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US$35 per issue
The firST and only inSTiTUTional inveSTmenT magazine 100 percenT focUSed on SoUTheaST aSia
JUNE 2013
alpha Southeast a
sia JU
ne 2013
ww
w.w
hatinvestorswant.com
RETAILWILL ThEy pAy foR
InvEsTmEnT AdvIcE?
MAY 2013
fEATUREs:
3rd AnnuAl Best CorporAte AwArds
uses of quAnt investment strAtegies in AsiA
the rise of the Cross-Border trAnsACtion
vietnAm report
ISLAMIC DEBT, SUKUK & FUND MANAGEMENT
CONTENTS
Publisher/CEO: Siddiq Bazarwala. Head of Events and Research: Lisa Kirkpatrick. Contributing Editors: Yosef Ardi, Al Labita, Dewi Loevard, Gerry O’Kane, Rienzie Biolena. Photo Editing: Alvin Yong, Adek Berry, Austin Bush, Carlos Legaspi, Richard Lim. Image Libraries: istockphoto; getty images; afp; sxc.hu; & dreamstime Accounts & Administration: Yardthip Patcharalapa. Subscriptions & Circulation Management: Marina Gonzales Design & Layout: Kevin Tsam Design & Layout (Thailand): Duangkamon Business Translation: CLS Translation Printing House: Jet Bright Printing-Hong Kong Regional Distributor: Royale Asia Regional Travel & Accommodation: Amina Chu, Taqwa Travel +852 28922361 Main Office: 1802 Worldwide House. 19 Des Voeux Road. Central. Hong Kong T: (852) 3667 9078 F: (852) 3667 9079 Editorial Bureaus: Indonesia & Thailand Website: www.alphasoutheastasia.com Subscriptions: One year (10 issues) for US$400 net.
To subscribe, email: [email protected]
For syndication (to republish any of the articles produced by us) in your local newspaper or magazine, please email: [email protected]
US$35 per issue
The firST and only inSTiTUTional inveSTmenT magazine 100 percenT focUSed on SoUTheaST aSia
JUNE 2013
alpha Southeast a
sia JU
ne 2013
ww
w.w
hatinvestorswant.com
RETAILWILL ThEy pAy foR
InvEsTmEnT AdvIcE?
MAY 2013
fEATUREs:
3rd AnnuAl Best CorporAte AwArds
uses of quAnt investment strAtegies in AsiA
the rise of the Cross-Border trAnsACtion
vietnAm report
ISLAMIC DEBT, SUKUK & FUND MANAGEMENT
FEATURES:
18 SOUTHEAST ASIA’S INSTITUTIONAL INVESTOR AWARDS FOR CORPORATES
As the first and only institutional investor poll focused on Southeast Asia, we present the outcome
of Southeast Asia most well perceived companies. Instead of ranking two dozen-odd companies, we have narrowed our choices down to top 3 in each of the five award categories. Also, to ruffle some feathers, we have once again listed names of companies that are ‘not-so-well-perceived’ buy our poll universe i.e., investors. By the Editorial Team
30 THE RISE OF THE CROSS-BORDER TRANSACTION The global expectation that cross-border M&A will drive acquisitive growth has increased by 56% since 2008 and 18% in the last year alone. In this report, Grant Thornton explores whether there is an increased appetite of companies for cross-border acquisitions. By Grant Thornton
MAY 2013
8 DEAL OF THE MONTH
The Deal of the Month for the month of May 2013 does not go to a particular deal but an event that was kick-started by two simultaneous landmark bond deals out of Singapore in late May when two UK-based banks issued yuan denominated bond deals out of Singapore for the very first time, on the same day. While the issuance sizes of both deals were easily negligible, the implications and impact on the further development of the bond market in Singapore cannot be understated. In this month’s Deal of the Month, we detail behind-the-scenes deal mechanics that has made this a landmark, game-changing transaction for Singapore and the region. By the Editorial Team
COVER STORY
10 RETAIL In an era where retail investors in Asia are fairly well-informed about flaws in the current distribution model, we ask whether retail investors are willing to pay for investment advice to overcome the problem of frontline staff remuneration based on sales targets regardless of performance and product suitability By the Editorial Team
34 VIETNAM INVESTMENT UPDATE HSBC’s Vietnam Manufacturing Purchasing Managers’ Index (PMI) continued to increase from 50.8 in March to 51.0 in April, the highest in two years. A level above 50 indicates an expansionary economy, indicating that recovery has become more sustainable. With credit growth expected to pick up gradually, investors appear excited about changing their ‘wait and see’ stance By Dragon Capital
36 USES OF QUANTITATIVE INVESTMENT STRATEGIES IN ASIA What are some of the best practices for Asian Institutions considering quantitative approaches to investing? By Greenwich Associates
MONTHLY REPORTS
2 ISLAMIC DEBT, SUKUK & FUND MANAGEMENT By the Editorial Team
43 FUNDING & BORROWING ROUNDUP By the Editorial Team
Alpha Southeast Asia | June 2013 1
6 IN A PRIVATE BANKER’ SHOES Following up with the hypothetical investment made on behalf of an imaginary high net worth individual in late December 2012 within the monthly section on high net worth wealth management for individuals based in Southeast Asia, we present the sixth report in this series. By the Editorial Team
2 June 2013 | Alpha Southeast Asia
ISLAMIC DEBT, SUKUK & FUND MANAGEMENTALPHA SOUTHEAST ASIA JUNE 2013
ISLAMIC DEVELOPMENT BANK SETS GUIDANCE FOR US$1 BILLION SUKUKIslamic Development Bank, a Jeddah-
based multilateral institution, set price
guidance for a US$1 billion Islamic bond
sale, a statement from the lead banks
arranging the issue showed. The AAA-
rated bank, whose largest shareholder is
Saudi Arabia, is offering a price guidance
of midswaps plus high 30 basis points for
the five-year sukuk, the document said.
Banks arranging the sukuk are Qatar’s
Barwa Bank, Credit Agricole, CIMB,
National Bank of Abu Dhabi, Natixis, NCB
Capital - the investment banking arm
of Saudi’s National Commercial Bank,
Royal Bank of Scotland and Standard
Chartered. Mid-May 2013, the bank
which provides financing and loans in
Muslim countries, more than tripled its
authorised capital to US$150 billion to
better support development projects in
its 56 member nations reported Reuters.
RM1.6 BILLION (US$518 MILLION) SUKUK PROPOSAL BY FOR GAS-FIRED POWER PLANT IN PENANGTenaga Nasional’s wholly owned
subsidiary TNB Northern Energy has
proposed to issue RM1.625 billion
(US$518 million) in nominal value sukuk
based on the shariah principles of ijarah
and wakalah. In a filing with Bursa
Malaysia, TNB said the proposed sukuk
TNB NE will be issued in one lump sum
and will consist of 39 series with tenors
ranging from four years to 23 years from
the date of issuance. Malaysian Rating
Corporation (MARC) has assigned a
final rating of AAAIS to the sukuk TNB
NE. ‘The proceeds to be raised from the
proposed sukuk will be utilised for the
construction and delivery and working
capital requirement for the 1071.43 MW
combined cycle gas-fired power plant
in Prai, Pulau Pinang,’ TNB said. Upon
issuance of the proposed sukuk TNB
NE, TNB’s consolidated borrowings will
increase by RM1.625 billion (US$518
million) reported StarBiz.
SIME DARBY’S RM2.4 BILLION (US$800 MILLION) SUKUK RECEIVES BNM’S EMAS STATUSBank Negara Malaysia (BNM) has accorded
its ‘Emas’ status to Sime Darby’s US$800
million Sukuk in conjunction with the 10th
Islamic Financial Services Board Summit.
This was the 11th ‘Emas’ status accorded
by BNM for foreign currency denominated
bonds and Sukuk originating from Malaysia
in the global capital market. This inaugural
Emas sukuk issuance by Sime Darby
attracted substantial demand regionally
where Asian investors represented about
70% of total Sukuk issuance and it was
10 times oversubscribed. BNM said
the Malaysian marketplace for Islamic
finance was well supported by a deep
primary market and active secondary
market trading for Sukuk issuance, as
well as efficient price discovery and the
availability of expertise in this market.
Besides the US Dollar, BNM’s ‘Emas’ sukuk
have been issued in Singapore Dollar and
Renminbi reported StarBiz.
AUTO LENDER BANK INTERNASIONAL INDONESIA FINANCE TO RAISE RP 1.5 TRILLION (US$154 MILLION) FROM BONDS The auto-financing arm of Maybank-
backed Bank Internasional Indonesia plans
to raise Rp 1.5 trillion (US$154 million)
in a bond issue in June 2013 a bid to
bolster its capital base. Bank Internasional
Indonesia Finance Center intends to
sell three-year and five-year bonds in
June 2013, the company said in a brief
prospectus published in Bisnis Indonesia.
The company plans to offer the notes to
investors from June 11 to 13, 2013 and
plans to list the notes on the Indonesia
Stock Exchange on June 19, 2013, the
company said in the prospectus. The
company did not announce detailed terms
for the notes. The company has hired
Kim Eng Securities, RHB OSK Securities
Indonesia and Danareksa Sekuritas to help
arrange the notes. ‘The proceeds from the
bond sale, after deductions for costs of
issuance, will be used to boost capital,’ the
company said in the prospectus.
INDONESIAN GOVERNMENT TO ESTABLISH NEW SHARIAH BANK Indonesia State-Owned Enterprises
Minister Dahlan Iskan revealed that the
government is planning to establish
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4 June 2013 | Alpha Southeast Asia
ISLAMIC DEBT, SUKUK & FUND MANAGEMENTALPHA SOUTHEAST ASIA
a Shariah-compliant bank in order
to manage Rp 40 trillion (US$4
billion) worth of Indonesian
hajj funds. Dahlan said
the establishment of the
bank will support the
implementation of a
new policy issued by
the Ministry of Religious
Affairs obliging hajj
funds to be managed
exclusively by Shariah
banks. The government has
stakes in four lenders — Bank
Mandiri, Bank Rakyat Indonesia,
Bank Negara Indonesia and Bank
Negara — that run their own Shariah
units. None of these banks, however,
focus solely on Shariah banking. Dahlan
said the government wants to support
the development of Shariah banking
in Indonesia with the new bank since
the sector controls only 4.9 percent of
market shares in Indonesia’s banking
industry, according to first quarter data
from Bank Indonesia. ‘Shariah banks in
Indonesia command … only a seventh
of the assets that Malaysian Shariah
banks [do],’ Dahlan told Indonesian
news portal republika.co.id. Indonesia’s
Shariah-compliant banks controlled
a total of Rp 214.5 trillion (US$21.9
billion) in the first quarter of 2013, a
37.8 percent increase compared with
the same period last year. The hajj
funds are expected to help boost this
figure. Bank Indonesia is targeting a 58
percent increase in banking assets this
year that comply with Islam’s ban on
interest reported Jakarta Globe.
ISLAMIC FINANCE NEEDS GLOBAL SHARIA BOARD - IDB PRESIDENTThe Islamic Development Bank (IDB), a
Jeddah-based multilateral institution,
has called for the creation of a global
sharia advisory board that can offer
greater uniformity for the Islamic
finance industry, its president said. A
centralised format to the supervision
of sharia-compliant banking products
is gaining favour across the globe, as
regulators seek to standardise industry
practices and improve consumer
perceptions. ‘IDB and IFSB (Islamic
Financial Services Board) should study
ways for creating globally acceptable
references for the industry for the
benefit of all,’ IDB president Ahmad
Mohamed Ali said. ‘This could include
striving for the concept of a globally
accepted sharia committee or body,
which would be able to assist all Islamic
financial institutions and bring them in
line with a uniform standard.’ Malaysia
pioneered the country-level sharia
board and in recent months several
countries have introduced central
boards of their own, including Dubai,
Oman, Pakistan and Nigeria. Countries
like Oman have gone as far as imposing
term limits on the sharia scholars who
are members of these boards, while
also requiring they abide by a code of
conduct reported StarBiz.
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
HSBC Holdings PLC
Standard Chartered PLC
Deutsche Bank
Emirates NBD PJSC
Citi
19 Others
USD1.987 Billion
USD1.182 Billion
USD1.074 Billion
USD886 Million
USD782.2 Million
USD3.794 Billion
Alpha Southeast Asia | June 2013 5
JUNE 2013
ZETI GIVES ADVICE ON ISLAMIC FINANCIAL
INNOVATIONSInnovations in Islamic
financial solutions
will need to take
into account the
higher regulatory
expectations for
more transparency,
as well as the
effective management
of risks and capital,
said Bank Negara govenor
Dr Zeti Akhtar Aziz. She also
noted that while Islamic finance had
benefited from a well developed,
more competitive and well-regulated
eco-system, it needed to build on and
reinforce the ‘solid foundations that
have been achieved in this decade’.
‘As the industry transitions into a new
era of growth and development, the
competitive financial landscape is being
redrawn by the evolving international
regulatory reforms, changing operating
models, rising consumer expectations
and increased competition,’ she said. ‘In
this more challenging environment, the
success of sustaining the momentum
of Islamic finance as a transformative
agent for the economy, will hinge on
the ability to keep raising the bar in the
pursuit of an effective functioning and
sound financial system,’ she told an
international audience at the Islamic
Financial Services Board (IFSB) Summit
2013 reported StarBiz.
MALAYSIA-BASED IILM TREADS FINE LINE IN DESIGNING MAIDEN SUKUKInternational Islamic Liquidity
Management Corp (IILM) faces a delicate
task as it designs its maiden sukuk: it
must make the issue attractive enough
for investors to buy, but not so attractive
that most of them buy to hold. Whether
it gets the balance right will affect the
development of Islamic money market
trading in the Gulf and South-East Asia
over the coming year. Malaysia-based
IILM, backed by nine central banks and
monetary agencies as well as the Jeddah-
based Islamic Development Bank, has said
it planned to issue up to US$500 million
of dollar-denominated sukuk in the second
quarter of this year, and eventually expand
the programme to as much as US$3 billion.
