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Dispatch (Asia edition)
| by Peta Tomlinson, Majella Gomes, Sonia Kolesnikov-Jessop 12 Jun 2007 Topic: News |
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Hong Kong's accounting regulator is seeking to further polish the city's clean corporate image by improving the quality of its financial reporting. In an initiative believed to be a first for the region, the Hong Kong Institute of Certified Public Accountants (HKICPA) is requiring Hong Kong auditors to benchmark themselves against the International Auditing and Assurance Standards Board's (ISAASB) quality control standard. All audit firms must complete an annual questionnaire covering issues such as company ethics, quality of staff, quantity of staff and training procedures. Any firms which indicate a high-risk profile will be identified for a site visit. Patricia McBride, executive director of HKICPA, said the initiative makes the audit process more transparent, sharpening Hong Kong's competitive edge in the global financial market. It was a proactive measure, with Hong Kong remaining largely free from corporate scandals, McBride pointed out. 'It is important for Hong Kong that everything in the financial reporting supply chain is premium quality. Our job is to get that infrastructure as right and transparent as possible, without interfering with business or imposing additional burdens on auditors.' She added that Hong Kong is one of the early audit regulators to review the application of the ISAASB quality control standard, and others around the world are 'watching with interest'. HKICPA says the annual quality testing will be good for audit firms, the accounting profession in general and Hong Kong. 'We are not looking to punish or find fault. This is a preventative measure, a "health check" that will guide firms to identify deficiencies and help to ensure they are meeting international standards,' said the chief executive, Winnie CW Cheung. The initiative follows the recent set-up of the independent Financial Reporting Council, established to investigate irregularities committed by auditors of listed companies. Cheung said this wraps up the accounting profession's regulatory reform in Hong Kong, after four years of change 'in the post-Enron world'. Power plants in Malaysia are expected to quadruple their use of coal within the next three years, as a result of its national fuel diversification policy which intends to decrease the country's gas dependency. This was announced by the Energy, Water and Communications Minister, Lim Keng Yaik, at the official launch of Tenaga Nasional Bhd's (TNB) 21,000MW coal-fired plant, the first of its kind to run on clean coal technology. However, TNB almost simultaneously announced that it was quitting its coal mining venture in Indonesia, although the main reason for entering the Indonesian coal mining industry was originally to have more control over supply and pricing. In 2003, TNB invested US$11.9m (RM40.7m/£6.07m) in the Indonesian company PT Dasa Eka Jasatama (DEJ), which owns mining rights in south Kalimantan. Now it is selling this stake, 76,951 units of shares, currently held by Dynamic Acres Sdn Bhd, a wholly-owned subsidiary of TNB Coal International Ltd, which in turn is a 92.5% subsidiary of TNB, to PT Pamapersada Nusantara (PAMA) for US$19.5m (RM66.69m, £9.95m). Even as TNB appears to be leaving the Indonesian coal mining industry, another Malaysian player may be making its debut. Andaman Resources Sdn Bhd, a subsidiary of Malaysia's Andaman Group, recently signed an agreement with coal mine owners PT Putra Dewa Jaya and PT Putra Bara Jaya. The mines, located in Kalimantan, have a reserve of more than 70 million cubic metres, and are expected to start production by the third quarter of 2007. While the coal mined is initially destined for Guangxi in southern China, production is expected to be stepped up, and there are plans in the pipeline to acquire a third concession of about 5,000 hectares in Kalimantan of approximately 50 million tons of steaming coal, for use in power generation. SGX proposes key changes to listing rules The Singapore Exchange Ltd (SGX) has proposed amending its securities listing rules as part of ongoing efforts to keep its rules relevant to the developments of the marketplace. The previous amendments to listing rules in 2005/06 concentrated on improvements to corporate governance. This time, the new rules aim to improve market efficiency. To minimise market disruption arising from prolonged trading halts, the exchange is proposing to shorten the trading-halt requirement for information dissemination from one hour to 30 minutes, pointing out that, with technological advances, real-time information is now readily available. It also wants to clarify trading-suspension rules when a company is unable to continue as a going concern, as well as in a takeover situation. The treatment of listed shell companies, without core businesses, may also be clarified, the SGX said. Currently, listed shells must be delisted within 12 months of a suspension to trading if they do not find a new business. SGX is suggesting that, after the initial 12 months, a company should be granted an extension of up to six months to find a new business, but only if it can provide milestones against which investors can evaluate its progress. If it cannot find a new business, no further extension will be granted, and it will have to delist and make a cash exit offer to shareholders. New rules will also require a listed company to make an immediate announcement when employee share options are granted and also give clear details on the options, including date of grant, exercise price and number of options granted; the company share price on grant date; the number of options granted to directors and controlling shareholders; and the validity period of options. The move is intended to prevent any backdating of options. Such backdating allows the management to date the grant of options to correspond with a low share price period, hence allowing the employees to benefit at the expense of shareholders, the SGX said. These new rules should provide added clarity and foster the accountability of listed companies, the exchange added. about-turn for Malaysian telecoms company The first indication of it was an unobtrusive mention in local newspapers of the 'possibility' of it being taken private. As the week progressed, however, the possibility became a distinct certainty, ending with the announcement of share buyback that saw its shares hitting a record high of RM15.30 just before trading was suspended. The big telecommunications company Maxis Communication Berhad is looking at delisting itself and going private, having debuted on the Malaysian Bourse in July 2002 at RM4.36 per share. The move means one of Malaysia's