The Debt Crisis In 2012

Japan has long been mired by an aging population, sluggish growth and deflation since an asset bubble popped in the early 1990s.  The country already has the highest debt-to-GDP ratio in the world--about 220% according to the OECD -- and a debt load projected at a record 1 quadrillion yen this fiscal year.

 

Based on a plan approved by the Cabinet in Tokyo on 23 Dec, the country is now looking to sell 44.2 trillion yen ($566 billion) of new bonds to fund 90.3 trillion yen ($1.16 trillion) of spending in fiscal year 2012 starting 1 April.  That will raise Japan budget’s dependence on debt to an unprecedented 49%.

According to Bloomberg, the government projects new bond issuance will surpass tax revenue for a fourth year. Receipts from levies have shrunk about a third this year after peaking at 60.1 trillion yen in 1990.  Non-tax revenues including surplus from foreign exchange reserves also halved to 3.7 trillion yen. Social-security expenses, now at 250% of the level two decades ago, will account for 52% of general spending next year

Moreover, an April 2011 analysis by CQCA Business Research showed that "Japan has an extremely near-future tilted debt maturity timeline" (see chart below).  CQCA estimated that in 2010, Japan was able to push 105 trillion yen into the future, but concluded it is doubtful that Japan will be able to continue this.

 

Chart Source: CQCAbusinessresearch.com, April 2011

Indeed, as one of the major and relatively stable economies in the world, and since almost all of its debt are held internally by the Japanese citizens or business, Japan has been able to still borrow at low rates (10-year bond yield at 0.98% as of Dec. 26, 2011), partly thanks to the Euro debt crisis going on for more than two years.

So as long as Japan could keep financing a majority of its debt internally without going through the real test of the brutal bond market, the country most likely would not experience a debt crisis like the one currently festering in Europe.

 

But the chips seem to have stacked against Japan now.  On top of the new and re-financing needs, the Japanese government estimated that the economy will shrink 0.1% this fiscal year citing supply-chain disruptions from the earthquake and tsunami disaster in March, the strengthening of the yen and the European debt crisis.  Moreover, S&P said in November that Japan might be close to a downgrade.  After a sovereign debt downgrade to Aa3 by Moody's in August, 2011, it'd be hard pressed to think Japanese bond buyers would shrug off yet another credit downgrade.

Burgeoning debt, coupled with the global and domestic economic slowdown, and continuing political turmoil (Japan has had three Prime Ministers in the last two years, and the current PM Noda’s popularity has fallen since he took office in September), would suggest it is unlikely that Japan could continue to self-contain its debt.

It looks like its massive debt could finally catch up with Japan in the midst the sovereign debt crisis that's making a world tour right now.  While some investors might see Japan as a bargain, it remains to be seen whether the country will continue beating the odds of a debt crisis.

Read more: http://feedproxy.google.com/~r/EconForecastFullFeed/~3/TIJNwGPhjtA/debt-crisis-2012-forget-europe-check.html#ixzz1hjsHdRg9






Comment: Funnily, the decision to sell $566bn worth of bonds by the Japanese is uncannily close to the 460bn euro long term funding facility by ECB. While we all should know why Japan's debt problem may not be as devastating as the other sovereign types - in that the bulk of the buyers are NOT foreign funds, the buyers are Japanese, private and institutions, Private as in via their massive postal savings scheme. Even I think its not a severe problem for Japan but the one development which seems critical is that this would mark the fourth year whereby the dependency on bond sales is higher than tax revenues.


It also seems that BOJ is unable to reverse the strength of the yen at all, further crippling spending. The E.U. crisis has caused a lot more funds to be repatriated back as well. The tsunami/quake early in the also caused many institutions (insurance) to bring back funds to yen. The yen is causing untold problems to the Japanese economy.





The twin problems of stronger yen and dwindling economy is very hard to stomach. Even a recent downgrade of JGBs by S&P failed to push local buyers away from JGBs. So, while we see a huge problem mounting, I do not yet see anything that would trigger a major debt crisis in Japan. For that to happen, you have to see local private, businesses and institution shrivelling from buying JGBs, how???


