Categories
Economics

[2006] Of did MAS buy a forward/future contract?

Analysts expect Malaysian Airlines System to make a loss in the order of RM2 billion for the first quarter of 2009. They attribute the loss to a hedging strategy “gone awry”: in times when jet fuel prices were over USD100 per barrel, MAS made a bet for prices to remain above USD100 per barrel. Now that prices are below USD100, MAS is in trouble.[1]

It is unclear what kind of hedging strategy MAS used but judging from the article — words like mark-to-market for instance and the fact that MAS is making large loss due to a hedging strategy when prices are below the agreed prices of delivery — I have a feeling that MAS bought future or forward contracts.

Forward and future contracts are commonly defined as a contract between parties to deliver or accept a certain quantity of goods at an agreed future date at agreed prices. Differences exist between the two but I feel they are unimportant in this case. The important characteristic is that at the agreed date, the contract must be fulfilled regardless of gains or loss on any side.

If it is true that MAS bought future or forward contracts, my question would be why?

Would it not be more prudent to purchase options instead of future or forward?

With options, the buyer will have two choices: buy from the spot market or execute the option. When spot prices are below the strike prices, a buyer can simply purchase from the spot market and hence, avoid the kind of loss a buyer would suffer under a future or forward contract.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — KUALA LUMPUR, June 12 — Malaysia Airlines (MAS) is expected to post a loss, which could exceed RM2 billion, on fuel hedges gone awry for its first quarter to end March.

RHB Research estimated the national carrier’s loss in the region of RM1.7 billion, a projection based on an MAS decision to adopt Financial Reporting Standard 139, requiring the company to recognise mark-to-market losses on its hedges. Industry executives, however, expect the loss to exceed RM2 billion.

When jet fuel was trading at well over US$100 (RM350) per barrel last year, MAS had bet on prices remaining high at around US$100 — but was caught out when the global financial crisis hit last year. The sharp pull-back in business activities quickly dragged down the price of crude oil to less than half at its lowest. [MAS’s Q1 loss expected to top RM2 billion. Business Times Singapore via The Malaysian Insider. June 12 2009]

Categories
ASEAN

[2005] Of a third bridge? Where is the second?

A third bridge?

PUTRAJAYA, June 11 (Bernama) — Singapore is quite keen on the construction of a third bridge linking the republic to Malaysia, Prime Minister Datuk Seri Najib Tun Razak said Thursday.

“The concept of the third bridge on the eastern side of Johor is something which we will pursue, and Singapore is quite keen on having the third bridge.

“When we have a third bridge, we can develop the whole of the eastern side (of Johor) up to Mersing and onwards to Desaru.

“Singapore did say that it (the area) has the potential to be another Nusa Jaya like in Bali (Indonesia),” he said in his opening address at the 2010 Budget consultation meeting at the Finance Ministry, here. [Singapore Keen On Third Bridge – Najib. Bernama. June 11 2009]

Sir, where is the second bridge? How can we have a third bridge when we do not have two bridges linking Johor and Singapore together?

The Causeway is not a bridge, if you are counting that as a bridge.

Categories
Politics & government

[2004] Of Ms Fui does it again…

This is the kind of use of statistics that I absolutely abhor.

In the 1990 general elections, PAS’ support base stood at 375,867 votes. Last year, it reached 1.14 million, an almost threefold increase in 18 years. The huge increase in PAS’ support in last year’s general elections came mainly from its new supporters — the non-Malays.

By comparison, BN’s votes increased from 2.98 million in 1990 to 4.1 million last year, an improvement of only one-third. [BN vs Pakatan: Chinese reaction to PAS is the key. Fui K. Soong. The Straits Times via The Malaysian Insider. June 8 2009]

It is so bad, I think it is self-apparent. The logical gap is too wide to hide.

Spot the problem. Or problems.

Mind you, this is a CEO of an MCA think tank…

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

p/s — hints.

What was the percentage of Chinese who voted for PAS in 1990? In 2008?

What is the growth rate of total voters?

What about 1999?

Ong Kian Ming more or less raised this question in my Facebook account: how many seats PAS contested in 1990? in 2008?

Categories
Liberty Photography

[2003] Of reading Utilitarianism under a tree

I have not been posting pictures for a very long time. The reason for that is a certain photography shop — ah, hell, I will just name it; Foto Flash — is taking a very long time to send it to Nikon and service my DSLR.

In the meantime, I have to settle with my old trusty Fujifilm A303. That is a very old point-and-shoot camera; it is the camera before I migrated to D40.

This is the first photo by A303 after more or less 2 years, I think.

Some right reserved.

This is not an entertaining book due to its long proses but it is enlightening anyway. I do not however agree with some that Mill writes, especially with bias towards religion. Somehow, he makes exception for his religion what he outlines for others.

