The Economic Cabinet has approved the Capital Market Masterplan as proposed by the Capital Market Development Committee which is chaired by the Minister of Finance.
The capital market is important to a country’s economic and social system. It plays the crucial roles of capital raising for both public and private sectors, promoting balance and stability in the financial system, decreasing dependency on the banking sector, driving the economy forward and creating jobs, as well as being an alternative method for savings. A strong capital market will lessen the impact of economic fluctuations which can be compounded by the fast-flowing nature of capital.
However, there are still many issues besetting the Thai capital market: few institutional investors, small retail investor base, limited financial products, high transaction costs, and lack of efficient regulatory enforcement are some examples. Moreover, Thailand’s capital markets in recent times have grown at a very slow pace. The size of the stock market compared to GDP is only 51% (as of June 2009) which is smaller than other countries in the region such as Hong Kong (845%), Singapore (202%), Malaysia (104%) and South Korea (66%). Should this trend continue, Thailand’s capital market will stagnate and become increasingly marginalized. Various studies have shown that inadequate development of the capital markets will impact its ability to raise, channel and monitor resources efficiently. In the end, this will lead to loss of growth opportunities, standard of living and prosperity.
In recognizing the importance of the capital market, Prime Minister Abhisit Vejjajiva has appointed the Capital Market Development Committee (The Committee) on January 27, 2009. This appointment is a continuation from the last but one government which has appointed the first Committee on March 25, 2008. The Committee is tasked with formulating an overall masterplan for the development of Thai capital market as well as monitoring the implementation of such plan. The Committee comprises of the Minister of Finance as the chairperson and experts from public and private sectors.
In formulating the Capital Market Development Masterplan (The Masterplan), the Committee has solicited inputs and opinions from all stakeholders and has formed the vision and the 5-year development objectives (2009-2013) as follow:
“The Thai capital market is the primary mechanism for aggregating, channeling, and monitoring economic resources. The goal of the capital market is to perform these tasks efficiently to increase overall competitiveness of Thailand”
The Committee has formulated 6 primary missions and objectives to realize this vision:
1. Capital market must be easily accessible by investors seeking investment opportunities and corporations seeking funds
2. Increase quality and variety of products and services
3. Reduce cost of funds to issuers and any intermediary and transaction costs to investors to enable Thai companies to become more competitive
4. Develop efficient infrastructure framework in legal, regulations, accounting, tax, information, technology and enforcement
5. Educate investors and ensure that adequate protection mechanism are in place
6. Promote competition in the Thai capital market and build links with the global market system
The Masterplan consists of 8 important reform measures that will affect the course of development and bring about major changes in the system.
Measure 1: Abolish the Monopoly and Improve Competitiveness of the Stock Exchange of Thailand (SET). Liberalization of capital flows and competitive pressure increase the chances of the SET being marginalized. To make the SET responsive to fast-changing business environments, its business structure must be transformed to increase efficiency and promote competitiveness. First step is to demutualize the SET, convert it into a public company (The Exchange Company), separate the exchange business from capital market development work, and establish a Capital Market Development Fund (CMDF) with the mission of long-term capital market development. The SET’s monopoly on exchange businesses will also end. Therefore, there may be other trading platforms permitted to trade listed stocks. The Exchange Company will be allowed to permit persons other than securities firms incorporated in Thailand to have direct access if it wishes to in order to increase liquidity and expand investment base to promote linkage with global capital market, and decrease limitations which currently obstruct the growth of Thai capital market.
Measure 2: Liberalization of securities business to promote market efficiency. This measure, while in line with recent trends of liberalization in the financial system, also aims to increase competitiveness of Thai capital market and enable it to withstand impact of fast capital flow. Liberalization of licenses will foster the market competition. Securities firms will have to adjust by forming alliances with strategic partners to increase its efficiency by offering new products and services. Deregulation of commissions will reduce transaction cost and increase market activities in the long run.
Measure 3: Reforming Legal Framework. Currently, there are draft laws relating to the capital market, being proposed to the House of Representatives which are: (1) Amendment Act to Royal Enactment on Special Purpose Juristic Persons for Securitisation B.E..... (2) The Draft of Commercial Collateral Act B.E and (3) Amendment Act to the Civil and Commercial Code B.E….. The government should keep pushing for passage of these laws. The Committee also had the resolution to propose further reforms, including (1) Laws to facilitate mergers and acquisitions activities, (2) Adopt civil penalty and (3) Amend the Civil Procedure Code to include class action lawsuits, which would help make enforcement of the Securities and Exchange Act more efficient.
Measure 4: Streamline Tax System. This measure aims to make the tax system more efficient to transactions, improve fairness, and provide tax incentives for transactions that the state would like to promote for the development of capital market. Taxation areas to streamline include those related to mergers and acquisitions, investments in debentures, elimination of double taxation on dividends, equalize tax incentives on direct investment and investment through intermediaries, transfer of investments in provident funds, public savings funds, life insurance premiums, Islamic bonds, securities borrowing and lending of the Bank of Thailand, and venture capital.
