The Great Investing Dilemma: 'Always Late to the Party'

Published: Tuesday, 18 Sep 2012 |

By: Jeff Cox

CNBC.com Senior Writer

Money has been fleeing the stock market as fast as the market has been rising, leaving open the fear that, once again, mom-and-pop investors will come back only after missing the best part of the rally.

Getty Images NY Stock Exchange Traders

The trend of retail investors to buy high and sell low is one of the oldest — and most confounding — traits of the stock market.

And true to form over the past four years, and in 2012 in particular, money has been leaving the equity and money markets and pouring into bonds. This has happened even as theStandard & Poor's 500 [.SPX  1460.26    -0.79 (-0.05%)   ] has gained more than 110 percent off its financial crisis lows.

However, there are some halting signs that investors are ready to put money to work.

Exchange-traded funds have been a substantial beneficiary of the mutual fund exodus. Investors increasingly are choosing ETFs as a way to play the market, and flows there suggest some investors actually are beginning to come back to stocks.

The worry is that by the time the trend accelerates, the rally will be over and it will be too late to benefit from stock gains.

"They're always late to the party," says Nadav Baum, executive vice president at BPU Investment Management in Pittsburgh, Pa. "The reality is we haven't had a real good fundamental stock market with growth and companies buying back stock and splitting and dividends since 1998.

"If in fact we are getting in this period of a true, strong market where the fundamentals are good, the companies are buying back stock and they're increasing dividends, that could keep the market going for 10 years. At some point, retail will be back in."

But whether that will be too late and whether the retail investor will ever come back are two nagging questions.

Examining mutual fund flows as a proxy for investor behavior has become a favorite pastime for Wall Street pros, the media and the blogosphere, and the story from there — albeit only partially true — suggests a caravan out of stocks.

Investors have dumped more than $40 billion from stock-based mutual funds in 2012 alone and about $535 billion since 2008, while bond funds have taken in $950 billion, according to data from the Investment Company Institute.

RELATED LINKS

• Fine-Tuning: 10 Tips
• The Market's Election Call
• Buffett's Initial Holdings
• Where Markets Go Now 

The good news for investors is they've been rewarded handsomely for diving into fixed income. While the rewards were not quite so gaudy as the stock market's the risks were far less and thus obviously more pleasing.

Changing that behavior, then, won't be easy.

"Typically, the retail investor needs to get burned. When they actually get burned, they will leave an asset," says Quincy Krosby, chief market strategist at Prudential Annuities in Newark, N.J. "As long as they've felt they're doing all right and there's no risk, they've been quite happy in these various assets within fixed income."

The issue, most everyone agrees, is that fixed income has been a bit of an oasis in a troubled world filled with debt crises, political stalemates and market malfunctions — the May 6, 2010 Flash Crash and the Facebook [FB  22.59   -0.70  (-3.01%)   ] debacle to name just a few.

"Mind you, many retail investors are very well diversified, so they have exposure to equities. They've been in high yield, which is very highly correlated to equities," Krosby says. "So they have returns in their portfolio. The issue is, do they start increasing their allocation?"

There's a much under-examined aspect of the fund-flows chatter that tells a somewhat different story about investor behavior.

While it's true that equity mutual funds have been hemorrhaging cash, that money isn't all going to bonds.

Many investors instead are showing preference to exchange-traded funds, which are composed like mutual funds but trade like stocks. The $1.3 trillion ETF industry has seen huge inflows at the same time that mutual funds have been losing investor cash.

Domestic equity ETFs have jumped from holding just $370 billion in assets at the beginning of 2008 to $702 billion now, according to ICI.

That's not quite a 1-for-1 correlation and it doesn't mitigate how much investors have been taking out of money markets and pouring into bonds. But it's certainly an indicator that the retail investor isn't quite so fearful as the mutual fund flows indicate.

But the perception among many pros is that confidence remains lacking, and until that returns in the stock market the retail crowd likely won't, either.

