Khamis, 26 September 2013

The Star Online: Business

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The Star Online: Business

KLCI higher in early trade, banks up but UMW falls


KUALA LUMPUR: Malaysia's blue chips inched up in early Friday trade, lifted by mild fund buying of banks, while glove makers extended their gains.

At 9.04am, the FBM KLCI was up 2.44 points to 1,776.60. Turnover was 108.79 million shares valued at RM39mil. There were 154 gainers, 38 losers and 103 counters.

However, the gains could be restrained by worries over a budget impasse in the US and ongoing uncertainty about the Federal Reserve's policy outlook.

At Bursa Malaysia, Public Bank foreign rose 20 sen to RM17.86, RHB Cap added eight sen to RM7.68 and AmBank seven sen higher at RM7.42.

Glove makers Hartalega added nine sen to RM7.52 and Kissan eight sen up to RM6.60 as interest returned.

Sona Petroleum rose 1.5 sen to 45 sen and the warrants edged up two sen to 29.5 sen in active trade on StarBiz's report it was looking to buy a stake in Singapore-listed RH Petrogas in addition to acquiring some of the latter's offshore oil & gas blocks.

UMW fell the most, down 18 sen to RM12.42 with 25,700 shares done.

Malaysia Smelting Corp fell after the non-renewal of its PT Koba Tin's contract of working in Indonesia.

Dollar firm, shares mixed after U.S. data


TOKYO: The dollar held firm in early Asian trade after U.S. jobless claims figures pointed to a improving labour market, reviving expectations of a reduction in U.S. monetary stimulus.

Lack of progress in budget and debt negotiations in Washington could also undermine investor risk appetite, capping gains in global shares.

Both Japanese shares and MSCI's broadest index of Asia-Pacific shares outside Japan were little changed in early trade.

"Though U.S. jobless claims data is positive enough to marginally lift the market, investors need further evidence of a U.S. economic recovery as well as a settlement in Washington," said Hanyang Securities analyst Lim Dong-rak.

The dollar's currency basket index held firm after gaining 0.2 percent on Thursday, extending its recovery from seven-month low hit last week when the Fed decided not to trim its bond buying.

The dollar was also helped by the euro's fall amid renewed concerns Italy's fractious coalition government could fall apart.

Italian centre-right deputies supporting former Prime Minister Silvio Berlusconi renewed threats to resign if their leader is expelled from Parliament following a tax fraud conviction.

The euro traded at $1.3487, off seven-month high of $1.3569 hit last week while the dollar fetched 98.87 yen, maintaining its 0.6 percent gain on Thursday.

The yen showed no reaction to data that showed Japan's core inflation rose to five-year high.

U.S. weekly initial claims for unemployment benefits dropped 5,000 last week despite economists' expectations of a rise, helping U.S. shares to end a five-day losing streak.

The claims data's four-week moving average, a key gauge that smoothes out weekly volatility, dropped to 308,000, the lowest level since June 2007.

That fall could add to the case that the Fed is safe to go ahead with winding down its bond buying programme later this year.

Indeed, Fed Board Governor Jeremy Stein, who voted for keeping stimulus in place at the Sept. 17-18 meeting, said on Thursday he would have been comfortable with tapering at that meeting, adding the decision was, for him, a "close call".

An end to U.S. monetary stimulus could, however, hurt emerging markets that rely on foreign capital, such as India and Indonesia. Overnight, most Latin American shares eased.

An impasse in U.S. congressional negotiations over the budget and increasing the federal borrowing limit is likely to cap global shares.

"The market thinks default will be averted in the end, as usual. Yet this is not something that makes the markets go risk-on," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.

The cost of protection against U.S. sovereign debt default in the credit default swap market has risen to its highest level in four months.

Republican lawmakers in the U.S. House of Representatives refused to give in to President Barack Obama's demands for straightforward bills to keep the government running beyond Sept. 30.

The move makes does not bode well for prompt resolution of these fiscal battles that could lead to a government shutdown on Oct. 1 and at the very extreme, a default in mid-October, when the Treasury will have run out of money. - Reuters

How Jack Ma can keep a tight grip on Alibaba after an IPO


NEW YORK/SAN FRANCISCO: Alibaba Group Holding Ltd founder Jack Ma wants to keep a tight grip on the Chinese e-commerce company he founded even after he takes it public, and U.S. law gives him several ways to do so.

The company had planned to list in Hong Kong, but the exchange there threw cold water on Ma's plan to give Alibaba's insiders, who only own about 10 percent of the stock, the power to nominate a majority of the board, sources say. Regulators in the Chinese territory said that all shareholders must be treated equally.

A source close to the company told Reuters that Alibaba, now effectively controlled by a group of 28 "partners" including Ma, senior executives and other insiders, is intent on keeping a similar structure when it goes public. Listing in the U.S. makes that possible, a key consideration in choosing New York over Hong Kong, the source said.

Alibaba, which some analysts estimate to be worth up to $120 billion, is the most anticipated Internet IPO since Facebook's $16 billion offering last year. The loss of the share sale, which bankers have estimate will be worth more than $15 billion, is a blow to the Hong Kong exchange, as the listing would have added to its clout and trading volume.

Keeping a tight rein on its operations may be one way for Alibaba's founders and top management to prevent the company from becoming victim of short-term market demands in a business that requires constant innovation and capital investments, the source said. Facebook Inc and Google Inc have made similar choices.

But while many U.S. companies, including Facebook and Google, use a dual-class stock structure to keep power within the hands of the companies' founders, Alibaba is likely to pursue a different approach, the source said.

The source did not elaborate. But several corporate lawyers, while noting that they had no direct knowledge of the company's plans, said that one likely route for the 28 partners would be to list Alibaba by effectively creating a new partner that would become the publicly traded company.

Setting up the corporation that way - known as an "Up-C corporation," or umbrella partnership - can give the original partners much stronger voting rights, lawyers said.

While Japan's Softbank Corp, which owns 35 percent of Alibaba, and Internet company Yahoo, with 24 percent, each have a seat on Alibaba's four-person board of directors, neither company is represented among the 28 partners. In fact, there are no outside investors in the partners' group.

The partners' powers may increase after the IPO as it gains control of an expanded board of directors. Yahoo will lose its board seat when it sells half its stake in Alibaba in the IPO.

Under the structure the company envisions, Alibaba's shareholders would still have the ability to approve or reject all the directors. But the structure would prevent an activist investor from ever taking control of the board by nominating a majority of directors.


While relatively rare, companies that have employed the Up-C structure include investment bank Evercore Partners Inc, payment processor Vantiv Inc and online foreign exchange provider FXCM Inc.

Some corporate governance experts say that Alibaba's desire to maintain its partnership structure could create friction with investors.

"Short-term oriented retail investors may place very little value on voting, but longer-term institutional investors will put more weight on it," said Jason Schloetzer, an assistant professor at Georgetown University's McDonough School of Business.

But some institutional investors note that they have been willing to buy shares with weaker voting rights in the past, particularly at companies with a dual class shareholding structure. For example, Facebook CEO Mark Zuckerberg has almost complete control of the social media company through a dual share structure.

"Our view is that if we don't like something management is doing, we can always sell," said Dave Stepherson, chief investment officer at Hardesty Capital Management in Baltimore.

"The voting issue is a little silly because most investors don't vote," Stepherson added.- Reuters


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