How Does GST, Subsidy Cuts, Credit Rating affects us as Malaysian?

An article from The Edge dated 1st March 2013 highlighted the following:

The article states that if the Malaysia Government is able to reduce the national debt, better credit ratings will be given to Malaysia by Standards & Poor Rating Agency (S&P). Therefore a country with excellent credit rating would most likely attract more foreign investors to invest in Malaysia. In some ways the article created a feel good factor to showcase that the government (pre-election) was doing a great job at reducing our national debt. 

However does the article above truly reflects the current situation of our country's debt? 

Digging further back to an article from The Malaysian Insider dated 6th September 2012 as shown below:

In this article from The Malaysian Insider, it clearly states that our country's debt is in serious shit trouble. S&P is in fact threatening to downgrade our credit rating if measures such as introduction of "Goods and Services Tax (GST)" and subsidy cuts. 

Both pre-election articles painted different pictures of our country's debt situation. So which exactly is the true situation of our country's debt? Here's an article from The Edge published on the 17th May 2013 (post election) as shown below:

Based on this article, the implementation of GST is indeed inevitable in Malaysia thereby concurring with the earlier article from The Malaysian Insider. Our country's debt situation is in serious situation and measures recommended by S&P to introduce GST and subsidy cuts must be implemented to please the rating agency. Despite all the well worded press release from Datuk Seri Idris Jala about GST, the fact remains the same! 

If our country's rating is downgraded, our Economic Transformation Program (ETP) which is highly dependent on foreign investors would eventually fail. Similar to a business, if ETP fails to attract foreign investors, the borrowed billions being pumped into this program would lead to further debt crisis for our country. 

To cut the long story short, here are some key points I would like to summarize:

1. GST and Subsidy Cuts will be carried out in order create additional income for the government and to prevent our debt situation from worsening.
2. The Economic Transformation Program must succeed in terms of generating income for the country to offset the spending.
3. Our country cannot afford a rating downgrade by S&P or we might be the next Greece in the making.

How Does GST, Subsidy Cuts, Credit Rating and all the mumbo-jumbo above affects us as Malaysian?

For many of us whom are ignorant, we might not be overly concerned about credit rating and national debt.

"This is all Government fault-lar!" that's what many of us would say. Politics aside, the issue of national debt is a worrying situation which would eventually be cascaded down to the rakyat as seen from the implementation of GST.

Then we have subsidy cuts which most likely see the rise in petrol prices, cooking gas, cooking oil, sugar, flour and rice. By removing subsidies from the above items, we are looking at a rise in the country's inflation rate and ultimately reducing the rakyat's purchasing power.

(to know more about government subsidy and consumer price index, do read my article on Do You Really Know What Inflation Is?)

Here's a simple illustration of the situation (click to enlarge):

Our country's current inflation currently stands at about 2%. However from my article Discovering Malaysia's Actual Inflation Rate, I've calculated that after removing all government subsidies, our inflation rate would increase by an additional 5.82%. Therefore the actual inflation rate is actually 7.82%!!!

FYI, if your savings and retirement funds are kept in EPF (6%) or Fixed Deposite Rate (3.5%), then you better start worrying!

Die-lar...What To Do Next?

Here are some recommended ways to offset the problem of inflation as well as to retain your purchasing power:

1. Make more money then you can spend.

2. Invest in instruments that can provide returns higher then the inflation rate such as Unit Trust or Stocks.

3. Hedge your money into Gold or Property.

4. Last resort, migrate to another country.

For myself, I selected to invest into Item 2 and 3 as my counter measures for the above situation. 

How about you?

Cheers and Happy Investing!

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UNIT TRUST STATISTICS - WHAT YOU DO NOT KNOW

Here are some general statistics about Unit Trust taken from Securities Commission website, updated 31st March 2013:

Key Points:

• There are 41 different Fund Management Companies
• The fund management companies manage a total of 609 funds
• 436 funds are Conventional Type ( funds can invest into anything that is available under the sun)
• 173 funds are Islamic Type (funds that are managed according to the Syariah law, no casinos, gambling, alcohol and banking stocks)
• 20.90% of our Bursa Malaysia Stock Market Capitalization consist of asset managed by equity related unit trust funds.

Th purpose of today's short post is to highlight the fact that there is not only one unit trust company in the market. Secondly, these statistics I hope will help broaden your perspective about unit trust investing by realizing that as an investor you have the right to be choosy and picky when it comes to selecting a fund to invest in. In fact with 609 funds available, you might need to refer to certain consultants for advice.