Measure 5: Develop Financial Products. Currently, the Thai capital market has few financial products to choose from, which cannot take care of diverse needs of investors thus making the market relatively unattractive. This measure aims to push for development of new products which would help increase the variety of instruments and consequently help develop the market. Example of new products are Infrastructure Fund to promote investments by the private sector, life annuities, interest rate derivatives, inflation-indexed government bonds, Islamic bond, venture capital, and divestiture of ministry of finance’s shares of publicly traded companies.
Measure 6: Establishment of a National Savings Fund. The Ministry of Finance had proposed a National Savings Fund Act, and the cabinet in a meeting on October 20, 2009 has agreed to the first draft. The National Savings Fund will cover workers outside the formal system comprising approximately 70% to total labor force in Thailand. The objective is to institutionalize savings for retirement, create equality of opportunity, and ensure that these informal sector workers are provided with some income after retirement. The National Savings Fund will become a major source of savings and investments in Thailand and will contribute to the development of Thai capital markets. It will help lessen the volatility of capital movements and also indirectly promote new financial products as well.
Measure 7: Developing a Culture of Savings and Investments. This measure aims to provide choices when investing in provident fund and Government Pension Fund, so that investors’ needs are met. It will also encourage investors to be proactive about acquiring new knowledge on financial products, so that investors can truly determine what types of products suit them.
Measure 8: Development of Domestic Bond Market. This measure aims to develop the government’s cash management methods and study alternatives of amending laws relating to treasury reserves, so that the government can issue treasury bills efficiently. The government should also be able to manage treasury reserves for yield by such means as depositing the reserves with other institutions instead of the Bank of Thailand. This will help decrease the cost of funds that the government faces. Moreover, the Bank of Thailand will take the lead in developing and promoting the private repo and securities borrowing and lending markets, providing the bond market with another tool to manage liquidity efficiently with low risks. Overall, this would lead to further growth in the market.
Aside from the 8 reform measures, the Masterplan consists of 34 further measures that should be implemented. These measures are important in changing the basic framework and developing new infrastructures in the long run, which would lead to the fulfillment of the Masterplan’s main objectives.
After the Masterplan has been approved, the drafting subcommittee will transform into the Implementation and Oversight Committee and charged with overseeing, monitoring, and assessing the implementation of the Masterplan. The new committee will use KPIs to assess progress and efficiency of the implementation.
The Committee believes that success in implementing the Masterplan, aside from directly benefiting the capital market, will have far-ranging benefits to society and economy as a whole. It will improve competitiveness, promote savings and retirement planning, improve linkage between Thai and global capital markets, and benefit all sectors of society. The results will be reflected and noticeable in the capital market structure itself. Thai capital market will grow larger with more liquidity which will strengthen balance and stability of the financial market. It will become a key driver in economic development, which will be observable in the prosperity of Thai people in the long run.
Saturday, November 21, 2009
Friday, November 13, 2009
OUR ECONOMIC BACKBONE NEEDS MORE SUPPORT
Thailand must revamp its agricultural sector to compete with improving productivity in neighbouring countries
Prime Minister Abhisit Vejjajiva earlier this week vowed to push forward the Farmers Council Bill, which is intended to improve the wellbeing of farmers. During the session to consider the passage of the bill, Abhisit said the issue should be on the national agenda for it involves millions of Thais who form the economic backbone of the country.
Although Thailand is an agriculture-based country, most of our farmers are heavily indebted. Many don't own the land upon which they work. Past governments have systematically failed to support farmers, and Thailand does not have a comprehensive agricultural development plan to provide sustainable growth in this sector in the future.
These shortcomings should not be allowed to continue. Thai farmers should be better equipped to compete with their counterparts from neighbouring countries after Asean member countries open up agricultural markets including rice, tapioca and corn from 2010. Thai farmers should be able to effectively improve their yields per rai in order to increase overall productivity. In terms of production, Vietnamese farmers are now catching up with Thai farmers very quickly, due largely to Thailand's failure to improve in this regard.
Agriculture is a vital sector of the economy that many countries strive to improve in order to ensure their food security. Thailand has exploited its natural advantages, such as its rich soil and climate, for centuries. However, these advantages may not last forever, and we will not always be alone in benefiting from geographical providence.
The Farmers Council Bill should play a role in empowering farmers by ensuring their rights to receive proper assistance so they can continue with the incentive to work the land. One particular area of importance is that farmers should gain access to proper irrigation systems.
Investors from some countries are anxious to own farmland in Thailand because they realise the significance of the sector. Unfortunately, some Thais have failed to realise the value of our natural resources. Some have sold land plots to foreigners through proxy ownership.
The proposed new law should also help ensure legitimise ownership of land, and will give farmers a channel to voice their opinions at the national level.
The bill should also provide for the formation of institutions to assist farmers, such as a micro-financing system. Otherwise, many farmers will continue to borrow money from unscrupulous lenders who charge extremely high interest rates.
If there is no shake-up of the system as it is at present, Thai farmers will remain caught in a trap of relying on Mother Nature and crooked politicians who exploit farmers' needs for their own short-term political gain. And they will have no other choice than to come out to block the roads every time they cannot sell their produce at a good price.
