Happy Easter

The real meaning of Easter has had to fight the nonsensical infiltration into the true meaning of Easter.

So here's the comeuppance for the bunny ....

Our Next MACC Chairman

Unfortunately, his speeches are in Cantonese, but he is so hardworking, at least 20 odd ceramahs a month throughout the country. He does not mince his words, its liberal with profanities, much like me. Plus he has a Phd in History and was a senior lecturer at a top HK university. DAP Superman is Hew Kuan Yau.

He has the audacity to declare that he will contest for the same seat as Chua Soi Lek - man, will I love it when he crushes CSL. He is cool. He is very funny, cutting, incisive and makes sense... but what is over riding is his passion for a better Malaysia.

Fair But Not Reasonable

It used to be independent advisors can only recommend shareholders to accept or reject a deal. Accept if its fair and reasonable, reject if its not. But somehow, in recent times there is a new category of qualification for them: fair but not reasonable. To me thats a bloody cop out. A shirking of duties from all sides. 

Its like all MBA graduate employees insisting that we must do a market survey before launching a product. In reality, its not so much to gain more data on potential market - in the end its more to cover their ass ... if the product failed, they can say, "But, we did the survey before launching ....".

The "fair but not reasonable" is a bogus fortune teller kind of opinion ... "Mr. so and so, you will be rich soon, if not you might be poor ... RM500 thank you". 

Can we go back to reject or accept ... pay a few hundred thousand just to get a "Yes, but maybe not ..." view sounds like such a waste of resources. If a deal gets that opinion, and say the deal goes through, the company gets privatised ... and 6 months later the same asset get relisted somewhere else at a 40% premium to takeover price .... end result is NOBODY gets into trouble, not the SC, not the independent advisors, .... oh but minority shareholders get shafted.

Just look at the last four or five opinions from independent advisors, most have taken the safe, insured route of "fair but not reasonable" ... what you are going to get from now ON is a lot of the same fucked up "yes but no" opinions. Apa value add? What can minority shareholders do? Basically you are telling MI, well, you can sell at this shafted price valuation but don't sue me.

I am in no way implying the offer for MISC is not reasonable or that the opinion is wrong by the independent advisor. I am arguing that the opinion would be worth so much more SALT if they can only tell us to ACCEPT or REJECT. In the MISC case, what do you think they will opine if they have only 2 options and not 3???!!! 

I mean seriously, the offer for MISC is 1.1x book ... lets assume for a moment that book value is RM2bn .... hmmm why don't I fucking give Petronas RM2.2bn and they go and build another MISC from scratch??!! Can you see how ridiculous it is now ... you can cite downturns in sector but you try and build another MISC now and see how much it will cost you, not to mention the human talent, branding, goodwill attached with foreign clients, the network ...

"Absence of competing bid" ... OMG... its like advising your girlfriend to accept the marriage proposal because there seems to be no other guys wanting to propose to you.... cbmf...


Can we switch back to just reject or accept ... the current system is seemingly not fair and not that reasonable to minority shareholders.


Meanwhile back at the EPF/MISC stable ...

The Employees Provident Fund (EPF) is probing the reason for the sales of 
1.494m MISC shares, weeks after its CEO Tan Sri Azlan Zainol said Petronas 
should raise its buy-out price for the national shipping company. "The selling of the MISC shares were done by one of our external portfolio managers and was not from our internally-managed portfolio," EPF public relations general 
manager Nik Affendi Jaafar said in a statement. As such, he said the EPF is 
following up with the fund manager concerned to ascertain the reason for the 
shares were sold, adding a total of 3.99mn shares were sold between March 
12-15. (BT)

MISC's stock price, which had fallen below the RM5.30 buyout price rebounded 
yesterday to end the day at RM5.34. The concern though is that without a higher price, the deal could fall through considering the views expressed by the EPF which owns a 9.6% stake in MISC. EPF's chief executive Tan Sri Azlan Zainol has spoken out asking for a higher price than the RM5.30 per share offered which is at 1.1x MISC's book value. MISC's other big minority shareholder is Skim Amanah Saham Bumiputra with a 6.35% stake. Since the offer is conditional upon getting this 90% acceptance, the offer will lapse if Petronas does not get that level of acceptance.

The Minority Shareholder Watchdog Group has come out to say that the RM5.30 offer price by Petronas is "not compelling enough". Its chief executive, Rita Benoy Bushon said that "Petronas might do well to consider putting a larger carrot on the stick if its intention is to fully take MISC private." 

