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Goldman Sach Says China Is Oversold

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FinanceAsia: A multitude of concerns have overshadowed China�s prospects during 2011, including slowing growth, rising inflation, ballooning local government debt, overheating property prices and mounting bad loans among the banks. But it is not all bad news. Goldman Sachs reckons that China will be able to maintain decent growth during 2012 and 2013, despite some risks remaining.
�We think that China overall growth for next year will continue to be fairly stable and strong,� said Helen Zhu, chief China strategist at Goldman Sachs. Despite revising down the eurozone�s predicted economic growth to -0.8% from 0.1%, Goldman Sachs estimates that China will grow by 8.6% in 2012, which is slightly higher than the market consensus of 8.5%. Predictions for most countries in the rest of the world are below consensus.


Goldman Sachs also points out that the 8.6% growth rate for China during 2012 is below the 9.2% growth achieved in 2009, while the global economy will grow by 4% � marginally stronger than in 2009.


There have been concerns about the health of government revenues given that land sales are expected to slow down after policymakers intervened to cool the property market. Taxation and fiscal revenues will provide the buffer, according to Zhu. Goldman Sachs estimates that total government revenue will continue to grow to Rmb16 trillion ($2.5 trillion) by 2015, up from the current Rmb12 trillion ($1.9 trillion), with the contribution from land sales declining to 10% in 2015 from 23% this year.


However, the substantial rise in lending is still a worry. Although China can loosen its monetary and fiscal policies to drive up growth, it has far less room than it did during 2008 and 2009. China�s total credit hit 197% of GDP during the first half of the year, up from 152% before 2008. In fact, China has a higher credit ratio than many countries with similar GDP per capita, such as Brazil, Thailand and Russia.


�Since the global financial crisis, China has levered up a lot,� said Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs. �It has now used up that space [for easing policies] and needs to be a little more cautious.�


China recently cut bank reserve ratios by 50 basis points to avoid a growth slowdown. �China has already started to ease policies,� said Buchanan. �We do not expect any repeat of what we saw in 2008, but roughly speaking we would expect [the easing policy] to continue.�


Although risks exist, Timothy Moe, chief Asia-Pacific strategist at Goldman Sachs, said that the market has overreacted. �We think the market is pricing in concerns a lot more than it should do,� said Moe. �You have the biggest gap between the market and earnings that we have seen in a decade and a half.�


�We continue to maintain our relative preference for China versus the rest of the Asia-Pacific region in terms of equity returns,� Zhu added.

The Truth Is Not Pretty

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THE TRUTH EMERGES October 2009 


A former minister shares eyebrow-rising inside stories from his long political career.  �In the old days, the corruption was smaller. If an Umno branch leader did not get a taxi permit, he would dissolve his branch. Now many Umno leaders are busy looking for big projects. That�s the success of the NEP (New Economic Policy),� he laughs.


By ANDREW SIA, The Star



UNLESS the name on the cover is Mahathir or Badawi, ministerial memoirs wouldn�t usually be greeted with bated breath. But the book by Tan Sri Mohamed Rahmat that was released on Oct 12 has been causing quite a stir. He was, after all, the person who controlled for more than a decade what the Malaysian public saw and heard on Government TV and radio channels as Information Minister from 1987 to 1999.


Now, aged 71 and suffering from diabetes and cancer, Tok Mat, as he is known, freely admits that his job was really as a Propaganda Minister. In his political memoirs, Umno: Akhir Sebuah Impian (Umno: The End of a Dream), he explains how his ministry�s campaigns, such as Setia (Loyalty), were actually a response to the Team A versus Team B split in Umno in 1987.


�I had to bring Malay loyalty back to Umno. And I had to raise a presumption that anybody who supported (Team B led by Tengku Razaleigh then) was not loyal. I went all out in this psychological warfare,� he writes.



�The Malays were numb to political arguments ... I needed something that penetrated the heart. I needed a song.�


So he wrote one himself: the famous Setia song with its supposedly patriotic lyrics  (�Demi negara yang tercinta�, or �For our beloved country�, goes the first line) that was broadcast for years especially via the Government�s RTM (Radio Televisyen Malaysia) stations.


