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Wednesday, January 14, 2015

Will shale oil survive the price fall?

American shale oil enterprise WBH Energy filed for bankruptcy on January 4, 2015. This could be the beginning of a shakeout of shale oil enterprises. Since 2010, the debt of America's energy enterprises has increased 55 percent; meanwhile, the energy sector of S&P 1500 index has dropped rapidly. The shale oil revolution has not only been stricken by the low oil price, but also "abandoned" by investors. As liquidity runs short, small and medium-sized shale oil enterprises will either go bankrupt or be taken over if they survive the oil price crisis.


The reason for the oil price slump is becoming clearer: oversupply. However, since oil producers will not reduce output, the downward trend continues. Canadian heavy crude has dropped below 35 USD, a new low since February 2009. In the past six months, the price has fallen by 60 percent. We can say that the shale oil revolution is being blocked by the low oil price - in other words, it is being hindered by OPEC (Organization of Petroleum Exporting Countries), principally represented by Saudi Arabia. When the oil price dropped below 50 USD, OPEC had a meeting seeking consensus on maintaining oil output. The average production cost of OPEC is about 40 USD, while the cost of shale oil is above 60 USD. As long as the price is above 40 USD, OPEC can still make profit, but the shale oil enterprises will be squeezed out.

At the end of 2014, in order to exploit the market for US oil producers, the US Department of Commerce lifted the ban on the export of condensate oil. The US has ended its 40-year oil export ban to join in competition with the other oil producers, which means that on the one hand the US has become an international oil producer, while on the other hand shale oil has had a huge impact on the world energy structure, and the world oil market has excess production capacity. For the US, shale oil has provided a new economic growth point and provided additional chips when competing with other oil producing countries. Therefore, the US government will offer necessary supports to shale oil enterprises. However, the market cannot be easily manipulated by one or two countries. The US wanted a moderate drop in the oil price, which would stimulate its economy as well as "fix" those insubordinate oil producing countries. But the downward trend of the oil price has been irresistible, and now threatens the survival of the American shale oil industry.

Faced with the falling oil price, shale oil enterprises, with their relatively high production costs, have entered a crucial phase of life and death. Unless all the oil producing countries join hands to limit production and achieve a rebalancing of supply and demand, the oil price will not rebound in the short term. Saudi Arabia and the other Gulf countries blame the oil price crisis on the irresponsible behavior of non-OPEC oil producing countries, which in fact targets the shale oil producers.

TThe new energy industry is suffering under the impact of the falling oil price too. The stock price of electric vehicle producer Tesla is also in a slump. But for the shale oil enterprises, this is an issue of life or death. - (People's Daily Online)

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Wednesday, January 7, 2015

Success factors: higher education, right skills and knowledge


Young people are aware that career success is only possible if they pursue higher studies and are armed with the right skills and knowledge.

AS the demand for highly skilled and knowledgeable workers intensifies in the knowledge-based economy, so does the demand for higher education.

Indeed, higher education plays an increasingly significant role in this dynamic and integrated world economy.

There is much evidence in research literature that show the positive correlation between higher education and economic development.

In addition, pursuing higher education is seen as an important pathway to career success. However, as tertiary studies become more accessible to the masses, there are concerns on the value of higher education.

Based on the classification of the Education Ministry, the higher education sector in Malaysia consists primarily of universities, university colleges, colleges, polytechnics and community colleges.

An online survey was conducted recently where 298 respondents participated. More than 80% of the respondents were students in public and private higher education institutions in Malaysia while the rest were random respondents.

The data from this survey was collected through the UTAR (Universiti Tunku Abdul Rahman) Opinion Poll (http://poll.utar.edu.my/), an online platform developed by the varsity to collect public opinion on current issues, particularly issues faced by youth in the country.


Seeking jobs

The survey revealed that the two reason for pursuing a university or college education were to get a decent job and earn a higher salary.

The value of higher education in providing access to improved jobs, better earnings and career prospects is an important driving force for people to invest in higher education.

Other important values of higher education as highlighted in the survey include promoting social mobility and gaining self-fulfilment.

In the survey, when respondents were asked about what kind of knowledge should be emphasised and delivered by higher education, students and non-student respondents gave somewhat different feedback.

Student respondents placed great emphasis on the provision of professional knowledge that would prepare them with the information and knowledge required for a professional career while career-related knowledge came in second.

For non-student respondents (consisting of respondents working in different professions and 67% of them have a degree), they are of the opinion that higher education should firstly prepare students for good citizenship and to be well-versed in general knowledge.

This was then followed by the preparation for a professional career and a job.

The survey also revealed that vocational or technical knowledge to prepare students with technical skills has not been seen as a priority for higher education.

Due to the burgeoning number of higher education institutions, particularly private higher education institutions in the country since the introduction of the Private Higher Educational Institutions Act in 1996, higher education has changed from a social institution to an industry and is increasingly perceived as a profit-making industry.

About 75% of the respondents felt that higher education was becoming “commercialised” and profit-oriented, thus creating the varying standards of higher education institutions, and the programmes offered in the country.

The diverse quality has somehow contributed to the diminishing value of a higher education degree.

It has also led to the distorting job market signalling effect of an academic degree in the employment market.

Hence, more efforts in screening and filtering are required during recruitment to help employers hire the right candidate with the relevant requirements.

In order to ensure the quality of higher education in the country, it is crucial for the authorities to develop a reliable and effective mechanism to closely monitor and assess the quality of teaching and learning in higher education institutions in Malaysia.

“Too-examination oriented” is the general perception of the respondents (78.3%t) on the current higher education system in Malaysia.

