OSK-UOB Asian Growth Opportunities Fund, Discovering A Needle in The Haystack

The talk among the investment community for the year 2013 is the growth potential in the Asia market. Economic recovery in China since the start of 2012 has indirectly spilled over to neighboring Asia countries such as South Korea, Hong Kong, Indonesia and Thailand. Hence the limelight of the best performing unit trust funds for the 1st Quarter of 2013 has been hogged by China and Asia Pacific exc Japan funds. 

Investors who have missed the early 2012 investment opportunity boat for these funds are concerned that the present price of these funds have gone too high up to invest in. While it's true that most of the top performing fund's current NAV price have gone way above the initial offering price, investing opportunities are still available  for investors. One of it I believe is OSK-UOB Asian Growth Opportunities Fund.

In today's post, I will be reviewing this fund in particular and highlighting my personal views on why this fund is worth investing in.

OSK-UOB Asian Growth Opportunities Fund

Background

• Fund Category : Feeder Fund (The Fund will invest principally in one of the funds managed by UOB Asset Management Limited, Singapore (“UOBAM”) that is the United Asian Growth Opportunities Fund (“UAGOF”)
• Fund Type : Growth Fund
• Fund Inception : 8 January 2008
• Launch Price : RM 0.50 /unit
• Fund Size as of 31 Dec 2012 : RM84.32 million
• Financial Year End : 31 December
• Minimum Initial / Subsequent Investment : RM1,000 / RM100
• Management Fee : 1.80% p.a of NAV
• Trustee Fee : 0.08% p.a of NAV subject to minimumRM18,000 p.a
• Redemption Charge : None
• Switching Fee : RM25.00

Fund Portfolio Allocation

The following data for OSK-UOB Asian Growth Opportunities Fund portfolio allocation is updated as of 31 Dec 2012. 

Important note: It is vital for investors to find out where, what and how much is the portfolio allocation of a fund before investing.

Fund portfolio by Sector Allocation

What is Consumer Discretionary?
What is Consumer Staples?

My view : 58.38% of the fund's NAV is allocated into consumer products catering to essential and non-essential consumer products. This is a strong indicator for me as economic growth in any country increases the purchasing power of consumers and encourages spending.

Fund portfolio by Country Allocation

My views : Key countries that are expected to show strong growth for 2013 are China (duh!), South Korea, Hong Kong, Indonesia, Thailand, Philippines. With the fund's NAV allocated into all these countries, it is expected that the fund will continue to perform throughout the rest of 2013, barring any unseen foreseen circumstances such as natural disaster. political unrest, etc.

Fund Top 5 Holdings

My views : 

• Super Group Ltd is listed in the Singapore Stock Exchange. The company manufactures, packages, and distributes instant cereal flakes, instant beverages, instant coffee powder, and other convenience food products. The Company also provides vending machine services.
• OSIM International Ltd is listed in the Singapore Stock Exchange. The company creates, designs, develops & markets well-being and healthy lifestyle products through its specialty retail outlets worldwide. The Company's products include massage chairs, foot massagers, neck & shoulder massagers, head massagers, fitness equipment, diagnostic equipment, vitamin & supplements and luxury tea.
• Tianneng Power International Limited is listed in the Frankfurt Stock Exchange. The company manufactures motive battery products. The Company's batteries are used predominantly in electric bikes.
• Kingboard Chemicals Holdings Limited is listed in the Hong Kong Stock Exchange. The company through its subsidiaries, manufactures laminates, copper foil, glass fabric, glass yarn, bleached kraft paper, printed circuit boards, and chemicals.
• Chu Kong Petroleum & Natural Gas Steel is listed in the Hong Kong Stock Exchange. The company manufactures steel pipes for the oil and gas industry. The Company sells these products to enterprises in the oil, petrochemical, and natural gas industry for the use of pipeline transmission.

Fund Performance
Cumulative Performance

My views : The fund has posted a cumulative 19.54% returns over the past one year (as of 31 Dec 2012), making it one of the top performing fund in the Asia Pacific excluding Japan category ranked over a period of one year. 

As of 22 February 2013, this fund is ranked 4th in the list according to returns over a period of 1 year as shown below:

This fund as yielded 21.71% from 22 Feb 2012 - 22 February 2013

Although there are higher rank funds, I shall clarify the reason this fund is chosen later. Over a 3 year cumulative return, this fund has posted made a 13.01% loss which is way above the benchmark value of -2.09%. Although not a favorable figure, this is expected from this fund as the nature of investment of this fund is to invest in small capitalization stocks that has potential growth.

