31 December 2010

New Deposit Insurance Limit At RM250,000

Effectively today (31st December 2010), the deposit insurance limit will be increased to RM250,000 per depositor per bank, announced Perbadanan Insurans Deposit Malaysia (PIDM).

Below is the summary of the said announcement:-
  • The new PIDM Bill 2010 has been passed in Parliament.
  • The limit of RM250,000 will protect 99% of retail depositors in full.
  • Under the new Bill, foreign currency depositors will now enjoy deposit insurance protection.

29 December 2010

The Electrifying TENAGA (Nuclear, USD, Tariff)

Tenaga Nasional Bhd (TNB), the national power producer of Malaysia, would embark on nuclear power in the next few years. Given the sensitivity of such issue, Malaysia government has again hinted that there are plans to construct nuclear power plants in the country to fulfill boost up the electricity capacity.
Example of Nuclear Power Plant

According to theStar recently, Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Malaysia plans to build two nuclear power plants with a capacity of 1,000 megawatts (MW) each and commencement of operations in 2021-2022. This is part of the country's overall long-term plan to balance its electricity generation mix.

The two nuclear plants would represent 9% of peninsular Malaysia's existing power generation capacity of 21,817 MW. This is necessary for the country given that the peninsula's power reserve margin will drop from 44% currently to below 20% by 2016 while the 1,600MW Bakun undersea cable project has been discontinued.

While nuclear power is a long-term catalyst, there is short and medium-term positive news for Tenaga.

24 December 2010

Petronas Carigali will be the Largest IPO ever?

Petronas Caragali Sdn Bhd, the exploration unit of Petroliam Nasional Bhd (Petronas), may be listed on Bursa Malaysia next year and it is expected to attract a large number of foreign funds.

"The mother of all initial public offerings (IPO) next year will be Petronas Carigali. We need companies like this to make Bursa attractive," said MIDF Amanah Investment Bank Bhd senior vice president and head of research, Zulkifli Hamzah.

Petronas officials could not be reached for comment. Zulkifli said analysts have been told by Bursa officials of a possible IPO for Petronas Carigali.

OSK Research head Chris Eng said Petronas Carigali should be the largest IPO ever in Malaysia, with a potential market value of close to RM150 billion.

This would eclipse current leader Malayan Banking Bhd, with a market value of RM62 billion as at yesterday.

PETRONAS E&P Business Quick Facts

23 December 2010

Brighter outlook for Glove Sector?

Yesterday, Adventa (Malaysia's 5th largest glove manufacturer) surprisingly reported 4Q10 net profit of RM11.8 million, up 50.8% year-on-year. According to RHB research, the results were above expectations, mainly because of of a deferred tax write back of RM5.6 million. Excluding the differed tax write back, FY10 net profit would have been RM30.2 million.

Advent's range of products
However, profit before tax was lower due to a time lag as only about 70%-80% of the higher costs incurred as a result of rising latex prices and the weakening of the USD against MYR were passed on to customers --- OSK research.

To sweetened the announcement, Adventa also declared a final tax-exempt dividend of 7 sen, which translates into a net payout of 30% and net yield of 3.6%.

Indicating a revival of Glove counters?

22 December 2010

Top 3 Commodity Picks for 2011

Forget about supply and demand issue of commodity, everyone knows the main mover now is Emerging Market, especially China. As long as US economy not yet recovered, China was expected to continue its great appetite to consume commodities globally. Not for its consumptions, but mainly because of China's currency management.

China, already the largest creditor of US by holding USD which was slipping with a series of quantitative easing programs, would definitely forced China to diversify its holding elsewhere. However, China would hand-picking according to its own local demand. As such, Finance Malaysia forecasts those commodities which were used heavily in construction, infrastructure, production will continue to perform in 2011.

21 December 2010

Super BIG Xmas gift for KNM

After a long suffering period, KNM investors can be very joyous coming this Christmas celebration with another good news announced today. In a statement after trading hours, KNM announced that its wholly owned subsidiary, KNM Process Systems Sdn Bhd (KNMPS), had landed a RM2.19 billion job in the United Kingdom.
The contract is for the engineering, procurement, construction and commissioning of works towards the development of an 80MWe gross capacity energy from biomass and waste recycling centre project known as EnergyPark Peterborough. Duration of the contract is about 4 years.

