A Wider Deficit for 2010?

Further to the earlier press release, MIER has now issued their take of the upcoming Malaysian Budget 2010.

According to MIER, expect Malaysia's budget deficit to reach 8-9 per cent of GDP in 2010 due to lower tax receipts and the possibility that more stimulus spending will be needed to revive growth.

Releasing its third quarter economic outlook, MIER revised its forecast for 2009 gross domestic product to a contraction of 3.3 per cent from 4.2 per cent and for 2010, GDP growth to 3.7 per cent from 2.8 per cent.

But it said more extra spending may be needed to prop up the economy given that two stimulus packages worth RM67 billion already in effect, will only start having an impact during the third quarter and beyond.

The government's 2009 GDP forecast is expected to be revised upwards from its previous forecast of a contraction of four to five percent when the 2010 budget is announced on Oct 23.

MIER's executive director, Dr. Mohamed Ariff, said however that growth would remain "tepid, fragile and shallow" at least until the start of 2012.

"This is why the government may need to introduce another fiscal stimulus package next year if it wants to really fuel the recovery. The recovery process still needs a lot of assistance," he told a news conference.

Ariff said if a third stimulus package worth RM8 billion was implemented, it would add about 2 percentage points to the budget deficit.

Malaysia, which heavily relies on exports and oil revenues, has forecasted a budget deficit of 7.6 per cent for 2009 and the 2010 shortfall is expected to come down marginally.

The MIER also saw no immediate inflation threat, but issued a warning caution that it could be "imported" in the future from other countries which have been printing money as a means to pull out of the financial crisis.

"There is also the fear that if the asset bubble in China bursts, the knock-on effects would be felt here," said Dr. Ariff.

So do watch the danger signal flags as we cruise home on the last quarter of 2010.

Is PDS in Vogue Again?

Anita Gabriel about public debt security in the On-line Star today (14 Oct)

In her write-up, she says things are looking up for public debt securities. Read her piece here.

" The corporate debt market, spooked by regulatory risks and a fear of rising defaults, as well as a lack of business clarity through much of this year, is getting its groove back.

Several elements are driving the upbeat tone – a system awash in some RM200bil liquidity, an economy on the mend and an extended period of low and stable interest rates.

As investors gradually turn their attention back to the debt market with renewed risk appetite, companies are rushing in to catch this time “window”.

A week ago, there was a spate of news that several top-rated potential issuers were mulling debtissues.

Genting Bhd said it planned to issue up to RM1.6bil nominal value medium-term notes (MTN) to fund its operational expenses,notably linked to the Sentosa Resort Project and “the balance would be on-lent to Genting and its subsidiaries.”

Then came Pengurusan Aset Air Bhd which said it would sell RM2bil of Islamic bonds this month to fund projects and refinance debt as part of its RM20bil Islamic medium-term note programme.


Subsequently, a news wire agency reported that Port of Tanjung Pelepas (PTP) might issue RM 1bil to RM 2bil of government-guaranteed Islamic bonds to fund its expansion.

With that, many expect the local bond market to spring back to life.

In fact, Maybank Investment Bank’s fixed income research head, expects private debt securities (PDS) issuance this year to be higher at an estimated RM45bil to RM50bil.

Lending further encouragement is the secondary bond market, which has seen trading volume pick up (weekly volume of RM1.5bil), not just for traditionally top notch papers (AAA or Government Guaranteed (GG)-papers), but also for AA- and A-rated debt papers, which implies a gradual return of investor appetite for risks.

“There are clear signs of momentum shifting to PDS, judging from the rising PDS volume against a declining MGS (Malaysian Government Securities) volume,” said a AmResearch credit research director.

He expects the trend to be sustained “as many supportive factors are at play, including valuation, supply-demand, M&A catalysts, etc.”

“This would mark brighter days ahead for the PDS market,” he said in AmResearch’s strategy report.

Needless to say, such a backdrop heightens the allure of tapping funds from the bond market.

A week ago, the Reserve Bank of Australia made a surprise move to raise its overnight cash rate target from 3% to 3.25% after having previously cut rates from 7.25% since September 2008.

The move sparked speculation on who would be next.

