Monday, October 30, 2017

ISAKI - Excellent Japanese Food & Wonderful Ambience



Isaki or Grunt Fish has a very light and delicate taste. Grunt fish can be eaten as sashimi, grilled with salt or marinated with chili leaves. Isaki is also a wonderful restaurant in Sri Hartamas. Located at the end of the row that houses Backyard pub, Bulldog, Aunty Nat and Saigon .

I love its outdoor garden setting. Coming into the open bench area that is its portico, one gets a nice feeling to the place, a friendly vibe that Isaki has a casual dining side to it. The pebble lined walk, the Japanese wooden lanterns and small pine wood slats that the waitresses scurry across in typical wooden sandals. Upstairs is a large area that lends itself perfectly to parties and events, with ample bar and seating. You get the overall impression of intimacy and minimal pretensions here. Here I have to say that they make the best sushi rice - an often overlooked factor. I mean, the seafood has to be fresh and the cuts appropriate, those are a given. However, not many places take the case to come up with proper sushi rice. I shy away from the Sushi Kings and Sakae Sushis because they have no idea how to do the sushi rice. Maybe its because they are "process-manufactured", the rice is packed as hard as a chinese dumpling, and the rice vinegar-sugar-water-salt mix is almost indistinguishable. In Isaki's case, the mix is excellent plus I suspect they do put in a dash of sake or kombu.

Isaki's sushi rice is so good, I can eat the rice on its own.

Somehow, a good sushi rice place has to equate to a good place for sake. At Isaki, you know they are serious when they have 4 different huge sake bottles being heated at any one time, and the sake menu is extensive.

I have never seen a Japanese restaurant that has so many pork items on their menu - its an eye opener. It could very well be that the restaurant is more influenced by Okinawan cooking (will ask them next time). Okinawan cooking tends toward stronger and spicier flavors than Japanese food, and is more heavily influenced by Chinese cooking styles. Hence pork is a very important ingredient to Okinawan cooking. Other items on the menu that are very good: the buta kakuni (steamed pork belly) and buta shishilo itame (pork slices with Japanese chillies). The garden setting makes for a wonderful place to have a barbecue as well, as almost one-third of their menu is catered to having the mini barbecue pit at your table. Fresh ingredients, lotsa meats and veggies, lotsa sake (hot and cold), wonderful outdoor setting, how not to like the place.

Lastly, I want to mention that its a very dog friendly place. If you go in the evening, you are likely to see the owners, a tanned Japanese man who won't be back in Japan anytime soon and a lovely Chemor girl called Maggie Liew, with their two beautiful dogs - one is the cutest bulldog that looks like a bodybuilder gone bad, while the other is a lovely dobbiemix with a nice shiny coat - both absolutely people friendly. The place is very dog friendly.

I know some people has a list of so called pet friendly eateries - to me, most of them are not pet friendly, but rather if they have a patio/verandah, they don't mind you bringing your pets. Those are pets tolerant places, not pet friendly, they just accomodate you because of your business. Genuine pet friendly places are an inclusive and embracing environment for responsible dog owners who bring their dogs out because they are part of their family rather than just pets. 





Sunday, September 24, 2017

Moon My Cakes - The Annual Rant!!!




 Well, every year I brace myself for what will be the new fangled flavours for mooncakes. Ta-dah ... last year takes the cake (pun intended). Its Angry Birds mooncakes!  I think its a brilliant marketing strategy, its taking China/HK by the proverbial storm. Is that raining bird shit ... no, its just kids throwing their Angry Birds mooncakes in the air for effect. 
Now we even get Nasi Lemak ones.

This is for the benefit of new readers of this blog who have only been visiting for less than a year.

Each passing year, we get further away from tradition. Is this fusion or variety or just plain stupidity. I am talking about mooncakes. The whole thing marks of a scam.

Who doesn't know that the cost of a mooncake is minimal really compared to their exorbitant selling price. Why do you think almost every restaurant sells them? There must be a global collusion to sell these over priced things - its a Chinese mafia I tell you.

At best, the mooncake festival can be an excuse for family togetherness. The actual reasons and history for how the festival started are pretty flimsy. Its more stuffs of legends and fairytales than rooted in reality. But anyways, since the Chinese culture has no solid God/religion, where everything goes (the world is full of deities and
buddhas as the saying goes), hearsay and stories evolved into things cultural, which in turn becomes tradition, and finally morphs into a marketing extravaganza.