"To some extent, isn't that what it's always about?" says Liz Ann Sonders, chief market strategist at Charles Schwab in San Francisco. "There's muscle memory from the severity of the financial crisis. We had two bubbles in a 10-year period. You had the lost decade. You have the Flash Crashes and all the mini-flash crashes from other stocks."

Sonders has been mostly bullish on the market during its rise from the crisis depths, and believes that despite the various dangers looming the market can keep climbing.

"It's an overused term, but we're continuing to see the green shoots," she says. "They bring out the animal spirits that are just bubbling now."

It's also worth noting that while equity mutual funds have taken a hit in recent years the industry still holds $5.6 trillion in assets, including $4.2 trillion in domestic funds. Those are numbers that suggest plenty of investors have seen benefits even if the trend is moving away from stocks.

"That's why retail investors should have advisors," BPU's Baum says. "They keep buying bonds, and they are going to take a hit with inflation. These interest rates are going to keep going up, and people are going to get hammered in these bond funds."

© 2012 CNBC.com

http://www.cnbc.com/id/49061779?__source=yahoo%7Crelated%7Cstory%7Ctext%7C&par=yahoo

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

The Mood of Investors

Airtime: Fri. Nov. 19 2010
Sharon Sager of UBS Private Wealth Management tells CNBC's Maria Bartiromo how she's developing strategies for clients who have become more conservative.


Related:
Why Retail Investors Still Avoid Stocks

INVESTING November 14, 2010, 9:18PM EST

Why Retail Investors Still Avoid Stocks

Major U.S. stock indexes have returned 80% or more since their 2009 lows, but individual investors remain wary. Investor psychology expert Brad Barber discusses why

Even as U.S. stocks trade at some of their highest prices in two years, individual investors continue to sell, leaving the buying to larger players like hedge funds and other institutions. A Nov. 10 Morningstar (MORN) report showed in October another $6.3 billion was pulled from U.S. stock mutual funds, which are used mostly by smaller, retail investors.

A leading expert on investor psychology, Brad Barber is a finance professor at the University of California, Davis, and head of the university's Center for Investor Welfare & Corporate Responsibility. In a Nov. 9 interview with Businessweek.com's Ben Steverman, Barber talked about how he interprets retail investors' reaction to the current rally. Edited excerpts of their conversation follow:

Ben Steverman: Even though the stock market is up, retail investors seem to be sitting on the sidelines. According to Morningstar, investors have pulled $64.2 billion from U.S. stock mutual funds so far this year through October, even after withdrawing $26 billion last year. When might that change?
Brad Barber: My sense is that sentiment for equities isn't going to get positive until the economy is on strong footing. Even though the market has come back, it hasn't really been accompanied by robust economic growth. That can to some degree explain why retail investors remain skittish. The back story of the returns has just not been strong for the last year or two.

By "back story," you're not really talking about the condition of the economy, but the stories that are told in the media about the state of the economy?
Yes, and it's that back story that I think would need to improve to see renewed excitement and participation by retail investors.

Do you think investor behavior is different this time, compared with market rallies after previous recessions?
The more recent crisis certainly feels different. Unemployment rates have been much higher for much longer. The talk on the news is constantly about the weakness in the economy. The Internet bubble bursting in 2000 was a dramatic event, but it was not accompanied by the magnitude of economic dislocation that followed this financial crisis. Losing your job is different from losing a lot of your retirement portfolio.

Does the behavior of these small retail investors have a real effect on the market? Or are they such a small part of the investment pool—alongside hedge funds, pension funds, and other large institutions—that they don't have much impact?
It is true that retail investors directly hold very little stock, under 20 percent [of total shares] these days. There's been a secular shift toward institutions holding investments on behalf of individuals. Having said that, sentiment can also affect institutions to some degree. Direct ownership of stocks by retail investors isn't a big [driver], but it's a good instrument for thinking about the sentiment of the market as a whole.

What is the track record of smaller investors? Do they tend to buy and sell at the right times?
The order flow of small investors perversely forecasts returns. What I mean by that is: If small investors seem to be buying a stock, it tends to forecast poor returns for the stock. Conversely, if small retail investors are selling a stock, it tends to portend strong returns for the stock.

