Some thoughts on Analysing Stocks
Ideally a stock you plan to purchase should have all of the following charateristics:
•A rising trend of earnings, dividends and book value per share.
•A balance sheet with less debt than other companies in its particular industry.
•A P/E ratio no higher than average.
•A dividend yield that suits your particular needs.
•A below-average dividend pay-out ratio.
•A history of earnings and dividends not pockmarked by erratic ups and downs.
•Companies whose ROE is 15 or better.
•A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.
Keep It Simple and Safe.
Also read:
8 signs of doomed stock
http://myinvestingnotes.blogspot.com/2009/08/8-signs-of-doomed-stock.html
Wednesday 14 October 2009
Tuesday 13 October 2009
Buffett's focussed investing
According to Buffett, his results follow not from any master plan but from focussed investing - allocating capital by concentrating on businesses with outstanding economic characteristics and run by first-rate manager.
It is the Business that Matters
Over the long haul, stock prices tend to track the value of the business. When firms do well, so do their shares, and when business suffers, the stock will as well. Always focus on the company's fundamental financial performance.
Analyst upgrades and chart patterns may be fine tools for traders who treat the stock market like a casino, but they're of little use to investors who truly want to build wealth in the stock market. You have to get your hands dirty and understand the businesses of the stocks you own if you hope to be a successful long-term investor.
P/S: Look at Hai-O to learn that price tracks the value of the company's business.
Analyst upgrades and chart patterns may be fine tools for traders who treat the stock market like a casino, but they're of little use to investors who truly want to build wealth in the stock market. You have to get your hands dirty and understand the businesses of the stocks you own if you hope to be a successful long-term investor.
P/S: Look at Hai-O to learn that price tracks the value of the company's business.
Great Opportunities to buy companies with durable competitive advantage
a) Correction or panic during a bull market:
Any company with a durable competitive advantage will eventually recover after a market correction or panic during a bull market.
b) Bubble-bursting situation:
But beware. In a bubble-bursting situation,during which stock prices trade in excess of 40 times earnings and then fall to single-digit PEs, it may take years for them to fully recover.
After the crash of 1997, it took until 2007 to match the 1990s bull market highs. There are still companies trading today at below their last decade high price. On the other hand, if you bought during the crash, as Warren Buffett often did, it didn't take you long to make a fortune.
Any company with a durable competitive advantage will eventually recover after a market correction or panic during a bull market.
b) Bubble-bursting situation:
But beware. In a bubble-bursting situation,during which stock prices trade in excess of 40 times earnings and then fall to single-digit PEs, it may take years for them to fully recover.
After the crash of 1997, it took until 2007 to match the 1990s bull market highs. There are still companies trading today at below their last decade high price. On the other hand, if you bought during the crash, as Warren Buffett often did, it didn't take you long to make a fortune.
Stock market creates buying opportunities
The bull/bear market cycle offers many buying opportunities for the selective contrarian investor.
The most important aspect of these buying opportunities is that they offer the investor the chance to buy into durable-competitive-advantage companies that have nothing wrong with them other than sinking stock prices.
The herd mentality of the shortsighted stock market creates buying opportunities.
The most important aspect of these buying opportunities is that they offer the investor the chance to buy into durable-competitive-advantage companies that have nothing wrong with them other than sinking stock prices.
The herd mentality of the shortsighted stock market creates buying opportunities.
One buys in a bear market and sells in a bubble.
One of the interesting differences between bubbles and bear markets is that in a bear market, there are plenty of bulls and bears. In a bubble, the few bears are drowned out by the loud and almost universal bullishness.
It is natural to like momentum and money, but if investors have no disciplines and no sense of bubbles, then they are headed not for the big money, but for quite the opposite.
With bear markets, one wants to use buy and sell disciplines and buy when prices and fundamentals would dictate that.
There are market bubbles once in a great while, perhaps once in a life-time, but individual stock bubbles are more common. All bubbles have some similarities that concern how perceptions, emotions, and a lack of accurate information combine to set an investor trap.
It is natural to like momentum and money, but if investors have no disciplines and no sense of bubbles, then they are headed not for the big money, but for quite the opposite.
With bear markets, one wants to use buy and sell disciplines and buy when prices and fundamentals would dictate that.
There are market bubbles once in a great while, perhaps once in a life-time, but individual stock bubbles are more common. All bubbles have some similarities that concern how perceptions, emotions, and a lack of accurate information combine to set an investor trap.
Beware of individual stock bubbles
With bubbles, there is an element of mystery. To cope with that, start with the first step, knowledge, and combine that with your disciplined buy and sell strategies, since in a bubble it is likely that the beliefs of the crowd cannot be supported by real knowledge.
Yet the entire crowd thought in this way about many companies because of incorrect and incomplete information. Emotions temporarily filled that void. A disciplined buy and sell strategy helps you control your emotion.
Yet the entire crowd thought in this way about many companies because of incorrect and incomplete information. Emotions temporarily filled that void. A disciplined buy and sell strategy helps you control your emotion.
Behavioral economics supplies a framework for investing
Behavioral economics has gone beyond just trying to provide explanations for why investors behave as they do. It actually supplies a framework for investing and policy making to help people avoid succumbing to emotion-based or ill-conceived investments.
“Adhering to logical, rational principles of ideal economic choice may be biologically unnatural,” says Colin F. Camerer, a professor of behavioral economics at Caltech. Better insight into human psychology gleaned by neuroscientists holds the promise of changing forever our fundamental assumptions about the way entire economies function—and our understanding of the motivations of the individual participants therein, who buy homes or stocks and who have trouble judging whether a dollar is worth as much today as it was yesterday.
http://www.scientificamerican.com/article.cfm?id=the-science-of-economic-bubbles
“Adhering to logical, rational principles of ideal economic choice may be biologically unnatural,” says Colin F. Camerer, a professor of behavioral economics at Caltech. Better insight into human psychology gleaned by neuroscientists holds the promise of changing forever our fundamental assumptions about the way entire economies function—and our understanding of the motivations of the individual participants therein, who buy homes or stocks and who have trouble judging whether a dollar is worth as much today as it was yesterday.
http://www.scientificamerican.com/article.cfm?id=the-science-of-economic-bubbles
Market bottoms
A market bottoms when we reach what is known as the "point of maximum pessimism". This means that investors have lost so much money they completely throw in the towel - and shares correct to an undervalued level.
Don't Let a Market Crash Hit You at the Finish Line
Don't Let a Market Crash Hit You at the Finish Line
by Jason Zweig
Tuesday, October 13, 2009
Can you make the risk of stocks go away just by owning them long enough? Many investors still think so.