Prime Minister Abhisit Vejjajiva earlier this week vowed to push forward the Farmers Council Bill, which is intended to improve the wellbeing of farmers. During the session to consider the passage of the bill, Abhisit said the issue should be on the national agenda for it involves millions of Thais who form the economic backbone of the country.
Although Thailand is an agriculture-based country, most of our farmers are heavily indebted. Many don't own the land upon which they work. Past governments have systematically failed to support farmers, and Thailand does not have a comprehensive agricultural development plan to provide sustainable growth in this sector in the future.
These shortcomings should not be allowed to continue. Thai farmers should be better equipped to compete with their counterparts from neighbouring countries after Asean member countries open up agricultural markets including rice, tapioca and corn from 2010. Thai farmers should be able to effectively improve their yields per rai in order to increase overall productivity. In terms of production, Vietnamese farmers are now catching up with Thai farmers very quickly, due largely to Thailand's failure to improve in this regard.
Agriculture is a vital sector of the economy that many countries strive to improve in order to ensure their food security. Thailand has exploited its natural advantages, such as its rich soil and climate, for centuries. However, these advantages may not last forever, and we will not always be alone in benefiting from geographical providence.
The Farmers Council Bill should play a role in empowering farmers by ensuring their rights to receive proper assistance so they can continue with the incentive to work the land. One particular area of importance is that farmers should gain access to proper irrigation systems.
Investors from some countries are anxious to own farmland in Thailand because they realise the significance of the sector. Unfortunately, some Thais have failed to realise the value of our natural resources. Some have sold land plots to foreigners through proxy ownership.
The proposed new law should also help ensure legitimise ownership of land, and will give farmers a channel to voice their opinions at the national level.
The bill should also provide for the formation of institutions to assist farmers, such as a micro-financing system. Otherwise, many farmers will continue to borrow money from unscrupulous lenders who charge extremely high interest rates.
If there is no shake-up of the system as it is at present, Thai farmers will remain caught in a trap of relying on Mother Nature and crooked politicians who exploit farmers' needs for their own short-term political gain. And they will have no other choice than to come out to block the roads every time they cannot sell their produce at a good price.
World's workshop back in business, data show
Chinese factory output growth surged to a 19-month high in October, showing the worlds thirdlargest economy has firmly put the worst of the global financial crisis behind it.
Other figures released yesterday showed a dip in the pace of investment and loan growth as the impact of the initial burst from a bank-financed fourtrillion-yuan ($585-billion) economic stimulus package, announced a year ago,tapered off.
Exports and imports also undershot market forecasts, falling from year-earlier levels for the 12th month in a row.
But economists said China was maintaining the momentum of its recent recovery, which has made it a certainty that Beijing will surpass its target of 8%growth for 2009 as a whole.
Whats more, the large number of investment projects still in the governments pipeline, a sharp rebound in real estate spending and the huge volume of loans issued this year virtually guarantee stronger GDP growth in the coming year.
Industrial output rose 16.1% in the year to October, the fastest pace since March 2008 before the global downturn brought Chinas export-orientated factories to their knees.
The figure, up from Septembers reading of 13.9%, easily beat market forecasts of 15.5% growth.
Factory output is a crucial gauge because industry generates about 43% of Chinese gross domestic product, a larger share than services.
A battery of energy and commodity data for October confirmed the strength of the sector:
Power generation in the year to October increased 17.1%, the fastest growth in 19 months.
Crude steel output was equivalent to an annualised 609 million tonnes,22%higher than 2008.
Output of refined copper and primary aluminium hit a record for the second straight month.
The volume of refined crude oil rose 10.4% from a year earlier to a fresh high.
Trade, by contrast, was weaker than economists had expected.
Exports in October were down 13.8%from a year earlier, an improvement on Septembers 15.2% fall but short of the median market forecast of a 13.2% drop.
And imports were down in dollar value by 6.4% from October 2008, compared with forecasts of a 1.0% fall and compared with a 3.5% year-on-year decline in September.
As a result, the October trade surplus ballooned to $24 billion, a reminder ahead of US President Barack Obamas visit to China next week of the imbalances plaguing the global economy.
Because global trade fell off a cliff last November after the shock to confidence delivered by the bankruptcy of investment bank Lehman Brothers, economists still think exports will resume positive year-on-year growth by December at the latest.
This will make it more difficult for Beijing to resist international pressure to let the yuan appreciate and also make it easier for policymakers to justify a stronger currency to domestic audiences, said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong.
A stronger currency would help to rebalance the Chinese economy by steering resources away from exports and related investments and towards domestic, consumption-related sectors.
To that end, policymakers will take comfort from a surprising acceleration in retail sales growth to 16.2% in the 12 months to October from 15.5% in September, handily outstripping market projections of a 15.8% rise.
By contrast, year-to-date urban investment in fixed assets such as factories and property eased to 33.1% from 33.3%in the first nine months. Economists had forecast 33.5%.