For example, people might become enamored with the latest high-tech startup firms. Retail investors pile in, driving the prices up, but the reality is these companies aren't making earnings. Later, there's a day of reckoning. Conversely, you might have really stodgy, old-line companies, about which retail sentiment is pretty negative. But they're plugging along and posting reasonable earnings. The lack of retail sentiment for those stocks may beat down their prices temporarily, and those low prices would portend strong returns as long as they have earnings to back up the company.

So, sentiment causes fluctuations in prices above or below some level justified by the underlying fundamentals of the company.

Given all the losses investors have experienced, do you expect that Americans are going to permanently change the role stocks play in their portfolios?
There is a lot of evidence that people's attitudes about their portfolios change as a function of market conditions. There is a nice paper by Ulrike Malmendier [an economics professor at the University of California, Berkeley] and Stefan Nagel [a finance professor at Stanford University] looking at how investors allocate stocks in their retirement portfolios.

If you lived through the Great Depression, you're less likely to invest in stocks because you stomached a 15-year period where stocks basically had a zero return. Conversely, if you experienced stocks during the late '80s and '90s—pretty much an unrelenting bull market—you probably were bullish on stocks and tend to have a high allocation of stocks in your investment portfolio. The last decade, of course, has been pretty lousy. And so investors who were saving and coming of age in the last decade are probably going to have lower allocations to stock in their retirement portfolios. The punch line is "experience matters."

So relatively short-term market conditions tend to affect long-term investment decisions. People who came of age in this decade might be permanently much less likely to own stocks?
Or at least have a lower allocation to stocks. In the late 1990s, when I was teaching MBA students, it was hard to convince students that if you held stocks for 10 years that you had any risk of loss. That's not so hard anymore. [Laughter.] The example that I used to try to hammer home this point was Japan, which in the late 1990s had been mired in a 10-year crash. Now it's 25 years and counting.

To what extent is this reluctance to buy stocks rational behavior on the part of investors? And to what extent is it irrational, because investors miss out on stock gains and then, when sentiment finally turns positive again, might end up buying at the top of the market?
It's very difficult for people to understand their ability to tolerate risk until they experience it. It's all well and good to say "I can tolerate the gyrations of the markets." You can sit down with a financial adviser or you can go through online tutorials, but you don't understand until you actually live through it.

Folks go through these times where their portfolios are dropping 30, 40, and even 50 percent, and it causes them to lose sleep. Is it irrational to dial down your equity allocation when it's affecting your sleep and health? I don't think so.

Is it what most economists would recommend investors do? Probably not.

As someone who studies investor behavior, are there questions raised in the last couple of years that you're eager to answer?
The most pressing issue is how investors save and prepare for retirement. This will become even more pressing as we think about solutions to the underfunding of Social Security benefits.

There are a lot of folks doing work on these issues now: How can we get people to save adequately for retirement or make sensible investment choices?

http://www.businessweek.com/investor/content/nov2010/pi20101112_224434.htm

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

M’sian capital market need more informed investors

by Chin Kee Leong. Posted on November 1, 2010, Monday

MIRI: The Malaysian capital market need more informed investors who are encouraged to trade online.

Q&A SESSION: (From left) Shin, Mo and Tan on stage fielding questions from the floor during the roadshow.

OSK Investment Bank Bhd (OSK) organised Market Chat 2010 roadshow in Grand Palace Hotel here recently that provided insights on stock market investment to educate and create awareness on the securities market as well as to encourage online trading amongst retail investors.

“A good investor is an informed investor – creating more informed investors is one of the goals of our Market Chat roadshows,” said Bursa Malaysia Bhd (Bursa Malaysia) head of surveillance research and development (R&D) and market surveillance, Arshad Azizi Kamaruddin in his opening speech.

Arshad welcomed some 150 participants who turned up at the fourth season of Market Chat roadshow.