Petronas� offer price to privatise MISC is "not fair but reasonable", said the 
independent adviser to the RM8.8bn deal. The offer allows shareholders to 
realise their investment at a premium of between 19.6% and 27.1% over MISC's five-day to three-month volume weighted average market price. Petronas owns 62.7% of MISC's total and paid-up share capital. (BT)

With the independent adviser on Petroliam Nasional Bhd's planned buyout 
of MISC Bhd recommending that shareholders accept the offer, all eyes are on 
the Employees Provident Fund (EPF). The provident fund has already said it 
viewed the offer as being too low. And it has all the right to do so. Its decision to speak out sends the right message to millions of its members. Last Friday, AmInvestment Bank Bhd, the independent adviser to the minority shareholders of MISC, said while the offer was not fair, it was reasonable. 

AmInvestment said the offer was unfair as it was priced at a significant 
discount to MISC's sum-of-parts valuation (SOPV) but considered it reasonable due to a weak shipping outlook that may persist and the absence of a competing bid. So, it recommends that minorities accept Petronas' offer.

In EPF's case, this is very pertinent, because it holds the key in the MISC 
buyout being the second largest shareholder and the largest 
non-interested shareholder with a 9.63% block worth about RM2.44bn. 
In a recent interview with Bloomberg, EPF chief executive Datuk Azlan 
Zainol said the pension fund wants a higher price and that Petronas 
should increase its RM5.30 per share offer. (StarBiz)

Podcast For Wednesday Morning S&M Show

If you missed it, here's the podcast on speculative stocks and highly speculative stocks ....


Must Watch Movies

Amid the tension surrounding the elections and the uncertain market conditions owing because of that, let's look at something else to take our minds to something different. For the last 3 months or so, there have not been any worthy English films to talk about, probably because the Oscar race is over and other blockbusters are awaiting the summer release. However, I have found 3 magnificent Canto/Mando films, highly entertaining to boot. Must watch.

The first is the sleeper hit from China, Lost In Thailand. Its a kind of Planes, Trains and Automobiles (Steve Martin, John Candy) meet The Hangover. It was so successful, it has grossed more than US$200m in China alone. It has also caused the number of Chinese tourists to Thailand to jump manifold. It tells of two executives from a venture capital firm seeking the signature of their boss who has gone for a sabbatical at one of the monastery in Thailand for a critical deal. Its very funny in any language.

Lost in Thailand film poster

The Cold War, brilliant in the same style as Infernal Affairs, only this time the crooks have abducted a police patrol van with the 5 police officers inside and ransoming the entire police force. Although Aaron Kwok looks a bit too young to be cast as a very very senior police officer, it was a mild thing. The story line is captivating but its the personalities in the police force that takes center stage. As the top officer is overseas, the next 2 most senior fought for the right to oversee the "rescue/ransom" - Tony Leung Kar Fai was brilliant, trying to gain control of the operations as his son is one of the 5 kidnapped officers. While Aaron is not really a detective but rose from the ranks of administration and strategy. You feel for all the main characters. Gripping stuff.


The final one has to be the bravest comedy produced from HK. Its called Vulgaria, and the entire movie is filled with profanities in Cantonese, but very funnily done. Top notch actors delivering the crudest lines with a hard to believe story line, but somehow it all works. The profanities are not deliberate because in reality its how normal HK people speak. There are too many laugh out loud scenes, most are too crude to describe here. Must be conversant in Cantonese to watch this one.

Let's All Adopt This - How Car Drivers Say Thank You

There are very few cases of road rage in Japan. See how car drivers say thank you in Japan. If you let another car into your lane, the other driver will press the hazard lights and let it blink a couple of times to say thank you. So cool ... yet I think it will go a long way to de-stress those around us and lets make a step to try and change the Malaysian driving culture bit by bit.

Important To View: Can The Pakatan Manifesto Stands The Math Test

The simplest way to attack the Pakatan Manifesto is to say that it will not work, that there is not enough money to fund all that. Tony Pua, a learned person of business and strategist, explains why the Pakatan Manifesto is not a pipe dream. Excellent presentation and convincing too.

