Wednesday, April 29, 2009
Is Now The Right Time To Buy Property?
House buyers cautious due to fears of income security
PETALING JAYA: Potential house buyers are still wary about making property purchases despite lower mortgage rates as the economic outlook remains uncertain, analysts said.
Average mortgage rates have fallen to about 3.5%, but at the same time banks have been more stringent on the approval of loans. The average mortgage rate is obtained from base lending rate (BLR) of 5.55% minus 1.5% to 2.4% for housing loans (or effective annual rates between 3.15% and 4.05%), depending on the amount and tenure of loans, and the package customers sign up for.
OSK Research said the attraction of lower mortgage rates had been superseded by fears of income security amid a deteriorating economic outlook.
“For those who are still financially sound, most would rather wait a while longer to snatch up better bargains a few more months down the road. Some are hoping for developers to come up with more creative and attractive perks and some are also waiting for prices to drop further, if any, before they are convinced to buy,” the OSK analyst told StarBiz.
The research house said downside risk for landed properties appeared limited compared to luxury condominiums, with the demand for landed properties expected to return by year-end.
“Most of the homebuyers in this segment are cash-rich and not highly leveraged. Given the accommodative interest rates today, any forced-selling or foreclosures of properties like the one we saw during the 1997/98 Asian Financial Crisis will be limited in this downcycle,” it said.
OSK Research expects the demand for luxury condominiums to decline by 30% to 40% in 2010 from 2008, with luxury condo prices already currently down by 15% to 20%. (OSK is always overbearish or overbullish!!)
An analyst from Kenanga Research agrees that the bearish economic outlook is making potential buyers hesitant about buying properties now.
“What if this (sign of market recovery) is just one-off data? What we need is for the sentiment to improve,” she said, noting that only 60% of bookings had been translated to actual sales compared to almost 100% previously due to more stringent loan requirements.
Jupiter Securities Sdn Bhd head of research Pong Teng Siew said that with the mortgage rates of 3.5% and effective cost of funds of 1.5%, banks net interest margin should be about 2% now.
“But cost of funds for smaller banks such as EON Capital Bhd, RHB Capital Bhd, AMMB Holdings Bhd are higher (slightly over 2%) because of higher interest bearing liabilities,” he told StarBiz.
A house buyer contacted by StarBiz said his current mortgage loan interest rate was 3.15% for the first two years and 3.45% for the remaining tenure.
He recently signed up for a 20-year conventional home loan from Alliance Bank Malaysia Bhd for the purchase of a double-storey house. He is paying about RM1,700 per month for his RM300,000 loan.
His loan package included a one-time payment of RM2,500 for mortgage reducing term assurance, legal fees and stamp duty.
Other banks are offering similar mortgage rates.
For example, RHB Bank is charging BLR minus 2.1% for housing loans that range from RM250,001 to RM500,000, while Hong Leong Bank Bhd is offering BLR minus 2.2% for a RM300,000 mortgage loan. (the most efficient banks always offer the best rates!)
Malayan Banking Bhd uses a property’s location as one of the criteria to determine interest rate, but is still offering rates in the region of BLR minus 2%.
All these banks have BLR of 5.55%.
Source: http://biz.thestar.com.my/news/story.asp?file=/2009/4/29/business/3793031&sec=business
Tuesday, April 28, 2009
Gates Makes Lifetime Pledge to Buffett’s Berkshire
Gates Makes Lifetime Pledge to Buffett’s Berkshire
By Erik Holm and Betty Liu
April 28 (Bloomberg) -- Microsoft Corp. co-founder Bill Gates, recruited by his friend Warren Buffett to join the board at Berkshire Hathaway Inc., said he’s committed to the firm for the rest of his life.
Gates and fellow Berkshire board member Don Keough, the former president of Coca-Cola Co., said in separate interviews with Bloomberg Television that their role with Omaha, Nebraska- based Berkshire is to protect the company’s culture and values after Buffett, 78, steps down.
Buffett has pledged the majority of his Berkshire shares to Gates’s charitable foundation.
