Fusion Investor Chatbox

This chatbox is for fundamental, technical and related discussions on investing in Bursa Malaysia. Registration is required to join. Please email me at fusion.investor@gmail.com with your preferred name and password and I will inform you when registration is confirmed.

Disclaimer: As usual, you are solely responsible for your trading & investing decisions.

Monday, June 30, 2008

Beta, MPT, KLCI, Genting and Resorts.

The chatbox were discussing Genting and Resorts this morning, and a regular chatter "bullbear" shared his observations below.

"seng, from my observation... genting and resorts are high beta stocks... their prices have always swing wildly..."

"surprisingly, i checked the beta (weekly) of these stocks in invest asia online.com site: Genting beta (weekly ) = 0.9... Resorts beta (weekly) = 1.12...."

Serious investors should know what is Beta, at least conceptually. If you don't know, you may read here - http://en.wikipedia.org/wiki/Beta_(finance). Beta is an important concept in Modern Portfolio Theory (MPT), and again, you may read more here - http://en.wikipedia.org/wiki/Modern_portfolio_theory. Both are taught in Finance courses in most if not all universities around the world, and any Finance graduate worth his salt should at least remember what is Beta and MPT.

However, despite being widely taught all over the world, ironically, the world's most successful investor of all time - Mr Warren Buffett - is a critic of MPT and Beta. Basically, he doesn't think that Beta is important for lifetime investment success.

To recap, Beta measures the extent the Expected Return (ER) of a stock correlates to the Expected Return of the Market. If Beta = 1, then, it means the stock ER should match the Market ER. If Beta <> 1, then, the stock ER is greater than Market ER.

Which means that the only way to calculate Beta of a stock is from historical data. The ass-u-me-tion is that the past predicts the future. So, you compare past prices of a stock against a Market index (often ass-u-me-d to represent Market Returns), and calculate your Beta.

And immediately, a problem arises - exactly how long in the past do you need to calculate Beta?

Won't you get different numbers if you use different past time-periods?

In short, the concept of Beta as a fixed constant is just plain wrong.

Beta is not a constant. Academically, we must acknowledge it is a Random Variable, meaning, the number can vary.

And again, if you want to study Beta further, you must make certain ass-u-mp-tions, that this Beta is a "Random Variable".

Don't let that phrase Random Variable turns you off. What it basically means is that academics don't really know anything about it. They ass-u-me it has a certain Mean and a certain Standard Deviation, following another ass-u-me-d underlying statistical distribution (such as a "Normal distribution" or "Poisson distribution" or another distribution with fancy names), and in the real world, no one knows whether this is actually true or not!

If you think academics likes to make a lot of ass-u-me-ptions, you are not wrong.

So, immediately, you can conceptually understand that the concept of Beta as a specific constant is flawed.

Anyway, for me, I prefer charts.

You see, charts can tell me quickly what words will take paragraphs and still won't be able to convey accurately.

As they say, a "picture paints a thousand words" and possibly more.

So, let me show you 2 charts.

The first chart compares the KLCI with Genting and Resorts during the recent "bull run".

The second chart compares the KLCI with Genting and Resorts during the current "bear market".

Chart 1 - "Bull Run"

Quick comments:

1. Blue line = KLCI. Red = GENTING. Green = RESORTS. Y-scale = % returns from same starting reference point 4 July 2005.

2. Looking at the blue line, you will notice that the KLCI was basically flat from July 2005 to June 2006, before the bull run begins.

3. From July 2005 to June 2006, GENTING outstripped RESORTS, but they caught up again by June 2006. "Beta" which the academics used will never be able to convey this picture to you.

4. From June 2006 to June 2007, GENTING outstripped RESORTS again in the bull run. The academics which obtain higher Beta numbers for GENTING will then point out to you that this is "proof" that GENTING has higher Beta than RESORTS but you won't find them in 3 above.

5. But interestingly, both GENTING and RESORTS outstripped KLCI. If you believe KLCI represents "market", then, it does put to question whether GENTING have a Beta of less than 1 ... hmmnn ....

Chart 2 - Bear Market

Quick Comments:

1. Same colouring codes. Same type of graph. The reason KLCI is showing negative returns because during this period, it is a bear market. I'm using the term "bear market" in a loose manner, meaning, it's a market in decline, and not necessarily one which academics pain-in-the-butt "bear market" definition must meet a minimum % fall.

2. Again, the most immediate observation is that both GENTING and RESORTS has fallen faster than KLCI. Again, I don't know and has never been interested to know whether GENTING Beta is less than 1 or greater than 1, but just from the charts, I know that GENTING falls faster than KLCI.

3. But in the business of making money (as opposed to being academics), I'm more interested in finding "exploitable opportunities". I noticed that usually, GENTING would fall faster than RESORTS. The Red Line leads the Green Line.

But interestingly, since last week, we appear to have seen a "divergence". The Red Line spikes up, but the Green Line continue to come down and is line with KLCI fall.

Is this a true divergence? Is this a temporary divergence? Is this difference exploitable? I don't know the answers, but some traders might take this opportunity to trade with tight stop loss and see what happens.

Baltic mulls average daily time charter rate

Saw this article, and thought I save this here for future reference. Full link here - http://www.lloydslist.com/ll/news/baltic-mulls-average-daily-time-charter-rate/20017547498.htm


Baltic mulls average daily time charter rate

Michelle Wiese Bockmann - Friday 27 June 2008

THE Baltic Exchange will consider industry demands to develop an average daily time charter rate for the Baltic Dry Index, to boost transparency for the rapidly-growing market in freight derivatives.

The move follows the recent launch of a series of retail-based derivatives products based around the BDI, aimed at banks, hedge funds and other investors outside shipping seeking direct exposure to global freight rates.

Now viewed as a vital economic barometer for world trade, the BDI reflects the average freight rates for 26 routes and four ship types, and is expressed via points, not as a dollar-per-day rate for bulk carriers.

Baltic Exchange chief executive Jeremy Penn said the request for establishing a time charter average had been made by derivatives traders.

“There’s an argument that if we can do that (provide a time charter average) then so can everybody else,” Mr Penn said.

“But we will certainly be taking a look at that and come back with a view on that, and whether it’s unnecessary because it’s something we already can do on our own.”

In June derivatives brokers Imarex and ICAP Hyde both launched derivatives contracts based around the BDI.

Forward freight agreements for the dry bulk industry had previously been traded only on the daily average time charter rate for different bulk carrier types or the daily time charter cost on major routes. These are then settled against the corresponding Baltic Exchange indices.

Both brokers said there was strong demand for a simpler global freight derivatives contract as the evolution of screen-traded, cleared contracts sharply reduced counter-party risk, opening up new participants.

Six months ago the Baltic Exchange began providing a dollar-per-day rate for its tanker indices for the first time, in addition to Worldscale rates.

A daily average timecharter rate for most tanker types is now provided for the Baltic Dirty Tanker Index for very large crude carriers, suezmax and aframax tankers.

The step was viewed as an important step forward to boost transparency for paper trading in tanker derivatives, allowing contracts to be better priced and more easily understood by traders outside the shipping industry.

Sunday, June 29, 2008

Crude Oil Charts Update

Tracking crude oil price is one of the many popular topics in my chatbox for many reasons.

- Last year, it was indispensable if one owned and tracked O&G stocks (But relationship has "weakened" recently and was even "inverted" at times).

- Appreciation that higher crude oil prices isn't good for stock market from global inflationary impact.

- Appreciation that higher crude oil is not good for Malaysians in general via higher fuel prices.

- Superb trader Boon declared his long positions in his blog here (http://www.bhcinvestment.com/) and he has quite a following there and here too.

- Fellow bloggers Dali and Moolah also covers the topic in their blogs regularly. I think it's safe to say many other blogs including mine also covers the topic regularly.

- It is clear any serious stock investor and trader would be tracking crude oil prices regularly due to the important stock market impact, even though they might not have any direct positions in crude oil spot or futures contracts.

Well, it seems that this close tracking appears to have been vindicated some last Friday. On 27 June, crude oil broke out to a new high ($143) again, and closed $140. The weekly and daily charts below.



Some observations

Weekly chart shows continued Uptrend.

Daily chart is more interesting, as it tells you a bit more information.

One of the major tools of Technical Analysis is Trend Lines. As mentioned before, there are usually many ways to draw trend lines, and this case is no exception. Trend lines are important because they indicate both general price direction (up, down, sideways) and possible support and resistance levels.

Here, I've just drawn 2 out of many possible Uptrend lines. For simplicity, there is a shorter (approximately 1 month) and steeper uptrend line, which suggests possible support level of $135. There is also a longer (approximately 3 months) and less steep uptrend line suggesting stronger support level of $132.