"Over any 20-year period in history, in any market, an equity portfolio has outperformed a fixed-income portfolio," one reader recently emailed me. "Warren Buffett believes in this rule as well," he added, referring to Mr. Buffett's bullish selling of long-term put options on the Standard & Poor's 500-stock index in recent years. (Selling those puts will be profitable if U.S. stocks go up over the next decade or so.)
As the philosopher Bertrand Russell warned, you shouldn't mistake wishes for facts.
Bonds have beaten stocks for as long as two decades -- in the 20 years that ended this June 30, for example, as well as 1989 through 2008.
Nor does Mr. Buffett believe stocks are sure to beat all other investments over the next 20 years.
"I certainly don't mean to say that," Mr. Buffett told me this week. "I would say that if you hold the S&P 500 long enough, you will show some gain. I think the probability of owning equities for 25 years, and having them end up at a lower price than where you started, is probably 1 in 100."
But what about the probability that stocks will beat everything else, including bonds and inflation? "Who knows?" Mr. Buffett said. "People say that stocks have to be better than bonds, but I've pointed out just the opposite: That all depends on the starting price."
Why, then, do so many investors think stocks become safe if you simply hang on for at least 20 years?
In the past, the longer the measurement period, the less the rate of return on stocks has varied. Any given year was a crapshoot. But over decades, stocks have tended to go up at a fairly steady average annual rate of 9% to 10%. If "risk" is the chance of deviating from that average, then that kind of risk has indeed declined over very long periods.
But the risk of investing in stocks isn't the chance that your rate of return might vary from an average; it is the possibility that stocks might wipe you out. That risk never goes away, no matter how long you hang on.
The belief that extending your holding period can eliminate the risk of stocks is simply bogus. Time might be your ally. But it also might turn out to be your enemy. While a longer horizon gives you more opportunities to recover from crashes, it also gives you more opportunities to experience them.
Look at the long-term average annual rate of return on stocks since 1926, when good data begin. From the market peak in 2007 to its trough this March, that long-term annual return fell only a smidgen, from 10.4% to 9.3%. But if you had $1 million in U.S. stocks on Sept. 30, 2007, you had only $498,300 left by March 1, 2009. If losing more than 50% of your money in a year-and-a-half isn't risk, what is?
What if you retired into the teeth of that bear market? If, as many financial advisers recommend, you withdrew 4% of your wealth in equal monthly installments for living expenses, your $1 million would have shrunk to less than $465,000. You now needed roughly a 115% gain just to get back to where you started, and you were left in the meantime with less than half as much money to live on.
But time can turn out to be an enemy for anyone, not just retirees. A 50-year-old might have shrugged off the 38% fall in the U.S. stock market in 2000 to 2002 and told himself, "I have plenty of time to recover." He's now pushing 60 and, even after the market's recent bounce, still has a 27% loss from two years ago -- and is even down 14% from the beginning of 2000, according to Ibbotson Associates. He needs roughly a 38% gain just to get back to where he was in 2007. So does a 40-year-old. So does a 30-year-old.
In short, you can't count on time alone to bail you out on your U.S. stocks. That is what bonds and foreign stocks and cash and real estate are for.
In his classic book "The Intelligent Investor," Benjamin Graham -- Mr. Buffett's mentor -- advised splitting your money equally between stocks and bonds. Graham added that your stock proportion should never go below 25% (when you think stocks are expensive and bonds are cheap) or above 75% (when stocks seem cheap).
Graham's rule remains a good starting point even today. If time turns out to be your enemy instead of your friend, you will be very glad to have some of your money elsewhere.
Write to Jason Zweig at intelligentinvestor@wsj.com
http://finance.yahoo.com/focus-retirement/article/107943/dont-let-a-market-crash-hit-you-at-the-finish-line.html?mod=fidelity-readytoretire
by Jason Zweig
Tuesday, October 13, 2009
Can you make the risk of stocks go away just by owning them long enough? Many investors still think so.
"Over any 20-year period in history, in any market, an equity portfolio has outperformed a fixed-income portfolio," one reader recently emailed me. "Warren Buffett believes in this rule as well," he added, referring to Mr. Buffett's bullish selling of long-term put options on the Standard & Poor's 500-stock index in recent years. (Selling those puts will be profitable if U.S. stocks go up over the next decade or so.)
As the philosopher Bertrand Russell warned, you shouldn't mistake wishes for facts.
Bonds have beaten stocks for as long as two decades -- in the 20 years that ended this June 30, for example, as well as 1989 through 2008.
Nor does Mr. Buffett believe stocks are sure to beat all other investments over the next 20 years.
"I certainly don't mean to say that," Mr. Buffett told me this week. "I would say that if you hold the S&P 500 long enough, you will show some gain. I think the probability of owning equities for 25 years, and having them end up at a lower price than where you started, is probably 1 in 100."
But what about the probability that stocks will beat everything else, including bonds and inflation? "Who knows?" Mr. Buffett said. "People say that stocks have to be better than bonds, but I've pointed out just the opposite: That all depends on the starting price."
Why, then, do so many investors think stocks become safe if you simply hang on for at least 20 years?
In the past, the longer the measurement period, the less the rate of return on stocks has varied. Any given year was a crapshoot. But over decades, stocks have tended to go up at a fairly steady average annual rate of 9% to 10%. If "risk" is the chance of deviating from that average, then that kind of risk has indeed declined over very long periods.
But the risk of investing in stocks isn't the chance that your rate of return might vary from an average; it is the possibility that stocks might wipe you out. That risk never goes away, no matter how long you hang on.
The belief that extending your holding period can eliminate the risk of stocks is simply bogus. Time might be your ally. But it also might turn out to be your enemy. While a longer horizon gives you more opportunities to recover from crashes, it also gives you more opportunities to experience them.
Look at the long-term average annual rate of return on stocks since 1926, when good data begin. From the market peak in 2007 to its trough this March, that long-term annual return fell only a smidgen, from 10.4% to 9.3%. But if you had $1 million in U.S. stocks on Sept. 30, 2007, you had only $498,300 left by March 1, 2009. If losing more than 50% of your money in a year-and-a-half isn't risk, what is?
What if you retired into the teeth of that bear market? If, as many financial advisers recommend, you withdrew 4% of your wealth in equal monthly installments for living expenses, your $1 million would have shrunk to less than $465,000. You now needed roughly a 115% gain just to get back to where you started, and you were left in the meantime with less than half as much money to live on.
But time can turn out to be an enemy for anyone, not just retirees. A 50-year-old might have shrugged off the 38% fall in the U.S. stock market in 2000 to 2002 and told himself, "I have plenty of time to recover." He's now pushing 60 and, even after the market's recent bounce, still has a 27% loss from two years ago -- and is even down 14% from the beginning of 2000, according to Ibbotson Associates. He needs roughly a 38% gain just to get back to where he was in 2007. So does a 40-year-old. So does a 30-year-old.