“I’ve got a commitment to stay involved with Berkshire as a lifelong thing,” Gates, 53, said in an interview scheduled to be broadcast today. “We always have to think about what might happen and make sure Berkshire is not just great now, but forever.”
Buffett, Berkshire’s chairman and chief executive officer, has said the board’s most important job will be to replace him when he’s unable to perform his duties. He will host about 35,000 people on May 2 at Omaha’s Qwest Center arena for the annual shareholder meeting -- an occasion where he typically fields questions about the succession plan.
“It’s the most important issue there is,” Buffett said in an interview with Bloomberg Television at Berkshire’s headquarters last month. “There’s nothing more important. Nobody knows on any given day where I’ll be the next day.”
‘Intense and Real’
Buffett built Berkshire over four decades from a failing manufacturer of men’s suit linings into a $140 billion company by investing in out-of-favor stocks and buying dozens of businesses ranging from insurance and underwear to ice cream and utilities. Buffett says his ideal time horizon to hold a stock is “forever,” and he purchases operating companies for Berkshire with the promise to their owners never to sell them.
“When you’re sitting on the board, you’re talking about sustainability of Berkshire Hathaway long-term, the issue of management down the road,” said Keough, 82. “The culture he’s built into Berkshire is intense and real and, I think, permanent.” Berkshire is the largest shareholder in Coca-Cola, and Buffett served on the soft-drink maker’s board with Keough.
Buffett said in letters to shareholders and at past annual meetings that the chairman post will go to his son, Howard Buffett, to keep the culture intact, and said the remainder of his work will be split between at least two people: a CEO and person or group that handles investing.
‘Total Confidence’
“All candidates currently work for or are available to Berkshire and are people in whom I have total confidence,” he said in the company’s most recent annual report. Buffett said in an interview March 5 that the CEO candidates hadn’t changed in a year. He declined to name them.
“You could water-board me,” and he still wouldn’t tell, Buffett joked.
Berkshire stockholders and Buffett-watchers have long speculated about who will fill the CEO position. Barron’s has reported that David Sokol, the head of Berkshire’s MidAmerican Energy Holdings Co., was the most likely successor. Sokol said in an interview with Bloomberg Television he hasn’t discussed succession with Buffett.
“Never a word,” Sokol said. “Unfortunately my name comes up because people try to come up with names.”
Tony Nicely, the head of Berkshire’s Geico Corp. car insurance business, and Ajit Jain, who runs a unit that sells reinsurance, are also on media lists of potential successors. Buffett biographer Alice Schroeder, now a Bloomberg News columnist, has suggested Buffett adviser Byron Trott, formerly at Goldman Sachs Group Inc., is an ideal candidate.
Charitable Foundation
Gates’s commitment to Berkshire mirrors Buffett’s pledge to the Bill & Melinda Gates Foundation, a charity established by Gates and his wife to fight disease and global poverty. Buffett in 2006 promised to give the majority of his Berkshire shares to the foundation, in 5 percent annual increments, as long as Gates or his wife is still alive and managing the foundation.
His grant, valued at about $31 billion at the time it was made, also stipulates that the stock payments may be accelerated in the event of Buffett’s death.
Forbes magazine in March ranked Gates as the richest person in the world, and listed Buffett as second. The two men have known each other since 1991, according to Schroeder’s book, when they met at a party outside Seattle celebrating July 4, the U.S. Independence Day.
“As soon as I sat down with him, he was asking me, ‘Why didn’t IBM do this,’ and ‘why wasn’t Microsoft doing that’, and he was asking the questions that I’ve always waited for somebody to ask,” Gates said in the interview. “We just got into this conversation where the whole day went by.”
Gates owns 300 Berkshire shares personally and another 4,050 through his Cascade Investment LLC according to a regulatory filing last month. The stake was valued at more than $390 million based on yesterday’s closing price of $90,000 a share.
(Portions of the interviews with Buffett, Gates, Keough, Trott and Sokol will be broadcast today starting at 5 p.m. New York time, as part of a special about Berkshire Hathaway airing on Bloomberg Television and at BTV on the Bloomberg terminal.)
