Malaysia's Economic Transformation Programme - Tourism (EPP12)

 
Status of Malaysia's Tourism Industry
Over the past two decades we have managed to increase our international arrivals from 7.4 million in 1990 to approximately 16 million in 2004 and to approximately 24 million in 2009.
The tourism sector has grown from RM 30 billion in 2004 to RM 53 billion in 2009 - a growth of 1.8 times (or 12 percent per annum from 2004 to 2009) placing Malaysia 13th in terms of global tourist receipts.  Only a few countries have been able to sustain double-digit growth over such a long period of time including Egypt, China and South Africa.
FACT : Malaysia ranked 9th globally for tourist arrivals in 2009

12 EPPs to Deliver RM 66.7 billion incremental GNI
Twelve entry points projects (EPPs) have been identified across five themes to enhance our tourism yields.  In addition, we have identified three business opportunities which will materialise due to the expected growth in the industry. The 12 EPPs are segmented in five broad themes that cater to different segment of tourists ranging from the avid shopper to the nature lover and business traveller, as well as families on vaction.  The five themes and 12 high-impact projects identified are:
Theme 1 : Affordable luxury

• EPP 1 : Positioning Malaysia as a duty free shopping destination for tourist goods
• EPP 2: Designating Kuala Lumpur City Centre-Bukit Bintang area as a vibrant shopping precinct
• EPP 3: Establishing three new premium outlets in Malaysia

Theme 2 : Nature adventure

• EPP 4 : Establishing Malaysia as a global biodiversity hub

Theme 3 : Family Fun

• EPP 5 : Developing an eco-nature integrated resort in Sabah
• EPP 6: Creating a Straits Riviera

Theme 4 : Events, Entertainment, Spa and Sports

• EPP 7: Targetting more international events
• EPP 8 : Establishing dedicated entertainment zones
• EPP 9a : Developing local expertise and better regulating the spa industry 
• EPP 9b: Expanding sports tourism offerings in Malaysia beyond hosting events 

Theme 5 : Business Tourism

• EPP 10 : Establishing Malaysia as a leading business tourism and destination
  Cross theme projects : Medium-haul connectivity; better quality hotels 
• EPP 11: Enhancing connectivity to priority medium-haul markets 
• EPP 12: Improving rates, mix and quality of hotels  

The list of EPPS mentioned above are just a brief outline of what the government is planning to do for the industry.  I'll focus more in EPP 11 and EPP 12 which are more relevant to hotel business segment.
EPP 11 : Enhancing connectivity to priority medium-haul markets
Tourist from the medium-haul markets contribute 53 percent higher yields than tourists from short-haul markets.  Medium-haul markets also have the highest forecasted growth from 2010 to 2020 of 8 percent (versus 3 percent for short-haul and 2 percent for long-haul).  However, Malaysia's proportion of medium-haul tourist arrival is only 15% compared to 43% for Singapore and 36% for Thailand.  A key reason for this difference is the significant gap in medium-haul flights.  In 2010 Malaysia had 579 medium-haul flights per week, compared to 928 for Thailand and 1010 for Singapore.  This gap is critical as we expect 43% of incremental arrivals in 2020 to come from medium-haul markets.
Action
1. Increase flight frequencies and air rights to 10 priority cities.  Australia, China, India, Japan, South Korea and Taiwan are expected to contribute over 90% of incremental tourist arrivals from medium-haul countries by 2020.  It is thus critical to focus on the key cities within these six countries where there is a significant connectivity gap today, namely : Beijing, Delhi, Melbourne, Mumbai, Osaka, Seoul, Shanghai, Sydney, Taipei, and Tokyo.  Compared to Singapore and Thailand, Malaysia has a double-digit flight frequency gap to most of these cities.  The increase in flight frequencies to address this gap and meet 2020 tourist arrivals will be achieved through focused capacity increases from our local airlines and targetted efforts by Malaysia Airport Holdings Berhad (MAHB) to attract more airlines from these countries to either start operating or increase existing flight frequencies to Malaysia.  In parallel, the Ministry of Transport will focus efforts on increasing air rights to countries that currently have restricted air rights (primarily Australia, India and Japan).

ImpactWith these actions, we will expect to see an increment of medium-haul tourists. By 2020, medium-haul tourist will account for 43% of all tourist.  Among that, 38% will be from China and 27% from India.

EPP 12 : Improving Rates, Mix and Quality of Hotels
Hotels represent a critical part of the tourism industry.  In order to achieve our goal of attracting high yield tourists, we need to ensure Malaysia has the right mix and quality of hotels.  Relative to our regional peers, Malaysia today has a lower mix of five-star hotels (ie. 5% in Malaysia versus 13% and 14% in Singapore and Thailand respectively).  In moving towards our ambition of growing tourist receipts by three times and tourists arrivals by 1.5 times, we will need more investments (to first upgrade and subsequently to increase supply) into our four- and five-star hotels as well as to ensure higher quality of service.
We need to enable our hoteliers to generate sufficient returns to encourage re-investment into the sectors as well as attract higher quality staff.  A key impediment to this today is our relatively low hotel rates (RM 320 per night_ for a fve-star hotel in Malaysia versus RM 766 in Singapore)
Actions
1. Link rating of four and five-star hotels to a target average room rate.  From 2013, a minimum room rate will be set for four- and five-star hotels.  This move is to encourage the hotel industry as a whole to increase their rates to close our gap versus peers in the region.  This increase is meant to ensure hotels are able to provide higher quality of service (through attracting and retaining better quality staff) and to encourage more investment into the four- and five- star hotel segments.
2. Adjust MIDA incentive to encourage investment into more four- and five-star hotels.  In order to encourage hotels to upgrade and refurbish their assets, we will extend the Investment Tax Allowance (ITA) to include four- and five-star hotels with foreign ownership.  In addition, we will also allow ITA for new construction as well as new purchase of four and five star hotels across Malaysia.  Currently, this incentive is open given to one-, two-, and three-star hotels across Malaysia and four- and five-star hotels in selected states only.  The ITA for refurbishment of hotels will also be increased from three times per company to five times for each property regardless of ownership.
Following preliminary discussions with MIDA, the Ministry of Tourism will champion and push through the request for ITA expansion.