Given the need to keep a lid on inflationary pressures amid the strengthening economy, there is expectation that South Korea, China and India may follow suit to raise rates.

That has triggered another question: is Malaysia’s corporate credit market facing a rate-hike risk? Answer: for the moment, not quite.

“There is a decoupling of interest rate expectations,” said the spokesman, who expects the United States to hold interest rates at current low levels as long as the economy remains in its current fragile state.

On the contrary, he pointed out that rates were likely to go up in economies such as Australia, Hong Kong, India and China which have fared rather well.

“(But) Malaysia is an open economy and is still exposed to exports, which growth is not yet on firm ground. Its GDP for the past two quarters have been in negative territory so we are not likely to see a rate hike,” he said.

“Australia escaped recession unlike Malaysia. Also, Malaysia is more of a pro-growth country and as such, is likely to keep interest rates low, especially if there is no significant economic recovery.

“In terms of rate risk, investors do not see one in the short-to medium-term horizon. So the risk remains a benign one. Interest rate hikes still look like next year’s problem,” he added.

Interestingly though, expectations of an imminent rate hike has driven up interest rate swaps.

“Even if our market does not see a hike in overnight policy rate (at 2% currently), regional rate hikes are likely to hog the headlines in the next few months and as such, we will see some pressure on the yield curve,” he reckoned.



There is now a consensus that a potential rate hike may emerge in the later part of 2010.

With that, and understandably so, companies may grab the opportunity to raise debt over the near to medium-term to lock in funding at current low rates.

But according to a spokesman of Maybank Investment, demand for top investment-grade corporate bonds has long been holding steady.

“The thing is, it was not matched by the supply side. Prior to this, companies were afraid of issuing bonds as there was no business certainty. Now with the economic recovery, issuers are coming back into the market,” he said.

But credit risk concerns have not vanished altogether, particularly so as the economy is still fragile.

"In the third quarter of this year," he said,"credit conditions may continue to slide with more downgrades and negative outlooks as opposed to upgrades and positive outlooks, and the number of negative outlooks thus far this year is 3.5 times more than positive outlooks. As such,all this points to a weak credit environment and we can expect the trend to continue until mid 2010 at least.”

The good news – the supply and demand metric is driving up demand for high-quality below AAA-rated debt papers.

“There is potential rising scarcity going forward. Issuance pipeline has clearly shifted towards highly-rated segments (GG and AAA), and drying up on lower-rated segments,” he added.

One case in example is the below-AAA papers of Binariang GSM which has seen some active trading in recent weeks. Binariang is the parent company of Maxis Bhd which is expected to make its debut on the stock exchange by end-November.

Part of the proceeds raised from the initial public offering will be used to partially buy back Binariang’s bonds, hence raising the scarcity value of such papers.

“Also, as Binariang sukuk would be partially bought back at close to AAA levels, capital gains by Binariang bondholders would enhance market sentiment towards PDS,” he said.

So, is the Malaysian market awash with cash still for the PDS sector? Things are not so clear as AS1M Fund has failed miserably to draw in potential players.

China: To Take the Lead and Keep It!

For China, nothing is impossible. With its head for business, calculated risk-taking and strategic alliance,it has now broken away from the the bulk of the runners running the global trade race;except for competitive India and the aggressive Asia-pacific economies; pacing on steadily behind. The old warrior economies such as the US,Europe and Japan are sadly just not able to play catch-up at the moment.

The New York Times today circa 14 October has this to report. The Report has been paraphrased in parts for brevity.

"SHANGHAI, Oct 14 — With the global recession making consumers and businesses more price-conscious, China is grabbing market share from its export competitors, solidifying a dominance in world trade that many economists say could last long after any economic recovery.

China’s exports this year have already vaulted it past Germany to become the world’s biggest exporter.

Now, those market share gains are threatening to increase trade frictions with the United States and Europe. Case in point: The European Commission proposed yesterday to extend anti-dumping duties on Chinese and Vietnamese shoe imports.

China is winning a larger piece of a shrinking pie. Although world trade declined this year because of the recession, price-sensitive consumers are demanding lower-priced goods and Beijing, determined to keep its export machine humming, is finding its own way to deliver.