Purist will argue that my 2nd trend line is not technically correct since it cuts the second point rather than touch, and I would not argue with them (smile). Don't always blindly trust what you read including here. Always exercise your own independent, critical thinking.

Despite possible disagreement with trend lines, one thing you can't argue is the way prices pulled back, which I indicated in circles.

There are 5 circles drawn. First circle in Feb 2008 is small and brief before resuming uptrend. Second circle in late Mar 2008 is typical W shape pullback, before resuming uptrend. Third in late Apr 2008 is also an interesting smaller shake-out. Fourth in late May 2008 is a much bigger shake-out. Note so far the pullbacks and shake-outs are spaced roughly once a month. But the fifth (and current June month) lasts longer than the 4 prior pullbacks, and the uprise gets harder and harder, and even last Friday's rise seems to lack the usual energy. This is of course evident to most practitioners, and should be taken as a warning signal.

The question now is how should one act if one is long? In view of the weakness seen that is weaker than prior pullbacks, does this means we should changing strategy and now try to sell at the top, i.e. attempt to pick tops and sell? Or do you still retain your discipline and only sell when the uptrend is over at much lower prices?

Is the uptrend is over? Technically, as a price makes a new high, we cannot yet say the uptrend is over yet. We have to wait for a confirmation before we can conclusively say it is over. The flip side of course is that when confirmation is received, prices are no longer near the top.

So, try to find top and sell at the top? Or wait for confirmation and sell at a lower price? Which should you do?

Much depends on your trading strategy, whether you aim to ride the big moves, or are trying to catch the smaller cycles. Both have their pros and cons, and some will tell you their methods are better than others.

The problem with selling at $140 is that if the price makes a new high, you will miss out on further uprise which can be significant. If your plan is to get back in at $142, you might risk a whipsaw. On the other hand, if you continue to hold on, you have to be prepared to see it fall back to $131. There is no free lunch, and this is what makes trading exciting.

Also, I expect those who bought it at much lower price and have held it over a much longer period (= the masters) will try to give this bugger more rope to move, since this sort of rise does not occur daily. My belief - true trend following traders like the Turtle Traders, Bill Dunn, John Henry, Ed Seykota, etc. knows that the big one is the one they must hold on, no matter how wild the horse bucks, because they know that their high returns depends on riding the wild horse all the way to the top - they may suffer drawdowns like 30 small losses in a year, to ride 3 big ones, and the 3 big gains is what they expect to give them an overall +50%, +80%, +100% return per annum after subtracting the 30 losses. They know that if they sell too soon, they will lose their position, and without a position, they cannot enjoy further uprise.

This naturally is not what the average trader does, and requires huge, huge nerves of steel and immense discipline, and in my opinion, is what separates legends like them and Jesse Livermore from the average trader. As Livermore likes to say, the big money is in the big moves.

the same time as prices get higher and higher and especially when prices are no longer justifiable and nearly everyone wants a piece of that action when buyers are nearing exhaustion, the masters tighten their stops, rather than giving a bigger rope. The million $ question is when do you tighten the rope and when do you give a bigger rope? This is not an easy question to answer if you are a discretionary trader, but is already answered if you trade your mechanical system. For the latter, you simply must follow the system that you knew worked.

Should I short this bugger? I think not yet ... at least, not June 27. Will have to see how June 30 goes first. This is the good thing about trading. As Buffett likes to say, investing is like playing baseball, except you (as the batter) don't have to swing every time, and you never get sent out after 3 strikes. If June 30 is not good, wait for July 1, and if not good, wait for July 2, etc. Be patient, and wait for the perfect pitch.

Disclaimer: I
am not a futures trader, only a pretend one, so, treat this as merely one observer's blabber and mumbles (smile). As usual, buy, hold, sell at your own risks.

Saturday, June 28, 2008

Choices, choices, choices: A personal review, mutters & blabbers

Fellow blogger and famous Star writer - Dali - dropped a short note in my cbox last night.

"seng, forgot to tell u that tomorrow's article in the star is dedicated to u, tks for inspiring me to write Door 1 Door 2...lol remember"

Naturally, I took a quick look at his article this morning (grin). The full article is here - http://thestar.com.my/news/story.asp?file=/2008/6/28/bizweek/1433084&sec=bizweek. Reading it, it was clear to me that Dali has given quite a lot of thought on this topic. It is wide-ranging, and very thought provoking. Whilst I find myself in full agreement with many of his points, I also find myself surprised by some of his points. And I certainly wouldn't dare to claim credit for even 1% of the material written there. It is definitely his own sweat and effort (grin).

Because Dali has written a really thought provoking article, I thought I take the opportunity to provide a personal commentary (i.e. mumbles and blabbers) to a few of the more interesting points raised. For avoidance of doubt, he didn't pay me to write this article (grin).

"It boils down ... to a person’s net worth and their tolerance of risk." - Dali

Seng comment: This is a good point to remember. Each of us here has differing levels of net worth, and differing levels of risk (or pain) tolerance. We also have different ways in defining, thinking about and calculating "net worth". Some of us just think about the capital we set aside to trade stocks, others include all forms of assets less liabilities, and a few might even have plans for next month/s salary which has not yet arrived.

So, when you hear an analyst touting a good stock to buy, or get a stock tip from your colleague at work, friend, family or even directly from the Internet, don't just blindly follow.

He may say he's putting everything he has on this sure thing, but that might turn out to be $50k cash that he has, when his net worth is over $1 Million (if you include his business, his property, other assets, etc.) which he didn't tell you.

Or he may have a much higher tolerance for risk in that particular trade, and can sleep soundly when the stock price went from $1 to $0.50, but you already can't sleep when it falls to $0.90 and again he didn't tell you and you didn't tell him.

Or he may have a certain profit objective (e.g. 20% gain) and a certain stop loss (e.g. 5% loss) and predefined a certain risk amount (e.g. maximum loss not more than $1k) which you weren't aware of, but had you know, you will quickly realize that it is not suitable for you since you were thinking of a quick 5% gain, with no idea of stop loss, and thinking of risking all the money you set aside to buy a house next year.

Or a million other possible differences.

Hence the phrase: "No 2 person are quite ever alike".

"Is it any wonder then that the markets cannot be understood just via numbers and valuations alone. Things we cannot explain, we call them sentiment or momentum or over-sold or over-bought? You get the drift" - Dali

Seng comment: Markets definitely cannot be understood via reported business fundamentals alone. My opinion.

You might have thought about this phenomena before - e.g. company quarterly earnings reports. The business numbers are published just once (usually end of day) every 3 months, yet, prices can fluctuate hugely and daily during that 3 month period. So, doesn't that mean price movements not depend on business results alone?

News flow on the business is another attempt to explain price movements. Sometimes it works, but sometimes it doesn't and can have an opposite price reaction to what seems like a good/bad news. It is obviously grossly inadequate since the company news do not feature daily in the news, yet price moves daily. Same thing with analyst reports. It sometimes cause an opposite price reaction, and it isn't published daily. How does one explains price movements when there is simply no news?

The most often quoted answer (and has become cliched which is a shame) is supply and demand for the stock.

But it doesn't mean we must dismiss business fundamentals as useless. On the contrary, Fundamental investors' edge is the ability to decipher and deeply understand the business numbers, where together with other knowledge, one is able to project correctly how that business will perform in the coming year/s, and thereby ride out the "noise". In fact, lower "irrational" prices is often an opportunity to buy on the cheap. But the key is the ability to project correctly the future worth of the business. This is much tougher than it sounds. It is a fact that most people will get it wrong, seriously wrong. Very few if any can get it consistently right to the extent of being able to consistently make serious money out of it. And ironically, and invariably, most if not all these projections carry a very, very high degree of confidence level! Hence the phrase: "Surely they all cannot be right, despite their confidence!".

"...you will find investors, who usually start off with a proper well-researched decision on what stock to buy. The same person will make an illogical decision to cut-loss, or take profit too early because there were other factors that will come into the picture for them.". - Dali

Seng comment: I might be taking this particular phrase out of context, but I think some of you might find yourself in the current situation, where in your own belief, the decision to go long when the KLCI was 1500 was well-researched, and you now face a dilemma about what to do with your current holdings now that the KLCI has gone from 1500+ to 1200.

Should you cut loss? "But it was well-researched you might argue, so, maybe I shouldn't cut loss?" ... "But Seng said the majority analysis are wrong, so, maybe I could be wrong." ... "But I'm so sure I'm right! Surely I belong to the minority who can research well right?" (and if you keep second guessing yourself, you might go crazy like me right?)