Commodities futures

You might have heard of people making money from trading commodity futures. I'm here to make it clear once and for all. Yes, you can make money from trading commodity futures. You can trade any commodity ranging from rice, and wheat to pork belly and oil.

Here's how it all began.

Given the urban nature of the city of Chicago, we often forget that it is located in the agricultural market center for neighboring states. Chicago was the meeting place for farmers looking for buyers of their crops and grain mills looking to purchase product for their operations. However, despite the central location, timing and logistic issues created inefficient means of conducting business and thus inflated commodity prices.

At the time, grain elevators were sparse, which made it critical that a farmer sell his crop upon harvest at the annual meeting in Chicago due to a lack of storage. Even for those who did have a method of storing the grain, frozen rivers and roadways made it nearly impossible to travel to Chicago during winter months. Likewise, the springtime trails were often too muddy for wagon travel. Thus, during and immediately after harvest, grain supply was in such abundance that it was common for unsold grain to be dumped into Lake Michigan for lack for means to transport and store unsold portions.

As you can imagine, as the year wore on, the grain supply would dwindle to create shortages. This annual cycle of extreme oversupplies and subsequent undersupplies created inefficient price discovery and led to hardships for both producers and consumers. The feast or famine cycle created circumstances in which farmers were forced to sell their goods at large discount when supplies were high, but consumers were required to pay a large premium during times of tight supplies. Luckily, a few of the grain traders put their heads and resources together to develop a solution…an organized exchange now known as Chicago Board of Trade.

The Chicago Board of trade (CBOT) was created by a handful of savvy grain traders to establish a central location for buyers and sellers to conduct business. The new formalized location and operation enticed wealthy investors to build storage silos to smooth the supply of grain throughout the year and, in turn, aid in price stability.

The CBOT is still located in downtown Chicago and is the world’s oldest future exchange. After spending the last decade and a half as one of the largest future trading organizations in the world and a direct competitor to Chicago Mercantile Exchange (CME), the CBOT and the CME merged in 2007 to form the CME Group, creating the largest derivatives market ever!

The CBOT division of CME Group is the home of trading of agricultural products such as corn, soybeans, and wheat. However, the exchange has added several products over the years to include Treasury bonds and notes and the Dow Jones Industrial Index.

The success of the CBOT fueled investment dollars into exchanges that could facilitate the process of trading products other than grain. One of the offsprings of this new investment interest is the Chicago Mercantile Exchange. The CME was formed in 1874 under the operating name Chicago Produce Exchange; it also carried the title Chicago Butter and Egg Board before finally gaining its current name.

The CME is responsible for trading in a vast variety of contracts including cattle, hogs, stock index futures, currency futures, and short-term interest rates. The exchange also offers alternative trading vehicles such as weather and real estate derivatives. At the time of this writing, and likely for some time to come, the CME has the largest open interest in options and futures contracts of any futures exchange in the world.

The futures markets and the instruments traded there, as we know them today, have evolved from what began as private negotiations to buy and sell commodities between producers and users. The agreements that resulted from these negotiations are known as forward contracts. Fortunately, efficient-minded entrepreneurs discovered that standardized agreements can facilitate transactions in a much quicker manner than a privately negotiated forward contract, and thus, the future contract was born.

A forward contract is a private negotiation developed to establish the price of a commodity to be delivered at a specific date in the future. For example, a farmer that has planted corn and expects it to be harvested and ready to sell in October might locate a party interested in purchasing the product in October. At that time, both parties interested in purchasing the product in October. At that time, both parties may choose to enter an agreement for the transaction to take place at a specific date, price and location. Such an agreement locks in the price for both the buyer and the seller of the commodity and, therefore, eliminates the risk of price fluctuation that both sides of the contract face without the benefit of a forward contract.

Along with a centralized grain trade, the forward contract was big step forward price stability, but there was a problem. Forward contracts reduce price risk only if both parties to the arrangement live up to their end of the agreement. In other words, there is no protection against default. As you can imagine, a farmer that locks in a price to sell his crop in the spring through a forward contract and discovers that he can sell the product for considerably more in the open market might choose to default on the forward contract.

It is easy to see the lack of motivation for parties to a forward contract to uphold their end of the bargain. Even the most honest man would be tempted to default if it means a better life and less suffering for his family.

