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Showing posts from March, 2007
Warrants Premium
Andrew Lim said...
Can you tell me why those warrants are still trading at a lower premium now although their mother share has almost recovered back to the pre-correction levels? It is so hard to set an entry and exit price since the premium can varies from time to time

I assume you are saying the premiums just before the March selldown are a lot higher than the premiums now for warrants. There was little risk since the beginning of the year leading up to the March selldown. In fact, Malaysia was the best performing market in the world ytd then. As warrants are necessarily a bull market leveraged instrument, the premium investors are willing to pay will be higher in a rising market.
Even though mother share prices may have climbed back to pre-selldown levels, the premium would have shrunk because the outlook is a lot different than the first couple of month of the year. Now, investors are "pricing in risk", new all time highs does not look an easy mountain to cl…
The Equaliser
Important Insights For Coffee Shop Talk


Casual conversations can sometimes elicit the roll of our eyes, and sometimes I have to stop myself wanting to explain an investing issue further among friends as it could drag on and on. However, when you can add logic and persuasion into an investing issue, we musn't be stingy.

There are again two types of people in the world when it comes to knowledge and information dissemination. Group one are those who will try and get by by hoarding as much knowledge and information for their advantage (what the rest don't know would benefit me, I have leverage and the edge). Group one are also those who are likely to "lord over people" with their "extra knowledge and information". For example, they are the ones who may have a passion for wines and would read up voraciously on it, and in social settings will snigger and gently shake their heads at any faux pas or shallow commentary on certain wines - that's lord…
Update - The fact that daily volume for Tebrau has surged past 100m or 30% of free float means it will move to the next range very soon. (Thursday 29/3 12.30pm)


Tebrau Trends
There are certain things that you should know when playing stocks like Tebrau. Its not just any other stock. Its a market theme stock, its even a market leader, it moves and sways to build up of buyers and sellers waves. It will be volatile. You would still have to know the demand and supply, the resistance levels, and the surrounding fundamentals to get a grasp of where it is going, where it can go, where to take profits. Its part concept turning into reality fast, so things can change very fast indeed. What seems inflated valuations now can look decently priced later.
Shares: 669.7mn Kump Prasarana Johor holds 42.4%, leaving free float at 386m. Average daily volume 3m-5m or 10% free float change hands every week or so. RNAV @ RM30 psf = RM1.70 per share. Land values will command a higher premium as it has 26km wate…
US Housing Cycle
First the China scare, then the yen trade, now the US subprime. It seems like a merry go round, the bears are trying very hard, this one cannot-ah, what about this-one? The table above clearly shows that the market has been weakening for a pretty long time. Subprime worries is not the start of a calamity, its the near-end of a weak cycle. If you wanted to get all hot and bothered, you should have done so 6 months ago, and then had ample time to get out of the subprime shares way before they tanked. The weakness in US housing is not fresh or big news, just look at 2006, the US saw a contraction of 10% in construction and housing related jobs, but still we are seeing an overall jobs increase for the last 2 quarters and even month on month figures looked good. Which is to say, if the housing side wasn't so weak, you may even have unemployment at way below 4% even. Jobs growth in other sectors have more than compensated for the down cycle in housing. That is why, despite…
Old Friends
Some of you may remember Tebrau as one of my significant picks last year. Went from 38 sen to 72 sen linke within 2 weeks, man, even I felt like a demi-god then! Ever since IDR gathered a head of steam over the last few weeks, Tebrau has nipped past UEM World in terms of percentage gains, and for the first time in many moons, it has topped the volume charts today. As mentioned in the Nusajaya Dreamin' post before, the Kota Selat vehicle will comprise of land injections from Danga Bay, Tebrau and Khazanah, with Khazanah taking the lead and biggest share.
The land we are talking about is the super prime in the Tebrau corridor. Tebrau's book value is only at RM13.40 psf. Even if you mark it to RM30 psf, which is about lower side of market value (although you do find transactions that are much higher priced), you are still getting RM1.70 per share as RNAV. Tebrau stands a better chance than most of realising the conversion value of its land into cash as its only 1,011 ac…
HK's Future

