India: Growing Faster in 2009/10

We have been having good news from East Asian economies lately on their potential growth in the current year.

This Reuters report indicates that India’s economy will grow faster in 2009/10 more than what the government has forecasted. This was announced by Pranab Mukherjee,the finance minister fueling expectations that a strong recovery would lead to tighter fiscal and monetary policy.

A top economic adviser said plans for an exit from stimulus policies may be in the national budget on Feb 26, and the deputy governor of the central bank said reforms were needed to sustain growth in a weaker global environment.

Economists said the finance ministry and the central bank were betting on better-than-expected growth in the second half of the current fiscal year, which ends in March, and markets have firmed up their expectations for a rise in official interest rates.

Finance Minister said the economy would grow 7.75 per cent in 2009/10, slightly above the central bank’s view and higher than a forecast of 7.2 per cent issued by the government’s statistical office on Monday.

“Overall the growth number seems ambitious as the investment cycle won’t pick up and agriculture will be hit in the second half,” said Sujan Hajra, chief economist at Anand Rathi Financial Services.

“However, on the inflation side, concerns have not yet been solved,” he added.

Asia’s third-largest economy has been picking up momentum since mid-2009, and data on Friday is expected to show industrial output grew an annual 12 per cent in December.

At a policy review last month, the central bank increased banks’ reserve requirements but held key interest rates steady.

Analysts expect a rate rise at or before the next review in April, and the 10-year bond yield equalled its 2010 high today as traders positioned for tighter policy.

Attention is increasingly focused on the budget, with investors looking for signals as to how the government plans to cut a budget deficit forecast to hit a 16-year high of 6.8 per cent of gross domestic product in 2009/10.

The government has been reluctant to commit to withdrawing stimulus steps such as spending and duty cuts which it took since late 2008 to shore up the economy against the global crisis, in case it derailed confidence in the recovery, but there are some signs it thinks the recovery is firmly based.

Since December 2008, India has announced stimulus packages equalling about 12 per cent of GDP to boost infrastructure and support economic recovery.

“The budget can attempt a roadmap for exit,” C. Rangarajan, chairman of the prime minister’s Economic Advisory Council, told reporters on Wednesday.

Strong growth could ease pressure on the government’s finances by easing welfare spending and increasing tax receipts.

A finance ministry source on Wednesday said gross market borrowing in 2010/11 was likely to be within the current year’s record 4.51 trillion rupees (RM332.8 billion).

The government has said it wants to get the US$1.2 trillion economy back to growth rates of around 9 per cent seen before the crisis, but inadequate infrastructure has long been an obstacle to sustained high growth.

Further, a lack of financial sector reforms means local markets cannot produce the funding needed to upgrade poor roads, ports, railways and airports.

Reserve Bank of India Deputy Governor Subir Gokarn said domestic reforms were needed to offset the changed global environment, and infrastructure investment needed to be accelerated.

“We will need to see a huge amount of frontloading of investment in infrastructure, a lot of which will come from outside because of the fiscal constraints,” Gokarn said.

That could impose significant pressures on managing capital inflows, he said.

Looks like this is real growth and no longer a mirage.

Malaysia: Pay Less with GST?

Is this an assurance? Need we speculate no more?

According to Kamariah Hussain, the Chairman of the Tax Review Panel in the Ministry of Finance, this is so.

The implementation of the Goods and Services Tax (GST) based on current estimates, will not lead to price increases due to the offset from the abolishment of the sales and services tax (SST).

She said logically, with GST, consumers would pay 4.0 per cent tax compared with the current service tax of 5.0 per cent and sales tax of 10 per cent.

“GST is progressive rather than regressive, with tax incidence at the 4.0 per cent GST rate being lower than the current SST,” she said at the Affin Investment Bank forum on GST here today.

For instance, consumers currently pay about 2.8 per cent in tax in the prices of goods purchased but with GST, the tax element will be reduced to 2.5 per cent.

With GST, price should decrease as registrants will be able to claim on GST incurred on their inputs, she said.

“We really hope industries will pass on these savings to the consumers,” said Kamariah.

She said the Ministry of Domestic Trade, Cooperative and Consumerism is coming up with a regulation to address issues of businesses taking advantage and keeping the savings to themselves instead of passing on savings to consumers.

“We are really taking care of the lower income group and ensuring that this lower income group will not be affected by the GST,” she said.

However, the implementation of GST will not only benefit the lower income but is expected to be enjoyed by the whole “rakyat”, she said.

In terms of tax collection for the government with the GST, she said the government is expected to collect less revenue with the replacement of SST with GST.

The government currently collects a revenue of almost RM11 billion to RM12 billion from SST. However, under the GST system there will be an estimated shortfall of RM1 billion in revenue, she said.

In order to collect the same amount, the government would have to impose a 4.2 per cent GST rate, she said.

The less collection means more savings to consumers, she added.

More than 140 countries have implemented GST and Malaysia needs to introduce GST due to “inherent weaknesses” in the current consumption tax, said Kamariah.

The proposed GST model is a broad-based consumption tax in the form of value added tax and it covers all sectors of the economy as well as imposed on the supply of goods and services.