In short, you can't count on time alone to bail you out on your U.S. stocks. That is what bonds and foreign stocks and cash and real estate are for.
In his classic book "The Intelligent Investor," Benjamin Graham -- Mr. Buffett's mentor -- advised splitting your money equally between stocks and bonds. Graham added that your stock proportion should never go below 25% (when you think stocks are expensive and bonds are cheap) or above 75% (when stocks seem cheap).
Graham's rule remains a good starting point even today. If time turns out to be your enemy instead of your friend, you will be very glad to have some of your money elsewhere.
Write to Jason Zweig at intelligentinvestor@wsj.com
http://finance.yahoo.com/focus-retirement/article/107943/dont-let-a-market-crash-hit-you-at-the-finish-line.html?mod=fidelity-readytoretire
Investing: When to bet the farm
Our own personalities add complexity to high-risk situations.
Bill Gurtin of Gurtin Fixed Income Management in San Diego points out the risks associated with overly emotional reactions.
"What you don't want to happen is for people to get emotional with the market," he says.
The more emotional we get, the more likely it is we will make a mistake, Gurtin explains.
A company's business prospects can be measured and evaluated statistically, but there is no easy measure for mood swings.
Before making any moves, people contemplating high-risk investments should come to grips with their emotional makeup and know how they are likely to react.
Whether considering an investment in a stock, a privately held startup or a hedge fund -- all high-risk propositions -- investors should start by digging through the details of the business case to figure out how the return on investment is likely to be generated.
Professionals, even the most seasoned, have the same emotions as everyone else. Learning the ropes professionally does not eliminate human emotion, nor does it elimate urges to buy or sell emotionally. Faced with uncertainties, the tide of emotion surges. How can one resist the surging tide of emotion? Only if one has a framework of disciplines and knowledge within. Controlling emotions and replacing them with the elements of this framework are the secret.
http://myinvestingnotes.blogspot.com/2008/08/investing-when-to-bet-farm.html
Before making any moves, people contemplating high-risk investments should come to grips with their emotional makeup and know how they are likely to react.
Yet successful investors take major risks all the time. They succeed because
- they do their research,
- can afford to lose the money they invest in high-risk schemes and
- are able to make up any losses they incur with other investments, which frequently involve complementary or counterbalancing risks.
Whether considering an investment in a stock, a privately held startup or a hedge fund -- all high-risk propositions -- investors should start by digging through the details of the business case to figure out how the return on investment is likely to be generated.
- How big a payoff might the investment produce?
- And how likely is success?
- What would the price of failure be?
- And how likely is that?
Professionals, even the most seasoned, have the same emotions as everyone else. Learning the ropes professionally does not eliminate human emotion, nor does it elimate urges to buy or sell emotionally. Faced with uncertainties, the tide of emotion surges. How can one resist the surging tide of emotion? Only if one has a framework of disciplines and knowledge within. Controlling emotions and replacing them with the elements of this framework are the secret.
http://myinvestingnotes.blogspot.com/2008/08/investing-when-to-bet-farm.html
Different PE ratios
Price = estimated EPS x PE
Estimated EPS is based on a number of assumptions about the behaviour of revenues and costs. The reliability of the EPS forecast hinges critically on how realistic are these assumptions.
The other half of the valuation exercise is concerned with the price-earnings ratio which reflects the price investors are willing to pay per cents of EPS. In essence, it represens the market's summary evaluation of a company's prospects.
We will generally use the PE ratio based on current year's expected earnings.
http://myinvestingnotes.blogspot.com/search/label/different%20PE%20ratios
Estimated EPS is based on a number of assumptions about the behaviour of revenues and costs. The reliability of the EPS forecast hinges critically on how realistic are these assumptions.
The other half of the valuation exercise is concerned with the price-earnings ratio which reflects the price investors are willing to pay per cents of EPS. In essence, it represens the market's summary evaluation of a company's prospects.
We will generally use the PE ratio based on current year's expected earnings.
http://myinvestingnotes.blogspot.com/search/label/different%20PE%20ratios
Buy low, improve your chances
The most common investing mistake is throwing good money after bad. (This refers to buying a lousy company.)
The second most common investing mistake is finding and buying a great company (with growth, intrinsic value, supporting fundamentals, and intangibles all there), but paying too much for it.
http://myinvestingnotes.blogspot.com/search/label/buy%20low
The second most common investing mistake is finding and buying a great company (with growth, intrinsic value, supporting fundamentals, and intangibles all there), but paying too much for it.
http://myinvestingnotes.blogspot.com/search/label/buy%20low
Investment merit at a given PRICE but not at another
PRICE: is frequently an essential element, so that a stock (and even a bond) may have investment merit at one price level but not at another.
______________________________________
Having selected the company to invest based on various parameters, the next consideration will be the price we are willing to pay for owning part of its business.
Price is always an important consideration in investing. At a certain price, the company can be acquired at a bargain, at a fair price or at a high price. Each scenario will impact on our investment returns.
http://myinvestingnotes.blogspot.com/search/label/investment%20merit
______________________________________
Having selected the company to invest based on various parameters, the next consideration will be the price we are willing to pay for owning part of its business.
Price is always an important consideration in investing. At a certain price, the company can be acquired at a bargain, at a fair price or at a high price. Each scenario will impact on our investment returns.
http://myinvestingnotes.blogspot.com/search/label/investment%20merit
KLSE STOCK MARKET PERFORMANCE IN 2008
STOCK MARKET PERFORMANCE IN 2008
Q1, 2008
The strong performance of the local stock market in the fourth quarter of 2007 continued to rally into 2008 with the Kuala Lumpur Composite Index (KLCI) touching a series of record highs before closing at the peak of 1,516.22 points on 11 January 2008. It had climbed 4.9% to emerge as the top performer in Asia. However, a sell down in regional and global market due to the lingering fears of a US triggered global recession with its origins in the US subprime and credit crunch problems, brought the KLCI to lower close of 1,357.40 points as at the end of February 2008.
Undoubtedly the biggest news in 2008 was the 12th general election held on 8 March 2008. With the ruling Barisan Nasional returned to power with only a simple majority and a total of five states falling into the opposition rule, the market reacted extremely negatively. The KLCI plunged by a hefty 123.1 points or 9.5% on 10 March 2008 on a heavy volume of 1.18 billion shares traded,recording its biggest daily losses. The recovery of regional and global equity markets, however helped to mitigate the situation. KLCI managed to close higher at 1,247.52 points as at the end of March 2008, down 13.7% for the first quarter of 2008.
