Who will be the top market performer this quarter?

Monday January 24, 2011

PETALING JAYA: If we have to summarise global economic performance in 2010, it would be this: the year reinforced the growing differences in economic growth between the developed economies (the United States, Europe, Japan) and emerging markets.

In particular, South-East Asia had a remarkable year, with the region's economies and stock markets charging ahead.

Thailand, Indonesia and our home market Malaysia took the top three spots in the Top Markets for 2010 list, according to analyses fromFundsupermart.com.

But enough about 2010. Which markets do you think will perform best this quarter (January-March 2011)? 

Guinness Anchor Berhad: Changes in Share Holdings

Changes in Share Holdings

24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(19,000)	Credit Suisse Group AG	18,283,700
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(104,800)	Credit Suisse Group AG	18,302,700
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(9,700)	Credit Suisse Group AG	18,274,000
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(104,800)	Mitsubishi UFJ Financial Group, Inc	18,614,800
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(19,000)	Mitsubishi UFJ Financial Group, Inc	18,595,800
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(7,700)	Mitsubishi UFJ Financial Group, Inc	18,588,100
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(104,800)	Aberdeen Asset Management PLC and its subsidiaries	18,302,700
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(104,800)	Aberdeen Asset Management Asia Limited	17,881,500
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(19,000)	Aberdeen Asset Management PLC and its subsidiaries	18,283,700
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(19,000)	Aberdeen Asset Management Asia Limited	17,862,500
24-Jan-11	GUINNESS ANCHOR BERHAD	GAB	(2,000)	Mitsubishi UFJ Financial Group, Inc	18,586,100

A Brief Look at Guinness

http://myinvestingnotes.blogspot.com/2011/01/brief-look-at-guinness-malaysia.html

Analyst Recommendations and Revisions

http://www.reuters.com/finance/stocks/analyst?symbol=GUANF.PK

GUINNESS ANCHOR BHD

 (Kuala Lumpur: 3255.KL )

Last Trade:	10.00
Trade Time:	3:56AM EST
Change:	0.38 (3.66%)
Prev Close:	10.38
Open:	10.28
Bid:	10.00
Ask:	10.12
1y Target Est:	N/A

Day's Range:	10.00 - 10.28
52wk Range:	6.60 - 11.00
Volume:	47,300
Avg Vol (3m):	119,619
Market Cap:	N/A
P/E (ttm):	N/A
EPS (ttm):	N/A
Div & Yield:	N/A (N/A)

Quotes delayed, except where indicated otherwise. Currency in MYR.

OVERALL

Beta:	0.38
Market Cap (Mil.):	$3,135.78
Shares Outstanding (Mil.):	302.10
Annual Dividend:	0.45
Yield (%):	4.34

FINANCIALS

	GUANF.PK	Industry	Sector
P/E (TTM):	19.05	3.45	22.28
EPS (TTM):	35.66	--	--
ROI:	31.61	1.72	4.53
ROE:	33.64	2.55	8.00

BUY/SELL

» Analyst Consensus

How do Banks make Profits?

A bank generates its income from three main sources.

1. There is the net interest rate difference between what it earns on loans and what it pays for deposits.
2. There are the extra fees it charges for various services and
3. There is the profit it earns from other activities like running a stockbroking division, a funds management business and offering services to customers like helping them with foreign exchange transactions.

Banks can also be involved as active traders in financial markets.

As far as the income they earn is concerned, this is generally about 3 per cent of the value of the multi billion dollars of assets for which they are responsible.  

• About 2.4 per cent of this 3 per cent comes from interest income and 
• about 0.6 per cent from fees and other income.

From this it pays running expenses that reduce the income on total assets to about 2 per cent. 

The other major cost is allowing for bad debts, which can arise from people not being able to pay their interest as well as from losses on bank business enterprises.

• These expenses can range widely from 0.2 per cent of assets when times are good to more than 1 per cent during bad times. 

Last but not least is tax which reduces any net income by 30 per cent.

From these basic observations, the major challenge banks currently face in developed countries comes from bad debts.

Summary:

3 Main Sources of Income

(1) Interest Income = 2.4% of Total Assets

(2) Fees and (3) other Income = 0.6% of Total Assets

Total Income = 3.0% of Total Assets

less

Expenses = 1% of Total Assets

Profit before provisioning for bad debts and before tax = 2% of Total Assets

less 

Provisioning for Bad Debts = 0.2% to 1% of Total Assets

Profit Before Tax = 1.8% - 1% of Total Assets

less 

Tax = 30%

Profit After Tax = 1.26% - 0.7% of Total Assets

Besides looking for a consistent mid- to high-teen ROE, it is good to see a high level of ROA as well.


For banks, a top ROA would be in the 1.2% to 1.4% range.