Only If

One of the most heart wrenching yet empathetic video ever. Life was never meant to be easy no matter how we shout phrases of positivism. While reality is never always pristine and trouble free, we cannot dwell on them. The struggles, pain and loss that happen to us, much of which we may never have total control over ... are there and will be there in our journey. Happiness, joy and contentment are fleeting and temporary. It seems we get a raw deal in every sense of the word. We soldier on because of our human spirit and the love of those around us, and the love for our own selves. We will never get to understand fully or comprehend the whys. Take care of one another, appreciate the little things in life cause the big ones don't come too often, don't dwell on disappointments for too long, heal yourself, live well, be generous where you can ... and my mantra... bloom where you are planted.

Advice On Men

No, not from me, its from Oprah Winfrey. I have to agree almost 90% with what she said. Worth a million dollars if it can get you to rethink your choices in life. Of course it doesn't say anything about those who are already married ... but you should know what you should be doing then.

1. If a man wants you, nothing can keep him away. If he doesn�t want you, nothing can make him stay.
2. Stop making excuses for a man and his behavior. Allow your intuition (or spirit) to save you from heartache.
3. Stop trying to change yourself for a relationship that�s not meant to be. Slower is better.
4. Never live your life for a man before you find what makes you truly happy.
5. If a relationship ends because the man was not treating you as you deserve then heck no, you can�t �be friends�. A friend wouldn�t mistreat a friend. Don�t settle.
6. If you feel like he is stringing you along, then he probably is.
7. Don�t stay because you think �it will get better� You�ll be mad at yourself a year later for staying when things are not better.
8. The only person you can control in a relationship is you.
9. Avoid men who�ve got a bunch of children by a bunch of different women. He didn�t marry them when he got them pregnant, why would he treat you any differently?
10. Always have your own set of friends separate from his.
11. Maintain boundaries in how a guy treats you. If something bothers you, speak up.
12. Never let a man know everything. He will use it against you later.
13. You cannot change a man�s behavior. Change comes from within.
14. Don�t EVER make him feel he is more important than you are. Even if he has more education or in a better job.
15. Do not make him into a quasi-god. He is a man, nothing more nothing less.
16. Never borrow someone else�s man.
17. A man will only treat you the way you ALLOW him to treat you.
18. All men are NOT dogs.
19. You should not be the one doing all the bending. Compromise is two way street.
20. You need time to heal between relationships. There is nothing cute about baggage. Deal with your issues before pursuing a new relationship.
21. You should never look for someone to COMPLETE you. A relationship consists of two WHOLE individuals. Look for someone complementary not supplementary.
22. Make him miss you sometimes. When a man always know where you are, and you�re always readily available to him � he takes it for granted.
23. Never move into his mother�s house. Never co-sign for a man.
24. You should know that you�re the best thing that could ever happen to anyone and if a man mistreats you, he�ll miss out on a good thing. If he was attracted to you in the 1st place, just know that he�s not the only one. They�re all watching you and you want more .. so you have a lot of choices. Make the right one.
25. Ladies take care of your own hearts. Share this with other women (just so they know) You�ll make someone smile, another rethink her choices, and another woman prepare. 

What Market Was That?

If we had the kind of market we had on Thursday for 3 months, watch the velocity of money rushing through the economy, the multiplier effect would be enormous. Catching everybody off guard. I mean, Muhibbah went very close to being LIMIT UP, my gosh, when did we ever hear of that phrase nowadays, so ancient.

OK, the Iskandar linked counters led the way for the last few days. Like I said before, for any kind of bull to appear, there has to be a leader. Remember this theme because after the elections we will have a genuine bull run, probably with the same actors and supporting actors.

No one could believe what was happening on Thursday because the election was supposed to be so damn close, to be called any day, and yet you seemingly have the start of the mother of all bull runs appearing. So many retail players were sidelined, but can't help it, the lure of a trend is soooooo  ... intoxicating. Your discipline is called into question and kinda gave way very quickly to the temptations of the 'flesh'. How weak we humans are ...

We can all study the best business books but the madness of crowds usually prevails. Will this run continue? Looks like it. Very hard to stop a moving train. Of course unless parliament is dissolved, that could drag things down somewhat. So its all the more exciting and unbelievable ..... its like a casino that declares that they have changed all the odds in favour of players against the bank (blackjack, banker has to draw till 18; the roulette 0 means all numbers get paid off ...) so you have this wonderful casino but management of the casino also said that there is an earthquake registering 9 on the Richter scale that is coming anytime and there is a house fire in the kitchen that could engulf the casino in a matter of hours .... and yet the punters flock in knowing full well the pending uncertainties. Wallah!