The country’s factories are aggressively reducing prices — allowing China to gain ground in old markets while making inroads in new ones.

The most striking gains have come in the United States, where China has displaced Canada this year as the largest supplier of imports.

In the first seven months of 2008, just under 15 per cent of American imports came from China. Over the same period this year, 19 per cent did.

Meanwhile, Canada’s share of American imports fell to 14.5 per cent, from nearly 17 per cent.

Besides increasing its share of many American markets, China is increasing the value of exports in absolute terms in some categories.

In knit apparel, for instance, American imports from China jumped 10 per cent through July of this year — while America’s imports from Mexico, Honduras, Guatemala and El Salvador plunged 19 to 24 per cent in each country, according to Global Trade Information Services.

A similar tale is told around the world, from Japan to Italy.

One reason is the ability of Chinese manufacturers to quickly slash prices by reducing wages and other costs in production zones that often rely on migrant workers.

Factory managers here say American buyers are demanding they do just that.

“The buyers are getting tough in bargaining for lower prices, especially American buyers,” says the Head of international trade at the Changrun Garment Company, based in southern China which exports jeans to Europe and the United States.

“They offer US$2.85 (RM9.65) per pair of jeans for a package of a dozen, when the reasonable price is US$7.”

Because China produces a diversified portfolio of low-priced and essential items, analysts say the country’s exports can hold up relatively well in a recession. Few other countries can match what has come to be called the “China Price.”

“China has a huge advantage,” says Nicholas R. Lardy, an economist at the Peterson Institute for International Economics in Washington. “They can adjust to market changes very rapidly. They have flexibility in their labor markets. And as consumers trade down the quality ladder, China thus benefit.”

Additionally, the expiration of textile quotas in large parts of the world this year has allowed China to increase its market penetration.

But equally important are government policies that support this country’s export sector — from Beijing keeping its currency weak against the dollar to its determination to subsidize exporters through tax credits and billions of dollars in low-interest loans from state-run banks.

The results have been impressive. All told, in the first half of 2009, China exported US$521 billion worth of clothes, toys, electronics, grains and other commodities to the rest of the world.

Though that represented a 22 per cent decrease from the first half of 2008, it compares favorably to other major exporters. German exports, for example, have fallen 34 per cent over the same period. Japanese exports were down 37 per cent and American exports 24 per cent, according to Global Trade Information Services.

Trading powerhouses like Germany are suffering from weaker demand for heavy equipment, automobiles and luxury goods. But the value of exports from oil-producing countries, like Russia and Saudi Arabia, has fallen even more.

One reason is that the price of oil has plummeted from last year’s record highs. But since oil is priced in dollars and the value of the dollar has fallen markedly, so have the value of American imports from these countries — over 45 per cent in the case of Russia’s exports to the world.

Meanwhile, American imports from Saudi Arabia have fallen 65 per cent.

China’s market share gains are mostly at the expense of countries like Japan, Italy, Canada, Mexico and Central America — in industries that China has long sought to dominate.

China’s share of furniture imports in the United States has grown from 50 to 54 per cent over the last year, while furniture exports to the United States from Canada and Italy have plunged 40 per cent from a year ago.

In Europe, Chinese textiles and apparel have gained market share in every major country, after the quota expiration in January.

Not long ago, Italy’s shoe imports were dominated by Romania; now China has a commanding share.

Japan once relied on electronics shipments to the United States, but every year for the past decade Japan has lost market share to China. This year is no different.

In 1999, electronics goods from Japan made up 18 per cent of America’s electronics imports. Today, that figure is down to 7 per cent.

China’s market share has climbed 10 to 20 percent from a year ago. Together, the gains are helping China increase is immense trade surplus with the rest of the world, reviving worries about global trade imbalances — and once again putting the spotlight on China’s currency, the renminbi.

After letting its currency rise against the dollar, beginning in July 2005, China is once again pegging it closely to the dollar.

As the dollar has fallen against other major currencies like the euro — about 15 per cent since a year ago — Chinese imports have become more and more competitive.

Now, European officials are clamoring for China to reduce its flood of exports and even pressing for anti-dumping investigations.

