The MALAYSIAN
justice, progress, unity
Issue No. 14 Ė  11 August 1999


Changing the tune on the stock market
Not so long ago, Dr M and company were boasting of the performance of the KL Stock Exchange -- how it had grown by leaps and bounds, how it reflected the effectiveness of capital controls and the economic recovery, how it showed the tremendous confidence in the governmentís policies, and so on.

On Monday, he changed his tune, saying that the fall in the KL Stock Exchange was, oh, so normal, nothing to worry about. What? -- He passed up a chance to blame the evil foreigners, despite so many reports by foreign analysts and newspapers of a foreign sell-off in the lead up to September 1? Or is it because he knows very well that the fall has been due to a very severe rattling of confidence not just among foreign, but also local investors?

More than anything, the dive -- for that is what it is -- has been largely due to the announced bank mergers, as well as a more sober re-assessment of the actual state of the economy, despite a likely positive GDP figure for the second (April-June) quarter of 1999.

The fall in the stock exchange has been anything but normal. Since July 5, when the KL Composite Index hit a high of 870, it has fallen by 200 points, to close at just over 668 on Monday. Fully 100 of those 200 points occurred within the week from Monday, August 2, to Monday, August 9.

This is a drop of 23 per cent in just over a month. Even more dramatically, the market dropped 13 per cent in the week Monday to Monday. No other market in the region has done this, capital controls or no capital controls; and this, despite the announcement of RM80 billion more in loans for share purchases!

That the bank merger plans -- once people woke up to what was really happening -- are behind this decline can be seen clearly from the index of finance stocks.  For a day or two following the announcement of the merger plans, there was a little bit of euphoria. Then reality set in and from 6,172.17 at the start of trading on Monday, August 2, the finance index has dived to 4,864.83 on Monday, August 9. This represents a drop of 21 per cent, compared to a drop of 13 per cent in the overall composite index for the same period.

More, despite the Mahathir governmentís efforts at trying to prop up the property market, the property index dropped 20 per cent in the past week.

As they say, you can fool all the people some of the time, and you can fool some of the people all the time; but you surely cannot fool all the people all of the time.

More on Penangís water authority
Monday, we reported that well-placed business circles believe the Penang Water Authority, the countryís best run water board, and a public one at that, will likely be injected into Intria Bhd as part of a bail-out scheme for the latter. Although you likely guessed, we didnít mention who owns Intria Bhd, its current financial state, and what it does. Sorry. But we didnít want to give you a heart attack.

Yes, you guessed correctly. Intria Bhd is owned by Halim Saad and associates. So boringly predictable, isnít it?
As for its current financial state -- well, to put it politely, itís in one very deep hole. Bluntly, it is in debt default all over the place. For the year ended June 1998, it made a net loss of over RM577 million. Yet, the directors paid themselves a tidy RM742,000, shared amongst six of them. Not bad, huh? The audited results for the half-year ending Mar 1999 shows that the company managed to get into an even bigger hole, with a worsening cash flow problem.

What does Intria do? Well, one of their wholly owned subsidiaries runs a major activity in Penang. Yes, Intria, through wholly-owned Penang Bridge Sdn Bhd, holds the 25 year toll concession, dated from September 1993, on the Penang Bridge.  This is cronyism with a vengeance.

It now falls upon the citizens of Penang to defend their water authority from being swallowed up. No one else can -- not the Gerakan, nor the MCA nor UMNO nor the MIC.

Higher tolls on the Penang Bridge
While Penangites catch their breath over their water authority, be prepared to cough up more for the bridge next year -- one way or another. You see, they signed an agreement in which if the toll concessionaire is not allowed an increase, the government -- that means we taxpayers -- must compensate them: another example of the Ďwin-winí philosophy of the Mahathir regime.

On Saturday, Penang CM Koh Tsu Koon announced that the Penang Bridge toll may be increased next year, given favourable economic growth. He said the state could no longer offer any valid reasons to postpone the new rates. Tolls for cars may be increased to RM8, while charges for heavy vehicles would also be increased according to the formula stipulated in the contract.
For the first 9 months of 1998, not a very good year, Intria reported a net operating cash flow for the bridge concession of RM60.6 million, or about RM80 million a year. So, it would be fair to estimate that the total net operating cash flow for the preceding five years is at least between RM350-400 million.

Now can we please be told the following:
? what proportion, if any, of the collection goes to the government?
? what has been the cost of maintenance for the preceding five years?
The CM shouldnít just come up with some fancy calculations about how many per cent increase, and how it is better than on the North-South Highway. Nor should he justify the increase on the grounds that there has been no increase since the bridge was opened in 1985. After all, whatever happened to inflasi sifar?

END

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