Can these kind of market days suddenly appear? NO. Is it orchestrated somewhat ... if you ask me privately, I will give you a very detailed answer. Things like this cannot happen in our markets unless you can see a confluence of economic and fundamentals and liquidity according to the textbook. You tell me, can the market move like it did with so many funds flowing in, throw in the "syndicates" (in my dictionary "syndicates" is not illegal or sinister but the gathering of two or more people agreeing to do something together). You tell me, can they all suddenly wake up and decide all at the same day to "move stocks".

Just be careful, people.

Jon Hamm's Penis Banned From Mad Men

Mad Men is a very good series, but the producers are having a hard time with Jon Hamm's little general, as men during those days wear much tighter trousers, so much so that his cowabunga had to be photoshopped out of posters..etc... What a wonderful positive PR problem to have.

When a man walks into a room, he brings his whole penis with him. A fleshy appendage, no less primitive than the prehensile tail we lost when we evolved, yet no less important than the heart that keeps us pumping. It makes a man feel whole. It drives a man. It�s the stick that chases the carrot. And when it hangs off of Jon Hamm, it causes problems simply because it stands up for itself.
Conflicts between the Mad Men crew and Jon Hamm�s increasingly demanding companion, Little Dick Whitman, have apparently become so prevalent, the show�s producers have �politely� asked the notoriously freewheeling star to stifle his penis with a layer of restrictive underwear, after Hamm�s penis became too distractingly headstrong. �This season takes place in the 1960s, where the pants are very tight and leave little to the imagination,� an insider "source" explains to the New York Daily News. And while, yes, the entire series has so far taken place in the 1960s, either the closer trouser cuts of Carnaby Street have begun to encroach upon Mad Men, or Jon Hamm�s penis has similarly begun to experiment with the styles of the era, and its insistence on copying Bob Dylan�s fly-away hair and Cuban boots have made Hamm�s penis all the more disruptive.
In addition to being banned from the set, Jon Hamm�s penis has also been Photoshopped out of promotional booklets and advertisements, with NYDN�s source laughing, �Imagine how distracting that would be on the side of a bus or building.� Hamm�s representative, however, doesn�t find anything amusing about his client�s enormous, impudent genitals being scrubbed from city buses so as not to cause traffic accidents. �It is ridiculous and not really funny at all. I�d appreciate you taking the high road and not resorting to something childish like this that�s been blogged about 1,000 times,� they said, clearly not familiar with the Internet. 
On a related note, Matthew Weiner is still allowed free rein. "Around here there can only be one Weiner in charge," he said, hopefully.

Where Is Cyprus?

To most of us, we do not even know the locations of Cyprus, maybe even the fact that it was admitted into the European Union as well. How can something so small be so significant? How can it drag markets down so much? In hindsight, the weaker markets gave the lawmakers a big signal. Its not so much that they can whack the depositors in Cypriot banks, they are scared that such tough and unreasonable measures may be employed at other difficult countries such as Spain or Italy.

What is likely to happen: the Cypriot lawmakers will vote down the rule. This will anger the ECB and may pave the way for Cyprus exit. I mean, seriously, in the whole scheme of things, its only $7bn. You may actually see a minor bank run at places such as Italy and Spain as well, which may bring back the ECB, IMF and EU finance ministers to the discussion room. Likelihood, the tax will only apply to deposits above 100,000 euros ... paving the way to tax the rich but not the poorer citizens - that may be acceptable, the shortfall can easily be made up by the trioka.

Global markets were rattled slightly. However as more news on the backlash by so many parties, it is likely that the rule has to be changed significantly to gain acceptance, and more importantly restore confidence in the ECB's recovery and restoration plan. Cyprus ia small issue, no one will risk pushing the silly rule through at the risk of major fallouts in bigger EU nations. Last thing they need in Italy and Spain is a bank run.

(excerpts from Bloomberg & NYT)

A plan to rescue the tiny European country of Cyprus, assembled overnight in Brussels, has left financial regulators, German politicians, panicked Cypriot leaders and a disgruntled Kremlin with a bailout package that has outraged virtually all the parties. Russia was angry it was left out of talks to aid Cyprus, where it has billions in banks. Aha, you see, Cypriot banks was seen as a haven for a lot of riche Russians to stash their millions and billions.

As markets tumbled and the Cypriot Parliament fell into turmoil. It now looks likely that the Cypriot lawmakers will vote down the measures.

