Malaysia a stock-pickers’ market

Malaysia a stock-pickers’ market

Tags: Deutsche Bank | Stock-pickers | Valuations

Written by Financial Daily
Friday, 16 October 2009 11:23

THIS is the continuation of a report by Deutsche Bank which appeared yesterday. This last part of the report looks at the challenging valuations and the stock picks in Malaysia.

Overshadowed by Asean markets
Still expensive — does not deserve a premium rating
Structural and political challenges aside, the market’s near-term obstacle is its stretched valuation. The market is currently trading at a 3%-11% premium to the region at 17.7x and 15.2x PER 2009E and 2010E, respectively.

This appears to be at the upper end of the market’s post-Asian crisis valuation range of 12.5-18x forward PER. On a P/B basis, the market is trading at 2-2.1x for the same period, again at a 5%-11% premium against the region.

Within an Asean context, Malaysia trades at the highest PER valuation and offers the second lowest, after Indonesia, net dividend yield at 3% for 2010.

Not surprising then that Indonesia and Thailand have both enjoyed net fund inflows given a combination of attractive valuations (Thailand at 11.5x PER 2010 and Indonesia at 13.8x PER) and strong revision ratios.

In fact, despite mixed political news flow in Thailand, the market continues to maintain a high level of foreign ownership at c. 33% (vs 21% in Malaysia). The positive news is that earnings risk has abated since 1Q.

However, in a regional context, Malaysia is in sharp contrast to say a market like Korea where earnings revision has been strong. Malaysia lags in EPS and target price revision momentum. This clearly explains why the market is still placed in the region’s low beta “bucket”.


Significant improvement in 2Q; earnings expectations raised
Of the 21 Deutsche Bank-covered stocks which reported, 61% were in line with expectations, 29% above and 10% below. The results were far better than the first quarter.


Financial sector came through unscathed — positive; PLANTATION [] sector rebounds
The star of the reporting season was the banking sector. Most of the banks reported stronger-than-expected earnings driven largely by higher non-interest income and lower loan loss provisions. Again, this tells us that the Malaysian credit cycle is turning out to be less severe than anticipated.

The plantation sector too had a reasonable quarter after what was a very weak 1Q production season given the effects of severe floods in East Malaysia. 2Q was supported by stronger CPO prices and production lifting, though marginal.

The gaming companies did not have a weak quarter as many had originally expected. Domestic consumption trends held up. There was slight weakness in results from companies like DiGi.Com (RM21.66, hold, target price RM19.80) which had the slowest quarter in more than six years) and KNM (75 sen, buy, target price RM1.10) which faced margin pressure.

The trajectory for earnings recovery is now far more convincing after the 2Q reporting season. We believe the lumpy writedowns as a result of diminution in value of major investments are now largely behind the market. Leading indicators in the economy have also been encouraging with a bottoming in industrial production, electricity sales, and loan approval and applications.


Post-2Q results: EPS growth at -8.6% and 17% for 2009 and 2010
Prior to the reporting season, we were forecasting EPS growth of -7.1% for 2009 and 9.9% for 2010, respectively. Today, these forecasts have been revised to -8.6% and 17.4%, respectively. The stronger growth outlook for 2010 was largely due to EPS revisions for the financial, plantation, CONSTRUCTION [] and gaming sectors.


Domestic liquidity; top-down index target suggests 13% upside
Domestic funds like the Employees Provident Fund (EPF) and PNB have been actively buying in the market, especially where foreign interest has waned. This explains why foreign ownership in the market has stayed flat at around 20%-21% despite the recovery in the market.

This trend is likely to persist in the near term, thereby keeping market valuations lofty. Our 12-month bottom-up index target for Deutsche Bank’s universe of stocks suggests an MSCI target of 453 (0.4% upside) and an FBM KLCI target of 1,213 (+0.4%). This compares against the consensus bottom-up target of 1,234, which suggests upside of 2.2%. We believe the key difference between the Street and our estimates is our slightly more conservative view on GDP growth estimates, currently at -3% and 4% for 2009 and 2010, respectively.

Putting this in the context of Asia, our regional strategist, Niklas Olausson, expects MSCI Asia ex-Japan to reach 522, suggesting upside of 18.2%.

With most markets expected to offer upside of more than 15%, Malaysia is naturally an underweight, along with Hong Kong, India, and the Philippines. The implied top-down valuation of 17.2x 2010 PER is at the upper end of Malaysia’s historical trading range. By using our bottom-up approach, with an implied valuation of 15.3x PER, this puts Malaysia in the “fair” territory, the mid-range of its post-Asian crisis PER band.


Local news flow can drive interest in the market despite demanding valuations
There have been times when the market outperforms the region momentarily on domestic news flow, ignoring valuations. In recent years, market-friendly initiatives, such as the first stage of GLC restructuring, have ushered renewed interest in the market.

Similarly, the property market liberalisation in 2007 prompted a re-rating of the smaller- to mid-cap sectors. We think a similar re-rating is likely to occur if and only when the market is convinced of three key issues.

First, that Barisan Nasional is gaining traction with the voter base, hence providing the market with renewed confidence that the corporate landscape or regulatory environment does not run the risk of significant changes under a new party. Secondly, sustainable signs that structural changes made are bearing fruit. Thirdly, potential sizeable new listings to force attention back into Malaysia, as discussed earlier.


Positioning into the final quarter of 2009/early 2010
We believe most would agree that Malaysia has been a difficult market for most of 2009. Often the market has been referred to as “Asia’s rounding error”, “Asia’s lost child” and “Asia’s most unloved market”, etc. And indeed it has been the worst-performing market in Asia ex-Japan year to date. (My comment:  Probably the best piece of news in this article.)

But we also argue that it does not mean the entire market is a write-off. Far from it, we believe. In fact, Malaysia has always been a stock-pickers’ market. We believe it is important to select stocks for the final quarter of 2009 or early 2010 with the following pointers in mind:

• To focus on companies with growth prospects outside Malaysia, and especially those with an increasingly strong Asean/regional footprint; for example CIMB, Genting and IJM Corp.

• To focus on companies that have structurally transformed themselves by utilising improved systems and infrastructure to take advantage of a more robust economic environment next year; for example, AMMB.

• Returns being the priority of top management and having the ability to execute on the plans. Many Malaysian companies place significant emphasis on enhancing shareholders’ return but very few actually execute on them with a structured plan. Companies that have articulated their returns policies, and where we have a high degree of comfort of execution are Public Bank (though a hold), KL Kepong (has consistently paid 50% dividend payout ratio in the last four years) and CIMB.

• To focus on companies that continue to generate strong cash flows and are still dominant in their industry, ideally not heavily reliant on the domestic market for growth; for example KLK.

• Avoid companies that are heavily reliant on government contracts — political news flow is likely to stay volatile in the near term.

• Quality stocks tend to hold their valuation premiums, defying fundamentals at times — largely due to scarcity reasons and often, liquidity. These include companies such as Public Bank, IJM Corp and IOI Corp (RM5.21, hold, target price RM5.05).


Risks to our underweight call on the market:
The biggest risks to our Underweight call on the market fall into three areas.

The first risk is better-than-expected macro indicators as a result of the second stimulus package and improvements in domestic consumption trends. The second risk is that market liberalisation/structural change measures surprise the market. The last risk is a sudden collapse in neighbouring markets, such as Indonesia, prompting a sudden surge of liquidity into low-beta markets such as Malaysia.


This article appeared in The Edge Financial Daily, October 16, 2009.

