My enquiries says the move is not as simple as it first appears. Let’s take a look behind the scene to see how it may have come to be.

A group of people who are neither about being Democrats nor Republicans but who are the real power behind America meet in Dallas, Texas. Lets call the leader Hal.

Addressing the group gathered, he says “Gentlemen! All this $%%^&* bickering over raising our nation’s debt ceiling and achieving a balanced budget crap is getting to be a real pain in the butt. I know that many of your business decisions are being delayed for it. We can’t tolerate it for our own interest and in the interest of our beloved Nation. Whoever needs a balanced Government budget anyway?

I’ve come up with a plan that’ll give the nay Sayers something to think about and at the same time convey an interesting message to the global community. My plan is to persuade one of our rating agencies to downgrade our nation’s debt to AA from AAA for the reason that the recently approved increase in the debt ceiling is inadequate. The downgrade will be temporary and I’ll brief the President on the benefits. I assure you he’ll go along with the plan.

Here Gentlemen are the benefits for the rating agency and more importantly for us all and of course our beloved country:-

One. By going along with the plan, the rating agency concerned will be able to salvage some of the credibility they’ve lost since the sub-prime fiasco. They will appear to be independent and the US rating decision will give greater weight to the other Sovereign downgrades I’ll be persuading them to make.

Two. The perceived loss of face to Americans on the US downgrade will put pressure on all the traitors in the senate and house. They’ll be blamed for not supporting an increase in the debt ceiling when they could. You can bet that it’s going to affect their reelection prospects. So the next time they’re called to vote on an increase we’re not going to have any trouble from them… and that’ll suit us just faaaine.

Three. The US downgrade will provide a solid reason for rating agencies to re-rate other Sovereign debt and downgrade then accordingly. This will of course put enough pressure on the Euro and other upstart currencies that are trying to replace our dollar as the world’s reserve currency. It will go a long way to screw up the Euro – which as we all know is our nations long term goal.

Four. The US downgrade will send a clear message to countries like China etc. that have grown rich by exporting their cheap crap to us, just how much power we have over the value of their surpluses. It’ll show ‘em that if they don’t tow the line and keep investing in our debt, we can pres the ratings button and the value of their assets will drop like a bomb.

So, Gentlemen do I have your support or do I have your support?”

Hal received unanimous support and the rest is history…

According to an article by Mark Konyn for the Financial Times, as at the end of April 2011, the total amount held in Renminbi deposits at Hong Kong banks had reached Rmb510bn ($78.7bn).

This increase from Rmb90bn at the beginning of July last year has been driven by liberalization measures announced last year by the Chinese and Hong Kong authorities aimed at internationalizing the mainland currency even while it remains restricted on the mainland.

Such deposits are accumulating at an average of Rmb50bn a month and are largely the result of trade settlement, suggesting that deposits will reach Rmb1,000bn by early next year.

As part of longer-term plans to allow the Chinese currency to be freely convertible for both the trade and capital accounts, China aims to establish Hong Kong as the international centre for trade settlement and investment. Currently Renminbi deposits account for only 7 per cent of total deposits in Hong Kong and there is widespread expectation that this will grow to between 20 to 40 per cent in the next few years as the offshore currency market develops and more investment opportunities become available as part of the liberalization strategy.

In anticipation that these trends will attract more international investors, both retail and institutional to increase their allocation to the Renminbi and Renminbi-denominated assets, Rocks Asia Capital in Hong Kong has mandated Dr. A S Johan to advise on the establishment of RMB BondsCorp – an institutional investor in Renminbi and Renminbi-denominated assets.

RMB BondsCorp is being capitalized at US$120 billion through direct equity participation from mainland Chinese, Asian and other international institutions and Sovereign Wealth Funds.

The company will primarily invest in RMB Bond Issuer’s Credit Default Swaps, offshore Renminbi (CNH) and onshore RMB (CNY) denominated securities (i.e. straight, convertible, and zero coupon bonds).

As part of its effort to further develop the offshore Renminbi securities market, the company is researching the development of a new Investor Generated Real time Corporate Rating System for use by investors and issuers. The new system is to be named after its acronym of RiGER.

According to Dr A S Johan, the architect behind the idea, RiGER is unique in its design and application because its ratings verdict (output) is solely determined on a voluntary basis by a large sample of pre-screened and pre-qualified investors – as opposed to a team of analysts employed for the purpose.

The collective input of these investors on various aspects of a corporation’s fundamentals, market perception, treatment of investors, transparency, social awareness etc. is processed by a proprietary, fully automated algorithm and the results updated and posted in real-time.

According to Dr Johan, the introduction and use of RiGER is very much in keeping with current investor needs. As proven by events leading up to the sub-prime fiasco, traditional rating systems have been shown to be fallible – big time!

RiGER is expected to empower investors and this can only lead to the development of a more robust and investor centric securities market. After all what could be better that a corporate rating generated by investors for investors!

issuers and investors is being authored by Dr A S Johan and Eric Chen and is expected to be published soon.

