World stuck with dollar

Saturday March 28, 2009

THE dollar is, and will remain, the US’ currency and its own and everyone else’s problem.

The idea of creating a global currency, as espoused by China earlier this week, is interesting, has a certain amount of merit and is simply not going to happen any time soon.

The US’ desire for free access to the cookie jar that being the world’s reserve currency represents will be too strong, especially given its need to finance huge amounts of debt reasonably cheaply. As well practicalities are fearsome, even if consensus was more or less there.
Chinese central bank head Zhou Xiaochuan on Monday called for the creation of a new “super-sovereign” global reserve currency, advocating building on an International Monetary Fund instrument called Special Drawing Rights.

Zhou echoed a call by Russia last week, when it indicated it would raise the issue at the upcoming Group of 20 meeting in London on April 2, saying the idea had support from emerging market economies including Brazil, India, South Korea and South Africa.

There is no doubt that the current system breeds instability, but it enjoys the great advantage of entrenchment and sticking with it allows the US, and others, to avoid making hard choices and paying true market prices for their economic decisions.

No surprise then that President Barack Obama knocked the idea down in blunt terms. “I don’t believe that there’s a need for a global currency,” Obama said, terming the dollar “extraordinarily strong right now.”

Exactly. Too strong by some margin, especially when one considers the coming effects of both quantitative easing and a massive long-term need to fund the costs of the debt binge that exploded and the ever increasing bailout to clean up the aftermath.

In fact, you could say the dollar’s “extraordinary” strength can only be fully explained when you take into account the fact that foreign central banks keep piling up huge reserves of the thing and that it is the international medium of exchange for commodities and energy, well really for global trade and financial intermediation.

Treasury Secretary Timothy Geithner said on Wednesday the US dollar is still the world’s reserve currency and will remain so for a long time, but expressed openness to greater use of IMF SDRs.

The dollar’s central role has two main implications, both rather ugly but also very seductive for those involved.

For the US, it’s a bit of a free ride as far as debt financing goes. People buy and hold treasuries more and the US gets cheaper financing that would otherwise be the case. Of course, that’s a bit like an alcoholic bartender getting a discount at work; a real benefit, but not a true one. It also means that even if the US has the will to take away the proverbial punchbowl or drive the dollar down, it doesn’t always have control, as what it does at the short end of the interest rate curve can be confounded by foreign purchases that keep the long end and financing costs down and the dollar up.

The US reserve status also opens up the opportunity for mercantilist countries, like, say China, to keep its own currency cheap, building up huge dollar stocks and force-feeding the American milch cow with cheap credit with which to buy imported goods.

That may not work any more anyway, as all of the cow’s stomachs are full and the milk’s gone thin.

There is a temptation also to build up reserves as protection against bad times and bitter IMF medicine. Many Asian leaders seem to have vowed after 1997 that they would do what was needed, which often included building up dollar reserves, to avoid having to meet an IMF director’s plane at the airport and accept the accompanying prescription.

That rather indicates that the old system, with the US as global reserve currency, is dying, but I doubt it will do so without a fight and with cooperation among nations willing to cede part of their sovereignty, even for a greater good.

It is amazing and encouraging that China speaks of ceding control of a portion of its foreign reserve assets to IMF management, but I have a hard time seeing it happening widely soon.
So, we will have to get through the next year or two without a super-sovereign currency and with global imbalances being worked out, or around, under the current system.

My best guess is that things actually go in the right direction, more or less. The dollar should weaken as a result of US policy even without a deliberate push downhill from the Chinese. Asian exporting nations will see slowing reserve growth generally, which should translate into diminished flows into the dollar and Treasuries.

That’s going to be painful all around. The Chinese and others will see their investments dwindle, even as they have to resist the impulse to sell into the fall. For the US the process of implementing monetary policy and paying for fiscal policy will be made that much more difficult.

So, goodbye and perhaps good riddance to dollar hegemony, but don’t expect a stable system of global cooperation to rise easily and quickly in its place. – Reuters

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Gold prices climb as investors seek safe-haven

Wednesday October 8, 2008 MYT 12:16:31 PM

NEW YORK: Gold prices kept rising Tuesday, approaching US$900 an ounce after another day of turmoil in financial markets encouraged buying of safe-haven assets. Silver also rose.

Investors remained skittish even after the Federal Reserve announced it would ramp up emergency efforts to clear obstructed credit markets and revive the economy.

The central bank said it would buy massive amounts of short-term commercial debt and in a speech Tuesday, Fed Chairman Ben Bernanke hinted that it might cut interests rates as well.

The measures, which follow last Friday's approval of a $700 billion financial bailout, failed to console Wall Street.

The Dow Jones industrials fell more than 500 points.

With few safe places to put money, investors flocked to gold.

The December contract jumped $15.80 to settle at $882 an ounce on the New York Mercantile Exchange, after earlier rising as high as $893.70.

On Monday, gold shot up $33 to $866.2 an ounce.

Gold, long considered an attractive investment during rough economic times, has seen a resurgence of late as the spreading credit crisis weighs down equity markets across the globe.

"This bailout plan has not been the magic bullet that many people hoped it would, so gold is catching some of the safe-haven bid from that,'' said Matt Zeman, head trader at LaSalle Futures in Chicago.

December silver rose 9.5 cents to settle at $11.38 an ounce on the Nymex, while December copper fell 15.55 cents to settle at $2.5345 a pound.

A slightly weaker dollar Tuesday also supported gold.

A falling greenback encourages investors to buy precious metals as a hedge against inflation or weakness in the U.S. currency.

In energy markets, oil prices rebounded from the previous day's big drop as investors halted selling to see whether the economic bailout can gain traction and stem a widening global downturn.

Light, sweet crude for November delivery rose $2.25 to settle at $90.06 a barrel on the Nymex, after earlier trading as high as $93.02.

In other Nymex trading, heating oil rose 3.17 cents to settle at $2.5057 a gallon, while gasoline futures rose less than half a penny to settle at $2.0628.

In agriculture trading, major grain prices traded mixed on the Chicago Board of Trade.

Wheat for December delivery rose 8 cents to settle at $6.0325 a bushel, while December corn fell 7 cents to settle at $4.17 a bushel.

November soybeans added 4 cents to settle at $9.26 a bushel.


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Barclays may acquire more of Lehman

Thursday September 18, 2008

LONDON (AP) - Barclays PLC said Wednesday it may pick up some of Lehman Brothers assets and employees in Europe and Asia, on top of the British bank's deal to acquire key U.S. operations from the failed investment bank.

"Options, not obligations,'' Group Chief Executive John Varley said of the possibility of salvaging more of Lehman Brothers businesses.

Barclays PLC, the third-largest British bank, took advantage of Lehman Brothers Holdings Inc.'s bankruptcy reorganization to reach a deal on Tuesday for Lehman's North American investment banking and trading operations for just $250 million.

Barclays also picked up Lehman's New York headquarters and two data centers in New Jersey for $1.5 billion, all subject to court and regulatory approval.

Barclays President Robert D. Diamond Jr. said in a conference call with analysts that Barclays' interest was primarily in the U.S. cash equities business, as part of the company's goal to boost its earnings from North America.

"It's an absolute machine, it's extremely profitable,'' Diamond said.

"We wouldn't want to miss the opportunity to add some of the talent from the U.K. and Europe to the team,'' Diamond added.

"It would most typically be where Lehman has a strong position and BarCap (Barclays Capital) a weak position.''

The two executives also indicated a possible interest in some assets in Asia.

In a statement earlier Wednesday to the London Stock Exchange, Barclays confirmed the deal and said that some of its shareholders had expressed interest in subscribing to at least $1 billion of additional equity in support of the acquisition and to beef up Barclays capital base.

"The proposed acquisition of Lehman Brothers North American investment banking and capital market operations accelerates the execution of our strategy of diversification by geography and business in pursuit of profitable growth on behalf of our shareholders, in particular increasing the percentage of Barclays earnings sourced in North America,'' Varley was quoted in the statement as saying.

"This transaction delivers the strategic benefits of a combination with Lehman Brothers core franchise, whilst meeting Barclays strict financial criteria, and strengthening our capital ratios."

Meanwhile PriceWaterhouseCoopers, which is administering Lehman's assets in London, said staff there would receive their September pay packets - as long as they come into work.

As Lehman works to close the sale of U.S. assets, a bankruptcy judge in New York on Wednesday gave Lehman Brothers initial approval to sell key North American businesses to Barclays Capital Inc. for $1.7 billion in cash.

The approval came just two days after Lehman Brothers Holdings Inc. filed the biggest bankruptcy in U.S. history.

The judge's approval sets in motion the asset sales but leaves open the possibility of a competing bid. Lehman plans to seek final court approval Friday.

Barclays said Tuesday that it would buy Lehman's investment banking and capital markets businesses for $250 million in cash, as well as Lehman's New York headquarters and two data centers in New Jersey for an additional $1.5 billion.

Lawyers for creditors and bondholders objected to the speed of the process, saying two days was not enough time to evaluate the deal much less put together a competing bid.
But Judge James Peck declined to delay the approval of the bidding process and said, "There is effectively one logical purchaser for these assets."

Lawyers for the Federal Reserve Bank of New York, the Securities and Exchange Commission and JPMorgan - which believes it could be the company's biggest creditor - supported the sale effort.

The judge also approved Lehman Brothers' request for a $100 million breakup fee plus $25 million in expenses to be paid to Barclays if the deal fails and a competitor wins out.

Lehman said it has made a list of 200 employees it said were "key'' to the business and another eight were determined to be "critical'' to its success.

It said the retention of a majority of those employees was part of the agreement.

Under the proposed deal, Barclays would continue to employ about 10,000 Lehman employees based in the U.S. for 90 days, or pay them severance equal to what was promised by Lehman.

Lehman estimated that such severance payments would cost Barclays about $2.5 billion.
Barclays would also pick up Lehman contracts, some of which would be transferred when the deal closes and a second group that could move to Barclays within 60 days.

Lehman also said in court filings that it was putting up its once-prized investment management unit, Neuberger Berman Holdings LLC, as collateral for a $450 million loan to fund operations while in bankruptcy.

Barclays shares closed up 3.7 percent in trading on the London Stock Exchange at 317.75 pence ($5.74).


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US stocks tumble after government bailout of AIG

Thursday September 18, 2008

NEW YORK: Wall Street plunged again Wednesday as anxieties about the financial system ran high after the government's bailout of insurer American International Group Inc. and left investors with little confidence in many banking stocks.

The Dow Jones industrial average lost about 450 points, giving it a shortfall of more than 800 so far this week.

As investors fled stocks, they sought the safety of hard assets and government debt, sending gold, oil and short-term Treasurys soaring.

The market was more unnerved than comforted by news that the Federal Reserve is giving a two-year, US$85 billion loan to AIG in exchange for a nearly 80 percent stake in the company, which lost billions in the risky business of insuring against bond defaults.

Wall Street had feared that the conglomerate, which has extensive ties to various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy.

