By Chetan Ahya & Deyi Tan | Singapore & Shweta Singh | India
Factoring in a Broadening of Credit Crunch in 2009
Financial markets have deteriorated rapidly since early October. We no longer feel comfortable with our ASEAN GDP growth forecast of 3.5%Y for 2009 and are now lowering it by 1.5pp to 2.0% to reflect a higher degree of collateral damage from the credit crunch. The credit problem is turning out to be more severe, and not only in terms of the depth of the impact in the epicenters of the developed world. Liquidity problems are also reaching the shores of emerging markets, and tight credit conditions are no longer a problem faced only by the private sector. Below, we outline the extension of the credit crunch in terms of depth, geography and sectors:
• From financial markets to real economy: The transmission from credit market deterioration to the real economy is leading our US and Europe economists to further downgrade their GDP forecasts for 2009 from -0.2%Y and 0.2%Y, respectively, to -1.3%Y and -0.6%Y. As a result, we now expect the industrial world to contract 0.9%Y in 2009 from 0.1%Y previously, with ramifications for trade demand for ASEAN. The industrial world accounts for 52% of the global economy, and the US, EU and Japan still constitute around 28% of ASEAN's export market demand.
• From developed world to emerging markets: The credit crunch is not just being felt in developed economies. The impact is also percolating in the emerging markets as the supply of risk capital reverses. Risk-aversion will deprive emerging markets of capital, and the real economy implications would be all the more severe if growth had been credit-dependent over the past few years. Export demand from emerging markets had been one of the last dominos to fall in the de-coupling story. Global demand destruction and the spillover into commodity prices were already negatively affecting the terms of trade for commodity-producing EMs. The further shutting of the liquidity tap will deliver a double-whammy, in our view.
Anecdotally, EM commodity producers are seeing an increase in defaults by end-market wholesale traders. Traders are now finding it hard to break even, as spot prices have fallen significantly from the contracted prices. This will likely create a vicious cycle, leading banks to pull back further on letters of credit (LCs) at a time when they are already in short supply. This not only has the indirect impact of slowing export demand from EM. ASEAN economies such as Indonesia are also directly affected as their CPO contracts are defaulted on.
• From private sector to sovereigns: The credit crunch is no longer localized in the private sector; it is now also infecting sovereign debt. In this regard, the nationalization of the pension fund in Argentina aggravated sentiment, particularly for emerging market sovereigns. ASEAN sovereign CDS spreads have since retraced their steps, but they remain 150-450bp above the levels seen in January 2008. Specifically, ASEAN economies with a relatively higher share of external public debt and perceived currency vulnerability (Indonesia) have seen a disproportionately bigger widening in their sovereign CDS spreads. On the other hand, Malaysia and Thailand have seen a relatively smaller increase in their CDS spreads, from 43bp and 57bp, respectively, in early 2008 to 210bp in November 2008. Unless the government has a pristine balance sheet, the spillover of the credit crunch from the private to the public domain – and consequently higher costs of fiscal financing – is likely to undermine how aggressively ASEAN governments can engage in fiscal pump-priming.
Assessing ASEAN in a Three-Factor Framework
As developed economies likely contract in 2009, ASEAN economies will face their most difficult test since 2001. To set the context, while the 1997-98 financial crisis had its epicenter in the East, this credit crunch was not made in Asia. The debt supercycle in the US saw American financial institutions, GSEs, corporates and households leveraging up. However, ASEAN economies (government, corporates and households) have deleveraged coming out of the 1998 crisis. Bank credit (as a percentage of GDP) fell from 60-166% of GDP at the peak to 25-100% in 2007. Government debt similarly fell from peak levels of 61-93% of GDP to 35-42% in 2007. Macro imbalances such as the current account deficits that most ASEAN economies were running prior to the 1998 crisis had also given way to either a surplus or a milder deficit.
To the extent that macro problems are not domestic in ASEAN, better fundamentals will enable ASEAN to quickly regain its footing once the global macro recovery is in sight. Yet, ASEAN remains vulnerable to the spillover impact from the credit market fallout. In our view, the relative ranking of ASEAN macro vulnerability hinges on what we see as a two-fold transmission mechanism and the propensity/ability for monetary and fiscal policy response, which we outline below:
• Who is most addicted to risk-capital liquidity? Overall balance sheets are less overstretched compared to 1997-98. However, economies that have, at the margin, been most dependent on leverage as a fuel of economic growth would be most affected, as liquidity becomes scarcer and more costly in this deleveraging cycle. The source of credit funding is also critical. In an environment of risk-aversion, economies that had been running a credit cycle alongside current account deficits are likely to see the most disruptive tightening of liquidity conditions. By these measures, we believe that Indonesia is most vulnerable, followed by Singapore, Thailand and then Malaysia, as credit growth in the latter two remained relatively subdued.
