Showing posts with label foreign shareholdings in klci. Show all posts
Showing posts with label foreign shareholdings in klci. Show all posts

Monday 14 March 2011

Foreign investors selling down shares: MIDF

Foreign investors selling down shares: MIDF
Published: 2011/03/14

Bursa Malaysia's total market capitalisation held by foreign investors, is estimated to be about 21.5 per cent currently, assuming a net foreign selldown of about RM4 billion since the beginning of the year.

The percentage of its total market capitalisation held by foreign investors was 21.9 per cent at the end of December, MIDF Research said in a note today.

It said foreign investors have been selling down local shares since January, after a bullish start to the year.

Local institutions continued to prop up the market while retailers were still relatively heavy net sellers, MIDF said, adding, gross purchase by local institutions amounted to RM4.5 billion last week, similar to that of the previous week.

"Risk aversion is creeping back into the market. There is too much uncertainty in the world currently for equity investors to be even remotely aggressive," it said. "Locally, the market's volatility appears to be increasing by the day," it added. -- Bernama


Read more: Foreign investors selling down shares: MIDF http://www.btimes.com.my/Current_News/BTIMES/articles/20110314121658/Article/index_html#ixzz1GZ0vznMp

Saturday 25 December 2010

Bursa Malaysia: Follow the 'smart money'


It is probably wise to follow the "smart money" in investment. When smart money buys, we buy. When smart money sells, we sell.  What is smart money? How do we know which is smart money? When do we know smart money has started buying? Also, how do we know that the smart money is really "smart"?

What is smart money?
Smart money is a fund that is supposed to be influential and has a strong impact on stock prices. It is supposed to be well informed and know exactly when and what to invest.

Its actions may also move prices. Because of its reputation as a market mover, it is able to attract many followers who also join in the purchases, causing stock prices to move further. If smart money can make money most of the time, then tracking the investments of smart money and following its footsteps can be a profitable strategy.

In this article, we will discuss several types of smart money, some of which are really "smart" but some may have limited impact on the market.


Accumulation by owners
Purchases by owners of listed companies are deemed to be influential. As owners, they are required to make disclosures to the exchange after each purchase, and their transactions are regularly monitored by the market players.

Owners are supposed to know what happens in their companies. They know the prospects of the company. The future direction of the company is literally in their hands. There are many plans that they have for the company, which may not have been brought to the board for consideration. In many instances, preliminary discussions on deals are engaged by the owners privately.

Many dealmakers prefer to talk to owners who can make immediate decision on a deal, as getting the board's approval is probably just a formality if the owners have already agreed to the deal.

On the other hand, if there are troubles ahead, owners are definitely the first to sense them. If the company is not doing well or if its earnings are not improving, it is unlikely that the owners will buy the stock. They will probably wait for a better time to buy. At least, this is the perception of investors.

Investors will also feel more confident to participate in the stock if the owners have the confidence to buy the stock. Even if the stock price does not go up after a series of purchases by the owners, there is no pressure for other shareholders to sell.
On the other hand, if the market comes to know that an owner has been disposing of his stock in the market regularly or in large quantities, they may become very uncomfortable and wonder what's going wrong. Is there something that the owner knows that the public is not aware of? As such, disposals by owners will have more impact than their purchases.

However, owners of listed companies may have multiple objectives and it could be difficult to read their minds.

?
First, the owners may own a big percentage of the company and what they are buying could just be a small fraction of what they own. They may just want to support the share price to instil confidence in the market.

?
Second, if the owners pledged their shares to banks (owners' shares under nominees are likely to be pledged), they may need to support the share price to prevent force-selling by banks if the share price falls below a certain level.

? Third, owners prefer to invest in their own shares. Even if their stock is undervalued, there is no guarantee that it will go up, as there could be other stocks that are more attractive to fund managers.

?
Lastly, owners may also give a false impression of their action, as they may buy smaller quantities under their names but at the same time sell larger amount using nominee names, which is not uncommon in this part of the world.