Q2, 2008
While the rise was in line with the recovery of regional and global equity, it was still 1.3% below the pre-general election closed of 1,296.33 points on 7 March 2008. The KLCI continued to edge higher in early May 2008, reaching a second quarter high of 1,300.67 points on 16 May 2008. In mid May till end of June 2008, it came under further selling pressure due to many factors, led by cost push inflationary pressure from higher petrol prices and increase in electricity tariffs that dampened economic growth. Consequently, the KLCI slipped into an extended period of bearish sentiment and ended the first half of 2008 at 1,186.57 points, a drop of 258.80 points or by 17.9%.
Q3, 2008
The downward trend continued into the third quarter of 2008 amidst the contagion fears following concerns of the financial crisis in the US and Europe. Much of the weakness in the global equity markets was caused by the uncertainties over the health of US economy. The string of highly published failures of large financial institutions in the US sent shock waves through the global financial markets and further aggravated the market sentiments. The KLCI fell below 1,000 points on 18 September 2008 to close at 991.66 points. Although it recovered slightly to record at 1,018.08 points at the close of third quarter, it shed 14.1% for the quarter.
Q4, 2008
At the start of the fourth quarter, KLCI retreated further in tandem with the sharp fall of the global and regional equity markets. Despite the corrective measures introduced by Governments and Central Banks worldwide to cut interest rate and inject massive liquidity into the financial system, the dysfunctional global credit market continued to generate fears of global recession. The KLCI reacted adversely falling into a four year low of 829.41 points on 29 October 2008. It however, recovered when US Federal reserve cut interest rate by 50 basis points to 1.0% on 29 October 2008.
The KLCI continued to recover following the US and regional equity market and closed the fourth quarter at 876.75 points, recording again of 5.7% from 829.41 points on 29 October 2008.
The year 2008 was indeed a roller coaster year. The outlook for the stock market in 2009 remains challenging. Fears of a global recession will continue to pervade in the first half of 2009. The US economic downturn along with falling commodity and oil prices is expected to have a negative effect on Malaysia’s export. Combined with a lower GDP growth outlook for 2009, the current consensus is only for a 3.6% upside for the KLCI.
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
(Page 81/217)
Q1, 2008
The strong performance of the local stock market in the fourth quarter of 2007 continued to rally into 2008 with the Kuala Lumpur Composite Index (KLCI) touching a series of record highs before closing at the peak of 1,516.22 points on 11 January 2008. It had climbed 4.9% to emerge as the top performer in Asia. However, a sell down in regional and global market due to the lingering fears of a US triggered global recession with its origins in the US subprime and credit crunch problems, brought the KLCI to lower close of 1,357.40 points as at the end of February 2008.
Undoubtedly the biggest news in 2008 was the 12th general election held on 8 March 2008. With the ruling Barisan Nasional returned to power with only a simple majority and a total of five states falling into the opposition rule, the market reacted extremely negatively. The KLCI plunged by a hefty 123.1 points or 9.5% on 10 March 2008 on a heavy volume of 1.18 billion shares traded,recording its biggest daily losses. The recovery of regional and global equity markets, however helped to mitigate the situation. KLCI managed to close higher at 1,247.52 points as at the end of March 2008, down 13.7% for the first quarter of 2008.
Q2, 2008
While the rise was in line with the recovery of regional and global equity, it was still 1.3% below the pre-general election closed of 1,296.33 points on 7 March 2008. The KLCI continued to edge higher in early May 2008, reaching a second quarter high of 1,300.67 points on 16 May 2008. In mid May till end of June 2008, it came under further selling pressure due to many factors, led by cost push inflationary pressure from higher petrol prices and increase in electricity tariffs that dampened economic growth. Consequently, the KLCI slipped into an extended period of bearish sentiment and ended the first half of 2008 at 1,186.57 points, a drop of 258.80 points or by 17.9%.
Q3, 2008
The downward trend continued into the third quarter of 2008 amidst the contagion fears following concerns of the financial crisis in the US and Europe. Much of the weakness in the global equity markets was caused by the uncertainties over the health of US economy. The string of highly published failures of large financial institutions in the US sent shock waves through the global financial markets and further aggravated the market sentiments. The KLCI fell below 1,000 points on 18 September 2008 to close at 991.66 points. Although it recovered slightly to record at 1,018.08 points at the close of third quarter, it shed 14.1% for the quarter.
Q4, 2008
At the start of the fourth quarter, KLCI retreated further in tandem with the sharp fall of the global and regional equity markets. Despite the corrective measures introduced by Governments and Central Banks worldwide to cut interest rate and inject massive liquidity into the financial system, the dysfunctional global credit market continued to generate fears of global recession. The KLCI reacted adversely falling into a four year low of 829.41 points on 29 October 2008. It however, recovered when US Federal reserve cut interest rate by 50 basis points to 1.0% on 29 October 2008.
The KLCI continued to recover following the US and regional equity market and closed the fourth quarter at 876.75 points, recording again of 5.7% from 829.41 points on 29 October 2008.
The year 2008 was indeed a roller coaster year. The outlook for the stock market in 2009 remains challenging. Fears of a global recession will continue to pervade in the first half of 2009. The US economic downturn along with falling commodity and oil prices is expected to have a negative effect on Malaysia’s export. Combined with a lower GDP growth outlook for 2009, the current consensus is only for a 3.6% upside for the KLCI.
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
(Page 81/217)
Rubber Glove Companies
Latexx appears to be succeeding in its aggressive growth plan. It is expected to post strong growth until 2012 as it ramps up current production capacity of 5.2 billion pieces a year to six billion pieces by the end of this year, 7.5 billion by 2010 and nine billion by 2012.
Latexx and Adventa have seen the most aggressive capacity expansion (as a percentage of current capacity) among rubber glove companies. Nevertheless, Latexx is confident of selling the additional capacity as it currently cannot meet its customers' demand. All its facilities are located in Kamunting, which ensures better quality control and lower operating costs.
Adventa has a 15% share of the global surgical glove market. As it is operating at close to full capacity, Adventa is planning to aggressively expand its surgical glove production from 250 million pieces a year to 350 million by early 2010 and 450 million by end-2010.
From the edge newspaper: Focussing on FY 2010 valuations, the rubber glove companies are still cheap in an industry where Malaysia is the dominant player and where pricing power exists. Adventa is the cheapest rubber glove company with a prospective FY2010 price-earnings ratio (PER) of only 7.5 times.
Rubber glove companies offer a rare combination of being defensive and offering growth. Investors would be familiar with those like Top Glove, Supermax, Kossan Rubber and Hartalega, but there are some smaller ones like Adventa, Latexx and Singapore-listed Riverstone that operate in interesting niches and perhaps offer better growth prospects as they start from a lower base.