Its issues will be based on a very
different premise than other sukuk. Other
issuers design their sukuk merely to attract
investors and raise money cheaply; IILM’s
mission is to create a highly liquid tool
which Islamic banks will trade to manage
their short-term funds. To ensure trading
of the sukuk around the world, IILM had
signed agreements with eight primary
dealer banks, said Ayhan Keser, executive
vice president at Turkey’s Albaraka Turk,
one of the market-making banks. ‘These
primary dealers are given the right to
purchase the issued sukuk in the primary
market, have the responsibility to set the
secondary market and actually buy and
sell the bonds to form a market price,’
Keser said reported StarBiz.
AMMB Holdings
CIMB Group
RHB
HSBC Holdings PLC
Malayan Banking
7 Others
USD2.536 Billion
USD2.271 Billion
USD1.896 Billion
USD1.603 Billion
USD1.377 Billion
USD2.545 Billion
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
6 June 2013 | Alpha Southeast Asia
Following up with the hypothetical investment made on
behalf of an imaginary high net worth individual in late
December 2012 within the monthly section on high net
worth wealth management for individuals based in Southeast
Asia, we present the sixth report in this series. Over the last
one month, we have generated a net 16.5% gain while over
the last five months since this hypothetical exercise began, we
have generated a net 12.1% gain making up for some glaringly
large losses in the month of March when global markets were
shaken up by uncertainties in Europe - on the initial investment
of US$7 million (excluding fees), allocated between several
real award-winning investment funds, managed by yet again,
an imaginary family office based in Asia.
The bulk of the gains on this portfolio investment however
need to be credited to a single fund that has generated
a remarkable 9% gain over the last five months. The ING
Investment Management Global High Dividend is a SICAV
incorporated in Luxembourg and its objective is to generate
capital appreciation. The Fund invests in a diversified portfolio
of global equities selected based on their high dividend yield
and some of its largest holdings are among large profile Fortune
500 companies including JPMorgan, Chevron, Royal Dutch Shell,
Novartis, Microsoft, General Electric, etc.,
To recap, the imaginary individual is in his mid-to-late thirties
with an appetite for medium to high-risk investments at least
for the next few years. In essence, the funds selected below
are a fair reflection of his preferred investment strategy and
risk tolerance level. In this theoretical case, up to US$7 million
worth of liquid assets will be invested directly into these funds
with US$3 million kept aside as cash for ongoing investment
opportunities that may surface between Thursday Dec 20, 2012
and Friday, Dec 20, 2013, exactly one year after making the initial
imaginary investment (To be announced).
The preferred allocation is to go beyond the most general
asset-class targets (stocks, bonds, and cash) to provide broad-
based exposure to both the equity (value, dividend, growth,
Note: Readers of Alpha Southeast Asia should not make any investment decisions solely based on this imaginary investment scenario. It is best you read the relevant information relating to these funds and investment options and contact an investment professional to understand risk factors involved.
By the editorial team
IN A PRIVATE BANKER’ SHOES
NAME 24 May, 2013 NAV on 20 Dec, 2012 AUM
AllianceBernstein Global Bond Fund US$8.65 (-1%) US$8.58 US$1.5 billion
Pictet Asset Management Asian Local Currency Debt US$149.13 (-4%) US$154.66 US$2.1 billion
ING Investment Management Global High Dividend US$400.68 (+5%) US$310.7 US$21.7 billion
Franklin Templeton Investment Funds - Templeton Asian Growth Fund EUR27.45 (+1.1%) EUR 33.65 EUR 16.9 billion
Macquarie International Infrastructure Fund S$0.1820 (+1%) S$0.635 US$1 billion
Kuwait Investment Al-Hilal Islamic Fund AED115.58 (+8%) AED105.01 S$34 billion
Phillip Singapore Real Estate Income Fund S$1.46 (+2%) S$1.28 S$31.7 billion
Amount Invested on 20th Dec 2012: US$7 millionTo-date, one-month return (excluding the 4% fees): 12.1% gain
Alpha Southeast Asia | June 2013 7
sector or country specific) and fixed-income (investment-grade
or high-yield) markets, beyond Asia.
The eight multi-currency denominated funds selected
with imaginary investment holding includes: (I)
AllianceBernstein Global Fixed Income Fund (global fixed
income); (II) Pictet Asset Management Asian Local Currency
Debt (local currency Asian fixed income); (III) ING IM
Global High Dividend Fund (global equity); (IV) Franklin
Templeton Asian Growth Composite (Asia ex-Japan equity);
(V) Infrastructure Macquarie Infrastructure and Real Assets
(infrastructure); (VI) Al-Hilal Islamic Fund (shariah and socially
responsible investments); & (VIII) Phillip Singapore Real Estate
Income Fund (REITS in Singapore).
While the current asset allocation strategy is tactical, where
the imaginary family office appears more keen on taking an
active approach, positioning a portfolio into sectors or individual
broad-based funds that show the most potential for gains, the
HNWI is evaluating further imaginary investment opportunities
in commodities (i.e., energy, industrial metals, precious metals,
agriculture, etc.,) as well as other non-traditional investment
options such as intellectual and digital property, coins, stamps,
art and antiques and real estate, using the surplus balance of
US$3 million cash in hand.
Since the (fees) management expense ratio (MER),
management, custody and administration fees for the above
range of funds varies from 2.85% to 4%, the editorial board at
Alpha Southeast Asia has resolved to aim for an annualised
return that far exceeds 4%, just in order to break-even. Since
trading between funds over the next twelve months will lead
to higher costs, the target ceiling of 4% may be raised further
to take into account the affects of inflation and other recurring
costs of trading and managing these investments.
8 June 2013 | Alpha Southeast Asia
MAY 2013
The Deal of the Month for the month of May 2013 does
not go to a particular deal but an event that was kick-
started by two simultaneous landmark bond deals out
of Singapore in late May when two UK-based banks issued yuan
denominated bond deals out of Singapore for the very first time,
on the same day.
While the issuance sizes of both deals were easily negligible,
the implications and impact on the further development of the
bond market in Singapore cannot be understated.
Global banking heavyweights HSBC and Standard Chartered
issued 2 and 3-year notes worth 1.5 billion yuan or US$240
million on aggregate.
HSBC said it had issued 500 million yuan of two-year fixed
rate notes on the market, with yields of 2.25 percent. The funds
will be used to finance the bank’s expansion of yuan-based
lending assets, said Matthew Cannon, head of global markets at
HSBC Singapore.
“The start of yuan clearing service in Singapore is one more
step forward to the internationalisation of the renminbi,” he said,
referring to the growing influence of the Chinese currency. “It
allows issuers and investors to find it more convenient, as well as
cheaper and quicker to make payments in the Chinese currency”.
In a statement he further added, “This issuance will help
open the market to other issuers looking to fund themselves
internationally in RMB, offer new investment opportunities to
the substantial pool of wealth managed in Singapore and assist
in funding the rapidly growing RMB-denominated trade business
in Asia”.
Guy Harvey-Samuel, group general manager and CEO at HSBC
Singapore, said apart from the “historic” bond issue, the bank
has also completed a number of other yuan transactions for its
customers in Singapore through the new yuan-clearing facility.
Almost simultaneously, Standard Chartered PLC announced it
had raised 1 billion yuan ($163.36 million) through the offshore
bonds. The three-year senior unsecured issuance was priced with
a coupon of 2.625 percent after generating more than 3 billion
yuan in orders from 75 investors across Asia.
“We see this as another milestone for Singapore in the
development of its status as an offshore yuan hub”, said Ray
Ferguson, chief executive officer of Standard Chartered Bank
Singapore.
He added the country’s contribution to the development of the
yuan is further enhanced by the issuance, as it already leads as
a regional treasury center, and was a springboard to Southeast
Asia along the key trade corridor with China while providing a
hub for Asian wealth management and commodities trading.
Through these two transactions, both banks have become the
first lenders to take advantage of the Southeast Asian country’s
newly launched yuan-clearing system.
Just as the deals were launched, it was learnt depositary
services were also launched by the Singapore Exchange for
yuan-denominated bonds, in a bid to boost the city’s position
as an offshore hub for issuers and investors of dim sum bonds.
Magnus Bocker, CEO of Singapore Exchange, said the exchange
will keep growing and enhancing its suite of yuan and China-
SIMULTANEOUS RMB1.5 BILLION DIM SUM BONDS ISSUED IN SINGAPOREBy THE EDITORIAL TEAM
“We see this as another milestone for Singapore in the development of its status as an offshore yuan hub.”
Ray Ferguson, CEO, Standard Chartered Bank Singapore
Alpha Southeast Asia | June 2013 9
MAY 2013
related products and services as Singapore’s role as an offshore
yuan center becomes increasingly important.
On the same day, the Industrial and Commercial Bank of
China’s Singapore branch also kicked off yuan clearing services
in the island nation.
Mainland Chinese and Hong Kong borrowers have dominated
the offshore market for yuan bonds, or dim-sum bonds, since
it started to take off in 2010. The new yuan-clearing hub
underscores rising use of the yuan for trade, as well as Beijing’s
push to internationalize its currency.
Since 2007, yuan-denominated bonds were mainly cleared out
of Hong Kong, Beijing’s chosen offshore yuan trading center for
a trial, and much of the yuan activity in Singapore was handled
through banks based in mainland China, or through state-owned
Bank of China’s unit in Hong Kong.
In February, Beijing approved Industrial & Commercial Bank of
China to clear yuan trades in Singapore, which is now up against
Taipei, London, Tokyo, Luxembourg and Kuala Lumpur in the fight
to become the world’s second-largest offshore yuan-trading hub
after Hong Kong.
According to market commentators, yuan bond issuance
outside of China in 2013 could top last year’s 170 billion yuan,
and even reach 200 billion yuan. Helped by the yuan’s strong
value, the issuance of offshore yuan bonds so far this year has
exceeded 140 billion yuan.
Other banks, such as Singapore’s largest lender, DBS Group is
also reportedly looking to issue dim sum bonds in Singapore.
The bank, Southeast Asia’s largest bank by assets, said it plans to
issue yuan-denominated bonds that will be cleared in Singapore.
It didn’t disclose further details.
“As yuan clearing can be done out of Singapore now, it could
hopefully draw more issuers from Singapore and Southeast Asia,”
and in turn attract a broader investor base out of Singapore, said
Clifford Lee, head of fixed income at DBS.
Taipei became the second hub for offshore yuan note sales
in February, following the start of the Dim Sum bond market in
Hong Kong in 2007. Through this latest development, Singapore
has now become making the third offshore hub for such notes
and further consolidated its standing as an international
financial center.
Analysts from HSBC estimate that offshore debt sales
denominated in the Chinese yuan may reach as much as US$360
billion this year.
According to the Society for Worldwide Interbank Financial
Telecommunication, or SWIFT, in terms of the value of offshore
yuan payments, Singapore ranked second last month following
the United Kingdom in regions excluding Hong Kong and the
Chinese mainland.
China and Singapore doubled the size of their currency-swap
arrangement to 300 billion yuan in March, one month after the
Chinese central bank approved the Singapore branch of ICBC as
its clearing bank.
As of June 2012, deposits of the currency in Singapore stood at
about 60 billion yuan.
The yuan has become the 13th most-used currency overall
with an all-time high market share of 0.74 percent, and payments
denominated by the currency grew in value by 32.7 percent, in
comparison with the average increase of just 5.1 percent across
all currencies, according to SWIFT.
Buns to Bonds - The start of yuan clearing service in Singapore for
dim sum bonds is one more step forward to the internationalisation
of the renminbi
F ive years is a long time in finan-
cial markets. Long enough to be
forgotten as history as investors
reemerge into the equity and bond mar-
kets of Asia today.
Not a week goes by and reports are
published as to how private bank-
ing and wealth management units are
spearheading growth at banks, brokers
and asset management firms of all col-
ours and stripes while other products
within the same financial institution
produce growth rates that are not near-
ly as dynamic.
“While the collapse of Lehman
Brothers in 2008, which backed CDO
products improperly marketed by some
consumer banks as bond funds to re-
tail investors and costs investors huge
amount of money is probably one in-
cident that has been a game-changing
event for the whole of the wealth man-
agement industry especially those tar-
geting inexperienced retail investors
and high net worth individuals to invest
in equity and bond markets, the demand
for qualified wealth management ad-
vice has never been better”, according to
a senior relationship manager at a lead-
ing wealth management bank in Asia.
As a random example of an Asian-
domiciled bank, OCBC’s private banking
business has continued to expand, with
assets under management increasing
27% to US$44 billion (S$55 billion) as
at 31 March 2013, up from US$35 bil-
lion (S$44 billion) the previous year
- or more than double the US$15.8 bil-
lion when OCBC acquired ING’s private
banking assets in late 2009. As a share
of total revenue, wealth management
business today accounts for over 28%
of the bank’ bottom-line, compared with
23% in 2011.
“Business momentum is strong, and
asset quality remains sound. With our
solid capital and stable funding base,
we will devote additional resources to
strengthen the group’s regional fran-
chise to tap on the higher economic
growth potential in our key overseas
markets”, said Samuel Tsien, CEO at
RETAILWill they pay for investment advice?
By the editorial team
“When the ASEAN Exchanges collaboration starts recognising the need for regional research, there is likely to be greater focus on depth and breadth of research by the larger regional players as economies of scale definitely matter when it comes to providing structured and value-based research.”
tengku dato' Zafrul aziz, Ceo at maybank investment Bank
Tengku Dato' Zafrul Aziz, CEO at Maybank
Investment Bank
10 June 2013 | Alpha Southeast Asia
COVER STORY
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OCBC Bank when announcing the 2012
year-end results early this year.