The International Monetary Fund is calling on China to rebalance its economy and allow its currency to appreciate against other major currencies.

The United States — which for years complained about China’s weak currency and soaring trade imbalances — has largely been silent in recent months, analysts say, partly because Washington is trying to improve relations with Beijing at a time when it desperately needs China to purchase American debt.

“Obama’s interest is not to push China to appreciate the currency, but to get them to pay the bills,” Dong Tao, an economist at Credit Suisse says, referring to China’s purchases of American debt.

For its part, Beijing worries that raising the value of its currency could be catastrophic, disrupting the stimulus that hundreds of billions of dollars has brought to the Chinese economy.

But the country’s leaders are well aware of the need to shift the economy away from heavy dependence on exports and toward stronger domestic consumption. Indeed, China is eager to move up the value chain, by selling higher-priced goods like computer chips, aircraft and pharmaceuticals — all of which would bring better-paying jobs and healthier economic growth.

Moreover, many economists say that as Chinese consumers become richer, they will buy more of their own goods. And as the dollar falls, it will make American exports more competitive globally, including in China.

Those trends together could eventually help rebalance global trade — which became overly reliant on Americans buying cheap Chinese goods and China buying American debt.

Right now, Beijing worries about growing trade frictions with its biggest trading partners, the European Union and the United States, and the possibility of some countries initiating protectionist measures.

Chinese exporters, meanwhile, fear that even as they gain market share, the pressure to produce at low prices will hurt them and the quality of their products in the long run. Liao at the Changrun factory says many producers are essentially scavenging to source raw material.

“Some even go to old factories to collect abandoned fabrics from old stock, so they can save two-thirds of the cost on raw material,” she says. “These fabrics are in very bad shape. They won’t wash, and easily wear out.”

But the discounting period may be here for a while with many economists forecasting a lengthy period of slow growth in Europe and the United States.

“China is going to get stronger,” Tao at Credit Suisse says. “Its competitors are getting weaker in the downturn. And the Chinese state has helped bail out some industries, like the auto industry; so in the future some new industries may emerge as exporters.”

So, it looks like China is on the roll.

Perhaps the world would like to study the China economic model up close? Perhaps, just, perhaps, it will help to pull themselves quickly out the sluggish world economy? The earlier, the better.

Billionaire Factory

Nowhere can you manufacture billionaires that fast except in China. Within a short period of inviting capitalism into its national abode, the country is teeming with its unfair share of billionaries!

The Straits Times has this report today (14 Oct). I have parapharased wherever necessary for the purpose of brevity.

"The China’s super-rich have bounced back from the financial crisis with a vengeance, and the country now has more known dollar billionaires than any other country except the United States, according to a new report.

The annual Hurun Report released yesterday said China has 130 known US dollar billionaires, up from 101 last year.

The number in the US is 359 while Russia has 32 and India 24, according to Forbes magazine.

A Warren Buffett-backed car entrepreneur worth US$5.1 billion (RM17.2 billion) has surpassed a disgraced appliance tycoon to become the richest person in China.

Huang Guangyu, the richest man in China last year, dropped to 17th on the list this year with a worth of US$3.4 billion, after he resigned as chairman of the country’s biggest appliance chain while under investigation for alleged economic crimes.[This is a very serious offense in China]

Car mogul Wang Chuanfu, as chairman of BYD Co, made big strides in the past year to become the first carmaker to launch the mass production of a plug-in hybrid electric vehicle.

The company also secured backing from US billionaire investor Buffett, whose MidAmerican Energy Holdings has a 9.9 per cent stake in the Hong Kong-traded company.

With help from a growing domestic car industry, Wang’s 27.8. per cent stake in BYD elevated him 102 places in Hurun Rich List’s 2009 rankings.

Second place went to Zhang Yin and family, owner of paper recycler Nine Dragons Paper, while in third place was Xu Rongmao and family, owner of Shimao Property Holdings.

China’s rich are also getting richer, with the average wealth on the list standing at US$571 million, up almost one-third from last year, said compiler Rupert Hoogewerf.

“With the greatest wealth destruction in the West of the last 70 years, we’ve seen China buck the trend and the wealth seems to be still growing,” Hoogewerf told Reuters on the sidelines of an event to unveil the 2009 rich list.

