The firST and only inSTiTUTional inveSTmenT magazine 100 ... · CONTENTS PublisherC iddi Baarwala Head of vents and esearch isa irpatric Contributing ditors Yose Ardi Al aita Dewi

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MAY 2013

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3rd AnnuAl Best CorporAte AwArds

uses of quAnt investment strAtegies in AsiA

the rise of the Cross-Border trAnsACtion

vietnAm report

ISLAMIC DEBT, SUKUK & FUND MANAGEMENT

CONTENTS

Publisher/CEO: Siddiq Bazarwala. Head of Events and Research: Lisa Kirkpatrick. Contributing Editors: Yosef Ardi, Al Labita, Dewi Loevard, Gerry O’Kane, Rienzie Biolena. Photo Editing: Alvin Yong, Adek Berry, Austin Bush, Carlos Legaspi, Richard Lim. Image Libraries: istockphoto; getty images; afp; sxc.hu; & dreamstime Accounts & Administration: Yardthip Patcharalapa. Subscriptions & Circulation Management: Marina Gonzales Design & Layout: Kevin Tsam Design & Layout (Thailand): Duangkamon Business Translation: CLS Translation Printing House: Jet Bright Printing-Hong Kong Regional Distributor: Royale Asia Regional Travel & Accommodation: Amina Chu, Taqwa Travel +852 28922361 Main Office: 1802 Worldwide House. 19 Des Voeux Road. Central. Hong Kong T: (852) 3667 9078 F: (852) 3667 9079 Editorial Bureaus: Indonesia & Thailand Website: www.alphasoutheastasia.com Subscriptions: One year (10 issues) for US$400 net.

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US$35 per issue

The firST and only inSTiTUTional inveSTmenT magazine 100 percenT focUSed on SoUTheaST aSia

JUNE 2013

alpha Southeast a

sia JU

ne 2013

ww

w.w

hatinvestorswant.com

RETAILWILL ThEy pAy foR

InvEsTmEnT AdvIcE?

MAY 2013

fEATUREs:

3rd AnnuAl Best CorporAte AwArds

uses of quAnt investment strAtegies in AsiA

the rise of the Cross-Border trAnsACtion

vietnAm report

ISLAMIC DEBT, SUKUK & FUND MANAGEMENT

FEATURES:

18 SOUTHEAST ASIA’S INSTITUTIONAL INVESTOR AWARDS FOR CORPORATES

As the first and only institutional investor poll focused on Southeast Asia, we present the outcome

of Southeast Asia most well perceived companies. Instead of ranking two dozen-odd companies, we have narrowed our choices down to top 3 in each of the five award categories. Also, to ruffle some feathers, we have once again listed names of companies that are ‘not-so-well-perceived’ buy our poll universe i.e., investors. By the Editorial Team

30 THE RISE OF THE CROSS-BORDER TRANSACTION The global expectation that cross-border M&A will drive acquisitive growth has increased by 56% since 2008 and 18% in the last year alone. In this report, Grant Thornton explores whether there is an increased appetite of companies for cross-border acquisitions. By Grant Thornton

MAY 2013

8 DEAL OF THE MONTH

The Deal of the Month for the month of May 2013 does not go to a particular deal but an event that was kick-started by two simultaneous landmark bond deals out of Singapore in late May when two UK-based banks issued yuan denominated bond deals out of Singapore for the very first time, on the same day. While the issuance sizes of both deals were easily negligible, the implications and impact on the further development of the bond market in Singapore cannot be understated. In this month’s Deal of the Month, we detail behind-the-scenes deal mechanics that has made this a landmark, game-changing transaction for Singapore and the region. By the Editorial Team

COVER STORY

10 RETAIL In an era where retail investors in Asia are fairly well-informed about flaws in the current distribution model, we ask whether retail investors are willing to pay for investment advice to overcome the problem of frontline staff remuneration based on sales targets regardless of performance and product suitability By the Editorial Team

34 VIETNAM INVESTMENT UPDATE HSBC’s Vietnam Manufacturing Purchasing Managers’ Index (PMI) continued to increase from 50.8 in March to 51.0 in April, the highest in two years. A level above 50 indicates an expansionary economy, indicating that recovery has become more sustainable. With credit growth expected to pick up gradually, investors appear excited about changing their ‘wait and see’ stance By Dragon Capital

36 USES OF QUANTITATIVE INVESTMENT STRATEGIES IN ASIA What are some of the best practices for Asian Institutions considering quantitative approaches to investing? By Greenwich Associates

MONTHLY REPORTS

2 ISLAMIC DEBT, SUKUK & FUND MANAGEMENT By the Editorial Team

43 FUNDING & BORROWING ROUNDUP By the Editorial Team

Alpha Southeast Asia | June 2013 1

6 IN A PRIVATE BANKER’ SHOES Following up with the hypothetical investment made on behalf of an imaginary high net worth individual in late December 2012 within the monthly section on high net worth wealth management for individuals based in Southeast Asia, we present the sixth report in this series. By the Editorial Team

2 June 2013 | Alpha Southeast Asia

ISLAMIC DEBT, SUKUK & FUND MANAGEMENTALPHA SOUTHEAST ASIA JUNE 2013

ISLAMIC DEVELOPMENT BANK SETS GUIDANCE FOR US$1 BILLION SUKUKIslamic Development Bank, a Jeddah-

based multilateral institution, set price

guidance for a US$1 billion Islamic bond

sale, a statement from the lead banks

arranging the issue showed. The AAA-

rated bank, whose largest shareholder is

Saudi Arabia, is offering a price guidance

of midswaps plus high 30 basis points for

the five-year sukuk, the document said.

Banks arranging the sukuk are Qatar’s

Barwa Bank, Credit Agricole, CIMB,

National Bank of Abu Dhabi, Natixis, NCB

Capital - the investment banking arm

of Saudi’s National Commercial Bank,

Royal Bank of Scotland and Standard

Chartered. Mid-May 2013, the bank

which provides financing and loans in

Muslim countries, more than tripled its

authorised capital to US$150 billion to

better support development projects in

its 56 member nations reported Reuters.

RM1.6 BILLION (US$518 MILLION) SUKUK PROPOSAL BY FOR GAS-FIRED POWER PLANT IN PENANGTenaga Nasional’s wholly owned

subsidiary TNB Northern Energy has

proposed to issue RM1.625 billion

(US$518 million) in nominal value sukuk

based on the shariah principles of ijarah

and wakalah. In a filing with Bursa

Malaysia, TNB said the proposed sukuk

TNB NE will be issued in one lump sum

and will consist of 39 series with tenors

ranging from four years to 23 years from

the date of issuance. Malaysian Rating

Corporation (MARC) has assigned a

final rating of AAAIS to the sukuk TNB

NE. ‘The proceeds to be raised from the

proposed sukuk will be utilised for the

construction and delivery and working

capital requirement for the 1071.43 MW

combined cycle gas-fired power plant

in Prai, Pulau Pinang,’ TNB said. Upon

issuance of the proposed sukuk TNB

NE, TNB’s consolidated borrowings will

increase by RM1.625 billion (US$518

million) reported StarBiz.

SIME DARBY’S RM2.4 BILLION (US$800 MILLION) SUKUK RECEIVES BNM’S EMAS STATUSBank Negara Malaysia (BNM) has accorded

its ‘Emas’ status to Sime Darby’s US$800

million Sukuk in conjunction with the 10th

Islamic Financial Services Board Summit.

This was the 11th ‘Emas’ status accorded

by BNM for foreign currency denominated

bonds and Sukuk originating from Malaysia

in the global capital market. This inaugural

Emas sukuk issuance by Sime Darby

attracted substantial demand regionally

where Asian investors represented about

70% of total Sukuk issuance and it was

10 times oversubscribed. BNM said

the Malaysian marketplace for Islamic

finance was well supported by a deep

primary market and active secondary

market trading for Sukuk issuance, as

well as efficient price discovery and the

availability of expertise in this market.

Besides the US Dollar, BNM’s ‘Emas’ sukuk

have been issued in Singapore Dollar and

Renminbi reported StarBiz.

AUTO LENDER BANK INTERNASIONAL INDONESIA FINANCE TO RAISE RP 1.5 TRILLION (US$154 MILLION) FROM BONDS The auto-financing arm of Maybank-

backed Bank Internasional Indonesia plans

to raise Rp 1.5 trillion (US$154 million)

in a bond issue in June 2013 a bid to

bolster its capital base. Bank Internasional

Indonesia Finance Center intends to

sell three-year and five-year bonds in

June 2013, the company said in a brief

prospectus published in Bisnis Indonesia.

The company plans to offer the notes to

investors from June 11 to 13, 2013 and

plans to list the notes on the Indonesia

Stock Exchange on June 19, 2013, the

company said in the prospectus. The

company did not announce detailed terms

for the notes. The company has hired

Kim Eng Securities, RHB OSK Securities

Indonesia and Danareksa Sekuritas to help

arrange the notes. ‘The proceeds from the

bond sale, after deductions for costs of

issuance, will be used to boost capital,’ the

company said in the prospectus.

INDONESIAN GOVERNMENT TO ESTABLISH NEW SHARIAH BANK Indonesia State-Owned Enterprises

Minister Dahlan Iskan revealed that the

government is planning to establish

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ISLAMIC DEBT, SUKUK & FUND MANAGEMENTALPHA SOUTHEAST ASIA

a Shariah-compliant bank in order

to manage Rp 40 trillion (US$4

billion) worth of Indonesian

hajj funds. Dahlan said

the establishment of the

bank will support the

implementation of a

new policy issued by

the Ministry of Religious

Affairs obliging hajj

funds to be managed

exclusively by Shariah

banks. The government has

stakes in four lenders — Bank

Mandiri, Bank Rakyat Indonesia,

Bank Negara Indonesia and Bank

Negara — that run their own Shariah

units. None of these banks, however,

focus solely on Shariah banking. Dahlan

said the government wants to support

the development of Shariah banking

in Indonesia with the new bank since

the sector controls only 4.9 percent of

market shares in Indonesia’s banking

industry, according to first quarter data

from Bank Indonesia. ‘Shariah banks in

Indonesia command … only a seventh

of the assets that Malaysian Shariah

banks [do],’ Dahlan told Indonesian

news portal republika.co.id. Indonesia’s

Shariah-compliant banks controlled

a total of Rp 214.5 trillion (US$21.9

billion) in the first quarter of 2013, a

37.8 percent increase compared with

the same period last year. The hajj

funds are expected to help boost this

figure. Bank Indonesia is targeting a 58

percent increase in banking assets this

year that comply with Islam’s ban on

interest reported Jakarta Globe.

ISLAMIC FINANCE NEEDS GLOBAL SHARIA BOARD - IDB PRESIDENTThe Islamic Development Bank (IDB), a

Jeddah-based multilateral institution,

has called for the creation of a global

sharia advisory board that can offer

greater uniformity for the Islamic

finance industry, its president said. A

centralised format to the supervision

of sharia-compliant banking products

is gaining favour across the globe, as

regulators seek to standardise industry

practices and improve consumer

perceptions. ‘IDB and IFSB (Islamic

Financial Services Board) should study

ways for creating globally acceptable

references for the industry for the

benefit of all,’ IDB president Ahmad

Mohamed Ali said. ‘This could include

striving for the concept of a globally

accepted sharia committee or body,

which would be able to assist all Islamic

financial institutions and bring them in

line with a uniform standard.’ Malaysia

pioneered the country-level sharia

board and in recent months several

countries have introduced central

boards of their own, including Dubai,

Oman, Pakistan and Nigeria. Countries

like Oman have gone as far as imposing

term limits on the sharia scholars who

are members of these boards, while

also requiring they abide by a code of

conduct reported StarBiz.

SOURCE: Thomson Reuters (1st Jan - 30th May 2013)

HSBC Holdings PLC

Standard Chartered PLC

Deutsche Bank

Emirates NBD PJSC

Citi

19 Others

USD1.987 Billion

USD1.182 Billion

USD1.074 Billion

USD886 Million

USD782.2 Million

USD3.794 Billion


JUNE 2013

ZETI GIVES ADVICE ON ISLAMIC FINANCIAL

INNOVATIONSInnovations in Islamic

financial solutions

will need to take

into account the

higher regulatory

expectations for

more transparency,

as well as the

effective management

of risks and capital,

said Bank Negara govenor

Dr Zeti Akhtar Aziz. She also

noted that while Islamic finance had

benefited from a well developed,

more competitive and well-regulated

eco-system, it needed to build on and

reinforce the ‘solid foundations that

have been achieved in this decade’.

‘As the industry transitions into a new

era of growth and development, the

competitive financial landscape is being

redrawn by the evolving international

regulatory reforms, changing operating

models, rising consumer expectations

and increased competition,’ she said. ‘In

this more challenging environment, the

success of sustaining the momentum

of Islamic finance as a transformative

agent for the economy, will hinge on

the ability to keep raising the bar in the

pursuit of an effective functioning and

sound financial system,’ she told an

international audience at the Islamic

Financial Services Board (IFSB) Summit

2013 reported StarBiz.

MALAYSIA-BASED IILM TREADS FINE LINE IN DESIGNING MAIDEN SUKUKInternational Islamic Liquidity

Management Corp (IILM) faces a delicate

task as it designs its maiden sukuk: it

must make the issue attractive enough

for investors to buy, but not so attractive

that most of them buy to hold. Whether

it gets the balance right will affect the

development of Islamic money market

trading in the Gulf and South-East Asia

over the coming year. Malaysia-based

IILM, backed by nine central banks and

monetary agencies as well as the Jeddah-

based Islamic Development Bank, has said

it planned to issue up to US$500 million

of dollar-denominated sukuk in the second

quarter of this year, and eventually expand

the programme to as much as US$3 billion.