As such, following this type of "smart money" may not be very reliable. Therefore, we need to know the character of the owners and whether they are credible or not.

Purchases by the EPF
The Employees Provident Fund (EPF) is the largest local equity investor in our stock market. It was reported that the EPF accounted for as much as 50% of the total traded volume during certain periods. Since the EPF is a large player, its actions have far-reaching impact on prices of many stocks.

Since most of its investments exceed 5% of the stock's paid-up capital, the EPF make regular disclosures on their purchases and disposals.
Sometimes, investors are puzzled why the EPF trades regularly between buy and sell.

The presumably unclear direction of trades is because the provident fund also appoints external fund managers (EFMs) who have the full discretion to buy or sell. As such, sometimes the EPF could be buying a stock but their EFMs could be selling the same stock on the same day.

In certain cases, one EFM buys but another EFM could be selling at the same time or a few days later. Hence, the disclosure by the EPF is a combination of trades by its internal fund managers as well as that of EFMs.

Due to the difference in opinion between the EPF and its EFMs, there is no clear signal of the direction of this powerful domestic fund. The fund could be big, but they are not "united" and they are in fact competing with each other. This is also a way to generate liquidity in the market. As such, relying on the trades of this "smart money" for direction may not be very reliable.

Even if the fund is buying a particular stock persistently, we observe that the stock price may not seem to rise substantially. This may be linked to the way the orders are placed - that is, they tend to buy lower after a completed trade. This is different from the trading style of foreign fund managers, which we shall discuss later in this article.

Actions of local institutions
Although other local institutions are smaller in size than the the EPF, they could be more focused when it comes to buying a stock. Generally, purchases on big-cap stocks by local institutions may not have much impact on the stock price.

Since big-cap stocks are widely owned by most local funds, such as mutual funds, insurance companies and asset management companies, for every purchase to lift the stock price, there could be several funds waiting to sell to the buyer. Local institutions are competing with each other to achieve maximum returns as they have their own stakeholders to answer to.

As the market continues to rise, more and more local institutions are seeking investment opportunities in undiscovered stocks and unpolished gems. Research houses are competing with each other to identify growth stocks with good earnings prospects and "good story" to satisfy the appetite of local funds and entice them to buy.

Most of these stocks are the tightly held mid- to small-cap stocks, where the valuation is generally much cheaper than that of the big-cap stocks. If the "story" is compelling, more funds are likely to participate in the purchases. If there are also private placements from the owners or by the company, a stock may attract even more interest and can move quite fast.
A stock may be attractive from various angles, but if there is no liquidity, most funds are hesitant to participate due to the lack of liquidity to get out when the need arises. When funds started to buy a stock, the rise in the share price is likely to bring out some sellers, which will lead to improved liquidity. The subsequent improvement in liquidity will in turn attract even more funds to partake in the "game". If there are sufficient "followers" the stock price will continue to climb; otherwise, it may just fizzle out a short jerk.

As such, local institutions could be a useful "smart money" to follow if they start to have position in smaller cap stocks. A neglected stock may turn out to be a star performer if the stock has been successfully promoted. There are a number of such well-promoted stocks which have performed very well this year.

Share buyback 
In the case of share buyback schemes by certain listed companies, this provides yet another hint to investors that the management believes the stocks are undervalued. Although share buybacks may not be very popular among listed companies in Malaysia, there are a number of listed companies that buy back their own shares regularly. The impact on the stock price will depend on how aggressive the share buyback is conducted. The degree of "aggressiveness" depends on the percentage of shares being bought back and the proportion of the share buyback against the daily traded volume.

From our observation, share buybacks seldom have much impact on stock price. Such repurchase of own share will definitely reduce the free-float of the stock in the market, but moving the stock price to a higher level is another issue. Share buyback may clear off some of the weak holders and place the stock in a good position to run if other strong buyers emerge. But for the stock to attract strong buyers, it must deliver results and show growth potential.

Buying by insiders 
Insiders are those who hold key positions in a company or those who have access to information not known to the public. Insiders include directors of the company, company secretary, senior management, corporate lawyer, auditors, merchant bankers who handle important corporate information for the company.