Officials scrambled to explain what went wrong and how best to control the damage of completely irrational decision to make bank depositors liable for part of the bailout. The deal flopped so badly that finance ministers who came up with it shortly before dawn on Saturday were on the phone to each other Monday night talking about ways to revise it. Whatever the outcome, the dispute is a vivid demonstration of why Europe, which until recently was congratulating itself on having weathered the worst of the financial storm, has trouble making decisions with so many different interests represented at the table.

Politics, both domestic and international, get in the way of economics and make it difficult for wealthy countries to line up behind a plan to help the smallest ones. The northern European nations have grown so weary of bailouts for their southern neighbors that they were intent on exacting a hefty contribution from their latest supplicant. Germany in particular, with parliamentary elections looming in September, was set on driving a hard bargain.

A wild card in this instance were the Russians, who have deposited billions in Cypriot banks, extended a $3.25 billion line of credit to Nicosia in 2011 and were in negotiations to help out Cyprus once again. Cypriot leaders apparently were so concerned with keeping their wealthy offshore Russian customers happy that they pushed their own citizens to pay even more than some of the lenders were demanding.

The Russians reacted angrily to a so-called stability tax on deposits in Cyprus, and at being left out of the negotiations. On Monday, Russia�s minister of finance, Anton Siluanov, warned that Russia might not extend the existing credit line because the Europeans had not consulted authorities in Moscow about the deposit levy plan. On Sunday, one Russian official was reported by the Interfax news agency as advising Russians to withdraw funds from Cyprus, saying the banking system was untrustworthy.

The all-night discussions began Friday and ran for 10 hours, ending shortly before dawn on Saturday. Cyprus needed to come up with billions of dollars to help cover the costs of the bailout of the country�s financial sector, or its European allies said they would leave it to face the prospect of collapse alone.

Each of the major stakeholders, which included the International Monetary Fund, the European Central Bank and euro zone finance ministers, entered the room with a conflicting goal. Protecting the small-time saver was at the top of no one�s list. The result was a compromise solution everyone is now unhappy with, officials say, one that stands to cost ordinary Cypriot depositors 6.75 percent of their savings.

The Germans and their northern European allies wanted to exact a maximum contribution from Cyprus to ensure the deal could pass their recalcitrant, bailout-weary parliaments at home. A confidential report by the German foreign intelligence agency, known by its German initials as the B.N.D., was making the rounds, one that painted the island as a haven for money-laundering. The stigma attached to helping the Cypriots � and the political cost in an election year � was rising rapidly.

The I.M.F. was dead set on keeping the debt at what its number-crunchers considered a sustainable level. The Cypriots, meanwhile, wanted to spread the pain around.

The European Central Bank also had reservations about levying higher taxes, but the Germans wanted $9.2 billion from depositors, officials said. That was an enormous contribution for a country the size of Cyprus.

Cypriot lawmakers is likely now to shoot down an unprecedented levy on bank deposits, risking the island�s membership in the euro. Cypriot President Nicos Anastasiades warned German Chancellor Angela Merkel in a call yesterday that he may not be able to win passage, said a Cypriot government official. 

Finance chiefs from the 17-member euro area late yesterday urged Cyprus to spare small-scale savers, while keeping unchanged the size of their demand on account holders. While Cyprus accounts for less than half a percent of the euro economy, the fight over the bank tax risks triggering new turmoil in the financial crisis that began in 2009 in Greece.

A complete rejection of the measure would forego European assistance and could lead to a sovereign default, or even an exit from the currency union. What we have seen in the last few days is a very serious blunder by European governments that essentially are blackmailing the government of Cyprus to confiscate the money that belongs rightfully to depositors.

Once banks on the island reopen, the country could see more than 7 billion euros in outflows, or about 10 percent of the total, Central Bank Governor Panicos Demetriades told a parliamentary committee.

Anastasiades was rebuffed in a call to German Chancellor Angela Merkel yesterday. Merkel told him that he can only negotiate a rescue with the so-called troika, which comprises the European Commission, the ECB and the International Monetary Fund, according to a German government official.

The bank levy and additional tax measures reduced the overall rescue package to 10 billion euros from about 17 billion euros to meet the IMF�s demand for debt sustainability and German politicians� skepticism over financial transfers.
German Finance Minister Wolfgang Schaeuble said there was no other option if the troika wanted to keep the price tag for the bailout at 10 billion euros. Naturally, the Cypriot president tried to find a way around it, but there was none, and that the levy doesn�t violate deposit guarantees, because such protections are �only as good as a state�s solvency.

Russian President Vladimir Putin called the tax �unfair, unprofessional and dangerous,� according to a statement posted on the Kremlin website. Russian companies and individuals have $31 billion of deposits in Cyprus, according to Moody�s.

