Saturday 24 August 2013

Scary Financial Headlines, Don't Be Mislead!

I find it extremely disconcerting that our daily paper are spewing out troubling headlines such as the one shown below:

Obviously the title is a headline grabber, otherwise why would I click to read the contents. However the contents is rather far fetched from what I expected it to be. Instead of expecting a good solid case study backed with reliable figures on what might trigger a larger global crisis, I got a write-up of a public investment seminar by a certain person from an investment organization. Big disappointment there!

Secondly, after reading the article, I'm find myself rather disappointed that the element of fear, some inaccurate statistics, some presumptions and a tinge of exaggeration were used by the speaker in this seminar. I intend to take the opportunity to share my personal views and perhaps correct some inaccuracies stated in the article.

Point Number 1
Let's take a look at the introduction first:


Most of us should be aware by now that the economy of any country will go through cycles of ups and downs. This is the natural order of economics, what goes up must come down. When an economy gets out of control, a downturn runs its course to cool things off. Then comes the rebuilding and growth stage all over again. 

Now back to the news article, I totally agree that an impending financial crisis would happen somewhere in the near future. No doubt about it. What I disagree is the severity of the crisis which according to the speaker would be tremendous in proportion. A crisis without recovery is something that I can't accept. What facts and figures are the speaker referring too to come to this kind of prediction? 

He speaks of capital flights and volatile markets? We have gone through the worst of the Asian Financial Crisis in 1997/98 yet the effected countries such as Thailand, Indonesia and Malaysia were able to weather the storm and recover to achieve newer heights of economic growth. In fact the crisis itself created many millionaires and billionaires whom invested into stocks of company at below par prices. 

Global Financial Crisis causing rising inflation and social unrest? Once again, what are the facts to back this kind of prediction? The Euro Crisis which resulted in rising inflation and social unrest in Greece, Italy and France was rather serious but it did not trigger a collapse of the global financial institution. Hence for such an event to occur at a global scale, you need both the US and China economy to collapse which I do not think would be happen not when the United States hold the authority to manipulate cash flow of their economy while the Chinese have tremendous amount of foreign cash in their reserves.

Point Number 2
In terms of Malaysia, the speaker has an unfavorable outlook for Malaysia. Is this a hint for investors that Malaysia equities are a big no no?

Let's take a look at a snippet from the news article:

In terms of Government Debt, I do not deny that Malaysia has the highest figure in comparison with Indonesia, China and Thailand. Indeed measures need to be taken by the Government to reduce the debt level as per what I have written in many of my previous articles. While the debt issue is at a worrying level, it has not reach a crisis level that could trigger a financial meltdown for Malaysia. With the next election 4 years away, the ruling Government should be able to introduce taxes and subsidy cuts to reduce or at least maintain the debt level at a manageable level.

In terms of household debts, worrying as it is, Central Bank Governor, Tan Sri Dr Zeti Akhtar Aziz most recently introduced Financial Services Act to curb the problem of shadow banking. Tighter rules for loans issuance must be practiced both by shadow banks to prevent uncontrolled personal loan issuance. Click HERE to read more about shadow banking. In addition, Bank Negara Malaysia is also concentrating their effort into preventing property speculation and uncontrolled issuance of housing loan for 2nd and 3rd property. Find out more by clicking HERE.

For all the efforts by Tan Sri Dr Zeti, I believe that we would be able to overcome the issue of household debts in Malaysia gradually. If all else fails, what we will experience is an accelerated drop in property price as the bubble pops. Either way, I see it as a win-win situation for Malaysians whom can't afford to even purchase their first property!

Point Number 3
The speaker compares Malaysia with China, Indonesia and Thailand yet I hope he is aware that China is plague with a serious problem of shadow banking, Indonesia is facing inflation issues while Thailand is going through a recession now.

Point Number 4
In the news article, it is stated that half (50%) of our country's government bond is held by foreigners! I believe the situation is not as dire as what the speaker claim it to be. With the recent foreign outflow from our Government Bonds, the figure now stands at 46.8% as of June 2013 and should drop further as foreign investors return to the US equity market. However the situation of foreign outflow is as expected according to Tan Sri Dr. Zeti in this article published on the 22nd of August 2013:


It is common sense for foreign funds to flow in and eventually flow out again as the US economy improves. If a common person such as myself is able to foresee such an outcome, I am sure the Head of Bank Negara Malaysia (BNM) would have been more then prepared to face this situation. Key actions taken by BNM that would prevent an economic meltdown due to foreign funds outflow are:
  1. Sufficient foreign reserves. Our country's foreign reserve currently stands at USD137.9 billion. This is more then enough to buffer the exit of foreign funds from out bond market which currently only stands at RM228.9billion (approximately USD69billion).
  2. Low foreign debt. Our country's foreign debt is at an extreme low of RM16.453 million.

