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Showing posts from December, 2006
The Good, The Bad & The Fugly
Lessons From Bangkok

The Good

Willingness to rectify rules immediately when it does not look to be going the way they thought it should. Many govenrments would have hung on a day or two too long, or longer.

The Bad

Foreign investors sold 25bn baht of shares or US$690m in value the day it fell 15%. Even when it recoup 11.2% the following day, foreign investors were still net sellers to the tune of 2.8bn baht. Hence most of the bargain hunters were Thai local funds and retail players rather than foreign funds. That being the case, it would be difficult to see how the SET can sustain its stock prices recovery. Who will come in to take the share from the Thais? Shit happens, but we should try and learn from them. It will take time to regain foreign investors' trust.

The Fugly

Pridiyathorn, a former central bank governor, and now the finance minister and economic policy maker, was believed to have given his blessing to the capital controls that he vigorously …
Mai Pen Rai

Bloomberg: The Finance Ministry late yesterday in Bangkok reversed the Bank of Thailand's move requiring banks to lock up 30 percent of new foreign-currency deposits for a year on funds earmarked for stocks. The restrictions sent Thailand's SET Index tumbling 15 percent, wiping away US$23 billion in market value and prompting declines in emerging markets globally. PTT Pcl, Thailand's biggest energy company, plummeted 17 percent yesterday, while Bangkok Bank Pcl, the largest lender, sank 16 percent. Shares of companies in the 458-member SET Index now trade at 9.91 times forecast earnings, the cheapest of any country in the MSCI emerging markets index. The benchmark slid to a more than two-year low of 622.14 after overseas investors dumped a net 25.1 billion baht (US$699 million) worth of shares, the largest such sell-off since at least Jan. 4, 1999, according to data compiled by Bloomberg. The drop erased all of the SET's gains this year. The index is now 13 …
Mai Vee Vella Sarm Lap Koun
Dejavu 1997?

As reported in Bloomberg: Thai stocks plunged after regulators yesterday told banks to lock up 30 percent of new foreign- currency deposits for a year to curb speculation. The baht dropped the most in three years. The benchmark Stock Exchange of Thailand index slid as much as 8.9 percent, the heaviest in more than three years, and the baht almost doubled yesterday's 0.8 percent drop after central bank Governor Tarisa Watanagase said she was ``confident'' the measures will reduce inflows. The currency, Asia-Pacific's best performer, had surged 16 percent this year before yesterday as overseas investors bought the nation's stocks. ``Foreign investors will rush to take money out as they're afraid the baht may weaken further,'' said Visit Tantisuthorn, Secretary General of the Government Pension Fund, the country' biggest fund with more than US$7.8 billion in assets. ``It'll help exporters and the country's…
REIT Me My Rights

gsg said...
i do believe that with the malaysian govt at this right juncture doing the right things to lure/improve foreign interest in malaysia, will eventually do the necessarily to make malaysia competitive in terms of REITs.....so yes, it will be something to watch for,.....the smart companies are waiting for the right time to REIT their assetsany suggestions on which in KLSE will benefit?


I do agree that REITs will be a big theme in 2007 for Malaysia. Malaysia only have less than RM4bn in REITs while Singapore has a stupendous RM52bn. The issue is Malaysian commercial properties are not all-REITable immediately, maybe just 5% of the total passes the basic criteria required. However, more savvy player will be able to reinvent, refurbish existing commercial properties to a REITable state. We can also expect players to come in and buy up existing big commercial properties and do it up to a REITable state, or like CapitaLand - buy some, build the rest. The key players…
Hello Tourism Minister!
Not My Area Of Responsibility La...

Malaysia's recently opened low-cost airline terminal is to be expanded and upgraded next year in response to complaints about overcrowding and a lack of facilities. "We will be providing better amenities and more chairs for the comfort of those using the LCCT (low-cost carrier terminal)," Malaysia Airports CEO Bashir Ahmad told The Star newspaper. Bashir said that Malaysia Airports has been holding talks on the project with AirAsia which is so far the only airline to use the terminal. The Star likened the scene at the terminal to a "disaster relief centre", with weary travellers sitting on trolleys, lying asleep on the floor or slumped over tables at fast-food outlets. The low-cost facility which is designed to handle 10 million passengers a year opened in March, just before neighbouring Singapore launched its own no-frills terminal in a race to secure the burgeoning budget sector. From the start, the Ma…
Wake Up BURSA!