This is associated with the feedback that higher education institutions should provide more practical training opportunities and industry exposure to students.

The curriculum design should consider incorporating innovative teaching and learning methods. This would include problem-based learning, project-based assignments, case studies or experiential learning, rather than the traditional lecture-based method.

Internship is found to be an effective way for students to gain hands-on learning experience.

Non-student respondents were asked to give comments and their perception on the performance of students in the higher education institutions.

The majority of them (80.6%) felt that our students are lacking in international exposure.

It would be a disadvantage if we are not preparing our students and equipping them with global competence skills to compete in the global economy.

International internships.

Many universities around the world, particularly universities in Europe and North America, have incorporated into their curriculum at least one semester of study abroad or international internships.

Compared to these universities, we are lagging behind in this aspect.

Higher education institutions in Malaysia should participate more actively in internationalisation initiatives, particularly international student exchange programmes to provide students the opportunity to acquire global experience during their studies.

Another major comment is related to students’ lack of good communication skills.

In fact, this is not a new finding. We often read reports or hear comments about the inadequacies of our students in communication skills.

It is not so much of a language barrier, but more related to the capability to express and deliver one’s idea and messages clearly and correctly.

Interestingly, when student respondents were asked to reveal what skills they acquired in university or college, communication skills topped the list as the skills most acquired.

This is something that needs further investigation.

The higher education system is undergoing dramatic changes due to many underlying factors, particularly technology innovation, emergence of knowledge economy, shifting demographics and globalisation.

The role and value of higher education has somehow changed as well.

It is important for us to review the best practices to prepare students to succeed in the increasingly dynamic world and to produce the “right” knowledge workers for society.

This article sheds light on some of the issues in Malaysian higher education as perceived by students and general respondents.

By Prof Cheng Ming Yu The Star/Asia News Network

The writer is a Professor at the Department of Economics, Faculty of Accountancy and Management at Universiti Tunku Abdul Rahman. This is the final article in a series of STEM for life-themed articles published in our pullout.

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Tuesday, January 6, 2015

Ringgit Malaysia slides to lowest vs USD: fears of low oil prices, rate hike, rethink study options


PETALING JAYA: The ringgit has fallen to its lowest against the US dollar since August 2009 amid concerns over the impact of low oil prices on Malaysia’s economy and the timing of US interest rate hike.


At 5pm yesterday, the ringgit was quoted at 3.5425 against the US dollar, which has been gaining strength against all major currencies in the world. That represented a weakening of 10.81% for the ringgit against the US dollar in the last six months.

According to independent economist Lee Heng Guie, the ringgit would likely remain under downward pressure as investors were concerned about the impact of falling crude oil prices on Malaysia’s economy.

Malaysia, which is a net exporter of crude oil and petroleum, is seen as the biggest loser in Asean of lower oil prices.

“Being a net oil and gas exporter, it will cause a sharp slowdown in oil and gas investments and affect the Government’s ability to spend as it struggles to manage its fiscal deficit on account of falling oil revenue,” RHB Research Institute said in a recent report.

Low oil prices would result in some loss of income for Malaysia through lower dividends from state oil producer Petroliam Nasional Bhd and lower tax and excise duties. Petroleum-related revenues account for around 30%-40% of total government revenue each year.

Savings from recent subsidy reforms might not be sufficient to offset the loss in income for the Government that was looking to cut its fiscal deficit to 3% of gross domestic income (GDP) in 2015 from 3.5% of GDP this year, economists said.

There were divided views as to whether Malaysia would momentarily slip into twin deficits, a situation where an economy is running both fiscal and current deficits, in the coming months.

Brent crude oil, an international benchmark, fell to a fresh five-year low at 5pm yesterday when it was quoted at US$54.23 (RM192.11) per barrel. That represented a decline of more than half from the peak of around US$115 (RM406.80) per barrel in mid-June.

Investors are expecting the US Federal Reserve to raise interest rates in the coming months, following the end of its third round of quantitative easing (QE3) programme last October.

QE3, which was launched in September 2012, involved the buying of long-term US Treasury bonds to push long-term interest rates low to support the country’s economic recovery.

In the last six months, the ringgit had also weakened against other regional currencies, including the Singapore dollar, against which it fell 3.63% to 2.6493. The ringgit fell 0.91% against the South Korean won to 0.3184; and 2.9% against the Indonesian rupiah to 0.02801.

Nevertheless, the ringgit had appreciated against the British pound, euro, Australian dollar and Japanese yen over the last six months.

Yesterday, the ringgit was quoted at 5.4080 against the pound, 4.2249 against the euro, 2.8541 against the Australian dollar and 2.9397 against 100 yen.

By Celilia Kok The Star/Asia News Network

Weakening ringgit forces parents to rethink study options


PETALING JAYA: Parents planning to send their children to study overseas, particularly the United States, are beginning to feel the pinch with the ringgit continuing its slide against the greenback.

Many are reconsidering their options by looking at other destinations for their children’s higher studies.

Some are also planning to shorten the study period of their children to cope with the extra costs incurred, while there are those who are thinking of asking their children to take up part time jobs to help finance their education.

The ringgit has slipped to its lowest since August 2009 at 3.5280 to the US dollar.

A media practitioner said he enrolled his daughter for an American degree programme with a local college two years ago.

“She’s doing a twinning course with two of the four years to be spent in the US. At that time, the ringgit was holding up fairly well against the US dollar.

“With the ringgit’s slide now, I’ll have to cough up much more to finance my daughter’s studies in the US,” he said.

Retired pilot Wong Yoon Fatt, a father of two, said he planned to send his 18-year-old daughter overseas as he had saved up funds for his children’s education.