“They’ve put the credit crunch behind them,” he said. “The key driver has been urbanisation. You’ve got all these cities being built, and that requires property developers, iron and steel manufacturers. The latest thing is cars.”

Hoogewerf also said the actual number of billionaires could be higher than estimated.

“Either they are super-discreet, or perhaps they haven’t come to the surface,” he said. “Having said that, the transparency of wealth... is now very much in the open. There’re many more listed companies.”

He said that among the people who probably should have been listed are Liu Chuanzhi, chairman of the world’s No. 4 PC maker Lenovo, and Chen Feng, founder of Hainan Airlines.

They are not on the list because it is not known how rich they really are."

Suffice to say here,that it is simply getting involved in urbanisation industries from cars to recycling to property can can put you into the mould of a billionaire.

So what are you waiting for? Your cloud is here;so look for its silver lining!

A Rush of Investment Adrenalin for India

How true is the proverbial saying-"Every Cloud has its silver lining." And so it came true for India in the second quarter of 2009.

The New York Times has this to report today. I have paraphrased certain sections to make it more concise.

"MUMBAI, Oct 14 — Six months ago, it looked as if India was in for a bumpy recession. Factories were laying off workers and construction sites were grinding to a halt as foreign investment slowed to a trickle.

But in the last few months India has hit a gusher, as investors around the world have turned away from the dollar, the global refuge during the crisis, and rediscovered their optimism in the world economy and India’s place in it.

There is palpable optimism here. Major stock indexes have roughly doubled from their March lows. Companies are advertising initial public offerings on television. And articles about bonuses and corporate expansion plans have started replacing news about layoffs and deferred projects on the front pages of newspapers.Walla!

Nearly US$7 billion (RM23.7 billion) more foreign direct investment flowed into India's economic arteries than left the country in the second quarter, from April through June. This is nearly twice as much as in the previous six months combined.

Including cash invested in the stock and bond markets, India received about US$15 billion in foreign investment, the most it has received in any quarter except the last three months of 2007, according to Macquarie Securities.

If the current surge continues — and skeptics doubt that it can — the Indian economy could start growing at 8 to 9 per cent a year as early as 2010, far sooner than forecasts by the International Monetary Fund (IMF) and many independent analysts.

“Clearly after the big shock of last year, things are back on track,” said a spokesman of Oxus Research and Investments, based in New Delhi. “People are seeing the recovery to be lot more robust than what many of the naysayers are saying.”

While many say the good times are here to stay, some analysts worry that the renewed ebullience will be fleeting if global financial markets take another turn down.

Confidence in India’s potential could also falter if the government does not address some long-standing problems, namely, improved infrastructure, investment in education and economic reforms, as it has promised to do so, to lift hundreds of millions out of poverty.

Another big concern is that the foreign money might re-inflate bubbles in stock and real estate markets.

Indian stocks are less than 20 per cent shy of their 2008 peak, even though corporate profits and the economy as a whole are growing more slowly now.

“Because we are a fairly large attractor of capital, the possibilities of bubbles building up in sectors like real estate are very real,” said an economist at HDFC Bank, who is nonetheless upbeat about the economy.

“It has clearly happened in China and there is some of that sort of problem here, as well.”

For a country that quarantined its economy from the rest of the world for much of the last 60 years, India has increasingly relied on foreign investment in recent years.

It has helped bridge the gap between domestic savings and the growing capital needs of the private sector and the government, which is borrowing money to pay for welfare programs and subsidies.

In the India’s fiscal year, which ended in March, growth slowed to 6.7 per cent, from 9 per cent a year earlier, in part because of lower foreign cash flows.

Most analysts estimate the economy will grow more than 6 per cent this year, but some optimists say growth will be as high as 8 per cent.

Rising foreign investment should help offset some of the economic impact of erratic monsoon rains. The agricultural sector makes up about 17 per cent of India’s economy but sustains more than half its population.

India’s economy lacks some of the handicaps present in other countries.

For instance, domestic demand never collapsed to the extent it did in the United States, and yet consumer spending is picking up now. Car sales were up 13 per cent in the five months that ended in August, compared with the same period last year.

