Asian suspension aftermath

Press, 27 December 1985, Page 12

Asian suspension aftermath

Reprinted from the “Economist,” London

Singapore A bank rescue of PanElectric Industries, whose financial woes caused the recent three-day closure of the stock exchanges in Singapore and Malaysia/ promises to give the local stock markets time to sort out their problems. As part of an agreement with the banks signed on December 11 by Mr Tan Koon Swan (a Malaysian businessman-cum-politician who has a big indirect stake in Pan-Electric), he “and his associates” have provided Pan-Electric with a new sSingapore2oM (about SNZI9.3M) interest-free loan. They will also, it seems, honour ?Singaporel4oM (about JNZI3SM) of Pan-Electric’s forward share-purchase contracts.

In return, the 32 creditors’ banks have granted a threemonth moratorium on the firm’s debts of ?Singapore 400 M (about SNZ3BSM). These measures will help to prevent a multiple default on other forward share contracts held by investors in

Singapore and Malaysia — worth at least ?Singapore46oM (about JNZ442M). If any of these commitments are not honoured in the future, stockbrokers and others could still go bust. Pan-Electric’s resuscitation was finely timed. The marine-salvage and property firm would have gone into liquidation on December 9 if Singapore officials had not released, three days earlier, sSingapore2oM they had seized from Mr Tan as part of an investigation of alleged fraud in Pan-Elec-tric. Mr Tan is backed by a consortium of powerful Malaysian-Chinese businessmen. Unico Holdings, the cash-rich investment arm of the associated Chinese chambers of commerce in Malaysia, will acquire at least 30 per cent of Grand United Holdings, one of four Tan companies whose shares are suspended in Kuala Lumpur and Singapore. An associate of Grand United Holdings, Sigma International, owns 23 per cent of Pan-Electric.

Share prices fell sharply when the markets reopened on December 5, recovered

during the next couple of days and then drifted downward. The Singapore Straits Times Industrial Index closed on Wednesday, December 11, at 647.21. That was 6 per cent lower than its level before share-trad-ing was suspended. Trading was light in both Kuala Lumpur and Singapore. More attention was focused on the financial health of the stockbrokers themselves. Only one securities firm suspended dealing: Associated Asian Securities, which is indirectly linked to Pan-Electric. No stockbroker availed itself of the ?Singapore3loM lifeboat extended by banks to brokers in the two countries.

Foreign money men say it will take years to restore the reputation of Singapore’s financial markets. One big British fund, Britannia Investment, says that some time ago it reduced

its stake in Singaporean and Malaysian companies from JNZS6OM to between ?NZB4OM and $NZ1,120,000. M. and G., another large British fund manager, still holds 2 per cent of PanElectric. It says that it made big profits in reducing a 5 per cent stake in the company to two per cent over the past two years. — Copyright, the “Economist.”