First, the fuel hike that affects virtually the entire nation, then, the electricity tariff hike with almost similar reach (except for the small users), and now, we are starting to see what started as a couple of shock waves becoming larger and larger tsunamis from an inflationary viewpoint.
The full article here - http://themalaysianinsider.com/index.php/malaysian-news/34-malaysian-news/879-bank-workers-to-get-17pc-pay-rise. My comments in italics brackets.
_________________
KUALA LUMPUR, June 21 — After months of a deadlock in negotiations for a new collective agreement (CA), banks have agreed to pay a 17 per cent salary rise for about 32,000 employees, including 25,000 members under the National Union of Bank Employees (NUBE).
(Seng: It is unclear to me whether this 17% is a per annum figure, or accumulated since Jan 1, 2006, so that the yearly increase might be smaller when spread over 2-3 years. 17% for just 1 year looks TOO BIG a figure. If anyone knows, please feel free to let me know)
The salary adjustment would be based on the basic salary as at Dec 31, 2005, with arrears backdated to Jan 1, 2006.
The employees would also continue to receive two months’ contractual bonus at the end of every year.
According to NUBE secretary-general J. Solomon, the arrears for the salary and bonus, between RM4,000 and RM17,000 depending on their positions, will be paid within one month, less the 7 per cent interim salary adjustment which was paid in February this year.
(Seng: Even though I don't know the actual % increase in future, the key here is the amount mentioned here per person. They can use whatever %, old or new salaries, backdate it to whatever date, but bottom line is that these 32,000 employees will receive extra payment in respect of a past period, and future salary increases. The extra payment alone will probably cost $10,000 (say) x 32,000 = $320,000,000 or say $200M to $300M, which is a decent boost to the economy, with multiplier benefits and some inflationary effect. And higher salaries means higher future bonus, etc. so more multiplier effects in future. Of course, salaries are company expenses which means smaller profits unless prices goes up. Short term, more pressures on bank profits. Expect nationwide inflation figures to go up. Not sure what BNM's exact stance on interest rates is going to be yet.)
"This (17 per cent) increase is the highest in the last 10 years. If you look back in the year 2005 when we concluded the last CA, we only got nine per cent, but now we have 17 per cent," he said.
He said this to reporters after the signing of the collective agreement between the NUBE and the Malayan Commercial Banks' Association (MCBA) here today. It was witnessed by Prime Minister Datuk Seri Abdullah Ahmad Badawi.
(Seng: Nice 'feel good' feeling at a critical time .... how can any of these 32,000 bank employees hate Abdullah now? See Bernama's reporting below too.)
Besides this, the workers’ other terms and conditions of service would also generally be enhanced with increases in various allowances and benefits.
Among these enhancements are a 5 per cent increase in various allowances, a higher eligibility for housing loans and the provision of a sum not exceeding RM300 from the medical benefits for the purchase of a hospital and surgical insurance for the spouse and children of staff.
Solomon also said bank employees will also be getting RM100 as a cost of living allowance for the next collective agreement, which is effective from Jan 1, 2009. — Bernama
__________________
Since the actual source is from Bernama, I thought it might be worthwhile to read the news from the horse's mouth here - http://www.bernama.com/bernama/v3/news_lite.php?id=340985
Just 2 extracts:
"The event was witnessed by Prime Minister, Datuk Seri Abdullah Ahmad Badawi."
"Solomon also said that the decision was in line with the advice given by the Prime Minister."
Wow! See how this 17% pay rise decision came as a result of the advice given by the PM? Now, why am I not surprised?
Saturday, June 21, 2008
Don't Blame the Dow!
Towards the end of last year when the US sub-prime crisis went from bad to critical, it was quite popular locally to talk about "financial disintermediation" (?) between the KLSE and the NYSE. It is a financially-big word - the general impression is that the writer claims that the US economy should have progressively diminishing effect on the KLSE, whereas China and other Asian markets will have progressively greater influence for the simple reason that the writer expects Malaysia's international trades to reflect the above similarly.
Whilst it sounds persuasive, many of the local traders and funds still look at the US markets every morning for guidance, as well as the Dow Jones Futures every evening in deciding whether to hold a position overnight or not. So, is it prudent to accept the view that US markets don't matter?
And despite the above, traders who look at US markets usually focus on the Dow, especially the DJ Futures. There is some debate whether the Dow or the S&P500 better represents the US markets. But if in doubt, why not look at both?
Anyway, the fact that there are many Dow followers means that after last night's performance, some of them will probably be worried now. Why? Well, the Dow has been on a downtrend since August last year, and the latest fall on Friday appears to have broke-out below an important longer term uptrend line. You can see how on the right edge of the chart below, the Dow closed lower than the uptrend line drawn.
Bottom Line = Don't Worry, Be Happy (smile). And always keep your losses small.
Disclaimer: The writer does not encourage bottom fishing. The writer also does not encourage blaiming others. If you want to blame, look at yourself first, but be gentle on yourself too since you are just human. As usual, bottom fish or buy/hold/sell at your own risk. And don't forget to share the kuacis too. :-)
Whilst it sounds persuasive, many of the local traders and funds still look at the US markets every morning for guidance, as well as the Dow Jones Futures every evening in deciding whether to hold a position overnight or not. So, is it prudent to accept the view that US markets don't matter?
And despite the above, traders who look at US markets usually focus on the Dow, especially the DJ Futures. There is some debate whether the Dow or the S&P500 better represents the US markets. But if in doubt, why not look at both?
Anyway, the fact that there are many Dow followers means that after last night's performance, some of them will probably be worried now. Why? Well, the Dow has been on a downtrend since August last year, and the latest fall on Friday appears to have broke-out below an important longer term uptrend line. You can see how on the right edge of the chart below, the Dow closed lower than the uptrend line drawn.
Fortunately, or unfortunately, Technical Analysis is not a precise science. Even when one draws uptrend lines, there are usually many ways to draw the uptrend line. If one goes beyond the last 3 years, one can draw other types of uptrend lines that shows that Friday's closing is either broken or unbroken. But interestingly, the majority of the uptrend lines apprears to have been broken. And the general principle is that when these uptrend lines are broken, it is a generally bearish signal since an important market psychology has changed. The strength of the signal depends on many other technical factors, and even amongst trend-line breakouts, it also depends on factors such as the length of the uptrend line (longer trend lines are generally more significant), number of points touched (the more points touched, the more significant the trend line is and the violations), the slope and angle of the uptrend line, etc. Yet, at the end of the day, all of them are merely probability signals rather than points to certainty (even if they have varying degrees of probabilities).
Further complicating the signals is that if one applies the same technique to the S&P500, the uptrend line over the same period is generally not yet violated. Further, for NASDAQ and Russell2000, the fall is even relatively smaller, suggesting that the "fear" appears to be concentrated more on the Dow than the wider US markets.
So, if one wants to panic this coming Monday morning, my advise is to be panic for the right reasons, and don't just blame it on the Dow! (smile)
For example, markets in US and Asia are generally weak (think China, Vietnam), so, it is unfair to just blame the Dow.
Also, the local political developments has gone from ugly to uglier, especially with SAPP and Opposition parties attempting to call for a Vote of No Confidence against the PM on Monday June 23, although the general belief is that not only is the date impractical, the result likely to be unsuccessful and the PM is likely to retain his leadership post.
However, despite some thinking that last week's fall was "knee-jerk"(?) in reaction (since if AAB is likely to retain his post, then, a temporary fall is often seen as opportunities to buy), I think the Market didn't expect RPK to drop another bombshell this weekend, which lends credence to the often quote phrase "there's usually more than just one cockroach".
Since RPK's weekend bombshell claims to involve personalities like Rosmah, Najib, Abdullah and Khairy, and touches on a complex web of issues with popular conspiracy theories such as the Judiciary, the ACA, the Media, the blisters, the lies, etc. this is likely to create further uncertainties and uneaseness amongst KLSE investors and players in general. Again, in itself you cannot really fault some writers to declare that this too is another "knee-jerk" reaction comes this Monday.
So, remember. If the market tanks on Monday, don't just blame it on the Dow. (smile)
Further complicating the signals is that if one applies the same technique to the S&P500, the uptrend line over the same period is generally not yet violated. Further, for NASDAQ and Russell2000, the fall is even relatively smaller, suggesting that the "fear" appears to be concentrated more on the Dow than the wider US markets.
So, if one wants to panic this coming Monday morning, my advise is to be panic for the right reasons, and don't just blame it on the Dow! (smile)
For example, markets in US and Asia are generally weak (think China, Vietnam), so, it is unfair to just blame the Dow.
Also, the local political developments has gone from ugly to uglier, especially with SAPP and Opposition parties attempting to call for a Vote of No Confidence against the PM on Monday June 23, although the general belief is that not only is the date impractical, the result likely to be unsuccessful and the PM is likely to retain his leadership post.
However, despite some thinking that last week's fall was "knee-jerk"(?) in reaction (since if AAB is likely to retain his post, then, a temporary fall is often seen as opportunities to buy), I think the Market didn't expect RPK to drop another bombshell this weekend, which lends credence to the often quote phrase "there's usually more than just one cockroach".
Since RPK's weekend bombshell claims to involve personalities like Rosmah, Najib, Abdullah and Khairy, and touches on a complex web of issues with popular conspiracy theories such as the Judiciary, the ACA, the Media, the blisters, the lies, etc. this is likely to create further uncertainties and uneaseness amongst KLSE investors and players in general. Again, in itself you cannot really fault some writers to declare that this too is another "knee-jerk" reaction comes this Monday.
So, remember. If the market tanks on Monday, don't just blame it on the Dow. (smile)
Happy knee-jerking, Happy bottom fishing, Happy blaiming, Happy standing on the sidelines, Happy watching, Happy eating kuacis, etc.
Bottom Line = Don't Worry, Be Happy (smile). And always keep your losses small.
Disclaimer: The writer does not encourage bottom fishing. The writer also does not encourage blaiming others. If you want to blame, look at yourself first, but be gentle on yourself too since you are just human. As usual, bottom fish or buy/hold/sell at your own risk. And don't forget to share the kuacis too. :-)
ACA = Anti Corruption Agency?
I was thinking of blogging on this, but someone beats me to it. No sense duplicating, so, I will just provide a link here - http://mrfrust.blogspot.com/2008/06/can-we-trust-our-aca-department.html
Personally, I find it incredible that the timing of the ACA investigation is so "accurate". For a start, this is a 1996 case, or nearly 12 years old. What happened in the last 12 years? Why does the ACA only announce this now? Are all BN politicians in the same boat as Yong? Do they have "blisters" that are hidden from public's eye, only to be revealed when they don't tow the line? Within the BN which comprise of 14 parties, Yong is only a "small gun" relatively, as SAPP only has 2 MPs out of BN's entire 140 MPs. And naturally, with the recent RPK's statutory declaration bombshell that is all over the Net now, together with Najib's docile and obedient behaviour to our PM (despite many people including TDM asking him to take the initiative), do you think Najib has bigger "blisters" to hide compared to Yong?