“Retail investors have always been a crucial investor segment of our Malaysian capital market.

“We have been steadfast in working hand-in-hand with our stakeholders and broker partners to stimulate interest amongst Malaysians to invest in our stock market,” said Arshad who explained the main aim in boosting the retail stock market with Market Chat started in 2006.

According to him, Bursa partnered with nine selected brokers which included OSK, and has since conducted 117 roadshows and reaching nearly 18,000 investors in the past three years.

“We were able to generate nearly 3,600 new CDS accounts over the period.Naturally, we intend to make Market Chat bigger and better each year,” he said.

He hoped to see expansion to more cities and non-urban areas, and eventually reach out to all segments of society.

“Our government is committed to make Malaysia more business-friendly to investors.

“The call for the divestment of government stakes in public listed companies are examples of measures to promote vibrancy, free float and liquidity in our market to enhance the attractiveness of the Malaysian capital market.

“These developments hold opportunities for all investors like you,” he said.

In order to achieve greater efficiency and offering convenience to the public, Bursa has introduced the eDividend to enhance payment efficiency.

“We would like to see the younger generations take keener interest in the stock market. It is very important for stakeholders to collaborate in enhancing the pool of retail investors,” he said.

He urged participants to spread the word and encourage others to participate in future roadshows.

“I believe that there are always opportunities if we know what we’re looking for. And yes, there are hidden gems in our capital market,” he added.

During the Q&A session, he replied to a participant that he will bring up the matter with Bursa of introducing similar e-payment systems for the Warrants and Futures trade, which involve larger sums of money.

The main speakers were Shin Kao Jack of OSK Research Sdn Bhd, Kuala Lumpur (KL) who presented ‘Market sOutlook’, Eric Tan of OSK Investment Bank (Derivatives and Structured Products), KL with ‘Understand Call Warrants and ETF’, and Grace Mo of OSK Investment Bank, Sibu with ‘How to trade KLCI Futures and CPO Futures’.

The guest speakers were Sarawak Plantation Bhd (SPB) corporate finance manager Koay Bee Eng, and Naim Cendera Holdings Bhd senior director Ricky Kho who enlightened participants with the portfolios of their respective companies listed on the stock exchange.

http://www.theborneopost.com/?p=72153

Ordinary Malaysians shun stock market amid stalling recovery

By Yow Hong Chieh

September 01, 2010

Individual investors began fleeing the local market in 1997, and have yet to return. — Reuters pic

KUALA LUMPUR, Sept 1 — Individual investors continue to shun the Malaysian stock market as public confidence remains shaky due to fears that the market’s recovery following the 2007 US sub-prime mortgage crisis may not be real.

Economists and analysts said that a slowdown in foreign investments, poor enforcement against unscrupulous activities and overseas competition for local funds also contributed to the lack of interest among ordinary Malaysians in investing in the local share market.

Kenanga Investment Bank economist Wan Suhaimie Wan Saidie said most investors were tired of the Malaysian stock market, which was not as competitive as other bourses in the region, and added that participation was also muted due to the lack of foreign direct investment (FDI).

“There is a correlation between retail participants and foreign investment flows,” he said, referencing the massive 81.1 per cent drop in foreign direct investment (FDI) Malaysia experienced last year.

“If foreign investment flows are not forthcoming individual investors are more likely to shun the local market.”
He said there was a possibility that investors might “go back to hibernation” until they saw signs of a firm recovery, but cautioned that the flow information both locally and abroad did not suggest that things were getting any better.

Until then, however, investors still had many other options to buy both locally and abroad or put their money into properties and commodities, he explained.

The Kuala Lumpur Composite Index’s 45 per cent gain last year lagged behind Southeast Asian neighbours even after the government announced stimulus plans totalling RM67 billion to help pull the region’s third-largest economy out of a recession.

The slump in trading by individuals coincided with an exodus by foreigners from Asean’s second-biggest stock market, leaving Bursa Malaysia more reliant on domestic institutional funds.

