DANAVEST

By Fabio Benedetti-Valentini,

Nov. 14 (Bloomberg) — Dexia SA, the world’s largest lender to local governments, will sell its bond insurance business for $722 million to Assured Guaranty Ltd., the bond insurer backed by billionaire Wilbur Ross.

Dexia will receive $361 million in cash and 44.6 million new Assured Guaranty shares for Financial Security Assurance Inc.’s insured portfolio of $425 billion, of which $110 billion was asset-backed securities, the Franco-Belgian lender said today. After the transaction, Dexia will own 24.7 percent of Assured Guaranty, which secured “back-up” financing from funds affiliated to WL Ross & Co.

“It’s unbelievable that they can sell the insurance portfolio for money,” said Jaap Meijer, a London-based analyst at Dresdner Kleinwort who recommends investors sell Dexia. “Still, they remain exposed to the financial products” of FSA, he added.

While Chief Executive Officer Pierre Mariani has cut risks associated with New York-based FSA, the lender must cover losses of as much as $4.5 billion at the financial-products unit. Dexia, which in September obtained a 6.4 billion-euro ($8.1 billion) lifeline from France, Belgium and Luxembourg to avert collapse, is among the worst hit European banks following the failure of Lehman Brothers Holdings Inc.

Dexia fell 13 percent to 4.35 euros by 1:35 p.m. in Brussels, valuing the bank at 7.67 billion euros. The stock has dropped 75 percent this year, more than the 60 percent decline of the 69- member Bloomberg Europe Banks and Financial Services Index.

Managing Risks

“We’ve decided to sell the bond insurance activity, which was FSA’s biggest activity,” Mariani, who replaced Axel Miller last month, told journalists in Paris. “It’s a way for Dexia to get rid of its strong exposure to U.S. real estate.”

Dexia expects to book a 1.5 billion-euro loss from the sale of the business, Mariani said.

The deal is subject to confirmation from rating agencies that the acquisition won’t have a “negative impact” on the company’s financial strength ratings, Assured Guaranty said in a separate statement. The cash portion of the deal will be funded from a share sale with “back-up commitment” from funds affiliated to WL Ross & Co., it added.

“The combination of the two organizations will create the premier financial guaranty company with the talent, capacity, financial resources and relationships to serve the demands of our customers,” said Assured Guaranty CEO Dominic Frederico.

Assured Guaranty agreed on Sept. 18 to let Ross raise his stake in the Hamilton, Bermuda-based bond insurer to 18.9 percent. Ross committed to invest as much as $1 billion in Assured Guaranty in February, taking a seat on its board.

FSA Provisions

FSA’s $16.5 billion financial products portfolio, which includes subprime mortgage-backed securities, is excluded from the Assured Guaranty deal. Dexia will cover a first loss of $3.1 billion from that unit on top of the $1.4 billion provisioned by Sept. 30. The French and Belgian states will guarantee the unit’s assets, Dexia said.

Dexia ran into trouble when it agreed in August to provide $300 million to FSA after provisions tied to the subprime crisis led to a loss at the unit. The bank had already pledged a $5 billion credit line to FSA in June, after injecting $500 million into the unit in February.

The lender said the financial crisis cost 2.19 billion euros in the third quarter, including an additional 460 million euros of FSA provisions after U.S. markets deteriorated. Bond investment losses totaled 741 million euros with 482 million euros of that attributed to Lehman.

Dexia posted a third-quarter net loss of 1.54 billion euros, after net income of 439 million euros a year earlier, the Paris- and Brussels-based bank said in an e-mailed statement today. That missed the median estimate of a 656 million-euro loss from seven analysts surveyed by Bloomberg News.

Added the following HLG Unit Trust funds into the list:

(1) HLG Star Select-Capital Protected (View daily fund price)
(2) HLG GEM Resources Strategic Fund (View daily fund price)
(3) HLG Shariah Inflation Select Fund (View daily fund price)
(4) HLG GEMS Cash Plus Fund (View daily fund price)

Maybank acquired 100% of BinaFikir Sdn Bhd. The deal was completed on Friday, 7 November 2008.