Yearly Performance

My views : To to the risky nature of investment, the fund has seen both tremendous growth such as in 2009 where it posted 104.40% returns as well as losses of -23.49% in 2011. The year 2012 has seen the fund grow by 19.54% and YTD for 2013 is already at +9.21%!

Why this Fund?

1. I believe that this is an opportunity (as well as a risk) for investors to ride on the economic growth of Asian countries. While many prefer to invest in funds that have their portfolio invested in established companies such as Samsung or China Telecom (these are dividend companies), investing into small cap companies is akin to investing in potential growth companies. The returns are high but so is the risk of these companies going bankrupt.
2. The current NAV price of this fund is at RM0.4902/unit, which is lower then the initial offer price of RM0.50/unit. There is potential here to accumulate units which is currently being sold at below offering price of this fund. 
3. I believe that investing in this fund is not recommended for long term investors.Due to the volatility as seen in the yearly performance of this fund, the buy low and exit at high strategy is recommended for investors. Take profit when you feel that you have achieved your targetted percentage of returns.

Suitable For Investors Who:

1. Have additional cash to invest in!
2. Are willing to take high risk in order to obtain higher returns.
3. View this fund as part of a diversified portfolio
4. Has nothing better to do

Summary

While it may sound attractive to invest into this fund, investors should be wary of the potential risks involved. As author of this blog, I am reviewing this fund because I feel there is a potential to make some profit. Lastly, the decision to invest or not to invest in this fund depends entirely on yourself. Therefore do decide wisely and if unsure, do read more about the fund from it's annual report and prospectus. 

Download Annual Report HERE

Download Prospectus HERE

Like to buy this Fund? Find out how to get it from eUnittrust at only 2% Sales Charge Fee! 

Cheers and Happy Investing!

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Part 1 : Do You Really Know What Inflation Is???

One of the most common term used when it comes to financial planning, investment or financial freedom is "Inflation Rate". While many of us do not understand how the inflation rate is obtained, we tend to read or hear the following:

1. For investors, we must make sure that our % investment return per year must be higher then inflation rate.
2. For consumers, our money is getting "smaller" every year due to inflation, hence our purchasing power becomes weaker every year.
3. For personal financial planning, inflation is taken into consideration when it comes to ensuring that the money we save/invest grows faster then the inflation rate.
4. For salary earners, we complain about our salary increment is lower then inflation rate. 

While we speak as if we know inflation like the back of your hands (but only know "tiga suku" about it), I intend to share my own findings about inflation in today's post. 

What is Inflation?

In actual definition, "inflation" is the shortened term for "Price Inflation" or increase in price. Vice versa, inflation also has an opposite called "deflation" or "price deflation". 

What kind of price are we referring to? 

The "price inflation or deflation" which we refer too are the movement of prices for consumer related goods and services. It's pretty logical when you look back at point 2, continuous price inflation every year will shrink our purchasing power. Hence we tend to hear complains such as;

"Those days ah...I can buy nasi lemak for 10cents, now I need to pay RM2.00 for a packet"

all the time!

Who monitors the movement of prices?

The movement of consumer related goods and services are monitored on a monthly basis in which a report called Consumer Price Index report is then generated by the Department of Statistics, Malaysia. Yeap, I just found out today that we have our own statistic department that reports directly to the prime minister! 

Ironically, the head of the Statistics Department is called Chief Statistician!

Dr. Haji Abdul Rahman HasanChief Statistician, Malaysia 

What is Consumer Price Index?

The Consumer Price Index (CPI) Malaysia measures the percentage change through time in the cost of purchasing a constant basket of goods and services which represents the expenditure pattern of all households in Malaysia in a specified time period. It is calculated based on the international standard and procedures; known as the Laspeyres formula. 

 "Index" in this scenario refers to a reference value where the current prices of goods and services are benchmarked against. As of present, the benchmark value used for comparison is the price of goods and services in the year 2010. 

For example:

The price of Item A in 2010 is RM2.00. Therefore Item A at RM2.00 in 2010 is assigned a benchmark CPI value of 100. 

Say in 2013, item A is sold at RM2.50, an increase of RM0.50 from the price in 2010. Therefore the percentage change is: (RM0.50 / RM2.00) x 100% = 25%

A 25% increase in Item A from 2010 to 2013 will give Item A a CPI value of 125.