Our country is blessed to have a prudent yet brilliant lady as the Head of the National Bank!

Point Number 5


Speker states that Malaysian workforce is now less productive as compared to Thailand and Philippines. I can't believe that a point like this can be used as a point to indicate Malaysia is not a favorable investment destination. How do you know Malaysian as lesser productive? Are you measuing the hours put into work? Production figures? Let's have some numbers to back that up dear speaker. Nuff said!

Point Number 6
Speaker says that Malaysia imports more oil then selling it. Ever thought why are we doing this? What do you think is supporting our country's economy? Profit from of oil and gas sales of course! FYI, profit from oil and gas contributing more then 20% annually to our GDP! 

Known for producing better quality oil, Petronas is selling our oil at premium price to other countries while importing cheaper lower grade oil back to Malaysia. Some might question as to why can't Malaysians enjoy our own natural resources? This is one subject I wish not to debate or politicize via this post. Know for a fact that without the profit from oil and gas sales, our country would not be able to sustain the economy and provide us Malaysians with subsidies exceeding RM20 plus billion per year.

Summary
After reading the news article, I find that the seminar conducted had the following elements:
1. Fear Mongering
2. Discrepancy in figures
3. Unjust acquisition
4. Lack of understanding towards the economic situation of this country

Any investor with no actual figures in their hand or have minimal understanding of the economy and financial situation would have been overwhelmed by the seminar. Fear of investing in Malaysia and generally the stock market would have been created easily just from reading the article, not to mention attending it. 

I did a background check with the company that organized the seminar and discovered that one of the primary investment option offered by them is Gold Exchange Traded Fund (Gold ETF). In fact it is the biggest Hong Kong-domiciled gold ETF firm which held gold worth about USD100 million as of June 2013.

Now that explains the recommended diversification option given by the speaker as shown below:


Need I say more?

Cheers and Happy Investing

P/s : Whenever you read something, listen to a proposition or perhaps attend a seminar, take what's throw at you with a pinch of salt. Always do your homework and perform detailed checking on the points and figures before deciding to invest.

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Wednesday 21 August 2013

"Spend Less Then What You Earn" - Still Can Pakai?

There is an age old phrase used by many which goes something like this "Spend Less Then What You Earn". Our parents probably told us the very same phrase when we were kids, then our teachers when we were teenagers, then during adulthood by our spouse and probably by financial advisers (if you've engaged one). 

Despite these countless reminders, some of us (not all) allow ourselves to spend, spend and spend, not realizing that those tiny little debts which we accumulate each month is fast turning into a mountain. Are we to be blamed for giving in to luxuries ranging from smart phones, gadgets, branded clothes, etc? 

As humans, we naturally seek for fulfillment (no matter how short term it might be). It is that very "weakness" which made companies such as Samsung, Apple, Prada, Sony and many more into billion dollar companies. What are millions spent on marketing and advertising when ultimately the company get billions in returns? I am sure we have seen how as human, in search of such fulfillment tend to overspend not only in monetary terms but in emotional and physical terms as well. Setting up camp outside a store a night before an official launching of a new smart phone is a classic example. Not forgetting the most recent McDonald's minion craze of course.

My point here is that humans are susceptible to such attractions thanks to those awesome mind blowing ads. From a financial planning point of view, some of us tend to overspend on such attractions. What's worst is that credit card is facilitating the ownership of such luxuries so easily! Just one swipe! Only a single swipe, no cash changes hand and you have your 15 minutes of fame and satisfaction! Easy-peasy except now you just got yourself 24 months worth of debt installment to pay.

Let's move a little higher to the middle income earners whom can afford to pay cash in return for these so called "fulfillment". I agree that each and every one us whom has worked hard and would like to reward ourselves in return. What I can't understand about rewarding is when one changes phone every time a newer version is out. Or getting a new branded clutch or handbag every month. Perhaps it is something that I am unable to comprehend or feel. Perhaps it is an interest or a passion to some. 

Whatever the reason might be, if you intend to take control of your financial planning, all you need is to complete three simple key objectives every month before spending on those so called "fulfillment":

First :Stay out of debt (specifically credit card debts) 
Second : Save by paying yourself first. 
Third : Use that money earned from paying yourself to invest. Make your money work even harder!

Whatever extra you have after completing above, then by all means go get yourself an awesome Iphone or a Coach pursue. You deserve it.

Cheers and Happy Investing!