Latexx 17.10.2009

Valuation
http://spreadsheets.google.com/pub?key=tGjkSMyCWNewTHtuEfqzoVg&output=html

Its latest quarterly Q2 '09 result:
qtr EPS = 5.86 sen
annualised EPS = 4 x 5.86 = 23.44 sen

At today's price of $2.40, its PE (based on annualised EPS)
= 2.40/0.2344
= 10.24

Latexx is the 5th largest glove company in Malaysia.  Given its relatively smaller size, its growth is anticipated to be faster than the bigger glove companies (Topglove, Supermax) in the next 2 years. 

Kossan's share price is playing catch-up with the other companies PE valuations. 

Hartalega appears richly valued at its present price and market capitalization.

Hai-O 17.10.2009

Valuation
http://spreadsheets.google.com/pub?key=t44jTv4fYF_pLfGhtHJN8aA&output=html

This share has done well the last 2 years.  It is a multi-bagger. 

Patience and confidence go hand in hand with successful investing.

As you invest in your personal portfolio in the next few months, always remember your long-term focus. Build wealth in the stock market over a five-year and longer horizon. Patience and confidence go hand in hand with successful investing.

Behavior of the Stock Market

The behavior of Stock Market and the prices of stocks depend greatly on the speculation of the investors. So, over- reactions and wrong speculation can give rise to irrational behavior of the Stock Market. Excessive optimistic speculation of future prospects can raise the prices of stocks to an extreme high and excessive pessimism on the part of the investors can result in extremely low prices. Stock Market behavior is also affected by the psychology of “Group Thinking”. The thinking of a majority group of people many times influences others to think in the same line and the Stock Market behavior gets naturally affected.

Sometimes the Stock Market behavior is affected by rumors and mass panic. The prices of the stocks fluctuate tremendously by the economic use even if it has nothing to do with values of stocks and securities.

So, it is extremely difficult to make predictions about the Stock Market and the inexperienced investors who are not that much interested in financial analysis of stocks; rarely get the financial assistance from the Stock Market at the time of need.

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says


By Shigeki Nozawa

Oct. 15 (Bloomberg) -- The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

The dollar last week dropped to the lowest in almost a year against the yen as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, has fallen 15 percent from its peak this year to as low as 75.211 today, the lowest since August 2008.

The gauge is about five points away from its record low in March 2008, and the dollar is 2.5 percent away from a 14-year low against the yen.

“We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency. Hossein Ghazavi, Iran’s deputy central bank chief, said on Sept. 13 the euro has overtaken the dollar as the main currency of Iran’s foreign reserves.

Elliott Wave

The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.

The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno.

The Elliot Wave was developed by accountant Ralph Nelson Elliott during the Great Depression. Wave sizes are often related by a series of numbers known as the Fibonacci sequence, pioneered by 13th century mathematician Leonardo Pisano, who discerned them from proportions found in nature.

Uno said after the dollar loses its reserve currency status, the U.S., Europe and Asia will form separate economic blocs. The International Monetary Fund’s special drawing rights may be used as a temporary measure, and global currency trading will shrink in the long run, he said.

To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.

Last Updated: October 15, 2009 03:34 EDT

http://bloomberg.com/apps/news?pid=20601109&sid=a_A5nqmw9Dq8

Your shares have advanced, good! A cause for prudent concern

A substantial rise in the market is at once a legitimate reason for satisfaction and a cause for prudent concern, but it may also bring a strong temptation toward imprudent action.


Your shares have advanced, good! You are richer than you were, good!

•But has the price risen too high, and should you think of selling?


•Or should you kick yourself for not having bought more shares when the level was lower?


•Or - worst thought of all - should you now give way to the bull-market atmosphere, become infected with the enthusiasm, the overconfidence and the greed of the great public (of which, after all, you are a part), and make larger and dangerous commitments?

Presented thus in print, the answer to the last question is a self-evident NO, but even the intelligent investor is likely to need considerable will power to keep from following the crowd.

It is for these reasons of human nature, even more than by calculation of financial gain or loss, that we favour some kind of mechanical method for varying the proportion of bonds to stocks in the investor's portfolio. The chief advantage, perhaps, is that such a formula will give him something to do.

As the market advances, he will from time to time make sales out of his stockholdings, putting the proceeds into bonds; as it declines he will reverse the procedure.


(For today's investor, the ideal strategy for pursuing this formula is rebalancing)

http://myinvestingnotes.blogspot.com/2008/10/market-fluctuations-of-investors.html

When you are caught in a market panic

In fact, the only rational thing to do is take courage and make buys. Being gutsy enough to act on our contrarian test - refusing to sell good stocks cheap because Wall Street and Main Street have lost faith for a few days - ensures that your earlier selling at better levels, or not at all, will prove appropriate.

It will be emotionally difficult to buy in a panic. those who can do so are demonstrably rational and therefore also calm enough to sell with discipline as the prior highs approached.

So, should you find yourself in the midst of a crisis in the future, remember:


•Do not engage in panic selling.

•Sit tight and stick to your strategy.

•If you are a long-term, buy-and-hold investor, do hold on.

•If you are an adventurous investor, follow your strategy to buy on dips.

Make sure your overall portfolio is designed to limit your potential losses during a substantial market decline.

Pro-active action in a panic or crash

When appropriate selling has left an investor with only a few, high-quality stocks, he can and should hold onto those gems and play through the difficult experience of a panic or crash. He will be holding only a relatively small portfolio, so his level of pain will be no worse than moderate.

Consequences must dominate Probabilities

In making decisions under conditions of uncertainty, the consequences must dominate the probabilities. We never know the future.


http://myinvestingnotes.blogspot.com/2008/10/consequences-must-dominate.html

In any crisis, there will be opportunities.

How to value these companies' businesses today? This will be difficult. The earnings for the next few quarters will need to be tracked. Past earnings are historical and due to fundamental changes in the businesses of various companies, assessing the value of these companies based on historical earnings will be unwise.

However, some companies can be anticipated to do not too badly. These are traditionally in the defensive sectors of food and beverages, gambling, healthcare and utilities.

For other companies, particularly in the industrial, plantations, tradings, construction, and housing sectors, the future earnings will be difficult to project with any degree of certainty at present.

Yes, some of these companies might have been oversold in the general negative sentiment of the present market but one can only be very certain of this when the results of the next few quarters are known.

Fifteen Things More Important Than Money

The Simple Dollar: “Fifteen Things More Important Than Money” plus 1 more

Fifteen Things More Important Than Money
Posted: 15 Oct 2009 01:00 PM PDT

Three and a half years ago, I was in a desperate debt situation. My lifestyle was tied desperately to spending far more than I was bringing in – and I was finally paying the consequences.

I had let money become the most important thing in my life. It drove all of my choices and decisions. It chose my career for me. It chose my specific job for me. It chose how I spent my free time – I did expensive things to escape from the debts and the pressure-filled work, usually with a device on my hip that chained me to that job.

I was desperate and unhappy. I was in a prison made of money – and I knew I had to escape it.

Today, I realize something much more compelling. Money is not the most important thing in life. In fact, in a healthy life, money often follows behind many other elements in your life. If you put your energy and time into other things more important than money, money will follow. It will find a way to work.

Here are fifteen things I’ve found that are more important than money.

Experiences
Hug someone. Kiss someone. Write someone a letter telling them how you feel. Run (or walk) a marathon. Spend all day making an exquisite meal and eat it by candlelight. Make love to someone. Face the thing you most fear right in the face. The rush you get from experiencing something amazing is one of the best parts of being human, and most of the time the financial cost is minimal.

