the size and growth of the fund would be small.
They might not have regular income, so they might not contribute in some months. The authorities should prepare some clear guidelines about compromising on the contribution continuity of members, the research house said.
The NPF is likely to set certain investment policies such as choosing lowrisk assets to ensure that members would get their benefits and also guarantee the contribution from the government.
This must also include a minimum return, which should be no less than oneyear deposit rates, or 0.651.0 per cent as of September 7, according to the average rates of four large banks.
Another concern is the criteria that the NPF would use to select the asset management companies to manage its investments. The NPF's investment policy committee would likely consider each fund manager's track record in operating results. Their management fees and charges for other services would also be considered.
Thus, the number of asset management firms working for the NPF would be fixed for competition and comparison among them as to which would benefit the members the most.
SocGen staff quit to set up hedge fund
Thirty senior bankers from Societe Generale have left to set up their own hedge fund business, amid growing pressure on French banks to curb bonuses for top staff, a report said yesterday.
The team, including the head of the bank's global hedge funds business and several of his most senior colleagues, have left in a move backed by an American equity firm, the Financial Times said.
The new hedge fund venture will be called Nexar Capital and will be based in Paris with an office in New York, the newspaper said, citing unnamed sources. Nexar aims to raise US$10 billion (Bt336.9 billion) in assets under management, excluding acquisitions, within five years.
French President Nicolas Sarkozy has taken a tough line on cracking down on bonuses for bankers, blamed in part for the global financial crisis. Officials have warned that Sarkozy was ready to walk out of next week's G-20 summit if there is no progress on curbing bonuses.
France's two largest investment banks, Societe Generale and BNP Paribas, have pledged to act on pay outs, but some in the financial sector have warned that curtailing bonuses will deter firms from hiring and keeping top staff.
The team, including the head of the bank's global hedge funds business and several of his most senior colleagues, have left in a move backed by an American equity firm, the Financial Times said.
The new hedge fund venture will be called Nexar Capital and will be based in Paris with an office in New York, the newspaper said, citing unnamed sources. Nexar aims to raise US$10 billion (Bt336.9 billion) in assets under management, excluding acquisitions, within five years.
French President Nicolas Sarkozy has taken a tough line on cracking down on bonuses for bankers, blamed in part for the global financial crisis. Officials have warned that Sarkozy was ready to walk out of next week's G-20 summit if there is no progress on curbing bonuses.
France's two largest investment banks, Societe Generale and BNP Paribas, have pledged to act on pay outs, but some in the financial sector have warned that curtailing bonuses will deter firms from hiring and keeping top staff.
Tuesday, September 15, 2009
ADB SEES RISE IN BOND YIELDS
A premature increase in bench-mark interest rates by Asia's central banks and widening budget deficits may push bond yields higher in the region, the Asian Development Bank said.
"Discussions on exit strategies from easy monetary policy are creeping into the headlines and keeping bond investors on edge," Sabyasachi Mitra, an economist with the Office of Regional Economic Intergration, said in an interview before the Manila-based bank released the report on debt markets yesterday.
Central banks in the region, from Indonesia to South Korea, have stopped cutting rates as their economies recover from the global recession.
The Bank of Korea, which kept its benchmark interest rate unchanged at a record low 2 per cent for a seventh month in September, signalled last week it might increase borrowing costs to damp inflation risks.
"A continuing trend toward a steepening of government bond yield curves" is also a risk, the ADB report said. "Government bond yield curves have steepened in most markets through August, reflecting much lower policy rates at the short end of the curve and market concerns over fiscal sustainability at th longer end."
In the Philippines, the difference between two-and 10-year rates tripled to more than 3 percentage points this year, from less than 1 percentage point at the end of last year.
A similar trend was seen in Indonesia and Thailand, the ADB said.
APPROPRIATE MATURITIES
The lender said in Korea, Hong Kong and the Philippines, debt maturing longer than 10 years accounts for just 5 per cent of the total, reflecting the "reluctance of investors to take longer-dated risk as well as the reluctance of issuers to pay the higher coupons".
By contrast, 40 per cent of debt will fall due in more than 10 years in Indonesia, which "has remained mindful of the rollover risks created by an inappropriate maturity structure," the ADB said.
Borrowing costs at record lows in places like the Philippines have encouraged companies to sell bonds, fuelling an expansion in local-currency debt markets.
The corporate bond market expanded by 90.9 per cent in China and 62.4 per cent in the Philippines in the first half compared to a year earlier, according to the report.
