Half year into 2013, RHB investment analysts are already using forward price earning of 2014. It is still one and a half year away. But I think that's how the valuation in Malaysia work, and probably that's how international equity valuation work too. 1.5 years forward earning, it suddenly give room to a lot of stocks to run further, it suddenly open more opportunities for investment.
To study and value a company, we should try to forecast the next 2 to 5 years earning (try our best to guess base on previous track record, management planning, contract in hand, economy growth etc) and have roughly in mind how the stock price will be down the road. Better company will have better earning visibility and the better management planning and execution ability. Better company will let the investor know their direction clearly.
Tuesday, May 28, 2013
Tuesday, May 21, 2013
Malaysia bull market party started
When the news said retail investor started to come in Malaysia stock market, I reckon that Malaysia stock market is going in a full blown bull market. All category of stock from small to big cap will rise, pull the index rise. Fund manager whose fund performance track the index will probably have to invest. They will fuel the market further. When you see stock like Landmark where it's hotel business is not making profit and its hotel property is so small compare to the whole balance sheet, (all other asset is land development in Pulau Bintan in Indonesia where we still have no idea when the contribution will come in), when you see even Landmark stock started to follow the other Malaysia property developer stock rising, you know probably no stock will be left out unseen. Let the party begin.
NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. I may already have positions in the above mentioned counter. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. I may already have positions in the above mentioned counter. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
Saturday, May 11, 2013
Unprecedented low interest rate
In this global unprecedented low interest rate environment, what happen is that highly leveraged corporates and individuals benefit as they can accelerate their deleveraging process. In the same time, huge liquidity created by central banks, profits and excess income generated by other healthy corporate companies and individuals need to be invested. Because of low interest rate, opportunity cost of not investing into higher risk asset is high. So, it drive up all asset price, namely property, stock market, high yield bond and others bonds as well. High liquidity is also solving the price anormally of lack of liquidity stock, small capital stock where marketability is low. A lot of those stocks are being discovered and revalued. Less and less arbitrage in the market as all is being exploited (money is not a problem, they can always borrow because of cheap borrowing cost). Eventually, the discount rate, thus business risk will be down (to close the premium between interest rate and discount rate) and hence, asset valuation will be up significantly.
We are in that journey, but i really dont know how long before the journey end. As long as the journey goes on, all asset price will hit new high. Some time down the road, the 2 factors: deleveraging process call upon completion and wealth effect created by high asset price, may prompt central bank to raise interest rate. At that time, we should turn cautious of the reversal of asset price.
How long? Now? 1 year, 3 years, 5 years? This is a million dollar question!
We are in that journey, but i really dont know how long before the journey end. As long as the journey goes on, all asset price will hit new high. Some time down the road, the 2 factors: deleveraging process call upon completion and wealth effect created by high asset price, may prompt central bank to raise interest rate. At that time, we should turn cautious of the reversal of asset price.
How long? Now? 1 year, 3 years, 5 years? This is a million dollar question!
Wednesday, May 8, 2013
Technology should play main role in election process
I think in next general election, technology should play main role. All of our Identity card IC should be come with security verification like thumbprint or password like feature. Our personal info is further store inside for verification purpose. So when election, we insert our IC and let the computer verify our thumbprint and other security question. We self register using computer and vote through computer. The computer will then count the vote.
Therefore, no unqualified or fake voter, no voting for others, no manipulate of vote, no unknown or extra vote box.
Just we need to make sure the thoroughness of the software system, and security of the software system. It has to be very well design, cannot be hacked and most importantly agreed by every people before the election.
A lot of time, people is the main reason for being used to manipulate. We should leave it to technology computer which just know to obey order and system without bias.
Therefore, no unqualified or fake voter, no voting for others, no manipulate of vote, no unknown or extra vote box.
Just we need to make sure the thoroughness of the software system, and security of the software system. It has to be very well design, cannot be hacked and most importantly agreed by every people before the election.
A lot of time, people is the main reason for being used to manipulate. We should leave it to technology computer which just know to obey order and system without bias.
Tuesday, May 7, 2013
Malaysia is having internal and external risk (内忧外患）
The Malaysia election is finally over, with the ruling party again winning the election with simple majority. While it is over, the dust has yet to settle down. There are still uncertain factors here and there, such as
1) The losing side's emotion, will there be demonstration, protest going on, and how will it settle down? When will it settle down?
