Corporate Vision-The View from Below

Ever wonder why the personnel at the lower rungs of the pecking order do not subscribe to the vision of the bosses?

Here's why!

Malaysia: Slumpy September

Looks like the economic pain will last a little bit longer.

The Ministry of International Trade has just announced that Malaysia's exports, the mainstay of the economy, slumped 24.2 percent in September from a year ago.

It said in a statement that exports fell to RM47.24 billion (US$13.8 billion) year-on-year while imports fell 20.2 percent to RM37.97 billion, producing a trade surplus of RM9.27 billion.

So, aren't we over-dependent on the export model?

Is it TIME to Fly Again?

Having built a shoulder price at the 30 sen level for about close to 3 months, Time started moving. It overshot into the 40 sen territory last Friday (30 October 2009). On Monday it crossed the 50 sen mark before falling off back to 44 sen yesterday. Today it went up 7 sen again to 51 sen.

So what is this obsession and frenzy with TIME?

Could it be just this following announcement by TIME Engineering made at the end of trading today that it will merely exit (uplifted from) the Practice Note (PN)17 status tomorrow (5 November 2009) as its regularization plan has been completed?

But then, wasn't this obvious to the seasoned stock market player?

The huge volume of shares transacted must mean more than that.

What is it then? Speculative fever? If so, will it fly like a phoenix like SILK and LITYAN after their successful restructurings?

That is the RM64,000 question.

Only TIME will tell.

Mortgage loans : Pending Rate Pains

Lending rates are expected to rise in the near term.

So those who has taken mortgage loans at 'friendly' rates must ready themselves to pay more very soon. You now have to back-pay the 'benefits' you were offered in the past in terms of lower interest rates.[Talk about an Indian Giver!]

The whole property and banking sector are anticipating this raise increase. Banks particularly are positioning themselves for a gradual increase in the rates for their long-term loans.

The monthly statistical bulletin released by Bank Negara for September showed that average lending rate (ALR) was 4.91% compared with 4.9% in August and 4.96% in July. The average base lending rate (BLR) remained unchanged at 5.51% as at Oct 15.

According to UOB Kay Hian Research’s latest update, one of the first loan segments to be impacted would be mortgages. The report said that financing for the purchase of residential properties, which comprise 27% of total loans in the banking system, would likely slow down due to the re-introduction of real property gains tax as part of the measures under Budget 2010.

Mortgage growth would also take a temporary adjustment due to a rise in effective lending rates as banks lowered their mortgage spreads, the research house added.

“Our market survey shows that mortgage spread has been reduced from the previous BLR minus 2%-2.3% to BLR minus 1.6%-1.9%,” the report said.

The rate increase was expected to mitigate the slower loans volume growth, the research house added.

“In this scenario, Public Bank would benefit the most from its strong loans growth supported by its strong branding and lower cost of funding,” the report said.[What about the others?]

An analyst with another brokerage said he had heard reports of the rise in effective rates recently but declined to comment further. Banks, when contacted, declined comment on this matter.

Banking data for September continued to show strong credit demand from the household sector, leading to total loans growth of 7.2%.

Loan applications in the household sector amounted to RM23.2bil in September, compared with monthly average of RM22.8bil in the preceding eight months to August.

UOB Kay Hian Research noted that robust approvals in the six months to Sept 30 would sustain strong loans growth in the fourth quarter of this year and the first quarter of 2010.

“However, potential slower property sales and credit card demand due to the new budget measures would likely lead to slower loans growth in the second half of 2010,” the report said.

The research house, however, maintains its “overweight” call for the banks as slower growth would be mitigated by the increase in effective lending rate.

I am wondering why this “overweight” call?

Isn't it possible that the volume of potential new mortgages may shrink to such an extent that the increase in effective lending rate may just not be enough to off set this shortage?

A Horizon of Gray Clouds for 2009

This is the latest BERNAMA Report on the Malaysian economy and projection for 2010. Are we still looking for that silver lining as gray clouds are still predicted by the World Bank?

This is the Report dated Nov 4.

Malaysia's near-term outlook shows a slow process of recovery, with real GDP projected to contract 2.3 per cent this year before growing by 4.1 per cent next year, the World Bank said in its latest update.

In its half-yearly assessment of the economic health of East Asia and Pacific region released today, it said the revised projection showed lower growth compared to -1.0 forecast in April.

It said consumption and fixed investment growth would remain relatively subdued due to uncertainties on the global outlook, efforts of fiscal consolidation and still low levels of capacity utilisation.

The turnaround in the inventory cycle is expected to be the main growth driver, it said, adding that import growth would continue to outpace export growth in the coming quarters, resulting in a smaller trade surplus.

The current account balance is expected to decline to 12.3 per cent of the GDP this year and further to 12.1 per cent next year.

The update titled "Transforming the Rebound into Recovery" said large and timely fiscal stimulus spending in most East Asian and Pacific countries led by China and South Korea, along with a powerful inventory restocking process now under way, have driven the rebound in the region and contributed significantly to confidence in a global pick-up.

Developments in the region remain strongly influenced by China as the projected GDP increase this year will offset three quarters of decline in the GDP of the United States, the Eurozone and Japan.

With the projected 8.4 per cent growth in China this year and the country’s domestic demand racing ahead global demand, countries exporting consumer durables, electronic components and raw materials to China have felt the positive flow-on effects.

As a result, the World Bank is projecting 6.7 per cent growth this year for developing East Asia and the Pacific and 7.8 per cent next year.

Though Indonesia and Vietnam were performing well, East Asia, excluding China, is expected to grow at around one per cent this year. More slowly than South Asia, Middle East and North Africa and only slightly stronger than Sub-Saharan Africa.
Some countries remain hard hit, with the GDP of Cambodia, Malaysia and Thailand contracting and barely growing in Mongolia and some of the Pacific Islands, the report said.