To resolve this issue of merchants and farmers defaulting on forward contracts, the exchanges began requiring that each party of the transaction deposit a good faith deposit, or margin, with an unrelated third party. In the case of failure to comply with the contract, the party suffering the loss would receive the funds deposited in good faith to cover the inconvenience and at least part of the financial loss.

Because forward contracts were negotiations between two individuals, it was a challenge to bring buyers and sellers together that shared the same needs in terms of quantity, timing and so on. Also, forward contracts were subject to difficulties arising from incontrollable circumstances such as drought. For example, a farmer obliged to deliver a certain amount of corn via a forward contract might not comply due to poor growing conditions, thus leaving the counter-party to the transaction in a dire predicament.

The exchanges’ answer to problems arising from forward contracts was the standardized future contract. In its simplest form, a future contract is a forward contract that is standardized in terms of size, deliverable grade of the commodity, delivery date, and delivery location. The fact that each contract is identical to the next made the trading of futures much more convenient than attempting to negotiate a forward contract with an individual. It is the concept of standardization that has allowed the futures markets to flourish into what they have become today.

According to the CME, the formal definition of a future contracts is as follows:
“A legal binding, standardized agreement to buy or sell a standardized commodity, specifying quantity and quality at a set price on a future date”

In other words, the seller of future contracts agrees to deliver the stated commodity on the stated delivery date. The buyer of a futures contract agrees to take delivery of the stated commodity at the stated delivery date. The only variable of a future transaction is the proce at which it is done, and this is determined by buyers and sellers in the marketplace.

Although the future contacts bought or sold represent an obligation to take or make delivery, according to the CME approximately 97% of future contracts never resulted in physical delivery of the underlying commodity. Instead traders simply offset their holding prior to the expiration date.

Thanks to the standardization of each contract, the subsequent ease of buying and selling contracts, and a lack of default risk, futures trading has attracted price speculation. Participation is no longer limited to those who own, or would like to own, the underlying commodity. Instead unrelated third parties can easily involved themselves in the market in hopes of accurately predicting, and therefore profiting from, price fluctuations. And for your information, I’m one of them.

Has anyone heard of an exchange for health-products such as bird nest, shark fin, and black fungus? As you can see, how much trouble we can eliminate if there were an exchange for these products.

Thank you.

Where is humanity?

Wikileaks founder Julian Assange was just arrested yesterday morning in London on molestation and rape charges. No one is sure if he really committed those act or it might just be a way the governments are trying to bring him down. But one thing we know is that he is trying very hard to show the world a simple thing...truth. He wants the world to know that government around the world are keeping its people blind from actual things that happened around the world.

Here is a video of US military killing civilians indiscriminately over the helicopters. Two Reuters staff were killed and two children were injured as well.

A Third World War?

On 23rd November 2010, North Korean just shelled an Island of South Korea known as Yeonpyeong killing at least two South Korean Marines and injuring many more including civilians. This assault is the worst of its kind in decades targeting not only the military units but spilled over to civilians too.

All parties including South Korea, Japan, US, and China are on high alert mode now. Investigation and analysis is going on to determine the reason and intention of North Korea. North Korea claimed that South Korea has been continuing it's military rehearsal in the DMZ despite strong opposition from North Korea, therefore they launch this major attack as a response.

US is definitely backing the South Korea while China is the major ally of North Korea. South Korea and the US definitely does not want a war, it would not only screw the economy of South Korea which is now the major homeland of international companies. For the US, there's already two wars going on in Iraq and Afghanistan, adding another one to the list would not only cost more lives but billions or even trillions of dollar. Obama has just recently lost his majority in the House of representative, taking this war proposal to the table will not only make him even less popular but might even drag him down in the upcoming presidential election in 2012.

China would not want a war too. If a war breaks out, millions of refugee would flood into China and that is definitely the last thing China wants. However, it is of China's interest to continue supporting the North Korea regime in order to counter the US influence over the region. For China, a continuing minor tension is desirable but not a major escalation to war.

I personally don't think this incident will escalate to a major war. Everyone is trying to avoid that and hopefully this assault is just another minor one that the North Koreans have been doing since the end of the Korean War. The situation in North Korea is becoming more unpredictable in recent years as the ailing dictator Kim Jong II is shifting his power to his successor (his son) Kim Jong Un. This attack could be just a show of its military power to unite his regime.

From my analysis, if the tension were to get WORSE and a war is inevitable, it is advisable for us to do the followings:
Advice
1. If you are in some foreign country near that region get back to your own country before countries around it placed bans over their air border.

2. Get yourself a few thousand US dollar. It is still the most widely acceptable cash even in crisis mode.

3. Change your surplus currency to one of the following currencies : Swiss Fran or Singapore dollar. So far these are the two best currency to have as a safer haven.

4. If you are in stocks/shares or bonds. Sell them (wars are never good for the stock market), and get into solid commodities like Gold and silver. Unless you are a sophisticated investor or trader, you can actually take advantage of the war to make a profit. Invest in companies that deals with arms such as Victek Co Ltd (065450:KS) or get into companies that distribute food supplies.

5. If you trade futures, get into futures for gold, rice, wheat and crude oil. These are always the commodities that will gain during war times. Gold is always the safe haven for people during times of uncertainty, you can protect the value of your asset by getting into gold. Rice is the major food needed during war and disaster. Crude oil is always needed for war, countless equipment, machines and vehicles would not function without oil. Beware of a surge in petrol prices if a war takes place. (it has happened before during both first and second Gulf war)

6. Keep yourself updated to the news every day. You can visit various websites such as bloomberg, CNN, BBC, Wall street Journal, Korea times, or The Chosunilbo.