Source: http://www.bloomberg.com/apps/news?pid=20601109&sid=aRC2DR.cwZFs
By Erik Holm and Betty Liu
April 28 (Bloomberg) -- Microsoft Corp. co-founder Bill Gates, recruited by his friend Warren Buffett to join the board at Berkshire Hathaway Inc., said he’s committed to the firm for the rest of his life.
Gates and fellow Berkshire board member Don Keough, the former president of Coca-Cola Co., said in separate interviews with Bloomberg Television that their role with Omaha, Nebraska- based Berkshire is to protect the company’s culture and values after Buffett, 78, steps down.
Buffett has pledged the majority of his Berkshire shares to Gates’s charitable foundation.
“I’ve got a commitment to stay involved with Berkshire as a lifelong thing,” Gates, 53, said in an interview scheduled to be broadcast today. “We always have to think about what might happen and make sure Berkshire is not just great now, but forever.”
Buffett, Berkshire’s chairman and chief executive officer, has said the board’s most important job will be to replace him when he’s unable to perform his duties. He will host about 35,000 people on May 2 at Omaha’s Qwest Center arena for the annual shareholder meeting -- an occasion where he typically fields questions about the succession plan.
“It’s the most important issue there is,” Buffett said in an interview with Bloomberg Television at Berkshire’s headquarters last month. “There’s nothing more important. Nobody knows on any given day where I’ll be the next day.”
‘Intense and Real’
Buffett built Berkshire over four decades from a failing manufacturer of men’s suit linings into a $140 billion company by investing in out-of-favor stocks and buying dozens of businesses ranging from insurance and underwear to ice cream and utilities. Buffett says his ideal time horizon to hold a stock is “forever,” and he purchases operating companies for Berkshire with the promise to their owners never to sell them.
“When you’re sitting on the board, you’re talking about sustainability of Berkshire Hathaway long-term, the issue of management down the road,” said Keough, 82. “The culture he’s built into Berkshire is intense and real and, I think, permanent.” Berkshire is the largest shareholder in Coca-Cola, and Buffett served on the soft-drink maker’s board with Keough.
Buffett said in letters to shareholders and at past annual meetings that the chairman post will go to his son, Howard Buffett, to keep the culture intact, and said the remainder of his work will be split between at least two people: a CEO and person or group that handles investing.
‘Total Confidence’
“All candidates currently work for or are available to Berkshire and are people in whom I have total confidence,” he said in the company’s most recent annual report. Buffett said in an interview March 5 that the CEO candidates hadn’t changed in a year. He declined to name them.
“You could water-board me,” and he still wouldn’t tell, Buffett joked.
Berkshire stockholders and Buffett-watchers have long speculated about who will fill the CEO position. Barron’s has reported that David Sokol, the head of Berkshire’s MidAmerican Energy Holdings Co., was the most likely successor. Sokol said in an interview with Bloomberg Television he hasn’t discussed succession with Buffett.
“Never a word,” Sokol said. “Unfortunately my name comes up because people try to come up with names.”
Tony Nicely, the head of Berkshire’s Geico Corp. car insurance business, and Ajit Jain, who runs a unit that sells reinsurance, are also on media lists of potential successors. Buffett biographer Alice Schroeder, now a Bloomberg News columnist, has suggested Buffett adviser Byron Trott, formerly at Goldman Sachs Group Inc., is an ideal candidate.
Charitable Foundation
Gates’s commitment to Berkshire mirrors Buffett’s pledge to the Bill & Melinda Gates Foundation, a charity established by Gates and his wife to fight disease and global poverty. Buffett in 2006 promised to give the majority of his Berkshire shares to the foundation, in 5 percent annual increments, as long as Gates or his wife is still alive and managing the foundation.
His grant, valued at about $31 billion at the time it was made, also stipulates that the stock payments may be accelerated in the event of Buffett’s death.
Forbes magazine in March ranked Gates as the richest person in the world, and listed Buffett as second. The two men have known each other since 1991, according to Schroeder’s book, when they met at a party outside Seattle celebrating July 4, the U.S. Independence Day.
