Olam hits back after Muddy Waters attack

SINGAPORE - Singaporean commodities trader Olam said an attack on its prospects and accounting practices by Carson Block, the founder of shortseller Muddy Waters, was "baseless and unsubstantiated".

Shares in Olam, 16 per cent-owned by Singapore state investor Temasek Holdings - which would not comment on th matter, closed down 7.5 per cent in heavy volume on Tuesday.

Muddy Waters, best known for targeting North American-listed Chinese companies, questioned Olam's capital expenditure and goodwill writedowns.

"We are unable to reconcile its capex (from last year) with announced projects," Block told a conference in London on Monday. He said his investigators had looked at Olam's investments in Africa, Asia and the United States.

"They have been very active in the public debt market. There is a lot of paper to short," he said.
Olam has $4.125 billion outstanding debt, including bonds and loans, according to Thomson Reuters CreditViews. The bulk of its bonds are held by retail investors who can be quick to unload paper, making for volatile prices.

Olam's 5.75 per cent bonds due 2017 fell 5 percentage points to 91/92 cents on the dollar.
Started by the Kewalram Chanrai Group in Nigeria, Olam has grown into a diverse agricultural commodities trading company with interests ranging from cocoa and coffee to nuts and sugar.

Chief executive Sunny Verghese has led an expansion that has seen it take on larger commodity players such as Noble Group and Wilmar International.

Olam also has an industrial raw materials segment which includes cotton, rubber and wood.

"We are dismayed at the nature and lack of substance of these assertions and opinions about Olam's financial position, particularly as we were not contacted in advance by Carson Block or anyone else from Muddy Waters," Olam said.

SHORTING

Olam is the most borrowed stock among Singapore's top 30 companies, suggesting heavy demand from short sellers.

Nearly 80 per cent of Olam's shares that can be borrowed were out on loan, compared with an average of about 6 per cent for the index constituents, according to Markit Securities Finance.

Also at the conference on Monday, John Armitage, chief investment officer of London-based Egerton Capital, said he was short Olam shares, saying the stock was "a great short".

Olam said its annual financial accounts were audited by Ernst & Young, which said the statements gave "a true and fair view of the state of affairs and financial results of the group and the company".

Company officials said in a conference call it would be able to fund operations for 18 months even if it were shut out of the debt markets as a result of the allegations by Muddy Waters, and it would now consider share buybacks after its price fell.

Past reports from Muddy Waters have hit shares in several Chinese companies including Sino-Forest Corp, which filed for bankruptcy protection early this year 10 months after the shortseller said the company had exaggerated its assets.

Muddy Waters has a mixed track record, however, and the share prices of some companies in its reports have bounced back.

"Muddy Waters seems to target companies with quite complex business models and accounting structures. So, it is difficult to get a handle on what is exactly happening in the company," said David Smith, head of corporate governance at Aberdeen Asset Management Asia.

"Given the complexity of the companies that they target, it means that there is always that lingering doubt regardless of what the company says," he said.

In February 2011, Olam denied there were inaccuracies in its accounts after a CLSA analyst raised concerns about internal controls, citing multiple and sometimes significant differences between Olam's audited and unaudited statements.

Olam said CLSA analyst Swati Chopra used examples which were incorrect. Chopra left CLSA a few months after the report was published and now works at a rival.

Olam reported a 26 per cent rise in quarterly net profit last week. Out of 21 analysts tracking the stock, 15 have "buy" or "strong buy" ratings, five have "hold" recommendations, and one has a "sell" call, Thomson Reuters data showed.

Dollar down, markets up in Asia after Obama win

HONG KONG: The dollar slipped in Asian trade on Wednesday, while share markets rose after President Barack Obama was re-elected in a knife-edge US presidential election.

As a hard-fought campaign came down to the wire Obama was declared winner after picking up crucial swing states, wiping away uncertainty that had pervaded markets for the past few days.

But in afternoon foreign exchange trade the greenback slipped against the euro and yen as dealers bet that under Obama the Federal Reserve would continue with the loose monetary policy that has seen it flood markets with billions of dollars.

The European single currency bought $1.2861 in Tokyo, well up from $1.2788 earlier Wednesday and $1.2814 in New York late Tuesday. The greenback was also at 80.05 yen compared with 80.34 yen in New York.