21st March, Thursday @ Grand Hyatt

Self-Censorship & The Brilliant Independence of Brokers' Research

I have yet to come across a top tier broker research that truly examines ALL the potential outcomes of the upcoming election and the implications. Yes, we had the research from Bank Islam and see what happened. Nomura Research only presented 3 possible scenarios. THREE, nothing more.

Even the dumbest person in the room would know that that is not the entire scenarios available or the available outcomes. Even in my "biased piece below", at least I have the decency to look at all the possibilities.

Nomura has painted three potential election scenarios and their impacts on the economy.
The first scenario is that the ruling coalition will win a smaller majority of 120-124 seats out of 222. BN currently holds 137 seats. The second scenario is that the number of seats won by the opposition and the ruling coalition are marginally less than 120 seats, which would likely be an accelerated ousting of the prime minister. Nomura said within this 20% probability, there is a small chance of the election leading to a hung parliament. The final scenario is that the ruling coalition winning around 125 to 130 seats. But Nomura said this outcome looks unlikely unless there is an unexpected fall in support for the opposition.

Three fucking scenarios ONLY??? Its a fucking coin toss, the last elections popular vote is like 49-51, and you fucking give only 3 scenarios??? Why don't you just say it out loud ... that you cannot make any comment on the other 2 possibilities, no matter HOW REMOTE they may be, only then can you say it is from a fucking research house!!! (the other two possibilities: PR wins by small majority, and PR wins by more than 10 seats majority). Why the self censorship, is there something you cannot say, ... its like predicting the recent US elections and you only give Obama winning by less than 2%, 5% or 10% ... asif the Republicans never existed. I know your hands are tied and you depend on the flows of IB deals but seriously, if you cannot comment or choose not to comment on the other side of the coin .... then don't fucking print the research idiots. It makes a mockery of the so call research piece.

Another one, just received from Morgan Stanley, the big US house, from the land of the purveyor and global sheriff of the maintenance and prevalence of democracy ... they also gave 3 fucking scenarios ONLY ... sigh, long live the USA ... OR come out with a note that says that you think there is a ZERO chance of Pakatan winning the elections and see how many legs you have to stand on.

I am sure we all understand the self censorship part, I would understand but not condone it, if it came from a local house ... but from a foreign house it smacks of something smelly.


#3: Election Scenarios and macro implications 
? Scenario 1: 
BN Parliamentary seat share > 63% 
Positive surprise for investors
? Scenario 2: 
High 50% < BN Parliamentary seat share < 63%
? Scenario 3: 
BN Parliamentary seat share < mid 50% 
(To be fair to Morgan Stanley, they did a decent policy comparison between the two parties without really saying too much one way or the other. The snaps attached below are from MS).

The Edge/Sun Daily: Nomura Economics Research said the upcoming general election (GE), which is likely to be held on a weekend between April 6 and 20, 2013, could make or break its relatively positive economic outlook on Malaysia.
"Our baseline scenario is for the ruling Barisan Nasional (BN) to win, but by a smaller majority of 120-124 seats, which is lower than what we had previously penciled in, partly because recent surveys show an emboldened and well-organised opposition," said Nomura in its "Asia Special Report: Southeast Asia" dated March 6, 2013.
"This raises uncertainty over whether there would be an orderly transition of power, whether Prime Minister Datuk Seri Najib Abdul Razak remains in power and whether the much-needed economic reforms can continue," it added.
Nomura has painted three potential election scenarios and their impacts on the economy.
The first scenario is that the ruling coalition will win a smaller majority of 120-124 seats out of 222. BN currently holds 137 seats.
"Although there is scope for some relief on this baseline result because a small minority of the market sees the opposition actually winning the election, we believe this will be short-lived owing to the immediate implications of a small majority.
"A simple majority in parliament calling a no-confidence vote could emerge when parliament convenes for its first session 60 days after the election. This would raise political and economic uncertainty," said Nomura.
The second scenario is that the number of seats won by the opposition and the ruling coalition are marginally less than 120 seats, which would likely be an accelerated ousting of the prime minister.
Nomura said within this 20% probability, there is a small chance of the election leading to a hung parliament.
"The risk of such an outcome includes policy paralysis, potential protests, calls for a recount or even an annulment of the election results, which can be called within three weeks of the election announcement," said Nomura.
Risk of a no-confidence vote from the opposition on the prime minister will also be even greater, while internal party pressure could also lead to a change in Umno leadership.
"Currently, Deputy Prime Minister Tan Sri Muhyiddin Yassin is seen as a potential replacement for Najib and viewed by the market as somewhat hard-line. This change could emerge earlier than the planned October/November 2013 party elections.
"With the negative political backdrop and economic risks, as well as possible delays in investment projects, these could lead to a sovereign rating downgrade," the research firm said.

