Monday, April 30, 2007
yes, tenaga is a weird animal... most brokers and foreign ones esp have tnb as a buy for the longest time, its not even matching the index gains ... so there is a disconnect here:
a) funds don't like tnb's story
b) glc revamp impact not so great at tnb, maybe they have fewer kinks to start with
The biggest disconnect has to be the way IPPs have given a viable alternative for investing vis-a-vis TNB. Hence TNB's policy, or rather the govt. policies are to be blamed for being "too nice" to IPPs to the detriment of TNB. That doesn't seem to be changing much, hence the under-performance can be expected to continue.
Coffee Shop Talk Over The Weekend
Friend: Hey, I tell you something very exclusive ...
Me: Go on.
Friend: Unbelievable la...
Me: Go on or I will be going.
Friend: Maxis to be privatised la
Me: You got to be joking!
Friend: I know, some more its for 41bn ringgit
Me: If it was a stranger telling me this, I would whack him over the head already, but since its you, I'd give you the benefit of doubt. Very rarely do you find telcos being taken private because they need huge capital spending, need to tap capital market. Then they usually have a low NTA to share price as they have little real assets such as land or buildings. Their assets are in the infra they built and the subscribers they have.
Friend: Yea, its unbelievable but this source very choon-la.
Me: I guess they could take it private as Maxis is printing money, but they are also investing into Indonesia, India and Sri Lanka... which requires capital. Come to think of it, their free cash flow is sufficient to for that.
Friend: Think some more.
Me: If you are having 1-2 bn free cash, take the company private, then assemble all your foreign telco holdings and relist in Singapore, Maxis could come out in front. I mean, Usaha Tegas could come out in front. Actually since you mentioned 41bn ringgit, can see whether got some truth in it by doing some exercise.
(2 minutes later)
Me: Chee b.. , 41bn equals about RM16.20. Compared to closing RM13.00, looks real and believable. Did my computation, all covered warrants would gain 100% or near that if the news is true.
Friend: Ya la, no harm right, opening Monday buy a few hundred k Maxis-CD at 20 sen. If it turns out well, good la, if not, Maxis is not going to tank, right?
Me: Sounds OK, but I tell you, taking a telco private is rare indeed.
(Monday morning, Chee-b.. the stock suspended..)
Friday, April 27, 2007
Ahead Of The Holidays
a) Better to reduce stock holdings substantially ahead of long holidays, and ahead of the tilting Chinese markets especially when they come back after the holidays.
b) Underlying tone of market still bullish for rest of the year. Will look for lower entry levels in a couple of weeks.
c) The May Factor. To sell in May and return after October is a good rule of the thumb, especially for "long only" players. In a revealing study: an investor who placed US$10,000 in the Dow average at the end of April each year since 1950 and sold at the end of October would have a net loss of US$272, while someone doing the opposite would have gained an astounding US$534,323.
There is a familiar saying in capital markets "Sell in May and go away", made popular by author Jeffrey Hirsch who publishes the Stock Trader's Almanac. It doesn't help that most of the major corrections have taken place between May and October. A factor which has not been cited for the May-October effect is bonuses/holidays. In order to put in the good figures for year end purposes, there has always been a covergence of interests for players involved to have a solid last quarter so that bonuses in the new year will be good. Plus, you have extended holidays with the last 2 weeks of December and the first week of January - hence you need the cash and peace of mind to have some fun. Generally nothing untoward will happen during end-December / early-January because of that.... a kind of financial detente.
Thursday, April 26, 2007
From A Boiling Pot To A Frying Wok
A news report just out said that home sales in Beijing nosedived in the first three months as hundreds of thousands of investors shifted from property investing and speculation to chase quick gains in the China share market. National Bureau of Statistics figures show that sales of completed residential properties in the capital dropped almost 60 percent year on year to 615,000 square meters during the first quarter.
Presales of uncompleted flats also slumped more than 40 percent to nearly 1.8 million sqm in the same period. This bit of news would tie in nicely with the huge number of new share trading accounts being opened so far this. Surprisingly, despite all that, the National Development and Reform Commission released figures showing home prices in Beijing increased 9.9 percent in the first quarter. While home prices in Guangzhou were up less than 10 percent in the first quarter, while apartment prices in Shenzhen jumped more than 10 percent amid a dearth of new supply. Average housing prices in the two cities climbed 20 percent last year.