The greenback was also broadly lower against other Asia-Pacific currencies, including the Australian, Taiwan and Singapore dollars, and the Indian rupee.

A clear victory had been the overriding hope as it will now allow the government to move on fixing the austere "fiscal cliff" of tax hikes and spending cuts that sits on the horizon and could hammer the economy.

In afternoon trade Asian shares were higher.

Sydney gained 0.71 per cent, or 31.7 points, to end at 4,516.5, and in the afternoon Hong Kong rose 0.30 per cent, Seoul gained 0.33 per cent and Shanghai was up 0.16 per cent while Tokyo was flat.

"An Obama victory ensures the continuity of the US monetary policy, which is likely to be kept loose," SHK Financial strategist Daniel So told Dow Jones Newswires.

He added that a Romney win would likely see him "launch policies to incentivise fund flow back to the US, so in terms of liquidity inflow an Obama win also favours the Asian markets".

Wall Street ended with impressive gains ahead of the election results. The Dow rose 1.02 per cent, the S&P 500 climbed 0.79 per cent and the Nasdaq added 0.41 per cent.

However, regional traders were still concerned about Europe's debt woes, which were stoked on Tuesday after data showed a bigger-than-expected slump in factory orders in Germany, the eurozone's biggest economy.

Berlin said industrial orders declined 3.3 per cent in September from August after already falling 0.8 per cent the previous month.

That is much steeper than expected. Analysts polled by Dow Jones had been pencilling in a fall of 0.5 per cent.

The drop was largely due to a decline in export orders, particularly from the eurozone, where they plummeted 9.6 per cent.

Eyes are also on the upcoming 18th congress of the Chinese Communist Party that begins on Thursday and which will see the country's leaders for the next 10 years anointed.

Oil prices were lower, with New York's main contract, light sweet crude for delivery in December, down 29 cents to $88.42 a barrel and Brent North Sea crude for December delivery shedding 52 cents to $110.55.

Gold prices rose thanks to the weaker dollar, sitting at $1,710.40 by 0545 GMT compared with $1,679.75 late Monday.

Raffles Education at 8-year low after rights issue plan

Shares of Raffles Education Corp Ltd fell to an eight-year low after the Singapore education services provider announced a rights issue plan and a net loss of $59.3 million for the financial year ended June.

Raffles shares fell as much as 8.1 per cent to $0.34, the lowest since August 2004. More than 2 million shares changed hands, 2.2 times the average full-day volume over the past 30 days.

"There is some concern about dilution because of the rights issue, and their main business seems to be facing a lot of difficulties," said a trader.

Raffles said late on Monday it plans to issue up to 170.9 million rights shares at $0.14 each, on the basis of one rights share for every five existing shares held by certain shareholders.

The company also announced last week that it swung to a net loss of $59.3 million for its 2012 fiscal year from a net profit of $13.2 million a year earlier.

Raffles expects its business in China to continue being affected by challenging operational conditions in the country. Its operations in Vietnam had also been suspended, the company said.

Asian markets rise after heavy sell-off

HONG KONG: Asian markets climbed on Tuesday and the euro clawed back some of its losses as dealers took a breather from a recent heavy sell-off caused by concerns over the eurozone.

Tokyo rose 0.75 percent as the yen lost some of its recent strength, Hong Kong was 1.03 percent up, Shanghai gained 0.52 percent, Sydney added 1.37 percent and Seoul climbed 0.68 percent.

With little to drive sentiment after the weekend analysts said there was an opportunity to buy after most regional bourses fell into negative territory for the first time in 2012.

The "mostly flat performance in New York, and a pause in the yen's strength are likely to invite some buying" on Tuesday, Rakuten Securities senior market analyst Masayuki Doshida said.

But jitters over the eurozone debt situation and concerns over the state of the global economy are likely to weigh on sentiment, Doshida told Dow Jones Newswires, signalling that any gains may be limited.

On Wall Street the Dow fell 0.14 percent, the S&P 500 was flat and the Nasdaq Composite gained 0.46 percent.

Spanish Prime Minister Mariano Rajoy called at the weekend for a banking union in Europe, which would be able to provide aid to lenders, especially in Spain, a move that was picking up support in France and at the European Central Bank (ECB). However, Germany remained strongly opposed for the moment.

Global markets have been hammered since the start of May as Europe's debt troubles returned after a Greek general election saw a strong showing for anti-austerity parties, while Spain's bank crisis has left the already creaking economy teetering.