The shortest answer is that there is no easy answers. :-)

But what I do know is never, ever let ego get in the way of rational, sound, objective decisions, even if it means you must cut loss. Cut loss is a huge topic in itself, if only because it is so difficult to execute stop loss for many, many people.

Values & Ethics

This is my favorite part. It is a topic close to my heart and one that inspires me to blog here and there, and to make comments in the blogs of others from time to time when time permits. Totally agree with the observation that ".... no one can say with absolute certainty until they have actually been posed with a real choice." - Dali

So, what is our Door 1 and Door 2? How do they appear? Do they knock loudly and announce that they have arrived? Or do we create the opportunities for Door 2 to appear when we only have Door 1?

If we are "lucky" to have Door 1 Door 2 right now, how should we think about the choices? Figure it out ourselves? Talk to trusted ones? Listen to gut instincts? Let ourselves be tempted by the saying "opportunities don't knock twice?". Or take the view that "opportunities are all around us, we just have to look at the right places"?

What about mentors? Those wiser than us? The wisdom within ourselves, our inner wisdom? Do we have enough quiet time to reflect? If not, you won't have the chance to even ask this question "What is your Door 2 value?". Some of us are so busy in our daily lives, that when prompted, our natural reaction is "Huh? Door 2? What Door 2? What is that scream? Huh? Is that the house burning down? OMG! ..."

But to spice this article up, let's take the perspective of a substantial shareholder who is also the M.D. and CEO of a company.

As the CEO, he has a lot of time in his hands to reflect about Door 1 and Door 2 and many other doors. In fact, he has already probably mastered the art of constantly looking for new doors, which probably brought him the CEO position in the first place. (And for some CEO, they don't even question their hidden JD - Job Description - which is to constantly seek and create as many Door 2 to benefit themselves first as much as possible)

But to keep things simple, let's say his Door 1 is his guaranteed regular salary of say $500k per annum (excluding bonus & perks).

His Door 2 might be this opportunity (in reality, he has many Doors daily). Let's keep it simple and say a possible profit opportunity of $5M, where by spending $20M of the company's money, he will use that to buy a property from his wife's company, where the property current market value might just be $15M say. And let's say he knows a valuer who can value it for him at say $20M. He knows the company's total gross assets is say $400M, so, a $20M purchase is unlikely to attract much attention. The purchase can be made legal as a matter of routine. He knows of a few others who has done it before, he knows his good personal MP friends has done it too and boasted to him before when they were holidaying in Australia, New Zealand or Hong Kong (grin). In short, low chance of being caught (who dares to pry into things that don't matter to us?), even lower chance of being prosecuted, the fine is minimal/small if convicted, the success payoff is high and a very high, if not almost certain chance of success.

Sounds familiar?

Obviously such a purchase is not in the minority shareholder's best interest. The purchase benefits the CEO's personal pocket, at the expense of minority shareholders.

How should the CEO respond to his Door 1 Door 2 choice?

And if minority shareholders realize that all CEOs always have this Door 1 Door 2 choices regularly, how should minority shareholder behave and respond?

This of course is a very, very tough question to answer. "I don't think I want to swallow that wake-up pill. Give me that sleeping pill again please".

As Dali mentions, rules and regulations only goes so far. Current reality is that it is inadequate. Just look at the size of Moolah's blog here - http://whereiszemoola.blogspot.com/. We cannot deny many cases has happened, and will continue to happen. Many more cases get off without being even detected. Very few cases gets charged in courts. Only a handful probably gets prosecuted, but none really gets a heavy enough fine to deter the rest of their peers. Current reality is it will continue, which is sad, unless there is a big enough TSUNAMI to change current reality.

And a Tsunami will never happen unless there is a big enough wave and force. It certainly won't happen if there is not even a ripple. In other words, it must start with ourselves. Do we recognize and accept, deep in our own hearts, that certain actions are right and wrong? If you sincerely believe that certain actions are wrong, have you considered lending public support and condemn that action if you can? If not, why not?

If the CEO is ethical, has a strong sense of what is morally right and wrong (usually but not necessarily from a strong and deep personal religious belief) and think like a shareowner first, then, he probably would do the right thing and quickly lock Door 2 , throw away the keys before even thinking of opening it. And he makes sure noone else finds the keys to unlock Door 2, or take actions to strongly deter/catch/penalize those who try to even open Door 2 for themselves.

Other CEO's who knows that personal reputation is a very important thing to protect might refrain from opening Door 2 also, since even just 1% chance of being discovered and reputations destroyed is not worth a lifetime of building one's career. Many CEOs are also deeply practical people and will act in the path of least resistance.

And therein lies the problem. A rare few shines like a beacon, a small minority may be trusted, many are borderline opportunistic, and some are simply no hope hard-core cases. What should you do, as a minority shareholder when we simply just don't know the CEO nor management that well? And we know that once-a-year annual meeting to voice our displeasure is so grossly inadequate for so many cases?

Recently, we discussed another different case in Moolah's blog here - http://whereiszemoola.blogspot.com/2008/06/lion-diversified-acquisition-of.html. You might be able to see what is a possible Door 2 if you stop and think about the Bursa announcement and ask the questions that Moo has asked. I can see some readers thinking that it is "unfair" for me to pick this case, out of possibly hundreds of cases each year, but to me, the issue is simple - if we haven't yet observe, we must start observing from somewhere. And that link is as good as any to start with.

Anyway ...

Back to this Door 2 topic for all of us who are neither substantial shareholder nor CEO nor MD.

Obviously, we all have our own Door 2's as well. Perhaps not as big nor as frequent as the hypothetical CEO above. Perhaps, it's as tiny and insignificant as "Should I take an extra pen home from the office stationary since the Mrs say we need one at home?"

Obviously, put in this way, live long enough in the real world and we all have faced Door 1 and Door 2 choices before. And since we are just human beings, how many of us can honestly say we have never made mistakes in our past choices? Have we done what we expect from ourself to rectify our past mistakes to the best of our ability then? Can we let go of the past? Are we ready to let go of the past? Unfortunately, we can never go back into the past to change things. And we cannot live in the past. But what should we do from here on, from this point onwards, after having swallowed the wake-up pill? Is the Door 2 choice illusory? Is our Door 2 just a Hobson's choice, i.e damned if we do, damned if we don't? Is staying on Door 1 is too painful to bear any longer, we simply have to take the chance with any Door 2?

Tough choices. Yet, "we always have choices in our life, more than what we initially think".

Ok. I think I better stop here. This blabber is getting too long, and this is one of the problems of having read a really thought-provoking article. All sorts of thoughts comes in and out, and I haven't even scratched a small fraction of what I want to say.

Happy thinking!

Friday, June 27, 2008

Higher bumi equity holdings: Commentary

It seems UMNO Branch Elections will start this July 17, culminating in the Supreme Council polls in December.

The PM knows that everyone knows that he is facing a real challenge in this upcoming UMNO election.

Many mentioned the PM has now shifted gear.

Instead of focussing on Malaysian issues, he is more likely to push for Malay interests first. Even if this is at the expense of nation's best interest.

Thus we can expect more of the same (old sheeet?), especially on issues like the above.

I personally don't think it's the right thing to do.

The PM should always be PM of ALL Malaysians first. Yesterday, today and tomorrow.

But sadly, we live in the land of Malaysia Boleh. Where personal interests always come first before national interests. Maybe I am getting too idealistic.


If you are over the age of 18, chances are you will have heard and remember that the Bumiputera equity holding is not a new issue.

It's an issue that has been debated and discussed many, many times with great passion in the past.

But since it was reported in the Star today, I intend to apply critical thinking today on it anyway.

We should never be complacent about these things.

My usual comments in Italics Bold in Brackets.


Full article here - http://biz.thestar.com.my/news/story.asp?file=/2008/6/27/business/21670303&sec=business

Higher bumi equity holdings

PETALING JAYA: Bumiputra equity ownership in the corporate sector, based on the par value of shares, increased to 19.4%, or RM120.38bil, in 2006 from 18.9% in 2004, according to the Economic Planning Unit (EPU).

(Seng comment: Three points:

1. Please, please, please split Corporate Sector into Listed vs Unlisted Companies lar. Why?

Because Listed Companies are not small - $700 Billion to $1 Trillion, depending on market values.

2. Show Market Values also lar, not just Par Values. Why?

Because Par values are outdated and totally irrelevant. Market value is what's paid out when sold, not par value. Market Value for older companies can be far bigger than Par Value. Market Values for listed companies are readily available.

It is "kacang putih" for EPU to publish Market Values. No technical excuses acceptable.

