Showing posts from May, 2011

OSK Stock Picks for June 2011

The KLCI performed as expected as a reasonable stream of results provided a stable floor while strong news flow drove up Bigger Caps. For June, while the 4 upcoming IPOs and the KLCI review may draw some attention, OSK believe all eyes will be on the potential tussle between CIMB and Maybank over the control of RHB Cap. Outlook: Possibly not as quiet as expected
With a total of 4 IPOs going for listing in June and July, it was expected that the market to be somewhat quiet as investors stored away funds to subscribe to the IPOs or buy into them when traded. Despite concerns that the amount of funds raised by the 4 IPOs, namely UOA Development, MSM Malaysia, Axis International REIT and Bumi Armada, would suck the liquidity out of the market, but the amount of funds (RM7.7bn) is far less than that raised in 2010 with the listing of MMHE and Petronas Chemicals (RM14bn). Thus, there should not be much of an issue on the liquidity of the market post the 4 IPOs.

Together with the KLCI review An…

Don't Buy It

The rumor that the German government is considering endorsing a new bailout package for Greece has sent world stock markets soaring. Don't buy it. All this means is that Germany is willing to throw good money after bad. Along with the German government's ridiculous decision to abandon nuclear energy by 2012 (why not get rid of electricity as well?), the German government continues to live in it's own island of self delusion. Stocks should have a nice run today, but, after that, watch out.

Dionne in Dreamland

E. J. Dionne, the columnist for the Washington Post must not be reading his own employer's newspaper. Dionne devotes his column today to praising "other countries," who have, in his view, successfully overcome the challenges of health care, budget deficits, and unemployment. Dionne is careful not to list these countries or mention any specific country by name. Which countries is he referring to?

Europe? Japan? He must mean China and India where there are no entitlement programs and not much in the way of a tax system. If somehow Dionne thinks that Europe and Japan are doing well in regard to the various items he ticked off in his article, he must have been living in a cave the last few years. Europe and Japan cannot afford any of the things that Dionne is talking about and their economies are on life support. He complains about US unemployment. Most of Europe would trade for our unemployment rate (now, or in the past four decades). Europe is busy trying to dismant…

Bursa Malaysia: e-Share Payment

Do you know that Malaysia now has two types of dividend? In default, listed companies are giving away dividend in cash. But, this kind of scenario has been changed, whereby shareholders are sometimes are given the "share-dividend" instead. Maybank rocks the market last year by purposing a share-dividend plan, in contrary to the usual cash dividend. Then, few listed companies are following the latest trend. Here, let us know more about scheme.

Similar to eDividend, one of the main objectives of implementing e-Share Payment is to promote greater efficiency of the payment system which is aligned to the national agenda of migrating to electronic payment.

What is e-Share Payment?
It is a service provided by all stockbrokers for the purpose of: payment of share sales proceeds by the stockbroker directly into your bank account; and/orproviding an option for you to initiate payment via e-channels (e.g. Internet banking, mobile banking, ATM) or to authorize the banks where you maintain …

Even If There Were No Debt

The current discussion of Western European sovereign debt problems are ridiculous. So, too, are the discussions of American sovereign debt problems (state, local and federal). If you spend a multiple of your income every year, would it matter, long run, how much you owed on day one? Eventually, you would go broke regardless of the initial level of debt. In fact, if anyone bails you out now, you will just take a little longer to go broke and the debt will be much, much larger when you eventually do go under.

There are not enough assets in the Eurozone to prop up Greece, forget about Portugal, Ireland, Italy and Spain. For that matter, there is no real hope for ultimately paying off the national debts of Germany, France and the UK. They all spend too much relative to their income. Ditto for the US.

The Great Experiment, promising future old folks a guaranteed income and free or inexpensive health care cannot work. It's simply a matter of numbers. Debt can postpone the bankrup…

New Fund: AmAdvantage Brazil

If you are a football fans, sure you know at least a bit about Brazil - the country of football. Almost everyone in Brazil knows football, male or female. Brazil is going to host the FIFA World Cup. But, did you know that Brazil is one of the top emerging markets in the world currently. BRIC, which comprise of Brazil, Russia, India and China is the main growth engine of the world now. Do you want to invest in the mighty Brazil? This is the only fund available in the market that invest directly and solely in Brazil. Let's check this out.

AmAdvantage Brazil fund is managed by AmInvestment Services Berhad. This is a feeder fund, which will invest a minimum of 95% of Fund's NAV into the HSBC Global Investment Funds-Brazil Equity (Target Fund), a sub-fund of the HSBC Global Investment Funds domiciled in Luxembourg.

The fund is suitable for an investor seeking: Long Term capital growth on their investment,Participation in the upside potential of the Brazilian market,Medium to High ris…

Government to increase electricity tariff? And, RON95 price? (24 May 2011)

Before Government making the decision on two of the most important necessity of Rakyat, let us make a guess first. I know this would be a hot debate on whether Government should increase the electricity tariff and RON95 petrol price. Actually, both are linked closely with crude oil - the black GOLD.

