My Investment Record (4) - 30 August 2013

Market Overview

Between Last holding until now, KLCI once reached its height at 1810 pt on 24th July 2013. However, worrying that US Federal reserve may tap Quantitative Easing (QE) soon, foreign capital start flowing out of emerging market, thus bringing KLCI back to 1720++ level. News of possible military action by US against Syria Assad Government further sent the market down to 1660++ level, where the market recovered only these few days. 

The fluctuation of stock price is emotionally driven rather than fundamentally driven. Thus, when investor's fear prevail, it would be a good time to enter the market and pick some good stock. However, this opportunity window is very short, where local fund will keen on exploiting it hence providing support to price level. 

Current Return and performance

The holding period return for KLCI in the past period ( 1st July - 31st August 2013) is -2.03% (with dividend included). Holding Period return for my portfolio, is -2.37%. Total holding period return for my first year of investing is -1.34%. Which is way below the Fixed Deposit rate of 3.2-3.8%, or KLCI return of 8.77%. 

The bad performance could be attributed to few of the bad picks at the beginning of my investment.  They are Jewellry Company's (Pohkong and Tomei) which suffered badly when gold price drop significantly during the year, non-performing company like RCE-Capital, "red chips" like Maxwell, Msport, XDL that saw their price depressed even though their P/E ratio （less than 3), cash level （higher than current market capitalization) remain attractives.  

Things should get better as my current portfolio is more diversify now, holding some potential stocks like YOCB, MNRB, MFCB and Harrison. Figure below listed a summary of stocks that i currently hold. 

New Members

Cheetah & UMSNGB have the same characteristics, their earning remain stable, ROE and ROIC around 10%, but price is below NAV per share. I believe this kind of stocks have the good chance to track/beat the market while enjoying lower downside risk. However, as general market still in fairly price/overprice region, it become increasingly rare to find the potential picks at bargain price. 

Market Watch - 4th August 2013

Question 1: Recent Fitch downgrading Malaysia's public debt sent KLCI to its first largest decline since GE13, which prompt a question, is KLCI overheat? 

I say no. We are far from overheat. Although KLCI had risen to all time high of 1800 compared to 1400 reached 6 years ago, just before the world financial crisis erupted, Our national GDP in nominal term also expand 1.5 times during the period, which make the KLCI market capitalization to national GDP ratio still significantly lower than what we are 6 years ago. The quick rebound in last two trading day after the sharp decline can confirm that market still confidence in the short and long term outlook of our economy.

However, we might already be at the brink of overheating. A quick scan through majority of stocks in Bursa Saham main market can tell you that there are no more undervalue stocks left to be hunted by value investor. 

Question 2: Talk about recent trend in property market, especially in KL area? 

First, property market rarely collapse unless there is market madness occurring. 

Second, the loan structure that triggered massive rate of default of housing mortgage, which in turn triggered the further collapse of property market, don't exist in Malaysia. I haven't heard of loan with teaser rate, where the borrower pay only 1-2% interest rate at the first few year, then subject to Base Lending Rate at 6-7% been offer in the market yet. With majority of the loan made are in fixed rate, you can be sure of the loan paying ability of the borrower. 

Third, with the latest MRT project coming online, KL will have more extensive transportation network that can cater more population. Property price in this area could hardly go down, when demand still outweight supply , or when people still expecting price to increase in the future. 

Question 3: The long term stability of Malaysia economy? 

I have a theory, which i shall elaborate more if i have the time to do research. 

Malaysia government had done a brilliant thing in creating the Employment Provident Fund (EPF). 

With the total asset of EPF amounting to RM 537 billion, which is about 60% of our national GDP. 

We have the financial capacity to fulfill government borrowing's need, pumping liquidity into private bond market, investing in stock market supporting prices, and even diversify out by investing in foreign equities, bonds and properties. 

A nation economy will start to collapse if investors realize the government might not be able to repay the national debt, which caused the market to charge extremely high interest rate to newly issue government securities, thus forcing the national debt cannot be finance in sustainable way anymore. 

In Malaysia, with EPF fund growing faster than increment of government debt, we wont see problem in near term future. 

However, with huge amount of EPF asset in government's liabilities form, the government is effectively funding our retirement, through collection of tax to pay the interest of the debt. The different between us and the western countries is, western countries like UK and Europe are lived on define benefit plan, while we are living on define contribution plan. The former is more prompt to collapse of the system. 

Question 4: Is China Growth Myth Over? 

I'm afraid the answer is yes. 

Failure to relax the birth control earlier had forced China to enter an Old folk society sooner than expected. The newly implemented retirement scheme and medical care requirement, will put the government financial at strain. 

There is other thing to worry about, 

Civil society required highly educated civilian to sustain. A society where its elite/talent group isnt producing enough offspring, will face the decline of populace cultivation when its education system cant replace the loss.

 It wasnt about the gene that can be inherit from the  parents, but is more about the education environment that the family can provide to the children.