Indeed, we believe that the disruptive tightening in liquidity conditions for Indonesia could be further exacerbated. The rupiah remains vulnerable to depreciation pressures and liberal capital account convertibility. If the central bank chooses to intervene to preserve FX stability, it will withdraw liquidity (buying rupiah and selling dollars) from the system at a time when liquidity conditions are tight. In addition, the fall in commodity prices could further depress the commodity trade balance at a time when the non-commodity trade balance has already fallen into negative territory. On the other hand, Singapore also had a strong credit cycle with loan growth at 24.8%Y in September 2008. Its liquidity conditions are less dismal, given the huge current account surplus and the central bank's excess liquidity pool. Nonetheless, Singapore banks have not been immune to widening financial CDS spreads. Lending spreads have risen, and bank lending standards have tightened.
• Who is most exposed to global trade and asset markets? Economies with a smaller domestic demand base and higher trade and asset market linkages will be more susceptible to a bigger growth deceleration in this coming global slowdown. In this regard, we believe that Singapore remains most vulnerable, followed by Malaysia, Thailand and then Indonesia.
Indeed, Singapore's dependence on external demand is further undermined by the relative underperformance of its exporters. Its electronics export industry lags in terms of technology and does not have a fully integrated tech food chain or strong local brand names, as is the case with Taiwan or Korea. Moreover, its biomedical exports are notoriously volatile, as production remains dominated by a few key players. Malaysia faces a similar problem with its non-commodity exports. Its exporters of integrated circuits and telecommunications equipment saw their global market shares decline from 8% and 4.5%, respectively, in the early 2000s to 6.5% and 2.6% in 2006.
• Who has the ability and wherewithal to undertake policy responses? The ability to cushion the downcycle would depend on the authorities' propensity for and the extent of policy responses. However, widening spreads, a change in the pricing of risk and tighter lending standards have rendered the monetary policy easing less effective than usual. Indeed, despite the rate pause, we believe that monetary policy rate changes have already ceased being an effective signaling tool in Indonesia, as automatic tightening by the market will likely continue. Nonetheless, economies where the central banks are sitting on reasonable liquidity (i.e., Malaysia) and that have not seen a strong credit cycle (i.e., Malaysia and Thailand) – hence have a lesser possibility of bad lending – will likely experience a higher degree of success in terms of monetary easing.
As discussed earlier, fiscal expansion is likely to be constrained by a higher cost of fiscal financing, particularly for Indonesia. Despite the 2009 elections, the Indonesian government expects the fiscal deficit to narrow to 1% of GDP from 1.3% in 2008. Malaysia and Thailand's fiscal pump-priming would similarly be constrained by rising financing costs. The Singapore government has the most gunpowder, given its history of fiscal surpluses, and the government is also looking to revise regulations to unlock more of its SWFs' expected stream of capital gains for government expenditure. However, in spite of the anti-cyclical stance, we note that Singapore's fiscal expansion tends to be less aggressive than its ASEAN neighbors. Recall that the fiscal deficit stood at around -0.9% of GDP in F2001 and -1% of GDP in F2003. Our ranking in terms of policy responses is Singapore (more effective), Malaysia, Thailand and then Indonesia (less effective).
Based on the above three criteria, the pecking order for ASEAN macro vulnerability in a downcycle would be Indonesia (most pain), followed by Singapore, Malaysia and then Thailand (lesser pain).
A Tepid Growth Recovery in 2010
We are simultaneously rolling out our forecasts for 2010. As highlighted by our global economists, Joachim Fels and Richard Berner (see Beyond a Deeper Recession: Tepid Recovery, November 10, 2008), our macro team expects the 2010 recovery to be anemic rather than dynamic, mainly because still-lower asset values and slower growth constrain consumer spending while negative operating leverage makes it less compelling for capital investment. Moreover, credit costs are also likely to be structurally higher from regulatory reforms.
As a result, we expect ASEAN 2010 growth to come in at 4.4%, significantly lower than the five-year average of 5.8% seen between 2003 and 2007. We continue to see the risks to our forecasts as skewed to the downside, with 1% global growth as a real possibility.
星期日, 十一月 30, 2008
Will it be heading down to 52wks low?
