The General Election 13 Factor

I read with interest of an article published by theStar today. Speaking to six fund managers on what's in store for us in 2013, I have decided to summarized the key points of the article for readers. Never the less, if you would like to read the full story, click HERE.

Danny Wong, Areca Capital (CEO)

If the global economic outlook continues to improve and the regional markets sustain or keep the bullish tr end, I believe that Malaysian equities will become “the star”, provided there is no major surprises from the GE.

China's focus may be shifted to economic policy action and stimulus to ensure its GDP for the next decade doubles (or grows at a yearly rate higher than 7% over the next 10 years).

My major concerns for 2013 are an unfavourable GE outcome (such as a smaller majority government), a full-blown EU crisis and high inflationary pressures caused by governments' “spending” or excessive quantitative easing.

I prefer large-cap defensive high-yield stocks until the GE is over and I will allocate some money for cash/short-term fixed income for opportunity.

I would pick up index-linked stocks whose prices slump during this period. When the certainty of the GE becomes clearer, I would switch to high-growth stocks, in particular higher beta names.

In general, my top three sectors are banking, plantation and telcos and mid-smallcaps names like Can-One Bhd, Kumpulan Fima Bhd and Hartalega Holdings Bhd.

Thomas Yong, Fotress Capital Asset Management (M) Sdn. Bhd., (CEO)

Main uncertainty in the near term is the timing and concerns over the outcome of the GE

Observations from recent releases of economic data from the US and China indicate an improving external environment.

Barring any unforeseen circumstances, the Asian economies and equity markets are likely to fare better in 2013

We have maintained minimum exposure to the Malaysia market, and this posture will be kept until after the GE

we prefer stocks that will benefit from an improving external environment and avoid stocks exposed to government policy changes risk, such as subsidies, etc. In the early part of the year, our client portfolios will continue to posture towards the positive re-rating in Chinese and Hong Kong equities.

Tan Teng Boo, Capital Dynamic Asset Management Sdn. Bhd., (Managing Director)

Globally, in contrast to the consensus view, Capital Dynamics is optimistic. Locally, in contrast to the popularly held view, it is timid.

Geoffrey Ng, Hong Leong Asset Management Berhad, (CEO)

The Malaysian market faces a large political- risk-driven event during the early part of 2013 with the impending GE. Investor sentiment will remain guarded during this time.

Our strategy going into 2013 is to remain defensive and with a fairly high cash allocation.

We, however, will hold conservative exposure to cyclical growth sectors such as oil & gas and construction, two primary beneficiaries of the continued ETP-led pump-priming programmes by the Government.

Chan Ken Yew, Kenanga Investment Bank Bhd (Research Head)

The long-awaited 13th GE has somewhat overshadowed market sentiment. This can be seen from the declining FBM Small Cap Index. The small-cap index has been trending down to 11,425.02 from its two-year high of 13,356.97 on Dec 13, 2012.

The weaknesses of the global economy could spill over into the first half of 2013 as the resolution for the Eurozone debt crisis remains uncertain. However, with a high probability that the US fiscal cliff would be resolved, and further signs of improvement in the US economy as reflected mainly in the housing and manufacturing sectors, we believe the global economy will have a fair chance to stabilise.

Furthermore, China's main economic indicators also showed steady improvement during the second half of 2012, which confirms that it is nearing the end of its two-year down cycle. 

We prefer to adopt a trading stance - Buying-on-Weakness' below 1,610 and Selling-on-Strength' above 1,710 in a rangebound market environment. 

We also reckon that consistent performer, defensive and high-yield stocks will still be the mainstream investment choices. 

As for sector selection, we are generally bullish on Banking, Non-Bank Financials, Oil & Gas and Power Utilities.

We are also optimistic on Consumer F&B as we believe that value has emerged following the recent price corrections here.

Mark Mobius, Templeton Emerging Markets Group, (Executive Chairman)

Two particular investment themes stand out to us: consumers and commodities.

The consumer theme arises from consumers in many emerging markets becoming increasingly wealthy while macroeconomic policy has increasingly been aimed at moving from export-based models toward ones fueled by domestic demand

The commodity theme reflects our expectation for strong growth in demand for hard and soft commodities as many emerging markets industrialise, likely grow wealthier and increase spending on infrastructure, which tends to tilt the balance between supply and demand for such products in favor of producers.

