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7 Responses to “2010 Market Outlook and Stock Pick Insight Goods and Services Tax Briefing”

1. alan on April 7th, 2010 at 9:51 am

   Insight into stock trading

   PERSONAL INVESTING By OOI KOK HWA

   A LOT of retail investors like to trade in stocks. As a result of high losses incurred over the years, especially on stocks that have been delisted, they do not believe in holding stocks for the long term.

   They believe stocks are suitable for trading and not for long-term investment.

   Stock trading is not as simple as trading based on tips and market rumours. Most retail investors actually rely on tips from their remisiers to help them make quick gains from the stock market.

   Investors need to understand that trading involves high discipline, commitment of time and skills. Based on interviews with some top traders, Jack D. Schwager concluded that all successful traders are serious about their trading and are willing to spend a lot of time on market analysis and trading strategies.

   The secret to their success is usually a methodology that worked for them, together with having very rigid loss-control.

   They always act independently of the crowd and have the patience to wait for the right timing for trading. In addition, all the successful traders understand that losing money from trading is part of the game.

   A lot of traders always say that trading in stocks has a lower risk than buying stocks for the long term. Many retail investors like to buy stocks for trading because they do not have the patience to hold stocks for the long term.

   But whenever they incur losses, they tend to change their original objective of stock trading to long-term investment, not knowing that the majority of those stocks for trading are not suitable for long-term investment.

   While some of them may be aware of this important fact, due to their unwillingness to admit their mistakes by cutting losses, they choose to continue to hold on to the stocks. As a result, they get stuck with a lot of poor fundamental stocks in their portfolio for the long term. Most of the time, they will hold those stocks until they get delisted!

   Investors need to understand that stock trading involves constant locking in of gains and cutting of losses. They must always set target profits (profits per trade or PPT) and maximum loss (loss per trade or LPT) for every trade. They need to set the target number of trades that are supposed to bring gains, which is also known as trading success ratio (success ratio or SR).

   They then need to set the target number of trades that they are willing to be involved in per month (trades per month or TPM).

   Hence, profits that can be made by a trader will very much depend on his SR as well as TPM. Most of the time, the target PPT and maximum LPT are relatively constant and are dependent on individual risk tolerance level and skills.

   For example, an investor has set his PPT at RM500, LPT at RM300 and SR at 60%. If he sets 10 TPM, based on SR of 60%, of the 10 trades that he has made, six trades will make gains of RM500 each and four trades will incur losses of RM300 each. The net gain for 10 trades will be RM1,800 ((6xRM500) – (4xRM300)). If the trader intends to increase his profits, he needs to do more trades per month; in other words, increase the TPM.

   Given that the movement of stock prices is random, the probability of stock prices moving up or down is 50%. We think it is a great achievement if a trader can achieve an SR of 55% to 60%. Most retail investors hope for 90% because they are not willing to cut losses.

   As a result, they will wait for the stock price to break even whenever it drops below their purchase prices. However, the longer they wait, the more losses they will incur. Most of the time, of the 10 trades done, they may achieve SR of 90% where nine trades may give them gains but the one trade that incurs loss may wipe out all their nine gains!

   We agree that the above methodology is easier said than done. A lot of times, investors may have the discipline to lock in their gains, but do not have the discipline to cut losses.

   Besides, investors need to allocate a certain amount for their trading capital, which is the amount that investors are willing to lose in stock trading. It should not cause financial problems to investors if they lose all the trading capital.

   Lastly, investors should not average down their losing position. If they have incurred losses in the past three to four trades, it means they may have lost touch with the market timing and sentiment. In this case, it may be good for them to take a break from trading and analyse the reasons behind those losses before continuing.

   ● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/4/7/business/6003482&sec=business

2. alan on May 3rd, 2010 at 8:25 am

   Banks expect people to take more loans this year

   PETALING JAYA: Banks are optimistic of the outlook for trade financing this year, buoyed by increasing demand from the domestic manufacturing sector due to stabilising global economic conditions.

   In the first quarter this year, most banks recorded robust growth year-on-year (y-o-y).

   About a year ago, at the height of the global economic crisis, StarBiz reported that trade financing had declined by 70%.

   RHB Banking Group director of retail banking Renzo Viegas said the bank had generally seen an uptrend in trade financing requirements since the second quarter of 2009.

   “Though the growth is still small, we foresee it will strengthen amid the positive outlook for global economic recovery.