The other related problem is deflation, with slowing consumption and strengthening yen, we have the very silly situation whereby seemingly positives become huge negatives: DEFLATION, STRONG CURRENCY. Unemployment is getting out of hand as the strong currency is exporting plenty of mid-level jobs away from the country at a time when the economy is not growing.


Endgame: Disenchantment by the young and those caught by the nasty shift in economic paradigm..




Will this end horribly?I don't see it, what I see is a slow, long and painful decline for the welfare of Japanese. 

PMP For Charity

What a noble move by all concerned. Malaysian tycoons push gaming for charity, finally something that really gives back to society. Proposal involving Tanjong's gaming unit needs only one more regulatory nod, i.e. from the Domestic Trade Ministry. My concern is that the NFO business is great but no one seems to be saying anything about the Racing Totalisator Operations (RTO). Whatever 1+3D makes, you can safely whack RM150m losses by RTO. Can you imagine a monopoly losing money in gaming crazy Malaysia? ... The other funny thing was that among the many tycoons contributing to buy PMP collectively, somehow I don't see the "so called initial interested buyers" of PMP being part of the contributing group??? ... I have attached my previous posting on RTO after Jaya's wonderful article.



By S JAYASANKARAN

MALAYSIA'S first earnings-recurrent charity for education stands one regulatory approval away from being created. Jana Pendidekan Malaysia, whose profits will be channelled to a charitable foundation called the Community Chest, will fork out RM2.1 billion (S$857.5 million) to acquire Pan Malaysia Pools (PMP), the gaming unit of tycoon T Ananda Krishnan's recently privatised Tanjong plc in a deal that has all but gone through. All regulatory approvals have been obtained except one from the Domestic Trade Ministry.

According to executives familiar with the matter, Jana will raise RM500 million from a unit of gaming conglomerate Genting (RM250 million) and some of the biggest names in corporate Malaysia loosely grouped in a private entity called Community CSR (RM250 million).

Another RM1.54 billion will be raised through bank loans to make up RM2 billion, the original price tag. However, the executives said the price was raised by RM100 million two weeks ago. The extra RM100 million will come from Mr Krishnan himself and is payable, with interest, to Community Chest within 15 years.

What is unique about the deal is its charitable intent - the funding of Chinese and Indian education in Malaysia. There are at least 60 'independent' Chinese schools that have always been funded by the community but Indian education has remained inadequately financed. Indeed, Community Chest promises to be the first financially sustainable charity in South-east Asia.

Some of the names in Community CSR read like a Corporate Who's Who of Malaysia. Among them: billionaire tycoon Quek Leng Chan (RM50 million); steel magnate William Cheng (RM30 million); billionaire realtor Chua Ma Yu (RM30 million); Hap Seng Group patriarch Lau Cho Kun (RM30 million); and health and beauty care products maker Koo Yuen Kim.

Mr Krishnan: Tanjong was privatised by him last year for RM4.5b (RM30 million). The other names include property tycoon Ta Kin Yen (RM15 million); Central market founder Bernard Bong (RM10 million); the See Hoy Chan family (RM10 million); Dialog founder Ngau Boon Keat (RM10 million); financier Vijay Sethu (RM10 million) and Taliworks director Lim Chee Meng (RM10 million). There is a RM15 million shortfall which will be temporarily underwritten by Genting until a new donor is roped in.



The government is supporting the deal. Community Chest's four permanent trustees are Genting's Lim Kok Thay, Hong Leong's Mr Quek, Mr Cheng of the Lion Group and Mr Chua. In addition, four independent trustees would also be appointed to the trust, all of whom would be nominated by the office of Prime Minister Najib Razak.

There is no doubt that such a deal would be populist. It has become clear that the Chinese, who form 25 per cent of Malaysia's 27 million people, have been turning away from the ruling coalition, in favour of the opposition. An educational trust prodded on by the government might go a long way in re-establishing trust.

On financing, the executives said that four banks - CIMB (RM395 million), Hong Leong Bank (RM375 million), RHB (RM375 million) and Maybank (RM375 million) - would partially fund the buyout. The executives said that the deal's promoters were likely to ask the banks for a two-year interest moratorium given the charitable aspects of the buyout. They were also likely to ask the government for a waiver of stamp duties and other fees.