Wisdom
If you think you know the answer, you’re far from wise. Keep learning. Wisdom comes from knowing how little you actually know. Spend some time learning something new, perhaps even becoming skilled at something. You’ll surprise yourself at what you gain, often far beyond the mere knowledge you hoped to attain.

Marriage
Accepting another person wholly and intimately into your life is utterly life-changing. Opening up every part of yourself to another person is constantly challenging, but constantly powerful in how it changes you and makes you strive to be a better person.

Friendships
The regular companionship and camaraderie of people you care about and share interests with is continually life-affirming. Friendships don’t revolve around the things you have or the activities you can afford – they revolve around people.and shared experiences.

Physical health
Health can’t be bought, but it can be helped by the personal choices we make. Exercise. Eating better. Making choices that are less sedentary. Getting involved with activities that get us moving. Practicing proper hygiene. Money pales in comparison to the value of the physical health needed to enjoy life.

Mental health
On the flip side of the physical coin is mental health. Expressing our feelings in a healthy way. Finding people to talk to and relate our problems. Addressing the issues that bother us. Seeking professional help when these options don’t change things for the better. Again, money is insignificant compared to the value of mental balance.

Personal passions
What activities make you feel truly excited and fulfilled? Those things are the spice of life – every one of us wins by digging into our passions. The best part? Quite often, seeking out and following your passions often means that money will follow in the wake.

Communication
The ability to express our thoughts and feelings to a receptive audience is truly invaluable. it enables us to share elements of our inner world with others, something that can’t be achieved by all of the material wealth on this planet.

Self-reliance
Money comes, money goes. The ability to survive and even thrive with no money means that money becomes significantly less important. The ability to do things yourself reduces the need you have for money to solve your problems.

Security
If we channel our efforts into creating a safe and secure enviroment where we’re protected from our failures, we create a situation where our fortunes are much less tied to our ability to put money in our pocket. If we put effort into security now, we have true safety later, a type of safety that can’t be broken by ordinary material needs.

Helping others
For most people, the action of helping others provides a great deal of personal joy and satisfaction, something that cannot be replaced by any sort of material item. Helping others often requires no financial resources at all and can sometimes generate financial resources – free meals and such – plus goodwill in the community. Good karma has tremendous value.

Personal growth
Every single person has countless opportunities to improve as a person – their behavior, their beliefs, and so forth. Working to grow as a person only improves you and rarely costs anything, but it almost always improves your income potential for the future as well as naturally improving your outlook on the world and your self-confidence.

Thankfulness
When you move from desiring the things that you do not have to being thankful for the things that you do have, your perspective on the world changes drastically. Your desire for having the latest things goes down while, at the same time, your contentedness with life goes up dramatically.

Hobbies
If you can discover personally fulfilling activities to fill your time, you introduce happiness into your life. Many people fall into routines by default, never asking if their choices introduce authentic happiness, then they try to chase a sense of happiness by purchasing things. Step back from this. Try new things, and dig into the things you genuinely enjoy. Often, it’s the simplest things – playing a game with our partner, going on long walks, collecting rocks or leaves – that bring us the greatest personal satisfaction.

Spirituality
Does our life have a purpose? Do we have a spirit? Is there something greater than we can comprehend all around us? Digging into these questions through reading, contemplation, meditation, and prayer can bring an incredible sense of calm, peace, and even joy that can be difficult to find in other avenues – and impossible to find with money.

The more of these elements you dig into and discover in your life, the lesser the role of money, materialism, and spending occupies. In the end, you’ll find that you’re no longer chasing money, but that instead money is following you on the path to a much better life.

http://www.thesimpledollar.com/
http://www.thesimpledollar.com/2009/10/15/fifteen-things-more-important-than-money/

You survived! Valuable lessons learned

Once an investor has successfully navigated the worst of the choppy investment seas, he/she will have learned survival lessons and will have internalized feelings and a vivid experience that will be of permanent psychological and instructive value.

Price is what you pay, value is what you get.

If stocks are bought without reference to value, they will in turn be sold without reference to value.

----

When prices increase at a greater rate than can be justified by business performance, they must eventually stagnate until the value catches up or they must retreat in the directions of the value.

Only when a stock is bought at less than its value can price increases that exceed incremental increases in value be justified.

Investing is the intention to seek a required rate of return (RR) relative to risk, based on an assessment of value.

Investing in stocks is not about buying scrip that will go up and down in price, but about investing long term in a sound business that represents good value at its present price.

Current temporary PRICE is determined by a tiny minority interested in buying or selling

Although prices are deemed to reflect consensus, it should be remembered that prices are determined not by the majority of shareholders who are uninterested in buying or selling at the current temporary price, but by the tiny minority who are.

Petdag 16.10.2009

Remarkable.  The present price is back to its all time high.

Valuation:
http://spreadsheets.google.com/pub?key=tWD_ov2ZEm3y2RrDZLIGDYg&output=html

Implication of less liquid stocks or funds

Liquidity (relative lack of interest and trading activity) can be a double-edged sword:


•If you're selling, you may not get as good a price, but

•if you're buying, you'll likely get a discount.

It is not hard to see that these less liquid stocks or funds should be considered long-term investments.

Is it surprising that iCap is trading at a discount?

During the last bull market, iCap traded at a high of $2.82.  There are many investors in the market with realised losses or who are still holding iCap shares at higher costs to its present price.

When selecting a closed-ended fund, investors must determine the reason the fund is trading at a discount and whether the discount is significant enought to be attractive. A discount may be justified by

•uncertainty,

•popularity or perceptions of the fund, and

•the underlying asset base.

Never subsidize losers with winners.

Rather than take the medicine -- the loss -- they hold on to the losers and sell their winners.
 
They never learn my rule:  Never subsidize losers with winners.


Sell the losers and wait a day. If you really want them, go buy them back the next day. I also am certain that you never will.

Eject the losers and the winners will lift the portfolio.

It is the percentage of time that most of a portfolio is invested in rising stocks that determines how good performance will be. Eject the losers and the winners will lift the portfolio.

An exception to every rule. This applies particularly to value investors with long term horizon. Instead of blindly selling the losers until all you have are winners, you should really look at whether the fundamentals have changed for the stocks. There may indeed be a good reason for the relative underperformance of Stock B – e.g. poor management or grim industry outlook. However if nothing has changed and you thought Stock B was good value when you first bought it, it must be an absolute bargain after dropping an extra 50%! Shouldn’t you be buying more instead of selling?

Be an emotion free investor

An emotion free investor would only look objectively at the fundamentals and the valuation of the stock, instead of getting hung up on the entry price.

Be confident in the quality of your investments

Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term.


Day traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement - the one that occurs over many years - so keep your focus on developing your overall investment philosophy by educating yourself.

Don't panic when shares experience short-term movements
As a long term investing strategy, you should not panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture.

Hong Leong Bank starts operations in Vietnam

Hong Leong Bank starts operations in Vietnam
Published: 2009/10/16
HANOI: Malaysia's Hong Leong Bank Bhd has begun operations in Vietnam, making it the first Southeast Asian bank lured to the country's growing market, an official said yesterday.
Wholly owned subsidiary Hong Leong Bank Vietnam Ltd opened its doors in the southern commercial centre of Ho Chi Minh City, Tri Tran Minh, told AFP by telephone.