HK did not depreciate the HKD during the difficult 1997-2001 period, it should have but Tung and his top dogs lacked the political willpower to carry out such a decision. Probably they did not get the Ok from Beijing then. The financial climate has improved markedly over the last 3 years, especially since Tsang too over the Chief Executive role. Its not really Tsang's ability, much of the goodness and turnaround were due to cyclical factors.
But you have to give it to him, some people are just lucky, some not so much. Tung had probably the worst kind of luck, started in 1997, Asian financial implosion, unemployment, blame seeking population, SARS, etc... Tung had bad luck but he has also shown a consistent inability to lead, inability to step forward, inability to be proactive; dwells and surrounds himself with rhetoric ... so much so that in the end, even Beijing admonished him severely in the open.
In that sense Tsang was luckier, even though nobody bothered with t…
Two Tribes Go To War
There appears to be two investment camps in global equity markets. Who has more power? You decide.
Hard Landing Camp - This group believe that the US subprime shit will hit the fan and everyone will get some in the eye. They are bears and they keep shouting that we all need to be very afraid. Pessimists maybe but nonetheless they have more substance than Dr. Doom Marc Faber. They don't think US hosuing market has bottomed out, in fact it has a lot more downside to it. They also believe that sub prime lending has also crept into some prime lending areas over the last 12-18 months. They also think the housing recession will affect other areas of the economy. Most importantly, this camp believe the US hard landing will affect global markets as well. Believe housing bubble is a global problem. They see slowing growth and rising inflation which is stagflation in the US ... and to add a bummer into the works, a collapsing US dollar which can cause all markets to be in…
What's Yuan Gotta Do With It?
giggsy said...
Quoted "Yuan will be allowed to appreciate more for the rest of the year. What a good investment option ... mind if I ask, what made you said that for the above statement? thanks, Jeff
p/s since you used the nick of probably M.U.'s all time best player next to Cantona, gotta try and answer your question ...
China's yuan has been pegged to a flat dollar within a narrow band (0.3%) around an official rate of 8.28 to 1 since 1995. Even though the yuan is still not entirely freely convertible, China has made deliberate moves to allow the yuan to appreciate in light of its enormous trade surpluses. Now the rate is 7.72, and more significantly even surpassed the HK dollar's 7.81 rate! The US is about the only country that can have a seemingly strong currency that leads to trade deficits is in its national interest in a global economy dominated by international trade. This is because a strong dollar backed by high interest rates …
The Games We Play
& The Politicians Who Celebrate Victories
Another gem has been spotted in one of my favourite blogs (which happens to be written in exquisitely expressive Malay language). The heading was a clever play on "sob-story" and shuttlecock, but I digress ...
Cerita Tangis dan Bulu Tangkis
Hari tu gua menangis. Gua dah lama dah tak menangis. Tidak pernah semenjak menonton cerita Sepet, yang membuatkan gua menangis atas kekayuan pelakonnya, bahagian-bahagian 'redundant'nya dan terlebih publisitinya....sorri, terlanjak pulak. Ok sambung cerita gua menangis. Ya, selepas lebih 20tahun, selepas melihat Razif dan Jalani menjulangnya buat kali terakhir, aku tak dapat menahan emosi bila beregu negara menang All England tempoh hari. Menang ada gaya la katakan. Sepanjang kejohanan tak pernah kalah satu set pun. Ini baru panggil Malaysia Boleh (tapi Koo, hang kontrol sikit keret hang tu. Janganlah joget kat depan net time dapat matchpoint. Ada ubi ada batas, ada hari …
And Now For Something Completely Different
ICC Cricket World Cup
After bitching all around about having to pay RM400 for the bloody broadcast of the ICC Cricket World Cup, the tournament is gaining momentum. You either love or hate cricket. Its 22 players waiting around for one ball for half a day, that's one day cricket; stretch it over 5 days its called Test cricket. For those who like American sports (high scoring, a buzz a minute) then one day Cricket World Cup is as close as it will get ... just remembered a brilliant American joke...
I hate American beer, when I drink them its like makin' love in a canoe ... Cos its fuckin' close to water ...
Anyway back to the game. For the uninitiated, cricket is only played very well by the Test teams, sort of like a Champions League. Teams do get added as a Test team, but its like getting Singapore to legalise chewing gum (could happen, may happen, but will take a bloody long time). Current 10 Test teams include England, South Africa,…
The Little Bull Terrier
Nusajaya's Mascot
As investors focus on UEM World, Gamuda, Mulpha, Tebrau... etc... now that the catalysts predicted are in motion, I would like to point out that investors should keep an eye also on the little bull terrier in Ekovest. A spv named Kota Selat Tebrau Sdn Bhd has been established to undertake the development of the Danga Bay project in IDR. Danga Bay Sdn Bhd holds a decent size 1,380 acres in a very prime area, and is controlled by Lim Kang Hoo. Kota Selat Tebrau will have Khazanah as the majority lead partner with Kumpulan Prasarana Rakyat Johor, and Lim will inject all or most of Danga Bay into the spv. If all of Danga Bay is injected, the transaction could be in the region of RM350-400m or around 20%-25% stake in the spv. Danga Bay is prime because the land actually faces Singapore.
Ekovest could be brought into the picture because Lim Kang Hoo controls Ekovest and if you look at the trading history for the past few months, it looks like most…
China Calling Again
Similar to the blog posting below, I think there will be a lot more rapid pronouncements to tighten liquidity and regulations to prevent a complete bust-up. It is almost inevitable that there will be some form of substantial correction in stock and property markets in the future. All the government can do is to mitigate the impact and trickle down effects. I think it is excellent foresight on their part to start the tightening process even now.
China's Securities Regulatory Commission has now barred listed companies from using share sale proceeds to invest in stocks. Companies are also barred from buying derivatives and convertible bonds with the share sale proceeds. The move will force companies to reinvest wisely to build up business or return them to shareholders as dividends. Companies who are actively investing in stocks may be too dependent on gains from share trading. The contagion effect from a market crash could seriously weaken these companies' bala…
China Calling
First, you had that stupid scare on rumours of a possible capital gains tax which started a markets' diarrhoea. Now that was proven to be untrue. However at the recent very big pow-wow (National People's Congress) a few major decisions were made.
a) China will allow a new agency to manage a portion of its US$1 trillion in foreign reserves, prompting fears that China may not be as aggressive in holding USD in the future. Yes, baby steps initially, but nothing much for the Fed to worry about initially. This may herald the start of the soon to be infamous long term decline of the USD. Just imagine how this decision will affect other central banks or the oil barons. Holding USD is definitely no longer fashionable. Anyway, back to the issue, it looks like China wants to put a part of the reserves to be managed similar to Temasek, and hence will be modeled after Temasek to do direct equity investments. The new company will be called Lianhui and will start with 250bn yuan…
Current Investing Insights
Consensus Estimates - If there are 20 research reports, or index predictions by experts, the general view is to take the average of all predictions and take that as the consensus. Consensus information is an overused thing when it comes to investments. It is very one-dimensional and blocks out a lot of useful information but still, reporters and the media will jump on earnings results and compare it vis-a-vis to consensus estimates.
If I have 20 experts predicting where the Dow Jones index will be come end-December 2007; and say the consensus is 13,000: I wouldn't be very interested in reading those in the middle of the pack but rather I would be very keen to get hold of the two extreme predictions. Say the person who predicted 16,000 and the other who predicted 9,000 because they are bound to be very convinced by certain factors/scenarios which caused them to make those predictions. It is up to us to assess the viability of their arguments but its refres…
RPGT To Be Removed
Guess The Motivations - Bending Over Backwards
It is very likely that an announcement will be made during the Invest Malaysia 2007 conference later this week. It is felt that the abolishment of Real Property Gains Tax will help draw real estate investors to the Iskandar Development Region in south Johor. The RPGT structure was last revised in the mid-1990s amid a hot property market. The RPGT is presently assessed based on a percentage ranging between 5% and 30%, depending on how long the seller has held the property. For Malaysian individuals, there is no RPGT if the property is disposed of after five years. For foreigners, a flat rate of 30% is applicable within five years from the purchase of the property, and 5% on the sixth and subsequent years. As such, it is easy to see why it has been argued that a relaxation on RPGT can trigger a re-rating of the property sector.