RESORTS WORLD BHD(Kuala Lumpur: 4715.KL)
Last Trade: 2.34
Trade Time: Nov 28
Change : 0.10 (4.10%)
Prev Close: 2.44
Open : 2.43
Bid : 2.33
Ask : 2.34
Day's Range: 2.28 - 2.43
52wk Range : 2.16 - 4.26
Last Trade: 2.34
Trade Time: Nov 28
Change : 0.10 (4.10%)
Prev Close: 2.44
Open : 2.43
Bid : 2.33
Ask : 2.34
Day's Range: 2.28 - 2.43
52wk Range : 2.16 - 4.26
星期六, 十一月 29, 2008
又到年尾大整理...
还有一个月， 2008 年就要过去了。。趁今天闲空，整理了REITS的资料，shortlist
了一些新加坡REIT，以待时机才进场。。
接下来的几个周末也该总结一下今年度的所有投资了，然后草拟自己2009年的个人
预算案 。。
了一些新加坡REIT，以待时机才进场。。
接下来的几个周末也该总结一下今年度的所有投资了，然后草拟自己2009年的个人
预算案 。。
Forfeiting RM73.36 million deposit ，IOI真是 亏大了 !
By Jeeva ArulampalamPublished: 2008/11/29
MENARA Citibank is back up for sale now that IOI Corp Bhd has called off its purchase for RM586.73 million, said agent Regroup Associates Sdn Bhd.
"Interested parties with a strong financial background can make an offer as the seller is still willing to consider a good offer," Regroup Associates executive director Paul Khong told Business Times yesterday.
However, Khong said it would not be possible to complete the sale of the building by the end of this year as deals of such nature take a few months to complete.
"The timeframe depends on how quickly the parties come to an agreement on the terms of the deal and sign the SPA (sale and purchase agreement), which will then be subject to the FIC approval," he said, adding that this could take up to six months.
While Khong was unable to comment on which parties have expressed interests, he said there were many enquiries on the building as it was still an attractive income-yielding asset.
"Menara Citibank is a Grade A office building with good tenants, who will not look to move out in a slowing economy," he said, adding that the exclusive agent for the deal was CB Richard Ellis Singapore.
IOI backed out of the deal on Thursday, forfeiting its RM73.36 million deposit paid to Inverfin Sdn Bhd, citing concerns over the economy.
Inverfin is 50 per cent owned by Menara Citi Holding Co Sdn Bhd, a unit of US bank Citigroup. Singapore's CapitaLand Ltd holds another 30 per cent, while Amsteel Corp Bhd owns the rest.
In August, Business Times reported that IOI Corp Bhd, a private equity fund and a Korean fund were short-listed as bidders for the building.
Menara Citibank has a net lettable area of 733,626 sq ft and a 99 per cent occupancy rate.
The net book value of the building as of December 31 last year was RM458 million and the gross rental revenue was RM43.3 million (excluding the revenue from the car-park of RM3.3 million).
MENARA Citibank is back up for sale now that IOI Corp Bhd has called off its purchase for RM586.73 million, said agent Regroup Associates Sdn Bhd.
"Interested parties with a strong financial background can make an offer as the seller is still willing to consider a good offer," Regroup Associates executive director Paul Khong told Business Times yesterday.
However, Khong said it would not be possible to complete the sale of the building by the end of this year as deals of such nature take a few months to complete.
"The timeframe depends on how quickly the parties come to an agreement on the terms of the deal and sign the SPA (sale and purchase agreement), which will then be subject to the FIC approval," he said, adding that this could take up to six months.
While Khong was unable to comment on which parties have expressed interests, he said there were many enquiries on the building as it was still an attractive income-yielding asset.
"Menara Citibank is a Grade A office building with good tenants, who will not look to move out in a slowing economy," he said, adding that the exclusive agent for the deal was CB Richard Ellis Singapore.
IOI backed out of the deal on Thursday, forfeiting its RM73.36 million deposit paid to Inverfin Sdn Bhd, citing concerns over the economy.
Inverfin is 50 per cent owned by Menara Citi Holding Co Sdn Bhd, a unit of US bank Citigroup. Singapore's CapitaLand Ltd holds another 30 per cent, while Amsteel Corp Bhd owns the rest.
In August, Business Times reported that IOI Corp Bhd, a private equity fund and a Korean fund were short-listed as bidders for the building.
Menara Citibank has a net lettable area of 733,626 sq ft and a 99 per cent occupancy rate.