Its issues will be based on a very

different premise than other sukuk. Other

issuers design their sukuk merely to attract

investors and raise money cheaply; IILM’s

mission is to create a highly liquid tool

which Islamic banks will trade to manage

their short-term funds. To ensure trading

of the sukuk around the world, IILM had

signed agreements with eight primary

dealer banks, said Ayhan Keser, executive

vice president at Turkey’s Albaraka Turk,

one of the market-making banks. ‘These

primary dealers are given the right to

purchase the issued sukuk in the primary

market, have the responsibility to set the

secondary market and actually buy and

sell the bonds to form a market price,’

Keser said reported StarBiz.

AMMB Holdings

CIMB Group

RHB

HSBC Holdings PLC

Malayan Banking

7 Others

USD2.536 Billion

USD2.271 Billion

USD1.896 Billion

USD1.603 Billion

USD1.377 Billion

USD2.545 Billion



Following up with the hypothetical investment made on

behalf of an imaginary high net worth individual in late

December 2012 within the monthly section on high net

worth wealth management for individuals based in Southeast

Asia, we present the sixth report in this series. Over the last

one month, we have generated a net 16.5% gain while over

the last five months since this hypothetical exercise began, we

have generated a net 12.1% gain making up for some glaringly

large losses in the month of March when global markets were

shaken up by uncertainties in Europe - on the initial investment

of US$7 million (excluding fees), allocated between several

real award-winning investment funds, managed by yet again,

an imaginary family office based in Asia.

The bulk of the gains on this portfolio investment however

need to be credited to a single fund that has generated

a remarkable 9% gain over the last five months. The ING

Investment Management Global High Dividend is a SICAV

incorporated in Luxembourg and its objective is to generate

capital appreciation. The Fund invests in a diversified portfolio

of global equities selected based on their high dividend yield

and some of its largest holdings are among large profile Fortune

500 companies including JPMorgan, Chevron, Royal Dutch Shell,

Novartis, Microsoft, General Electric, etc.,

To recap, the imaginary individual is in his mid-to-late thirties

with an appetite for medium to high-risk investments at least

for the next few years. In essence, the funds selected below

are a fair reflection of his preferred investment strategy and

risk tolerance level. In this theoretical case, up to US$7 million

worth of liquid assets will be invested directly into these funds

with US$3 million kept aside as cash for ongoing investment

opportunities that may surface between Thursday Dec 20, 2012

and Friday, Dec 20, 2013, exactly one year after making the initial

imaginary investment (To be announced).

The preferred allocation is to go beyond the most general

asset-class targets (stocks, bonds, and cash) to provide broad-

based exposure to both the equity (value, dividend, growth,

Note: Readers of Alpha Southeast Asia should not make any investment decisions solely based on this imaginary investment scenario. It is best you read the relevant information relating to these funds and investment options and contact an investment professional to understand risk factors involved.

By the editorial team

IN A PRIVATE BANKER’ SHOES

NAME 24 May, 2013 NAV on 20 Dec, 2012 AUM

AllianceBernstein Global Bond Fund US$8.65 (-1%) US$8.58 US$1.5 billion

Pictet Asset Management Asian Local Currency Debt US$149.13 (-4%) US$154.66 US$2.1 billion

ING Investment Management Global High Dividend US$400.68 (+5%) US$310.7 US$21.7 billion

Franklin Templeton Investment Funds - Templeton Asian Growth Fund EUR27.45 (+1.1%) EUR 33.65 EUR 16.9 billion

Macquarie International Infrastructure Fund S$0.1820 (+1%) S$0.635 US$1 billion

Kuwait Investment Al-Hilal Islamic Fund AED115.58 (+8%) AED105.01 S$34 billion

Phillip Singapore Real Estate Income Fund S$1.46 (+2%) S$1.28 S$31.7 billion

Amount Invested on 20th Dec 2012: US$7 millionTo-date, one-month return (excluding the 4% fees): 12.1% gain


sector or country specific) and fixed-income (investment-grade

or high-yield) markets, beyond Asia.

The eight multi-currency denominated funds selected

with imaginary investment holding includes: (I)

AllianceBernstein Global Fixed Income Fund (global fixed

income); (II) Pictet Asset Management Asian Local Currency

Debt (local currency Asian fixed income); (III) ING IM

Global High Dividend Fund (global equity); (IV) Franklin

Templeton Asian Growth Composite (Asia ex-Japan equity);

(V) Infrastructure Macquarie Infrastructure and Real Assets

(infrastructure); (VI) Al-Hilal Islamic Fund (shariah and socially

responsible investments); & (VIII) Phillip Singapore Real Estate

Income Fund (REITS in Singapore).

While the current asset allocation strategy is tactical, where

the imaginary family office appears more keen on taking an

active approach, positioning a portfolio into sectors or individual

broad-based funds that show the most potential for gains, the

HNWI is evaluating further imaginary investment opportunities

in commodities (i.e., energy, industrial metals, precious metals,

agriculture, etc.,) as well as other non-traditional investment

options such as intellectual and digital property, coins, stamps,

art and antiques and real estate, using the surplus balance of

US$3 million cash in hand.

Since the (fees) management expense ratio (MER),

management, custody and administration fees for the above

range of funds varies from 2.85% to 4%, the editorial board at

Alpha Southeast Asia has resolved to aim for an annualised

return that far exceeds 4%, just in order to break-even. Since

trading between funds over the next twelve months will lead

to higher costs, the target ceiling of 4% may be raised further

to take into account the affects of inflation and other recurring

costs of trading and managing these investments.


MAY 2013

The Deal of the Month for the month of May 2013 does

not go to a particular deal but an event that was kick-

started by two simultaneous landmark bond deals out

of Singapore in late May when two UK-based banks issued yuan

denominated bond deals out of Singapore for the very first time,

on the same day.

While the issuance sizes of both deals were easily negligible,

the implications and impact on the further development of the

bond market in Singapore cannot be understated.

Global banking heavyweights HSBC and Standard Chartered

issued 2 and 3-year notes worth 1.5 billion yuan or US$240

million on aggregate.

HSBC said it had issued 500 million yuan of two-year fixed

rate notes on the market, with yields of 2.25 percent. The funds

will be used to finance the bank’s expansion of yuan-based

lending assets, said Matthew Cannon, head of global markets at

HSBC Singapore.

“The start of yuan clearing service in Singapore is one more

step forward to the internationalisation of the renminbi,” he said,

referring to the growing influence of the Chinese currency. “It

allows issuers and investors to find it more convenient, as well as

cheaper and quicker to make payments in the Chinese currency”.

In a statement he further added, “This issuance will help

open the market to other issuers looking to fund themselves

internationally in RMB, offer new investment opportunities to

the substantial pool of wealth managed in Singapore and assist

in funding the rapidly growing RMB-denominated trade business

in Asia”.

Guy Harvey-Samuel, group general manager and CEO at HSBC

Singapore, said apart from the “historic” bond issue, the bank

has also completed a number of other yuan transactions for its

customers in Singapore through the new yuan-clearing facility.

Almost simultaneously, Standard Chartered PLC announced it

had raised 1 billion yuan ($163.36 million) through the offshore

bonds. The three-year senior unsecured issuance was priced with

a coupon of 2.625 percent after generating more than 3 billion

yuan in orders from 75 investors across Asia.

“We see this as another milestone for Singapore in the

development of its status as an offshore yuan hub”, said Ray

Ferguson, chief executive officer of Standard Chartered Bank

Singapore.

He added the country’s contribution to the development of the

yuan is further enhanced by the issuance, as it already leads as

a regional treasury center, and was a springboard to Southeast

Asia along the key trade corridor with China while providing a

hub for Asian wealth management and commodities trading.

Through these two transactions, both banks have become the

first lenders to take advantage of the Southeast Asian country’s

newly launched yuan-clearing system.

Just as the deals were launched, it was learnt depositary

services were also launched by the Singapore Exchange for

yuan-denominated bonds, in a bid to boost the city’s position

as an offshore hub for issuers and investors of dim sum bonds.

Magnus Bocker, CEO of Singapore Exchange, said the exchange

will keep growing and enhancing its suite of yuan and China-

SIMULTANEOUS RMB1.5 BILLION DIM SUM BONDS ISSUED IN SINGAPOREBy THE EDITORIAL TEAM

“We see this as another milestone for Singapore in the development of its status as an offshore yuan hub.”

Ray Ferguson, CEO, Standard Chartered Bank Singapore


MAY 2013

related products and services as Singapore’s role as an offshore

yuan center becomes increasingly important.

On the same day, the Industrial and Commercial Bank of

China’s Singapore branch also kicked off yuan clearing services

in the island nation.

Mainland Chinese and Hong Kong borrowers have dominated

the offshore market for yuan bonds, or dim-sum bonds, since

it started to take off in 2010. The new yuan-clearing hub

underscores rising use of the yuan for trade, as well as Beijing’s

push to internationalize its currency.

Since 2007, yuan-denominated bonds were mainly cleared out

of Hong Kong, Beijing’s chosen offshore yuan trading center for

a trial, and much of the yuan activity in Singapore was handled

through banks based in mainland China, or through state-owned

Bank of China’s unit in Hong Kong.

In February, Beijing approved Industrial & Commercial Bank of

China to clear yuan trades in Singapore, which is now up against

Taipei, London, Tokyo, Luxembourg and Kuala Lumpur in the fight

to become the world’s second-largest offshore yuan-trading hub

after Hong Kong.

According to market commentators, yuan bond issuance

outside of China in 2013 could top last year’s 170 billion yuan,

and even reach 200 billion yuan. Helped by the yuan’s strong

value, the issuance of offshore yuan bonds so far this year has

exceeded 140 billion yuan.

Other banks, such as Singapore’s largest lender, DBS Group is

also reportedly looking to issue dim sum bonds in Singapore.

The bank, Southeast Asia’s largest bank by assets, said it plans to

issue yuan-denominated bonds that will be cleared in Singapore.

It didn’t disclose further details.

“As yuan clearing can be done out of Singapore now, it could

hopefully draw more issuers from Singapore and Southeast Asia,”

and in turn attract a broader investor base out of Singapore, said

Clifford Lee, head of fixed income at DBS.

Taipei became the second hub for offshore yuan note sales

in February, following the start of the Dim Sum bond market in

Hong Kong in 2007. Through this latest development, Singapore

has now become making the third offshore hub for such notes

and further consolidated its standing as an international

financial center.

Analysts from HSBC estimate that offshore debt sales

denominated in the Chinese yuan may reach as much as US$360

billion this year.

According to the Society for Worldwide Interbank Financial

Telecommunication, or SWIFT, in terms of the value of offshore

yuan payments, Singapore ranked second last month following

the United Kingdom in regions excluding Hong Kong and the

Chinese mainland.

China and Singapore doubled the size of their currency-swap

arrangement to 300 billion yuan in March, one month after the

Chinese central bank approved the Singapore branch of ICBC as

its clearing bank.

As of June 2012, deposits of the currency in Singapore stood at

about 60 billion yuan.

The yuan has become the 13th most-used currency overall

with an all-time high market share of 0.74 percent, and payments

denominated by the currency grew in value by 32.7 percent, in

comparison with the average increase of just 5.1 percent across

all currencies, according to SWIFT.

Buns to Bonds - The start of yuan clearing service in Singapore for

dim sum bonds is one more step forward to the internationalisation

of the renminbi

F ive years is a long time in finan-

cial markets. Long enough to be

forgotten as history as investors

reemerge into the equity and bond mar-

kets of Asia today.

Not a week goes by and reports are

published as to how private bank-

ing and wealth management units are

spearheading growth at banks, brokers

and asset management firms of all col-

ours and stripes while other products

within the same financial institution

produce growth rates that are not near-

ly as dynamic.

“While the collapse of Lehman

Brothers in 2008, which backed CDO

products improperly marketed by some

consumer banks as bond funds to re-

tail investors and costs investors huge

amount of money is probably one in-

cident that has been a game-changing

event for the whole of the wealth man-

agement industry especially those tar-

geting inexperienced retail investors

and high net worth individuals to invest

in equity and bond markets, the demand

for qualified wealth management ad-

vice has never been better”, according to

a senior relationship manager at a lead-

ing wealth management bank in Asia.

As a random example of an Asian-

domiciled bank, OCBC’s private banking

business has continued to expand, with

assets under management increasing

27% to US$44 billion (S$55 billion) as

at 31 March 2013, up from US$35 bil-

lion (S$44 billion) the previous year

- or more than double the US$15.8 bil-

lion when OCBC acquired ING’s private

banking assets in late 2009. As a share

of total revenue, wealth management

business today accounts for over 28%

of the bank’ bottom-line, compared with

23% in 2011.

“Business momentum is strong, and

asset quality remains sound. With our

solid capital and stable funding base,

we will devote additional resources to

strengthen the group’s regional fran-

chise to tap on the higher economic

growth potential in our key overseas

markets”, said Samuel Tsien, CEO at

RETAILWill they pay for investment advice?

By the editorial team

“When the ASEAN Exchanges collaboration starts recognising the need for regional research, there is likely to be greater focus on depth and breadth of research by the larger regional players as economies of scale definitely matter when it comes to providing structured and value-based research.”

tengku dato' Zafrul aziz, Ceo at maybank investment Bank

Tengku Dato' Zafrul Aziz, CEO at Maybank

Investment Bank


COVER STORY

BLACKYELLOWMAGENTACYANCR 0073_investment banking_Alpha Sea_PATH_X3_11/4/2013_11.55AM

SLM12A67281APR13

OCBC Bank when announcing the 2012

year-end results early this year.