Overall View

It seems that all six of the Fund Management Companies above are concern about the upcoming GE. For me, the outcome of the election seems to be pretty bleak for the current ruling party as hinted by many of the fund managers above.

I'll probably be looking for Unit Trust that invest in China as the economy there is slowly recovering. Also I intend to sell some of my non performing shares in preparation for GE13. Gold is also another investment avenue which I am considering to increase my investment in. The price of Gold has dropped recently and I believe it is a good time to buy now.

Cheers and we look forward to 2013

Happy Investing everyone

MY Investor

Money Making Options In Malaysia

When I first started my working life, I was totally oblivious about long term investment. During that period, the salary I earned as an Engineer was considered meager while my parents ask me to save whatever I have in Fixed Deposit(FD) accounts.

Till now, the advice from my parents remain the same that is to save all I can in Fixed Deposit accounts. No doubt the fixed deposit account is the safest investment available with almost zero risk and promise of a fix annual return.With FD rates ranging from 3.0 ~ 3.5% per annum, every RM10,000 saved via FD promises a return of between RM300 ~ RM350 per year, guaranteed!

I remember fondly about a year into working life, I dabbled into the share market using a speculative method called contra. Never the less, it was a short lived experience as I find myself looking more often at share prices then concentrating on my work. It was ridiculous, time wasting, created unnecessary stress and was a constant distraction to me. Thankfully it was a short lived experience and I broke even on the profit and losses.

There were also some hiccups along the years where I was foolishly convinced into investing in a pyramid scheme that promises good returns. As always, the one's which normally lost money from pyramid schemes are the one's like me who entered during the end stages of the scheme.Never the less, I consider the money lost from it an education fee for me towards becomming a smart investor. 

Pyramid schemes or ponzi schemes, whatever you might call it still exist in Malaysia, always resurfacing in various forms and offering sub-standard products. Yet many Malaysians, blinded by greed as well as smooth talking agents continue to invest their hard earned money into it. The people who are actually making money are the one's who created these schemes and the people who sit at the top of the pyramid. Money made from foolish Malaysian who continue to pile up at the bottom of the pyramid.

As the saying goes, as we grow older, we become wiser. I don't claim myself as a wise investor as there is still so much more to learn and master. In truth I see myself as somewhat of an amateur investor, a little wiser then some who have zero knowledge on investment but stupid in comparison to season and experience investors. 

Now that aside, do allow this somewhat amateur investor share some knowledge on the available investment options in Malaysia.

1) Fixed Deposit (FD)

Like what I have stated earlier in this post, FD is the safest and most well known investment option available for Malaysian. With a promised return of 3.0 ~ 3.5% per annum, investors are guaranteed their returns annually. Apart from being the oldest form of investment in Malaysia, FD is pratically risk free!

2) Unit Trust (UT)

Unit Trust is defined as an organization which takes money from small investors and invests it in stocks and shares for them under a trust deed, the investment being in the form of shares (or units) in the trust. 

Simply said, unit trust is an avenue that provides small investors a chance to invest into shares, stocks or bonds. Like many of us who command a day to day job and a family to go back too, we might not have the luxury of spending time studying investment methods or analyzing the right shares to invest in, yet we would love our money to grow more then what can be offered by FD. 

Hence the existence of Unit Trust which provides investors with an opportunity to grow their money. By entrusting our money with Fund Managers (some experienced and some not), we allow the Fund Managers to decide what stocks and/or what investment vehicle that would bring us the highest possible returns.

With hundreds of Unit Trust Funds available, small investors are spoilt with choices of investment. Therefore before investing into Unit Trust, a few factors have to be considered such as:

1. The investment nature of a particular fund (Equity? Asia Market? Fixed Income? etc).

2. The risk factor for a particular fund. Higher risk funds tend to give higher returns and also higher losses.

3. The Fees and Charges incurred.

4. Historical performance of a fund.

In short, investing in Unit Trust is to entrust your money to a a team professional/full time investor and allowing them to decide the best possible investment with the highest return.