   “Improving economic conditions locally and internationally has contributed to the growth in the requirements for trade financing,” he said.

   From left: RHB head of retail banking Renzo Viegas, RHB chairman Tan Sri Azlan Zainol and RHB group managing director Datuk Tajuddin Atan at the launching of Easy by RHB outlet in Sri Gombak. (The Star/File pic)

   “Growth contributions are mainly from the manufacturing sector such as electronics and electrical, and agriculture and construction-related industries.

   “Our strong customer base in these industries has contributed to our growth in the trade finance business,” Viegas told StarBiz.

   For the financial year ended Dec 31, he said, RHB processed more than RM45bil of trade volume, of which more than 60% required trade financing.

   “This year we are projecting double-digit growth in line with the expected favourable local and global economic scenario,” he said.

   Alliance Bank Malaysia Bhd executive vice-president, head of SME banking, Steven Kenneth Miller said the bank’s trade financing volume in the first quarter this year (calendar year), as opposed to the corresponding period last year, had increased by RM240mil, representing a growth of 8%.

   “The increase in the volume of trade financing is mainly attributed to improving economic conditions both globally and locally, which saw businesses replenishing their stocks amid renewed orders or contracts.

   “Our customer base has also grown in the financial year 2010, contributing new business volume to the bank.

   “Further growth is anticipated as the economy recovers, with the gross domestic product (GDP) growth forecast to be in the region of 4.5% to 5.5% this year,” he said.

   Miller said the bank’s total trade financing volume in the previous financial year ended March 31 was RM12.3bil and it was cautiously optimistic of the trade volume growth for the current year.

   “We plan to grow above the market average by leveraging on our branch network, which includes 26 specific trade windows catering to our commercial customer base,” he said, adding that trade financing made up approximately 30% of Alliance SME’s asset base.

   OCBC Bank (M) Bhd head of global trade finance Chuang Boon Kheng said that demand for the bank’s trade financing products grew by more than 20% y-o-y in the first quarter this year.

   “And we are looking at growth in the teens for this year as the global economy has recovered significantly since the fourth quarter of last year, following the implementation of numerous national policy measures that help to improve global trade conditions.

   “However, the recovery path remains uneven, with developing Asia leading the global growth,” she said, adding that Malaysia’s economy too had rebounded in the last quarter of 2009.

   Chuang said the domestic manufacturing sector, which was largely dominated by export-oriented industries, had also picked up towards the end of last year.

   “We note that the bulk of the increase is coming from export sectors such as wood-based, palm oil and resource-based commodities, and represents mainly intra-Asia trade flow,” she said.

   In line with the robust trade financing growth so far, the banks are also projecting positive outlook for their loan growth this year, with RHB expecting a double-digit increase in the current year ending Dec 31.

   “Trade financing is one of the components of banks’ loans and advances. Thus, any increase in trade financing volume will have a direct impact on loan growth,” Viegas said.

   “Currently, trade financing contributes about 11% to RHB’s loans and advances.

   “In addition, trade financing continues to be one of the key focuses for most banks as it also contributes to fee and foreign exchange income,” he said.

   Meanwhile, Chuang said OCBC’s total loans grew 5% to RM32.6bil in previous financial year ended Dec 31, due to increased lending to SMEs and large corporate customers as well as higher mortgage loans.

   “We are targeting loan growth of at least 10% this year,” she said.

   Miller said Alliance SME projected loan growth of between 15% and 20% for the current financial year, due to the continued economic recovery supported by both government and private investments.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/5/3/business/6167346&sec=business

3. alan on May 5th, 2010 at 8:06 am

   The risks of buying into IPOs
   Personal Investing – By Ooi Kok Hwa

   Investors may not necessarily make quick gains from share offerings

   AS our economic outlook is getting more promising, there are growing interests from companies to list on Bursa Malaysia.

   However, despite the higher number of initial public offerings (IPOs) and bigger, broad trading volumes lately, we noticed that the general public’s buying interest, especially of retail investors, in recent IPOs remains low.

   If we were to scrutinise IPO prospectuses, we will seldom come across one that states the main purpose of the company seeking to go public is to share its profits with the investors. Instead, most companies would want the investors to share the risks involved in running the companies.

   Hence, more often than not, the first few sections of the prospectuses will highlight all the risks involved in buying into those IPOs.

   Investors need to understand that buying into IPOs does not necessarily mean investors can make quick gains. Sometimes, they may need to hold on to those investments for medium to long term.