The executives said that Jana would issue 500 cumulative redeemable preference shares (CRPS) of RM1,000,000 each would be distributed proportionally to the donors. That would raise RM500 million which would partially fund the PMP acquisition. The notes would also carry a 4 per cent dividend yield which would be paid in 10 years when PMP was to be listed.

On listing, all CRPS-holders would be issued shares by way of a formula that took into account his total subscription price for outstanding notes. The executives added that even if PMP was listed, the Community Chest was to have at least 51 per cent of the gaming firm post-listing.

The Pan Malaysia Pools that Jana would acquire, however, does not come with the Big Sweeps Lottery but would include the numbers forecast operations and a mildly lossmaking 40-acre stud farm. It is said to have a 24 per cent share of the country's NFO market. (RTO???)

Tanjong was privatised by its majority shareholder, tycoon T Ananda Krishnan last year for RM4.5 billion. Analysts have said he intends to break up the conglomerate and relist its component parts. Mr Krishnan's desire to get out of gaming is part of a restructuring to make Tanjong syariah-compliant and tap the Middle East and North African markets together with those in South and South-east Asia to expand the firm's power-generation business.

Mr Krishnan's only son is also a Buddhist monk in Thailand, a factor that might also help explain Mr Krishnan's desire to exit the industry.

---------------------------------------


POSTING ON RTO BUSINESS:

The Edge Weekly reported that the Cheng family is believed to be eyeing the gaming business of the soon-to-be privatised Tanjong plc. Other interested parties are said to be the Genting Group and Multi-Purpose Holdings. The key surprise is that the Chengs could be a new entrant into the NFO (Number Forecast) arena. Sure, many would be keen to claim the last NFO but they could face hurdles in the form of competition objectives and regulatory approvals.

The key is many seem to forget that the "dastardly-run-hands-tied" Racing Totalisator (RTO) will be part of the package. If its just 1+3D operations, thats fine, I am not sure if the bidders are aware of the "most 'beguiling' business unit in the whole of Malaysia". Many would think they know what they are buying, when even Ananda Krishnan cannot get the "political will" to make the necessary changes to the RTO, you think anyone else can???

While AK may be wanting to shed the gaming business to mould the business to be shariah compliant for future fund raising purposes, I doubt that is his main motivation. I mean, he can easily source for lenders, shariah or otherwise. Who does not want a mini-monopoly with the 3rd leg of NFO business in Malaysia? Its a brilliant cash cow. Its the RTO business that is making them crazy.

The Chengs are looking into the deal and have arrived at a valuation of about RM2bn for the entire business. Should the Chengs decide to bid, the proposed acquisition will be done in a private capacity, and that they will probably partner a private equity fund.

Of course the Genting Group would be a keen bidder as well. Four years ago, when Tanjong expressed interest in selling the business, Genting Bhd and Multi-Purpose Holdings had said they were interested, but pricing was a problem then. There has been speculation in the past that Tanjong and Genting could swap assets, with the former hiving off its gaming business in exchange for the latter’s power division. That would make a lot of sense.

For MPHB which owns 51% of Magnum Corp, acquisition of Tanjong’s gaming assets is, on the surface, an easy way to expand its market share. But most NFO outlets are so close to one another that the real value may not be as attractive to Magnum's operations. To relocate some of the outlets to improve yields may not be as easy as it is on paper.

The Cheng family: Headed by Datuk David Cheng, is in the gaming slot machine business, mostly in the Klang Valley. The family is also in the food and beverage industry. One of David’s two sons, Datuk Douglas Cheng, teamed up with Datuk Vincent Tan Ting Wong and Henry Yip to establish the popular Chinese restaurant chain Dragon-I in 2004.

Trust me, AK wants to get rid of the RTO and he wouldn't mind bundling the NFO with it. However all bidders would want the NFO business only and they should get that out of their business model, it will come with the RTO.

