Best Credit Cards for Malaysians?

I am writing this up because there is no direct comparison of the credit cards available in Malaysia. This is due to the fact that:

• all the credit cards have different cashback/ points earning mechanisms and limitation that I  believe was designed to confuse the consumers so they are harder to choose from, 
• the credit card points earned between different banks also valued differently, 
• there is very little attempt by the credit card comparison articles/websites to compare the credit cards available based on the consumption pattern of the consumers

For example, the Ringgit Plus Website listed up to 7 credit cards for Best Travel Credit Cards for All Income Bands (here), and 5 credit cards for Air Miles Credit Card In Malaysia (here). However, both articles failed to do a holistic comparison of what the consumer stand to gain based on his/her consumption pattern, accounting for different cashback/points earning criteria and cap, the value of the rewards between cashback and treat points for different reward programs and considerations of other charges (such as foreign currency conversion fee). 

For the start, lets quickly go through a few of the general rules regarding the credit cards in Malaysia,

Rule 1: For Credit Cards focus on cashback, Credit Card that advertised a higher cashback rate usually has a stringent criterion (in the form of minimum spending) and Cap on the amount that you can earn. 

For example, Standard Charter Just One Platinum MasterCard advertises a cashback rate as high as 15% for grocery, dining and online transaction. However, you need to spend a total of RM 2,500 per month to earn 15%, and the total cashback for the three categories combined is RM60 only. The rest of the spend will only earn a meager 0.2%. Now if you spend a total of RM 2,500 per month, with RM 400 on the three categories that are entitled to 15% cashback, 
How much is your total cashback?  Estimate RM 64.2
How much is your actual cashback rate?  around 2.568%
And the drawback is, any amount you spend above the RM 2,500, will only earn you 0.2% cashback now. 

Rule 2: For Credit Cards that focus on points, usually redeeming points into Airmiles will give you better value. However, be aware of the conversion rate and cap. 

Take HSBC Visa Signature, for example, on paper, it sounds really good with high conversion rate to Airmiles, where it earns 8X rewards point for shopping in foreign currency, 5X reward point on online shopping and 5X reward point on participating malls, which can be effectively converted to Enrich miles at the rate of 18:1. 

However, there is a catch. There is a cap of 15,000 rewards points per category per month. Once you reach the cap, there is only 1X reward point for shopping in foreign currency, online shopping, and participating malls.  For example, if you spend RM 6,000 abroad, the actual reward points you get is only 21,000 points, which give you only 1167 enrich miles, a meager rate of 0.19 miles per RM spent. 

Rule 3: For overseas spend, beware of Foreign Currency Conversion Charge, 

For example, 

AMEX Card network charge is typically 2.5% (here)

For Visa Card & Master Card: Typical Typical network charge is 1.25% + Bank administrative charge of 1% (here)

So far the only two banks/financial institutions that I knew which currently don't levy bank administrative charges are public bank and Big pay. 

And according to this post, Master Card had a slightly better foreign currency conversion rate (here)

Now before we start the comparisons, there is still one important question left, how to compare credit card points earned vs cashback credit card? 

One quick way out is to use the amount of Airmiles earned as a benchmark as the Airmiles are usually of better value compared to other points redemption options. I have tried to establish the value of Enrichmiles and Krisflyermiles here. There are also few articles that discussed the value of Enrichmiles (see here) and Krisflyer miles (see here and here). For the sake of convenience lets just assume each Enrichmiles worth at least RM 0.036 and each Krisflyermiles worth at least RM 0.038. 

For AirAsia Big Points, the value is fixed around RM 0.01. 