Earlier reports have said that the government aimed to fully implement the GST in mid 2011.

Do you find her explanation acceptable,palatable and believable?

Malaysia: Export Pickup in December 2009

The Statistics Department stated that Malaysian industrial production grew by 8.9 per cent in December compared to the same period in 2008. This is the strongest annual increase since February 2008 led by a pick up in exports.The rise in factory output in December was also in line with the 9 pct gain as reflected in the Reuters poll.

From the data released today of industrial production-a measure of manufacturing, mining and electricity output-it was up 4.6 per cent from a month ago.

Standard Chartered Bank’s economist Alvin Liew said that “output expanded more than expected.”

“Going forward, we think the favourable base effect and the gradual external demand recovery should bode well for industrial production in the first half of the year. The domestic economy is also set to benefit from the impact of the government’s stimulus packages and the recovery in global demand.

“Given the improvement in economic conditions, we are likely to see the central bank on track to normalise interest rates, starting with a 25 basis points hike in the next policy meeting in March."

Let us hear the rate increase from Bank Negara Malaysia then.

MRCB: More than 50% Turnover by 2011

Malaysian Resources Corporation Bhd (MRCB) is definitely seeing its stars shining these days. Possibly brighter than before the current rights issue offer.

MRCB expects turnover from its property division to exceed 50 per cent by next year as the construction of KL Sentral project gains momentum.

According to OSK Research, MRCB's property turnover to group's profits is between 30 and 40 per cent currently. Its on-going projects in KL Sentral are progressing as planned with some ahead of schedule.

"Other than the on-going projects and an improving outlook for the property sector, MRCB is expected to launch its luxury condominium project later this year with an estimated gross development value (GDV) of more than RM800 million," it said.

The research house said MRCB has indicated that its joint venture partner, CMY Capital Sdn Bhd, had reaffirmed its commitment to kick-start the St. Regis Hotel & Residences project soon with an estimated GDV of RM1.5 billion.

In order to continue its legacy in the property sector, OSK Research said MRCB was eyeing several land parcels belonging to the Federal government as part of its landbank replenishment strategy.

It said the company's recent rights issue could be an indication that MRCB was close to sealing the deal.[Are the writings already on the wall?]

"Although there is no firm timeframe on the deal, we believe the potential land acquisition could be a positive catalyst for the stock price," the research house said.

MRCB had hinted earlier it may acquire small parcels of federal land in the Kuala Lumpur city centre including the Brickfields area.

Will MRCB be the wonder kid of the block?

Let us see what are its potential brand new land bank acquisitions.

This will tell if the stars will shine ever brightly for the group after the rights issue close.

Native Expressions 3: Good To Know

Here are some more gems from De Mente's book.

1.Beat one brains out:

Odd but common expression meaning to tire oneself out using all of one’s energy to remember or figure something out.

E.g.

You have been beating your brains out all day long trying to remember where you first met her.
I sat there for an hour or so beating my brains out to no avail.
Rather than continue beating your brains out, take a break and then come back.

2.Below the belt:

This saying may have developed from the sports of boxing where it is illegal to hit an opponent below the belt t oavoid the danger of serious injury. In today's parlance,it refers to a comment or action that is unfair, cowardly or mean-spirited.

E.g.

Some opponents love nothing better than to hit their opponents below the belt.
Her comments were definitely below the belt but I ignored it.
he was not above hitting below the belt if an opportunity arises.

3.Birthday suit:

It refers to a state of complete nakedness,to be nude, in reference to new-born babies.

E.g.

The neighbour's boy running on the beach in his birthday suit.
When you go to the pool party tonight,all you need is your birthday suit.
She startled everyone at the party by walking out in her birthday suit.

4.Bottom out:

It refers to something that has been going down reaching its lowest point,beyond which it cannot go.It is commonly used in the stock market,after which the market will start to rise.

E.g.

Many people started to enter the buy shares when the stock bottomed out.
I am waiting until the market bottoms out.
The market for crude oil bottomed out,and then began rising.

5.Butter up:

This saying means to get to someone's good side by catering to them,praising them. The phrase is drawn from the analogy of spreading butter on toast or something else to make it more desirable or palatable.]

E.g.

No matter how much you butter the boss he is not going to give you a promotion.
She has him so buttered up that he does not know what is going on.
Will you agree if I butter you up?

Native Expressions 2: Good To Know

From the same book," Cheater's guide to Speaking English like a Native" by De Mente, here are 5 more interesting English expressions.

1.Can of worms:

Originally the phrase referred to live worms collected and put in a can for use as fish bait. Now it is used in reference to situations that are very unpleasant, disadvantageous or otherwise presents a problem.

E.g.

The new contract was so complicated that it quickly became a can of worms.
If you get involved in that partnership, you will be opening a can of worms.
I knew I was in a can of worms as soon as I accepted that new position.

2. Carrot and stick:

This phrase refers to offering a combination of a reward (carrot) and punishment (stick) to influence someone’s behavior. It goes back to the days when mules and horses were trained by giving them carrots when they behaved well and punishing them when they misbehaved.

E.g.

