Monday, March 08, 2010

Anything Wrong With This Picture?

Credit Suisse is organising its annual Asian Investment Conference on March 22-24 in HK. Let's see if you can suss anything wrong with that.

Keynote Speakers

Keynote Speakers (listed in order of appearance)

See anything there yet? OK, let me throw in another fact, what if the country head of CS Malaysia has been giving out as gifts to all intending participants (mostly institutional fund managers) Barry Wain's The Malaysian Maverick: Mahathir Mohammad, which was and still is banned in Malaysia. Do any of you see anything wrong with this picture?

None... well, what if I tell you that the PM is expected to address the Invest Malaysia conference in KL at the end of March, one that is "government sanctioned" and involved Bursa Malaysia, Nomura and Maybank as main organisers. The event is "supposed to see our PM launch and address the new economic model. Anything wrong with this picture?

I have a few queries:

a) Why is our PM there to meet fund managers? I shake my head. I don't see other heads of state meeting fund mangers. This is so obviously NOT the PM's decision, obviously he has been ill advised. Do we REALLY need foreign funds that badly??? Do you think Singapore's PM will EVER meet fund managers at a conference??? It is a bit embarrassing, really. I am sure there are bigger fish to fry, why even bother, its just index stocks we are talking about. Foreign funds will come in when its cheap, they will leave when its not. There is no need to court them. We all know why they are not in Malaysian stocks, and meeting them will not do the trick - but doing the "other important stuff" will change perception.

b) Why is CS giving out a banned book to the intending participants? Is it to say that "yea, Malaysia is ok with everything, I can invite the Malaysian PM, and still give you guys the book that is banned in the country AT THE SAME TIME". I do not like Mahathir one bit, but if the book is banned in my country, and if I am the PM, you should not really throw this in my face. Maybe the country head thinks he knows Malaysian politics and sensitivities better than I do, I don't know. Let me give you a better metaphor, assume that I am Muslim Chinese, and you invite me to your house as main celebrity guest and speaker, and you serve pork as the main dish ... I am not debating whether the book should or should not be banned (personally I think the book should be allowed in), but how we are treated and regarded. If I am a devout Muslim Chinese and you invite me to your house as the main speaker and guest of honour, you should not have Victoria Secret models dancing and singing just before my speech. Wakarimastaka?

c) The PM was obviously ill advised because you have a more important date at the end of the month. From the grapevine, members of the Invest Malaysia committee have put their case to the PM and asked him not to go, but somebody else more 'powderful' said its better to go. Its like I directed and produced Avatar, a pure all Malaysian made movie and the grand premiere is end of March in KL, ... suddenly I am also doing another premiere in HK??!!! Who is going to attend the KL event? Will the PM be touching on the new economic model speech? I am sure he will be asked to anyway in private - why preempt the announcement? Even if you are not going to talk about the new economic model, why even talk about "Malaysian investing" at all a week before the big launch and big speech?

Below was my posting on how we "inflate" the value and perceived "attractions" in having foreign funds in our markets. Unless they are long term PDI in to build factories and reate jobs and industries, anything else is short term in nature, be it 6 weeks or 6 years even. Think again people ...


Saturday, August 23, 2008

Foreign Funds, Buy Me Please!

What is this fixation among some Malaysians that foreign funds must/should buy Malaysian stocks? Is it a self-esteem issue? That somehow “they love us more” if they buy? And if they don’t, it means “we are not worthy”? Please lose the pre-independence, second-class citizenry, developing country mentality.

A stock market is just a structure where shares are bought and sold. Whether foreign funds come in or not does not mean we are running companies with “world’s best practices/standards” or that we are making strong strides in the respective industry’s competitive landscape. No, it does not mean that at all.

Funds will flow to places where they can make money, be it Vietnam, Indonesia, South Africa, China, Turkey, Egypt, etc. I doubt many of these markets are practising “world’s best practices/standards”, or have credible market openness or strong liquidity.

People buy stocks that they think are going to give good returns. Even if we have very good companies, people may not buy because we may be overvalued already.