Company Share price Market Cap
Top Glove 8.11 2409.8 m
Hartalega 5.45 1320.6m
Kossan 4.64 741.8m
Supermax 2.80 727.2 m
Latexx 2.27 443.0 m
Riverstone Holdings 0.44 331.0m (Singapore)
Adventa 1.73 218m
Medi-flex 0.09 103.3m (Singapore)
Shun Thai Rubber 1.60 81.0m (Thailand)
Latexx and Adventa have seen the most aggressive capacity expansion (as a percentage of current capacity) among rubber glove companies. Nevertheless, Latexx is confident of selling the additional capacity as it currently cannot meet its customers' demand. All its facilities are located in Kamunting, which ensures better quality control and lower operating costs.
Adventa has a 15% share of the global surgical glove market. As it is operating at close to full capacity, Adventa is planning to aggressively expand its surgical glove production from 250 million pieces a year to 350 million by early 2010 and 450 million by end-2010.
From the edge newspaper: Focussing on FY 2010 valuations, the rubber glove companies are still cheap in an industry where Malaysia is the dominant player and where pricing power exists. Adventa is the cheapest rubber glove company with a prospective FY2010 price-earnings ratio (PER) of only 7.5 times.
Rubber glove companies offer a rare combination of being defensive and offering growth. Investors would be familiar with those like Top Glove, Supermax, Kossan Rubber and Hartalega, but there are some smaller ones like Adventa, Latexx and Singapore-listed Riverstone that operate in interesting niches and perhaps offer better growth prospects as they start from a lower base.
Company Share price Market Cap
Top Glove 8.11 2409.8 m
Hartalega 5.45 1320.6m
Kossan 4.64 741.8m
Supermax 2.80 727.2 m
Latexx 2.27 443.0 m
Riverstone Holdings 0.44 331.0m (Singapore)
Adventa 1.73 218m
Medi-flex 0.09 103.3m (Singapore)
Shun Thai Rubber 1.60 81.0m (Thailand)
Fraser and Neave
Fraser and Neave Ltd: Its Malaysian Unit expects to double its revenue in Thailand and countries in Indochina to RM 2 billion within five years. Bernama reported, citing the unit's CEO Tan Ang Meng.
Sunday 11 October 2009
Reviewing LPI CAPITAL BHD share price performance in 2008
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
Read: Page 80/217 to 87/217
LPI CAPITAL BHD SHARE PRICE PERFORMANCE IN 2008
Q1, 2008
LPI Capital Bhd share price rose from RM12.10 as at 31 December 2007 to a year high of RM12.70 on 14 February 2008 following the announcement of its 2007 results on 13 February 2008. With its improved results, LPI Capital declared a final dividend of 55 sen per share less 26% income tax and a special dividend of 25% per share less 26% income tax. With the interim dividend of 30 sen less income tax of 26%, the total gross dividend declared for the year was 110 sen per share. The ex-dividend price was RM12.20 traded on 15 February 2008.
A sell down in regional and global equity market triggered by the sub-prime and credit crunch problems in US and coupled with results of the 12th general election held on 8 March 2008, LPI Capital share price fell to close at a low for the first quarter of 2008 at RM10.80 on 10 March 2008. This was the lowest price recorded for the first quarter of 2008.
The share price of LPI Capital remained at this level for the next two weeks before gradually improved in line with the general up trend of the KLCI to reach RM11.20 on the close of the first quarter.
Q2, 2008
The early second quarter saw LPI Capital share price hovering around RM11.30 and began to edge upward reaching RM12.30 on 13 May 2008. In line with the decline in local and regional equity markets on concerns of the rising inflation rate due to the increase in crude oil prices, LPI Capital share price corrected to RM11.80 at the close of the second quarter.
Q3, 2008
When the improved second quarter results were announced together with an interim dividend of 30% less 26% income tax on 10 July 2008, LPI Capital share price traded upwards moderately. After the payment of dividend the share prices consolidated to RM11.00 and this level was maintained till the middle of September. Thereafter the string of highly published failures of large financial institutions in US began to hound the equity markets and LPI Capital share price started to trend downwards in the last weeks of the third quarter. The share price closed at RM10.40 shedding a 9.5% in value.
Q4, 2008
In the last quarter of the year share prices in the regional and global stock market experienced sharp decline on the concerns of the fallout of the global financial crisis and global recession.
In tandem with the lower KLCI, LPI Capital share retreated to a year low of RM8.20 on 29 October 2008 before recovering and closed at RM9.45 for the year ending 31 December 2008.
In 2008, LPI Capital’s value in terms of market capitalisation declined by 21.25% or RM353.7 million to RM1,310.9 million compared to the decline of 39.3% of the KLCI. Based on the closing price on 31 December 2008 of RM9.45 and on the total gross dividend of 110 sen paid during the year, the shareholders would have enjoyed a gross dividend yield of 14% for 2008.
Read: Page 80/217 to 87/217
LPI CAPITAL BHD SHARE PRICE PERFORMANCE IN 2008
Q1, 2008
LPI Capital Bhd share price rose from RM12.10 as at 31 December 2007 to a year high of RM12.70 on 14 February 2008 following the announcement of its 2007 results on 13 February 2008. With its improved results, LPI Capital declared a final dividend of 55 sen per share less 26% income tax and a special dividend of 25% per share less 26% income tax. With the interim dividend of 30 sen less income tax of 26%, the total gross dividend declared for the year was 110 sen per share. The ex-dividend price was RM12.20 traded on 15 February 2008.
A sell down in regional and global equity market triggered by the sub-prime and credit crunch problems in US and coupled with results of the 12th general election held on 8 March 2008, LPI Capital share price fell to close at a low for the first quarter of 2008 at RM10.80 on 10 March 2008. This was the lowest price recorded for the first quarter of 2008.
The share price of LPI Capital remained at this level for the next two weeks before gradually improved in line with the general up trend of the KLCI to reach RM11.20 on the close of the first quarter.
Q2, 2008
The early second quarter saw LPI Capital share price hovering around RM11.30 and began to edge upward reaching RM12.30 on 13 May 2008. In line with the decline in local and regional equity markets on concerns of the rising inflation rate due to the increase in crude oil prices, LPI Capital share price corrected to RM11.80 at the close of the second quarter.
Q3, 2008
When the improved second quarter results were announced together with an interim dividend of 30% less 26% income tax on 10 July 2008, LPI Capital share price traded upwards moderately. After the payment of dividend the share prices consolidated to RM11.00 and this level was maintained till the middle of September. Thereafter the string of highly published failures of large financial institutions in US began to hound the equity markets and LPI Capital share price started to trend downwards in the last weeks of the third quarter. The share price closed at RM10.40 shedding a 9.5% in value.
Q4, 2008
In the last quarter of the year share prices in the regional and global stock market experienced sharp decline on the concerns of the fallout of the global financial crisis and global recession.
In tandem with the lower KLCI, LPI Capital share retreated to a year low of RM8.20 on 29 October 2008 before recovering and closed at RM9.45 for the year ending 31 December 2008.