Overseas investors have sold a net RM1.36 billion of Malaysia’s equities this year, adding to RM8.57 billion withdrawn in 2009 and RM38.6 billion that flowed out in 2008, paring their share of local stocks down to 20.6 per cent at the end of April from 27.5 per cent in April 2007.

Wan Suhaimie was critical of the level of participation in the market by statutory funds such as Employees Provident Fund (EPF), which he said distorted the market as they focused only on index-linked stocks.
On March 30, Prime Minister Datuk Seri Najib Razak revealed that the state-controlled EPF accounted for 50 per cent of daily trading volume in the equity and bond markets. Additionally, more than half of the RM417.1 billion market value in the benchmark stock index is owned by government-linked funds, according to calculations by Bloomberg.

“It doesn’t really reflect the real overall performance of the stock market. Most of the information and research is skewed towards big cap stocks,” he said, adding that it was possible that investors might miss out on smaller companies that have better growth potential because of this.

A Hwang-DBS remisier who wanted to be identified only as Kok explained that, during good times, retail investors make up 60 to 70 per cent of trading value in a normal market.

However, according to a Bloomberg report, trading by individuals have fallen to as low as 20 percent of trading value from more than half before the start of the 1997 Asian financial crisis, when the KLCI slumped by a record 52 per cent.

Kok said the battering individual investors took in 1997 and the recent sub-prime crisis led many to put their money in safer alternatives like unit trusts or sukuks (Islamic bonds), adding that many were also still holding onto stocks that had yet to recover.

“With the market in such a lacklustre mode, you can’t make money punting,” he said. “The market is just drifting. The main market movers are just blue chip index counters... Most retail investors are still on the sidelines nursing their wounds.”

“Any spare money they’ll probably keep in interest-bearing accounts or, if they have more money, they’ll probably just park it with a fund manager.”

Most individual savings started shifting to mutual funds and unit trusts since Malaysia’s economy went into a recession in 1998 but have not returned to stock trading even as the economy expanded at an annual average of five percent over the past decade and the benchmark index more than doubled, Bursa Malaysia CEO Yusli Mohamed Yusoff said in June.

In order to boost retail investors’ share of trading to closer to one-third and tap into Southeast Asia’s second-highest savings rate, Bursa is currently working with brokerages and banks to encourage investors to open up accounts and pursue online trading.

However, Kok said he felt that investors were still wary of trading on the market because they were not convinced that Malaysia’s economic recovery was real.

“When you talk about six or seven per cent (GDP) growth, I suppose you and I don’t see it,” he said.

A broker with a local investment bank who declined to be named was similarly sceptical of the strength of the market’s recovery, pointing out that the KLCI, which is used as a bellwether for the Malaysian stock market, focused only on selected blue chip stocks.

“It is very obvious that the index, targeting only 30 counters, is not a true reflection of the overall market. A lot of the companies are actually really going down,” she said.

“Because the downtrend from ‘07, until today, in terms of all those general stocks that people buy and sell, a lot of them are still very much at the bottom.”

She added that retail investors have also been “very quiet” partly because they had lost confidence in market regulators, citing the recent case of furniture make Kenmark Industrial Co Bhd.

Kenmark’s troubles began in late May when its Taiwanese managing director James Hwang disappeared mysteriously — leading to a plunge in share price and plant closures in Port Klang and Vietnam — only to resurface nearly a week later, claiming his absence was due to illness.

During Hwang’s absence, Datuk Ishak Ismail entered the market and amassed shares amounting to a 32.36 per cent stake in the company over 10 days at prices of between 5.8 sen and 6.0 sen, claiming he had done so to help out his friend Hwang and offer re-employment to the company’s workers.

However, Ishak later sold his direct and indirect stake in Kenmark between June 9 and June 11 at between 14 sen and 16 sen after failing to convince Hwang to return to the company.

The Securities Commission finally stepped in on June 16 when it obtained a High Court order to stop Ishak from using or dealing with the RM10.16 million proceeds from the sale of shares in Kenmark as part of a move to probe possible insider trading.

