Phillip Capital's New Branch Launching at Taman Sutera Utama, Johor Bahru!

First and foremost, my heartiest congratulations to Phillip Capital Malaysia for a successful launching of the new Phillip Capital branch at Taman Sutera Utama, Skudai, Johor! The Taman Sutera Utama branch is the second Phillip Capital outlet after first stepping foot on Johor back in 2012 and opening their first branch at Taman Molek Johor Bahru. As part of the Phillip Mutual's family of consultants, we were also given an invitation to witness the opening ceremony which was held on the 6th of July 2013.

I was told by the event organizing team that various key industry figures from the Derivatives Sector, Exchanges as well as the top management from Phillip Capital Malaysia and Singapore were present for this event. VIPs present on that day were:

1. Mr. Chong Kim Seng - CEO, Bursa Malaysia Derivatives
2. Dato Loh Liam Hiang - President of Chinese Chamber of Commerce and Managing Director of Multi Fiber Sdn. Bhd. & Pure Water Sdn. Bhd.
3. Mr. Lim Wah Tong - Executive Director Phillip Securities Private Limited, Singapore
4. Mr. Andy Lim Say Kiat - Managing Director of Phillip Capital Malaysia
5. Mr. Teyu Che Chern - CEO, Phillip Futures Private Limited, Singapore
6. Mr. Alex Poh - Singapore Exchange (SGX)
7. Mr. Henk Huitema - Eurex Exchange (EUREX)
8. Mr. Kelvin Wong - CME Group (CME)
9. Mr. Stefan Ulrich - New York Stock Exchange - Liffe (NYSE Liffe)
10. Mr. Joseph Koehnen - CQG

VIPs at the Phillip Capital, Taman Sutera Utama New Branch Opening Ceremony

SPEECHES

The event started off with an opening speech by Mr. Andy Lim, MD of Phillip Capital Malaysia. Key highlights of his speech were the achievements of Phillip Capital in Malaysia, thanking Bursa Malaysia Derivatives for their quick response in approving Futures Trading license for this Sutera Branch and lastly his appreciation for everyone whom were present for this ceremony.  

Here is Mr. Andy's speech captured via my Samsung Tab 10.1:

Mr. Lim Wah Tong, Executive Director Phillip Securities Private Limited, Singapore was next to be invited. In his speech, Mr. Lim highlighted the importance of having a one stop financial center close to the neighborhood. The concept of financial center next to the neighborhood has been widely accepted and practiced in Singapore that he hopes that the same concept can also be replicated in Malaysia.

See Mr. Lim's full speech from the video below:

Last but certainly not the least, Mr. Chong Kim Seng, CEO of Bursa Malaysia Derivatives was invited to speak. Being a well articulated man, Mr. Chong certainly lived up to his position of Malaysia's Derivatives top gun as he delivered an inspirational speech about the future of high risk investing in Malaysia. 

You can watch his entire speech below:

LAUNCHING CEREMONY
Once all the key speeches were over, next in line was the launching ceremony. Here's a short video recorded during the ribbon cutting ceremony.



Pictures:

VIPs with the twin lions

Lions preparing to enter the through the entrance

Bringing luck and prosperity to the new Branch

Once the launching ceremony ended, all guest were treated to a sumptuous buffet lunch and were given the freedom to network with each other. I had the opportunity to speak to Mr. Andy, whom shared his vision of unit trust and how Phillip Capital intends to bring unit trust investing closer to investors. 

At the back looking busy

Mr. Andy and me

Another highlight for me is this:

A picture with Mr. Chong Kim Seng - CEO, Bursa Malaysia Derivatives

Lastly, kudos to the organizing team from the Phillip Capital, Johor Bahru whom made all the effort to ensure that the entire ceremony was organized and executed smoothly. Job well done!

SPECIAL PROMOTION

To celebrate the opening ceremony of Phillip Futures at Taman Sutera Utama,  those who sign up futures account during (6^th July 2013 to 4^th October 2013), will be entitled to FREE first ten lots of trading commission.

For further information, feel free to contact Phillip Futures at 07-557 2188

Cheers and Happy Investing!

Why Investors Lost Money from China Equity based Unit Trust Fund?

In some of my previous posts and reviews about unit trust investing, I've stated that many investors got burnt investing into China Equity Unit Trust Funds. Despite the launch of these funds somewhere between 5 to 6 years ago, many investors whom invested into them during launching have yet to regain their principal investment amount.

In today's post, I intend to look into the history of China Equity based Unit Trust Funds, what caused the losses and finally how the losses could have been prevented.

Background

Being the largest unit trust company in Malaysia, Public Mutual Berhad (PMB) was the first to launch Public China Select Fund (PCSF) on the 5th of June 2007. This fund offer investors an opportunity to invest into greater China market such as Hong Kong, China and Taiwan.

Between 2003 to 2007, China's GDP growth grew from 10% to above 14% as shown below:

Leveraging on China's double digit growth, PMB was able to market PCSF with relative ease to investors. PMB's Unit Trust Consultants had it easy for the facts and figures were available to back their sales pitch. 