Looking at trends, consumption is accelerating, while investment is decelerating. The change is pretty modest but it is an interesting trend to see and is positive in the sense of really being what the government wants, said Jun Ma,chief China economist at Deutsche Bank in Hong Kong.
Deflation eased in October, but not by as much as expected. Consumer prices fell 0.5% in the year to October, with producer prices down 5.8%.
A sharp drop in new lending, to 253 billion yuan in October from 516.7 billion yuan in September, was partly a seasonal phenomenon but might have reflected regulatory pressure to curb loan growth,said Zhou Xi, an economist with Bohai Securities in Tianjin.
Other figures released yesterday showed a dip in the pace of investment and loan growth as the impact of the initial burst from a bank-financed fourtrillion-yuan ($585-billion) economic stimulus package, announced a year ago,tapered off.
Exports and imports also undershot market forecasts, falling from year-earlier levels for the 12th month in a row.
But economists said China was maintaining the momentum of its recent recovery, which has made it a certainty that Beijing will surpass its target of 8%growth for 2009 as a whole.
Whats more, the large number of investment projects still in the governments pipeline, a sharp rebound in real estate spending and the huge volume of loans issued this year virtually guarantee stronger GDP growth in the coming year.
Industrial output rose 16.1% in the year to October, the fastest pace since March 2008 before the global downturn brought Chinas export-orientated factories to their knees.
The figure, up from Septembers reading of 13.9%, easily beat market forecasts of 15.5% growth.
Factory output is a crucial gauge because industry generates about 43% of Chinese gross domestic product, a larger share than services.
A battery of energy and commodity data for October confirmed the strength of the sector:
Power generation in the year to October increased 17.1%, the fastest growth in 19 months.
Crude steel output was equivalent to an annualised 609 million tonnes,22%higher than 2008.
Output of refined copper and primary aluminium hit a record for the second straight month.
The volume of refined crude oil rose 10.4% from a year earlier to a fresh high.
Trade, by contrast, was weaker than economists had expected.
Exports in October were down 13.8%from a year earlier, an improvement on Septembers 15.2% fall but short of the median market forecast of a 13.2% drop.
And imports were down in dollar value by 6.4% from October 2008, compared with forecasts of a 1.0% fall and compared with a 3.5% year-on-year decline in September.
As a result, the October trade surplus ballooned to $24 billion, a reminder ahead of US President Barack Obamas visit to China next week of the imbalances plaguing the global economy.
Because global trade fell off a cliff last November after the shock to confidence delivered by the bankruptcy of investment bank Lehman Brothers, economists still think exports will resume positive year-on-year growth by December at the latest.
This will make it more difficult for Beijing to resist international pressure to let the yuan appreciate and also make it easier for policymakers to justify a stronger currency to domestic audiences, said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong.
A stronger currency would help to rebalance the Chinese economy by steering resources away from exports and related investments and towards domestic, consumption-related sectors.
To that end, policymakers will take comfort from a surprising acceleration in retail sales growth to 16.2% in the 12 months to October from 15.5% in September, handily outstripping market projections of a 15.8% rise.
By contrast, year-to-date urban investment in fixed assets such as factories and property eased to 33.1% from 33.3%in the first nine months. Economists had forecast 33.5%.
Looking at trends, consumption is accelerating, while investment is decelerating. The change is pretty modest but it is an interesting trend to see and is positive in the sense of really being what the government wants, said Jun Ma,chief China economist at Deutsche Bank in Hong Kong.
Deflation eased in October, but not by as much as expected. Consumer prices fell 0.5% in the year to October, with producer prices down 5.8%.
A sharp drop in new lending, to 253 billion yuan in October from 516.7 billion yuan in September, was partly a seasonal phenomenon but might have reflected regulatory pressure to curb loan growth,said Zhou Xi, an economist with Bohai Securities in Tianjin.
Sunday, November 8, 2009
CISCO CHIEF PAINTS ROSY OUTLOOK AS FIRM BEATS FORECAST
Cisco Systems'John Chanmbers, one of the first technology leaders to herald the recession two years ago, said he now sees a global economic recovery, fuelling a rebound in his company's sales this quarter.
"The numbers are indicating us being in the early, initial phase of a recovery - with the US leading the way," Chambers said yesterday, following the release of Cisco's fiscal first-quarter results.
"The numbers for US enterprise orders were dramatic, going from a minus 20 per cent order rate a quarter ago to plus 10 per cent. That's beyond a tipping point."
Sales will grow 1 per cent to 4 per cent in the second quarter from a year earlier, Cisco said.
That equates to at least US$9.18 billion (Bt327 billion), toopping the $8.96-billion average estimate of analysts surveyed by Bloomberg.
The rebound follows four straight quarters of declines.
After putting off orders during the recession, customers are resuming spending on networking gear to handle growing traffic.
Cisco, the biggest maker of network equipment, also is benefiting from cost reductions over the past year, including a hiring freeze and travel cutbacks.
As demand bounces back, Cisco is stepping up investments and acquisitions.