However, the ramifications of the world's largest insurer going under likely would have far surpassed the demise of Lehman.

"People are scared to death," said Bill Stone, chief investment strategist for PNC Wealth Management.

"Who would have imagined that AIG would have gotten into this position?''

He said the anxiety gripping the markets reflects investors' concerns that AIG wasn't able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter.

Over the past year, companies including Lehman and AIG have sought to reassure investors that they weren't in trouble, but as market conditions have worsened the market appears distrustful of any assurances.

"No one's going to be believing anybody now because AIG said they were OK along with everybody else," Stone said.

The two independent Wall Street investment banks left standing - Goldman Sachs Group Inc. and Morgan Stanley - remain under scrutiny, as does Washington Mutual Inc., the country's largest thrift bank.

Morgan Stanley revealed better-than-expected quarterly results late Tuesday and insisted that it is surviving the credit crisis that has ravaged many of its peers.

Lehman filed for bankruptcy protection on Monday, and by late Tuesday had sold its North American investment banking and trading operations to Barclays, Britain's third-largest bank, for the bargain price of $250 million.

Over the weekend, Merrill Lynch & Co., the world's largest brokerage, sold itself to Bank of America Corp. in a quickly arranged plan to sidestep further slides in its stock.

"It's still uncertain ground we're treading. We just have to move on a daily basis," said Jack A. Ablin, chief investment officer at Harris Private Bank.

The Dow fell 449.36, or 4.06 percent, to 10,609.66, finishing not far off its lows of the session.

On Monday, the Dow lost 504 points, the largest tumble since its drop following the September 2001 terror attacks.

On Tuesday, it rose 141 points, after the Fed decided to leave interest rates unchanged.

The index is down more than 7 percent on the week, its worst showing since July 2002.

The blue chips have fallen more than 25 percent since reaching a record close of 14,164.53 on Oct. 9 last year.

Broader stock indicators also fell sharply Wednesday.

The Standard & Poor's 500 index dropped 57.21, or 4.71 percent, to 1,156.39.

The Nasdaq composite index fell 109.05, or 4.94 percent, to 2,098.85.

About 200 stocks rose on the New York Stock Exchange, while nearly 3,000 fell.

The stock market is likely to see heavy back-and-forth movement as traders continue to assess the flood of news that has poured in over the past several days.

Short-term Treasurys moved sharply higher as investors sought a safe place for at least the near future.

There was heavy buying in T-bills, which range from three months to a year in maturities.

But the yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.42 percent from 3.43 percent late Tuesday as longer-term debt fell.

Tom di Galoma, head of Treasurys trading at Jefferies & Co., characterized the mood of the bond market as "sheer panic."

With turmoil in markets such as credit default swaps, which are essentially insurance policies against bond defaults, investors sought out alternative short-duration assets, he said.

The US dollar was lower against other major currencies.

Commodities prices that have slumped in recent weeks amid growing signs of economic weakness, soared because of the appeal of hard assets.

Gold for December delivery shot up as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session; that was its largest ever one-day gain in dollar terms.

Crude oil that had also skidded lower since midsummer $6.01 to settle at $97.16 a barrel on the Nymex after the government reported a drop in domestic crude and gas inventories.

Oil dropped by about $10 a barrel on Monday and Tuesday.

The government took other measures Tuesday to help alleviate the turmoil in the markets.

The Treasury said it will start selling bonds for the Fed to aid it with its lending efforts, while the Securities and Exchange Commission said it will strictly prohibit naked short-selling starting Thursday.

Short-selling occurs when traders borrow shares of a stock they expect will fall and sell them.

If the stock does indeed fall, the traders buy the cheaper shares to cover the borrowed ones and profit from the difference.

Naked short-selling occurs when sellers don't actually borrow the shares before selling them; it's a practice some say is partially responsible for the huge drop in the shares of investment banks like Lehman, Merrill Lynch and Bear Stearns Cos., which JPMorgan Chase & Co. bought earlier this year.

Among financial names getting hit, Goldman Sachs fell $18.51, or 14 percent, to $114.50 and Morgan Stanley fell $6.95, or 24 percent, to $21.75. AIG fell $1.70, or 45 percent, to $2.05.

Many of the investment banks are now being forced to pair up with regular banks, whose solid deposit base can provide ballast in a turbulent market.

"People are afraid of the unknown and they don't know what's on the books of these companies," said Joe Saluzzi, co-head of equity trading at Themis Trading.

"The first reaction in a situation like this is to sell."

Saluzzi noted that surging gold prices and other measures of investors jitters indicate that anxiety is building.

Indeed, the Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped nearly 15 percent to its highest close since 2002.

A widely followed measure of financial stocks fell to its lowest close since mid-July.

Saluzzi is somewhat optimistic that the nervousness could be nearing a crescendo, which could squeeze out more investors and then clear the way for a snapback rally.

But the woes of the financial sector could also exacerbate problems facing other parts of the economy, given that individuals and businesses rely on the nation's money centers.

The Commerce Department reported Wednesday that home construction fell by 6.2 percent in August to 895,000 units, the slowest pace since January 1991.

Slumping demand for houses, sinking home prices and mortgage defaults have been the catalysts behind Wall Street's turmoil - and the risky mortgage-backed assets held by the nation's banks are not apt to regain in value until the housing market turns around.

NYSE volume came to a heavy 2.14 billion shares. - AP


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Barclays to buy Lehman banking divisions for US$250M

Wednesday September 17, 2008

NEW YORK: British bank Barclays PLC says it will acquire Lehman Brothers' North American investment banking and capital markets businesses for US$250 million in cash.

Lehman filed for bankruptcy protection Monday after it was unable to find financing or fresh capital to shore up its balance sheet amid the continued downturn in the credit markets.

Barclays said Tuesday it will acquire Lehman's North American banking operations, which include Lehman's fixed income and equities sales, trading and research and investment banking business.

About 10,000 employees work in the divisions.

Barclays will also purchase Lehman's New York headquarters and its two data centers in New Jersey for $1.5 billion. - AP


Earlier report
==============

NEW YORK: British bank Barclays PLC intends to unveil a plan to acquire all or part of Lehman Brothers Holdings Inc.'s investment banking and trading operations, a person close to the talks said Tuesday.

The deal, which was expected to be announced by early Wednesday, would throw a lifeline to more than 9,000 Lehman employees whose future was uncertain after Lehman filed for bankruptcy protection on Monday.

Lehman collapsed from massive exposure to risky real estate holdings.

Barclays President Robert Diamond has addressed Lehman investment bankers to inform them of his company's intentions, this person said.

He spoke on condition of anonymity because a final agreement had yet to be reached.

The third-biggest bank in the U.K. had withdrawn from weekend talks with Lehman Brothers about a possible outright acquisition.

There have been reports that Barclays can pick up the assets it wants for about $2 billion to $3 billion.

The deal must get approval from the bankruptcy court.

Lehman's first bankruptcy hearing began late Tuesday afternoon in a crowded courtroom at the U.S. bankruptcy court in Manhattan - just steps away from Wall Street's iconic bull statue.

Shai Waisman, a lawyer for Weil, Gotshal & Manges, LLP representing Lehman Brothers, in his opening statement argued that Lehman's Brothers' downfall was the result of a "chain reaction" of events that were largely out of the investment bank's control.

"Lehman operated in an extremely unfavorable business environment," Waisman said, referring to declining asset values and low levels of liquidity.

Requests to get initial approval of potential asset sales and to obtain loans to operate while in bankruptcy from a judge were postponed by one day to a hearing scheduled for Wednesday.

Judge James Peck approved a motion Tuesday confirming that "automatic stay" applies to Lehman.

Automatic stay is a typical bankruptcy rule that prevents creditors from taking actions - such as filing lawsuits - to collect debt from the company in question.

Peck also approved a motion Tuesday that JPMorgan Chase & Co. will remain Lehman's clearing house through the bankruptcy proceedings.

The issue arose over the past two days, during which JPMorgan advanced Lehman $138 billion to allow it to keep trading and "avoid a disruption of the financial markets," according to court filings.

JPMorgan advanced Lehman $87 billion when the market opened Monday, acting in part on a request by the Federal Reserve Bank of New York.

The New York Fed later repaid JPMorgan that amount. On Tuesday, JPMorgan advanced another $51 billion.

Also on Tuesday, the House Oversight and Government Reform committee said it would hold a hearing Sept. 25 to examine the "regulatory mistakes and financial excesses" that led to Lehman's bankruptcy filing.

It asked Lehman Chief Executive Richard Fuld to testify before the committee. - AP

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Global finance still fragile

The Star: Wednesday September 17, 2008

Recovery will be slow and painful for everyone tied to it

THE slew of investments banks in the US that are either in trouble or have filed for bankruptcy is a worrying trend that has shaken global financial markets and dampened investors’ confidence.

The initial tangible signs that the US economy was in ill-health and likely headed for a major fall appeared about in February 2007 when home sales in the US began to fall drastically.

In fact, the plunge was the steepest since 1989, leading the US Treasury Secretary to call dub it the “bursting of the house bubble” and the most significant risk to the US economy.

That month and the next, over 25 subprime lenders declared bankruptcy.

But this, we now know, was just the tip of the iceberg, going by the number of high profile and large investment banks that have taken a dive, despite several prop-ups via interest rate cuts by the Federal Reserve (Fed) that proved only to be a stop-gap measure to the crisis.

The investment banks that went bust earlier included the largest US subprime lender then - New Century Financial. It filed for chapter 11 bankruptcy last April.

Barely four months later in August the world witnessed a global credit crunch as subprime mortgage-backed securities were discovered in portfolios of banks and hedge funds around the world: from BNP Paribas to Bank of China.

The European markets were also affected but to a lesser extent.

Meanwhile, more subprime lenders in the US such as American Home Mortgage and Country Financial Corp were tumbling or requesting funds to prop-up their organisations.

In March 2008, the US government tried to support Bear Stearns via Fed funding only to see it later being acquired by JPMorgan Chase for US$2 a share in a fire sale to avoid bankruptcy.



The Fed backed the deal to a tune of US$30bil to cover Bear Stearns’ losses.

And earlier this month, the US government bailed out mortgage giants Fannie Mae and Freddie Mac.

The latest to bite the dust is Lehman Brothers Holding Inc, the fourth-largest US investment bank, which filed for bankruptcy protection.

This time the Government has decided not to lend a hand, which does not augur well for the company.

The bankruptcy of Lehman Brothers and fears of more bank failures have US investors in jitters, which is reflected in the lacklustre performance of Wall Street, and deepening the credit crisis.

Monday’s trading on Wall Street saw the steepest sell-off since the lending crunch began as the blue-chip Dow Jones Industrial Average fell more than 500 points, or 4.4%, the biggest one-day drop since October 2002.

The broader Standard & Poor’s 500 Index plunged more than 4.7% — its lowest close since October 2005 and sharpest drop since the September 2001 attacks.

In Asia and Europe, stocks took a nosedive as fears of further bank failures in the world’s largest economy spread throughout global markets.