Electricity Tariff
For TNB, the revise is crucial for its sustainably of the company to continue electrified Malaysia's economy. In fact, this is a long overdue issue, delay and postpone until now. But, why now? I believes that Government, initially wanted to review the tariff once the much anticipated general election. But, the Sarawak state election result could have derailed the early election plan. If we don't review now, TNB may facing financial difficulties which may impact the cash flow and credit ratings of its debts. High natural gas price is affecting the bottom line of the company. Petrol RON95 price Comparing to its brother (RON97), we should be more than happy to still pu…

New IPO: UOA Development Berhad

Being one of the most established developer in Klang Valley, UOAD is going to be a darling property stocks for investors once listed. The strong "UOA" brand name as a developer of high end residential and commercial properties, makes it stands out from its competitors.

What's so interesting about UOAD? Based on the IPO price of RM2.90 per share, the company is listing with a market capitalization of RM3.5bn, which eventually will place UOAD to be the 4th largest property company in Bursa Malaysia. The top 3 are UEMLand, SP Setia and IJMLand.
Don't forget about UOA REIT, which is the real estate investment trust of UOA Group in Malaysia. In other words, whatever properties that was construct by UOAD may inject into REIT one day. With UOAD being granted a "Right of First Refusal" to inject its completed commercial buildings into UOA REIT, it definitely provides UOAD the opportunity to redeploy its capital where the proceeds from asset injections will be re-utili…

New Fund: OSK-UOB Multi-Asset Recovery Strategy Fund

With the ongoing global economic recovery and the various opportunities created from the vast stimulus packages put forth by governments around the world, we are currently witnessing differing levels of economic expansion across all economies. And different asset classes such as equities, bonds, commodities, currencies and cash perform differently under different stages of economic expansion.

Hence, OSK-UOB now offer investors a fund that will capitalize on the potential opportunities arising from the different market conditions resulting from this economic expansion phase by dynamically investing in multi-asset classes that are expected to do well in specific market conditions.

The OSK-UOB Multi-Asset Recovery Strategy Fund is a fund-of-funds which aims to achieve long term capital appreciation by investing in a portfolio of exchange traded funds (ETFs). The fund aims to achieve its objective through a portfolio of ETFs chosen from 5 major asset classes, i.e equities, bonds, commoditie…

New Fund: Am-Mateen Asia Pacific Equity Fund

Launched on 5th May 2011, AmIslamic Funds Management Sdn Bhd presented to investors an opportunity to participate in the growing Asia Pacific region and also investing according to Shariah principles.

The Fund is a Shariah compliant equity fund that seeks to grow the value of investments over the medium to long term by investing in listed equities, equity related investments and other approved instruments across Asia Pacific (ex-Japan) that conforms to the Shariah investment guidelines.
The investment style is active and focuses on strategic structuring of the portfolio. Meanwhile, the investment strategy is to select a core portfolio of low volatility and high dividend stocks with a 3 year time horizon coupled with a value approach to identify undervalued companies due to economic cycles which have been ignored relative to historical patterns.
However, the Manager may adopt temporary defensive strategy by maintaining 100% of the fund's NAV in liquid assets/cash weightings t…

3 Hints given by BNM (16 May 2011)

Bank Negara Malaysia (BNM) hiked the OPR by 25bps to 3% on 5 May as what some analysts said "Surprising". The OPR hike was a pre-emptive strike on inflation pressures as the output gap closes. Many analysts are expecting hikes to resume only in July as inflation remains largely supply side driven. However, BNM seems to act before demand pull pressures dominate and before the output gap turns positive. In our view, the OPR and SRR hike is indicating two things here.

Hints #1 Inflation is going to threaten the Malaysian economy in the near-term (at least). Recent increase in prices of petrol and sugar will further accelerate the numbers. With ongoing efforts by Government to reduce the subsidies, inflation numbers for sure will gone up.

Hints #2 Related to inflation also, BNM is trying to reduce the increasing food and resources prices. If we can reduce the import price, by having a stronger currency, this would be a wise move. So, BNM is trying hard to cramp down our money spent …

Protecting GM Products

Suppose the government decided that GM cars are so great that consumers should take much better care of them than they do. So, to protect GM cars, henceforth all GM owners will be required by law to have them washed and waxed once a week. Surely their owners can afford that...that would only be about $ 35 per week for the wash and wax. Definitely affordable.

Would that affect the sale of GM cars?

Apparently, the answer, according to the government is no. Since owners can afford to wash and wax their GM cars every week then they should be required to do so.

What about Ford cars? Let's suppose the government doesn't like them, so it doesn't care whether Ford cars get washed or waxed, so they decide not to "protect" them with legislation requiring a weekly wash and wax. Why "help" those guys?

How would all of this effect the sale of GM cars? Ford cars? Who wins with this kind of legislation GM or Ford?

The answer is obvious: Ford wins. Consumers can a…

Tax Big Oil? Who Pays

The new solution to high energy prices proposed by the Administration is to increase taxes on oil companies. An interesting energy policy! Forbid drilling and exploration of new energy sources and tax existing production. Is the plan to eliminate energy supplies?

