Credit Cards-Just Use the Scissors!

If credit card issuing banks, marketing agencies for credit cards and card holders expects the government to buckle and withdraw the RM50 tax soon, think thrice!

As early as yesterday,30 October, PM Najib affirmatively said there will be no immediate plans to revise the RM50 annual service tax on credit and charge cards.

Najib said it was too soon to talk about any revision as the matter was just recently announced in the 2010 Budget.

“Tunggulah dulu (We wait first). The Government also needs revenue. If we can’t hike up (the price of) anything, susah kita (it would be hard for us).

“Who is going to fund the nation’s development?”

Najib announced the proposal to impose a service tax of RM50 for each main credit and charge card, and RM25 on supplementary cards in his 2010 Budget.

If implemented, financial analysts predicted that at least 30% of the holders of 11 million cards in circulation who have more than one card will have to pay RM100 every year.

It was reported in The Star yesterday that applications for new credit cards dropped by 80% following the Government’s an-nouncement of the service tax starting next year.

For those having more than two cards,review the cards in your possession and cancel them.

Looking for the scissors is the best bet yet!

China: A Bumpy Ride Ahead

This is certainly true-a gradual global economic recovery will help Chinese exports grow again. However, a statement from China’s Commerce Ministry said;"there are still many uncertainties and any recovery will be “hard and tortuous”.

Exports in September were 15.2 per cent below their level a year earlier, beating forecasts of a 21 per cent fall, though the government expects a double-digit fall for all of 2009.

In a statement released late yesterday on the ministry’s website, it said the full-year fall in exports compared with the previous year should be less than 20 per cent.

“In 2010, the world economy will hopefully see a gradual recovery, and the environment for Chinese trade will gradually improve,” it said.

“But as there is not yet sufficient strength in the global economic recovery, many problems and contradictions have yet to be resolved. The recovery will be hard and tortuous, and it will be hard to see an sustaining recovery in international demand in the short term.”

Net exports shaved 3.6 percentage points off GDP growth of 8.9 per cent in the third quarter as Chinese manufacturers continued to reel from a slump in global trade.

"Protectionism and increasing competition are main issues of concern", the ministry said.

“At present some nations are conducting probes into Chinese goods, which is causing yet further obstruction for a recovery in Chinese exports,” it said.

A US trade panel yesterday approved the eighth government investigation this year into charges of unfair Chinese pricing practices in a case in which US companies want a nearly 100 per cent duty or more on US$382 million (RM1.3 billion) of imported steel pipes.

Still, there were signs for optimism, the ministry added.

The government will conntinue to provide help to exporters in the form of export tax rebates, and numerous new markets awaited Chinese firms.

“There is a bright future for developing trade with newly emerging markets,” it said.

Credit Card Service Tax -Overkill!

Credit card agents cried foul over service charge plan.
This is the first concerted backlash against the 2010 Budget to impose RM50 service charge for principal credit card holders.

On 30 October, 5,000 credit card agents and 18 credit card issuers through a joint press conference,urged the government to withdraw the tax proposal effective on 1 January 2010.Some of the representatives from over 40 sales agencies holding up credit cards showed their displeasure as their rice bowls are on the line.

Francis Teow, who runs a credit card sales agency in Penang, said banks would not be keen to maintain their large sales force if they were not confident of achieving the desired sales target when the RM50 tax is enforced.

As for the Government’s argument that the RM50 was seen as a way to encourage prudent use of finances, Teow said a better alternative would be to raise the interest on the minimum monthly repayment from the current 5% to 20%.

“However, the Government is well aware there are many cardholders with substantial amount of outstanding balances in their credit cards.

“And if they increase the monthly minimum payment, many will default payment and non-performing loans will increase,” added Teow.

Credit card sales agency director H.K. Tan said the service tax would not only have a negative impact on sales agents but also on card holders as well.

“The newly imposed service tax will affect low and middle-class consumers.

“Many can’t settle their outstanding bills, imagine having to fork out another RM50 for service tax,” he said.

Credit card consultant Kevin Choong said it was not viable to burden the industry that had done much for consumers with the new tax.