2) The change of structure inside UMNO（the ruling coalition). How will it affect the policy and the stability of nation
Political unstability period is a transition period that we have to wait and see. But the economy issue can be rather pressing. With the debt/GDP reach 55%, shadow unofficial number of debt/GDP may be even more. Public debt and consumer debt is reaching a very high level. Continuing budget deficit of Government may soon put a cap on the development. High consumer debt may also put a cap on consumer spending too. With government spending and consumer spending reaching the cap, we have to rely on foreign investment to boast GDP. We definitely can also increase the income of consumer, but it can be very difficult in current situation of middle income trap.
Foreign investment brought in money and boast the ringgit to very high level in short time. They can create jobs for Malaysian. But now I see the problem is more and more money is pouring in to buy property, land rather than create jobs. (May be we can argue that jobs will be created along the way, we have to wait and see, we have to see also wether the jobs created is a low pay job or high pay job) Strong ringgit is good for Malaysia consumer spending, but is it true? There is no sign the inflation is slowing down, may be only good for Tony Fernandes. Strong ringgit will make Malaysia less competitive because of higher living cost and business doing cost. Unless Malaysian can increase productivity or work in highly paid service job,that may put a cap of foreign investment. Strong ringgit is also bad for export, it will push out export manufacturing to lower cost countries or out of business completely in worst case scenario. Export manufacturing is one of the main income to Malaysia. Malaysia require company to switch to automation and reduce worker. This has to be done gradually.
Lower commodity price is another blow to Malaysia income group. Malaysia depend largely on resources. Low commodity price means lower consumer spending and government spending. With the global economy slow down and there is no sign of picking up in this year or next (Europe is worse off, China is slowing further), commodity price may not able to pick up soon. There is also risk of over expanding of oil palm in Indonesia and Africa.
Uncertainty of political landscape; high government and consumer debt; high budget deficit; rapid rising of RM; huge inflow of foreign money; low commodity price; gloomy global economy; There are many risk in Malaysia economy. Government need to do something to mitigate. I think government should now focus more on 养精蓄锐 (conserve wealth and build nation structurally to become more transparent and effective) rather than desperately expand aggressively to reach the 2020 high income vision.
1) The losing side's emotion, will there be demonstration, protest going on, and how will it settle down? When will it settle down?
2) The change of structure inside UMNO（the ruling coalition). How will it affect the policy and the stability of nation
Political unstability period is a transition period that we have to wait and see. But the economy issue can be rather pressing. With the debt/GDP reach 55%, shadow unofficial number of debt/GDP may be even more. Public debt and consumer debt is reaching a very high level. Continuing budget deficit of Government may soon put a cap on the development. High consumer debt may also put a cap on consumer spending too. With government spending and consumer spending reaching the cap, we have to rely on foreign investment to boast GDP. We definitely can also increase the income of consumer, but it can be very difficult in current situation of middle income trap.
Foreign investment brought in money and boast the ringgit to very high level in short time. They can create jobs for Malaysian. But now I see the problem is more and more money is pouring in to buy property, land rather than create jobs. (May be we can argue that jobs will be created along the way, we have to wait and see, we have to see also wether the jobs created is a low pay job or high pay job) Strong ringgit is good for Malaysia consumer spending, but is it true? There is no sign the inflation is slowing down, may be only good for Tony Fernandes. Strong ringgit will make Malaysia less competitive because of higher living cost and business doing cost. Unless Malaysian can increase productivity or work in highly paid service job,that may put a cap of foreign investment. Strong ringgit is also bad for export, it will push out export manufacturing to lower cost countries or out of business completely in worst case scenario. Export manufacturing is one of the main income to Malaysia. Malaysia require company to switch to automation and reduce worker. This has to be done gradually.
Lower commodity price is another blow to Malaysia income group. Malaysia depend largely on resources. Low commodity price means lower consumer spending and government spending. With the global economy slow down and there is no sign of picking up in this year or next (Europe is worse off, China is slowing further), commodity price may not able to pick up soon. There is also risk of over expanding of oil palm in Indonesia and Africa.
Uncertainty of political landscape; high government and consumer debt; high budget deficit; rapid rising of RM; huge inflow of foreign money; low commodity price; gloomy global economy; There are many risk in Malaysia economy. Government need to do something to mitigate. I think government should now focus more on 养精蓄锐 (conserve wealth and build nation structurally to become more transparent and effective) rather than desperately expand aggressively to reach the 2020 high income vision.
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