As I was trying to do a review of the covered warrants, I had great difficulty trying to come up with essential information on these covered warrants.

a) If you check the newspapers, Star and NSTP - Star has a 52 week high low, closing warrant price, +/-, volume traded, exercise price and expiry date. No mention on the conversion ratio. Conversion ratio is very important as investors would need to use the formula to calculate premium and gearing.

NSTP shows the week's high and low, closing warrant price, change, year issued, maturity year and exercise. OMG, biz editor at NSTP, please wake up! Why show us maturity year, no use punya info. Plus year issued, why, why do we need that info. Does anyone at the NSTP biz desk understands warrants. The most important info one MUST have:
- warrant price
- conversion price
- maturity date
With these 3 data, only then can an investor work out the premium and gearing. Mother share prices are available everywhere, so no bother there. …
Culling The Covereds (Part 1)
Call Warrants Review

Air Asia-CA 10/2007
Warrant Px 0.225
Mother share 1.46
Conversion Px 1.96
Premium 49%
Gearing 6.5x
Verdict: Premium very high, not the best (B-)

BToto-CA 3/2007
Warrant Px 0.54
Mother share 4.66
Conversion Px 4.43
Premium 6.6%
Gearing 8.6x
Verdict: Great gearing and low premium. Even though time to maturity is near, but like I say, a market's best chance for a bull run is in the 1st and 4th quarters, so not much point holding onto a warrant expiring in the 2nd and 3rd quarters (A)

Bursa-CA 4/2007
Warrant Px 1.51
Mother share 7.80
Conversion Px 6.07
Premium -2.8%
Gearing 5.1x
Verdict: Discount, ok maturity into 1st quarter, ok gearing, but nobody believes me when I say Bursa shares can go to RM9.00, even though I always blast the Bursa (A+)please ignore this opinion as it was based on one for one conversion (which was wrong)

Well, ty Tangee888, see what i mean, the bloody Bursa covered is 2 to convert into one share, hence my calculations were wrong!!! S…
Investment Themes - Malaysia

sopskysalat said...
dali, given the many investment theme being played, going into 2007, oil and commodities may continue to be in focus. looking into the domestic scene, the boom in property sector happening in singapore and malaysia may well put the construction into the limelight with many const. co. being badly battled down for the past 4 years or so. infrastructure deal are popping everywhere. therefore, isn't it time to seriously consider const. co. again? my view is yes. what's yours?


Usually, I am averse to construction as it is cyclical, and in Malaysia's case, a lot depends on who you know rather than what you can do. Still, there have been winds of change over the last 3 years, as projects dried up and the better ones had to venture overseas to secure a better portfolio. Those who stayed back and keep begging for crumbs are not the ones to buy and hold. Leverage on your expertise, we can do a lot of thing well, even in construction, an…
For Whom The Tolls Toll
Probably My Least Popular Posting

As reported in Reuters:
Malaysia will announce on Thursday a sharp rise in road toll rates to help trim state subsidies, in a move that could spark a public outcry and raise inflation. Tolls will go up by as much as 60 percent and will affect users of five highways in and around the capital, Kuala Lumpur. The new rates take effect on Jan. 1. A spokesman for the Works Minister confirmed that an announcement would be made at a news conference at 3.15 p.m. (0715 GMT) on Thursday. He declined to give details. Under toll concession agreements that critics say favour operators, the government has to reimburse operators if traffic volumes and revenues fall short of pre-agreed projections. Works Minister S. Samy Vellu said recently the government would have to fork out 2 billion ringgit (US$565 million) in compensation to five highway operators if toll rates were not revised. The operators include listed firms Gamuda Bhd and Lingkaran Tra…
Patient's Condition

Nurse, pass me the anal thermometer .... two straight days of hammering, now everyone who was cheering "Malaysia Boleh" last week has turned cynical. Some gleefully shorting the index waiting for a pickup at 1,050.