Let's start to look at the results

Spending Pattern One (the budget guy) 

Annual Spend around RM 30,000
Monthly spending breakdown:

Petrol : RM 225

Dining: RM 1,000

Groceries: RM 225

Other Retail Purchase: RM 625

Utilities, Insurance Payment : RM 150

Other Online Transaction: RM 175
Flights Ticket (Average per month) : RM 100

No oversea spending

Assuming all flights using Airasia

The best credit card? Maybank 2 Gold Cards (Assuming you can swipe with AMEX with a total of RM 1000 during weekend).
Best alternative? Standard Chartered Just One Platinum

Spending Pattern Two (the typical family) 

Annual Spend around RM 60,000
Monthly spending breakdown:

Petrol : RM 400

Dining: RM 2,000

Groceries: RM 1000

Other Retail Purchase: RM 600

Utilities, Insurance Payment : RM 300

Other Online Transaction: RM 500
Flights Ticket (Average per month) : RM 200

No oversea spending

Assuming all flights using the specific airlines of the credit card (Like Airasia for Hong Leong Airasia Platinum)

The best credit card? Still Maybank 2 Gold Cards (Assuming you can swipe with AMEX with a total of RM 1000 during weekend).
Next alternative? Standard Chartered Just One Platinum or RHB World Master Card

Spending Pattern Three (the typical family with annual oversea trips) 

Annual Spend around RM 84,000
Monthly spending breakdown:

Petrol : RM 400

Dining: RM 2,000

Groceries: RM 1000

Other Retail Purchase: RM 600

Utilities, Insurance Payment : RM 300

Other Online Transaction: RM 500
Flights Ticket (Average per month) : RM 500
Oversea spending (Average out per month) : RM 1700

Assuming all flights using the specific airlines of the credit card (Like Airasia for Hong Leong Airasia Platinum)

The best credit card? Maybank 2 Cards Premier (Assuming you can charge all your expenses on AMEX).
Next alternative? Maybank Manchester Visa Infinite or equivalent.

Discussion & Afterthoughts:
As you may see, when your total annual spending increase, the cashback credit card starts gaining fewer values due to the cashback cap per month. And among all the Airmiles cards, Maybank's Visa Infinite or equivalent and Maybank 2 Cards Premier start to stand out among others.

It is worth noting that, as AMEX charges a higher foreign currency conversion charge compared to a visa card, hence the higher the potion of your oversea expenditure, it may be better to use Maybank Visa Infinite or equivalent instead. Plus, AMEX is actually less acceptable in overseas.

There is few special card - one of it is Public Bank Visa Signature, that offers 6% cash back on groceries, dining and online transaction without minimum spending requirement, but capped at RM 38 per month. One can actually spend on groceries, dining and online transaction till about RM 633 per month on Public Bank Visa Signature, before charging the rest of the expenditures on other cards.

Another card is Public bank quantum master/visa, which offer 5% cash back capped at RM 30 per month for online/contactless purchase.

Let me know which other cards you like to see for comparison or which other spending patterns you like to use.

How much is Enrich & Krisflyer Miles Worth?

Introduction:

For those who like to collect credit card points or airline miles, most of the joy derived from the moment we finally convert the points/Airmiles into something tangible that we can enjoy the most. Hence it is worth to know how much exactly each airline miles worth, and hence select the points/miles method that maximizes the earnings. 

Things get complicated when there are numerous ways to use Airmiles. Taking Enrich miles, for example, you can use enrich miles to redeem Lazada voucher, redeem for a stay in a hotel of your choice,  or redeem an economic / a business class flight ticket. Each of these options values the miles differently, and it is important to know the value before redemption to avoid losing out. 

For the benefit of Malaysian & Singaporean travelers, I did a quick study on the RM value of each enrich & kris flyer miles, with results as below

Discussions:

1. In-flight redemption with items are usually of the worst value as items sold (whether it is a luxury bags, watches, electronics or alcohol etc) are usually highly overpriced. Which is why I don't calculate for this redemption option. 