Related:
What should investors look for when investing in banks and other financiers?
http://myinvestingnotes.blogspot.com/2010/05/what-should-investors-look-for-when.html

Comparative Analysis of Banking Stocks (16.5.2010)

http://myinvestingnotes.blogspot.com/2010/05/comparative-analysis-of-malaysian.html

http://spreadsheets.google.com/pub?key=t3v2VY0rD9DcGSjmVkAV-gQ&output=html

How to analyze the market?  Bank

http://myinvestingnotes.blogspot.com/2008/08/how-to-analyze-market-bank.html

Hallmarks of Success for Banks: ROE and ROA
http://myinvestingnotes.blogspot.com/2009/06/hallmarks-of-success-for-banks-roe-and.html

Are these in our Sejarah textbooks? Perhaps, the general election is near.

Sunday January 23, 2011

Najib: Every race contributed to a successful Malaysia

By SIMON KHOO
simonkhoo@thestar.com.my

PEKAN: Malaysia is where it is today because of the contributions by all races to nation building, Datuk Seri Najib Tun Razak said.

Without the participation of the Chinese and Indians in the talks for independence, the British may not have given it to Malaya (in 1957), the Prime Minister said.

“Many non-Malays also sacrificed their lives during the Japanese occupation and the Communist insurgency,” he said, adding that this must not be disputed and should be remembered.

A crush for oranges: Residents of Pekan in Pahang queuing up to receive free mandarin oranges at a function that was attended by Prime Minister Datuk Seri Najib Tun Razak yesterday. Najib, in his speech, said Malaysia is where it is today because of the contributions of all races to nation building.

Citing examples in the sports arena, Najib said the national football team that recently won the AFF Suzuki Cup took their instructions from coach K. Rajagopal, while badminton world No 1 Datuk Lee Chong Wei stood by his coach Datuk Misbun Sidek.

“These players are bonded by the spirit of 1Malaysia, transcending racial boundaries in their quest to achieve success.” he said at a function to present Mandarin oranges to the people here yesterday.

Earlier, at a presentation of aid to poor pupils at the Umno building, Najib said Malaysia has many success stories of poor people making it good in life to serve as role models for others.

“These success stories that can tug the heart strings of the people are about sons of fishermen, general workers, labourers and clerks.

“Within one generation, they have become successful entrepreneurs, corporate figures and administrative officers,” he said, adding that the Government would continue to help the needy to ensure there is social equality for all.

Najib, who is Pekan MP, said the Government would continue to uphold a system of social justice for all through proper education.

Later in his speech when launching the Malaysia Ex-Kemas Members Association here, Najib said with the advent of information technology, people were expected to be polished in computer applications.

Aid for poor pupils: Najib with recipients from various schools after presenting bicycles and schoolbags in Pekan yesterday. Looking on is Pahang Mentri Besar Datuk Seri Adnan Yaakob (light blue shirt). — Bernama

Asking people to change their mindset to move in tandem with mainstream development, he added that education was important as part of their struggles.

“We can only become a successful race if we adopt new ideas and technology.

“In this regard, Kemas, which was at the forefront to educate rural folks through ‘adult classes’ during the early independence years, must also evolve,” he said.

http://thestar.com.my/news/story.asp?file=/2011/1/23/nation/7855476&sec=nation

Both sides should stop excessive politicking, says Mohd Shafie

Both sides should stop excessive politicking, says Mohd Shafie by Kong See Hoh PETALING JAYA (Jan 23, 2011): IN spite of the many changes made by Umno, including political transformation, the majority of the Chinese still hold the notion that the party has not changed much. Datuk Seri Mohd Shafie Apdal This, according to Umno vice-president Datuk Seri Mohd Shafie Apdal, is because the Opposition has politicised a lot of issues. Speaking to Sin Chew Daily in an interview published today, Mohd Shafie said for Malaysia to progress, parties from both sides of the political divide should not play politics too much, instead they should work towards better governing states and the country. They should not politicise everything or use political activities to achieve their aim on issues that concern the interests of the people, he said. Mohd Shafie, who is rural and regional development minister, said currently there is too much politicking for personal interest. He said the Chinese community should not believe in what these politicians say, including their claims that the government has not managed the country’s economy well, which is not true. He pointed out that the majority of those who benefited from the stock market are Chinese, and had government not implemented various measures that favoured economic growth, the Chinese businessmen would not have benefited the way they did. He said that in everything the government has done, the government hoped to see the results benefit all races. The government’s policies are not aimed at pleasing a particular community but to benefit all, and everything is done to ensure they are fair to all communities, he said. On excessive politicking, he cited the Selangor state secretary saga as an example how the Opposition politicised issues resulting in a change in people’s perception of the federal government. “(If we) use political activities to achieve our aims in everything, no one will benefit in the end. “We hope parties from both sides of the political divide would reduce political play, and serve the country and the people (instead). Mohd Shafie also urged non-Malays not to be overly sensitive to certain remarks uttered by some Umno leaders, saying it does not help the situation if they over-emotionalise matters. Of course, he said, leaders should mind their language and be mindful of other races’ feelings. Asked if the Chinese community should not be too serious over certain extreme remarks, Mohd Shafie said such remarks should be viewed seriously but not over-emotionalised. “We must, at all times, consider what is most important to the people. We can take other people’s warnings as reminders,” he said. http://www.thesundaily.com/article.cfm?id=56670

Michael Burry: Money managers typically get paid simply for amassing vast amounts of other people's money under their management.