"Spending on data-networking gear is a tide that will lift all boats," said John Krause, and Appleton, Wisconsin-based analyst for Thrivent Financial for Lutherans, which owned 4.4 million shares as of September 30, according to Bloiomberg data._We're likely to see this improvement continue on into 2010."
Cisco, based in San Jose, California, rose 64 cents, or 2.8 per cent, to $23.93 on Thursday in Nasdaq Stock Market trading. The shares have gained 47 per cent this year.
In November 2007, Chambers reported a "drematic" decline in sales to automobile and financial companies. The remarks triggered the biggest technology sell-off in more than four years and foreshadowed the recession.
Cisco has announced four acquisitions and a joint venture since October 1, living up to a pledge by Chambers last month to get more aggressive in mergers and partnerships.
One of those deals, the acquisition of Tandberg for about $3 billion, has yet to win shareholder support.
A group of investors owning more than 24 per cent of Tandberg's shares has pressed Cisco for a higher bid.
By Norwegian law, 90 per cent of a company's share-holders must approve the transaction.
"The odds are very high we will find a way to make this work," Chambers, 60,said.
"It's in our interest and Tandberg's interest to do so. We think we paid a fair price, and we will play out the hand appropriately. If we can't get a fair price, we've walked from several deals already this year."
Cisco's net income fell 19 per cent to $1.79 billion, or 30 cents a share, in the first quarter, which ended on October 24.
The US economy grew about 3.5 per cent last quarter, re-emerging from the longest recession since World War II. As demand recovers, companies are stepping up investments in their networks.
AT&T, the largest US phone company, expects to spend at least$5 billion on capital equipment in the final three months of 2009.
In September, Goldman Sachs Group predicted that worldwide spending on technology products will decline 8 per cent this year.
As demand bounces back, Cisco is stepping up investments and acquisitions.
"The numbers are indicating us being in the early, initial phase of a recovery - with the US leading the way," Chambers said yesterday, following the release of Cisco's fiscal first-quarter results.
"The numbers for US enterprise orders were dramatic, going from a minus 20 per cent order rate a quarter ago to plus 10 per cent. That's beyond a tipping point."
Sales will grow 1 per cent to 4 per cent in the second quarter from a year earlier, Cisco said.
That equates to at least US$9.18 billion (Bt327 billion), toopping the $8.96-billion average estimate of analysts surveyed by Bloomberg.
The rebound follows four straight quarters of declines.
After putting off orders during the recession, customers are resuming spending on networking gear to handle growing traffic.
Cisco, the biggest maker of network equipment, also is benefiting from cost reductions over the past year, including a hiring freeze and travel cutbacks.
As demand bounces back, Cisco is stepping up investments and acquisitions.
"Spending on data-networking gear is a tide that will lift all boats," said John Krause, and Appleton, Wisconsin-based analyst for Thrivent Financial for Lutherans, which owned 4.4 million shares as of September 30, according to Bloiomberg data._We're likely to see this improvement continue on into 2010."
Cisco, based in San Jose, California, rose 64 cents, or 2.8 per cent, to $23.93 on Thursday in Nasdaq Stock Market trading. The shares have gained 47 per cent this year.
In November 2007, Chambers reported a "drematic" decline in sales to automobile and financial companies. The remarks triggered the biggest technology sell-off in more than four years and foreshadowed the recession.
Cisco has announced four acquisitions and a joint venture since October 1, living up to a pledge by Chambers last month to get more aggressive in mergers and partnerships.
One of those deals, the acquisition of Tandberg for about $3 billion, has yet to win shareholder support.
A group of investors owning more than 24 per cent of Tandberg's shares has pressed Cisco for a higher bid.
By Norwegian law, 90 per cent of a company's share-holders must approve the transaction.
"The odds are very high we will find a way to make this work," Chambers, 60,said.
"It's in our interest and Tandberg's interest to do so. We think we paid a fair price, and we will play out the hand appropriately. If we can't get a fair price, we've walked from several deals already this year."
Cisco's net income fell 19 per cent to $1.79 billion, or 30 cents a share, in the first quarter, which ended on October 24.
The US economy grew about 3.5 per cent last quarter, re-emerging from the longest recession since World War II. As demand recovers, companies are stepping up investments in their networks.
AT&T, the largest US phone company, expects to spend at least$5 billion on capital equipment in the final three months of 2009.
In September, Goldman Sachs Group predicted that worldwide spending on technology products will decline 8 per cent this year.
As demand bounces back, Cisco is stepping up investments and acquisitions.
BUFFETT SOUNDS WAKE-UP CALL TO LOWER COSTS
Berkshire Hathaway managers may deliver more cost cuts to chief executive Warren Buffett after the billionaire replaced Richard Santulli as the head of a money-losing plane-leasing unit.
Berkshire executives have eliminated jobs and closed plants as the sale of bricks, jewellery and luxury flights suffered in the recession.
The company, which reports third-quarter results yesterday, may need further reductions, even as the US recovers, said Jeff Matthews, founder of the hedge fund Ram Partners.
"I don't think Berkshire hit the reset button as hard as other companies" when it came to cutting costs, said Matthews, the author of "Pilgrimage to Warren Buffett's Omaha".