The book, reportedly the first of its kind, is being co-authored by Dr A S Johan and Eric Chen, both of whom are finance industry veterans associated with the Rocks Asia Capital Group in Hong Kong. Johan and Chen each have years of hands-on experience in the international and Asian capital markets.

The book will be available in English initially with Chinese (both Simplified and Traditional) and Japanese editions expected to follow soon thereafter.

According to the authors, the book will draw on the experiences of actual players in the market and attempt to forecast the way forward for both issuers and investors.

Regulators, issuers, investment bankers, advisers, investors, lawyers and reporting accountants will be asked about the successful and not so successful deals they have been involved in and of the key issues they see affecting future corporate and sovereign capital raising effort through Offshore Renminbi Bonds.

According to reliable sources, the book will be distributed through both traditional and online channels. However, autographed copies of the book may only be available at Renminbi Bond Seminars scheduled to be held in key cities in the Asia, the USA and Europe.

For more information including being featured in the book please contact the authors through the Rocks Asia Capital website.

Dr A S Johan (ASJ) was first interviewed by me and published in April 2007 regarding his views on the way hedge funds were managed. In spite of the euphoria hedge funds enjoyed at that time, ASJ had predicted that the global financial markets was precarious as returns on investments declared by many hedge fund managers were fictitious and untenable.

ASJ predicted the global financial crisis

Since that time, we have seen the global financial crisis unfold with the US Sub-prime debacle acting as the main catalyst. Many countries and their financial institutions had been bankrupted and others just too big to be allowed to fail had to be bailed out with taxpayers money with the resultant risk of fueling massive inflation globally.

The bailout has in fact resulted in the massive increase of worldwide money supply. Government published official inflation figures are carefully manipulated and do not reflect real inflation rates. Ask anyone who has to shop for life’s daily necessities or any purchasing manager at a supermarket or manufacturing company and you’ll get an insight into real inflation figures.

What’s really behind the Socio-political unrests in MENA

Since that interview with ASJ, I must admit that I’ve been impressed with his reading of the global financial markets as it was then and as subsequent events proved. So I decided to interview ASJ once again to seek his views on a current issue that could have a serious impact on the world – the Middle East and North African (MENA) socio-political unrests and what lies ahead. Following is a summary of my interview and specific questions I asked ASJ.

First off ASJ insisted that he was neither an expert in sociology nor politics and as such did not consider himself qualified to comment. I suggested that as he had spent time based in the Middle East and served as an adviser to several sovereign wealth funds, family offices and high net worth individuals there, he might care to share some private insights into how the MENA unrests may unfold.

First I asked him why he decided to leave MENA and return to Asia well before any sign of the social unrests were apparent there. ASJ explained that his return was partly because he became aware of similarities in MENA with the hedge fund situation. Only this time it was apparently financial but in the form of social and political.

He said that he had felt a growing tension among common folk. A growing feeling of hate for the minority ruling classes. “Jayke, the key word here is RULE. In the USA and other western and even Asia democracies, the elected President or prime minister is said to SERVE the citizens.

During my stay in MENA, I felt that many people in the MENA region were becoming aware that they were not being SERVED but were instead being RULED. This awareness was fast developing into a feeling of unease and distrust and all that was needed was something to act as a tipping point.

The tipping point turned out to be the massive rise in the cost of living for ordinary people, further highlighting the difference in wealth between the ruling minority and the rest of the citizens.

With the increase in education levels and advances in communication, people in MENA have become more aware and better informed about the things in life that their grandparents and parents took for granted. They began to ask why they have little or no say in who serves their interests and how they are served. Many countries in MENA are not democracies, as we know it, and have instead been ruled by the same or closely related family of rulers for years.

The democratic process may have its flaws, but it is still believed to be a great deal better than any political system that does not allow for change in the selection of the leadership by popular vote.”

Will real democracy ever come to MENA?

When I asked if the current unrests in MENA will result in real change or just go back to the same old position, ASJ said that he believed that real socio-political changes will develop in many MENA countries and. possibly even in some non MENA countries where a real democratic system is yet to be effected.

“Changes will be markedly different from the current way these countries are ruled. For a start he believes that the concept of RULING will be replaced by SERVING. Where there is still rule by the monarchy – it will become respectfully symbolic and the country’s real leadership will be chosen by popular vote that can be held accountable. There is nothing better than the threat of removal to motivate efficiency.”

ASJ explained that dictatorships, be they monarchs or ordinary mortals who have seized power through a once popular uprising, who have a strong desire to perpetuate their rule, are often fond of saying that their citizens are not as yet ready for democracy. So for the citizens’ and the country’s’ own good, they have to RULED.

This may well be true for a time – however, when citizens rise in protest, as they are currently doing in MENA, it is clear that they are ready for democracy – with all of its ups and downs.

How will socio-political changes in MENA affect International companies?

ASJ explained that in his view, once significant political changes evolve in MENA, the supply of petroleum will stabilize and prices will once again reflect supply and demand – as it should. This does not mean that prices will be cheap or expensive. After all petroleum is a depleting energy source and demand for it will eventually dictate price levels at any point in time.