KNM drive into Renewable and Clean Energy Sector...

20 December 2010

English Premier League from Maxis?

Recently, TM and Maxis concluded a 10-year agreement for TM to provide High Speed Broadband (HSBB) Access Services to Maxis. According to RHB research, Maxis with the agreement, can instantly roll out fixed home services to a potential pool of higher ARPU customers with last mile access via TM’s HSBB network to 700k premises, and up to 1.3m premises by end-2012.

Currently, Maxis’ fixed home services is limited to Bandar Utama, Sierramas, Bangsar and Sri Hartamas via its own fibre-to-the-home (FTTH) network. And, as Finance Malaysia know, Maxis is targeting to launch its service in the newly popular township of Puchong.

Maxis's secret weapon - Content

18 December 2010

Understanding Exchange Traded Fund (ETF)

What is an Exchange-Traded Fund (ETF)?
An ETF is an open-ended investment fund listed and traded on a stock exchange, which aims to track the performance of an index and to provide access to a wide variety of markets and asset classes. By holding a basket of individual securities, an ETF allows an investor to expose to many companies or fixed income securities with one single trade.

Benefits of Investing in ETFs...
  • Prices are available throughout the day (according to trading time of Bursa Malaysia)
  • Flexibility and Liquidity, due to combination of trading on an exchange and the continuous offering of units
  • Transparent portfolio. Investors will know exactly what stocks they are investing in.
  • Diversification
  • Lower management costs as compared to mutual funds
How is the pricing of an ETF being set?

16 December 2010

2010 Top 10 Malaysian Companies

Wall Street Journal (WSJ) recently announced the result of Asia 200 survey, which ranked the top 10 companies of selected countries according to financial reputation, corporate reputation, quality, vision, and innovation. Want to know the winners of Malaysia?

Wall Street Journal: "For the second year in a row, Public Bank Bhd ranked 1st overall among Malaysian companies. The bank's profit rose 20% to RM 2.2 billion on a 12% rise in revenue during the first nine months of the year.

Customer deposits grew at an annualized rate of 12.2%. Public Bank, Malaysia's 3rd largest lender by assets behind Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd (CIMB), also ramped up its Tier 1 capital ratio while touting a dramatically lower impaired-loans ratio at 1.2%, versus 3.4% for the industry overall."

15 December 2010

Cypark Resources Bhd – Our Environmental Friend

Cypark International is an integrated landscape and environmental services group that provides design and build services, build services and landscape maintenance. Cypark is also a supplier of plant materials, granites, and landscaping and architectural lighting. Cypark currently operates through its own offices and network offices in Qatar, UAE, Saudi Arabia, Thailand, China and Singapore.

Philip Capital Management (PCM):

About CyparkCypark is the only locally listed environmental technology & engineering specialist. It was established in 2004 and was listed on the Main Board of Bursa Malaysia on 15 October 2010. Its principal activities involve landfill closure and upgrades, construction of waste transfer stations and operating and maintenance of waste facilities (O&M) (see Picture 1). 

13 December 2010

Revised EPF approved funds effective 1 Sept 2010

Effective 1 September 2010, there are 223 unit trust funds approved under the EPF Members Investment Scheme (EPF-MIS). The list of EPF approved funds is updated upon conducting the fund evaluation exercise based on EPF-MIS fund evaluation methodology (FEM).

Under the FEM, funds must meet the set standard criteria, including:-
  1. At least 3-years track records
  2. Have investment mandate of not exceeding 30% in overseas assets
  3. Consistency in return performance among peers/ with benchmark
How frequent will it be reviewed?

11 December 2010

3 wrong perceptions on Malaysia's Properties

In Malaysia, property investment is gaining momentum since last year. And, the property sector seems unstoppable with record breaking sales. New launches are fully taken up within few hours. Speculators are becoming greedier than ever. Calming down, figuring out, is it so attractive after all? Let's have a look at the 3 big wrong perceptions

Wrong perception #1: 
Malaysia's properties still attractive?

No doubt, many analysts and researchers comment that the local market price is still low if comparing to regional markets, such as Singapore and Hong Kong. This was wrong because we cannot simply compare with islands, where land is limited. We cannot simply compare with China, where billions of people chasing for limited supply of houses.