“Credit cards have reduced the need to borrow from loan sharks. Imagine, people who do not have credit cards to avoid paying the RM50 service tax, they may need to carry a lot of cash and they will become easy target for thieves.

“Or, if in case of an accident in the middle of the night and you need to be admitted into the hospital, the credit card provides you with financial security,” he said.

I think PM Najib is again ill-advised on this tax move just like what happened in the case of the RM10 billion Amanah Saham1 Malaysia unit trust.

YTL-E Solutions: Looking for One

YTL E-solutions Berhad (YTE-E), a subsidiary of YTL, has been slapped a fine of RM1.9 million by the Malaysian Communications and Multimedia Commission (“MCMC”)because Y-Max Networks(YMN),YTE-E's subsidiary failed to roll-out a WiMax network programme to achieve 25% population coverage by 31 March 2009.

Some background.

YMN was awarded the right to the 2.3 GHz spectrum in March 2007. Under the terms of the award, YMN was required to submit a business plan to MCMC with a roll out programme to achieve 25% population coverage by 31 March 2009. Subsequently, YMN changed its business plan and decided to build a nationwide network instead of undertaking a piecemeal roll out. Under its revised business plan, YMN will exceed the targeted coverage prescribed by MCMC by next year. The revised business plan has been submitted to MCMC for approval.

An appeal has accordingly been made to MCMC to reconsider its decision in light of the revised business plan submitted by YMN. YMN is awaiting the response from MCMC to its appeal.

Do you think MCMC was right to call the bluff to provoke the YTL bosses to sit upright to seriously look into their obligations?

Genting Malaysia:The Wynn Caper

Genting Malaysia Berhad (GENM) is a potential 'naughty company'with a cash horde of close to RM5 billion. It will definitely do something with it for profit either actively or passively.

And so we see the first action being unleashed;though a passive one.

To beef up its burgeoning coffers, GenM through its wholly owned subsidiary, Resorts World Limited has subscribed to the First Mortgage Notes in Wynn,Las Vegas LLC and Wynn Las Vegas Capital Corporation. Based on an exchange rate of RM3.3675 : US$1.00, Resorts World Limited, has on 20 October 2009 completed the subscription to US$15 million (approximately RM50.51 million) nominal amount of these Notes.The total amount of First Mortgage Notes issued was US$500 million in aggregate principal amount at 7.875% returns due 2017.

The Notes, issued at a discount of 97.823% of par, were offered by Wynn as part of a private placement of US$500 million in aggregate principal amount of the Notes and the proceeds will be used by Wynn to part settle some of its outstanding debts and for general corporate purposes.

The Notes are secured by a first-priority lien on substantially all of the existing and future assets of the Issuers, and subject to the approval of the Nevada Gaming Commission. The Notes are senior secured obligations of the Issuers, guaranteed by certain of Wynn Las Vegas, LLC’s subsidiaries, which also guarantee Wynn’s other senior indebtedness; and equal in right of payment with, or senior to, all existing or future indebtedness of Wynn and each of its guarantors.

For GenM, investment in these Notes represent a good opportunity to expand its investment portfolio and to enhance returns on its existing cash balances. With yield returns in excess of 8%, the investment generates an attractive return compared to what is currently attainable in the money markets or in other secured investments regionally, especially within the GENM group's core leisure and hospitality industry. Further, the Notes are secured against quality gaming and entertainment assets in Las Vegas.

The subscription to the Notes is not expected to have a material impact on the net assets or earnings per share of the GENM group for the financial year ending 31 December 2009.

Wynn is one of the leading casino entertainment providers in the United States, owning and operating two properties located in Las Vegas, Nevada. Wynn also owns and operates Wynn Macau in the Macau Special Administrative Region of the People’s Republic of China. For the financial year ended 31 December 2008, Wynn group recorded net revenues of approximately US$3 billion.

On 9 October 2009, Wynn completed a successful Initial Public Offering for Wynn Macau on the Hong Kong Stock Exchange, raising over US$1.87 billion in new equity.

The subscription to the Notes is prohibited under Paragraph 8.23 of the Listing Requirements ("LR") of Bursa Malaysia Securities Berhad ("Bursa Securities") and Paragraph 2.2 of Practice Note No. 11/2001 of the LR. Accordingly, the approval of Bursa Securities was sought and subsequently obtained on 13 October 2009 for GENM to subscribe to US$15 million nominal amount of the Notes, subject to the condition that GENM releases an announcement to Bursa Securities on the same.