Investing Unit trust is similar to buying a car. If you have the "moolah" you can choose between a Merz, an Audi or perhaps a BMW. Just because Public Mutual a Merz is an older and more established brand in Malaysia, it does not mean you have to buy a Merz.....if you get my point.

Cheers and Happy Investing

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Top 10 Best Performing Unit Trust Funds As of 22th May 2013

Normally, the top 10 review will be published early and middle of each month. In this edition of Top 10 Best Performing Unit Trust, I had to delay the mid month review till today as the data provider did not fully update all fund's NAV during mid-May. My apologies to all readers.

If this is your first time reading this review, I would highly recommend that you read "A Guide Towards Understanding Unit Trust Performance Table" before proceeding.

Review
Fund Category : Asia excluding Japan 
Top 10 Best Performing Fund for Category Asia Excluding Japan (click Image to Enlarge):

2 Weeks Gain/Loss Ranking Table for Category Asia Excluding Japan:

Fund Name	YTD as of 30th April 2013	YTD as of 22nd May 2013	2 Weeks Gain / Loss (%)	2 Weeks Gain/ Loss Rankings	Previous 2 Weeks Gain/Loss Rankings
Public Islamic Asia Dividend Fund	-3.18	-2.2	0.98	5	3
Public Asia Ittikal Fund	-3.84	-0.74	3.1	3	2
Eastspring Investments Asia Pacific Shariah Equity Fund	0.6	0.14	-0.46	9	6
PB Islamic Asia Equity Fund	-4.74	-1.6	3.14	2	1
Pheim Asia Ex-Japan Islamic	-0.6	5.22	5.82	1	9
MAAKL Shariah Asia-Pacific Fund	-5.9	-4.96	0.94	6	8
CIMB Islamic Asia Pacific Equity Fund	-1.2	-0.54	0.66	8	5
Eastspring Investments Asia Pacific Equity MY Fund	-1.69	-0.24	1.45	4	4
Hong Leong Asia-Pacific Dividend Fund	0.89	1.73	0.84	7	7
AmCumulative Growth	Newcomer	0.4	N/A	N/A	N/A
AVERAGE 2 WEEKS GAIN/LOSS (%)			1.83

Review of Asia Excluding Japan Funds:

From 30th April 2013 - 22nd May 2013, the top 10 funds in this category averaged about +1.83% gain. Strong performance from Pheim Asia Ex-Japan Islamic (PAEJI) Fund saw it's NAV grew by +5.82%. On the other bottom end, Eastspring Investment Asia Pacific Shariah Equity Fund shed -0.46% of it's NAV. We also welcome AmCumulative Growth Fund into the top 10 list and saying bye-bye to MAAKL Pacific Fund.

In terms of long term (5 years annualized performance), we see PB ISlamic Asia Equity Fund and PAEJI moving up one spot each to 4th and 5th position in the ranking table. In terms of Yield to Date (YTD), PAEJI Fund has gained 5.22% since 1st January 2013, while other fund's performance remains lackluster.

Today, Japan's NIKKEI plunged 7.3% or 1,143.28 points which indirectly drove all other Asian countries market to shed between 0.9% - 2% from their index. Asian companies that have economic and trading relationship with Japan will also be effected. China's and Hong Kong's Index both shed 1.13% and 2.54% respectively, which would most likely effect the performance of Asia Pacific excluding Japan funds for the coming week.

In my honest opinion, as long as fund managers have made fundamentally sound research on companies and purchase stocks during a market low, these funds would and should provide reasonable returns over the long run. Domestic demands at countries such as Singapore, Indonesia and Philippines should be strong enough to counter off minor dips being experienced recently.

If you like to invest in the Asia Pacific market, do look through my previous reviews where I have specifically recommended a few funds (not in the list above) that's worth looking into.

Review
Fund Category : Greater China

Top 10 Best Performing Fund for Category Asia Excluding Japan (click Image to Enlarge): 

2 Weeks Gain/Loss Ranking Table for Category Greater China:

Fund Name	YTD as of 30th April 2013	YTD as of 22nd May 2013	2 Weeks Gain / Loss (%)	2 Weeks Gain/ Loss Rankings	Previous 2 Weeks Gain/Loss Rankings
PB China Titans Fund	-2.22	0.32	2.54	3	2
CIMB-Principal Greater China Equity Fund	-5.14	-2.98	2.16	8	6
CIMB-Principal Greater China Equity Fund	-5.14	-2.98	2.16	8	6
Public China Ittikal Fund	-3.9	-1.56	2.34	6	5
PB China Pacific Equity Fund	-0.98	1.5	2.48	4	3
Public China Select Fund	0.89	3.19	2.3	7	1
AmIslamic Greater China	-6.76	-3.73	3.03	2	7
Eastspring Investments Dinasti Equity Fund	-2.52	-0.63	1.89	10	4
Hwang China Select Fund	3.67	10.85	7.18	1	9
MAAKL Greater China Fund	-3.83	-1.47	2.36	5	8
AVERAGE 2 WEEKS GAIN/LOSS (%)			2.84