Market players will be looking to the result of a conference call later in the day between the Group of Seven finance ministers to discuss Europe's crisis, in particular Spain's travails.

In Europe the ECB will hold a rate-setting meeting Wednesday, with investors looking to see if it will announce any moves to kickstart the region's stuttering economy.

On currency markets the euro -- which last week hit a 23-month low versus the dollar and a near 12-year low against the yen -- regained a little ground.

The common unit bought $1.2534 and 98.18 yen in early Asian trade, up from $1.2494 and 97.89 yen in New York late Monday. The dollar was flat, buying 78.35 yen.

Oil prices rose in early trade. New York's main contract, West Texas Intermediate crude for July delivery, was 85 cents higher at $84.83 a barrel and Brent North Sea crude, also for July, rose by 54 cents to $99.39.

Gold was at $1,621.50 an ounce at 0230 GMT, compared with $1,622.08 late Monday.

2 in 3 S'pore workers don't save enough

About two in three Singapore workers save less than 20 per cent of their monthly salary, with those in the events management, public relations and sales being the worst savers.

A total of 2,278 people were surveyed online by JobsCentral from August to September last year.

The survey found that the savings trend is consistent across two vastly different income levels - those who earned less than $1,000 a month and those who made above $10,000 a month.

Majority of both groups of respondents - who comprise employed individuals from all levels of occupation and income groups - indicated that they save 10 to 20 per cent of their monthly income.

The top three savers among the group are employees in research and development (56.7 per cent), consulting (50 per cent) and business development (47.7 per cent).

JobsCentral Group's deputy CEO Huang Shao-Ning noted that it is "interesting" that the top three worst savers are those who "require strong social skills and high energy level to perform their tasks".

Ms Huang added: "The more exuberant personalities of these three groups of workers, and the requirement of their jobs to leave positive impressions on new people they meet every day may also translate to higher expenditure on grooming, commuting and entertainment."

The survey also showed that 44 per cent said they save most of their bonus.

At least one in three indicated that they spend the bulk of their bonus on recreation, mostly on holidays, shopping, and giving most of it to their parents.

Only nine per cent said they would put it into investments, and 0.5 per cent said they will donate to charity.

Most of the respondents (76 per cent) indicated that salary-related information should be kept private and prefer not to share it with their peers in the company.
Respondents with higher gross monthly salary are more tight-lipped about their salary compared to those who earn less.

About three-quarters of those surveyed said they do not moonlight and those who do, earn extra income through dividends from stocks or bonds, freelance work and part-time jobs.

Downturn: What it means

THERE is a chance Singapore may slip into a recession.

Compared to the first three months of this year, our economy contracted by 6.5 per cent in the April to June period.

If the European debt crisis and the US economic woes cause the economy to contract again in the July to September period, Singapore will enter into a technical recession (two consecutive quarters of negative growth).

A recent Bank of America Merrill Lynch report noted that there's a 59 per cent chance of Singapore entering a recession.

We look at how five sectors could fare if this happens:



Property

Property prices will drop.

But by how much will depend on the severity of the recession, if past recessions are any guide.

In the last recession between 2008 and 2009, property prices dropped about 25 per cent, said property consultancy SLP International research head Nicholas Mak.

But that wasn't as bad as the 1997-98 Asian financial crisis where property prices fell by 45 per cent, he said.

Mr Mak said that for those looking to buy a place to live in, the recession period could be a good time to monitor and buy on the low.

"But if you've a few properties on your portfolio, now may be a good time to lighten up," he added.

"During the down time, you could be hit by low rentals or even none.

And you also have to worry about negative equity or banks foreclosing on your properties.

"But if all your properties are fully paid up, then you don't have to worry."



Gold

When times are bad, look for the glitter.

Historically viewed as a form of protection against inflation and tumultuous economic times, investors pile onto gold because they think the price will rise.

Gold climbed to a record US$1,921.15 (S$2,317) an ounce earlier this week, reported the Business Times.

Gold is in the 11th year of a bull run, and analysts said the gold rush is far from over.

Mr Kelvin Tay, a Singapore-based chief investment strategist at UBS Wealth Management Research, believes that jewellery demand will remain strong, despite high and rising gold prices.

So holding on to your gold jewellery may help and having gold can be a hedge against recession.



