LONDON: Oil fell below US$43 (RM156.09) a barrel on Dec 9, reversing earlier gains as investors expected US data to show another drop in fuel demand in the world’s top consumer.

US crude was down 54 cents at US$43.17 a barrel at 1418 GMT, after sinking earlier to US$42.89.

London Brent crude eased by 59 cents to US$42.83.

The downward trend for oil remained very much intact.

“US$40 a barrel could be difficult to break, but we expect WTI to go lower in the coming months. GDP, oil demand weakness and the crude overhang are much clearer than Opec cuts so far,” said SG Commodities Research said in a weekly note.

Oil traders were awaiting the 1700 GMT release on Tuesday of the US Energy Department’s Short Term Energy Outlook, which was expected to show downgrades in 2009 oil demand estimates.

In a forecast issued last month, the Energy Department said total US oil demand was projected to fall by an additional 250,000 bpd, or 1.3% next year, after dropping 1.1 million bpd, or 5.4%, in 2008.

The outlook for global oil consumption is very much on the minds of ministers from the Organisation of the Petroleum Exporting Countries (Opec), which meets on Dec 17 in Algeria.

Opec is expected to reduce overall production by a minimum of one million barrels per day (bpd).

“Oil is on a count-down to Opec now and everyone is expecting them to come up with something big — probably a cut of 1-1.5 million bpd,” said Rob Laughlin, senior oil analyst at brokers MF Global in London.

“If Opec doesn’t make a big cut, this market is in trouble.” — Reuters

The company reported a third quarter loss of RM40.38 million and warned that its UK gaming operations would be hit.

The company said that its power division would be hit by lower demand and lower prices.

Citibank today cuts Genting’s target price to RM3.79 from RM3.88 ringgit and cut fiscal 2008 earnings by 6.5 per cent. - Reuters
JPMorgan Chase & Co today downgraded the stock to “underweight” from “overweight” and slashed its 12-month price target to RM3.70 from RM6.40.

“With significant earnings headwinds expected ahead as a result of the current economic slowdown coupled with the existing overhang at Resorts World at Sentosa in Singapore, we think it would be difficult for Genting shares to outperform the market over the next six to nine months,” JPMorgan analyst Sit Yin Wong said in a research note.

Genting shares have fallen almost 45 per cent this year, more than the 41 pe rcent decline in the Kuala Lumpur Composite Index. - Agencies

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.

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.

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.

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.

With Pakistan now joining Iceland, Hungary and Ukraine in the line forming outside the International Monetary Fund’s New York headquarters, fears are rising as to just how prepared the IMF is should more countries fall into financial catastrophe.

Though the fund is set up to float loans to central banks in times of financial crisis, some say the mounting pressures could soon leave the global lender of last resort unable to help those countries in need.

Yesterday, British Prime Minister Gordon Brown called for a substantial increase in the IMF’s reserves, appealing for help from countries still holding high foreign reserves, including China and oil-rich Middle Eastern states.

“Capital flight has made a number of countries potential victims of this crisis,” Brown said.

“It is becoming increasingly clear that we cannot delay and that we need substantial international resources in addition to the $250 billion (U.S.) that the IMF already has. We need this for the crisis we face now in the 21st century.”

The funds currently available to the IMF have been mostly amassed and given to the fund by members of the G-8 and, in total, amount to roughly a third of what the U.S. alone required to bail out the American banking industry earlier this month.

Peter Christoffersen, professor of economics at McGill University who worked with the IMF during the Asian financial crisis, seconded Brown’s assertion.

“(The IMF) could certainly reach a point where they have no lending capacity and then the governments that are not in trouble would then have to step in” to keep the fund buoyant.

The problem is that it is becoming increasingly hard to find a country that’s currently navigating the global financial storm with impunity.

While the crisis took root in the U.S. and then Europe, it’s small and emerging nations that are most at risk of actually defaulting as their currencies are battered and their financial structures are perceived as weaker.

Paul Masson, research fellow and adjunct professor of international finance at the Rotman School of Management, said it’s the nations that are running short on foreign reserves that are at greatest need of a bailout. And their needs are adding up.

Iceland has sought at least $2 billion as its capital-starved banks are bailed out by government. Ukraine seeks $16.5 billion; Hungary $10 billion or more; and now Pakistan an estimated $15 billion.

Poland, Serbia, Belarus, Romania, Turkey and even Brazil are thought to be nearing such uncertainty that they too might need to float a loan from the IMF.

The growing fear now becomes: What happens if more countries have to turn to the IMF?

“The IMF is like a credit union,” said Masson. “Members deposit money and can borrow back when they need to. The problem is that if everyone tries to borrow at once then there won’t be enough to go around.”