Review of Greater China Funds:

Finally Greater China funds are moving averaging +2.84% among the top ten funds. Top performing fund for this review is none other then Hwang China Select Fund (HCSF) gaining a whopping +7.18% of it's NAV within a period of 3 weeks. The rest of the top 10 funds have gains close to the average 2.84%.

Over the long term range (5 Years Annualized), PB China Titans Fund have move to the top spot. However investors that have invested consistently over the course of 5 years should be seeing profit from the effects of dollar cost averaging. If you've bought funds 5 years ago with a lump sum of money, then the wait continues.

As I've mentioned earlier, the China Stock market also suffered a dip today due to poor manufacturing performance for the month of May 2013 as shown by the article from Bloomberg News:

Click HERE to read the full article

Discouraging? Yes. Poor? Not really! Just because the May reading is a tiny bit lower then the median value and projected value, everyone is going cuckoo about it and selling their holdings. Well that's the nature of speculators which help create opportunities for investors. Grin...

However, there's still much uncertainty about China's economic growth and how it will pan out in the coming year. China being a cash rich country should be able to sustain growth in the long run, just not as outstanding as speculators some expect it to be. Am considering going for a long term consistent buying of a solid China fund such as HCSF...what say you?

Review
Fund Category : Equity Malaysia

Top 10 Best Performing Fund for Category Equity Malaysia (click Image to Enlarge):

2 Weeks Gain/Loss Ranking Table for Category Equity Malaysia:

Fund Name	YTD as of 30th April 2013	YTD as of 22nd May 2013	2 Weeks Gain / Loss (%)	2 Weeks Gain/ Loss Rankings	Previous 2 Weeks Gain/Loss Rankings
MAAKL-HDBS Flexi Fund	5.3	14.76	9.46	4	3
Kenanga Growth Fund	4.76	14.8	10.04	3	1
Phillip Master Equity Growth Fund	6.13	18.03	11.9	2	8
AMB Dividend Trust Fund	3.75	8.9	5.15	10	7
Kenanga Syariah Growth Fund	4.8	13.21	8.41	6	6
Hwang AIIMAN Growth	5.18	18.3	13.12	1	5
MAAKL Dividend Fund	5.38	13.39	8.01	8	3
CIMB-Principal Equity Fund	5.6	13.92	8.32	7	2
CIMB-Principal Wholesale Equity Fund	2.72	11.76	9.04	5	N/A
Public Focus Select Fund	3.48	10.55	7.07	9	9
AVERAGE 2 WEEKS GAIN/LOSS (%)			9.05

Review of Equity Malaysia Funds:

Everyone's flavor of the week, or should I say weeks. 3 weeks average gain for the top 10 equity Malaysia fund : +9.05% (move aside ASB). Top performer? Hwang AIIMAN Growth (HAG) at +13.12% over 3 week period. Those who did not get BR1M, you get it back here.

Apart from HAG, I would like to point out Philip Master Equity Growth Fund (PMEGF) which have climbed to the 3rd spot in terms of 5 years annualized performance. PMEGF along with HAG have already gained more then 18% in terms of returns since 1st January 2013. That's impressive by any standards.

The outstanding performance of all top 10 unit trust fund invested in Equity Malaysia have made many unit trust investors rather happy for the past 1 month or so. Whether it will continue to rise or fall, I'm not entirely concerned. Let the fund managers worry about that.

If you've dumped a large sum into any one of the unit trust investment above, perhaps it is time to do some profit taking by redeeming some units. If you're long term investor, just continue your consistent contribution until you've reached your financial goal. 

Cheers and Happy Investing!

P/s : If you like to invest into Philip Master Equity Growth Fund or Hwang AIIMAN Growth, feel free to contact me at sickfreak03@gmail.com 

P.P/s : All recommendations made are based on my experience and understanding. After which I apply them to my own personal investment. I am not into unit trust for hard selling. If you feel what I have recommended is bullshit, feel free to leave your frustration behind by commenting in this post. 

P.P.P/s : Happy Wesak Day Dear Readers!

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