Since it is stuff of legends and fairytales, its not rooted deeply in anything really, and is open for interpretation. It used to be just lotus paste and black sesame. Throw in the egg yolks if you want. NOW you have:
lotus with dried sambal; green tea with pu'er; dragonfruit with blackcurrent; spirulina; the omochis; the ice cream ones; the durian paste; pandan sweet corn; capuccino; yam gingko nut; chocolate strawberry fondue; the various types of skin covers; oreo; chocolate walnut brownie; charcoal powder with wolfberry; Charcoal Infused Mocha Milk Tea; Snow Skin Japanese Potato with Custard; Fragrant Corn with Soft Yolk; Royal Jade Jelly; Nutty Chocolate with Yolk; Snow Skin Raspberry; Bluberry; Snow Skin Silky Vanilla Chestnut; Snow Skin Black Sesame; Green Beans with Cheese; chocolate peanut praline; blueberry blackcurrant cheese; chestnut Japanese jingsa; .... enough already... we are all losing the plot!!! Heck, I can even create an apom balik black sesame eggyolk ikan bilis flat moon cake... its all marketing baby!

Go back to the roots of the tradition. Why do we have Mooncake Festival? Its for family togetherness, its really for the kids ... I remember as kids I loved the festival, the lanterns and candles. I liked that connection, knowing that my dad and grand dad probably played with similar lanterns, similar candles and ate the same kind of mooncakes 50 or 100 years ago. That's the tradition that connects, and the kind you want to pass on to the next generation.


Above: lanterns for sale around Mid-Autumn Festival.


Not that anything about the mooncake thing is true, however, its cultural and it carries values, things we want to pass on - whether the festival is rooted in true events is not material anymore.

Hence, please you bloody marketers,
do not cheapen the tradition. We want the connectivity. I will still want to buy the basic lotus paste or black sesame... and also the baked fish-shapes / pig-shaped mooncake biscuits ... because they all remind me of the past which I longed to remember and the people I do not wish to forget.


Of course, variations is a strong strategy to differentiate in a product/event that has "almost zero veracity" in truth or religious text. You don't find the Catholics changing ONE IOTA of the sacrament through the ages. Hence differentiation will continue cause no one cares, everyone is out to stand out and make money or get the latest "bling".

This year let me give you my HAZE Mooncakes, looks like smog, taste like freshly burnt tropical forest with a strong charcoal aftertaste - happy moonlike festival!!!

Wednesday, September 20, 2017

EPF Should Not Sell PLUS

Is there an alternative to North South Highway? How much of toll roads come under PLUS? There are 14.5m EPF members. We begrudgingly pay tolls, at least thinking some of it goes back to EPF returns.

If you look at our population bell curve, you can surmise that we are a growing population with a relatively wider base. In many aspects we are skewed towards a younger working population. This means that the annual contributions to EPF is likely to grow even more.

We can also surmise that there are limited investing opportunities locally, taking into account the kind of risk EPF is allowed to partake. PLUS is a significant player in an infrastructure that plays a critical role for the country. To replace PLUS with a similar investment with similar returns would be very difficult.


Fair Value - Not Enough Even

As a socialist-capitalist, I can be torn between getting more than a fair return on investment. That is, if an asset is being sold at higher than normal valuations, by all means, sell. I am certain that any potential buyer would have to offer a premium. The question then is how much of a premium would it make sense for EPF and Khazanah to dispose PLUS.

To me, the premium would have to be very high, so high that it would be silly not to sell, so high that it would be sillier to buy.








p/s: Yoona of Girls Generation


Critical Asset

Imagine a few years down the road, instead of the usual 5-10% annual increment, you see your normal RM1.10 toll

being raised to RM2.50. I am not saying it will happen. Yes there are rules to safeguard some of the increments, but seriously, it can only go up, and it won't be LESS than when EPF/Khazanah are the owners.

We are already having to increase our investing overseas owing to the deluge of contributions into EPF. We should not replace PLUS or assets with similar values.


Cornerstones Should Not Be Tampered With

We should be thankful that EPF has been able to give around 6% annual returns (tax free). Go and ask CPF whats their rate for the past few years. The high-ish rate is thanks to a solid platform girding the overall investing philosophy. Cagamas and other critical asset like PLUS are the cornerstones. You do not want to remove the cornerstones as the foundation would be shaky then.