Some parents take a carrot and stick approach to bringing up their children.
Dictatorships often rely on the carrot and stick approach to controlling people
The carrot and stick approach doesn’t work with Teddy.

3.Cave in:

By nature, caves are subject to collapsing or ‘falling in on itself’. This happens when they are undermined, giving rise to the term ‘caving in’. Today, it is use in the general sense in reference to people giving up whatever they are trying to do.

E.g.

The union forced the company to cave in to its demands for a wage revision.
Their negotiating team suddenly caved in and agreed to our terms.
No matter how tough the going I am not going to cave in.


4.Clean sweep:

An expression deriving from the act of sweeping a floor completely of all debris. It now refers to ‘complete success’, winning everything, the whole series etc.

E.g.

The Home team made a clean sweep of the tournament championships.
The new owners are going to make a clean sweep of the old management.
We won every post in the union elections. It was a clean sweep.

5.Cook the books:

This expression grew out of cooking food to make it taste better. Today,it refers to illegally changing accounting information in the company books to make the financial situation of the company looks better that it really is.

E.g.

The accountant was cooking the books for over a year before he was found out.
The company went bankrupt after it was learned that its books had been cooked.
Some companies are very good at cooking their books.

Genting: RWS Licence and Share Price Fatigue

It couldn't happened at the worse time. With the fearful cloud of sovereign incapacity of some European nations such as Spain and Greece, Resorts World Singapore which finally obtained its casino licence is expected to open this week,so reports Leong Hung Yee of the STAR.

Let us read what are the issues on this.

"Genting Singapore PLC, which has been issued a licence for its casino at Resorts World Sentosa (RWS), is expected to open its doors this week.

Managing director Justin Tan Wah Joo said in a statement yesterday that RWS, an indirect wholly-owned subsidiary of the Genting Singapore, was issued the licence by Singapore’s Casino Regulatory Authority on Feb 6. RWS is one of two casinos which will start operation in Singapore this year.

Genting Singapore saw its shares shed 2 cents on the Straits Times Index to S$1.09. Genting Malaysia’s share fell 6 sen to RM6.72 yesterday. The company suspended its trading in its securities in early trade to formally announce the receipt of the casino licence. However, it did not say when it expects to open the casino in RWS.
Men walk past Singapore's first casino which is expected to open this week. - APfile. Singapore regulators said Saturday, Feb. 6, 2010, they issued Resorts World Sentosa a license to operate the city-state's first casino.

News report said the group might open its Universal Studios theme park at RWS on Feb 11 and the casino a day after.

Attempts to contact Genting Singapore, Genting Malaysia and RWS to confirm on its opening were unsuccessful.

RWS opened four of its hotels on Jan 20, and will open other attractions in phases, while Marina Bay sands (MBS) has said it would open in mid-April.

“The opening will allow RWS to capitalise on the Chinese New Year (CNY) celebrations, often the most active time for Asian gamblers,” an analyst said, adding that beating MBS would allow RWS to capitalise on the excitement around Singapore’s much anticipated entry into gambling.

Morgan Stanley estimated that the Singapore’s gambling industry could generate between US$3bil and US$3.7bil of revenue in its first year of operation.

ECM Libra Research said it came to understand that RWS would open its doors to casino patrons yesterday. “To open a week before CNY will allow RWS to capture the higher margin mass market CNY volumes.”

“With MBS slated to open between April and June, RWS will take the lion’s share of the Singaporean gaming market which we value at S$4bil. With two to four months lead time, avid Singaporean gamblers will opt to pay the annual levy of S$2,000 rather than pay S$100 per 24 hour visit and commit themselves to gambling at RWS,” it added.

“With these first mover advantages, RWS is able to help contain cannibalisation on sister casino, Resorts World at Genting (RWG), by cross selling before MBS opens. We understand that the purpose of establishing the Simon Chelsea Premium Outlets and potentially hotels and theme parks in Johor is to direct RWS-RWG Malaysian patrons away from MBS,” it said.

TA Securities said rumour had it that tenants have been gearing up for opening by weeks-end, which marked the start of CNY festivities.

“If casino does open by Feb 13, we estimate that the additional 47 days worth of gaming receipts could add about S$209mil of FY10 revenue. Bottom-line would increase by S$63.67mil or 10.5%,” it said.

Analysts said Singapore’s casinos was well-placed to tap gamblers’ interest in Southeast Asia, and could possibly take business from the region.

According to Nomura Equity Research, investors would be watching if the competition from the two new casinos in Singapore prove less severe than what was currently anticipated by the street.

It added that investors would be assessing the impact of the two new casinos closely over the next 12 months on Genting Malaysia’s business.

“To reflect the potential threat from the two casinos in Singapore, we have factored in a 30% drop in high-roller business, 20% drop in VIP business, and a 10% fall in the mass-market contribution for FY10f.

“The fall in mass-market contribution is likely to be temporary, given the novelty factor of the new casinos.

“Over the long term, we expect the mass-market segment to stabilise, since it is difficult to imagine Malaysian mass-market punters making regular visits to Singapore,” Nomura said."

Well, we shall see how all these predictions pan out,won't we?