The latest financial firms under threat include bank Washington Mutual and American International Group Inc (AIG), the largest US insurer.

AIG reportedly needs to raise US$20bil in capital and sell another US$20bil in assets.

Local analysts and fund managers generally believe there is still more down side to the US credit crunch.

A fund manager with AmInvestment Bank said the US economy was still “fragile” and the road to recovery would be slow and painful for everyone tied to it.


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Insurance giant AIG faces failure as firestorm burns markets

US insurance giant AIG raced against the clock to avert collapse Tuesday after three blows to its credit standing, and central banks pumped out 160 billion dollars to prop up financial markets.AIG was at risk of following Lehman Brothers into bankruptcy despite approval for it to borrow 20 billion dollars and as report said the Federal Reserve had asked two banks to help provide 70-75 billion dollars.Economist Jeffrey Sachs of Columbia University warned: "There is more ahead. The US economy is definitely going into recession ... There's more financial turmoil ahead."

Stock markets fell for a second day on widespread recognition that the financial crisis is the worst since the crash of 1929. The fall in Europe was smaller than on Monday but Asia markets plunged and bank shares everywhere were showing big losses.

AIG was in the eye of the storm as the European Central Bank, and British and Japanese central banks injected 160 billion dollars so that banks, reluctant to lend to each other, have funds.
The US Treasury, as it had done for Lehman, ruled out using taxpayer money to prop up AIG.
The Wall Street Journal, citing people familiar with the situation, reported that on Monday the US Federal Reserve asked Goldman Sachs Group and JP Morgan Chase to help make 70-75 billion dollars in loans available to AIG.

New York state has thrown the only lifeline of sorts to AIG, announcing Monday that the company can, in effect, loan itself 20 billion dollars, by borrowing against its assets.

But even that failed to reassure credit rating agencies. In blow after blow late Monday, the three main agencies -- Standard & Poor's, Moody's and Fitch -- lowered AIG's credit score.

Bottom line: they judge the solvency of AIG, the largest US insurer, with a global reach, at risk.
As a consequence, AIG will need to raise huge amounts in new capital to survive, although it already has sought billions of dollars to keep it going.

The Wall Street Journal reported Tuesday that people close to the situation say AIG may be forced into filing for bankruptcy if it cannot raise the money by Wednesday.

"The situation is dire," an anonymous source close to AIG told the Journal.

The three ratings agencies gave essentially the same reasons for the downgrade: the US housing crisis, to which AIG is highly exposed, and its share freefall.

On Monday AIG shares plummeted 61 percent to 4.76 dollars; they have lost 93 percent of their value in a year.

"The rating actions reflect Fitch's view that AIG's financial flexibility and ability to raise holding company cash is extremely limited," Fitch said in a statement.

Standard & Poor's Ratings Services lowered its long-term counterparty rating to 'A-' from 'AA-' and its short-term counterparty credit rating on AIG to 'A-2' from 'A-1+' according to a statement. Moody's downgraded AIG to 'A2' from 'AA3' and Fitch lowered its rating to 'A' from 'AA.'

Far more than other insurers, AIG has been a big player in a complex parallel market called credit default swaps (CDS), financial instruments in which Wall Street companies take out a form of market insurance against the risks of bond default.

These products, often linked to the US real-estate market, are at the heart of the current banking crisis and have led to massive write-downs of assets around the world.
AIG alone has written down 25 billion dollars amid spiking defaults on US mortgage payments in the United States.

In a filing with US market regulator, the Securities and Exchange Commission, AIG said it would need 13.3 billion dollars to meet its CDS obligations, if S&P and Moody's lowered its rating a notch.

Moody's, in a dire warning, said that "further downgrades of the parent and certain operating units are likely if the immediate liquidity and capital concerns are not fully addressed. Such downgrades could amount to multiple notches."

The stakes are high for a company that until only recently had been long considered the world's largest insurer. In the past year it has been battered by the global credit crunch and the worst US housing slump in decades.

AIG has 74 million customers worldwide, most of them American, who would find themselves without insurance if the company goes bankrupt. It employed 116,000 people in 130 countries at the end of 2007.

According to US media reports, among the assets AIG is hoping to sell is its aircraft leasing business, International Lease Finance Corporation, which has a fleet of 1,000 planes.

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Lehman Bros goes bust - US investment bank files for bankruptcy

Tuesday September 16, 2008

NEW YORK: Lehman Brothers Holdings Inc filed for bankruptcy protection, after trying to finance too many risky assets with too little capital, making it the largest and highest profile casualty of the global credit crisis.

The Chapter 11 filing on Monday did not include its broker dealer operations and other units, such as asset management firm Neuberger Berman. Those businesses will continue to operate, although Lehman is expected to liquidate them. It said it was in advanced talks on selling its investment management division.

Lehman is one of the biggest investment banks to collapse since 1990, when Drexel Burnham Lambert filed for bankruptcy protection amid a collapse in the junk bond market.

Time is of the essence as Lehman sells assets. Customers are often reluctant to trade with dealers whose parent companies are in bankruptcy, so the longer Lehman waits to sell its broker dealer unit, for example, the less it will be worth.

”Much of (Lehman’s) asset value at the end of the day is tied up in its credibility, and that takes a significant hit early in a bankruptcy case,” said Jack Williams, resident scholar at the American Bankruptcy Institute and a professor at Georgia State College of Law.

The Chapter 11 filing represents the end of a 158-year-old company that survived world wars, the Asian financial crisis and the collapse of LongTerm Capital Management but could not survive the global credit crunch.

Financial institutions globally have recorded more than US$500bil of writedowns and credit losses as the US subprime mortgage crisis has spread to other markets.

Bankruptcy also represents a bad end to chief executive Dick Fuld’s four decade career at Lehman. Fuld, who piloted the investment bank through prior crises with aplomb, was widely seen as too slow to recognise Lehman’s need to raise capital and shed bad assets.

Lehman had US$600bil of assets financed with just US$30bil of equity as of the end of August.

Having so little capital meant that a 5% decline in assets would wipe out the value of the company, which investors saw as a real risk thanks to the company’s billions of dollars of mortgage securities.

”Lehman decided to play chicken with the market, and they lost,” said James Ellman, portfolio manager at hedge fund Seacliff Capital, late on Sunday.

Lehman listed its biggest unsecured creditors as Citigroup Inc, Bank of New York Mellon Corp, Aozora Bank, and Mizuho Financial Group Inc Citi and Bank of New York Mellon are trustees for Lehman bonds.

The investment bank, once the fourth largest in the US, had hoped to raise capital by selling off a stake in its investment unit, and use that capital as well as other funds to spin off some of its toxic assets to shareholders.

But that plan did not satisfy investors, who pushed Lehman’s share price to just a few dollars, or rating agencies, who pressed the company to find a stronger partner.

The filing comes after a weekend of heated negotiations among regulators and Wall Street firms regarding Lehman’s fate.

The US government refused to backstop Lehman’s worst assets in the way it backstopped Bear Stearns Cos Inc’s sale to JP Morgan Chase. Government officials told banks to support Lehman or else be prepared for more investment banks to lose investor confidence and fail.

But prospective bidders refused to buy Lehman without government support, people briefed on the matter said. – REUTERS


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Merrill Lynch sold

Tuesday September 16, 2008

Bank of America offers US$50bil in all-stock deal

WASHINGTON/NEW YORK: Bank of America Corp said it agreed to buy Merrill Lynch & Co Inc in an all-stock deal worth US$50bil, snagging the world’s largest retail brokerage after one of the worst ever weekends on Wall Street.

The deal came after tense negotiations over the fate of Lehman Brothers Holdings Inc, which triggered concern that market participants would lose faith in other investment banks.

”It catapults Bank of America into positions of strength in three businesses where they were weak,” said James Ellman, portfolio manager at hedge fund Seacliff Capital.

”Now Bank of America has one of the best and largest retail brokerages in the country, one of the top investment banks in the world, and a large stake in one of the best investment managers in the world,” Ellman said.

Bank of America agreed to pay 0.8595 shares of Bank of America common stock for each Merrill Lynch share. The price is 1.8 times stated tangible book value.

The bank is buying about US$44bil of Merrill’s common shares, as well as US$6bil of options, convertibles, and restricted stock units.

Bank of America said it expected to achieve US$7bil in pre-tax expense savings, fully realised by 2012, and expects the deal to be accretive to earnings by 2010. The transaction is expected to close in the first quarter of next year.

The price, which comes to about US$29 per share, represents a 70% premium to Merrill’s share price on Friday, although Merrill’s shares were trading at US$50 in May and over US$90 at the beginning of January 2007.

The deal has been approved by directors of both companies. Three Merrill directors will join the Bank of America board.

Stuck with some of the same toxic debt – much of it mortgage-related – that torpedoed Lehman’s balance sheet, Merrill has been hit hard by the credit crisis and has written down more than US$40bil over the last year.

Last month, Thain arranged to sell over US$30bil in repackaged debt securities to Dallas-based private equity firm Lone Star Funds for 22 cents on the dollar.

In spite of its exposures to complex debt securities, the bank had been seen by some as undervalued, in part because of its massive brokerage business, which analysts have said is worth more than US$25bil. The brokerage is the largest in the world by assets under management and number of brokers.

Merrill also has a stake of about 45% in the profitable asset manager BlackRock Inc, worth more than US$10bil.

But this is not the first time Bank of America has done a quick acquisition. In 2005, the bank bought credit card company MBNA after less than a week of due diligence.

Bank of America has spent over US$100bil since 2004 buying other companies.

Most recently, it acquired troubled mortgage lender Countrywide Financial Corp. – Reuters

http://thestar.com.my/news/story.asp?file=/2008/9/16/business/2033806&sec=business

Bursa appoints new CIO

PETALING JAYA: Bursa Malaysia Bhd has appointed Lim Jit Jee as its new chief information officer effective Sept 15.

He has also been appointed as a new member of the management committee. Lim, who will head the technology group, will be responsible for both strategic and operational levels of information technology (IT) strategy and policy and IT management. His responsibilities also include management of new IT system development projects, systems upgrades and change requests.

Lim has more than 20 years of experience in the securities industry. He served the Association of Stockbroking Companies Malaysia as an executive director from January 2006 to May 2008. Prior to this, he was the head of exchange operations at Bursa Malaysia.

http://biz.thestar.com.my/news/story.asp?file=/2008/9/16/business/2035376&sec=business

Bond issuance to slow down in second half

This due to rising yield expectations to account for higher inflation

PETALING JAYA: Bond issuance in the second half year is expected to slow down due to rising yield expectations to account for higher inflation.

“There is a pricing gap between what the issuers are willing to pay and what investors expect from their investments,” said RAM Holdings Bhd chief economist Dr Yeah Kim Leng.

In addition, there are policy risks premium on selected projects, like power, which was earlier slapped with windfall taxes by the Government.

The independent power producers have agreed to renegotiate the power purchase agreements to be exempted from the windfall taxes. The discussions are still ongoing.