Categories that makes up Malaysia Consumer Price Index

Item A above is just one of the 460 items (goods & services) monitored. All 460 items are group accordingly into 12 important categories, each with separate percentage size as shown below

1. Food & Non-Alcoholic Beverages - 30.3%
2. Alcoholic Beverages & Tobacco - 2.2%
3. Clothing and Footwear - 3.4%
4. Housing, Water, Electricity, Gas & Other Fuels - 22.6%
5. Furnishings, Household Equip. & Routine Household Maintenance - 4.1%
6. Health - 1.3%
7. Transport - 14.9%
8. Communication - 5.7%
9. Recreation Services & Culture - 4.6%
10. Education - 1.4%
11. Restaurants and Hotels - 3.2%
12. Miscellaneous Goods & Services - 6.3%

Therefore, if prices of items in a major category such as "Food & Non-Alcoholic Beverages" goes up, the overall Consumer Price Index for Malaysia will also increase drastically and vice versa.

Overall Consumer Price Index for Malaysia

While we need not be overly concerned about the details of each of the 12 categories, we do need to look at the overall Consumer Price Index movement for Malaysia. The movement of overall CPI, normally stated in % increase or decrease, tells us if the price of goods and services that we use are:

• increasing or decreasing
• the rate of the price of goods increasing or decreasing

Let's take a look at this report from theStar dated 20 Feb 2013 below:

In the article, it states that "the inflation rate, measured by the consumer price index (CPI) increased to 105.9 from 104.5 a year ago".

From the statement about Malaysia CPI, we should now be clear on the following:

1. The CPI benchmark is at 100 (using 2010 as reference)
2. In January 2013, the CPI is at 105.9
3. In January 2012, the CPI is at 104.5
4. The increase in CPI is 1.4 points from Jan 2012 to Jan 2013
5. The % increase in CPI is 1.3% approximately from Jan 2012 to Jan 2013

Relating CPI with Inflation

If you remember earlier in this post, we defined inflation as "price inflation" or "price increase". The rate of price increase or decrease is then measured via Consumer Price Index. Hence an increase in the Malaysia CPI, indicates that our country is experiencing inflation  A decrease on the other hand means that our country is experiencing deflation. 

Understanding Inflation Rate

While most countries in the world are experiencing inflation, what separates one country from the other is the inflation rate. The rate of inflation is derived on year to year basis utilizing the Consumer Price Index value. 

Here's an example:

Country A CPI as of 31 Dec 2011 : 104.0

Country A CPI as of 31 Dec 2012 : 105.9

Difference in CPI : (105.9 - 104.0) = 1.9

% Increase in CPI between 31 Dec 2011 to 31 Dec 2012

: (1.9 / 104.0) *100% = 1.83%

A 1.83% increase in CPI between 31 Dec 2011 to 31 Dec 2012 is in fact the inflation rate for Country A for the year 2012.

Summary

I believe that the basic meaning of inflation should be covered by this post. It does sound a little long winded, but should be easy enough for readers to understand. There will be a part 2 post on this topic which I will get it up in a few days. I hope you've enjoyed reading this post about inflation.

Even chickens hope for high inflation.
Why?
Well higher prices equals lesser spents on meat.

Cheers and Happy Investing!

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The Basics of Gold Investing and Finding the Best Bargain!

You might have noticed that the price of gold has taken a dip from a high of RM175.94/gram (somewhere in Oct 2012) to RM159.88/gram (as of 17 Feb 2013). Percentage wise, the price of gold today has lost about 10.05% in comparison to the highest value achieved in October 2012.

Taken from Goldprice.org

While some are predicting that gold price will rise to a new high by the end of 2013 and the early of 2014 (read the article HERE), the recent dip in gold price is indeed an opportunity for investors to accumulate more gold.*
*This is by no means a recommendation to buy gold. My sole purpose is to highlight the current gold scenario and investors should decide for themselves if it is worth investing or not.

If you decide that you do want to invest into gold, the most obvious question is how do you do it and where can you purchase gold from? 

As of my knowledge, there are two ways to invest into gold:

1. Investing in Paper Gold
2. Investing in Physical Gold

What is Paper Gold?

In simple explanation, Paper Gold is actually an agreement between you and the bank to purchase gold at a price offered by the bank. You will not be given a gold bar and instead the only proof that you own gold is a "passbook" that states how much gold you have bought and at what price. If you intend to sell that gold, you can only do so by selling it back to the bank where you originally bought the gold from. 

Pros of Paper Gold

• You need not worry about where to store the gold you've purchased since there is no actual gold being exchanged. 
• Buying and selling gold is can be done instantly over the counter or via internet banking.

Cons of Paper Gold

• You don't own actual physical gold. All you have is an agreement between you and the bank in the form of a passbook.
• If the bank which you purchased the gold from goes bankrupt/defaults, so will the gold you've purchased.
• Investing in paper gold is not guaranteed by PIDM.
• Paper Gold investment is considered as "Non Halal" income for Muslims. (please correct me if I'm wrong)

Who should invest in Paper Gold

• Investors who intend to diversify their investment by allocating a small portion of their investment into gold. 
• Amount of gold purchased are small in quantity. 
• Investors who are confident that banks such as Maybank, Public Bank or CIMB will not default or go bankrupt.

