Stock-Take Of Malaysian Counters

Weathered the May/June storm pretty well, did not drop as much but rebounded better than most emerging markets. The Securities Commission and KLSE were hell-bent on removing the arms and legs of Coper Aul's team, stocks linked to his group include Iris, Mobif, Satang Jaya, MTD Infra (for a short period, but apparently Coper Aul opted out later), Farm Best, etc... People ask me if the recent huge dumping in Iris and Mobif will affect Coper's fortunes. I think not, in most of the syndicates' strategy, you get in without putting much of your capital, especially with Coper Aul's reputation. Blocks of shares are usually signed off from owners to be pledged for margin facility for financial engineering. More funds are usually obtained via speculative investing groups, highly leveraged hedge funds or funds that do not know what "risk" is. At the end of the day when there is the dump, chances are they would have made a bundle already, if there's any baggage, shares will be given back to owners, margin facility in owners' names, or broking houses will end up with shares and margin facility unpaid.

Strong syndicates will make money all along the way, not just at final distribution phase. Accounts would have been set up in HK, Singapore, Thailand, etc... to place "contra-buy orders" at the right time, allowing the main accounts/funds to take them out at the appropriate time. Hence despite seeing the huge falls in Iris and Mobif, you can be assured that there are a smattering of accounts throughout the region and even globally with millions in contra profits sitting nicely. The fact that SC/Bursa are more determined to lop the heads off the main culprit should not be ignored, and will be picked up by other syndicates - SC/Bursa will make life very tough on those financial engineers. At the end of the day, the main accounts for Iris and Mobif probably did not make money after all the hoo-hah as the average carrying cost is quite high, as their operations was somewhat thwarted towards the end. "Main accounts" refers to the supposedly banker account with profits to be shared between owners and syndicate. Like I said, owners may not make, but betcha Coper Aul did.

Despite all that, Malaysian first and second liner stocks and the relevant indices largely ignored the calamity. This is good as institutions stayed largely away from bad stocks. The palm oil play has picked up momentum. Very interesting to see CIMB having the iron balls to come up with an IOI Corp covered warrant, but why is the delay in listing it... scared?? Assuming the conversion px is RM16.20, the company stands to lose buckets if they do not hedge properly. Particularly since there are already some top foreign broking research looking at IOI Corp possibly hitting RM25.00 within the next 12 months. On balance, there is momentum in palm oil rally, and does not appear to be overdone. The impact of biodiesel as a new consumer category has not been fully imputed.

For the rest of the year, we can expect good upside for big palm oil stocks, in particular KLK and PPB. Other potential favs for institutional investors will include AirAsia, Maybank, UEM World, Tenaga, Resorts World and B-Toto. On the shorter term trading front, new developments should attract trading activity in Konsortium and DRB Hicom.