Wrong perception #2: 
KL Developers are going high-end?

10 December 2010

Two cents for Government’s Talent Retaining Program

First, congratulates Talent Corp for continuing trying to achieve the objectives of bringing back Malaysian or foreign talent back home. Indeed, this was a very tough task, as Malaysians already implant the thinking inside. Every year, our "bright stars" migrate to other countries searching for their dream jobs.

Cartoon In: Economist, August 11, 2005.
Why it happens?

09 December 2010

KNM – Good & Bad

Recently, KNM is coming back to the limelight in Bursa Malaysia. After the 4 to 1 share consolidation exercise, KNM is inching up since securing a contract worth RM680 million in Uzbekistan. Then, KNM held a briefing with research outfits indicating that the company was on the road to recovery after a hiatus one-and-a half year.

Good facts:
  • Order book had grown to RM2.4 billion
  • Tender book grown to RM16 billion
  • Better capacity utilization
  • Re-surging of crude oil price which touches USD90 per barrel now
  • Malaysia government's intention to spur oil & gas sector
  • Listing of Petronas' subsidiaries enhancing the viability of local listed companies
  • Impending projects roll-out by Petronas soon
  • Planning to tap into nuclear industry in Africa

08 December 2010

New Fund: AmConstant Multi Maturity

AmConstant Multi Maturity is a close-ended bond fund that seeks to provide regular income from 3 investment portfolios comprising of local and/or foreign bonds. These investment portfolios will mature respectively on the 3rd, 4th, and 5th anniversary of the commencement date and scheduled Capital Repayment(s) will be made to the unitholders following the respective anniversary.

The fund intends to invest a minimum of 95% in a multitude of local and/or foreign bonds carrying a minimum "A" rating by RAM or MARC equivalent to "BBB" by S&P or Moody.

As this is a close ended bond fund, the fund adopts a buy and hold strategy whereby bonds purchased will be held until its respective maturity. At the maturity of these bonds, issuers of bonds held by the fund will be obligated to pay the face value provided there is no occurrence of credit default by issuer.

A downgrade in credit rating may result in additional credit risk assumed by the fund. The manager may choose to liquidate the bond prior to its maturity, if it is of an opinion for the benefit of the fund. By doing so, the manager may be subjecting the fund to a risk of capital loss, hence affecting the value of scheduled capital repayments.

AmConstant Multi Maturity is suitable for investors seeking:
  • An investment that provides capital repayment on the 3rd, 4th and 5th anniversary
  • An investment that targets to distribute regular income
  • Potentially higher returns than fixed deposits
  • To participate in a scheme that provides lower risk than equities 

07 December 2010

Proton loves Perodua to avoid extinction?

There has been a longstanding issue which has to be solved in Malaysia automobile industry – demise of Proton. The national car manufacturer had before storming the local car industry with its popular models such as Wira and Waja. While Proton was unbeatable during that time, Perodua (national 2nd car manufacturer) had approached Proton for a merger, but was turned down.

Now, the whole table turned the opposite direction, with Proton begging for a merger with Perodua. Why Proton so desperate right now?

  1. Proton was over-taken as the #1 in Malaysia
  2. Proton is running with an half-empty plant
  3. Proton must address its problem as soon as possible
Why Perodua then?

In fact, Proton had identified two main areas where they have to improve on – technology and scale. To address it, Proton chose the technology path because it was the national icon, and only technology expertise could transform the company for the long-run independently.

First, Proton approaches Volkswagen, then General Motors, then Volkswagen again. But, all was failed because of the integrity of Malaysia as Proton was the icon, as the foreign partners reportedly keen to be the ultimate decision-maker.

So, scale was the last path for Proton. With the poor sales volume and unpopular new models in this highly competitive market, Proton had a difficult way to go the extra miles without an angel. Meanwhile, Perodua with popular models like Myvi and Elza, facing the needs to expand its plant to cope with the demands. As such, Proton which has the excess capacity in its Tanjung Malim plant could perfectly address Perodua's good problem.

Moreover, Proton can clinch back their #1 the fastest way by merging with Perodua, thus eliminate their main competitor. Perodua also has the more advance technology expertise since they collaborate with Daihatsu, a Toyota-controlled manufacturer, which explains why the quality and performance is better than Proton's.