There have been fiscal measures introduced to try to curb the property bubble. In February a land appreciation tax was introduced, plus better regulation and policing of foreign purchases: both seem to have the desired effect. Investors are finally convinced that there will be more fiscal curbs to come for property, adding fuel to the switch to stocks.
Looks like a substantial amount of the sharp property gains in 2006 and in 1Q2007 are now being leveraged to play the sharemarket. Seems like however you cut it, it does not paint a pretty picture, but small fortunes can be made before the fat lady opens her mouth. I believe the bulk of the players know that as well, and even know they are playing musical chairs as well - so everyone is watching everyone and you don't want to be there when they all rush for the door.
The figures would placate the government officials somewhat on the property side. Now they have a bigger problem brewing suddenly in the sharemarket. How to let some steam off boiling kettle without scalding your fingers? Its tough to be at the top.
Wednesday, April 25, 2007
Tuesday, April 24, 2007
rask3: Hi, Thanks for your views. I enjoy your arguments as well as your humour. :) An avalanche of statistics can be trotted out to stress the validity of a projection. Yet those statistics can fail to capture a very crucial factor or point that casts reasonable and valid doubts on the prophecy. I would like to illustrate what I mean by an example from your own blog. Several weeks ago you called a buy on UEM World at around RM4.00 or thereabouts. Correct me if I am wrong. (I made a bigger call when stock went to RM3.20) You painted a rosy scenario on how the stock could double or triple from there, before the year is out. Well, you may turn out to be right and make many people rich by your prediction. Being the cynic that I'm I checked the stock on Bursa's website. You know anyone could do that easily. What I found was, insiders of UEM were selling the stock like crazy and en masse. Knowing that insider selling is not always an ominous sign, I considered the reasons for them to do so. They may have sold them for any of the following reasons:
1) They all had better investment opportunities elswhere.
2) They all were not greedy and wanted to leave some money on the table for others.
3) They all had to meet urgent financial obligations.
4) They all were taking partial profits as an insurance, in case the market tanked and took away their paper profits.
5) Being better informed about the company, they didn't put much credence on the rosy projections made in the print media or the internet.
6) Well, there could be other reasons.
I wondered at that time why your scenario didn't point out the crucial fact of heavy insider selling. May be you weren't aware. May be you thought it was not all that significant. May be ........ Well, readers, take all investment or trading advice, be it in the print or internet media with a pinch of salt before you plonk down your hard earned money. Check out the story. Dig deeper. You owe it to your financial health. Despite the disclaimers that people who make recommendations cover themselves with, people do act on recommendations if they seem plausible at first glance. Sometimes their prophecies become self-fulfilling. Thanks and good luck. Rask
Nice job Rask. I am aware of the insider selling. Good advice too. Me, I tend to think all people should pull back and take a snapshot where they are most comfortable over the situation. You assume insiders know the destiny of a stock price. Of course insider selling is not a terribly good sign but it is also not necessarily a sell sign. Yusli can tell you that already!!! He sold at RM6.50 and then at RM8.50 ... call him up!!! I do agree that insider selling is more important when it comes to very speculative or low paid up counters, more prone to manipulation, not so much when it comes to bigger caps.
Just think of the time when you LOST the most money on a stock, think clearly, ... wasn't it because you were so close to the source, very inside already!!! 9 out of 10 times, that's the case, which is why its better to pull back and take an overall snapshot of a view. That's why Warren Buffett can operate better by not being in NY or London but Omaha. The same insiders who are selling are just as intelligent as you and me. To take insider selling as an indicator is ok.
