Tan Teng Boo View On Icapital biz Berhad
Listen to this interesting interview by Mr.Tan Teng Boo, Managing Director of Capital Dynamics, a global fund manager.
He explain we do not need to worry about US Economy!
He also tells whether he believes there will be a double dip and his outlook for China in 2H 2010, as well as for Malaysia.
He also tells how he picks stocks for his iCapital Global Fund (Singapore) and iCapital International Fund (Australia).
On the closed-end fund, iCapital.biz (Malaysia), he explains why the fund is trading below its net asset value (NAV).
Capital Dynamics will be organising an Investor Day ala Berkshire Hathaway style on the AGM of iCapital.biz.
Read more on Icapital biz Berhad Investor Day 2010 and 6th Annual General Meeting
Top Pick Is iCapital.biz
icapital Bhd’s First Ever Investor Day 2010
Capital Dynamics Sdn Bhd MD Tan Teng Boo talked about what he hopes to achieve via icapital.biz Bhd’s Investor Day 2010, who his investment heros are and the return rates on his funds.
The Wall Street Carnage – Should We Cut and Run? – Tan Teng Boo, MD Capital Dynamics
Part 1: Discussion on rationale of the rescue of Bear Sterns and the absence of it for Lehman, and if Malaysian AIA policy-holders should be worried about the near-failure of AIA’s parent, AIG.
Part 2: Is it too late to sell? Also, debunking of efficient markets theory and how short selling aggravates the inherent asymmetrical nature of stock markets.
Part 3: Has financial media blown the crisis out of proportion? And in Malaysia’s case specifically, what’s the impact of political uncertainty on the local stock market?
FBM KLCI to test 1,200 points – Tan Teng Boo, Capital Dynamics – 14-Aug-09 00:00
Tan Teng Boo, MD of Capital Dynamics, believes the FBM KLCI will hit 1,200 points in the next 6 months. His top stock picks are still Parksons and Padini. And he says not to stereotype Chinese companies that are seeking to list on Bursa Malaysia.
Up Close and Personal with Tan Teng Boo
By TEE LIN SAY
HE has been defined as one of the country’s iconoclastic minds in financial markets research and having been compared to the Oracle of Omaha, Warren Buffett, it’s no surprise that Capital Dynamics Asset Management Sdn Bhd Tan Teng Boo has done it again.
His latest toy – the Australian Financial Service Licence he secured recently for his firm. Just how many Asian fund managers would attempt such a feat singularly in a foreign land?
Renowned for his brilliant and eclectic style of investing, Tan is also noted for his critical writing and constant criticism of Malaysia’s past mismanagements, white elephant projects and poor economic policies.
In fact, if one were to ignore the variables (Buffet’s investment firm has a huge base and is largely exposed to the US market which has taken a major beating) and compare Tan’s performance with Warren Buffett’s in the last 10 years, Tan wins.
From 1998 to Mar 2009, Capital Dynamics Asset Management Sdn Bhd delivered a net compound return of 19.78% annually versus 3.16% per annum for the Kuala Lumpur Composite Index (CI). Meanwhile, Buffett’s Berkshire Hathaway has delivered annual returns of only 5% over that period!
“I’m pretty damn good at what I do. I would say I am one of the top five fund managers in the world. It is a pity that people don’t really recognise that,” says Tan in such a matter-of-fact manner, that it’s almost hard to construe that as boasting.
Tan today has three funds operating in three countries investing in 42 countries. He reads close to 300 annual reports a month and is constantly on the lookout for undervalued companies.
Tan considers himself very lucky to be alive in this era when China is undergoing its majestic economic and power transformation. And his view on the market?
“We’re in the start of a bull market that will be led by China. There is no economy in this world that is stronger than the Chinese economy,” says Tan.
Biggest achievement
For Tan, setting up Capital Dynamics (Australia) Ltd in Sydney, is more than a mere business milestone.
With an initial paid up capital of A$500,000, Capital Dynamics (Australia) is targeting a fund size of A$50mil in the next 12 to 18 months for the I Capital International Value Fund.
Undeniably, its a huge achievement, but there’s an obviously deeper meaning when Tan says the Australian licence is one of his accomplishments he is most proud off.
“For me, it was also a challenge to myself. I want to show people that Malaysians can do it. I am proud to be a Malaysian, a Chinese and an Asian.”
“I dedicate this challenge to my son and daughter. I want to let young Malaysians know that you can actually do it on your own simply through hard work, focus and determination.”
He says that if every Malaysian were to think this way, then we would be living in a different country today, where the political scene would not be in its present state.
For Tan, he sees himself on a crusade which far exceeds his role as a fund manager. It is perhaps not surprising why Tan writes critically in his weekly iCapital newsletter.
“I would like to think that as an individual, I am making a difference to the country. Malaysia has huge potential … but it is being destroyed by selfish politicians,” he says.