Because key personnel have unfair advantage over the public, it is illegal to trade on insider information, which unfortunately is very difficult to prove. To reduce the incidence of insider trading, blackout periods for the trading of stock are imposed before the release of important announcements and these include the announcement of quarterly results, right/bonus/split issues and other material announcements, which may have a strong impact on the share price.

The purchases made by insiders are difficult to detect. A sudden share price movement of a stock is usually suspected to be related to insiders who may use nominees to avoid detection. The only way to detect possible insider trading is through technical charts, which may reveal such activities from price movement as well as changes in volume. Otherwise, it is difficult to identify this type of "smart money".

Syndicate buying
A syndicate is also another influential force, as it normally focuses on a handful of stocks. The objective of such a syndicate is to make money. They may act independently or with the help of the owners or top management. They may or may not play based on insider information. If there is a stock worth buying with the intention to sell at a higher level, they will be interested. Stocks selected by a syndicate could be purely because of cheap valuation or some impending news, which could be entirely conceptual.

Although syndicated play could be powerful, their movement is very secretive and hard to predict. As a syndicate is out there to make money, they will use all sorts of tactics to achieve their objectives. The tricks may include dissemination of untimely rumours just to lure in other punters to help them to stir the market. Unknowing speculators could be drawn in by their own greed.

Going along with a syndicate is a risky game, as they will not disclose their game plan. They can play one game on the surface but at the same time be selling quietly at the back.

Inflow of foreign funds
Perhaps the most influential smart money is foreign funds. Foreign funds come in droves, which is more powerful than if they act individually. The movement of foreign funds, or simply hot money, follows certain investment themes for investment purposes. Their investment duration is normally fairly long to achieve maximum profit. One of the factors driving the flow of foreign funds is the direction of the US dollar. When the US dollar weakens, this hot money will flow to emerging markets and to Asia, causing market here to rise (See charts).




There is a number of reasons why following the footsteps of foreign fund managers are more reliable:

? Purchases by foreign fund managers are more dynamic, as they normally push up the share price when buying. In this way, not only can they obtain the quantity of shares required, they can also record immediate price appreciation.

? The quantity allocated to each stock is normally larger, as foreign funds are normally bigger in size and hence have bigger allocations.

? Unlike local funds, which probably have two dozen or more stocks,
foreign funds normally select a handful of local stocks to invest.

Summary
The strategy of investing by following the "smart money" must be very selective, as many of them are either not very effective or not reliable. It is better to follow foreign funds, which are more powerful and less deceitful.


Source: The EdgeDaily
Written by Ang Kok Heng   
Monday, 20 December 2010 11:01
Ang has 20 years' experience in research and investment. He is currently the chief investment officer of Phillip Capital Management Sdn Bhd.

Saturday 18 December 2010

LOCAL retail investors have been net sellers of stock for all but one month up to November this year

Saturday December 18, 2010

Buying patterns of foreign and local investors

LOCAL retail investors have been net sellers of stock for all but one month up to November this year, but the pace of buying has slowly caught up with selling as the stock market rose towards its record high levels at the end of the year.

According to trade statistics from Bursa Malaysia, retailers bought RM8.93bil worth of stock in November and sold RM8.99bil worth of shares. In terms of purchases, the highest amount of shares bought or sold was in January when retailers bought shares worth RM9bil but sold RM9.1bil.

The pace of transactions declined thereafter but started to pick up in September when purchasers rose to RM5.58bil versus selling RM5.72bil worth of equity.

In October, buying and selling rose to RM7.57bil and RM7.73bil respectively and in November, when the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) hit a record 1,528 points, retailers bought RM8.93bil worth of shares and sold RM8.99bil worth.

The pace of purchasers also reflected the monthly value of trade done on Bursa Malaysia. Data for December has not been released.

In terms of value, the highest month of transactions based on value was November when RM39bil worth of trade was conducted. The month also saw the entry of the largest IPO in the country, Petronas Chemicals Group Bhd, which attracted a great deal of interest among institutional investors.