The net book value of the building as of December 31 last year was RM458 million and the gross rental revenue was RM43.3 million (excluding the revenue from the car-park of RM3.3 million).
星期六, 十一月 08, 2008
In these troubled times do you hold stocks or cash?
欲与和我一样的初学者分享这篇文章。。。
According to a study by Gary P. Brinson, L. Randolph Hood and Gilbert L. Beebower in 1986, 95% of the variance of fund returns was the result of the asset allocation decision.
Hence, the right asset allocation between cash and stocks plays a very important role in determining the returns of a portfolio.
Two key strategies in asset allocation:
1. constant mix (CM)
key principle :
buy stocks when the market drops and sell them when the market recovers
Under normal market conditions, the CM strategy is an excellent tool for rebalancing our portfolio.
This strategy requires us to rebalance our portfolio based on a constant mix, where we set a constant ratio of stocks to total assets.
Assuming we have only two asset classes, namely stocks and cash, we will maintain the desired invested portion in our portfolio regardless of market conditions.
If we have a portfolio value of RM100,000 and intend to maintain a stocks to total asset ratio of 60%, we invest RM60,000 in stocks and hold RM40,000 cash.
If the overall market drops by 10%, our stocks will drop by RM6,000 (10% of RM60,000) to RM54,000.
Now, our portfolio will be RM94,000 (RM54,000 + RM40,000 cash) Our invested portion will drop to 57.5% (RM54,000 of stocks divided by our new portfolio value of RM94,000).
In order to maintain a 60% investment, we need to have an invested portion of RM56,400 (0.6 x RM94,000).
So we will use RM2,400 in cash to buy stocks (RM56,400 - RM54,000).
After this portfolio rebalancing, our new invested portions will be RM56,400 in stocks and RM37,600.in cash.
This will bring the invested portion back to 60% with the total portfolio value of RM94,000.
The CM strategy will cause us to buy more stocks when the market drops.
We will be able to acquire a lot of quality stocks at cheap prices.
However, we will continue buying more stocks while the overall market continues to plunge. During a bear market, we will see our portfolio shrink in value as our earlier purchase price may get cheaper.
Unfortunately, not many investors can tolerate a drop in their portfolio value.
2. constant proportion portfolio insurance (CPPI) strategy
key principle:
sell when the market plunges and buy when it recovers
We should continue selling stocks until the portfolio drops near our pre-set floor level.
Once the market touches our floor level, we will hold all cash and no stocks.
The CPPI strategy is appropriate for use in either a super bull or a super bear market.
It is not suitable for use on normal market periods as we need to sell stocks when the market drops and buy when the market is on the way up.
We may end up buying at high prices and selling them at low.
Under the CPPI strategy, the portion of money in stocks is based on the formula that:
Money in stock = M x (TA - Floor) Where M = stock investment multiplier (proportion), TA = total assets held in the portfolio, Floor = the minimum allowable portfolio value (zero risk level) and TA - Floor = cushion or funds that can be put at risk.
Assuming we have a portfolio value of RM100,000, if we set our minimum allowable value (Floor) = RM70,000 and stock multiplier (M) = 2, we will invest RM60,000 in stocks [2 x (RM100,000 – RM70,000)].
If the overall market drops by 10%, our stocks will drop by RM6,000 (10% of RM60,000) to RM54,000. Our portfolio will be RM94,000 (RM54,000 + RM40,000 cash).
Our invested portion needs to be reduced to RM48,000 as 2 x (RM94,000 – RM70,000).
We need to dispose of RM6,000 worth of stocks (RM54,000 – RM48,000) and bring the cash level to RM46,000.
Following this portfolio rebalancing, the portion invested in stock is RM48,000 with cash of RM46,000.
The total portfolio value is RM94,000.
We will continue to sell stocks and hold more cash as the market drops.
We will stop investing in stocks when our total portfolio hits the floor level (TA – Floor= 0).
The strength of the CPPI strategy is that our lowest portfolio value at any point in time will be RM70,000 whereas the CM strategy may cause our portfolio value to drop much lower if the market crashes further.
In conclusion, the choice of strategy will depend on the overall economic outlook.
Unless we know our economy will not drop into recession, otherwise — based on our current situation, the CPPI strategy has the advantage of protecting our minimum portfolio value at the floor level.
According to a study by Gary P. Brinson, L. Randolph Hood and Gilbert L. Beebower in 1986, 95% of the variance of fund returns was the result of the asset allocation decision.
Hence, the right asset allocation between cash and stocks plays a very important role in determining the returns of a portfolio.