“In regards to the role of international energy companies in MENA, I am of the view that they will enjoy renewed opportunities. However, those companies that have benefited as a result of past relationships with deposed dictators will be viewed as tainted and possibly be denied new opportunities”.

What can international companies do now?

I asked ASJ what he thought international companies could do now in preparation for the inevitable changes that he thinks are coming to MENA. He said that rather than giving what may be misunderstood as advise, he would rather tell me what he and his clients are doing to prepare.

“For one thing we are not by any means abandoning MENA. While taking care to avoid any random violence that may affect our people in several of the MENA countries, one of the companies I advise i.e. Richman’s Clubs is in fact preparing to open one of their thirty planned international clubs, in Dubai.

You may be aware Richman’s is a very pro business club whose stated mission is to proactively expand and protect the business and commercial interests of its members by arranging private access to influential national and global decision makers in a luxurious and relaxed environment.

As far as the MENA region is concerned, Richman’s is assessing the changes in leadership that may eventually evolve. Even if, in a shift to democracy, the ordinary citizen is eventually empowered to elect who is to serve as their leader, it will still be a particular chosen leadership that make key decisions as to which international or local company is favored and which are not. My job as an adviser to Richman’s is to ensure that Richman’s members fall into the favored group.

It is naïve to think that politics has little to do with business. Successful leadership in today’s global business is all about correctly anticipating change not just reacting to it.

Copyright 2011. Jayke Umarezz

Dr A S Johan

Furthermore, no one of any authority in China seems to commenting on it which in itself is strange.

Refer to two recent articles from Arabian Business and Racing Post. They seem to provide a slightly different perspective to all the PR hype.

Some friends of mine in the banking industry in the Middle East do not believe that financing for the announced project is available and commented on the project thus –

“After creating huge big white elephants in Dubai at the expense of bankers, can the white elephant technology be really exported to China? It’s unlikely that Chinese banks want more white elephants?”

Out of interest, I phoned some people in – the – know in Tianjin and was told that the proposed project was not in Tianjin City but in fact in Ninghe – a small town outside Tianjin City with a population of just 360,000 – relatively small for China. Few people in Tianjin or even in China seem to have heard anything about this Tianjin Horse City project until the recent announcement through press releases. The horse racing community too seems a bit taken back.

Given that the accumulated total foreign investment in Ninghe to date is just around $290 million such a huge inflow (of $4 billion) as announced by Meydan cannot go unnoticed. So I find it very strange that nobody in China seems to have heard of this JV up till now.

Furthermore, it seems strange that Meydan should even consider such a major equestrian based real estate project in such a small town when it has been invited to participate in much better cities with an already licensed race course operator.

By way of an example, I have head it said that The Royal Nanjing Jockey Club in Nanjing city (“RNJC”) has been trying to partner with Meydan to develop its race course and integrated equestrian facilities.

Consider these facts. Nanjing has a resident population of over 7 million compared to Ninghe’s miserly 360,000. Nanjing also has a large established domestic and foreign tourist population inflow. Furthermore, The Royal Nanjing Jockey Club project site is set on more than 1,600 acres of flat land as opposed to the Ninghe site which is less than half the size. Nanjing is just 2 hours by road from Shanghai and even faster by rail thereby guaranteeing adequate patronage for racing events, hotels and even real estate sales.

The Royal Nanjing Jockey Club is already licensed for non gambling horse racing while the horse racing status of Ninghe is as yet an unknown entity. The best part of it all is that the total investment that will be required at RNJC to match the developments proposed for Ninghe is significantly less – by at least half. So back to the question why Ninghe?

Meydan, being part of a Sovereign Fund, has both the business and moral obligation to achieve commercial viability for all of its activities be it foreign or domestic – if it wants to establish the credibility that Dubai as a whole lost during the recent financial crisis.

According to a spokesperson at RS Management, global general managers for Richman’s IMC, the decision was made in order to retain an inventory of at least ten (10) CCPMs just in case of requests that cannot be refused from certain persons.

When asked how much each of the ninety CCPMs were placed for, the spokesperson refused to elaborate saying “It is not our policy to elaborate on members or their membership purchase prices. Let’s just say that while they were placed at a discount to the official list price the discounts were not too deep.”

I have also learned that based on a comprehensive independent study commissioned by RS Management, Richman’s clubs development strategy will be changed for the better.

Richman’s new development strategy will now concentrate on a Richman’s owned exclusive private island resort, various Richman’s owned fine dining and networking clubs in key cities around the world, a Richman’s owned super luxury submarine serving as a Richman’s Club at Sea – instead of the luxury yachts previously planned and Richman’s Racing with training and stable facilities for members horses in preparation for competitive racing in China and other countries.

Several important memberships benefits that have not changed however are Richman’s member’s ability to enjoy VIP privileges at various other third private clubs around the world and Richman’s Global Concierge Services which includes emergency medical assistance globally.

For any further information please contact Dr A S Johan of RS Management Limited by email at contactrsm@gmail.com

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