*Pictures, courtesy of Times magazine and The Chosunilbo. The author will not be responsible for any losses impaired by this article.

Are you afraid of China?

Current
Now that China is getting strong again, the fear for the West comes again. This time, they are afraid that China is going to rule the world with their cheap products and control of rare-earth minerals. The following are some of the major issues the West have been trying protray China as the villain.
1. Currency Manipulator : The West has accused China saying that the country is trying to manipulate its currency to make them cheaper so that it is competitive compared to products made from the West.

2. Rare-earth minerals : Recently, China has reduced the export of rare-metals by at least 70%. The West again accused China of monopolizing the trade and that act is against policy of WTO. The fact is China has only a third of all rare-metal reserve in the world, there are actually not that rare, it's the West problem for being unable to produce them at a competitive price. Also producing these rare-metal brings a huge toll onto the environment, that is a major issue the chinese government is trying to tackle.

3. Human rights : The West is tryin to create havoc in China by raising human rights issues starting from issues related to Dalai Lama to recently awarding a peace Nobel prize to an imprisoned Chinese activist who fights for democracy.

4. Adding oil and fire to the soured relationship between China and Taiwan. Don't forget, US is the biggest firearm supplier of Taiwan.

You can just see how worry the West are about China, trying every way just to topple China. They have even effectively incorporated this fear into everyone's mind. The advertisement above is just one example. It is not produced by the Chinese that's sure. It is produced by the Americans as a political advertisement for their current mid-term election which will be held this November. It brings a sense of anti-china message in it as well.

HISTORY
Take a look at the video above and you will understand the fear the West have for China. The U.S. have been creating tricks and plans to topple this rising dragon of the East. Even from before during the late 19th Century, the West have started the Opium war with China. Just a little history. China was a prosperous country with various products that the West need such as silk, cotton, grains, porcelain, metals, rare-metals, spices, and many more. During that time, the only thing that China need from the West is simple : Gold or Silver (That was the currency that they use since ancient times). The West have nothing to offer them, the Chinese don't want coffee (they have their own tea), they don't really want anything from the West because the West has nothing to offer. So they figured out a better way to exchange these products. The West introduced opium to the Chinese. Once they got hooked on, they just need to trade opium with them in order to get what they want. They also started selling them firearms (That's what the west is best at : Violence).
Once the Chinese realize the problem, they banned opium trade. The West reacted furiously by sending army to attack China and force them to open up their trading port to continue trading opium. That is what they are best at "Giving people shit and get their treasure".
Even worse, China was forced to surrender Macao and Hong Kong for their rule for 100 years.

Wake up, the 19th century belongs to the U.K, the 20th century to the US. 21st Century belongs to China. Please give China this opportunity.

Malaysia Economy vs Malaysia Politics

The budget Malaysian Prime Minister Najib Razak delivered last week is being interpreted as the opening parry for a possible early election next year. If that's so, he'll have a lot more work to do to spur the kind of growth voters tend to reward when they head to the polls.

That will sound like an odd claim, given the government's projections. The Najib administration pegs GDP growth at 7% for this year and between 5% and 6% next year. Some analysts think those estimates may be on the low side. Exports have rebounded after the global downturn and domestic consumption is rising.

But problems lurk beneath those headline numbers. The economy ran a capital-account deficit for all but one of the past 11 years, an odd situation for a developing country that ought to be importing capital to finance growth. Portfolio investors aren't fleeing the stock market—there was a small portfolio surplus last year. Rather, direct investment, the kind that builds new factories or seeds new businesses, has been exiting since 2007. This outflow amounted to an astonishing 21% of gross fixed capital formation last year, according to the United Nations.

In other words, Malaysians think it's more profitable to invest abroad than at home. One reason is that government, not private entrepreneurship, is driving growth. Government consumption grew 107% between 2000 and 2009, while private consumption grew 78%. On the production side, government services expanded by 77% in that period, second only to the financial industry as a growth engine (83%). This has been financed with deficit spending, which will be roughly 5.5% of GDP next year.

Enter Mr. Najib. To his credit, he said Friday "the time has come for the private sector to resume its role as the engine of growth." But his budget focused mainly on attracting investment to public-private partnerships to build new public works projects, on which he'll spend 137 billion ringgit ($44 billion). That includes 40 billion ringgit for a mass transit system in Kuala Lumpur—the kind of infrastructure Malaysia needs—but also five billion ringgit on a new 100-story office tower. It's worth asking whether thrusting government into the commercial real-estate business is really the best way to let the private sector blossom.

Building the 5 billion ringgit tower is a questionable issue, do we really need such as tall tower? To Najib and PNB, they said yes "With this new landmark, we'll put Malaysia on the global map of investment community, to spur foreign direct investment (FDI)". They have the same mindset like Dubai, building Burj Dubai (The world tallest man-made building). But remember, what they have is the world tallest building, our current proposed 100 storey building is still far behind the Burj Dubai. Do we really need this expensive building to place us on the map? Does more developed countries like Singapore or even Switzerland has a world freaking tallest building to put them on the map? No. That huge sum of money which is financed from debt should be put to better use.