The above gave Proton reasons to launch a "forced marriage" with Perodua. Malaysians would have to continue subsidizing the profit of Proton and paying more for non-national cars for the survival of Proton. We had had enough all these years. Let's give Malaysians lower car prices and forget the prized Proton.

We are happy for having Perodua, not Proton. The forced marriage would not make babies (bear fruits), and Malaysians will continue suffers with expensive, yet poor quality cars. Think about our babies (next generation), instead of Proton's.

Finance Malaysia was being told that Myvi is faster than other cars…

05 December 2010

Credit Card Insurance, worth it?

I believe almost every credit card users had been offered a new type of insurance - credit card insurance.

What is credit card insurance?

  • it insured you of the outstanding amount owed in your credit card
  • it covers death and disablement of credit card holders
  • it charges card holders an insurance premium annually normally

And, in my case, it offers me a better plan which only charge me if there is any outstanding credit card loan. If you're a prompt paymaster, this is definitely the better option for you. If you agreed on the deal, all you need is to answer 'YES' through the phone. Then, they will issue a contract notes and mail to your home address.

Ya... Pretty easy and convenient though.

But, is it worth to have such insurance?

Finance Malaysia opine that it is not worth, and its a waste of money because of the following points:-
  • Credit card supposed is for our ease of making purchases, especially for those 0% installment deals.
  • Those who opts credit card loans would have been due to financial constrain.
  • By charging extra premium on top of the loan amount will UP the outstanding loan amount, thus, the monthly repayment.

03 December 2010

Broad-Ban in Malaysia?

Forget about the old fixed line internet connections anymore. We have the on-the-go broadband services, which provide almost unlimited boundaries for internet lover to surf anytime anywhere. However, you may not know a very unpleasant scenario is happening in Malaysia (at least I found out now).

Although I comment about TM's monopoly status in fixed line internet connection previously, I still prefer Streamyx for its unlimited surfing, lower monthly charges, and stable connectivity. Most importantly, more than one people can online at the same time, without extra fees. Whereas, broadband cannot.

Don't know #1

Recently, I moved to a new area, and hopes to subscribe for Streamyx (fixed line internet service provided by TM). However, I was shock to found out that I cannot subscribe for Streamyx, because my area was under Maxis territory. Wow… Sounds like I am living in the battle-field, where Maxis won the game!!!

The reason given was that my area's telephone line is bought over by Maxis, and Streamyx needs the telephone line to connect. Since this was the only fixed line internet service you can find in Malaysia, and again thanks to TM's monopoly status, I have no choice, but to look for broadband service.

Don't know #2

Then, I subscribe for a broadband service, but, the connection is slow (running at below 100kbps during peak hours). Can you imagine how slow 100kbps is? It's like opening a single website until you felt asleep. So, I went to another service provider to en-quire  theirs. Thanks for his honesty, he told me that if you are staying near the mountain, and in an apartment unit above 5 storey, you can't expect to get a good connection.

Conclusions… Broad-Ban

Are we living in a business friendly society, in the expense of public's freedom of choice? 
First, Maxis is wrong by conquering certain areas, which undermine the choice of citizen there. 
Second, why TM agreed to let go some of its assets?

Finance Malaysia thinks that Rakyat should be given to freedom to choose for their preferred service. Business owners should cares about the difficulties faced by Rakyat. And, government should monitor the latest development which could affect the welfare of Rakyat. Internet services are very important our daily lives now. Oh my dear Malaysians.

*The telecommunication company is expanding its territory now. Would your area be the next battle-field?

02 December 2010

E&O is the next take-over target?

The recent spate of mergers have been dominating the trading sentiment of local market, with IJM-MRCB, UEM Land-Sunrise, and Sunway-SunCity. Investors are wondering whether there is any mergers activities else, and the million-dollar question is "Who is the Next".

 Main factors of taking private...
  1. Undemanding valuation
  2. Strong branding
  3. A well-run and profitable company
Quayside (Seafront Resort Condominium) of E&O property development
 After screening through the list of property counters, E&O could potentially emerged as the next company of being privatized. The main reason being E&O's is trading at a huge discount to its revised net asset value (RNAV) of RM2.72* per share.