The value of transactions has also mirrored the FBM KLCI’s ascendency to its new peak.

Total value of trade in October was RM36.5bil and RM31.6bil worth of share transactions were done in September.

Trade value has been consistently rising since July when total transactions were RM26.1bil. The value of transactions has somewhat tracked the rising amount of foreign investor interest in the stock market.

Foreign institutions have been net buyers of Malaysian shares since June but over the last couple of months, the amount of the net purchasers by foreign institutions has been shrinking.

As foreign investors have been net buyers of Malaysian shares over the past 6 months, most of that extra liquidity or shares available for purchase has come from local institutions.

Local institutions have been net sellers of shares on Bursa Malaysia since June and only emerged as net buyers in November.

One of the highest months of purchases by local institutions was in March when local funds bought RM12.8bil worth of stock and sold RM13.1bil in shares.

Total transactions by local institutions dipped thereafter but started to pick up once again in September when such funds bought RM9.7bil worth of shares and sold RM14bil worth.

The net selling gap then dropped as interest in Malaysian shares picked up again and in October, local institutions bought and sold RM12.8bil and RM14.2bil worth of shares.

In November, local funds reversed their selling trend of previous months when it bought RM12bil in stock and sold RM11.5bil in shares.

Foreign investors have also increased their buying of Malaysian shares in recent months and in August bought more shares than local institutions.

Foreign investors continued to buy more shares on Bursa Malaysia compared with local insitutions in September but in October, as the market continued to charged towards its record high, local institutions poured more money into Malaysian shares compared with foreign institutions.

In November, local institutions’ purchase of stocks at RM12bil was higher than foreign institutional funds which snapped up RM11.5bil worth of shares. — By Jagdev Singh Sidhu

http://biz.thestar.com.my/news/story.asp?file=/2010/12/18/business/7640311&sec=business

Tuesday 7 December 2010

The emergence of the underperformers

The emergence of the underperformers

by Ghaz Ghazali ghazghazali@theborneopost.com.
Posted on December 6, 2010, Monday

Earning numbers in 3Q10 not favouring outperformers – Analysts



SHIFT IN TREND: Photo shows the Bursa Malaysia building at Bukit Kewangan, Kuala Lumpur – the nation’s bourse and index centre. Companies pegged under ‘downgrade’ call have exceeded the ‘upgrades’ by 33 per cent as corporate earnings in the country have been slipping against expectations since last year’s fourth quarter.

KUCHING: The year’s third quarter results signals the rise of underperformers, which outnumbered outperformers by two to one – indicating continued pressure faced by certain key sectors, say analysts.

On a percentage basis, companies pegged under ‘downgrade’ calls exceeded the ‘upgrade’ ones by 33 per cent as corporate earnings in the country had been slipping against expectations since last year’s fourth quarter, observed OSK Research Sdn Bhd’s (OSK Research) head of research Chris Eng.

“Third quarter earnings were uninspiring particularly the small caps, with 45 per cent of companies reporting results that were below expectations compared with the big caps, of which 60 per cent were within expectations.

Sector-wise, only the media sector outperformed. On the flipside; the smaller steel, technology and O&G (oil and gas) companies reported weak results owing to lower margins, a stronger ringgit and delays in contract awards,” he outlined.

On the other hand, ECM Libra Capital Sdn Bhd’s (ECM Libra) head analyst Bernard Ching noted that while the trend appeared to favour underperformers in the reviewed quarter, positive earnings surprises were somewhat more than those in the negative.

“Even as positive ear-nings surprises for the third quarter – which comprised 18 per cent of stocks under our coverage – were lower than the 29 per cent reported in the preceding second quarter, there were fewer negative earnings surprises as well,” he pointed out, adding that 12 per cent of stocks under coverage had failed to meet estimates against 20 per cent in the preceding quarter.