Local-currency bonds outstanding in emerging Asia increased 12.8 per cent in the first half to the equivalent of US$3.94 trillion (Bt135 trillion), the ADB said.
"In the first half, corporate bonds have been a major driver of growth," Mitra said.
"Easy monetary policy, low inflation and domestic liquidity in many markets have combined to provide corporates with easier access to local-currency bond markets," he said.
"Discussions on exit strategies from easy monetary policy are creeping into the headlines and keeping bond investors on edge," Sabyasachi Mitra, an economist with the Office of Regional Economic Intergration, said in an interview before the Manila-based bank released the report on debt markets yesterday.
Central banks in the region, from Indonesia to South Korea, have stopped cutting rates as their economies recover from the global recession.
The Bank of Korea, which kept its benchmark interest rate unchanged at a record low 2 per cent for a seventh month in September, signalled last week it might increase borrowing costs to damp inflation risks.
"A continuing trend toward a steepening of government bond yield curves" is also a risk, the ADB report said. "Government bond yield curves have steepened in most markets through August, reflecting much lower policy rates at the short end of the curve and market concerns over fiscal sustainability at th longer end."
In the Philippines, the difference between two-and 10-year rates tripled to more than 3 percentage points this year, from less than 1 percentage point at the end of last year.
A similar trend was seen in Indonesia and Thailand, the ADB said.
APPROPRIATE MATURITIES
The lender said in Korea, Hong Kong and the Philippines, debt maturing longer than 10 years accounts for just 5 per cent of the total, reflecting the "reluctance of investors to take longer-dated risk as well as the reluctance of issuers to pay the higher coupons".
By contrast, 40 per cent of debt will fall due in more than 10 years in Indonesia, which "has remained mindful of the rollover risks created by an inappropriate maturity structure," the ADB said.
Borrowing costs at record lows in places like the Philippines have encouraged companies to sell bonds, fuelling an expansion in local-currency debt markets.
The corporate bond market expanded by 90.9 per cent in China and 62.4 per cent in the Philippines in the first half compared to a year earlier, according to the report.
Local-currency bonds outstanding in emerging Asia increased 12.8 per cent in the first half to the equivalent of US$3.94 trillion (Bt135 trillion), the ADB said.
"In the first half, corporate bonds have been a major driver of growth," Mitra said.
"Easy monetary policy, low inflation and domestic liquidity in many markets have combined to provide corporates with easier access to local-currency bond markets," he said.
Friday, September 11, 2009
HSBC QUARTERLY SURVEY FINDS MOST FUND MANAGERS ARE NOW MORE OPTIMISTIC ABOUT ASIA-PACIFIC STOCKS
Nine out of 10 fund managers polled in HSBC's quarterly Fund Managers Survey are holding a positive view on Asia-Pacific ex-Japan equities this quarter, up from 45 per cent last quarter. Overall, fund managers in the surฌvey are more optimistic about equiฌties as an investment class, with 50 per cent of fund managers overฌweight in the third quarter of the year from 30 per cent in the second quarter.
Fund managers remain bullish about Greater China equities - 75 per cent this and last quarter - while 73 per cent of fund managers hold a positive view towards emerging marฌkets equities, up from 27 per cent.
Fund managers' views on bonds shifted to neutral, 70 per cent from 20 per cent. Only 30 per cent of fund managers, down from 70 per cent last quarter, are bullish on bonds.
The views are the least positive on cash, with a significant shift of fund managers - 57 per cent from 25 per cent - to an underweight view. No fund manager held an overweight view versus 25 per cent last quarter.
Bruno Lee, HSBC's head of wealth management for AsiaPacific, sees improving market performance, combined with some signs of ecoฌnomic recovery especially in AsiaPacific and emerging markets, as buoying investor sentiment for equiฌties while people actively seek growth opportunities.
"Investors remain positive about Greater China equities, given the stellar performance of the stock marฌket and positive signs of economic development in the region over the past few months."
The quarterly HSBC survey analysed 13 of the world's leading fund management houses by their funds under management (FUM), their asset allocation views and their global money flows. The net money flow estimates are derived from movements in FUM versus index movements in the equivalent class. At the end of the second quarter, the fund houses covered in the survey reported aggregated FUM of US$3.1 trillion (Bt106 trillion), representฌing about 15.2 per cent of the estiฌmated total global FUM.