"They see very good potential in the banking industry here," Minh said.
The State Bank of Vietnam announced late last year that Hong Leong Bank would be allowed to set up a fully-owned subsidiary, and said it would have registered capital of almost US$60 million (US$1 = RM3.35).

Minh said Hong Leong Bank, which did not have a Vietnam presence before, will initially offer a dollar deposit service but would expand its services and plans to open a branch in Hanoi.

On its website, the bank says it is the first foreign bank from Southeast Asia to establish a wholly-owned subsidiary in Vietnam.

A South Korean bank and financial institutions from Australia and Britain, have also been allowed to set up wholly foreign-owned operations in what they see as a relatively untapped market.

On Tuesday, US-based Citibank became the first US bank to offer a retail banking service in Vietnam. It has been in Vietnam since 1993, with branches in Hanoi and Ho Chi Minh City, but until Tuesday had only offered corporate and investment services without retail banking. - AFP

Public Bank nets RM639m profit in Q3

Public Bank nets RM639m profit in Q3
By Chong Pooi Koon
Published: 2009/10/16


Public Bank Bhd (1295), the country's third largest bank, reported a 3.7 per cent higher third-quarter net profit as it earned more from loans, despite a weak economy and even as it has set aside more money to cover potential bad debts.

Net profit for the three months to September 30 2009 came in at RM639 million, although revenue fell 12.7 per cent to RM2.4 billion.

The bank has put aside RM176.4 million of allowances for loan losses, 65 per cent more compared to the same time last year.

Managing director and chief executive officer Tan Sri Tay Ah Lek said Public Bank is on track to achieve a 14-15 per cent loans growth target this year, driven by demand for loans to small businesses, mortgages and car loans.

Public Bank is expected to maintain the earnings momentum and continue to record satisfactory performance for the rest of the year, he said in a statement yesterday.
"As the global recession begins to recede and with recovery on the horizon, the outlook for the banking industry is expected to improve. However, margins continue to be under pressure due to continued intense competition," he added.

Despite a difficult economy this year, Public Bank's net profit has expanded consistently in the first nine months this year.

Net profit in the second quarter grew 3.6 per cent to RM611 million from RM589 million in the first quarter, and improved further by 4.6 per cent in the latest quarter.

Loans grew by 14.3 per cent on an annualised basis, while deposits expanded by 19.5 per cent. This compares with the industry's 6.8 per cent growth for loans and 6.3 per cent for deposits.

Public Bank's non-performing loans ratio stayed below 1 per cent, the lowest among Malaysian banks.

OSK Research analyst Keith Wee said the lender's performance was largely in line with his expectations. He maintains a "buy" call on Public Bank shares with a RM11.80 target price.

"The stock is currently trading at an undemanding 13 times its fiscal 2010 price earnings multiple, against its historical mid-cycle average valuation of 14.8 times," Wee wrote in a note after the results announcement.

The stock closed flat at RM10.62 on Bursa Malaysia yesterday.


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

EPF's total asset allocation as at Q2 2009

http://biz.thestar.com.my/news/story.asp?file=/2009/10/16/business/4916564&sec=business

Cash Rich and Profitable Companies

Net Cash = Total Cash and Equivalents - Total Liabilities.

By having net cash and the company is in profit, the company is in the position that is able to make acquisition when opportunity comes or providing consistent dividend to the shareholder.

Company	RM mil
Resorts World	4600
Petronas Gas	1500
Oriental	910
Bursa Malaysia	280
Carlsberg	220
Uchitec	136
Dialog	112
Amway	108

Ref:
http://fortunesense.blogspot.com/2009/06/cash-rich-and-profitable-companies.html

Do you know how Warren Buffett invests in stocks ?

How Warren Buffett Invests ?

Do you know how Warren Buffett invests in stocks ?

Here lists down the factors on how Buffett finds low-priced value by asking himself some questions when he evaluates the relationship between a stock's level of excellence and its price.

1. How Long The Company Has Been Established ?
Preferable the company should have been established for at least 10 years. The reason for this factor is that the company has stood the challenging economy hard time.

2. What Are The Company's Products Portfolio?
What are the company's products ? Are the products different than another firm within the same industry. Any products or features that are hard to replicate is what Buffett calls a company's economic moat, or competitive advantage. The wider the moat, the tougher it is for a competitor to gain market share.

3. Is The Stock Intrinsic Value 25% Higher Than The Market Capitalization ?
Find the companies that are undervalued by determine the intrinsic value of a company. Intrinsic value is derived from the elements such as earnings, revenues and assets.

Buffett likes to determine the intrinsic value of the company as a whole and compares it to its current market capitalization. Buffett sees the company as one that has value if intrinsic value is at least 25% higher than the company's market capitalization.

4. Has the Return On Equity (ROE) Consistently Performed Well?
Return on equity (ROE) is likes the stockholder's return on investment (ROI) that reveals the rate at which shareholders are earning income on their shares.

Buffett always looks at ROE to see whether or not a company has consistently performed well in comparison to other companies in the same industry.

ROE = Net Income / Shareholder's Equity

You will need to know the past five to 10 years ROE in order to have a better idea of historical performance.

5. What is the debt/equity ratio ?

Debt/Equity ratio = Total Liabilities / Shareholders' Equity

This ratio shows the proportion of equity and debt the company is using to finance its assets, and the higher the ratio, the more debt is being used to finance the operation of the company.

Buffett prefers to see a small amount of debt so that earnings growth is being generated from shareholders' equity as opposed to borrowed money.

The reason why prefer a small amount of debt is to reduce the volatility of the company earning and to avoid paying too much interest expenses. For a more stringent test, investors sometimes use only long-term debt instead of total liabilities in the calculation above.

6. Profit Margins and Trends

Profit Margins = Net income / Net sales.

Company that shows good and increasing profit margin is better. Again better to have the past five to 10 years profit margins record in order to have a better idea of historical performance.

Company that executes its business well will lead to the high profit margin. Efficient company management level will bring to the increasing margins by controlling the company expenses.

Are you following this methods in your stock selection criteria ? Anyway, those are not the only things Buffett analyzes but rather a brief summary of what Buffett looks for.

If we wish to invest successfully like Buffet, shouldn't we follow his system or methodology since he has proved himself by becoming the world second richest man through investing.

Many books had been published that reveals the system or method of how Warren Buffett select the stocks. One of it is The Buffett System eBook that costs US 49 or around RM 177.

If you are interested and wish to have a try on this system, do visit the Buffett System to find out more information.


http://fortunesense.blogspot.com/2009/07/how-warren-buffett-invests.html
http://fortunesense.blogspot.com/2009/07/buffet-system.html
The Buffett System



Buffett System Table Contents

We're Halfway Back to the Top.

Pulling Ourselves Out of the Crash
We're Halfway Back to the Top. How Much Longer Till We Get There?


By Tomoeh Murakami Tse
Washington Post Staff Writer
Sunday, October 11, 2009

NEW YORK

As far as recovery goes, U.S. stocks appear to be halfway there.

Contrary to warnings by analysts that the market had gone up too much too fast, the rally that began in the spring only accelerated over the summer as investors took on more risk in both the stock and bond markets. The Standard & Poor's 500-stock index now stands at 1071, nearly 400 points above its recent low on March 9.

But the benchmark has almost 500 points to go before it recovers to its October 2007 high, making battered investors whole again.

