Maybank among top losers as KLCI falls nearly 15pts

Tuesday August 20, 2013 

KUALA LUMPUR: Fund selling of key bank stocks including Maybank and CIMB weighed on the market sentiment on Tuesday, pushing the 30-stock FBM KLCI down nearly 15 points.

At 10.51am, the KLCI was down 14.76 points to 1,763.60. Turnover was 983.32 million shares valued at RM804.39mil. Losers thrashed gainers 614 to 71 while 219 counters were unchanged.

At Bursa Malaysia, Maybank fell 34 sen to RM10.10 with 15.45 million shares done, HL Bank lost 28 sen to RM13.90 and CIMB 21 sen lower at RM7.69.

Bloomberg reported Asian stocks fell for a fourth day, with the regional benchmark equities gauge trading near a two- week low, as metals prices declined for the first time in five days and profit at QBE Insurance Group Ltd slumped.

The wire report said speculation that the Federal Reserve will curb bond buying spurred investors to sell risk assets across Asia and emerging markets. The Federal Open Market Committee's July meeting minutes are scheduled to be released on Wednesday.

http://www.thestar.com.my/Business/Business-News/2013/08/20/Maybank-among-top-losers-as-KLCI-falls-nearly-15pts.aspx

Inter-Pacific Research: Rise in government bond yield, the weakness in ringgit and the Fitch negative rating resulted in the weaker performance of the Malaysian market.

Monday August 19, 2013 MYT 6:31:21 PM

BY JOSEPH CHIN, NADYA NGUI

KUALA LUMPUR: Malaysian equities closed lower on Monday in very volatile trade, tracking the weaker regional markets, while volume surged past the three billion units traded and the ringgit weakened to the lowest since June 2010.

At 5pm, the FBM KLCI was down 9.88 points or 0.55%  to 1,778.36. Turnover was 3.16 billion shares valued at RM2.44bil. The broader market weakened to see decliners beating advancers 515 to 339 while 279 counters were unchanged.

Reuters reported rising expectations the Federal Reserve will soon scale back its stimulus drove German and US bond yields to multi-month highs on Monday and dealt a blow to emerging markets, with India's rupee cartwheeling to historic lows.

It reported Wednesday's minutes from the last Fed meeting could offer hints on when the U.S. central bank will taper its bond-buying and up-to-date sentiment indicators will help track momentum in the reviving euro zone.

Inter-Pacific Research Sdn Bhd research head Pong Teng Siew said rise in government bond yield, the weakeness in ringgit and the Fitch negative rating resulted in the weaker performance of the Malaysian market.

He said it was a rather serious drop across the region where  Indonesia and India are experiencing a balance of payment problem.

"Indonesia spooked the market as foreign investors are afraid Malaysia might go down the same path.

"This negative data has been chipping away investors confidence and they are withdrawing," he told StarBiz, adding that he was concerned that the ringgit would weaken further. The ringgit was at 3.2872 against the US dollar from the previous day's 3.2770.

The Indian rupee slid as far as 62.50 per dollar, emphatically breaching the previous low of 62.03. The share market lost 1.4%, on top of a 4% drubbing last Friday.

Reports said Indonesia's rupiah shed 0.9% to four-year lows at 10,475 per dollar, with share and bond markets weakening in the wake of data showing a sharp widening in the country's current account deficit. The Jakarta Composite fell 5.58% to 4,313.52.

The weakening ringgit weighed on banking stocks on Bursa Malaysia. CIMB fell 14 sen to RM7.90 and erased 2.43 points off the KLCI. Hong Leong Bank and HLFG fell 18 sen each to RM14.18 and RM14.50 while RHB Cap was down 14 sen to RM7.91 but Public Bank gained six sen to RM17.30.

Genting Malaysia fell nine sen to RM4.21 and wiped out 0.95 of a point from the KLCI.

BAT fell the most, down 48 sen to RM62. Petronas Dagangan lost 32 sen to RM27.98 and Lafarge 18 sen to RM10.

Crude palm oil futures for third month delivery rose RM23 to RM2,332. Kluang rose 20 sen to RM3.50 and KL Kepong 14 sen to RM21.34. However, PPB lost 30 sen to RM14.36 and Genting Plantations 15 sen to RM9.53. However,

MAS was the most active with the largest trading volume ever of 744.25 million units done. It rose 3.5 sen to 36.5 but off the day's best of 40 sen.

Among the key regional markets:

Japan's Nikkei 225 rose 0.79% to 13,758.13;

Hong Kong's Hang Seng Index fell 0.24% to 22,463.70;

Shanghai's Composite Index rose 0.83% to 2,085.60;

Taiwan's Taiex fell 0.31% to 7,900.21;

South Korea's Kospi fell 0.13% to 1,917.64 and

Singapore's Straits Times Index fell 0.76% to 3,173.33.

US light crude oil fell 21 cents to US$107.25 but Brent rose 13 cents to US$110.53.

Spot gold was flat at US$1,376.57

http://www.thestar.com.my/Business/Business-News/2013/08/19/Market-closes-10-pts-down-volume-hits-3b-shares.aspx

Value investors prefer to estimate the intrinsic value of a company by looking first at the assets and then at the current earnings power of the company.

At the core of most investment approaches lies the practice of valuations, the techniques by which the real or intrinsic value of a company can be estimated.

Most investors want to buy securities whose true worth is not reflected in the current market price of the shares.

There is general agreement that the value of a company is the sum of the cash flows it will produce for the investors over the life of the company, discounted back to the present.  

In many cases, however, this approach depends on estimating cash flows far into the future, well beyond the horizon of event he most pro-phetic analyst.