But apart from better controls, more

unified investor education from the in-

dustry, better training, comprehensive

documentation and a dialogue with cus-

tomers about product suitability, what

more can be done to increase interests

in retail investors to move saving funds

into equities and fixed income invest-

ments away from bank deposits and

property, especially in times of market

volatility let alone ongoing economic

uncertainty?

In Malaysia, Munirah Khairuddin,

Deputy CEO at CIMB-Principal Asset

Management is of the opinion financial

advisors play a critical role in helping

generate interest in investing in equity

and bond markets, “Financial advisers

ought to raise more awareness on the

importance of portfolio diversification

in achieving long-term financial goals”.

She further adds, “Besides that, inves-

tor education on retirement savings and

long-term investing continue to play an

important role”. Illustrating with an ex-

ample, she says, “If we look across Asia

in general, people need to be more edu-

cated on the necessity of having better

retirement savings, considering that

cost of living is on the rise and savings

will be depleted in due time”.

Citing reasons for the renewed inter-

est’ in investing in the local equity mar-

ket, Dr. Kongkiat Opaswongkarn, CEO of

Asia Plus Securities in Thailand shares,

“The Thai Stock Market has gained more

interest over the past four years driving

more investors into the market, both ex-

isting and new generation investors, due

to many factors including lower interest

rates, higher EPS growth, government’s

policy to allow personal income tax

savings invested via Long-Term Equity

Funds (LTFs) and Retirement Mutual

Funds (RMFs), and better education to

investors provided by financial institu-

tions, the Stock Exchange of Thailand

(SET), and universities”.

However, is the revival of interest in

investing in the equity market driven

mainly by public policy and the educa-

tional push by various stakeholders in-

cluding brokers, asset managers, banks

& regulators or are there simply more

avenues investors can choose from to

make investments?

Making a case for a platform through

which investors could be attracted to

the idea of investing, Ms. Khairuddin

at CIMB-Principal Asset Management

says, “technology could become an al-

ternate avenue to conventional meth-

ods of investing”. Citing an example,

she explains, “the ease of online trading

platforms and fund platforms will cater

to the tech-savvy and growing Gen-Y

investors. The lower fees available via

this type of platform may be a sparking

point for some fee-sensitive investors”.

Tengku Dato' Zafrul Aziz, CEO at

Maybank Investment Bank is however

of a different opinion. “While key as-

pects of being Social, Local and Mobile

are being rapidly embraced and driving

the growth of retail online transactions,

equity investing for the retail segment

from a fully integrated platform has yet

to materialise in a meaningful way and

the ability to mobilise funds via several

clicks to invest in multi-markets, multi-

products and multi-currencies assisted

by expert advice if so desired, has yet

to receive the kind of investments re-

quired for its actualisation”, summing

up why a number of markets in Asia ex-

cept Singapore, Hong Kong, South Korea

and Japan may not be quite as ready to

invest using online platforms however

countries like Thailand and Malaysia

are increasingly catching up with some

of the developed financial markets.

Regardless of which platform retail

investors prefer using, are investors

Dr. Kongkiat Opaswongkarn, CEO of Asia

Plus Securities in Thailand


COVER STORY

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today using investment products to

chase the latest hot benchmark based

on trading opportunities with a shorter

investment horizon in mind or are they

beginning to realise the importance

of investing in the longer-term and in

diversifying?

Tengku Zafrul does not see this as an

issue. “The key proposition of a Stock

Exchange has to be the diversity of list-

ed products for all investor types with

different risk appetites. Long term, short

term, high risk, low risk, hot stocks, divi-

dend stocks”. Elaborating on what he

thinks is more important to focus on, he

points out, “The key is to educate inves-

tors and help them understand what in-

vestment opportunities or products are

best suited for their risk profile, objec-

tives and time horizon”.

Alan Inn, Head of Regional Retail

Broking at CIMB Investment Bank con-

curs. “Different retail investors have

different investing styles. While in-

vestors that trade more on sentiment

and rumours still exist today, there

are an increasing number of investors

who trade and invest sophisticatedly”.

Explaining one of the factors pushing

this trend ahead, he says, “One of the

reasons for this could be attributed to

the workshops run by stockbrokers who

encourage their clients to take a more

informed approach to investing that

is based on fundamentals or techni-

cal charting, rather than hear-say and

rumours”.

As pragmatic as responses come,

Dr. Kongkiat at Asiaplus Securities in

Thailand simply states, “Most of the

existing retail investors in the mar-

ket today are still short-term investors

even though some of them may have

started thinking about longer-term in-

vestments”. Explaining how the trading

mentality is far from over among retail

investors, he quickly adds, “They would

not hesitate to take profit at the ex-

pected level as and when the relevant

opportunities come by”.

Just as quickly contrasting his ear-

lier statement, he counters, “However, a

large number of so called “value inves-

tors” have proven to be highly success-

ful in a ‘buy and hold’ strategy for the

longer term in growth stocks and this

strategy has influenced a good number

of investors to follow and has resulted

in a better mix of short and long-term

investors”, he says.

In Malaysia Ms. Khairuddin too, be-

lieves the idea of a typical retail inves-

tor does not exist. “There will always

be a group of retail investors that trade

short-term but there is a growing num-

ber of retail investors that are educated

and realise that investing is a long-term

proposition. The goal is long-term accu-

mulation of investment assets”.

Explaining the generic rationale be-

hind investment decisions made by re-

tail investors, Tengku Zafrul explains,

“With interest rates at very low levels,

investors are beginning to consider

larger exposure into equities with me-

“In Thailand, where real-time data, stock information and research are all bundled up to investors for free, I believe retail investors are unlikely to be willing to pay for investment advice because there are a lot of free information and tools widely available to them.”

dr. Kongkiat opaswongkarn, Ceo of asia Plus Securities in thailand

Munirah Khairuddin, Deputy CEO at CIMB-

Principal Asset Management


COVER STORY

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dium risk and volatility to generate the

target returns for long term. Dividend

stocks, REITs, and consumer stories are

gaining popularity as retail investors

are becoming more conversant with

product selection to achieve their in-

vestment objectives”.

Not enough to independently man-

age their own portfolios but sufficiently

well-informed about flaws in the cur-

rent distribution model in Asia i.e. ,

frontline staff remuneration based on

sales targets regardless of performance

and product suitability.

But if retail investors were encour-

aged to pay for investment advice,

would this mitigate the problems the

industry is faced with today?

Tengku Zafrul at Maybank Investment

Bank explains matter-of-factly, “Retail

investors may be more willing to pay

for advice as long as the fees paid are

commensurate with additional income

and performance. Performance fees are

to be expected for customised services,

while off-the-shelf products should still

be based on the traditional distribution

model; Essentially he sums up, “investors

must be offered choices and alternatives”.

He however foresees a few challenges

before the market becomes ready to pay

for investment advice. “Most of the large

brokers provide independent research,

but the packaging of the research and

the distribution of the research may still

not as efficient as it could be. There are

some significant efforts underway by

some of the larger players to deliver re-

search content.”

Explaining the important role of re-

gional research, Tengku Zafrul makes

an interesting point. “When the ASEAN

Exchanges collaboration starts recognis-

ing the need for regional research, there

is likely to be greater focus on depth and

breadth of research by the larger region-

al players as economies of scale defi-

nitely matter when it comes to providing

structured and value-based research”.

At CIMB-Principal Asset Management,

Ms. Khairuddin does not mince her

words and acknowledges how short-

ages in skilled manpower needs to be

fixed first before investors are asked

to pay more for services rendered. She

says, “The industry needs more certified

and qualified financial planners to be-

gin with. This includes advisers who can

plan on total portfolio basis on creation

of wealth, protection via insurance, es-

tate planning and retirement planning”.

In Thailand, Dr. Kongkiat at Asiaplus

Securities is of the view a whole pleth-

ora of information and data is readily

available today to the average inves-

tor therefore, he does not think the

market is likely to be ready to pay for

investment advice. “In Thailand, where

real-time data, stock information and

research are all bundled up to investors

for free, I believe retail investors are

unlikely to be willing to pay for invest-

ment advice because there are a lot of

free information and tools widely avail-

able to them”.

Mr. Inn at CIMB Investment Bank

shares the same view. “Investors today

are more empowered by a variety of

information easily accessible to them

via the Internet and by comprehensive

online trading platforms, which bring

them closer to market action”.

There is also “certainly more empha-

sis on portfolio management and in-

vestment diversification now than in

the last few years and that is one posi-

tive outcome as a result of the global

financial crisis”, sums up Ms. Khairuddin

signaling how local capital markets in

the region are set to evolve regardless

of how the regulatory environment and

investor sentiment changes from time

to time.

Alan Inn, Head of Regional Retail Broking

at CIMB Investment Bank


COVER STORY

Asia’s largest & most established hedge funds conference

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Co-located with Emerging Managers Forum, Hedge Funds World Asia is Asia’s most established conference for hedge funds and end investors seeking to maximise returns, manage risks and make invaluable connections in the funds management industry.

Speakers include:

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For more information, please contact Manmitha Srinivasan at +65 6322 2321 or [email protected]

Joseph PaciniHead of Alternative

InvestmentsBlackRock

Edwin BurtonTrustee

Virginia Retirement System

Nobuki YasudaDirector of Alternative

InvestmentPension Fund Association

Peter DouglasPrincipal & Investment Committee Chairman

GFIA

Ed RogersCEO / CIO

Rogers Investment Advisors

Ken ChungSenior Vice PresidentVision Investment

Stuart LeckieChairman

Stirling Finance Ltd

Carolyn M. WeissCFO

FJC Inc.

Vik MehrotraCEO

Venus Capital Management

Edward GustelyCEO

Penida Capital

Thomas ThygesenHead of Cross Asset

StrategySEB Group

Kevin LiemCIO

TTG Wealth Management

David BridgeAssociate Director

PAAMCO

Michael LiangCIO

Foundation Asset Management

Jerome LussanCEO

Laven Partners

Amy BenstedHead of Hedge Funds

ResearchPreqin

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7Twelve Portfolio

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Richard WaddingtonCEO

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Raymond GuiManaging DirectorIncome Partners

Simon HopkinsCEO

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These are the results of our third annual poll to find

Southeast Asia’s top companies. Instead of ranking two-

dozen odd companies, we have once again uniquely

narrowed investor choices down to top 3 in each of the seven

award categories: Most Organised Investor Relations; Best

Senior Management IR Support; Strongest Adherence to

Corporate Governance; Most Consistent Dividend Policy; Best

Strategic CSR; Best CFO in Southeast Asia; & Best Annual Report

in Southeast Asia;

A key distinguishing feature of this investor poll unlike any

other poll is that we not only name investor favourites but

adventurously put our potential advertising income on the

line by publishing names of companies that are not so well

appreciated, by this same group of investors by asking them

about companies perceived to have Poor Management Access &

IR as well as Unpredictable IR Strategy.

For this annual poll of Southeast Asia’s top companies, we

successfully collected votes from more than 473 investors and

analysts across the region as well as US & Europe, a slight

increase from last year. The participants included fund managers

with investment interests in Southeast Asia, large institutional

investors, insurance companies, pension funds, funds of hedge

funds, private banks, equity and fixed income brokers as well

as buy and sell-side analysts. Voting by public-listed corporates

or individuals with vague contact details were automatically

discarded and excluded from the final vote count. Over 3,000

qualified participants were sent questionnaires starting mid-

January 2013 and all responses were received and collated by

mid-to end May 2013.

The results are published country by country and this year,

we have once again nominated the Best CFO in Southeast

Asia; Best Annual Report in Southeast Asia as well as Strongest

Commitment to Sustainable Energy in Southeast Asia.

In Indonesia, seven leading companies with the best perception

among investors include conglomerate Astra International,

miners Adaro Energy & Antam, leading banks Bank Central Asia

and Bank Mandiri as well as telecom giant Telkom & telecom

infrastructure company Tower Bersama

In Malaysia, the nine leading companies include regional

powerhouses

CIMB Group,

Maybank, Public

Bank & RHB

Capital, energy giants

Petronas Gas, Petronas

Dagangan, real estate

company KLCC Property Holdings,

Asian focused telecoms group TM and conglomerate YTL Corp.

In Philippines, the eight companies include diversified

conglomerate SM Investment Corp and Ayala Corp, predominantly

real estate focused player Megaworld, leading bank BDO,

telecoms players Globe Telecom & PLDT as well as consumer

giant San Miguel.

In Singapore, six companies most preferred by institutional

investors include regionally diversified telecoms company

SingTel, aspiring global real estate player Capitaland, regional

banks DBS Bank & OCBC, engineering specialist ST Engineering

and conglomerate Keppel Corp.

In Thailand, seven companies most sought after among

investors include stock exchange market mover PTT Plc., along

with its key subsidiaries PTTEP & Thai Oil, industrial giant Siam

Cement Group, telecoms provider TAC, fast growing regional

beverage giant Thai Beverage as well as global seafood exporter

Thai Union Frozen.

In terms of the Best CFO in Southeast Asia, the award goes to

Kenny Kim, Group CFO at CIMB responsible for managing the

financial resources of its growing regional footprint. The award

for the Best Annual Report in Southeast Asia goes to Adaro

Energy, an aspiring Indonesian mining giant in the making

while the award for the Strongest Commitment to Sustainable

Energy in Southeast Asia once again goes to Thai Oil for its clear,

transparent and consistent CSR goals and aspirations.

In all, 37 Southeast Asian publicly listed companies were

ranked and this list represents the crème-de-la crème of best

practices whether it be on corporate governance, investor

relations, disclosure, transparency, financial management, CSR or

dividend policy.

Congratulations to all the winners.