Prognosis: The selldown on Tuesday and Wednesday was good for the patient, he had gorged on durian and stout, plus two packets of nasi lemak. Needed to do a body cleansing you know, detoxification ... now, nurse, did the patient vomit blood??

I see, no cold sweat on his forehead also, nothing to worry about.

Seriously, the Tuesday and Wednesday activity was largely due to contra plays, just check the volume late last week. It couldn't continue as the contra plays would just get bigger and bigger. The huge buys on Sime and PNB companies was not due to the Credit Suisse report, it was just the prop trading desk of Credit Suisse buying a huge position in those stocks - which is still a very good sign, the play is on for Malaysia stocks.

How ca…
The Fed & US $$$

The Federal Reserve opted to keep US interest rates on hold for the fourth meeting running, fretting about inflation but also warning that a housing downturn is now substantial. The Federal Open Market Committee (FOMC) decided to keep its key fed funds interest rate pegged at 5.25 percent.

My guess is that if the US dollar did not weaken so much over the last 2-3 weeks, the Fed WOULD HAVE LOWERED INTREST RATES BY 0.25 percentage points. However, the dollar weakness basically left the Fed with little choice but to maintain rates in order to maintain some stabilising platform for the dollar to stand on. A drop in rates by the Fed could very well send the US dollar down another 2%-3%. That would have been two uppercuts to the jawbone of the US domestic economy - a risk not many are willing to stomach.

The Fed has held interest rates steady for four meetings since it halted a run of 17 quarter-point increases in August. The Fed acknowledged that the downturn in the US&#…
No Malice Intended!

simon_alibaba said...
comeon guys,just let it go...... i am as wrong as you guys.good luck to tan sri lim! this deal is paramount important to him than to us.let see how he develop it?


ali,
do not take this to mean i don't want genting to get the project... i think its a coup and will actually strengthen m'sia-sing ties ... i even said those who bot the covered on friday deserved to get paid, however, the mother share looks shaky yesterday and today and even taking it at 33, the covered is way way overpriced... people need to know that and appreciate the valuations ... whether it happens to be genting or not ... so it is not a slight on the lims, they have done very well for themselves and i think the london clubs purchase was even more significant ... so even though i predicted kerzner would win, i was wrong on genting's chances but i am still glad ... btw... the snetosa thing was a pure joke and not to blast anyone ... lol

but you cannot just dismiss th…
Jenting-Cover Your Belakang

Investors went nuts on the covered warrants, please let the math dictate your investing policies. Conversion for Jenting-Covered is 10 covered warrants to buy ONE Genting share.

Jenting-Covered price RM1.15
Conversion price RM25.54
Expiry May 2007
Mother share RM33.00

Premium = (10 x 1.15) + 25.54 / 33.00 = 12.2%
If the share trades at RM32.00, the premium swells to 15.7%

Gearing is the troubling thing here, usually covered warrants have excellent gearing to compensate for the short maturity period, hence you would find great leverage in the region of 8x or even 10x gearing. However in Jenting-C's case, the gearing is = 33.00/11.50 or just 2.8x. Do not be fooled by the low price of the covered warrant at RM1.15 as that is not the gearing. If you took RM1.15, the the gearing would look at a ridiculous 28x.

For gearing that is less than 3x with less than 6 months to maturity, it should trade very close to zero premium. That means the really FAIR value for the cove…
The One Thing The Media Missed On Sentosa Island

Sentosa Island, what a charming name in Malay. I mean, did the name came by accident. In Malay, "sentosa" means peaceful or tranquility. Ta-dah ... Sentosa was the new name for the island, renamed by smart Singapore government officials. Does anyone have a clue of its old name? I think, if they stuck with the old name, there WOULD HAVE BEEN LOUD GUFFAWS heard around the region.