Other than that, E&O has a very good brand name in the premium market, having some prime land-bank in strategic locations (especially in Penang). Couple with its strong marketing acumen, this company fit nicely into the take-over picture currently.

Spicing it up, speculations to privatized E&O has emerged in one of the news portal few months ago, saying that the major shareholder of E&O would made an offer for the rest of the remaining shares he did not hold.

Bursa Malaysia to take on ASEAN

Yesterday, news portal reported that Bursa Malaysia (BM) together with Singapore Stock Exchange (SGX) and Stock Exchange of Thailand (SET) are set to join the Asean Exchange Linkage which will go live by the 2nd half of 2011.

In addition to the linkage, the exchanges would also promote leading Asean public companies under the brand of "Asean Star". The cross-border offering of collective investment scheme would kicks-in after that.

Migration of local investors?
In fact, many local investors are already trading overseas shares, especially Singapore and Hong Kong markets. For them, this made no significant difference, except that the new cross-border trading will reduce the lagging time, thus, boosting the participation and matching rate. If the overhead costs of trading is reduced accordingly, investors will be more reluctant to trade. Anyway, investors can diversify more effectively to regional markets soon.

Brokers do not "broke" anymore?
Local brokers are expecting a revival of the industry, last seen in the 90s. Reportedly, all local stock broking firms would be given the green light to link with the new platform. But, brokers would need to monitor regional markets too, with more than few thousands counters!!!

What is the impact to Bursa Malaysia?
Of course, Bursa Malaysia could benefit from the cross-border trading with increase revenue generated, up-lifting the profile of local market, making it more attractive and vibrant. However, I scared local investors would in turn, shunning the local market in favor of regional markets.

Weathering the storm together...
After all, we will stick together more closely, and shoulder the good and bad times together. This is because, investors are becoming more regional, and a fall in one market would most likely going to trigger a fall in another market.

30 November 2010

New Incentives Plan for Oil and Gas‏

The government has endorsed a new plan of tax incentives proposed by Petronas which will be incorporated in the Petroleum Income Tax Act, Prime Minister said today.

“By lowering risks and increasing the rewards for investment, this initiative will potentially lead to additional petroleum-generated revenue of more than RM50 billion for Malaysia over the next 20 years” he said when announcing 9 new developments and Entry Point Projects of the Economic Transformation Program.

Najib said there would be a notional trade-off of about RM8 billion in the form of revenue foregone from investment tax allowances, reduced tax and the export duty waiver for marginal fields.

The 5 new incentives are:-
  1. Investment tax allowance of capital expenditure.
  2. Reducing tax rate from 38% to 25% for marginal oil field development
  3. Accelerated capital allowance of up to 5 years from 10 years.
  4. Qualifying exploration expenditure transfer between non-contiguous petroleum agreements with the same partnership or sole proprietor
  5. Waiver of export duty on oil produced and exported from marginal field development
Source: Bernama

Finance Malaysia (FM):-
"This is definitely a good perks for the oil & gas sector. The main objective here is to encourage deep water exploration, which is capital intensive and requiring more technical know-how."

"MHB which was listed recently could be the main beneficiary, judging by its expertise and available resources and technical in this field."

"Following the listing of MHB and Petronas Chemical Group, any good news announced would definitely excite the market. FM believe this is just one of the good news prior to the next general election, reportedly early next year".

28 November 2010

QSR shares is "flying", because KFC is "frying"?

Yet, another lesson could be learned in Bursa Malaysia last week. In the midst of series of corporate activities happening, how could you left out QSR Brands Bhd and its jewel KFC Holdings (M) Bhd (QSR holds 50.6% of KFCH)?

Below is the important date and announcements made:-
19th Nov : QSR received a take-over proposal, but in preliminary stage (closing at RM5.76)
20th Nov : Halim Saad was said proposed to take-over QSR at RM5.60 per share only
21th Nov : QSR shares dive 6.4% to RM5.39
25th Nov : US private equity fund Carlyle Group make an RM6.20 offer for QSR shares

For me, there are some very strange things happening, especially on the timing of announcements.
  1. Halim's real announcement was made on Saturday (20th Nov) on Bursa Malaysia website. Saturday?
  2. Halim's offer price is lower than the previous closing price.
  3. Another offer came few days later, which commands a much higher premium.
QSR's recent share price movements
What does this reflect?
Would someone trying to "goreng" the shares of QSR and KFC?