The Government has been easing restrictions on foreign buyers in recent times. As an indication, f…
Bears Making A Ruckus
A trend is your friend they say, and when the going gets tough, bears come out to hunt. Herd mentality, I guess. We have to filter out the noise made by the bears and just look at things in its proper perspective. If we were to look at the current bull run, it is not a massive one. In fact it ranks just seventh out of the nine bull runs in terms of scope and magnitude. Its hard to be over-exuberant or grossly over-inflated when you are #7.
Does anybody remember the global scenario a year ago? Corporate valuations are about similar but oil was some US$13-16 higher per barrel, we didn't see the edginess then as we do now, did we? Yes, there are worries in the market, the liquidity situation: as in all bull runs, it is generally fueled by strong liquidity - too much liquidity chasing assets creates bubbles, I doubt we are at a bubble stage yet.
But what is liquidity? It is certainly not just yen carry trade, its just a simple demand and supply equation. Liquidity h…
Nusajaya Dreamin'!
All The Leaves Are Brown & The Sky Is Grey
Some readers have been making wisecracks at my call on UEM World. Fair enough. RM14-15 might be a stretch for now with the repricing of risk into equity markets but I am still confident that the stock can at least get close to RM10 inspite of the troubled waters globally. The stock has fallen from above RM4 to nearly RM2.5 during the recent selloff and has since rebounded to RM3.20 or thereabouts. Hence my call is quite huge, a bit like George Bush Jr being tipped to win the Nobel Peace Prize, or HK having a genuine and truly democratically elected government, or NOT hearing a Singaporean tourist in other Asian countries commenting "waah... so cheap-one" all the time ...
A regular reader of this blog commented wisely that there are many similarities with the Nusajaya (IDR) project and the Multimedia Super Corridor. For those who are uninitiated, the MSC started off as a field of dreams to mirror the successes…
From One Baseless Scare To Another
We Like To Scare Ourselves Shitless
Let's take a few steps back and look at the developments over the last 2.5 weeks. It seems all global investors have decided to see The Exorcist at the same time, followed up by a double screening of Salem's Lot and The Omen. After every movie, we come out with shivers, recounting some of the scenes, ... its just a movie but were scared shitless for a couple of hours anyway. Are we having that kind of experience in global markets? You be the judge.
First scare, rumours that there will soon be a capital gains tax on stock trades in China sent Shanghai tumbling by 9%, causing a rippled effect across all time zones. The next day, phew, its rumours only.
Second scare, yen suddenly begun to stregthen as investors preferred to see more horror movies, causing investors to assume a huge yen carry trade reversal is in the offing. This was followed by a sequel and then a prequel, the yen carry trade caused panic attacks …
Corruption In Asia
The figures below were from the respected Political & Economic Risk Consultancy unit in HK which has been supplying yearly corruption perception index data on all countries. Ten being the worst score and zero being the best, the figures are for the 2007 study,bracketed was the country's score back in 2005:
Philippines 9.4 (8.8) Indonesia 8.03 (9.1) Thailand 8.03 (7.2) Vietnam 7.54 (8.65) India 6.67 (8.63) South Korea 6.3 (6.5) China 6.29 (7.68) Malaysia 6.25 (6.8) Taiwan 6.23 (6.15) Macau 5.1 Japan 2.1 (3.46) HK 1.87 (3.5) Singapore 1.2 (0.65)
Some Observations: a) Phillippines and Thailand have worsened significantly, and have taken on the roles as top of the heap. It used to be that no one can beat Indonesia, Vietnam or China when it comes to corruption. However, these are not hard and fast conclusions as these are still just perceptions, but the study has been done yearly with a good cross section of sampling, it does give a good overview of trends. Is it a coincidence w…
Bull: "Rumours Of My Death Have Been Greatly Exaggerated"

