The Star Online: Business
The Star Online: Business |
- Italy credit rating down 3 notches
- Knowing market risk vital
- RHB Cap looking forward to merger talks
| Italy credit rating down 3 notches Posted: 05 Oct 2011 06:29 PM PDT NEW YORK: Moody's Investors Service cut Italy's bond ratings by three notches, saying it saw a "material increase" in funding risks for eurozone countries with high levels of debt. Moody's downgraded Italy's ratings to A2 from Aa2, a lower rating than that of Estonia, and kept a negative outlook on the rating, a sign that further downgrades are possible within the next few years. The move comes after Standard and Poor's cut its rating on Italy to A/A1 from A+/A1+ on Sept 19 and underlines growing investor uncertainty about the eurozone's third largest economy, which is now firmly at the centre of the debt crisis. "The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area," Moody's said in a statement. "The uncertain market environment and the risk of further deterioration in investor sentiment could constrain the country's access to the public debt markets." Moody's also said that Italy's rating could "transition to substantially lower rating levels" if there were long-term uncertainty over the availability of external sources of liquidity support. Italy's mix of chronically low growth, a huge public debt amounting to 120% of gross domestic product and a struggling government coalition has caused mounting alarm in financial markets. The Moody's decision came as little surprise after the agency said on Sept 17 that it would finish a review for possible downgrade of its rating on Italy within a month. "It's not that it was unexpected, but it doesn't help the situation at all," said Robbert Van Batenburg, head of equity research, at Louis Capital in New York. "They have already traded as if there was somewhat of a downgrade in the works, so it will probably force Italian policymakers to embark on more austerity programmes. It will put another fiscal strait-jacket on them," he said. Moody's said the likelihood of a default by Italy was "remote," but the overall shift in sentiment on the euro area funding market implied a greater vulnerability to a loss of market access at affordable interest rates. Italy's borrowing costs have soared over the past three months and have only been kept under control by the European Central Bank's (ECB) purchase of its government bonds on secondary markets. An auction of long-term bonds last month saw yields on 10-year BTPs rise to 5.86%, their highest level since the introduction of the euro more than a decade ago. The centre-right government of Prime Minister Silvio Berlusconi has been under heavy pressure over its handling of the escalating crisis and recently cut its growth forecasts through 2013. It is now expecting the economy to expand by just 0.6% next year, down from a previous projection of 1.3%. The government last month pushed through a 60 billion-euro austerity package bringing forward by one year to 2013 a goal to balance its budget in return for support for its battered government bonds from the ECB. Meanwhile, Berlusconi said Moody's decision to cut Italy's bond ratings was expected and reiterated that the government was committed to its budget goals. "The Italian government is working with the maximum commitment to achieve its budget objectives," he said in a statement, adding that its plans, including a target to balance the budget by 2013, had been welcomed and approved by the European Commission. Reuters |
| Posted: 05 Oct 2011 05:56 PM PDT PETALING JAYA: To ensure the sustainability of a business amid the current economic uncertainties, companies including small and medium enterprises (SMEs) should have trade credit insurance, the ability to manage market changes as well as take charge of their businesses by having the right strategies. Export-Import Bank of Malaysia Bhd (Exim Bank) managing director and chief executive officer Adissadikin Ali said SMEs often do not have a trade credit insurance policy when they export overseas. With the lingering eurozone sovereign debt crisis and sluggish US economy, local exporters were at higher risk of their payments being defaulted by overseas buyers, he said, adding that this could be averted by taking up such a policy. In turbulent times, SMEs should look for opportunities in overseas markets to expand their reach. Before doing so, they should really understand the market risk and have the right management tools, Adissadikin said at The Star Outstanding Business Awards (SOBA) 2011 roundtable discussion at Menara Star. Other speakers at the event were Bursa Malaysia issuer development, securities department head Arulnathan Michael Dass, Associated Chinese Chambers of Commerce and Industry Malaysia SMEs deputy chairman Koong Lin Loong and SMI Association of Malaysia national president Chua Tiam Wee. Adissadikin said that over the last five years, the bank had provided total financing worth RM3bil to companies of which 80% were SMEs and the remaining corporates. During this period, Exim Bank had also offered financing to more than 500 borrowers and close to 2,000 trade credit insurance policies were issued in facilitating cross-border ventures. Chua said SMEs, in the current trying times, should keep a close eye on market changes and obtain the latest market information from relevant industry experts so that they could make informed business decisions. They should also keep close contact with their key customers, suppliers and bankers to further support the growth of their businesses. Cash management, Chua said, was an important tool as it was important to get the right market