The force of the surge in equities -- the S&P is up 58 percent since the March low -- came as investors grew more confident that the doomsday scenario of the nationalization of large banks and a prolonged global recession had been avoided. But with consumers hurting and unemployment high, expect the second leg of the healing journey to take much longer, experts say.

"I think we are entering into a period right now of 'Show me,' " said Robert Millen, chairman of Jensen Investment Management. "The market has bounced back dramatically. We're in a real critical period right now where the market's taking a breath and is now starting to pay more attention to fundamentals."

During the past eight recessions, Millen said, the S&P 500 took an average of 1.9 years to recover to the previous high. The fastest recovery time was 83 days, after the 1981-1982 downturn. The longest was 2,114 days, almost six years, after the recession in the mid-1970s.

Analysts will be closely watching the third-quarter corporate earnings results over the next several weeks for clues on just how long this recovery will take.

For his part, Millen says he thinks it could be at least 3 1/2 more years. Some bulls say it could happen sooner. But others say the recent rally is just another bubble in disguise -- not progress toward real recovery.

"We're seeing everything move up," said Axel Merk of Merk Mutual Funds and author of the book "Sustainable Wealth," due out this month. "But that's exactly what we saw in the pre-crisis. . . . Some investors are going to jump on the bandwagon because they want to be a part of this. But this has to have a bad ending."

During the quarter ended Sept. 30, the Dow Jones industrial average of 30 blue-chip stocks jumped 15 percent, to 9712. This is on top of an 11 percent gain in the second quarter. And on Friday, the Dow climbed to its high for 2009, gaining 78 points to hit 9865.

The S&P 500, a broader market measure, finished the third quarter up 15 percent, at 1057. Both benchmarks posted their best quarterly performance in more than a decade. The tech-heavy Nasdaq composite index rose 16 percent.

Leading the rally were the companies hit hardest during the financial crisis -- those with heavier debt, riskier balance sheets and inconsistent earnings. In the third quarter, shares of financial firms soared 25 percent; companies in the consumer discretionary sector -- think home builders, automakers, apparel manufacturers and hotel chains -- rose 19 percent. Defensive stocks in the utilities and consumer-staples sectors, meanwhile, turned in more modest gains of 5 and 10.5 percent, respectively.

According to Lipper, a mutual fund data company, funds that invest in financial services companies rose an average of 23 percent for the quarter. The best performers among sector funds were real estate funds. They returned nearly 33 percent after being hit hard in the downturn.


Mutual funds that invest in shares of small companies outperformed those that invest in more stable, larger companies. Value funds did better than growth funds as investors searched for undervalued shares. Large-cap growth funds returned 14 percent in the third quarter; small-cap value funds came in at 21 percent, Lipper said.


Funds that invest overseas fared even better. International large-cap growth funds returned 17 percent, while emerging-market funds gained 21 percent, Lipper said. Those that focus on Latin American companies were up 28 percent.

Investors also took on more risk in the credit markets. Here, funds that invest in high-yield junk bonds performed best, returning 13 percent for the quarter. Emerging-market debt funds also did well, gaining 11 percent. Meanwhile, short-term U.S. Treasury funds rose 0.8 percent. Longer-dated Treasury funds gained 4.7 percent, Lipper said.

"We're getting the typical market recovery in anticipation of the economy getting better -- and I think it will," said Mark Coffelt, chief investment officer of Empiric Funds, adding that he thinks the S&P could rise 100 to 150 points in the fourth quarter. Because they think the performance trends seen in stocks during the third quarter will continue for at least six more months, his team is looking for stocks of smaller companies that are selling cheaply, he said.

Still, Coffelt and others cautioned that it could be a slow and long recovery. Consumer spending, the main driver of the U.S. economy, is hardly expected to come roaring back, as consumers' job security is threatened and lines of credit are cut.

There is also worry that another shoe could drop. Speaking at a dinner in Manhattan on Tuesday honoring influential female bankers, Sheila C. Bair, head of the Federal Deposit Insurance Corp., said she was concerned about the commercial real estate industry and its impact on banks. "Commercial real estate is starting to eclipse mortgages" as the driver of bank losses, said Bair, who added that she expected bank failures to continue at a good clip into 2010.

Merk said stocks are overvalued and that the recent rally is a direct result of investors taking advantage of the easy money created by the Federal Reserve's fiscal policies. In response to the economic crisis, the Fed has reduced interest rates to near zero and flooded the market with money by buying up Treasurys and other assets.

"People are again yield-hungry," said Merk, 40, who added that he has no stocks in his personal portfolio. "They're going to grab anything that gives them a little bit more return than Treasurys that yield close to nothing. Rather than normalizing things where we would have slower growth but market-based returns, we have the Federal Reserve interfering in the markets artificially, depressing yields and encouraging exactly the sort of practices that got us into trouble in the first place. We haven't resolved the issues from the last crisis."

James Paulsen, the bullish chief investment strategist at Wells Capital Management, disagrees.

During the recent downturn, companies purged payroll and inventory, getting their operating costs down to "a place where they can survive the next coming of the Depression," he said. This, combined with profits generated from the economic recovery, will lead to "a whale of an earnings cycle."

"I still see a lot of potential here," he said. "I highly doubt that the markets are likely to peak a couple of months after the recession is over."

Companies in the S&P 500 were trading at 14.5 times their estimated earnings for the next 12 months, near the historical average of 15 times earnings, according to Thomson Reuters.

But bulls such as Paulsen argue that stocks' price-to-earnings ratio is not necessarily extended, citing favorable market conditions of below-average inflation and interest rates.

Jeff Mortimer, chief investment officer of Charles Schwab Investment Management, says it wouldn't be surprising to see the market pause or pull back 5 to 10 percent. Such moves are typical in the early stages of a bull market, which is where he says we are now.

So, what's a small investor to do?

Of course, the answer depends on an individual's risk tolerance, time horizon and outlook.

"I would be buying at points of weakness to add to my positions or get closer to my target asset allocation if I'm underweight equities," he said. "My recommendation would be to dollar-cost-average and get to your target allocation over the next six, 12, 18 months. You may find that the longer you wait, the higher the market gets. Then you're really in a pickle."

http://www.washingtonpost.com/wp-dyn/content/article/2009/10/09/AR2009100904712_3.html?nav=emailpage

Many Small Investors Have Sat Out Rally

Investors in mutual funds, which are among the most common ways for individuals to participate in the stock market, pulled more than $205 billion out of stock funds between September 2008, when equities plunged, to the end of March, when they began their rally, according to data from the Investment Company Institute. During the same period, small investors sought the safety of cash, pouring $357 billion into money-market funds.


In contrast, only $56 billion returned to stock funds between April and the end of August, the most recent date for which data are available. Money-market-fund levels remained high.


Many Small Investors Have Sat Out Rally
Rebound Driven by Institutional Clients

The Dow closed above 10,000 on Wednesday. (By Travis Fox -- The Washington Post)

By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, October 15, 2009

NEW YORK, Oct. 14 -- Wall Street may be cheering the rally in the U.S. stock market, but many individual investors watched the Dow Jones industrial average soar past the 10,000 mark Wednesday on the sidelines.

Still shell-shocked from the ravaging of their retirement accounts during the financial crisis, mom-and-pop investors remained cautious as the Dow soared 53 percent from its March 9 low to Wednesday's closing price of 10,015.86.

The likely drivers of the rally are instead institutional investors such as large pension funds and hedge funds, market analysts said. And in interviews over the past two weeks, fund managers and financial advisers said most small investors have only recently begun to talk about getting more aggressive with their beaten-down portfolios.

