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.