In 2008, LPI Capital’s value in terms of market capitalisation declined by 21.25% or RM353.7 million to RM1,310.9 million compared to the decline of 39.3% of the KLCI. Based on the closing price on 31 December 2008 of RM9.45 and on the total gross dividend of 110 sen paid during the year, the shareholders would have enjoyed a gross dividend yield of 14% for 2008.
KNM adds RM155m to order book
KNM adds RM155m to order book
Tags: Borsig Boiler Systems GmbH | Jebel Ali Free Zone | KNM Group Bhd | new orders
Written by The Edge Financial Daily
Tuesday, 06 October 2009 00:29
KUALA LUMPUR: KNM GROUP BHD []’s wholly owned units in Malaysia, Germany and Dubai, have collectively secured RM155 million worth of new orders from Sept 24 to Oct 5, the company said on Oct 5.
KNM said FBM-KNM FZCO, a unit incorporated in Dubai’s Jebel Ali Free Zone, won a contract from Danieli & C Officine Meccantiche SpA for reactor vessels for the Gulf Steel Plant project in Egypt; KNM’s Germany-incorporated Borsig Boiler Systems GmbH won an order for the engineering, supply and installation of steam boilers at Chemelot Industrial Estate in Geleen, Netherlands, from EdeA VOF; while KNM Process Systems’ contract was from Technip Italy SpA, for shop assembly columns for the Jubail Export Refinery project in Saudi Arabia.
KNM expects the orders to contribute positively to its earnings for the years ending Dec 31, 2009 and 2010.
KNM added 1.5 sen to 76 sen with 19.05 million shares done on Oct 5.
http://www.theedgemalaysia.com/business-news/150666-knm-adds-rm155m-to-order-book.html
Tags: Borsig Boiler Systems GmbH | Jebel Ali Free Zone | KNM Group Bhd | new orders
Written by The Edge Financial Daily
Tuesday, 06 October 2009 00:29
KUALA LUMPUR: KNM GROUP BHD []’s wholly owned units in Malaysia, Germany and Dubai, have collectively secured RM155 million worth of new orders from Sept 24 to Oct 5, the company said on Oct 5.
KNM said FBM-KNM FZCO, a unit incorporated in Dubai’s Jebel Ali Free Zone, won a contract from Danieli & C Officine Meccantiche SpA for reactor vessels for the Gulf Steel Plant project in Egypt; KNM’s Germany-incorporated Borsig Boiler Systems GmbH won an order for the engineering, supply and installation of steam boilers at Chemelot Industrial Estate in Geleen, Netherlands, from EdeA VOF; while KNM Process Systems’ contract was from Technip Italy SpA, for shop assembly columns for the Jubail Export Refinery project in Saudi Arabia.
KNM expects the orders to contribute positively to its earnings for the years ending Dec 31, 2009 and 2010.
KNM added 1.5 sen to 76 sen with 19.05 million shares done on Oct 5.
http://www.theedgemalaysia.com/business-news/150666-knm-adds-rm155m-to-order-book.html
Secretive gathering of ships off coast of Malaysia
Secretive gathering of ships off coast of Malaysia
Written by South China Morning Post
Monday, 05 October 2009 12:25
HONG KONG: In the soupy green tropical waters that lap the jungle shores of southern Malaysia, a lone Indian officer in a peaked cap glares anxiously down from the 280-metre-long deck of a towering container ship anchored alongside countless other idle vessel.
As our ramshackle wooden fishing boat bobs up and down on the waves, perilously close to the ship, he shoos us away and then, spotting the photographer, scurries back into the echoing vastness of the vessel he has been left to look after almost by himself.
Navigating a precarious course around the hull of the Panama-registered ship, we reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ships sit high in the water.
Nearby, as we meander in searing midday heat and dripping humidity between the hulls of silent ships, a young European officer peers curiously at us from the bridge of an oil tanker owned by Maersk, the world's biggest container shipping line. We ask to go on board, but are waved away by two Indian crewmen. "No one is supposed to be here and they are very frightened of pirates," explains our captain.
Here, on a sleepy stretch of shoreline, we have tracked down what might count as the biggest and most secretive gathering of ships in maritime history. Over the past year, as the global economic crisis has deepened, hundreds of container ships, bulk carriers and oil tankers have congregated, drawing an iron curtain along more than 30 kilometres of Johor state coastline.
With its palm-fringed sandy beaches and lush hinterland, this could be an enticing destination for tourists. Instead, a forbidding armada of steel has sailed quietly in from around the world to transform it into a last resort for the global shipping industry.
Offshore from the bamboo huts and fishing villages, between 300 and 500 vessels, equivalent to the United States and British navies combined, have gathered. It's a remarkable sight and one that shipowners and government economists would prefer you not to see. This vast "ghost fleet" - which, in better times, would have been steaming fully laden between China, Europe and the US to stock shops ahead of Christmas - is symbolic of the depths of the sickness still ravaging the world's economies.
"We know the ships are anchored out there somewhere but we aren't sure exactly where," an officer from one of the sailors' unions in Singapore told us. "People have flown over the area and talked of seeing a massive number of ships off the coast of Malaysia, so that's probably the place to look." And it is.
With the waters of Singapore already teeming with ships paying hefty anchorage fees, idle vessels are instead being anchored in shallow international waters between the southern coast of Malaysia and the Indonesian island of Batam.
Fisherman Ah Wat, 42, who lives in Sungai Rengit, Johor, says: "Before, there was nothing out there - just sea. Then the big ships suddenly came one day, and every day there are more of them. Some of them stay for a few weeks and then go away. But most of them just stay. You used to look from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon."
The size of the idle fleet is so great you can only begin to guess at its number when the ships' lights are switched on after sunset. Seen from the shore, a blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts is a surreal and disorienting experience, making you feel as if you are adrift on a dark sea staring at an illuminated city.
"We don't understand why they are here," says Ah Wat. "There are so many ships - there must be nearly 500 out there - but no one seems to be on board. When we sail past them in our fishing boats, we never see anyone.
"They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships."
Tim Huxley, chief executive of Wah Kwong Shipping in Hong Kong, says: "A couple of years ago, those ships would have been steaming back and forth, going at full speed, but now you have got something like 12 per cent of the world's container ships currently doing nothing."
Shipowners choose to anchor vessels in waters close to Singapore because it is well positioned for key global trade routes when the economy revives, Huxley says. It is also seen as a safe haven because of the region's benign climate and relatively low typhoon count.
Business for bulk carriers has picked up slightly in recent months, largely because of the mainland's revived appetite for raw materials such as iron ore, says Huxley, but this is a small part of international business, and the prospects for the container trade remain bleak. Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in what Maersk calls a "crisis of historic dimensions". Last month, the company reported its first half-year loss since it was founded, 105 years ago.