In Chinese, Tan’s name literally translates to “ability to carry any burden”. He’s certainly living up to his name.
At his age, Tan ought to be winding down and enjoying the fruits of his labour, but Tan says he is on a very long and tough journey, both for his passion for investing and for society.
Tan says that Malaysia, during the sixties was a much better place than it is today.
“Since 1997, I have been very depressed with the state of our country. What I’m doing now, is akin to walking the Antarctica. There is no road map and there are obstacles on the way. But I make this my personal mission while I am here on earth, that is to make the world a better place,” he says.
Background
Tan was born in Alor Star to a family of six. As a 17 year old student, Tan says he remembers his father switching on the radio everyday at 7pm for the market report on the RTM station.
While the stock market influence was there, Tan describes himself as being very laid-back then, and was only too happy to stay put in Alor Star.
He worked briefly as a Reuters reporter, before deciding instead to pursue a degree in Economics from The University of Sussex in 1973. At the tender age of 21, he married his secondary school mate.
Upon graduating, he came back to Alor Star and Tan was contented to help out with the family business of rubber processing and trading.
Nonetheless, he still invested in the market, and his experience of hitting it big was with Kuchai Development Bhd in 1978.
“I bought it at 70 sen and sold it at RM5 in 1981,” he recalls.
At the same time, friends and relatives advised Tan to leave Alor Star to make a name of his own. Hence, Tan left for Kuala Lumpur in 1983. He joined GP Securities (now PB Securities) as an office manager doing mostly administrative work.
“Back then, there were two things I was really keen on. One was to be in the cemetery business, and the other was to be a stockbroker. Cemetery businesses offered really good money. I guess my passion for stocks won out,” he says.
Tan says he wanted to provide investors with an alternative and independent view, as retailers were mostly being “screwed” left and right by biased reporting.
Hence started Capital Dynamics Sdn Bhd in 1989, Malaysia’s first licensed independent investment adviser. The principles of the company hinged on “independence, intelligence and integrity”.
Through its flagship weekly publication and its investment portal, icapital.biz, Capital Dynamics till today provides sound investment advice to investors.
Since then, Capital Dynamics has taken up much larger challenges. It listed its closed end fund, icapital.biz Bhd on Oct 19, 2005. Up to March 2009, it has gained 13.89% annually versus -1.34% per annum for the CI.
A year later, Capital Dynamics (S) Pte Ltd was founded in Singapore. This manages the i Capital Global Fund (ICGF), a global fund that has also outperformed the Morgan Stanley World Index.
From inception in July 6, 2007 to Mar 31, 2009, the fund performance of ICGF is -18.95% per annum. The Morgan Stanley All Country Index plunged 32.14% and the Morgan Stanley World Index plunged 31.81% during the same period.
These days, with the increasingly global nature of his company, Tan shuttles between Malaysia, Singapore and Australia every other week.
“If not for the advice of friends and relatives at that time, I would probably still be in Alor Star today, still not knowing what I wanted,” says Tan.
Staunch values
Tan is a staunch admirer of the “Chinese Gentlemen” or the concept of a man with honour. He says he lives according to the rules of Confucianism, where he has an idealistic view of the world, and really desires to make the world a better place.
Confucius said: “A gentleman needs to have three basic characters, which I have not lived up to. Be benevolent with no worry; be wise with no bepuzzlement; be courageous with no fear”.
Tan takes his relationships and friendships very seriously.
“My standards of friendship are very demanding compared to other people. I give that much, and I expect that much back also,” he says.
For Tan, a life well lived is one where it is meaningful and his children eventually come back to join his business. Presently, both his children are working and studying in the US.
Tan agrees that money cannot buy happiness. In fact after a certain point, money starts to devalue. Nonetheless, Tan is still hoping to purchase either a Ferarri or Lamborghini once he is done renovating his Malaysian home!
While Tan’s ultimate ambition is to be one of the greatest investors of all time, he also hopes to find the time to write books and novels.
“I would love to write books on investing, economy or even a storybook which is more reflective and contemplative,” he says.
Tan is one of those who likes to read several books at the same time. Apart from annual reports, Tan is reading Grapes of Wrath by John Steinbeck, Essays on the Great Depression by Ben Bernanke and My Years with General Motors by Alfred P Sloan among others.
Things he has yet to do? He hopes to master the Mandarin language and wants to be an accomplished pianist.
Nonetheless, he has no regrets.
Being the rational and logical realist, Tan believes heaven is on earth. While he believes in God, Tan does not believe in the conventional religions of the world. “For me, heaven is here on earth. That is why we need to live it to the fullest. After we die, we merely disintegrate to dust and are used only to fertilise the ground.”