If I know about the Carlyle's offer one week before, I would try to bought QSR shares. However, the shares is too high already. How?

I would try to "cause" the share price come down, so that, I could accumulate the shares at a cheaper price. Lastly, just wait until Carlyle's good news. By then, I would have making a 15% profits on my investment in  merely 5 days.

The question is: "Did Halim know about the soon to be announced Carlyle's offer?"

UnEthical "Ipoh Bean Sprout Chicken Rice" Restaurant... Beware!!!

Beware, especially KL people. There is a famous "Ipoh bean sprout chicken rice" which do business in its own way - unethical. And, for your information, this restaurant have many outlets in KL. I am wondering how it can expand so rapid with the experience of mine as below:-

The story...

Last night, I went for dinner at this outlet in Puchong. Here is my order:
  • One white chicken rice. And, I stressed that I want the "normal" one.
  • One Ipoh chicken Hor Fun.
However, it turned out as following:
  • One famous "farm chicken" which cost RM1 more.
  • One Ipoh chicken Hor Fun with beef balls (sure more expensive la...).
When I confront with the waitress, who took my order. She said: "Oh... We have changed the menu , and we only have Ipoh chicken Hor Fun with beef-balls or fish-balls. Since we do not have fish balls already, I just give you beef-balls today."

Picture by Rasa Malaysia
After charging the bill, I complain to the manager. Because, this is not the first-time I visit the restaurant, and I know the price and what is available on the menu quiet clearly. And, this is not the first-time I order the "normal" white chicken rice, but they gave me the specially more expensive one.

As expected, the manager said there is normal white chicken rice and pure Ipoh chicken Hor Fun available in the menu. Then, she gave me back RM1 for the extra white chicken rice charged. Since then, they lost a few customers like me.

Back to financial-related angle, does it mean that ethical business would not make money?
After analyzing, I believe the said restaurant teaches their server to do it the "more profitable" way, to add-value, and to squeeze customers. Because, I have been served for 3 times before, and they are acting the same. Why can't we do business in a more ethical way? If the food is in good taste, customers sure will return. If the service is good, customers sure will be loyal. Correct?

Finance Malaysia sure will boycott those unethical business. Don't you?

23 November 2010

New Fund: Public Islamic Infrastructure Bond Fund

Public Islamic Infrastructure Bond Fund is an Islamic bond fund that seeks to provide annual income to investors through investments in sukuk of companies in the infrastructure sector.

The fund allows investors to access the sukuk market, which is usually inaccessible to the average investor as it is a market for institutions where the standard transaction lot is RM5 million. Sukuk issued by companies in the infrastructure sector are generally underpinned by predictable cash flows and stable income stream over the respective issuer's concession period. Example, companies with power plant concessionaires, telecommunication service providers, toll-road concessionaires and port operators.

The fund invests up to 98% of its NAV in a portfolio of sukuk of companies involved in the infrastructure sector and the balance of its assets in Islamic money market instruments. To achieve increased diversification, the fund may invest up to 25% of its NAV in foreign sukuk, which includes Singapore, United Kingdom, Japan, Australia, Hong Kong and other permitted markets.

The fund is suitable for investors seeking the stability of annual income with some safety of principal via participating in sukuk issued by companies in the infrastructure sector.

Source: Public Mutual

22 November 2010

New Fund: Public Islamic Alpha-40 Growth Fund

Public Islamic Alpha-40 Growth Fund is an Islamic equity fund that seeks to achieve capital growth by investing up to a maximum of 40 selected Shariah-compliant blue chip stocks, index stocks and growth stocks listed primarily on Bursa Securities and regional markets.

The fund adopts a more focused investment strategy and is able to achieve potentially higher returns over the mid to long term as it concentrates its investment in a portfolio of not more than 40 stocks. Currently, 88% of securities listed on local bourse are Shariah-compliant representing about two-thirds of Bursa Malaysia's market capitalization.

The equity exposure will generally range from 75% to 98% of its NAV. To achieve increased diversification, the fund may invest up to 30% of its NAV in selected foreign markets, which include Singapore, Taiwan, South Korea, Japan, Australia, New Zealand, Hong Kong, China, Thailand, Indonesia, Philippines and other markets.

