Video On The Resignation of Ramalingam Raju of Satyam

Found this video on the resignation of Ramalingam Raju, former Chairman and founder of Satyam. Watch this...Sounds more like a commentary on a horse racing day!

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Oh No, Another Accounting Scandal?

Oh no, here it is again, another massive accounting scandal and fraud, involving another top company. This time, is happening at the shores of one of the world's fastest growing emerging market, India. The latest fiasco involves India's fourth largest information technology company, Satyam (Computer Services), that is.

The chairman of India's fourth largest information technology companies admitted he concocted key financial results including a fictitious cash balance of more than $1 billion, a revelation that sent shock waves across corporate India and is likely to prompt investors to question the validity of corporate results as the once-hot economy slows.

B. Ramalinga Raju, is the founder and chairman of Satyam. In fact, the word "satyam" means truth in Sanskrit! Satyam has presence in over 66 countries and employs more than 53,000 global workforce. Together with the revelation, Raju has also tendered his resignation today. In his letter, he revealed overstating profits for the past several years, overstated the amount of debt owed to the company and understated its liabilities.


Raju said that Satyam had inflated its operating profit for the three months ended Sept. 30 to 6.49 billion rupees ($136 million) from 610 million rupees reported previously, while revenue was inflated to 27 billion rupees from 21.12 billion rupees. It had reported an operating margin of 24% which was actually 3%.

Raju also said Satyam's balance sheet as of Sept. 30 had a non-existent cash balance of 50.4 billion rupees; nonexistent accrued interest of 3.76 billion rupees; an understated liability of 12.3 billion rupees; and an overstated debtor position of 4.9 billion rupees compared with 26.51 billion rupees reflected in its books.

This has resulted in artificial cash and bank balances going up by 5.88 billion rupees in the second quarter alone.

Interesting to note that the auditor of Satyam Computer Services is no other than one of the big four Accounting Firm, PricewaterhouseCoopers (PwC). Questions point to whether PwC was involved in the accounting fraud. Remember the fate of Arthur Andersen with Enron?

Satyam's share price has plunged a staggering 78% in one day! On the other hand, India's Bombay Stock Exchange has plunged more than 7%.

For a copy of the content of the letter, please click here.

Belated Santa Rally?

Just when the expected year-end (2008) window-dressing activity (or commonly known as Santa Rally) for global stock markets ended with much disappointment, global stock markets have surprisingly started the year with resolute intention! The chart below shows selective global market performance over the first 2 to 3 days of trading.


Having a sense of too good to be true, especially after so many false starts and suckers rally?

This may well be an exception! In my opinion, key global markets are possibly gearing up for a mini-rally this month, particularly after such a severe bear beating last year. So, there is a good chance we may experience more than just a technical rebound. After such a devastating and disappointing stock market performance in 2008, where key global markets plummeted from around 30% to more than 60%. The start of the year saw fund managers worldwide jostling to position their portfolios for the new year and the bombed out stocks worldwide, a scenario that has not happened for a very long time.

In Malaysia, the reasonably high average daily Bursa volume of about 700 million seem to support the notion too, suggesting there were plenty of buying support, on top of the more than 5% gain in 3 days.

However, bear in mind that this does not mean we have seen market bottom. It's just market "forces" at play at the moment.

While the US Government is doing what they possibly can to salvage the wreckage back home, the story in Asia may just be the beginning of a severe slowdown. Hence, the worst may have yet to happen in Asia. On a conservative note, economic recovery may be more realistic in 2010 than the second part of 2009.

The Best And The Worst of 2008

2008 is an eventful year but probably a year to forget for many! Ironically, it is so eventful that perhaps it is impossible to forget!

To name a few....sub-prime financial crisis, global credit crunch, global assets crash(es) followed by the extreme volatility, oil price skyrocketing to $147/barrel followed by skydiving to below $40, inflation followed by stagflation, global recession, Obama becoming the first black American President, the collapses of well-known global powerhouses such as Lehman Brothers, financial bailouts of giants such as Citibank, China Sichuan earthquake, etc.

For Malaysia, we have the added March 08 General Election followed by the political uncertainties.

Here's how some of the major markets have performed in 2008:
Dow Jones Industrial Average -33.8%
Japan's Nikkei -42.1%
Hong Kong's Hang Seng index -48.1%
Singapore's Straits Times Index -49.4%,
Malaysia's KLCI -39.3%

By the way, the dash (-) stands for minus!

Below shows the best and worst performing stock markets all around the world in 2008. Interestingly, only one stock market (Tunisia) ended in positive territory. Some you probably never even knew existed, but all were victims of the credit crisis and global recession.

Source: BBC

Best Wishes

I would like to take this opportunity to wish you all Happy Holidays!

I wish you the best this holiday season and hope that we can look forward to a better year ahead!

Have a Merry Christmas and a Happy New Year!