Meanwhile, Mr. Najib's focus on public works distracts from all the other ways Kuala Lumpur deters private investment. For instance, affirmative-action preferences for majority ethnic Malays are a stumbling block for all investors, foreign and domestic, who understand that hiring the best employees regardless of ethnicity is key to generating returns. Corruption remains a major irritant, and the politicized sodomy trial of opposition leader Anwar Ibrahim raises rule of law concerns.

Mr. Najib tries to take a few steps forward. The budget proposes making government-linked companies sell stakes in some listed companies to boost stock market liquidity. Mr. Najib also would offer three new stockbroking licenses to domestic or foreign banks. But, assuming they're even implemented, these reforms won't amount to much if they aren't backed up by much broader and deeper liberalization to set animal spirits astir. Despite other reform gestures in recent years, a "big bang" does not appear to be on the horizon.

If Mr. Najib is contemplating an early vote, he's wagering on current economic growth, his party's tightening grip on civil discourse, and the lack of viable opposition alternatives to win another victory. That might work in the short term. But investors already are voting against Mr. Najib, and if Kuala Lumpur doesn't change that, it may be only a matter of time before voters follow suit.

*Quotes and figures adapted from Wall Street Journal Asia, article modified by Hong.

Gold Gold Gold

I found this interesting survey box result from the community journal of Wall Street Journal. Even though gold is at its all time high breaking record every other day, a lot of people (73.5%) still think there's room for gold price to rise.



To me, this totally feels like a bubble, it just sounds exactly like the pre-crash of internet bubble (2001) when all internet & technology stocks are at its all time high and people still freaking think that there's plenty of room to grow.

For the case of gold, is there really a real demand for such precious metal? I don't think so, people are parking their money into gold because there's a false believe (gold bug) that gold's value is always stable rising up steadily and would not fall. That's very wrong, most recently, during the crash of 2008/2009, gold's price is so volatile that it fell to a low of less than USD 700 per ounce. Now it's over USD 1350 per ounce. That's almost a 100% rise in less than 2 years. Is that not volatile enough?

For some people, they think the US economy is so bad and the US dollar is depreciating like hell and there's no other better ways to place their money, so they dumb it into gold. And yes, that's the truth, money is flowing into commodity assets and emerging markets such as China, India, Brazil, and South east asian nations such as Singapore, Malaysia, Indonesia and Thailand.

For those that have profited from the rise of gold, it's wise to get out slowly from now. I would be selling my gold assets and probably finish selling all of them before it hits USD 1500 per ounce if it ever happens.

Crude Palm Oil

I've just opened a futures account to trade crude palm oil (CPO). I can see the bright future of palm oil industry. If you look at the agricultural history of Malaysia even before independence, there is a gradual swift from rubber tree plantation to oil palm plantation. Malaya (Under British colonization) made huge profits during the first world war by trading rubber exporting rubber to major countries of the world such as America, Japan and European countries such as Germany. Rubber is needed for manufacturing of tyres which is mass produced for military vehicles during war times. However, during second world war, due to short supply and trade war, the Japanese had invented synthetic rubber! Since then, rubber demand has fallen dramatically throughout the world. Today, it is mainly used for the manufacturing of gloves and tyres. And since then, Malaysia has shifted from a country that rely heavily on rubber plantation and mining to an industrialized country. The focus has been place into plantation of oil palm. Today, Malaysia is one of the biggest exporter of palm oil. Most of our biggest listed companies are some how directly or indirectly involved in the palm oil industry (Sime darby, IOI corporation, United plantation, Genting plantation, ...)

Palm oil can be found in many products ranging from cooking oil and biscuits to bio diesel and medical products. More research will be done on CPO and i'll write more about it in coming weeks.
Thanks

Sarawak Bakun Dam

Some of you might not heard of Bakun Dam before. For your information, it is actually one of the largest hydroelectric dam in the world. The federal government has recently decided to sell its stake to back to Sarawak. This dam has a surface area of 690 km square which is slightly bigger than Singapore (630 km square).

Location of Bakun Dam. Sungai Balui which is a tributary source of Rajang river (Longest river in Sarawak)

An aerial view of Bakun Dam.

KUALA LUMPUR: The Federal Government will negotiate with the Sarawak Government to come up with a "reasonable price" over the state's bid to buy the Bakun hydroelectric dam for RM6 billion.

Deputy Prime Minister Tan Sri Muhyiddin Yassin confirmed the Federal Government would sell the nation's largest hydroelectric dam to the Sarawak government.

He said on Monday, Sept 27 the Federal Government was working out the details for the transaction including the finalisaiton of the price and method of payment.

"In principle, the (federal) government has already agreed (with the sale) as was announced by Datuk Seri Peter Chin," he said.

He was speaking to reporters after delivering the keynote address at the World Capital Markets Symposium 2010.

Last Friday, Chin, who is Minister for Energy, Green TECHNOLOGY [] and Water said both governments would begin negotiations on pricing terms for the deal.

"It is normal for people to make a lower offer when they want to buy something. But I believe when the deal will be finalised at a reasonable price that will be agreed by both parties," said Muhyiddin when asked to comment on purported higher offers by other parties bidding for the hydroelectric dam in Belaga, Sarawak.

Recently, Chief Minister Tan Sri Abdul Taib Mahmud was reported said the state may even consider offering up to RM7 billion under certain conditions.