About BinaFikir Sdn Bhd
BinaFikir, founded in January 2002, is Malaysia’s premier independent financial advisory firm specialising in restructuring & reorganisations, M&A, debt/equity financing, Islamic structured finance and strategic financial advisory.

We adopt a holistic and strategic approach to corporate finance, rather than treating it merely as a singular ‘deal driven’ exercise. We ensure that the clients’ long term strategic outlook be the determining factor for any corporate finance activity, and such activity is evaluated in a balanced manner to maximize long term shareholder value.

We have an imbued and ingrained culture of excellence and strive to deliver optimality of solutions for our clients. With our value principles of Integrity, Balance, Excellence and Innovation guiding us, we achieve success for our clients even in the most challenging of situations.

We hold a Capital Markets Service Licence advising on Corporate Finance, issued by the Securities Commission, Malaysia and we are registered Consultants with the Ministry of Finance, Malaysia.

The Management

Mohammed Rashdan Yusof (Managing Director)
Rashdan was one of the two co-founders of BinaFikir Sdn Bhd, and has been its Managing Director since 1st June 2004. His experience portfolio encompasses strategic advisory, corporate and industry restructuring and structured products. He was instrumental in the design of the innovative restructuring solution for MAS in 2002, widely known as the Widespread Asset Unbundling (WAU) restructuring. The WAU restructuring solution won the Deal of the Year 2002 from The Edge and the Asian Corporate Finance Deal of the Year 2002 from AirFinance Journal.

Feisal Zahir (Executive Director)
Feisal joined BinaFikir as an Executive Director in September 2004. Prior to this, he was a Vice President in Citigroup Global Market’s Investment Banking Division based in Hong Kong and Singapore (formerly named Salomon Smith Barney), where he was responsible for coordinating the M&A and capital markets business development efforts for key target clients in the Industrial sector in the Asian region.

Feisal has over 15 years experience in accounting, financial advisory services, corporate finance (including M&A) and corporate strategy.

The Star

KUALA LUMPUR: DAP wants to know if the recent RM5bil injection into ValueCap Sdn Bhd is in fact a “rescue package” to repay its RM5.1bil debt due in February next year.

DAP National Publicity secretary Tony Pua (DAP- PJ Utara) said that The Malaysian Insider (www.themalaysianinsider.com) had reported that ValueCap had a RM5.1bil debt to bondholders - the Employees Provident Fund (EPF), Khazanah, and Permodalan Nasional Bhd.

“The latest audited report of ValueCap in 2007 also confirmed that there is an existing ‘long-term deferred liability’ of that amount.

“We call upon the Finance Minister (Datuk Seri Najib Tun Razak) to come out with the truth if they are using the money to repay ValueCaps’s debts,” he told the press here on Tuesday.

He added that the underlying reason for the RM5bil injection was not known, but “it looks extremely suspicious”.

Pua explained that according to documents from the Securities Commission website, ValueCap had issued bonds on Feb 28, 2003 which would mature three years from the date of issuance.

It can be extended for another three years, as allowed in the terms of the bond in 2006.

“So now ValueCap is required to return the monies to the three bond holders come Feb next year.

”We find it very incidental that the Finance Minister had only recently announced an injection of RM5bil to ValueCap to support the flailing stock market.

“His statement can only be described as a half-truth,” he said.

He added that in addition, DAP demands a “full and immediate accountability of ValueCap investments since 2003”.