SOUTHEAST ASIA INSTITUTIONAL INVESTOR CORPORATE AWARDS

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MOST ORGANISED INVESTOR RELATIONSAstra International 187Bank Mandiri 185Adaro 142

BEST SENIOR MANAGEMENT IR SUPPORTAstra International 167Bank Mandiri 146Antam 118

STRONGEST ADHERENCE TO CORPORATE GOVERNANCEBank Mandiri 174Adaro 167Antam 132

MOST CONSISTENT DIVIDEND POLICYAstra International 188Telkom 185Bank Central Asia 152

BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYAdaro 175Astra International 151Bank Mandiri 133

BEST CFO IN INDONESIA Pahala Mansury, CFO, Bank Mandiri

BEST ANNUAL REPORT IN INDONESIAAdaro Energy

POOR & UNPREDICTABLE IR STRATEGYBumi Resources 233Bakrie Land 176Media Nusantara Citra 154

INDONESIABUMI REVEALS $200M BLACK HOLE IN FINANCIAL RESULTSScandal-hit mining group says it seeks to recover

the $152m in 2012 and $49m in 2011 that had ‘no

clear business purpose’

By JOsEPhINE MOuLds

Bumi, the scandal-hit Indonesian coal miner, has revealed a

US$200 million black hole at its main subsidiary, as it released

much-delayed financial results for 2012. The FTSE-250

company – which has been dogged by a very public battle for

control between financier Nat Rothschild and his co-founders,

Indonesia’s powerful Bakrie family – said it would seek to recover

the money that had been spent over the past two years “with no

clear business purpose”. A source close to Rothschild, who is no

longer on the board but remains the company’s second largest

shareholder, said: “It’s appalling but not surprising.” Bumi revealed

the missing funds as it reported a pre-tax loss of $2.4bn for 2012,

reflecting a decline in the value of its Indonesian mines, in part

due to expectations of a lower coal price. The company said that

$152m in 2012 and $49m in 2011 had been wrongly attributed

to the maintenance and extension of hauling roads, payments to

landowners, consulting costs and goodwill. It is working with the

Serious Fraud Office and Indonesian authorities to track those

funds down. The company has removed the chief executive and

six other senior managers from Berau, the Borneo coal mine in

which it has an 85% stake. It continues to search for a group

finance director and chief mining officer to be based in Jakarta.

Bumi last month asked for its shares to be suspended amid the

inquiry into irregular payments at Berau. Bumi was founded

three years ago in a $3bn deal when the powerful Bakrie family

placed its coal assets into a cash shell formed by Rothschild. But

the two sides fell out amid accusations of financial irregularities

– strongly denied by the family – and a whistleblower report,

which the company alleged was based on hacked emails. In

February this year, Rothschild failed in his attempt to gain control

of Bumi, leaving the current management team in place. The

review of Berau delayed Bumi’s results by two months. Nick Von

Schirnding said: “The first quarter results speak for themselves.

During this whole mess the underlying business has performed

very well.

Source: The Guardian, 31 May 2013

Pahala Mansury, CFO, MD of Finance & Strategy and Director, Bank Mandiri



MOST ORGANISED INVESTOR RELATIONSCIMB 176Maybank 143KLCC Property holdings 112

BEST SENIOR MANAGEMENT IR SUPPORTPetronas Gas 187Maybank 167CIMB 123

STRONGEST ADHERENCE TO CORPORATE GOVERNANCECIMB 156Maybank 127yTL Corp 114

MOST CONSISTENT DIVIDEND POLICYPetronas dagangan 157Maybank 156Public Bank 154

BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYyTL Corp 176TM 174Maybank 138

BEST CFO IN MALAYSIAKenny Kim, CIMB

BEST ANNUAL REPORT IN MALAYSIATM

MALAYSIAMALAYSIAN AIRLINE’S Q1 NET LOSS WIDENS ON FOREX, FINANCE COSTSBy yANTOuLTRA NGuI

Malaysian Airline System Bhd (MAS), the country’s national

carrier, posted a bigger net loss in first-quarter, hurt mainly

by foreign exchange loss and finance costs. MAS reported

a US$91.67 million loss in the three months that ended in

March, compared with US$55 million loss a year earlier. No

forecast was available for the quarter according to Thomson

Reuters I/B/E/S. “The group remains cautiously optimistic

of its performance for the rest of the year,” MAS said in a

local stock exchange filing [in late May]. “While the carrier’s

operating statistics for the first quarter showed strong

growth, the business environment is getting tougher,” it

added. Added capacity in the market, increased competition

and continued high jet fuel prices are putting pressure

on yields, said MAS. Its local peer AirAsia, Southeast Asia’s

biggest budget airline by passenger traffic, posted a 39.23

percent fall in first-quarter profits on May 22, hurt mainly

by higher finance costs and a foreign exchange loss on

borrowings. Shares in MAS are up about 21.2 percent so

far this year, outperformed by an increase of around 14.6

percent for local peer AirAsia. MAS possesses a forward

12 month price-to-earnings ratio (PER) of 70.1 times, the

highest forward PER among 85 airlines companies in the

world, according to StarMine.

Source: Reuters, May 29, 2013

Nazir Razak, Group CEO, CIMB Group

POOR & UNPREDICTABLE IR STRATEGYGlenealy 174MAs 145BursaMalaysia 123

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MOST ORGANISED INVESTOR RELATIONSBdO 186Megaworld 167sMIC 156

BEST SENIOR MANAGEMENT IR SUPPORTsMIC 192Megaworld 156BdO 124

STRONGEST ADHERENCE TO CORPORATE GOVERNANCEAyala Corp 189sMIC 178Megaworld 153

MOST CONSISTENT DIVIDEND POLICYPLdT 156san Miguel 127Globe 118

BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYsan Miguel Corp 167Ayala Corp 156sMIC 153

BEST CFO IN THE PHILIPPINESJose sio, CFO, sM Investment Corp

BEST ANNUAL REPORT IN THE PHILIPPINESAyala Corp

PHILIPPINESPHILEX ASKED TO PAY OVER P6.4-B FOR TAILINGS DISCHARGE

State-run National Power Corp. (NAPOCOR) is asking Philex

Mining Corp. to pay for the damages caused by the miner’s

accidental discharge on its tailings pond in Padcal mine,

Benguet province last year. In a disclosure to the stock

exchange, the country’s largest gold producer acknowledged

NAPOCOR is demanding Philex Mining to remove 13.5

million cubic meters of mine wastes from the reservoir or

pay its equivalent of US$151 million. NAPOCOR also asked

Philex to pay for opportunity losses of US$145 million)

annually, while mine wastes are not yet removed from the

reservoir. Philex however said, it cannot take the NAPOCOR

demand letter seriously due to lack of legal and factual

basis for its demands. It requested NAPOCOR to substantiate

its claims and provide supporting documents as needed. In

August 2012, Philex Mining confirmed four leaks in its Padcal

tailings pond due to unfavorable weather. Mine sediments

from the tailings pond No. 3 of Philex’s Padcal mine flowed

into the Balog Creek and the Agno River, which is connected

to the San Roque Dam in Pangasinan. Philex Mining was

slapped with over a US$23 million fine, which it paid in full

last February. It contested the fines arguing force majeure,

but the miner’s appeals were denied. Apart from the US$23

million fine for violating the Philippine Mining Act of 1995,

Philex is facing other fines for polluting Balog creek and

Agno River, and violating the Clean Water Act. Philex has a

pending request to the MGB to allow the resumption of its

temporary operations in Padcal to ensure the stability of the

tailings dam.

Source: Reuters, May 29, 2013

Jose Sio, CFO, SM Investment Corp

POOR & UNPREDICTABLE IR STRATEGYPhilex 145Melco Crown (Philippines) Resorts Corp 118Eton Properties Inc. 108

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MOST ORGANISED INVESTOR RELATIONSCapitaland 172sT Engineering 167singTel 156

BEST SENIOR MANAGEMENT IR SUPPORTsingTel 146Capitaland 135sT Engineering 123

STRONGEST ADHERENCE TO CORPORATE GOVERNANCEsingTel 194Capitaland 176Keppel Corp 154

MOST CONSISTENT DIVIDEND POLICYsingTel 167dBs Bank 156OCBC 148

BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYCapitaland 157singTel 137dBs 128

BEST CFO IN SINGAPOREFang Xie, heather, Global Logistics Property

BEST ANNUAL REPORT IN SINGAPOREKeppel Corp

SINGAPOREOLAM SURVIVES AS SHORT-SELLER BLOCK PROVES INVESTORS’ FRIENDBy MIChELLE yuN

Short-seller Carson Block’s charge that Olam (OLAM)

International Ltd. will fail, his first attack on a Singapore

company, is a victory for shareholders after it made the

commodity trader more responsive to investors. “We have

listened to our fiercest critics as well as our most ardent

advocates,” Olam Chief Executive Officer Sunny Verghese said

[in late May] at the company’s annual business review, its first

since Block questioned Olam’s finances in November. Sunny

Verghese, chief executive officer of Olam International Ltd.,

said [the current] annual strategic review has “taken on a

sense of urgency with regard to all the recent developments

surrounding Olam.” Olam will slash capital spending by around

US$808 million from fiscal 2014 to 2016 and sell assets to

reduce debt, the world’s second-largest rice trader said at the

review. The company also dropped its $1 billion earnings target

for 2016. In the five months since Block and his Muddy Waters

LLC questioned Olam’s accounts, the commodity trader has

raised $712.5 million selling bonds, scrapped a sugar deal and

sold almond orchards to boost cash. The company also won

increased backing from Temasek Holdings Pte, Singapore’s

state investment firm, which now holds 24 percent of Olam,

buoying shareholder confidence. Block first revealed he was

betting against the stock on Nov. 19. “While Olam slowing

its spending could be viewed as a tacit admission that we

were correct, we believe the change is too little, too late to

save this company - particularly given its massive debt load,”

Muddy Waters said in an e-mail on April 25, 2013. Olam shares

-- pushed as low as S$1.395 after Block’s allegations -- have

rebounded in Singapore trading. They closed unchanged at

S$1.67, before the announcement was made, compared with

S$1.74 before Block’s first assault.

Source: Bloomberg, April 25, 2013

Chua Sock Koong, CEO, SingTel

POOR & UNPREDICTABLE IR STRATEGYOlam International 287Wilmar International 229Golden Agri Resources 188



MOST ORGANISED INVESTOR RELATIONSPTTEP 183sCG 136Thai Bev 126

BEST SENIOR MANAGEMENT IR SUPPORTPTT 176Thai Bev 168TAC 135

STRONGEST ADHERENCE TO CORPORATE GOVERNANCEThai Oil 158sCG 147Thai Bev 137

MOST CONSISTENT DIVIDEND POLICYPTT 178TAC 158sCG 147

BEST STRATEGIC CORPORATE SOCIAL RESPONSIBILITYPTT 193PTTEP 128Thai Oil 111

BEST CFO IN THAILANDsurong Bulakul, Chief Financial Officer, PTT

BEST ANNUAL REPORT IN THAILAND;Thai union Frozen

THAILANDTHAILAND STOCK EXCHANGE TO PROBE SIAM MAKRO TRADESBy suTTINEE yuvEJWATTANA

Thailand’s stock exchange will investigate trading that

preceded the announcement of the nation’s largest takeover

bid, the purchase of discount wholesaler Siam Makro Pcl

(MAKRO) by 7-Eleven chain operator CP All Pcl. (CPALL)

Siam Makro’s shares rose 30 percent in the six trading

sessions before CP All’s US$6.6 billion bid was announced.

The stock jumped 15 percent on April 17, while the volume

of shares traded rose to 1.6 million, almost four times the

six-month average. CP All, backed by Thai Billionaire Dhanin

Chearavanont, offered to buy Siam Makro for US$26 (THB

787 baht) a share on April 23. “It’s our job to investigate

any irregularities,” Charamporn Jotikasthira, president of

the Stock Exchange of Thailand, said in an interview on

April 25,2013. “We have seen it and begun the process

to investigate that.” Korsak Chairasmisak, chief executive

officer of CP All, and Suchada Ithijarukul, CEO of Siam Makro,

weren’t immediately available for comment after calls to

their offices. The deal would be the largest on record for a

Thai company and the biggest takeover announced in Asia

this year, data compiled by Bloomberg show. CP All’s offer

is 41 percent above Siam Makro’s average price in the prior

20 days, a record premium for a retail deal in emerging Asia,

according to data compiled by Bloomberg.

Source: Bloomberg, April 25, 2013

Surong Bulakul, Chief Financial Officer, PTT

POOR & UNPREDICTABLE IR STRATEGYCP All 175Toyo Thai 126G steel 121

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ME.pdf 1 4/5/13 12:51 PM


FEATURE STORY

Foreword

When reflecting on the results from this year’s International

Business Report (IBR), one has to take into account the major

political and economic events that have dominated the

global agenda over the past twelve months.

With the on-going eurozone negotiations, the US ‘fiscal

cliff ’, the continuing Arab Spring and the various domestic

elections, including those in France, the US, India and Japan,

it is understandable that many business leaders surveyed

remain cautious about their current and future commitment

to M&A.

However, what is encouraging from this year’s results

is the increased appetite of companies for cross-border

acquisitions, which is at its highest level since the IBR first

asked this question in 2008.

This trend underlines that this domain, previously

dominated by large corporates, is progressively becoming

a focus area for businesses of all sizes, whether they are

acquiring or indeed looking to source potential acquirers for

their own business.

Accessing global customers, relationships and new

markets may well now be the most important strategic tool

for companies seeking to grow, especially as many continue

to experience either limited growth domestically or are

operating in a highly competitive saturated domestic market.

As dynamic businesses look to M&A within their own

borders or across the globe, Grant Thornton’s M&A experts

across the global organisation of more than 110 member firms

have the experience and expertise to assist business owners

and management teams in achieving their strategic goals.