Two key strategies in asset allocation:
1. constant mix (CM)
key principle :
buy stocks when the market drops and sell them when the market recovers
Under normal market conditions, the CM strategy is an excellent tool for rebalancing our portfolio.
This strategy requires us to rebalance our portfolio based on a constant mix, where we set a constant ratio of stocks to total assets.
Assuming we have only two asset classes, namely stocks and cash, we will maintain the desired invested portion in our portfolio regardless of market conditions.
If we have a portfolio value of RM100,000 and intend to maintain a stocks to total asset ratio of 60%, we invest RM60,000 in stocks and hold RM40,000 cash.
If the overall market drops by 10%, our stocks will drop by RM6,000 (10% of RM60,000) to RM54,000.
Now, our portfolio will be RM94,000 (RM54,000 + RM40,000 cash) Our invested portion will drop to 57.5% (RM54,000 of stocks divided by our new portfolio value of RM94,000).
In order to maintain a 60% investment, we need to have an invested portion of RM56,400 (0.6 x RM94,000).
So we will use RM2,400 in cash to buy stocks (RM56,400 - RM54,000).
After this portfolio rebalancing, our new invested portions will be RM56,400 in stocks and RM37,600.in cash.
This will bring the invested portion back to 60% with the total portfolio value of RM94,000.
The CM strategy will cause us to buy more stocks when the market drops.
We will be able to acquire a lot of quality stocks at cheap prices.
However, we will continue buying more stocks while the overall market continues to plunge. During a bear market, we will see our portfolio shrink in value as our earlier purchase price may get cheaper.
Unfortunately, not many investors can tolerate a drop in their portfolio value.
2. constant proportion portfolio insurance (CPPI) strategy
key principle:
sell when the market plunges and buy when it recovers
We should continue selling stocks until the portfolio drops near our pre-set floor level.
Once the market touches our floor level, we will hold all cash and no stocks.
The CPPI strategy is appropriate for use in either a super bull or a super bear market.
It is not suitable for use on normal market periods as we need to sell stocks when the market drops and buy when the market is on the way up.
We may end up buying at high prices and selling them at low.
Under the CPPI strategy, the portion of money in stocks is based on the formula that:
Money in stock = M x (TA - Floor) Where M = stock investment multiplier (proportion), TA = total assets held in the portfolio, Floor = the minimum allowable portfolio value (zero risk level) and TA - Floor = cushion or funds that can be put at risk.
Assuming we have a portfolio value of RM100,000, if we set our minimum allowable value (Floor) = RM70,000 and stock multiplier (M) = 2, we will invest RM60,000 in stocks [2 x (RM100,000 – RM70,000)].
If the overall market drops by 10%, our stocks will drop by RM6,000 (10% of RM60,000) to RM54,000. Our portfolio will be RM94,000 (RM54,000 + RM40,000 cash).
Our invested portion needs to be reduced to RM48,000 as 2 x (RM94,000 – RM70,000).
We need to dispose of RM6,000 worth of stocks (RM54,000 – RM48,000) and bring the cash level to RM46,000.
Following this portfolio rebalancing, the portion invested in stock is RM48,000 with cash of RM46,000.
The total portfolio value is RM94,000.
We will continue to sell stocks and hold more cash as the market drops.
We will stop investing in stocks when our total portfolio hits the floor level (TA – Floor= 0).
The strength of the CPPI strategy is that our lowest portfolio value at any point in time will be RM70,000 whereas the CM strategy may cause our portfolio value to drop much lower if the market crashes further.
In conclusion, the choice of strategy will depend on the overall economic outlook.
Unless we know our economy will not drop into recession, otherwise — based on our current situation, the CPPI strategy has the advantage of protecting our minimum portfolio value at the floor level.
星期五, 十一月 07, 2008
YTL shortlisted in Singapore power bid
SINGAPORE: A consortium led by Hong Kong’s CLP, Bahrain’s Arcapita and Malaysia’s YTL Corp has made the second round in the bidding for Singapore electricity generating firm PowerSeraya, the Business Times reported today.Singapore firms Sembcorp Industries and Keppel Corp failed to make the shortlist, the paper quoted sources as saying.CLP’s partners include Japanese trading house Itochu and Thailand Electricity Generating Public Co, the paper added.PowerSeraya is the third of three power companies that Singapore state investor Temasek Holdings is selling as part of efforts to liberalise the city-state’s electricity market. - Reuters
星期二, 十一月 04, 2008
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