   There are two main types of share offerings: public issue and offer for sale.

   Public issues involve companies issuing new shares to investors and the money raised will be channelled into reducing companies’ borrowings or used for future expansion.

   As for offer for sale of stock, the shares that investors subscribe to are from existing company owners. Therefore, the money raised from the new investors will be channelled to existing owners, which also means the existing owners will have cashed out a portion of their investments in those companies.

   The Table shows how the owners of a listed company, Company A, are able to get back their original investment through an IPO. The total shareholders’ funds of RM800mil represent the total original investment cost of Company A’s existing owners.

   Let’s assume Company A offers 25% of its shares to the general public (line f) and the type of offering is offer for sale. If the IPO price to book value per share is about four times (line e), the offer for sale of 25% of its outstanding shares will allow the existing owners to recoup all of their initial capital invested in the company (Line g, h and i).

   Even though this does not imply that Company A is not able to perform in future, investors need to understand that the remaining 75% of the shares or 1,534 million (0.75 x 2,045 million shares) owned by the existing owners are in effect “free” to them.

   If Company A is fundamentally strong with good future prospects, then investors should not be too worried about the existing owners cashing out.

   However, if the fundamentals of Company A start to deteriorate, investors need to be extra careful as the remaining 75% of the shares owned by the existing owners are now costless to them. Under such circumstances, every share the existing owners manage to sell into the market, regardless of the price, is extra gain for the owners.

   Therefore, the existing owners can afford to sell the shares at any price they wish. However, if the price is below what retail investors had paid, it will mean a loss to them.

   ● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/5/5/business/6190058&sec=business

4. alan on May 24th, 2010 at 8:30 pm

   Are there opportunities in a down market?

   However, fund managers advise caution

   PETALING JAYA: They say never waste a crisis. Fund managers are cautious but see an opportunity in the midst of global markets tumbling on the back of Europe’s tumultous debt problems.

   Emerging markets are always known to be more volatile. As its ups and downs are always more extreme, would it be wiser to rejig one’s portfolio or brace through the storm?

   Fortress Capital Asset Management Sdn Bhd chief executive officer CEO Thomas Yong, who started trimming his position three weeks ago, is no longer selling, but waiting to see how things pan out.

   “We are in a position to buy (in Malaysia), but it would be premature to act now. Risk aversion will remain for now, and everyone will be cutting positions,” he said.
   Thomas Yong … ‘Risk aversion will remain for now and everyone will be cutting positions.’

   He opined that Europe might not be as quick as the United States in implementing measures, hence uncertainty would continue to dominate sentiments for the time being.

   Aberdeen Asset Management managing director Gerald Ambrose is a buyer of the market, and is in fact buying some of the stocks he could not previously buy because it had moved too fast. “For instance, the rubber gloves have done very well and have gone up a lot. With this correction, they also fall faster. Here’s an opportunity,” he said.

   He added that volatility was irrelevant, and Aberdeen’s investment was not based on market volatility.

   “Markets are now operating on a trampoline. The safety net, which had been the interest rates and financial stimulus used by central banks, have been used so much that it doesn’t work anymore. Now that the safety net has been removed, there is a possibility that things could go really wrong,” Ambrose said.

   Ambrose likes gold, and said it was the only insurance against the follies of the authorities of the world.
   Gerald Ambrose … ‘Markets are now operating on a trampoline. The safety net doesn’t work anymore.’

   Meanwhile, HwangDBS Investment Management Bhd chief investment officer David Ng said that in view of what’s happening in the euro zone, they had reduced the risk in their portfolios by cashing in on the less liquid stocks.

   “Moving forward, we are still cautiously optimistic about the market as we expect the economic recovery to continue even if it might be reduced by the events in Europe. However, the market will need to further re-price this slower growth outlook before we opt to increase our invested levels,” he added.

   On Thursday, BNP Paribas’ Cliver McDonnell said that the euro zone crisis signalled that markets were about 40% through the crisis.

   “We believe we are in the fear phase, don’t buy stocks until capitulation is reached,” he said.

   He added that for Asian equities, the two biggest worries were negative earnings translation due to euro weakness and the impact of a slowdown on euro-zone demand.

   McDonnell listed his 10 steps to capitulation, four of them which he said had already occurred. These included worst recession, loss of investment-grade status, drying up of liquidity, and further de-rating of the euro-zone banks.