Notable players that recorded such positive earnings surprises included telco giant Axiata Group Bhd, national airline Malaysian Airline System Bhd (MAS), O&G-related services provider Dayang Enterprises Holdings Bhd and construction conglomerate Sunway Holdings Bhd.

On the negative end, the research house weighted off building materials provider Lafarge Malayan Cement Bhd; consumer goods distributor Pelikan International Corp Bhd; O&G groups Petra Perdana Bhd and Wah Seong Corporation Bhd; plantation player Boustead Holdings Bhd; and construction company Sunway City Bhd.

Adding in a more optimistic take on the underperformers-versus-outperformers scenario, HwangDBS Vickers Research Sdn Bhd’s head of research Wong Ming Tek maintained that the restructuring of the KLCI in July last year should provide an added boost with higher weightings on bigger caps.

“The absolute 2010 net profit for our universe is set to surpass pre-financial crisis levels, supporting the KLCI (Kuala Lumpur Composite Index) to new highs in 2011. Coupled with impending Sarawak state elections, the government’s ongoing reforms and potentially strong CPO (crude palm oil) prices; we believe that the resilient economic growth, interest rate differential and weak US dollar could also see higher levels of foreign ownership.”

Similarly, ECM Libra’s Ching was also positive on the foreign ownership matter, highlighting that foreign net equity inflows would remain strong in the near term.

“We are still positive in the near term. Although the local index has retraced by about three per cent since hitting a high of 1,528.01 three weeks ago, we are unfazed by it.

“Rather, we believe the market will continue its uptrend in a more meaningful manner in next year’s first quarter, led by resilient domestic consumption, strong foreign net equity inflows, M&A (mergers and acquisitions) activities and also the Sarawak state election.”

On behalf of OSK Research, Eng believed that upgrades might again beat downgrades by the end of the fourth quarter, assuming that “things to turn for the better in the coming last quarter of this year.”

“For now, we maintain our 2011 fair value of 1,648 points, with our KLCI earnings growth to remain intact at 16 per cent. We maintain our ‘overweight’ call on the Malaysian market,” he added.

http://www.theborneopost.com/?p=78965

Thursday 11 November 2010

Foreign, retail buys spur Bursa trading

Main points:

  1. Last month, foreign funds bought RM10.6 billion worth of stocks and sold some RM8.8 billion of them.
  2. In contrast, domestic funds bought RM12.8 billion worth of stocks and sold some RM14.2 billion worth of stocks.
  3. Last month, retail players bought RM7.6 billion worth of stocks and sold RM7.7 billion worth of stocks.
  4. Retailers accounted for 48.04 per cent of the 25.2 billion shares traded in October.
  5. Apart from sentiment, cheap credit has also helped stir the layman's interest in equities.
  6. According to Bank Negara Malaysia, up to September this year, some RM35.6 billion, which is an increase of 8.1 per cent over the same period a year ago, was lent by banks for purchase of securities.





By Francis Fernandez
Published: 2010/11/11




The momentum is in the larger capitalised stock, and the buying has been steady, says Jupiter Securities' head of research

Malaysia's stock market drew more buyers than sellers among foreign investors in October while small or retail investors made up almost half of the trading volume, data from Bursa Malaysia showed.

Jupiter Securities head of research Pong Teng Siew expects the trend to continue this month, as local institutions like the Employees Provident Fund need to sell to raise income for dividends.

"They need to sell to pay dividends. But, because the market is strong the local institutions will also be buying stocks," Pong told Business Times in a telephone interview.

It is also clear that foreign funds are buying although they have yet to do so in large quantities.

"The momentum is in the larger capitalised stock, and the buying has been steady," said Pong.

Last month, foreign funds bought RM10.6 billion worth of stocks and sold some RM8.8 billion of them.


In contrast, domestic funds bought RM12.8 billion worth of stocks and sold some RM14.2 billion worth of stocks.

Meanwhile, Lee Cheng Hooi, Maybank Investment Bank's head of retail research for equity markets, said that retailers were also strongly back in the market.

Lee added that opportunities are abundant in the market, and retailers should focus on laggards and lower-priced stocks.