But apart from better controls, more
unified investor education from the in-
dustry, better training, comprehensive
documentation and a dialogue with cus-
tomers about product suitability, what
more can be done to increase interests
in retail investors to move saving funds
into equities and fixed income invest-
ments away from bank deposits and
property, especially in times of market
volatility let alone ongoing economic
uncertainty?
In Malaysia, Munirah Khairuddin,
Deputy CEO at CIMB-Principal Asset
Management is of the opinion financial
advisors play a critical role in helping
generate interest in investing in equity
and bond markets, “Financial advisers
ought to raise more awareness on the
importance of portfolio diversification
in achieving long-term financial goals”.
She further adds, “Besides that, inves-
tor education on retirement savings and
long-term investing continue to play an
important role”. Illustrating with an ex-
ample, she says, “If we look across Asia
in general, people need to be more edu-
cated on the necessity of having better
retirement savings, considering that
cost of living is on the rise and savings
will be depleted in due time”.
Citing reasons for the renewed inter-
est’ in investing in the local equity mar-
ket, Dr. Kongkiat Opaswongkarn, CEO of
Asia Plus Securities in Thailand shares,
“The Thai Stock Market has gained more
interest over the past four years driving
more investors into the market, both ex-
isting and new generation investors, due
to many factors including lower interest
rates, higher EPS growth, government’s
policy to allow personal income tax
savings invested via Long-Term Equity
Funds (LTFs) and Retirement Mutual
Funds (RMFs), and better education to
investors provided by financial institu-
tions, the Stock Exchange of Thailand
(SET), and universities”.
However, is the revival of interest in
investing in the equity market driven
mainly by public policy and the educa-
tional push by various stakeholders in-
cluding brokers, asset managers, banks
& regulators or are there simply more
avenues investors can choose from to
make investments?
Making a case for a platform through
which investors could be attracted to
the idea of investing, Ms. Khairuddin
at CIMB-Principal Asset Management
says, “technology could become an al-
ternate avenue to conventional meth-
ods of investing”. Citing an example,
she explains, “the ease of online trading
platforms and fund platforms will cater
to the tech-savvy and growing Gen-Y
investors. The lower fees available via
this type of platform may be a sparking
point for some fee-sensitive investors”.
Tengku Dato' Zafrul Aziz, CEO at
Maybank Investment Bank is however
of a different opinion. “While key as-
pects of being Social, Local and Mobile
are being rapidly embraced and driving
the growth of retail online transactions,
equity investing for the retail segment
from a fully integrated platform has yet
to materialise in a meaningful way and
the ability to mobilise funds via several
clicks to invest in multi-markets, multi-
products and multi-currencies assisted
by expert advice if so desired, has yet
to receive the kind of investments re-
quired for its actualisation”, summing
up why a number of markets in Asia ex-
cept Singapore, Hong Kong, South Korea
and Japan may not be quite as ready to
invest using online platforms however
countries like Thailand and Malaysia
are increasingly catching up with some
of the developed financial markets.
Regardless of which platform retail
investors prefer using, are investors
Dr. Kongkiat Opaswongkarn, CEO of Asia
Plus Securities in Thailand
12 June 2013 | Alpha Southeast Asia
COVER STORY
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12 June 2013 | Alpha Southeast Asia
today using investment products to
chase the latest hot benchmark based
on trading opportunities with a shorter
investment horizon in mind or are they
beginning to realise the importance
of investing in the longer-term and in
diversifying?
Tengku Zafrul does not see this as an
issue. “The key proposition of a Stock
Exchange has to be the diversity of list-
ed products for all investor types with
different risk appetites. Long term, short
term, high risk, low risk, hot stocks, divi-
dend stocks”. Elaborating on what he
thinks is more important to focus on, he
points out, “The key is to educate inves-
tors and help them understand what in-
vestment opportunities or products are
best suited for their risk profile, objec-
tives and time horizon”.
Alan Inn, Head of Regional Retail
Broking at CIMB Investment Bank con-
curs. “Different retail investors have
different investing styles. While in-
vestors that trade more on sentiment
and rumours still exist today, there
are an increasing number of investors
who trade and invest sophisticatedly”.
Explaining one of the factors pushing
this trend ahead, he says, “One of the
reasons for this could be attributed to
the workshops run by stockbrokers who
encourage their clients to take a more
informed approach to investing that
is based on fundamentals or techni-
cal charting, rather than hear-say and
rumours”.
As pragmatic as responses come,
Dr. Kongkiat at Asiaplus Securities in
Thailand simply states, “Most of the
existing retail investors in the mar-
ket today are still short-term investors
even though some of them may have
started thinking about longer-term in-
vestments”. Explaining how the trading
mentality is far from over among retail
investors, he quickly adds, “They would
not hesitate to take profit at the ex-
pected level as and when the relevant
opportunities come by”.
Just as quickly contrasting his ear-
lier statement, he counters, “However, a
large number of so called “value inves-
tors” have proven to be highly success-
ful in a ‘buy and hold’ strategy for the
longer term in growth stocks and this
strategy has influenced a good number
of investors to follow and has resulted
in a better mix of short and long-term
investors”, he says.
In Malaysia Ms. Khairuddin too, be-
lieves the idea of a typical retail inves-
tor does not exist. “There will always
be a group of retail investors that trade
short-term but there is a growing num-
ber of retail investors that are educated
and realise that investing is a long-term
proposition. The goal is long-term accu-
mulation of investment assets”.
Explaining the generic rationale be-
hind investment decisions made by re-
tail investors, Tengku Zafrul explains,
“With interest rates at very low levels,
investors are beginning to consider
larger exposure into equities with me-
“In Thailand, where real-time data, stock information and research are all bundled up to investors for free, I believe retail investors are unlikely to be willing to pay for investment advice because there are a lot of free information and tools widely available to them.”
dr. Kongkiat opaswongkarn, Ceo of asia Plus Securities in thailand
Munirah Khairuddin, Deputy CEO at CIMB-
Principal Asset Management
14 June 2013 | Alpha Southeast Asia
COVER STORY
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dium risk and volatility to generate the
target returns for long term. Dividend
stocks, REITs, and consumer stories are
gaining popularity as retail investors
are becoming more conversant with
product selection to achieve their in-
vestment objectives”.
Not enough to independently man-
age their own portfolios but sufficiently
well-informed about flaws in the cur-
rent distribution model in Asia i.e. ,
frontline staff remuneration based on
sales targets regardless of performance
and product suitability.
But if retail investors were encour-
aged to pay for investment advice,
would this mitigate the problems the
industry is faced with today?
Tengku Zafrul at Maybank Investment
Bank explains matter-of-factly, “Retail
investors may be more willing to pay
for advice as long as the fees paid are
commensurate with additional income
and performance. Performance fees are
to be expected for customised services,
while off-the-shelf products should still
be based on the traditional distribution
model; Essentially he sums up, “investors
must be offered choices and alternatives”.
He however foresees a few challenges
before the market becomes ready to pay
for investment advice. “Most of the large
brokers provide independent research,
but the packaging of the research and
the distribution of the research may still
not as efficient as it could be. There are
some significant efforts underway by
some of the larger players to deliver re-
search content.”
Explaining the important role of re-
gional research, Tengku Zafrul makes
an interesting point. “When the ASEAN
Exchanges collaboration starts recognis-
ing the need for regional research, there
is likely to be greater focus on depth and
breadth of research by the larger region-
al players as economies of scale defi-
nitely matter when it comes to providing
structured and value-based research”.
At CIMB-Principal Asset Management,
Ms. Khairuddin does not mince her
words and acknowledges how short-
ages in skilled manpower needs to be
fixed first before investors are asked
to pay more for services rendered. She
says, “The industry needs more certified
and qualified financial planners to be-
gin with. This includes advisers who can
plan on total portfolio basis on creation
of wealth, protection via insurance, es-
tate planning and retirement planning”.
In Thailand, Dr. Kongkiat at Asiaplus
Securities is of the view a whole pleth-
ora of information and data is readily
available today to the average inves-
tor therefore, he does not think the
market is likely to be ready to pay for
investment advice. “In Thailand, where
real-time data, stock information and
research are all bundled up to investors
for free, I believe retail investors are
unlikely to be willing to pay for invest-
ment advice because there are a lot of
free information and tools widely avail-
able to them”.
Mr. Inn at CIMB Investment Bank
shares the same view. “Investors today
are more empowered by a variety of
information easily accessible to them
via the Internet and by comprehensive
online trading platforms, which bring
them closer to market action”.
There is also “certainly more empha-
sis on portfolio management and in-
vestment diversification now than in
the last few years and that is one posi-
tive outcome as a result of the global
financial crisis”, sums up Ms. Khairuddin
signaling how local capital markets in
the region are set to evolve regardless
of how the regulatory environment and
investor sentiment changes from time
to time.
Alan Inn, Head of Regional Retail Broking
at CIMB Investment Bank
16 June 2013 | Alpha Southeast Asia
COVER STORY
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18 June 2013 | Alpha Southeast Asia
These are the results of our third annual poll to find
Southeast Asia’s top companies. Instead of ranking two-
dozen odd companies, we have once again uniquely
narrowed investor choices down to top 3 in each of the seven
award categories: Most Organised Investor Relations; Best
Senior Management IR Support; Strongest Adherence to
Corporate Governance; Most Consistent Dividend Policy; Best
Strategic CSR; Best CFO in Southeast Asia; & Best Annual Report
in Southeast Asia;
A key distinguishing feature of this investor poll unlike any
other poll is that we not only name investor favourites but
adventurously put our potential advertising income on the
line by publishing names of companies that are not so well
appreciated, by this same group of investors by asking them
about companies perceived to have Poor Management Access &
IR as well as Unpredictable IR Strategy.
For this annual poll of Southeast Asia’s top companies, we
successfully collected votes from more than 473 investors and
analysts across the region as well as US & Europe, a slight
increase from last year. The participants included fund managers
with investment interests in Southeast Asia, large institutional
investors, insurance companies, pension funds, funds of hedge
funds, private banks, equity and fixed income brokers as well
as buy and sell-side analysts. Voting by public-listed corporates
or individuals with vague contact details were automatically
discarded and excluded from the final vote count. Over 3,000
qualified participants were sent questionnaires starting mid-
January 2013 and all responses were received and collated by
mid-to end May 2013.
The results are published country by country and this year,
we have once again nominated the Best CFO in Southeast
Asia; Best Annual Report in Southeast Asia as well as Strongest
Commitment to Sustainable Energy in Southeast Asia.
In Indonesia, seven leading companies with the best perception
among investors include conglomerate Astra International,
miners Adaro Energy & Antam, leading banks Bank Central Asia
and Bank Mandiri as well as telecom giant Telkom & telecom
infrastructure company Tower Bersama
In Malaysia, the nine leading companies include regional
powerhouses
CIMB Group,
Maybank, Public
Bank & RHB
Capital, energy giants
Petronas Gas, Petronas
Dagangan, real estate
company KLCC Property Holdings,
Asian focused telecoms group TM and conglomerate YTL Corp.
In Philippines, the eight companies include diversified
conglomerate SM Investment Corp and Ayala Corp, predominantly
real estate focused player Megaworld, leading bank BDO,
telecoms players Globe Telecom & PLDT as well as consumer
giant San Miguel.
In Singapore, six companies most preferred by institutional
investors include regionally diversified telecoms company
SingTel, aspiring global real estate player Capitaland, regional
banks DBS Bank & OCBC, engineering specialist ST Engineering
and conglomerate Keppel Corp.
In Thailand, seven companies most sought after among
investors include stock exchange market mover PTT Plc., along
with its key subsidiaries PTTEP & Thai Oil, industrial giant Siam
Cement Group, telecoms provider TAC, fast growing regional
beverage giant Thai Beverage as well as global seafood exporter
Thai Union Frozen.
In terms of the Best CFO in Southeast Asia, the award goes to
Kenny Kim, Group CFO at CIMB responsible for managing the
financial resources of its growing regional footprint. The award
for the Best Annual Report in Southeast Asia goes to Adaro
Energy, an aspiring Indonesian mining giant in the making
while the award for the Strongest Commitment to Sustainable
Energy in Southeast Asia once again goes to Thai Oil for its clear,
transparent and consistent CSR goals and aspirations.
In all, 37 Southeast Asian publicly listed companies were
ranked and this list represents the crème-de-la crème of best
practices whether it be on corporate governance, investor
relations, disclosure, transparency, financial management, CSR or
dividend policy.
Congratulations to all the winners.