There's no real need to hide this info. When you hide, you create distrust. Nobody will believe you. Isn't this common sense?

3. I cannot comment intelligently Par value figures increasing from 18.9% 2004 to 19.4% 2006. I really don't know if market values are increasing or decreasing! It's like driving with eyes looking everywhere except the road in front and the map.)

It said the Government's target under the Ninth Malaysia Plan (9MP) was to attain bumiputra equity ownership of 20% to 25% by 2010.

(Seng comment: A government target using par value is just plain stupid.

It is as silly as you and me trying to increase our par value net worth by 2010!

No financially informed person would do this.

Our entire personal financial planning and financial services industry don't use par value!

Both Finance and Deputy Finance Minister should know this simple fact.

Why continue to behave like an ostrich sticking its own head in the sand and never look up?

If you want to continue whatever policy you are trying to justify, just continue. Don't insult our intelligence lar. The fact that you continue to justify whatever you are doing using Par Value shows clearly that you are not interested in listening to us anyway.

If the government is not interested, then, I hope the Opposition listens.)

EPU director-general Tan Sri Sulaiman Mahbob told a press briefing on the mid-term review of the 9MP on Wednesday that of the 19.4% in 2006, individual ownership was 15.1% (an increase from 15%), institutions at 2.6% (up from 2.2%) and trust agencies unchanged at 1.7%.

(Seng comment: I cannot be bothered to look at any analytical breakdown by par value by itself. It is just plain stupid.)

Equity ownership was based on the par value of shares and not on market capitalisation, he said.

Sulaiman said equity ownership in the corporate sector among non-bumiputras also increased from 40.6% in 2004 to 43.9% in 2006. Of the 43.9%, Chinese ownership increased from 39% to 42.4%, while for Indians, there was a slight decline from 1.2% to 1.1%. It was unchanged at 0.4% for other races.

(Seng comment: Trying to come to some wealth distribution conclusions by race using par value only is nonsensical. If every company runs their business to maximize par value, they would not go anywhere!)

Nominee companies owning shares showed a decline from 8% to 6.6%, while for foreigners, there was a drop from 32.5% from 30.1%.

(Seng comment: Yes, don't forget foreigner's shares too. Much more important than just focusing on races. Whilst we argue and bury our heads in the sand arguing which race gets more which gets less, Malaysians as a whole may be getting less shares! We should be Malaysians first, and race second, not the other way round.)

The estimation of the ownership took into account 680,000 active companies from the Companies Commission of Malaysia data. The Government's shares in firms, including government-linked companies, were excluded from the estimation.

(Seng comment: So, EPU has the sophistication to exclude certain companies. This is not easy and is undoubtedly computerised. But no sophistication to show market values? I guess Malaysian cows can fly.)



2nd Article from Malaysia Today. Full article here - http://www.malaysia-today.net/2008/content/view/9270/1/

Bumi ownership at 25% by 2010, says Abdullah

Posted by Super Admin
Friday, 27 June 2008

KL government will continue to push pro-Malay economic policies, says Premier

He proposed several measures to help Malays increase their ownership of listed companies to 30 per cent by 2020.

By Carolyn Hong, The Straits Times

MALAYSIA will continue to promote its pro-Malay economic policies to help increase bumiputera ownership of listed companies to up to 25 per cent by 2010.

Prime Minister Abdullah Badawi, in tabling a mid-term review of the country's five-year development blueprint, said Malay corporate equity had increased from 18.9 per cent in 2004 to 19.4 per cent in 2006.

The final target is 30 per cent, by 2020.

He proposed several measures to reach this target, including setting up a database to monitor the performance of the majority-Malay community in the corporate sector.

'Greater emphasis will be put on ensuring that the bumiputera community has controlling stakes in private companies,' he told Parliament.

The Ninth Malaysia Plan runs from 2006 to 2010. The mid-term review is a scheduled revision of the plan.

The affirmative-action policies, which aim to give the Malays a leg-up in the economic and education sectors to help them catch up with the Chinese, have become controversial.

Latent resentment has bubbled to the surface in recent years as the Malay rhetoric escalates, and the issue has become a significant factor that caused non-Malay voters to shun the ruling Barisan Nasional coalition.

The level of Malay corporate equity ownership has also come under dispute after an academic last year claimed that the 30 per cent target had already been reached.

He disputed the government's calculation method which excluded government-linked companies and used the par value of shares rather than their market value.


However, Datuk Seri Abdullah can ill afford to do that at a time when the Malay community is chafing at a perceived loss of power after the March 8 polls.


The report showed that the Indian share of corporate equity had slipped from 1.2 per cent to 1.1 per cent from 2004 to 2006, while Chinese ownership had risen from 39 per cent to 42.4 per cent.

(Seng comment: Again, analysis of wealth distribution using Par Values are stupid and nonsensical. One cannot draw any serious conclusion based on this...


Thursday, June 26, 2008

KB council bans lipstick, high heels?

This evening, the chatbox was chatting - amongst other things - about Kelantan where the topic about banning lipstick, high heels & rape prevention came up!

Personally, my knowledge about this is limited, and came primarily from the Star article below.

The Star attributed the source of reporting to Bernama, which should have raised eyebrows.

But the actual impact of that reporting surprised me in retrospect.

In the absence of conflicting information, none of us suspected anything and just ass-u-me-d that both Bernama and the Star were reporting the truth, the whole truth, and nothing but the truth.

And in retrospect, this turned out to be a BIG mistake!

Anyway, if you still don't understand what I'm talking about, this is what the Star reported:



KB council bans lipstick, high heels

KOTA BARU: Muslim women employees working here are forbidden to wear lipstick and high-heeled shoes to work.

This directive is contained in a municipal council circular dated May 25 and signed by its president Shafie Ismail, which has been distributed to business premises here.

A check, however, found that only a few tenants had received the circular this week.

The circular stated that the directive, targeted at Muslim women employees working in food outlets and other business premises, was issued to prevent incidents like rape and illicit sex as well as to safeguard the morals and dignity of Muslim women in Kelantan.

It stated that Muslim women were forbidden to wear thick make-up, bright coloured lipstick and high-heeled shoes which made a tapping sound.

Those who insisted on wearing high-heeled shoes should choose those with rubber soles.

Attempts to contact Shafie for clarification were futile.

The directive on the wearing of lipstick and high-heeled shoes are in addition to the wearing of scarves, which should cover the chest and not be of transparent material, blouses with long sleeves, which were long and loose, as well as socks.

Those who do not adhere to the regulation can be fined up to RM500. – Bernama


So, if you just read that and that only, what do you think?

Well, if you're like most people, I think this might be what you're thinking ...

"What a stupid & idiotic thing to do in Kelantan"

"It is stupid to ban lipsticks and high heeled shoes!"

"Lipsticks and high heeled shoes have nothing to do with rape prevention!"

"Men must take responsibility for their own feelings and actions, not the women!"

"Which stupid government in Kelantan introduced this? PAS?"

"Doesn't PAS has better things to do in Kelantan?"

etc. etc. etc.


So easy to think like this isn't it?

And like you, I also fell into that trap of thinking for nearly 2 days.

Until I visited this website here - http://harismibrahim.wordpress.com/2008/06/24/selamat-datang-ke-darul-al-taliban/

A few enlightening things:

1. More facts in that article. There is an actual copy of the circular in that link. It also has a copy of the pamphlet so that we can better understand what actually happened in Kelantan.

2. The first shocking discovery I got from the website is that the scope is not applying to the entire Kelantan state, but to just Muslim women traders within the ambit of Majlis Perbandaran Kota Bahru (MPKB) Bandar Raya Islam.

This was a real shock!

Bernama and the Star failed to clarify.

Instead, see how the Star and Bernama reported this:

"The circular stated that the directive, targeted at Muslim women employees working in food outlets and other business premises, was issued to prevent incidents like rape and illicit sex as well as to safeguard the morals and dignity of Muslim women in Kelantan."


Amazing isn't it?

How by just taking out the reference to the ambit, we were led to think that this happened throughout the whole state of Kelantan.

Do you think this is an omission?

Or the work of a clever writer?

3. Reading further the excellent investigative article by Helen Ang disclosed several other facts:

a. The circular and the pamphlet are 2 separate documents. (The Star reporting didn't disclose the presence of the pamphlet).

b. The circular is issued annually, and does not appear to be something new. (I didn't get this sense from the Star Reporting. Instead, I thought it was a new directive).

c. Where did MSM (Bernama, The Star) get the info in red bold about "... The circular stated that the directive, targeted at Muslim women employees working in food outlets and other business premises, was issued to prevent incidents like rape and illicit sex as well as to safeguard the morals and dignity of Muslim women in Kelantan."???