“We call upon the Finance Minister to withdraw the RM5bil injection which only serves to deal with the symptoms of the global financial crisis,” he said.

www.publicmutual.com.my

Public Bank’s wholly-owned subsidiary, Public Mutual declares distributions for three of its funds. The total gross distributions declared for the financial year ended 31 October 2008 are as follows:

Public Industry Fund 7.50 sen

Public Equity Fund 5.00 sen

Public Islamic Bond Fund 4.00 sen

Public Mutual’s Chairman Tan Sri Dato’ Sri Dr. Teh Hong Piow commented that despite challenging market conditions, Public Mutual is pleased to be able to declare distributions on these three funds.

Public Mutual is the largest private unit trust company in Malaysia, and it manages 67 funds for more than 2,000,000 accountholders. As at 30 September 2008, the total net asset value of the funds managed by the company was RM24.2 billion.

The Edge Daily

KUALA LUMPUR: AmMutual has declared the first income distribution of 7.3 sen per unit for AmDual Opportunities-Capital Protected for the financial year ended Oct 2008.

In a statement yesterday, AmMutual said the first yearly income distribution represented a yield of 7.3% based on the net asset value (NAV) per unit of RM1 offered during the offer period from Sept 3, 2007 to Oct 2, 2007.

It is a close-ended fund which seeks to provide yearly distribution over a two-year investment period investing in the volatility of euro to US dollar exchange rate (EUR/USD), deriving its appreciation from upward as well as downward movements in the euro currency while providing 100% capital protection when held to maturity.

The fund invested a minimum of 90% of the NAV in two-year zero-coupon negotiable instruments of deposits (ZNIDs) which seek to protect investor’s capital, and up to 5% in an option.

“As at Oct 17, 2008, the fund delivered a one-year return of 12.95% as compared to its benchmark, the Maybank one-year fixed deposit rate of 3.7%, an outperformance by 9.25%,” said Datin Maznah Mahbob, AmInvestment Bank group chief executive officer of the funds management division.

The Edge Daily

SYDNEY: Bank Negara Malaysia (BNM) is estimated to have spent US$12 billion (RM42.4 billion) during September to defend the ringgit, said Moody’s Economy.com.

Moody’s said the ringgit was among Asia-Pacific currencies that had depreciated despite current account surpluses, the others being the Singapore dollar and Philippine peso.

“Sound current accounts may have created a bottom for these currencies and they have ‘only’ depreciated by 5% to 10% since June,” Moody’s Economy.com economist Tine Olsen said in her report yesterday.

She said other currencies in the middle group had fallen because of deleveraging, while those experiencing the biggest depreciation, including South Korea, Indonesia and India, also struggled with current account deficits.

Olsen said Asia-Pacific currency markets had been driven recently by the liquidity squeeze and by current accounts as risk-averse investors moved funds from high-risk markets to safe havens to avoid losses, and also to preserve liquidity.

These include the unwinding of carry trades — the repatriation of funds from high-interest countries to repay loans taken out in low-interest countries.

“As the liquidity crisis eases, investors turn their attention to economic fundamentals to determine the value of national currencies,” Olsen said.

She said the global economic slowdown had encouraged investors to avoid countries with deteriorating current accounts, as they feared export weakness would put downward pressure on currencies.

Olsen said running against the trend of currency markets was the Japanese yen, which is a global reserve currency. The yen has appreciated against the US dollar, but all other major regional currencies have fallen against the US dollar since June.

She said the Australian and New Zealand dollars had been battered in the markets since June, seeing depreciation of 35% and 27%, respectively.

“Monetary policy rates have come down and investors have deleveraged, making the two currencies less attractive than they were earlier.

“At the other end of the scale is the Japanese yen, with an appreciation of 10% due to its status as a safe haven and its role in the carry trade,” she said, adding that as uncertainty increased, investors commonly moved funds out of high-interest countries and paid off their low-interest yen-dominated loans.

Olsen said the forces behind exchange rate movements varied greatly, as were the responses by governments.

“An economic slowdown and looser monetary policy in New Zealand and Australia have reduced the carry trade: borrowing in a low-interest country such as Japan and investing in Australia and New Zealand is no longer as profitable.