For the year ended Jan 2010, NFO under Tanjong recorded an operating profit of RM234.9m while the RTO registered a loss of RM65.8m. For the previous year the RTO business posted losses of RM26.9m. I tell you that the RTO business will be losing RM100m or more a year very soon.

The key here is, what ails RTO. I mean its a monopoly with the 3 turf clubs in Malaysia. For those of you not familiar with horse racing, Malaysian horse racing garners possibly more betting revenue than the Genting Highland casino + illegal football bets + all 4D operators all added together, and is in multiples of that collective sum. I would not be off a lot if I were to say that the number one place on earth for horse race betting is HK, followed by Australia and then Singapore and Malaysia. How on earth can the RTO business be in the red all the time???

Its the most "hands-tied-business" in the country for sure. Its also the biggest sector in the "shadow economy". The country loses billions in taxes foregone, at least we still get taxes from NFOs and the casino business.

There is a lot of inertia with the "boards" that run each turf club, there is so much vested interest. Race fixing is rampant in Malaysia, probably second in the world next to Macau. For each race, the total betting received by the local turf clubs may be around RM300,000. The actual real betting with bookies is conservatively 20x-30x that amount.

Say the government tax is 15% and the RTO gets 10%. Technically the government gets RM45,000, the RTO gets RM30,000. Now, you add the fact that there are at least 30 races a week x 52 = 1,560. The government gets RM45,000 x 1,560 = RM70.2m and the RTO getsRM46.8m. When you start to deduct funds needed to pay the prize money for each race and the usual operating expenses, its a wonder they only make RM80m losses.

If we take the low end of estimate of actual illegal betting, the government is losing 20 x RM70.2m = RM1.4 billion a year in uncollected taxes/duties. While the RTO could very well have gotten 20 x RM46.8m = RM936m in revenue.

Why would the RTO allow that to happen? Firstly, they are not paid as per revenue/profit achieved. It is better to allow for status quo because of "certain information flow". Now, it is so rampant that a substantial number of horse owners are also bookies themselves, how to win at this?




New owners of NFO and RTO would be likely to try to implement the following (which I am sure Tanjong and Ralph Marshall have tried their hardest):
- reduce government taxes by half, the lower the duties, the better the pool payout which will eat into bookies' margins
- improve access, convert at least half of 1+3D outlets to take racing bets and allow for live broadcast at these outlets
- have a truly independent steward board and disciplinary board, now 90% of all riders who "pull" horses get off scot-free, same for the trainers (btw do you know how many jockeys and trainers get bashed up a year ...more than you know)
- have a special task police unit to haul up all illegal bookies, at the tracks and elsewhere, if they can be so effective during the World Cup, this can be done
- remove all the turf club board members, replace with one professional management unit that is paid professionally and with credibility
- work with authorities to block the enterprising internet betting sites continuously

So, think again before you bid for Tanjong's NFO and RTO business. If you want just the former, I think AK will ask to to go fly wau.

p/s: before there was Zhou Weitong, there was Haruna Yabuki

Let's Take A Walk With The New "Apek" On The Block

I will go through the entire exercise of reading the prospectus and noting the important points of this China-company listing on Bursa, K-Star Sports. This way, we all can discuss on how we should be evaluating the whole thing.

Yes, you guessed it correctly, its another shoe maker. Why is it that shoe making industry is the only industry being keen to list on Bursa? That's another question for another time.

K-Star will offer 15.32 million new shares at an issue price of RM2.15 per share with 3.4 million shares allocated for the Malaysian public and the rest of 11.92m for selected investors. OK, the size of the offering is not too big at all. The thing to watch out for is the placement to selected investors - if its a huge allocation to selected investors compared to the public, then maybe the promoters and lead underwriters are NOT THAT CONFIDENT on the issue at all. A large sized placement to selected investors may be negative as well, remember MultiSports and Mr. Quek.

Some may think that its a good thing that its all new shares issued. I think if its an ACE company, then that is OK, but for an established company churning decent profits, that is myopic and naive. You should have some sort of moratorium but you should also be upfront with shares that owners might want to sell. I would rather that they sell 20% of their shares to the public and 5% to selected investors - and then the rest of the shares be placed on a moratorium for 6 months, and only sell another 10% from 7-24 months. That way, they can go and concentrate on running the business but with some sort of buffer on being listed. You cannot and should not deny entrepreneurs from some cashing out after having growing the company to a listing.