China Shanghai & Shenzen Blues
I have mentioned before that the most dangerous external event that could rattle global equities is the Chinese markets. Extended Labor Day Golden Week holiday is coming in the first week of May, generally I would not expect the authorities to try anything silly before the mass exodus of Chinese back to their hometowns all across China. Economic growth was a stronger- than-expected 11.1 percent in the first quarter, compared with a year earlier, while inflation hit a two-year high last month at 3.3 percent. Apparently the authorities were not happy with the recent huge growth figures and higher than expected inflation. Some ten banks were roped in by the Banking Regulatory Commission and were reprimanded that they needed to rein in their loans growth rates in order to minimise future NPLs. The 10 are Construction Bank, Bank of China, Bank of Communications, Merchants Bank, CITIC Bank, Shanghai Pudong Development Bank, Minsheng Bank, Industrial Bank, Huaxia Bank and Zheshang Bank.
I have noticed some interesting postings by Moola and MooMooCow (my that sounded like I am writing a children's book) on Shanghai. They highlighted Marty Chenard's article (in Safehaven.com) which had the chart above, thanks guys. I agree with Moola who mentioned that some of the credit card balances and mortgages may be leveraged upon to invest in the stock markets as well - very frothy. If one were to look at the performance last year, which was exceptional, and the follow through activity this year - you can get a lot of tells. There had been a deluge of new account openings this year. The two silly drops of 9% and the recent 4.5% were on flimsy rumours and fears, which is troubling indeed - lack of sophisticated institutional investors, loads of herd mentality and momentum investors and panic-driven as well when the time is right/wrong.
"This is definitely a bubble in the making - for most stocks, positive earnings growth has been priced in until 2009," said Steven Sun, HSBC equities analyst. "At the height of the last bubble [2000-01], we saw investors opening 2m accounts a month, which is half the current rate." Again taken from Moola's blog, the fact that there are 4m new stock accounts a month being opened in China in 2007 is a very worrying trend.
If we were too look at the chart above, the triangle surges looks worrying and excessive, well 4m new accounts would do that to you. 4m new accounts a month would also seem to be IGNORING the danger signs, and IGNORING the fact that Chinese equity markets is very much a policy-driven market (i.e. things can change very fast with new fiscal measures).
Fact is 2006 was a very good year already for Chinese stocks, but the animal has been injected with glucose in 2007, just compare the volatility and gradient of the surges in 2007 compared to 2006. Does this mean I am bearish on Chinese markets? Yes and no, please read the following carefully (point (f) being my strongest conviction):
a) the markets there will need to correct
b) the authorities there is getting antsy
c) nothing will be done till after the extended May holidays, at least let them have a nice holiday before clobbering them over the heads
d) the authorities have reminded and warned players, banks and brokers numerous times already this year on the likelihood of stringent fiscal measures if the excesses are not controlled
e) probably no Asian market is that positively viewed than the Chinese markets in 2007, so excessive valuations are normal to an extent, a lot of companies are trading at 40x - 60x earnings already
f) even if you look at the above chart, which is frightening, you can drawn a line on all the low points and it points to a very BULLISH undertone for the rest of the year: so even in a 10%-15% correction (which is VERY LIKELY, VERY SOON), there will be enormous support buying activity at critical levels
If I can sum it up, a big whack down is likely very soon and that can destabilise all markets, but the overly strong undertone will ensure for a swift rebound. Be prepared for a very volatile May and June 2007.
The People's Bank of China has ordered lenders to increase the reserve requirement six times since July to remove more than 1 trillion yuan from the market. New credit growth jumped 41 percent last year, while in the first quarter new loans of about 1.4 trillion yuan (HK$1.42 trillion) were made, more than the total for half of last year. I have argued before that raising these capital reserve requirement does not do anything for the markets. Neither does the benign currency appreciation. Hence the authorities will implement some stringent fiscal measures very soon - with or without that, the self-propelling Chinese speculative activity will find a way to drown themselves very soon.
Monday, April 23, 2007
Dow Jones / S&P500
Near Term Importance
Most Asian bourses are a bit wary now that almost all global markets are near or surpassing their all time highs. A lot will look towards the American markets for better guidance and confidence. Dow Jones will easily surpass the 13,000 barrier. The scenario is a bit different for S&P. Though everyone knows Dow Jones index because its been around forever, its not a true indicator of the underlying strength, depth and direction of US markets. The DJ only has 30 stocks, compared to the 500 for S&P. The trouble for S&P index is that some 30% of the 500 are in technology. Most are still some 50%-60% from their bubblish peaks during the internet-zany days. Hence for the S&P 500 to scale past its all time high would take a lot.