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Tuesday 13 August 2013

Top 10 Best Performing Unit Trust Funds As of 7th August 2013

If you've noticed, I have reduced the Top 10 Best Performing Unit Trust fund review from every fortnightly to monthly. The main reason for doing so is because I am lazy believe that the gains or losses for unit trust over a one month period is more significant as compared to every two weeks.

As usual, 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.

That aside, let us begin with the review!

Review

Fund Category : Asia excluding Japan 
Top 10 Best Performing Fund for Category Asia excluding Japan (ranked according to 5 Years Annualized Performance):

Click to Enlarge
4 Weeks Gain/Loss Ranking Table for Category Asia excluding Japan

Fund Name
YTD as of
10th July 2013
YTD as of
7th Aug 2013
4 Weeks
Gain / Loss (%)
4 Weeks Gain/
Loss Rankings
Previous
4 Weeks Gain/Loss Rankings
Public Islamic Asia Dividend Fund
-2.2
1.3
3.5
5
2
Public Asia Ittikal Fund
-3.18
0.59
3.77
4
3
PB Islamic Asia Equity Fund
-4.12
-0.27
3.85
3
5
Eastspring Investments Asia Pacific Shariah Equity Fund
-4.06
-1.13
2.93
9
6
Pheim Asia Ex-Japan Islamic
5.09
8.31
3.22
7
1
CIMB Islamic Asia Pacific Equity Fund
-5.38
-1
4.38
2
9
MAAKL Shariah Asia-Pacific Fund
-10.58
-7.12
3.46
6
7
Public Regional Sector Fund
Newcomer
11.13
N/A
N/A
N/A
PB Islamic Asia Strategic Sector Fund
-1.86
1.24
3.1
8
4
MAAKL Pacific Fund
-4.83
0.91
5.74
1
8
AVERAGE 4 WEEKS GAIN/LOSS (%)
3.77

Review of Asia excluding Japan Fund
An interesting month for the Asia excluding Japan market as seen by the Average 4 Weeks Gain of all 10 funds achieved +3.77%. Largely buoyed by the positive performance of the China market, all funds posted reasonable gains lead by MAAKL Pacific Fund at +5.74%. 

The average gain of +3.77% for the period of 10th July to 7th Aug 2013 is the highest average gain over a one month period since our review started in 31 Jan 2013. Comparing the performance of the Top 10 Fund vs MSCI Asia Excluding Japan Index Benchmark:


Benchmark performance over 1 month : -1.41%
Average Gain/Loss of Top 10 funds over 1 month : +3.77%

Is this a positive sign of better performance to come?

Over the short duration, most Asian countries market performance are dragged down by news of the US stimulus, the impending tapering as well as the exit of foreign investors from the Asian market.

Since funds in this category include stocks from China, the losses caused by news from the United States were countered off by gains coming from China. This will be further elaborated under the China Fund review. Furthermore, Asian countries which are dependent on exports to China have also benefit from some positive economic data coming from China over the past one month.

The impending tapering should be seen as a good sign of recovery for the economy of United State. Eventual recovery would lead to increasing demands for products from Asia countries to the world largest economy. If economic data from China continues to meet the targets, we are looking at an opportunity for investment into the Asia Excluding Japan funds.

In my honest opinion, there is an opportunity for investment via lump sum over a period of 1 to 3 years. However, please do invest only if you have additional cash to do so.

Recommended funds for investing:
Pheim Asia Ex-Japan Islamic Fund
Reason :  Has shown robustness with YTD returning +8.31% while other funds in the top 10 are in the negative zone.

Kenanga Asia Pacific Total Return Fund
Reason : A newly launched fund that you might want to consider as this fund has set a target of achieving 10% per annum return. Secondly, the fund investment strategy will be based on Absolute Return philosophy.

Hwang Select Asia (ex) Quantum
Reason : Has zero exposure to China and South Koreaequities. The fund targets investment in Asia Pacific equities such as Singapore, Thailand, Indonesia, etc therefore shielding direct losses (if any) that comes from China's volatility. With no direct exposure to China and South Korea, this fund has yielded +27.70% between 1st January 2013 to 31st May 2013.