Source: Public Mutual

21 November 2010

When would asset bubbles in Emerging Market "Burst"?

Do you discounted the possibilities of asset bubbles in Emerging Market?

Even though our governments, including China, saying that asset bubbles is under-controlled for almost one year now, yet, investors are not comfortable with the record breaking prices.

Investors are encountering high prices in properties, commodities, resources, and of course, shares market in emerging markets. People are investing, buying, spending, and borrowing to an extent that would caused asset bubbles in various sectors.
Return, the only thing in mind...
Meanwhile, investors are chasing for returns to beat the market at large, and to avoid being left behind. This "Kiasu" behavior are only pouring oils on fire. Yet, returns is the only thing in mind, and those "kiasu" investors are winning the game to date. For those who does not participate in the game were blaming them for causing the high property prices, undermining their affordability to own a house.
When did the bubbles started?
In fact, the asset bubbles was started end of last year. And, the bad news is, the bubbles are growing non-stop until today. People are blindly pouring oils (until crude oil reaches USD87 per barrel lately), although the fire is big enough to swallow a bungalow.
When would it stops?

Oh... To answer it, we have a two-sided views...
One, the asset bubble will anyway stop one day
Two, it will stop when it "burst"
All will come to an end by following the sequence below:
- when US and Europe recover from their painful crisis,
- when investors found that US and Europe can give them better return,
- when "kiasu" attitude infecting US and Europe,
- when oil prices is too pricey to ignite the fires (commodities will come down),
- when speculative capital flow out of emerging markets,

19 November 2010

Tax Benefits of Unit Trusts YOU Must Know

Due to Malaysian Government's efforts to promote unit trusts, most of the income received by unit trusts will be exempt from income tax. Basically, the income of unit trust may consist of dividends, interest or profit and gain from sale of investments and returns on bonds. Then, the income is assessed and charged to tax separately from the income of unit holders, which was governed by the Income Tax Act

Gains on disposal of investments by unit trust will not be subject to income tax. The only exception is where the investments represent real properties which could be subject to real property gains tax (RPGT).

Exempt Income
Interest and discount derived by unit trusts from the following types of investments is exempt from income tax:
  • Securities or bonds issued or guaranteed by the Government
  • Debentures, other than convertible loan stocks, approved by the Securities Commission
  • Bon Simpanan Malaysia issued by Bank Negara Malaysia
  • Interest paid or credited by any bank or financial institution
  • Income from overseas investment is also exempted from Malaysian tax
    How about dividends from investments?

    Such dividends would already have tax credits attached to them and can be used to offset against the unit trust's tax liabilities. Therefore, either of the following will happen:-
    1. NO further tax applicable
    2. If the unit trust's tax liability is less than the tax credits, the tax credits attached to dividends can be refunded to unit trust
    More Benefit for Corporate investor…

    Example, a corporate investor were to deposit funds in a fixed deposit, the interest will be subjected to corporate tax of 25% currently. But, unit trusts are specifically tax exempted on interest on fixed deposits. In other words, fixed income and money market funds should be an 'Angel Fund' for corporate investors.

    16 November 2010

    Time dotCom needs more TIME?

    After 2 days of suspension and an announcement, Time dotCom (TdC) slides 18% to RM0.63 today. In conjunction with that, TIME - the mother of TdC - also join-in to close down 16% to RM0.435.

    Actually, what is so bad about the announcement? Prior to the outcome, both counters jump up in anticipating of good news. Anyway, it looks like investors are jumping blindly before this.

    The announcement by TdC:-
    • Buy Global Transit Communications (GTC) for RM106 million, the wholesale Internet service and back haul provider
    • Buy Global Transit Ltd (GTL) for RM105 million, which owns 10% of trans-Pacific submarine cable
    • Buy AIMS Group for RM128 million, owner of network-neutral data centers in the region
    • Capital repayment of 2 sens-a-share
    To finance the acquisitions, TdC will pay RM90.9mil cash and the rest in new shares. The deal was expected to enhance TdC's earnings straight away, transforming TdC into a regional telco player, and over-taking other competitors.

    Why still falls after such a good news?
    No one knows the main reason behind. And, Finance Malaysia makes the first comment regarding this, and the main reason was - No More Story. In other words, all the good news have been factor-in before the announcement, and as such, No More Story will be bad news for this company. The last investor who jump in will be the hardest hit.