The riSe oF The croSS-borderTrAnSAcTionGrant thornton InternatIonal BusIness report 2013

2013 M&A reporTcroSS-border deAlS SeT To riSe

Whilst domestic acquisitions remain the focus of acquisitive

growth for many businesses (84%), the desire to make a cross-

border acquisition is becoming increasingly prominent. The

global expectation that cross-border M&A will drive acquisitive

growth has increased by 56% since 2008 and 18% in the last

year alone.

Whilst overall the survey results indicate that some businesses

may be holding back on committing to acquisitions in the next

three years, there is no doubt that many of those that will be

considering an acquisition will be looking overseas to facilitate

their growth.

regionAl highlighTS

norTh AMericA

North American interest in growing through a domestic

acquisition remains healthy with 88% expecting a domestic deal.

However, what is fascinating is the escalation of the interest

in cross-border acquisitions. Over the past four years, both US

(56% increase) and Canadian (67% increase) respondents have

shown a considerable rise in the expectation that cross-border

acquisitions will underpin their acquisitive growth.

europe

There is less emphasis on the importance of domestic acquisitions

to drive acquisitive growth amongst European businesses (71%),

as companies from this region continue to show an increasing

desire to drive growth through a cross- border acquisition (44%).

Spain (61%) is the country where businesses are most fervent


M&A AcTiviTyThe results of the survey show that 28% of businesses across

the globe expect to be participating in M&A activity in the

next three years. Whilst a decrease in comparison to 2012,

the results remain above those at the depths of the global

down-turn in 2010.

It appears that with many key global and regional

economic issues still to be resolved, there is a more subdued

outlook for global M&A activity compared to the apparent

optimism shown last year.

about future cross-border M&A activity whilst, in contrast,

German businesses have increased their support for domestic

acquisitions (11% year on year increase). UK and Irish companies

remain focussed on domestic acquisitive growth (84%) but with

33% effecting their M&A activity to be cross-border, UK and Irish

corporates remain keen global acquirers.

bric

BRIC countries (87%) continue to place significant importance

on making acquisitions within their own borders with China

(90%) leading that trend. However, the BRIC region’s mid- market

respondents are now showing a greater interest in overseas

acquisitive growth with an increase of 20% year on year.

The year on year increase in appetite for cross-border

acquisitions from countries such as Russia (increase of 117%)

and China (81% increase), emphasises the development and

growing financial strength of mid-market companies within

these countries that now have the ability and interest in sourcing

growth internationally.

ASiA pAciFic

The results from India (59% increase) illustrate that the recent

economic slowdown and political and economic issues still to

be resolved appear to be impacting on where businesses seek

acquisitions with a greater focus on overseas opportunities.

Japanese respondents’ 50% increase in interest in cross-

border acquisitive growth coupled with their high expectation

of acquisitive growth being made through domestic acquisitions

(91%) only further indicates how important acquisitions are to

Mature Markets IncreasIngly lookIng overseasPrecentage of busIness PlannIng a Merger or acquIsItIon over the next three years Japanese businesses seeking to grow.

Singapore (86%) and the UAE (66%) are two of the countries

most interested in growing through cross- border acquisition.

Australian respondents (94%; an increase year on year of 25%)

show the most support for domestic targets as the focus of their

acquisition strategy.

Interest In M&a actIvItyPercentage of busIness PlannIng to grow through acquIsItIon over the next three years

“Although not at pre-crisis level, private german companies continue to generate a decent level of profits. with significant cash resources behind them we are optimistic for an increase in M&A activity in 2013.”

Kai Bartels, Grant thornton Germany


FEATURE STORY

exiT percepTionSBusiness owners are often reticent about disclosing their

long term ownership plans. This year’s results illustrate this

once more with globally only 8% of businesses stating that

they foresee an exit over the next three years, the lowest

level since 2008.

This decrease indicates a reaction to a turbulent 2012 and

maybe a reflection of business owner’s views that they may

not be able to attract the level of interest or price acceptable

to them.

regionAl highlighTS

europe

Owners of UK and Irish businesses (12%) remain some of the

FinAncing growThWhilst M&A remains a key growth strategy, the ability to

finance such growth in the current financing market is

potentially impacting on respondents’ views on the likelihood

of transacting in the short term.

When asked how they expect to finance their growth

strategies, it is notable that bank finance slipped to 48% of

respondents from 53% last year. On the contrary, the IPO

funding option increased by 40% year on year with Polish

respondents showing the greatest appetite for raising money

through the public market (28%). As the private equity (PE)

market continues to expand globally, it is notable to see

Brazilian business the most expectant to raise PE funds (47%)

to fund their growth, which is unsurprising considering the

increasing number of PE firms now present in South America.

AcquiSiTion rATionAleThe most likely reason for engaging in M&A remains similar

year to year. Accessing geographical markets (65%) remains the

main motivation to participate in M&A and this has increased

in importance this year. French respondents (77%) put the most

emphasis on using M&A to access new markets. This further

illustrates that for well managed and funded businesses M&A

remains the quickest and most effective way to gain a footprint

and build scale in new geographies.

regionAl highlighTS

norTh AMericA

Businesses in Canada and the US continue to be as keen

on M&A as they were last year with this region remaining

the most supportive of M&A activity. 37% of respondents

expect to grow through acquisition in the next three years.

europe

European companies continue to be less enthusiastic about

M&A than their North American counterparts, although

there remains a strong expectation for M&A activity to

facilitate growth in the Netherlands (55%) and France (31%),

whilst notably German, UK and Irish respondents say they

are less likely to undertake in M&A.

bric

The BRIC region’s respondents have historically been the

most enthusiastic when forecasting future M&A activity.

However, over the past two years, that desire appears to have

been stifled by global economic events and their responses

are now more aligned with the rest of the world (27%).

reST oF The world

From the developing and high growth markets, it is Latin

American businesses that have the highest expectations of

their future growth being driven by M&A (31%).

Noticeably it is Australian respondents whose opinions

have been impacted the least by recent global events, with

their survey results remaining relatively consistent over the

past three years (28%).

“with the government now demonstrating policy initiatives and addressing some of the foreign investment deterrents, there are expectations of an increase in M&A activity in 2013, with private equity exits and investments at the forefront.”

Munesh Khanna, Grant thornton InDIa


SuMMAryWith a turbulent 2012 behind us in which significant political

and economic decisions were made and with many key decisions

and policies to be set in 2013, not least in the US, Europe, India

and Japan, it is unsurprising that businesses are cautious.

However, across the world M&A remains a key strategic

tool to drive growth and build scale. The marked increase

in prominence and importance of cross-border M&A to

business owners illustrates that accessing global markets and

opportunities is now more than ever a vital growth strategy.

At Grant Thornton, we have the global advisory capability,

expertise and reach to provide insightful global advice and

support to domestic and international businesses seeking to

expand their operations organically or through acquisition.

most open and upbeat about the potential to sell their business.

Respondents from countries across mainland Europe

(8%) are generally less forthcoming or expectant to sell

their business in the next three years. However French

business owners showed an increased interest and are 25%

more likely to sell in the next three years compared to last

year. Interestingly it is business owners in the Netherlands

(14%) and Finland (26%) who are amongst the most positive

regarding a future sale of their business.

reST oF The world

Globally the trend is very similar with many respondents

not showing an inclination to sell, though those from Brazil

(19%) and South Africa (15%) expressed a far greater interest

than the rest of the world.

exiT rouTe

Selling to a competitor is the most likely exit route for

businesses in the current climate. Whilst 44% of UK businesses

expect to sell to a trade buyer, South African businesses

(35%) see their most likely exit route being to management,

35% of Canadian firms expect to hand over their business to

family and, to further underline the investment made by PE

firms in South America, 40% of Brazilian companies expect

to exit via private equity.

uk & Ireland business most likely yo sellPercentage of business foreseeing a change of ownership in the business over the next three years

The Grant Thornton International Business Report (IBR) is

a quarterly survey of 3,500 senior executives in listed and

privately-held businesses all over the world. Launched in

1992 in nine European countries the report now surveys

13,000 businesses leaders in 44 economies on an annual

basis providing insights on the economic and commercial

issues affecting companies globally.

The data in this report are drawn from 12,156 interviews with

business leaders conducted between January and December

2012.

To find out more about IBR and to obtain copies of reports

and summaries visit: www.internationalbusinessreport.com.

argentinaarmeniaaustraliabelgiumbotswanabrazilcanadachilechina (mainland)Denmarkestoniafinlandfrancegeorgiagermany

greece hong kong India Ireland ItalyJapan latvialithuaniaMalaysiaMexiconetherlandsnew ZealandnorwayPeruPhilippines

Polandrussiasingaporesouth africaspainswedenswitzerlandtaiwanthailandturkeyunited arab emiratesunited kingdomunited statesvietnam

participating economies


VN INdex dropped 3.3% oN low lIquIdItyThe VN Index (in US$ terms) dropped by

3.3% and closed April at 474. Average

daily liquidity in April was US$58m,

similar to the previous month. Foreign

net buying declined from US$50m in

March to US$16m in April. Diversified

Financials was the hardest hit and

was down 11.7%, led by Petro Vietnam

Finance (PVF), which dropped 19%.

Banking declined 7.2% with a wide

range of performance within the sector

from -14% to +4% whilst Real Estate

maintained its losing streak and dropped

5.2%. On the upside, F&B continued its

positive run thanks to Vinamilk’s (VNM)

increase by 6.9%.

locAl INVeStorS took A ‘wAIt ANd See’ StANce whIle the mArket wAS led dowN by profIt tAkINgWith both the mid-term Central

Committee Party and the National

Assembly meetings scheduled for May,

local investors took a ‘wait and see’

stance. Meanwhile the market was led

down by ETFs who took profits after

a rally for four consecutive months,

a move that was followed by local

specula- tors. By the end of the month,

most of the hot local money had exited

the market and liquidity dried up. It

may well be that part of the hot local

money was withdrawn to benefit from

the strong drop in the gold market.

A couple of SegmeNtS of the property Sector mAy be cloSe to theIr bottomIf property companies in Indonesia,

Thailand, and Malaysia after 1997 are

any guide, it will take several years

of deleveraging to allow the sector

bottoming out. We haven’t seen this

happening in Vietnam just yet. However,

we have started seeing a pick up in

activities in a few segments. In the past

two- three months, four large office /

hotel transactions occurred in Ho Chi

Minh City at good prices. In addition,

some good residential projects are

starting to see improving turnover and

stabilising prices whereas six-nine

months ago prices were still declining

and turnover was absent. Two segments

of the property market may be close

to their bottom: 1) good quality office

buildings in prime locations and 2)

residential buildings in good locations

developed by well-known players. Last

but not least, it is comforting that the

banks’ 1Q2013 reports indicate that

performance has not been worsening

any further. These brighter signals give

rise to hope that these related sectors

which have suffered more than any other

sector are close to forming a bottom.

hSbc pmI coNtINued to INcreASe IN AprIl to the hIgheSt leVel IN two yeArS, INdIcAtINg thAt recoVery hAS become more SuStAINAbleHSBC’s Vietnam Manufacturing

Purchasing Managers’ Index (PMI)

continued to increase from 50.8 in March

to 51.0 in April, the highest in two years. A

level above 50 indicates an expansionary

economy. The PMI was boosted by faster

growth of new orders and employment

and a further expansion of production

volumes. The new orders increased from

51.4 to 51.8, driven by local demand as

the New Export Order Index marginally

declined to 50.1, reflecting competitive

and subdued global market conditions.

The PMI was boosted by faster growth

of new orders and employment and

VIetNAm INVeStmeNt updAte

34 June 2013 | Alpha Southeast Asia Alpha Southeast Asia | June 2013 35

a further expansion of production

volumes. The new orders increased from

51.4 to 51.8, driven by local demand as

the New Export Order Index marginally

declined to 50.1, reflecting competitive

and subdued global market conditions.

Mean- while, manufacturing employment

continued to improve considerably

for the second month in a row. This is

an important signal as it reflects that

firms are more confident about the

future. Furthermore, the April data also

indicated that inventory has declined for

the sixth straight month. Together with

increased new orders, this indicates that

the cycle of inventory reduction is about

to finish and that we are about to enter

a cycle of new production. In summary,

the April PMI supports our belief that the

recovery has become more sustainable.

VIetcombANk took the leAd to cut depoSIt rAteS. effectIVe leNdINg rAteS wIll coNtINue to fAll to StImulAte credIt growthThe Government hinted that lending

rates will have to be low- ered further in

future to support the economy. In order

to allow lowering its lending rates and

boost credit growth, Vietcombank (VCB)

took the lead, ahead of the hinted lower

policy rates, to cut all its deposit rates:

one month from 7.5% to 6%, six months

from 7.5% to 7% and twelve months from

9% to 8%. The move reflects the excessive

liquidity in the banking system and is

an indicator for the impending interest

rate race between banks. Total deposits

grew 5.3% YTD, triple the growth in same

period of 2012, while credit growth was

estimated at only 2.1%. At some point,

this excessive liquidity will lead to lower

lending rates. We already have seen that

good companies can borrow at 9%, but

many others still have to borrow at 14-

17%. This is why our estimate for the

average lending rate remains at 14%,

implying there is still a quite some way

to go before reaching 9-11%, which was

the norm between 1997 and 2007.

credIt growth IS expected to Slowly pIck up. polIcy rAteS mAy be cut by 100-200 bpS IN

Next SIx moNthSVND deposit rates are still around 5%

higher than US$ rates. Given that inflation

is 6.6% y/y, this implies that real interest

rates remain positive. Lower deposit

rates therefore won’t pose a challenge

for the currency. Unlike deposit rates,

we expect policy rates, i.e. OMO rates

and refinance rates, to be cut by another

100-200 bps in the next six months. We

have seen that banks have been more

willing since the beginning of 2013 to

renew their existing loans at lower rates

which is helping to reduce the lending

rates faster than during 2012. Given the

negative credit growth of -0.6% from

January to April 2012, it is encouraging

to see that credit growth has bounced

back to +2.1% during the same period in

2013. If the Vietnam Asset Management

Company (V-AMC) comes into operation

in 3Q2013, we are confident that credit

growth will finally increase to healthy

levels again. Chances for this occurring

are good as lending rates are expected

to fall further and business conditions

are expected to improve.