Tok Mat admits in his book that he first used Information Ministry staff in 1977 on a �mission� to topple the PAS State Government of Kelantan. He reveals that later, in 1995, during the Sabah state elections, he sent 500 ministry staff members to �campaign for Umno� against PBS (Parti Bersatu Sabah, which was controlling the state government then).


�The officers went to the ground,� he explains in fluent English at a recent interview.


�They rented rooms in villages, they slept and ate like the locals, they gathered information and persuaded the people. This silent propaganda works very well.�



Since government machinery is supposed to be neutral, I ask Tok Mat if he considers what he did an abuse of power. He replies: �You could say I abused radio and TV, but it was a privilege I had. I could not depend on TV3, (The New) Straits Times, Berita Harian or Utusan Malaysia because they were then controlled by Anwar Ibrahim�s boys. I had no choice but to use RTM.


�I was asked to bring PBS down. I shut the media off, there were no reports. People didn�t know what the Sabah Government was doing, so it looked like they were doing nothing. It was a very dirty tactic,� he now admits.


Tan Sri Mohamed Rahmat is proud of the job he did as Information Minister. Tok Mat had his secondary school education at Johor Baru�s English College before doing a Bachelor of Arts at Universitas Indonesia, Jakarta. He tells me that he learnt the basics of propaganda when he was a script writer for Filem Negara (the National Film Board) in the mid 1960s. �There was no TV then, so that was the Government�s only (way to generate) propaganda,� he recalls.


He honed his innate musical ability there and picked up film editing skills too. He later went on to personally devise the melody and lyrics of various songs, including Setia, Syukur and Sejahtera Malaysia, that were used for his �nation-building� campaigns. Tok Mat has always had a fondness for oldies by Nat King Cole and Bing Crosby, and once even made it to the quarter finals of Radio Singapore�s talentime singing contest in the 1950s.


�Tan Sri can sing and he can play the piano by ear,� chips in his wife, Puan Sri Salbiah A. Hamid, who is also at the interview. �And he can write. I still keep all his love letters from when we met as teenagers,� she smiles. With these skills, Tok Mat became the chief loyalist and cheerleader for then Prime Minister Datuk Seri (now Tun) Dr Mahathir Mohamad, whose political rivals included Musa Hitam, Tengku Razaleigh and, later, Anwar.


He claims that most Umno people were hedging their bets then: �Everybody was half  leg here, half leg there, very few were working (100%) for Dr Mahathir. I was totally devoted to him.�



But then again, he has a chapter in his book that declares I Am Not a Yes Man. In it, he cites how the developers of the Second Link to Singapore, who were Dr Mahathir�s �friends�, were trying to acquire the land of villagers in his constituency at 80 sen per sq ft (psf) so they could resell it at RM17.80 psf! He claims that he spoke up despite Dr Mahathir�s anger with him, and helped the villagers secure a better deal.


When the Setia campaign was not sufficient to bring back Malay support to Umno, Tok Mat says his ministry then launched the Semarak campaign in 1988, during which Dr Mahathir had massive �meet the people� sessions.


�I told the police chief,� says Tok Mat, �I don�t want to see any police uniforms around Mahathir, because that looks like we live in a police state. Instead, I gave the policemen Setia T-shirts to wear, so it looked like he was surrounded by the public.�


Tok Mat�s promotion of Dr Mahathir � who certainly had his critics, even in those days � indirectly made him �the most hated man in Malaysia�, he says.


In his book, he even acknowledges that people called him the �barking dog of the government�: �When the people hated Dr Mahathir, I became the face of the Government for them to hurl abuse at,� he writes. But he took all this as a sign of �success� because it meant that he had managed to �penetrate people�s minds� to provoke anger: �In the art of propaganda, touching a nerve is very important,� he explains.



Tok Mat claims that a sign of Setia�s success was that he has personally heard even non-Malays singing the song. As for the Semarak campaign, he says the crowds at Dr M�s  meet-the-people sessions ranged from 30,000 up to 100,000.


Were civil servants �pressured� into attending such events?