Lessons from subprime to make a money manager squirm
MICHAEL EVANS
January 22, 2011

AS THEY devoured their holiday reading over summer, Australia's fund managers could not have failed to miss the name Mike Burry.

Burry is a doctor who stumbled into investing by writing a blog in the wee hours after his hospital shift that so impressed professional investors that they gave him the money to start his own fund.

He spent hours poring over financial accounts looking for an investment idea. And when he found it, he bet against the entire market, punting that the US subprime housing market was unsustainable. He bet millions and then waited - even after his own investors began to fret and started demanding their money back.

As one of the key figures in Michael Lewis's account of the origins of the subprime crisis, The Big Short, Burry's tale is one every money manager dreams about: spot a fundamental flaw in the market, invest your clients' money, hold your nerve when they panic and prove them wrong by making them hundreds of millions - plus a cool hundred million for yourself.

But as Australia's fund managers dragged their heels back to work this week, they would have taken less delight in another of Lewis's tales about Burry.

When he started his business, Burry disapproved of the typical manager's fee structure. Money managers typically take a slice of their total assets under management, meaning they get paid simply for amassing vast amounts of other people's money. As Lewis wrote, Burry's Scion Capital charged investors only its expenses, which typically ran well below 1 per cent of the assets. To make the first nickel for himself, he had to make investors' money grow.

''Think about the genesis of Scion,'' says one of his early investors. ''The guy has no money and he chooses to forgo a fee that any other hedge fund takes for granted. It was unheard of.''

It's the kind of news to make Australia's money managers shift uncomfortably in their seats. After all, waiting for them when they arrived back at work this week, they were greeted with a scorecard of their 2010 performance that showed that as a group they had a poor year. Investors were left wondering why they paid professionals to grow their savings given the median fund in the Mercer scorecard showed it had lagged the S&P/ASX 300 Index.

Surely investors who simply followed the benchmark themselves would have come out ahead of the median investor in Mercer's annual scorecard? And they wouldn't have paid fees.

But money managers are quick to point out that one year is too short a time to judge their efforts. Paul Fiani's Integrity Investment Management, for example, posted a three-year performance better than many other fund managers who had a stronger 2010 than he did. Over three years, Integrity is just outside the top 10 on the scorecard of more than 130 funds.

Fiani says many gains last year were made at the risky end of the market.

''Last year was all about small resources. The market was basically flat and, overall, small resources were up 30 per cent. So, if you weren't at the high-risk end of the market you lagged the benchmark. We run a pretty rigorous fundamental value investment process and there's no way you could justify being invested in that high-risk end.''

Managing client expectations is tough for money managers. Quarterly and yearly report cards add to the pressure, particularly when investors are told to invest for the medium and long term. As the world enters a low-growth phase that experts expect to last for five to 10 years as the debt hangover plays out, investors may have to adjust their hopes.

Simon Marais, who managed the best-performed fund last year at Orbis, says the importance of individual stock-picking will rise because of low global economic growth.

But what about fund managers being asked to manage their expectations? Australia's investment community enjoys a weekly flow of 9 per cent of every worker's salary into the superannuation pie that helps grow funds under management. And, remember those fees based on funds under management?

Michael Lewis was brutal passing judgment on Wall Street money managers who were being paid to manage investments but did not see the looming subprime disaster: ''What are the odds that people will make smart decisions about money if they don't need to make smart decisions - if they can get rich making dumb decisions? The incentives on Wall Street were all wrong; they're still all wrong.''

Investors rely on the experts. They are willing to pay to have an expert make decisions for them. But given the structure of the system - and the constant drip of compulsory super payments - what are the consequences of bad decisions? Not enough emphasis is placed on performance-based reward.

Aligning the interests of fund managers and investors says, ''my dinner is riding on your success too''.

This week the Australian Prudential Regulation Authority released figures showing retail super funds posted sharply lower returns than average for the sector over the past decade. And when taking inflation into account, many have gone backwards over that time.

The introduction of plain vanilla products into the retail market as a result of the Cooper super review will provide a benchmark in coming years on how they perform against active funds run by the big boys.

Cutting fees like Mike Burry may not make money managers heroes in the eyes of the industry. But if they followed his lead their images would rise a notch or three in the eyes of investors.

http://www.smh.com.au/business/lessons-from-subprime-to-make-a-money-manager-squirm-20110121-1a036.html

Related:
Learning from Michael Burry: from being a medical resident to being regarded as one of the greatest investors in recent history.

Betting on the Blind Side