“This was amplified by the liquidity squeeze. Interest rates have come down from 7.25% to 6% in Australia and from 8.25% to 6.5% in New Zealand. Investors may have also been discouraged by the current account deficits in these two countries,” she said.

Olsen said if investors began to worry about Australia’s current account deficit, the Australian dollar would be severely challenged in the near term.

She said the Reserve Bank of Australia (RBA) intervened three times in the Aussie market, purchasing the domestic currency two Fridays ago and again last Monday and Tuesday. It has been more than a year since the RBA intervened in currency markets.

Olsen said in Indonesia, by contrast, the central bank was intervening often as it was trying to keep the rupiah steady after the currency reached the psychologically important level of 10,000 rupiah per US dollar.

“With an inflation target of 4% to 5% and annual inflation at 13.6% in July on a year-ago basis, it appears Indonesia has abandoned its inflation target and now focuses on exchange rate stabilisation,” she said.

Olsen said the region’s most troubled currency was the Korean won as doubts about the state of the Korean current account and South Korean importers’ high exposure to the US dollar had prompted traders to stage what at times looked like a run on the currency.

“The government’s repeated assurance that its foreign reserves are healthy has not stopped the exit, and the won has depreciated more than 40% since the end of June.

“The drop appeared to have been halted this week (last week) by a smaller-than-expected current account deficit for September and a currency swap line with the US Federal Reserve. On Thursday, the Korean won jumped 14% as a result,” she said.

Olsen said on a crude scale, the yen’s 10% appreciation matched the depreciation of smaller currencies with no underlying current account problems.

“An exchange rate movement of 10% may therefore be assigned to increased uncertainty and the liquidity squeeze in global markets, and has happened regardless of the sign of the current account.

“How much of the remaining part of exchange rate movements can be assigned to the unwinding of carry trade and worries about the current account is harder to quantify,” she said.

Olsen said the depreciation of Australian and New Zealand currencies was mainly driven by carry-trade reversal, whereas the Korean and Indian currencies had been brought down by speculation about their current accounts.

“As credit markets thaw, currencies may be expected to reverse the 10% move, which was based on the liquidity squeeze.

“Currencies with underlying current account deficits face turbulence in the near future, as a global slowdown puts pressure on the trade balance. Finally, high-interest currencies may be further challenged by looser monetary policy,” she said.

By Shannon Teoh, The Malaysian Insider

KUALA LUMPUR, Nov 4 - Finance Minister Datuk Seri Najib Razak defended the RM5 billion injection into ValueCap via a loan from the Employees Provident Fund (EPF) despite an outstanding RM5.1 billion debt, saying that the company has performed well so far.

“The shareholders are happy and have gotten returns. They will decide what is the best way to handle it,” he said referring to the sum owed in interest-bearing unsecured bonds.

The Malaysian Insider had yesterday broken the news that ValueCap still owed the sum which were due to mature in February 2006 but was then extended to February 2009.

The debt was incurred in March 2003 when ValueCap borrowed the amount from shareholders Khazanah Nasional, Kumpulan Wang Amanah Pencen and Permodalan Nasional Bhd to invest in the stock market.

The DAP had today called for Najib to withdraw the RM5 billion loan from EPF, calling it a zero-impact move as the RM5 billion EPF injection would be used to pay off the debt.

In a press conference after winding up the Budget debate, Najib, who is also Deputy Prime Minister, said there was no problem with using EPF funds as it was guaranteed by the government and, furthermore, ValueCap had performed well with a stock portfolio that had appreciated in value.

He also said that the opposition were being irresponsible by walking out in the middle of his winding-up speech.

“I intended to give a clear picture first and then I would be willing to give any clarification,” he said, defending his move not to allow any requests for clarification until he had completed his speech.

“The people must be aware that the opposition has abandoned its responsibility to be a constructive opposition.” he added.

Najib also asserted that it was not a new budget as claimed by the opposition.