The survey shows that at the end of the second quarter, FUM increased by $315 billion, up 11.4 per cent from the first quarter. Equity funds, which decreased by $85 bilฌlion in the previous quarter, posted an increase of $206 billion in the secฌond quarter, contributing the most to the overall FUM growth in the quarter. All other funds, except for money market funds, saw an increase in the quarter.
Emerging market equities, Asia-Pacific ex-Japan equities and Greater China equities posted inflows last quarter, showing renewed confiฌdence in the region's recovery and growth prospects. Investors' risk appetite for developed markets declined, resulting in outflows in North American and European, including UK, equities.
"In the second quarter, investors appeared to gain more confidence as evidenced by increased inflows and a return to equity funds with a bias towards AsiaPacific exJapan, emerging markets and Greater China," Lee said.
"However, in the context of uncerฌtain longterm growth prospects in the global economy and volatile equity markets, investors continued to preserve capital by keeping a porฌtion of their assets in bonds investฌed in a diversified portfolio."
The HSBC Fund Flow Tracker, which represents cumulative dollar value of money flows covering the past 12 quarters, showed that withฌin the equity funds sector, net inflows were recorded from the first to the second quarter. The second quarter net inflow volume returned to the highs of the first and fourth quarters of 2007.
"In the context of uncertain long-term growth prospects in the global economy and volatile equity markets, investors continued to preserve capital by keeping a portion of thier assets in bonds invested in adiversified portfolio."
Fund managers remain bullish about Greater China equities - 75 per cent this and last quarter - while 73 per cent of fund managers hold a positive view towards emerging marฌkets equities, up from 27 per cent.
Fund managers' views on bonds shifted to neutral, 70 per cent from 20 per cent. Only 30 per cent of fund managers, down from 70 per cent last quarter, are bullish on bonds.
The views are the least positive on cash, with a significant shift of fund managers - 57 per cent from 25 per cent - to an underweight view. No fund manager held an overweight view versus 25 per cent last quarter.
Bruno Lee, HSBC's head of wealth management for AsiaPacific, sees improving market performance, combined with some signs of ecoฌnomic recovery especially in AsiaPacific and emerging markets, as buoying investor sentiment for equiฌties while people actively seek growth opportunities.
"Investors remain positive about Greater China equities, given the stellar performance of the stock marฌket and positive signs of economic development in the region over the past few months."
The quarterly HSBC survey analysed 13 of the world's leading fund management houses by their funds under management (FUM), their asset allocation views and their global money flows. The net money flow estimates are derived from movements in FUM versus index movements in the equivalent class. At the end of the second quarter, the fund houses covered in the survey reported aggregated FUM of US$3.1 trillion (Bt106 trillion), representฌing about 15.2 per cent of the estiฌmated total global FUM.
The survey shows that at the end of the second quarter, FUM increased by $315 billion, up 11.4 per cent from the first quarter. Equity funds, which decreased by $85 bilฌlion in the previous quarter, posted an increase of $206 billion in the secฌond quarter, contributing the most to the overall FUM growth in the quarter. All other funds, except for money market funds, saw an increase in the quarter.
Emerging market equities, Asia-Pacific ex-Japan equities and Greater China equities posted inflows last quarter, showing renewed confiฌdence in the region's recovery and growth prospects. Investors' risk appetite for developed markets declined, resulting in outflows in North American and European, including UK, equities.
"In the second quarter, investors appeared to gain more confidence as evidenced by increased inflows and a return to equity funds with a bias towards AsiaPacific exJapan, emerging markets and Greater China," Lee said.
"However, in the context of uncerฌtain longterm growth prospects in the global economy and volatile equity markets, investors continued to preserve capital by keeping a porฌtion of their assets in bonds investฌed in a diversified portfolio."
The HSBC Fund Flow Tracker, which represents cumulative dollar value of money flows covering the past 12 quarters, showed that withฌin the equity funds sector, net inflows were recorded from the first to the second quarter. The second quarter net inflow volume returned to the highs of the first and fourth quarters of 2007.
"In the context of uncertain long-term growth prospects in the global economy and volatile equity markets, investors continued to preserve capital by keeping a portion of thier assets in bonds invested in adiversified portfolio."
Tuesday, September 8, 2009
BOT MULLS ANOTHER BOND ISSUE
The Bank of Thailand (BOT) might issue another batch of savings bonds this year after the overwhelming response to the recent issue, with total subscription at Bt130.7 billion. The move is a part of its plan to restructure its liquidฌity management by increasing longterm instruments to absorb excess liquidity. This could reduce shortterm tools like bilateral repurchase market.