“However, if the ringgit continues to weaken, I may shorten the duration of their studies abroad. From three years, I may consider cutting it to just a year or two abroad,” he said, adding that he would encourage his children to take up part-time jobs during their vacation.

Housewife Noorhaidah Mohd Ibrahim, 61, said if the economic situation worsened, she was prepared to send her 21-year-old daughter Tasneem to study at a local university.

“If we can get the same quality of education here, then why not?” she said, adding that she was planning to send Tasneem to pursue higher education in Britain.

Mass communication student S. Samhitha, 21, said she had a choice of continuing her final-year overseas but opted to stay back because of increasing costs to study abroad. “I can still get the same degree here. However, the thing I will miss is the exposure of studying in a different country,” she said.

Law student Janani Silvanathan, who is in Britain, said she would feel the pinch of the weakening ringgit in her next term when she would have to travel back and forth from Bristol to London weekly.

“Transportation will be more expensive. A train ticket from Bristol to London costs RM180 each now,” the 24-year-old lamented. A 20-year-old film making student who identified herself as Stephanie said she was planning to study in Canada but would have take up a part-time job.

“The depreciating ringgit will not severely affect me but my parents will definitely incur higher costs,” she said.

Law student Lisa J. Ariffin, 25, who is studying in Cardiff, Wales, said she was more careful in spending money, even on food.

“I can’t eat out as often and will always look out for good bargains or offers,” she said.

By Yuen Meikeng The Star/Asia News Network

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Sunday, January 4, 2015

AirAsia pilot's son obsessed with video games don't know dad is gone!

Galih, the 10-year-old son of AirAsia Flight QZ8501 pilot Capt Iriyanto, is still unaware of what has happened to his father

SURABAYA: It seemed like any other Saturday morning at the home of Indonesia AirAsia Flight QZ8501 pilot Capt Iriyanto, with the television on and birds chirping outside in Jalan Pondok Jati in an upscale neighbourhood of Siduarjo, East Java.

So much so, a stranger wouldn’t have guessed that the owner of the two-storey bungalow was involved in the air crash last Sunday and remains missing. And this impression was intentional – put on for the benefit of the experienced pilot’s 10-year-old son, Galih (pic).

“Until today, he doe not know what has happened to his father. We are not planning to tell him until the remains of his father are found,” said Capt Iriyanto’s brother-in-law Wahyu Budi Bornomo.

Wahyu, 53, said Galih would usually ask about his father if he did not see him around.

“He would ask if ‘papa’ was home. If he did not see him, he would assume that his father was out somewhere flying – Galih is used to not seeing Capt Iriyanto most of the time.”

He said the schoolgoer’s obsession with video games would keep him preoccupied at home, when asked if he noticed the unusual crowd that had been coming to their residence every night for prayers since the plane went missing.

“He is an avid video gamer and spends most of his time upstairs.

“He would wonder about the crowd (that were coming to the house because of the tragedy), but was never curious,” said Wahyu.

When The Star visited the house at 8am local time, his wife, Ida, was talking to her sisters at the porch, politely declining to be interviewed.

“Maaf ya, nanti aja. Saya ngak mau cakap. (I am sorry, just wait. I do not want to talk),” she said, before walking back into the house.

Clad in a T-shirt and shorts, Capt Iriyanto’s daughter, Ninis, 25, was seen going in and out of the house to run errands.

Wahyu said Capt Iriyanto was “a loving husband and father”, and a caring man who helped his neighbours.

“He will be missed dearly by everyone.”

Not too long after that, Galih, who was still in his Mickey Mouse pyjamas, came down from his room, looking for his sister.

“Smile for the camera!” Ninis told Galih as The Star’s photographer points her camera towards him.

Asked if Capt Iriyanto’s family had been this calm since the news of the tragedy hit them, Wahyu said: “At first, of course, we were all shocked. Ida refused to talk to anyone, but as days passed by, she became okay.”

By Rahmah Qhazali The Star/ANN

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Saturday, January 3, 2015

Malaysian property market likely to regain momentum post GST

Based on the experience of several countries that implemented GST, Wong, research head of CIMB says there has been a pick-up in retail sales ahead of the value-added tax, particularly three to six months before the implementation. Retail sales then eased (in those countries) in the six months after GST before rebounding in the nine to 12-month period after (see chart).

ALTHOUGH the goods and services tax (GST) has caused uncertainties among the people, the real estate market is expected to even out after the initial rush to close sales, property agents say.

Developers are also taking advantage of public expectations that they would have to pay more for property after the GST becomes effective, real estate consultants say.

The implementation of the GST is expected to increase house prices by between 3% and 5%. It would likely further exacerbate the market sentiments. “So (until April 1), some buyers are likely to adopt a ‘wait and see’ approach due to the uncertainties on the impact of the GST,” says C H Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen.

The overall price increase will be less in the residential sub-segment, but more in the commercial sub-segment, PA International Property Consultants head of agency Wendy Tong says.

Although residential properties are zero-rated for GST, materials and services supplied in the development process will be subject to GST and these costs are likely to be passed on to home buyers.

“Pricing is determined by demand and we expect the market to be impacted for at least the first two quarters when the GST becomes effective,” Tong says.

After April, the market will find its own level and even out a little, says Malaysian Institute of Estate Agents president Siva Shankar. As transactions in the first half of 2014 were lower compared with first half of 2013 after the property boom in 2011 and 2012, Shankar expects property transactions in 2015 to move slowly.

“This year, a small growth of between 2% and 5% can be expected as the market braces itself,” he says.