My own take of the chronology of events is as follows. For illustrative purposes, I will provide links provided by Malaysian Insider. Naturally, there are many other sources as well, but I'm lazy, so, this is not meant to be exhaustive.
18 June: Yong came out to announce SAPP MPs' intention to either support or to call for a Vote of No Confidence (VONC) against AAB administration, and not against BN party. (http://themalaysianinsider.com/index.php/home/42-lead-stories/643-huge-blow-to-abdullahs-leadership
http://themalaysianinsider.com/index.php/home/42-lead-stories/649-a-bombshell-but-kit-siang-thinks-its-merely-symbolic
http://themalaysianinsider.com/index.php/home/42-lead-stories/652-sapp-chief-some-mps-may-go-independent)
19 June: BN held a supreme council meeting to discuss what to do with SAPP's VONC. The outcome is not to expel SAPP yet, since AAB believed that Yong had acted alone. (http://themalaysianinsider.com/index.php/home/42-lead-stories/743-barisan-nasional-stays-its-hand-on-sapp-yong
http://themalaysianinsider.com/index.php/home/42-lead-stories/716-more-questions-in-light-of-sapp-bombshell)
20 June: In a quick turn of events, ACA announced that they are investigating Yong here (http://themalaysianinsider.com/index.php/home/42-lead-stories/795-aca-to-question-yong-over-rm5m-payment). On the same day, SAPP held its own supreme council meeting, and confirmed that this VONC is the Party's position, and not just Yong's position (http://themalaysianinsider.com/index.php/home/42-lead-stories/805-yong-tan-meet-ahead-of-sapp-emergency-meeting, http://themalaysianinsider.com/index.php/home/42-lead-stories/835-sapp-goes-ahead-with-anti-pm-vote).
Naturally, today will not be anywhere near the end of the Yong/SAPP Anti-PM VONC saga. But I will stop here, since the purpose of this short article is to merely observe the timing of the ACA investigation into Yong, for future reference.
Naturally, one also wonders that besides Yong, Najib and other BN politicians, whether the ACA brass themselves have hidden blisters too ... Do you think Pakatan Rakyat's politicians have similar blisters themselves too? Or still too early to tell? Are these blisters a function of being in power for too long? As Rakyat, did we have a role to play in the creation of these blisters? Who says that one person's vote didn't matter?
Happy Observing.
Personally, I find it incredible that the timing of the ACA investigation is so "accurate". For a start, this is a 1996 case, or nearly 12 years old. What happened in the last 12 years? Why does the ACA only announce this now? Are all BN politicians in the same boat as Yong? Do they have "blisters" that are hidden from public's eye, only to be revealed when they don't tow the line? Within the BN which comprise of 14 parties, Yong is only a "small gun" relatively, as SAPP only has 2 MPs out of BN's entire 140 MPs. And naturally, with the recent RPK's statutory declaration bombshell that is all over the Net now, together with Najib's docile and obedient behaviour to our PM (despite many people including TDM asking him to take the initiative), do you think Najib has bigger "blisters" to hide compared to Yong?
My own take of the chronology of events is as follows. For illustrative purposes, I will provide links provided by Malaysian Insider. Naturally, there are many other sources as well, but I'm lazy, so, this is not meant to be exhaustive.
18 June: Yong came out to announce SAPP MPs' intention to either support or to call for a Vote of No Confidence (VONC) against AAB administration, and not against BN party. (http://themalaysianinsider.com/index.php/home/42-lead-stories/643-huge-blow-to-abdullahs-leadership
http://themalaysianinsider.com/index.php/home/42-lead-stories/649-a-bombshell-but-kit-siang-thinks-its-merely-symbolic
http://themalaysianinsider.com/index.php/home/42-lead-stories/652-sapp-chief-some-mps-may-go-independent)
19 June: BN held a supreme council meeting to discuss what to do with SAPP's VONC. The outcome is not to expel SAPP yet, since AAB believed that Yong had acted alone. (http://themalaysianinsider.com/index.php/home/42-lead-stories/743-barisan-nasional-stays-its-hand-on-sapp-yong
http://themalaysianinsider.com/index.php/home/42-lead-stories/716-more-questions-in-light-of-sapp-bombshell)
20 June: In a quick turn of events, ACA announced that they are investigating Yong here (http://themalaysianinsider.com/index.php/home/42-lead-stories/795-aca-to-question-yong-over-rm5m-payment). On the same day, SAPP held its own supreme council meeting, and confirmed that this VONC is the Party's position, and not just Yong's position (http://themalaysianinsider.com/index.php/home/42-lead-stories/805-yong-tan-meet-ahead-of-sapp-emergency-meeting, http://themalaysianinsider.com/index.php/home/42-lead-stories/835-sapp-goes-ahead-with-anti-pm-vote).
Naturally, today will not be anywhere near the end of the Yong/SAPP Anti-PM VONC saga. But I will stop here, since the purpose of this short article is to merely observe the timing of the ACA investigation into Yong, for future reference.
Naturally, one also wonders that besides Yong, Najib and other BN politicians, whether the ACA brass themselves have hidden blisters too ... Do you think Pakatan Rakyat's politicians have similar blisters themselves too? Or still too early to tell? Are these blisters a function of being in power for too long? As Rakyat, did we have a role to play in the creation of these blisters? Who says that one person's vote didn't matter?
Happy Observing.
Thursday, June 19, 2008
Malaysian blogs didn't lead to opposition votes?
Came across this article reported by Asia One and circulated in MT - http://www.malaysia-today.net/2008/content/view/9000/84/
Must say I am surprised by the studies reported there. It did not match my own experience, and makes me wonder if this is propoganda-linked? What do you think?
__________________
(Asia One) - A STUDY of the Internet's influence on the 2008 Malaysian general election found no evidence that those who read blogs and other online political content were inclined to vote for opposition parties.
(Seng comment: Wow! Is this a serious Study? Or still living in Denial?
Let's ass-u-me for a moment that the Study is genuine - what could possibly be the explanations? Is the study design flawed perhaps? Or could it be that the vast majority of blog-readers were already pro-Opposition parties years ago, and so, there was no change a year later because they remained pro-Opposition, and because of this "no-change", the researches misinterpreted that as "found no evidence"? If so, what's not reported in this article?)
The study, by four academics from Universiti Teknologi Mara's Communications and Media Studies Faculty, showed that 80 per cent of respondents were aware of blogs, which were popular with the middle class and below.
(Seng comment:
University Teknologi Mara ... Must say I'm not feeling terribly impressed now.
Popular with middle class and below only? Perhaps the middle class and below is a naturally higher % of the population, and so the sample merely reflects population if one does a simple counting which might not be the right way to do a sampling study to test this hypothesis ...
I do however notice that investing blogs (not necessarily the same as political blogs) tend to attract a reasonably high % of high net worth investors (just a general impression) who are also politically astute. I wonder if this is in line with your own experience?)
"After making the cross matching, we found that there was no strong evidence that supports the notion that the Internet content had moved people to vote for the opposition," Professor Madya Baharuddin Aziz told Bernama.
(Seng comment: LOL! This is NOT in line with my own personal experience. What about yours?)
Instead, the study showed that the ruling Barisan Nasional coalition, which were thrashed at the election, failed to adequately address issues raised online.
The survey of 1,100 voters in four zones - north (28 per cent), south (22 per cent), east coast (19 per cent) and central (31 per cent) - showed that blogs were popular because they discussed issues in a different way from mainstream media.
(Seng comment: Yes. Blogs are interactive, and there is a real interaction between the writers and the readers, unlike MSM. Further the interaction is almost instantaneous, such as my chatbox. The connection is real and not distanced like MSM. Furthermore, most if not all blog articles are uncensored. Many are written from the heart, which enhances the connection further.)
When ministers and politicians also hop into this phenomenon, they give clout to blogs and online journalism, said Prof Baharuddin.
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.
(Seng comment: I'm not sure my personal experience agrees here ... Speaking for myself, I don't read Berita Harian nor Utusan Malaysia. The general feedback is that they are so pro-government that they can be sickening and potentially cause vomitting .... (smile) Just curious - what is your experience here?)
Prof Baharuddin said "digital media warfare" and the preference of the younger generation should be given serious thought, particularly with 1.8 million new voters in the next election in 2012 or 2013.
_____________
Conclusion
For me, I find that my own personal experience did NOT match the study.
1. For me, reading blogs over the past year has certainly influenced me to be more sympathetic to the Opposition than the BN coalition.
2. I did not read Berita Harian nor Utusan Malaysia at all, and so, not as much as the other blogs mentioned in that list. Whereas, Malaysiakini and Malaysia Today are probably the Top 2.
3. I also wonder who would want to commission a University study that concluded that Internet did not influence voting ... Here's an idea - why not commission a study to see in what way MSM and Internet reports the same event in different manner (such as Bersih or Hindraf Rally). Then, I would be very impressed with the relevance of our local Universities.
Which now makes me a little wary of the type and quality of the above study in our local Universities ...
Must say I am surprised by the studies reported there. It did not match my own experience, and makes me wonder if this is propoganda-linked? What do you think?
__________________
(Asia One) - A STUDY of the Internet's influence on the 2008 Malaysian general election found no evidence that those who read blogs and other online political content were inclined to vote for opposition parties.
(Seng comment: Wow! Is this a serious Study? Or still living in Denial?
Let's ass-u-me for a moment that the Study is genuine - what could possibly be the explanations? Is the study design flawed perhaps? Or could it be that the vast majority of blog-readers were already pro-Opposition parties years ago, and so, there was no change a year later because they remained pro-Opposition, and because of this "no-change", the researches misinterpreted that as "found no evidence"? If so, what's not reported in this article?)
The study, by four academics from Universiti Teknologi Mara's Communications and Media Studies Faculty, showed that 80 per cent of respondents were aware of blogs, which were popular with the middle class and below.
(Seng comment:
University Teknologi Mara ... Must say I'm not feeling terribly impressed now.
Popular with middle class and below only? Perhaps the middle class and below is a naturally higher % of the population, and so the sample merely reflects population if one does a simple counting which might not be the right way to do a sampling study to test this hypothesis ...
I do however notice that investing blogs (not necessarily the same as political blogs) tend to attract a reasonably high % of high net worth investors (just a general impression) who are also politically astute. I wonder if this is in line with your own experience?)