“The expenditure remains the same. Only some amendments were made due to savings from fuel subsidies which have been reduced from RM21 billion to around RM10 billion,” he said, referring to the RM7 billion stimulus package he announced.

He further refuted claims by the opposition that he was lying when he called Pakatan Rakyat’s alternative budget a contractionary budget.

“They suggest an operating expenditure of RM130 billion when ours is RM154 billion,” he said.

“I have the figures,” he quipped, adding that these figures have not been repudiated.

Najib also stated that the budget was based on oil prices of US$70 per barrel and the government would try to control changes in deficit should the price of oil fluctuate in the future.

He added that developments to such areas as Cochrane and Ampang Hilir would bring “income of several billion” to the government but it depended on what sort of development concept was pursued.

Answering a question on the RM1.67 billion Eurocopter deal, he said that the postponement has already been announced and that the price may be higher if the government did not seal the purchase soon as the tender price expires in February 2009.

by Lim Shie-Lynn, The Edge Daily

KUALA LUMPUR: Bursa Malaysia will launch a new system for equities trading on Dec 1 to replace the existing system that ran into problems in July and caused trading to be suspended an entire day.

Sources said that brokers were briefed by Bursa Malaysia recently on the new equities trading platform. A broker when contacted said that they were told that the new trading platform will go online on Dec 1.

“We hope there would not be any more delay this time,” the broker said.

A Bursa Malaysia official, when contacted, confirmed that a new trading system was going to be in place. However, the official said that the launch date has not been fixed. “The stock exchange is seeking relevant approvals from the Securities Commission.”

The official also said that Bursa had been conducting a series of test runs over the past few months for the equities trading system called Bursa Trading Securities (BT Securities).

Previously, it was reported that Bursa was looking at implementing a new platform powered by Atos Euronext Market Solutions Ltd in late July. It is a solution that Bursa was looking at long before the current system crashed on July 3. However, the incident in July is said to have added to the urgency of implementing the new system.

The new system is likely to feature real-time match orders compared with the current 10-second delay. At the same time, the online trading facilities provided by the securities firms are expected to be upgraded to a newer version of Java Runtime Environment (JRE).

The system crash on July 3 was the worst-ever technical glitch in Bursa Malaysia’s history. The back-up system also failed, drawing heavy criticism for Bursa.

It is learnt that the problem was due to human error and that the back-up sysem also failed because it was not adequately tested. Since the incident, Bursa has a new chief technical officer.

Trading on the derivatives market was also not without problems. On Sept 8, running on a new platform, the morning session of the market was suspended before trade resumed in the afternoon.

The derivatives market also suffered technical glitches earlier in March when it was unable to disseminate market data to participants.

Bursa’s launching of a new equities trading platform is long awaited. To recap, Bursa initially planned to launch BT Securities by fourth quarter 2005, which was the second phase of a major project to change the common trading platform (CTP) for all its products.

The first product to change to a new trading platform was derivatives and it was implemented in 2006. The CTP is expected to help boost trading volumes, revenue streams and will put Bursa’s trading system on par with other platforms used in stock exchanges worldwide.

by Yantoultra Ngui Yichen, The Edge Daily

PETALING JAYA: Bursa Malaysia Securities Bhd has decided to delist Techventure Bhd on Nov 14, 2008 as the company does not have an adequate level of financial condition to warrant continued listing on the Second Board.

Bursa Securities said Techventure could make an appeal by Nov 11.

“In the event Techventure submits an appeal to Bursa Securities within the appeal timeframe, the company is required to make an immediate announcement of the said appeal, and the removal of its securities from the local bourse on Nov 14, 2008 shall be deferred pending the decision on the appeal by Bursa Securities,” it said.

Bursa Securities had on Oct 14 started delisting procedures against Techventure as the Securities Commission (SC) had rejected the company’s appeal against SC’s earlier decision to reject the company’s regularisation plans.