Did the circular in Helen Ang's article refer to "rape prevention"?

If not, don't you wonder where MSM got this info from?

Helen Ang (the author) mentions the possibility that maybe the pamphlet might have something like that, but she was speculating at the time of writing her articles. Certainly, the "circular" didn't appear to say that.

Again, I ask you - do you think this is accidental omission?

Or is this the work of someone clever?

Well, I don't know about you, but I think this one deserves an A+.


Despite the misreporting, MPKB did issue something and you might wonder "Does MPKB has the moral authority to even issue such a circular and pamphlet?"

What do I think?

Well, this is tricky.

Because if you had read just the Star & Bernama articles and nothing else, chances are good that you will have already formed your own opinions.

My guess - very strong opinions.

Which means, in practice, it would be very difficult for you to then take the personal effort to study the circular and the pamphlet in detail.

Have you tried looking at the circular and pamphlet in Helen Ang's article?

I did.

Unfortunately, the font size in Helen Ang's article of the pamphlet is far too small for me to read.

I couldn't make sense of what's written in there to be honest.

So, I still don't know what is actually written in that pamphlet.

Which means, I am still not able to form an intelligent view of what MPKB has actually issued.

Which means, I don't have a strong intelligent opinion.

But from the little that I can gather ...

There seems to be some sort of "uniform" code for the traders in MPKB.

In the pamphlet, I can see on the left side, an "example" of an acceptable dress code. In the middle, some examples of what isn't acceptable.

I also know that dress codes are a fairly common thing in many industries and service sectors. E.g. work uniforms like the army, police, nurses, doctors, factories, traders, etc.

But let me ask you another question.

If you had just read the Star and Bernama, what would be your immediate feelings towards Kelantan government?

You might think PAS is an idiot isn't it?

So, would this article then be considered seditious?

Any lawyers like to lend their views?

Monday, June 23, 2008

Confusion? Flip Flop? or Wayang?

What do you make of Khairy's latest proposal here? Full link here - http://themalaysianinsider.com/index.php/home/42-lead-stories/962-khairy-explains-how-to-ease-price-hikes

Khairy explains how to ease price hikes

PARLIAMENT, June 23 — Rembau MP Khairy Jamaluddin broke his no-comment rule and held a press conference in the Parliament lobby in the afternoon to elaborate on his proposal to the government on how to ease the burden of price hikes on the people.

"Any tax goes straight to the federal government (right now). The government should find ways to...take the tax and pass it straight back to Tenaga [1]," he said.

Currently, if the price of gas and coal go up, so do the tariffs [2] on electricity. This, Khairy said, is built into the present power purchase agreements [3].

"What I didn't get to explain earlier...We should have a pooling system. Tenaga should buy from the cheapest supplier. The whole structure should change. The IPPs (independent power producers) should come forward as responsible corporate players [4]," he added.

He refused to entertain other any other questions but confirmed that he was running for the Rembau Youth chief post and was up to face challenges for that position because "Umno is a democracy".

He added that he had not yet decided if he was going to run for the national Youth chief post.


My comments:

[1] When I first read this article, I am confused!

Without specific proposals, how does one evaluate this press conference which Khairy has called for?

Reading this, it appears that this is just Khairy blabbering in public without the presence of Tenaga and IPP executives. He does not appear to have a specific proposal to announce.

Is he trying to claim credit for something that is a fait accompli later?

Is Tenaga going to benefit, lose or remain neutral from this vague press conference?

Is IPPs going to benefit, lose or remain neutral from this vague press conference?

What about Rakyat?

Will this be another Flip Flop where electricity tariffs is raised and then, later reduced?

[2] I think this is potentially misleading.

Of course, at the end of the day, the government can choose to do what they like.

I believe most analyst understands that when the market prices of gas and coal goes up (or down) daily, the electricity tariffs might stay stable for some time (e.g. a month, maybe longer if the government doesn't approve the tariff adjustment).

I believe (although I'm just guessing) that Tenaga currently don't have an explicit, transparent nor automatic tariff adjustment formula with the government.

Instead, I believe every tariff increase proposal requires explicit government's approval.

Whereas Khairy's statement appears to project the mirage that government's approval is just a formality, and this situation has been and will be the case which is an open question ... I really don't like what I'm reading here.

[3] Is [2] really built into all (or just some) power purchase agreements?

[4] After all these years in trying to get all the IPPs to come out as responsible corporate players and failed, is Khairy now thinking that he alone (via this press conference) will be able to get all the IPPs to agree to a change in the entire structure at lesser cost?

I don't believe the young MP is that naive.

If not, is he trying to pull a "wayang" over the markets eyes?

Knowing the IPPs, the only way Khairy is going to get them to agree to a contractual change is to provide them with better and/or longer compensation period.

I.e. it's going to cost Tenaga more.

And if so, will we end up seeing more Federal and tax monies being used and channeled to further increase firstly IPP profits, secondly Tenaga profits, and perhaps thirdly partly alleviate the burden for the poorer Rakyat?

In other words, all this at the expense of the middle and above middle class?

How much will it cost? Isn't the slippage potentially large?

Rereading the title of the article, I think a more appropriate title should be "Khairy creates more confusion on how to ease price hikes".

RBS: S&P 500 to reach 1050 by September?

Fellow blogger and chatter "Moolah" shared with the chatbox this article. Thought I share it with you. Full link here - http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/06/18/cnrbs118.xml

As you read this article, ask yourself several questions:

- What is the writer predicting?

- What is the basis and reasoning for his prediction?

- Is the picture he paints realistic or exaggerating?

- Has some of the fears been priced in, or is there more to come?

- Is it consistent with your entire observation of markets?


RBS issues global stock and credit crash alert

By Ambrose Evans-Pritchard, International Business Editor

Last Updated: 12:19am BST 19/06/2008

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century.

RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.

"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said.

US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.

The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.

"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.

Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.

Sunday, June 22, 2008

Petronas 2007 website Annual Report - Where are pages 81 to 165?

With recent explosive news from SAPP's VONC (Vote of No Confidence) and RPK's SD (Statutory Declaration), I had almost forgotten about Petronas.

However, fellow blogger Dali has just written a couple of pieces on Petronas. http://malaysiafinance.blogspot.com/2008/06/petronas-bashing.html

Conceptually, I agree with Dali's view that if one wants to bash Petronas, they should bash Petronas for the right reasons. For example, I think it is not fair to demand Petronas to explain how the dividends paid to the Government has been spent. Why? Because once the monies are paid to the Government, Petronas no longer has control over how the monies were spent. For Khairy to demand Petronas "more details" seems "fishy" to me when I first heard about it, since I immediately thought of "wayang", as a means to divert attention from other more serious problems - http://thestar.com.my/news/story.asp?file=/2008/6/17/nation/20080617174919&sec=nation.

Notwitstanding the above, I have also seen and heard CEO Hassan mentioned several times (yes, more than once) that the annual report is available on their website, and that they have nothing to hide.

Let me reproduce one of his phrases here (http://thestar.com.my/news/story.asp?file=/2008/6/6/nation/21470681&sec=nation):

"... Hassan said the corporation published a very detailed annual report ... “For all intents and purposes, Petronas is a public-listed company because we are rated by agencies like Standard and Poors, and Moody. We do not hide anything.

Or from the this article (http://thestar.com.my/news/story.asp?file=/2008/6/17/nation/20080617174919&sec=nation)

"Hassan said 5,000 copies of the (annual) report was printed and distributed to various quarters and it was also available on Petronas' website."

My fellow chatters have also informed me that on National Television (TV1), he also reiterates the same thing there, making it at least 3 times, if not more times that he has said so.

Even fellow blogger Dali has mentioned it too in his article ... "Petronas has always published solid annual reports .... It’s all there on their website." (bold italicized mine).

So, it seems more than one person is saying that Petronas full annual report is available from Petronas website.

But is it there really? Is the full 2007 Annual Report really there with nothing to hide? Or just a partial report and playing with words with the intention of hiding certain information?

I had actually blogged before on Petronas. My chief complaint then was that the 2007 Annual Report was incomplete. http://fusioninvestor.blogspot.com/2008/06/petronas-accounts-who-is-external.html.

So, I went to Petronas website here again today. http://www.petronas.com.my/internet/corp/centralrep2.nsf/Src/WebDoc*Investor+Relations+Default/?Open

And took a screenshot here:

Unfortunately, it still looked the same to me.

In particular, note the upper left corner, where it says "Annual Report 2007 (5.09 MB)"

This is a hyperlink - click on it to download Petronas Annual Report.