"After making the cross matching, we found that there was no strong evidence that supports the notion that the Internet content had moved people to vote for the opposition," Professor Madya Baharuddin Aziz told Bernama.
(Seng comment: LOL! This is NOT in line with my own personal experience. What about yours?)
Instead, the study showed that the ruling Barisan Nasional coalition, which were thrashed at the election, failed to adequately address issues raised online.
The survey of 1,100 voters in four zones - north (28 per cent), south (22 per cent), east coast (19 per cent) and central (31 per cent) - showed that blogs were popular because they discussed issues in a different way from mainstream media.
(Seng comment: Yes. Blogs are interactive, and there is a real interaction between the writers and the readers, unlike MSM. Further the interaction is almost instantaneous, such as my chatbox. The connection is real and not distanced like MSM. Furthermore, most if not all blog articles are uncensored. Many are written from the heart, which enhances the connection further.)
When ministers and politicians also hop into this phenomenon, they give clout to blogs and online journalism, said Prof Baharuddin.
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.
(Seng comment: I'm not sure my personal experience agrees here ... Speaking for myself, I don't read Berita Harian nor Utusan Malaysia. The general feedback is that they are so pro-government that they can be sickening and potentially cause vomitting .... (smile) Just curious - what is your experience here?)
Prof Baharuddin said "digital media warfare" and the preference of the younger generation should be given serious thought, particularly with 1.8 million new voters in the next election in 2012 or 2013.
_____________
Conclusion
For me, I find that my own personal experience did NOT match the study.
1. For me, reading blogs over the past year has certainly influenced me to be more sympathetic to the Opposition than the BN coalition.
2. I did not read Berita Harian nor Utusan Malaysia at all, and so, not as much as the other blogs mentioned in that list. Whereas, Malaysiakini and Malaysia Today are probably the Top 2.
3. I also wonder who would want to commission a University study that concluded that Internet did not influence voting ... Here's an idea - why not commission a study to see in what way MSM and Internet reports the same event in different manner (such as Bersih or Hindraf Rally). Then, I would be very impressed with the relevance of our local Universities.
Which now makes me a little wary of the type and quality of the above study in our local Universities ...
SAPP Chief: Some MPs may go independent
Full link here - http://themalaysianinsider.com/index.php/home/42-lead-stories/652-sapp-chief-some-mps-may-go-independent
___________
KUALA LUMPUR, June 18 — Sabah Progessive Party (SAPP) president Datuk Yong Teck Lee today indicated that some elected representatives from Sabah abandoning Barisan Nasional (BN) will become independent representatives.
The former Sabah chief minister also ruled out the possibility of these "independent MPs" and state assemblymen joining Parti Keadilan Rakyat (PKR)-led Pakatan Rakyat should they decide to quit the ruling coalition.
Yong, who has been critical of Abdullah's political decisions on Sabah and what he described as "unpopular" measures pertaining to fuel price hikes and illegal immigrants' issues in the state, said they were not keen to cross over to a peninsula-based Opposition party.
"We don't want that. What we want is if there is any political party in the state, it should be a Sabah-based party, looking after the affairs in the state and its people," he said in an interview with Bernama in Kota Kinabalu recently.
"We don't foresee ourselves joining any other peninsula-based opposition party if we ever decide to dump BN. Maybe only in terms of a loose coalition."
He, however, declined to say whether SAPP itself would leave the BN.
"Let's wait and see," said Yong, who declared in Kota Kinabalu today that the party's two members of parliament (Sepanggar and Tawau) would support a motion for a vote of no confidence against the prime minister in the coming Parliament sitting on Monday.
Several SAPP leaders said that a number of Sabah politicians from other parties had shown interest in joining the "coalition of independent representatives".
"It's not just SAPP only. It will be a bigger coalition of independent members of parliament and assemblymen, at least until the next general election," said one leader who declined to identified.
It is learnt that 10 to 18 Sabah MPs and assemblymen would announce their decision to quit BN and jump-start the "independents pack" in a matter of days.
"Just watch out for this Saturday. It could be another political tsunami," an aide to the SAPP chief said.
Meanwhile, a political observer said several MPs from Sabah could announce their stance in the BN after the SAPP holds its emergency supreme council meeting on Friday.
Yong said he had nothing personal against the prime minister and his last meeting with Abdullah on May 13 in Kuala Lumpur had been very cordial.
"That was when I made it quite clear so that I was not misunderstood, I said it three times, that although there was no crossover as speculated, the prime minister should not rule out the possiblity of this happening sometime in the future because the issues are real, the MPs are serious," he said. — Bernama
___________
KUALA LUMPUR, June 18 — Sabah Progessive Party (SAPP) president Datuk Yong Teck Lee today indicated that some elected representatives from Sabah abandoning Barisan Nasional (BN) will become independent representatives.
The former Sabah chief minister also ruled out the possibility of these "independent MPs" and state assemblymen joining Parti Keadilan Rakyat (PKR)-led Pakatan Rakyat should they decide to quit the ruling coalition.
Yong, who has been critical of Abdullah's political decisions on Sabah and what he described as "unpopular" measures pertaining to fuel price hikes and illegal immigrants' issues in the state, said they were not keen to cross over to a peninsula-based Opposition party.
"We don't want that. What we want is if there is any political party in the state, it should be a Sabah-based party, looking after the affairs in the state and its people," he said in an interview with Bernama in Kota Kinabalu recently.
"We don't foresee ourselves joining any other peninsula-based opposition party if we ever decide to dump BN. Maybe only in terms of a loose coalition."
He, however, declined to say whether SAPP itself would leave the BN.
"Let's wait and see," said Yong, who declared in Kota Kinabalu today that the party's two members of parliament (Sepanggar and Tawau) would support a motion for a vote of no confidence against the prime minister in the coming Parliament sitting on Monday.
Several SAPP leaders said that a number of Sabah politicians from other parties had shown interest in joining the "coalition of independent representatives".
"It's not just SAPP only. It will be a bigger coalition of independent members of parliament and assemblymen, at least until the next general election," said one leader who declined to identified.
It is learnt that 10 to 18 Sabah MPs and assemblymen would announce their decision to quit BN and jump-start the "independents pack" in a matter of days.
"Just watch out for this Saturday. It could be another political tsunami," an aide to the SAPP chief said.
Meanwhile, a political observer said several MPs from Sabah could announce their stance in the BN after the SAPP holds its emergency supreme council meeting on Friday.
Yong said he had nothing personal against the prime minister and his last meeting with Abdullah on May 13 in Kuala Lumpur had been very cordial.
"That was when I made it quite clear so that I was not misunderstood, I said it three times, that although there was no crossover as speculated, the prime minister should not rule out the possiblity of this happening sometime in the future because the issues are real, the MPs are serious," he said. — Bernama
SAPP Sap Sui?
Since SAPP publicly announced the "bombshell" at 2 PM today, there was a lot of discussion in my chatbox on this topic. The first session during trading hours was more "speculative" since there wasn't much newsflow then. The second session in the evening appears more measured as everyone tried to digest the newsflow. It is good to see the regulars chipped in to share opinions, data and links. Whilst we tried to stick to known data as much as possible, inevitably, opinions/known rumours are included and it is hard to separate the two.
To save time, rather than write a new piece from scratch, I will just copy and paste the bits that I find interesting with minor editing for better readability, including the links for future reference.
As you read below, keep in mind what might likely transpires over the near term on the political front. The first area is is obviously the VONC (Vote of No Confidence) and the various party positions. As expected, BN component parties - MCA, MIC has publicly supported AAB (i.e. reject VONC) which I believe is what the market expects also. Similarly, PKR, DAP has publicly supported VONC and I believe the market expects this also. Other parties (such as UMNO, Gerakan, PAS, etc.) have yet to issue public statements at the time I write this, and personally, I don't expect surprises to be announced. I believe markets will look closely at how UMNO - the main party - votes. I think UMNO, despite their internal squabbles - will unite and reject VONC to protect their personal interests in Government and Parliament (despite numerous individual wishes otherwise).
The second is to look for clues as to how AAB intend to deal with this "dissent" from SAPP party. A couple of chatters opined earlier that AAB has no choice but to expel SAPP, as a matter of BN discipline, to deter future "dissent". After editing below, my own opinion is that the bulk of the damage to the BN party has already been done when Yong decided to publicly announce VONC. As to whether SAPP stays, voluntarily leave or is expelled, future market reactions will depend on how much political instability is generated. Much depends on AAB and BN, since if BN MPs are not united on the VONC, then, they risk losing everything (e.g. the government, their MP position within Parliament, etc.) and from their perspective, it should be a matter of rationally weighing conflicting priorities. Emotional knee-jerk reactions are more likely to be harmful to the nation in the long run.
If you are in cash, is this crisis an opportunity to buy shares on the cheap, or wait? If you are currently holding shares, should you sell tomorrow or wait for a while until this crisis ease?
My own opinion is that if you are an investor who don't watch prices all the time, then, you should wait and stay in cash (or just buy a small fraction if you cannot resist). The KLCI closed 1212.59, and even though this looks attractive compared to last year's peak, I think the odds are very good that we will see even lower prices before this coming August to October period.
However, if you think you have the ability to time the market i.e. go in at lower prices and sell at higher prices, then, perhaps you don't really need to ask me and perhaps it is me who needs to ask you (smile).
Happy Monitoring!
_____________
Extracts from the Chatbox:
Seng (20:13) : A short update from Channel 7 (evening news) on TV (this is based on my take from memory & can be wrong. I did not take notes, and am recalling from memory what I saw).
Seng: As expected, MCA and MIC publicly announced their support for AAB and against the Vote of No Confidence (VONC). It seems their members have been instructed to vote for AAB. I didn't catch the bit whether UMNO will unilaterally vote for AAB, but if MCA and MIC votes for AAB, then, I lean towards the view that UMNO will be behind AAB on the VONC. After all, within UMNO, AAB has already said that he will hand over orderly to Najib, and this matter could also be viewed as within UMNO, and not something outside UMNO like the VONC.
Seng: PKR via Khalid's statement also - as expected - will support the VONC. However I noticed that during his speech, there are many parts that he hesitated and it wasn't a continuous, free flowing response. Perhaps he is less well versed, or perhaps he's trying to find the right words.
Seng: DAP - via LGE - expressed surprise by SAPP's move. He repeated that SAPP is only a 2 MP party, and it's not as if BN will fall as a result of this move. But he says anyone is welcome to join PR. Channel 7 only showed a snippet, so, I don't know if LGE called other Sabah MP to also join in the VONC. Naturally, like PKR he says DAP supports the VONC.
Seng: So, from what I gather, it seems broadly consistent with what we discussed today, which is that the VONC is likely to be voted down, unless more MPs from BN cross over. The impression from Channel 7 is that (the latter) probably won't happen since MCA and MIC stands solidly behind AAB in Channel 7.