   He said the next likely step was the nationalisation of a bank in southern Europe, as he thought it was improbable that not a single bank had racked up significant losses related to non-performing loans and trading losses as a result of the recent economic downturn and wild swings in markets.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/5/24/business/6313926&sec=business

5. alan on May 24th, 2010 at 8:31 pm

   Investors shying away from stock market

   Analysts warn of contagion effect despite positive corporate results

   PETALING JAYA: Investors have been shying away from the stock market even with the slew of better than expected corporate results over the past couple of weeks and the trend is expected to continue this week.

   “I don’t advise investors to load up on shares at the moment. It is obvious that company earnings are doing nothing for the market – external factors are providing all the risk,” Pong Teng Siew, head of research at Jupiter Securities said.

   “The outlook is not good at all,” he told StarBiz.

   On Thursday, the country’s second largest bank by market value CIMB Group Holdings Bhd delivered another record year-on-year earnings growth of 36.5% although quarter-on-quarter, growth was flattish.

   Diversified group UMW Holdings Bhd doubled its net profit to RM132.9mil from RM66mil earlier on improved margins while Media Prima Bhd reversed its earlier losses to make a net profit of RM45.6mil after consolidation of The New Straits Times Press (M) Bhd into the group.

   Still, sentiment failed to catch up and over the week, more than RM41bil in market capitalisation was wiped out from the local bourse, according to Bursa Malaysia data.

   “Amidst doubts about the strength of the global economic recovery and European leaders struggle to contain the region’s debt crisis, as well as the deepening correction of the Dow Jones, the FBM KLCI is likely to see more correction ahead,” Hong Leong Research told clients in a note on Friday.

   In such a catching-a-falling-knife situation, traders and investors should be vigilant, analysts said.

   Across the world, most markets were also swimming in a sea of red amid the string of unfavourable external news which made headlines.

   Among which, Germany announced tough measures to restrict naked short-selling which did nothing for investors’ confidence and triggered further falls in the euro and global oil prices.

   Jupiter’s Pong pointed out that amid the debt crisis, more than 100 billion euros had been withdrawn from southern European banks in a matter of hours.

   “It happened so rapidly last week that authorities there had no time to react, the euro was close to collapsing, it goes to show how fragile financial markets can be,” he said.

   The euro reached the weakest level in more than four years on Wednesday while the pound slumped to a 13-month low against the dollar.

   The greenback climbed to as high as US$1.4239 versus the pound, the strongest in over a year as investors took out their money from risker markets and poured it into safe havens.

   Recent data pointed out that foreign investors were big sellers of Asian equities since the beginning of the month.

   A Credit Suisse report showed, as at May 18, net foreign selling had reached US$8.3bil – the worst month since August 2008 just before Lehman Brothers filed for bankruptcy.

   RHB Research Institute said on Friday that the local benchmark index had formed a “dead cross” pattern, a bearish indicator which signalled more losses for the index.

   Its technical chartist told Bloomberg that should the index fall below 1,300, “it would be a confirmation signal that we will be moving into a correction phase”.

   The index finished last Friday18.43 points down to 1,285.73.

   “Fear is reigning through the global markets with the situation likely to remain ugly for the near term,” Kenanga Research said on Friday.

   An analyst pointed out that speculation that selling of equities had been overdone over the past week could lead to a slight rebound in stocks this week.

   “But the ongoing euro-zone debt crisis may limit any real upside. Investors anywhere should be wary,” he added.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/5/24/business/6317410&sec=business

6. alan on June 6th, 2010 at 10:01 pm

   M’sian banks fundamentally unaffected by debt crisis

   PETALING JAYA: Malaysian banks are only affected by the negative sentiment of the European debt crisis. Fundamentally, it is business as usual.

   “Business wise, the banks are affected by the negative regional sentiment in the past two weeks. Even then, the selldown was more related to the massive losses of plantation conglomerate Sime Darby,” said a banking analyst from a local house.

   Sime Darby shares had tumbled by some 12% in the last two weeks after news on its provisions of RM964mil broke out.

   “If the manufacturing sector is suffering a meltdown in demand from Europe, then this will indirectly affect out banks’ lending prospects,” said the analyst.

   However, this is not the case, as the manufacturing sector is on a pick up trend. Malaysian banks also have no exposure to any of Europe’s papers.

   “Any negative impact from Europe will probably be through trade. Malaysia’s exports to Europe make up some 10% of its total exports,” said Affin Securities economist Alan Tan.