�No,� he asserts, �nor did we provide transport or give out free T-shirts.�


His �propaganda� might have been successful, but the Government still hired a PR and advertising firm during his tenure to advise on winning popular support. Now in hindsight, he is critical of the move.


�I think I was more effective because I understand the culture better. I had 1,000  officers working on the ground giving me feedback. Even Pak Lah (former PM Tun Abdullah Ahmad Badawi) used these foreigners. But what results did these PR people get?�


Tok Mat�s detractors say one of his career missteps took place in May 1999 when many Malays were angry at Umno over the Anwar Ibrahim saga.  Tok Mat alienated non-Malay voters (who were to play a crucial role in returning Barisan Nasional to power in the general elections later that year) with his infamous remark that Anwar�s wife, Datin Seri Dr Wan Azizah Wan Ismail, was �unfit� for leadership as she had been �educated in Singapore� and had �darah cap naga� (dragon brand blood), an euphemism for Chinese blood or lineage.


�No, it wasn�t a mistake,� says Tok Mat now. �Because Anwar wanted Azizah to become Prime Minister. By the way, I am also cap naga. My mother is a Chinese (who was adopted by Malays). So I can talk. I can scold the Chinese and the Malays because I am one of them.�


Whether by coincidence or not, Tok Mat was relieved of his minister�s post in May 1999 too. However, he writes that this was because �forked tongues� whispered to Dr Mahathir that he was a secret Anwar supporter.


�What I can�t forget is the way Dr Mahathir dropped me without any hati budi (grace and gratitude),� he writes in the chapter entitled Habis Madu Sepah Dibuang (When the Sweetness is Finished, the Tasteless Part is Thrown Away).


Since then, he has become more critical of his former political master. For instance: �We know that Dr Mahathir blamed Pak Lah in all aspects even though the initial problems were caused by he himself. This is the �expertise� of Dr Mahathir,� writes Tok Mat sardonically. Despite his rather caustic tone, Tok Mat says to me, �It may sound like it lah ... but I don�t hate Dr Mahathir. I�m not angry with him. I still consider him a great leader of the country.�


In fact, he leaps to Dr Mahathir�s defence when I ask him about other controversial episodes when Dr M was PM. However, he adds that money politics really became a �cancer� within Umno during Dr Mahathir�s era.


�In the old days, the corruption was smaller. If an Umno branch leader did not get a taxi permit, he would dissolve his branch. Now many Umno leaders are busy looking for big projects. That�s the success of the NEP (New Economic Policy),� he laughs.


More seriously, his book concludes, �Umno has jeopardised its image with power grabbing, money politics, bribery and excessive racism by certain leaders.... Umno must reform or I fear the End of the Dream (for the party) will really happen.�

Movies Take Their Inspiration From Reality

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This will make you smile, laugh and LOL. I suspect some of them might be photo-shopped but certainly Ronaldinho's wasn't. Have a nice weekend.













Need To Revamp These Archaic Laws

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This is an important add-on to Mr. Koon's article below over Malaysia's flagrancy with regards to debt. While I strongly agree that our government coffers have been misused, and in many cases, blatantly, ... we also need to know that there is a highly inequitable treatment of those who fall under bankruptcy in the Malaysian system.
Vivian Hsu no67167


I have written before on the dire need to revamp Malaysia's archaic bankruptcy laws. Let's look at hard facts:

a) Inland Revenue Board CEO Dr Mohd Shukor Mahfar is 'embarrassed' to explain clearer the issue of why five million people in the country who are eligible to pay taxes but only 1.7 million are active taxpayers.

b) As of October 2011, there were 235,908 individuals who were still declared bankrupt, according to Insolvency Department's Datuk Abdul Karim Abdul Jalil. On average 41 new ones are added everyday.

Take the two together, this is to say that nearly 5% of those working are bankrupts. Yes, I know some are not working. So we are still looking at 1 in 20 of our workforce.
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The trouble with our system is that bankruptcy runs in perpetuity (i.e. almost never ending till you die). Unlike in HK, Singapore and many forward thinking economies where you only have 4 or 5 years to pay down your debt and after that you are free from the debts.


Why is it so important to implement a limited period for bankruptcy?


