Fortune favours those who dare

  • Business
  • Thursday, 18 Jun 2009

IF there is one industry that is not short of money during these tough economic times, it is sports. Sure, Formula One is trying to impose spending limits on its teams but big money is being spent in other sports in the pursuit of success.

And it’s being spent in the world’s biggest sport like never before.

Real Madrid grabbed the headlines and imagination of football fans around the world after it broke the world transfer record twice to buy two of the biggest names in the game. Having spent US$94mil to buy Kaka from AC Milan, Spain’s most decorated team then splurged US$131mil to secure the services of Cristiano Ronaldo from Manchester United.

Indications are that the spending by Real Madrid has not dried up and the repercussions and reactions on and by other teams will be pronounced too during the summer transfer window period.

Drawing similarities to the corporate world, investments by companies during these trying economic times too are continuing but understandably, have not kept pace with the football teams.

Yesterday’s papers reported AirAsia X has placed an order to buy 10 Airbus A350 XWB at a cost of US$2bil. Nestle is investing RM860mil in the region, of which the bulk will be in Malaysia to grow the halal component of its food business.

Then there is Vale’s RM9bil proposed iron ore hub in Manjung, Perak. All these are good signs of confidence in not just Malaysia but also the businesses they operate in.

Investing for growth is something many companies have been doing in the past and in Malaysia’s case, much of that has taken place in other forms as many of the countries’ large corporations have invested vast sums of money to build businesses and operations beyond our shores.

From buying foreign banks in Indonesia to erecting high-rise buildings in Vietnam, companies have spent in search of higher returns and better business dynamics than Malaysia at this time can seemingly offer.

Regardless of those examples, overall spending now by Malaysian companies is understandably lower as they adopt a cautious stance over their finances. However, they can do more.

The balance sheet of corporate Malaysia has improved leaps and bounds in the decade since the Asian financial crisis. Malaysian banks are in great shape and companies have been generating plenty of cash until recently. That cash generation capability might be wounded but I doubt it is broken for many companies.

And companies should take advantage of the lull in the global economy to position themselves for the future.

Hoarding cash is not going to grow revenue or increase market share and in the case of Real Madrid, spending when others might not have the appetite to do so, will help narrow the gap or leapfrog over your competitors.

If they have the capacity to take on a little more risk, they should. Like in the case of Real Madrid, the payoff will surely be great. For latest Bursa Malaysia indices, charts and other information click here

For latest Bursa Malaysia indices, charts and other information click here

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