BOT assistant governor Suchada Kirakul said yesterday that the central bank will issue a new tranche of savฌings bonds if the government does not issue its second lot of savings bonds within this year.
Moreover, it has to consider if demand and supply in the market was appropriate.
The Finance Ministry has planned to issue between Bt30 bilฌlion and Bt50 billion savings bonds in October after its first batch of Bt80 billion savings bonds sold out like hot cakes.
"If we issue a lot of the twoyear and fouryear bonds, we could reduce the shortterm instruments. The government is not issuing the bonds currently but we have to closely coordinate with them," said the assistant governor.
Liquidity surplus in the finanฌcial system now stands at Bt2.9 trillion, Bt1.7 trillion of which is available in the banking system. Of the total Bt2.9 trillion, a mere Bt500 billion is absorbed by bonds for periods of over a year.
The BOT said about 60,000 investors bought the BOT savings bonds totalling Bt130.69 billion, 60 per cent of which were sevenyear maturity bonds.
Suchada said after issuing the savings bonds, the central bank has reduced absorbing liquidฌity through other channels such as bilateral repurchase and deposit facility.
In addition to bonds, the central bank injects or absorbs the liquidity with many tools, including the bilateral repurchase operation, outright purchase and foreign exchange swap.
"We want to use different tools and don't want to rely largely on any particular instrument," she said.
Currently, the outstanding BOT bonds, including saving bonds, amount to Bt1.5 trillion.
Suchada said the central bank has reduced its liquidity absorpฌtion activities as the government has yet to spend after it had issued savings bonds worth Bt80 billion in early August.
Moreover, the excessive liquidity slightly dropped due to corpoฌrate tax payment.
The BOT makes liquidฌity projection to ensure it is on track. But the liquidity that the central bank provides daily to commercial banks would decline from around Bt800 billion to Bt900 billion to Bt660 billion.
Suchada said a number of banks have actively reacted to a series of savings bond issues by the government and the central bank by raising longterm fixed deposit rates or introducing special deposit packages to attract customers.
"The interestrate structure has not yet changed and the rates have long hit rock bottom," said the assistant governor.
Meanwhile, the BOT has obtained a contribution of 802 million special drawing rights (SDR), or US$1.25 billion (Bt42.6 trillion), from the International Monetary Fund (IMF) in August.
BOT assistant governor Suchada Kirakul said yesterday that the central bank will issue a new tranche of savฌings bonds if the government does not issue its second lot of savings bonds within this year.
Moreover, it has to consider if demand and supply in the market was appropriate.
The Finance Ministry has planned to issue between Bt30 bilฌlion and Bt50 billion savings bonds in October after its first batch of Bt80 billion savings bonds sold out like hot cakes.
"If we issue a lot of the twoyear and fouryear bonds, we could reduce the shortterm instruments. The government is not issuing the bonds currently but we have to closely coordinate with them," said the assistant governor.
Liquidity surplus in the finanฌcial system now stands at Bt2.9 trillion, Bt1.7 trillion of which is available in the banking system. Of the total Bt2.9 trillion, a mere Bt500 billion is absorbed by bonds for periods of over a year.
The BOT said about 60,000 investors bought the BOT savings bonds totalling Bt130.69 billion, 60 per cent of which were sevenyear maturity bonds.
Suchada said after issuing the savings bonds, the central bank has reduced absorbing liquidฌity through other channels such as bilateral repurchase and deposit facility.
In addition to bonds, the central bank injects or absorbs the liquidity with many tools, including the bilateral repurchase operation, outright purchase and foreign exchange swap.
"We want to use different tools and don't want to rely largely on any particular instrument," she said.
Currently, the outstanding BOT bonds, including saving bonds, amount to Bt1.5 trillion.
Suchada said the central bank has reduced its liquidity absorpฌtion activities as the government has yet to spend after it had issued savings bonds worth Bt80 billion in early August.
Moreover, the excessive liquidity slightly dropped due to corpoฌrate tax payment.
The BOT makes liquidฌity projection to ensure it is on track. But the liquidity that the central bank provides daily to commercial banks would decline from around Bt800 billion to Bt900 billion to Bt660 billion.
Suchada said a number of banks have actively reacted to a series of savings bond issues by the government and the central bank by raising longterm fixed deposit rates or introducing special deposit packages to attract customers.
"The interestrate structure has not yet changed and the rates have long hit rock bottom," said the assistant governor.