1) Being bankrupt means you are also literally removing 5% of the working public and 5% of households from participating in the real economy. Cannot do business, cannot get loans, even job hunting may be a problem every now and then.


2) The Malaysian archaic system overly favours the banks and financial lending institutions. When its in perpetuity, the banks can clamp down on you for the rest of your life. We have to make banks and other lenders also responsible for their part in giving out the loans. Look, even creditors to EU give haircut once Greece is in trouble. That is why banks in Malaysia can be so bloody aggressive with credit cards, they know they have a very long recourse to make your life a living hell.


3) The 235,000 figure will jump exponentially soon. Why? Just look at the way they are dishing out the study loans under PTPTN. When you give out RM30,000 or RM40,000 or RM50,000 to someone and their job is only likely to pay them RM2,000 when they graduate, if they graduate, and if they can find a job then, ... you are going to have huge problems. Plus, we haven't got to the credit card users yet.
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4) Even fuckers who end up in jail for a few years and come out, they are free ... not if you are a bankrupt, man, they will drag you till you go to your grave.


5) The onus needs to shift back to the banks and other institutional lenders for a more balanced and equitable solution. For far too long have the banks been operating giddily under such a protective umbrella in their favour. There has to be a fairer distribution of risk for lending and borrowing. I am not suggesting that debtors need not pay, I am saying you need to give them a limited timeline.


6) When you take out 5% of the household from the real economy in perpetuity, it has a lot of indirect repercussions: cannot get study loans for children, making it very difficult to reverse their position as their job prospects may be affected as some companies frown on their status, etc. Needless to say, these 5% will also NOT play a part in the real economy in an effective manner - talk about dropping an anchor on the economy, it weighs heavily especially if its in perpetuity.


7) We have NO UNEMPLOYMENT INSURANCE or other similar SAFETY NETS. If our economy tanks, or the industry we are in tanks, and we are suddenly out of a job ... it becomes very easy for us to spiral swiftly to bankruptcy if you have car loans, housing loans, etc... and no job.


8) Our current laws stifle entrepreneurship. When they try to start businesses, they usually have to take loans, sometimes they will fail, you do not want to punish a risk taker too much by literally barring him/her from ever being an entrepreneur again. We all know that to have a vibrant economy, we need more risk takers, not shut them down the moment they fail. Many successful entrepreneurs will tell you they needed to fail a few times before striking it.


9) It is also precisely these laws that causes many to go for the "ah longs" to make ends meet. No one will resort to these avenues if we have a saner approach to this mess.


10) And this is the most important reason of all, we need a KINDER, GENTLER society and government, that embraces all and not excessively punishes some.





p/s I know there will be many who will harp on bigwigs and connected individuals amassing huge loans from government linked banks and government linked financial institutions, and not paying back. That is a separate issue altogether, and should NOT be lumped into what I have written above. Heck, most of these connected people do NOT EVEN EVER get slapped with a bankruptcy notice, so they really do not count - theirs is a matter of poor government governance, lack of accountability, poor or no enforcement, running circles around regulations, the lack of political will to enforce or do the right thing, no checks and balances. So these are TWO related BUT almost entirely separate issues.

Malaysian Malaise by Koon Yew Yin

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M�sian Malaise: The govt as everybody�s cash cow
by Koon Yew Yin


Since my retirement from active business, I have been more and more concerned about our increasing financial profligacy and irresponsibility. Every day new details emerge about how spendthrift we are as individuals, as households and as a nation. 


At the national level, the Auditor-General's recent report pointed out that Malaysia's national debt rose 12.3 percent to over RM407 billion in 2010. The amount is equivalent to 53.1 per cent of gross domestic product (GDP) and is the second straight year that the national debt has exceeded 50 percent.
At the micro level, details of how ordinary Malaysians who have accumulated huge debts and are hotly pursued by Ah Long (loan sharks) fill the papers. These stories sit beside constant advertisements urging Malaysians to apply for credit cards with generous spending limits � ads which we have not been able to resist. At last count, there are more than eight million credit card holders, owing over RM30 billion. About one quarter � over two million of card holders � earn less than RM3,000 a month, meaning that many are unlikely to be able to settle their debts.