In terms of affordability, however, the general understanding is that the GST will inevitably add cost to houses in the primary market, as a result of developers incurring input costs but unable to charge those costs as output costs for claim.

“Generally, when demand is good, developers can pass the cost down to buyers. It looks like demand would be low because the market is not fully undestanding the situation due to some confusion (on the GST),” says Khong & Jaafar group of companies managing director Elvin Fernandez.

“Those costs will slowly seep into the system in the second or third quarter of 2015,” Fernandez says.

CIMB Research head of research Terence Wong said in a report that this would be a “tricky” year given the pick up in sales momentum in 2014 on expectation of property prices rising post GST. He points out developers have faced a slow first half of last year due to Budget 2014 measures to curb speculation, however, property sales has picked up in the second half on renewed confidence and expectations that property prices would rise.

“The net effect is that 2015 could end up being a similar year to 2014 in terms of property transactions, which we could categorise as a lacklustre year,” Wong said.

In spite of the tough measures, CIMB Research is keeping its “overweight” recommendation on the property sector in its review and outlook sector as valuations of property stocks are attractive and many developers are on track to report record sales and record profits.

“Many developers had also shrugged off the (anti-speculative) measures and continued to target record sales for 2014. But the first half of 2014 has turned out to be a lot tougher than expected and developers, including UEM Sunrise, have slashed their sales target from RM3.2bil to RM2bil mid-way through the year while others struggled to even match the record sales achieved in 2013,” Wong said.

Based on the experience of several countries that implemented GST, Wong says there has been a pick-up in retail sales ahead of the value-added tax, particularly three to six months before the implementation. Retail sales then eased (in those countries) in the six months after GST before rebounding in the nine to 12-month period after (see chart).

“If Malaysia goes through the same pattern and property sales also mimic retail sales, the second half of 2015 will be a trying period for developers,” Wong says.

Several developers have lined up aggressive launches to take advantage of pre-GST buying to lock in as much sales as possible before potential post-GST blues set in.

CIMB Research downgraded the property sector from “overweight” to “neutral” in light of tougher property market conditions after the implementation of the GST.

“Savvier and stronger developers such as Mah Sing and Eco World should be able to weather any turbulence better than the rest and therefore we keep them as our only ‘buy’ calls. UEM Sunrise has been downgraded from ‘add’ to ‘hold’ while SP Setia has been downgraded from ‘hold’ to ‘reduce’ after widening their discount to RNAV further.

Year of consolidation 

With lower oil prices, economists are not anticipating rate hikes in the near-term

Buyers will likely adopt a wait and see attitude for six to nine months after the implementation of the GST.

THE property sector is expected to slow down further this year following cooling measures and tougher lending conditions implemented in 2014.

However, the rate of the slowdown may be cushioned with the continuous fall in the price of oil.

One of the biggest concerns this year is the possibility of the United States raising interest rates, causing more outflow of funds from emerging markets into that country.

However, the falling oil prices are seen as a boon for the property sector. This is because the deflationary effect it is already having on economies.

The changing dynamics of lower oil prices on the economy are still unravelling. But economists are not looking at any rate hikes for Malaysia in the near term, unless there are changes in the external sector, and this is something which will work well for the property sector.

While oil price is a factor, CIMB said the goods and services tax (GST) is another. In a report entitled “Property Development and Investment: Post GST Blues?”, CIMB Research head Terence Wong foresees a pick-up in buying momentum in the first half of 2015.

According to Wong, there was renewed interest in property transactions in the second half of 2014.

“Buyers will likely adopt a wait and see attitude for six to nine months after that (post GST implementation), which will be in line with the typical consumer behaviour experienced in most countries that implemented GST. The net effect is that 2015 could end up being a similar year to 2014 in terms of property transactions, which we would categorise as a lacklustre year.... 2015 will be tricky,” he says in his report.

According to statistics from the National Property Information Centre (Napic), although the country’s overall residential property transactions showed an increase in the first half-year of 2014, this was due mainly to the primary market transitions in Johor, where people buy directly from developers. In the Klang Valley, purchases from developers dropped in the first half of 2014 and increased marginally in Penang.

In the second half of 2014, the Johor market reversed, according to developers and real estate personnel there.

Although it has often been said that the Johor market is different from the rest of the country, due to the economic growth area of Iskandar Malaysia and the leverage provided by its proximity to Singapore, the feel-good factor which spurred sales and interest there has shifted.

Johor-based developer Welton Development Sdn Bhd CEO Thomas C.Y. Ling says the first half of 2014 went on well – good sales figures, great confidence in that market and swarms of investors from around the world.

However, things started to change in the second half when negative news begun to filter through. This included the increased toll rates at the Singapore and Malaysia checkpoints, concerns about the possible rise in interest rates, the imposition of cooling measures and tighter lending rules.

Ling says “well known” developers begun lowering prices in the middle of last year. He says this, as well as the weakening ringgit, had brought about concerns to foreign investors.

Another sign of the times is that buyers are moving away from high-rise projects as prices increase and instead, are investing in landed properties. A Johor-based agent reckons that condominiums priced at RM600,000 and above are seeing this shift towards landed units.

Sunway Iskandar launched its first phase of mixed development in Iskandar Johor – Citrine, the Lakeview precinct – and successfully sold out its office suites in the middle of last year.

“Sunway’s pricing came with some discounts. So it did well,” the Johor-based source said.

The Petaling Jaya-based developer, known also as a theme park developer, is expected to launch landed property this year at fairly “competitive” prices in Sunway Iskandar.

“Competition is going to be keen as developers are expected to price launches at lower prices. This is expected to be the trend in 2015 and we have already begun to see that during the second half of 2014,” the source says.