Sunday, August 27, 2017

Bull Bear Major Indicators


















(Farah Ann Abdul Hadi)

There are tons of financial newsletters but the only one I read religiously is Maudlin Economics. His views are fair, mostly objective, minimal emotional attachment and logical. One of his recent articles entered on whether the bull run globally is over.

ET To Elliot ...

The Elliott Wave Principle, all the rage in the 1980s, is less influential now but is still watched by the technical analysis team at Goldman Sachs. The Elliott Wave comprises sequential upward and downward market moves – “waves” – that form repeating cycles. A full cycle has eight waves. Waves 1–5 are bullish, with only minor pullbacks between. Waves 6–8 are corrective, or bearish, and you do not want to be long when they happen.

The market is presently in wave 4, according to Goldman market technician Sheba Jafari. That means the next downturn will be limited and followed by another bullish wave. Then we would see a bigger correction.









200 Day Moving Average

The 200 day MA is not a very solid indicator but as a guide to overall trend it gives you a lot of flags to be turn cautious. No point looking at Dow Jones index as the composition consists of too few stocks. Hence in order of importance, look at the S&P 500, the NASDAQ, Dow Jones and the Russell 2000. The first three are all above their 200-day moving average, and the Russell just dipped below its 200-day average.

Russell 2000 are the broadest in coverage and might have more retail attention and a lot less institutional interest. The bulk of the market is "controlled" by big funds' movements and not retail.

Hence when the more important indices start to break 200 day MA on the way down, its a red flag to be cautious.


Corporate Earnings

When you buy a stock, you are really buying its future earnings: Each share’s price is the discounted present value of its expected future earnings. Prices change when expectations change, which happens for many different reasons.


The present bull market is still with us in large part because earnings are pretty good. With most of the second-quarter reports now in, FactSet reported in its August 11th letter a 10.2% blended S&P 500 earnings growth since the same period in 2016. Earnings grew in every sector except Consumer Discretionary.


Factors To Watch

The global bull run will continue to edge ahead as long as the following are intact, according to Maudlin Economics, and I agree:

1. Global growth would have had to decelerate. It is not.
(European growth is actually picking up. Germany blinked on financing Italian bank debt, and the markets now have more confidence that Draghi can do whatever it takes.)

2. Wages and inflation would have had to rise. They are not.

3. The Fed would have planned to tighten monetary policy significantly. It is not.
(They should have been raising rates four years ago. It is too late in the cycle now. They may raise rates once more, but the paltry amount of “quantitative tightening” they are likely to do is not going to amount to much.)

4. The ECB would have to tighten policy substantially. It will likely not.
(Draghi will go through the motions, though he knows he is limited in what he can actually do – unless for some unexpected reason Europe takes off to the upside. And while Eastern Europe is actually doing that, “Old Europe” is not.)

5. Credit growth would have had to be surging. It is not.
(Credit growth is generally picking up but not surging. And most of the credit growth is in government debt.)

6. Equities would have had to be expensive relative to bonds. They are not.

7. Investors would have had to be euphoric about equities. They are not.

8. High-yield spreads would have had to be widening. They are not.
(I pay attention to high-yield spreads, a classic warning sign of a turn in market behavior. Are they at dangerous levels? Damn, Skippy, I cannot believe some of the bonds that are being sold out in the marketplace. Not that I can’t believe the sellers are willing to take the money – you’d have to be an idiot not to take free money with no strings attached. I just don’t understand why major institutions are buying this nonsense.)

9. The classic signs of excess would have had to be evident. They are not.

10. China’s credit binge would have had to threaten the global financial system. It does not.
(Xi has somehow managed to push off the credit crisis, at least for the rest of this year, until after the five-year Congress. Rather amazing.)

11. Global trade would have had to be weakening. It is not.

12. The US dollar would have had to be strengthening. It is not.




Conclusion

The longevity of the current global bull run has a lot more to do with the massive quant easing taken after the 2008 financial crisis. It has plugged many holes, but almost every central bank has NOT done anything to rein in the excess liquidity. While growth is evident over the last couple of years, the recovery is still very ginger in the most affected countries. No central bank is willing to tempt fate by pulling back the liquidity.