3) Shares 

The riskiest of all investment listed here apart from Item 5 if you consider that as a form of investment. Trading of shares are done over the Kuala Lumpur Stock Exchange. Each unit of shares signifies a small percentage of a company. By investing into shares of a particular company, you are then called a shareholder of that company. A profitable company would be reflected via increase in the share price of that company.

Investors make their profits from selling the shares they own to another who is interested in purchasing them at an agreed price. The entire buy-sell are done over various avenues from the old schooled phone call to the remisier or the latest personal online share trading platform.

The objective of share investment are normally to make a profit from the difference between the purchasing price and the selling price (Selling price > Purchasing price =  Profit). On the other hand, some investors purchase shares to enjoy the dividend given out by the company. Do take note that investing in shares are categorized as high risk due to its volatility. Factors such as Global Economic meltdown, Recessions, Elections, Terrorist attack, general shareholder sentiments, stock manipulation,  and many more factors could lead to a either a quick rise or a sharp drop in share prices.

4) REITS

The concept of REITS is almost similar to Unit Trust. REITS are actually shares which we can purchase over KLSE. Each shares denominates a small part of a property depending on what kind of REITS you purchase. If you purchase Pavillion REITS, that means you are have become owner of Pavillion, albeit a small small part of Pavillion. All profits obtained from Pavillion such as rental or rental increase is then distributed back to you depending on the number of Pavillion shares you own.

In short, purchasing in REITS is similar to investing in properties. We do not own the property directly, but we become a share holder of that property. Many investors are looking at REITS as it promises regular high returns on dividens. Furthermore investing in property is one of the preferred option of investment especially during slow/bad economy periods.

4) Gold & Silver
Another alternative investment that is available for investors is Gold & Silver. Categorized as precious metals, investors are purchasing and selling these commodities in order to make profit from the difference in price between purchase and sales. For example, the price for of Gold has appreciated a whopping 101.53% if you've purchased gold five years ago. That's an average of +20% return annually over the money you've invested.

There a many ways of purchasing these precious metal from buying the actual physical metal to trading paper gold/silver. Paper gold/silver is the latest trend among investors as you can purchase gold/silver from banks such as Maybank, CIMB and Public Bank without the hassle of actually having the actual gold in hand. By investing in paper gold/silver, there's no worry about losing your physical gold/silver due to theft/natural disaster/robbery/misplace as everything is recorded and tracked via a simple passbook.

5) 4D, Toto, Da Ma Cai, Lottery Tickets

I'm not advocating that you should invest your money into this. Its certainly not an investment option but do not be surprised to hear that many Malaysians consider this as an investment. Millions are spent by Malaysian into gambling with actual winners making up a very very very small percentage. Yet, in a game of chance, many Malaysians especially Chinese loves to make an occasional punt or two, hoping that luck might shine upon them.

Regardless of the many forms of investment, the decision to invest depends on the risk appetite of the investor. If you're not the risk taker type, FD would be the best option for you. For younger investors with higher risk threshold, many investment options are available for your picking. The above are just a general overview of the available options in Malaysia. Personally, I have investments in the first four  options with the bulk of my investment placed into the FD for security. Stability is currently my primary concern as there is bound to be instability due to the coming election and the uncertainty of the Global Economy.

In addition, I do intend to allocate additional funds into purchasing paper gold and paper silver as these are limited precious metals. Prices are bound to rise for gold and paper of the long run.

Heading into 2013, there's more challenges ahead and for the wise investors, the key point is to be cautious and prudent in investing your hard earned money.

Happy 2013 to all readers and Happy Investing

Cheers

MY Investor

FAQ on Private Retirement Scheme (PRS)

FREQUENTLY ASKED QUESTIONS ON PRIVATE RETIREMENT SCHEME (PRS)