What is Physical Gold?

Investing in Physical Gold means purchasing gold bars or gold coins which are 99.99% made of pure gold. Gold bars and gold coins are purchasable from certain banks and/or from gold trading companies such as Public Gold.

Pros of Physical Gold

• You get to see, admire, keep, love, bring it to sleep with you all the gold you've purchased.
• There is no risk of losing your gold investment even if the bank or company you've purchased from goes bankrupt. 
• You can sell your gold to other banks, trading companies or to your local "pajak gadai" if the need arises.

Cons of Physical Gold

• There is a possibility of you losing your gold due to theft, robbery, fire, etc if you keep your gold at home.
• Having large quantity of gold bars will incur cost in terms of storage.

Who should invest in Physical Gold

• Serious investors take primarily invest into gold.
• Investors who feel secure having the real "thing" in hand instead of a piece of paper.

I'm all set to invest in Gold, so what should I do?

When it comes to investing in gold, investors should be wary that there will be a difference between the buying price and the selling price of gold. 

Similar to what you see at a Money Exchanger, buying and selling currency at different price allows the owner of a money exchanger to profit from the difference in pricing. The same concept applies for gold trading where the selling price of gold will always be a little higher then the buying price.  

For example;

Bank A is selling paper gold at RM160/gram and buying back paper gold at RM155/gram. 

You decide to purchase 10 grams of paper gold from Bank A at RM1600.00 today and for "God knows what reason" you decide to sell your gold back to Bank A immediately! 

By doing so, you are now RM50.00 poorer.

The basic concept of investing in Gold is to ensure that when you decide to sell you gold, do ensure that the buy back price of gold is higher then the price when your first bought that gold. 

Another point I should highlight when investing in Gold is to check on the difference between the buying and selling price of gold. The smaller the difference, the more you can save. I shall elaborate on this later.

Where to Buy and What is the Best Offer?

Purchasing Paper Gold

From what I've checked, there are currently 5 banks in Malaysia which offers Paper Gold investment:

1. Public Bank
2. Maybank
3. CIMB Bank
4. UOB Bank
5. Kuwait Finance House
6. (To add on if I've left out other banks)

Since there are 5 Banks offering Paper Gold investment, which one should you invest in? Let's take a look at the buying and selling price of paper gold as of 16th February 2013 for all 5 banks as shown in the table below:

Paper Gold Comparison - price RM per gram
	Selling	Buying	Difference	% Difference
Public Bank	166.47	159.93	6.54	4.09%
Maybank	165.94	158.99	6.95	4.37%
CIMB	165.30	159.70	5.60	3.51%
UOB Bank	164.70	162.70	2.00	1.23%
Kuwait Finance House	166.90	159.30	7.60	4.77%

The "Difference" column indicate the difference in RM between the selling and buying price for each bank.The "% Difference" column is self explanatory. If you remember earlier, I mentioned that selecting to purchase gold with the smallest difference helps you to save. Apart from that, a smaller % difference in buying and selling price helps you to recoup your investment faster when the gold price is bullish. 

Purchasing Physical Gold

There are currently 3 banks and 1 Trading Company in Malaysia which offers Physical Gold investment:

1. Maybank
2. UOB Bank
3. Bank Negara Malaysia
4. Public Gold (Trading Company)
5. (To add on if I've left out other banks/trading companies)

For comparison of buying and selling price, I've decided to take Gold Bullion Coins as a sample:

99.99% Gold Bullion Coins - 1 Troy Ounce (31.105g)
	Selling (RM)	Buying (RM)	Difference (RM)	% Difference
Maybank Kijang Emas	5,371.00	5,149.00	222.00	4.31%
UOB Gold Maple Leaf	5,326.00	5,141.00	185.00	3.60%
Bank Negara Malaysia Kijang Emas	5,371.00	5,149.00	222.00	4.31%
99.99% Gold Bullion Coins - (50g)
	Selling (RM)	Buying (RM)	Difference (RM)	% Difference
Public Gold	8,591.00	8,118.00	473.00	5.83%

As you can see, although the quality of physical gold coins are all at 99.99%, buying from different banks or companies will have significant impact in terms of time taken to recoup your investment.

Summary

I hope this article has given you an introduction to gold investing and assist in helping you to find the best bargain for buying gold in Malaysia.

By the way, you can check the Daily Paper Gold Prices HERE

Cheers and Happy Investing!

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