Unfortunately, I remembered the file size is still the same - around 5 MB. I.e. it's the same report with the missing pages from pages 81 to 165.

Anyway, just to verify it for myself, I clicked the link to download the PDF file.

Opened the PDF file and saw the following:

Note 2 things

1. Upper left corner. Adobe software says you are currently watching page 1, and it is (1 of 84). In other words, there are only 84 pages in that PDF file that one download from Petronas official website.

2. Lower right corner. The Table of contents says "Financial Statements ..... 81-165". In other words, Adobe should have said there are at least 165 pages, not just 84 pages.

Anyway, I scrolled down to the bottom, and true enough, pages 81-165 are missing!

And it does have the Petronas back-cover too.

Which means, it's not due to corrupt file. I'm 99% sure that the Financial Statement pages 81-165 was intentionally removed.

But then, I'm technologically challenged, so, don't trust me blindly.

Verify it for yourself.

Go to that link. Click on it, download it, and see for yourself.

Make sure pages 81-165 are really missing, before you get excited.

No point for you to get excited if pages 81-165 is really there.

And if you are convinced that pages 81-165 are missing, then, what is Hassan talking about that the full report is really there in his website with nothing to hide???

If there is nothing to hide, shouldn't Hassan order his people to fix the website?

This is a simple task - shouldn't take more than five minutes for an average I.T. person.

If cannot show the full report, don't go to MSM and Television and claim that Petronas has nothing to hide.

Why waste everybody's time with this "wayang"?


You may wonder why I insist in reading the financial statement pages from pages 81-165.

There are several reasons.

1. To assess if Hassan is someone I can trust or not trust. It is obvious to me that either Hassan doesn't really know his website, or he is someone who isn't afraid to lie repeatedly to the press and the entire world about the "full report" and "nothing to hide".

Maybe he is an okay guy, but I just don't like our Petronas CEO to not know the details but is willing to go public in a big way about something he is not sure or is ass-u-me-ing.

It creates a sense of distrust.

How can I trust him, if he cannot get it right the simple things - like having a complete Petronas Annual Report on his website with nothing to hide?

2. Someone mentioned to me that "maybe" he is forced by the government to only show a partial report.

Personally, I would treat this as merely one of many possible hypothesis. And actually, if true, I would find this hypothesis even more disturbing.

Why? Because it points to a conspiracy between Hassan and the government to hide information from the public at the very least. It also points to collusion at the deepest level. I'll be thinking - if they can collude on minor things like this, what makes you think they can't collude on other things that involves lots of monies which benefits them? It also points to the fact that this "hiding of information" may be an orchestrated "wayang", to divert attention from things that really matter.

But until we have such proof, it's best not to go into that direction at the moment.

To me, the onus is still on Hassan to show the full report with some apology and explanations, or to retract his previous statement that the Full Report is available on his website and explain why only a partial report is available from Petronas website.

3. For me, there are many reasons to see the entire report, and one of these is the Independent Auditor's Report, to see who is the Auditor, and more importantly, to see if the Auditor had put in any "new qualifications" since their last audit. Yes, I know some of you may have seen an older report before, but to me, it is not enough since new problems can always crop up. If I analyze a company, I want to see the full list, including the latest Independent Audit Report, not something that is 2 or 3 years old. Preferably, I want to see the Independent Audit Report for each year over the last 10 years, if such records exist which I would expect from a professional company like Petronas. In fact, not having that, or with just 1 year missing would raise an eyebrow.

4. I'm sure the Financial Statements are "most likely" comprehensive and "most likely" complies with local and "probably" International Accounting Standards. Why? Because it's 85 pages long and that tells you something. But there is a crucial difference between "most likely" or "probably" vs "certainty". An analyst with strong attention to detail will want to make sure that there is nothing fishy, and I mean Nothing. Also, for a new Petronas analyst like myself, there are so many useful details in the Financial Statements - all 85 pages - that will tell me a lot more about the company. It also acts as checks to what the company says, etc. So, to me, there is simply no substitute to seeing the full 85 pages of the Financial Statements. I want to see other things too of course but that's a different story.

And speaking for myself, until I see Petronas amend the website (or some corrective action), then, I still distrust Hassan because his words doesn't conform with what I saw for myself from his website. It's just that simple. Nothing complicated or sinister. If Hassan publishes the full 2007 Annual Report, then, I don't have a strong reason to distrust him if he also owns up to his previous mistake and apologizes, with good reasons why the previous report was incomplete.

However, with every passing day that he does nothing, and with every passing day that he keeps insisting that his report on the website is "complete", then, more brownie points are lost, as time is critical and more lies told.

MSM Blackout on RPK's Bombshell?

It's already been at least 36 hours, when RPK first dropped the "bombshell" with his latest Statutory Declaration (SD).

Malaysiakini first published it on Friday, June 20, 10.33 PM. ttp://www.malaysiakini.com/news/84831

And as I'm writing this at noon, this would make the bomb-shell at least 36 hours, if not longer.

Our regular chatter "newbie" was very quick with this story. He alerted this chatbox just a short 45 minutes later (Friday, June 20, 11:18 PM). Now, if only MSM is as quick as "newbie" (smile).

From the usual places, Netizens have already carried the articles with some blogs registering hundreds of comments! Some of the links are provided at the end of this article.

Surprisingly, some of the places on the Internet that I expect to see haven't yet carried them. Perhaps Net fatigue?

And I am dissappointed that none of the MSM that I visit on the Net carried that article.

I am basing this observation at the time I write this article which is around Noon, Sunday, June 22.

After all, at least 36 hours if not more has elapsed already.

Here's a list of MSM which I've checked at noon, and still haven't carried the article.

- http://www.nst.com.my/

- http://thestar.com.my/news/nation/

- http://www.bharian.com.my/

- http://www.utusan.com.my/

- http://www.sun2surf.com/

Interestingly, my "favorite" business newspaper which carried that wonderfully narrow AirAsia reporting also think that RPK's "bombshell" is not newsworthy enough. (http://fusioninvestor.blogspot.com/2008/05/edge-on-airasia.html)

Why? Because I still haven't seen them publishing it.

But I note The Edge believed it is critical to print articles on SAPP VONC on AAB, so that its business and market readers are kept constantly up-to-date and take a timely market action. http://www.theedgedaily.com/cms/index.jsp.

So, since The Edge didn't carry the article on RPK's SD, I guess the conclusion one must draw is that The Edge thinks RPK's bombshell will NOT impact business and KLSE market tomorrow! So, no need to worry, since if it's not in the MSM news, it's not real! (not)

And remember the University Teknologi Mara article that I blogged previously? http://fusioninvestor.blogspot.com/2008/06/malaysian-blogs-didnt-lead-to.html; Remember it's so called survey and wonderful conclusion that Malaysian blogs do not lead to more Opposition votes? In that article, there were references to the so-called popular sites. Let me reproduce the sites here and see whether they carry / not carry RPK's SD article:

"Among the popular blogs and websites were Malaysiakini, Suara Keadilan, SPR, Harakah Online, Berita Harian Online, Utusan Malaysia Online, Malaysia Today, The Star Online and those of news agencies."

Let's see ... Malaysiakini carries it. Suara Keadilan carries it on its front webpage via link to DSAI's blog. SPR is irrelevant since this is an election website. Harakah Online surprisingly didn't have it on its front page at the time of writing (http://www.harakahdaily.net/). And as for the MSM and other news agencies, all the 3 sites mentioned there (Berita Harian, Utusan, Star) still did not carry them.

So, what could be the possible reasons for MSM not carrying this article?

Perhaps, one might try to argue that it is not the role of MSM to spread "lies" (and this is pre-judging that RPK's SD is a lie, which is yet to be determined). The MSM defenders might say that there is no truth to RPK's SD, or that cannot be determined yet, or that might be subjudiced to the present trial happening, or a thousand other possible reasons. (But never the reason that it would make all "big" people implicated look bad)

Even if any of these were the case, surely MSM could still interview at least the "big" people implicated by RPK's SD namely - Rosmah, Najib, Abdullah, Khairy - for their statements at the very least isn't it? After all, writing and signing a Statutory Declaration in Court is not exactly risk-free to RPK. It opens RPK to indefinite time-period liability, where anyone could bring RPK to courts with harsh penalties if it turns out that RPK has lied. I am sure - that if RPK lied - it should be very easy for them to vehemently deny and to proceed with court action to sue RPK for lying. Then, MSM can further publish that on their front pages, and everything is open and transparent.