DRAGON CAPITAL VIETNAM INVESTMENT UPDATE - JUNE 2013

“If the property companies in Indonesia, thailand, and malaysia after 1997 are any guide, it will take several years of deleveraging to allow the sector bottoming out.”


FEATURE STORY

ExEcutivE SummAry

The use of quantitative strategies by Asian investors will

likely increase as rapid asset growth prompts institutions

throughout the region to incorporate a broader mix of asset

classes and investment strategies into their portfolios.

Although the share of Asian institutions currently using

quantitative strategies tis modest relative to the widespread

use among U.S. institutions, a new study from Greenwich

Associates suggests that Asian institutions are likely to

allocate more to quantitative strategies over time as they

seek new sources of alpha and investment approaches with

low correlations to fundamental managers.

Asian institutions are growing rapidly. As they accumulate

assets in an environment of historically low yields and

high levels of market volatility, they are venturing beyond

the local fixed income and cash investments that once

dominated their portfolios and moving into a broader range

of asset classes and investment strategies. Currently, about

a third of Asian institutions include quantitative investment

strategies in this expanding mix. This low rate of adoption

can be attributed to several factors, including a general

lack of understanding about precisely how these complex

strategies generate alpha and the role they should play in an

institutional portfolio, as well as negative perceptions about

how some quantitative managers have performed during

recent periods of extreme market volatility. Compounding

these issues for Asian investors is the fact that many

quantitative managers house their investment operations

half a world away and maintain little permanent presence

in local markets.

However, Greenwich Associates believes growing numbers

of Asian institutions will be looking for managers who can

deliver sources of diversified and consistent returns with

low correlations to their existing fundamental exposure.

When they do, quantitative investment managers who can

clearly articulate the role of their strategies in portfolios and

maintain a local presence in Asia will be strong contenders.

To assist Asian investors in this process, we completed a study

on the use of quantitative strategies among institutions

in Asia and the United States. This report presents the

results of that research, along with a set of best practices

for institutions to follow as they consider and implement

quantitative approaches. In general, those best practices

relate to two main principles for institutions to consider:

gaining a firm understanding of the process by which a

quantitative manager generates alpha, and understanding

how the quantitative fund will fit with the fundamental

strategies that make up the bulk of their portfolios.

uSES of QuAntitAtivE invEStmEnt StrAtEgiES in ASiABest Practices for asian institutions considering Quantitative aPProaches to investing

“Asian institutions are growing rapidly. As they accumulate assets in an environment of historically low yields and high levels of market volatility, they are venturing beyond the local fixed income and cash investments that once dominated their portfolios and moving into a broader range of asset classes and investment strategies.”


Study PArticiPAntS

Between November and December 2012, Greenwich

Associates interviewed 44 institutional asset owners in the

United States (22) and Asia (22) to better understand their

perceptions and use of quantitative investment strategies.

Respondents included pension funds, sovereign wealth funds,

insurance companies, endowments and foundations.

KEy Study findingS

• Current low penetration Approximately one-third of

responding Asian institutions use quantitative investment

strategies, compared with 82% of U.S. institutions.

• Increasing trend Approximately 30% of Asian institutions

participating in the study that now employ quantitative

strategies expect to increase their use of these approaches

in the coming three years and none expect to reduce their

usage. Thirteen percent of Asian institutions not currently

using these strategies expect to add quantitative funds to

their portfolios for the first time.

• Investors have been generally satisfied Roughly half of

participating institutions in Asia and the United States say

they are satisfied with the performance of quantitative

funds from 2011 to 2012, 17% say returns over the

period actually exceeded expectations, and about a

third say quantitative strategy performance fell short of

expectations.

• Less understanding of quantitative strategies No Asian

institutions participating in the study claim to have a

strong understanding of quantitative models versus a third

in the United States, and about 45% of Asian investors find

quantitative strategies to be too opaque.

• Local presence is crucial All Asian users of quantitative

strategies participating in the study invest in global funds.

This practice differs markedly from the approach employed

by U.S. investors, among which more than 90% invest in

domestic funds and only 53% invest in global funds. This

global focus — and the fact that most quantitative funds

house their investment operations in Western locations

— means that Asian investors will benefit greatly from

managers that maintain the local presence required to

provide consistent and robust support.

• Investors need better servicing and stronger capabilities

Investors rate transparency and manager communication

as a top criterion in considering a quantitative manager,

second in importance only to the strength of managers’

quantitative systems and models. Generally, Asian

investors see servicing capabilities and the ability to

advise on broader investment issues as important factors

in selecting a quantitative manager.

Greenwich Associates research reveals growing interest

in quantitative strategies among Asian institutions.

Approximately one-third of Asian institutional investors

employ quantitative strategies, as compared to the more than

80% of U.S. institutions that currently include quantitative

strategies in their portfolios. That differential suggests room

for substantial growth in Asia.

Assets under management by Asian institutions have grown by

approximately 50% since 2009. Asset growth of this magnitude

requires dramatic alterations to investment strategies and asset

allocations, as well as a significant expansion of in-house staff

and capabilities. Many of these institutions are still building

out their investment strategies. Lacking hands-on experience

with quantitative strategies, many Asian institutions are for

now sticking with more familiar fundamental approaches.

However, the research results clearly suggest that once

Asian institutions gain first-hand experience with quantita-

tive strategies, they are likely to increase their allocations

to quantitative approaches relatively rapidly. Among Asian

institutions that have already started using quantitative

toP rEASonS for imPlEmEnting A QuAnt StrAtEgy1 Diversify sources of return2 Achieve higher alpha3 Lower portfolio’s correlation to markets


FEATURE STORY

investment strategies, approximately 30% plan to make more

use of these strategies in the next three years and none expect

to cut back.

Why QuAnt?

Why should Asian institutions care about quantitative strategies

— even in the wake of an especially challenging period for

many quantitative managers?

At a general level, active fundamental investors and

quantitive investors are working to achieve the same goal:

To parse information for opportunities to generate alpha.

However, the two types of managers approach this taskfrom

vastly different perspectives. Fundamental managers

generally look to outperform the market by using their own

expertise and information advantages to pick out individual

investments with the potential to generate alpha. Quantitative

managers feed sources of information into a repeatable and

consistently applied process designed to create alpha from a

broad portfolio of holdings.

These differences make quantitative strategies

complementary to fundamental approaches. Quantitative

strategies have low correlations with fundamental strategies,

When thinking about institutional use of quantitative

strategies in Asia or any other market, it is important

to bear in mind that quantitative strategies are not a

monolithic set of techniques. To the contrary, the term

“quantitative strategies” is a general label applied to a

broad and dynamic set of approaches that apply rigorous

and systematic analysis to investing. Quantitative

investors use multiple sources of information to

design consistently applied investment processes

to manage portfolios with typically greater breadth

than fundamental strategies. Many

quantitative managers’ approaches

are differentiated from so-called

“black box” strategies by the fact

that investment teams have the

ability to intervene to allocate risk

dynamically if market conditions call

for it, as opposed to implementing purely model-driven

processes. Quantitative investing can take the form of

long- only and hedge fund strategies, and spans multiple

asset classes and geographies.

Grouped under the “quantitative” umbrella are a diverse

array of individual strategies. For example, long-only funds

use value, momentum and earnings strategies, while for

hedge funds, typical quantitative strategies include equity

market neutral, event driven, systemic macro, correlation,

and short- term strategies as well as other technical

strategies and more esoteric approaches like volatility

arbitrage. These strategies vary significantly in underlying

methodologies, correlation levels, volatility measures, and

performance histories.

In fact, the universe of quantitative strategies is much

more diverse today than it was just five to 10 years ago.

In the past, quantitative strategies’ main distinguishing

characteristic was their rigorous, risk-controlled

methodology. While that methodology

remains in place, quantitative managers

are pushing into new sources of

return, such as emerging markets, and

employing new strategies and more

complex and increasingly unstructured

information sources. For example,

some managers have been able to leverage technology

and their own research skill to generate opportunities by

processing regulatory filings, conference call transcripts,

analyst reports and other textual sources of information

with the aim of gauging broker sentiment and measuring

management confidence.

Nevertheless, virtually all quantitative strategies

continue to share some important characteristic

dEfining QuAnt

“Quantitative investing can take the form of long- only and hedge fund strategies, and spans multiple asset classes and geographies.”


in part because the two approaches use different sources of

alpha. In fact, since the 2007–2009 period of deleveraging,

quantitative managers have focused on taking advantage of

innovations in technology and increased access to data in

order to produce unique and uncorrelated sources of excess

returns. For example, quantitative managers are now able to

employ natural language processing to analyze huge volumes

of information and harness “unstructured” information sources

that until recently were inaccessible to investors and remain

largely untapped by fundamental investors. The addition of

quantitative funds that leverage these and other new sources

of alpha can increase portfolio diversification.

In addition to diversification, quantitative strategies offer

investors the potential for consistent returns. Quantitative

models are designed to apply their investment process and

risk controls systematically and regularly over the course of

the market cycle. Because the investment model and risk

controls are independent of both managers’ personal views

and the macro factors that drive fundamental strategies,

returns should be relatively consistent throughout the cycle

— even in volatile markets.

it’S thE QuAlity (of rEturnS) thAt countS

Despite general perceptions that quantitative strategies have

failed to live up to their potential during recent periods of

extreme market volatility, roughly half of

Asian institutions participating in the study say they are

satisfied with quantitative performance from 2011–2012

and 17% say returns over the period actually exceeded

expectations. About a third of study participants do say

quantitative strategy performance fell short of expectations

over the period. Some investors’ disappointment with

their quantitative investments could be explained by past

beliefs about quantitative strategy correlation levels,

which proved to be much higher than expected during the

2007–2009 period. Over a 10-year period, large cap long-

only U.S. fund managers pursuing quantitative strategies

marginally outperformed fundamental managers, according

to eVestment Alliance data. However, rolling 36-month

correlations of quantitative and fundamental returns

strengthened to as high as 0.80 just prior to 2007, before

dropping to where they are today, around 0.20.

In many cases, those early expectations were inflated by

eager managers who marketed their products as “all-weather”

strategies capable of delivering strong performance regardless

of external market conditions. As a result, many institutions

were likely disappointed by performance during a recent

period that proved to be the most challenging in history for

quantitative strategies.

As the representative of one Japanese pension fund explained:

“We had expected stable performance from our quantitative

investments even in volatile markets, but it did not happen after

[the] Lehman shock. The future of quantitative investment depends

on asset managers’ efforts to improve their models.”

For investors, the main lesson from the 2007–2009 period

of severe underperformance among quantitative strategies

is to find managers who are ahead of the game in terms of

designing strategies that avoid crowded trades and who are

vigilant in monitoring the efficacy of quantitative factors.

In this regard, investors may consider asking prospective

quantitative managers: What insights do you have into

what other quantitative investors are doing? Managers with

robust and sophisticated analytics processes and systems

can report accurate, up-to-date and detailed risk positions

and information ratios for each factor in their quantitative

models. Investors should seek managers who are willing to

share those risk and information ratio statistics and interpret

them for clients.

“compounding these issues for Asian investors is the fact that many quantitative managers house their investment operations half a world away and maintain little permanent presence in local markets.”


FEATURE STORY

Risk-adjusted returns are the most popular method of

measuring quantitative strategy performance among Asian

institutions. However, because so many institutions invest in

quantitative strategies not just for the return potential, but also

for the benefits these strategies can provide at the portfolio-

wide level, a more useful measure might be “quality of returns,”

a broader metric which would include not only risk-adjusted

returns but also consistency of returns/volatility levels and

correlation levels/portfolio diversification benefits.

A representative of an Asian sovereign wealth fund provided

a concise definition of the type of high-quality returns

institutions should be seeking from quantitative managers:

“We are looking for consistency of performance, the ability to

protect the performance during the sharp downturn, and how well

the model is developed.”

PrEPAring to BooSt QuAnt AllocAtionS: focuS

on undErStAnding of invEStmEnt ProcESSES

And Portfolio fit

The one factor that can truly differentiate quantitative

managers today is continuous dedication to research,

combined with the ability to process and react effectively

to new information. The quantitative investing industry has

evolved beyond its early days of boutique fund houses with a

few managers. Quantitative investing has become more about

processes. Significant scale and resources are now required to

research innovative signals, process large and complex data

sets and draw unique connections that can produce alpha in a

competitive market.

For investors with limited exposure to quantitative

strategies, the research and investment processes can seem

daunting. Investors in quantitative funds rarely receive access

to the specific signals used in manager trading models, and

even in cases in which investors do receive such information,

most institutions lack the technology infrastructure required

to test them.

Not a single Asian institution participating in the study

claims to have a strong understanding of quantitative models.

About 45% of the investors find quantitative strategies to be

too opaque. Although few institutions say they see quantitative

strategies as entirely “black box” strategies, a solid majority of

institutions (64%) say they would like their managers to better

explain their quantitative strategies. Reflecting that desire,

these investors rate transparency and manager communication

as a top criterion in considering a quantitative manager, second

in importance only to the strength of managers’ quantitative

systems and models.

These findings reflect the fact that gaining a full

understanding of how a manager creates alpha is becoming

increasingly important as signals become more diffuse and

many financial markets remain correlated with each other.