As for household debt, this has also been rising steadily. According to recent estimates, household debt had reached RM560 billion by the end of August 2010. Household debt-to-GDP ratio had increased sharply from 66.7 percent in 2004 to 76 percent in 2009 making it amongst the highest in Asia. What is especially worrying is that this rate of household debt increase is rising more quickly than the level of increase of household income or wages, meaning that most households are spending more than what they are earning and making up for the difference through borrowing.


Fostering culture of financial insouciance
Besides borrowing from Ah Longs, family members, friends, pawn shops, credit card companies and banks, Malaysians are heavily indebted to the government.
Borrowing from the government for many Malaysians start at an early age and is in the form of loans from the National Higher Education Fund Corporation (PTPTN). Between 2000 and 2009 over 1.3 million young Malaysians in the public and private higher education institutions had received loans ranging from RM8,500 to RM20,000. In all, a total of RM20 billion, RM39 billion and RM71 billion were allocated to the PTPTN for loans to students for the 9th, 10th and 11th Malaysia Plan periods respectively.


Whilst it is encouraging that many young Malaysians are prepared to pursue higher education even though they may not be able to afford it, what is worrisome is the widespread failure to repay the loans taken for the purpose. Authoritative data on loan defaults is not easily available but estimates from a World Bank study in 2007 indicate that the PTPTN management estimates that it recovers only 25 percent of the total amount it should be receiving. As until 2004, the number of graduates making their repayments was only 44 percent of the total number of loan beneficiaries.

In my opinion, some of the blame for the culture of financial profligacy and irresponsibility in our society is traceable to this government policy aimed at providing cheap and easily accessible loans to higher education of our young. Providing low interest loans for educational purposes is in itself an admirable policy. But its noble intentions become subverted when implementation is seriously flawed as students from well-to-do families who can afford the tuition fees are provided access, and there is an inability or unwillingness by the authorities to enforce the repayment of loans.


Once young people learn that they can get away with not paying back their loans or are able to get access to credit despite being ineligible, the bad apples amongst them graduate to scamming the public exchequer and private financial institutions in other ways after they obtain their degrees and diplomas. How else does one explain the massive loans given out to finance businesses in every sector of the economy which have gone sour and have not been repaid? 


Readers can identify a sector �  whether agricultural or non-agricultural; hi-tech or low-tech; rural or urban � and I am willing to donate a large sum to any charity of their choice if they can show me proof that the repayment of loans provided by the government has been able to exceed more than 70% in that sector.


The bigger the loan that is provided by the Government, the surer it appears to become transformed into a bad debt � this appears to be another financial axiom of life in Malaysia.  Recently during the Dr Ling Liong Sik cheating trial, we heard that the Port Klang Authority (PKA) cannot afford to pay back its RM4.6 billion loan for the Port Klang Free Zone (PKFZ) project to the government. This was according to the prosecution�s witness, Adnan Abidin.
Mind you, this was a project in which the development cost ballooned from RM1.088 billion to RM4.6 billion in 2007 and which the cabinet, according to Dr Ling�s lawyers, had given their retrospective approval. It is not surprising therefore that the cabinet is not concerned about the small fry of student loan defaulters when it is blind to other possible financial scandals that involve billions of dollars.


Publish the names of all govt debtors
Clearly too, those who are likely to have access to government loans are those with the most powerful political strings such as happened in the RM250 million cattle-farm scandal linked to Minister Shahrizat Abdul Jalil�s husband and children.


Although I am critical of students who have taken out loans for their education and have refused to repay them, it is unfair for the government to put their names into a blacklist for public consumption as has been done periodically. 
However if the government intends to continue carrying out this measure, I would like to propose that it also publishes the names of other Malaysians who have obtained loans for their projects and businesses and failed to repay them, especially those with large multi-million ringgit loans.


Only if this non-discriminatory public disclosure of all Government debtors (and not just of student defaulters) is undertaken can justice be said to be equally meted out. Needless to say, it would be especially revealing to read the names of these large debtors and the amounts that they owe to the government � or actually, to the people of Malaysia.  

Dilbert@Malaysia

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"Quiet Time" For Today

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