John Lipsky, the IMF’s first deputy managing director, told the CNBC cable news network yesterday: “It is worth thinking that if the problems continue to grow that we might think about whether we would need additional resources and we will be discussing with our members that possibility.”

The IMF has assets of some $200 billion and can draw on $50 billion more through standing borrowing arrangements with groups of IMF member nations.

Set up in 1944 at a United Nations conference in Bretton Woods, New Hampshire, its mandate was simple: avoid a repetition of the vicious circle of competitive devaluations that had contributed to the Great Depression by building a framework for economic co-operation.

IMF membership now numbers 185, with member countries responsible for a portion of the IMF’s reserve. Canada and the United States, respectively, contribute 2.93 per cent and 17.09 per cent of the IMF’s total value.

The last time the IMF was called on for major help was in 1997-1998 when the financial crisis in Asia sent several states to its doorstep.

STOCKHOLM–Sweden’s Parliament on Wednesday approved a rescue package for the nation’s financial sector worth 1.5 trillion kronor (US$200 billion).

The measure allows the government to give the money in credit guarantees to banks and mortgage lenders to improve liquidity amid the global financial turmoil. It also creates a “stability fund” to bail out any Swedish banks that run into solvency problems.

The bill, proposed last week, was part of a co-ordinated European bailout effort to calm markets and restore lending between banks and to customers.

Financial Markets Minister Mats Odell told Parliament that Swedish banks are relatively stable “but we cannot during the current turbulence exclude that the crisis deepens.”

It became clear this week that the credit crunch has hit the Scandinavian country as troubled investment bank Carnegie AB requested a five-billion-kronor ($630 million) credit line from the central bank, and Swedbank, one of Sweden’s largest banks, announced a new share issue to raise more capital.

The main points of the nine-point bill were approved without a vote in the 349-seat legislature. The left-wing opposition demanded votes on two points, both of which were approved by a majority of lawmakers present.

Banks and mortgage lenders that want to join the program must pay a fee and agree to certain restrictions on compensation for their top executives.

Earlier Wednesday, Sweden’s central bank said it would help large nonfinancial companies with corporate funding since the financial crisis has resulted in the country’s loan supply drying up. The Riksbank said it will provide a new temporary credit facility so that corporations can receive loans more easily.

Malaysian investors should take a long-term view of between three and five years and take advantage of the current cheap valuations, says CIMB-Principal CEO

THE global financial crisis may have wiped out trillion dollars worth of assets, but this should not deter local investors from investing in the stock market, said CIMB-Principal Asset Management Bhd chief executive officer Datuk Noripah Kamso.

She said investors should take a long-term view of between three and five years and take advantage of the current cheap valuations.

“And when they invest, they must do so through a regular savings plan and do not invest in one lump sum,” she said at a media briefing on how to invest in difficult markets in Kuala Lumpur yesterday.

“Stay invested and do not try to time the market,” she said, adding that the global recession will pass and market will rebound.

Chief investment officer Raymond Tang said if investors save slowly in capital market funds, they will get the returns.

“Buy when there is blood in the street,” he said.

Tang said some US$1.8 trillion (RM6.32 trillion) worth of assets have been marked down worldwide by the US subprime crisis.

“In Asia, in the short term, there will be secondary effects but countries with strong domestic demand such as China and India will be able to withstand this,” Tang said.

He said there is a lot of liquidity in the system now in Asia although banks are becoming more cautious in lending, but the slowdown may only be for the next six months or so.

“There will still be some growth as inflation is not going to be as bad in the months to come. Malaysian corporates are also in a better gearing position than they were 10 years ago and it is time that we should stop overly relying on the US market.”

CIMB-Principal Asset Management, in trying to encourage the investing public to take advantage of the current situation to invest defensively, has put together eight core funds from over 70 funds it manages, into what it calls Flagship Funds.

The funds, said Noripah, have consistent long-term risk-adjusted returns and are widely diversified across different sectors and asset classes.

The funds are four conventional ones namely CIMB-Principal Equity Fund, CIMB-Principal Equity Growth and Income Fund, CIMB-Principal Balanced Fund and CIMB-Principal Bond Fund.

The other four are Islamic funds, namely CIMB Islamic Dali Equity Growth Fund, CIMB Islamic Dali Equity Fund, CIMB Islamic Balanced Fund and CIMB Islamic Balanced Growth Fund.

Out of the eight funds, three are invested up to 50 per cent in the Asia Pacific markets, excluding Japan.

The legendary investor’s Berkshire Hathaway (BRKA) is making a $3 billion investment in General Electric (GE). The deal was announced Oct. 1, one week after Buffett bet $5 billion on investment bank Goldman Sachs (GS).

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