The IPO exercise is expected to raise RM32.94mil out of which RM9mil will be used for raising the company's production capacity, RM5mil for sales and marketing network expansion, RM4.5mil to enhance product design and development capabilities, RM3mil on branding and advertising efforts and the rest for working capital and listing expenses.

The company, scheduled for listing this May 31, recorded a revenue of RM294.4mil and a pre-tax profit of RM45.54mil last year (StarBiz made an error in taking the RMB figures for RM). Here is the key, it makes RM45.54m a year, and yet it is only raising RM32.94m??? There is absolutely no need to get listed, is there? Generally, a company should be making much less than what it is trying to raise - that way, it is to channel additional capital to fund growth. When you already make more than what you are trying to raise, you MUST HAVE OTHER BIGGER OBJECTIVES on your agenda.

Hence, the bullshit about increasing capacity, marketing network expansion, enhancing product design, branding and working capital are all plain bullshit (and it smells too).

I am not saying you cannot list when the amount you are raising is a lot less than your annual profit but you got to be more upfront-la, not so many idiots running around. I would be a lot happier if the company says that its also to allow for some early investors to cash out - there is nothing wrong with that at all, but don't try to pull a fast one. We all need entry and exit strategies, and its an accepted process for capital to invest and divest, so that the process can be repeated, its the whole mantra of investing and capitalism.ol

K-Star has been in the apparel industry for twenty years and its product range include athletic footwear and leisure wear. They are also the original design manufacturer (ODM) and original equipment manufacturer (OEM) for international brands including Umbro, Diadora, Kappa, Le Coq Sportif, Die Wilden Kerle, Canguro Cosby and Bridgestones, as well as PRC footwear brand, Double Star. This is good stuff, proven deliverables across a wide section of reputable clients. It has four production lines and produces four million pairs of shoes in-house annually.

Back to valuations, RM45.54m based on 89m shares is a net EPS of 51 sen. At IPO price of RM2.15 thats a remarkably cheap PER of 4.2x. However, we should do a comparison: Xinquan, for year ending June 2010 should be making 35.7 sen, at RM1.17 it is trading at 3.27x PER. Why do you want to list on Bursa when you get PER valuations between 2x-5x???

Look at the 2010 PER valuations for similar China sports apparel companies: Anta in HKSE 17x; Dongxiang in HKSE 15x; Li Ning in HKSE 19x; Hongxing in Singapore at 8x. The key difference besides the different exchanges is the size of the companies. Anta, Dongxiang and Li Ning all have a market cap of above $3bn. Even Hongxing in Singapore has a credible market cap of $338m. Xinquan's market cap is just $103m. As for K-Sports, its market cap on listing 89m x 2.15 =RM191.4m / 3.2 = $60m.

Realistically, I think Xinquan is more interesting because if you ascribe an 8x PER (like in Singapore) for Xinquan, its market cap would be close to Hongxing. But even at 3.2x PER Xinquan only paid out 5.3 sen in dividend, presenting a yield of just 4.7%. If you are really generating so much cash flow and you are concerned on your share price, then maintain a strong dividend policy. Xinquan should make RM109m for year ending June 2010 and is only likely to pay out 5.3 sen gross dividend. They have 307.3m shares but they are paying only RM16.3m in dividends. Do this, declare that you will pay 50% of net profits as annual dividends. RM109m x 0.5 = RM54.5m = 17.7 sen. At RM1.17, thats a gross dividend yield of 15%. Once you declare a firm dividend policy, watch your share fly. I am sure using 50% of net profits is more than sufficient to grow the business.

K-Star directors said in the prospectus that they intend to pay 10%-20% of profits in dividend. At RM45.54, assume 20% = RM9.1m / 89m = 10.2 sen. At RM2.15 thats a yield of 4.7%. So tell me what K-Star is doing that is any different from Xinquan??? The controlling shareholder will retain 58.4% of shares upon listing, the key again is who holds the rest?