Review

Fund Category : Greater China
Top 10 Best Performing Fund for Category Greater China (ranked according to 5 Years Annualized Performance): 


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

Fund Name
YTD as of
10th July 2013
YTD as of
7th Aug 2013
4 Weeks
Gain / Loss (%)
4 Weeks Gain/
Loss Rankings
Previous
4 Weeks Gain/Loss Rankings
CIMB-Principal Greater China Equity Fund
-8.28
0.23
8.51
1
8
CIMB-Principal Greater China Equity Fund
-8.28
0.23
8.51
1
8
PB China Titans Fund
-3.14
0.65
3.79
8
4
Public China Ittikal Fund
-3.23
3.28
6.51
4
1
PB China Pacific Equity Fund
-2.93
3.71
6.64
3
5
Public China Select Fund
0.26
5.8
5.54
6
3
AmIslamic Greater China
-7.6
-3.87
3.73
9
2
Eastspring Investments Dinasti Equity Fund
-4.56
2.6
7.16
2
7
Hwang China Select Fund
8.12
14.47
6.35
5
6
MAAKL Greater China Fund
-7.95
-2.54
5.41
7
10
AVERAGE 4 WEEKS GAIN/LOSS (%)
6.22

Review of Greater China Fund
China funds have done well for the past one month averaging about +6.22% in terms of average gains. Top performing fund for this review goes to CIMB-Principal Greater China Equity Fund, gaining +8.51% over the 1 month period. An impressive figure whereby helping the fund to return to positive figures in terms of Yield to Date (YTD). Even the poorest performer, AmIslamic Greater China managed to gain +3.73%! 

Positive economic data released this month in China boosted the Shanghai Stock Exchange. The SSE gained +4.69% between 5 July 2013 to 12 Aug 2013. 


Comparing the SSE Gain with the Gains of the Top 10 funds, only 2 funds failed to meet the benchmark. 

What caused the mini revival? Two reasons:
1. China's economic growth met the forecast result of 7.5% in the 2nd quarter. This has helped to ease worries among investors that China might not be able to meet the forecast target which was previously revised downward from 8.0% to 7.5%.
2. Second reason is the rise in foreign investment into China resulting from reason no.1.

Despite the positive euphoria enveloping China, I am still against placing your investment into a single bucket (in this case a fund that purely invest into China). The volatility of the Shanghai Stock Exchange over a 1 year period as shown below is just too much for my risk appetite:


Review

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


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

Fund Name
YTD as of
10th July 2013
YTD as of
7th Aug 2013
4 Weeks
Gain / Loss (%)
4 Weeks Gain/
Loss Rankings
Previous
4 Weeks Gain/Loss Rankings
MAAKL-HDBS Flexi Fund
12.43
12.4
-0.03
10
6
Kenanga Growth Fund
14.8
16
1.2
7
5
Phillip Master Equity Growth Fund
23.79
26.48
2.69
2
1
Kenanga Syariah Growth Fund
13.65
15.12
1.47
5
3
Hwang AIIMAN Growth
16.3
17.66
1.36
6
9
CIMB-Principal Wholesale Equity Fund
13.99
18.24
4.25
1
2
CIMB-Principal Equity Fund
13.31
16.04
2.73
3
4
AMB Dividend Trust Fund
6.25
8.39
2.14
4
8
MAAKL Dividend Fund
12
12.71
0.71
8
7
Public Focus Select Fund
7.55
7.73
0.18
9
10
AVERAGE 4 WEEKS GAIN/LOSS (%)
1.67
                                                                                                                                                 
Review of Equity Malaysia Funds:
There is no place like home..free of natural disasters such as earthquake or massive floods, our economy and stock market are not affected by the "Act of God". Despite concerns over our massive Government debts affecting the economy, I strongly believe that sound investing philosophy practiced by certain fund managers (when it comes to selecting companies to invest in) should be able to weather out storm if the stock market crashes. Furthermore, a stock market crash is considered a major housekeeping practice to weed out dodgy companies from the good quality and sustainable ones.

Back to our review, in terms of Average 4 Weeks Gain/Loss, the top 10 funds managed to achieve  an average gain of +1.67%. An acceptable average gain if you compare it with the the Kuala Lumpur Stock Exchange Index which managed to gain only +0.60% over the same period.


In terms of individual fund performance, CIMB Principal Wholesale Equity Fund is the top performing Equity Malaysia fund, adding +4.25% to the fund's YTD. 9/10 of the top 10 funds managed to perform above the benchmark KLSE index except for Public Focus Select Fund.

With no major local economic news happening over the past one month, the top 10 funds did not experience any major gains or losses. For long term investors, continue to invest consistently and utilize the Dollar Cost Averaging strategy to mitigate the downside of the stock market.

Recommended Funds for Long Term Investment (Conventional):
1. Phillip Master Equity Fund

Recommended Funds for Long Term Investment (Syariah Compliant)
1. Hwang AIIMAN Growth Fund
2. Kenanga Syariah Growth Fund

That's all for this month's review!

Cheers and Happy Investing!

P/s : If you like to invest into Philip Master Equity Growth Fund, Hwang AIIMAN Growth or any other funds that you feel is right for you, drop me an email at shanesee03@gmail.com

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