Last month, retail players bought RM7.6 billion worth of stocks and sold RM7.7 billion worth of stocks.

Retailers accounted for 48.04 per cent of the 25.2 billion shares traded in October.

Yet another indicator of retailers coming back to the market is the rise in volume on Bursa Malaysia's FBM Small cap index, which measures the performance of stocks with smaller market values.

This has led to a surge in demand for stocks below RM1. Over the past three months, from the 17 stocks that have gained more than 100 per cent, 13 of them are priced below RM1.

Among the penny stocks that have notched gains of 200 per cent or more are Scope Industries Bhd, Karambunai Bhd, Petaling Tin Bhd, Majuperak Holdings Bhd, Ho Wah Genting Bhd and Cuscapi Bhd.

Apart from sentiment, cheap credit has also helped stir the layman's interest in equities.

According to Bank Negara Malaysia, up to September this year, some RM35.6 billion, which is an increase of 8.1 per cent over the same period a year ago, was lent by banks for purchase of securities.

Pong says the bulk of the money went to large corporations to fund takeovers, and retailers are getting their purchasing power from loans provided by stockbroking firms.


Read more: Foreign, retail buys spur Bursa trading http://www.btimes.com.my/Current_News/BTIMES/articles/forexx-2/Article/index_html#ixzz14vh6GpgX