SOUTHEAST ASIA INSTITUTIONAL INVESTOR CORPORATE AWARDS
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20 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA INSTITUTIONAL INVESTOR CORPORATE AWARDS
MOST ORGANISED INVESTOR RELATIONSAstra International 187Bank Mandiri 185Adaro 142
BEST SENIOR MANAGEMENT IR SUPPORTAstra International 167Bank Mandiri 146Antam 118
STRONGEST ADHERENCE TO CORPORATE GOVERNANCEBank Mandiri 174Adaro 167Antam 132
MOST CONSISTENT DIVIDEND POLICYAstra International 188Telkom 185Bank Central Asia 152
BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYAdaro 175Astra International 151Bank Mandiri 133
BEST CFO IN INDONESIA Pahala Mansury, CFO, Bank Mandiri
BEST ANNUAL REPORT IN INDONESIAAdaro Energy
POOR & UNPREDICTABLE IR STRATEGYBumi Resources 233Bakrie Land 176Media Nusantara Citra 154
INDONESIABUMI REVEALS $200M BLACK HOLE IN FINANCIAL RESULTSScandal-hit mining group says it seeks to recover
the $152m in 2012 and $49m in 2011 that had ‘no
clear business purpose’
By JOsEPhINE MOuLds
Bumi, the scandal-hit Indonesian coal miner, has revealed a
US$200 million black hole at its main subsidiary, as it released
much-delayed financial results for 2012. The FTSE-250
company – which has been dogged by a very public battle for
control between financier Nat Rothschild and his co-founders,
Indonesia’s powerful Bakrie family – said it would seek to recover
the money that had been spent over the past two years “with no
clear business purpose”. A source close to Rothschild, who is no
longer on the board but remains the company’s second largest
shareholder, said: “It’s appalling but not surprising.” Bumi revealed
the missing funds as it reported a pre-tax loss of $2.4bn for 2012,
reflecting a decline in the value of its Indonesian mines, in part
due to expectations of a lower coal price. The company said that
$152m in 2012 and $49m in 2011 had been wrongly attributed
to the maintenance and extension of hauling roads, payments to
landowners, consulting costs and goodwill. It is working with the
Serious Fraud Office and Indonesian authorities to track those
funds down. The company has removed the chief executive and
six other senior managers from Berau, the Borneo coal mine in
which it has an 85% stake. It continues to search for a group
finance director and chief mining officer to be based in Jakarta.
Bumi last month asked for its shares to be suspended amid the
inquiry into irregular payments at Berau. Bumi was founded
three years ago in a $3bn deal when the powerful Bakrie family
placed its coal assets into a cash shell formed by Rothschild. But
the two sides fell out amid accusations of financial irregularities
– strongly denied by the family – and a whistleblower report,
which the company alleged was based on hacked emails. In
February this year, Rothschild failed in his attempt to gain control
of Bumi, leaving the current management team in place. The
review of Berau delayed Bumi’s results by two months. Nick Von
Schirnding said: “The first quarter results speak for themselves.
During this whole mess the underlying business has performed
very well.
Source: The Guardian, 31 May 2013
Pahala Mansury, CFO, MD of Finance & Strategy and Director, Bank Mandiri
22 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA INSTITUTIONAL INVESTOR CORPORATE AWARDS
MOST ORGANISED INVESTOR RELATIONSCIMB 176Maybank 143KLCC Property holdings 112
BEST SENIOR MANAGEMENT IR SUPPORTPetronas Gas 187Maybank 167CIMB 123
STRONGEST ADHERENCE TO CORPORATE GOVERNANCECIMB 156Maybank 127yTL Corp 114
MOST CONSISTENT DIVIDEND POLICYPetronas dagangan 157Maybank 156Public Bank 154
BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYyTL Corp 176TM 174Maybank 138
BEST CFO IN MALAYSIAKenny Kim, CIMB
BEST ANNUAL REPORT IN MALAYSIATM
MALAYSIAMALAYSIAN AIRLINE’S Q1 NET LOSS WIDENS ON FOREX, FINANCE COSTSBy yANTOuLTRA NGuI
Malaysian Airline System Bhd (MAS), the country’s national
carrier, posted a bigger net loss in first-quarter, hurt mainly
by foreign exchange loss and finance costs. MAS reported
a US$91.67 million loss in the three months that ended in
March, compared with US$55 million loss a year earlier. No
forecast was available for the quarter according to Thomson
Reuters I/B/E/S. “The group remains cautiously optimistic
of its performance for the rest of the year,” MAS said in a
local stock exchange filing [in late May]. “While the carrier’s
operating statistics for the first quarter showed strong
growth, the business environment is getting tougher,” it
added. Added capacity in the market, increased competition
and continued high jet fuel prices are putting pressure
on yields, said MAS. Its local peer AirAsia, Southeast Asia’s
biggest budget airline by passenger traffic, posted a 39.23
percent fall in first-quarter profits on May 22, hurt mainly
by higher finance costs and a foreign exchange loss on
borrowings. Shares in MAS are up about 21.2 percent so
far this year, outperformed by an increase of around 14.6
percent for local peer AirAsia. MAS possesses a forward
12 month price-to-earnings ratio (PER) of 70.1 times, the
highest forward PER among 85 airlines companies in the
world, according to StarMine.
Source: Reuters, May 29, 2013
Nazir Razak, Group CEO, CIMB Group
POOR & UNPREDICTABLE IR STRATEGYGlenealy 174MAs 145BursaMalaysia 123
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24 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA INSTITUTIONAL INVESTOR CORPORATE AWARDS
MOST ORGANISED INVESTOR RELATIONSBdO 186Megaworld 167sMIC 156
BEST SENIOR MANAGEMENT IR SUPPORTsMIC 192Megaworld 156BdO 124
STRONGEST ADHERENCE TO CORPORATE GOVERNANCEAyala Corp 189sMIC 178Megaworld 153
MOST CONSISTENT DIVIDEND POLICYPLdT 156san Miguel 127Globe 118
BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYsan Miguel Corp 167Ayala Corp 156sMIC 153
BEST CFO IN THE PHILIPPINESJose sio, CFO, sM Investment Corp
BEST ANNUAL REPORT IN THE PHILIPPINESAyala Corp
PHILIPPINESPHILEX ASKED TO PAY OVER P6.4-B FOR TAILINGS DISCHARGE
State-run National Power Corp. (NAPOCOR) is asking Philex
Mining Corp. to pay for the damages caused by the miner’s
accidental discharge on its tailings pond in Padcal mine,
Benguet province last year. In a disclosure to the stock
exchange, the country’s largest gold producer acknowledged
NAPOCOR is demanding Philex Mining to remove 13.5
million cubic meters of mine wastes from the reservoir or
pay its equivalent of US$151 million. NAPOCOR also asked
Philex to pay for opportunity losses of US$145 million)
annually, while mine wastes are not yet removed from the
reservoir. Philex however said, it cannot take the NAPOCOR
demand letter seriously due to lack of legal and factual
basis for its demands. It requested NAPOCOR to substantiate
its claims and provide supporting documents as needed. In
August 2012, Philex Mining confirmed four leaks in its Padcal
tailings pond due to unfavorable weather. Mine sediments
from the tailings pond No. 3 of Philex’s Padcal mine flowed
into the Balog Creek and the Agno River, which is connected
to the San Roque Dam in Pangasinan. Philex Mining was
slapped with over a US$23 million fine, which it paid in full
last February. It contested the fines arguing force majeure,
but the miner’s appeals were denied. Apart from the US$23
million fine for violating the Philippine Mining Act of 1995,
Philex is facing other fines for polluting Balog creek and
Agno River, and violating the Clean Water Act. Philex has a
pending request to the MGB to allow the resumption of its
temporary operations in Padcal to ensure the stability of the
tailings dam.
Source: Reuters, May 29, 2013
Jose Sio, CFO, SM Investment Corp
POOR & UNPREDICTABLE IR STRATEGYPhilex 145Melco Crown (Philippines) Resorts Corp 118Eton Properties Inc. 108
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26 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA INSTITUTIONAL INVESTOR CORPORATE AWARDS
MOST ORGANISED INVESTOR RELATIONSCapitaland 172sT Engineering 167singTel 156
BEST SENIOR MANAGEMENT IR SUPPORTsingTel 146Capitaland 135sT Engineering 123
STRONGEST ADHERENCE TO CORPORATE GOVERNANCEsingTel 194Capitaland 176Keppel Corp 154
MOST CONSISTENT DIVIDEND POLICYsingTel 167dBs Bank 156OCBC 148
BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYCapitaland 157singTel 137dBs 128
BEST CFO IN SINGAPOREFang Xie, heather, Global Logistics Property
BEST ANNUAL REPORT IN SINGAPOREKeppel Corp
SINGAPOREOLAM SURVIVES AS SHORT-SELLER BLOCK PROVES INVESTORS’ FRIENDBy MIChELLE yuN
Short-seller Carson Block’s charge that Olam (OLAM)
International Ltd. will fail, his first attack on a Singapore
company, is a victory for shareholders after it made the
commodity trader more responsive to investors. “We have
listened to our fiercest critics as well as our most ardent
advocates,” Olam Chief Executive Officer Sunny Verghese said
[in late May] at the company’s annual business review, its first
since Block questioned Olam’s finances in November. Sunny
Verghese, chief executive officer of Olam International Ltd.,
said [the current] annual strategic review has “taken on a
sense of urgency with regard to all the recent developments
surrounding Olam.” Olam will slash capital spending by around
US$808 million from fiscal 2014 to 2016 and sell assets to
reduce debt, the world’s second-largest rice trader said at the
review. The company also dropped its $1 billion earnings target
for 2016. In the five months since Block and his Muddy Waters
LLC questioned Olam’s accounts, the commodity trader has
raised $712.5 million selling bonds, scrapped a sugar deal and
sold almond orchards to boost cash. The company also won
increased backing from Temasek Holdings Pte, Singapore’s
state investment firm, which now holds 24 percent of Olam,
buoying shareholder confidence. Block first revealed he was
betting against the stock on Nov. 19. “While Olam slowing
its spending could be viewed as a tacit admission that we
were correct, we believe the change is too little, too late to
save this company - particularly given its massive debt load,”
Muddy Waters said in an e-mail on April 25, 2013. Olam shares
-- pushed as low as S$1.395 after Block’s allegations -- have
rebounded in Singapore trading. They closed unchanged at
S$1.67, before the announcement was made, compared with
S$1.74 before Block’s first assault.
Source: Bloomberg, April 25, 2013
Chua Sock Koong, CEO, SingTel
POOR & UNPREDICTABLE IR STRATEGYOlam International 287Wilmar International 229Golden Agri Resources 188
28 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA INSTITUTIONAL INVESTOR CORPORATE AWARDS
MOST ORGANISED INVESTOR RELATIONSPTTEP 183sCG 136Thai Bev 126
BEST SENIOR MANAGEMENT IR SUPPORTPTT 176Thai Bev 168TAC 135
STRONGEST ADHERENCE TO CORPORATE GOVERNANCEThai Oil 158sCG 147Thai Bev 137
MOST CONSISTENT DIVIDEND POLICYPTT 178TAC 158sCG 147
BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYPTT 193PTTEP 128Thai Oil 111
BEST CFO IN THAILANDsurong Bulakul, Chief Financial Officer, PTT
BEST ANNUAL REPORT IN THAILAND;Thai union Frozen
THAILANDTHAILAND STOCK EXCHANGE TO PROBE SIAM MAKRO TRADESBy suTTINEE yuvEJWATTANA
Thailand’s stock exchange will investigate trading that
preceded the announcement of the nation’s largest takeover
bid, the purchase of discount wholesaler Siam Makro Pcl
(MAKRO) by 7-Eleven chain operator CP All Pcl. (CPALL)
Siam Makro’s shares rose 30 percent in the six trading
sessions before CP All’s US$6.6 billion bid was announced.
The stock jumped 15 percent on April 17, while the volume
of shares traded rose to 1.6 million, almost four times the
six-month average. CP All, backed by Thai Billionaire Dhanin
Chearavanont, offered to buy Siam Makro for US$26 (THB
787 baht) a share on April 23. “It’s our job to investigate
any irregularities,” Charamporn Jotikasthira, president of
the Stock Exchange of Thailand, said in an interview on
April 25,2013. “We have seen it and begun the process
to investigate that.” Korsak Chairasmisak, chief executive
officer of CP All, and Suchada Ithijarukul, CEO of Siam Makro,
weren’t immediately available for comment after calls to
their offices. The deal would be the largest on record for a
Thai company and the biggest takeover announced in Asia
this year, data compiled by Bloomberg show. CP All’s offer
is 41 percent above Siam Makro’s average price in the prior
20 days, a record premium for a retail deal in emerging Asia,
according to data compiled by Bloomberg.
Source: Bloomberg, April 25, 2013
Surong Bulakul, Chief Financial Officer, PTT
POOR & UNPREDICTABLE IR STRATEGYCP All 175Toyo Thai 126G steel 121
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ME.pdf 1 4/5/13 12:51 PM
30 June 2013 | Alpha Southeast Asia
FEATURE STORY
Foreword
When reflecting on the results from this year’s International
Business Report (IBR), one has to take into account the major
political and economic events that have dominated the
global agenda over the past twelve months.
With the on-going eurozone negotiations, the US ‘fiscal
cliff ’, the continuing Arab Spring and the various domestic
elections, including those in France, the US, India and Japan,
it is understandable that many business leaders surveyed
remain cautious about their current and future commitment
to M&A.
However, what is encouraging from this year’s results
is the increased appetite of companies for cross-border
acquisitions, which is at its highest level since the IBR first
asked this question in 2008.
This trend underlines that this domain, previously
dominated by large corporates, is progressively becoming
a focus area for businesses of all sizes, whether they are
acquiring or indeed looking to source potential acquirers for
their own business.
Accessing global customers, relationships and new
markets may well now be the most important strategic tool
for companies seeking to grow, especially as many continue
to experience either limited growth domestically or are
operating in a highly competitive saturated domestic market.
As dynamic businesses look to M&A within their own
borders or across the globe, Grant Thornton’s M&A experts
across the global organisation of more than 110 member firms
have the experience and expertise to assist business owners
and management teams in achieving their strategic goals.
The riSe oF The croSS-borderTrAnSAcTionGrant thornton InternatIonal BusIness report 2013
2013 M&A reporTcroSS-border deAlS SeT To riSe
Whilst domestic acquisitions remain the focus of acquisitive
growth for many businesses (84%), the desire to make a cross-
border acquisition is becoming increasingly prominent. The
global expectation that cross-border M&A will drive acquisitive
growth has increased by 56% since 2008 and 18% in the last
year alone.
Whilst overall the survey results indicate that some businesses
may be holding back on committing to acquisitions in the next
three years, there is no doubt that many of those that will be
considering an acquisition will be looking overseas to facilitate
their growth.
regionAl highlighTS
norTh AMericA
North American interest in growing through a domestic
acquisition remains healthy with 88% expecting a domestic deal.