The uncertainty over the global economy will hold down appetite to raise funds in the debt market. “Europe and Japan have been hit with economic slowdown while the US has yet to see the (light at the) end of the tunnel,” Yeah said.


Nonetheless, the bond market is still an attractive funding alternative for large-scale, long-term projects. RAM currently has about RM60bil worth of bonds in the pipeline, waiting to be issued when the “time is right.”

“It’s a good indication of the demand,” Yeah said, adding that the sukuk market was growing strongly propelled by government initiatives to attract investors from oil-rich countries in the Middle East.

Based on Bank Negara data, 60% of the outstanding global sukuk were from Malaysia as at end-2007. The Malaysian sukuk market has been increasing at an annual rate of 20%, and accounts for about 56% of the outstanding bonds in the country.

Last year, Malaysia’s new issuance of bonds amounted to RM123bil. In the first half, new issues amounted to about RM62bil, of which RM4.5bil were new Islamic bonds.

Meanwhile, the spike in yield levels has dampened the secondary bond market.

According to Aseambankers Malaysia Bhd head of fixed income research Tan Chee Wee, yield levels spiked up in June when the Government announced the petrol hike, hence raising expectation of higher inflation.

This led to a big sell-down in the bond market, wiping out gains secured in the beginning of the year when yields were falling, he said.

“Yields are still on an upward trend for now but this will depend on whether Bank Negara would reduce or maintain interest rates.

“If the central bank decides to keep monetary policy rate at 3.5%, the yield will eventually come down,” Tan added.

He noted that companies that were previously vying to issue bonds to raise capital had mostly held back as “it’s too expensive now.”

http://thestar.com.my/news/story.asp?file=/2008/9/11/business/1998052&sec=business

Sukuk issuance to exceed US$20bil this year

KUALA LUMPUR: The sukuk market is picking up again and the issuance is expected to exceeed US$20bil this year, Standard & Poor’s Rating Services (S&P) said in a report.

The Sukuk Market Continues To Grow Despite Gloomy Global Market Conditions report said the appetite from issuers in a large number of countries was growing.

In a statement yesterday, S&P said entities in more than 15 countries, predominately non-Muslim, had expressed interest or announced their intention to issue sukuks.

S&P credit analyst Mohamed Damak said more than 50% of sukuk issued in the first half of 2008 were “ijara” (lease financing), most probably as a direct consequence of the debate among some syariah scholars regarding the syariah-compliance of most sukuks previously issued.

Mohamed said the US dollar had lost its position as the currency of choice for sukuk issuance this year not only because of its weakness but also due to speculation about the depegging of some Gulf Cooperation Council (GCC) currencies from the dollar.

“Corporates remained the main issuers, with financial institutions and sovereigns far behind,” he said.

According to the report, total issuance stood at about US$14bil in the eight months to Aug 31, down from about US$23bil during the same period in 2007.

“The lower level of issuance was largely due to the deteriorated conditions on the global markets resulting in lower investor interest in buying the paper and the related widening of credit spreads,” it said.

It said most sukuks were issued in markets where liquidity was still abundant and/or appetite for syariah-compliant instruments was high, namely the countries of the GCC and Malaysia. — Bernama

http://thestar.com.my/news/story.asp?file=/2008/9/11/business/1995997&sec=business

What is Sukuk?

Sukuk is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed income, interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.

Conservative estimates by the Ten-Year Framework and Strategies suggest that over $700 billion of assets are managed according to Islamic investment principles.[1] Such principles form part of Shari'ah, which is often understood to be ‘Islamic Law’, but it is actually broader than this in that it also encompasses the general body of spiritual and moral obligations and duties in Islam.

Sharia-compliant assets worldwide are worth an estimated $500 billion and have grown at more than 10 per cent per year over the past decade, placing Islamic finance in a global asset class all of its own. In the Gulf and Asia, Standard & Poor's estimates that 20 per cent of banking customers would now spontaneously choose an Islamic financial product over a conventional one with a similar risk-return profile.

With its Arabic terminology and unusual prohibitions, Sukuk financing can be quite mystifying for the outsider. A good analogy is one of ethical or green investing. Here the universe of investable securities is limited by certain criteria based on moral and ethical considerations. Islamic Finance is also a subset of the global market and there is nothing that prevents the conventional investor from participating in the Islamic market.

History
In classical period, Islam sakk (sukuk) – which is cognate with the European root "cheque" (which itself derives from Persian)- meant any document representing a contract or conveyance of rights, obligations or monies done in conformity with the Shariah. Empirical evidence shows that sukuk were a product extensively used during medieval Islam for the transferring of financial obligations originating from trade and other commercial activities.

The essence of sukuk, in the modern Islamic perspective, lies in the concept of asset monetisation - the so called securitisation - that is achieved through the process of issuance of sukuk (taskeek). Its great potential is in transforming an asset’s future cash flow into present cash flow. Sukuk may be issued on existing as well as specific assets that may become available at a future date.

Valued at the end of 2006 more than US$ 50bn the sukuk market is due for an exponential rise in 2007 with every issue likely to be oversubscribed 5 to 6 times amid a fast growing interest in the western countries.

Principle
Shari’ah requires that financing should only be raised for trading in, or construction of, specific and identifiable assets. Trading in indebtedness is prohibited and so the issuance of conventional bonds would not be compliant. Thus all Sukuk returns and cashflows will be linked to assets purchased or those generated from an asset once constructed and not simply be income that is interest based. For borrowers to raise compliant financing they will need to utilise assets in the structure (which could be equity in a tangible company). Equity financing is Shari’ah compliant and fits well with the risk/return precepts of Islam.

As Shari’ah considers money to be a measuring tool for value and not an asset in itself, it requires that one should not be able to receive income from money (or anything that has the genus of money) alone. This generation of money from money (simplistically interest) is "Riba", and is forbidden. The implications for Islamic financial institutions is that the trading and selling of debts, receivables (for anything other than par), conventional loan lending and credit cards are not permissible.

This principle is widely understood to mean uncertainty in the contractual terms and/or the uncertainty in the existence of an underlying asset in a contract and this causes issues for Islamic scholars when considering the application of derivatives. Shari’ah also incorporates the concept of "Maslahah" or "public benefit", denoting that if something is overwhelmingly in the public good, it may yet be transacted – and so hedging or mitigation of avoidable business risks, may fall into this category but there is still much discussion yet to come.

Malaysian bond market

Instruments traded on the Malaysian bond market comprise conventional and Islamic papers which includes the following:

Government Securities
Malaysian Treasury Bills (MTB) and Malaysian Government Securities (MGS) are short term and long term papers issued on conventional basis by the Malaysian Government to manage the economy. Government Investment Issues (GII) are intended for similar purposes but are issued based on Islamic principles. MGS Floating Securities are issued based on spread basis.

Bank Negara Papers
Bank Negara Bills (BNB) and Bank Negara Notes (BNN) are issued by the Central Bank for its market operations.

Cagamas Papers
Cagamas Berhad is the National Mortgage Corporation whose business is to promote the secondary mortgage market in Malaysia. Cagamas funds its business operation by issuing Notes, Bonds & Sanadat. Sanadat is an Islamic bond.

Private Debt Securities (PDS)
Private debt securities comprise short and long term debt securities issued by private corporations on conventional or Islamic basis.

Asset Backed Securities (ABS)
ABS are securities backed by assets such as mortgages, loans, receivables, etc and are issued by private or quasi Government corporations. ABS is also issued on an Islamic basis in Malaysia.


Source: http://www.klse.com.my/website/bm/trading/bonds/instruments_traded.html

Islamic Capital Market Terms

Bai` Bithaman Ajil (BBA)
A contract which refers to the sale and purchase transaction for the financing of assets on a deferred and instalment basis with a pre-agreed payment period. The sale price will include a profit margin.

Bai` al-`Inah
A contract involving the sale and buy-back transaction of assets by a seller. A seller sells an asset to a buyer on a cash basis and later buys it back on a deferred payment basis where the price is higher than the cash price. It can also be applied when a seller sells an asset to a buyer on a deferred basis and later buys it back on a cash basis, at a price which is lower than the deferred price.

Bai` al-Istijrar
A contract whereby the supplier agrees to supply a particular product on an ongoing basis, e.g. monthly, at an agreed price and an agreed mode of payment.

Bai` al-Dayn
A transaction involving the sale and purchase of securities or debt certificates which conforms with the Shariah. Securities or debt certificates are issued by a debtor to a creditor as evidence of indebtedness.

Bai` al-Muzayadah
An action by a person to sell his asset in the open market, which is accompanied by the process of bidding among potential buyers. The asset for sale is awarded to the person who offers the highest price. It is a sale and purchase transaction based on tender.

Bai` al-Salam
A contract whereby payment is made in cash at point of contract but delivery of asset purchased is deferred to a pre-determined date.

Bai` al-Wafa'
A contract with a condition that when the seller pays back the price of the goods sold, the buyer returns the goods to the seller.

Dhaman
A contract of guarantee whereby a guarantor underwrites any claim and obligation that should be fulfilled by the owner of an asset. This concept is also applicable to a guarantee provided on a debt transaction in the event a debtor fails to fulfil his debt obligation.

Gharar
Gharar is an element of deception either through ignorance of an essential element of the goods, the price, or through faulty description of the goods, in which one or both parties stand to be deceived. E.g. gambling is a form of gharar because the gambler is ignorant of the result of the gamble.

Gharar is divided into three types, namely gharar fahish (excessive), which vitiates the transaction, gharar yasir (minor) which is tolerated and gharar mutawassit (moderate) which falls between the other two categories. Any transaction can be classified as forbidden activity because of excessive gharar.

Haq Maliy
Haq maliy is a right on the financial assets, e.g. haq dayn (debt rights) and haq tamalluk (ownership rights).

Hibah
A gift awarded to a person.

Hiwalah
A contract which allows a debtor to transfer his debt obligation to a third party.

Ibra'
An act by a person to withdraw his rights to collect payment from a person who has the obligation to repay the amount borrowed from him.

Ijarah
A manfaah (usufruct) type of contract whereby a lessor (owner) leases out an asset or equipment to a client at an agreed rental fee and pre-determined lease period upon the `aqd (contract). The ownership of the leased equipment remains in the hands of a lessor.

Ijarah Thumma Bai`
A contract which begins with an ijarah contract for the purpose of leasing the lessor's asset to the lessee. Consequently, at the end of the lease period, the lessee will purchase the asset at an agreed price from the lessor by executing a purchase (bai`) contract.

Istisna`
A purchase order contract of assets whereby a buyer places an order to purchase an asset to be delivered in the future. The buyer requires the seller or a contractor to construct the asset and deliver in the future according to the specifications given in the sale and purchase contract. Both parties decide on the sale and purchase prices and the settlement can be delayed or arranged based on a schedule of work completed.

Ittifaq Dhimni
A sale and repurchase of an underlying asset whose prices are agreed by the parties prior to the completion of the contract. This is an agreement which must be reached before the contract can be concluded to allow for the bidding process (bai` al-muzayadah) to take place.