But my question is - has MSM done this yet? Has any one of the newspapers sent their "investigative" reporters to interview the 4 people involved? Or more importantly, has any one of the newspapers sent their "investigative" reporters to interview RPK?

Why the deafening silence?

Isn't RPK's Statutory Declaration not the slightest bit "newsworthy"?

Won't our new law minister Zaid Ibrahim continue to blame "investigative" journalists for lacking guts if they don't print this?

What about the 150+ reporters who staged a walk-out recently to protest for freer media (the so called "walk for press freedom")? Where are these reporters now on this explosive story? Do all of them only know how to walk, but not know how to investigate and write?

A. Asohan recently did a piece criticizing the journalists and thinks that Zaid Ibrahim has a point when he pointed the fingers at the journalists. http://thestar.com.my/columnists/story.asp?file=/2008/6/15/columnists/straythoughts/21505152&sec=Stray%20Thoughts


So, where is A. Asohan now? How come no piece from A. Asohan? Now a betrayer to his own kind is it? Or will he write another piece scolding his own kind again? Maybe he'll just shut up.

Do you really think NONE of the journalists cares?

Speaking for myself, I actually don't, since NONE is a very strong word. I believe there are still some journalists who cares. I'm sure they would leap at the smallest chance granted by their bosses to either interview RPK or the 4 people implicated by the SD. If only their bosses would give the go-ahead.

The deafening silence is why are the MSM bosses not even pushing their own people to investigate?

What are the MSM bosses so afraid of?

Isn't it their business to print news?

Why the censorship?

Afraid of the government?

The Law Minister Zaid previously implied to the press that there is nothing which the Press should be afraid of, when he puts the blame squarely on the journalist.

Or you think the Law Minister was behaving like a "lawyer buruk" when he addressed the Press?

Bottom line is - Mr Zaid - you cannot escape the fact that the government is PRIMARILY responsible for the present self-censorship dis-ease that the country is suffering over the last decades.

I can actually sympathize with the MSM.

Just imagine the Star say (or another MSM).

Let's say lar that the Star is bold and publishes it without fear nor favour to the government.

Can Zaid guarantees that the Star will not be penalized later by the government?

Can Zaid guarantees that he is going to be around perpetually in government to make sure later the Star doesn't get penalized?

Surely Zaid is not that naive?

And surely, Zaid does not expect the Star owners to be that naive too?

Of course, maybe the Star is not a good example, since the owners are also politically linked, and would want to see such news not reported.

If so, you can replace it with another MSM.

The point is this is only an illustration, and just my own thoughts and mumblings.

At first, I actually thought that it might have been an explicit Media Blackout instructed by the government.

But after writing this article, I'm beginning to think that perhaps that is irrelevant.

The self-censorship culture is now so strong, that maybe it doesn't even need an explicit instruction.

The bottom line is that there IS MSM blackout in the first 36 hours, and that is all we need to know.

And from a market perspective, we all know that News can MOVE Markets in a big way, depending on the news.

And So, censored (or delayed) News is not a generally good thing for Market players who rely on MSM only.


The original Statutory Declaration posted in Malaysiakini website - http://malaysiakini.com/doc/rpk_against_rosmah.php

Bloggers on RPK's SD:

- http://kamal-talksmalaysia.blogspot.com/2008/06/raja-petra-kamaruddins-statutory.html

- http://ktemoc.blogspot.com/ (see Saturday, June 21 entry)

- http://magickriver.blogspot.com/2008/06/rpk-for-igp-stonewall-begins-to-crumble.html

- http://malaysianunplug.blogspot.com/ (go to Friday, June 20, 22:05 entry)

- http://bigdogdotcom.wordpress.com/2008/06/20/is-this-statutory-declaration-true/

- http://sloone.wordpress.com/2008/06/21/raja-petras-statutory-declaration-worst-than-c4/

- http://harismibrahim.wordpress.com/2008/06/21/ticking-time-bomb-and-rakyat-reeling/, http://harismibrahim.wordpress.com/2008/06/20/rpk-drops-the-mother-of-all-bombshells/

Politician bloggers, only LKS and DSAI carry so far:

- http://blog.limkitsiang.com/2008/06/21/rpks-bombshell-allegation-on-altantuya-murder-abdullah-najib-rosmah-cannot-remain-silent/

- http://anwaribrahimblog.com/2008/06/21/perakuan-sumpah-raja-petra/

Note TDM's blog (http://www.chedet.com/) is silent. Other DAP and PKR bloggers are presumably silent since their leaders have already blogged on it.

In contrast, UMNO politicians are still silent. E.g. Khir Toyol (http://www.drkhir.blogspot.com/), Khairy J (http://www.rembau.net.my/index.asp)

MCA website & MCA politician is also silent, as expected. They see it worthy to comment on SAPP, but not RPK's SD.

- http://www.mca.org.my/English/Pages/default.aspx

- http://drchua9.blogspot.com/

Malaysian Insider (being linked to BN) also hasn't yet carry this story - http://themalaysianinsider.com/. The irony is Malaysian Insider carried many very detailed, in-depth stories regarding SAPP ... you have to wonder why isn't it?

Disclaimer: It is possible that my article might become out of date and factually inaccurate since I base my observation at around noon today, which is around 36 hours after Malaysiakini published RPK's bombshell. I do not intend to maintain an update, as this is a personal blog to record my own observations of what the MSM does or didn't do within the first 36 hours of RPK dropping the bomb-shell.

Saturday, June 21, 2008

POS Malaysia: ACA Probe

On Friday, June 20, Malaysia Today carries a potentially explosive piece about the ACA Probe on POS Malaysia here - http://www.malaysia-today.net/2008/content/view/9041/1/

A day later, Saturday, June 21, The Star carries another version of the same story (ACA Probe) here - http://biz.thestar.com.my/news/story.asp?file=/2008/6/21/business/21618138&sec=business

It's an eye-opener, and a stark contrast in what was pointed out between the 2 articles! Let me start first with MT's story as this is the earlier article. As usual, I will reproduce both articles for your easy reading, with my own comments at the point where I want to comment in bold, italics brackets preceded by "Seng comment:".


What is Najib’s role in the Gading Sari Aviation Services scam?

The question that begs an answer is (1) how could Gading Sari Aviation Services get a contract from Pos Malaysia when it does not even own any aircraft plus it was the highest bidder? And (2) who was it that forced Pos Malaysia to reinstate the contract after it was terminated on 31 March 2008?


Malaysia Today

Pos Malaysia Bhd acting managing director and group chief executive officer, Datuk Abu Huraira Abu Yazid, confirmed that on Wednesday, 18 June 2008, the Anti-Corruption Agency (ACA) raided the company's premises. "We cooperated with them fully. We have nothing to hold back or to hide," he told reporters after the company's annual general meeting the following day.

Abu Huraira said that it is just a ‘general investigation’ but admitted that the ACA had confiscated some documents relating to the investigation. However he was not in the office when the ACA raid was conducted so he does not know more than that.

Abu Huraira did not reveal what the ACA raid or investigation was about. But he did confirm that Pos Malaysia is reviewing its contracts with Transmile Group Bhd and Gading Sari Aviation Services Sdn Bhd. The contracts for both these companies expire at the end of March next year.

What Abu Huraira did not reveal, though, was that Gading Sari Aviation Services Sdn Bhd’s contract had, in fact, already been terminated on 31 March 2008 but then Pos Malaysia received instructions from the Deputy Prime Minister’s office to reinstate the contract -- so he is not really telling us everything.

Abu Huraira added that the review of the two companies’ contracts was based on their performances. "We have an arrangement with them to handle our business in Sabah and Sarawak. We are now re-evaluating their performance before making a decision," he told reporters. (Seng comment: After reading RPK's article in full, one has to wonder if the contract review is ever based solely on performances, or some other hidden criteria. You and I know there is always something else isn't it?)

Gading Sari Aviation Services is a helicopter rental company owned by Tengku Abdullah, the son of the Sultan of Pahang. Tengku Abdullah owns 750,000 shares in the company while Raja Mufik Affandi Bin Raja Khalid owns 250,000 shares and Md Ismail Bin Abdul Kader the balance 4 million shares. Raja Mufik and Md Ismail are both Directors of the company.

The question that begs an answer is how could Gading Sari Aviation Services get a contract from Pos Malaysia when it does not even own any aircraft plus it was the highest bidder? And who was it that forced Pos Malaysia to reinstate the contract after it was terminated on 31 March 2008? According to the talk in Pos Malaysia, the phone call came from the Deputy Prime Minister’s office?