As such, when conducting due diligence on quantitative

managers, institutions should be clear in their understanding

of the investment approach and models used by the manager.

While some aspects of a manager’s investment process will

remain proprietary, institutions should demand that managers

provide transparency with regard to their processes and help

the investor understand how the strategy works. Although

some quantitative managers still keep portfolio holdings

secret, other firms have moved to provide significant amounts

of portfolio transparency.

It is critical that institutions develop a disciplined due

diligence process that looks beyond past performance. The

standard due diligence involves investigating the ability of a

“Among Asian institutions that have already started using quantitative investment strategies, approximately 30% plan to make more use of these strategies in the next three years and none expect to cut back.”

“roughly half of participating institutions in Asia and the united States say they are satisfied with the performance of quantitative funds.”


manager’s investment platform and firm infrastructure to deliver

consistent, high-quality returns. In addition, investors should

ask quantitative managers detailed questions about how the

manager creates alpha. For example, what kind of resources does

a fund dedicate specifically for research? How does the manager

leverage technology to filter and identify opportunities?

How many data feeds does a manager use? Access to data

can be crucial for quantitative investing, especially strategies

focused on fixed income, which is traded over- the-counter as

opposed to on an exchange, where data is readily available.

When considering a quantitative investment, institutions

should look closely at a manager’s track record in providing

detailed strategy explanations as well as overall education and

ongoing support to their clients. Upon completing due diligence,

investors should feel they have a complete understanding of

the process by which a strategy generates alpha and how the

strategy will interact with the overall portfolio. Quantitative

managers who provide prospective investors with little more

than a deluge of data that the institution cannot understand

or process signal the likelihood of insufficient communication

throughout the future relationship. Investors should seek

managers who are willing and equipped to provide the time

and support needed to explain their investment process and

the role their strategy can play within the portfolio.

locAl SuPPort iS A muSt

In the United States and other developed markets, institutions

rely on investment consultants for education about how

quantitative and other innovative investment strategies work

and for advice about the role new strategies should play

in an institutional portfolio. In the United States, more than

75% of institutions rely on consultant relationships for advice

on investment matters. Asian institutions, on the other hand,

typically rely on in-house capabilities, with only about 25–30%

of institutions using external investment consultants. Based on

those factors,

it comes as no surprise that Asian institutions focus more

than their U.S. counterparts on quantitative managers’

servicing capabilities. Less than half of U.S. institutions rate

servicing capabilities as “important” or “very important” criteria

in selecting a manager.

By contrast, three-quarters of Asian institutions rate manager

servicing capabilities as “important” or “very important.”

Contributing to this difference is the fact that Asian institu-

tions are much more likely than U.S. investors to invest in global

funds. Among the institutions in this study, all Asian users of

quantitative strategies invest in global funds, 57% invest in

Asian funds and 42% invest in emerging markets funds. All

Asian users also employ quantitative strategies in equities and

43% use them in fixed income.

To that end, one of the top priorities for institutions moving

into this space should be ensuring that they access managers

with a proven history of providing clients with strong support

and high levels of ongoing interaction and education about

how these strategies work and the role they should play in an

institutional portfolio.

Because of the many unique characteristics of the Asian

marketplace, a manager’s ability to provide consistent, high-

quality coverage and support should receive extra consideration

as an important manager selection criterion.

Although the deployment of product specialists and other

investment professionals based in Asia puts a manager ahead

of competitors, even a local presence does not guarantee

the level of service institutions should be seeking for such

complex strategies. Rather, Asian institutions should focus

on finding managers who have moved beyond the model of

“in addition to diversification, quantitative strategies offer investors the potential for consistent returns.”

“Among the institutions in this study, all Asian users of quantitative strategies invest in global funds, 57% invest in Asian funds and 42% invest in emerging markets funds.”


FEATURE STORY

selling proprietary quantitative products, and instead embrace

the notion of partnership, in which the manager works to

understand the needs of its investors and help them achieve

their objectives at a portfolio-wide level. The key is to find

managers who see it as part of their responsibility to have

real conversations with investors in which they listen to the

needs of the institutions, explain in detail their own investment

philosophy, process and source of alpha, and then work with

the investors to determine the proper role for the strategy

within the portfolio.

concluSion

Quantitative strategies will increase in popularity across

Asia as rapid asset growth prompts institutions throughout

the region to incorporate a broader mix of asset classes and

investment strategies into their portfolios. Although the

number of Asian institutions currently using quantitative

strategies is modest relative to the near-universal use

among U.S. institutions, Greenwich Associates research

shows that Asian investors who obtain first-hand experience

with quantitative funds are quite likely to increase their

allocations to the strategy in subsequent years. Among

the benefits attracting these institutions is portfolio

diversification resulting from low correlation levels between

quantitative approaches and the fundamental strategies

that make up the bulk of institutional assets, as well as the

potential for low volatility levels and consistent returns

throughout the market cycle.

In order for institutions to realize those benefits, however,

they must pick the right strategies and managers. The complex

and often proprietary investment models employed by

quantitative funds make manager

selection and due diligence a difficult task for any investor.

Compounding that challenge is the fact that increasing

competition among a fast-growing universe of quantitative

funds makes it increasingly difficult for managers to find and

exploit opportunities to create alpha. As a result of these

factors, it is imperative that institutions contemplating an

investment in a quantitative fund first gain a full understanding

of the manager’s investment philosophy, investment process

and source of alpha, and how that strategy will fit into the

institutions’ broad investment portfolio. As they learn more

about the different approaches employed by quantitative

managers, investors should focus on innovative firms whose

investment processes create a real competitive advantage and

truly diversify the institutions’ sources of return.

mEthodology

Greenwich Associates conducted phone interviews with

institutional asset owners including pension funds, government

agencies, endowments and foundations. Respondents were

asked to provide detailed information on their quantitative

strategies usage, application of quantitative strategies,

selection of quantitative managers and servicing needs with

respect to quantitative investing. Greenwich associates inter-

viewed 22 existing and potential quantitative institutional

investors across Asia including Japan, and 22 investors in the

United States.

The findings reported in this document reflect solely the

views reported to Greenwich Associates by the research

participants. They do not represent opinions or endorsements

by Greenwich Associates or its staff. Interviewees may be

asked about their use of and demand for financial products and

services and about investment practices in relevant financial

markets. Greenwich Associates compiles the data received,

conducts statistical analysis and reviews for presentation

purposes in order to produce the final results.

“the main lesson from the 2007–2009 period of severe underperformance among quantitative strategies is to find managers who are ahead of the game in terms of designing strategies that avoid crowded trades and who are vigilant in monitoring the efficacy of quantitative factors.”


MAY 2013SOUTHEAST ASIA:

BORROWING & LENDING ROUNDUP

INDONESIAN INVESTMENT FIRM SARATOGA SEEKS UP TO US$343 MILLION IN IPO Indonesian investment holding firm

Saratoga Investama Sedaya, controlled

by tycoons Edwin Soeryadjaya and

Sandiaga Uno, aims to raise as much

as Rp 3.36 trillion (US$343 million) in

an initial public offering in June 2013.

The firm is offering 430.88 million

shares, equivalent to 15 percent of its

equity. It set an IPO price range of Rp

6,100 (US$0.62) to Rp 7,800 (US$0.80)

a share. The company is also providing

64.63 million shares for a greenshoe

option. Deutsche Bank, UBS and

Indopremier Securities are the IPO

underwriters. The listing date will be

June 28, 2013. Saratoga owns shares in

several Indonesian companies, such as

miner Adaro Energy and tower operator

Tower Bersama Infrastructure. Saratoga

has said it expects to raise more than

US$1 billion from its own IPO and that

of a unit this year reported Reuters. The

investment holding firm is also preparing

two of its subsidiaries to go public so

that they will be able to stand on their

own feet to finance their business

expansion, the company’s senior

executive has said. Power company

Medco Power Indonesia and oil refinery

firm Tri Wahana Universal should be

ready to enter the stock market within

the next two to three years, Saratoga

president director Sandiaga Uno said.

‘We will boost their performance so

that they will be prepared in terms of

governance, finance and size for the

stock market,’ he said.

ALL EYES ON HOW SPH WILL DEPLOY PROPOSED REIT PROCEEDSShares in Singapore Press Holdings

(SPH) rose 8 cents (US$0.63) as the

media and property group moved a

step closer to listing its mall assets,

but questions remained about how

the company will deploy an expected

US$757 million in cash following the

deal. ‘Ultimately it will depend on

what they do with the proceeds,’ DMG

& Partners analyst Joshua Low said.

The stock of SPH gained 1.8 per cent

to close at US$4.47 after the company

announced that it planned to pay

out 18 cents per share in a special

dividend after spinning off its malls

into a listed real estate investment

trust (Reit). The Reit is targeted to

be launched through an expected

US$540 million initial public offering

in July 2013. SPH, which could retain

a 70 per cent stake in the Reit and

collect fees as the manager, expects

to receive about US$1 billion in net

cash proceeds, of which about US$291

million will be paid out through the

special dividend. That would leave

US$757 million for working capital and

reinvestment in ‘growth strategies’

reported Singaporean Business Times.

EPF TO LET RHBCAP AND MBSB DECIDE ON MERGER PLANSThe Employees Provident Fund (EPF)

will let RHB Capital and Malaysia

Building Society (MBSB) decide on

merger plans. The EPF holds a 44.84

per cent stake in RHBCap and a 65.5

per cent stake in MBSB, a non-bank

lender to civil servants. ‘We will wait

for the two companies to decide what

they want to do and there will be a

few announcements to be made,’

EPF chief executive officer, Shahril

Ridza Ridzuan told a media briefing in

Singapore. ‘The fact that EPF is a big

shareholder in RHBCap and MBSB tends

to let people draw an assumption that

we are going to do something about

the two, but this is not necessarily the

case,’ he said. The merger plan should

take into account current strategies

of the two businesses, the business

UBS

Morgan Stanley

Phatra Securities

JP Morgan

CIMB Group

20 Others

3.9 Billion

1.5 Billion

1.3 Billion

1.3 Billion

1.1 Billion

7.4 Billion

USD

USD

USD

USD

USD

USD



SOUTHEAST ASIA: BORROWING & LENDING ROUNDUP

model and future in finance industry.

MBSB for instance, is already on the

path towards becoming a bank and

has invested in a core banking system,

while in constant contact with the

authorities on this issue. ‘There will

be a case of MBSB just continuing to

transform into a banking platform on

its own or maybe go through a merger

and acquisition, if it makes sense,’ he

said. The talk that RHBCap is eyeing

MBSB has been ongoing for about a

year reported StarBiz.

MALAYSIA LEADS THE WAY IN BASEL III DEBT

Malaysia is poised to host Asia’s first

public issue of loss-absorbing bank

debt, so-called bail-in bonds, since the

region began the transition to Basel III

standards earlier this year. CIMB Bank

has received preliminary approval

from the country’s central bank for a

subordinated ringgit bond that will

count towards its Tier 2 capital, and

may launch the deal in the next few

weeks. There is also talk that another

local lender, Public Bank, will follow

suit with a similar Basel III compliant

issue. If the deals materialise in the

coming weeks, they promise to set a

template as the first in Asia, excluding

Japan and Australia, since regulators

from India to China introduced Basel

III rules in January 2013. Under the

new, stricter capital requirements,

subordinated bonds require loss-

absorption features if they are to

count towards a bank’s capital ratios,

ensuring that holders are ‘bailed in’

through writedowns or conversion

to equity before any public funds

are used to bail out a bank. Given

their fairly well capitalised levels,

Malaysian bankers had not expected

a Basel III-compliant structure to hit

the markets so soon. CIMB, however, is

in talks to buy Philippines-based Bank

of Commerce for an estimated US$296

million, which may have hastened

its plans to raise bank capital. ‘No

bank wants to be the first, since they

will have to cough up a lot more to

compensate the investors for that

write-off feature, and there is really

no proper benchmark or comp in the

Asian markets,’ said one rival banker

reported Reuters.

EPF INVESTS MORE ABROAD, INVESTMENT ASSETS EXCEED HALF-A-TRILLION RINGGIT (US$173.4 BILLION)The Employees Provident Fund (EPF)

has invested US$1.3 billion (RM3.91

billion) more overseas in global real

estate, bonds and equities for the first

quarter ended March 31, 2013 as part

of its diversification strategy to expand

its investments abroad. The EPF said

in a statement its overseas exposure

stood at 17.55% of its total investment

cost at the end of the said quarter. The

pension fund is allowed to invest up to

23% of its investment assets overseas.

‘The fund’s investment assets now

exceeds half-a-trillion ringgit and

continues to grow at an average rate

of 8% to 9% yearly. The constraints

in the domestic market make it

imperative for us to find suitable

investments globally that fit our

long-term diversification programme.

‘This would enable the fund to build

a more balanced investment portfolio

in accordance with our risk appetite,’

said chief executive officer Shahril

Ridza Ridzuan. As at March 31, 2013,

the fund’s investment assets stood at

RM536.55 billion (US$173.4 billion),

up 9.86%, or an increase of RM48.16

billion (US$15.6 billion), from the

RM488.39 billion (US$157.8 billion)

recorded in in the same corresponding

period a year ago.

Citi

Standard Chartered

Deutsche Bank

HSBC Holdings

JP Morgan

18 Others

USD

USD

USD

USD

USD

USD

2.9 Billion

2.7 Billion

2.5 Billion

2.4 BIllion

2 Billion

10 Billion

TOP BOOKRUNNERS

FOR DCM IN SOUTHEAST ASIA BONDS YTD 2013

Proceeds (US$ Mil)



SINARMAS LAND MAY RAISE US$300 MILLION Sinarmas Land, an Indonesian

developer of homes, shops and golf

courses, hired Macquarie Group for an

initial public offering of an industrial

properties project that may raise as

much as US$300 million, said people

with knowledge of the matter. The sale

of shares in Kota Deltamas, also owned

by Japan’s Sojitz Corporation, may raise

US$200 million to US$300 million as

early as this year, the people said, asking

not to be named as the information is

private. Sinarmas Sekuritas, Citigroup

and Nomura Holdings will also help

manage the offering, the people

said. Shares of industrial real estate

companies in Indonesia have surged this

year, powered by a booming economy.