There are tons of options for the global investors, and the Malaysian market is just a little thing.

Get over yourself. Do you know how big the Malaysian stock market is? Take any one of the top 10 market cap stocks in the US and you will see that it is bigger than the total market cap of all 1,000-odd companies listed in Malaysia. As a matter of fact, foreign funds ignoring smaller markets can be perceived as a good thing!

Foreign investors will only invest if they think they can make money. If they cannot, maybe the Malaysian stock market is fully valued or overvalued. Or it could mean that the local funds/institutions and local private investors have snapped up all bargains — leaving no room for the good stocks to be “undervalued”.

We could also argue that when foreign funds and research houses issue a Buy on a certain country, it’s because the local funds/institutions and local private investors are not savvy enough to pick up undervalued stocks. So which is which? Do you want a back-handed compliment?

Attracting more foreign funds is not so straight forward. Do you work it out based on a percentage of the market? What level would we be comfortable with? If foreign funds own 10% of the market cap of Bursa Malaysia, is that too low? What about 30%? Too high? Should we put in protectionist policies then?

We don’t even know where our “comfort level” is, and what should be our strategy? So why even bother trying to attract them?

Too often, we are just reactionary in our policy making. We see an issue and we address it, but without proper thinking and strategising over the big picture. And then when it hit road bumps, we react with more policies! But why are we doing this in the first place?

Let’s look at the stocks with the largest foreign shareholdings (as a percentage of the company’s shares):

Public Bank Bhd 11%, IOI Corp Bhd 9.4%, Bumiputra-Commerce Holdings Bhd 9.1%, Sime Darby Bhd 8.4%, Genting Bhd 7%, Tenaga Nasional Bhd 6.4%, Resorts World Bhd 5.3%, Malayan Banking Bhd 5.2%, DiGi.Com Bhd 3.4%, Kuala Lumpur Kepong Bhd 2.8%, AMMB Holdings Bhd 2.7%, Telekom Malaysia Bhd 2.5%, and Gamuda Bhd 2.5%.

I don’t know about you but from the list it appears that foreign funds have basically been exiting a lot of their usual positions. Sime Darby and IOI’s levels may be even lower now following the CPO (crude palm oil) sell off over the last three weeks.

On another point, some companies may not really have foreign investors.

The foreign shareholders may actually be the same family-controlled holdings based in some tax-free island.

When its cheap enough, foreign funds will come back. At the end of the day, foreign funds will gravitate to where there is money to be made. If you have more big cap stocks, it will allow them better liquidity as they can move in and out with size.

If you make your currency fully transactable and convertible globally, that’s good too. If you stop making ad hoc rules that limit the flow of capital, that would be very good as well. If minority shareholders’ interests are aggressively protected by the courts, that would be splendid.

If the regulators are swift to prosecute wrongdoers in listed companies, it improves the integrity and confidence in the market place among investors. If you can find ways to create more free float, that would be good as well. These are measures the regulators should address and constantly improve on — not because they will encourage foreign funds to invest, but because you have to, so as to get closer to world-class standards for the Malaysian exchange.

Foreign funds are not always right. Their presence does not necessarily mean we are doing well economically. Their presence could be inflating values as well. Foreign funds are just as likely to make huge losses.

It is a good thing to compare our performance with other markets to improve our ways, but don’t get emotional about it. They are just stock prices, not the price of your dignity or the price of our children.

Get a better perspective. True worth comes from knowing who we are. We do not need someone from outside to tell us that today we are just RM1.56 or that the next day, we are worth just RM1.10!

Don’t worry about how much foreign funds there are in our markets. Don’t worry about whether they like our markets or not.

We need to build good companies. We need to build great companies. We need to build solid corporate governance and integrity. We need to build and instill professionalism among the regulators, senior management and board of directors.

Just like in the Kevin Costner movie, Field of Dreams: If you build, they will come. But build not to please the foreign funds or to have better market velocity. Do it because that’s the right thing to aspire to for the benefit of shareholders.

p/s photos: Akumsiri Suwansook


hishamh said...

