Briefs

Indonesia to become Southeast Asia’s biggest stock market

Indonesia, Southeast Asia’s largest economy, is finally poised to take the title of the biggest equity market in the region.

Its market value of US$529 billion ($712 billion) has nearly matched that of slumping Thailand, which snatched the top spot from Singapore in May, buoyed by a strengthening baht. With the baht giving back some gains and economic growth trailing forecasts, the SET Index is the region’s only benchmark to decline in the past three months.

In contrast, Indonesia’s Jakarta Composite Index has gained 5.5% in US$ terms during that period. President Joko Widodo is embarking on a new round of infrastructure projects and pursuing reforms to stimulate the fourth-most populous country in the world.

Indonesia held the most-valuable crown for several short periods between January and April last year. Before 2019, Singapore was Southeast Asia’s leader the vast majority of the time since at least 2003 when Bloomberg began compiling the data.

“There is a big opportunity in Indonesia,” said Vincent Mortier, deputy chief investment officer at Amundi Asset Management, which manages about 1.56 trillion euros ($2.34 trillion) of assets. “It has a growth story, political landscape and valuations.”

Indonesia’s Bank Central Asia now ranks as the region’s biggest company by value, at about US$62 billion, ahead of Singapore’s DBS Group Holdings and Thailand’s PTT. — Bloomberg LP

MAS, ACRA launch framework for Variable Capital Companies

The Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) on Jan 15 launched the Variable Capital Companies (VCC) framework.

The VCC is a new corporate structure that can be used for a wide range of investment funds and provides fund managers greater operational flexibility and cost savings.

In a joint media release, MAS and ACRA say this will encourage more funds to be domiciled in Singapore and enhance the country’s value as an international fund management centre.

Fund managers will be able to constitute investment funds as VCCs across both traditional and alternative strategies, and as open-ended or closed-end funds.

Fund managers may also incorporate new VCCs or re-domicile their existing investment funds with comparable structures by transferring their registration to Singapore as VCCs.

The launch saw a total of 20 investment funds incorporated or re-domiciled as VCCs. This includes the 18 fund managers that participated in a VCC Pilot Programme that was initiated by MAS and ACRA in September last year.

To further encourage industry adoption of the VCC framework in Singapore, MAS has also launched a Variable Capital Companies Grant Scheme. The grant scheme will help defray costs involved in incorporating or registering a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers.

“The VCC framework provides fund managers with a greater choice of investment fund vehicles in Singapore that caters to the needs of global investment funds and investors,” says Benny Chey, assistant managing director (Development and International), MAS. – By Stanislaus Jude Chan

Half of Singapore businesses expect business climate to worsen

In a sluggish economic climate laced with uncertainty, local businesses are feeling the pinch.

According to the latest annual National Business Survey released by the Singapore Business Federation (SBF) on Jan 14, some 49% of local businesses expect Singapore’s business climate to become more challenging this year, while 44% expect the climate to remain the same.

Conducted between August and October 2019, the survey also found that 51% of all businesses felt the Singapore business environment had worsened over the past year.

According to Ho Meng Kit, CEO of SBF, the weaker overall business sentiment across 1,018 companies did not come as a surprise on the back of ongoing US-China trade tensions.

“Although the survey was done prior to talks of the Phase One trade agreement, the results are unlikely to vary that much now if the survey is conducted now,” says Ho.

SBF also highlighted key concerns of businesses which include increasing business costs, uncertainties due to US-China trade tensions as well as China’s economic slowdown.

Despite the subdued economic climate, Singapore businesses are continuing to venture out and expand overseas. 84% of businesses now have an overseas presence, up from 75% last year. In particular, SMEs have been expanding internationally, with 78% now having an overseas presence from 68% in the previous year. – By Uma Devi

Hyflux suitor Utico ‘willing to walk away’ from restructuring deal

A Middle Eastern suitor for Hyflux said it is willing to walk away from a deal with the embattled water treatment company, after a little-known firm made an offer for the utility’s debt.

The development is an added complication in Singapore’s highest-profile restructuring case, which has left some 34,000 retail investors in the lurch, with few signs of a resolution emerging after more than 18 months. Hyflux is separately asking for a three-month extension of its debt moratorium.

UAE-based utility Utico FZC will hold a town-hall meeting for holders of Hyflux’s perpetual securities and preference shares, as well as medium-term notes, on Jan 20 in Singapore. It comes just days before the expiry of an offer by Aqua Munda to buy the Singaporean company’s debt.

“We are willing to walk away” if note holders “don’t want us,” Richard Menezes, CEO of Utico, said in a press release. “However, I believe that taking part in the town hall will present the correct forum to know facts and take a decision.”

Utico entered a restructuring deal with Hyflux in November. Weeks later, Aqua Munda emerged from nowhere with an offer to purchase Hyflux’s debt at a minimum discount of 85%. – Bloomberg LP

Boeing mocked Lion Air calls for more 737 Max training

Indonesia’s Lion Air considered putting its pilots through simulator training before flying the Boeing 737 Max but abandoned the idea after the planemaker convinced them in 2017 it was unnecessary, according to people familiar with the matter and internal company communications.

The next year, 189 people died when a Lion Air 737 Max plunged into the Java Sea, a disaster blamed in part on inadequate training and the crew’s unfamiliarity with a new flight-control feature on the Max that malfunctioned.

Boeing employees had expressed alarm among themselves over the possibility that one of the company’s largest customers might require its pilots to undergo costly simulator training before flying the new 737 model, according to internal messages that have been released to the media. Those messages, included in the more than 100 pages of internal Boeing communications that the company provided to lawmakers and the US Federal Aviation Administration and released widely on Jan 9, had Lion Air’s name redacted.

But the House Transportation and Infrastructure Committee provided excerpts of those messages to Bloomberg News that un-redacted the Indonesian carrier’s name.

“Now friggin Lion Air might need a sim to fly the MAX, and maybe because of their own stupidity. I’m scrambling trying to figure out how to unscrew this now! idiots,” one Boeing employee wrote in June 2017 text messages obtained by the company and released by the House committee.

In response, a Boeing colleague replied: “WHAT THE F%$&!!!! But their sister airline is already flying it!” That was an apparent reference to Malindo Air, the Malaysian-based carrier that was the first to fly the Max commercially.

Doing simulator training would have undercut a critical selling point of the jet: that airlines would be able to allow crews trained on an older 737 version to fly the Max after just a brief computer course. – Bloomberg LP