“As soon as I sat down with him, he was asking me, ‘Why didn’t IBM do this,’ and ‘why wasn’t Microsoft doing that’, and he was asking the questions that I’ve always waited for somebody to ask,” Gates said in the interview. “We just got into this conversation where the whole day went by.”
Gates owns 300 Berkshire shares personally and another 4,050 through his Cascade Investment LLC according to a regulatory filing last month. The stake was valued at more than $390 million based on yesterday’s closing price of $90,000 a share.
(Portions of the interviews with Buffett, Gates, Keough, Trott and Sokol will be broadcast today starting at 5 p.m. New York time, as part of a special about Berkshire Hathaway airing on Bloomberg Television and at BTV on the Bloomberg terminal.)
Source: http://www.bloomberg.com/apps/news?pid=20601109&sid=aRC2DR.cwZFs
Monday, April 27, 2009
After SARS and Tsunami, Can AirAsia Weather Another Storm - Swine Flu?
AirAsia slumps as swine flu may hit travel
SHARES of Malaysia’s budget carrier AirAsia slid nearly 9 per cent to RM1.14 today after fears that further spread of swine flu would hit the travel industry, analysts said.
State-owned Malaysia Airlines’ (MAS) shares were also down 3.2 per cent at RM3.04, slightly better than AirAsia because of a lower level of foreign shareholders, an analyst with a local brokerage whose policy does not allow him to be named, said. “I think this (swine flu) is going to hurt everybody." (even uncles and aunties in coffeeshop also think so!)
MAS shares are fairly tightly held by local institutions but AirAsia shares are widely owned by foreigners. So you have higher liquidity in the market and as and when something happens you will see bigger volatility in share price,” the analyst said.
Fears of a global swine flu pandemic mounted with new infections in the United States and Canada, and millions of Mexicans stayed indoors to avoid a virus that has already killed up to 103 people. - Reuters
Thursday, April 23, 2009
The Worst Is Far From Over!
IMF, World Bank warn global downturn is far from over
WASHINGTON: The heads of the International Monetary Fund and World Bank pledged new resources Thursday to fight the worst global downturn since the Great Depression of the 1930s, while warning that the crisis is far from over.
Dominique Strauss-Kahn, managing director of the International Monetary Fund, said U.S. and European leaders need to fulfill pledges they made during a summit in London earlier this month to clean up their banking systems by removing distressed assets from banks' balance sheets.
With the right policies, the world economy could recover in the first half of 2010, he said.
"We still have long months of economic distress in front of us," Strauss-Kahn said.
Strauss-Kahn said there "may be need for more" stimulus spending by individual countries in 2010.
Underscoring the extent of the challenges, the IMF released a new economic forecast Wednesday that projected that the world economy would shrink 1.3 percent this year, the first decline since World War II, and what the IMF called "by far the deepest global recession since the Great Depression."
Private economists said an output decline of that magnitude would leave at least 10 million more people jobless around the world.
Read all: http://biz.thestar.com.my/news/story.asp?file=/2009/4/24/business/20090424091011&sec=business
WASHINGTON: The heads of the International Monetary Fund and World Bank pledged new resources Thursday to fight the worst global downturn since the Great Depression of the 1930s, while warning that the crisis is far from over.
Dominique Strauss-Kahn, managing director of the International Monetary Fund, said U.S. and European leaders need to fulfill pledges they made during a summit in London earlier this month to clean up their banking systems by removing distressed assets from banks' balance sheets.
With the right policies, the world economy could recover in the first half of 2010, he said.
"We still have long months of economic distress in front of us," Strauss-Kahn said.
Strauss-Kahn said there "may be need for more" stimulus spending by individual countries in 2010.
Underscoring the extent of the challenges, the IMF released a new economic forecast Wednesday that projected that the world economy would shrink 1.3 percent this year, the first decline since World War II, and what the IMF called "by far the deepest global recession since the Great Depression."
Private economists said an output decline of that magnitude would leave at least 10 million more people jobless around the world.