The final scenario is that the ruling coalition winning around 125 to 130 seats.
But Nomura said this outcome looks unlikely unless there is an unexpected fall in support for the opposition.
"(However, if it does happen,) the pressure on Najib to step down on this outcome would be significantly reduced and economic policy continuity will likely be maintained."
Nomura believes that increased political and economic concerns if the opposition gains power could be overstated as there may not actually be any major policy changes.
"The opposition has a common objective and is likely to initially focus on governance issues (which could lead to slower government investment), keeping key government staff in place such as the central bank governor and heads of key state companies, consolidate the civil service, before focusing on the direction of economic policy," it said.

hishamh said...

I've looked at the problem myself, and for the life of me, I can't figure out how anybody can make an objective forecast of GE13, much less tease out the probability distribution of outcomes.

We are nowhere near being able to replicate basic electoral prediction methodologies, much less aggregate them as e.g. Nate Silver did recently for the US presidential election.

Problem 1: The overall Malaysian electoral sample size (across time) is too small, both for votes and seats.

Problem 2: The sample size for the predictors normally used (opinion polls, quarterly economic data) is even smaller - small enough that a regression estimate can't be generated, which is a precondition for estimating the probability distribution of outcomes.

Problem 3: GE12 may represent a structural break from the past, but that can't be determined statistically until confirmed by results of GE13.

A time series analytical approach can handle the first two statistical issues, and predicts a BN victory with well above a two thirds majority (point estimate) but with a sample error so large as to make any forecast worthless (I suspect this is due to problem 3).

I don't understand how Nomura or MS or BIMB can predict such tight probability outcomes given these constraints. There's nothing in the scenario analysis methodology that allows you to estimate the probability distribution. Scenario analysis is more of an ...if...then... decision tool, not a forecasting methodology per se.

In short, i don't think self censorship has much to do with this, rather everyone's just pissing in the dark. You're absolutely right - nobody should be publishing research on this, because its too damaging to their credibility.

Malaysia Equity Strategy

Election is the most talked about subject matter. How should we view Malaysian equity? Will the election result matter in the end?

Fact: Retail players and to a lesser extent local funds, have been avoiding or exiting their holdings for the past 3 months despite bouts of uptrend in the local bourse.

Fact: Foreign funds have been net buyers for the past 3 months. You wonder if they know something we don't.

The confidence exhibited by foreign funds in local shares may be due to the way they view how politics affected Thailand. That country has had more riots, protests rallies and change in government for the past 10 years than all Asian countries combined, I think. Yet the equity market there has shown a strong performance albeit with bouts of minor volatility with each "eventful event". Asian equities are not expensive, but they are no longer outright cheap, except for Malaysia comparatively.

How different is Malaysia from Thailand? I think there are more similarities than differences. 

If we have a change in government, what will be main causes of a market meltdown? One, there is a prolonged and difficult transition of power. Will that happen? Rightly or wrongly, the over-riding view is that there will not be a change in government if the Malays do not want one. If there is a change it would be because they do, and being part of the new majority, it is highly unlikely that the police or army may make the transition of power difficult.

Two, if there was to be a dramatic reneging of contracts or reversal of corporate deals. This is critical as that erodes confidence of contractual obligations. Thats akin to Hugo Chavez or Fidel Castro nationalising whatever they like and whomever they want to punish. I think there are enough brain smarts in Pakatan to know that its not the right path to take. Witch hunting is also a no-no for confidence, which Anwar has said that there will be none of that.

Fact: Malaysian equity has basically been left out from the massive equity rally globally for the last 4 months, owing to election uncertainty which has distracted local investors and deterred them as well. The belief among most foreign funds investing in Malaysia is that Malaysia will be playing a lot of catching up when the election is over - whatever the result may be.

Malaysia looks interesting to foreign funds given its recent under performance but the only decision regional investors will make is NOT whether to buy Malaysian stocks  BUT when to buy. This is beginning to look a lot like a similar wave of foreign funds coming in early when the locals are shunning the markets. After the election (regardless of the outcome), the Malaysian market rallies ... and guess what, the local retail and local funds jump in with gusto, helping to take out the foreign funds above 1700. Sounds familiar?