As long as that persists, interest rates environment will still be very low in the affected countries. That will play itself out into the various financial assets and instruments, making for a very "low risk" environment favouring equities.

Wednesday, August 16, 2017

Bobo - For Magical Nights


I would strongly recommend Bobo @ Jalan Bangkung for a magical night out. Its situated along the now famous Jalan Bangkung @ Bangsar. Strangely but fittingly, Bobo occupies the 1st and 2nd floors only. The small entry door next to Lucky Bo reminds you of possibly of an old jazz club back in the swinging 30s in New York.

The first floor is the dining area with a beautiful couch area, and another partially more intimate dining area separated by sheer curtains. The ambience is inviting, modern yet clean lines in design. Love the many art pieces, cleverly chosen to exude a visually pleasing environment.  



Musical Artistes / Performers - The Best In KL Has To Offer ...


Familiar names will appear every Friday, Saturday and sometimes Sunday too. You can like their Facebook page to keep up with their monthly schedule. I would strongly recommend to come on Thursdays though as the resident pianist David Gomes will be tinkling the ivories and engage in lively banter with the audience ... its very American songbook stuff, imagine drinking your wine or gin and being transported to a rustic New York quiet jazz club.. its refreshing yet melancholic at the same time.

The Food

Inventive yet pleasing.



Pedas Special Red Rice Nasi Lemak ...

The red rice, or Beras Sia’ is a variety of Beras Adan, a local heirloom rice variety traditionally hand planted by the Lun Bawang people in the Highlands of Lawas, Sarawak.

The red rice—Beras Sia’ packs a slightly nutty, wholesome fluffy texture and is often used as substitute for brown rice.

Complement your meal with our selection of small dishes. Available by pre-order only. Call 03-2092 5002 to book. 






Another must try dish ... the Seafood Spaghetti ala Bobo ... buff said.



















The Poisons

I can safely say that Bobo has the best gin bar in Malaysia. Their concoctions are pleasing and inventive, with a brave inclusion of local ingredients to boot.

A sweet pick-me-up for hump day, you got this!

Monkey 47 Sloe Gin Fizz—Monkey 47 sloe gin, lemon, syrup, 
egg white, rosemary




Coconut Ohh Lala—Hendrick’s gin, fresh coconut water, egg white, pandan syrup 




Available at the  Gin Bar. Open daily, 5 pm till late.







The 2nd Floor - Performance Hall

OK, NO SMOKING!!! Even though I smoke cigars, I think its very important and more conducive in an intimate performance arena to be totally smoke free. The ladies love it, I like it.

To go to the second floor, you have open a very heavy sound-proofing door. You won't hear a bleep of the performances when you are dining.

It opens to a snazzy tiny bar where people can mingle prior to the show starting, and its basically to serve drinks to patrons inside the hall.









The Acoustics

Designed by an expert, the sound proofing and acoustics are fantastic. It creates warm notes and resonating tones. The open-thatched roof is a sight to behold.



















Conclusion

Good food, great music or comedy, in a classy setting ... what a magical night out!!!








Above pic is the balcony on first floor for smokers to take a break, its very very nice ... and when its raining outside, I can think of no better place to be than here smoking a cigar and getting a G&T, it really is quiet, just watching the world drifts by. 



Sunday, August 06, 2017

1997 - 2017 ... Asian Financial Crisis Revisited


 The Asian Financial Crisis of 1997 lasted more than a few years. Now its 20 years on and most media outlets have covered the topic to death. Are we going to repeat this mistake?





Pics: Indonesia's Pevita Pearce, enough said.

Asia’s currency reserves at well over $6 trillion make up more than half of the world’s holdings, led by China’s $3 trillion hoard. In 1996, Asia’s reserves were less than $1 trillion, leaving central banks short handed when their fixed and managed currencies came under speculative attack.


COUNTRY  /  Reserves 1996 / Reserves May 2017 / Percentage Gain

South Korea      $33b      $378b     1145%
Philippines        $11.8b   $82b       695%
Thailand            $38.7b  $184b      475%
Malaysia           $27b      $98b       362%
Indonesia          $18.3b   $125b     683%


Looking at the new level of reserves alone, it will take a lot more firepower to drag down this group collectively. Individually, most are still vulnerable, though South Korea might have elevated itself to a new level of safety.

