Is the market short of retail players?

Quick Comment: Is the market short of retail players?
After reading some articles in the newspapers today, I feel that Bursa Malaysia is managed by a pack of jokers (management of Bursa Malaysia). Not only that, these jokers are supported by another group of jokers (brokerage and remisiers). And since they are all jokers, smarter opportunists out there took advantage of the market to make some good money. Here is what I read and my comments:

First article: Bursa woos retail investors
In the article, it says "BURSA Malaysia Bhd is working with several broking houses to increase retail participation in the stock market. Bursa Malaysia chief executive officer Yusli Mohamed Yusoff said that while the stock market had been performing relatively well in the past few months, more could be done to improve retail participation."

Investssmart: Do we actually need more retail participation? What we lack now is foreign funds participation. We have enough of retail participation. After all, retail participation will not help Bursa Malaysia because most Malaysian retail investors are interested in speculative stocks like TIMECOM, NSCOM and the chicken stocks. By encouraging more retail investors to invest in these kinda stocks is to cheat them off their money because most will end up losing. Where are the foreign funds? Everyone knows Malaysia has hardly any foreign funds participation. Bursa Malaysia should work hard with the government to get the foreign funds. Without them, Bursa Malaysia cannot perform well. Enough of swindling retailers money.

Second article: Advice from broking houses to retail players
Advice from broking houses? What? Aren't these the people who managed the unit trusts that losses money year after year? Yes, it is a shame that most of the unit trusts and funds managed by Malaysian fund managers are losing money. Of course there are exceptional ones like Public Mutual and ICapital but for every good one in Malaysia, there are probably 9 lousy ones. A lot of these funds are there just to support the market, not to maximise your wealth. Is their advise (or bullshit to some of us) worth listening to? Of course not. Even Investssmart is better.

Third article: SMR Technologies 108 times oversubscribed
Bursa Malaysia says they want more retail participation but their latest IPO was oversuscribed an astonishing 108x! How much money were there in just this IPO just from retail investors? 2.5m shares were offered to the public at 33c each. Oversuscription of 108x means that the public suscribed a total of $90m just for one IPO! And yet, Bursa Malaysia complained of the lack of retail participation. Where are their senses? What the market lack is foreign funds participation! Not retail investors.

SMR Technologies offered only 2.5m shares for the public. At 33c, it is only raising $825k from the public! What a joke! If you convert that to USD, it will be just USD223k. If you want to raise so little from the public, don't even go for listing. Or at least, Bursa Malaysia should not allow the listing. We have enough companies on Bursa Malaysia and one which raises $825k from the public is just not needed. If they don't want to let the public own more of their shares, just ask them to keep it as a private company!

These companies are listed by those who is taking advantage of the stupidity of the management of Bursa Malaysia. They are all going for the easy money. All they need to do is offer as little shares as possible and make it look very much in demand. Then, on the first day of trading, its share price will soar at least 50%! These opportunists will then start unloading their shares. Investors overseas will laugh if they hear an IPO raising USD223k from the public. They are probably already laughing. What can we expect? We have a market managed and supported by jokers.

Disclaimer: This report is brought to you by Investssmart, an unlicensed investment adviser. Please exercise your own judgment or seek professional advice from your remisiers. By law, they are the experts. I am not responsible for your investment decisions.

http://investssmart.blogspot.com/2006_03_01_archive.html

Survey: Investors to stick to mainstream investments

Survey: Investors to stick to mainstream investments
Published: 2009/08/26

In the retail space, asset managers believe that clients will focus more on capital protection rather than returns they can potentially earn.

POST financial crisis, investors worldwide will likely stick to simpler and safer mainstream investments for a long time to come instead of blindly chasing high returns, a global survey of asset managers shows.

"Retail clients are likely to display stronger behavioural changes than other segments. Loss aversion will be rife for the foreseeable future. Priorities will change," said Barbara McKenzie, the chief operating officer of Principal Global Investors, which commissioned the study.

"The memory and impact of the recent financial crisis will last longer this time."

The research sought to assess industry sentiment and how the global asset management industry will evolve after the crisis. The survey was conducted on 225 asset managers and pension funds in 30 countries, responsible for US$18.2 trillion (US$1 = RM3.51) of assets as at April this year.

In the retail space, asset managers believe that clients will focus more on capital protection rather than returns they can potentially earn.

Institutional clients, meanwhile, are expected to stress on expected risks instead of the expected returns, the survey showed.

"Simplicity, safety and quality are now the watchwords underpinning clients' investment goals," McKenzie said in a media briefing in Kuala Lumpur yesterday.