Read all: http://biz.thestar.com.my/news/story.asp?file=/2009/4/24/business/20090424091011&sec=business
Stocks rally may not be sustainable
Stocks rally may not be sustainable: Prudential
2009 is likely to be a year of further pain rather than recovery, says Prudential Asset Management, adding that real recovery after a banking crisis will take years.
PRUDENTIAL Asset Management, which manages US$19 billion (RM69.35 billion) of life insurance money in the region, said the recent share market rally may not sustain because real recovery after a banking crisis will take years.
Corporate earnings may not recover to trend for a few years, said Kelvin Blacklock, chief investment officer of global asset allocation. "Historically, financial crisis take a long time to work through and are very painful," he said. "Based on experience, 2009 is likely to be a year of further pain rather than recovery.
"Equity is getting ahead of themselves. We are quite sceptical that this can be sustained. It's probably a bear market rally,"
At present, the fund is only 10 per cent invested in stocks, mainly Russia and Turkey shares which he said are cheap and may offer the best returns. It is holding another 30 per cent in bonds, mostly US credit and the rest is in cash. "Maybe we've lost some opportunity (in the current rally), but I'm willing to be patient and hopefully we could buy more cheap stocks later," he said.There are still some "big picture" concerns, he said.
Financial confidence and final consumer demand are two key aspects that must improve to make recovery possible. "Our concern is that policy measures are still not enough to address the essential issue, which is to recapitalise the insolvent banks," Blacklock said.
If policy makers do not stabilise demand and solve the banking crisis by carving out bad assets from lenders and recapitalise the insolvent banks, then there may be a secondary downturn in growth, profits and share prices, he said."That means the current stabilisation in economies may not be sustainable and further macro deterioration could take equity valuations back to recent lows," he added.
Moreover, the US consumers, who are a major source of final demand in the world economy, are still suffering. "This leaves global final demand vulnerable and suggests it is too early to expect a sustainable recovery yet," Blacklock said.
http://www.btimes.com.my/Current_News/BTIMES/articles/kelv/Article/
Maybank, Axiata share price may face pressure
Maybank, Axiata share price may face pressure
KUALA LUMPUR: Now that Malaysia’s two largest cash calls to raise some RM11.45 billion is near their respective closing, it is now time to watch if the share prices of Malayan Banking Bhd and Axiata Group Bhd would succumb to selling pressure when the new rights shares list over the next two weeks.
Up to 2.2 billion new Maybank shares are scheduled to list by April 30, while Axiata (formerly TM International Bhd) will see up to 4.59 billion new shares listed by May 11.
However, “some medium-term weakness” could emerge when the new rights shares are listed, OSK Research said in a report in late March. This was concluded based on its analysis of share price trends of companies like HSBC plc and DBS Holdings Ltd that recently completed cash calls.
OSK had qualified that the analysis ignored fundamental developments. So far, it had been right about share prices trending higher post ex-rights and prices holding up during the rights entitlement trading period.
The final number of rights shares to be listed is scheduled for released by Monday for Maybank and by May 5 for Axiata, when the companies announce the final subscription results for their respective rights exercise.
Maybank’s share base will be enlarged by 45% to 7.08 billion shares from its nine-for-20 issue while Axiata’s five-for-four issuance is expected to balloon its share base by 125% to 8.45 billion shares.
An analyst with a local brokerage firm said he “still expects some selling pressure when the rights shares list”, although acknowledging that Axiata’s share price had run ahead of his expectations.
At yesterday’s closing prices, investors who picked up both Axiata’s and Maybank’s renounced rights entitlement and subscribed to the rights shares are sitting on theoretical paper gains.
Axiata shares closed at RM1.98 yesterday, up 18.9 sen or 10.6% from its ex-rights price of RM1.791 on April 7.
Axiata’s renounced rights entitlement (unpaid rights to the rights shares) that ceased trading yesterday, had traded between 57 sen and 73 sen apiece before closing at 69.5 sen.
This puts investment cost, for those who picked up the renounced rights and paid RM1.12 apiece to subscribe to the rights, at between RM1.69 and RM1.85 apiece. This is between 6.6% and 14.6% below Axiata’s RM1.98 close yesterday.