Seng: Also, the Parliament Speaker reiterates that he has the right to accept or reject the VONC. He reiterates the 14 day notice, but mentioned that he hasn't received "instructions" (?) or feedback from anybody on the SAPP's VONC plans.
Seng: Lim Kit Siang (LKS) in his blog thinks that it is unlikely VONC can be tabled next Monday - his response is "I see little possibility of SAPP’s No Confidence Motion against Abdullah as Prime Minister being tabled and debated on Monday unless there is a second political tsunami in the next few days, with waves of support from other Barisan Nasional MPs from Sabah, Sarawak and Peninsula Malaysia making it a credible parliamentary move"
Seng: So, it seems now it depends on the remaining MPs that sits on the fence over the next few days, whether they will publicly announce their support or otherwise for the VONC.
Seng: Also, my impression from hearing SAPP President's talk just now on TV is that his gripe seems focussed on AAB than BN party. He refers to Abdullah's administration rather than Barisan Nasional. This capitalizes on the wave of dissent within UMNO against Abdullah personally, rather than BN. It's a gamble. If AAB and BN retains power it will be a dilemma for AAB whether to expel SAPP or not. By phrasing it as a VONC against Abdullah personally, AAB must bear in mind that if he expels SAPP, it could be seen as a personal revenge as well as further weakening BN. So far, none of MCA and MIC has called for SAPP to be expelled. Perhaps if BN position is stronger and perhaps if they get more arrogant, then, (I think) they might consider expel. At the moment, BN's position is tenuous, and I believe they clearly realize the position they are in.
Seng: Also, PKR Khalid repeated his offer to vacate his seat to DSAI.
Seng: RPK's take should put a smile on your face - "0.1% chance Pak Lah can stay on as PM beyond Christmas; There is a strong possibility that the next Parliament session will commence with a vote of no confidence against Prime Minister Abdullah Ahmad Badawi and there is also a strong possibility he may be out of office as early as next week." - http://www.malaysia-today.net/2008/content/view/8964/1/
Seng (20:42) : This together with Channel 7 confirms my impression that SAPP is not against BN, but Abdullah's leadership. He has put it squarely on Abdullah. - http://www.malaysia-today.net/2008/content/view/8957/84/ - "SAPP president Datuk Yong Teck Lee said the party is not pulling out from the Barisan Nasional but has called for Prime Minister Datuk Seri Abdullah Ahmad Badawi to step dowe because they do not have confidence in his leadership. Yong said the party would make its stand known in Parliament on June 23."
Seng: So, the million $ question is what should we take from all this? Is this the start of more worse things to happen? Or is this a temporary crisis that presents temporary opportunity before the next crisis? Comments invited.
Seng: Here is MCA official stand on the SAPP VONC - http://www.mca.org.my/English/Commentaries/Pages/MCAstandsbythePrimeMinister.aspx; "MCA will stand steadfastly with the Prime Minister of Malaysia, YB Dato’ Seri Abdullah Ahmad Badawi and the BN coalition ..." - this one is supporting BOTH AAB and BN.
Seng: MIC official website is hopelessly out of date - their latest news is dated 3 March 2008. LOL! - http://www.mic.org.my/MIC/Home.aspx
Seng (21:26): Mohd Kamal Abdullah frequently writes in Malaysiakini, MalaysiaToday and in the FORUM column of MALAYSIA CHAT www.malaysia-chat.com. - here is his take on this issue on (17 June) - http://kamal-talksmalaysia.blogspot.com/2008/06/sapp-vote-of-no-confidence-on-prime.html; "Its been reported that many BN UMNOputras top leaders are in Kota Kinabalu trying to convince Datuk Yong from weakening the BN. The leaders were PM Datuk Seri Abdullah Ahmad Badawi yesterday while Tengku Adnan, Tan Sri Muhd Mohammad Taib and even Khairy Jamaluddin are in Sabah.; ... "If PM Datuk Seri Abdullah announces that BN will set-up a Royal Commission of Inquiry on the Sabah illegal immigrant issue, then the issue of defection or leaving the BN will 'temporarily' be called-off. Its now in the hands of the BN leaders or PM Datuk Seri Abdullah himself."; So, if he is to be believed, maybe all it takes is for AAB to agree to an RCI, and the VONC might not materialize ... (or maybe not, since VONC needs 14 days to be tabled in)
Seng: ... found this poll (in SAPP website) which was mentioned in Channel 7 which I just remembered - http://sapphq.blogspot.com/ - 86% of online voters vote that SAPP should leave BN and join PR!
starter: From AAB : he had not been able to satisfy Yong’s "personal greed". Actually Yong has been upset with Abdullah since before the general election when his request to contest the Kota Kinabalu parliamentary seat was turned down by the BN leadership.
starter: Sabah party divided on opposing PM http://themalaysianinsider.com/index.php/home/42-lead-stories/651-sabah-party-divided-on-opposing-pm
starter: SAPP chief: Some MPs may go independent http://themalaysianinsider.com/index.php/home/42-lead-stories/652-sapp-chief-some-mps-may-go-independent
starter: Huge blow to Abdullah's leadership http://themalaysianinsider.com/index.php/home/42-lead-stories/643-huge-blow-to-abdullahs-leadership
starter: Now we have some personal reasons why Yong is not happy with AAB. He wasn't choosen for the KK seat during the last election.
Seng: It seems DAP was not consulted when SAPP made the announcement today. Two reasons. 1. LGE expressed surprise in Channel 7, as I mentioned below. 2. LKS's blog also queried the June 23 date, since "The Parliamentary Standing Orders not have special provision for VONC". E.g. Standing Order #27 says must give 14 day notice, i.e. July 2 is first available date. Standing Order #18 has deficiency since only allow 1 hour debate. etc. A respected commentator there "Jeffrey" thinks that DAP was NOT consulted about SAPP's VONC plans, suggesting that it is rather poorly planned, if it was planned with PR in the first place.
starter (21:55) : Seng, I don't think its planned with PR in the first place. DSAI might know about it ,Ku Li definitely knows about it as he is the first one to break out the news about a defection from a BN compunent party.
starter: Now lets see why Sapp must resort to this actions.... By announcing their plan to table a motion of no confidence, Datuk Yong Teck Lee and the SAPP have already achieved what they set out to do - embarrass and humiliate Abdullah. The message that Yong wants to send to the rest of Malaysia is that the PM is weak and he should be replaced as the head of Barisan Nasional
starter: In recent days, Yong has told BN colleagues that he was leaning towards making SAPP an independent political party. He believed that there was a good chance of BN and Umno being defeated in the next general elections and felt that it was a good strategy to fight for the interest of Sabahans first and decide later which coalition to join.
Seng: starter, 21:55 - I agree with you. I find it ironic that DAP didn't know, DSAI knows, Ku Li (within UMNO) knows i.e. BN knows but PR (except DSAI) doesn't know.
starter: I think Yong threatened AAB about this defection when they met last time. A time frame of until August was set and some of Yong request includes appointing him as a senator and eventually a cabinet post.
starter (22:02) : Apparently AAB called for a BN supreme council meeting on Thursday to evaluate on Yong's demands . Hmmm ? Thursday ?
starter (22:06): BN officials believe that the motion of no-confidence gambit was planted in Yong’s mind by Anwar and are prepared for a flurry of surprises from the former deputy prime minister over the next few days. They believe this will be Anwar’s best opportunity to build some momentum and make good his boast of being able to force the crossover of more than 30 BN MPs to Pakatan Rakyat.
Seng: starter, 22:02 "The PM has called for a Barisan Nasional supreme council meeting on Thursday when he is likely to detail some of Yong’s demands to him, including an appointment as a senator followed by a position in the Cabinet." - I think the article might be referring to tomorrow, Thursday, 19 June, due to the phrase "when he is likely to ...".
Seng: starter, 22:06 ... I think the Malaysian Insider article indicates the writer's opinion since he refers to "BN officials believe". I wonder who are these "BN officials". Also, in other parts of the same article, the author wrote "It is understood ..." ... Anyway, it is a natural suspicion since it is my opinion that Non-BN people also suspect the same thing, since DSAI met him twice apparently.
starter: yeah Seng,you are right about the date,the supreme council meeting is schedule for tomorrow. But why Yong outburst today when his request has not been deliberated yet?
starter: But note this...Abdullah hit back last night saying that he had not been able to satisfy Yong’s "personal greed". I think Yong got the signal yesterday night.
Seng: Also, there is a possibility that PAS wasn't consulted either, making it both PAS and DAP. And judging from PKR Khalid's talk this evening in Channel 7, not sure if he knows too ... maybe only DSAI knows ? Hmmnn ...
starter: I think this outburst caught everyone by surprise except AAB. DSAI might be hoping for something like this to occur but I don't think he expected it also but then Yong has met DSAI twice,in KL and HK,so anything is possible.
Seng: "Abdullah hit back last night saying that he had not been able to satisfy Yong’s "personal greed". " - According to the writer, it seems that way isn't it? I wonder who the writer in Malaysian Insider is, since for him to write this, he must have heard it from someone close to AAB I suspect. Isn't this considered a rumour piece?
Seng: The Malaysian Insider articles (3) provides interesting insights into possible motivations for Yong to do what he did. I'm curious why Malaysian insider is so keen to provide these possible motivations ...
Seng: Kamal - in my 21:26 - who writes for Malaysiakini - seems to have a different take than Malaysian insider ...
starter: I think AAB might have told some of the BN supreme council members about this and also his discussion with Yong and his personal request. Leakages might be from some of the ppl assisting some of the supreme council members in their daily events. Just speculating here.
Seng: Yeah, possible. In the past, I noticed Malaysian Insider seems to lean towards BN views too, although just a general feeling now. They may be closer to BN and so, have these 2nd hand feedbacks from people in the know. Possible ...
Seng: You see, according to Kamal, Yong was in discussion with AAB, Tengku Adnan, Mohd Taib and Khairy when they were in Sabah ...
starter: I think during the latest visit to Sabah by AAB, only Yong didn't turn up and it was reported in the main stream media. The friction is there already
Seng: So, maybe the 5 of them were in discussion first, then, in the latest visit, Yong isn't there? Or vice versa? What do you make of Kamal's piece?
bullbear: Anwar has been feeding the rumour mill of BN MPs crossing over to PR. If this occurs, it will be unlikely to be from MPs in Peninsular Malaysia. If there is, it is very likely (with due respect to Sabah and Sarawak) to be from the smaller coalition partners of BN in Sabah and Sarawak. http://drchua9.blogspot.com/
bullbear: Presiden SAPP, Datuk Yong Teck Lee berkata parti itu tidak akan keluar pada masa ini dari BN yang dipimpin oleh Abdullah, tetapi statusnya akan disemak pada hujung minggu ini. http://www.malaysiakini.com/news/84658
Seng: starter, note the date of Kamal's piece - he actually wrote that yesterday, so, he knew Yong is coming out today.
bullbear: seng, & starter: looks like Yong Teck Lee has some specific demands put to AAB for Sabah. These could not be met and he felt that this period is an opportunity for him to act. After this, the opportunity window will be closed.
