16 theSun | TUESDAY OCTOBER 20 2009

business

RHB Capital to acquire ‘Property

Bank Mestika for RM1.6bil
KUALA LUMPUR: RHB Capital
Bhd, the country’s fourth largest
banking group which operates RHB
Bank Bhd, is acquiring 80% of Indo-
nesia’s PT Bank Mestika Dharma for
RM1.16 billion.
The move was in line with the
group’s aspirations of becoming one
of the leading financial services pro-
viders in Asean by 2020, RHB Bank
chairman Tan Sri Azlan Zainol, who
is also a director of RHB Capital, told
a media briefing yesterday.
A conditional sale and purchase
agreement was signed yesterday
between RHB Capital and Bank
Mestika’s owner PT Mestika Benua
Mas, which currently holds 99.95%
of the issued and paid-up share
capital of the bank.
Also present at the signing were
RHB Capital group managing direc-
tor Datuk Tajuddin Atan and Bank
Mestika president commissioner
Witarsa Oemar.
Both parties also signed an
option agreement for another 9%
of Bank Mestika for RM131 million,
including an additional return of up
to 15% annually.
To fund the acquisition, RHB
Capital has proposed renounceable
rights issue of new RHB Capital
shares to raise gross proceeds of
about RM1.3 billion.
The acquisition is expected to be
completed by the second the quarter
of next year and have a positive
contribution to the group’s future
earnings.
“This acquisition puts us in a
strong position to grow with Indone-
sia as this nation is poised for further
economic success,” Azlan said.
“Indonesia’s relatively low
penetration rate of banking serv-
ices, with a loan-to-gross domestic
product ratio of only 25% against a
population of 240 million, offers
the banking group immense op-
portunities,” he said.
The venture is also in line with
its regional expansion, which
currently has its footprint in
Singapore, Brunei, Thailand and
Vietnam. It is understood that the
group is also eyeing the markets of
Cambodia, Laos and Vietnam.
Azlan also said that RHB
Capital was looking to apply for
a banking licence in Vietnam and
expand its presence in Thailand
to become a top three player in
Asean by 2020. – Bernama
market to
pick up by
year-end’
PETALING JAYA: The Malaysian prop-
erty market is expected to continue
to show positive signs of recovery to-
wards the year-end, likely to be driven
by continuous interest in residential
properties, Housing and Local Govern-
ment Minister Datuk Seri Kong Cho Ha
said yesterday.
He said the property sector saw a
strong comeback in the third quarter of
the year, with renewed buying interest
in residential property on anticipation
of a recovery in economy.
This was evident although the com-
mercial property market, including
office and retail space, remained quite
soft with easing demand bringing down
rental and occupancy rates, he said.
Prices of houses are expected to
see further upside, driven by huge
liquidity in the economy as well as

Financial policies must benefit people, says Nazrin
KUALA LUMPUR: Financial
policies created must be people-
focused and should not be formu-
lated only for investors and their
money managers, the Raja Muda
of Perak, Raja Dr Nazrin Shah, said
yesterday.
He said at the start of the cur-
rent global financial crisis, stark
contrasts were painted between
the interests of “Wall Street ver-
sus Main Street”, adding that Asia
could not afford its own version of
this duality.
“Policymakers cannot cater to
the needs of the elites and ignore
those of the man and woman on
the street struggling to put food
on the table,” said Raja Nazrin,
who is also financial ambassador
of the Malaysian International
Islamic Financial Centre.
He said this in his keynote
address at the Asian Develop-
ment Bank-Bank Negara Malay-
sia-European Commission Joint
Conference themed “Beyond the
Global Crisis: A New Asian Growth
Model?”, here.
According to Raja Nazrin, the
bottoming out of the recession
came not at a moment too soon.
“But what lies beyond the
global crisis? Is it a return to busi-
ness as usual? Or do we seek to
do things differently?” he said.
Raja Nazrin said there was
a need to be vigilant in order to
formulate proper policies and
plans for the future so as not to be
lulled into a false sense of security
and be blinded to the clear and
present dangers.
“The large amount of money
that has been created to combat
the recession will have to be neu-
tralised or it will pose a problem
rather than a solution. Fiscal defi-
cits will need to be reined in, as will
the rising levels of debt,” he said.
Hoping that the worst was now
behind, Raja Nazrin said there was
also a need to “regularly check
our beliefs and assumptions” and
be wary about the dangers of
“groupthink”.
At the same time, he urged
Asia to seek alternative sources
of growth besides the traditional
“export-led” growth.
Asia’s traditional export mar-
kets in the West are weak and
poised to grow at much slower
rates over the next few years as
fiscal and monetary balance was
gradually restored, he said.
Raja Nazrin said rising pres-
sures and protectionism were
also threatening to constrict
trade and investment as govern-
ments sought to pander to their
domestic constituents, and the
increase in competition was also
high as many more countries and
regions aspired to join the ranks
of exporters. – Bernama
further rebound in residential rent,
Kong said in his keynote address at the
National Property and Housing Summit
2009 yesterday.
He said analysts were expecting
a more robust revival in the region’s
property market towards the end of the
year, in tandem with further pick-up in
Fine the global economy.
feast Speaking to reporters later, Kong
said the market, especially in the Klang
fiesta Valley had seen a healthy growth the
pg 21 past few months.
“In the past few months more up-
market projects have been planned and
the sales are also encouraging. These
are good signs for the economy,” he
added.
Meanwhile, on abandoned housing
projects, Kong said the government
successfully revived 12 out of 148 of
such projects over the years.