Ji`alah
Contract of reward – a unilateral contract promising a reward for a specific act or accomplishment.

Kafalah
It has the same meaning as dhaman.

Khilabah
A form of fraud, either in word or deed by a party to the trading contracts with the intention of inducing the other party into making a contract. This is prohibited according to the Shariah.

Khiyanah
Deception, by not disclosing the truth or breaching an agreement in a hidden way. This is prohibited according to the Shariah.

Mal
Something which has value and can be gainfully used according to the Shariah.

Maisir
Any activity that involves betting whereby the winner takes the bet and the loser loses his bet. This is prohibited according to the Shariah.

Mudharabah
A contract made between two parties to finance a business venture. The parties are a rabb al-mal or an investor who solely provides the capital and a mudarib or an entrepreneur who solely manages the project. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio. If the business is a loss, it will be borne solely by the a provider of the capital.

Murabahah
A contract referring to a sale and purchase transaction for the financing of an asset whereby the cost and profit margin (mark-up) are made known and agreed to by all parties involved. The settlement for the purchase can be settled either on a deferred lump sum basis or on an instalment basis, and is specified in the agreement.

Musyarakah
A partnership arrangement between two parties or more to finance a business venture whereby all parties contribute capital either in the form of cash or in kind. Any profit derived from the venture is distributed based on a pre-agreed profit sharing ratio and a loss is shared on the basis of capital contribution.

Muqasah
Debt settlement by a contra transaction.

Qabdh
Qabdh means possession, which refers to a contract of exchange. Generally, qabdh depends on the perception of `urf or the common practices of the local community in recognising that the possession of a good has taken place.

Qardh Hasan
A contract of loan between two parties on the basis of social welfare or to fulfil a short-term financial need of the borrower. The amount of repayment must be equivalent to the amount borrowed. It is, however legitimate for a borrower to pay more than the amount borrowed as long as it is not stated or agreed at the point of contract.

Rahn
An act whereby a valuable asset is used as a collateral for a debt. The collateral will be used to settle the debt when a debtor is in default.

Riba
An increase, in a loan transaction or in exchange of a commodity, accrued to the owner (lender) without giving an equivalent counter value or recompensation in return to the other party. It covers interest both on commercial and consumer loans, and is prohibited according to the Shariah.

Sarf
A buying and selling of currencies.

Suftajah
A credit instrument issued to enable a creditor to use or cash it at another pre-determined venue and at a future date.

Sukuk
A document or certificate, documenting the undivided pro-rated ownership of underlying assets. The sak (singular of sukuk) is freely traded at par, premium or discount.

Shariah
Islamic law, originating from the Qur`an (the holy book of Islam), and its practices and explanations rendered by the prophet Muhammad (pbuh) and ijtihad of ulamak (personal effort by qualified Shariah scholars to determine the true ruling of the divine law on matters whose revelations are not explicit).

Tadlis al-`aib
Refers to the activity of a seller intentionally hiding the defects of goods. This activity is prohibited according to the Shariah.

Takaful
A form of Islamic insurance based on the principle of ta`awun or mutual assistance. It provides mutual protection of assets and property and offers joint risk sharing in the event of loss incurred by one of its members. Takaful is similar to mutual insurance in that members are the insurers as well as the insured.

Tanajush
Refers to a conspiracy between a seller and a buyer wherein the buyer is willing to purchase the goods at a higher price. This is done so that others would rush to buy the goods at a higher price, resulting in the seller obtaining a huge profit. This transaction is not permissible in Islam.

Ta`widh
Penalty agreed upon by contracting parties as compensation which can be rightfully claimed by the creditor when the debtor fails or is late in meeting his obligation to pay back the debt.

Ujrah
Financial payment for the utilisation of services or manfaat. In the context of today's economy, it can be in the form of salary, wage, allowance, commission, etc.

`Urbun
A deposit or earnest money forming part payment of the price of goods or services paid in advance, but is forfeited if the transaction is cancelled. The forfeited money is considered as hibah (gift).

'Uqud al-Mu'awadat
Contracts of exchange.

'Uqud al-Tabarruat
Charitable contracts.

'Uqud al-Ishtirak
Contracts of partnership.

Wakalah
A contract which gives a person the power to nominate someone to act on his behalf, as long as he is alive, based on the agreed terms and conditions.

Wadiah Yad Dhamanah
Goods or deposits kept for safekeeping with another person, who is not the owner. As wadiah is a trust, the depository becomes the guarantor and guarantees repayment of the whole amount of the deposits, or any part thereof outstanding in the accounts of the depositors, when demanded. The depositors are not entitled to any share of the profits but the depository may provide returns to the depositors as a token of appreciation.

Zakat
A tax, which is prescribed by Islam on all persons having wealth above a certain amount at a rate fixed by the Shariah. According to the Islamic belief zakat purifies wealth and souls. The objective is to take away a part of the wealth of the well-to-do to distribute among eight categories of people stated in the Quran.

source: http://www.sc.com.my/eng/html/icm/Glossary.html

GLOSSARY OF CAPITAL MARKET TERMS

Allotment
The allocation of new securities to an applicant for a new issue.

Annual General Meeting
Mandatory yearly meeting of a company for the purposes of receiving the directors' report and statement of accounts for the year, declaring a dividend, electing directors and auditors and determining the auditors' remuneration.

Annual Report & Accounts
A document to be forwarded to shareholders by the directors of a company on an annual basis which contains, amongst others, the annual audited accounts of the company.

Arbitrage
Buying on one exchange and selling on another at virtually the same moment to take advantage of a price variation in a company's shares listed on the two exchanges.

Articles of Association
The documents of a company that govern the management and administration of that company.
Asset Backing A handy yardstick for shareholders. It is the net assets of a company (assets less liabilities) divided by the number of shares.

At Discretion
An instruction given by a client to his broker, for the broker to buy or sell a stock at his (the broker's) discretion.

At Limit
An order placed which sets a limit on either the lowest or highest price, for which a share is bought or sold.

At Market (also At Best)
An instruction to buy or sell at market price. Allows the broker/dealer complete freedom of action. Should be treated with caution and used only when a share must be sold.

Authorised Capital
The nominal amount of capital that a limited company is permitted to raise under the capital clause in its Memorandum of Association.

Averaging
Buying more of the same shares, generally on a falling market, to lower the average cost per share. (Can also average up, thereby raising the average cost per share).

Balance Sheet
A company's year-end statement of assets and liabilities.

Bear Market
A stock market in which sellers dominate, resulting in generally falling prices.

Beta
The beta reflects the sensitivity of a share or portfolio relative to the overall market development.

Bid
Indicated willingness to purchase at a specified price.

Blue Chips
The shares of a company known to make profits in good and bad times. As there is a low risk of capital loss, the dividend and earnings yield are proportionately low.

Board Lot
Shares are normally traded in specific amounts called Board Lots, currently 100 units. Any amount less than board lots are called special lots or odd lots.

Bond
A document recording a loan and specifying the date of maturity and the rate of interest to be paid.

Bonus Issue
Distribution of capital funds (usually from a revaluation of assets or a share premium reserve) to shareholders in the form of shares for which payment is not required.

Bourse
A French term for stock exchange, grain exchange or exchange dealing in commodities.

Break-even Point
The price level at which a particular strategy neither makes nor loses money.

Broker (Stockbroker)
An agent, authorised to buy and sell shares on behalf of a client.

Brokerage
A fee charged for the broker's services. Also called commission.

Bull Market
A stock market in which buyers dominate and where prices are on a rising trend.

Buy side
Buy side is a financial term used in financial security trading. As opposed to the sell side, which refers to banks and brokerages who are required to be market makers in a given security, the buy side refers to firms which buy and sell as customers of these market makers, usually taking speculative positions or making relative value trades.

Cagamas Papers
Cagamas Berhad is the National Mortgage Corporation whose business is to promote the secondary mortgage market in Malaysia. Cagamas funds its business operation by issuing Notes, Bonds & Sanadat. Sanadat is an Islamic bond.

Calls
An instalment called up by a company on contributing or partly paid shares. A legal liability for shareholders of other than a "No Liability" company.

Capital Gain/ Loss
Profit/loss made on the sale of a capital asset.

Cash Market
The underlying market of a futures product.

CDS (Central Depository System) Account
It is an account opened under the investor’s name (applicant must be at least 18 years old) with a stockbroking company. This account will enable the investor to buy and sell shares and to carry out activities on other non-equity counters (i.e., bonds, warrant, loan stock, etc.) which are under CDS.

Closing Price
The price of a share or security at the end of a day's stock market trading.

Class of Shares
A document recording a loan and specifying the date of maturity and the rate of interest to be paid.

Commission
A fee charged for the broker's services. Also called brokerage.

Companies Act 1965
The Act of Parliament that governs companies.

Company
A separate legal entity, incorporated under the Companies Act 1965, carrying on a business or trade. A company may be private or public, limited by shares or unlimited, or limited by guarantee.

Contra Transactions
The procedures in giving orders to buy and sell in a contra transaction are the same. The only difference is that the client pays the broker or the broker pays the client for the difference in price between his buy and sell transaction. If the buy cost is higher than the sell proceeds, it results in a contra loss which the client pays to the broker. If the sell proceeds are higher, it results in a contra profit which the broker pays to the client. Contra dealing is not a right of the client but rather a privilege accorded by the stockbroking company to its clients. This means that the stockbroking company is not obliged to allow contra dealing facilities for all its clients.

Contract Month
The trading month(s) that is available to trade at any one point.

Contract Note
Document sent by brokers to clients of a purchase or sale of shares. It confirms the transaction, giving details of price, brokerage, stamp duty and clearing fee.

Convergence
This refers to the tendency of cash and futures prices coming together as a futures contract nears expiration.

Corporate bond
A debt instrument for a loan which is issued by a borrower to an investor who is the buyer of the bond and lender of the money. In return for the money, the issuer agrees to pay regular interest to the bondholder for the term of the loan and the principal sum borrowed upon maturity.

Cum
A prefix meaning "with". A share quoted "cum-dividend" means the buyer is entitled to a dividend currently attaching to it, similarly with cum-rights and cum-bonus.

Day Order
An order that is placed for execution just for that day only.

Day Trading
Refers to establishing and liquidating the same position(s) within the same trading day.

Debenture
A fixed interest security which has a maturity date and a specified rate of interest. The assets of the borrowing company are charged against the debenture issue; details of the charge are included in a Debenture Deed drawn up to protect the debenture holder.

Debt/Equity Ratio
The relationship between a company's borrowing and its shareholders' capital funds.

Delivery Month
The calendar month in which physical delivery of a futures contract must be made.

Direct Business
In relation to the KLSE, any share transactions effected outside the Exchange, including:
crossing, that is transaction between two stockbroking companies; or
"married" transaction between two clients within a stockbroking company.

Discount
The amount by which the price of a share is quoted below its paid-up value.

Dissolution
The winding up of a company by way of compulsory liquidation or voluntary liquidation.