Meanwhile, the BOT has obtained a contribution of 802 million special drawing rights (SDR), or US$1.25 billion (Bt42.6 trillion), from the International Monetary Fund (IMF) in August.
Sunday, September 6, 2009
FIRST INFRASTRUCTURE FUND TO BE LAUNCHED NEXT YEAR
Thailand's first ever infrastructure fund - to finance construction of the 34-kilometre Srirasmi Expressway from Bang Sue to Taling Chan - will be unveiled around the second or third quarter next year.
Prapa Puranachote, senior executive vice president and chief provident-fund business officer at Krung Thai Asset Management (KTAM), said the Expressway Authority of Thailand (EXAT) would take responsibility for paying an annual dividend to unit-trust holders of the fund during the construction period, which is expected to last four years. KTAM will manage the Bt20-billion fund.
However, whether the minimum annual guarantee will be provided to the unit-trust holders has not yet been determined.
EXAT will manage fresh capital arising from the fund sales. For instance, the company might utilise 10 per cent of the capital to finance construction in the first year and it might allocate the remainder in other investment instruments to pay dividends to the unit-trust holders.
KTAM has jointly worked out details of the 30-year-maturity fund issuance to finance the Srirasmi Expressway with EXAT over the past three to four years.
The Securities and Exchange Commission gave the nod last October to asset-management companies setting up infrastructure funds to invest in completed projects generating revenue or projects under construction and scheduled to start operations.
An infrastructure fund based on existing projects should have a minimum size of Bt5 billion and must have at least 250 unit-trust holders, with limits on the maximum shareholding of any one investor. Foreign investors are restricted to holding 49 per cent of total outstanding units.
Prapa said the authorities planned to expropriate land from those who live in the construction area next year. The expropriation will be subject to Cabinet approval.
"The government will support the expropriation budget of Bt9 billion, while the construction budget of Bt20 billion will be raised in one transaction," she said.
The expected return for the 34-km expressway is based on an assumption of initial traffic of around 80,000 vehicles a day with 2-per-cent growth per year.
Investors will be able to select whether they want a fixed or floating return. The floating return will be tied to the minimum lending rate.
Prapa added that the return should be half a percentage point higher than the 30-year government bond, now being offered at 4.8 per cent per annum.
EXAT can make early redemption but the company would have to specify the price in advance.
On a separate matter, Prapa said KTAM would this year roll out a Bt1.7-billion property fund to invest in a high-end hotel in Phuket. The hotel's occupancy rate now stands at 65 per cent and the minimum room rate is higher than Bt10,000 per night for a standard room.
Most of the hotel's customers are foreign tourists.
"Currently we are negotiating with the hotel owner about the minimum return guarantee that will be offered to investors," Prapa said.
KTAM will launch another property fund at the beginning of next year. The fund of more than Bt5 billion will invest in a luxury hotel in Chiang Mai.
The Securities and Exchange Commission gave the nod last October to asset-management companies setiing up infrastructure funds to invest in completed projects generating revenue or projects under construction and scheduled to start operations.
Prapa Puranachote, senior executive vice president and chief provident-fund business officer at Krung Thai Asset Management (KTAM), said the Expressway Authority of Thailand (EXAT) would take responsibility for paying an annual dividend to unit-trust holders of the fund during the construction period, which is expected to last four years. KTAM will manage the Bt20-billion fund.
However, whether the minimum annual guarantee will be provided to the unit-trust holders has not yet been determined.
EXAT will manage fresh capital arising from the fund sales. For instance, the company might utilise 10 per cent of the capital to finance construction in the first year and it might allocate the remainder in other investment instruments to pay dividends to the unit-trust holders.
KTAM has jointly worked out details of the 30-year-maturity fund issuance to finance the Srirasmi Expressway with EXAT over the past three to four years.
The Securities and Exchange Commission gave the nod last October to asset-management companies setting up infrastructure funds to invest in completed projects generating revenue or projects under construction and scheduled to start operations.
An infrastructure fund based on existing projects should have a minimum size of Bt5 billion and must have at least 250 unit-trust holders, with limits on the maximum shareholding of any one investor. Foreign investors are restricted to holding 49 per cent of total outstanding units.
Prapa said the authorities planned to expropriate land from those who live in the construction area next year. The expropriation will be subject to Cabinet approval.
"The government will support the expropriation budget of Bt9 billion, while the construction budget of Bt20 billion will be raised in one transaction," she said.
The expected return for the 34-km expressway is based on an assumption of initial traffic of around 80,000 vehicles a day with 2-per-cent growth per year.