Too right - there's often confusion between portfolio "investment" and FDI. The former is not "investment" in any economic sense - it's just change in ownership of assets, and doesn't add anything to the capital stock of the country.

tohff7 said...

i bet if there is a Q&A section, our PM would surely be asked to give comments on the banned book. Wonder what he will say.

Soon Hui said...

The reason why PM has to woo foreign funds is because without them, the KLSE is a pond of dead water with only government funds and local unit trust funds in it and nobody else, not even the small investors. Without foreign funds the KLCI index wouldn't go up and hence would paint a very bad and bleak picture of our economy.

Everyone knows that the best and only way to woo encourage investment is to build good companies. But that is a bit too hard to do currently, given our current competitive standing ( think about all those nonsensical economic policies and you will get my point). So PM has to resort to personally asking the funds to come.

What a pity, but PM may not have other choices.

Sentra said...

how to have good company..... when there's so many company going privatise the moment it had just turned into black from red.... ie Sarawak Ent, MRCB (giving excuse not to privatise....aftrer GO ..but who knows)....probably's like asking the Mat Salleh.... buy my counters..... and I'll privatise later at lower price.....

K H said...

Well, it could be that our PM is also the Minister of Finance.

MIN said...

If the prices are now considered overvalued...what about in 1993 where the market was HOT ...foreign funds were everywhere in Malaysia and 90% of counters were priced more than RM1?? Hwa Tai was RM200 per lot back then???? Hemm

brad said...

The CS conference has a quite a number of big names like "Mr. Yen" Sakakibara. Perhaps the PM is attending in his capacity as an born-again economist; after all, he has a degree in industrial economics from Nottingham University. And perhaps he will explain that the audience is intellectually mature enough to read the banned book, but please understand, many Malaysians are too intellectually immature to read the book without sensativities arising which could jeopardise national security! Perhaps he will talk about FDI and not portfolio investments and give a sneak preview of the New Economic Model and invite the participants to the Invest Malaysia thing to see the full show

Salvatore_Dali said...

soon hui, thats where i disagree... u don't need foreign funds to go up... if u need them to go up, u will also go down when they leave, how much foreign funds in stocks really do stay around, even if its 3 weeks or 3 years ... no need to kowtow to them... u stay focused to improve transparency, regulation and financial metric and size and strategy... they will come... its like lobbying your teacher to give you an A when u r rated a C ... no need to beg, go n study n improve, yr teacher will eventually give u the A u deserve

KH, u may have a point there, still someone like Zeti or the second finance minister should suffice for these second rate conferences

MIN, what r u trying to say... yes 93-96 was due largely to foreign funds everywhere, n when they exit... .. remember 97... they will fuck u n leave u dry when things go bad after pushing u sky high, where is the justice... be careful what u ask for as u may get it.

MIN said...

U said the foreign funds will go to places where they can make money. Buy low and sell high. U said that "they go to market that they think are cheap." I bet to differ in that statement. Because.. personally.. there are many many cheap counters in malaysia..with good fundamental and growth plus profit and yet they still refuse to come here. So it is not because our market is overvalued. Prices now are much much cheaper than year 93-96.TENAGA was RM15, Hwatai was RM200 , Maybank was RM18 back then. Do these number means undervalued?..Of coz not.There were way way OVERVALUED. But still foreign whacked like hell. So the issue of our current market being overvalued is not really correct.

I personally dunt want foreign funds to drive our market. It's not healthy. 97/98 crash was a good example.

I dunt think our market is overvalued. Its just that our market is not attractive to them anymore. Why?.. Lots of local people has lost money and faith..and therefore its hard for the foreign to speculate and trapped our local players.

I believe,one day when our market are hot.. they (the foreign funds would make it a lot hotter) and eventually burn many local playersss.

Those days are gone. It gonna take a very long time for the market to give faith to local players..

Only big fund can make our market hot. Who has it?.. The foreign funds ...............

Thats why our beloved PM has got to do what he has to do. Lure the outside money into our market.I dunt blame him 100%.

We have to blame ourselves for not being patient and for being very greedy. Just my 2 cents.