Thursday 31 January 2013

Currency & interest rate, something to be monitored closely

Contrary to what is taught in conventional textbook, personally I believe liquidity carries more weight than economic condition in influencing the stock market movement.

For instance, is the 100% increase in house price in Klang Valley since 2009 justified by the moderate growth in the economy or our salaries/ earnings? Low interest rate and easy financing basically were the reasons for the property boom since 2009.

Giving another example, I do not think the earnings of giant consumer stocks like BAT, NESTLE, DLADY multiplied proportionately to the increase in share price. The surge in share prices of these stocks outpaced the increase in earnings and  dividend payout and hence, these stocks are being traded at high PE multiples and the dividend yields are compressed. Again it is market liquidity rather than the earnings itself that caused the sharp rise in share prices

Interest rate and currency exchange rate are two relevant indicators of liquidity.

Low interest rate in the US encourages USD carry trade and as a result, the global stock markets are flooded with liquidity. Funds with low borrowing costs are chasing for yield and that is one of the main  reasons for the surge in dividend stocks like NESTLE, DLADY, MAXIS etc.

Normalisation of the interest rate could trigger unwinding of carry trade and withdrawal of funds from stock markets. Therefore, interest rate is a financial figure to be monitored closely.

The relationship between stocks in Bursa Malaysia and currency exchange rate can be better explained by portfolio balance approach whereby the strength of currency and strength of stock price are positively correlated. Both KLCI and RM/USD has significant and strong relationship. The outlook of the movement of currency exchange rate may give a hint of the outlook of local stock market and movement of currency exchange rate shall not be neglected when forecasting the direction of KLSE.

The US 10-year bond yield has crept up and crossed above the 2.00% mark...

RM has depreciated and the RM/USD has broken the resistance at 3.06

While it is not significant at the moment, further increase in the interest rate and depreciation of RM could trigger outflow of fund from the Bursa Malaysia. These two figures should be monitored closely for the market direction.

Saturday 26 January 2013

List of furniture related stocks listed in Bursa Malaysia

Ahb 7315 
Dps 7198
Eg 8907
Eksons 9016
Eurosp 7094
Facbind 2984
Ffhb 8605
Hevea 5095
Homeriz 5160
Jaycorp 7152
Latitud 7006
Lcheong 7943
Liihen 7089
Lingui 2011
Pohuat 7088
Sernkou 7180
Shh 7412
Sign 7246
Syf 7082
Tafi 7211
Tiger 7079
Swscap 7186

Thursday 24 January 2013

Reit Distributable Income

What is Reit Distributable Income?

The distributable income for each distribution period shall be the realised income for such distribution period being the net income for the distributable period adjusted as deemed necessary by the Manager in the interest of Reit and the unitholders for the following effects which may or may not have been recorded in the profit or loss for the relevant distribution period:

i) the portion of the management fee paid or payable in units
ii) amortisation and other non-cash expenses or gains
iii) valuation gain/loss on investment properties and financial instruments
iv) depreciation or impairment of assets
v) any other entries, provisions, write-offs or adjustments required by the approved accounting standards
vi) expenses/loss which is charged to the profit or loss relating to issuance of new units or expenses that is capital in nature; and
vii) unamortised costs which had been paid and incurred but had not been expensed off to the profit or loss other than those incurred for issuance of units or raising of funds

Tuesday 22 January 2013

Good return with certainty?

"Invest in Certainty" was the mantra for a local grower scheme.

But I think Datuk Ng Yen Yen made a bad call on the investment. What an illed advice from the ex-Deputy Finance Minister.

Abstracted from an article in the Star,

Grab chance to invest in scheme, women urged

Women should be more actively involved in investment especially those with minimum risk, said Deputy Finance Minister Datuk Dr Ng Yen Yen.
“Women should be given a chance to have a better understanding of how to invest within their financial means,” Dr Ng said at the launch of the World First Oil Palm Grower Invest-ment Scheme for Women Pre-view at the Palace of Golden Horses here on Tuesday night. 
Dr Ng, who is Wanita MCA chief, said the investment was offered at an affordable price with RM5,000 per plot with 23 years of annual dividends. 
An 8% rate of return is guaranteed for the first three years while returns for the remaining 20 years are to be based on the price of crude palm oil,” she said. 
She urged women to take up the opportunity to invest in the scheme during this exclusive period for them. 
She also said the men should buy the investment as a gift for their wives, daughters or mothers in conjunction with International Women’s Day today. 
A press statement said there would be a return on capital outlay from net proceeds of sale of the oil palm estate at the end of the 23rd year. 
For details, contact Mines Marketing Sdn Bhd at 03-89411888 or Women’s Wealth Creation (M) Sdn Bhd at 03-80683993.
However, a circular has been sent out to the investors on the proposed voluntary termination of the grower scheme. See attachment

Reasons given:

a) Unpredictable weather condition (Was it due to inclement weather? Was the rainfall actually higher than usual? Did the company study the rainfall before purchasing the land?)

b) Incursions of wild elephants into the plantation (Surprising someone highlighted this earlier in a forum in 2009. See below)

c) Soil fertility

d) Shortage of key personnel and manual workers

e) Umcompromising terrain (Did the company study the terrain before buying the land? Or did the terrain changed substantially after the purchase?)