However, what is fascinating is the escalation of the interest
in cross-border acquisitions. Over the past four years, both US
(56% increase) and Canadian (67% increase) respondents have
shown a considerable rise in the expectation that cross-border
acquisitions will underpin their acquisitive growth.
europe
There is less emphasis on the importance of domestic acquisitions
to drive acquisitive growth amongst European businesses (71%),
as companies from this region continue to show an increasing
desire to drive growth through a cross- border acquisition (44%).
Spain (61%) is the country where businesses are most fervent
Alpha Southeast Asia | June 2013 31
M&A AcTiviTyThe results of the survey show that 28% of businesses across
the globe expect to be participating in M&A activity in the
next three years. Whilst a decrease in comparison to 2012,
the results remain above those at the depths of the global
down-turn in 2010.
It appears that with many key global and regional
economic issues still to be resolved, there is a more subdued
outlook for global M&A activity compared to the apparent
optimism shown last year.
about future cross-border M&A activity whilst, in contrast,
German businesses have increased their support for domestic
acquisitions (11% year on year increase). UK and Irish companies
remain focussed on domestic acquisitive growth (84%) but with
33% effecting their M&A activity to be cross-border, UK and Irish
corporates remain keen global acquirers.
bric
BRIC countries (87%) continue to place significant importance
on making acquisitions within their own borders with China
(90%) leading that trend. However, the BRIC region’s mid- market
respondents are now showing a greater interest in overseas
acquisitive growth with an increase of 20% year on year.
The year on year increase in appetite for cross-border
acquisitions from countries such as Russia (increase of 117%)
and China (81% increase), emphasises the development and
growing financial strength of mid-market companies within
these countries that now have the ability and interest in sourcing
growth internationally.
ASiA pAciFic
The results from India (59% increase) illustrate that the recent
economic slowdown and political and economic issues still to
be resolved appear to be impacting on where businesses seek
acquisitions with a greater focus on overseas opportunities.
Japanese respondents’ 50% increase in interest in cross-
border acquisitive growth coupled with their high expectation
of acquisitive growth being made through domestic acquisitions
(91%) only further indicates how important acquisitions are to
Mature Markets IncreasIngly lookIng overseasPrecentage of busIness PlannIng a Merger or acquIsItIon over the next three years Japanese businesses seeking to grow.
Singapore (86%) and the UAE (66%) are two of the countries
most interested in growing through cross- border acquisition.
Australian respondents (94%; an increase year on year of 25%)
show the most support for domestic targets as the focus of their
acquisition strategy.
Interest In M&a actIvItyPercentage of busIness PlannIng to grow through acquIsItIon over the next three years
“Although not at pre-crisis level, private german companies continue to generate a decent level of profits. with significant cash resources behind them we are optimistic for an increase in M&A activity in 2013.”
Kai Bartels, Grant thornton Germany
32 June 2013 | Alpha Southeast Asia
FEATURE STORY
exiT percepTionSBusiness owners are often reticent about disclosing their
long term ownership plans. This year’s results illustrate this
once more with globally only 8% of businesses stating that
they foresee an exit over the next three years, the lowest
level since 2008.
This decrease indicates a reaction to a turbulent 2012 and
maybe a reflection of business owner’s views that they may
not be able to attract the level of interest or price acceptable
to them.
regionAl highlighTS
europe
Owners of UK and Irish businesses (12%) remain some of the
FinAncing growThWhilst M&A remains a key growth strategy, the ability to
finance such growth in the current financing market is
potentially impacting on respondents’ views on the likelihood
of transacting in the short term.
When asked how they expect to finance their growth
strategies, it is notable that bank finance slipped to 48% of
respondents from 53% last year. On the contrary, the IPO
funding option increased by 40% year on year with Polish
respondents showing the greatest appetite for raising money
through the public market (28%). As the private equity (PE)
market continues to expand globally, it is notable to see
Brazilian business the most expectant to raise PE funds (47%)
to fund their growth, which is unsurprising considering the
increasing number of PE firms now present in South America.
AcquiSiTion rATionAleThe most likely reason for engaging in M&A remains similar
year to year. Accessing geographical markets (65%) remains the
main motivation to participate in M&A and this has increased
in importance this year. French respondents (77%) put the most
emphasis on using M&A to access new markets. This further
illustrates that for well managed and funded businesses M&A
remains the quickest and most effective way to gain a footprint
and build scale in new geographies.
regionAl highlighTS
norTh AMericA
Businesses in Canada and the US continue to be as keen
on M&A as they were last year with this region remaining
the most supportive of M&A activity. 37% of respondents
expect to grow through acquisition in the next three years.
europe
European companies continue to be less enthusiastic about
M&A than their North American counterparts, although
there remains a strong expectation for M&A activity to
facilitate growth in the Netherlands (55%) and France (31%),
whilst notably German, UK and Irish respondents say they
are less likely to undertake in M&A.
bric
The BRIC region’s respondents have historically been the
most enthusiastic when forecasting future M&A activity.
However, over the past two years, that desire appears to have
been stifled by global economic events and their responses
are now more aligned with the rest of the world (27%).
reST oF The world
From the developing and high growth markets, it is Latin
American businesses that have the highest expectations of
their future growth being driven by M&A (31%).
Noticeably it is Australian respondents whose opinions
have been impacted the least by recent global events, with
their survey results remaining relatively consistent over the
past three years (28%).
“with the government now demonstrating policy initiatives and addressing some of the foreign investment deterrents, there are expectations of an increase in M&A activity in 2013, with private equity exits and investments at the forefront.”
Munesh Khanna, Grant thornton InDIa
Alpha Southeast Asia | June 2013 33
SuMMAryWith a turbulent 2012 behind us in which significant political
and economic decisions were made and with many key decisions
and policies to be set in 2013, not least in the US, Europe, India
and Japan, it is unsurprising that businesses are cautious.
However, across the world M&A remains a key strategic
tool to drive growth and build scale. The marked increase
in prominence and importance of cross-border M&A to
business owners illustrates that accessing global markets and
opportunities is now more than ever a vital growth strategy.
At Grant Thornton, we have the global advisory capability,
expertise and reach to provide insightful global advice and
support to domestic and international businesses seeking to
expand their operations organically or through acquisition.
most open and upbeat about the potential to sell their business.
Respondents from countries across mainland Europe
(8%) are generally less forthcoming or expectant to sell
their business in the next three years. However French
business owners showed an increased interest and are 25%
more likely to sell in the next three years compared to last
year. Interestingly it is business owners in the Netherlands
(14%) and Finland (26%) who are amongst the most positive
regarding a future sale of their business.
reST oF The world
Globally the trend is very similar with many respondents
not showing an inclination to sell, though those from Brazil
(19%) and South Africa (15%) expressed a far greater interest
than the rest of the world.
exiT rouTe
Selling to a competitor is the most likely exit route for
businesses in the current climate. Whilst 44% of UK businesses
expect to sell to a trade buyer, South African businesses
(35%) see their most likely exit route being to management,
35% of Canadian firms expect to hand over their business to
family and, to further underline the investment made by PE
firms in South America, 40% of Brazilian companies expect
to exit via private equity.
uk & Ireland business most likely yo sellPercentage of business foreseeing a change of ownership in the business over the next three years
The Grant Thornton International Business Report (IBR) is
a quarterly survey of 3,500 senior executives in listed and
privately-held businesses all over the world. Launched in
1992 in nine European countries the report now surveys
13,000 businesses leaders in 44 economies on an annual
basis providing insights on the economic and commercial
issues affecting companies globally.
The data in this report are drawn from 12,156 interviews with
business leaders conducted between January and December
2012.
To find out more about IBR and to obtain copies of reports
and summaries visit: www.internationalbusinessreport.com.
argentinaarmeniaaustraliabelgiumbotswanabrazilcanadachilechina (mainland)Denmarkestoniafinlandfrancegeorgiagermany
greece hong kong India Ireland ItalyJapan latvialithuaniaMalaysiaMexiconetherlandsnew ZealandnorwayPeruPhilippines
Polandrussiasingaporesouth africaspainswedenswitzerlandtaiwanthailandturkeyunited arab emiratesunited kingdomunited statesvietnam
participating economies
34 June 2013 | Alpha Southeast Asia
VN INdex dropped 3.3% oN low lIquIdItyThe VN Index (in US$ terms) dropped by
3.3% and closed April at 474. Average
daily liquidity in April was US$58m,
similar to the previous month. Foreign
net buying declined from US$50m in
March to US$16m in April. Diversified
Financials was the hardest hit and
was down 11.7%, led by Petro Vietnam
Finance (PVF), which dropped 19%.
Banking declined 7.2% with a wide
range of performance within the sector
from -14% to +4% whilst Real Estate
maintained its losing streak and dropped
5.2%. On the upside, F&B continued its
positive run thanks to Vinamilk’s (VNM)
increase by 6.9%.
locAl INVeStorS took A ‘wAIt ANd See’ StANce whIle the mArket wAS led dowN by profIt tAkINgWith both the mid-term Central
Committee Party and the National
Assembly meetings scheduled for May,
local investors took a ‘wait and see’
stance. Meanwhile the market was led
down by ETFs who took profits after
a rally for four consecutive months,
a move that was followed by local
specula- tors. By the end of the month,
most of the hot local money had exited
the market and liquidity dried up. It
may well be that part of the hot local
money was withdrawn to benefit from
the strong drop in the gold market.
A couple of SegmeNtS of the property Sector mAy be cloSe to theIr bottomIf property companies in Indonesia,
Thailand, and Malaysia after 1997 are
any guide, it will take several years
of deleveraging to allow the sector
bottoming out. We haven’t seen this
happening in Vietnam just yet. However,
we have started seeing a pick up in
activities in a few segments. In the past
two- three months, four large office /
hotel transactions occurred in Ho Chi
Minh City at good prices. In addition,
some good residential projects are
starting to see improving turnover and
stabilising prices whereas six-nine
months ago prices were still declining
and turnover was absent. Two segments
of the property market may be close
to their bottom: 1) good quality office
buildings in prime locations and 2)
residential buildings in good locations
developed by well-known players. Last
but not least, it is comforting that the
banks’ 1Q2013 reports indicate that
performance has not been worsening
any further. These brighter signals give
rise to hope that these related sectors
which have suffered more than any other
sector are close to forming a bottom.
hSbc pmI coNtINued to INcreASe IN AprIl to the hIgheSt leVel IN two yeArS, INdIcAtINg thAt recoVery hAS become more SuStAINAbleHSBC’s Vietnam Manufacturing
Purchasing Managers’ Index (PMI)
continued to increase from 50.8 in March
to 51.0 in April, the highest in two years. A
level above 50 indicates an expansionary
economy. The PMI was boosted by faster
growth of new orders and employment
and a further expansion of production
volumes. The new orders increased from
51.4 to 51.8, driven by local demand as
the New Export Order Index marginally
declined to 50.1, reflecting competitive
and subdued global market conditions.
The PMI was boosted by faster growth
of new orders and employment and
VIetNAm INVeStmeNt updAte
34 June 2013 | Alpha Southeast Asia Alpha Southeast Asia | June 2013 35
a further expansion of production
volumes. The new orders increased from
51.4 to 51.8, driven by local demand as
the New Export Order Index marginally
declined to 50.1, reflecting competitive
and subdued global market conditions.
Mean- while, manufacturing employment
continued to improve considerably
for the second month in a row. This is
an important signal as it reflects that
firms are more confident about the
future. Furthermore, the April data also
indicated that inventory has declined for
the sixth straight month. Together with
increased new orders, this indicates that
the cycle of inventory reduction is about
to finish and that we are about to enter
a cycle of new production. In summary,
the April PMI supports our belief that the
recovery has become more sustainable.
VIetcombANk took the leAd to cut depoSIt rAteS. effectIVe leNdINg rAteS wIll coNtINue to fAll to StImulAte credIt growthThe Government hinted that lending
rates will have to be low- ered further in
future to support the economy. In order
to allow lowering its lending rates and
boost credit growth, Vietcombank (VCB)
took the lead, ahead of the hinted lower
pol- icy rates, to cut all its deposit rates:
one month from 7.5% to 6%, six months
from 7.5% to 7% and twelve months from
9% to 8%. The move reflects the excessive
liquidity in the banking system and is
an indicator for the impending interest
rate race between banks. Total deposits
grew 5.3% YTD, triple the growth in same
period of 2012, while credit growth was
estimated at only 2.1%. At some point,
this excessive liquidity will lead to lower
lending rates. We already have seen that
good companies can borrow at 9%, but
many others still have to borrow at 14-
17%. This is why our estimate for the
average lending rate remains at 14%,
implying there is still a quite some way
to go before reaching 9-11%, which was
the norm between 1997 and 2007.
credIt growth IS expected to Slowly pIck up. polIcy rAteS mAy be cut by 100-200 bpS IN
Next SIx moNthSVND deposit rates are still around 5%
higher than US$ rates. Given that inflation
is 6.6% y/y, this implies that real interest
rates remain positive. Lower deposit
rates therefore won’t pose a challenge
for the currency. Unlike deposit rates,
we expect policy rates, i.e. OMO rates
and refinance rates, to be cut by another
100-200 bps in the next six months. We
have seen that banks have been more
willing since the beginning of 2013 to
renew their existing loans at lower rates
which is helping to reduce the lending
rates faster than during 2012. Given the
negative credit growth of -0.6% from
January to April 2012, it is encouraging
to see that credit growth has bounced
back to +2.1% during the same period in
2013. If the Vietnam Asset Management
Company (V-AMC) comes into operation
in 3Q2013, we are confident that credit
growth will finally increase to healthy
levels again. Chances for this occurring
are good as lending rates are expected
to fall further and business conditions
are expected to improve.