2. Lazada E-Voucher is one of the worst redemption options for Enrichmile, where your mile is only worth RM 0.0125

3. Redemption for a hotel stay is surprisingly quite valuable for Enrichmiles, which currently valued at RM0.034 per mile by the Enrich Hotel. For Krisflyer mile, the value is a bit worse at SGD 0.8cent per mile or RM 0.0244. 

4. The estimate redemption value for flight tickets is the average of 

- short-haul flight (KL to Singapore)

- Middle-haul flight (KL/Singapore to Tokyo) 

- Long-haul flight (KL/Singapore to London). 

The general rule of thumbs is that 

- redemption for a longer haul flight will have a higher valuation, 

- redemption for higher class flight (like business or first class) will have a higher valuation. 

The second rule is especially true for Singapore airline Krisflyer Airmiles, where their business class will require fewer miles to redeem compared to Malaysia Airlines Enrich thanks to the availability of saver package. 

All in all, you can safely assume that if redeem wisely, the value of Enrich/Krisflyer miles can reach RM 0.05 to RM 0.10

5. The best redemption option when using Krisflyer Airmiles is to redeem a business class Round The World (RTW) ticket from Star Alliance with 240,000 miles. This article summarizes well the how and the rule of booking an RTW ticket. And a quick try using the Star Alliance Website indicates that the Business Class RTW tickets can easily cost you around S$15k, which brings the redemption value of Krisflyer mile works out to be about RM .195 per mile. 

Final Thought:

There are some explanations why redeeming for the higher class long-haul flights will give you more value per mile:

1. Accumulate miles is not easy.  Especially when both the credit card points and miles have a three-year validity date. It is very hard to imagine a person/family spend enough in the few years interval to accumulate the 240,000 miles required to redeem one RTW business class ticket. Hence airlines like Singapore Airlines are not afraid of people redeeming this high-value reward, as very few people actually able to do this. 

2. Most people will not choose to fly a higher class because of the steep increase in costs. Taking the RTW mentioned just now, for example, the same route booked using economical class and accepting stopover flight costs about $3k only, or around RM 12k, which is only one-fourth of the cost when booking business class. And most people will find the extra 50-70 hours experience of flying first class not worth the extra RM 38k. 

But there is another perspective looking at it, most of the Airmiles are accumulated at very low / no cost. And instead of redeeming it at a low value (like RM0.0244 per mile for hotel stay), you can use it to an RTW Business Class ticket that gives you 8 times value at RM 0.195 per mile.  And moreover, this will be items that you won't buy in the first place. 

So, are you convinced to start to accumulate Airmiles now to redeem the RTW Business class award? Let me know if you ever redeemed one. 

Things you need to know about KLCI Composite Index

1. What is KLCI Index, from the FTSE KLCI Index Factsheet
"Malaysia’s headline index, the Kuala Lumpur Composite Index (KLCI) is now enhanced and known as FTSE Bursa Malaysia KLCI. Part of the FTSE Bursa Malaysia Index Series, the 30 stocks tradable index is representative, liquid and transparent providing domestic and international investors with an enhanced index to access the Malaysian market."

2. The five years return (average per annum, I think is dividend excluded) of KLCI is not good, with data as of 29th November, the return equal to - 3.0%.

3. The estimated dividend yield for KLCI index is 3.53% (when the index is 1572.51)
This is comparable to the best fixed-deposit rate available in the market, but not good enough.

4. The estimated P/E ratio is 20.41, calculated based on

• 26th December 2019 data
• Excluded negative outlier (such as Axiata and Sime Darby plantation that has negative return)
• the stocks past 12 months earning
• Adjusted for the stocks %weightage in KLCI, if unadjusted then the average P/E is 25.42. 

In contrast, the S&P 500 P/E ratio is about 24 now. 

5. Price earning ratio measures the ratio of stock price to the annual earnings of the companies, lower P/E is usually better, KLCI historical P/E is somewhat around 17, this means with a P/E ratio of around 20.4, KLCI is currently overpriced. 