Dividend Cover
The number of items a company's annual dividend could be paid out of current earnings.

Dividend Yield
The amount of a company's annual dividend expressed as a percentage of the current price of the share of that company.

Earnings Per Share
The amount of a company's annual profits or earning attributable to each ordinary share of that company.

Equity
Another name for the ordinary shares of a company.

Electronic Trading Platform (ETP)
ETP is the acronyms of Electronic Trading Platform. The ETP shall be the centralised price and trade repository and dissemination for the primary and secondary bond market. It is an efficient and facilitative market control system for Bursa to supervise the bond market. ETP facilitates the trading and reporting of all secondary market activities. The key business components that contribute to the business of ETP are the provisions of 1) central order book for matching, trade reporting and negotiation, 2) a comprehensive dissemination system for price/yield and trade information dissemination, 3) data storage for market history data referential maintenance for exchange administrator, 4) real time market surveillance system. The core ETP system interfaces with other systems such as the FAST (Fully automated system for Tendering) and Information vendors. The capital market is divided into the primary and secondary market. The capital market comprises the conventional market and Islamic market. Primary market activities include the insurance or lender of debt securities & money market transactions. Primary market is the source of referential data for trading in secondary market. Secondary market activities include trading of Government Securities (MGS, MTB and GII) and Private Debt Securities (PDS). Transactions that are available on ETP are Outright buy and sell, When Issued, Reallotment, Repo or Securities Buy Back Agreement, Securities Borrowing and Lending. The bond investors comprise secondary market participants such as the Financial Institutions, institutions investors and fund managers.

Ex
Prefix meaning "without", the opposite to "cum". The purchaser is not entitled to dividends, bonus shares or rights previously attached to the share.

Face Value
The actual paid-up value of a share. Seldom the same as the market value.

Float
Term given to the commencement or listing of a new company on the stock market.

Gilt Edged
A term usually associated with government or semi-government securities, more generally used on British markets.

Growth Stocks
Shares of companies with good prospects for increasing profits and capital size. Likely to bring shareholders future capital gains through a share price rise, high dividends, share bonuses or rights issues.

Guarantor
Person or entity who is legally bound to pay a financial obligation incurred by the person taking the financing if that person fails to pay.

Hedge
The purchase or sale of a futures contract as a temporary substitute for a transaction to be made at a later date, usually it involves opposite positions in the cash market and the futures market at the same time.

Initial Margin
The amount of liquid funds that a customer must put up before establishing a futures contract. The rate is determined by the Clearing House and will vary depending on the volatility of the futures market.

Indices
In relation to a stock exchange, calculations made on an index number basis to indicate the movements in the general level of prices of securities listed on that stock exchange.

Insider Trading/ Dealing
Insider trading or dealing is the purchase or sale of a company's securities effected by or on behalf of a person with knowledge of relevant but non-public material information regarding that company. The insider is in a position to make massive gains by selling or buying securities before information that might affect the price of the company's securities (price-sensitive information) is made public. Insider trading is an offence under the Companies Act 1965 and the Securities Industry Act 1983.

Issued Share Capital
The total number of shares issued by a company.

Last Trading
The final trading day of a particular futures contract as determined under an exchange’s rules. All outstanding futures contracts will be settled either by cash settlement (monetary settlement) or by physical delivery.

Liquidation
The winding up of a company, which may either be compulsory or voluntary.

Liquidity of the Market
The state of affairs in a stock market in which it is generally easy to convert securities into cash and vice versa, without causing a movement in prices.

Loan Stock
A security issued by a company in respect of a loan made by investors.

Long
One who has bought a futures contract(s) to establish a market position.

Long Hedge
The purchase of a futures contract(s) in anticipation of actual purchases in the underlying market at a future date. Used as protection against an increase in the cash price.
Manipulations
The act of transacting in the securities of a company that will have or is likely to have the effect of raising or lowering or maintaining the price of the company's securities on a stock market, with the intention of inducing other persons to purchase or subscribe for the company's securities. Such acts are illegal under the Securities Industry Act 1983.

Margin
The collection of margin on all positions held by a clearing participant is fundamental to the operations of Bursa Clearing (Derivatives) to protect itself against losses arising from a clearing participant’s default. The margin level is set to cover the maximum one-day price movement (derived from a statistical formula) with a confidence factor of at least 99%. The level of margin is based on historical price volatility, current and anticipated market conditions, and other risk factors. Bursa Clearing (Derivatives) adopts a gross margining concept where each client account of a clearing participant is margined separately. The total margin for a clearing participant is the sum of the margins for all the individual client accounts of the clearing participant. The proprietary position of a clearing participant is margined on a net position. The Approved Collateral for margin coverage are RM cash and approved foreign currencies; Approved shares; and Letters of Credit.

Margin Call
Margin call occurs whenever the market moves against the investor’s position(s). The Clearing House will demand the Clearing Member (or by a Brokerage firm) to collect from its clients the additional cash funds that is required to be topped-up into their trading account to cover the adverse price movement.

Mark-to-Market
Daily evaluation of open futures contract(s) that an investor holds to reflect profit / losses. All futures positions are marked-to-market using the settlement price.

Market Capitalisation
The total value of a listed company's shares based on current market price.

Marketable Parcel
Shares traded on a stock exchange as set in multiples based on share price.

Market Bids
A scale on which trading bids, through a stock exchange, are based.

Memorandum of Association
The document of a company that lays down its name, registered office, objectives, share capital and the liability of its members in the event of winding up.

Merger
In general terms, the amalgamation of two business enterprises into a new entity.

Minimum Bid
A minimum bid is the permissible change on the offer to buy price over the previous done or quoted price. When trading on Bursa Malaysia, bids and offers for shares within different price ranges follow different minimum bids.

Negotiated Commission
The amount of fee to be paid to a stockbroker as agreed upon between client and stockbroker and not subject to a scale stipulated by the stock exchange concerned.

Nominee Company
A company formed by a stockbroking company, bank or other institution for the purpose of holding shares on behalf of the beneficial owners of the shares.
Odd Lots
Not a marketable parcel, i.e. less than board lot. Can be bought or sold but the broker's commission rate is higher than for amounts that are at least the board lot.

Offer
Indicates willingness to sell at a certain price.

Offer for Sale
One way in which the shares of a company are offered to the public, normally through an issuing house.

Official List
In respect of the Kuala Lumpur Stock Exchange, the list of all securities which have been admitted for quotation in accordance with the Exchange's Listing Requirements.

Offsetting
Liquidation of a futures contract by purchasing or selling an identical contract. Also known as close-out.

Open Contract
Contracts which have been bought or sold without the opposite transaction taken place or closed-out by subsequent sale or purchase.

Open Interest
Number of futures contracts that are yet to be closed-out. Refers to unliquidated purchases or sales.

Option
Right to take up or sell shares at an agreed price at or before a specified future date. Prefixed with terms of "call" or "put".

Option/warrant
An instrument that gives the holder the right but not the obligation, to subscribe for a particular instrument, e.g. new ordinary shares, at a pre-determined exercise price within a stipulated validity time frame (exercise period). The warrant becomes worthless after the expiry of the exercise period.

Paid-Up Capital
The amount of a company's authorised capital which has been subscribed by shareholders.

Par Value
The nominal price of a share, loan stock or debenture.

Pari Passu
In relation to a statement that newly issued shares rank pari passu with all existing shares, such newly issued share rank equally in every respect with all the other shares of the same class previously issued.

Physical Delivery
The tender and receipt of an actual commodity, financial instrument, cash or any other instrument or product for the purpose of settlement of a futures contract.

Portfolio
A selection of securities held by an investor.

Premium
The amount by which a share is quoted above its paid-up value.

Price Earnings Ratio
The relationship between the price of a share and the earnings of the company attributable to that share, the result being expressed as the current share price divided by the latest available figure of earnings per share.

Price Limit
The maximum price fluctuation allowed on a contract during a trading session according to the rules of the Exchange.

Private Company
A company in which the number of its members is restricted to 50.

Privatisation
The Government's exercise of the transfer to private ownership companies or public enterprises owned by the Government.

Prospectus
The document to be issued by a company intending to make an issue of shares to the public.

Proxy
One who is given written authority to vote for and on behalf of a shareholder at a meeting of the company.

Quotation
The prices bid and offered by buyers and sellers for securities listed on a stock exchange.

Receiver
An official appointed to wind up the affairs of a company.

Registrar
The official or corporation responsible for maintaining a company's share register.

Registrar of Companies
The public official appointed to administer the Companies Act 1965 and the Securities Industry Act 1983.

Remisier
An agent of a stockbroking company who brings business to that company in return for a share of the brokerage or commission.

Renunciation
The action of a shareholder in not taking up new shares attached as a right to the share he currently holds by renouncing such a right.

Reserves
The accumulated capital of the company which belongs to the shareholders, and is represented by various company assets. "Secret Reserves" are those created by understating assets as a result of unnecessarily writing off investment, plant and machinery in the Profit and Loss account or making excessive provisions for contingencies.

Rights
Companies raise additional capital by offering to existing shareholders the rights to subscribe for new shares, at a price usually below the current market price. These rights, while current, attract a price of their own and can be traded on any stock exchange.

Roll Over
A spread trading procedure, which involves the shift of one month’s position into another month where the purchase and sale of 2 separate contract months are traded simultaneously. The open position of one month is immediately closed and opened into the other month at the same time.

SCORE
The acronym for "System on Computerised Order Routing and Execution", the automated trading system of the Kuala Lumpur Stock Exchange.

Scrip
Share certificate

Securities
The generic term for any instrument traded on a stock exchange.

Securities Industry Act 1983
The Act of Parliament governing the business of dealing in securities, stock exchanges and related matters in Malaysia.

Securities Commission
Established by the Ministry of Finance to streamline the activities relating to equity and futures markets.

Securities Commission Act 1993
The Act of Parliament under which the Securities Commission was established on 1 March 1993.

Securities Industry (Central Depositories) Act 1991
The Act of Parliament which governs the activities relating to the Central Depository.

Sell side
Sell side is an expression used to refer to firms that take orders from Buy side firms and then work the orders. This is typically achieved by splitting them into smaller orders which are then sent directly to an exchange or to other firms. Sell side firms are paid through commissions charged on the sales price of the stock. Sell side firms employ research analysts, traders and salespeople who collectively strive to generate ideas and execute trades for Buy side firms, enticing them to do business. Part of the research analyst's job includes publishing research reports on public companies, these reports analyze their business and provide recommendations on the purchase or sale of the stock.

Settlement Price
The daily price at which the clearing house mark-to-market all trades. Settlement prices are used to determine both margin calls and invoice prices for products that require physical delivery

Share
In relation to a company, a security representing a portion of the holder's capital in that company. There are basically two types of shares, namely ordinary shares and preference shares. 1) Ordinary shares give holders the rights of ownership of the company, such as the right to share in the profits of the company by way of dividend, the right to vote in general meeting and to elect and dismiss directors. 2) Preference Shares have a preferential position over ordinary shares, in regard to the payment of dividends and the division of the company's assets. Some preference shares may have a cumulative entitlement in that dividends not paid can be carried forward and must be paid prior to an ordinary dividend payment or distribution on liquidation. Some preference shares are "participating" with ordinary shares in all dividend above a set rate, in addition to their own preferential dividend rate. Other preference shares are redeemable at a certain date.