That's the not so good news. The better news is that all things being equal, how the tech stocks perform over the near future would determine to a large extent the vibrancy of the S&P 500. As most are still a long way from their highs, we have to examine the likely trends to get a better picture from the tech stocks. Nasdaq would provide a decent guide. Recent spate of earnings from leaders such as Google, SAP, Xerox would point things are headed north. So-so stuff from Intel and IBM are the flip side of the coin. However some concerns are there over reduced corporate spending which would hurt the tech side. So, watch for this week's release of earnings from Texas Instruments, Apple and Microsoft for further guidance.
To get a better grasp of how much more the S&P can go: from the first day of this century till now, the DJ is up some 30% (inclusive of dividends) while the S&P 500 is up around 1%. On fundamentals, the S&P 500 stocks are yielding about 6.4% while the 10-year Treasuries are clocking in at 4.6%. The gap is still there which provides good support for buyers of stocks. As cash holdings are still at an all time high for corporate America, its only prudent that they step up their share buyback programs till the spread narrows significantly. Same way, I would start getting bearish if the gap is less than one percentage point.
Besides earnings, we can expect a slew of M&A and private equity buyouts as PE firms jostled to get ahead of the pack to invest while interest rates are still favourable. These buyouts will inevitably push up prices of same industry class stocks.
Market Strategy At 1,330
At or near all time high, all equity markets will behave the same way: volatile, profit taking activity and sharp buybacks. Judging from Asian bourses' excellent closing session last Friday and European/American bourses steady gains later that evening: many would be predicting a good week ahead. However, I was a bit hesitant and afraid that players would go overboard in the morning session today. Markets have opened for more than an hour now with the KLSE registering just RM606m value traded. I think many remembered the RM3bn day which was quickly followed by disaster. The way the markets traded this morning is one of cautious optimism, which is very good. A terribly strong surge may find weak legs later. I would expect all markets to try to establish a platform and not surge away over the next few days. It is important to form a base. Judging from the KLSE movements, its not a time for big caps to move, which would be wiser to stay away from stocks requiring huge liquidity such as UEMW, MRCB and Resorts/Genting. Its a rotational wham-bam-thank-you-maam kind of market currently. If your chips are not off the table, you have not locked in your gains.
Sunday, April 22, 2007
Basis Of Commentary
Readers of this blog after a while would have surmise the basis of my kind of commentary. As I have mentioned before, its a daily blog, hence I do not want to talk too much about absolutely good undiscovered fundamentals, which may take forever to be undiscovered. I am not trying to be Warren Buffett here. I blog to have fun and share / exchange information. For cynics who find it hard to believe why I would do this for free, please read my posting on The Equaliser (29 March 2007) to get a better understanding of my persuasions. Free and public blogs do not get much respect, nobody would want to believe that good information is made readily available. Do I buy and sell shares? Yes. Do I buy before I post? Yes. Isn't that front running? Yes and no. I have to buy before I post, its believing in what you say. No, because the amount that I buy is not earth shattering. If I buy in millions, I would be posting this from my yacht off McMahons Point in Sydney, trust me!
Back to basis. As this is a daily blog, I blog about things happening around, things that perk me up, things that make me mad, ... On stocks, I would highlight them if I think its worth highlighting and timely. I will never be the first to highlight them unless I am the one running the company or the head syndicate manipulating the shares. I will not highlight stocks moving 12 months down the road, if I do, I will tell you. I am a fundamentals person at heart, but on a short term basis, technical play a big part, but I do not spend much time on TA. I have been in the screwed up financial markets long enough to predict better when stocks move. I am a big believer in identifying catalysts for stocks to move. No catalysts, you won't find me there. I don't hold stocks forever, I don't fall in love with stocks or have a relationship with it. I will not bitch if I did not sell near the highs or did not buy cheaper. Whats done is done, move on. I hate people who say "woulda, coulda, shoulda"... I shoulda hold onto Tebrau at 70 sen, blah, blah... you should have, but you didn't, so move on. Strong markets make it easier to be "right", not a super-hero. Firm believer in that people who did not "earn" gains properly will always find ways to lose it all back to the markets (look at where 99% of the owners / syndicates / players of the mid-90s Second Board excesses are now!!??). The markets do not OWE US A LIVING. It is not there to make you rich, it can make you very poor. If you missed a stock, don't fret, the market will always be there, we are the ones who might not. Cheers!