sopskysalatsaid...
Weak retail sales, econ data.. new info of late payment of subprime borrower... sent the US equities into a tail spin again.It is very tough. Weak data give the carry trade fear of US lowering interest rates and also weak econ.Not an easy task.. Strong data sounds bad, weak as well... moderate better.

Pricechartsaid...
Is the bull going to shit?

a) Slowing US demand, largely expected, will cause the Fed to lower rates soon, markets pricing in the possibility of this being a trend rather than a one-off decrease, which will narrow the differentials. Sectors which were sold down in Japan were those reliant on US demand such as auto makers and electronics, which is to say that the selling is properly fundamentals motivated rather than a herd based mentality.
b) Narrowing of differentials, well not quite yet. Even with the data a rate cut is not going to come in rapid succession. Labour data out last Friday st…
Funds Flow & Asia
Getting In & Out
The correction in Asia in particular, and global markets in general, caused some panic buttons to be pushed. For a time it looked like the markets may be headed for the abyss should the yen continue to strengthen or US numbers indicate a hard landing scenario. Thankfully sanity prevailed, or in my other blog, the Plunge Protection Team came to the rescue to buy time for investors to rethink their positions and to take the fear element out of the market equation.
However, some damage has been done. It is inevitable that there will be some redemption of funds being invested in emerging markets everytime fear and risk rear their ugly heads. For the first 7 days of March, a check with the funds which are dedicated to investing in Asia (except Japan) showed a startling redemption of US$4 billion. The redemption affects investments by these funds into China, Korea, Malaysia, Singapore, India, HK, the Philippines, Thailand, Taiwan and Indonesia. To qu…