Tuesday 29 June 2010

10 Reasons to Invest in Foreign Stocks

10 Reasons to Invest in Foreign Stocks

Most American investors have low exposure to foreign equities in their portfolios. There are many reasons for this type of asset allocation strategy. One of them is that financial advisors recommend putting just 10% to 20% of one’s assets in foreign equities. Another reason is due to the “home country bias” inherent in all of us. Americans prefer US-based companies than foreign ones because they know those companies better, those companies advertise heavily in the media, they sponsor community social/charity programs, etc. Some consider it to be even patriotic to invest in US companies.
Some investors think that foreign markets are very risky due to political issues, lack of transparency, accounting methods, lack of publicly available information, currency risks, lack of regulations, etc. While most of these factors are true, in my opinion foreign companies are getting better and are no more riskier than US companies. One can find risky companies anywhere whether it is a bio-tech start-up based in China or a gold miner such as Bre-X in Canada or an IT firm like Satyam based in India. However there are many excellent foreign companies that are as good as any large US company that US investors can consider adding to their portfolios.
The following are Ten Reasons to Invest in Foreign Stocks:
1. Investing globally offers diversification for a portfolio. In this age of globalization diversification is not complete if one invests just in US companies. One can argue that foriegn stocks are not required in a portfolio since about half the earnings of S&P 500 companies comes from overseas revenue. But that does not mean one is diversified enough just putting their money in an index fund tracking the S&P. Overseas companies operate under different dynamics than US companies and the only way to capture their growth is investing in them. As mentioned above, financial advisors also suggest adding some foreign equities for diversification.
2. Going abroad can offer better returns to investors than staying with only US stocks.  For example, the S&P500 was up 23.5% last year. But emerging markets such as Brazil, India, Russia, China were all up 82%, 81%,79% and 111% respectively.Among the developed markets, Australia was up 30% , Sweden was up 43% and The Netherlands was up by 36%. Other Western countries such as France, UK, had similar returns like the US S&P500. America’s largest trade partner Canada was up by 30%. The US market performance in the past decade was dismal as I discussed here.
A quick review of Callan’s Chart for developed markets reveal that US stock returns have been average to less than average relative other markets. The S&P 500 was never the top ranking performer among the developed market indices in any year between 1970 to 2005.
3. Americans already own their homes in the US. Hence they must have higher exposure to foreign markets to counteract the heavy exposure to the U.S. assets. In addition, it is possible that all US-based assets such as homes, stocks and interest rate on bank deposits can all go down at the same time like it occurred since the credit crisis. So investing overseas provides diversification as well as reduces the risk of putting all eggs in the same basket.
4.The US dollar may fall further this year due to sluggish economic growth here. If ones believes in this view, then one can invest in foreign equities as the return on foreign investments will be amplified when currency exchange value is taken into account.
5.The total market capitalization of all the world’s stock exchanges is $45.4 Trillion as of Nov, 2009.  The US markets (NYSE and NASDAQ) account for just about $14.5 Trillion.(Source: World Federation of Exchanges). This shows that more capital is flowing to markets outside the US and plenty of investment opportunities exist in other countries.
6. Thousands of publicly listed companies trade outside the US. Out of the total 45,826 listed companies wordwide in November 2009, only 6,066 trade in the US exchanges. That is just 13% of all public companies available for investment.(Source: World Federation of Exchanges). So investors have a large universe of companies to choose from by looking outside the US borders. Many of the world-class companies such as Nokia (NOK), Vodafone(VOD), Toyota(TM), BASF(OTC: BASFY), Nestle(OTC: NSRGY), Unilever(ULUN), Danone(OTC: DANOY), ABB(ABB), etc. are based in other countries.Some emerging market firms such as Tata Motor(TTM), Petrobras (PBR),Gazprom (OTC:OGZPY), etc. are also turning into global players.
7. Many foreign markets have higher dividend yields than the US S&P 500. The S&P 500 has an average yield of about 3%. In many developed markets such as Singapore, New Zealand, Australia, France, UK, Germany, etc .the dividend yields are higher than 3% with some exceeding 5%. So US investors can earn more by buying foreign stocks.
8. The current estimate for US Economic growth this year is lower than most developed and emerging markets.
9.The current US business management style is not as great as it is hyped up to be. The credit crisis is a classic example that showed that all the risk management controls in companies were ignored by those in charge or simply did not exist.This was true especially in the banking industry.Many large European companies are shareholder friendly and strive to make things better for all the stakeholders in the firm.Sure there were some European firms such as Royal Bank of Scotland(RBS) which abandoned its core principles and let down its investors. But there are many more companies that are well run and are world champions. In emerging countries, managements work harder due to lack or proper infrastructure, political corruption and myriads of other problems in order to attract capital and achieve growth by following sound management techniques. Compared to those companies, I think managers in US companies have become lazy and do not work as hard to better serve their stakeholders. One reason could be the culture that has changed so much in the past few decades leading many executives to worry only about their own earnings, stock options, golden parachutes, etc. than about anything else. Corporate boards have also become complacent in performing their fiduciary duties to the firm.
10. The population in the US is relatively small compared to the population of developing countries such as India and China. In the US, the majority of the working population is experiencing negative to flat growth in income levels compared to rising household income in many countries. Hence the demand for goods and services will go down in the US if the job and income levels do not improve. With their 401K retirement accounts down, mortgages underwater, wiped out home equity and low saving rate it is highly unlikely that that American consumer will do the heavy lifting for the US economy as in the past. This is in sharp contrast to the developing world and most of Europe where the economy is in much better shape.
Earlier:

Monday 29 March 2010

PM's Hong Kong visit eye-opener for investors


CREDIT Suisse group is forecasting a more bullish outlook for Malaysia with a gross domestic product of 6 per cent this year compared with Bank Negara Malaysia's (BNM) estimate of 5.5 per cent.

It also expects more senior investors to come to Malaysia for in-depth research on local listed companies following Prime Minister Datuk Seri Najib Razak's address at the Asian Investment Conference in Hong Kong last week.

"They now better appreciate that he is a prime minister who means business, but also respects the fact that he faces a herculean task in reforming Malaysia," said Stephen Hagger, country manager & head of equities for Credit Suisse in Malaysia.

He said that a key takeaway was that the prime minister understood what the market wanted, but has to balance that with socio-political considerations and getting elected.

"PM Najib's visit to Hong Kong served as a timely reminder to many investors not to forget about Malaysia," he said in response to questions sent via e-mail.

Credit Suisse is the number one institutional investor research company globally.