By 13th of August 2007 (2 months after launching), PCSF fund size grew to a whopping RM1billion in size! 

The popularity of PCSF lead to growing demands for an Islamic Syariah based China Equity fund as well. Hence on the 20th of November 2007, Public China Ittikal Fund (PCIF) was launched by PMB to cater to the Islam community. 

Rivals unit trust companies such as CIMB and OSK-UOB both launched their own China Equity Funds in December 2007 as shown below:

Fund Name	Launch Date
Public China Select Fund (PCSF)	5-Jun-07
Public China Ittikal Fund (PCIF)	20-Nov-07
OSK-UOB Big Cap China Enterprise Fund	3-Dec-07
CIMB-Principal Greater China Equity Fund	6-Dec-07

All four funds grew aggressively in terms of fund size between 2007 to 2008, indicating the confidence everyone had towards China's economy and growth. Investors were dumping in lump sum cash to invest into these funds, hoping to make fast money while foregoing the basic principal of unit trust investment, which is long terms investment. 

The Downside

An excerpt from an article by the China Digital Times dated 8th December 2008 outlined what happened to the China after 2008:

After starting 2008 with a double-digit growth rate, substantial trade surpluses, and over a trillion dollars in foreign reserves, it took almost half the year before China fell victim to the global financial crisis. At first some believed China might be immune; however, as banks began to collapse in the United States and Europe, China quickly found itself drawn into the financial mess.

When the U.S and Europe fell into the credit crisis earlier this year, they were forced to cut back on consumption, which fueled a massive decrease in demand for Chinese imports. China was already experiencing a economic downturn, and the lack in demand from abroad meant factory closures, resulting inhigh job losses all over China. Guangzhou, a major manufacturing town, lost tens of thousands of workersin 2008, forcing citizens to return to their home in the countryside. Dongguan, and the southern Pearl River Delta, also lost thousands of workers. Suddenly the great engine of China was slowing.

However the direness of the situation were already showing between 14th January 2008 to 23rd January 2008 when the Shanghai Stock Exchange lost almost 1000 points. But then again, how many consultants would have taken the initiative to warn investors to exit their holdings? In fact how many consultants would have predicted that by June 2008 the world was facing a global financial crisis?

Gains that investors enjoyed since the launching of PCSF were wiped out by March 2008. The same can be said for the 3 other funds launched later. 

To better illustrate the situation, let's take a look at the Shanghai Stock Exchange Index between 4th January 2007 to 24th June 2010 and the launching dates of all four China funds.

Click to Enlarge

Performance of all four China Equity Funds as of 31st May 2013

If you've invested lump sum into any of the fund on launching date, none have yet to return your principal investment amount as shown below:

Fund Name	Fund Size (RM - million)	Returns Since Launched
Public China Select Fund	808.74	-31.23%
Public China Ittikal Fund	397.20	-29.92%
OSK-UOB Big Cap China Enterprise Fund	231.54	-5.84%
CIMB-Principal Greater China Equity Fund	202.66	-9.64%

I don't know whether it is due to poor decision making or lack of experience in the China equity but both Public Mutual funds, PCSF and PCIF are still in the double digit loss zone as of 31st May 2013. 

The oldest China equity fund, PCSF, despite gaining handsomely between launching date to Oct 2007 is the biggest loser among four funds! On the other hand, OSK-UOB Big Cap Fund and CIMB's Greater China Fund have managed to reduce their losses to single digit.

What caused Investors to lose their investment?

The causes can be divided into a 2 main categories consisting of:

1. Human Emotion

• Desire and greed to make fast money by investing lump sum into a newly launched fund.
• Failure to take profit when opportunities were presented especially for PCSF investors.
• Over optimism that China would have continuous double digit growths. 
• Thinking that investing with the biggest unit trust company in Malaysia is equivalent to investing in the best performing fund. The performance figures proved otherwise.

2. Strategy

• Investing Lump Sum is a strategy that only works when the market is bearish. As you can see from the Shanghai Stock Exchange Index, the market was bullish and approaching its peak when China funds were launched. 
• Deciding to invest into China funds with no/historical performance or track record.
• Thinking that unit trust is an investment avenue for making fast money.

Could the losses be prevented or reduced?

Yes, the losses could have been prevented or at least reduced if:

1. Use Dollar Cost Averaging strategy instead of Lump Sum Investing
2. If you insist using Lump Sum strategy, make sure you have additional cash reserves to purchase more units if the market turns bearish. This would help bring down your average unit price.
3. Only invest a small portion of your investment portfolio (if you must) for newly launched funds with no track record.
4. Changing your perception about unit trust. It is not a get rich quick scheme and neither does it cheat your savings. Knowing about unit trust, how it works as well as its risk helps you to make wiser investment decisions.

Cheers and Happy Investing!