Regardless, I will be in Penang next week and I need my DSLR. If Foto Flash does not return my D40 in time, I may be in need of a new DSLR. At the moment, I am looking at D60. To do that, I might sell my D40 to subsidize my upgrade.

I will be leaving for Australia in the first or the second week of July. So, I need to get it off my hand rather quickly. I am thinking of selling my D40 in between RM1,000 and RM1,500. That is between half and 3/4 of the price I bought it for. Along with it are the charger, the CD, the manual and the kit len. If you are lucky, I might throw in a tripod for you too.

So, anybody want to buy my D40?

Categories
History & heritage Society

[2002] Of move on

Members of the older generations generally adopt a paternalistic attitude towards the younger generations when discussing the history of this country. It is true that not all of them assume that attitude but come Aug 31 and without fail, there is no escape from hearing the same old lament, especially in the media. Not to deny the importance of history, but perhaps it is exactly that disconnect from history allegedly prevalent among the younger generations that may bring this country forward.

While there are those among the younger generations who are no doubt ignorant of history, I do not fully agree with the accusation that all members of these generations are guilty as accused. The whole generalization is grossly overdone. Furthermore, even when a member of the younger generation has better knowledge of history compared to his or her older counterparts, the same paternalistic attitude prevails on the latter’s part. Why is that so?

Purely speculative of course but I suspect that it is emotional detachment of the younger generations from the old eras that the older generations lament. The young simply do not relate to the older generations’ experience. The more I think of it, the more I feel that it is not about the young’s knowledge in history.

Without making judgment, that detachment is inevitable.

Many problems besetting our society are something we inherited from the past. These are legacy issues. As Billy Joel wrote about 20 years ago, we did not start the fire; it has always been burning since the world was turning. When I use the pronoun we, I mean my generation and our peers who grew up during the information revolution, young enough to not have emotional attachment to the bogeyman that haunts Malaysian society.

There is certainly no shortage of legacy issues even when those issues which supposedly settled. For proof, look no farther than an old ghost called communism that has seen a resurrection recently. Judging by bitter responses to a suggestion to allow former Malayan Communist Party leader Chin Peng to return home from exile, especially from veterans of the security forces, old hurtful feelings obviously linger still. Time fails in healing old wounds.

For the generations that lived through the Emergency and indeed, unlucky enough to remember the gap between the last day of the Japanese Occupation and the eve of the British Military Administration in Malaya, nobody can deny their emotional attachment to that era. The attachment is far stronger if they suffered from personal loss. While the younger generations can learn history from any medium, it is hard to imagine how the same generations can grasp the same emotional connection the older generations have.

Maybe, the older generations with their personal emotional attachment to that era earned a right to assume a paternalistic attitude.

Nevertheless, the young’s emotional detachment does not always bring about a negative connotation. I am here to argue that that emotional detachment might exactly be an advantage the younger generations have to judge previous successes and mistakes objectively and to produce new paths forward for the country.

Emotional attachment of the older generations may become a liability for us all in times when progress means breaking away from the past. Strong emotional attachment may give unnecessary extra weight to historical factors at the expense of new realities. And perhaps, their emotional attachment make them hopelessly partial about their past successes and mistakes.

Consider, for instance, what I consider as an overemphasis on communism. Despite the brouhaha, how many Malaysians actually believe that the communists will take up arms in Malaysia again? Do we really need to have the police to monitor so-called communist activities?

As a steadfast believer of the right to private property, I vehemently oppose communism but surely, this scare is something irrelevant today. I personally do befriend individuals who maintain communist tendency but I do not seriously expect them to call me a capitalist pig, much less pick up a bayonet to stick it into my gut.

With all due respect, anybody who believes otherwise in these days is far too detached from reality. Concern about the communists taking up arms in Malaysia — even if Chin Peng finds himself in Malaysia — should be an issue that goes all the way down in the public priority list compared to issues of public safety, for instance. Or that lemon socialism and other possible improprieties related to the Port Klang Free Zone fiasco.

As for me, I fear robbers and murderers more than I fear the communists. In fact, I fear the odds of the police abusing private citizens are much, much higher than the chance of a Malaysia getting killed by a communist.

I find this preoccupation with threat of communism all the more ridiculous when the same groups riling against communism are blind to the central planning policies that the Barisan Nasional-led government currently runs on. Look all around and it is not hard to notice policies of price control, supply control, imposition of quotas and five-year plans. Worse, our own government has no shame in curtailing the liberty of Malaysians. A communist government would do these things anyway.

And so, we won the war against the communists for what? To exile Chin Peng only to implement policies that the communists will implement, anyway?

It does not make sense, does it?

This is what one gets if one bases his or her opposition on emotions. This is why emotional attachment is a liability. This is why the young, with their emotional detachment to that bygone era, will be able to move on to focus on issues that matter and discuss the future of this country instead.

I say move on.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on June 3 2009.