So it looks like a passive inroad into the Wynn Casino Group has happened,opening possibilities for active participation of some Genting units into the casino activities in both Nevada and Macau.

For GenM shareholders, potential windfalls can be seen from fiscal year 2010 up to 2018 in terms of monetary returns.

Do they dare dream that GenM will strike out on other more active participation in the near future? For that we await Father Time to tell us all.

Street Walk Art-Shockingly Realistic!

The Amazing chalk art man is back.

This time he has created more fantastic art pieces on the sidewalk.

Look at these. It is a marvel that he can create such realistic three dimension street walk art.

What a genius!

The US Economy: In Positive Territory

Reuters reported that the US economy grew in the third quarter for the first time in more than a year as government stimulus helped lift consumer spending and home building, fueling an unexpectedly strong advance.

Signaling the end of the worst recession in 70 years, the Commerce Department today said the economy expanded at a 3.5 per cent annual rate in the July-September period, snapping four down quarters with its fastest growth pace since the third quarter of 2007.

The report, which followed improving third-quarter corporate earnings, lifted stock markets around the world and the broad S&P 500 index of US stocks rose more than half a percentage point at the open. Prices for US government debt and the US dollar fell as traders switched out of safe havens and into riskier assets.

Growth was generally broad-based, with solid gains in consumer spending, exports and home construction. But it was also driven by government programs like the popular “cash for clunkers” incentive for new auto purchases and an US$8,000 (RM28,000) tax credit for first-time home buyers.

The auto discount program ended in August and the home tax credit is due to expire next month, although Congress is working on a plan to extend it.

Stripping out auto output, the economy would have expanded at only a 1.9 per cent rate in the third quarter.

“Better than expected GDP is confirming that the Great Recession has ended,” said Kevin Flanagan, fixed-income strategist for Global Wealth Management at Morgan Stanley in Purchase, New York. “The question going forward is, is this more of a statistical recovery or are we going to get some meaningful momentum on a sustained basis?”

Officials from the Federal Reserve — the US central bank — meet next Tuesday and Wednesday and will sift through the economic tea leaves to try to determine whether a sustainable recovery is building. They are widely expected, however, to keep stimulative monetary policies in place for some time.

Consumer spending, which normally accounts for more than two-thirds of US economic activity, surged at a 3.4 per cent rate in the third quarter, the fastest advance since the first quarter of 2007. Spending had fallen at a 0.9 per cent pace in the previous quarter.

Residential investment jumped at a 23.4 per cent rate, contributing to GDP for the first time since 2005, after declining 23.3 per cent in the April-June period. A housing slump had been the main factor behind the economy’s downturn.

A sharp moderation in the pace of inventory liquidation by businesses also supported recovery in the third quarter. Business inventories fell US$130.8 billion, slowing from the record US$160.2 billion plunge in the second quarter. The change added nearly 1 percentage point to the growth in GDP.

Analysts are hoping that the slowdown in the inventory decline by businesses will continue to support the economy in the fourth quarter, even as consumer spending is expected to retreat under the weight of the worst labour market in 26 years. With inventories at a lean level, any advance in consumer spending is more likely to lead to an increase in output.

Excluding inventories, GDP rose at a 2.5 per cent rate compared to a 0.7 per cent increase in the second quarter.

The weak dollar boosted exports, but a rise in imports subtracted from real GDP during the quarter. Federal government spending contributed to growth, but both state and local governments were a drag.

Business investment fell at a 2.5 per cent pace, with spending on non-residential structures dropping at a 9 per cent rate. A lack of credit has hit the US commercial property market hard.

A separate report from the Labour Department showed the number of US workers filing new claims for jobless benefits dipped by 1,000 last week to 530,000. Analysts polled by Reuters had forecast claims to fall to 521,000 from 531,000.

The number of people still on jobless aid after an initial week of benefits slid by 148,000 to 5.8 million in the week ended Oct 17. It was the lowest reading since March, hinting at some stability in the downtrodden job market.

This is good for global trade and stock markets.