The previous name for Sentosa Island was Pulau Belakang Mati. Literally it translates to "Stabbed In The Back Island" or "Died In The Rear Island". I cannot fathom anyone wanting to name an island with that name. Can you imagine a casino with the name Belakang Mati Casino - man, talk about bad fengshui - Masuk Hidup, Belakang Mati (Enter Alive, Die In The End ..) could be the slogan then. The thing is the words "Belakang Mati" are so vague, it could literally taken to mean so many things, for example:

a) Stabbed in the back
b) …
Derivatives Is A Whore

swifz said...
Hi, I just finished the book "Fiasco: The Inside Story of a Wall Street Trader". The last chapter touches about how Japanese companies uses derivatives to create profit out of nothing. Can you please comment on that?


Firstly, I don't really want to plug the book, which to me was a mediocre effort. It is easy to label derivatives as the bad guy. It is not the gun but the one who pulls the trigger - you know the analogy, and the relevant question is also why do we need guns in the first place!?

The gun analogy is quite close actually, derivatives were designed to MINIMISE risk. However, the array of product offerings have been so enormous that almost everyone forgot the main aim of derivatives in the first place. Now, it is mainly a leveraged bet, little capital waiting for th big home run.

You cannot blame derivatives, you can only blame the people buying them for not being informed enough. You cannot really blame the sales trader as its a…
Japan's Fortunes

sopskysalat said...
hello, although nikkei has underperformed the market as a whole against the asia equity, going forward, there is much interest rate risk. you are still confident of the nikkei 225 going to hit new high?

Other Asian bourses have rallied ahead of the Nikkei and Topix. The uncertainty has more to do with the US dollar-yen relationship, the oil price uncertainty, the domestic economy's uncertainty, and the direction of interest rates by Bank of Japan. Its also not so much that Japan is a hard sell but rather the other Asian bourses are an easier sell.

Corporate earnings - Capex increased 11.9% in 3Q2006 which is still decent. Meanwhile, profit growth remained strong at 15.5%, for the 17th-straight quarter of gains. Its the 17th straight quarter, let that sink in first. Mind you, the last 4 quarters had been clouded with much higher oil prices. Since oil prices have started to dip appreciably since August, corporate profits' growth should contin…
Big Picture Recheck

Equity markets, as expected, continued to bloom..., any scary movies in the near future?? Let's just examine a few notable developments in recent weeks affecting the big picture.

US Dollar - Sharp weakness, may be due to anticipation of lowering of rates by Fed. Fed may be tempted to do that soon due to the weakening housing starts and higher inventory. Particularly if the Christmas sales figures come in flat. How does that affect Asia? It used to be bad, now not so much. Most Asian currencies are willing to be a bit stronger to wave off imported inflation, and many considers it still OK to be a bit stronger without hurting competiveness or exports. The weaker dollar would ease pressure on Chinese yuan to appreciate at a faster pace. Bernanke would be welcoming on the easier US dollar. Paulson's hand is possibly evident here as he knows the US policy makers may be banging their heads against the wall asking the Chinese government to appreciate their currency …
Top Holdings By Top Hedge Funds

There was a revealing article in Barron's which identifies five top-notch hedge funds whose investment moves are closely watched by the industry, revealing their top holdings and some recent transactions:

David Tepper's Appaloosa Fund:
(1) Oracle Corp.
(2) Micron Technology Inc.
(3) Applied Materials Inc.
Other big holdings: Cisco Systems Inc., Microsoft Corp., Texas Instruments Inc., NASDAQ 100 Trust Shares ETF, AMR Corp., UAL Corp., and Continental Airlines Corp.
My Take - This lends credence to the belief that NASdaq is primed for a much better few months ahead than the S&P 500. It seems there is a growing consensus among fund managers that Nasdaq is due for big rally in the weeks. ahead.

David Einhorn's Greenlight Fund:
(1) Ameriprise Financial Inc.
(2) Microsoft
(3) Hospira Inc.
In May Einhorn talked about his affinity for Microsoft, saying that buying Microsoft at US$23 was like getting Alex Rodriguez for a merely average price in a fantasy…