Does this means Malaysian ringgit is vulnerable. Yes and no, $98b is good but we should aim for more. Judging from the population and trade, we need to get to $150b by 2020 at least. 

To be fair, Malaysia has had to combat a currency attack for the last 18 months. Without that, the figure should have been closer to $120b.

However, there is a silver lining, if you can call it that. Thanks to the "perception" issue and the 1MDB issue, the ringgit has been whacked lower already over the last 18 months. Technically we HAVE HAD our mini financial crisis as the ringgit is already 30-40% weaker against USD and around 10-20% weaker against the other countries above. A weaker ringgit may have a lot of negatives initially, but it also makes our largely export industries more competitive. This is an important "buffer" of sorts. 

TACIT AGREEMENTS


Realising that most of us in Asia is in the same boat, most central banks have signed tacit agreements especially with China to help combat any outrageous volatility or attacks on respective currencies. 

There is also the long term investment aspect as large MNCs contemplate where to invest in new plants and factories and offices.


ASEAN. Private consumption continues to drive steady growth among the ASEAN countries. Capital outflow pressures are muted and, more broadly, external vulnerabilities look to be in check for now. Lower commodity prices have not had major impact on Malaysia and Indonesia, both net commodity exporters. The group remains sensitive to developments in China. Other domestic uncertainties in these countries have not translated to lower economic activity and this is likely to be the case over the medium term. We forecast growth of 5.0% and 5.1% for ASEAN in 2017 and 2018 respectively - S&P


FOREIGN DEBT / GNI

This is where Malaysia has a problem. Our percentage has actually increased over the past 20 years from 41.3% to 66.3%. Meanwhile all the rest have seen that figure dropping to 22%-37%.

However Malaysia is in a unique position as our population is only around 30m. Whereas the rest have a credible and sustainable domestic economy buoyed by its sizeable population. Malaysia's position has always been structurally different because of population size (or lack of). We have to have our economy being more open compared to the rest.


WHAT ABOUT THE LOCAL STOCK MARKET?

I have written my views on that: http://malaysiafinance.blogspot.my/2017/06/how-long-will-bull-lasts-for-malaysia.html

If I may add some timeline catalysts: the October visit by Xi Jin Peng; the deadline by middle of 2018 for over RM2bn worth of insurers' shares to be transferred to local owners, either via direct placements/sale or IPO... we can look forward to at least 2 if not 3 massive IPOs; a probable CNY rally followed by elections.

Thursday, July 20, 2017

Baby Driver - Great Fun

Don't let the silly movie name put you off. Its a lot of fun. Plus you get to see a lot of Spacey, Hamm and Foxx strutting their stuff. Borrowing from Guardian of the Galaxy, there is a splendid soundtrack of great songs in it. Taking pole position was my all time fav rock song Brighton Rock by Queen, that alone would make it worth watching. Great car chases, a bit of Kayser Soza, a little Pulp Fiction ... great fun 8.5/10.





Friday, July 14, 2017

The Most Heartbreaking Singer/Song

Some of you may have already discovered Eva Cassidy, and would certainly agree with my assessment that whatever she sang, it goes straight for your heartstrings. Many people love Over The Rainbow, its iconic even. There have been so many covers of the song that it would take something very special to be even noticed.

The late Eva Cassidy ... in a most poignant, powerful rendition ... makes grown men cry buckets just listening to her rendition. Just so you know, when she was singing that song she was already battling cancer. Quiet yourself down, turn on the volume and listen to the whole song. Why real talented people go so soon...





Thursday, July 06, 2017

Dividends - A Proper Perspective

FOCUS Malaysia did a credible write up on dividends in Malaysia. There are still a few major issues which were not highlighted in the article. We need to fully appreciate the paradigm of investing, of listed shares, the expectations of investors and the real nature for dividends.




1) All things being equal, dividends are positive. Let's first examine WHY there are listed stocks. If we cannot grasp that, no point debating further. A stock gets listed for TWO MAIN REASONS, the other reasons are secondary. One, is to raise capital to power growth plans for the company. Two, to allow for investors to participate in the prospects and potential growth of the company.


p/s: pics of Zoie Tam Hoi Kei, ...I like
2) There are investors who invest because of the stability of the business and the predictable profit streams. These are usually termed as blue chips, the ability to sustain profits growth and maintain stable dividends. A lot of long funds will want to invest in them. A lot of retiree funds will want to be in them as they are deemed to be of lower risk to the volatility of the markets and can provide stable returns.