DRAGON CAPITAL VIETNAM INVESTMENT UPDATE - JUNE 2013
“If the property companies in Indonesia, thailand, and malaysia after 1997 are any guide, it will take several years of deleveraging to allow the sector bottoming out.”
36 June 2013 | Alpha Southeast Asia
FEATURE STORY
ExEcutivE SummAry
The use of quantitative strategies by Asian investors will
likely increase as rapid asset growth prompts institutions
throughout the region to incorporate a broader mix of asset
classes and investment strategies into their portfolios.
Although the share of Asian institutions currently using
quantitative strategies tis modest relative to the widespread
use among U.S. institutions, a new study from Greenwich
Associates suggests that Asian institutions are likely to
allocate more to quantitative strategies over time as they
seek new sources of alpha and investment approaches with
low correlations to fundamental managers.
Asian institutions are growing rapidly. As they accumulate
assets in an environment of historically low yields and
high levels of market volatility, they are venturing beyond
the local fixed income and cash investments that once
dominated their portfolios and moving into a broader range
of asset classes and investment strategies. Currently, about
a third of Asian institutions include quantitative investment
strategies in this expanding mix. This low rate of adoption
can be attributed to several factors, including a general
lack of understanding about precisely how these complex
strategies generate alpha and the role they should play in an
institutional portfolio, as well as negative perceptions about
how some quantitative managers have performed during
recent periods of extreme market volatility. Compounding
these issues for Asian investors is the fact that many
quantitative managers house their investment operations
half a world away and maintain little permanent presence
in local markets.
However, Greenwich Associates believes growing numbers
of Asian institutions will be looking for managers who can
deliver sources of diversified and consistent returns with
low correlations to their existing fundamental exposure.
When they do, quantitative investment managers who can
clearly articulate the role of their strategies in portfolios and
maintain a local presence in Asia will be strong contenders.
To assist Asian investors in this process, we completed a study
on the use of quantitative strategies among institutions
in Asia and the United States. This report presents the
results of that research, along with a set of best practices
for institutions to follow as they consider and implement
quantitative approaches. In general, those best practices
relate to two main principles for institutions to consider:
gaining a firm understanding of the process by which a
quantitative manager generates alpha, and understanding
how the quantitative fund will fit with the fundamental
strategies that make up the bulk of their portfolios.
uSES of QuAntitAtivE invEStmEnt StrAtEgiES in ASiABest Practices for asian institutions considering Quantitative aPProaches to investing
“Asian institutions are growing rapidly. As they accumulate assets in an environment of historically low yields and high levels of market volatility, they are venturing beyond the local fixed income and cash investments that once dominated their portfolios and moving into a broader range of asset classes and investment strategies.”
Alpha Southeast Asia | June 2013 37
Study PArticiPAntS
Between November and December 2012, Greenwich
Associates interviewed 44 institutional asset owners in the
United States (22) and Asia (22) to better understand their
perceptions and use of quantitative investment strategies.
Respondents included pension funds, sovereign wealth funds,
insurance companies, endowments and foundations.
KEy Study findingS
• Current low penetration Approximately one-third of
responding Asian institutions use quantitative investment
strategies, compared with 82% of U.S. institutions.
• Increasing trend Approximately 30% of Asian institutions
participating in the study that now employ quantitative
strategies expect to increase their use of these approaches
in the coming three years and none expect to reduce their
usage. Thirteen percent of Asian institutions not currently
using these strategies expect to add quantitative funds to
their portfolios for the first time.
• Investors have been generally satisfied Roughly half of
participating institutions in Asia and the United States say
they are satisfied with the performance of quantitative
funds from 2011 to 2012, 17% say returns over the
period actually exceeded expectations, and about a
third say quantitative strategy performance fell short of
expectations.
• Less understanding of quantitative strategies No Asian
institutions participating in the study claim to have a
strong understanding of quantitative models versus a third
in the United States, and about 45% of Asian investors find
quantitative strategies to be too opaque.
• Local presence is crucial All Asian users of quantitative
strategies participating in the study invest in global funds.
This practice differs markedly from the approach employed
by U.S. investors, among which more than 90% invest in
domestic funds and only 53% invest in global funds. This
global focus — and the fact that most quantitative funds
house their investment operations in Western locations
— means that Asian investors will benefit greatly from
managers that maintain the local presence required to
provide consistent and robust support.
• Investors need better servicing and stronger capabilities
Investors rate transparency and manager communication
as a top criterion in considering a quantitative manager,
second in importance only to the strength of managers’
quantitative systems and models. Generally, Asian
investors see servicing capabilities and the ability to
advise on broader investment issues as important factors
in selecting a quantitative manager.
Greenwich Associates research reveals growing interest
in quantitative strategies among Asian institutions.
Approximately one-third of Asian institutional investors
employ quantitative strategies, as compared to the more than
80% of U.S. institutions that currently include quantitative
strategies in their portfolios. That differential suggests room
for substantial growth in Asia.
Assets under management by Asian institutions have grown by
approximately 50% since 2009. Asset growth of this magnitude
requires dramatic alterations to investment strategies and asset
allocations, as well as a significant expansion of in-house staff
and capabilities. Many of these institutions are still building
out their investment strategies. Lacking hands-on experience
with quantitative strategies, many Asian institutions are for
now sticking with more familiar fundamental approaches.
However, the research results clearly suggest that once
Asian institutions gain first-hand experience with quantita-
tive strategies, they are likely to increase their allocations
to quantitative approaches relatively rapidly. Among Asian
institutions that have already started using quantitative
toP rEASonS for imPlEmEnting A QuAnt StrAtEgy1 Diversify sources of return2 Achieve higher alpha3 Lower portfolio’s correlation to markets
38 June 2013 | Alpha Southeast Asia
FEATURE STORY
investment strategies, approximately 30% plan to make more
use of these strategies in the next three years and none expect
to cut back.
Why QuAnt?
Why should Asian institutions care about quantitative strategies
— even in the wake of an especially challenging period for
many quantitative managers?
At a general level, active fundamental investors and
quantitive investors are working to achieve the same goal:
To parse information for opportunities to generate alpha.
However, the two types of managers approach this taskfrom
vastly different perspectives. Fundamental managers
generally look to outperform the market by using their own
expertise and information advantages to pick out individual
investments with the potential to generate alpha. Quantitative
managers feed sources of information into a repeatable and
consistently applied process designed to create alpha from a
broad portfolio of holdings.
These differences make quantitative strategies
complementary to fundamental approaches. Quantitative
strategies have low correlations with fundamental strategies,
When thinking about institutional use of quantitative
strategies in Asia or any other market, it is important
to bear in mind that quantitative strategies are not a
monolithic set of techniques. To the contrary, the term
“quantitative strategies” is a general label applied to a
broad and dynamic set of approaches that apply rigorous
and systematic analysis to investing. Quantitative
investors use multiple sources of information to
design consistently applied investment processes
to manage portfolios with typically greater breadth
than fundamental strategies. Many
quantitative managers’ approaches
are differentiated from so-called
“black box” strategies by the fact
that investment teams have the
ability to intervene to allocate risk
dynamically if market conditions call
for it, as opposed to implementing purely model-driven
processes. Quantitative investing can take the form of
long- only and hedge fund strategies, and spans multiple
asset classes and geographies.
Grouped under the “quantitative” umbrella are a diverse
array of individual strategies. For example, long-only funds
use value, momentum and earnings strategies, while for
hedge funds, typical quantitative strategies include equity
market neutral, event driven, systemic macro, correlation,
and short- term strategies as well as other technical
strategies and more esoteric approaches like volatility
arbitrage. These strategies vary significantly in underlying
methodologies, correlation levels, volatility measures, and
performance histories.
In fact, the universe of quantitative strategies is much
more diverse today than it was just five to 10 years ago.
In the past, quantitative strategies’ main distinguishing
characteristic was their rigorous, risk-controlled
methodology. While that methodology
remains in place, quantitative managers
are pushing into new sources of
return, such as emerging markets, and
employing new strategies and more
complex and increasingly unstructured
information sources. For example,
some managers have been able to leverage technology
and their own research skill to generate opportunities by
processing regulatory filings, conference call transcripts,
analyst reports and other textual sources of information
with the aim of gauging broker sentiment and measuring
management confidence.
Nevertheless, virtually all quantitative strategies
continue to share some important characteristic
dEfining QuAnt
“Quantitative investing can take the form of long- only and hedge fund strategies, and spans multiple asset classes and geographies.”
Alpha Southeast Asia | June 2013 39
in part because the two approaches use different sources of
alpha. In fact, since the 2007–2009 period of deleveraging,
quantitative managers have focused on taking advantage of
innovations in technology and increased access to data in
order to produce unique and uncorrelated sources of excess
returns. For example, quantitative managers are now able to
employ natural language processing to analyze huge volumes
of information and harness “unstructured” information sources
that until recently were inaccessible to investors and remain
largely untapped by fundamental investors. The addition of
quantitative funds that leverage these and other new sources
of alpha can increase portfolio diversification.
In addition to diversification, quantitative strategies offer
investors the potential for consistent returns. Quantitative
models are designed to apply their investment process and
risk controls systematically and regularly over the course of
the market cycle. Because the investment model and risk
controls are independent of both managers’ personal views
and the macro factors that drive fundamental strategies,
returns should be relatively consistent throughout the cycle
— even in volatile markets.
it’S thE QuAlity (of rEturnS) thAt countS
Despite general perceptions that quantitative strategies have
failed to live up to their potential during recent periods of
extreme market volatility, roughly half of
Asian institutions participating in the study say they are
satisfied with quantitative performance from 2011–2012
and 17% say returns over the period actually exceeded
expectations. About a third of study participants do say
quantitative strategy performance fell short of expectations
over the period. Some investors’ disappointment with
their quantitative investments could be explained by past
beliefs about quantitative strategy correlation levels,
which proved to be much higher than expected during the
2007–2009 period. Over a 10-year period, large cap long-
only U.S. fund managers pursuing quantitative strategies
marginally outperformed fundamental managers, according
to eVestment Alliance data. However, rolling 36-month
correlations of quantitative and fundamental returns
strengthened to as high as 0.80 just prior to 2007, before
dropping to where they are today, around 0.20.
In many cases, those early expectations were inflated by
eager managers who marketed their products as “all-weather”
strategies capable of delivering strong performance regardless
of external market conditions. As a result, many institutions
were likely disappointed by performance during a recent
period that proved to be the most challenging in history for
quantitative strategies.
As the representative of one Japanese pension fund explained:
“We had expected stable performance from our quantitative
investments even in volatile markets, but it did not happen after
[the] Lehman shock. The future of quantitative investment depends
on asset managers’ efforts to improve their models.”
For investors, the main lesson from the 2007–2009 period
of severe underperformance among quantitative strategies
is to find managers who are ahead of the game in terms of
designing strategies that avoid crowded trades and who are
vigilant in monitoring the efficacy of quantitative factors.
In this regard, investors may consider asking prospective
quantitative managers: What insights do you have into
what other quantitative investors are doing? Managers with
robust and sophisticated analytics processes and systems
can report accurate, up-to-date and detailed risk positions
and information ratios for each factor in their quantitative
models. Investors should seek managers who are willing to
share those risk and information ratio statistics and interpret
them for clients.
“compounding these issues for Asian investors is the fact that many quantitative managers house their investment operations half a world away and maintain little permanent presence in local markets.”
40 June 2013 | Alpha Southeast Asia
FEATURE STORY
Risk-adjusted returns are the most popular method of
measuring quantitative strategy performance among Asian
institutions. However, because so many institutions invest in
quantitative strategies not just for the return potential, but also
for the benefits these strategies can provide at the portfolio-
wide level, a more useful measure might be “quality of returns,”
a broader metric which would include not only risk-adjusted
returns but also consistency of returns/volatility levels and
correlation levels/portfolio diversification benefits.
A representative of an Asian sovereign wealth fund provided
a concise definition of the type of high-quality returns
institutions should be seeking from quantitative managers:
“We are looking for consistency of performance, the ability to
protect the performance during the sharp downturn, and how well
the model is developed.”
PrEPAring to BooSt QuAnt AllocAtionS: focuS
on undErStAnding of invEStmEnt ProcESSES
And Portfolio fit
The one factor that can truly differentiate quantitative
managers today is continuous dedication to research,
combined with the ability to process and react effectively
to new information. The quantitative investing industry has
evolved beyond its early days of boutique fund houses with a
few managers. Quantitative investing has become more about
processes. Significant scale and resources are now required to
research innovative signals, process large and complex data
sets and draw unique connections that can produce alpha in a
competitive market.
For investors with limited exposure to quantitative
strategies, the research and investment processes can seem
daunting. Investors in quantitative funds rarely receive access
to the specific signals used in manager trading models, and
even in cases in which investors do receive such information,
most institutions lack the technology infrastructure required
to test them.
Not a single Asian institution participating in the study
claims to have a strong understanding of quantitative models.
About 45% of the investors find quantitative strategies to be
too opaque. Although few institutions say they see quantitative
strategies as entirely “black box” strategies, a solid majority of
institutions (64%) say they would like their managers to better
explain their quantitative strategies. Reflecting that desire,
these investors rate transparency and manager communication
as a top criterion in considering a quantitative manager, second
in importance only to the strength of managers’ quantitative
systems and models.
These findings reflect the fact that gaining a full
understanding of how a manager creates alpha is becoming
increasingly important as signals become more diffuse and
many financial markets remain correlated with each other.
As such, when conducting due diligence on quantitative
managers, institutions should be clear in their understanding
of the investment approach and models used by the manager.