6. There are 11 individual stocks in KLCI that have a P/E ratio below the market average, 7 of them are the banking stocks (Public Bank, Maybank, CIMB, Hong Leong Bank & Financial Group, RHB, Ambank), the rest are Petronas Chemical (5183), Genting (3182), Genting Malaysia (4715) and Sime Darby Berhad (4197). 

7. To me, personally, I think the high P/E ratio of certain stocks is unjustifiable. For example, Nestle Malaysia (4707) has a P/E ratio of close to 50. This means if you invest in Nestle now, excluding the growth potential, you need 50 years to recoup your investment through corporate earning. And you will be amazed to see the company with little long term growth potential but have high valuation such as IHH (P/E around 51), Pressmetal (P/E around 37) and Maxis (P/E around 29). 

8. For those who like to see the full lists of estimated earnings, dividend, P/B, P/E, the yield for the 30 stocks on KLCI, see table below

Source Quoted:
FTSE Bursa Malaysia KLCI Factsheet, downloadable here

My investment record (44) September - November 2019

The estimated holding period return for KLCI in the  Sep-2019 is -1.45%  (with dividend included). Holding Period return for my portfolio is -1.04%. Total holding period return for my portfolio since the inception is 18.5%, annualized to be 2.42%, this underperform KLCI total return of 22.4% (annualized, 2.89%) 

The estimated holding period return for KLCI in the  Oct-2019 is 1.20%  (with dividend included). Holding Period return for my portfolio is 2.76%. Total holding period return for my portfolio since the inception is 21.7%, annualized to be 2.78%, this underperform KLCI total return of 23.8% (annualized, 3.03%) 

The estimated holding period return for KLCI in the Nov-2019 is -1.96%  (with dividend included). Holding Period return for my portfolio is -2.74%. Total holding period return for my portfolio since the inception is 18.4%, annualized to be 2.35%, this underperform KLCI total return of 21.4% (annualized, 2.71%) 

Trading Activities
1. Disposal of CIMB (1023)

Its Q2 result is disappointing while I am optimizing my portfolio, thus sell. 

2. Addition of HLFG (1082)

3. Addition of Public Bank (1295)

To sum it up, with dividends closer to FD and P/E ratio less than 10 for HLFG and around 14 for PB Bank, these are a better bet than FD in the long run. 

4. Disposal of MFCB (3069)

With their Don Sahong Hydropower Project near completion, this is one of the good cash cows to hold, however, looking from growth perspective their growth is fairly limited compared to other stocks. Hence the disposal to optimize my portfolio

5. Addition of Takaful (6139)

Insurance company operating in a market (Takaful) with a higher potential to grow than the general insurance market.  And the current valuation (forward PE) is still around 12. Grab it while you can

6. Addition of RCE-CAP (9296)

Good dividend, low P/E ratio (around 6) and steady business (consumer loan targeting government servant). 

7 years into investing stocks, what did I learn?

1. Market Timing is important.

You can't exactly time the market to decide when to enter, but you can be more patient and wait till the price of stocks falls below your average buying prices. From a retrospective perspective, I found this useful to help keep buying at cheaper price. 

2. The industry is key to long term holding.

The majority of my loss was related to investing in a declining and/or unprofitable industry. This includes the PRC related stocks, Office REIT and commercial property, Jewelry Industry, etc...

3. Contrary to the US, In Malaysia, good stocks are the one that always pays Dividend

When I started the journey, KLCI was at 1644.72 on 1st September 2012. 7 years after, KLCI ends up even lower at 1612.14. The only thing that keeping KLCI's return in positive is the dividend distributed by the companies. The dividend yield for my current portfolio average around 3.57% (include Airasia Special dividend of 90sen) and 2.47% (exclude Airasia dividends). The 2.47% mimics my average return for the past 7 years. Thus the key to beating the Fixed Deposit return will be buying into stocks with a higher dividend yield than FD. 

