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2 Responses to “Jupiter Online Market Outlook 2010 Seminar”

1. alan on August 25th, 2010 at 11:19 am

   Why is there a lack of interest in the market?

   Personal Investing – By Ooi Kok Hwa

   THE FTSE Bursa Malaysia KL Composite Index (FBM KLCI) finally touched 1400-level again. Despite high index level, the overall daily traded volume remained low at about 700 million-800 million. We believe, except for certain fund managers and day traders, not many retail investors were excited about the market. In this article, we will look into the reasons why investors are not investing at the moment.

   We believe one of the main reasons is that many investors are still quite worried about the global economic recovery. Given that a lot of newspaper articles, media as well as some investment gurus have been saying that the global economy still has the possibility to have “double dips” or slip into recession again. Nevertheless, at this point in time, we believe nobody will know for sure whether the economy will enter into recession.

   However, we notice that the current high FBM KLCI level was mainly driven by high stock prices of some key blue-chip stocks or fund favourite stocks. Investors need to understand that even though the FBM KLCI is surging to reach the recent 2008 peak of 1500-level again, there are still plenty of stocks selling at very cheap valuation.

   A lot of second- and third-liners are still selling at 2008-09 low but with good values, i.e. price/earnings ratio of about six times, dividend yield of above 5% as well as selling below the owners’ costs (or selling below net tangible asset).

   Despite the cheap valuation for lower liner stocks, not many investors are aware of their values. For those who may be aware of the values, not many are willing to inject fresh money into the stock market. One of the main reasons is many may still be holding poor quality stocks and these stocks are selling at 2008-09 low.

   Given that they are not willing to cut their losses and worried about losing more money in the stock market, they prefer to stay sidelined while waiting for their existing poor quality stocks to recover one day.

   In behavioral finance, we name this phenomenon as “snake-bite” effect.

   Unfortunately, in most instances, the moment the prices of these poor quality stocks start to recover, this may indicate the end of the recent market rally because most fund managers, company owners and experienced traders will take the opportunity to liquidate their holdings to these retail investors.

   Apart from the above reasons, some investors are quite worried over corporate governance issues in some Malaysian listed companies.

   Incidents, like some companies being abandoned by their key owners, companies defaulting on their loan repayments, increasing number of companies being classified under Practice Note 17 and later failed to regularise their companies, are affecting the overall market sentiment. As a result, retail investors are quite careful in investing in new companies lately.

   Except for Malaysia and a few other countries in the emerging market, the stock market performance of most overseas markets was weak since April this year.

   Retail investors were quite concerned over the financial crisis in some European countries, the weak euro currency, weak US economic indicators as well as asset bubble in China. As a result, the retail participation in these markets, including Malaysia, was quite low. Hence, the current low buying interest from our retail investors is in line with the overall global market phenomenon. The buying interest will only come back when the global stock market starts to show signs of recovery again.

   Another reason why investors are not buying stocks is that most retail investors have invested quite a big sum of money in unit trust funds. Even though they still have some savings to invest directly in the market, they prefer to keep those excess savings in fixed deposits rather than to buy stocks directly.

   This phenomenon also happens in most developed countries where investors prefer to put money in unit trust funds rather than investing in the stock market. As a result, the fund size managed by unit trust companies grows faster every year.

   Hence, we notice that the stock prices for fund managers’ favourite stocks or stocks covered by research analysts are surging to new high whereas the performance of the neglected firms remain low.

   Unless investors are holding those fund favourite stocks, they will complain that they have not benefited from the recent market rally.

   As mentioned earlier, we still have a lot of second or third liner stocks with strong fundamentals that are selling at cheap valuations. Investors are encouraged to do their own research to discover those companies.

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

   fr:biz.thestar.com.my/news/story.asp?file=/2010/8/25/business/6912416&sec=business

2. alan on October 22nd, 2010 at 9:29 pm

   Signs of slowing growth in H2

   Full-year growth still strong but H2 growth to be less than H1 for banking sector

   PETALING JAYA: While the banking sector will chart strong performance in the second half of 2010 (2H10) from a year ago, the sector will see a single-digit growth in 2H10 from the first half (1H10).