*News updated by The Edge Malaysia. on 27th September 2010.

History of Bakun Dam

Bakun Dam is expected to generate 2,400 megawatts (MW) of electricity once completed. The purpose for the dam was to meet growing demand for electricity especially for Peninsular Malaysia. However, the dam is located in East Malaysia (Sarawak), therefore the original plan was to build an undersea cable to sent 70% of the electricity generated from this dam to Peninsular Malaysia.

This giant hyrdroelectric dam is not something new. This project was actually proposed and studied in the early 1960s. It was first approved by the government in 1986 but was then shelved in 1990 due to decreased projection of electricity demand due to the economic recession of 1986 and 1987.

In 1993, the Prime Minister then Mahathir Mohammad revived the idea. In January 1994, he awarded the privatized contract to Ekran Berhad which is controlled by a business man, Ting Pek Khing. Ting had impressed Mahathir with his construction projects in Langkawi Island. It was an unfair bid since the project was not tendered publicly and also, Ting Pek Khing himself a timber tycoon with no experience in building a dam before was award a biggest project of the century. Of course, this project turned out to be failure under him. In 1997, due to the financial crisis, the project was halted. By then more than RM 1.6 billion had already been paid out by the government.

In 2000, the project was again revived through a government owned company, Sarawak Hidro. Part of the construction project was tendered out to Sime Engineering Berhand (A subsidiary of Sime Darby and Sino-Hydro Corporation of China). It was estimated be completed by 2008. However, due to various reasons and cost overrun, the project has been delayed, and it was estimated that this project had cost the government at least RM 7 billion plus interest.

Now that the Federal government have decided to sell its stake to Sarawak Energy, part of the electricity generate will definitely be used to support the upcoming Aluminium smelter in Similajau near Bintulu.

Interview with Google's Chairman and CEO Eric Schmidt

In an interview with WSJ's Alan Murray, Google Chairman and CEO Eric Schmidt stated that Bing was Google's primary competitor, not Apple or Facebook. He also insisted that Google is doing enough to protect user privacy.

Eric Schmidt is currently the Chairman and CEO of Google Inc. He is also in the Forbes's list as one of the richest man in the world with an estimated net worth of USD 6.3 billion surpassing Steve Jobs from Apple Inc.

Wind-Turbine maker Planning IPO

HONG KONG—Chinese wind-turbine maker Xinjiang Goldwind Science & Technology Co. plans to raise up to $916 million from a revived initial public offering in Hong Kong, according to a term sheet seen by Dow Jones Newswires on Friday, after scrapping a plan to raise $1.2 billion in June.

The company, which is already listed on mainland China's Shenzhen stock exchange, was previously scheduled to list in Hong Kong on June 22 but shelved the deal because of volatile markets. It now plans to list Oct. 8, according to the term sheet.

Xinjiang Goldwind was one of several firms that shelved IPOs in Hong Kong earlier this year. Chinese iron-ore producer China Tian Yuan Mining Ltd. called off its $522 million IPO on May 7, a day after Swire Properties Ltd. decided not to go ahead with a listing that had aimed to raise as much as $3.09 billion.

Since then, IPO markets have become active again. Agricultural Bank of China Ltd. listed in Hong Kong and Shanghai in July after raising $22.1 billion in the world's largest IPO, eclipsing the previous record held by Industrial & Commercial Bank of China Ltd.'s offering, which raised $21.93 billion in 2006. American International Group Inc. is listing its Asian life-insurance unit, AIA Group, in a share sale that could raise as much as $15 billion for U.S. taxpayers in coming months.

Xinjiang Goldwind is selling 395.29 million shares, amounting to 15% of the listed company, between 15.98 Hong Kong dollars ($9.13) and HK$17.98 a share, the term sheet said. The deal has an over-allotment option that, if exercised, would result in 16.9% of the company being listed in Hong Kong.

J.P. Morgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc., China International Capital Corp. and Haitong Securities Co. are bookrunners on the deal, a person familiar with the deal said Friday.

Xinjiang Goldwind is the world's fifth-largest wind-turbine maker by capacity. It is one of several Chinese clean-energy companies seeking to raise funds from Hong Kong listings over the next few months amid Beijing's push for alternative energy sources.

*The above news were adapted from WSJ Asia.

Xinjiang Goldwind Sci & Tech Co. Ltd.

Xinjiang Goldwind Science & Technology Co., Ltd is a China-based company engaged in manufacture and distribution of wind turbine generator sets. The Company’s major products are 750 kilowatt (KW) and 1.5 megawatt (MW) wind turbine sets. The Company also involves in spare parts development and manufacture, provision of wind power services, development and distribution of wind farms, as well as development and transfer of wind power technologies, among others. During the year ended December 31, 2009, wind turbine generator sets accounted for approximately 95.33% of the Company’s total revenue. It distributes its products in domestic and overseas markets.

Video on RIM's Blackpad and Facebook movie

RIM is planning to launch a tablet device to compete with the famous Ipad of Apple. This video also talks about a movie that is coming up soon featuring facebook and it's founder.

China's Agriculture

As we all know, our basic needs are food, clean water and air. Recently, i just did some research on China's agricultural section and found a few interesting companies which made up onto my list on-watch. I even bought one of them a week ago.