If you like reading this post, it would do me a great favor by:
1. Sharing this post on your Facebook!
2. Like my Facebook Page

3. Want to set up your own retirement fund via Unit Trust investment? Drop me an email at sickfreak03@gmail.com

Planning Your Child's Higher Education Fund..Even If You're Not Married

The Issue of Child Education Fund

One of the biggest obstacle many parents face is having enough money to support their child's higher education. Parents of the "Baby Boomers generation" whom have already experienced this stage of life would agree that the largest chunk of their savings are spent on ensuring the best possible higher education for their child. 

However among newly weds or parents with young toddlers, it is easy to brush aside this matter especially since the issue would only surface 20 years down the road. Rising household debts due to uncontrolled spending have largely contributed to the procrastination of many parents when it comes to starting their own child education fund. 

This procrastination syndrome was clearly proven based on the various conversations I had with young parents about planning their child education fund;

"Aiyah...why worry so much...20 years long way to go..plenty of time to save money for my kid's education"

or

"If not enough money, PTPTN can provide loan cover for me"

The Problem with Ignorance...

This goes to show that many young parents only see the immediate picture based on the responses above. Have they thought about the following possibilities? 

1. The future is full of uncertainties, what if 20 years down the road you are retrenched and unable to pay for your child education?
2. The cost of an engineering degree from a local private university cost about RM70,000 at present, with raging inflation what do you think the cost would be 20 years later? RM120,000? RM200,000? 
3. PTPTN can be a savior for your procrastination. Despite that, you've knowingly placed your child in debt even before he or she starts working. What would your child think of you?
4. You can take a portion of your EPF to pay for your child education in the future but wouldn't that leave you with lesser to retire upon?

Child education worries is akin to a buzzing mosquito hovering consistently at our ears all the time. We can choose to ignore the buzzing and live with it only to suffer the consequences of getting bitten 20 years down the road. Or perhaps we could do something about it now and swat the irritating mozzie away once and for all.

Case Study

Let's take a look at the present cost of education by sampling the Fee Structure from International Medical University (IMU) Malaysia.

There are 2 options to obtain a Bachelor of Medicine from IMU as shown below:

1. By completing the entire degree locally

2. By completing the 1st stage locally followed by the 2nd stage with a partner medical school overseas

Fee Structure from IMU as shown below:

Assuming that your pride and joy intend to become a Doctor in the future and you wish to pay for his or her education. How much do you think the course fee would be two decades from now including inflation? Let's take a look at the calculation:

Calculation of Projected Education Cost:

• Cost of Degree : RM410,000 (at present)
• Assuming Inflation Rate : 3% increase per year (I am taking a lower inflation rate as the increase in education fees is not as aggressive as the increase in food prices)
• Period for projection : 20 years

Based on the parameters given, the projected cost of a medical degree 20 years down the road would come up to an astounding RM740,505.61!!!

What should you do?

Inflation..inflation...inflation...we are all enslaved by it. Inflation is the reason why price of goods and services are increasing yearly. In order to protect the value of your money, you have to ensure that your savings is growing faster or at least equivalent to the inflation rate. 

The obvious answer to fighting inflation is via investing. Never the less I should forewarn that any form of investing involves risk. Even if you're stashing your money in a Fixed Deposit account, there will be risk. Are you able to guarantee that the bank holding your fixed deposit account would not default? Remember Lehman Brothers?

To simplify things, I've taken the initiative to compare the available option of "passive" investing* in order to achieve the targeted amount of RM740,505.61 within 20 years. Please refer to the table below:

Passive Investment Option	Expected Returns Per Annum	Monthly Savings Required
Savings Account	0.25%	RM 3,009.27
Fixed Deposit	3.50%	RM 2,134.83
Amanah Saham Bumiputera	9.00%	RM 1,108.73
Balanced Unit Trust (moderate risk)	10.50%	RM 913.63
Equity Unit Trust (high risk)	13.00%	RM 653.44

*Noticed I used the word "passive" investing? I have to be clear on this since stocks and properties are also investment options available for everyone. Yet both options were omitted from the table because I consider them as "active" investing. Active investing requires the investor to spend time and effort into researching and making the right selections. Not everyone, especially parents with kids could afford to do active investing, juggle their careers and manage their family all at the same time. One of it would give way eventually.

Summary

The subject of investing to build a Child Education Fund is a touchy topic to blog about. Firstly, investing itself is perceived as a negative sure lose option. Secondly the goal of the education fund is so far ahead in the future that many parents fail to visualize it. 

My self realization begin when I begin to take financial planning and investing seriously. Despite not being married...yet..., I've already started out investing into a balanced unit trust fund for my future (hopefully) son or daughter. If by faith I am not blessed with a child, then the invested amount would then be converted into my own retirement fund. Investing in unit trust is a step I am willing to take after understanding how it works as well as how to reduce the risk involved. 

I've made my choice, I hope that you will too!

Cheers and Happy Investing!

If you like reading this post, it would do me a great favor by:
1. Sharing this post on your Facebook!
2. Like my Facebook Page

3. Want to understand how to set up your own Child's Education Fund with Unit Trust? Drop me an email at sickfreak03@gmail.com