Showing posts from August, 2010

New Fund: Public Indonesia Select Fund

Public mutual is launching a new fund, Public Indonesia Select Fund on 1st September 2010. The fund invests in a diversified portfolio of blue chips, index stocks and growth stocks primarily in the Indonesian market, with up to 30% of its net asset value invested in the Malaysian and other global markets.
Public Mutual’s CEO said Indonesia, which has the largest economy in South East Asia, is poised to be one of the fastest growing economies in Asia after China and India.
Key selling points: Huge domestic base, being the 4th most populated country in the world.
Rich in resources
Improved fiscal position in recent years

The fund would focus on sectors which include banking & finance, commodities, building materials and consumers. The fund is a niche product suitable for aggressive investors who wish to capitalize on the long-term growth prospects of Indonesian market.
Offer period                 : 1 – 21st September Min investment             : RM 1,000 Min top-up                  : R…

Same 'Ole, Same 'Ole

President Obama talked about the economy yesterday, punctuating the end of "recovery summer." According to the President, the weakening economy is all the fault of stubborn Republicans who refuse to endorse the so-called "small business tax break" bill. This bill is another "targeted" tax break bill that is easily gamed and will contribute nothing to economic recovery. Republicans are correct to oppose this wasteful bill.

The President has no new ideas. His agenda is mostly a redistributive agenda with job-killing rules, regulations, taxes. The lack of job creation and the stultifying impact of Obama policies are a big surprise only to the President and his Congressional allies.

I wonder if this President will ever understand how jobs get created in the private sector? So far, Obama just keeps whistling the same discredited message of tax and spend. Fortunately, the Congress will have no more of this and November 2nd is fast approaching.

Downpayment to be raised to 20%?

According to real estate players, Bank Negara Malaysia (BNM) may impose a lower mortgage Loan-to-Value (LVR) ratio soon. How soon?
What is the rationale?
As reported in all dailies recently, property prices in Malaysia have been escalating since last year. No doubt, many people made handsome profit even in this down time through properties. Even though BNM has upped the base lending rate (BLR) 3 times so far this year, demand for properties seems unaffected, especially for high-end properties.
According to Bernama, Bank Negara is reported to have written to financial institutions to secure feedback on the possibility of capping the LVR for mortgages at 80% to avert the risk of a potential property bubble.
Recalled, government had imposed a 5% real property gain tax (RPGT) during Budget 2010 to curb the speculative buying of properties. So, it’s not surprise that BNM will implement the 80% cap on mortgage LVR, or at least for properties of more than RM500k.
Currently, banks can usually lend…

Out of Bullets?

How do you restart the economy? At this point, every government policy prescription has been tried. The net result: zero. The economy is struggling and some even expect the economy to show negative growth in the second half. That's unlikely, but certainly possible.

Maybe, just maybe, government policy is the problem, not the solution. The economy, had there been no TARP, no bailouts, no credit and debit card reform, no Obamacare, no demonizing rhetoric from the President, may have been well on the road to recovery by now. The government could well be the problem.

Macroeconomics is no science. When you ask an economist whether he favors spending or tax cuts, his answer tells you whether he is a Republican or Democrat? What kind of science is that? The cold, hard truth is that economists don't know what to do. Obama is now learning that truth to his chagrin.

Obama thought this would all be easy. With folks like Larry Summers, Tim Geithner, and Christina Romer telling him…

Reasons for Optimism

Don't let the national political scene get you down. Things are actually beginning to look up. November 2nd is the big day and no matter the result, there is an almost certain feeling that the political environment will get better for business.

Post November 2nd, Obama might change course. Not likely, though, as he seems to have his playbook memorized and can live with declining public approval. More likely, Republicans will block any new anti-jobs legislation that Obama and the Democrats can dream up. Moreover, there seems to real hope of gutting ObamaCare and shifting the health care discussion to a more rational plane. Progress can be made on repealing much of the finreg fiasco. Congresional committees can expose the enormous graft and corruption of the Obama Administration and their Congressional allies.

So, things will be changing for the better by late Fall and I would expect a very different public dialogue in 2011. All in all, I expect a better political environment…

Genting Malaysia – Drying up

The past two months have seen a slew of activities within the Genting group. Other than the spectacular result shown by Genting Singapore (GENS), Genting seems to be treating unfairly to another son – Genting Malaysia (GENM).
1st, GENM to buy Genting UK from GENS for £426m or RM2.1bn. (See figure 1)
2nd, GENM has won a bid to develop and operate Aqueduct racino in New York City. (See figure 2)

Well, the Aqueduct deal appears promising, with its key appeal being its strategic location just two subway stops from the New York subway. However, the UK assets seem to be too expensive for GENM to swallow.
According to CIMB research, the acquisition price seems slightly high at 1.2x price/book value. Recall GENS originally bought these assets back in 2006 for £699m and three impairment charges taken since then have reduced the book value to the current £289m.
No wonder minority shareholders are against the deal. Surprisingly, the proposed acquisition gets the go-ahead signal after a 2-hour session…

Forget the "Hindenburg Omen"

The latest craze among stock market pessimists is the "Hindenburg Omen.". If you subscribe to this view, you will sell everything you own and retreat to a cave somewhere....immediately. According to "HO," the stock market will get crushed in September and October -- maybe to 5,000 on the Dow, maybe to 1,000!

Don't listen to this silliness. The stock market is cheap and serious Investors should be fully invested. There will soon be an "end-of-Obama" rally, as the enormous political sea-change that will take place on November 2nd gets factored in. There is a real chance of sweeping political change that will bring capitalism back to the US. There are good signs in Europe that even Europe realizes the welfare state must be dismantled.

Things can turn around and it looks more and more like that is where we are headed. So, put on your optimist hat, buy stocks, and enjoy the coming rally.