Builders say sales of affordable apartments — priced from US$10,000 to US$30,000 — are up, too.

Even retailers, who were forced to close hundreds of stores last year after over-expanding, are talking about opening new outlets.

Some Western companies are eager to get a piece of this market. Last month, Ford Motor said it would build and sell a new hatchback here.

McDonald’s announced that it would open 120 more restaurants. And Baltimore-based T. Rowe Price, according to local news reports, is in talks to buy a stake in an Indian mutual fund firm.

At the same time, thanks to strong overseas demand for Indian stocks and bonds, companies here are raising billions of dollars. In a recent initial public offering for Oil India, a government-owned company, demand outstripped available shares by 31 times.

“There is a large amount of liquidity in the world,” said an executive director at Icici Securities. The money is flowing here, because “people see that India and China are the two growth areas.”

Still, the rising flow of foreign funds poses challenges.

India’s currency has appreciated 11 per cent since early March, to 46.13 rupees (RM3.37) to the dollar, because of rising demand for rupees and the broad decline in the dollar. That will make Indian garment and jewelry exports less competitive on the world market at a time when those industries are still recovering.

“That is a cause of worry,” said the Chairman of India’s Gem and Jewelry Export Promotion Council, about the appreciating rupee.

“Profit margins are being squeezed, and in such a period we cannot expect to raise prices.”

The governor of the Reserve Bank of India recently said that to control inflation, his central bank might have to raise interest rates before developed countries , where rates are at historic lows. But he said that doing so could encourage overseas investors to move even more money into India, driving the rupee even higher.

And that could be too much of a good thing."

Neighbouring China had used the market policy of interest rate quite efficiently to deflate the enthusiasm for stocks and properties.

But will India upped its interest rate,if they have to control bubbles?

Malaysia-A Likely 3.7% Growth Rate for 2010

Much quoted think-tank, Malaysian Institute of Economic Research (MIER) expects Malaysia’s economy to grow 3.7 per cent next year with inflation seen at 2.3 per cent. It said this in a news release on Oct 14 by Reuters.

Of all the economic scenario builders, MIER is by far the most accurate because the current leadership speaks their mind, without fear or favour.

“There are glimmer signs that the global downturn has stabilised somewhat, but the recovery is expected to be sluggish and uneven,” it said,adding that “the technical recession in the first half of 2009 is likely to continue into the third quarter before the economy could exit from it in the fourth quarter.

So, it looks like 3.7% would be a good guide for planning in 2010.

Leos on the Loose

They cannot but wait for Thursday 15th October to come by. Much of their future apparently is in the hands or 'tongues' of the MCA Central committee members. Will this small coterie of the potential out-going President's men and women hijack the will of the entire MCA membership and do appointments instead to short circuit the need for another EGM?

The MCA roulette wheel has been spun. What will the outcome be?

Just within less than 24 hours to another fateful D-Day,as MCA members await new developments, listless Leos are on the loose.

At best, they are the little leagues of Malaysian politics. Cherubs,no match for the UMNO leadership,are fighting for support.

Let us read this report. I have taken liberty to paraphrase where required.

"With the posts of MCA president, deputy president and two vice-presidencies potentially up for grabs tomorrow, various parties in the MCA central committee are said to be jostling for them.

Apparently Liow Tiong Lai and Kong Cho Ha have struck a bargain to be the new Number One and Two respectively.Another version has it that Wee Ka Siong and Ng Yen Yen should not be written off as yet. They are still in the running. A third version says Liow and Wee are said to be one team while Kong and Ng are said to be another. That Liow and Kong have settled the top two posts are apparently rumors and a “camouflage”.

As usual the "I" is stronger than the "We" in MCA. It has been like that after Tun Tan Siew Sin passed on the baton. And so as the rumour went,Kong and Ng felt they are more senior and that Liow and Wee can wait. Such pettiness continues to be evident.

There have also been some bargaining over who in the central committee would be elevated to become vice president should Liow, Kong, Wee or Ng become president and deputy.