“Developers are re-focussing,” she says. China developer Country Garden is launching studio units and units with sea views. Another China developer R&F has “quietened” down, the source says.

Developers in Iskandar are holding back or postponing launches and delaying construction. This has resulted in a downward spiral in the Johor property market with most over supply cases in Johor Baru, Danga Bay, and Nusajaya.

KGV International Property Consultant executive director Samuel Tan agrees that Johor has “several concerns”.

“The first is the over supply of high-rise units and the critical measure would be curbs on lending. The second is the high number of people who were lured into the market by developers interest bearing schemes, without which, they would not have the capital to do so,” he says.

Other concerns include the GST and its effect on all sub-segments and the economy.

“This year will be a consolidating year for all types of properties,” he says.

Landserve (Johor) Sdn Bhd executive director Wee Soon Chit says he is “still optimistic” about the industrial sector and shop office sector in Iskandar Malaysia.

The right location, pricing and reputable developer will still work although the general sentiment has been rather weak lately.

Those who can afford will start hunting for bargained properties (across the board), Wee says. It will take a little longer for the seller to start dropping prices. There will be more clarity towards the second half of 2015, he says.

Spillover effects in Klang Valley

The situation in the Klang Valley is expected to be similar, says Klang Valley-based real estate professionals.

City Valuers and Consultants Sdn Bhd managing director PB Nehru says high value properties – unless they are sold at a perceived bargain – will less likely be transacted.

New properties located near the light rail transit and mass rapid transit stations or near the purchasers’ centre of gravity will still be transacted.

“Properties that are surplus to immediate needs will not be a priority; the decision to purchase will be postponed,” says Nehru.

Having said that, however, he says the Klang Valley has a “large reservoir” of double income middle class households aged below 40 who do not own a “home” of their choice for their own occupation.

“They have access to down payments, from parents and savings. They will still buy as the perception in the Klang Valley is that, prices here will always go up as this is where all the productive people live and work,” says Nehru.

An issue befuddling the market is the sheer number of launches in 2011 and 2012 (see table). Transactions doubled between 2010 and 2011 from about 30,000 to 56,000 respectively. In 2012, the number of transactions increased to over 60,000 and dropped by a third in 2013.

Johor continued to do well in the first half of 2014 while transactions in the Klang Valley dropped.

Launches sold in 2012 are expected to enter the market this year, says PA International Property Consultants (KL) Sdn Bhd head of agency Wendy Tong.

Many of these buyers are expected to sell their units if they are unable to get the rent that will cover their mortgage payments, she says.

Tong’s advice is to “buy based on rental returns.”

“Buyers should not simply buy just to invest, or for the sake of buying. This was the situation the last couple of years. People were buying for the sake of owning a unit here, or a unit there,” says Tong.

She says for as long as she can remember, capital appreciation was the main driver in property investments. With slow, little capital appreciation and low yield, there may be little incentive now, she says.

Although Napic figures showed that primary residential transactions picked up in the first half of 2014 compared with the same period a year ago, both are a far cry from the first half of 2012. Penang primary transactions were the highest in 2011, increasing more than 440% over 2010 before falling by half in 2012. Penang has continued to slow since. Raine & Horne senior partner Michael Geh says Penang’s secondary market remains fairly active, particularly with landed housing.

“There is a correction in certain locations and segments of the high-end condominium market. The often-speculated upon luxury condo market priced RM700,000 and above (or RM800 and above per sq ft) is a bit soft while there is strong demand for units RM400,000 and below. Landed units remain popular; no correction there. “You got to segmentise the market. Penang is very price sensitive,” he says.

Office and retail market

In the overall retail market, there is expected to be less spending at retail malls. Weak sentiment may prevail, reducing retailers’ ability to pay high rents or even current rents due to less turnovers. Rents will directly affect prices. Thus, there will be limited growth in the capital values of retail properties, Nehru says.

As for the office market, supply exceeds demand and this is expected to continue into 2015, Nehru says.

The new office space can only be filled by multi-national companies (MNCs), government-linked corporations and public listed companies.

“They will insist on Grade A dual compliant office buildings for prestige purposes. But MNCs and foreign direct investments will only come if the country’s perceived narrow politics, security, graduate education system and standard of English improves from what they are now,” says Nehru.

If occupancies, rent and total net rental income cannot increase, prices are unlikely to increase. Older buildings will also continually lose tenants to the newer buildings and are likely to be converted to other uses such as hotels, hostels or be demolished for redevelopment.

At press time, crude oil is touching US$53 per barrel. The sliding oil price will impact the office market, especially in the Kuala Lumpur city centre, the base for many oil majors.

A deferment of any interest rate hike will be a major boost to sentiment for the property sector.

By Thean Lee Cheng and Cheryl Poo The Star/Asia News Network

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Thursday, January 1, 2015

AirAsia Flight QZ8501 exploded in mid-air?

It is unlikely that Indonesia AirAsia Flight QZ8501 exploded in mid-air, air crash experts say, as the first pieces of debris were spotted and some bodies recovered.



Chances are that the plane hit the Java Sea intact and broke up upon impact before plunging to the ocean floor.

The wreckage of the Airbus 320-200 was found more than 48 hours after the ill-fated flight, which left Surabaya for Singapore on Sunday morning with 162 people on board, went missing.