Seng: bb, MCA already came out with official party statement saying they will support both AAB and BN - see my earlier posting at 21:09 from MCA website. Dr Chua's opinion is interesting, but I don't think he's in the loop.
starter: I think Yong was there during the first discussion and infact he met AAB personally at Putrajaya and conveyed some of his request with August as a dateline. AAB must have slept on it and that is why Yong is angry and didn't turn up during the latest meeting. Will read Kamal article again....
bullbear: seng, chua soi leck's reasoning was what i wanted to alert our readers to.
bullbear (22:36) : anyway, SAPP may yet leave the BN... this is left open for the moment to be decided on Friday
starter: Seng, is it possible he key in the date wrongly? haha!! yeah ! you're right,he knew it yesterday,damn !!
Seng: bb, your 22:36, SAPP official stand is that it is AAB problem, not BN problem. They still want to stay in BN. Yong just don't have confidence with AAB personally. SAPP has put the blame squarely at AAB as a person, not the BN party. See my 20:42.
starter: So Seng,we can safely assume that the leakages happens yesterday night and as such the article in Malaysian Insider does have some truth to it ,right?
bullbear: ..SAPP is a small party... also Chinese based party.. just wondering why it should stick its neck out for the Sabah cause....?????
bullbear: "ada dalang disebelah batu"
newbie: it was very well planned by Anwar ... this will be the first step for check mate
bullbear: newbie.. it did cross my mind that it may be initiated by Anwar... but then why now?
newbie: BB, step by step more things will be unveal
Seng: starter, I really don't know the truth ... Malaysian Insider paints a picture that this could be a genuine personal problem between Yong and AAB which is perhaps more believable.
bullbear: which faction's purpose is better served when YTL proposed the VONC next week?? Is it for the benefit of AAB's opponents within UMNO? for PR? or just sandiwara (i.e.) no chance of success but just a threat...
Seng: And if the Malaysian Insider is right, then, UMNO will be solidly behind AAB, which means UMNO, MCA, MIC are solidly behind AAB. Which means the VONC is going to go down. But having said that, if the VONC happens July 2 (14 days notice period), then, anything can happen in the interim. Also, apparently, Thu, Fri and Sat is going to be interesting because there is going to be some specific developments like the UMNO supreme council meeting tomorrow ...
bullbear: Would AAB's opponents within UMNO be willing to risk a VONC in parliament given the uncertainties of maintaining control of the federal government?
Seng: bb, from what we know so far starting from my postings after Channel 7 piece, everything points pretty much to the VONC being shot down (I think all UMNO will support since MCA and MIC already support) if it happens today. Of course, this can't happen until July 2 earliest according to LKS due to Parliamentary Standing Orders requirement which it seems SAPP didn't know about.
bullbear: yes, why SAPP just withdraw from BN. Instead, proposing a VONC without a definite possibility of winning seems a feeble attempt at bringing SAPP's grievances into the open. Probably, SAPP has already decided to leave BN on own volition if this VONC cannot succeed for the present. Will AAB gives in to this threat? Remember the famous words, "Saya pantang di-cabar."
starter: Seng, lets look at things that we can confirm.... 1) Yong didn't contest in the KK seat he requested...anyone would be angry with this ,whatmore when he is the president of Sapp. So we have the motive, next we have two reporters stating the same reasons or condition that can prevent or postpone the defection.....Commission of Inquiry on the Sabah illegal immigrant issue and they knew about it last night ,so that means the source is quite reliable.
bullbear: He said the momentum for Sabah to recover autonomy, obtain 20% oil royalties instead of the present five per cent and the return of Labuan would be lost. http://thestar.com.my/news/story.asp?file=/2008/6/18/nation/20080618205211&sec=nation
Seng: bb, I think SAPP didn't want to withdraw from BN because Yong wants to make it very clear that his problem is with AAB as a person, and not BN the party. I don't know how this will play out over the next 2 weeks. IF VONC is shot down on say July 2, then, the next question is what to do with SAPP. I think AAB has a difficult choice since 1. Expel SAPP means it's personal rather than Party, and it's also a no no. 2. If SAPP is expelled and others follow suit and BN kaputs, then, AAB will be killed. It's not an easy choice, even though if he does nothing, he'll be seen as weak. With Yong presenting it as personal rather than party, it's a gambit.
Seng: starter, yes, Yong makes it clear it's personal. I agree.
bullbear: It is rather unfair in my opinion that Yong refers to AAB as the problem... surely the problem is with UMNO, the dominant party in BN.
Seng: bb, TDM (and others within UMNO) also makes it clear (that the problem is) AAB as a person, not the BN (or UMNO) party too
starter: Seng I think this motion of no-confidence might not happen at all because the the request if submitted today will only be heard on July2 under Standing Order #27 and I'm sure the speaker will reject it earlier just like previously when the PR submittted the request to debate on the Mahkota Cheras thingy.
Seng: Yes, this is what LKS is saying. That the earliest possible date is July 2. It can be done earlier under Standing Order #18, but this only allow 1 hour debate, which is meaningless.
Seng: Looks like the political uncertainty is going to be prolonged for at least 2 weeks at a more intense level than previously ... Today's volume was higher, suggesting real fear. Will be interesting to see if tomorrow's fear is higher or lower. I think most people won't analyse it in this detail, so, my guess is MORE FEAR tomorrow ...
starter: So I think next we have to wait for the BN whip...Najib to see whether he will expel Sapp or will they bow down to Yong's demand and set up a royal commission on illegal immigrants.(very unlikely)
Seng: starter, why do you mention that Najib will expel SAPP?
bullbear: http://malaysiana1.blogspot.com/2008/06/datuk-yong-teck-lee-his-demands.html
starter: Seng,he is I think the BN whip...I can't remember the term correctly but any action will be taken by him.
Seng: Ok. So, you're speculating UMNO will expel SAPP? Maybe you want to wait until after tomorrow's UMNO supreme council meeting first ...
starter: Yes Seng, we should know by tomorrow but I heard Bung from kinabatangan request BN to take stern actions on Sapp....TV3
To save time, rather than write a new piece from scratch, I will just copy and paste the bits that I find interesting with minor editing for better readability, including the links for future reference.
As you read below, keep in mind what might likely transpires over the near term on the political front. The first area is is obviously the VONC (Vote of No Confidence) and the various party positions. As expected, BN component parties - MCA, MIC has publicly supported AAB (i.e. reject VONC) which I believe is what the market expects also. Similarly, PKR, DAP has publicly supported VONC and I believe the market expects this also. Other parties (such as UMNO, Gerakan, PAS, etc.) have yet to issue public statements at the time I write this, and personally, I don't expect surprises to be announced. I believe markets will look closely at how UMNO - the main party - votes. I think UMNO, despite their internal squabbles - will unite and reject VONC to protect their personal interests in Government and Parliament (despite numerous individual wishes otherwise).
The second is to look for clues as to how AAB intend to deal with this "dissent" from SAPP party. A couple of chatters opined earlier that AAB has no choice but to expel SAPP, as a matter of BN discipline, to deter future "dissent". After editing below, my own opinion is that the bulk of the damage to the BN party has already been done when Yong decided to publicly announce VONC. As to whether SAPP stays, voluntarily leave or is expelled, future market reactions will depend on how much political instability is generated. Much depends on AAB and BN, since if BN MPs are not united on the VONC, then, they risk losing everything (e.g. the government, their MP position within Parliament, etc.) and from their perspective, it should be a matter of rationally weighing conflicting priorities. Emotional knee-jerk reactions are more likely to be harmful to the nation in the long run.
If you are in cash, is this crisis an opportunity to buy shares on the cheap, or wait? If you are currently holding shares, should you sell tomorrow or wait for a while until this crisis ease?
My own opinion is that if you are an investor who don't watch prices all the time, then, you should wait and stay in cash (or just buy a small fraction if you cannot resist). The KLCI closed 1212.59, and even though this looks attractive compared to last year's peak, I think the odds are very good that we will see even lower prices before this coming August to October period.
However, if you think you have the ability to time the market i.e. go in at lower prices and sell at higher prices, then, perhaps you don't really need to ask me and perhaps it is me who needs to ask you (smile).
Happy Monitoring!
_____________
Extracts from the Chatbox:
Seng (20:13) : A short update from Channel 7 (evening news) on TV (this is based on my take from memory & can be wrong. I did not take notes, and am recalling from memory what I saw).
Seng: As expected, MCA and MIC publicly announced their support for AAB and against the Vote of No Confidence (VONC). It seems their members have been instructed to vote for AAB. I didn't catch the bit whether UMNO will unilaterally vote for AAB, but if MCA and MIC votes for AAB, then, I lean towards the view that UMNO will be behind AAB on the VONC. After all, within UMNO, AAB has already said that he will hand over orderly to Najib, and this matter could also be viewed as within UMNO, and not something outside UMNO like the VONC.
Seng: PKR via Khalid's statement also - as expected - will support the VONC. However I noticed that during his speech, there are many parts that he hesitated and it wasn't a continuous, free flowing response. Perhaps he is less well versed, or perhaps he's trying to find the right words.
Seng: DAP - via LGE - expressed surprise by SAPP's move. He repeated that SAPP is only a 2 MP party, and it's not as if BN will fall as a result of this move. But he says anyone is welcome to join PR. Channel 7 only showed a snippet, so, I don't know if LGE called other Sabah MP to also join in the VONC. Naturally, like PKR he says DAP supports the VONC.
Seng: So, from what I gather, it seems broadly consistent with what we discussed today, which is that the VONC is likely to be voted down, unless more MPs from BN cross over. The impression from Channel 7 is that (the latter) probably won't happen since MCA and MIC stands solidly behind AAB in Channel 7.
Seng: Also, the Parliament Speaker reiterates that he has the right to accept or reject the VONC. He reiterates the 14 day notice, but mentioned that he hasn't received "instructions" (?) or feedback from anybody on the SAPP's VONC plans.