China, a nation with a population over 1.3 billion (that's about 20% of the world's population) has only 7% of the world's cultivation area feed all of them. No wonder, the Chinese government is so desperate working with WTO to subsizdize improvement and equipments for farmers to increase agricultural output. China has also assigned most of it's land as agricultural land and those who use these land for other purposes (eg. residential, commercial or industrial) will get severe punishment. And recently, the cry for a higher wage is still clear in your mind from those examples of work-related suicides that prompted Foxconn (who manufacture most of the mobile phones on earth) to increase their minimal wages by at least 30%. These are all examples of an inflation in salary which would eventually lead to an improvement in living standard for those 1.3 billion Chinese. With more money, we tend to enjoy life better, better food, better shelter and better transportation and eduction. Therefore, the demand for food will grow at an exponential rate, from rice, soybean and coffee to companies that manufacturers of fertilizers and tractors for those farmers will benefit.

There is a plenty of room for growth in the agricultural sector, for example, according to the USDA statistics, South Korea consumes seven times more milk than China per capita, Taiwan eleven times and Japan sixteen times.

Chaoda Modern Agriculture (Holdings) Ltd.
HKG : 0682, H-shares
Chaoda Modern Agriculture (Holdings) Limited is an investment holding company. The Company, along with its subsidiaries, is engaged in growing and selling of crops, and breeding and selling of livestock. The Company’s operations are primarily in the People’s Republic of China. Chaoda Modern Agriculture (Holdings) Limited is a fruit and vegetable producer. The Company supplies frozen fruits and vegetables to retailers, food processors and the food service industry in Europe, North America, the Middle East and Japan. It also breeds and sells livestock, including Boer goats, Dorper sheep and dairy cattle. The Company grows a wide variety of rice, which is marketed under the Chaoda brand. The Company mainly grows white, brown, black and Thai rice.
The best thing about this company is that it has a net profit margin of above 40%, that's a big fat margin for any kind of businesses. This company with a market capital of RMB 20 billion is sitting on a cash pile of RMB 1.1 billion. Also, the company's stock is currently trading at a P/E of 4.75 which is cheap given the company's potential growth and strong cash flow.

A summary of the company's consistent growth over a period of 9 years.

5 year financial summary

The company's stock price since 2001. The company is paying out regular dividends and have a consistent growth in it's stock's value. It is currently trading around HKD 6.80 per share which is still around 40% down from it's all time high of HKD 11.90 per share in 2008. It is a good bargain indeed.

Other companies to watch are listed as below:

China BlueChemical Ltd.
HKG 3983, H-shares

China BlueChemical Ltd. is engaged in the manufacture and sale of phosphate fertilizers. The Company operates in four segments: urea, phosphorus fertiliser, methanol and others. The urea segment is engaged in the manufacture and sale of urea. The phosphorus fertiliser segment is engaged in the manufacture and sale of mono-ammonium phosphate (MAP) and di-ammonium phosphate (DAP) fertilizer. The methanol segment is engaged in the manufacture and sale of methanol. The others segment consists of segments engaged in port operation, the provision of transportation services and the manufacture and sale of woven plastic bags and BB fertilizer. On February 28, 2009, the Company acquired 83.17% and 100% interest of Hubei Dayukou Chemical Co., Ltd. (DYK Chemical) and ZHJ Mining Company Limited (ZHJ Mining) respectively.

First Tractor Co., Ltd
HKG: 0038, H-shares
First Tractor Company Limited is engaged in production and sale of agricultural tractors. The Company operates in four segments: agricultural machinery, construction machinery, financial operations, and diesel engines and fuel jets. The agricultural machinery segment is engaged in the manufacture and sale of agricultural machinery, including tractors, harvesters, and related parts and components. The construction machinery segment is engaged in the manufacture and sale of construction and road machinery. The financial operations segment is engaged in the provision of loans, bills discounting and deposit-taking services. The related parts and components segment is engaged in the manufacture and sale of diesel engines and fuel injection pumps. Its subsidiaries include Brilliance China Machinery Holdings Limited, Yituo (Luoang) Construction Machinery Co., Ltd., Yituo (Luoyang) Building Machinery Co., Ltd. and Luoyang Changlun Agricultural Machinery Company Limited.

China Food Ltd.
HKG : 0506, H-shares
China Foods Limited is an investment holding company. The Company along with its subsidiaries is engaged in production, sale and trading of grape wine and other wine products; processing, bottling and distribution of sparkling beverages and distribution of still beverages; distribution of retail packaged cooking oil and other consumer food products, and production and distribution of chocolate and other related products. The Company operates in five business segments: wines segment, beverages segment, kitchen foods segment, confectionery segment, and corporate and others segment. On January 9, 2009, a 65% equity interest owned subsidiary of the Company, COFCO Coca-Cola Beverages Limited (CBL) acquired 40% interest in Beijing Coca-cola Beverage Co. Ltd (Beijing Bottler) from Coca-Cola China Industries Limited.


*Disclaimer: The author do own shares of Chaoda Modern Agriculture Ltd. but does not own shares of other companies mentioned in this article. The author will not be responsible for any damages or losses.

Ipad and it's competitors

Samsung is unveiling it's Samsung Galaxy Tab "An Ipad killer?"