Martin Stopford, managing director of Clarksons, London's biggest ship broker, says: "In 2006 and 2007, [container] trade was growing at 11 per cent. In 2008, it slowed down by 4.7 per cent. This year we think it might go down by as much as 8 per cent. Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere."
Trade is slowing because retailers in the West are running on very low stock levels, not only because they expect consumer spending to be down, even ahead of Christmas, but also because their levels of credit have shrunk, so they are unable to keep large stockpiles.
Stopford explains: "Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tonnes of cargo a year. That's more than one tonne per person and probably two to three tonnes for richer people like us in the West. If the total goes down by 5 per cent or so, that's a lot of cargo that isn't moving.
"We will find out at Christmas whether there are enough PlayStations in the shops or not."
About 4,800 kilometres northeast of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.
As the shipping industry teeters on the brink of collapse, the activity at boatyards such as Ulsan and Mokpo in South Korea looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches, have little choice; they are trapped in a cruel time warp.
A decade ago, South Korean president Kim Dae-jung issued a decree to his industrial captains: he wished to make his nation the market leader in shipbuilding. By 2004, his vision had been made real. His country's low-cost yards were winning 40 per cent of world orders. Japan was second, with 24 per cent, and China accounted for 14 per cent.
But shipbuilding is a horrendously hard market to plan. There is a three-year lag between the placing of an order and the delivery of a ship. With contracts signed, down payments made and work under way, stopping work on a new ship is the economic equivalent of trying to change direction in an oil tanker travelling at full speed towards an iceberg.
The labour in Korean shipyards represents the completion of contracts ordered in the fat years of 2006 and 2007. Those ships are doomed to sail out into a global economy that no longer wants them.
Maersk announced last month that it was renegotiating terms and prices with Asian shipyards for 39 ordered tankers and gas carriers. Maersk's Kristian Morch told the global shipping newspaper Lloyd's List: "It is a perfect storm. You have a contraction of oil demand, you have a falling world economy and you have a contraction of financing capabilities - and at the same time a lot of new ships are being delivered."
Demand peaked in 2005, when, with surplus tonnage worldwide standing at just 0.7 per cent, shipowners raced to order, getting in before docks and berths at major shipyards were fully booked. That spell of panic buying has heightened today's mismatch between supply and demand.
Keith Wallis, East Asia editor of Lloyd's List, says: "There was an ordering frenzy on all types of vessel, particularly container ships ... fuelled by consumer demand in the UK, Europe and North America, as well as the demand for raw materials from China."
Most orders to be delivered within the next six to nine months will be honoured, Wallis predicts, and the ships will go into service at the expense of older vessels, which will be scrapped or anchored off places such as southern Malaysia.
"Some shipowners won't be able to pay their final instalments when the vessels are completed," says Wallis. "Normally, 50 to 60 per cent is paid on delivery."
South Korean shipyard Hanjin Heavy Industries says it has had to put up for sale three container ships ordered at a cost of US$100 million by Iran's state shipping line after the Iranians said they could not pay the bill.
"The prospects for shipyards are bleak, particularly for the South Koreans, where they have a high proportion of foreign orders," Wallis says. "Whole communities in places like Mokpo and Ulsan are involved in shipbuilding and there is a lot of sub-contracting to local companies.
"The problems will start to emerge next year and certainly in 2011, because that's when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build."
Christopher Palsson, a Sweden-based senior consultant at Lloyd's Register-Fairplay Research, says: "Some ships will be sold for demolition but the net balance will put even more pressure on the freight rates and the market itself. A lot of shipowners and operators are going to find themselves in a very difficult situation."
The current downturn is the worst in living memory and more severe even than the slump of the early 1980s, Palsson says.
"Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected - bulk carriers, tankers, container carriers ... the lot," he says. "It is a much wider-spread situation that we have today. China was not a major player in the world economy at that time. Neither was India. We had the Soviet Union. We had shipbuilding in Europe. But then, back in those days the world was a very different place."
Nowhere are those stark economic realities being felt as keenly as in the waters off southern Malaysia. Singapore port chaplain Christian Schmidt says that for the sailors stranded at sea, the pressures are immense.
"There will be a skeleton crew of maybe six to eight people. Some vessels stay that way for one, two or three months. For the crew, it's a tremendous psychological strain. You are stuck with the same small group of people and you have no idea how long it will be for," he says. "It's a very difficult situation. Seafarers tend never to make a big deal out of the hardships they suffer. They say this is what you expect when you go to sea. But in their current situation, many of them cannot keep in touch with their families and relatives. It is as if they are chained up in a prison."
On the shore, the strain is showing as well. "We just want them to go away," says retired fisherman Ha Heng, 62. "They are destroying our livelihood. Fishermen can't cast their nets because there are so many ships and the oil that washes up on the beaches is killing the fish. We've had enough.
"One day, we would like to be able to look out and see the horizon again." - South China Morning Post
Written by South China Morning Post
Monday, 05 October 2009 12:25
HONG KONG: In the soupy green tropical waters that lap the jungle shores of southern Malaysia, a lone Indian officer in a peaked cap glares anxiously down from the 280-metre-long deck of a towering container ship anchored alongside countless other idle vessel.
As our ramshackle wooden fishing boat bobs up and down on the waves, perilously close to the ship, he shoos us away and then, spotting the photographer, scurries back into the echoing vastness of the vessel he has been left to look after almost by himself.
Navigating a precarious course around the hull of the Panama-registered ship, we reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ships sit high in the water.
Nearby, as we meander in searing midday heat and dripping humidity between the hulls of silent ships, a young European officer peers curiously at us from the bridge of an oil tanker owned by Maersk, the world's biggest container shipping line. We ask to go on board, but are waved away by two Indian crewmen. "No one is supposed to be here and they are very frightened of pirates," explains our captain.
Here, on a sleepy stretch of shoreline, we have tracked down what might count as the biggest and most secretive gathering of ships in maritime history. Over the past year, as the global economic crisis has deepened, hundreds of container ships, bulk carriers and oil tankers have congregated, drawing an iron curtain along more than 30 kilometres of Johor state coastline.
With its palm-fringed sandy beaches and lush hinterland, this could be an enticing destination for tourists. Instead, a forbidding armada of steel has sailed quietly in from around the world to transform it into a last resort for the global shipping industry.
Offshore from the bamboo huts and fishing villages, between 300 and 500 vessels, equivalent to the United States and British navies combined, have gathered. It's a remarkable sight and one that shipowners and government economists would prefer you not to see. This vast "ghost fleet" - which, in better times, would have been steaming fully laden between China, Europe and the US to stock shops ahead of Christmas - is symbolic of the depths of the sickness still ravaging the world's economies.