Seng: Lim Kit Siang (LKS) in his blog thinks that it is unlikely VONC can be tabled next Monday - his response is "I see little possibility of SAPP’s No Confidence Motion against Abdullah as Prime Minister being tabled and debated on Monday unless there is a second political tsunami in the next few days, with waves of support from other Barisan Nasional MPs from Sabah, Sarawak and Peninsula Malaysia making it a credible parliamentary move"
Seng: So, it seems now it depends on the remaining MPs that sits on the fence over the next few days, whether they will publicly announce their support or otherwise for the VONC.
Seng: Also, my impression from hearing SAPP President's talk just now on TV is that his gripe seems focussed on AAB than BN party. He refers to Abdullah's administration rather than Barisan Nasional. This capitalizes on the wave of dissent within UMNO against Abdullah personally, rather than BN. It's a gamble. If AAB and BN retains power it will be a dilemma for AAB whether to expel SAPP or not. By phrasing it as a VONC against Abdullah personally, AAB must bear in mind that if he expels SAPP, it could be seen as a personal revenge as well as further weakening BN. So far, none of MCA and MIC has called for SAPP to be expelled. Perhaps if BN position is stronger and perhaps if they get more arrogant, then, (I think) they might consider expel. At the moment, BN's position is tenuous, and I believe they clearly realize the position they are in.
Seng: Also, PKR Khalid repeated his offer to vacate his seat to DSAI.
Seng: RPK's take should put a smile on your face - "0.1% chance Pak Lah can stay on as PM beyond Christmas; There is a strong possibility that the next Parliament session will commence with a vote of no confidence against Prime Minister Abdullah Ahmad Badawi and there is also a strong possibility he may be out of office as early as next week." - http://www.malaysia-today.net/2008/content/view/8964/1/
Seng (20:42) : This together with Channel 7 confirms my impression that SAPP is not against BN, but Abdullah's leadership. He has put it squarely on Abdullah. - http://www.malaysia-today.net/2008/content/view/8957/84/ - "SAPP president Datuk Yong Teck Lee said the party is not pulling out from the Barisan Nasional but has called for Prime Minister Datuk Seri Abdullah Ahmad Badawi to step dowe because they do not have confidence in his leadership. Yong said the party would make its stand known in Parliament on June 23."
Seng: So, the million $ question is what should we take from all this? Is this the start of more worse things to happen? Or is this a temporary crisis that presents temporary opportunity before the next crisis? Comments invited.
Seng: Here is MCA official stand on the SAPP VONC - http://www.mca.org.my/English/Commentaries/Pages/MCAstandsbythePrimeMinister.aspx; "MCA will stand steadfastly with the Prime Minister of Malaysia, YB Dato’ Seri Abdullah Ahmad Badawi and the BN coalition ..." - this one is supporting BOTH AAB and BN.
Seng: MIC official website is hopelessly out of date - their latest news is dated 3 March 2008. LOL! - http://www.mic.org.my/MIC/Home.aspx
Seng (21:26): Mohd Kamal Abdullah frequently writes in Malaysiakini, MalaysiaToday and in the FORUM column of MALAYSIA CHAT www.malaysia-chat.com. - here is his take on this issue on (17 June) - http://kamal-talksmalaysia.blogspot.com/2008/06/sapp-vote-of-no-confidence-on-prime.html; "Its been reported that many BN UMNOputras top leaders are in Kota Kinabalu trying to convince Datuk Yong from weakening the BN. The leaders were PM Datuk Seri Abdullah Ahmad Badawi yesterday while Tengku Adnan, Tan Sri Muhd Mohammad Taib and even Khairy Jamaluddin are in Sabah.; ... "If PM Datuk Seri Abdullah announces that BN will set-up a Royal Commission of Inquiry on the Sabah illegal immigrant issue, then the issue of defection or leaving the BN will 'temporarily' be called-off. Its now in the hands of the BN leaders or PM Datuk Seri Abdullah himself."; So, if he is to be believed, maybe all it takes is for AAB to agree to an RCI, and the VONC might not materialize ... (or maybe not, since VONC needs 14 days to be tabled in)
Seng: ... found this poll (in SAPP website) which was mentioned in Channel 7 which I just remembered - http://sapphq.blogspot.com/ - 86% of online voters vote that SAPP should leave BN and join PR!
starter: From AAB : he had not been able to satisfy Yong’s "personal greed". Actually Yong has been upset with Abdullah since before the general election when his request to contest the Kota Kinabalu parliamentary seat was turned down by the BN leadership.
starter: Sabah party divided on opposing PM http://themalaysianinsider.com/index.php/home/42-lead-stories/651-sabah-party-divided-on-opposing-pm
starter: SAPP chief: Some MPs may go independent http://themalaysianinsider.com/index.php/home/42-lead-stories/652-sapp-chief-some-mps-may-go-independent
starter: Huge blow to Abdullah's leadership http://themalaysianinsider.com/index.php/home/42-lead-stories/643-huge-blow-to-abdullahs-leadership
starter: Now we have some personal reasons why Yong is not happy with AAB. He wasn't choosen for the KK seat during the last election.
Seng: It seems DAP was not consulted when SAPP made the announcement today. Two reasons. 1. LGE expressed surprise in Channel 7, as I mentioned below. 2. LKS's blog also queried the June 23 date, since "The Parliamentary Standing Orders not have special provision for VONC". E.g. Standing Order #27 says must give 14 day notice, i.e. July 2 is first available date. Standing Order #18 has deficiency since only allow 1 hour debate. etc. A respected commentator there "Jeffrey" thinks that DAP was NOT consulted about SAPP's VONC plans, suggesting that it is rather poorly planned, if it was planned with PR in the first place.
starter (21:55) : Seng, I don't think its planned with PR in the first place. DSAI might know about it ,Ku Li definitely knows about it as he is the first one to break out the news about a defection from a BN compunent party.
starter: Now lets see why Sapp must resort to this actions.... By announcing their plan to table a motion of no confidence, Datuk Yong Teck Lee and the SAPP have already achieved what they set out to do - embarrass and humiliate Abdullah. The message that Yong wants to send to the rest of Malaysia is that the PM is weak and he should be replaced as the head of Barisan Nasional
starter: In recent days, Yong has told BN colleagues that he was leaning towards making SAPP an independent political party. He believed that there was a good chance of BN and Umno being defeated in the next general elections and felt that it was a good strategy to fight for the interest of Sabahans first and decide later which coalition to join.
Seng: starter, 21:55 - I agree with you. I find it ironic that DAP didn't know, DSAI knows, Ku Li (within UMNO) knows i.e. BN knows but PR (except DSAI) doesn't know.
starter: I think Yong threatened AAB about this defection when they met last time. A time frame of until August was set and some of Yong request includes appointing him as a senator and eventually a cabinet post.
starter (22:02) : Apparently AAB called for a BN supreme council meeting on Thursday to evaluate on Yong's demands . Hmmm ? Thursday ?
starter (22:06): BN officials believe that the motion of no-confidence gambit was planted in Yong’s mind by Anwar and are prepared for a flurry of surprises from the former deputy prime minister over the next few days. They believe this will be Anwar’s best opportunity to build some momentum and make good his boast of being able to force the crossover of more than 30 BN MPs to Pakatan Rakyat.
Seng: starter, 22:02 "The PM has called for a Barisan Nasional supreme council meeting on Thursday when he is likely to detail some of Yong’s demands to him, including an appointment as a senator followed by a position in the Cabinet." - I think the article might be referring to tomorrow, Thursday, 19 June, due to the phrase "when he is likely to ...".
Seng: starter, 22:06 ... I think the Malaysian Insider article indicates the writer's opinion since he refers to "BN officials believe". I wonder who are these "BN officials". Also, in other parts of the same article, the author wrote "It is understood ..." ... Anyway, it is a natural suspicion since it is my opinion that Non-BN people also suspect the same thing, since DSAI met him twice apparently.
starter: yeah Seng,you are right about the date,the supreme council meeting is schedule for tomorrow. But why Yong outburst today when his request has not been deliberated yet?
starter: But note this...Abdullah hit back last night saying that he had not been able to satisfy Yong’s "personal greed". I think Yong got the signal yesterday night.
Seng: Also, there is a possibility that PAS wasn't consulted either, making it both PAS and DAP. And judging from PKR Khalid's talk this evening in Channel 7, not sure if he knows too ... maybe only DSAI knows ? Hmmnn ...
starter: I think this outburst caught everyone by surprise except AAB. DSAI might be hoping for something like this to occur but I don't think he expected it also but then Yong has met DSAI twice,in KL and HK,so anything is possible.
Seng: "Abdullah hit back last night saying that he had not been able to satisfy Yong’s "personal greed". " - According to the writer, it seems that way isn't it? I wonder who the writer in Malaysian Insider is, since for him to write this, he must have heard it from someone close to AAB I suspect. Isn't this considered a rumour piece?
Seng: The Malaysian Insider articles (3) provides interesting insights into possible motivations for Yong to do what he did. I'm curious why Malaysian insider is so keen to provide these possible motivations ...
Seng: Kamal - in my 21:26 - who writes for Malaysiakini - seems to have a different take than Malaysian insider ...
starter: I think AAB might have told some of the BN supreme council members about this and also his discussion with Yong and his personal request. Leakages might be from some of the ppl assisting some of the supreme council members in their daily events. Just speculating here.
Seng: Yeah, possible. In the past, I noticed Malaysian Insider seems to lean towards BN views too, although just a general feeling now. They may be closer to BN and so, have these 2nd hand feedbacks from people in the know. Possible ...
Seng: You see, according to Kamal, Yong was in discussion with AAB, Tengku Adnan, Mohd Taib and Khairy when they were in Sabah ...
starter: I think during the latest visit to Sabah by AAB, only Yong didn't turn up and it was reported in the main stream media. The friction is there already
Seng: So, maybe the 5 of them were in discussion first, then, in the latest visit, Yong isn't there? Or vice versa? What do you make of Kamal's piece?
bullbear: Anwar has been feeding the rumour mill of BN MPs crossing over to PR. If this occurs, it will be unlikely to be from MPs in Peninsular Malaysia. If there is, it is very likely (with due respect to Sabah and Sarawak) to be from the smaller coalition partners of BN in Sabah and Sarawak. http://drchua9.blogspot.com/
bullbear: Presiden SAPP, Datuk Yong Teck Lee berkata parti itu tidak akan keluar pada masa ini dari BN yang dipimpin oleh Abdullah, tetapi statusnya akan disemak pada hujung minggu ini. http://www.malaysiakini.com/news/84658
Seng: starter, note the date of Kamal's piece - he actually wrote that yesterday, so, he knew Yong is coming out today.
bullbear: seng, & starter: looks like Yong Teck Lee has some specific demands put to AAB for Sabah. These could not be met and he felt that this period is an opportunity for him to act. After this, the opportunity window will be closed.