One hint, the conversion of a S$6.105m loan into 13.32m K-Star shares. This amount may be fluid and could be early sellers, maybe.

Sales to two major customers, namely Xiamen-Waitu Import Export and Qingdao Double Star Celebrity Industrial accounts for 40% of sales. I need not tell you that that is a significant risk, but still acceptable. Other financial metrics such as inventory turnover period of 13 days and receivables turnover period of 80 days are quite positive.



Overall, its valuations are attractive but will suffer the same fate as the rest. Initially you probably have to clear 15.32m + 13.32m shares = 28.64m shares. After that, maybe the share price can find some traction.

I would strongly advise that these companies come out and declare 50% profits payout as dividends; and Bursa put in my recommended moratorium on the owners and promoters. Only then will confidence be back in these shares, and you need confidence to be back if we are to be a viable alternative. You can have hundreds of meetings and brain storming sessions - these will be your best weapons.

Let's be honest here, even if we do all the right things, these shares will probably get between 7x-10x PER valuation max because:
- they will always be benchmarked to those listed in Singapore and HK
- the discounts for smaller China companies listed overseas are justified judging from the "shenanigans" concocted by some of the red chips in Singapore
- they list in Malaysia usually because someone had the bright idea of either cleaning up the books and/or inject fresh capital to dress up the company and/or hammering together a few smaller companies to make it listable and/or ... you get the drift ... when that's the case, usually the ideas man would want to cash out quick

Important View On Dubai World Factor In Equity Strategy

Well, just as swiftly foreign money came into emerging markets, just as swiftly will they leave, and not even on something direct. An indirect scare out of Dubai seems to be enough reason to take the chips from the table. On Wednesday, Dubai World, the government investment company behind some of the emirate's most ambitious projects, said it was seeking to delay repayment on a tranche of its debt. The company has $60bn of liabilities from its various companies including Nakheel, the property firm behind the Palm Jumeirah, the world's biggest artificial island, and the Nakheel Tower, the world's tallest building at 1km high. It also owns DP World, the ports operator that bought P&O Ferries. Nakheel is due to make a $3.52bn Islamic bond repayment, plus charges, on December 14.

Traders feared that the request for a six-month standstill was a sign that the Dubai Government was struggling with its other debts – and that the full impact of the financial crisis globally may not yet be over. British bank stocks, that are among the most exposed in the world to the Middle East, were hard-hit. Royal Bank of Scotland slumped 7.75pc, Lloyds Banking Group lost 5.75pc and HSBC fell 4.4pc – all three are among nine banks who were book runners on an outstanding $5.5bn syndicated loan to Dubai World in June 2008. HSBC's interim accounts showed that the bank had a $15.9bn exposure to the whole of the United Arab Emirates.

The concerns for UK banks also hit sterling, which fell to its weakest point in a month against the euro and a basket of currencies, while gilt futures leapt to a six-week high, propelled by renewed fears about credit quality. Property shares fell sharply amid concerns of a fire sale of Dubai's UK assets, which include the Grand Buildings in London. Dubai has also been a major buyer of UK property.

The risk of corporate default in Dubai clearly shows that contagion risks have not disappeared and that perhaps the market has turned a little complacent about risk. Foreign money flew out of emerging markets yesterday and the cost of borrowing shot up as investors sweated over the prospect of a state-owned Dubai company defaulting and sending another round of shock waves through the global banking system.

Banks in Europe and North America are heavily exposed to the Middle East, and Dubai in particular, with its $80 billion of debt. The cost of borrowing money increased sharply with the increased risk in financial markets. Credit default swap rates (CDS) rising on debt issued out of the Middle East and emerging markets rose, and borrowing costs on Dubai's five-year loan jumped to 5.4 per cent, up 2.24 per cent in two days.

If you look at the emerging nations' stock market performances it gives you a feel of how quickly Western capital will flow out of these nations on default fears. That said, we have to acknowledge that this is largely not long term funds anyway. These funds will find some obscure reasons to get out, if it wasn't this Dubai World situation, it will be some other obscure factor. Thats part and parcel of the high risk of having carry trades into your system. You can complain when they exit, but somehow the same people never seem to complain when they arrive??!! (ala Mahathir).