Ipad, Apple's innovative product has been facing fierce competition from its rival such as Toshiba, Samsung, Dell, HP and even RIM (Blackberry). So far, Apple has sold 3 million ipads and has 75% market share.
Here are some examples :

Samsung's newly launched Samsung Galaxy Tab. It is going into the market for around 200 to 300 USD. It runs on Android platform.

Toshiba's Folio 100, 10.1 inch multitouch tablet. It runs on Android platform.

Apple's Ipad. It runs on Apple OS

RIM's Blackpad. RIM is planning to launch it's Blackpad sometime around November 2010. It runs on Blackberry OS.

Toyota Sports car

Recently, Toyota (The world largest Auto maker) has placed more emphasis in the sports car segment to further grab its markets share and to improve its image which was badly hurt during the massive recalls of 8million vehicles last year. Here's a video from Bloomberg.

Apple vs RIM

Company profiles

Apple Inc.
Apple Inc. designs, manufactures, and markets personal computers and related personal computing and mobile communication devices along with a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers. Its famous products are Ipod, Ipod Touch, Macbook, Iphone and Ipad.
Research in Motion (RIM)
Research In Motion Limited (RIM) designs, manufactures, and markets wireless solutions for the worldwide mobile communications market. The Company provides platforms and solutions for access to email, phone, SMS messaging, Internet, and Intranet-based applications. Its famous products are Blackberry wireless handheld devices such as Blackberry Bold, Blackberry Curve and recently Blackberry Torch.

Stock Performance

Chart 1. This is the stock prices of Apple Inc. over a period of one year. Apple is trading almost at its all time high.

Chart 2. This is a stock price of RIM for a period of one year. RIM is trading at its 52 weeks lows.

Fundamentals

Apple is currently trading at 18.29 times P/E. which is significantly higher than RIM which is currently trading at 10.44 tims P/E. Both companies have good cashflows and debt management. The net profit margin both Apple and RIM are 20.72% (Q2, 2010) and 18.15%(Q2, 2010) respectively.

Question 1 : Why does RIM (Blackberry) underperforms?
The main reasons for such as huge discrepancy in the stock performance are mainly attributed to the wireless handheld devices and its Operating System (OS). RIM still held the biggest market share of smartphone with Blackberry OS, Android ranked second followed by Apple OS. However, with Blackberry's OS slow in catching up with the general market, it fails to attract non-corporate users while Android and Apple are happily swallowing users from any segment of the market enabling them to have such a tremendous growth. With Steve Jobs back in Apple, Apple has transformed itself into the most innovative technology company. While Michael Lazaridis from RIM who invented the Blackberry phones used to be praised for his understanding of corporate needs such as convenient wireless access to emails and messages and most importantly, confidentiality. That legacy would not hold long anymore,RIM is suffering pullbacks in countries like Saudi Arabia, U.A.E and India for its heavily encrypted data which could potentially be used as a source of communication for terrorist. RIM is still working out its deal with governments to solve those problems, but it would ultimately need to either let the government access their enterprise server or set up a data center in every country that requires access to its data. The question comes, even if you're not dealing with the terrorist, drugs or sex trafficking, would you want the government to have access to every single message or emails that you send?

Question 2 : Is this an opportunity or a trap?
For value investor, it is always an opportunity to invest in a company when it's stock prices is at a heavy discount such as RIM. Recently, RIM announced a share repurchase program, RIM is trying to convince the market that the company still have faith in its own product and future growth. The last time RIM made its stock repurchase in 2003, two years after that the stock went up an amazing >300%. Will the stock repeat that history this time?

Iphone 4 vs Blackberry Torch 9800

The Blackberry Torch 9800 by RIM

Iphone 4 by Apple Inc.

Apple Inc. has become the most innovative tech company in the world with dozens of its best selling products like Ipod, Ipod touch, Macbook, Iphone and Ipad. While Research in Motion (RIM) is the Canadian company the won the hearts of businessmen and corporate people with its famous Blackberry products.

Recently, both companies launched their latest products namely Iphone 4 (Apple) and Blackberry Torch (RIM). Here's a video comparing these two phones.




Which would you choose?

13 Bankers

13 Bankers describes the rise of concentrated financial power and the threat it poses to our economic well-being. Over the past three decades, a handful of banks became spectacularly large and profitable and used their power and prestige to reshape the political landscape. By the late 1990s, the conventional wisdom in Washington was that what was good for Wall Street was good for America. This ideology of finance produced the excessive risk-taking of the past decade, creating an enormous bubble and ultimately leading to a devastating financial crisis and recession.

More remarkable, the responses of both the Bush and Obama administrations to the crisis–bailing out the megabanks on generous terms, without securing any meaningful reform–demonstrate the lasting political power of Wall Street. The largest banks have become more powerful and more emphatically “too big to fail,” with no incentive to change their behavior in the future. This only sets the stage for another financial crisis, another government bailout, and another increase in our national debt.

The alternative is to confront the power of Wall Street head on, which means breaking up the big banks and imposing hard limits on bank size so they can’t reassemble themselves. The good news is that America has fought this battle before in different forms, from Thomas Jefferson’s (unsuccessful) campaign against the First Bank of the United States to the trust-busting of Teddy Roosevelt and the banking regulations of the 1930s enacted under Franklin Delano Roosevelt. 13 Bankers explains why we face this latest showdown with the financial sector, and what is at stake for America.

Download free here