TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
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By Craig Stephen
14 February 2011
An investment theme that is getting aired more frequently this year is to favour developed markets over emerging markets. Did BRICs really fall out of favour so quickly?
It appears so, with brokerage CLSA going as far as to describe this as the consensus trade in a recent strategy note.
You can take your pick of a lengthy list of ills facing the global economy, but for now, ballooning inflation and growth numbers are deemed more troubling than possible sovereign-debt defaults in sluggish developed markets.
Emerging markets falling out of favour is backed up by recent fund-flow data. Citigroup said in a research note last week there were $7 billion worth of redemptions from emerging-market funds, the third-largest weekly outflow on record. The trigger has been mounting concern over inflation and interest-rate increases in China — last week, the People’s Bank of China raised interest rates for a third time since October last year.
What has investors spooked about inflation is that it can bring big unknowns into the equation. Rising food prices were one of the contributing factors in the riots and protests in both Tunisia and Egypt. Last Friday, we saw what looks like the latest inflationary fallout — another devaluation of the Vietnamese dong. The currency was devalued by 8.5%, as the government struggles to cope with inflation that hit 12% in January.
While in most of Asia, rising levels of inflation have been accompanied by strengthening currencies, Vietnam differed as it has also been running a trade deficit. The fate of the dong, however, is a cautionary reminder that if inflation really does get out of control, you risk currency debasement as people lose confidence in the currency.
These developments are also likely to keep investors highly focused on China’s next move on the inflation front. Last week’s 25-basis-point rise takes deposit rates to 3%, but with the consumer price index believed to be running close to 5%, real interest rates are still negative.
This is one reason many analysts believe China is still behind the curve. Nomura analysts said in a new report: “The rate of policy tightening in China is still rising, and the front-loading of rate moves is unlikely to slow, given the further run-up in commodity prices at Chinese New Year.” They also point out that there has been an enormous spike in interbank rates in China recently.
The battle to stop food prices rising on the mainland is also being made more difficult by the prospect of a poor harvest. Key provinces in China are dealing with the worst drought in 60 years, which has put the wheat crop at risk. As a sign of how concerned Beijing is, at the weekend $1 billion in emergency aid to divert water and improve irrigation was announced.
It is also worth keeping in mind that further anti-inflationary rate hikes are by no means the only overhang for equity markets. More draconian measures, such as price controls on food or rationing of electricity, are possible.
Usually someone has to pay for price controls. At the weekend it was disclosed that 43% of mainland power plants made a loss in the first 11 months of 2010, as rising coal prices cut into profits, according to China’s National Development and Reform Commission.
This all leads to a level of uncertainty and lack of visibility that heightens risk aversion. What investors are looking for is some confidence that authorities can get inflation under control. The optimistic case is that the current inflation scare is just a blip in a long-term growth story.
It was, after all, only in late 2009 that HSBC released a report — “The Rise of the East and the Demise of the West” — which reflected the increasingly mainstream view of the changing balance of power and gravitation of economic growth to Asia. This was surely a long-term call to favour developing markets rather than the debt-burdened developed markets.
As we enter the earnings season, it will be important to see which companies are benefiting or coping best with the general tide of rising prices. It is also worth noting that while financial investors may be having second thoughts on developing markets, companies on the ground still look to be powering ahead. Consultants Hudson report hiring expectations have reached a new high in Hong Kong in the first quarter of 2011, with 66% of executives planning to hire more staff.