3) The first two points already alienate a umber of stocks accordingly, hence it is pointless to just segregate based on frugality or generosity owing to free cash flow. These free cash flow also should not be a 1, 2, 3 year snap shot as that paints a diminished view of free cash flow, or rather, the quality of FCF. A proper view should at least include a 10 or 15 year average FCF, and average FCF growth rates. To based a "need" to declare good dividends based on short term FCF would be unpersuasive at best.




4) I personally do not believe in dividends. If you like dividends so much, you can just as well sell some shares in it every year and take that as dividends??!!  Or did you believe that the share price does NOT adjust down when it goes ex-dividend???!!! Why bother investing in the company if its not to participate in the growth and prospects??? If FCF is so great that it overwhelms their ability to reinvest that said capital, then the company may consider dividends. Even then, the management has to exhaust other plausible options - e.g. buying out competition; going upstream/downstream if it made economic sense; investing in growth in other untapped markets/regions; maintain edge by investing in research & development, investing in potentially synergistic companies for the future, etc...




5) The revealing reasons for companies paying solid dividends. I am not talking about those institutional stocks only. I am especially talking about those that have not yet become blue chips, and/or smaller growth companies. When these companies keep paying good/high dividends (relative to FCF and profits) - it is a good sign generally. It shows a high degree of reliance on owning and HOLDING their shares. It also shows that they are keen to maintain and reward themselves via dividends without NEEDING or WANTING to dispose their shares.


6) Look at the goreng shares, I can bet you they have no dividends to pay, and even if they did it will be minuscule as their main route to riches is via goreng ops. Plus they are unlikely to hold much shares since bulk of shares could be circulating around syndicate groups.



7) What I am more interested in are those companies that have a high FCF but declare little or no dividends - what gives? Look at the companies, their FCF were so high compared to the dividends. Management should AT LEAST indicate what they are planning to do with funds (as mentioned - e.g. buying out competition; going upstream/downstream if it made economic sense; investing in growth in other untapped markets/regions; maintain edge by investing in research & development; investing in potentially synergistic companies for the future; anticipating a downturn; needing a cushion for untoward incidents; stock buybacks; etc...). Investors should not be kept in the dark on corporate strategy going ahead. 

Thats because good management and bad management can/will use FCF differently. I need not tell what a good management team will do with the funds, its good and boring. But let me look at things "bad management" can do with huge surplus cash:
a) take the cash largely for themselves via a purchase of assets - e.g. inflating the assets value and getting a kickback
b) using the funds to buy "own assets" (probably at inflated prices)
... and I am sure you all can think of a few more.













Thursday, June 15, 2017

Happy Father's Day - Let The Man Be The Man He Is

 p/s: yes, Meisa Kuroki is back ..

I had a good chat with a friend about dads growing old. I assume we are all filial sons and daughters. When our dads grow older and older, maybe some will have retired from their careers by now. I wonder how many of us "love our dads" in the way that allows him to continue to be the man that he is.

Dads who are now retired are dads from a different era. Most of our dads are the strong silent types, not like many of the younger dads nowadays who will try to be good friends with their kids. 

A man of the house usually takes the lead in the household. He takes care of the paycheck. He calls the shots in many areas of the household matters. When they retire, they may not have access to as much "money as before" - gee, do you ever wonder why, thats because he has brought you guys up, send you guys to further your studies, even finance your first car or even your first home, down payment for this and that. Flying you back from overseas, etc... 

Now he may be pushing 60 or 70, he may be living primarily off what you kids give him. We somehow think if we give them a few hundred or a thousand or two ringgit a month, we have done our part. Your dad is still the man he was, faults and all. He used to call the shots, ask you guys where you like to have dinner, ask you guys what you want for your birthdays.

Now, he has to take money from you guys. Funds may not be so "loose". When you guys take him out to dinner, he doesn't have the "right" to pay for you guys anymore. Heck, he may even shy away from ordering whatever he likes from the menu or dictate where he wants to have dinner. He may not even be able to just take your mum wherever they wish to go for holidays. 