On the outside, are those clamoring for fresh polls. These included political has-beens, rejected outright by Central delegates. Here,we have the likes of Fong Chan Onn and Donald Lim and newly reinstated MCA member,Dr. Chua Soi Lek, the apparent cause of all this imbroglio.

Opponents of fresh polls, however, say that an election would consume much time and resources and the party can ill-afford another bruising leadership battle.

Proponents for an election,however, say that it is the cleanest and only solution to renew MCA.

In less than a day, we will know whether selfishness or selflessness rules the roost in MCA. Will it spell a fresh new beginning for MCA or will it doom the already weakening party further?

The Millionaire Club-Are you In or Out?

Sad stories not only affect the poor. They also puncture the ego of the rich. And so as it goes, the global recession has also trimmed down the inclusive numbers in the Millionaire Club.

A Straits Times report circa Oct 14 unequivocally tells the story.

"The Asia-Pacific millionaires club has taken a hit in the face of the global economic downturn.

The number of high net worth individuals (HNWIs) in countries such as Japan, China and Australia — those who hold at least US$1 million (RM3.39 million) in investable assets — shrank by 14.2 per cent to 2.4 million last year, according to the Asia-Pacific Wealth Report released by Merrill Lynch and Capgemini yesterday.

Their wealth shrank 22.3 per cent to US$7.4 trillion.

As for the super-rich, the financial crisis dealt an even larger blow to their wealth. The report said that the ultra-high net worth individuals, with investable assets of at least US$30 million, saw their wealth shrink 35.1 per cent.

Those belonging to this well-heeled group in Asia-Pacific numbered 14,300 — a fall of 29.6 per cent. Japan, China and Australia are home to about three-quarters of Asia-Pacific’s high net worth individuals.

Japan has the biggest number of these individuals, with 1.37 million HNWIs, followed by China with 364,000.

The publication reports that wealthy Asians have staged a flight to safety in the face of economic uncertainty, allocating their wealth to ‘safer’ cash-based investments and demonstrating a lower appetite for riskier asset classes.

They have also favoured more familiar territories, choosing to invest in home regional markets instead of markets in Europe or North America.

Arvind Sundaresan, head of sales for Asia-Pacific at Capgemini’s financial services global business unit, said: “As markets recover and risk appetite returns, we expect Asian-Pacific (high net worth individuals) to adopt a more balanced investment approach and gradually increase their allocations to other regions.”

The report predicts that growth in Asia-Pacific’s wealth will pick up as market conditions improve. The region’s economies have shown signs of recovery and are forecast to grow at more than twice the pace of the global economy next year, it states.

The combined wealth of Asia-Pacific’s millionaires is estimated to grow at an annual rate of 8.8 per cent until 2018, faster than the global average of 7.1 per cent, the report said.

This increase will be led by China and India and will be fueled by their robust domestic consumption and growing number of affluent individuals.

In Singapore, the combined wealth of its millionaires shrank 29.4 per cent to US$272 billion during the year — the third-largest erosion of wealth in the region after Hong Kong and Australia.

In Singapore, cash-like assets rose 11 per cent to 33 per cent last year as investors headed to safer ground after regional stock markets plummeted.

Almost a quarter of the financial assets of local HNWIs were found to be in real estate last year.

However, a 5 per cent decline in the value of assets allocated to real estate is forecast by next year as market uncertainty causes investors to remain on the sidelines.

Despite the local stock market rallying almost 50 per cent since the beginning of this year, head of Singapore and Malaysia research at Merrill Lynch, Melvyn Boey, said that wealth generation through the stock market had a way to go before it reached its peak.

“With the assumption that portfolio wealth remains the same across asset classes, it is a reasonable assumption that the wealth of high net worth individuals is not back at levels we saw at the peak prior to the financial crisis,” he said.

Boey added that a recovery of 100 per cent was required before the local stock market returned to the position it occupied prior to the economic downturn.

He has seen a return to asset classes such as equity and fixed income and a decrease in the popularity of cash-based assets although investors still remain cautious.

Merrill Lynch anticipates 6.5 per cent real GDP growth for Singapore next year, citing positive investor sentiment and continued capital inflows".

Scarlett Has Come of Age

Scarlett Johanssen as you have never seen before. Coy and fabulous.