Value investors since Graham have always preferred a bird in the hand - cash in the bank or some close equivalent - to the rosiest projection of future riches.

Therefore, instead of relying on techniques that must make assumptions about events and conditions far into the future, value investors prefer to estimate the intrinsic value of a company by looking:
1.  first at the assets and 
2.  then at the current earnings power of a company.  

Only in exceptional cases are they willing to factor in the value of potential growth.  

New information is interpreted, and not all of that interpretation is rational. (Behavioral Finance)

Psychological research in behavioural finance dispute the idea that investors act as dispassionate calculating machines.

It turns out that like everyone else, investors respond to events in the world with certain powerful biases.  

New information is interpreted, not simply digested, and not all of that interpretation is rational.

One powerful set of biases tends to give more significance to the most recent news, good or bad, than is actually warranted.  The stocks of companies that report high rates of growth are driven to extremes, as are stocks of companies that disappoint.  (Recency bias).

These findings about excessive reactions confirm a belief that value investors have held since Graham:  Over the long run, performance of both companies and share prices generally reverts to a mean.

"Many shall be restored that now are fallen and many shall fall that now are in honor."

The most succinct description of value investing

"The value investor seeks to purchase a security at a bargain price, the proverbial dollar for 50 cents." 

Of course, there is considerably more to it than that.   However, this is a good starting point.



History of the Teaching of Value Investing in Columbia University

1928:  Benjamin Graham began to teach a course on security analysis at Columbia University.

1978:  Roger Murray, an author of the fifth edition of Security Analysis retired, and the course and the tradition disappeared from the formal academic curriculum.

1992:  Mario Gabelli, who had taken the course with Roger Murray, prevailed on Murray to offer a series of lectures on value investing to Gabelli's own analysts, who had found nothing like this in their formal MBA courses.  Bruce Greenwald, the newly appointed Heilbrunn Professor of Asset Management and Finance, attended those lectures out of curiosity.

1993:  Bruce Greenwald dragooned Roger Murray into joining him in offering a revived and revised version of the value course in Columbia University.

Effects of a stock market bubble on the markets and on the broader economy.

Effects of a bubble on the markets are obvious.

1.  On the way up, investors become too confident about their anticipated returns.

2.  Money floods in - part of the definition of a bubble - and prices rise to even more unrealistic levels.

3.  At some point, air starts to come out of the bubble.

4.  Share prices drop and some investors, including pension plans and other institutional holders, lose a lot of money.

5.  Many equity investors feel burned and move out of the stock market for good, and it takes years for new ones to take their place.

6.  The consequence of a bubble for markets, then, is to reward winners and punish losers with a savage intensity.  


The influence of a bubble market on the broader economy maybe even more long lasting and more perverse.  Here are some of the more important consequences of the technology bubble of 2000 in the U.S.:

1.  Excessive investment in telecommunications and related industries, thanks to the funds available from stock offerings and borrowings that the bubble market made possible.

2.  Expansion to the point of collapse, or near-collapse, by companies that were profitable but used the high price of their shares to make foolish acquisitions or increase capacity beyond what a sensible view of the future would have allowed.

3.  Incompetent, dishonest, and fraudulent behaviour by corporate executives, boards of directors, auditors, investment bankers, security analysts, and other market participants.


Conclusion:

Competitive market economies have always been subject to business cycles.

Like all cycles, they are painful on the way down.

A wider acceptance of the principles of value investing may ease some of that pain the next time the mania sets in.

Value Investing approach outperformed the market as a whole and Value Investors who stayed the course were rewarded, as least, on a relative basis.

Value investors emphasize on

1.  Real Assets
2.  Current Earnings

They treat prospects for profitable growth with skepticism.

Do not confuse productivity with profitability.  Productivity is not the same as profitability.

[The Internet can be both the friend of productivity and the scourge of profitability.   Airline travelers, for instance, can search more easily for lower fares, more convenient routes, and more generous rewards. Intensified competition almost always lowers prices.]

It is profits that ultimately determine stock prices.

Only firm with unique abilities, companies that enjoy a competitive advantage will reap extraordinary profits.

Chuck Carlson - Stock Market and Investment Opportunities

Published on 29 Apr 2013

The power of process will be essential for unemotional investing in this age of turbulence. Investors will learn about profit opportunities in 2013 and the power of dividends.

Investment banking

Dr Kathy Walsh from the School of Banking and Finance at the Australian School of Business has produced a video that introduces undergraduate students to the world of investment banking. 

Why to Invest in stock market?

Not doing anything differently: Buffet (2009)

16 Nov 2009
Warren Buffet, chairman and CEO, Berkshire Hathaway, has faith in his long standing value investing philosophy

Warren Buffett on Economics: Trading Stocks, Imports, Exports, Debt and U.S. Dollars

Warren Buffett: An Amazing Interview on Economic Recovery, Finance, Stocks (2012)

@39.00 "I read almost every book in the library on investment in Omaha by the age of 11."

Warren Buffett - Speculation Vs Investment

Understanding Risk and Return tradeoff

The Six Important Financial Parameters

Warren Buffett - Wiki Article

Systemic Value Investing

The speaker summarizes the principles of Peter Lynch, Warren Buffett and Benjamin Graham.
@25 min:  Long term investing - holding on to your strategies for the long term.

Warren Buffett (1962) talks about a brief stock market drop

Mr. Buffett the Teacher: Warren Buffett (2009)

@6.40  The 2 most important topics to learn:
1.  How to value an asset and
2.  Understanding the Market Fluctuations