   At present, though, Tan said most leading indicators – such as the global semiconductor sales, OECD composite leading indicators and global PMI (Purchasing managers index) leading indicators were still trending up.

   “In the immediate term, we will continue to see an improvement from the manufacturing side via inventory restocking. While Europe may be slowing down, our intra-regional trade will remain healthy as long as China’s exports hold up,” said Tan.

   Including China, exports to Asian countries accounts for over 50% of Malaysia’s total exports.

   Bank Negara, too, appears neutral on the next rate move in light of uncertainty in Europe’s debt crisis. Further rate moves are expected to be data dependent.

   In May, the central bank raised the overnight policy rate 25 basis points to 2.5%, citing the continued strength of the economic recovery amid moderate inflation pressure.

   Fundamentally, loan growth of 10% in February-March period, will provide a buffer against any deceleration following the rate increases.

   CIMB Research believes that its projected loan growth of 8% to 9% for 2010 is achievable even with interest rate hikes totalling 75 basis points in 2010.

   “Our projected loan growth for 2010 is stronger than the 7.8% registered in 2009,” said CIMB’s banking analyst in a recent report.

   In terms of asset quality, banks’ gross non-performing loans (NPL) ratio declined to 3.5% as of March 10 from 3.7%-3.8% in the preceding four months. This also provides a buffer against any increase in the gross NPL ratio after the rate hike to our projected 3.7-3.8% as at end-2010.

   The FBM KLCI has been an outperformer in the first half of 2010, rising 2% versus average declines of 5% to 11% of the other Asian countries.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/5/31/business/6343768&sec=business

7. alan on July 12th, 2010 at 9:23 am

   Interest rate hikes by M’sia and others a ‘vote of confidence’ in growth

   SINGAPORE: Recent moves by Asian central banks to raise interest rates are a strong vote of confidence that the region will weather risks stemming from the European debt crisis, analysts say.

   Since June 24, the central banks of Taiwan, India, Malaysia and South Korea have lifted interest rates by between 12.5 and 25 basis points, citing the need to tame inflation as their economies rebound from the global downturn.

   While Asia is not totally immune to the effects of a slowdown in Europe and the United States, the region’s dependence on them has been reduced as Asian consumers now play a bigger role in supporting domestic economies, according to analysts.

   “Concerns over Europe’s debt crisis continue to smoulder but that hasn’t stopped Asia’s central banks from pushing ahead with monetary tightening” in the wake of rapid and sustained GDP growth, said Singapore’s DBS Bank.

   Inflation rates were “nearly back to average in all Asian countries and surely headed higher in months to come,” it noted in a market analysis.

   DBS said the latest interest rate increases “are a loud vote of confidence from Asia’s central banks that (Asia’s) growth will continue despite weakness” in Europe, the United States and Japan, the region’s top trading partners.

   By increasing interest rates, Asian central banks were signalling that while these three markets matter, “Asia matters more“, DBS added.

   David Cohen, a Singapore-based regional economist with Action Economics, said the spate of interest rate hikes reflected growing Asian confidence as the region led global growth.

   “As far as the economic outlook is concerned, global markets are clearly nervous about potential faltering in the global recovery but so far the data out of Asia has been encouraging,” he told AFP.

   Cohen said second quarter gross domestic product (GDP) figures, expected to come out this month, were likely to show a continuation of Asia’s healthy economic expansion.

   The International Monetary Fund on July 8 upgraded its GDP growth forecast for Asia this year to 7.5% from 7.0%, moderating to 6.8% in 2011.

   Taiwan’s central bank on June 24 raised its key interest rate for the first time since the export-dependent island was thrown into recession by the global downturn.

   The bank said a recovering economy prompted it to raise the discount rate by 12.5 basis points to 1.375%.

   It cited rising inflation, fuelled by an improving world economy and higher crude oil prices, as the reason for the rate increase.

   On July 2, India’s central bank hiked two key short-term interest rates by 25 basis points in a bid to tame double-digit inflation.

   The increase, the third this year, had been predicted by many economists as India grapples with rising food prices, which have been spreading to other parts of the economy.

   Malaysia followed on July 8, increasing its key interest rate for the third time this year, citing robust economic activity in the second quarter. Bank Negara raised the overnight policy rate by 25 basis points to 2.75%.

   Consultancy Capital Economics, commenting on Malaysia’s move to raise interest rates, said it reflected a view by officials that the economic rebound was “sustainable and likely to stay strong”.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/7/12/business/6647178&sec=business