Seng: bb, MCA already came out with official party statement saying they will support both AAB and BN - see my earlier posting at 21:09 from MCA website. Dr Chua's opinion is interesting, but I don't think he's in the loop.
starter: I think Yong was there during the first discussion and infact he met AAB personally at Putrajaya and conveyed some of his request with August as a dateline. AAB must have slept on it and that is why Yong is angry and didn't turn up during the latest meeting. Will read Kamal article again....
bullbear: seng, chua soi leck's reasoning was what i wanted to alert our readers to.
bullbear (22:36) : anyway, SAPP may yet leave the BN... this is left open for the moment to be decided on Friday
starter: Seng, is it possible he key in the date wrongly? haha!! yeah ! you're right,he knew it yesterday,damn !!
Seng: bb, your 22:36, SAPP official stand is that it is AAB problem, not BN problem. They still want to stay in BN. Yong just don't have confidence with AAB personally. SAPP has put the blame squarely at AAB as a person, not the BN party. See my 20:42.
starter: So Seng,we can safely assume that the leakages happens yesterday night and as such the article in Malaysian Insider does have some truth to it ,right?
bullbear: ..SAPP is a small party... also Chinese based party.. just wondering why it should stick its neck out for the Sabah cause....?????
bullbear: "ada dalang disebelah batu"
newbie: it was very well planned by Anwar ... this will be the first step for check mate
bullbear: newbie.. it did cross my mind that it may be initiated by Anwar... but then why now?
newbie: BB, step by step more things will be unveal
Seng: starter, I really don't know the truth ... Malaysian Insider paints a picture that this could be a genuine personal problem between Yong and AAB which is perhaps more believable.
bullbear: which faction's purpose is better served when YTL proposed the VONC next week?? Is it for the benefit of AAB's opponents within UMNO? for PR? or just sandiwara (i.e.) no chance of success but just a threat...
Seng: And if the Malaysian Insider is right, then, UMNO will be solidly behind AAB, which means UMNO, MCA, MIC are solidly behind AAB. Which means the VONC is going to go down. But having said that, if the VONC happens July 2 (14 days notice period), then, anything can happen in the interim. Also, apparently, Thu, Fri and Sat is going to be interesting because there is going to be some specific developments like the UMNO supreme council meeting tomorrow ...
bullbear: Would AAB's opponents within UMNO be willing to risk a VONC in parliament given the uncertainties of maintaining control of the federal government?
Seng: bb, from what we know so far starting from my postings after Channel 7 piece, everything points pretty much to the VONC being shot down (I think all UMNO will support since MCA and MIC already support) if it happens today. Of course, this can't happen until July 2 earliest according to LKS due to Parliamentary Standing Orders requirement which it seems SAPP didn't know about.
bullbear: yes, why SAPP just withdraw from BN. Instead, proposing a VONC without a definite possibility of winning seems a feeble attempt at bringing SAPP's grievances into the open. Probably, SAPP has already decided to leave BN on own volition if this VONC cannot succeed for the present. Will AAB gives in to this threat? Remember the famous words, "Saya pantang di-cabar."
starter: Seng, lets look at things that we can confirm.... 1) Yong didn't contest in the KK seat he requested...anyone would be angry with this ,whatmore when he is the president of Sapp. So we have the motive, next we have two reporters stating the same reasons or condition that can prevent or postpone the defection.....Commission of Inquiry on the Sabah illegal immigrant issue and they knew about it last night ,so that means the source is quite reliable.
bullbear: He said the momentum for Sabah to recover autonomy, obtain 20% oil royalties instead of the present five per cent and the return of Labuan would be lost. http://thestar.com.my/news/story.asp?file=/2008/6/18/nation/20080618205211&sec=nation
Seng: bb, I think SAPP didn't want to withdraw from BN because Yong wants to make it very clear that his problem is with AAB as a person, and not BN the party. I don't know how this will play out over the next 2 weeks. IF VONC is shot down on say July 2, then, the next question is what to do with SAPP. I think AAB has a difficult choice since 1. Expel SAPP means it's personal rather than Party, and it's also a no no. 2. If SAPP is expelled and others follow suit and BN kaputs, then, AAB will be killed. It's not an easy choice, even though if he does nothing, he'll be seen as weak. With Yong presenting it as personal rather than party, it's a gambit.
Seng: starter, yes, Yong makes it clear it's personal. I agree.
bullbear: It is rather unfair in my opinion that Yong refers to AAB as the problem... surely the problem is with UMNO, the dominant party in BN.
Seng: bb, TDM (and others within UMNO) also makes it clear (that the problem is) AAB as a person, not the BN (or UMNO) party too
starter: Seng I think this motion of no-confidence might not happen at all because the the request if submitted today will only be heard on July2 under Standing Order #27 and I'm sure the speaker will reject it earlier just like previously when the PR submittted the request to debate on the Mahkota Cheras thingy.
Seng: Yes, this is what LKS is saying. That the earliest possible date is July 2. It can be done earlier under Standing Order #18, but this only allow 1 hour debate, which is meaningless.
Seng: Looks like the political uncertainty is going to be prolonged for at least 2 weeks at a more intense level than previously ... Today's volume was higher, suggesting real fear. Will be interesting to see if tomorrow's fear is higher or lower. I think most people won't analyse it in this detail, so, my guess is MORE FEAR tomorrow ...
starter: So I think next we have to wait for the BN whip...Najib to see whether he will expel Sapp or will they bow down to Yong's demand and set up a royal commission on illegal immigrants.(very unlikely)
Seng: starter, why do you mention that Najib will expel SAPP?
bullbear: http://malaysiana1.blogspot.com/2008/06/datuk-yong-teck-lee-his-demands.html
starter: Seng,he is I think the BN whip...I can't remember the term correctly but any action will be taken by him.
Seng: Ok. So, you're speculating UMNO will expel SAPP? Maybe you want to wait until after tomorrow's UMNO supreme council meeting first ...
starter: Yes Seng, we should know by tomorrow but I heard Bung from kinabatangan request BN to take stern actions on Sapp....TV3
Monday, June 16, 2008
AirAsia still profitable on US$200 a barrel oil?
Found this article reported in Malaysian Insider: http://themalaysianinsider.com/index.php/home/42-lead-stories/505-airasia-still-profitable-on-us200-a-barrel-oil-ceo-says
My thoughts and comments follows:
_____________
AirAsia still profitable on US$200 a barrel oil, CEO says
KUALA LUMPUR, June 16 — AirAsia, the region's biggest budget airline, can remain profitable even if world oil prices hit US$200 (RM654) a barrel, chief executive Datuk Tony Fernandes said today, allaying concerns that it may be hit by rising fuel costs.
AirAsia has no plans now to raise fares or fuel surcharge, but it will stick with plans to grow its regional route network, expand onflight sales to boost income and seek lower charges from airports, he said.
"We are comfortable even with oil at US$200 (a barrel). There is a silver lining. We have taken a very different approach in that we will market ourselves out of this problem," Fernandes told reporters on the sidelines of a two-day global economic forum.
"We think that just putting your head in the sand and crying about oil and cutting routes is not the solution."
After surviving the 2003 SARS epidemic, which he described as "a lot worse" than the current oil crisis, Fernandes said AirAsia can benefit from a consolidation in the airline industry.
"The silver lining is that everyone is going to be in a lot of pain. There will be more rational competition...there will be less people wanting to open a budget airline now," he said.
He acknowledged, however, that AirAsia may have to revise fares if oil prices breach US$200 a barrel.
Airlines have been struggling to contain costs this year as oil prices stay above US$130 a barrel. Scores of startup carriers have gone out of business and several major carriers have raised fuel surcharges, cut capacity and deferred plane orders or shed jobs.
Fernandes said AirAsia will launch four more new routes over the next two months.
To ease the fuel price burden, he said the company will expand its food menu and sell more in-flight products and services to its 22 million annual passengers.
"You can use your mobile phones on the plane soon, send SMS," he said.
"We are going to sell more things, more duty free (products). We will sell washing machines if we have to. There are many things we haven't done. In a crisis like this, you become more innovative," Fernandes said.
AirAsia will also benefit once the lucrative Kuala Lumpur-Singapore route, the fourth-busiest route in the region, is fully liberalised in January, he said. The carrier now only has limited flights on the route, which is dominated by national carriers Malaysia Airlines and Singapore Airline.
AirAsia reported an 86 percent jump in its January-March net profit from a year ago to RM162 million, buoyed by higher passenger demand and large foreign exchange gains.
It said it has hedged part of its fuel requirement for April-June, which will lead to US$10 million in cost savings for the quarter. But Fernandes ruled out plans to further hedge the company's fuel requirement.
"Only a lunatic will hedge fuel — it's too volatile. We will just have to ride it until there is some stability," he said. "You have to build a business that is sustainable at whatever price and the only way... is to have topline growth and good growth." — AP
____________
My Comments:
To be honest, my initial reaction when I read this is "You Got to be Joking"! This must surely be a "Big Talk" by the CEO in response to sagging AIRASIA prices (closed 87.5 sen, close to all time low). Only time I suppose will prove whether he is right or wrong.
There is some logic to what he says. In times like this, I can accept that there will be more rational competition within the industry, and from a business owner perspective, this should be beneficial in terms of ability to price higher as a general comment.
But I also seriously wonder what Tony means by "profitable". We all know that Reported Profit is not the same thing as Cash Flow. And the definition of Profits can mean different things depending on which side of the fence the Accountant sits. Ultimately, Cash is King and this is not necessarily the same thing as Profit. And I noticed that the $162M Profit reported here - this time whilst acknowledging Foreign exchange gain - still did not acknowledge the Tax Credits. And Tax Credits is not real Cash. Excluding both, it's still not $162M but $23M. (see my earlier article on where $23M is derived - http://fusioninvestor.blogspot.com/2008/05/edge-on-airasia.html). I don't sense Tony (or the Journalist) is being completely honest here in attributing the profit growth, and this to me is worrying. Why? Because when management starts lying to the public, the biggest danger is not when they don't fool the public, but when they end up lying to themselves and start believing their lies, and then make new decisions based on the half-truths. Of course, not all lies told are intentional. But this is a source of concern, because they might not be facing up to the full truth.
Second is the policy of not hedging during "volatile" times. Today is June, and he says he is still hedged from Apr to June. I wondered why he didn't say this (not hedging during volatile times) a lot earlier like late last year. I mean when did he come to the realization that oil is now volatile? This month? Last month? I think anyone - who tracks crude oil price closely and observe crude oil price charts - should see a price break-out above $80 happening as early as September last year. Break-outs are by definition "volatile" times, since when this happens, the market price breaks out, and becomes much higher than all previous prices before then. If this phenomena is not volatile then, then, I don't know what is (volatile). So, wouldn't one reasonably expect that this "realization" should have happened by September last year? But did he stopped hedging by September last year?