A member of forum rightly pointed out his doubts way back in 2009. The points he raised:

I won't put my money in CHGS because of the following doubts:

1) The CPO operation cost is about RM 1200/ tonnes at this moment, up from about RM 800/ tonnes less than 5 years ago. Assume CPO price is RM 1200 a tonne, the company is paying 2% return. (let's ignore FFB production bonus) The operation cost is expected to increase and maybe 10 years down the road, it will go up to RM 2100/ tonne. Assume the CPO price is RM 2100/ tonne, is the company able to pay 12% return to investors when the cost alone is RM 2100/ tonne? Where the money comes from? What I am trying to tell here is that the CPO payment chart doesn't work because it does not factor in inflation.

2) Did the prospectus spell out how the land to be sold after 23 years? If the real estate market is not doing well that time, are they going to hold? How long it takes to sell the land? And more important how soon can the investors get back their money!

3) The company said the return is guaranteed. Is it back by assets? If not, it is merely verbal guarantee. And mine you it is a private limited company

4) The boss is a very prominent businessman in Malaysia. If the plan is so good, do you think the public has the chance to invest in? Why not keep to himself or sell to his rich friends. It is easier to sell to his friends who can invest hige amount rather than having to manage so many retail investors.

5) If the plan is so profitable and safe, why not CHGS raise capital through debt which has lower cost of capital?

6) CPO has gone beyond RM 4700/ tonne and yet the plots were not fully suscribed yet. The total investment available for sale is less than RM 400 millions. It is coming to 3 years and the plots are still not fully suscribed. Few billion units of ASM and ASW 2020 which seems to have lower return were snatched up by Chinese investors within hours! Investors lack confidence is the scheme.

7) Since the company thinks the scheme is so profitable/ certain (the slogan is Invest in Certainty), why not the company offers guaranteed buy-back after the trees start to yield?

8) There were 18,000 oil palms damaged by wild elephants at Gua Musang in April 2009, causing massive loss to a company. Have sufficient measures being taken to mitigate this risk?

9) Track record of the boss Lee and Country Height Group is not so convincing. Look at the winding up of Min Hotel, Lake Front Business Centre owning local authorities up to million of assessment fee (it was reported in year 2006), check with the buyers of college height, Pajam and see whether they are happy with the company, if you happened to visit Mines Wonderland, you will be appalled how the ice sculpture look like, poor customer service, delay in payment etc...

10) The investment is very illiquid. Once the company cannot fulfill his payment, investors will rush to sell the plots... Do you think you can sell then? Few financial advisors said they won't invest in this scheme such as KCLAU, DAVID LEE and the boss of ISI Business Network

Friday 18 January 2013

Focus Malaysia

Malaysia weekly business magazine, focus malaysia online version/ e-paper is available here:

Monday 14 January 2013

MCA started a joke

MCA started a joke, which started the whole world laughing,
But it didn't see that the joke was on itself...

WKS can't even type properly the 3 letters, how can we trust HIM to bring Msia to greater heights?

What is a typo? Answer from Wikipedia

A typographical error (often shortened to typo) is a mistake made in the typing process (such as spelling) of printed material. Historically, this referred to mistakes in manual type-setting (typography). The term includes errors due to mechanical failure or slips of the hand or finger, but excludes errors of ignorance, such as spelling errors.

DAP typed as MCA considered a typo??

A funnier joke of course comes from the No.1 of the party, CSL.


CSL named a few bad deeds Anwar did when he was with UMNO and said Anwar, previously being Minister from UMNO for 17 years, still carry UMNO DNA in his blood.

Is CSL implying UMNO is evil? Then why is MCA still associating with UMNO??

Thursday 3 January 2013


Some info about FBMKLCI

More info available here:

The KLCI is now known as the FTSE Bursa Malaysia KLCI and the enhancements were implemented on Monday, 6 July 2009.

The FTSE Bursa Malaysia KLCI will consist of the largest 30 companies ranked by full market capitalisation, i.e. before the application of any  investability weightings. The number of constituents in this index is fixed.All classes of ordinary shares in issue are eligible for inclusion in the FTSE Bursa Malaysia
Index Series, subject to conforming to all other rules of eligibility, free float and liquidity.

The semi-annual review of the FTSE Bursa Malaysia Index Series constituents takes place in June and December. The meeting to review the constituents will be held June and December, using data from the close of business on the last day of trading in May and November. Any constituent changes will be implemented after close of business on the third Friday in June and December.

A security will be inserted at the periodic review if it rises to 25th or above while a security will be deleted at the periodic review if it falls to 36th or below.

If a constituent is de-listed from Bursa Malaysia, or ceases to have a firm quotation, or is subject to a take-over or has ceased to be a viable constituent as defined by the Ground Rules, it will be removed from the list of constituents. The vacancy will be filled by selecting the highest ranking security by full market value in the appropriate Reserve List as at the close of the index calculation two days prior to the deletion and related indices adjusted in accordingly.

If a new issue is so large (i.e. its full market capitalisation amounts to 2% or more of the full capitalisation of the FTSE Bursa Malaysia EMAS Index, before the application of individual constituent investability weightings) that the effectiveness of the index as a market indicator would be significantly and adversely affected by its omission, the new issue will be included as a constituent of the FTSE Bursa Malaysia KLCI and the remaining FTSE Bursa Malaysia Indices that it qualifies for after the close of business on the fifth day of trading and eligibility will be determined using the closing price on the first day of trading.

FBMKLCI component stocks