Bekasi Fajar Industrial Estate’s stock

has risen 51 percent and Surya Semesta

Internusa is up 43 percent, beating the

18 percent gain for the benchmark

Jakarta Composite Index. The Kota

Deltamas project in Cikarang, about 37

kilometers from Jakarta, covers an area

of about 3,000 hectares and will also

include commercial and residential

facilities, according to its website

reported Bloomberg & Jakarta Globe.

BSDE TO SELL RP 2.96 TRILLION (US$304 MILLION) NEW SHARES TO EXTEND CLAWSProperty developer, Bumi Serpong

Damai (BSDE) plans to sell new shares

in a non-preemptive rights issue to

earn around Rp 2.96 trillion (US$304

million) to support its expansion.

The company will off load 1.75 billion

new shares, which will account for 10

percent of its enlarged capital, with the

price set at Rp 1,691 (US$0.17). ‘[The

company] will use the funds raised

from the planned non-preemptive

rights issue to purchase plots of land,

develop projects and infrastructure,

as well as support operational capital,’

the company said in an announcement

made public recently. The company

also said that it would likely use

the funds to support its subsidiaries

through capital injections. BSDE will

seek approval from shareholders in

an extraordinary general meeting

scheduled on May 30, 2013. BSDE

has two years following the approval

from shareholders to exercise non-

preemptive rights issue either at once

or gradually. BSDE raised Rp 1 trillion

(US$102 million) from selling debt

papers last year, which was part of its

planned Rp 3 trillion (US$306 million)

bonds. BSDE director Hermawan

Wijaya said that the company would

likely exercise the next stage of the

bonds issuance this year reported

Jakarta Post.

GOVERNMENT REAPS RP 11.55 TRILLION (US$1.19 BILLION) IN BONDS SALESThe Indonesian government says it

has sold Rp 11.55 trillion (US$1.19

billion) in rupiah bonds, higher than

its indicative target of Rp 8 trillion

(US$816.6 million), at auction on May

6, 2013. The Indonesian government

auctioned five series of bonds, with

maturity periods of six months, one

year, six years, 15 years and 20 years.

Total bidding reached Rp 20.15 trillion

(US$2 billion). The Finance Ministry

reported that the government gained

Rp 1 trillion (US$102 million) from the

sale of three-month bonds and Rp 1.35

trillion (US$137.8 million) from one-

year bonds, while the six-year bonds

generated Rp 2.05 trillion (US$209

million), the 15-year generated Rp

2.25 trillion (US$229.7 million) and

20-year bonds Rp 4.9 trillion (US$500

million). The bid-to-cover ratio, which

measures investor demand, was 2.1

Standard Chartered

Indo Premier Securities

Danareksa

Bank Mandiri

BAHANA SECURITIES

8 Others

USD

USD

USD

USD

USD

USD

3 Trillion

2.9 Trillion

2.2 Trillion

1.9 Trillion

1.6 Trillion

17 Million

INDONESIARUPIAH BONDS

Proceeds (US$ Tril)




for six-year bonds and 1.59 for 20-year

bonds. The auction on May 6, 2013

followed a successful bond sale in

April 2013 that raised Rp 10.5 trillion

(US$1 million). The government

has raised Rp 116 trillion (US$11.8

billion) or about 41.3 percent of its

Rp 281.1 trillion (US$28.7 million)

bonds issuance target for 2013 to date

reported Jakarta Post.

NAZIR: DECISION ON CIMB BUYING STAKE IN PHILIPPINES’ BANK OF COMMERCE (BOC) TO BE KNOWN WITHIN A MONTH

CIMB Group chief executive Nazir

Razak has dismissed news reports

that negotiations on the proposed

acquisition of a stake of 60% in Bank

of Commerce (BoC) in the Philippines

was scrapped. ‘We are in the final

stages of discussion and we will

make our decision known in a month,

perhaps sooner. ‘We are obtaining

the regulatory approvals,’ he told

StarBiz reporters. In May 2012, CIMB

Group had announced the acquisition

of a 60% stake in BoC for 12.2 billion

pesos (US$288.7 million). Nazir

expects the gross domestic product

of 4.1% in the first quarter to perk up

in the second quarter. ‘What we’ve

achieved was within expectations.

‘Businesses and investments will

perk up now that the elections are

over and things are stabilising again.’

Meanwhile, San Miguel Corp is

reportedly willing to keep its banking

arm if Malaysia’s second-largest

lender, CIMB Group Holdings, walks

away from a deal worth nearly US$300

million (RM905.55 million) for a 58%

stake in the bank, its president said.

Ramon Ang, San Miguel president, told

reporters that CIMB was expected to

make a decision within the next week

or two on whether to pursue its plan

to acquire a majority of the unlisted

Bank of Commerce. ‘We already

agreed on the price, terms, long time

ago. ‘In fact, they are already involved

in the business. ‘But, somehow, I don’t

understand why it is taking a lot of

time for them to close,’ Ang said. He

added that ‘small’ issues related to the

bank’s IT infrastructure and property

holdings were delaying closure of

the deal. Foreigners are not allowed

to own real estate in the Philippines.

CIMB and San Miguel signed an initial

agreement a year ago that valued

58% of Bank of Commerce at nearly

US$300 million, reflecting a price-

to-book ratio of 1.14 as at the end

of 2011. CIMB said at that time the

valuation was expected to rise to an

effective ratio of about 1.3 times after

the sale. The deal would signal CIMB’s

entry into the Philippines as part of

its South-East Asia push and would

provide conglomerate San Miguel

more funds to deploy for acquisitions

and expansion reported Reuters.

STATE COMPANIES AIM FOR US$3.6 BILLION IN BOND SALES Ten of Indonesia’s state-owned

enterprises are planning to raise a

combined US$3.6 billion in bond sales

this year, according to Wahyu Hidayat,

deputy minister for structuring and

strategic planning at the state-owned

enterprises ministry. Most of the sales

will be denominated in rupiah, Wahyu

Hidayat said as reported, Bloomberg.

National flag carrier Garuda Indonesia

plans to raise about US$200 million

in a dollar-denominated bond sale,

while Perusahaan Listrik Negara

(PLN) plans to raise about US$1.225

billion. Others include Aneka

Tambang (Antam), which plans to

raise US$915 million and Pegadaian

(US$715 million), according to the

RHB

AMMB Holdings

CIMB Group

Malayan Banking

HSBC Holdings

11 Others

USD

USD

USD

USD

USD

USD

4.6 BIllion

3.6 Billion

3.4 Billion

1.9 Billion

1.6 Billion

3.9 Billion

MALAYSIANRINGGIT BONDS

Proceeds (US$ Mil)



report. PLN is the state electricity

firm, Pegadaian the state pawnshop

operator and Antam the state-

controlled gold and nickel producer.

The planned bond sales follow state

energy company Pertamina, which

raised US$3.25 billion from its latest

dollar-denominated bond sale, a huge

boost in its attempt to emerge as a

dominant player in the region. The

amount raised is the highest from any

such bond issuance in the country to

date, highlighting the growing trend of

Indonesian corporations tapping into

the bond market. ‘The offerings were

closed on Tuesday,’ Afdal Bahaudin,

Pertamina’s director of investment

planning and risk management said.

Pertamina received overwhelming

interest from international investors,

with offerings oversubscribing the

initial target 4.4 times, Afdal said. The

company booked US$14.4 billion from

667 international investors. Pertamina

raised US$1.625 billion from 10-year

bonds with a coupon rate of 4.30

percent that is p riced at par to yield at

4.30 percent. The remaining 30-year

bonds were priced to yield at 5.625

percent. Pertamina’s recent bond sale

is part its US$5 billion global medium-

term note program established early

in May 2013. The company’s bond sale

was the largest ever for Indonesia. It

also had the lowest ever coupon rate.

PERTAMINA PLANS US$5 BILLION BOND SALE THIS YEAR State-owned energy company

Pertamina plans to raise US$5 billion

from the sell of dollar-denominated

bonds this year, the third such sale in

as many years. Pertamina needs capital

for its ambitious program to become

a major player in the industry. Rising

investor confidence in Southeast

Asia’s largest economy has driven

the cost of borrowing to the lowest

level on record, prompting Indonesian

corporations such as Pertamina to

look at the bond market as a source

of financing. Pertamina raised US$1.5

billion from selling medium- and

long-term notes in 2011 and another

US$2.5 billion in 2012. Pertamina has

appointed Barclays Capital, RBS, and

Citigroup as the lead arrangers and

Mandiri Sekuritas as the co-arranger,

a person at Pertamina said. Standard

& Poor’s assigned its BB+ and axBBB+

ratings to Pertamina’s global bonds,

reflecting the long-term corporate BB+

credit rating, which is a level below

investment grade, on Pertamina. The

rating agency said that Pertamina

has ‘fair’ business risk profile and

‘significant’ financial risk profile.

TOYOTA ASTRA SET TO RAISE RP 1.2 TRILLION (US$127 MILLION) IN BOND SALE Toyota Astra Financial Services, a

Standard Chartered

Metropolitan Bank & Trust Co

Banco De Oro Unibank Inc

SB Capital Investment Corp

Bank of Philippine Islands

USD

USD

USD

USD

USD

4.5 Billion

2.5 Billion

2.5 Billion

2.5 Billion

2.5 Billion

PHILIPPINEPESO BONDS

Proceeds (US$ Mil)

DBS Group Holdings

Standard Chartered

HSBC Holdings

Oversea-Chinese Banking

United Overseas Bank

14 Others

USD

USD

USD

USD

USD

USD

1.8 Billion

1.8 Billion

926.5 Million

755 Million

730.7 Million

2.7 Billion

SINGAPOREDOLLAR BONDS

Proceeds (US$ Mil)





financing unit of Astra International,

Indonesia’s largest automotive

company, plans to raise Rp 1.2 trillion

(US$127 million) from selling bonds

in late May 2013. The company has

hired HSBC Securities Indonesia, Indo

Premier Securities, Mandiri Sekuritas

and Trimegah Securities. TAFS will

sell Rp 400 billion (US$40.8 billion)

in one-year bonds at a coupon of 6.6

percent. It also plans to sell Rp 700

billion (US$71.5 billion) in three-year

bonds at 7.60 percent and Rp 100

billion (US$10.2 billion) in four-year

bonds at 7.65 percent, the company

said in the prospectus. The coupons

on corporate bonds are typically

higher than that of government debt

of comparable terms, reflecting the

risk of holding such bonds. The yield

of the government’s four-year bond

was 4.73 percent on Friday and 4.77

percent the previous day, according to

data from the Indonesia Bond Pricing

Agency reported Jakarta Globe.

ASTRA SEDAYA RAISES FINANCING, EYES RP 3 TRILLION (US$306.2 MILLION) FROM BONDSAutomotive financing firm Astra

Sedaya Finance, part of the publicly-

listed diversified conglomerate Astra

International (ASII), is planning to

channel Rp 22.5 trillion (US$2.3

billion) in new financing this year, up

8.2 percent from 2012. The company

— which provides financing services

for new and used cars and heavy

equipment is looking to pay for the

purchases of 160,000 vehicles by

year-end, higher than the 145,000

units recorded last year. A new

vehicle segment will remain the major

contributor to the new financing

target with more than 70 percent,

while the used vehicle segment will

make up for the remaining percentage,

according to Astra Sedaya president

director Djony Bunarto Tjondro. ‘Both

new and used vehicle segments still

offer positive business prospects this

year, but we are anticipating a decline

in heavy equipment sales due to a

downturn in the overall commodity

sector,’ he said.

MODERNLAND HOPES TO RAISE US$300 MILLION FROM BOND SALES Property developer Modernland Realty

plans to sell US$300 million of dollar-

denominated bonds this year, more

than initially intended after strong

interest from investors, to raise funds

to finance its expansion, the company

announced. The company, which has

assets spread across western Java,

set the coupon on its dollar notes at

a maximum of 10 percent per annum,

the company said in a brief prospectus

published in Investor Daily. ‘The

notes will mature in five years,’ the

prospectus stated. ‘The company will

use proceeds from the bond sales to

buy more land and finance business

plans in the future.’ Freddy Chan,

Modernland’s financial director, said

in early April 2013 that the company

was looking to sell between US$150

million and US$200 million in global

bonds. Freddy said in April 2013 that

the company planned to purchase

400 hectares of land in Banten’s

West Serang this year to expand its

industrial estate in nearby Cikande.

Modernland currently owns about

445 hectares of land in the area. In

Cikande land prices are about half that

of more developed locations such as

Karawang. The company said in April

2013 that it expected its net income

to nearly triple to Rp 800 billion

(US$81.7 billion) this year on rising

property sales. The company posted

total net income of Rp 260 billion

(US$26.5 million) last year.

Siam Commercial Bank

Krung Thai Bank

Bangkok Bank

HSBC Holdings

Kasikornbank

7 Others

USD

USD

USD

USD

USD

USD

50.9 Billion

36 Billion

29.9 Billion

21.9 Billion

21.9 Billion

66 Billion

THAILANDBAHT BONDS

Proceeds (US$ Mil)


Documents

The firST and only inSTiTUTional inveSTmenT magazine 100 ... · CONTENTS PublisherC iddi Baarwala Head of vents and esearch isa irpatric Contributing ditors Yose Ardi Al aita Dewi