In Hong Kong, Hagger said he met several senior investors keen to come to Malaysia to "kick the tyres" or go the extra mile in doing company research after hearing the prime minister and realising that Malaysia was becoming "under-researched".

Najib last week met top-notch fund managers besides delivering a keynote address on Malaysia's attributes as an investment destination for equity and capital market investments and its ground-breaking economic reforms.

He also met Credit Suisse special adviser, Sir John Major, who moderated the luncheon address where Najib discussed Malaysia's economic transformation efforts to emerge as a high-income economy by 2020 and the soon-to-be unveiled new economic model.

Hagger said those who met the prime minister were surprised on the upside, particularly with regard to his openness and frank answers to questions.

Asked about concerns about investing in Malaysia, he said there were only a few well-capitalised stocks on Bursa Malaysia, while fund managers needed large and liquid stocks, so that they could buy or sell a position in one day.

"Malaysia has few such stocks and is competing for capital and 'air time' with the larger more liquid North Asian markets," he said.

Fund managers are also looking for well-managed companies, he said. 

However, he said the government has achieved considerable success with the government-linked companies' reform programme in scaling down equity in listed entities, particularly at Khazanah Nasional Bhd, the government's investment arm.

This has been followed up by the beginnings of a "selldown" by Khazanah, which should improve the liquidity of those stocks.

He cited how there was clearly a potential conflict of interest in the government owning controlling stakes in both Malaysia Airlines and Malaysia Airports Holdings, when there was no regulator to ensure "fair play" with other airline operators.

Hagger said Malaysia was struggling to stay relevant as an investment destination for global fund managers primarily due to size and liquidity, but also of course, valuation.

"We notice that the foreign ownership of the Malaysian market has fallen significantly and the number of visits by foreign fund managers has dwindled."

He said the annual Credit Suisse Asian Investment Conference was a great forum for companies, governments and investors to meet, whereby there were about 270 companies from around Asia, including 16 companies from Malaysia, meeting some 2,000 fund managers from around the world, including several from Malaysia.

In addition, working with CIMB, "we are proud to have "showcased" the prime minister and several Malaysian companies in New York last year."

"We have also assisted the three regulators - Securities Commission, Bursa Malaysia and BNM - to meet fund managers overseas.

"Unfortunately, some company chief executive officers take investor relations more seriously than others," said Hagger.

Hagger said Malaysia's problems looked very easy to fix "when you are sitting behind a desk in Boston".

The reform of the "30 per cent Bumi listing rule" would have been perceived as a "no brainer" by many foreign fund managers, who probably failed to appreciate that it was an incredibly brave step by the prime minister, he said.

"I believe that is why Prime Minister Najib took such pains to explain that ... he understands what the market wants, but he has to balance that with getting his party re-elected," he said. - Bernama



http://www.btimes.com.my/Current_News/BTIMES/articles/cres28/Article/

Friday 8 January 2010

Low Foreign Ownership in Malaysian Stock Market

Foreign investors were conspicuosly absent from the scene whenthe Malaysian stock market jumped 50% between mid-March 2009 and now.


This was evident in the insignificant level of trading activity by foreign investors (just 25% of trading value in Jan-Sept 2009) and the persistent net portfolio investment quarterly outflows (since 3Q07) with foreign ownership standing at a five-year low.


That may soon change.  Among the speculated reasons are:
  • Coming off from a depleted base, foreign funds could trickle back into Malaysia, especially if global equities turn increasingly volatile ahead. 
  • As the risk-reward profile tilts in the opposite direction because of stretched valuations, strategiests may be tempted to make a gradual tactical switch to more defensive low-beta markets like Malaysia.
  • The prospect of an appreciating rinngit is an added appeal for investors in search of incremental investmen returns.

 Some under-owned stocks - with foreign shareholdings far below their recent peaks - that could increasingly come under the investment radar of foreign investors again are:
  • CIMB (33% foreign shareholding in June 09),
  • IJM Corp (34%),
  • MRCB (19%),
  • SP Setia (28%) and
  • Tenaga (11%)

Ref:  HwangDBS Vickers Research