Indeed, spoken like a true contrarian.
fr:biz.thestar.com.my/news/story.asp?file=/2009/5/9/business/3846144&sec=business
iCapital: Malaysia needs performance-based society
By TEE LIN SAY
PETALING JAYA: Malaysia will follow in the footsteps of the world in economic recovery but iCapital warns that without economic reform, domestic growth would lack sustained momentum to pull itself up from the current middle-income structure.
To improve, Malaysia needed a performance-based society and to improve its productivity, efficiency and competitiveness, iCapital said.
iCapital has forecast Malaysia’s 2010 gross domestic product (GDP) to come in at between 6.3% and 6.7% and that growth is mainly attributed to the low base effect of the previous year.
It is targeting a 5% to 5.5% growth rate for 2011 as it predicts that investments into Malaysia will be benign.
“In 2009, Indonesia overtook Malaysia on an income per capital basis. In 1968, Malaysia’s income per capital was double that of Singapore. Today, Singapore’s is four times higher,” iCapital said.
Explaining why that happened, iCapital said one reason was that prices of goods had been kept artificially low due to subsidies. Subsidies are said to distort efficient market movements.
For instance, as fuel is relatively cheap in Malaysia people prefer to buy cars and hence, the development of public infrastructure has been lagging.
In terms of Malaysia’s budget deficit trend, its assessment is that the country appears to be following in Greece’s footsteps.
Indonesia has in fact lowered the government debt, even with the eruption of the global financial crisis. As of 2010, Indonesia’s targeted budget deficit is 2.2% of GDP.
The Malaysian Government has committed to reduce its deficit to 5.3% of GDP this year. It aims to reduce this figure to under 3% by 2015.
A budget deficit occurs when a government spends more than it receives in revenue.
iCapital continues to say that Indonesia’s economic growth has outperformed Malaysia’s since 2005.
Investments into Malaysia too have been on a decline and in terms of foreign direct investments (FDIs), Malaysia suffered the most in 2009 compared with other countries in the region. All other countries attracted double to triple the amount of FDIs into Malaysia.
Another example cited by iCapital is South Korea’s average starting salary per year, which is at US$20,300 (RM66,990). Meanwhile, a 1.6-litre car in South Korea costs some US$11,600 (RM38,280).
In contrast, the average starting salary of a Malaysian is RM27,000 while a Myvi costs RM49,000.
Approximately 83% of Malaysia’s manufacturing workforce have SPM or lower qualifications. ICapital said that Malaysia needed to have a more competitive work environment to increase productivity.
One way of increasing productivity is to raise the retirement age. In Singapore, the government is now mulling over increasing the minimum retirement age of 62 years.
On the US economy, iCapital said there were indications the United States would escape from the dreaded scenario of the economy slipping into another recession after plunging into one during the recent global credit crisis.
Companies in the United States are making record profits and the US property market is showing widespread improvement.
“The corporates are spending on capital investment and not on labour hiring. They are conserving cash just in case of another downturn,” iCapital said.
It added that people were too fixated with the 10% unemployment rate and had forgotten about the other 90% of the workforce that was spending and consuming.
“On the issue of unemployment, the question to ask is whether companies can’t hire or won’t hire?” it said.
iCapital feels that companies won’t hire because productivity levels have actually improved over the course of the recession.
“Corporates are squeezing more out of their workers. Also, a significant part of this productivity has been accompanied by a decline in hours of work. We have seen that in nine consecutive quarters,” it said.
This in turn has led to record profits and investing in capital, rather than hiring.
“Companies have the cash. They just need the will now, as there is still uncertainty,” iCapital said.
fr:biz.thestar.com.my/news/story.asp?file=/2010/8/16/business/6862420&sec=business
iCapital clarifies
With reference to the article entitled iCapital: Malaysia needs a performance-based society published on Aug 16, iCapital wish to clarify on the following points:
1) “In 2009, Indonesia overtook Malaysia on an income per capital basis. In 1968, Malaysia’s income per capital was double that of Singapore. Today, Singapore’s is four times higher.”
1970 was used as the base for comparison. This means that real gross domestic product (GDP) per capita in 1970 for both countries were rebased to 100 and their respective changes were compared from 1970 until 2009.
Thus, it means that Indonesia’s percentage gain in real GDP per capita from 1970 to 2009 is higher than that of Malaysia.
It is not correct that real GDP per capita for Indonesia has overtaken that of Malaysia in absolute terms.
Furthermore, in 1968, it was Singapore’s real GDP per capita that was around double that of Malaysia’s and not the other way around.
2) “iCapital feels that companies won’t hire because productivity levels have actually improved over the course of the recession.”
Productivity levels have improved because companies are not hiring, not that companies won’t hire because productivity levels have improved.
Tan Teng Boo
Managing Director
Capital Dynamics Sdn Bhd
fr:biz.thestar.com.my/news/story.asp?file=/2010/8/18/business/6871651&sec=business