A search and rescue worker preparing to load body bags onto a flight to Kalimantan in Pangkal Pinang on Indonesia's Bangka island yesterday. As operations move to search and recovery, it would take weeks before the authorities and investigators are able to determine how and why the crash happened. -- PHOTO: REUTERS
A search and rescue worker preparing to load body bags onto a flight to Kalimantan in Pangkal Pinang on Indonesia's Bangka island yesterday. As operations move to search and recovery, it would take weeks before the authorities and investigators are able to determine how and why the crash happened. -- PHOTO: REUTERS

Search teams reported seeing some bodies intact.

An air force plane reportedly spotted a shadow of what looked like a plane on the seabed.
 AirAsia QZ8501 debris
AirAsia QZ8501 debris

As the operations move from search and locate, to search and recovery, it would take weeks before enough pieces of wreckage and human remains are recovered for the authorities and investigators to determine how and why the crash happened.

Critical to this is finding the plane's black boxes which record conversations in the cockpit and preserve data on the position and speed of the aircraft.

But looking at what is known so far, there are several possibilities on what could have happened.

Retired United States airline pilot John Cox, who runs his own consultancy, said: "I am now seeing doors and reports of a large section located on the sea floor which are indicators, but not conclusive evidence, that the plane was in one piece when it hit the ocean.

"If the wingtips, nose and tail are found in the same area, then it will be conclusive that the plane was intact upon impact with the water."
 AirAsia QZ8501 search areas
AirAsia QZ8501 search areas

Mr Jacques Astre, president of industry consultancy International Aviation Safety Solution, said: "The fact that the debris field is relatively small would suggest the aircraft broke up upon impact with the sea and not in flight."

If some bodies are found intact, it would suggest the same, said Mr H.R. Mohandas, a former pilot and now programme head for the diploma in aviation management at Republic Polytechnic.

Mr Astre added: "The close proximity of the debris field to its last known location also suggests the aircraft descended fairly quickly."

The area is about 10km from the aircraft's last known location over the Java Sea.

The first sign of trouble came about 45 minutes after the plane left Surabaya at 5.30am - an hour behind Singapore time - for the two-hour sector. At 6.12am, the cockpit requested permission from the Jakarta air traffic control to turn left to avoid a storm, which is common procedure when pilots encounter rough weather.

The pilot then asked to take the plane higher to 38,000 feet from its position at 32,000 feet, without explaining why.

The air traffic control decided to allow the plane to increase its height but only to 34,000 feet, because at that time another AirAsia flight was flying at 38,000 feet.

But when this was communicated to the pilot of QZ8501, there was no response from the cockpit.


Republic of Singapore Air Force (RSAF) servicemen onboard a C-130 aircraft take part in the search and locate (SAL) operation for missing AirAsia flight QZ8501 over the Java sea on December 30, 2014.--PHOTO: AFP

Data from Indonesia's meteorological agency showed slight rain in the Belitung and Pontianak areas when the plane was estimated to be flying through the vicinity, with thick cumulonimbus clouds as high as 45,000 feet.

Such clouds can produce lightning and other dangerous weather conditions, such as gusts, hail and occasional tornadoes.

Mr Mark D. Martin, founder and chief executive officer of Martin Consulting, said: "In the unfortunate event of entering a cumulonimbus cloud at flight levels between 31,000 feet and 38,000 feet, it is common to see heavy updrafts and downdrafts, icing on control surfaces which can freeze corrective pilot actions, aggressive aircraft manoeuvres and the aircraft dramatically lose altitude in excess of 5,000 feet per minute."

A similar incident had occurred in June 2009 when Air France Flight AF447 plunged into the Atlantic Ocean, leaving no survivors, during a flight from Rio de Janeiro to Paris.

Official investigations concluded that the aircraft crashed after pilots failed to react correctly to temporary inconsistencies between air speed measurements.

This was likely due to ice crystals blocking the plane's pitot tubes, which measure air speed.

Mr Mohandas said: "It is possible that something similar happened to Flight QZ8501. In their attempt to avoid extreme weather conditions, the pilots could have taken some actions, including possibly initiating a climb which requires more power.

"This coupled with adverse weather conditions, including turbulence, and possibly the formation of ice on the surface of the aircraft at high altitude, could have disengaged the plane's auto-pilot systems."

He said: "With little or no visibility and without auto pilot, you don't know what's in front of you and the crew could have become disorientated. Under such circumstances, the plane could have gone into an uncontrolled descent."

With the wreckage found, experts can start piecing together the final moments of Flight QZ8501. To the relatives of those who perished, this may bring a sense of closure but, perhaps, no relief from the pain.

karam@sph.com.sg Straits Times/ANN

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AirAsia flight QZ8501 lost contact with air traffic control at 7.24am yesterday. There were 162 people on board - 155 passengers, and 7 c...

The Wealthy get wealthier

The richest people on Earth got richer in 2014, adding $92 billion to their collective fortune in the face of falling energy prices and geopolitical turmoil incited by Russian President Vladimir Putin.

 Video: http://www.bloomberg.com/video/popout/4PRJi7eqTcWSR0cwVL05iA/10.938/

The net worth of the world’s 400 wealthiest billionaires on Dec. 29 stood at $4.1 trillion, according to the Bloomberg Billionaires Index, a daily ranking of the planet’s richest.

The biggest gainer was Jack Ma, the co-founder of Alibaba Group Holding Ltd., China’s largest e-commerce company. Ma, a former English teacher who started the Hangzhou-based company in his apartment in 1999, added $25.1 billion to his fortune, riding a 56 percent surge in the company’s shares since its September initial public offering.

Ma, 50, with a $28.7 billion fortune, briefly passed Li Ka-shing as Asia’s richest person.

“I am nothing but happy when young people from China do well,” Li, 86, said through his spokeswoman in Hong Kong.