Naming David Sokol, chairman of Berkshire's energy business, to lead the aviation operation that Santulli founded may have been received as "a wake-up call to other managers".
Sokol said that Netjets was laying off as many as 495 pilots.
The CEOs of Berkshire's operating companies oversee more than 200,000 workers selling Fruit of the Loom T-shirts, Geico car insurance and Dairy Queen ice cream, while Buffett vets investments with a staff of fewer than 20 at the firm's Omaha, Nebraska headquarters.
Berkshire said on Wednesday that it agreed to pay US$26 billion (Bt867 billion) to buy Burlington Northern Santa Fe, adding a railroad with about 40,000 employees.
Berkshire has gained 5.5 per cent this year through Thursday on the New York Stock Exchange, compared with the 18 per cent gain in the Standard Poor's 500 Index.
Third-quarter profit may more than double to $2.89 billion, according to Meyer Shields, an analyst with Stifel Nicolaus.
The best back-to-back quarterly rally in the S&P in 34 year is helping Berkshire recover after its first loss since 2001 in the January-to-March period.
Berkshire's agreement to purchase the 77.4-oer-cent of Burlington it did not already own may mean Buffett is more confident in the company's finances after he scaled back on insuring catastrophes earlier this year to guard capital. The deal is Buffett's biggest.
"He's making such a large acquisition at a time when he was so concerned about having enough liquidity," said Gerald martin, a finance professor at American University's Kogod School of Business in Washington. "It might signal that Berkshire is kind of turning the corner."
Buffett built Berkshire into a $150-billion company over four decades by buying out-of-favour stocks and family businesses. After credit markets froze last year, Buffett added to holdings of bank stocks and agreed to finance Goldman Sachs Group, investments that surged in this year's recovery.
Buffett purchases operating companies for Berkshire with the promise to their owners never to sell them and says his ideal time horizon to hold a stock is "forever".
He reversed course on credit-rating company Moody's Corp, reducing Berkshire's stock holding three times since July. In February, he said he made a mistake by buying ConocoPhillips stock, which cost Berkshire $1.9 billion in the first quarter.
Buffett was a NetJets client before acquiring the firm in 1998 from Santulli, the inventor of fractional jet ownership.
Santulli added about 648 jobs at Columbus, Ohio-based Netjets in 2008 before presiding over about $350 million in losses in the first half. Sokol announced 300 job cuts in September and the additionaly layoffs on Friday.
Santulli said in August that he was resigning to spend more time with his family, and Buffett said he accepted the departure "with reluctance".
"Nothing is forever, even at Berkshire", Matthews said.
Buffett replaced Marvin Beasley in April as CEO of Helzberg Diamond Shops after saying in an interview that consumers "won't go in our jewellery stores" because of the recession.
A year earlier, Beasley told the kansas City Business journal that Helzberg was not planning more job cuts after eliminating 21 positions, saying, "we think it's going to be OK".
Helzberg has 234 US stores, according to its website, compared with the" nearly 270" tally given by the company in April when the transition was announced.
Marti Greathouse, a spokes-woman for Helzberg, did not return a call seeking comment.
Berkshire last year cut jobs at businesses including Clayton Homes, which builds manufactured housing, and brick-maker Acme Building Brands.
Buffett told shareholders at the firm's annual meeting in May that he expected more reductions. Shaw Industries, the world's largest carpet manufacturer, said last October it was closing a spun-yarn plant in Trenton, Georgia, to cut production. About 440 workers were affected.
Buffett built Berkshire into a $150-billion firm over four decades by buying out-of-favour stocks and family business.
Berkshire executives have eliminated jobs and closed plants as the sale of bricks, jewellery and luxury flights suffered in the recession.
The company, which reports third-quarter results yesterday, may need further reductions, even as the US recovers, said Jeff Matthews, founder of the hedge fund Ram Partners.
"I don't think Berkshire hit the reset button as hard as other companies" when it came to cutting costs, said Matthews, the author of "Pilgrimage to Warren Buffett's Omaha".
Naming David Sokol, chairman of Berkshire's energy business, to lead the aviation operation that Santulli founded may have been received as "a wake-up call to other managers".
Sokol said that Netjets was laying off as many as 495 pilots.
The CEOs of Berkshire's operating companies oversee more than 200,000 workers selling Fruit of the Loom T-shirts, Geico car insurance and Dairy Queen ice cream, while Buffett vets investments with a staff of fewer than 20 at the firm's Omaha, Nebraska headquarters.
Berkshire said on Wednesday that it agreed to pay US$26 billion (Bt867 billion) to buy Burlington Northern Santa Fe, adding a railroad with about 40,000 employees.
Berkshire has gained 5.5 per cent this year through Thursday on the New York Stock Exchange, compared with the 18 per cent gain in the Standard Poor's 500 Index.
Third-quarter profit may more than double to $2.89 billion, according to Meyer Shields, an analyst with Stifel Nicolaus.
The best back-to-back quarterly rally in the S&P in 34 year is helping Berkshire recover after its first loss since 2001 in the January-to-March period.