Axiata rose to as high as RM2.06 intra-day trade yesterday, before closing at its intra-day low of RM1.98, its fifth straight day of gains.
The stock has over the past month gained 50.9 sen or 34.6% from its recent low of RM1.471 on March 18.
Similarly, Maybank’s renounced rights entitlement traded between 98 sen and RM1.09 before they closed and delisted at RM1.06.
Investors who picked up these renounced rights entitlement from the open market and subscribed to the rights at RM2.74 apiece, puts their investment cost for the rights shares that are about to be listed at between RM3.72 and RM3.83 apiece.
This is between 11.3% and 13.9% below the RM4.32 close of Maybank shares yesterday. Maybank’s RM4.32 close yesterday is also 65.6 sen or 17.9% above its ex-rights price of RM3.664 on March 30.
Maybank is raising RM6.2 billion to boost its balance sheet while Axiata is looking to pare debt using the RM5.25 billion proceeds from the rights issue.
This article appeared in The Edge Financial Daily, April 23, 2009.
KUALA LUMPUR: Now that Malaysia’s two largest cash calls to raise some RM11.45 billion is near their respective closing, it is now time to watch if the share prices of Malayan Banking Bhd and Axiata Group Bhd would succumb to selling pressure when the new rights shares list over the next two weeks.
Up to 2.2 billion new Maybank shares are scheduled to list by April 30, while Axiata (formerly TM International Bhd) will see up to 4.59 billion new shares listed by May 11.
However, “some medium-term weakness” could emerge when the new rights shares are listed, OSK Research said in a report in late March. This was concluded based on its analysis of share price trends of companies like HSBC plc and DBS Holdings Ltd that recently completed cash calls.
OSK had qualified that the analysis ignored fundamental developments. So far, it had been right about share prices trending higher post ex-rights and prices holding up during the rights entitlement trading period.
The final number of rights shares to be listed is scheduled for released by Monday for Maybank and by May 5 for Axiata, when the companies announce the final subscription results for their respective rights exercise.
Maybank’s share base will be enlarged by 45% to 7.08 billion shares from its nine-for-20 issue while Axiata’s five-for-four issuance is expected to balloon its share base by 125% to 8.45 billion shares.
An analyst with a local brokerage firm said he “still expects some selling pressure when the rights shares list”, although acknowledging that Axiata’s share price had run ahead of his expectations.
At yesterday’s closing prices, investors who picked up both Axiata’s and Maybank’s renounced rights entitlement and subscribed to the rights shares are sitting on theoretical paper gains.
Axiata shares closed at RM1.98 yesterday, up 18.9 sen or 10.6% from its ex-rights price of RM1.791 on April 7.
Axiata’s renounced rights entitlement (unpaid rights to the rights shares) that ceased trading yesterday, had traded between 57 sen and 73 sen apiece before closing at 69.5 sen.
This puts investment cost, for those who picked up the renounced rights and paid RM1.12 apiece to subscribe to the rights, at between RM1.69 and RM1.85 apiece. This is between 6.6% and 14.6% below Axiata’s RM1.98 close yesterday.
Axiata rose to as high as RM2.06 intra-day trade yesterday, before closing at its intra-day low of RM1.98, its fifth straight day of gains.
The stock has over the past month gained 50.9 sen or 34.6% from its recent low of RM1.471 on March 18.
Similarly, Maybank’s renounced rights entitlement traded between 98 sen and RM1.09 before they closed and delisted at RM1.06.
Investors who picked up these renounced rights entitlement from the open market and subscribed to the rights at RM2.74 apiece, puts their investment cost for the rights shares that are about to be listed at between RM3.72 and RM3.83 apiece.
This is between 11.3% and 13.9% below the RM4.32 close of Maybank shares yesterday. Maybank’s RM4.32 close yesterday is also 65.6 sen or 17.9% above its ex-rights price of RM3.664 on March 30.
Maybank is raising RM6.2 billion to boost its balance sheet while Axiata is looking to pare debt using the RM5.25 billion proceeds from the rights issue.
This article appeared in The Edge Financial Daily, April 23, 2009.
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