The World Bank said Thailand’s economy is expected to shrink by 2.7 per cent this year before expanding by about 3.5 per cent next year if political stability continues in the country.

Crystal balling continues to see a slow gradual return of the Malaysian economy this year, with GDP figures still lurking in negative territory. 2010 sees greater promise.

So are are you betting on the stock market? Look for some good stocks, buy them and wait. I do not think you would lose.

Australia-Another Interest Rate Hike?

Watch out for another Australian interest hike this week. So reports Reuters.

On November 2, the Australian government once more upgraded its economic and fiscal outlook citing a more resilient domestic economy proved when compared to 6 months ago.

Australia boasts of being the only rich nation to have avoided recession during the global financial crisis. Last month, it became the first among the Group of 20 industrialised economies to raise interest rates as a global recovery emerged.

But the government on Monday sought to play down expectations for a rapid recovery, sketching a slightly weaker recovery than the central bank has forecast, and warning voters that the budget will remain in the red for at least seven more years.

“Despite the improved outlook, the global recession has still had a marked effect on the Australian economy and challenges remain,” Treasurer Wayne Swan said in his regular November review of budget estimates and forecasts.

“The economy is expected to continue to operate below capacity for some time and unemployment is still expected to rise.”

The government upgraded all its major economic and fiscal forecasts, as expected, with the outlook for growth, joblessness and the long-term fiscal deficit brighter than it appeared back in May, when the government framed its 2009/10 budget.

The government revised its economic growth forecast to 1.5 per cent for the year to end-June 2010, up from a 0.5 per cent contraction predicted in May, though its growth forecast of 2.75 per cent for the following year falls short of the central bank’s forecast for 3.25 per cent growth in 2010/11.

The government also forecast fewer jobless than expected in May, trimming its jobless forecast to peak at 6.75 per cent in 2009/10. Previously, the peak was seen at 8.5 per cent in 2010/11.

But the government’s inflation forecast also climbed to 2.25 per cent for 2009/10, from a May prediction of 1.75 per cent. Inflationary concerns prompted the Reserve Bank of Australia last month to raise its official cash rate from a record low of 3 per cent, taking it 25 basis points higher.

The bank is expected to raise the rate by another 25 basis points on Tuesday.

The stronger growth and jobs figures will be welcome news for Prime Minister Kevin Rudd as he heads into an election year in 2010, with his government under political attack for spending too much on economic stimulus.

Rudd remains well ahead in opinion polls, and may call a snap election early in 2010 if a hostile parliamentary upper house continues to block his reform agenda. –

China: Buoyant Optimism in Industrial Production

This was taken from a Reuters report.

In an 18-month window, China's vast manufacturing sector expanded at the fastest rate in October 2009 according to a survey. Economists expect the momentum to be sustained in the coming months.

The purchasing managers’ index (PMI) issued by the China Federation of Logistics and Purchasing rose to 55.2 last month, the highest level since April 2008, from 54.3 in September.

It was the eighth month in a row that the official PMI has stood above the boom-bust line of 50. The index, which is designed to provide a timely snapshot of business conditions in industry, slumped as low as 38.8 last November as the global financial crisis raged.

Zhang Liqun, a researcher with the Development Research Centre, a think-tank under the State Council, China’s cabinet, said the report showed the economy was now firmly on the recovery track.

In a comment for the logistics federation, Zhang said gains in the sub-indexes for imports and new export orders reflected growing demand both at home and abroad.

“All these show that economic growth will accelerate in the future, and the growth rate in the fourth quarter is likely to be 9.5 per cent,” he said.

Annual gross domestic product growth accelerated to 8.9 per cent in the third quarter from 7.9 per cent in the second.

The report was not universally strong. Growth in employment slowed, inventories of finished goods fell and input price inflation eased.

But Jing Ulrich, chairman of China equities and commodities at JP Morgan, agreed that the survey — especially the forward-looking components — suggested sustained expansion in industry.

“While public investment may moderate in the months ahead, private real estate investment, consumer spending and export demand should drive growth in the coming months,” she said in a note to clients.

Ulrich singled out a revival in property construction as developers replenish housing inventories. New starts rose 56 per cent in September from a year earlier.

Construction — infrastructure as well as property — accounts for a large chunk of China’s demand for materials, including 52 per cent of steel consumption, which grew 44 per cent in September from a year earlier, she noted.

Like other countries, China has started to debate the timetable for a gradual withdrawal of the monetary and fiscal stimulus it injected to support the economy through the crisis.

The government is almost half-way through a 4 trillion yuan (RM2 trillion) pump-priming programme, while the country’s mainly state-owned banks have increased their loan books by a third over the past year. In the first nine months of the year they lent a whopping 8.67 trillion yuan.

Ulrich, voicing the consensus view, said a broad-based macroeconomic tightening was unlikely over the rest of 2009.

“Until greater inflationary pressure and a sustained recovery in exports become apparent, pro-growth economic policies are expected to remain in place.

“Messages from the authorities suggest that they are not planning to withdraw stimulus measures in the near term, although the government is clearly fine-tuning policies for sectors that are prone to overcapacity,” she said.

That fine-tuning is also taking the form of orders to banks to ease up on the pace of lending. Yu Song and Helen Qiao at Goldman Sachs said this tightening was positive because it would slow credit growth to a rate that was sufficient to fuel the recovery while reducing overheating pressures down the road.

“We expect October activity growth data to continue to show firm readings when they are released on November 11,” the economists told clients.

So, the future looks bright for the Chinese economy during the final months of 2009.