    It was not surprise, because the deals involved so many parties and people, the so called "insider news" would have leaked out much early. Investors keeps on pouring in their hot money to participate, but, the smart one has started to cash out.

    By looking at the deal carefully, there was new shares being placed out.
    The question is at what price?
    And, how to determined the price?

    Ah...ha... According to it, the price of new TdC shares that will be issued to the vendors of the companies is 72.3 sen each, based on the 5-days volume-weighted average market price of TdC shares. You get what I mean? If the shares shot up and traded actively before the announcement, the price of new TdC share that will be issued would become higher.

    Good Luck on your next target...

    14 November 2010

    Would Steel sector ‘Stealing’ the show next?

    Pre and Post-Budget 2011, you like it or not, construction sector was the main beneficiary. Judging from the share price, construction stocks are almost fully valued now, with less upside space. Gamuda, IJM, MRCB, HSL, with the latest gainers of AZRB and Muhibbah, opportunities seems disappearing in construction counters.

    Next wave is STEEL?

    If you missed the construction boat, another boat is coming your way. Do not worry.
    What people forget was the chain effect of mega construction projects.
    What would construction sector needs? Can you construct without cement? Can you construct without steel?

    Investors have two choices now – cement and steel. Since there are only 3 cement stocks, namely LMCement, YTL Cement and Tasek, which was not so attractive right now, we better focus on steel related stocks.

    So, forget about the already construction rally and focus on steel counters instead, on the following reasons:-

    • Spur by local mega construction projects, such as LRT extensions and Warisan Merdeka Tower.
    • New Vale distribution hub in Lumut, which could lower the cost of local steel millers.
    • The maiden SCORE project at Sarawak to boost capacity substantially.
    • Potential duty hike for export of scrap metals, which is the raw materials needed locally.

    * Hint: LionCorp was looking attractive now

    13 November 2010

    Maybank is going to 'EAT' OSK?

    Financial Daily recently reported that Maybank is going to take-over OSK Holdings Bhd as Maybank was said to be continuously seeking opportunities. Although, both Maybank and OSK reply to Bursa Malaysia's query, both parties have neither denied nor confirmed the opportunities. And now, let us look at the possible acquisition.

    What makes OSK attractive?

    • Good track record of rapid growth, which offers a wide spectrum of financial, advisory and investment services.
    • Already operating in Malaysia, Singapore, Hong Kong and Shanghai.
    • One of the pioneers in local broking industry with 450 remisiers and 300 company dealer's.

      What's in-store for Maybank?

      • Maybank had explicitly wanted to expand regionally, especially on investment banking services.
      • Regional equities broking was always in Maybank's radar.
      • And, main weakness of Maybank now was its fund management arm, in which, OSK is famous of.
      If this is true, Maybank is heading in a right direction, by 'eating' OSK, to compliment with its aim to expand regionally and addressing its main weakness.

      12 November 2010

      Why you should DUMP YTL-e, and, BUY YTL-Power now?

      After successfully riding on the mini Bull market of KLCI, YTL-e is the star performer of YTL group of companies. From around RM0.80, charging upwards to RM1.70 now, YTL-e was the Top Gainer of October. However, Finance Malaysia (FM) is wondering what the reason was behind.

      • First, people are crazy of YTL-e because of its impending WiMax broadband services to be rolling out this coming 18th November
      • And, the above is the only reason. Nothing else.
      Why should you DUMP YTL-e now?

      • The business of WiMax 4G is under YTL Communications, which is a wholly own subsidiary of YTL Power.
      • Meaning, the success of the project would benefit YTL Power, not YTL-e.

        Why should you BUY YTL-Power now?

        • As mentioned, YTL Power is the ultimate owner of the WiMax broadband business.
        • Management of YTL hints that their service would be the most competitive and attractive in Malaysia.
        • YTL Power pays very good dividends annually.
        • YTL Power is a laggard among blue-chip counters.
        Then, what was there for YTL-e?

        The WiMax license is awarded to YTL-e. Therefore, YTL Power will pay license fees to YTL-e annually, and that's it.

        Why the service called YES?
        Is it meaning YTL-E Solution (Y.E.S)?