Investors will be able to select whether they want a fixed or floating return. The floating return will be tied to the minimum lending rate.
Prapa added that the return should be half a percentage point higher than the 30-year government bond, now being offered at 4.8 per cent per annum.
EXAT can make early redemption but the company would have to specify the price in advance.
On a separate matter, Prapa said KTAM would this year roll out a Bt1.7-billion property fund to invest in a high-end hotel in Phuket. The hotel's occupancy rate now stands at 65 per cent and the minimum room rate is higher than Bt10,000 per night for a standard room.
Most of the hotel's customers are foreign tourists.
"Currently we are negotiating with the hotel owner about the minimum return guarantee that will be offered to investors," Prapa said.
KTAM will launch another property fund at the beginning of next year. The fund of more than Bt5 billion will invest in a luxury hotel in Chiang Mai.
The Securities and Exchange Commission gave the nod last October to asset-management companies setiing up infrastructure funds to invest in completed projects generating revenue or projects under construction and scheduled to start operations.
IMF CHIEF URGES NATIONS TO MOP UP SEA OF CASH
The global economy "appears to be emerging" from a steep slump and countries should plan to wind down stimulus efforts, International Monetary Fund chief Dominique Strauss-Kahn said yesterday. "The global economy appears to be emerging at last from the worst economic downturn in our lifetimes," Strauss-Kahn said in a speech in Berlin.
The risks of the fragile recovery stalling appeared to be dominishing, as several advanced economies-including France and Germany-had already returned to growth and emerging economies were "recovering even more strongly",he said.
But the warned that problems in the financial sector could persist or even intensify,particularly if efforts to restore banks to health are not completed.
In light of the fragility of recovery, Strauss-Kahn cautioned there was "a real danger" countries may end their extraordinary monetary and fiscal crisis measures prematurely.
"Having said this, the time is right for policy-makers to formulate their exit strategies," he added.
The former French finance minister said international coordimation of exit strategies would perhaps be even "more important" than the well-coordinated crisis response.
"Greater clarity in communicating policy intentions to the public is also essential to shore up confidence," he said.
Strauss-Kahn was due to trave to London for a two-day meeting of finance chiefs from the Group of 20 developed and developing countries in advance of a September 24-25 summit in Pittsburgh, Pennsylvania.
The global recovery Strauss-Kahn said, would likely be "relatively sluggish", with unemployment continuing to rise through next year.
"A jobless recovery remains a risk.Having so many people out of work has significant economic costs, ranging from lower private demand to a decline in potential growth if structural unemployment rises," he said. "The social consequences are potentially even more worrisome."
Regulatory reform momentum was lacklustre, he noted, urging countries to avoid "complacency" as financial markets improve.
"The reform effort is not proceeding as quickly as is necessary to address the problems raised by the crisis," he said.
The IMF managing director addressed concerns about the international monetary system and the dollar's role as the world's reserve currency in the wake of the financial crisis.
Critics have noted the role of the dollar may have been "undermined" by US economic and financial troubles, he acknowledged.
The risks of the fragile recovery stalling appeared to be dominishing, as several advanced economies-including France and Germany-had already returned to growth and emerging economies were "recovering even more strongly",he said.
But the warned that problems in the financial sector could persist or even intensify,particularly if efforts to restore banks to health are not completed.
In light of the fragility of recovery, Strauss-Kahn cautioned there was "a real danger" countries may end their extraordinary monetary and fiscal crisis measures prematurely.
"Having said this, the time is right for policy-makers to formulate their exit strategies," he added.
The former French finance minister said international coordimation of exit strategies would perhaps be even "more important" than the well-coordinated crisis response.
"Greater clarity in communicating policy intentions to the public is also essential to shore up confidence," he said.
Strauss-Kahn was due to trave to London for a two-day meeting of finance chiefs from the Group of 20 developed and developing countries in advance of a September 24-25 summit in Pittsburgh, Pennsylvania.
The global recovery Strauss-Kahn said, would likely be "relatively sluggish", with unemployment continuing to rise through next year.
"A jobless recovery remains a risk.Having so many people out of work has significant economic costs, ranging from lower private demand to a decline in potential growth if structural unemployment rises," he said. "The social consequences are potentially even more worrisome."
Regulatory reform momentum was lacklustre, he noted, urging countries to avoid "complacency" as financial markets improve.
"The reform effort is not proceeding as quickly as is necessary to address the problems raised by the crisis," he said.