p/s there is a new service that will alert you whenever there is a new posting from this blog, scroll to the bottom of page and subscribe to Atom Post
Friday, April 20, 2007
Last Minute Shopping
AMMB- Call Warrant
Exercise price RM3.80
Mother share RM3.90
Expiry 12 October 2007
5 covereds to buy one share
Foreign houses valuing mother share at RM4.30-RM5.00. Catalyst soon, removal of some board members and installation of ANZ people on board, bound to stir more institutional interest. Now this covered warrant is reasonably priced, buy up to 22 sen, sell above 30 sen.
Premium = 5 x 20 sen = 1.00 + 3.80 = 4.80 / 3.90 = 23%.
Gearing = 3.90/1.00 = 3.9x
The only decently priced new call warrant over the last 3 weeks.
You Are Invited To A Cringe Worthy Chinese Wedding In Malaysia
Came across this very funny posting on his 9 reasons why you know the wedding dinner you are attending is SHIT! For foreign readers who have never been to a middle class Chinese wedding, do click on the link and you will feel yourself being transported to Anthony Bourdain's worst nightmare. Its funny cos' its real. Damn the kids with the squeaky shoes!!!
Following the robust run-up in SapuraCrest, some savvy fund managers have been piling into Sapura Tech. ST is not as interesting as SC but it has what we call buffer and indirect play into SC. It has already been announced that ST will be privatised, for every one ST, they will be exchanged for one SC plus 40 sen. Hence savvy funds would be locking in a buffer of around 30 sen or 20% and get exposure to SC during a period where the EEC should be the thematic play. Downside is the 2-3 months lockup but AGM is to be held this coming Monday, which has hasten some to pile in on likely approval for the deal. Nothing terribly new or exciting but fund managers who do their homework would have a leg up on the rest. Buffer man, buffer!
Grasping At Straws
The New Media / China
As I have mentioned before, the excessive focus and deluge of coverage by the media on all things, and in our case the business world, have required us to have a more critical mindset and also layers of filters in place when coming across so called "news / commentary / analysis". Take yesterday's drop around the globe. News editors around the world would want an article written immediately; analysts will be pestered by journalists and clients for reasons for the declines; dealers will try to make sense of the whys and hows; and the general public will just pick up whatever that is being broadcasted as coffee shop talk. Note the vicious cycle reconfirming and validating the purported news / reasons. What I am trying to get at is that sometimes why the market moves like that is "nothing significant". Media and analysts claim that a sharp pickup in the pace of China's economic growth underscores the challenges Beijing faces in trying to control and rein in the country's vast, far-flung economy.
China's statistics bureau announced yesterday that gross domestic product expanded 11.1% in the first quarter from a year ago, an acceleration from the 10.4% year-over-year growth recorded for the previous quarter. All major indicators, including retail sales, factory output, capital spending and inflation, accelerated during the period, raising new worries about excesses in an economy that has grown by more than 10% a year for four straight years. Concern among Chinese investors that the government would respond by seeking to slow growth by raising interest rates sent the Shanghai Composite Index down 4.5%, even before the economic data was released, and contributed to weakness in markets across Asia.
We have to learn to get more comfortable with the volatile China and India markets. I mean, look at the silly 9% correction in early March which caused a huge round of selloff ... and what was the reason, rumours of a capital gains tax on stocks!!?? Just a rumour can send the charged up market down 9%, so I guess a 4.5% fall really indicates very minute concerns.
Just like before, yesterday's correction was mainly due to a natural cycle of the need to correct, not because of any earth-shattering change in fundamentals. Its like when you poop, and journalists surround your toilet banging for reasons why you have to poop and why now! When you got to go, you got to go, its a normal cycle! Global markets have been chugging along to retest their all time highs - its only natural to have a bit of stop-start as markets try to get past those psychological levels. So, sometimes, no need to go searching for reasons too hard.