"For the first six months of the year, people just had their heads down. I don't know how many people told me they haven't looked at their statements," said Dan Lash, a financial planner in Vienna.

It was only last month, when the Dow had already recovered more than 40 percent of its losses, that Charlotte and Larry Vass of La Plata, Md., decided they were ready to consider taking a less conservative stance. The Vasses had been mostly invested in stocks two years ago but began pulling out last fall as markets were pummeled after the collapse of the Wall Street investment bank Lehman Brothers. Over the past year, the Vasses also moved deeper into bonds, said Charlotte, who is in her late 50s.

"Back then, we were in shock," she added.

While the couple plan to keep their portfolio more balanced, Charlotte and her husband, a dentist, have asked their financial planner to be a little more aggressive. They have begun adding money -- slowly -- to stock index funds, she said.

"If your 401(k) turns into a 201(k), you can't get it back in a couple of years," said Charlotte, adding that retirement, which the couple thought might come in a few years, has been pushed further down the road.

Investors in mutual funds, which are among the most common ways for individuals to participate in the stock market, pulled more than $205 billion out of stock funds between September 2008, when equities plunged, to the end of March, when they began their rally, according to data from the Investment Company Institute. During the same period, small investors sought the safety of cash, pouring $357 billion into money-market funds.

In contrast, only $56 billion returned to stock funds between April and the end of August, the most recent date for which data are available. Money-market-fund levels remained high.

"This market rise certainly is not being driven by mutual fund investors," said Brian Reid, the ICI's chief economist. "Mutual fund flows are not causing this run-up, and I would think that probably carries over for retail investors in general."

In fact, there's evidence that small investors in the past few months have once again been moving money out of U.S. stocks. On a weekly basis, small investors took out $2 billion to $4 billion more than they put into funds focusing primarily on domestic stocks from July to September, Reid said.

ICI data show that small investors have been pushing into bonds this year, taking advantage of falling interest rates and rising prices. During the first eight months of the year, $220 billion flowed into bond funds.

This Story
The Dow Passes Mile 10,000 on Road to Recovery
Many Small Investors Have Sat Out Rally
A Look Back: The Dow's First Time Crossing the 10,000 Mark
Market Milestones

"Last year is going to change people's risk tolerance for a long time to come," Lash said. "They're not going to have a diversified stock-only portfolio. They realize that everything went down the same last year. There was nowhere to hide except Treasurys and cash."

According to Christine Parker, president of Parker Financial in La Plata, many small investors have adopted a less-than-go-go outlook.

"There's the pessimism of 'Is this just short-lived? Will this last?' " said Parker, many of whose clients are female executives in their 40s and 50s and retirees. "People are worried about consumer spending and the ending of the stimulus." In particular, she said, investors are wondering what will happen to the economy after the government's $8,000 tax credit for first-time home buyers expires at the end of November.

As stocks go higher, warnings from investment strategists that the market has increased too far, too fast have grown louder.

"We've had this wonderful run-up. What you have to be concerned about is that valuations have become stretched," said Brett Hammond, chief investment strategist at TIAA-CREF. "Markets tend to anticipate economic news, but they don't necessarily predict it. The economic news is better than it was, but it's certainly not rosy."

On Wednesday, as the closing bell approached on the New York Stock Exchange, Charlotte Vass said she had no regrets about not returning to the market sooner.


"We're cautiously optimistic, so it makes sense to move back in more slowly," she said. "The market is a fickle lady."

http://www.washingtonpost.com/wp-dyn/content/article/2009/10/14/AR2009101403657_2.html?nav=emailpage&sid=ST2009101404142

TRADING PARTICIPATION BY CATEGORY OF KLSE INVESTORS

Statistics are based on monthly total trading value on Bursa Malaysia Securities.

The graph is updated mid-month, e.g. January's data is updated in mid February

Oct 08 - Dec 08
Domestic Individual 4% 31% 23%
Domestic Institution 36% 34% 34%
Foreign 40% 35% 43%

Jan 09 - Mar 09
Domestic Individual 26% 22% 22%
Domestic Institution 42% 40% 40%
Foreign 32% 38% 38%

Apr 09 - Jun 09
Domestic Individual 36% 42% 43%
Domestic Institution 41% 37% 36%
Foreign 23% 21% 21%

Jul 09 - Sept 09
Domestic Individual 30% 30% 26%
Domestic Institution 47% 46% 45%
Foreign 23% 24% 29%

Graphical format:
http://www.klse.com.my/website/bm/market_information/market_statistics/equities/downloads/trading_participation_investor2009.pdf

Warren Buffett's Priceless Investment Advice

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

So buying great companies at reasonable prices can deliver solid returns for long-term investors. The challenge, of course, is identifying great companies and determining what constitutes a reasonable price.

If investing in wonderful companies at fair prices is good enough for Warren Buffett -- arguably the finest investor on the planet -- it should be good enough for the rest of us.


The devil is in the details.

http://myinvestingnotes.blogspot.com/2009/07/warren-buffetts-priceless-investment.html

Is the market over-valued?

9.10.2009
KLCI index 1230.09
Market PE 23.53
EY = 1/PE = 4.25%
Risk free FD interest rate = 2.5%
Equity risk premium = 4.25 - 2.5 = 1.75%


Equity risk premium  = earnings yield (1/market PE) - the risk free rate.

 > 3.5%, market is undervalued
<  0.6%, market is overvalued
0.6% to 3.5%, market is fairly valued.

So, presently, the market is neither undervalued nor overvalued, but trading at fair value.


http://myinvestingnotes.blogspot.com/2009/07/when-is-market-over-valued.html

"SALE! 50% OFF!"

Stocks are crashing, so you turn on the television to catch the latest market news.

"Falling stock prices would be fabulous news for any investor with a very long horizon."

"You Ain't Seen Nothin' Yet."

It is to be expected that the price of a stock can goes down by a third and can goes up by a half, even in normal market situations.


In fact, when the market is being sold down, the long term value investor gets excited and enthused.

The risk is not in the price volatility.

•The risk is in oneself, reacting "stupidly" to price fluctuations.

•The other risk of course is making a wrong assessment of the future earnings and future earnings growth of the business of the company you bought.


http://myinvestingnotes.blogspot.com/2009/07/news-you-could-use.html

Investment Owner's Contract
http://myinvestingnotes.blogspot.com/2009/07/investment-owners.html

Market Price Fluctuations
http://myinvestingnotes.blogspot.com/2009/07/52w-hg-1.html

Glove companies

Valuation
Supermax, Topglove and Kossan

http://spreadsheets.google.com/pub?key=tIzNTWdhdVSJ803HE80Xn8Q&output=html

PBB 15.10.2009

Valuation:
http://spreadsheets.google.com/pub?key=tE7ISnWkuQCAPx-5JJTDp6g&output=html



Published: Thursday October 15, 2009 MYT 1:59:00 PM


Public Bank net profit higher by 3.7%

KUALA LUMPUR: Public Bank Bhd posted a 3.7% rise in net profit for its third quarter ended Sept 30, at RM639.04mil compared with RM616.34mil recorded a year ago on higher loans growth and deposits.

Revenue for the period was RM2.438 billion, compared with the RM2.79 billion a year ago. Earnings per share were 18.52 sen compared with 18.37 sen.

For the nine-months ended Sept 30, 2009, net profit declined to RM1.839 billion compared with RM1.927 billion. Revenue slipped to RM7.22 billion from RM7.94 billion.