Global stocks rose in 2014, with the MSCI World Index advancing 4.3 percent during the year to close at 1,731.71 on Dec. 29. The Standard and Poor’s 500 Index rose 13 percent to close at 2,090.57. The Stoxx Europe 600 gained 4.9 percent to close at 344.27.

Two of the year’s other biggest gainers were Warren Buffett and Mark Zuckerberg of the U.S. Buffett, the chairman of Berkshire Hathaway Inc., added $13.7 billion to his net worth after the Omaha, Nebraska-based company soared 28 percent as the dozens of operating businesses the 84-year-old chairman bought over the past five decades churned out record profit.

Gates, Slim

Buffett passed Mexican telecommunications billionaire Carlos Slim on Dec. 5 to become the world’s second-richest person. Bill Gates, the co-founder of Microsoft Corp., was up $9.1 billion during the year. The 59-year-old remains the world’s richest person with a $87.6 billion fortune.

Zuckerberg, the hoodie-wearing chief executive officer of the world’s largest social-networking company, gained $10.6 billion as the Menlo Park, California-based business rose to a record on Dec. 22.

Bloomberg Billionaires Gainers of 2014
Bloomberg Billionaires Gainers of 2014

This year Facebook made headway in mobile, a business that has flourished as mobile advertising increased and marketing initiatives expanded with applications and video. Facebook’s acquisition of Instagram in 2012 for $1 billion has also been paying off: A Citigroup Inc. analyst said on Dec. 19 the photo-sharing app is worth $35 billion.

Russia Woes

Zuckerberg’s company faced a challenge in Russia, where the blocking of a Facebook page promoting a Russian opposition rally highlighted the challenges the social network faces as Putin cracks down on the Internet amid a looming economic downturn. The European Union and U.S. limited Russian companies’ access to financing to punish Putin after he annexed Crimea in March. Russia’s troubles have been worsened by the corresponding plunge in the price of oil, a bedrock of the country’s economy.

Nobody was hit harder than Vladimir Evtushenkov. Once Russia’s 14th-richest person, the 66-year-old lost 80 percent of his wealth, dropping him from the Bloomberg ranking. He was sentenced to house arrest by a Moscow court in September after a money-laundering investigation connected to the $2.5 billion purchase of shares in oil producer OAO Bashneft.

The court also ruled in favor of nationalizing his stake in Bashneft, which he controlled through publicly traded AFK Sistema. Evtushenkov’s fortune has fallen $8.1 billion, the most of any Russian in 2014.

Leonid Mikhelson has been the biggest loser in dollar terms among those remaining in the country’s 20 richest, dropping $7.8 billion since the start of the year. The 59-year-old is the chief executive officer of OAO Novatek, Russia’s second-largest natural gas producer, which fell 44 percent during the year. He has a $10.1 billion fortune, according to the Bloomberg ranking.

Western Sanctions

Viktor Vekselberg surpassed Alisher Usmanov as Russia’s richest person after Usmanov’s MegaFon OAO lost almost half its value since June. Vekselberg is worth $14.1 billion, while Usmanov fell 32 percent to $13.8 billion.

One of only a few Russians among the world’s 400 richest who gained in 2014 was aluminum billionaire Oleg Deripaska, who added $1.6 billion as his Hong Kong-based United Co. Rusal rose 122 percent. Deripaska has increased his fortune to $8.2 billion. He’s the world’s 154th-richest person.

“The reputation of Russian business in the west has become worse, and will continue to get worse,” said Stanislav Belkovsky, a Kremlin adviser during Putin’s first term who now consults for Moscow’s Institute for National Strategy, a research firm. “That means that the capabilities for Russia’s billionaires to run businesses abroad are going to decrease.”

Adelson Falls

Belkovsky says Putin will try to compensate the country’s sanctioned businessmen by giving them access to different state resources.

“The competition for resources will increase, as will the redistribution of ownership,” he said.

Russian billionaires weren’t the only ones to suffer losses. Sheldon Adelson, the gambling mogul who controls Las Vegas Sands Corp., the world’s largest casino company, fell $8.7 billion as the Las Vegas-based company dropped 25 percent.

Macau’s casinos are looking at their first down year in revenue since the market was opened to foreign operators in 2002, after China’s President Xi Jinping cracked down on corruption on the mainland and high-rollers shunned the gambling enclave. More than half of the company’s 2013 $13.8 billion in revenue comes from Macau.

Bezos, Musk

Adelson’s decline was followed by Jeffrey Bezos, the chairman of Amazon.com Inc. The 50-year-old had $7.2 billion trimmed from his fortune as the Seattle-based company lost ground in the cloud computing market to crosstown competitor Microsoft Corp.

Bezos, whose Blue Origin LLC space company won a contract in November to deploy rockets from NASA launchpads in Florida, is ranked 21st in the world with a $28.7 billion fortune. Blue Origin will develop a space vehicle that isn’t scheduled to be ready until after 2020.

Elon Musk’s space-exploration company is close to winning the certification it needs to begin deploying satellites for the U.S. military, according to an Air Force official. A contract win by Hawthorne,
California-based SpaceX would be the first since the Pentagon opened the program in late 2012 to as many as 14 competitive missions.

Musk added $2.9 billion to his net worth, most of which was the result of a 50 percent gain by Tesla Motors Inc., the world’s largest electric-car manufacturer.

Chinese Gains

China’s 10 richest people have added almost $48 billion combined year-to-date. Following Ma’s $25.1 billion gain, technology entrepreneurs Richard Liu of online retailer JD.com and Robin Li of Baidu Inc. added a combined $8 billion.