The IMF managing director addressed concerns about the international monetary system and the dollar's role as the world's reserve currency in the wake of the financial crisis.
Critics have noted the role of the dollar may have been "undermined" by US economic and financial troubles, he acknowledged.
Friday, September 4, 2009
LATEST BOT OFFERING A BIG SUCCESS
Risk-averse investors yesterday warmly welcomed the latest central-bank savings-bond issue, snapping up Bt90 billion worth in only four hours.
To encourage those interested in a secure investment and having a big savings pot, the Bank of Thailand (BOT) is allowing them to buy an unlimited amount of the bonds until Monday.
Pongpen Ruengvirayudh, senior director of the Financial Markets and Reserve Management Department, expects demand for the bonds will exceed Bt100 billion. She did not confirm whether demand would reach Bt150 billion but did say the central bank would meet all requirements.
Initially, the BOT said the bond issue would total only Bt50 billion but later said if demand grew, that could rise to Bt100 billion.
However, yesterday the central bank said the issue amount could be unlimited.
"Take-up is more rapid than expected. The bonds are available until Monday, and we'll sell as many as investors want to buy," the senior director said.
Pongpen said the huge interest was due partly to a redemption of govekrnment bonds worth Bt54 billion on Wednesday.
The unlimited bond issue is one of the key conditions that are attractive to investors.
Earlier, savers were queuing very early in the morning for the savings bonds, because they were afraid that with a limited amount available, they would soon be sold out.
"We changed to an unlimited amount, so that investors did not have to get up in the early morning to be the first in the queue," said Pongpen.
Moreover, the bond yields are quite attractive compared with the low deposit interest rates offered by banks. The yields are slightly higher than those quoted in the secondary market and also cover with-holding tax of 15 per cent that bondholders are obliged to pay.
"The interest rates are not unattractive," she said. The central bank is offering 3.5 per cent per annum for the four-year bonds and an average of 4.2 per cent for the seven-year bonds. Interest will be paid twice a year.
Most investors have expressed interest in the long-term bonds.
Of total sales, Bt90 billion, or 70 per cent, has been for the seven year bonds. Pongpen said most investors bought the seven-year bonds because they offered a step up yield.
In the first and second years, they pay 3 per cent per annum. This increases to 4 per cent over the next two years and 5 per cent in the following two years.
In the final, or the seventh year, they pay 6 per cent per annum.
Pongpen said liquidity at some banks might be slightly affected by the bond issues/ However, their customers will be able to switch from deposit-based to bond-based saving.
The BOT insists it will keep liquidity in the financial system stable.
It plans to readjust transactions in other channels after the sale of the savings bonds ends.
The savings-bond issues will not affect the general bond market, because amounts are small compared with government bond issues. Corporate and BOT bonds are normally sold to institutional investors, she said.
"Take-up is mroe rapid than expected. The bonds are available until monday, and we'll sell as many as investors want to buy."
To encourage those interested in a secure investment and having a big savings pot, the Bank of Thailand (BOT) is allowing them to buy an unlimited amount of the bonds until Monday.
Pongpen Ruengvirayudh, senior director of the Financial Markets and Reserve Management Department, expects demand for the bonds will exceed Bt100 billion. She did not confirm whether demand would reach Bt150 billion but did say the central bank would meet all requirements.
Initially, the BOT said the bond issue would total only Bt50 billion but later said if demand grew, that could rise to Bt100 billion.
However, yesterday the central bank said the issue amount could be unlimited.
"Take-up is more rapid than expected. The bonds are available until Monday, and we'll sell as many as investors want to buy," the senior director said.
Pongpen said the huge interest was due partly to a redemption of govekrnment bonds worth Bt54 billion on Wednesday.
The unlimited bond issue is one of the key conditions that are attractive to investors.
Earlier, savers were queuing very early in the morning for the savings bonds, because they were afraid that with a limited amount available, they would soon be sold out.
"We changed to an unlimited amount, so that investors did not have to get up in the early morning to be the first in the queue," said Pongpen.
Moreover, the bond yields are quite attractive compared with the low deposit interest rates offered by banks. The yields are slightly higher than those quoted in the secondary market and also cover with-holding tax of 15 per cent that bondholders are obliged to pay.
"The interest rates are not unattractive," she said. The central bank is offering 3.5 per cent per annum for the four-year bonds and an average of 4.2 per cent for the seven-year bonds. Interest will be paid twice a year.
Most investors have expressed interest in the long-term bonds.