1.	What is a private retirement scheme?
	A private retirement scheme (PRS) is a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement. It complements the mandatory contributions made to EPF. Each PRS will include a range of retirement funds that individuals may choose to invest in based on their own retirement needs, goals and risk appetite. The fund options under a PRS must be consistent with the objective of building savings for retirement and ensure that there is a prudent spread of risk.
2.	What is the scope of private pension reforms undertaken by the Securities Commission Malaysia?
	The introduction of the private retirement scheme framework resulted from recommendations made by the Securities Commission Malaysia (SC) to the Government to accelerate development of the private pension industry in Malaysia. Private retirement schemes form an integral feature of the private pension industry with the objective of improving living standards for Malaysians at retirement through additional savings of funds. The PRS industry forms the third pillar in a multi-pillar pension framework and will complement Malaysia's mandatory retirement savings schemes.
3.	What is the regulatory framework governing PRS?
	The Capital Markets and Services Act 2007 (CMSA), the Capital Markets and Services (Private Retirement Scheme Industry) Regulations 2012 (the PRS Regulations) and the Guidelines on Private Retirement Schemes (PRS Guidelines) form the regulatory framework for the PRS industry in Malaysia. The 2011 amendments to the CMSA setting out the regulatory and supervisory framework for the private retirement scheme (PRS) industry came into force on 3 October 2011. Under the new Part IIIA of the CMSA, the SC regulates the following key participants in the PRS industry: (a) Private Retirement Scheme Administrator; (b) Private Retirement Scheme Providers (PRS Provider); (c) Private Retirement Schemes (PRS Scheme); (d) Trustee to Private Retirement Schemes (Scheme Trustee); and (e) Trustee to Employer-Sponsored Retirement Schemes (Employer Trustee). The PRS Regulations establish the duties and responsibilities of a PRS Provider and Scheme Trustee, as well as requirements on approval of the PRS Scheme, the registration and lodgement of the trust deed and the disclosure document as well as other provisions on the register of members and meeting of members. The PRS Guidelines are aimed at providing a regulatory environment that would safeguard the interests of contributors to PRS.
4.	What are the key components of the PRS framework?
	The PRS framework comprises approved PRS Providers, each offering a range of fund options under a PRS, where the assets are segregated and held by independent Scheme Trustees under a trust. The law also caters for the establishment of a Private Pension Administrator which would be responsible for the operationalisation of an efficient administrative system for the PRS industry. Underpinning the framework is a strong regulatory and supervisory structure based on the SC's regulatory objectives of ensuring robust regulation and supervision of the PRS industry, promoting trust and confidence in the PRS Schemes and protecting interest of members.
5.	What are the features of the framework to ensure a strong regulatory and supervisory structure?
	All relevant intermediaries in the PRS industry, namely the PRS Provider, Private Pension Administrator, Scheme Trustee and PRS distributors require approval of the SC to operate and will be subject to on-going regulatory requirements and supervision. The PRS will operate as a trust structure with the Scheme Trustee ensuring the assets of the funds are segregated from the PRS Provider. The funds under the PRS will be professionally managed by the PRS Providers with the purpose of meeting the retirement objective of members. Further, provisions on vesting of contributions and rights to accrued benefits set out in the CMSA will ensure that accrued benefits will be delivered to members to meet retirement needs. (Accrued benefits in the CMSA mean the amount of a member's beneficial interest in a private retirement scheme). A strong regulatory and supervisory framework will ensure that interests of members are safeguarded and protected, integrity of the PRS industry is upheld, risks are appropriately monitored and stability of the system is maintained. In addition to the SC's supervision, investigation and enforcement powers, the SC also has the power to issue directions over the intermediaries in the PRS industry. The SC's powers to issue directions include the ability to direct the intermediary to comply with the law, guidelines, conditions or restrictions, or take remedial action.
6.	What is the role of the Private Pension Administrator (PPA)?
	The PPA refers to a private retirement scheme administrator as defined under section 139A of the CMSA. The duties and responsibilities of the PPA under the law (Section 139H of CMSA) include taking into account public interest considerations in acting in the best interests of members and having regard to the need to protect members. The PPA would promote efficiency and convenience to members through: - Facilitating and maintaining all PRS-related transactions made by members; - Facilitating portability between PRS providers; and - Undertaking promotion and general education/awareness on PRS.
7.	What are the tax incentives for contributions to PRS?
	As announced in Budget 2012: Tax relief up to RM3,000 per annum will be given for an individual's contribution to the PRS; and Employers will also be given tax deduction on contributions to PRS made on behalf of their employees of up to 19% of the employees' remuneration.

FAQ taken from Securities Commission Malaysia