The title of Asia’s richest person could be challenged by Wang Jianlin, whose Dalian Wanda Group Co. staged an initial public offering of its commercial properties division this month. An IPO for Wanda Cinema Line Co. is planned for early 2015. Wang has a net worth of $25.3 billion, gaining $12.8 billion during the year.

Alibaba’s surge minted at least three new billionaires this year, including Simon Xie, an Alibaba co-founder and the second-biggest shareholder of the finance affiliate that owns Alipay. Xie, 44, owns 9.7 percent of Zhejiang Ant Small & Micro Financial Services Group Co., the parent of Alipay, according to company filings obtained by Bloomberg News.

Hidden Billionaires

Small & Micro CEO Lucy Peng and Jonathan Lu, CEO of Alibaba, each controls almost 4 percent in Small & Micro Financial, according to filings submitted by the company in Hangzhou. They also both own less than 1 percent of Alibaba, which made them new 2014 billionaires.

Bloomberg News uncovered 86 new or hidden billionaires who had never appeared on an international wealth ranking. Among them were the six heirs to a $13 billion Monaco fortune that were unveiled after the family’s matriarch, Helene Pastor, was gunned down in a parking lot in Nice, France, in May. The fortune spans two branches of the Pastor family, which built much of Monaco’s skyline and owns thousands of apartments in the city-state.

Carlos Pellas became Nicaragua’s first billionaire rebuilding his family sugar mill and parlaying the proceeds into a new bank, BAC-Credomatic, which, by 2005, was one of the largest financial institutions in Central America. He sold it to General Electric Co. in a deal completed between 2005 and 2010 for about $1.7 billion.

Latin America

His rise to riches was almost interrupted by a violent 1989 plane crash that killed more than 130 people and left his wife with 62 bone fractures and skin melting off her face.

Other Latin America fortunes that emerged include five billionaires from Brazil -- Joesley, Wesley, Valere, Vanessa and Vivianne Batista -- who created the world’s biggest beef producer after making more than $17 billion in acquisitions. Their company, JBS SA, rode the biggest stock rally on Brazil’s Bovespa index this year, jumping 30 percent year-to-date, fueled by surging beef prices and Russia’s lifting of a ban on Brazil meat-processing plants.

A surge in real estate and corporate valuations elevated the fortunes of at least five Blackstone Group LP billionaires. Co-founder and chairman Stephen Schwarzman added $926 million as the company rose 7.6 percent. The performance, along with surging art values, made James Tomilson Hill, Blackstone’s vice chairman who runs the company’s $64 billion hedge fund business, a billionaire. Jonathan Gray, who runs the firm’s real estate division, is worth $1.5 billion.

Strong Dollar

Real estate is seen as one way the wealthy could make further gains in 2015.
“The fact that interest rates are going to remain low, there might be some opportunities, especially with residential real estate in Europe,” Efrat Peled, the chairman of Arison Investments, said in a phone interview from her office in Tel Aviv.

Peled, who manages more than $2.5 billion in assets for Shari Arison, says a strong U.S. dollar should give some foreign markets a boost.

“Exports are better when the dollar is strong,” she said.

Whether interest rates stay low remains a looming question moving into 2015. Federal Reserve Chair Janet Yellen appears poised to raise interest rates for the first time in almost a decade, and prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg.
Photographer: Scott Eells/Bloomberg
Billionaire Jack Ma, chairman of Alibaba Group Holding Ltd. in 2014. 

Tuesday, December 30, 2014

Youngest USM don: Prof Dr Michael Khoo Boon Chong has made Penang proud

Expert views: Prof Khoo delivering his public lecture at USM’s Dewan Kuliah A.

GEORGE TOWN: Penang-born Prof Dr Michael Khoo Boon Chong has made the state proud as the youngest professor in Universiti Sains Malaysia (USM).

Prof Khoo, 39, who obtained his associate professor title in 2007, became a professor in the School of Mathematical Sciences four years ago when he was just 35.

He specialised in Statistical Quan­tity Control.

Prof Khoo, who hails from Bayan Lepas, said he chose to complete all his studies where he was born.

“I got my education, including my PhD in Penang. I went to La Salle School in Batu Lanchang (the school was closed down) from Year One to Year Three and then to St Xavier Primary School in Farquhar Street during Standard Four and continued my studies in St Xavier’s Insitution until I finished Form Six.

“I got my degree in Applied Sciences with first-class honours and my doctorate in Statistics from USM in 1999 and 2001 respectively.

“I joined USM School of Mathe­matical Sciences from 2001 as a lecturer,” he said after his inaugural public lecture after his appointment as a professor.

Citing the reasons for studying in Penang instead of overseas, he said as the only child, he wanted to be with his parents.

“I am not from a rich family. My 65-year-old father, Khoo Kah Peng, was a clerk with the city council and my mother Hoo Kim Bee, 67, is a housewife.

“My main priority during that time was that I wanted to stay close with my parents,” he said.

Prof Khoo said he followed his supervisor’s path to specialise in Statistical Quantity Control.

“I love to do research on Statistical Quantity Control, which is useful for industries to maximise profits and reduce costs,” he said.

He said he was thankful to USM as his hard work and research efforts were appreciated.

Prof Khoo is actively involved in publishing manuscripts and work papers.

He has published almost 100 manuscripts in international journals and presented more than 50 papers at national and international conferences.

BY Crystal Chiam Shiying The Star/Asia News Network

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 Mr Darren Tan with his proud parents - Mr Tan Chon Kiat and Madam Ong Ai Hock. The new lawyer changed the course of his life while he was behind bars. -- PHOTO: EDWARD TEO FOR THE SUNDAY TIMES