Of total sales, Bt90 billion, or 70 per cent, has been for the seven year bonds. Pongpen said most investors bought the seven-year bonds because they offered a step up yield.
In the first and second years, they pay 3 per cent per annum. This increases to 4 per cent over the next two years and 5 per cent in the following two years.
In the final, or the seventh year, they pay 6 per cent per annum.
Pongpen said liquidity at some banks might be slightly affected by the bond issues/ However, their customers will be able to switch from deposit-based to bond-based saving.
The BOT insists it will keep liquidity in the financial system stable.
It plans to readjust transactions in other channels after the sale of the savings bonds ends.
The savings-bond issues will not affect the general bond market, because amounts are small compared with government bond issues. Corporate and BOT bonds are normally sold to institutional investors, she said.
"Take-up is mroe rapid than expected. The bonds are available until monday, and we'll sell as many as investors want to buy."
EQUITY AND LONG-TERM FUNDS BEST INVESTMENT BET NOWARDAYS
Asset of both longterm equity funds and retirement mutual funds in the first eight months of this year jumped 29.74 per cent from Bt84.99 billion to Bt110.27 billion on the strong rally in the stock market. LTFs shot up 40.17 per cent to Bt63.72 billion at the end of August from Bt45.46 bilฌlion at the end of last year, the chairwoman of the Association of Investment Management Companies and managing director of BBL Asset Management said yesฌterday.
RMFs climbed up 17.74 per cent to Bt46.54 billion from Bt39.53 billion.
The higher assets under management could be ascribed to the euphoria in the stock market and the rising interest in both types of funds from investors for their tax deducฌtions.
The stock market has surged nearly 48 per cent so far this year
"Thai investors should separate personฌal investment from the country's economy. Those who have several years left before retirement should invest in LTFs and RMFs, investing in stocks in particular.
"They should not be paranoid about volatility and dollarcost averaging (investฌing an equal amount every month) is the best investment method. For those who are approaching retirement, they should shun investing in the stock market, as it is too risky for them.
"They should switch sharefocused RMFs to debt instrumentoriented RMFs and redeem their LTFs when their investment reaches five years," she said.
According to www.settrade.com, some LTFs as of September 1 had outperformed the stock market for a sixmonth period.
ING Thai Good Corporate Governance Long Term Equity Fund (ING CGLTF) reported a 65.70percent return, followed by Ayudhya SET 50 Long Term Equity Fund (AYFLTF50) at 59.11 per cent, Jumbo 25 Dividend Long Term Equity Fund (JB25 LTF) at 54.60 per cent and UOB Long Term Equity Fund (UOBLTF) at 49.50 per cent.
For threemonth returns, ING CGLTF still outperformed other LTFs with 14.56 per cent. AYFLTF 50 was second with 13.25 per cent, followed by JB25 LTF with 12.66 per cent and Nasset Big Cap Long Term Equity Fund (BIgCAPLTF) with 11.20 per cent.
RMFs climbed up 17.74 per cent to Bt46.54 billion from Bt39.53 billion.
The higher assets under management could be ascribed to the euphoria in the stock market and the rising interest in both types of funds from investors for their tax deducฌtions.
The stock market has surged nearly 48 per cent so far this year
"Thai investors should separate personฌal investment from the country's economy. Those who have several years left before retirement should invest in LTFs and RMFs, investing in stocks in particular.
"They should not be paranoid about volatility and dollarcost averaging (investฌing an equal amount every month) is the best investment method. For those who are approaching retirement, they should shun investing in the stock market, as it is too risky for them.
"They should switch sharefocused RMFs to debt instrumentoriented RMFs and redeem their LTFs when their investment reaches five years," she said.
According to www.settrade.com, some LTFs as of September 1 had outperformed the stock market for a sixmonth period.
ING Thai Good Corporate Governance Long Term Equity Fund (ING CGLTF) reported a 65.70percent return, followed by Ayudhya SET 50 Long Term Equity Fund (AYFLTF50) at 59.11 per cent, Jumbo 25 Dividend Long Term Equity Fund (JB25 LTF) at 54.60 per cent and UOB Long Term Equity Fund (UOBLTF) at 49.50 per cent.
For threemonth returns, ING CGLTF still outperformed other LTFs with 14.56 per cent. AYFLTF 50 was second with 13.25 per cent, followed by JB25 LTF with 12.66 per cent and Nasset Big Cap Long Term Equity Fund (BIgCAPLTF) with 11.20 per cent.
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