Datuk Noripah Kamso, the chief executive of CIMB-Principal Islamic Asset Management Sdn Bhd, said syariah-based investment management will gain momentum riding on this shift in investors' behaviour.

The values of Islamic asset management, which filters out risky investments and stress on the fair distribution of wealth, fit well with investors new priorities, she said.

CIMB-Principal Islamic Asset Management, which manages US$1.3 billion at the end of June, expects to pull in another US$400 million by the end of the year, Noripah said. The company is a partnership between Principal Global Investors and CIMB Group.

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

Tips for retail investors to stop losing money in stock market

Wednesday July 29, 2009
Tips for retail investors to stop losing money in stock market



IN the stock market, there are two main types of investors – smart investors and retail investors. While smart investors have been able to make money from the stock market, the majority of retail investors suffer losses most of the time.

As the market saying goes, only one out of 10 investors can make money from the stock market. The rest always incur losses in the stock market.

Some retail investors believe they can make quick money from the stock market. They believe that investing in the stock market is one of the best ways to accumulate wealth in a short period of time.

However, due to lack of proper financial training, investing knowledge and intelligence, they always find themselves at the losing end. When they are excited about investing, the stock market may be nearing to the peak.


On the other hand, when they are suffering losses, losing patience about investing and intending to cut their losses in the stock market, the market may be touching the bottom, and that, in fact, is supposed to be the best time to invest.

A majority of retail investors seldom pay attention to the stock market. They will only start doing so when newspapers or TV news headlines show that the market is touching a new high.

Driven by greed and the thought of making fast money, they will follow their friends or tips from their brokers to invest without paying much attention to the fundamentals of the stocks.

Due to lack of discipline to cut losses, more often than not, they find themselves holding on to a lot of poor quality stocks when the market collapses to a very low level.
(My comment: By sticking to high quality stocks, one hardly ever have to sell or to cut loss. However, it is extremely important to buy these stocks at bargain prices. Buying them at high prices may mean holding these stocks at a loss in the early years and also accepting a potentially lower compound annual return over the long term.)

We believe that the majority of retail investors do buy a mixture of good and poor quality stocks. However, they tend to hold on to poor quality stocks and sell the good ones when the stock market collapses.

This is because when the stock market crashes, poor quality stocks will drop much faster than good fundamental stocks.

Most retail investors find it difficult to sell poor quality stocks as the stocks may drop far lower their buying prices within a short period of time.

As retail investors refuse to admit their mistakes, they will hold on to these stocks, hoping to break even again in the future.

Unfortunately, they overlook one important market saying, which is: What goes up may come down, what goes down may never go up.

We may have emotional feelings about stocks but we should not refer to our purchase prices to determine whether we can cut our losses.

Our purchase prices are only important to us; they mean nothing to the overall market.

As our purchase prices may be much higher than those of other investors, even though we may not be able to sell the stocks, other investors, especially the company owners, can still liquidate their stocks.

We need to be careful when trading in speculative stocks especially those with prices that are much higher than the book values of the companies. The book value of a company reflects the owners’ costs in the company.

Hence, even though the stock prices tumble to a very low level, as long as the prices are still higher than the book values, a lot of company owners can still liquidate the stocks as their market prices are still higher than the cost invested.

For example, assuming the stock of a company is at the book value of only 30 sen and the stock price before the rally is 50 sen.

Due to the bullish sentiment and speculative play, the stock price may be pushed up to RM3. If our purchase price in the company is RM2, selling lower than RM2 means cutting a loss.

However, unfortunately, a lot of retail investors, instead of cutting losses continue to average down their purchase prices.

They may start averaging down their purchase prices at RM1.50, RM1, 80 sen and 50 sen.

If the company has poor fundamentals and has been incurring huge losses over a long period of time, averaging down our purchase prices this way means we will be incurring more losses.

While we are doing this, the owner of company can still sell the stock at 50 sen as his investment cost is only 30 sen!

(My comment: Therefore the importance of cutting loss early should your stock fundamentals suddenly deteriorated or should you realise that you have made a mistake in buying a stock.)

(My comment: Another reason why buying a share at a bargain price is important. The margin of safety is there, ensuring that any loss to your capital is minimised. Buying at a low or bargain price ensures the probability of upside is greater than that of downside. Also, the potential for greater reward should the upside be realised, and the minimisation of loss should the downside be realised.)

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting


http://biz.thestar.com.my/news/story.asp?file=/2009/7/29/business/4407802&sec=business