Seriously, if BN retains, the markets may rally but only a little because there's nothing new. If Pakatan comes in, there will be a mini knee jerk reaction, around 20-40 points, not much, because folks, much of what's going to happen IS IN THE MARKET already. As dumb as we like to paint foreign funds, they are actually quite savvy about things. Hence, my view is that after a swift initial small bout of downside, a Pakatan victory will propel the local bourse a lot higher and more sustainable too.

Why? The presumed better corporate governance, the presumed better management and allocation of resources, a more transparent way of doing things. Watch FDI comes in big waves as there are many who will regard it as a "welcome mat" - do you have any idea how many funds, stock investors and longer term FDIs have chosen to bypass Malaysia because of you know what ...

Rest assured, those "good plans" such as Iskandar will still get the go ahead with Pakatan. The speed rail from Singapore will still go on albeit with some changes, and a much much open tender process. Here is my opinion of the markets with the following scenario:

For the rest of 2013

BN retains but smaller majority:  1620-1730 (20%)

BN retains with a bigger majority: 1620-1760 (5%)

Pakatan wins with majority of less than 10 seats:  1580-1800 (45%)

Pakatan wins with a majority of more than 10 seats: 1580-1850 (30%)

For the differing scenarios, I have also assumed various likelihood in % out of 100. The 4 scenarios adds up to 100. Naturally this is just my view, and takes into account gerrymandering and potential voting issues raised by Bersih, hence this is not an ultra positive or whitewashed view.

Musa Hitam & Roubini .....

Pakatan regime won�t bankrupt nation, says Musa Hitam

MARCH 13, 2013
Malaysian InsiderKUALA LUMPUR, March 13 ? Malaysia will not become bankrupt if Pakatan Rakyat (PR) trumps the Barisan Nasional (BN) to take Putrajaya, Tun Musa Hitam said as concern grows over the nation�s economic state amid a possible regime change in the coming polls.
The former deputy prime minister appeared to defend the opposition pact, which has been forecast by politicians and some observers aligned to the ruling BN coalition as likely to empty the nation�s coffers and scare off foreign investors with their proposed public policies in their bid to take federal power.
�That is a political statement; in my opinion, no. In fact, I have openly commented on this matter, including to bankers and outsiders.
�If the opposition were to rule, they would not make foreign investors run away. They will not do so and bankrupt the economy,� Musa was quoted as saying at a news conference in Shah Alam yesterday by Malay language news website, Sinar Harian Online.
The 78-year-old, who had been in office from 1981 to 1986, was reported saying the pact would work hard to maintain the country�s economic growth should it win in the 13th general election as it was important to present a positive picture to draw in investors.
Without naming any one person or party, he lashed out at PR�s critics who have been mounting a psychological campaign against the PKR-DAP-PAS partnership by repeatedly casting doubt on their election manifesto.
�If you accept the concept of democracy, you will therefore not say another party will bankrupt the nation,� Musa was quoted saying.
Malaysia�s economy grew 5.4 per cent last year, slightly above the economy�s potential rate of about five per cent, global research house Moody�s Analytics reported last month.
Southeast Asia�s third-largest economy will weather the next general election and maintain its robust growth even if there is a change in government, renowned world economist Nouriel Roubini told the Datum Economic Forum 2013 here on March 1.
Roubini, also known in the media as �Dr Doom� for his consistently pessimistic economic outlook, gave his prediction amid previous warnings by names such as veteran statesman Tun Dr Mahathir Mohamad and former police chief Tan Sri Musa Hassan that Malaysia will descend into political and economic chaos should PR win the next polls.
�I would say whatever the result is going to be, this country has shown institutional and political stability.
�Investors recognised that, and therefore as long as there is a democratic process, as long as there�ll be policy clarity after those elections, it�s certainly going to be positive,� he said.
The PKR-DAP-PAS opposition parties had won 82 out of 222 federal seats in Parliament and four states in Election 2008, denying the BN their traditional two-thirds supermajority.
The landmark win has boosted the opposition bloc in their bid to topple the BN and form the next federal government.
Malaysia is expected to go to polls in the next few weeks.
Analysts have said the possibility for a regime change has emerged for the first time ever since the country�s independence in 1957.

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The S&M Show : Salvador Dali, Financial Blogger with Khoo Hsu Chuang
WhenWed, March 13, 9:30am � 10:00am
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