bluest blue-chip companies is exiting the public domain. Its founder, the reclusive billionaire T Ananda Krishnan, has bewildered many market watchers with his latest move. He holds 46% of Maxis via his private company, Usaha Tegas Sdn Bhd. The share buyback deal is expected to cost him at least RM16.4bn, the largest ever in Malaysia and the Asia Pacific region. The entire privatisation deal is valued at RM39.9bn. While many small investors will definitely hold on to their shares in the hope of seeing prices rise further, the major players - mainly affiliates and shareholders of Binariang GSM Sdn Bhd, the company doing the acquiring - have already agreed to Ananda Krishnan's offer of RM15.60 per share. His move has given rise to a great deal of speculation over his plans for the future of Maxis. The public-to-private exercise may be indicative of the first step towards obtaining finance from a larger pool than the Malaysian one, to fund more aggressive expansion plans in bigger markets. In January 2005, Maxis acquired a 51% stake in an Indonesian mobile phone operator, for US$100m, then raised its stake in the company to 95% in April 2007, with a further US$123.92m. December 2005 saw Maxis ink a partnership deal with India's Reddy family to take over Aircel, an Indian mobile phone operator. Subsequently, in December 2006, Aircel was awarded licences to operate in all of India's 23 circles. Sri Lanka may be next on the market list. These deals represent high risk investment, as well as high rewards, considering market potential. Maxis already leads the Malaysian market with a subscriber base of more than 12 million. Its privatisation may just mean that the pond has become too small for the fish. On 11 May, local newspapers reported that after increasing its stake in the Indonesian mobile services operator PT Natrindo Telepon Seluler (from 51% in 2005 to 95% in April 2006), Maxis had entered talks with several parties to sell part of this stake. Australians' love affair with coastal living could contribute to a train-wreck investment scenario where prime property values crash by up to 80%, a climate change business risk analyst has warned. This grim estimation by Karl Mallon, scientific director of the private sector advisory group Climate Risk, is based on the premise that beachfront properties could be deemed uninsurable against a severe weather event - and therefore become almost worthless. He said coastal residents would feel the impact of climate change on their property insurance long before global warming caused sea levels to rise. Pointing out that New Zealand's insurance sector was already reviewing its climate-related premiums, Mallon believes Australia will not be far behind. Mallon's comments followed the release of a United Nations report on the effect of global warming. The report, put together by 2,500 leading scientists, claims that over the next 50 years hundreds of thousands of low-lying Australian homes could be threatened by rising sea levels. Professor Nick Harvey of the University of Adelaide, who co-authored the Australia and New Zealand chapter of the UN report, identified popular tropical north cities as the most vulnerable. He said Australia has 700,000 addresses within 3km of the coast and within 6m of sea level; of these, 60% are in Queensland. The coastal communities of Townsville, Cairns and Darwin are hot spots for increased cyclone intensity by 2050, while Cairns would experience twice the amount of flooding from storm surges, he said. In addition to global warming, Harvey said the current wave of seaside migration is putting unprecedented pressure on the coast. Population figures show that as a result of 'sea change', a phenomenon referring to people who move to new areas for lifestyle rather than economic reasons, growth rates in Australian coastal towns are 50%-60% higher than the national average. The impact for business and local governments, Mallon said, goes far beyond the future value of their coastal property assets. He stressed the need to consider environmental effects in their day-to-day dealings. 'Businesses need to be on top of climate change and factor it into their strategic planning as an emergent risk,' he said. 'If, for example, they are conducting M&A activity today without looking into the carbon emissions of the company they are buying, this could be grounds for negligence litigation further down the track.' China will not allow any new internet cafes to open this year, blaming a 33% rise in juvenile crime on 'violent online games or erotic websites'. Officially, minors aged under 18 are not allowed to enter China's estimated 113,000 internet bar businesses, although not-for-profit school-owned cafes are permitted. According to Xinhua, the official news agency, statistics show that the number of internet users in China reached 123 million in mid-2006. About 15% of the total - or 18 million - are under the age of 18, and, of these, says a report released by the China National Children's Centre, 13% were 'internet addicts'. The internet is emerging as the media outlet of choice in the world's most populous nation, which, given that its penetration has barely touched the surface, represents untapped opportunity for online business. CTR Market Research reports that China's internet users surf online for an average of 137.8 minutes per day, up from 88.5 minutes in 2002. The number of internet uses has also increased, up fivefold since 2001, CTR research shows. It says the internet 'has already become one of the most important communication mediums. Based on this trend it seems likely that, in 2007, Chinese people will spend more time surfing online than they will watching TV'. Those surfers are also spending. China Internet Network Information Centre estimates the country has 123 million internet users, 26% of whom have shopped online. Xinhua reports that China's online sales could hit 51bn yuan (US$6.38bn) in 2007, up 63% on the previous year. Citing a report by the internet research company iResearch, it says the registered number of online shoppers in China was 43.1 million in 2006, and is expected to reach 55 million this year. The darker side of internet use may well be the revival of pornography and violence, vices almost wiped out under the puritanical rule of Mao Zedong. But as Beijing sends a message of zero tolerance, it also recognises that, even in China, business is business. In April it allowed Google, the world's second-largest internet market, to sell advertising on 400 websites owned by China Telecom. The deal gives Google access to a plethora of sites that provide information such as business directories, and connection to China Telecom's 30.5 million broadband users. The implications are staggering - in anyone's language. in brief...
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