Car

If the economy is weak and dips into a recession, Certificates of Entitlement (COE) prices will likely drop, said transport economist Michael Li of the Nanyang Business School.

He explained: "Demand for COEs will drop because people will delay the purchase of their car as they're not secure about their jobs and income.

"Fewer people will switch cars and (they) will tend to hold on to their old cars that are still working."

COE ended mixed at the latest tender yesterday as economic uncertainties dampened the appetite for big, luxury cars.

COE for cars above 1,600cc finished lower for the fourth consecutive tender at $63,002, down from $65,521.

But COE for cars up to 1,600cc finished higher.

It closed at $51,000, up from $49,301 two weeks ago.

Dr Li said global car manufacturers will lower the open market value (OMV) of cars here to clear their inventory, which will translate into lower prices.

OMV is determined by Singapore Customs, which pegs it to the car value declared by the importer.

His advice is to wait for the market to settle down, and for COE and car prices to drop.



Jobs

During a recession, businesses will be more cautious going forward, so wage growth and job creation will be moderate, said OCBC economist Selena Ling.

She added: "This also depends on the industry.

"For example, the manufacturing sector will be quite challenging because global demand (for goods and services) will be affected."

In such a situation, doing what you can to stay employable is important.

Taking courses to upgrade yourself is one way.



Stocks

The wild stock market roller- coaster swings are definitely not for the weak-hearted.

Analysts have made significant cuts - particularly for banking, property, and shipping and offshore counters - as the economic outlook grows murkier by the day, reported The Business Times on Tuesday.

CIMB research head Kenneth Ng said that if the recession escalates into a financial crisis, the Straits Times Index (STI) could go down to as low as 2,100 points.

Said Mr Ng: "If there's a recession, stock prices would fall as company earnings drop and sentiments get affected.

"People would also prefer to keep cash too."

Wall Street extends gains but caution persists

NEW YORK (Reuters) - Stocks rose for a third day on Monday as investors bought shares whose prices have been beaten down in recent weeks and as news of U.S. deals lifted sentiment.
Weeks of volatility have battered the S&P 500, which is down 12.6 percent since its April 29 highs.



"The market has become what technicians call oversold a week or so ago, and we're seeing a bit of a bounce from those levels," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.

While the overall trend should remain lower, levels of volume, volatility, breadth and sentiment were signaling a bounce, said John Kosar, director of research at Asbury Research in Chicago.
"Until those extremes get unwound, the market is likely to carry a bid for the near terms," Kosar said.

Volume was at 4.84 billion shares in afternoon trading, which was below the average last week.
Among the day's biggest gainers, Motorola Mobility Holdings Inc jumped 56 percent to $38.18 on Google Inc's offer to buy the company for about $12.5 billion in cash. Google dropped 2.2 percent to $551.43.

U.S.-traded shares of other companies in the cell phone sector rose, possibly on speculation they also may be takeover targets. Blackberry maker Research in Motion rose 7 percent to $26.44 and Nokia jumped 14.55 percent to $6.14

Among top-performing sectors, the S&P financial index rose 2.4 percent. Shares of Bank of America Corp shot up 7.5 percent to $7.73 after it said it plans to sell its credit card business in Canada to TD Bank Group, part of a plan to shed assets.

Shares of Lowes Cos Inc were up 0.2 percent at $19.55 after reported weaker-than-expected quarterly sales and cut its fiscal-year outlook for the second time in three months.

A meeting on Tuesday by French and German political leaders was expected to result in initiatives needed to restore confidence in credit and other markets.

The Dow Jones industrial average was up 150.72 points, or 1.34 percent, at 11,419.74. The Standard & Poor's 500 Index was up 17.60 points, or 1.49 percent, at 1,196.41. The Nasdaq Composite Index was up 24.53 points, or 0.98 percent, at 2,532.51.

Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas, said the deal news shows a certain confidence in the market.
But he expects volatility to remain in the market.

"Europe has been extraordinarily slow in taking any sort of decisive action to improve perceptions ... that means to me we could have volatility through the end of the quarter."

The CBOE Volatility Index, the market's fear gauge, was down 9.7 percent, but remained above the key 30 level.

In other deal news, world No. 1 oil drilling contractor Transocean is paying double the market price for Aker Drilling to refresh its aging fleet of Norwegian drilling rigs and boost flagging orders. Transocean shares were up 2.8 percent at $57.14 in New York.