In these very many small ways, he is not "allowed to be the man he used to be". We as children should empathise with that. If we can afford it, we should give him more than what he needs to survive. We should allow our father to be the father he still is. 

A person's spirit is the hardest to please and easiest to break. Love comes in many disguises. Love is not just money but our attitude as well. Reconsider how we love our dads. Mine is no longer around. If your dad still is, be thankful, and be the better son and daughter. Love your dad better.

Wednesday, June 14, 2017

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:






























p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far



http://malaysiafinance.blogspot.my/2016/12/bank-negara-may-have-switched-on-bull.html


I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has provided a cushion for improved margins for producers of goods and services

Hence we have what we need, a stable global equity playground so as to not destabilise other smaller equity markets. To continue the argument:





c) the bull run will continue for Bursa because the recovery of the ringgit is intact and will be slow; while nobody in the country liked the dramatic weakening of the ringgit over the past 2 years, there are benefits - we are still very much an export led economy, with less than 30 million, we can never be a domestic led economy; that said, the economy has been competitive and productive for the last 4-10 years at 3.20-3.40 to the USD ... interest dwindled and "funds departed" when the "issues" started to hit Malaysia over the last 2 years, causing the ringgit to slump to as weak as 4.40; that was the MAIN reason why I thought Bank Negara may have unwittingly started a big bull run when the implement the new strategies beginning of this year cause once investors can see a shift in the pendulum swing, a trend is your friend cause if you are productive and competitive at 3.2-3.4 ... what more at 4.2-4.4; that is still a 30%-37% "increase in competitiveness", it was certainly as good as a substantive devaluation





d) the no-par value regime: many are still in the dark with the no par value regime which began this year; the "snowball effects" for positive corporate exercises have not been appreciated or discounted at all by investors:

http://malaysiafinance.blogspot.my/2014/06/need-to-get-to-no-par-value-regime-very.html

There are two main reasons:

1) What is even more galling is the ACE market, which is supposed to be encouraging growth companies, but there is still the par value regime which locks out many applicants. Why do you think so many smaller growth companies have been going to AIMS and Taiwan to list their companies, while you can count the number of new ACE companies listed over the last 12 months on one hand. Let me tell you that the very poor performance of the last few listed ACE companies is probably due to the paid up capital issue - these are companies, by hook or crook boost up their paid up with bricks and mortars but no solid business, so you end with small manufacturing plants and unconvincing old school products. 

The very basis of encouraging growth companies is GROWTH PROSPECTS, THE SUSTAINABILITY & LEVERAGE/SCALABILITY of the business model, and NOT par value. It is very important because as current rules stands, even Facebook could not have listed 5 years back on ACE because their paid up was too low. Even when Facebook listed recently, their par value (which still exists, but there are no rules as to how low you can go) was something like 0.0006 cents per share, and IPO price was nearly $30.00.

When you hold to the current regime, any company considering to list on ACE must at least have a minimum of RM7m - RM10m, even that will considered as low to our regulators. We all should be aware that in the evolution of business model, invested capital is a poor judge and poor guide for evaluating any company. 

If you are making a few million ringgit, with a scalable business model, why do you need to have RM10m in paid up? The new economy would indicate emphatically that the internet, new business processes/delivery of services and new marketing platforms (MLMs, network marketing, franchising) are playing critical roles in new business models. Most of these require a LOT LESS INVESTED CAPITAL, but what they do provide is more VALUE ADD SERVICES and PRODUCTS delivered in a smarter and more creative way.

The longer Bursa/SC stays inactive with the par value regime, the more we are pushing away great smaller companies. As it stands in ACE, with a minimum of RM7m-RM10m "unwritten rule" as paid up, YOU ARE ENCOURAGING THE ENTIRE ECONOMY TO STAY WITH SUNSET INDUSTRIES, YOU ARE ENCOURAGING COMPANIES TO STAY OLD SCHOOL IN THINKING, YOU ARE STRONGLY DISCOURAGING INNOVATION - all that has a strong trickle down effect, how do you think private equity investors or angel investors will feel, they will further shy away from innovative companies and rather fund companies with bricks and mortar assets or in manufacturing. The cycle is devastating, when early seed funders do not get good exit options, smaller companies get little or no funding.