Kenmark’s share price plummeted from a high of RM0.85 to just RM0.07.

“Stocks can drop from a dollar to penny stocks... These sorts of events happen in the Malaysian market, yet the authorities are not taking action,” the remisier said.

“A company doesn’t just fold up within a month. I can understand how those investors feel.”

http://www.themalaysianinsider.com/business/article/ordinary-malaysians-shun-stock-market-amid-stalling-recovery/

Nazir: Retail investors moving offshore to expand investment options

Written by Bernama
Wednesday, 07 July 2010 16:37


KUALA LUMPUR: Retail investors are moving towards investing offshore as part of their strategies to grow investment options, CIMB Group Holdings Bhd group chief executive, Datuk Seri Nazir Razak, said.

He said for the past 18 months, retail investors had been investing offshore through many networks, including CIMB.

"That's a growth area. It may not make Bursa Malaysia terribly happy but at the end, retail investors are growing their investment options.

"The United States and Asean had been the top offshore destinations," he told reporters after delivering the keynote address at the CIMB Private Banking Second Annual Investment Conference here on Wednesday, July 7.

Nazir was commenting on the lack of participation by retail investors in the local bourse.

A recent Bursa Malaysia's report, "Rethink Retail", showed that 61% of the potential retail investors did not know how to invest in equity markets.

Furthermore, 48% of non-investors cited high risks as the main reason for their non-participation in the stock market.

Nazir said through the revival of CIMB Securities brand, the group was growing the number of remisiers to 1,000 across the region as part of its strategy to encourage more retail investor participation in the local bourse.

On the private banking potential, he said, the group, which currently has RM7 billion worth of asset under management (AUM), would grow it to RM10 billion within five years.

"The group is currently in the process of integrating its private banking capabilities across the region," he said.

At the same event, Nazir also announced that CIMB Group's automated teller machine (ATM) users could withdraw cash via its ATMs in Malaysia, Indonesia, Singapore and Thailand for free immediately.

On another note, Nazir said the bank was concerned with the recent development of SJ Asset Management (SJAM), which was currently being examined by the Securities Commission (SC) due to irregularities in its accounts.

"SJAM is one of the approved fund managers for our private bankers to recommend to our clients, so therefore, by extension, clients will have some money invested in," he said.

On CIMB's level of exposure in SJAM, Nazir said: "Even one sen will concern me because this is our clients' money in SJAM ... this is something that we are monitoring and engaging with SC closely."

According to newsreports, a number of banks' clients may have financial exposure to SJAM. - Bernama

http://www.theedgemalaysia.com/business-news/169431-nazir-retail-investors-moving-offshore-to-expand-investment-options.html

KL bourse out to woo retail investors

KL bourse out to woo retail investors
Published: 2010/06/09

Malaysia’s bourse said it’s seeking to lure individual investors who have shunned the market a decade after the Asian financial crisis.

Bursa Malaysia Bhd is working with brokerages and banks to “to reach out to retail investors in various towns and cities” to open up accounts and encourage online trading, chief executive officer Yusli Mohamed Yusoff said in an interview in Kuala Lumpur.

Trading by individuals fell to as low as 20 per cent of trading value from more than half before the start of the Asian financial crisis in 1997, when the benchmark index slumped by a record 52 per cent.

“A lot of retailers lost a substantial amount,” Yusli said yesterday. The result is that the market is now “dominated by the local institutions,” he said.

Most individual savings started shifting to mutual funds and unit trusts since Malaysia’s economy went into a recession in 1998, Yusli said. They haven’t returned to stock trading even as the economy expanded at an annual average of 5 per cent over the past decade and the benchmark index more than doubled.

The FTSE Bursa Malaysia KLCI Index has climbed 1.2 per cent so far this year, paring a gain of as much as 5.8 per cent amid concern austerity measures in Europe will reduce demand for the Malaysia’s technology and commodity exports.