Public Bank said excluding the one-off goodwill income from ING in 2008, the group’s underlying operating net profit for the nine-months increased by 3% from a year ago.

http://biz.thestar.com.my/news/story.asp?file=/2009/10/15/business/20091015135755&sec=business

Seven Forehead-Slapping Stock Blunders

Seven Forehead-Slapping Stock Blunders

by Glenn Curtis

Ignorance may be bliss, but not knowing why your stocks are failing and money is disappearing from your pockets is a long way from paradise. In this article, we'll uncover some of the more common investing faux pas, as well as provide you with suggestions on how to avoid them.

1. Ignoring Catalysts
The financial pundits, trade journals and business schools teach that proper valuation is the key to stock selection. This is only half of the picture because calculating P/E ratios and running cash flow spreadsheets can only show where a company is at a given point in time - it cannot tell us where it is heading.

Therefore, in addition to a quantitative evaluation of a company, you must also do a qualitative study so that you can determine which catalysts will drive earnings going forward.

Some good questions to ask yourself include:

•Is the company about to acquire a very profitable enterprise?
•Is a potential blockbuster product about to be launched?
•Are economies of scale being realized at the company's new plant and are margins about to rise dramatically?
•What will drive earnings and the stock price going forward?

2. Catching the Falling Knife
Investors love to buy companies on the cheap, but far too often, investors buy in before all of the bad news is out in the public domain, and/or before the stock stops its free fall. Remember, new lows in a company's share price often beget further new lows as investors see the shares dropping, become disheartened and then sell their shares. Waiting until the selling pressure has subsided is almost always your best bet to avoid getting cut on a falling knife stock. (To learn more, read How Investors Often Cause The Market's Problems.)

3. Failing to Consider Macroeconomic Variables
You have found a company you want to invest in. Its valuation is superior to that of its peers. It has several new products that are about to be launched, and sales could skyrocket. Even the insiders are buying the stock, which bolsters your confidence all the more.

But if you haven't considered the current macroeconomic conditions, such as unemployment and inflation, and how they might impact the sector you are invested in, you've made a fatal mistake!

Keep in mind that a retailer or electronics manufacturer is subject to a number of factors beyond its control that could adversely impact the share price. Things to consider are oil prices, labor costs, scarcity of raw materials, strikes, interest rate fluctuations and consumer spending. (For more on these factors, see Macroeconomic Analysis and Where Top Down Meets Bottom Up.)

4. Forgetting About Dilution
Be on the lookout for companies that are continuously issuing millions of shares and causing dilution, or those that have issued convertible debt. Convertible debt may be converted by the holder into common shares at a set price. Conversion will result in a lower value of holdings for existing shareholders

A better idea is to seek companies that are repurchasing stock and therefore reducing the number of shares outstanding. This process increases earnings per share (EPS) and it tells investors that the company feels that there is no better investment than their own company at the moment. (You can read more about buybacks in A Breakdown Of Stock Buybacks.)

5. Not Recognizing Seasonal Fluctuations
You can't fight the Fed. By that same token, you can't expect that your shares will appreciate even if the company's shares are widely traded in high volumes. The fact is that many companies (such as retailers) go through boom and bust cycles year in and year out. Luckily, these cycles are fairly predictable, so do yourself a favor and look at a five-year chart before buying shares in a company. Does the stock typically wane during a particular part of the year and then pick up during others? If so, consider timing your purchase or sale accordingly. (To learn more, see Capitalizing On Seasonal Effects.)

6. Missing Sector Trends
Some stocks do buck the larger trend; however, this behavior usually occurs because there is some huge catalyst that propels the stock either higher or lower. For the most part, companies trade in relative parity to their peers. This keeps their stock price movements within a trading band or range. Keep this in mind as you consider your entry/exit points in a stock.

Also, if you own stock in a semiconductor company (for example), understand that if other semiconductor companies are experiencing certain problems, your company will too. The same is true if the situation was reversed, and positive news hit the industry.

7. Avoiding Technical Trends
Many people shy away from technical analysis, but you don't have to be a chartist to be able to identify certain technical trends. A simple graph depicting 50-day and 200-day moving averages as well as daily closing prices can give investors a good picture of where a stock is headed. (To learn about this method, read the Basics Of Technical Analysis.)

Be wary of companies that trade and/or close below those averages. It usually means the shares will go lower. The same can be said to the upside. Also remember that as volume trails off, the stock price typically follows suit.

Lastly, look for general trends. Has the stock been under accumulation or distribution over the past year? In other words, is the price gradually moving up, or down? This is simple information that can be gleaned from a chart. It is truly surprising that most investors don't take advantage of these simple and accessible tools.

The Bottom line
There are a myriad of mistakes that investors can and do make. These are simply some of the more common ones. In any case, it pays to think about factors beyond what will propel the stock you own higher. A stock's past and expected performance in comparison to its peers, as well as its performance when subjected to economic conditions that may impact the company, are some other factors to consider.

To read about more investor follies, check out Seven Common Investor Mistakes, Learning From Others' Mistakes and Seven Common Financial Mistakes.

by Glenn Curtis, (Contact Author | Biography)

Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.

http://www.investopedia.com/articles/basics/08/blunders.asp

LPI 15.10.2009

Valuation:
http://spreadsheets.google.com/pub?key=tsEGbxGIFeKgOmg39MSjr9w&output=html

Hong Leong Bank 15.10.2009

Valuation:
http://spreadsheets.google.com/pub?key=tWGiC7HzTRd_Cpo4XYsejwg&output=html

Investing In A Weakening Dollar Environment

Investing In A Weakening Dollar Environment
Posted: October 13, 2009 12:17PM by Ryan Barnes

You've likely heard of this scenario mentioned in an ominous financial forecast: The U.S. dollar continues to lose value compared to other major world currencies, and any number of very bad things occur, spelling doom for our fragile economic recovery.

But even though a low dollar world has a few deleterious side effects, it also brings benefits, and the latter can be profited on by investors who think ahead about where to place their assets. Today we'll discuss what makes the USD rise and fall, and where to position your investments to take advantage of a low dollar world.

Background
The U.S. Dollar Index is an exchange-traded instrument that measures the value of the USD against a basket of 6 major world currencies, including the Euro, Yen, British Pound and Canadian Dollar.

In the past six months, the U.S. Dollar Index has fallen by roughly 13%. This is a continuation of a longer term trend that has seen USD Index fall by 46% since 2001.

What Causes a Falling Dollar?
There is no single bullet theory as to why the USD has fallen, but most professionals point to several ongoing events. First, the strength of the USD is largely determined by how willing global investors are to hold investments denominated in dollars versus other currencies. The USD is often noted as the "world's reserve currency," meaning that foreign governments around the world often choose to park a good chunk of their reserves in dollar assets like Treasury Bonds rather than holding them in their home currency.

But if investors become skittish about the strength of the U.S. economy and our ability to pay our future bills (via Treasury interest), they will begin to shift assets away from the dollar. The rising budget deficit of the U.S. is one of many caution flags that is beginning to be noticed by global investors.

Another reason why the dollar has weakened this decade is because interest rates have been historically very low. The 10-year Treasury Bond, a benchmark for global fixed income investors, has seen its lowest yields this decade since the 1960's. These low yields aren't much of an incentive for global investors to buy U.S. bonds.

The Federal Reserve has had good reason to keep interest rates low; it was crucial in freeing up money flows in the face of a global recession. But as the economy stabilizes, look for the Fed to slowly begin to ratcheting up interest rates. As this happens, the U.S. dollar should begin to strengthen.