At the end of the day, the government is unlikely to try anything drastic as they need to keep a happy face for the world to see for the Olympics. Nothing more important than "paper face".
Thursday, April 19, 2007
Corporate Hiring Strategy
Came across this well-written "half-joke half-non-fiction" piece. Certainly applies in most of the positions I have come across in my work.
How To Hire Well
Put about 100 bricks in some particular order in a closed room with an open window.
Then send 2 or 3 candidates in the room and close the door. Leave them alone and come back after 6 hours and then analyze the situation.
If they are counting the bricks.
Put them in the accounts department.
If they are recounting them.
Put them in auditing.
If they have messed up the whole place with the bricks.
Put them in engineering.
If they are arranging the bricks in some strange order.
Put them in planning.
If they are throwing the bricks at each other, put them in operations.
If they are sleeping.Put them in reception.
If they have broken the bricks into pieces.
Put them in information technology.
If they are sitting idle.
Put them in human resources.
If they say they have tried different combinations, yet not a brick has been moved.
Put them in sales.
If they have already left for the day.
Put them in marketing.
If they are staring out of the window.
Put them on strategic planning.
And then last but not least. If they are talking to each other and not a single brick has been moved. Congratulate them and put them in top management.
Dragon & Phoenix
Tuesday, April 17, 2007
Monday, April 16, 2007
Oil & Gas
Friday, April 13, 2007
When a foreigner was caught for defacing pictures of the Thai monarch, it made headline news globally. It made headlines again when the Swiss man was convicted and jailed for 10 years. The global press basically insinuated that the punishment was grossly excessive to the act. We are controlled by the powers of the media, and the media powers is Western-controlled, and hence the line of reporting has that line of bias. Westerners may not get what I am trying to say here, but its OK.
p/s I have to apologise for the puzzle, it seems to be more difficult than I anticipated. Got too many calls from my friends and readers. So, I will release additional clues/answers every ten minutes...
In my dream, I was walking in a lovely garden. The beautiful weather seems eternal, been like that forever. There is only one tree in the garden, couldn't make out the type but its the fruit bearing type. Then a wise looking man appeared from behind the tree and asked "What are you doing here?"
I replied, "Am I dead? Can I _BUY_ more time?"
God: What do you think this place is, like playing bacarrat in _GENTING_ ? (this cannot be "casino" because it would have to be "the/a casino", so its a proper name)
Me: If I am dead, I am sure you have the _POWER_ to do something about it.
God: You are not dead, go back and do better, where I _PLANT_ you, you have to bloom well. (for something to bloom, it has to be planted or a plant)
I woke up, was motionless for a while, and only then I realised I had been talking with God in ____. (the final clue shall not be revealed, it is NOT "heaven", clue in the first para)
p/s Sorry readers, had to do this cryptic stock tip cause I kinda promised someone that I cannot blurt out the stock tip that bluntly. Just fill in the 5 missing blanks and scramble the words around to make the "stock tip sentence". The stock is a vg trading tip, good luck!
Thursday, April 12, 2007
Live This Weekend
Best Supporting Actress
Best New Performer
Grow Up Fast
Wednesday, April 11, 2007
The nice table was nicked from a popular blog by Paul Kedrosky. It is highly significant that the market cap of Europe has now gone past the US. Usually these sort of things indicate a deeper under-current and long term trends. The Euro-zone economies should grow at about 4.2%, assuming 2.2% inflation in 2007. US GDP may grow at 2.2%. This rate is not just for 2007 but if you have a look at the past few years, the differentials are there already.
Tuesday, April 10, 2007
In 1996, Lee Kuan Yew said that low salaries will not attract able men who are or can be successful in their professions or business. Now they will be upping the peg of ministerial pay in Singapore to the top private sector earners again. Currently ministers earn just S$1.2m (US$1.836m) per year, and the repeg will put them at S$2.2m (US$3.36m) or higher if you are more "senior". Since 1994, the salaries of Singapore ministers have been set at two-thirds the median pay of the 48 best-paid bankers, lawyers, accountants, engineers, and executives in multi-nationals and manufacturing firms.