If a company is making RM2m-3m profit early in its life with a paid up of less than RM500,000 ... why stop them from listing on ACE? These are the very companies you need to encourage and foster. When they can do that with minimal capital, it show their business model is SCALABLE ... which is to say if you provide further capital by allowing them to tap the ACE market, say another RM5m-10m, they have a good chance to churn out 3x, 4x, maybe more profits.

And you know smaller companies will always find funding very difficult in their early days, banks... fergedaboudit, with minimal exit options, angel investors and private equity would be hesitant as well.

Let me give you a real example, a company that makes RM3m a year with a paid up of RM500,000 in its 3rd year of existence. No way can they list on ACE. They have to put in another RM7m-10m cash into the company as the minimum par value is 10 sen. So, if you have RM10m PUC, you can have 100m shares listed, and then issue another 25m shares to the public to raise funds.

In a no par value regime, the company can capitalise their profits and bring it up to say RM3m in PUC, and issue 100m shares with a par value of 0.3 sen a share. You price IPO shares no on par value, you price based on earnings potential,  ...historical and forward. Say for the same company making RM3m a year, you may even attribute a 15x PER as growth is paramount for sustainable growth companies = a market cap of RM45m, or an IPO price per share @ 45 sen. (If you force these companies to put in RM10m cash to get listed on ACE, what is the point ... if they have RM10m, they need not tap ACE for funds).

When you move to a no par value regime, you will be able to greenlight more exciting companies with scalable and creative business platforms - isn't that the very aim of ACE, isn't that the best way to encourage entrepreneurs, innovation, maintaining competitiveness and assimilation into the new economy?



2) Do you realise how many listed companies on Bursa are trading below their par value? We only have just over a thousand listed companies and I can safely say that there are between 250-400 companies, my estimates based on a brief perusal of a couple of sectors.

What happens when you trade below your par value? You get there usually because of accumulated losses over the years. Say your par value is RM1.00 and your share is RM0.70 sen now, there is no way you can issue new shares below par value to raise funds or to use new shares to buy some other businesses.

In a no par value regime, par value doe not count, the value of your shares is the last traded price. Hence even when you are at RM0.70, you can issue new shares around RM0.70 to existing shareholders (rights issue) to raise funds for new ventures, or you can issue new shares at around RM0.70 to take over some business which you thing will add value to your current platform or help to reinvent/recharge your business model.

In the current regime, these companies no longer have those options. Plus, for 99% of them, they would probably have MAXED out their available banking facilities as well ALREADY. So what is left for them to do?

With limited options, and a deteriorating business model, no access to funds, you can do zilch. Hence for many of them, they resort to speculative price "management" or what some of us refer to as rampings by syndicates, to bring forth some "profits" for themselves or stakeholders - I mean, they have to try to make money somehow.

They cannot even consider a RTO by a profitable and bigger company. In the cited example, no company will want to take new shares issued at RM1.00 for a company with a market price of RM0.70. Hence the only way left is to do a capital reduction. That is a fair path since the company has not been doing well, and shareholders are supposed to benefit and be punished alongside with company's fortunes. However, many are not taking up that option because they can very well make good pocket money by appointing syndicates to ramp up their shares once or twice a year. By limiting the options to these companies, Bursa/SC are indirectly condoning/encouraging these speculative share ramoings. (Especially when there IS ALREADY a viable, prove, global best practice that the authorities can adopt IMMEDIATELY ... ist not that their hands are tied or there are no options for Bursa/SC to take).

When the no par value regime is enacted, you will also energise the market enormously, which will have tremendous trickle down benefits. These companies below par value will be more active in scouring for good companies to buy to reinvent their business models (to help them get out of the slump). They could also do rights issues, and maybe even sweeten them with free warrants (which they could not do in a current regime).

The end result is they need not turn to syndicates to ramp their shares to make money, they can turn their attention to more genuine plans. It will reinvigorate investors as well as they can see some light at the end of the tunnel. Its 


like a patient with a terminal disease slowing rotting away, suddenly turning into a patient with new drug cures possibility.

Hence the strongest claim for a sustaining bull run has to be the no par value regime. Start researching companies taking advantage of the new regime.

So when will we need to be careful about this bull run? I think its not that hard to spot the turning points. I would start to be careful when the ringgit breaks 4.00 vs USD cause anything lower than that would probably signal to plenty of foreign funds to start taking profits to exit. So we still have a lot of legs for this market.


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