US dollar unlikely to demise in the near term

by Anthony Dass
IN early 2009, the BRICs (Brazil,
Russia, India And China) proposed
replacing US dollar as the main
reserve currency following the fi-
nancial crisis due to the collapse of
US mortgage market that led to the
worst global recession since World
War II. Also, the economic power is
shifting from G7 countries that saw
increasing acceptance of the other
economies currencies. And if US
recovery is weak, rates will remain
low, thus pressuring the dollar to stay
weak.
Latest IMF report on global
reserves currency composition (see
table), which showed US dollar hold-
ing dropped to 62.8% in Q2 this year
(from 65% in Q1), the lowest since
1995, has some level of exaggeration
to suggest liquidation of US dollar by
the central banks.
First, a large portion of the shift
in US dollar holding is due to weak
dollar itself. It boosted the US dol-
lar value of those reserves held in
other currencies. Second, there is
no clear indication that China will
turn its back on the greenback, with
US$2 trillion reserve composition
unknown and US Treasuries hold-
ings of US$800 billion in July from
US$780 billion June. Third, the US
dollar depreciated significantly since
2001 but did not trigger large scale
diversification.
Lately, the United Nations pro-
posed reducing using US dollar in
global trade and establishing a new
currency to protect emerging mar-
kets from the ‘confidence game’ of
financial speculation. We think this
may not happen that soon, although
we are not ruling out the possibility
Global reserves currency composition
1Q07 2Q07
US$ 65.3 65.2
Pound 6.7 6.8
Yen 2.9 2.8
Swiss Franc 0.2 0.2
Euro 25.2 25.3
Others 34.5 35.0
of it happening sometime mid-21st
century. Tracing the history of the
last switch in reserve currency, UK
lost its position to US as the world’s
largest economy in 1872 and the
largest exporter in 1915. Switch in
net debtor/creditor position began in
1914 and the US dollar emerged as a
convertible net creditor currency and
used in finance and trade. By 1945,
the pound was dethroned.
US dollar is in a net debtor posi-
tion like pound after WWII. They will
have to maintain it if US dollar re-
mains as the global reserve currency.
As such, when the global economy
expands, demand for reserve assets
will increase. It can only be met if US
operates in current account deficit. If
they stop operating in deficit and re-
duce supplying of reserves, it results
in liquidity shortage and drags down
global growth.
Can yuan surpass US dollar? To-
day, China is the world largest credi-
tor, while US dollar is in a net debtor
position. China should surpass US
by mid-21st century based on PPP
(purchasing power parity) at least on
paper. But much depends on China’s
policy. It must ease restrictions on
liquidity flow, continue domestic
financial reforms, improve bond
chart). We think the current risk to
US dollar lingers around its high risk
policies of quantitative easing (QE)
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 and large government borrowing
will debase the greenback by runa-
64.2 64.1 63.2 62.9 64.4 64.1 65.0 62.8 way inflation. We think it may not
7.1 7.3 7.3 7.4 7.5 7.1 6.4 6.2 happen. Looking at the bond market,
2.7 2.9 3.1 3.3 3.2 3.1 2.9 3.1 yields and break-even inflation rates
0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 are still low. Recent economic data
26.1 26.3 26.7 26.8 25.6 26.5 25.9 27.5 are showing the macro policies have
35.6 35.7 36.5 36.4 36.3 36.6 37.5 37.2 started to prop up the economy. If
their recovery becomes firmer, we
can expect speculation for an early
reversal of QE. It will prompt positive
US$ trade weighted index sentiment on US dollar and reduce
its appeal as a funding currency for
carry trades.
And with strong domestic demand
in Asia and high US household sav-
ings, US trade deficit and reliance of
US on foreign capital will ease. Hence,
Asian currencies will shoulder bulk
of the burden. It will ease pressure
on US dollar to weaken. The world
economy has averted the fear of Great
Depression. But if we assume the glo-
bal recovery becomes disappointing
and risk appetite wanes, appetite for
safe haven instruments will rekindle,
thus reviving US dollar. Also, the
authorities will not seek a weak US
dollar, fearing loss of confidence and
raise risk of financial instability.
To sum up, the possibilities of
market liquidity and make yuan fully single mode of payment. If gold is rebalancing reserves away from
convertible. used as the payment mode, it will be US dollar may happen sometime in
Recently, China, Russia, Japan, converted into US dollar for payment. the mid-21st century. The decision
France and Gulf states plan to dump Now, even if other currencies are to re-price oil depends on policy
US dollar in oil trades for basket of used, oil producers will swap some issues like exit strategy compared
currencies or gold. This may not of the proceeds earned in other cur- to the weak US dollar itself. Thus,
be viable in our view. If oil price is rencies back to US dollar. Currently, opportunity for US fundamentals to
based on a basket of currencies, the oil producers swap their US dollar improve and swing US dollar back
issue will be the mode of payment proceeds into other currencies. in its favour still holds.
– how the producers will insist on The US dollar looks promising go-
payments. ing forward based on the trend line of Anthony Dass is head of research at
Currently, US dollar is used as a trade-weighted US dollar index (see Inter-Pacific Securities Sdn Bhd.