Lagging Behind

The KLCI’s 45 per cent gain last year lagged behind Southeast Asian neighbors even after the government announced stimulus plans totaling RM67 billion to help pull Southeast Asia’s third-largest economy out of a recession.

Trading slumped by half to an average US$375 million a day over the six months ended May from the same period 13 years ago, right before the start of the regional financial crisis in July 1997, according to data compiled by Bloomberg. Neighboring Singapore’s figures have quadrupled to US$1.1 billion over that time, data from the city-state’s exchange show.

“People’s risk appetite is not there anymore, not like those days,” said Lye Thim Loong, who helps manage US$500 million at Avenue Invest Bhd in Kuala Lumpur. “Those who traded recklessly with no fundamental reasons got burnt.”

The slump in trading by individuals coincided with an exodus by foreigners from Southeast Asia’s second-biggest stock market, leaving Bursa more reliant on domestic institutional funds. Overseas investors have sold a net RM1.36 billion of Malaysia’s equities this year, adding to RM8.57 billion withdrawn in 2009 and RM38.6 billion ringgit that flowed out in 2008, according to exchange data. In 2007, they bought a net RM24.7 billion.

Foreigners

The exit left foreigners holding 20.6 per cent of local stocks at the end of April, down from 27.5 per cent in April 2007, according to stock exchange data. Overseas investors held 9.33 per cent of Tenaga Nasional Bhd at the end of April, compared with 27 per cent in April 2007, according to data from Malaysia’s biggest power producer.

The state-controlled Employees Provident Fund accounts for 50 per cent of daily trading volume in the equity and bond markets, Prime Minister Najib Razak said on March 30. More than half of the RM417.1 billion of market value in the benchmark stock index is owned by government-linked funds, according to calculations by Bloomberg.

“We’d rather see a more balanced distribution, so that one particular sector doesn’t dominate the market so much,” Yusli said.

Retail investors’ share of trading is low by comparison with at least one neighbor, Thailand, where individuals accounted for 56 per cent of turnover so far this year, according to data compiled by Bloomberg. Exchanges in neighboring Indonesia and Singapore don’t track the figures.

“There has been some increase in the total of retail account sign-ups recently, but the amount is negligible,” Alex Hwang, chief executive officer of HwangDBS Investment Bank Bhd in Kuala Lumpur, said in an e-mailed reply to questions. Investors are “more careful these days due to the volatile market,” he said. -- Bloomberg


Read more: KL bourse out to woo retail investors http://www.btimes.com.my/Current_News/BTIMES/articles/20100609084947/Article/index_html#ixzz0qLed7Wsg

Institutional and retail investors in the GCC have short time horizons compared to global benchmarks

Friday 4th, June 2010 -- 23:20 GMT
Invesco Middle East Asset Management Study finds a consistently high demand for emerging markets across the region

Posted: 26-05-2010 , 09:35 GMT

Invesco Asset Management Limited today unveiled the findings of its inaugural Invesco Middle East Asset Management Study. This regional study is the first of its kind and reveals a fascinating insight into the complex and sophisticated investment habits of this continually evolving region. The company, who opened its Dubai office in 2005, has been working with Middle East clients for decades, offering financial institutions and investment professionals access to global investment expertise.

Surveying the attitudes and behaviours of both institutional and retail markets across the six Gulf Co-operation Council (GCC) countries, the study revealed a number of key findings:
• There is currently a consistently high demand for emerging markets across all companies and territories
• Institutional and retail investors in the GCC have short time horizons compared to global benchmarks
• Investor location within the GCC has a strong influence on exposure to investment sectors


Interestingly, the study also indicated that both the institutional and retail market are becoming increasingly risk averse.

Nick Tolchard, Head of Invesco Middle East commented: “The Middle East is often portrayed as a homogenous region; this report clearly shows this is not the case, though there are some surprising similarities. The influence of investor location over asset allocation makes it quite clear that the Middle East is a highly diverse investment region.”

He continued: “We believe that this diversity is explained by access to investment products, which varies across the region. Certain markets, such as Saudi Arabia, have restricted access to international investments whereas others, such as the UAE, are dominated by offshore life wrappers with large international fund ranges.”