What Investments to Hold in a Low-Dollar World?
Commodities and other "hard" assets tend to do very well in a low dollar environment. The reason is twofold; hard assets are a safe haven when fiat currencies weaken, and most global commodities are priced in dollars. So foreign investors (whose currency has risen in value vs. the USD), can buy more with the same amount of money. This increases overall demand, leading to rising prices for things like gold, silver and oil. (For further reading, check out How to Invest in Commodities.)

Companies that are based in the U.S. but conduct a lot of business overseas make great investments in a falling dollar world. The reasoning is simple; costs to pay workers and produce goods are paid in dollars (which are weak), but goods are sold in foreign currencies abroad. When those higher-valued foreign currencies are translated back to dollars for the purposes of accounting, the favorable exchange rate adds to profit margins.

Investors can easily find out how much business a U.S. firm does overseas by reading the most recent annual report. Look for firms with greater than 40% of sales abroad, and having the bulk of factories and offices located in the U.S.

USD Outlook
The future strength of the dollar will largely depend on how well the U.S. government can control its budget deficit. The better the U.S. looks as a debt payer, the better the dollar will do. Use this as a guide to determine when it might be time to begin investing in dollar strength versus dollar weakness. (To learn more, check out What Fuels the National Debt?)

And when it comes to the dollar, a little inflation can be a good thing. As our economy strengthens, some inflation should begin creeping back into the system. This will trigger the Fed to start raising interest rates, boosting the dollar along with Treasury yields. When this trend begins to occur, look to shift away from the investments outlined above.

Parting Thoughts
A low dollar world will have some bad side effects, like more expensive overseas travel and higher prices of imports like gas and electronics. But savvy investors can make up the pennies being squeezed elsewhere by profiting from the many companies and assets that are taking a low dollar environment all the way to the bank.

http://financialedge.investopedia.com/financial-edge/1009/Where-To-Invest-In-A-Weakening-Dollar-Environment.aspx

A Little Knowledge Is a Dangerous Thing

Financial Fraud: Don't Let It Happen To You
Posted: October 9, 2009 1:20PM
by Andrew Beattie




If viewed as an industry, fraud is pretty resilient. It does well when the economy is up and people have speculative cash combined with big, optimistic dreams. It also does well when the economy is low and people are trying desperately to recoup losses, regain retirement nest eggs and generally stay afloat. Fraud cuts investors deep at the best of times, but with the current economy pushing baby boomers to the edge of desperate measures to assure retirement, the damage is potentially on a larger scale. The key to avoiding the growing legion of scams out there is to temper your desperate hopes with a healthy dose of sober second thought and careful research.

A Little Knowledge Is a Dangerous Thing
It's unfair to see victims of fraud as thoughtless people caught up by modern snake oil salesman. Many people who get caught by investment frauds are financially capable. At the very least, they have the habits that have allowed them to accumulate the wealth that makes them a target for people selling genuine investments as well as fraudulent ones.

In many cases, the people caught in frauds are sophisticated investors – Bernie Madoff among others have beguiled professionals right along with regular folks – and the failure is not a lack of knowledge but a lapse in due diligence. Afterwards, almost everyone hurt in a fraud realizes they should have known better, but they get caught up in the same way as investors in a bubble. (Identity thieves are using home equity lines of credit to commit their crimes. Find out more in Protect Yourself From HELOC Fraud.)

Count to Three
Hindsight is pretty useless when it comes to your portfolio, so there are three basic steps that can help you avoid getting caught up in an investment scam. They take time and, much like counting to ten when you're angry, can help dampen some of the emotion that can cloud an investors head when phrases like "iron-clad, double-digit returns" are being thrown about.
1) Research the Company and the People Involved.
You can find out a lot now by simply running an internet search, although an internet search isn't enough in itself. People often build up to big frauds and have a paper trail of their previous attempts. You might want to know if the guy selling you condos in Barbados has been the subject of any investigations or angry complaints. Asking for credentials, checking them, and looking up names in regulatory filings can uncover a host of interesting facts, including whether or not the person wanting to sell you investments is in anyway certified. Being certified isn't a badge of virtue, but a lack of any formal training can be a red flag.

2) Dig Into the Numbers
Revolutionary forms of investing that are so complex, yet so sure in yielding results should be viewed skeptically. Ask for a prospectus or explanation of any such investment in writing and work through it until you understand how the profits are made. If you don't, and no one around you does, then you have another red flag. Most highly complex investments aren't sold door-to-door, so don't underestimate your own smarts. When you don't understand where the money comes from, the chances are good that the person selling the investment doesn't either.

3) Delay
One of the easiest ways to avoid fraud is to delay. High-pressure sales tactics are at the heart of most frauds, as if this superb investment opportunity that is so solid that you'll be drinking daiquiris in a New York high-rise by years end will paradoxically vanish in moments. When someone is insistent that you don't have time to think about things, it's usually because they're afraid of what you'll figure out. People who are confident that they're selling a great investment should be happy to explain it in detail rather than imposing time deadlines and talking about you "missing the chance of a lifetime."

Scammers generally go for the easy and quick money to maximize their profits, consequently giving up fast in the face of delaying. If someone tells you they'll be sold out in a week, then wish him the best and let him go on to people who are less cautious with their money. (These fraudsters were the first to commit fraud, participate in insider trading and manipulate stock. Read more in The Pioneers Of Financial Fraud.)

A Truly Great Investment
The best investments are the ones you feel completely comfortable holding, whether land, stock, precious gems or anything else. Part of being comfortable is knowing the facts behind an investment and understanding the economic machinery that makes it tick. Taking your time and discovering all you can is the surest way to protect against fraud and build an investment portfolio you can truly believe in.

http://financialedge.investopedia.com/financial-edge/1009/Dont-Be-A-Victim-Of-Fraud.aspx?partner=ntu10

'Financial shares to rally 20pc'

'Financial shares to rally 20pc'
Jupiter's well-respected financials fund manager Philip Gibbs says the sector should enjoy a further 20pc gain before the current rally peters out.

By Matt Goodburn
Published: 3:24PM BST 01 Oct 2009

Mr Gibbs, the only manager to have been AAA-rated by Citywire for the entire ratings coverage, was also optimistic about the prospects for equities as a whole over the next few months. Mr Gibbs says he believes corporate earnings for the financials sector will be ''very much beating expectations'' after the current round of trading updates are released.

"The run could go a very long way. We are down over 50pc in global financials and the numbers are compelling. I think if the sector returns to more normal valuations it will stage a more significant rally of more than 20pc and individual stocks could do very well.''

Mr Gibbs' top fund holding is Barclays, which comprises 7pc of his £1.3bn Jupiter Financial Opportunities fund. He picked the bank as ''a winner from the credit crunch'' compared to rivals Lloyds and Royal Bank of Scotland: ''Lloyds is a microcosm of the sector. It is a very leveraged play on the UK consumer, but still has some very horrible problems, especially in commercial property. It is still undercapitalised and wrestling with the issue of paying a huge premium to the Government.
I prefer HSBC and Barclays.''

According to fund statisticians Lipper, Jupiter Financial Opportunities has posted a total return of 857pc since launch in June 1997 to the end of August, making it by far the most successful UK unit trust over the period, with an annualised return of 19.8pc.

http://www.telegraph.co.uk/finance/personalfinance/investing/6251200/Financial-shares-to-rally-20pc.html