Berkshire's agreement to purchase the 77.4-oer-cent of Burlington it did not already own may mean Buffett is more confident in the company's finances after he scaled back on insuring catastrophes earlier this year to guard capital. The deal is Buffett's biggest.
"He's making such a large acquisition at a time when he was so concerned about having enough liquidity," said Gerald martin, a finance professor at American University's Kogod School of Business in Washington. "It might signal that Berkshire is kind of turning the corner."
Buffett built Berkshire into a $150-billion company over four decades by buying out-of-favour stocks and family businesses. After credit markets froze last year, Buffett added to holdings of bank stocks and agreed to finance Goldman Sachs Group, investments that surged in this year's recovery.
Buffett purchases operating companies for Berkshire with the promise to their owners never to sell them and says his ideal time horizon to hold a stock is "forever".
He reversed course on credit-rating company Moody's Corp, reducing Berkshire's stock holding three times since July. In February, he said he made a mistake by buying ConocoPhillips stock, which cost Berkshire $1.9 billion in the first quarter.
Buffett was a NetJets client before acquiring the firm in 1998 from Santulli, the inventor of fractional jet ownership.
Santulli added about 648 jobs at Columbus, Ohio-based Netjets in 2008 before presiding over about $350 million in losses in the first half. Sokol announced 300 job cuts in September and the additionaly layoffs on Friday.
Santulli said in August that he was resigning to spend more time with his family, and Buffett said he accepted the departure "with reluctance".
"Nothing is forever, even at Berkshire", Matthews said.
Buffett replaced Marvin Beasley in April as CEO of Helzberg Diamond Shops after saying in an interview that consumers "won't go in our jewellery stores" because of the recession.
A year earlier, Beasley told the kansas City Business journal that Helzberg was not planning more job cuts after eliminating 21 positions, saying, "we think it's going to be OK".
Helzberg has 234 US stores, according to its website, compared with the" nearly 270" tally given by the company in April when the transition was announced.
Marti Greathouse, a spokes-woman for Helzberg, did not return a call seeking comment.
Berkshire last year cut jobs at businesses including Clayton Homes, which builds manufactured housing, and brick-maker Acme Building Brands.
Buffett told shareholders at the firm's annual meeting in May that he expected more reductions. Shaw Industries, the world's largest carpet manufacturer, said last October it was closing a spun-yarn plant in Trenton, Georgia, to cut production. About 440 workers were affected.
Buffett built Berkshire into a $150-billion firm over four decades by buying out-of-favour stocks and family business.
HK TIGHTENS REGULATIONS ON SALES OF DERIVATIVES
Officials in Hong Kong said yesterday regulations on the sale of complicated investment products have been tightened after thousands of local retail investors were burned by Lehman Brothers-backed derivatives last year.
But lawmakers said the new measures fall short and urged the government to prosecute banks that misled investors and to ban some risky products outright.
Under the new regulations, banks must issue risk warnings for complex products and record conversations between their sales staff and clients to prevent deception, KC Chan, Secretary for Financial Services and the Treasury, said at a legislative hearing yesterday. The government is also considering setting up an investor education body and a financial services ombudsman, he said.
The measures come after 30,000 Hong Kong small investors who bought US$1.8 billion (Bt60.2 billion) in Lehman-linked derivatives were left in limbo after the US investment bank collapsed September last year. They weren't fully aware of the risk their investments carried, many of the complex derivatives were innocuously labelled "mini-bonds", angry investors took to the streets.
Hong Kong regulators announced a settlement with 16 local banks in July that returned up to 70 per cent of principal to the buyers, or up to $6.3 billion Hong Kong dollars (B27.2 billion).
Opposition lawmaker Ronny Tong criticised the government for not focusing on legal action. "I think it's strange that there is not a single case of prosecution after investigating for more than a year," Tong said.
Another lawmaker, Albert Ho, asked Chan why the government didn't consider banning certain risky products altogether, as do a number of other developed markets when it comes to selling to retail investors.
"Your approach is still disclosure-based. As long as you disclose the risks, if the disclosure is fair and comprehensive, you can cell anything. But shouldn't the government exercise discretion and ban certain products that are very complicated, very risky or whose terms are unfair to investors?" Ho said.
Chan argued disclosure-based regulation is the international norm, adding that the new measures require bank staff to explan their products in layman's terms and assess their clients' appetite for risk.
But lawmakers said the new measures fall short and urged the government to prosecute banks that misled investors and to ban some risky products outright.
Under the new regulations, banks must issue risk warnings for complex products and record conversations between their sales staff and clients to prevent deception, KC Chan, Secretary for Financial Services and the Treasury, said at a legislative hearing yesterday. The government is also considering setting up an investor education body and a financial services ombudsman, he said.
The measures come after 30,000 Hong Kong small investors who bought US$1.8 billion (Bt60.2 billion) in Lehman-linked derivatives were left in limbo after the US investment bank collapsed September last year. They weren't fully aware of the risk their investments carried, many of the complex derivatives were innocuously labelled "mini-bonds", angry investors took to the streets.