Transmile Group Bhd, on the other hand, is an air cargo operator, which made the news last year for alleged financial irregularities amounting to RM700 million. Pos Malaysia holds a 14.99 percent stake in the troubled Transmile Group Bhd, which has debts to the tune of RM535.8 million. Abu Huraira said that Pos Malaysia does not intend to reduce its stake in Transmile Group Bhd. "The issue does not arise at the moment. We must give Transmile time to turn around its operations and improve the financial position." (Seng comment: I haven't thought of it before, but now that RPK mentioned it, it does beg the question - why didn't POS disposed of TRANMIL much earlier when prices were much higher and funds were selling as fast as they could? At its peak, TRANMIL share price was over $15 at the start of 2007, and nearly 1.5 year later, last Friday, closed at $1.33. POS should have had many opportunities to dispose TRANMIL at much higher prices. Strange.)

And the question that begs an answer here is have those who committed the criminal act of misappropriating the company’s money been brought to book or will Pos Malaysia have to eventually write the investment off and treat the entire episode as a misadventure at the expense of the rakyat? And what was the role of Pos Malaysia’s then executive chairman, Tan Sri Zainol, in the decision to award the contract to Transmile Group? It would be good if we can also find out the link with Megantara Air, an Indonesian company owned by Daniel, Tan Sri Zainol’s son-in-law.

Let us hope the ACA investigation shows some results and not end up as a NFA (no further action) like so many other scandals involving those who walk in the corridors of power. In the first place, both these companies are not qualified to get these contracts plus their prices were the highest. (Seng comment: RPK's full article did not provide more details, apart from this general claim that their prices were the highest. Personally, I don't yet know if this is true or not. If true, it does not bode well for TRANMIL since despite the POS "hand-out", it still makes losses!)

Then, when Pos Malaysia does the right thing by terminating Gading Sari Aviation Services’ contract, someone powerful in the corridors of power instructs them to reinstate the contract. The ACA investigation should not stop at Pos Malaysia. It should extend to those who walk in the corridors of power, to the Prime Minister’s and Deputy Prime Minister’s office if need be.

Pos Malaysia is losing millions of Ringgit. (Seng comment: Whilst this was true for 12 Months Ending 31/12/2007 when POS reported a loss, it is not actually true for the latest Quarter Ending 31/3/2008.)

And now we hear that Pos Malaysia has been given the task of refunding the RM625 to each car owner eligible for a rebate. And we also hear that RM1 billion has been handed over to Pos Malaysia for ‘safe-keeping’ to meet the cost of these rebates. Are we going to hear of another scandal involving misappropriation of funds a couple of years from now when the ACA discovers that fictitious payments have been made to ‘ghost’ car owners? Thus far there has been too many incidences of wrongdoings in Pos Malaysia to make us think otherwise. (Seng comment: This is a natural question to ask, in light of the large, large, large TRANMIL losses last year.)

Seng comment: Personally, I find RPK's article interesting yet puzzling - perhaps because there are still many missing pieces in my own mind. What connection does the ACA probe has with either Gadang Sari Aviation or Transmile? If Gadang Sari is indeed connected to Najib as RPK hinted, why would the supposedly BN controlled ACA probe POS? Is the ACA probe a warning to the new POS management that they should not repeat their stunt in terminating Gadang Sari's contract last 30 March 2008? Or is the purpose to remove documents? Did ACA really take away documents as RPK alleged here, since the Star article below said that ACA didn't take away documents. But why would the Star article says the ACA didn't take away documents but made copies? Is the Star article written in response to RPK's article a day earlier in an indirect manner? I personally don't like the way these games are being played over the MSM ...

Also, is there a connection between the previous resignation of POS MD and Group CEO Dato' Idrose and the termination of Gadang Sari's contract on 31 Mar, 2008?

At the moment, I don't know the answer. Suffice to say that if I was an investor, I would avoid both POS or TRANMIL.


Ok, the Star version now, which is published a day later after MT's article.

Pos Malaysia: Resignations, ACA probe not linked


PETALING JAYA: Pos Malaysia Bhd says the Anti-Corruption Agency (ACA) probe is not linked to the resignations of its former managing director and group chief executive officer (CEO) and chairman of the board.

(Seng comment: Wow. Already, from the Title and the First Sentence, POS denies that ACA probe is not linked to the former MD & Group CEO resignation. As a reader, I am curious now. Why is there a need to deny this? Guilty conscience?

Looking at Bursa Announcement, I noticed that POS did announce the resignation of Idrose on 5 May, 2008. Reading the actual media announcement, I find it interesting that it was silent on the effective date of the resignation. Instead, it announces Abu Huraira's appointment as Acting MD & Group CEO to replace Idrose. Usually one would expect a different sort of announcement, if the resignation was planned in advance.)

The government-linked company issued the statement following a visit by ACA officers to the Pos Malaysia headquarters on Tuesday. (Seng comment: A minor point, but RPK says Wednesday, 18 June, Star says Tuesday, 17 June. Which is correct? Which article can be better trusted? Neither? Or ACA visited POS twice - both 17 and 18 June. But if twice, why didn't either MT nor Star mentioned that it is twice i.e. Tuesday AND Wednesday? Very puzzling indeed.)

According to the statement, acting managing director and group CEO Datuk Abu Huraira Abu Yazid had met two ACA officers then and assured them the company would give its full cooperation. (Seng comment: Another minor point, but RPK quoted Abu Huraira as saying that he wasn't in office when ACA came on 18 June, and here, the Star quoted Abu Huraira as saying that he met 2 ACA officers when they came on 17 June. Perhaps ACA did visit POS twice on both 17 June and 18 June?)

No files or documents were taken out of the office. However, photocopies of some relevant documents were provided to the ACA at their request,” the statement said. (Seng comment: Again, a third anomaly. RPK said ACA took away documents, whereas Star says No Documents were taken. Who is right? Do you like what you're reading here?)

Huraira said in the statement: “Pos Malaysia welcomes the ACA probe. We will continue to extend our fullest cooperation to the ACA or any other relevant authorities.

“We wish to reiterate that Pos Malaysia pursues a rigorous corporate governance culture and this is detailed in our Annual Report 2007.” (Seng comment: A side comment, but I would like to take this opportunity to remind readers not to blindly trust Annual Reports, since they are almost always marketing pieces produced by company to self-promote themselves and their stock).

An analyst with a “neutral” call on the Pos Malaysia stock told StarBiz that market sentiment on the counter would be affected due to the probe, which was “not really a surprise.”

Apart from that, investors were disappointed with the stock as Pos Malaysia had not been able to generate a good return on investments despite having “a huge cash pile.”

The investment in Transmile Group Bhd, in which Pos Malaysia still holds 14.99%, “just reflects that they actually have not delivered,” the analyst said.

“We are expecting an allowance charge for Pos Malaysia this year from the Transmile investment and, analyst consensus is not good.”

Another analyst with a “buy” call on the counter said since there were no findings yet from the ACA probe, there was speculation as to whether it was a routine check or a more serious investigation.

(Seng comment: I wonder who is this "another analyst with a buy call" ... What would be the odds of ACA making a probe due to "routine check"? Especially when there is a possibility that maybe ACA visited POS twice on June 17 (Star claim) and June 18 (RPK claim). Two "routine checks"?? Hmmnn ...)

However, judging from the share price movements, if there were any seriously bad news, it would have been reflected in the price by now, he said.

Risk factors for Pos Malaysia continued to be higher staff costs, he added.

Meanwhile, in the same statement, Pos Malaysia said it wished to clarify that there was no conflict between the company or its board with major shareholders with regard to any award of contract or the “disposal” of the company's land in Brickfields as reported.

(Seng comment: Hmmnn ... not sure I like this clarification by POS. Why raise award of contracts in the first place? Is this another sign of guilty conscience? Is this in response to RPK's earlier article regarding the contract award to Gadang Sari & Transmile? If they are indeed talking about Gadang Sari and Transmile contract award, then, why divert and point to conflict with company vs shareholders, when RPK's claim is that POS siphons money out legally via high prices?)

“The company has not disposed of the Brickfields land or any other land or property,” it added.
Also, it said, the Transmile contract had expired on March 31, 2006 and not terminated as reported.

Pos Malaysia subsequently called for an open tender and 10 companies bid for the contract in 2006.

(Seng comment: I'm puzzled by this statement. Surely, POS, as a huge organization, would have given out many contracts. Why talk about the contract awarded in 2006? Is it trying to convey the impression that just because it did award one contract on open tender basis, we are supposed to ass-u-me that all contracts follow the same open-tender basis? Surely the Star doesn't think investors are that naive?)

“A full tender process was duly adhered to and the new contract was tendered based on block space as opposed to block hours under the previous contract,” the statement said.