Share Split
When a company reduces the paid or face value of its shares, and issues further shares in the same proportion, e.g., 100,000 RM 2 ordinary shares could be split into 200,000 RM 1 ordinary shares.

Short
One who has sold a futures contract(s) to establish a market position.

Short Hedge
The sale of a futures contracts(s) to eliminate or reduce the possible decline in value of ownership of an approximate equal amount of the underlying instrument.

Short Selling
The action of a person selling shares which he does not own at the time of selling.

Spot Month
Refers to the nearest delivery month of a futures contract.

Stag
One who applies for a new security with the intention of selling it at the first available opportunity.

Stockbroker
An agent who buys and sells shares on behalf of his clients and is paid brokerage or commission for his services.

Stock Exchange
An organisation providing the market-place or facility for the buying and selling of stocks and shares.

Sukuk
Sukuk is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed income, interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.

Trustee Security
A security which meets the requirements of legislation relating to the use of funds by trustees.

Underwriter
An organisation, normally a merchant bank or a broking firm, that guarantees a minimum level of subscription to a share or debt issue. If public subscriptions fail to reach the minimum level, the underwriter takes up the shortfall. Underwriters often have sub-underwriters to share the risk.

Unit trusts
Pools of money managed by an investment company. They offer investors a variety of choice, depending on the fund and its investment objective.

Unsecured Note
A fixed interest security with a maturity date and specified rate of interest. Unlike a debenture, it is not secured by a charge over the issuing company's assets. Unsecured note holders rank ahead of shareholders in the event of the company's liquidation.

Vendors' Shares
Shares allotted instead of cash to persons or companies as a consideration for acquisition of property. These shares are restricted in respect to transfer.

Volume
The number of transactions in a futures contract transacted during a specified period of time.

Winding Up
The voluntary or compulsory liquidation of a company.

Yield
Similar meaning as returns.

THE SECURITIES MARKET IN MALAYSIA

1. Securities Commission

The Securities Commission (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is responsible for the regulation and development of capital markets in Malaysia through the Securities Commission Act 1993, Capital Markets and Services Act 2007 and Securities Industry (Central Depositories) Act 1991. The SC is a self-funding statutory body with investigative and enforcement powers, and reports to the Minister of Finance.

The SC regulates the offerings and issues of securities by public companies, and debentures by private companies. It also regulates the listing of such securities on Bursa Malaysia, as well as matters relating to take-overs and mergers of companies, and unit trust schemes. It is the sole approving and registering authority for prospectuses of all securities (other than unlisted recreational clubs). The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007.

The SC introduced the Capital Market Masterplan (CMP) in 2001. This is a comprehensive plan that charts the strategic positioning and future direction of the Malaysian capital market for the next 10 years. The Masterplan prioritises the immediate needs of the capital market and charts its direction and long-term growth in anticipation of global developments to its environment. Visit the SC website at http:www.sc.com.my for more information on the SC and the CMP.

2. Bursa Malaysia Berhad

Bursa Malaysia Berhad (Bursa Malaysia) is an exchange holding company, listed on the Main Board of Bursa Malaysia Securities on 18 March 2005 . Bursa Malaysia operates a securities, derivatives and offshore exchanges, clearing houses for securities and derivatives and a central depository. The company also disseminates stock quotes and information related to securities listed on the exchange. The securities exchange, established in 1973, provides a central market place for buyers and sellers to transact business in the shares, warrants, fixed income securities and various other securities of listed companies. Diversity of products also includes options and futures derivatives contracts and multi-currency off-shore instruments, traded on the derivatives exchange and offshore exchange, respectively.

Bursa Malaysia today is one of the largest bourses in Asia with almost 1,000 listed companies offering a wide range of investment choices to the world. Companies are either listed on Bursa Malaysia Securities Main Board for larger capitalised companies, the Second Board for medium sized companies or the MESDAQ Market for high growth and technology companies.
In assisting the development of the Malaysian capital market and enhancing global competitiveness, Bursa Malaysia is committed to maintaining an efficient, secure and active trading market for local and global investors.

(i) Market Participants

a) Stockbroking Companies
Currently, there are 34 stock broking companies (including five foreign brokers) offering services in the dealing of securities listed on Bursa Securities. Of these, 13 are categorised as Investment Banks. Investment banks hold merchant banking license issued by Bank Negara Malaysia under the Banking and Financial Institutions Act 1989 (BAFIA) as well as Capital Markets Services license issued by the Securities Commission under the Capital Markets & Services Act 2007. As such, investment banks are able to offer a full scope of integrated capital market and financial services which include corporate finance, debt securities trading and dealing in securities. One stock broking company still holds the universal broker status. A u niversal brokers is able to offer integrated capital market services.
As at the end of 2007, there were 146 branches.

b) Trading Participants
A Trading Participant is a company which owns at least one Preference Share of Bursa Malaysia Derivatives to conduct business as a futures broker licensed by the Securities Commission under the Capital Markets and Services Act 2007 and carries on trading in Contracts traded on the Bursa Malaysia Derivatives. Currently, there are 18 Trading Participants.

(ii) Investor Protection

In the interest of protecting investors, Bursa Malaysia currently maintains three compensation funds, namely Compensation Fund of Bursa Securities, the Fidelity Fund of Bursa Derivatives and the Compensation Fund of Bursa Depository to compensate investors who have suffered losses falling within the circumstances specified under the relevant securities laws and rules. The funds are administered by the Compensation Committee.

(iii) Risk Management

Bursa Malaysia 's enterprise risk management (ERM) framework, through the supervision of the Risk Management Committee (RMC) is aimed at managing and controlling risks appropriately for the Group. Key risks are identified and ranked for likelihood of occurrence and magnitude of impact while the appropriate action plans are developed to manage significant residual risks.

source: http://www.mida.gov.my/en/view.php?cat=3&scat=30&pg=159

Glossary of Malaysian Investment Acronyms

ABS
Asset-Backed Securities

ADA
Authorized Depository Agent (MCD)

ADM
Authorised Direct Members (MCD)

AG
Accountant General (Ministry of Finance, Government of Malaysia)

AGM
Annual General Meeting

AML
Anti-Money Laundering

AMLA
Anti-Money Laundering Act 2001

AMLATFA
Anti Money Laundering and Anti-Terrorism Financing Act 2001

AML/CTF
Anti-Money Laundering/Counter Financing of Terrorism

APEC
Asia-Pacific Economic Cooperation

ASB
Amanah Saham Bumiputera (subsidiary of PNB)

ASN
Amanah Saham Nasional (subsidiary of PNB)

ASEAN
Association of South-East Asian Nations

AUM
Assets Under Management

AWAS
Advanced Warning and Surveilance System

BAFIA
Banking and Financial Institutions Act 1989

BC
Banker’s Cheque

BG
Bank Guarantee

BGB
Bank Guaranteed Bonds

BI
Bonus issue

BIDS
Bonds & Information Dissemination System (BNM)

BIS
Bank for International Settlements

BLR
Base Lending Rate - minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions' cost of funds and other administrative costs.

BNB
Bank Negara Bills (issued by BNM)

BNM
Bank Negara Malaysia (Malaysia's Central Bank)

BNN
Bank Negara Notes (issued by BNM)

bps
Basis points, e.g. 10bps is 0.1%

BSE
Bumiputera Stock Exchange

CADI
Cumulative Advance / Decline Indicator

CAGAMAS
Malaysian National Mortgage Corporation

CAGR
Compound Annual Growth Rate

CAR
Capital Adequacy Ratio

CARDS
Certificates for Amortizing Revolving Debts

CCIRS
Cross Currency Interest Rate Swap

CCM
Companies Commission of Malaysia

CDO
Collaterized Debt Obligations

CDRC
Corporate Debt Restructuring Committee (BNM)

CDS
Central Depository System - operated by MCD, a computerised system for the central handling and deposit of shares and other securities traded on Bursa Malaysia. CDS was launched in 1992, and fully implemented by 1996.

CDS
Credit Default Swap

CFA
Chartered Financial Analyst - an international professional designation offered by the CFA Institute of USA, for finance and investment professionals, particularly in the fields of investment management, investment banking and financial analysis of stocks, bonds and their derivative assets.

CIC
Capital Issue Committee

CLOB
Central Limit Order Book

CMDF
Capital Market Development Fund

CMO
Collateralized Mortgage Obligation

CMP
Capital Market Masterplan (SC)

CRM
Customer Relationship Management

CTR
Cash Threshold Reports (for AML)

D/E
Debt/ Equity Ratio

DVP
Delivery Versus Payment - service offered by SCANS in 1999 for institutional investors

DY
Dividend Yield

EAFE INDEX
The Europe, Australasia & Far East Index

EALIS
External Assets & Liabilities Information System - BNM's system to facilitate report on external assets & liabilities position of banking and non-banking sector

EBIT
Earnings before Interest and Taxes

EBITDA
Earnings before Interest, Taxes, Depreciation and Amortization

ECM
Exchange Control of Malaysia (Exchange Control Rules from BNM)

ECOS
Electronic Client Ordering System

EDMS
Electronic Documents Management System

EFT
Electronic Funds Transfer

EGM
Extraordinary General Meeting

EMAS
Exchange Main Board All Share Index - launched in 1991

EMBI
Emerging Markets Bond Index

EPF
Employees Provident Fund or KWSP

EPS
Earnings Per Share

ERM
Enterprise Risk Management

ESOS
Employees Share Option Scheme

ETF
Exchange Traded Fund

ETP
Electronic Trading Platform

EVA
Economic Value Added

FAST
Fully Automated System for Tendering - BNM's automated system for tendering, bids submission and processing of tender for scripless securities in the Malaysian debt securities market.

FATF
Financial Action Task Force (AML)

FCPO
Crude Palm Oil Futures

FDSS
Fixed Delivery and Settlement System - introduced to bring about a more efficient clearing and settlement system

FIA
Futures Industry Act 1993

FIBV
Federation Internationale des Bourses de Valeurs

FIC
Foreign Investment Committee

FIDS
Fraud Information Database System - BNM's repository of all fraud and attempted fraud cases reported by the financial institutions, and frauds detected and investigated by BNM

FINS
Financial Intelligence System - BNM's reporting system developed to cater for submission of Suspicious Transaction Reports (STRs) and Cash Threshold Reports (CTRs) from reporting institutions.