Investor type also plays a key role in asset allocation, according to the study. In the growing retail market, preferences vary according to distributer. Private client portfolio managers favour global equities and alternative assets, while retail banks prefer local equities and cash and IFAs opt for global equities and cash.

On the institutional side, preferences are even more diverse:
o Sovereign Wealth Funds prefer alternative investments (private equity and hedge funds)
o Institutional investors tend to invest in mainstream asset classes (equities, bonds and cash)
o Corporates (commercial banks and diversified financial services) prefer local over international assets.
o Asset managers prefer property

Commenting on these asset allocation preferences, Nick Tolchard said: “Sovereign Wealth Funds’ preference for private equity and hedge funds may align to opportunistic investment strategies to exploit any short-term market volatility and below average allocations to local securities and commodities is expected given that the source of funding for Sovereign Wealth Funds (government revenue) is heavily dependent on commodity prices and the performance of the local economy.”

In addition, one of the most striking findings is the universal preference for emerging market assets. Across all participants 82% of respondents forecast exposure to emerging markets over the next 3-5 years compared to 30% for North America, 14% for Europe and 8% for Japan. The key driver for this appears to be simply that GCC investors expect returns to exceed those in developed markets.

The Retail and institutional respondents in the GCC are also unified by their perceptions of change in risk appetite – they have indicated that 79% of institutional and 70% of retail investors have changed their attitude to risk in the last six to twelve months and in both cases, more investors have become increasingly risk averse.

In addition, the study indicated that the respondents also share similar very short-term investment time horizons, 38% of retail respondents have a time horizon of less than a year compared to 33% in the institutional market. Of those surveyed, only 12% of institutional respondents have an investment horizon beyond 5 years, significantly below global comparatives for institutional markets.* Invesco believes that the short retail time horizons in the retail market can be explained by the transient nature of retail expatriate clients, investment losses during the global financial crisis and the coverage on Dubai’s debt restructuring. Looking forward it expects retail time horizons to lengthen as markets stabilise, but to remain shorter than global retail benchmarks.

Nick Tolchard explained: “Perhaps the most surprising finding was the short term and highly volatile investment attitudes in the institutional sector. However, this could be explained by nimble and fast moving investment behaviour of Sovereign Wealth Funds in the GCC region, in contrast to other institutional markets which are typically dominated by large insurance and pension funds managing a high proportion of their assets against long-term liabilities.”

He concluded: “The Middle East is a growing investor force in the world and we see this research as part of our strategic commitment to understanding the perspective of investors, as well as the investment and savings culture of the Middle East. We intend to carry out this research on a regular basis, monitoring the retail investment market as it continues to grow, and learning even more about the behaviour and preferences of the highly sophisticated institutions operating in the GCC.”
© 2010 Mena Report (www.menareport.com)

http://www.menareport.com/en/business/316494


Summary:

This research studied the investment and savings culture of the Middle East. It highlights the growing retail investment market and the behaviour and preferences of the highly sophisticated institutions operating in the GCC.

The study indicated that the respondents share similar very short-term investment time horizons, 

• 38% of retail respondents have a time horizon of less than a year compared to 33% in the institutional market. 
• Of those surveyed, only 12% of institutional respondents have an investment horizon beyond 5 years, significantly below global comparatives for institutional markets.

* Invesco believes that the short retail time horizons in the retail market can be explained by

• the transient nature of retail expatriate clients,
• investment losses during the global financial crisis and 
• the coverage on Dubai’s debt restructuring. 

Looking forward it expects retail time horizons to lengthen as markets stabilise, but to remain shorter than global retail benchmarks.

Perhaps the most surprising finding was the short term and highly volatile investment attitudes in the institutional sector. 

• However, this could be explained by nimble and fast moving investment behaviour of Sovereign Wealth Funds in the GCC region, in contrast to other institutional markets which are typically dominated by large insurance and pension funds managing a high proportion of their assets against long-term liabilities.”