"We know the ships are anchored out there somewhere but we aren't sure exactly where," an officer from one of the sailors' unions in Singapore told us. "People have flown over the area and talked of seeing a massive number of ships off the coast of Malaysia, so that's probably the place to look." And it is.
With the waters of Singapore already teeming with ships paying hefty anchorage fees, idle vessels are instead being anchored in shallow international waters between the southern coast of Malaysia and the Indonesian island of Batam.
Fisherman Ah Wat, 42, who lives in Sungai Rengit, Johor, says: "Before, there was nothing out there - just sea. Then the big ships suddenly came one day, and every day there are more of them. Some of them stay for a few weeks and then go away. But most of them just stay. You used to look from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon."
The size of the idle fleet is so great you can only begin to guess at its number when the ships' lights are switched on after sunset. Seen from the shore, a blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts is a surreal and disorienting experience, making you feel as if you are adrift on a dark sea staring at an illuminated city.
"We don't understand why they are here," says Ah Wat. "There are so many ships - there must be nearly 500 out there - but no one seems to be on board. When we sail past them in our fishing boats, we never see anyone.
"They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships."
Tim Huxley, chief executive of Wah Kwong Shipping in Hong Kong, says: "A couple of years ago, those ships would have been steaming back and forth, going at full speed, but now you have got something like 12 per cent of the world's container ships currently doing nothing."
Shipowners choose to anchor vessels in waters close to Singapore because it is well positioned for key global trade routes when the economy revives, Huxley says. It is also seen as a safe haven because of the region's benign climate and relatively low typhoon count.
Business for bulk carriers has picked up slightly in recent months, largely because of the mainland's revived appetite for raw materials such as iron ore, says Huxley, but this is a small part of international business, and the prospects for the container trade remain bleak. Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in what Maersk calls a "crisis of historic dimensions". Last month, the company reported its first half-year loss since it was founded, 105 years ago.
Martin Stopford, managing director of Clarksons, London's biggest ship broker, says: "In 2006 and 2007, [container] trade was growing at 11 per cent. In 2008, it slowed down by 4.7 per cent. This year we think it might go down by as much as 8 per cent. Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere."
Trade is slowing because retailers in the West are running on very low stock levels, not only because they expect consumer spending to be down, even ahead of Christmas, but also because their levels of credit have shrunk, so they are unable to keep large stockpiles.
Stopford explains: "Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tonnes of cargo a year. That's more than one tonne per person and probably two to three tonnes for richer people like us in the West. If the total goes down by 5 per cent or so, that's a lot of cargo that isn't moving.
"We will find out at Christmas whether there are enough PlayStations in the shops or not."
About 4,800 kilometres northeast of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.
As the shipping industry teeters on the brink of collapse, the activity at boatyards such as Ulsan and Mokpo in South Korea looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches, have little choice; they are trapped in a cruel time warp.
A decade ago, South Korean president Kim Dae-jung issued a decree to his industrial captains: he wished to make his nation the market leader in shipbuilding. By 2004, his vision had been made real. His country's low-cost yards were winning 40 per cent of world orders. Japan was second, with 24 per cent, and China accounted for 14 per cent.
But shipbuilding is a horrendously hard market to plan. There is a three-year lag between the placing of an order and the delivery of a ship. With contracts signed, down payments made and work under way, stopping work on a new ship is the economic equivalent of trying to change direction in an oil tanker travelling at full speed towards an iceberg.
The labour in Korean shipyards represents the completion of contracts ordered in the fat years of 2006 and 2007. Those ships are doomed to sail out into a global economy that no longer wants them.
Maersk announced last month that it was renegotiating terms and prices with Asian shipyards for 39 ordered tankers and gas carriers. Maersk's Kristian Morch told the global shipping newspaper Lloyd's List: "It is a perfect storm. You have a contraction of oil demand, you have a falling world economy and you have a contraction of financing capabilities - and at the same time a lot of new ships are being delivered."
Demand peaked in 2005, when, with surplus tonnage worldwide standing at just 0.7 per cent, shipowners raced to order, getting in before docks and berths at major shipyards were fully booked. That spell of panic buying has heightened today's mismatch between supply and demand.
Keith Wallis, East Asia editor of Lloyd's List, says: "There was an ordering frenzy on all types of vessel, particularly container ships ... fuelled by consumer demand in the UK, Europe and North America, as well as the demand for raw materials from China."
Most orders to be delivered within the next six to nine months will be honoured, Wallis predicts, and the ships will go into service at the expense of older vessels, which will be scrapped or anchored off places such as southern Malaysia.
"Some shipowners won't be able to pay their final instalments when the vessels are completed," says Wallis. "Normally, 50 to 60 per cent is paid on delivery."
South Korean shipyard Hanjin Heavy Industries says it has had to put up for sale three container ships ordered at a cost of US$100 million by Iran's state shipping line after the Iranians said they could not pay the bill.
"The prospects for shipyards are bleak, particularly for the South Koreans, where they have a high proportion of foreign orders," Wallis says. "Whole communities in places like Mokpo and Ulsan are involved in shipbuilding and there is a lot of sub-contracting to local companies.
"The problems will start to emerge next year and certainly in 2011, because that's when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build."
Christopher Palsson, a Sweden-based senior consultant at Lloyd's Register-Fairplay Research, says: "Some ships will be sold for demolition but the net balance will put even more pressure on the freight rates and the market itself. A lot of shipowners and operators are going to find themselves in a very difficult situation."
The current downturn is the worst in living memory and more severe even than the slump of the early 1980s, Palsson says.
"Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected - bulk carriers, tankers, container carriers ... the lot," he says. "It is a much wider-spread situation that we have today. China was not a major player in the world economy at that time. Neither was India. We had the Soviet Union. We had shipbuilding in Europe. But then, back in those days the world was a very different place."
Nowhere are those stark economic realities being felt as keenly as in the waters off southern Malaysia. Singapore port chaplain Christian Schmidt says that for the sailors stranded at sea, the pressures are immense.
"There will be a skeleton crew of maybe six to eight people. Some vessels stay that way for one, two or three months. For the crew, it's a tremendous psychological strain. You are stuck with the same small group of people and you have no idea how long it will be for," he says. "It's a very difficult situation. Seafarers tend never to make a big deal out of the hardships they suffer. They say this is what you expect when you go to sea. But in their current situation, many of them cannot keep in touch with their families and relatives. It is as if they are chained up in a prison."
On the shore, the strain is showing as well. "We just want them to go away," says retired fisherman Ha Heng, 62. "They are destroying our livelihood. Fishermen can't cast their nets because there are so many ships and the oil that washes up on the beaches is killing the fish. We've had enough.
"One day, we would like to be able to look out and see the horizon again." - South China Morning Post
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