While some aspects of a manager’s investment process will
remain proprietary, institutions should demand that managers
provide transparency with regard to their processes and help
the investor understand how the strategy works. Although
some quantitative managers still keep portfolio holdings
secret, other firms have moved to provide significant amounts
of portfolio transparency.
It is critical that institutions develop a disciplined due
diligence process that looks beyond past performance. The
standard due diligence involves investigating the ability of a
“Among Asian institutions that have already started using quantitative investment strategies, approximately 30% plan to make more use of these strategies in the next three years and none expect to cut back.”
“roughly half of participating institutions in Asia and the united States say they are satisfied with the performance of quantitative funds.”
Alpha Southeast Asia | June 2013 41
manager’s investment platform and firm infrastructure to deliver
consistent, high-quality returns. In addition, investors should
ask quantitative managers detailed questions about how the
manager creates alpha. For example, what kind of resources does
a fund dedicate specifically for research? How does the manager
leverage technology to filter and identify opportunities?
How many data feeds does a manager use? Access to data
can be crucial for quantitative investing, especially strategies
focused on fixed income, which is traded over- the-counter as
opposed to on an exchange, where data is readily available.
When considering a quantitative investment, institutions
should look closely at a manager’s track record in providing
detailed strategy explanations as well as overall education and
ongoing support to their clients. Upon completing due diligence,
investors should feel they have a complete understanding of
the process by which a strategy generates alpha and how the
strategy will interact with the overall portfolio. Quantitative
managers who provide prospective investors with little more
than a deluge of data that the institution cannot understand
or process signal the likelihood of insufficient communication
throughout the future relationship. Investors should seek
managers who are willing and equipped to provide the time
and support needed to explain their investment process and
the role their strategy can play within the portfolio.
locAl SuPPort iS A muSt
In the United States and other developed markets, institutions
rely on investment consultants for education about how
quantitative and other innovative investment strategies work
and for advice about the role new strategies should play
in an institutional portfolio. In the United States, more than
75% of institutions rely on consultant relationships for advice
on investment matters. Asian institutions, on the other hand,
typically rely on in-house capabilities, with only about 25–30%
of institutions using external investment consultants. Based on
those factors,
it comes as no surprise that Asian institutions focus more
than their U.S. counterparts on quantitative managers’
servicing capabilities. Less than half of U.S. institutions rate
servicing capabilities as “important” or “very important” criteria
in selecting a manager.
By contrast, three-quarters of Asian institutions rate manager
servicing capabilities as “important” or “very important.”
Contributing to this difference is the fact that Asian institu-
tions are much more likely than U.S. investors to invest in global
funds. Among the institutions in this study, all Asian users of
quantitative strategies invest in global funds, 57% invest in
Asian funds and 42% invest in emerging markets funds. All
Asian users also employ quantitative strategies in equities and
43% use them in fixed income.
To that end, one of the top priorities for institutions moving
into this space should be ensuring that they access managers
with a proven history of providing clients with strong support
and high levels of ongoing interaction and education about
how these strategies work and the role they should play in an
institutional portfolio.
Because of the many unique characteristics of the Asian
marketplace, a manager’s ability to provide consistent, high-
quality coverage and support should receive extra consideration
as an important manager selection criterion.
Although the deployment of product specialists and other
investment professionals based in Asia puts a manager ahead
of competitors, even a local presence does not guarantee
the level of service institutions should be seeking for such
complex strategies. Rather, Asian institutions should focus
on finding managers who have moved beyond the model of
“in addition to diversification, quantitative strategies offer investors the potential for consistent returns.”
“Among the institutions in this study, all Asian users of quantitative strategies invest in global funds, 57% invest in Asian funds and 42% invest in emerging markets funds.”
42 June 2013 | Alpha Southeast Asia
FEATURE STORY
selling proprietary quantitative products, and instead embrace
the notion of partnership, in which the manager works to
understand the needs of its investors and help them achieve
their objectives at a portfolio-wide level. The key is to find
managers who see it as part of their responsibility to have
real conversations with investors in which they listen to the
needs of the institutions, explain in detail their own investment
philosophy, process and source of alpha, and then work with
the investors to determine the proper role for the strategy
within the portfolio.
concluSion
Quantitative strategies will increase in popularity across
Asia as rapid asset growth prompts institutions throughout
the region to incorporate a broader mix of asset classes and
investment strategies into their portfolios. Although the
number of Asian institutions currently using quantitative
strategies is modest relative to the near-universal use
among U.S. institutions, Greenwich Associates research
shows that Asian investors who obtain first-hand experience
with quantitative funds are quite likely to increase their
allocations to the strategy in subsequent years. Among
the benefits attracting these institutions is portfolio
diversification resulting from low correlation levels between
quantitative approaches and the fundamental strategies
that make up the bulk of institutional assets, as well as the
potential for low volatility levels and consistent returns
throughout the market cycle.
In order for institutions to realize those benefits, however,
they must pick the right strategies and managers. The complex
and often proprietary investment models employed by
quantitative funds make manager
selection and due diligence a difficult task for any investor.
Compounding that challenge is the fact that increasing
competition among a fast-growing universe of quantitative
funds makes it increasingly difficult for managers to find and
exploit opportunities to create alpha. As a result of these
factors, it is imperative that institutions contemplating an
investment in a quantitative fund first gain a full understanding
of the manager’s investment philosophy, investment process
and source of alpha, and how that strategy will fit into the
institutions’ broad investment portfolio. As they learn more
about the different approaches employed by quantitative
managers, investors should focus on innovative firms whose
investment processes create a real competitive advantage and
truly diversify the institutions’ sources of return.
mEthodology
Greenwich Associates conducted phone interviews with
institutional asset owners including pension funds, government
agencies, endowments and foundations. Respondents were
asked to provide detailed information on their quantitative
strategies usage, application of quantitative strategies,
selection of quantitative managers and servicing needs with
respect to quantitative investing. Greenwich associates inter-
viewed 22 existing and potential quantitative institutional
investors across Asia including Japan, and 22 investors in the
United States.
The findings reported in this document reflect solely the
views reported to Greenwich Associates by the research
participants. They do not represent opinions or endorsements
by Greenwich Associates or its staff. Interviewees may be
asked about their use of and demand for financial products and
services and about investment practices in relevant financial
markets. Greenwich Associates compiles the data received,
conducts statistical analysis and reviews for presentation
purposes in order to produce the final results.
“the main lesson from the 2007–2009 period of severe underperformance among quantitative strategies is to find managers who are ahead of the game in terms of designing strategies that avoid crowded trades and who are vigilant in monitoring the efficacy of quantitative factors.”
Alpha Southeast Asia | June 2013 43
MAY 2013SOUTHEAST ASIA:
BORROWING & LENDING ROUNDUP
INDONESIAN INVESTMENT FIRM SARATOGA SEEKS UP TO US$343 MILLION IN IPO Indonesian investment holding firm
Saratoga Investama Sedaya, controlled
by tycoons Edwin Soeryadjaya and
Sandiaga Uno, aims to raise as much
as Rp 3.36 trillion (US$343 million) in
an initial public offering in June 2013.
The firm is offering 430.88 million
shares, equivalent to 15 percent of its
equity. It set an IPO price range of Rp
6,100 (US$0.62) to Rp 7,800 (US$0.80)
a share. The company is also providing
64.63 million shares for a greenshoe
option. Deutsche Bank, UBS and
Indopremier Securities are the IPO
underwriters. The listing date will be
June 28, 2013. Saratoga owns shares in
several Indonesian companies, such as
miner Adaro Energy and tower operator
Tower Bersama Infrastructure. Saratoga
has said it expects to raise more than
US$1 billion from its own IPO and that
of a unit this year reported Reuters. The
investment holding firm is also preparing
two of its subsidiaries to go public so
that they will be able to stand on their
own feet to finance their business
expansion, the company’s senior
executive has said. Power company
Medco Power Indonesia and oil refinery
firm Tri Wahana Universal should be
ready to enter the stock market within
the next two to three years, Saratoga
president director Sandiaga Uno said.
‘We will boost their performance so
that they will be prepared in terms of
governance, finance and size for the
stock market,’ he said.
ALL EYES ON HOW SPH WILL DEPLOY PROPOSED REIT PROCEEDSShares in Singapore Press Holdings
(SPH) rose 8 cents (US$0.63) as the
media and property group moved a
step closer to listing its mall assets,
but questions remained about how
the company will deploy an expected
US$757 million in cash following the
deal. ‘Ultimately it will depend on
what they do with the proceeds,’ DMG
& Partners analyst Joshua Low said.
The stock of SPH gained 1.8 per cent
to close at US$4.47 after the company
announced that it planned to pay
out 18 cents per share in a special
dividend after spinning off its malls
into a listed real estate investment
trust (Reit). The Reit is targeted to
be launched through an expected
US$540 million initial public offering
in July 2013. SPH, which could retain
a 70 per cent stake in the Reit and
collect fees as the manager, expects
to receive about US$1 billion in net
cash proceeds, of which about US$291
million will be paid out through the
special dividend. That would leave
US$757 million for working capital and
reinvestment in ‘growth strategies’
reported Singaporean Business Times.
EPF TO LET RHBCAP AND MBSB DECIDE ON MERGER PLANSThe Employees Provident Fund (EPF)
will let RHB Capital and Malaysia
Building Society (MBSB) decide on
merger plans. The EPF holds a 44.84
per cent stake in RHBCap and a 65.5
per cent stake in MBSB, a non-bank
lender to civil servants. ‘We will wait
for the two companies to decide what
they want to do and there will be a
few announcements to be made,’
EPF chief executive officer, Shahril
Ridza Ridzuan told a media briefing in
Singapore. ‘The fact that EPF is a big
shareholder in RHBCap and MBSB tends
to let people draw an assumption that
we are going to do something about
the two, but this is not necessarily the
case,’ he said. The merger plan should
take into account current strategies
of the two businesses, the business
UBS
Morgan Stanley
Phatra Securities
JP Morgan
CIMB Group
20 Others
3.9 Billion
1.5 Billion
1.3 Billion
1.3 Billion
1.1 Billion
7.4 Billion
USD
USD
USD
USD
USD
USD
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
44 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA: BORROWING & LENDING ROUNDUP
model and future in finance industry.
MBSB for instance, is already on the
path towards becoming a bank and
has invested in a core banking system,
while in constant contact with the
authorities on this issue. ‘There will
be a case of MBSB just continuing to
transform into a banking platform on
its own or maybe go through a merger
and acquisition, if it makes sense,’ he
said. The talk that RHBCap is eyeing
MBSB has been ongoing for about a
year reported StarBiz.
MALAYSIA LEADS THE WAY IN BASEL III DEBT
Malaysia is poised to host Asia’s first
public issue of loss-absorbing bank
debt, so-called bail-in bonds, since the
region began the transition to Basel III
standards earlier this year. CIMB Bank
has received preliminary approval
from the country’s central bank for a
subordinated ringgit bond that will
count towards its Tier 2 capital, and
may launch the deal in the next few
weeks. There is also talk that another
local lender, Public Bank, will follow
suit with a similar Basel III compliant
issue. If the deals materialise in the
coming weeks, they promise to set a
template as the first in Asia, excluding
Japan and Australia, since regulators
from India to China introduced Basel
III rules in January 2013. Under the
new, stricter capital requirements,
subordinated bonds require loss-
absorption features if they are to
count towards a bank’s capital ratios,
ensuring that holders are ‘bailed in’
through writedowns or conversion
to equity before any public funds
are used to bail out a bank. Given
their fairly well capitalised levels,
Malaysian bankers had not expected
a Basel III-compliant structure to hit
the markets so soon. CIMB, however, is
in talks to buy Philippines-based Bank
of Commerce for an estimated US$296
million, which may have hastened
its plans to raise bank capital. ‘No
bank wants to be the first, since they
will have to cough up a lot more to
compensate the investors for that
write-off feature, and there is really
no proper benchmark or comp in the
Asian markets,’ said one rival banker
reported Reuters.
EPF INVESTS MORE ABROAD, INVESTMENT ASSETS EXCEED HALF-A-TRILLION RINGGIT (US$173.4 BILLION)The Employees Provident Fund (EPF)
has invested US$1.3 billion (RM3.91
billion) more overseas in global real
estate, bonds and equities for the first
quarter ended March 31, 2013 as part
of its diversification strategy to expand
its investments abroad. The EPF said
in a statement its overseas exposure
stood at 17.55% of its total investment
cost at the end of the said quarter. The
pension fund is allowed to invest up to
23% of its investment assets overseas.
‘The fund’s investment assets now
exceeds half-a-trillion ringgit and
continues to grow at an average rate
of 8% to 9% yearly. The constraints
in the domestic market make it
imperative for us to find suitable
investments globally that fit our
long-term diversification programme.
‘This would enable the fund to build
a more balanced investment portfolio
in accordance with our risk appetite,’
said chief executive officer Shahril
Ridza Ridzuan. As at March 31, 2013,
the fund’s investment assets stood at
RM536.55 billion (US$173.4 billion),
up 9.86%, or an increase of RM48.16
billion (US$15.6 billion), from the
RM488.39 billion (US$157.8 billion)
recorded in in the same corresponding
period a year ago.
Citi
Standard Chartered
Deutsche Bank
HSBC Holdings
JP Morgan
18 Others
USD
USD
USD
USD
USD
USD
2.9 Billion
2.7 Billion
2.5 Billion
2.4 BIllion
2 Billion
10 Billion
TOP BOOKRUNNERS
FOR DCM IN SOUTHEAST ASIA BONDS YTD 2013
Proceeds (US$ Mil)
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
Alpha Southeast Asia | June 2013 45
SINARMAS LAND MAY RAISE US$300 MILLION Sinarmas Land, an Indonesian
developer of homes, shops and golf
courses, hired Macquarie Group for an
initial public offering of an industrial
properties project that may raise as
much as US$300 million, said people
with knowledge of the matter. The sale
of shares in Kota Deltamas, also owned
by Japan’s Sojitz Corporation, may raise
US$200 million to US$300 million as
early as this year, the people said, asking
not to be named as the information is
private. Sinarmas Sekuritas, Citigroup
and Nomura Holdings will also help
manage the offering, the people
said. Shares of industrial real estate
companies in Indonesia have surged this
year, powered by a booming economy.
