This article first appeared in Forum, The Edge Malaysia Weekly on August 7, 2017 - August 13, 2017

Man, how time flies. It’s August already. And the nation turns 60 later this month. Sixty!

Normally, celebrations of this milestone are raucous affairs, with bawdy tales of lives well-lived and warm wishes for many good years ahead.

But we greeted August with tumult as Lotte Chemical Titan Holdings Bhd displayed FGV-like attributes to lose a third of its market value in a matter of days.

Its listing was the biggest in Malaysia since the heady days of Felda Global Ventures Holdings Bhd’s debut — perhaps not a positive omen after all.

So what happened at Lotte Chemical?

Was it such a stretch that an outage that was no secret — the disruption of its water supply had apparently been mentioned in its IPO prospectus — could have been so misunderstood as to result in such a savage drop in earnings and expectations?

By all indications, the extent of the year-on-year drop in earnings took everyone by surprise. And how could Eastspring Investments, Maybank and Permodalan Nasional have misread Lotte Chemical so badly?

As long-term pension funds built on investment mandates of stability and predictability, Lotte Chemical’s losses will only hurt risk-averse unitholders. The irony of ironies!

While Lotte Chemical did not generate the kind of buzz normally reserved for big-ticket IPOs, one indication of its buoyancy was a TA Research report from early July that called a “buy” and a target price of — wait for it — RM7.41.

A sign of Lotte Chemical’s looming troubles could have come from the assorted errata in its prospectus, which had led TA to drop its target price from an earlier RM9.10, due to what it reasoned would equate to higher feedstock prices for the company.

And to what extent should Maybank, the listing’s arrangers, be made culpable? Should it have been more careful in its assessment of Lotte Chemical’s business? Perhaps it should have been a little more guarded in terms of the way it sold the company to investors during bookbuild? Assumed a greater duty of care for its pension fund cornerstone investors?

The magnitude of Lotte Chemical’s losses and the reach of the impact recall a move some five years earlier in Hong Kong. The Securities and Futures Commission (SFC) had proposed to toughen the Hong Kong Stock Exchange’s code of conduct for IPO sponsors and make them liable for the contents of listing prospectuses.

The genesis of this proposal followed a string of scandals at Chinese companies that had gone public in Hong Kong, only to face accusations — and in some cases, proof — of fraud shortly thereafter.

While there remains no sign whatsoever of such misdeeds at Lotte Chemical, the volatility of today’s markets could and should also engender more caution than necessary.

And it’s not that Lotte Chemical should be 100% exempt of any suspicion.

As Financial Times reporter Song Jung-a points out in an article last month, the company’s original listing attempt was shelved as its parent, Lotte Group, had been “engulfed by a corruption scandal”.

The Seoul-based reporter writes: “Lotte Group’s chairman Shin Dong-bin (had been) on trial for charges of bribery, tax evasion and embezzlement … (and) was also embroiled in a family feud over succession between Mr Shin and his older brother, Shin Dong-joo. The corruption investigation has had a negative impact on some of Lotte’s businesses.”

He adds that Lotte Group last year scrapped a US$4.5 billion IPO for its hotel unit, which runs hotels and duty-free shops in South Korea, Russia, the US and Vietnam.

It is unfair (and probably invalid) for a direct read-across to be applied between both markets and entities.

But as shareholders and unitholders alike grapple with their losses and wonder if the disruption was indeed an isolated incident (or otherwise), such questions will continue to be raised.

Speaking of anniversaries, 60 is an exalted number. Certainly, most people of this vintage would have outgrown their petty prejudices and idiosyncrasies and settled into a life of rumination and reflection.

But the too-public spat over former prime minister Tun Dr Mahathir Mohamad’s ethnic origin certainly was not becoming. So what if his father originated from the Indian subcontinent? Or for that matter, so what if certain cabinet ministers have Javanese, Thai or Chinese blood?

Should it matter? Especially for a country that spends hundreds of millions on a global ad campaign that supposedly celebrates its ethnic diversity?

Tell you one thing, though. Donald Trump may be a lot of things, but he is right about one thing: America IS great. But lest we forget, America’s greatness was built on the sweat, industry and toil of its immigrants, who came seeking a better life and were thus willing to work hard for it.

Why not Malaysia too?

As we approach our sixth decade as a country, shouldn’t we focus on how to improve our economic competitiveness, the nation’s wealth and the well-being of the citizenry?

This country’s politicians need to realise — NOW — that there are far more pressing matters at hand than the race of someone’s father or mother.

The sooner they realise this, the more valid their existence will be, rather than the dubious platforms on which they wobble currently.

Khoo Hsu Chuang is contributing editor at The Edge Malaysia

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