YTL Corp

This company is known for being very savvy with its funds. It builds up its war chest during good times. It and its CEO always claim that, in crisis times, they will emerge to buy up cut-price assets. They proclaim that to be the company's forte or signature.

Lets look at some of their recent investments in Singapore. First, they bought the Lake Front Collection in Sentosa Island for S$150 million. This consists of 18 bungalow lots and is done with a joint venture partner. Then, they bought the Sandy Island residential development consisting of 19 bungalow lots for S$135 million. The price for these purchases does not look dirt cheap.

Their foray into Singapore includes the en bloc purchase of Westwood Apartments for a record price of S$435 million. The land area is 62179 sq ft and at a plot ratio of 2.8, the land cost per gross development area is $2500/ft2. This price does not look cheap and with today's market condition, profits will hard to find.

They got a good deal in Macquarie Prime Reit. They paid S$285 for 26% of the reit company and also 50% of Prime Reit Management Holdings.

The big one came when its subsidiary, YTL Power, got hold of Power Seraya for S$3.8 billion. This was bought through and unsolicited bid after Temasek has called off its tender excercise. The offer price can, at best, only be described as fair. Temasak wouldn't have left off the power generator at a steal to YTL Power.

YTL Corp is purported to have a war chest of RM11 billlion. The above purchases more or less used up its available funds. They have little left for further acquisitions. So, did they moved too fast or has its CEO loss some of his Midas touch.

Wonder why they suddenly poured so much funds into Singapore. They did not really get fire sale prices. Safe haven?

Why inflation now is good

Keynesian economics recommend that in an economic depression, the correct course of action should be to encourage spending and discourage saving. Governments should borrow money and boost demand by pushing the money into the economy. That's why countries like the US, UK, Japan, China, Malaysia and others are lauching huge stimulus packages for their conomies. Their aim is to stall any recessionary tendencies and hopefully set the economies on a growth path.

But what if the stimulus spendings don't work? Then, the country would go into recession, or worse, depression. The economy will slow down and jobs will be lost. In such a scenario, deflation may come into play. This means that price of goods and services will be lowered. Salaries too may drop.

However, debts such as home mortgages and business loans are in nominal trems (not adjusted for inflation). By this, it means that in a deflationary situation, your loans become more difficult to service. The instalment payment is a larger portion of your decreased salary. More people may default on their payments. This leads to more gloom in the economy.

But, if the extra injection of funds makes the economy sputter along and results in a modest inflation, then prices will move up. So too will your salary. Luckily, your loan remains the same. So, your instalment payment becomes slightly easier. This leaves you with more cash to spend which hopefully will boost the economy a bit. That's why it is important and good to have inflation in bad economic times.