Hong Kong regulators announced a settlement with 16 local banks in July that returned up to 70 per cent of principal to the buyers, or up to $6.3 billion Hong Kong dollars (B27.2 billion).
Opposition lawmaker Ronny Tong criticised the government for not focusing on legal action. "I think it's strange that there is not a single case of prosecution after investigating for more than a year," Tong said.
Another lawmaker, Albert Ho, asked Chan why the government didn't consider banning certain risky products altogether, as do a number of other developed markets when it comes to selling to retail investors.
"Your approach is still disclosure-based. As long as you disclose the risks, if the disclosure is fair and comprehensive, you can cell anything. But shouldn't the government exercise discretion and ban certain products that are very complicated, very risky or whose terms are unfair to investors?" Ho said.
Chan argued disclosure-based regulation is the international norm, adding that the new measures require bank staff to explan their products in layman's terms and assess their clients' appetite for risk.
LUXURY-BRAND FIRMS HUNT FOR UNTAPPED MARKETS
With spending on luxury goods down across the developed world in the economic crisis, luxury brands are increasingly looking far beyond the chic avenues of New York, London or Paris for revenue.
The new names on the lips of luxury professionals are far less familiar - Almaty, Shenzhen, Ulan Bator, respectively, the commercial capital of Kazakhstan, a major Chinese provincial centre and the capital of Mongolia.
"The desire for luxury is more and more universal so the luxury sector has to reach its clients around the world," Yves Carcelle, chairman of Louis Vuitton, said at the Paris launch of a new luxury products website for China.
Louis Vuitton earlier this month opened its first store in Mongolia, an Asian country of 2.7 million people with extensive mineral resources and an average per capital annual income of just $1,800 (Bt60,200).
"It's a country that is taking off economically," said Carcelle, adding: "In just a few days, we already know the store is doing well and we should make as much in Ulan Bator as in a good-sized provincial town in China."
Antoione Belge, luxury expert at British bank HSBC, explained the strategy.
"In Mongolio or in Kazakhstan, the big luxury brands are targeting pockets of wealth. In countries which are making revenues from energy, there are small communities of people that have money," he said.
"When you open a store in a new city in China, the clientele in that city multiplies by a factor of 10. There's the client who is used to buying the brand abroad and nine others who are new."
A study out this week by US-based consultancy Bain and Company showed luxury sales this year will drop by 16 per cent in North America, by 10 per cent in Japan and by 8 per cent in Europe compared to last year.
In Asia, however, sales are set to grow by 10 per cent.
"First we get local elites familiar with our brand, then we open a place where we offer the same quality of service, the same products and therefore the same prices as in other luxury-brand shops," said LVMH, the world's top luxury firm.
Out of 300 openings of upmarket stores in 2009, Bain said, 15 per cent will be in China, 25 per cent in other Asian countries, 30 per cent in the Middle East, and 15 per cent in Eastern Europe and the Middle East.
Just 15 per cent would be in Western markets, the study found.
"Emerging markets with dynamic profiles and appropriate economic potential will offer good growth opportunities," the Gucci luxury group said in a statement.
The new names on the lips of luxury professionals are far less familiar - Almaty, Shenzhen, Ulan Bator, respectively, the commercial capital of Kazakhstan, a major Chinese provincial centre and the capital of Mongolia.
"The desire for luxury is more and more universal so the luxury sector has to reach its clients around the world," Yves Carcelle, chairman of Louis Vuitton, said at the Paris launch of a new luxury products website for China.
Louis Vuitton earlier this month opened its first store in Mongolia, an Asian country of 2.7 million people with extensive mineral resources and an average per capital annual income of just $1,800 (Bt60,200).
"It's a country that is taking off economically," said Carcelle, adding: "In just a few days, we already know the store is doing well and we should make as much in Ulan Bator as in a good-sized provincial town in China."
Antoione Belge, luxury expert at British bank HSBC, explained the strategy.
"In Mongolio or in Kazakhstan, the big luxury brands are targeting pockets of wealth. In countries which are making revenues from energy, there are small communities of people that have money," he said.
"When you open a store in a new city in China, the clientele in that city multiplies by a factor of 10. There's the client who is used to buying the brand abroad and nine others who are new."
A study out this week by US-based consultancy Bain and Company showed luxury sales this year will drop by 16 per cent in North America, by 10 per cent in Japan and by 8 per cent in Europe compared to last year.
In Asia, however, sales are set to grow by 10 per cent.
"First we get local elites familiar with our brand, then we open a place where we offer the same quality of service, the same products and therefore the same prices as in other luxury-brand shops," said LVMH, the world's top luxury firm.
Out of 300 openings of upmarket stores in 2009, Bain said, 15 per cent will be in China, 25 per cent in other Asian countries, 30 per cent in the Middle East, and 15 per cent in Eastern Europe and the Middle East.
Just 15 per cent would be in Western markets, the study found.
"Emerging markets with dynamic profiles and appropriate economic potential will offer good growth opportunities," the Gucci luxury group said in a statement.
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