Bekasi Fajar Industrial Estate’s stock
has risen 51 percent and Surya Semesta
Internusa is up 43 percent, beating the
18 percent gain for the benchmark
Jakarta Composite Index. The Kota
Deltamas project in Cikarang, about 37
kilometers from Jakarta, covers an area
of about 3,000 hectares and will also
include commercial and residential
facilities, according to its website
reported Bloomberg & Jakarta Globe.
BSDE TO SELL RP 2.96 TRILLION (US$304 MILLION) NEW SHARES TO EXTEND CLAWSProperty developer, Bumi Serpong
Damai (BSDE) plans to sell new shares
in a non-preemptive rights issue to
earn around Rp 2.96 trillion (US$304
million) to support its expansion.
The company will off load 1.75 billion
new shares, which will account for 10
percent of its enlarged capital, with the
price set at Rp 1,691 (US$0.17). ‘[The
company] will use the funds raised
from the planned non-preemptive
rights issue to purchase plots of land,
develop projects and infrastructure,
as well as support operational capital,’
the company said in an announcement
made public recently. The company
also said that it would likely use
the funds to support its subsidiaries
through capital injections. BSDE will
seek approval from shareholders in
an extraordinary general meeting
scheduled on May 30, 2013. BSDE
has two years following the approval
from shareholders to exercise non-
preemptive rights issue either at once
or gradually. BSDE raised Rp 1 trillion
(US$102 million) from selling debt
papers last year, which was part of its
planned Rp 3 trillion (US$306 million)
bonds. BSDE director Hermawan
Wijaya said that the company would
likely exercise the next stage of the
bonds issuance this year reported
Jakarta Post.
GOVERNMENT REAPS RP 11.55 TRILLION (US$1.19 BILLION) IN BONDS SALESThe Indonesian government says it
has sold Rp 11.55 trillion (US$1.19
billion) in rupiah bonds, higher than
its indicative target of Rp 8 trillion
(US$816.6 million), at auction on May
6, 2013. The Indonesian government
auctioned five series of bonds, with
maturity periods of six months, one
year, six years, 15 years and 20 years.
Total bidding reached Rp 20.15 trillion
(US$2 billion). The Finance Ministry
reported that the government gained
Rp 1 trillion (US$102 million) from the
sale of three-month bonds and Rp 1.35
trillion (US$137.8 million) from one-
year bonds, while the six-year bonds
generated Rp 2.05 trillion (US$209
million), the 15-year generated Rp
2.25 trillion (US$229.7 million) and
20-year bonds Rp 4.9 trillion (US$500
million). The bid-to-cover ratio, which
measures investor demand, was 2.1
Standard Chartered
Indo Premier Securities
Danareksa
Bank Mandiri
BAHANA SECURITIES
8 Others
USD
USD
USD
USD
USD
USD
3 Trillion
2.9 Trillion
2.2 Trillion
1.9 Trillion
1.6 Trillion
17 Million
INDONESIARUPIAH BONDS
Proceeds (US$ Tril)
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
46 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA: BORROWING & LENDING ROUNDUP
for six-year bonds and 1.59 for 20-year
bonds. The auction on May 6, 2013
followed a successful bond sale in
April 2013 that raised Rp 10.5 trillion
(US$1 million). The government
has raised Rp 116 trillion (US$11.8
billion) or about 41.3 percent of its
Rp 281.1 trillion (US$28.7 million)
bonds issuance target for 2013 to date
reported Jakarta Post.
NAZIR: DECISION ON CIMB BUYING STAKE IN PHILIPPINES’ BANK OF COMMERCE (BOC) TO BE KNOWN WITHIN A MONTH
CIMB Group chief executive Nazir
Razak has dismissed news reports
that negotiations on the proposed
acquisition of a stake of 60% in Bank
of Commerce (BoC) in the Philippines
was scrapped. ‘We are in the final
stages of discussion and we will
make our decision known in a month,
perhaps sooner. ‘We are obtaining
the regulatory approvals,’ he told
StarBiz reporters. In May 2012, CIMB
Group had announced the acquisition
of a 60% stake in BoC for 12.2 billion
pesos (US$288.7 million). Nazir
expects the gross domestic product
of 4.1% in the first quarter to perk up
in the second quarter. ‘What we’ve
achieved was within expectations.
‘Businesses and investments will
perk up now that the elections are
over and things are stabilising again.’
Meanwhile, San Miguel Corp is
reportedly willing to keep its banking
arm if Malaysia’s second-largest
lender, CIMB Group Holdings, walks
away from a deal worth nearly US$300
million (RM905.55 million) for a 58%
stake in the bank, its president said.
Ramon Ang, San Miguel president, told
reporters that CIMB was expected to
make a decision within the next week
or two on whether to pursue its plan
to acquire a majority of the unlisted
Bank of Commerce. ‘We already
agreed on the price, terms, long time
ago. ‘In fact, they are already involved
in the business. ‘But, somehow, I don’t
understand why it is taking a lot of
time for them to close,’ Ang said. He
added that ‘small’ issues related to the
bank’s IT infrastructure and property
holdings were delaying closure of
the deal. Foreigners are not allowed
to own real estate in the Philippines.
CIMB and San Miguel signed an initial
agreement a year ago that valued
58% of Bank of Commerce at nearly
US$300 million, reflecting a price-
to-book ratio of 1.14 as at the end
of 2011. CIMB said at that time the
valuation was expected to rise to an
effective ratio of about 1.3 times after
the sale. The deal would signal CIMB’s
entry into the Philippines as part of
its South-East Asia push and would
provide conglomerate San Miguel
more funds to deploy for acquisitions
and expansion reported Reuters.
STATE COMPANIES AIM FOR US$3.6 BILLION IN BOND SALES Ten of Indonesia’s state-owned
enterprises are planning to raise a
combined US$3.6 billion in bond sales
this year, according to Wahyu Hidayat,
deputy minister for structuring and
strategic planning at the state-owned
enterprises ministry. Most of the sales
will be denominated in rupiah, Wahyu
Hidayat said as reported, Bloomberg.
National flag carrier Garuda Indonesia
plans to raise about US$200 million
in a dollar-denominated bond sale,
while Perusahaan Listrik Negara
(PLN) plans to raise about US$1.225
billion. Others include Aneka
Tambang (Antam), which plans to
raise US$915 million and Pegadaian
(US$715 million), according to the
RHB
AMMB Holdings
CIMB Group
Malayan Banking
HSBC Holdings
11 Others
USD
USD
USD
USD
USD
USD
4.6 BIllion
3.6 Billion
3.4 Billion
1.9 Billion
1.6 Billion
3.9 Billion
MALAYSIANRINGGIT BONDS
Proceeds (US$ Mil)
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
Alpha Southeast Asia | June 2013 47
report. PLN is the state electricity
firm, Pegadaian the state pawnshop
operator and Antam the state-
controlled gold and nickel producer.
The planned bond sales follow state
energy company Pertamina, which
raised US$3.25 billion from its latest
dollar-denominated bond sale, a huge
boost in its attempt to emerge as a
dominant player in the region. The
amount raised is the highest from any
such bond issuance in the country to
date, highlighting the growing trend of
Indonesian corporations tapping into
the bond market. ‘The offerings were
closed on Tuesday,’ Afdal Bahaudin,
Pertamina’s director of investment
planning and risk management said.
Pertamina received overwhelming
interest from international investors,
with offerings oversubscribing the
initial target 4.4 times, Afdal said. The
company booked US$14.4 billion from
667 international investors. Pertamina
raised US$1.625 billion from 10-year
bonds with a coupon rate of 4.30
percent that is p riced at par to yield at
4.30 percent. The remaining 30-year
bonds were priced to yield at 5.625
percent. Pertamina’s recent bond sale
is part its US$5 billion global medium-
term note program established early
in May 2013. The company’s bond sale
was the largest ever for Indonesia. It
also had the lowest ever coupon rate.
PERTAMINA PLANS US$5 BILLION BOND SALE THIS YEAR State-owned energy company
Pertamina plans to raise US$5 billion
from the sell of dollar-denominated
bonds this year, the third such sale in
as many years. Pertamina needs capital
for its ambitious program to become
a major player in the industry. Rising
investor confidence in Southeast
Asia’s largest economy has driven
the cost of borrowing to the lowest
level on record, prompting Indonesian
corporations such as Pertamina to
look at the bond market as a source
of financing. Pertamina raised US$1.5
billion from selling medium- and
long-term notes in 2011 and another
US$2.5 billion in 2012. Pertamina has
appointed Barclays Capital, RBS, and
Citigroup as the lead arrangers and
Mandiri Sekuritas as the co-arranger,
a person at Pertamina said. Standard
& Poor’s assigned its BB+ and axBBB+
ratings to Pertamina’s global bonds,
reflecting the long-term corporate BB+
credit rating, which is a level below
investment grade, on Pertamina. The
rating agency said that Pertamina
has ‘fair’ business risk profile and
‘significant’ financial risk profile.
TOYOTA ASTRA SET TO RAISE RP 1.2 TRILLION (US$127 MILLION) IN BOND SALE Toyota Astra Financial Services, a
Standard Chartered
Metropolitan Bank & Trust Co
Banco De Oro Unibank Inc
SB Capital Investment Corp
Bank of Philippine Islands
USD
USD
USD
USD
USD
4.5 Billion
2.5 Billion
2.5 Billion
2.5 Billion
2.5 Billion
PHILIPPINEPESO BONDS
Proceeds (US$ Mil)
DBS Group Holdings
Standard Chartered
HSBC Holdings
Oversea-Chinese Banking
United Overseas Bank
14 Others
USD
USD
USD
USD
USD
USD
1.8 Billion
1.8 Billion
926.5 Million
755 Million
730.7 Million
2.7 Billion
SINGAPOREDOLLAR BONDS
Proceeds (US$ Mil)
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)
48 June 2013 | Alpha Southeast Asia
SOUTHEAST ASIA: BORROWING & LENDING ROUNDUP
financing unit of Astra International,
Indonesia’s largest automotive
company, plans to raise Rp 1.2 trillion
(US$127 million) from selling bonds
in late May 2013. The company has
hired HSBC Securities Indonesia, Indo
Premier Securities, Mandiri Sekuritas
and Trimegah Securities. TAFS will
sell Rp 400 billion (US$40.8 billion)
in one-year bonds at a coupon of 6.6
percent. It also plans to sell Rp 700
billion (US$71.5 billion) in three-year
bonds at 7.60 percent and Rp 100
billion (US$10.2 billion) in four-year
bonds at 7.65 percent, the company
said in the prospectus. The coupons
on corporate bonds are typically
higher than that of government debt
of comparable terms, reflecting the
risk of holding such bonds. The yield
of the government’s four-year bond
was 4.73 percent on Friday and 4.77
percent the previous day, according to
data from the Indonesia Bond Pricing
Agency reported Jakarta Globe.
ASTRA SEDAYA RAISES FINANCING, EYES RP 3 TRILLION (US$306.2 MILLION) FROM BONDSAutomotive financing firm Astra
Sedaya Finance, part of the publicly-
listed diversified conglomerate Astra
International (ASII), is planning to
channel Rp 22.5 trillion (US$2.3
billion) in new financing this year, up
8.2 percent from 2012. The company
— which provides financing services
for new and used cars and heavy
equipment is looking to pay for the
purchases of 160,000 vehicles by
year-end, higher than the 145,000
units recorded last year. A new
vehicle segment will remain the major
contributor to the new financing
target with more than 70 percent,
while the used vehicle segment will
make up for the remaining percentage,
according to Astra Sedaya president
director Djony Bunarto Tjondro. ‘Both
new and used vehicle segments still
offer positive business prospects this
year, but we are anticipating a decline
in heavy equipment sales due to a
downturn in the overall commodity
sector,’ he said.
MODERNLAND HOPES TO RAISE US$300 MILLION FROM BOND SALES Property developer Modernland Realty
plans to sell US$300 million of dollar-
denominated bonds this year, more
than initially intended after strong
interest from investors, to raise funds
to finance its expansion, the company
announced. The company, which has
assets spread across western Java,
set the coupon on its dollar notes at
a maximum of 10 percent per annum,
the company said in a brief prospectus
published in Investor Daily. ‘The
notes will mature in five years,’ the
prospectus stated. ‘The company will
use proceeds from the bond sales to
buy more land and finance business
plans in the future.’ Freddy Chan,
Modernland’s financial director, said
in early April 2013 that the company
was looking to sell between US$150
million and US$200 million in global
bonds. Freddy said in April 2013 that
the company planned to purchase
400 hectares of land in Banten’s
West Serang this year to expand its
industrial estate in nearby Cikande.
Modernland currently owns about
445 hectares of land in the area. In
Cikande land prices are about half that
of more developed locations such as
Karawang. The company said in April
2013 that it expected its net income
to nearly triple to Rp 800 billion
(US$81.7 billion) this year on rising
property sales. The company posted
total net income of Rp 260 billion
(US$26.5 million) last year.
Siam Commercial Bank
Krung Thai Bank
Bangkok Bank
HSBC Holdings
Kasikornbank
7 Others
USD
USD
USD
USD
USD
USD
50.9 Billion
36 Billion
29.9 Billion
21.9 Billion
21.9 Billion
66 Billion
THAILANDBAHT BONDS
Proceeds (US$ Mil)
SOURCE: Thomson Reuters (1st Jan - 30th May 2013)