I never knew she got married to Ryan Reynolds as she has been romantically linked to both Josh Harnett and Benecio Del Toro.

Asiapacific to Outpace the World

A Bernama Report today (13 October)opines that the Asia Pacific will likely experience a faster economic recovery than the global economy in 2010; with gross domestic product (GDP) growth speculated to expand by 3.5 per cent versus the forecasted 1.6 per cent growth for the world.

For this year, the region’s GDP was expected to contract by 0.9 per cent, less than the 2.7 per cent contraction forecast for the world, said the Asia Pacific Wealth Report released by Merril Lynch Global Wealth Management and Capgemini.

The report said there were signs that the region was emerging relatively quickly from the global slump and will ultimately suffer less severe detrimental effects from the crisis than other regions of the world.

Stronger-than-average growth in emerging Asia, notably China and India, the report said was likely to lessen the effect of global economic crisis in the region this year and significantly contribute to its overall growth next year.

“The 2008-2009 government policy response of both China and India, particularly fiscal stimulus, is expected to lend significant support to those economies in 2009-10.

“However, growth in India could be undermined by drought,” it said.

Below-normal monsoon rains this year have pushed around 40 per cent of the country’s districts into drought-like conditions, which are likely to affect farm output and trigger a sharp rise in food prices.

The report stated that the overall business outlook for the region also remained promising. The business environment in China and India were likely to improve significantly during the period of 2009-13.

For example, according to the Economist Intelligence Unit’s Business Environment Ranking, China ranked 11 places higher for the 2009-13 forecast period than it did for 2004-08.

Unemployment in the region was also expected to be lower than the global average. The report explained that efforts to increase employment were under way across the region, helping to underpin its independent economic recovery.

“Domestic-demand growth in Asia Pacific region is likely to outpace the average domestic-demand growth in the world consistently during the period of 2009-2013, and would help in faster economic recovery of the region,” the report said.

It said this demand was likely to be experienced by China and India, forecast to grow at a compound annual growth rate of 9.7 per cent and 7.9 per cent respectively during the same period.

Moving forward, the region could further focus on domestic-demand growth by building stronger social protection systems and reducing the pressure on individuals to save for their health, education and retirement needs.

Such efforts, the report added would help to increase consumer confidence and stimulate private consumption and enable domestic currencies to appreciate.

Will Asiapacific economies live up to this expectation? Let the next quarter of 2009 tell the story.

Another Landmark Disappears!

The destruction of the notorious landmark called Pudu Jail started today. After the prison moved to its new locale at Sungai Buluh, there were plans to make Pudu Jail into a museum of sorts of well as a kind of tourist attraction. All these grand plans are gone with the wind.

October 13,2009,bulldozers came into the old Pudu Jail and began on the demolition of part of Pudu Jail, to make way for a road expansion and tunnel project. The new tunnel road will allow motorists to bypass the crossroads next to the old prison, now closed for several years.

“We started demolishing the prison last Thursday. We will be building a tunnel that will end just before the traffic lights turning into Puduraya,” said a City Hall (DBKL) spokesman.

The project costing some RM83 million is earmarked for completion by September 2011.


As to the owner of the Pudu Jail land,apparently it belonged to UDA Holdings Sdn Bhd had which bought over the land from the government. The are planning on building a shopping mall on the location, something similar to the adjacent Berjaya Times Square.

Pudu Jail was built in 1895 by state engineer Charles Edwin Spooner as a prison to house criminals, including drug offenders.

The estimated cost of the prison at the time was RM327,627.

After operating for more than 90 years, it was closed following the 1986 execution of Kevin Barlow and Brian Chambers, both Australian nationals. They were convicted for trafficking in heroin and were sentenced to death.

It was reopened in 1997-1998 as a museum and briefly in 2004.

Butchart Garden- Paradise of the Heavens

A veritable Garden of Eden, that is the Butchart Garden,Victoria,Vancouver for you.

A dash of red, a splash of purple and a crown of yellow. It is a mishmash of the earth's greens and flowers at its best, a showcase of the wondrous beauty that is nature.

If you are ever in Vancouver, never miss the Butchart Gardens- the nearest thing to the Garden of Eden on earth!