FKB3
3-Month Kuala Lumpur Interbank Offered Rate Interest Rate Futures

FKLI
Kuala Lumpur Composite Index Futures

FLR
Front-line regulator

FMCG
Fast Moving Consumer Goods (Industry)

FMG3
Three-Year Malaysian Government Securities Futures

FMG5
Five-Year Malaysian Government Securities Futures

FMGA
Ten-Year Malaysian Government Securities Futures

FMUTM
Federation of Malaysian Unit Trust Managers

FPKO
Crude Palm Kernel Oil Futures

FPX
Financial Process Exchange (facility for payment or transfer of funds via the Internet provided by MEPS)

FRA
Forward Rate Agreement - a contractual agreement between two parties to fix the rate of interest for a future period on a specified notional principal, such as a loan or deposit. A FRA is used to hedge an asset or liability. It is also a widely used instrument for investment, trading and arbitraging.

FRS
Financial Reporting Standards - issued by the Malaysian Accounting Standards Board

FSA
The Financial Services Authority (UK)

FSMP
Financial Sector Master Plan (issued by BNM)

FT
Funds Transfer

FTSE
Financial Times Stock Exchange Index

FTT
Foreign Currency Telegraphic Transfer

GCP
General Clearing Participant - existing clearing Participants (Futures Brokers) of Bursa Malaysia allowed to clear Ethylene OTC Futures for clients

GDY
Gross Dividend Yield

GIA
General Investment Account

GII
Government Investment Issues - similar to MGS but are issued based on Islamic principles (issued by BNM)

GIPS
Global Investment Performance Standards - a globally recognised collection of ethical guidelines drawn up by the CFA Institute for uniform and modern performance reporting within asset management.

GLC
Government-Linked Company

GO
General Offer

IB
Investment Bank

IBFF
Inter-Broker Fidelity Fund

IBFIM
Islamic Banking and Finance Institute Malaysia Sdn. Bhd.

IBG
Interbank GIRO (MEPS) - An electronic funds transfer payment system for interbank payments up to a maximum of RM100,000 per transaction

IBS
Islamic Brokerage System

ICM
Islamic capital market

ICP
Islamic Commercial Papers

ICULS
Irredeemable Convertible Unsecured Loan Stock

ICUN
Irredeemable Convertible Unsecured Notes

IFRS
International Financial Reporting Standards

IIFM
International Islamic Financial Market

IIMM
Islamic Interbank Money Market

IOFC
International Offshore Financial Centre

IOSCO
International Organization of Securities Commissions

IPC
Infrastructure Project Companies

IPO
Initial Public Offering

IPP
Independent Power Producer

IPRE
Income-producing Real Estate

IR
Investor Relations

IRR
Internal Rate of Return

IRS
Interest Rate Swap. IRS transaction is a contract between two parties to exchange interest rate payments (cash flows) at a future date. It allows the flexibility to convert a fixed rate asset/liability to a floating rate asset/liability and vice versa. There are basically two types of swaps which are traded daily by most markets - interest rate swaps (IRS) and currency swaps.

ISB
Islamic Stockbroking - AmInvestment is the second bank to set up an ISB unit in the country after Bank Islam Malaysia Bhd.

ISIN
International Securities Identification Number

ITC
Investment Tax Credit

IVR
Interactive Voice Response - a phone technology that allows a computer to detect voice and touch tones using a normal phone call

KLCCH
Kuala Lumpur Commodities Clearing House

KLCE
Kuala Lumpur Commodity Exchange - which was merged with Malaysia Monetary Exchange (MME) to form COMMEX. COMMEX subsequently merged with KLOFFE in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)

KLCI
Kuala Lumpur Composite Index or KLSE Composite Index

KLIBOR
Kuala Lumpur Inter Bank Offered Rate

KLOFFE
Kuala Lumpur Options and Financial Futures Exchange - which began operations in 1995 has subsequently been merged with COMMEX in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)

KLSE
Kuala Lumpur Stock Exchange (Bursa Malaysia)

KLSE CI
KLSE Composite Index - launched in 1986

KWSP
Kumpulan Wang Simpanan Perkerja or Employees Provident Fund

KYC
Know Your Customer (Policy) required under AMLA

Labuan IOFC
Labuan International Offshore Financial Centre

LFX
Labuan International Financial Exchange (Bursa Malaysia)

LHDN
Lembaga Hasil Dalam Negeri (Inland Revenue Board)

LIBID
London Interbank Bid Rate

LIBOR
London Interbank Offered Rate

LIFFE
London International Financial Futures Exchange

LME
London Metal Exchange

LO
Licensing Officer

LOFSA
Labuan Offshore Financial Services Authority

LOSR
Location of Share Registrars

LSE
London Stock Exchange

M&A
Memorandum & Articles of Association or
Mergers & Acquisitions

MARC
Malaysian Rating Corporation Berhad

MASA
Maklumat Saham (“share information”) was introduced in 1987, and MASA II was introduced in 1990. In 1994, WinStock which is a more integrated information system replaced MASA II.

MASB
Malaysian Accounting Standards Board

MAVCAP
Malaysia Venture Capital Management Bhd

MBO
Management Buy Out

MCD
Malaysian Central Depository Sdn Bhd - set up in 1990 to operate scripless trading through the Central Depository System (CDS) - a computerised system for the central handling and deposit of shares and other securities traded on Bursa Malaysia.

MECD
Ministry of Entrepreneur and Coorperative Development

MEPS
Malaysian Electronic Payment System Sdn Bhd - A consortium set up by domestic banking institutions to provide shared banking services, such as shared ATM network and Interbank GIRO.

MESDAQ
Malaysian Exchange of Securities Dealing and Automated Quotation

MFBA
Malaysian Futures Brokers Association

MGO
Mandatory General Offer

MGS
Malaysian Government Securities - long term papers issued on conventional basis by the Malaysian Government to manage the economy. MGS Floating Securities are issued based on spread basis.

MIDF
Malaysian Industrial Development Finance

MIDFCCS
MIDF Consultancy and Corporate Services Sdn Bhd

MIER
Malaysian Institute of Economic Research

MIFC
Malaysia International Islamic Financial Centre

MIH
Malaysian Issuing House

MLR
Minimum Lending Rate

MM
Money Market

MME
Malaysia Monetary Exchange - which was merged with KLCE to form COMMEX. COMMEX subsequently merged with KLOFFE in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)

MoF
Ministry of Finance

MoM
Month on Month

MoU
Memorandum of Understanding

MSCI
Morgan Stanley Capital International

MTB
Malaysian Treasury Bills

MTDC
Malaysian Technology Development Corporation

MTM
Mark-to-Market - Daily evaluation of open futures contract(s) that an investor holds to reflect profit / losses. All futures positions are marked-to-market using the settlement price.

MTN
Medium Term Notes

MYKAD
Malaysian National Identity Card

NASDAQ
National Association of Securities Dealers Automatic Quotation

NAV
Net Asset Value

NCD
Negotiable Certificate of Deposit

NID
Negotiable Instrument of Deposit, is a financial instrument issued by banks for the deposit of a specific sum of money for a fixed period of time at a prefixed interest rate. An NID can be bought or sold before the date of maturity.

NIDC
Negotiable Islamic Debt Certificate is the Shariah-based alternative to the Negotiable Certificate of Deposit (NCD), using e.g. using the concept of Al-Mudharabah (profit-sharing) or Al-Bai Bithaman Ajil (Deferred payment sale)

NOI
Net Operating Income

NOPAT
Net Operating Profit after Tax

NTA
Net Tangible Assets

NYSE
New York Stock Exchange

O&G
Oil and Gas (Industry)

OECD
Organisation for Economic Co-operation and Development

OFS
Offer for sale

OI
Open Interest - number of futures contracts that are yet to be closed-out

OKLI
Kuala Lumpur Composite Index Options

OPR
Overnight Policy Rate (set by Bank Negara’s Monetary Policy Committee)

OTC
Over-the-counter

PAL
Provisional Allotment Letter

PDS
Private Debt Securities

PE or P/E
Price to earnings ratio

PF
Project Finance

PLC
Public-listed company

PNB
Permodalan Nasional Berhad

QoQ
Quarter on Quarter

RAM
Rating Agency Malaysia Berhad

REIT
Real Estate Investment Trust

RENTAS
Real Time Electronic Transfer of Funds & Securities - BNM's system for electronic funds transfer, replacing SPEEDS. Minimum amount per transmission is RM10,000 except if the Remitting party is a government body.

REPO
Repurchase Agreement - the bank sells its money market instruments approved by Bank Negara Malaysia to an investor, with an understanding to buy back the said instruments at an agreed price (interest rate) on a specific future date.

RI
Rights issue

RIIAM
Research Institute of Investment Analysis Malaysia

ROC
Registrar of Companies - The public official appointed to administer the Companies Act 1965 and the Securities Industry Act 1983.

ROS
Restricted offer for sale

RSB
Redeemable Secured Bonds

RUB
Redeemable Unsecured Bonds

RULS
Redeemable Unsecured Loan Stock

SAC
Syariah Advisory Council

SBI
Second Board Index

SBL
Securities Borrowing and Lending

SC
Securities Commission - a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is responsible for the regulation and development of capital markets in Malaysia through the Securities Commission Act 1993, Capital Markets and Services Act 2007 and Securities Industry (Central Depositories) Act 1991. The SC is a self-funding statutory body with investigative and enforcement powers, and reports to the Minister of Finance.

SCA
Securities Commission Act 1993

SCANS
Securities Clearing Automated Network Services Sdn Bhd (Bursa Malaysia) - computerised central clearing house formed in 1984.

SCORE
System on Computerised Order Routing and Execution - implemented in 1989 to replace the outcry system and the trading floor at the stock exchange's premises. The fully automated trading and matching was introduced in 1992.

SCP
Special Clearing Participant - companies involved in the trading of ethylene product

SDR
Special Drawing Rights

SEC
U.S. Securities and Exchange Commission

SGX
Singapore Exchange Limited - inaugurated on 1 December 1999, following the merger of the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX).

SIA
Securities Industry Act 1983 - The Act of Parliament governing the business of dealing in securities, stock exchanges and related matters in Malaysia.

SICDA
Securities Industry (Central Depositories) Act 1991

SIDC
Securities Industry Development Centre (established by the SC)

SMF
Share Margin Financing

SMI
Small and Medium-sized Industry

SPV
Special Purpose Vehicle

SSF
Single Stock Futures

SRI
Socially Responsible Investing (Strategy)

SRR
Statutory Reserve Requirement

STR
Suspicious Transaction Report (for BNM required under AMLA)

SWF
Sovereign wealth funds

SWIFT
Society for Worldwide Interbank Financial Telecommunication - operates a worldwide financial messaging network allowing financial institutions to securely and reliably exchange financial transactions.

TSR
Transferable Subscription Rights

UB
Universal Broker

UT
Unit Trust

VCC
Venture capital company

VCMC
Venture capital management company

WACC
Weighted Average Cost of Capital

WEBS
World Equity Benchmark Shares

WinSCORE
Broker Front-End System - Windows version of SCORE (Bursa) launched in 1994 allowing each dealer to have a single integrated workstation which incorporates order-entry as well as real-time price information.

WTO
World Trade Organisation

YoY
Year on Year

YTD
Year to-date

YTM
Yield to Maturity (bonds)