4. Lower Trading Fee is key to protecting your return

The estimated annualized return from KLCI (with dividend included) is around 3.34%. Imagine if you are investing in a typical mutual fund with a 1.5% fee structure or higher, 40% of your return will be taken away by your fund management. The high management fee is the reason why a lot of the investors didn't see a significant return on their portfolio for the past 7 years. I will suggest BNM start cultivates a market for index funds like Vanguard 500 index fund in the US so that individual investors can benefit from the low management fees. 

5. Good stocks selection may be able to beat the market, as shown in table below, I am actually beating the markets for the past 3 years. Let's hope it continues

	My Return	Market
Last 7 years	2.62%	3.02%
Last 3 years	5.21%	1.80%
Last 1 year	-4.98%	-8.99%

My investment record (43) August-2019

The estimated holding period return for KLCI in the  Aug-2019 is -1.09%  (with dividend included). Holding Period return for my portfolio, is -2.18%. Total holding period return for my portfolio since the inception is 19.8%, annualized to be 2.61%, this underperform KLCI total return of 23.19% (annualized, 3.02%) 

Trading Activities
1. Addition of AmBank (1015)
2. Addition of RHB (1066)
3. Addition of HLFG (1082)
The banking stocks were dumped by the investor in anticipating of another round of OPR cut by BNM, despite the fact that their earning remain strong with PE less than 10, and dividend yield getting attractive which range from 3-5%. 

4. Reduce Holding of BJToto (1562)

Stock with good dividends, however, the price at a recent peak with limited upside potential (as government reduces the number of special draws). Sell some to place the bet on alternative choices

5. Buying Heineken Malaysia (3255)

I was looking into buying some consumer stock for my portfolio, then I came across Heineken Malaysia with good dividend yield, but price cheaper compare to its rival (Carlsberg). 

6. Addition of Takaful (6139)

The good stock recently falls from its recent peak, however, bought it too soon. Should have wait till end of the month where its price dropped further. 

7. Addition of Padini(7052)
Company in a apparel industry under good management, and it seldom sell cheap

8. Buying of RCE Capital (9296)

 Although it dealing with the most riskier sector of the loan (consumer credit and personal loan), its target customer base (mainly government servant) provide them enough buffer. I continue buying at a low P/E ratio. Its recent financial performance show increasing revenue and profit, which is a good sign. 

My investment record (42) July-2019

The estimated holding period return for KLCI in the  July-2019 is -1.94%  (with dividend included). Holding Period return for my portfolio, is -0.63%. Total holding period return for my portfolio since the inception is 22.55%, annualized to be 2.98%, this underperform KLCI total return of 25.55% (annualized, 3.34%) 

Trading Activities
1. Addition of PB Bank (1295)
Good stock fall due to potential escalation of US/China trade war which may force BNM to raise interest rate. 
Added in as dividend rate now better than FD

2. Reduce Holding of BJToto (1562)

Stock with good dividends, however price at recent peak with limited upside potential (as government reduce number of special draws). Sell some to place the bet on alternative choices

3. Disposal of Msports (5150)
Time to cut loss, lesson learned? never trust the accounting book of China company audited by Singaporean Auditing Firm. And shame on bursa for unable to protect investor interest 

4. Continue addition of Tune Protection (5230)

I found this article  a good read on why the company's profit fall in the past, which also highlighted rooms where the company can do better in the future. From other perspective,  insurance industry will be on continue growing mode, and it will be a steal to acquire Tune Protect at a P/E ratio of less than 11. 

5. Addition of Padini(7052)
Company in a apparel industry under good management, and it seldon sell cheap

6. Buying of RCE Capital (9296)
I bought & sold the share before few years back. It seems that since 2016, the company transformed where its revenue, profit and dividend on growing mode since then. Although it dealing with the most riskier sector of loan (consumer credit and personal loan), its target customer base (mainly government servant) provide them enough buffer. i am Testing market by buying at low P/E ratio.