views to avoid making wrong decisions.He added that an SME had to be an opportunist to gain its competitors' market share when they exit the market. "For example, a company should not expand when customers are downsizing their stocks but instead it should conserve cash and other resources. "SMEs can also scout for talent during a slowing economy when this pool of people are being released by multinational companies. This will boost the business of SMEs by having a skilled and talented workforce,'' Chua said. Arulnathan, however, felt that companies needed to take charge of their business and not the other way around and fundamentally "rethink the whole business strategy". For example, they need to look at their portfolios and whether it is better for them to divest or pursue an acquisition trail, launch new products or venture into new markets, according to him. He felt that smaller companies or those driven by entrepreneurs were able to take more risks compared with the larger ones as they had lower opportunity costs and could shift resources and take advantage of opportunities, unlike their larger counterparts who were tied down to various processes. Meanwhile, Koong said SMEs must not be too pessimistic during an economic slowdown. He cited a Chinese proverb that "when there are risks, there is also plenty of opportunities". He advocated SMEs to conform to the "4Ms" money, machinery (IT), men (human resource) and marketing to grow their businesses. Koong said branding was an important marketing tool for SMEs to venture overseas, adding that a change of mindset was needed to achieve this initiative. SOBA 2011 is organised by The Star with Exim Bank as presenter and BMW Malaysia as gold sponsor. It is supported by Bursa Malaysia and audited by BDO. The Royale Chulan Kuala Lumpur is the official hotel partner, Bernama TV the official TV news partner, Shang Hai the official business magazine and 98.8FM the official radio station. The SOBA 2011 Awards ceremony will be held at The Royale Chulan, Kuala Lumpur. Find out what makes the chosen few stand out from the rest. Call Star Events at 03-7967 1388 ext 1475, 1436 or 1244 for enquiries and reservations. |
| RHB Cap looking forward to merger talks Posted: 05 Oct 2011 05:54 PM PDT PETALING JAYA: RHB Capital Bhd, Malaysia's fifth-biggest banking group by assets, wants to grow in tandem with OSK Investment Bank Bhd's regional business map if the proposed merger deal between the two banking institutions goes through, according to RHB Banking Group principal officer Renzo Viegas. "Both parties have submitted applications to Bank Negara to start talks on the merger and after the central bank grants us the permission, I am sure it will be fruitful talks between us," he told reporters after a signing ceremony between the bank and Credit Guarantee Corp Malaysia Bhd (CGC) to formalise a strategic tie-up to further enhance the small and medium enterprises' (SMEs) access to financing through a new scheme the Enhancer Direct. Bloomberg had earlier reported that a merger with OSK would strengthen RHB's stockbroking business after separate merger talks with Malayan Banking Bhd and CIMB Group Holdings Bhd, the country's two largest banks, collapsed. OSK Investment Bank, a unit of OSK Holdings, is Malaysia's fourth-biggest stockbroker by trading value this year, while RHB Investment Bank Bhd is ranked third, according to stock exchange data. The combination of both parties would allow the enlarged group to overtake CIMB Investment Bank Bhd. as the country's top equity broker, Bloomberg said. Currently, RHB Cap has a market capitalisation of about US$5bil (RM15.95bil). Meanwhile, at the ceremony, CGC managing director Datuk Azhar Wan Ahmad said the Enhancer Direct was a credit guarantee scheme that was designed to assist viable SMEs that were unable to secure financing due to insufficient collateral and track record. "With a RM200mil portfolio, the new scheme is expected to benefit some 800-1,000 SMEs across all economic sectors in Malaysia. The development of a healthy and resilient SME community requires a sound financial infrastructure that offers a wide spectrum of innovative products and services," he said. He addded that the scheme was in line with the Government's financial inclusion policy that required all sections of the economy, the SMEs in particular, to have adequate access to a broader range of financing options in view of their critical role in the economic development of Malaysia. "We have provided guarantee valued at RM50bil to over 400,000 SMEs in the last 39 years. With today's increasing demand for SME financing, there is a need to intensify efforts to develop new and innovative products that are tailored to the specific needs of SMEs. Towards this, we have forged strategic alliances with various financial institutions to drive product development and indirectly leverage on their network to improve outreach," he said. Azhar also hoped the upcoming Budget 2012 would see the Government introduce a mechanism to subsidise the cost of SMEs getting a credit rating. "The Government has made great strides in enhancing the competitiveness and credibility of SMEs but many SMEs are unaware or ignorant of credit ratings due to the costs and an inefficient procedure," he said. The core issue, which was the credit standing of SMEs in getting loans, must be addressed, he said, adding: "When the SMEs do not get a loan, they tend to blame the banking institutions. However, the actual problem is that banks are afraid of taking a higher risk by providing loans for SMEs, without proper credit ratings." |
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