   Analysts and industry observers estimate that the sector will see an earnings growth of up to 30% for the full year, driven by healthy loan growth as well as better fee-based income and non-interest income.

   “For 2H10, banks will probably see a single-digit growth half-on-half (h-o-h) due to the continued growth in loans and higher interest margins as a result of a 75 basis points hike in the OPR (Overnight Policy Rate),” a local bank-backed analyst told StarBiz.

   A Citi Investment Research and Analysis (Cira) report published in September said sector earnings should increase 5% h-o-h in the 2H10 lifting full year growth to 28%.

   The acceleration in loan growth to 12.7% (annualised) in July 2010 will likely be sustained at 11%-12% until year-end by strong demand from households and a pick-up in lending to small and medium enterprises, the report said.

   Malaysian Rating Corp Bhd (MARC) vice-president and head of financial institution ratings Anandakumar Jegarasasingam said loan approval statistics by Bank Negara for August did not show any obvious signs of a slowdown.

   “Loan approvals for the household segment, especially mortgage loans and motor vehicles are expected to be maintained at current levels. We do anticipate an increase in business working capital loans in line with improved business confidence and funding needs. Overall, loan approvals are expected to remain at the current level of around RM30bil per month until year-end,” he said.

   While Kenanga Research expects the loan growth momentum for household to remain strong until year-end, it is cautiously optimistic on business loans as business activities over the next six months could be negatively impacted by a global slowdown.

   “For 2H10, there is an increasing risk that the business segment, mainly manufacturers and exporters, could see slower growth. Also, there may be a squeeze on profit margins due to intense competitive pricing,” it said in a report last week.

   Anandakumar said that macro interest rate hikes were normally associated with widening interest margins for banks as loan assets re-price more and at a faster rate than deposit liabilities.

   “The rise in interest rates is also likely to favour banks that have more variable rate loans. That said, rising interest rates are also likely to affect the repayment ability of some borrowers. However, any potential default as a result of this is likely to be manageable at this stage,” he added.

   Local banks will start releasing their quarterly numbers in the next month or so as earnings season gets under way.

   Public Bank Bhd, which released its third quarter results on Monday, said the three OPR hikes by Bank Negara in 2010 totalling 0.75% helped improved the group’s net interest margin.

   “The improved net interest margin, coupled with the strong organic growth in loans and core customer deposits, led to the group’s net interest and finance income improving by RM525mil or 15% in the first nine months of 2010 compared with a year ago.

   Public Bank’s net profit was up 22.5% to RM782.7mil in the third quarter ended Sept 30 from the previous corresponding period while its nine-month net profit grew 19.7% to RM2.2bil.

   Meanwhile, fee-based income should see noticeable recovery into the 2H10 driven by a rebound in investment banking, treasury, international trade financing and wealth management.

   Cira said that banks with sizeable investment bank business, such as CIMB Group Holdings Bhd and Malayan Banking Bhd (Maybank), will see earnings boosted by the completion of major merger and acquisition deals in 2H10.

   An analyst added that the third quarter would reflect better non-interest income as capital markets improved.

   Public Bank saw its non-interest income grow 18% for the nine-month period from the previous corresponding period, mainly driven by the increase in fee income generated from the group’s unit trust management and foreign exchange businesses.

   “Although there still remain some uncertainties with regard to the exact pace of this recovery, the downside for the banking sector appears limited at this stage. Nevertheless, the pace at which the authorities normalise the banking environment, which has been propped up by fiscal stimulus and monetary policy loosening on an unprecedented scale, targeted structural adjustments and counter-cyclical regulatory policies, is likely to be a key determinant of the sector’s performance going forward,” said Anandakumar.

   Kenanga Research said the implementation of a blanket 70% to 80% loan to value (LTV) ratio cap can impact the industry’s loan growth next year and place pressure on retail banks such as Public Bank, Alliance Financial Group Bhd, Hong Leong Bank Bhd and Maybank.

   It is speculated that the central bank may lower LTV ratio for residential mortgage from 90% and tighten limits on credit cards and personal loans.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/10/22/business/7257347&sec=business