OSK-UOB Capital Protected World Mining Fund

OSK-UOB Unit Trust Management Bhd: Following the stabilisation of the global economies after the global financial crisis, we have seen a significant recovery in prices of hard commodities (such as base metal (e.g. copper, aluminum), bulk commodities (e.g. coal, iron ore) and precious metal (gold, silver)). Whilst we do not necessarily expect the same rate of price increase going forward, it is our expectation that such commodity prices are likely to remain well supported from demand growth, particularly from the emerging markets such as China, India and Brazil as well as the western world coupled with supply side constraints which should underpin these commodity prices over the coming years.
OSK-UOB Capital Protected* World Mining Fund (CPWMF) is a 4-year closed-end capital protected fund which aims to provide capital appreciation over the medium term whilst protecting investors’ capital on the Maturity Date.

CPWMF is suitable for investors who:
have a low risk tolerance; seek capital pro…

New Economic Model - Urgent !!!

When Prime Minister announced the New Economic Model (NEM) this year, the private sector and investors are welcoming the measures taken by the government towards liberalization. However, things are hanging nowhere, and business community are wondering the implementations part.
Would NEM be implemented as promised? And, when?

Capital Dynamics Group CEO and MD Tan Teng Boo:
"The NEM is a breath of fresh air and has to be implemented quickly and executed in the right way so that the country can attract more foreign funds into the country. Malaysia faced serious economic structural problems in the areas of productivity, efficiency and competitiveness."

Recently, CIMB's Datuk Nazir Razak also share the same view, calling for a fast implementation of NEM to attract FDI into our country.
Lastest call is coming from Dr.Chua (MCA's president) by saying: (TheStar)
"Malaysia would be trapped as a middle-income country if it failed to liberalise its economy and boost investment, …

Rubber Glove - Growth Industry (still)?

Background Malaysia is the world’s largest producer and, together with Thailand and Indonesia, commanding world’s market share of 70%. World's and Malaysia's top-3 manufacturers are TopGlove, Supermax, and Kossan.
Recent events Glove counters were battering down by investors after experiencing a super bull-run since H1N1 outbreak until recently. The near term sentiment was affected mainly because of the following 3 reasons: High latex cost, which accounts for 70% of the bottom line, had hit an all-time high of RM7.78/kg in April as a result of supply concern from El Nino effect.Weakening US$ against RM by 6.4% this year could see earnings contracting, as US accounts for 80% of the export market.Orders slowing down.Growth-still? As history shown, glove manufactures are able to pass the operating cost to clients as long as the demand is strong. As for demand side, we can expect demand to stay strong from healthcare industry. Moreover, rising awareness in healthcare standards in emerg…

New Unemployment Claims Surge Once More

More bad news -- unemployment claims on the rise. Hovering just below 500,000, new unemployment claims is a window into what employers are doing at the moment. They are beginning to add to layoffs again.

For reasons laid out over and over again in earlier blogs, this is a perfectly rational response by private employers to actions taken by the Obama Administration and the Congress in 2009-2010. Commercial banks have, as a predictable response to Obama and the Congress, dramatically curtailed business lending. Can't be pilloried for making bad loans, if you don't make loans.

So, in some sense the Obama plan is working: the private sector has been brought to it's knees: way to go, Barrack! You paid those guys back. A little collateral damage, but so what if the unemployed ranks continue to grow.

Stock Watch -- Zhulian

Zhulian is one of the leading Direct Selling Companies in Malaysia with more than 80 authorized agencies and approximately 100,000 distributors. Founded in 1989 with initial core business in distributing gold-plated jewellery through Multi-Level Marketing (MLM) channel, Zhulian had since diversified its products lines to home care, f&b, nutritional supplements, personal care, cosmetics, air treatment, water treatment, sleep enhancement products and disposable hygiene products.
Keeps on Growing After venturing into Thailand and Indonesia market since 1990’s, Zhulian is currently looking to spread its wings to Philippines and Vietnam. In fact, Indonesia market is expected to contribute to its earnings tremendously in the next few years because of huge untapped market. Currently, it’s Thailand and Indonesia operations contribute 46% and 5% of its total sales respectively.
New products The company would continue to introduce 8-10 new products every year to entice its consumers and help it…

Why unemployment rate remain HIGH now?

Again, US will announce one of their main economy indicators – unemployment rate – this Friday, 6th August. Investors are cautiously trading ahead of the result, while some economists are projecting a higher unemployment rate this time. What? Higher?

Personally, I think the US unemployment rate will remain high in the short-term, at least, mainly because corporate are upgrading their system, instead of hiring now.
Cost Cutting For instance, 2008 economic crisis had forced many surviving companies to trim down their workforce, to reduce the fixed cost of a business.
Temporary measure Then, when economy is getting better in 2009, companies are hiring temporary or contract workers to beef up their inventory which slumped to record low level in previous year.
Improving efficiency Now in 2010, companies are spending to improve their operating or delivering systems to remain cost competitive. Hiring seems to be the last resort would a company take for long-term confirmation of a reviving economy.

Msia Tech Sector: Still have potential upside?

If you had invested into MPI and Unisem for the past one year, I congratulate you for the "sweet" returns. At this juncture, is it still good?
As written in my previous article, I highlighted that the tech-stocks maybe in the brink of peak. The chart below double-confirm with what I said. From there, global chips sales had peaked in March this year and now are showing signs of slowing down. If the share price of your darling stock still holds up well, this means that it is no longer cheap. Rule of thumb, CHIP sales reflecting how CHEAP is tech-stocks.

This is a turning point where rising raw materials prices and stronger Ringgit would affect the manufacturing sector. It is wise to take profits now.
Do not worry, 2nd quarter profit still considered okay. You still have plenty of times to unwind your holdings.