Perhaps $80 is still not "high enough". Ok. What about by December last year (5-6 months ago) when it broke out above $100? Surely it must be considered volatile already by then. After all, just months before that, it was trading at half the price (only $50-$55)? So, I am really curious as to when he came to that realization that crude oil first became"volatile". And my query is did he stopped hedging by December last year? If not, why not?
Or is this "stop hedging decision" a new decision just made this month? For the purpose of promoting this news article? I'm not an AirAsia fan, so, I might not have noticed it and perhaps, he might just be reiterating what is already a policy previously.
The other concern I have is the nature of the business itself. There is no doubt that times are tougher now. Higher global and domestic inflation arising from increase in global commodity and food prices, with multiplier / chain-reaction effects. Air travel will either reduce or suffer a smaller growth rate - okay, not as bad as 2003 SARS perhaps, but adversely affected nonetheless. (Don't tell me the current crisis are all planned and known in advance last year.) But unlike 2003 SARS, the business, global and operating environment (e.g. price of crude oil, etc.) today is very different and volatile. Back in 2003, crude oil "peak" is only $40. Today the peak is $140. Has airfares increased proportionately? Or are we still seeing heavily discounted fares in the industry? Or has the competition gone worse in terms of pricing?
Further interest rates are set to rise with higher inflation. I don't think AirAsia financing needs and costs are going to come down any time soon. Instead, with further new planes coming in and further expansion plans, they will eventually need further increase in financing, and one can only expect AA's financing costs to go up relatively higher than its competitors with better looking balance sheets. AirAsia's relatively newer fleet too will be hit hard with higher depreciation costs relative to its competitors with older plane fleets, at the a time when air travel revenues are likely to face a squeeze rather than growing fast.
To me, this is a very risky business plan. As Tony acknowledge, the prudent plan is to scale down expansion plans, cut down new aircraft purchases or defer buying. The obvious risk is that AA ends up with a lot more planes and excess capacity than it really needs or can utilize reasonably. This is a comparative analysis comparing current situation, future situation against past situation in a general manner. Of course, if anyone has very specific modelling which clearly show the situation in the past, present and future (3 scenarios), then, I'll be very happy to comment. But in my own judgement, if Airasia were to find itself to become unprofitable, I am afraid, it would become extremely difficult if not impossible to get out of the hole as it is playing an extremely high stake game with such huge borrowings and expansion plans. Buffett's analogy of driving with a knife pointing at the driver's heart comes into mind, because the slightest pothole and bump is likely to kill the driver.
Anyway, only time will tell whether AirAsia will come out smelling like roses, or we'll see serious deterioration in profits.
I do like though Tony's attempts at trying everything possible to make sure that AA remains profitable, including selling washing machines. All good managers are like that - extremely determined, persistent, and innovative. The only problem is I'm not sure I want to carry that heavy washing machine home by myself ... but I'm sure Tony will think of home delivery service as well before I can think of it! But at the end of the day, Air Asia must know its core competency, and I'm again reminded by Buffett's quote that when good managers faces a business with deteriorating economics, the latter usually almost always wins.
My thoughts and comments follows:
_____________
AirAsia still profitable on US$200 a barrel oil, CEO says
KUALA LUMPUR, June 16 — AirAsia, the region's biggest budget airline, can remain profitable even if world oil prices hit US$200 (RM654) a barrel, chief executive Datuk Tony Fernandes said today, allaying concerns that it may be hit by rising fuel costs.
AirAsia has no plans now to raise fares or fuel surcharge, but it will stick with plans to grow its regional route network, expand onflight sales to boost income and seek lower charges from airports, he said.
"We are comfortable even with oil at US$200 (a barrel). There is a silver lining. We have taken a very different approach in that we will market ourselves out of this problem," Fernandes told reporters on the sidelines of a two-day global economic forum.
"We think that just putting your head in the sand and crying about oil and cutting routes is not the solution."
After surviving the 2003 SARS epidemic, which he described as "a lot worse" than the current oil crisis, Fernandes said AirAsia can benefit from a consolidation in the airline industry.
"The silver lining is that everyone is going to be in a lot of pain. There will be more rational competition...there will be less people wanting to open a budget airline now," he said.
He acknowledged, however, that AirAsia may have to revise fares if oil prices breach US$200 a barrel.
Airlines have been struggling to contain costs this year as oil prices stay above US$130 a barrel. Scores of startup carriers have gone out of business and several major carriers have raised fuel surcharges, cut capacity and deferred plane orders or shed jobs.
Fernandes said AirAsia will launch four more new routes over the next two months.
To ease the fuel price burden, he said the company will expand its food menu and sell more in-flight products and services to its 22 million annual passengers.
"You can use your mobile phones on the plane soon, send SMS," he said.
"We are going to sell more things, more duty free (products). We will sell washing machines if we have to. There are many things we haven't done. In a crisis like this, you become more innovative," Fernandes said.
AirAsia will also benefit once the lucrative Kuala Lumpur-Singapore route, the fourth-busiest route in the region, is fully liberalised in January, he said. The carrier now only has limited flights on the route, which is dominated by national carriers Malaysia Airlines and Singapore Airline.
AirAsia reported an 86 percent jump in its January-March net profit from a year ago to RM162 million, buoyed by higher passenger demand and large foreign exchange gains.
It said it has hedged part of its fuel requirement for April-June, which will lead to US$10 million in cost savings for the quarter. But Fernandes ruled out plans to further hedge the company's fuel requirement.
"Only a lunatic will hedge fuel — it's too volatile. We will just have to ride it until there is some stability," he said. "You have to build a business that is sustainable at whatever price and the only way... is to have topline growth and good growth." — AP
____________
My Comments:
To be honest, my initial reaction when I read this is "You Got to be Joking"! This must surely be a "Big Talk" by the CEO in response to sagging AIRASIA prices (closed 87.5 sen, close to all time low). Only time I suppose will prove whether he is right or wrong.
There is some logic to what he says. In times like this, I can accept that there will be more rational competition within the industry, and from a business owner perspective, this should be beneficial in terms of ability to price higher as a general comment.
But I also seriously wonder what Tony means by "profitable". We all know that Reported Profit is not the same thing as Cash Flow. And the definition of Profits can mean different things depending on which side of the fence the Accountant sits. Ultimately, Cash is King and this is not necessarily the same thing as Profit. And I noticed that the $162M Profit reported here - this time whilst acknowledging Foreign exchange gain - still did not acknowledge the Tax Credits. And Tax Credits is not real Cash. Excluding both, it's still not $162M but $23M. (see my earlier article on where $23M is derived - http://fusioninvestor.blogspot.com/2008/05/edge-on-airasia.html). I don't sense Tony (or the Journalist) is being completely honest here in attributing the profit growth, and this to me is worrying. Why? Because when management starts lying to the public, the biggest danger is not when they don't fool the public, but when they end up lying to themselves and start believing their lies, and then make new decisions based on the half-truths. Of course, not all lies told are intentional. But this is a source of concern, because they might not be facing up to the full truth.
Second is the policy of not hedging during "volatile" times. Today is June, and he says he is still hedged from Apr to June. I wondered why he didn't say this (not hedging during volatile times) a lot earlier like late last year. I mean when did he come to the realization that oil is now volatile? This month? Last month? I think anyone - who tracks crude oil price closely and observe crude oil price charts - should see a price break-out above $80 happening as early as September last year. Break-outs are by definition "volatile" times, since when this happens, the market price breaks out, and becomes much higher than all previous prices before then. If this phenomena is not volatile then, then, I don't know what is (volatile). So, wouldn't one reasonably expect that this "realization" should have happened by September last year? But did he stopped hedging by September last year?
Perhaps $80 is still not "high enough". Ok. What about by December last year (5-6 months ago) when it broke out above $100? Surely it must be considered volatile already by then. After all, just months before that, it was trading at half the price (only $50-$55)? So, I am really curious as to when he came to that realization that crude oil first became"volatile". And my query is did he stopped hedging by December last year? If not, why not?
Or is this "stop hedging decision" a new decision just made this month? For the purpose of promoting this news article? I'm not an AirAsia fan, so, I might not have noticed it and perhaps, he might just be reiterating what is already a policy previously.
The other concern I have is the nature of the business itself. There is no doubt that times are tougher now. Higher global and domestic inflation arising from increase in global commodity and food prices, with multiplier / chain-reaction effects. Air travel will either reduce or suffer a smaller growth rate - okay, not as bad as 2003 SARS perhaps, but adversely affected nonetheless. (Don't tell me the current crisis are all planned and known in advance last year.) But unlike 2003 SARS, the business, global and operating environment (e.g. price of crude oil, etc.) today is very different and volatile. Back in 2003, crude oil "peak" is only $40. Today the peak is $140. Has airfares increased proportionately? Or are we still seeing heavily discounted fares in the industry? Or has the competition gone worse in terms of pricing?
Further interest rates are set to rise with higher inflation. I don't think AirAsia financing needs and costs are going to come down any time soon. Instead, with further new planes coming in and further expansion plans, they will eventually need further increase in financing, and one can only expect AA's financing costs to go up relatively higher than its competitors with better looking balance sheets. AirAsia's relatively newer fleet too will be hit hard with higher depreciation costs relative to its competitors with older plane fleets, at the a time when air travel revenues are likely to face a squeeze rather than growing fast.
To me, this is a very risky business plan. As Tony acknowledge, the prudent plan is to scale down expansion plans, cut down new aircraft purchases or defer buying. The obvious risk is that AA ends up with a lot more planes and excess capacity than it really needs or can utilize reasonably. This is a comparative analysis comparing current situation, future situation against past situation in a general manner. Of course, if anyone has very specific modelling which clearly show the situation in the past, present and future (3 scenarios), then, I'll be very happy to comment. But in my own judgement, if Airasia were to find itself to become unprofitable, I am afraid, it would become extremely difficult if not impossible to get out of the hole as it is playing an extremely high stake game with such huge borrowings and expansion plans. Buffett's analogy of driving with a knife pointing at the driver's heart comes into mind, because the slightest pothole and bump is likely to kill the driver.
Anyway, only time will tell whether AirAsia will come out smelling like roses, or we'll see serious deterioration in profits.
I do like though Tony's attempts at trying everything possible to make sure that AA remains profitable, including selling washing machines. All good managers are like that - extremely determined, persistent, and innovative. The only problem is I'm not sure I want to carry that heavy washing machine home by myself ... but I'm sure Tony will think of home delivery service as well before I can think of it! But at the end of the day, Air Asia must know its core competency, and I'm again reminded by Buffett's quote that when good managers faces a business with deteriorating economics, the latter usually almost always wins.
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