Who pays the tax on oil companies that Obama is proposing? Who owns the oil companies? The answer: the average middle class American in their pension funds and college endowments and foundations. They are, by far, the biggest owner. So, the plan is to tax middle American pension funds through their holdings in stocks. There isn't some unseemly rich guy out there owning American oil companies. It is the average American. He is the greedy oil guy. So, by all means, lets tax him.

So another "soak the middle American" scheme proposed by Obama -- this time as a solution to higher energy prices.

You can't make this stuff up,

Insurance: New Bank Negara ruling to impact claims ratio? (10 May 2011)

Now, every cars can get covered... RHB Research: Bank Negara Malaysia (BNM) announced last week that effective immediately, members of the public will be able to obtain motor cover from all general insurers and their branches as well as at Pos Malaysia and its branches nationwide. All general insurers are committed to provide motor cover to all motorists including the "displaced vehicles" which generally comprise private vehicles exceeding 10 years old and motorcycles currently underwritten by the Malaysian Motor Insurance Pool (MMIP). Obligation to provide cover with NO excessive loading
Based on this new ruling, general insurance players are obligated to provide cover to all insurance seekers, without excessive loading and cross selling of other classes of insurance to mitigate the risk. Although, general insurance players could still load the policies, albeit at a more reasonable amount and not 200-300% as previously charged by the MMIP for the so-called high-risk "disp…

OSK Stock Picks for May 2011

The KLCI lagged the region in April as it suffered from the fallout ahead of the Sarawak state elections. With that behind us, OSK see the market recovering in May as they believe the 1Q2011 will at least meet downbeat expectations after the past 4 quarters of disappointments. With the potential for reasonable results, we believe the market will shift back to fundamentals and look back at Big Caps.

KLCI was a laggard With the KLCI recording a total return of -0.25% in April, Malaysia's standing YTD slipped significantly to being the 4th worst performing market from being the 4th best. As mentioned earlier, the key drag on the Malaysian market was the Sarawak state elections. While the market had put in some gains ahead of the Invest Malaysia conference on 12 and 13 March, by these dates concerns that the incumbent Barisan Nasional would fare below expectations in the state elections led to significant profit taking in the Malaysian market. Towards month end, with the BN retaining i…

Finally, Some Job Growth

Friday's unemployment numbers were undeniably good news, even though the headline unemployment rate increased from 8.8 percent to 9.0 percent. The important news is not the unemployment rate but the number of new jobs created in the private sector of the economy. That number, nearly 300,000 after including revisions to earlier reports, is a very, very good number. Lets hope future months continue at that pace. Such growth would make my forecasts too pessimistic, but, heck, I've been wrong many times before. Lets hope that this month is the start of something big.

After Obama K.O Osama...

In fact, this year's Labor's Day is marred with some terrorist-related news. First, UN successfully bombarded a key area of Libya's dictator Qaddafi, killing his son and injuring scores of his followers and relatives. Then, US troops was successfully and secretly raid the most notorious terrorist leader, Osama bin Laden. The whole raiding process was witnessed by Obama and his key personnel in white house. After several minutes of heart-beating attempts, Obama made an historic announcement on Labor's Day: "Today and finally, we defeated Osama bin Laden, the mastermind behind the 9/11 terrorist attack. We had done the DNA on the body, and it was Osama."

Why Obama, and not Bush?
Through 10 years of hunting Osama, ex-US president George W.Bush launched several military efforts. This led to the Afghanistan war and the Iraq war. When Obama took over, all had been settled down until the Libya attack lately. If you ask me, I think it bodes well for Obama's next e…

A Glimpse of Sanity in Massachusetts

Massachusetts, a state on the brink of financial disaster, has removed the right of collective bargaining by public employees over health care issues. Massachusetts' overwhelmingly Democratic legislature acted for the same motives the state of Wisconsin legislature acted earlier this year -- to reign in the exhorbitant "deal" provided to public employees that taxpayers cannot afford.

The public employee unions cannot demonize the Massachusetts action as a Republican attack on unionism since the Republicans were not in the forefront of the effort in Massachusetts to strip the public employee unions of bargaining rights -- it was done by the Democrats!

Wonder why the President didn't weigh in on the Massachusetts action?

Pump Prices

One way to discourage energy production is to raise taxes on energy producers. That idea is at the center of Obama's energy strategy. Four bucks a gallon for gas is cheap, I suppose, to the Obama crowd, so why not remove the tax incentives in current law to increase oil production?

This continues the Obama Administration's strategy of punishing those who make good decisions -- in this case the oil industry.

On the Obama Administration logic, why not have a special tax for Apple? Apple created products that consumers wanted -- the Iphone, the Ipad. Why not go after them with a special tax increase? Apple, like oil companies, guessed right. Why not punish them too?

Imagine you know a way to increase oil production at lower cost. Would you consider investing in such a process knowing that Obama is waiting in the wings to raise your taxes if you are successful?

One more example of absurd government policy designed to make a serious problem -- higher oil prices -- even worse…