If nothing is resolved for Dubai World in the next few days you could expect more of the same next week. Uncertainty will breed fear, in other words. However methinks the risk of contagion is relatively low this time around - plus it came at a time when most equity markets were quite robust, and were actually looking for a reason to correct. This would be a good reason to correct - but I would have to say that its a buy on weakness this time around, rather than a "go for a few months holiday" kind of correction. I think markets should have a few more days of weakness, and a good strategy would be to slowly build up positions.

One big thing which most of the Western media have neglected is the role of Abu Dhabi/UAE in this - many seemed to just gloss over this. Abu Dhabi won't allow Dubai's state-owned companies default on debt payments as the global banking crisis limits their access to funds. Dubai and Abu Dhabi are interdependent and one can't be isolated from the other. Abu Dhabi Investment Authority is the world's largest sovereign wealth fund with assets of between $250 billion and $850 billion, according to the International Monetary Fund. The emirate owns more than 90 percent of the U.A.E.'s oil reserves, nearly 8 percent of the world's proven total.

Take all that into account, the risk of contagion and another credit crunch was low. Because seriously, the Middle East is not the engine of growth or a crucial part of the recovery we are seeing in the global economy. The sums that the affected banks will have to bear are not overly large, they can be written down safely, yes these banks' share prices will take a hit, but its nowhere as bad as the subprime situation.

p/s photo: Haruna Yabuki

Unusual Market Activity (UMA) - Needs Teeth

Trying to ensure an orderly market is difficult for Bursa. It seems that the constant issuance of UMAs will always result in the company replying that they are not aware of any material developments.

Sep 29: Bursa Malaysia queried two companies, LFE Corp Bhd and Tracoma Holdings Bhd, about the recent unusual market activity (UMA), which saw sharp increases in their share prices.

Bursa directed the two firms to provide an announcement for public release after making due enquiry with their directors and major shareholders seeking the cause of the UMA.

LFE surged more than 140%, or 24 sen, to 41 sen on Friday, its highest in 14 months. The counter added 4.5 sen, or 10.9%, to 45.5 sen at the mid-day break. It finished at 44 sen on volume of 7.5 million shares.

Meanwhile, Tracoma added six sen to 38 sen at the midday break but ended at 32.5 sen on volume of 1.55 million shares. On Friday, the counter jumped 64% to 32 sen.

In an announcement to the exchange, LFE said there had been no material corporate development not previously announced that might account for the UMA, including those in the stage of negotiation or discussion. It believed a recent newspaper report could account for the UMA.

Tracoma also said there was no material corporate development relating to its business and affairs that had not been previously announced that might account for the UMA.

My Views: Bursa is right to issue these UMA and these warning SHOULD be taken seriously by all investors. Bursa will only issue the UMA when the price and volume registered unusual movements. Usually, these counters also have very little in fundamentals to talk about. We must be careful to strike a balance as any well functioning capital markets needs to have a bit of "cowboyness" in it. So far, I am in agreement of all the recent UMAs issued.

But Bursa needs to move to the next level, it needs to have teeth. UMAs are now being regarded as junk email in the eyes of the affected companies. May I suggest that a clarification be issue by Bursa, that when a company is issued with a UMA, and the irrational price and volume persists, Bursa reserves the right to implement "cash only buying" for the counter for an indefinite period. Now that that is out there, I believe investors will take these UMAs very seriously. Cash buying only will make any manipulated counter collapse for sure.

p/s photo: Haruna Yabuki

The Talk Is Set - A Funny Thing Happened On My Way To The Stock Exchange

Well, I can say now that the investing/ finance / biz talk by yours truly is finally on. Details will be out in a day or two. The headline of the event is A Funny Thing Happened On My Way To The Stock Exchange.

After weeks of planning, juggling the topics and all, I have finally arrived at sufficient material that would be highly interesting. I have set out some of the topic on the jpg file (flyer) but the most important nuggets will be on how I arrive at my decision to buy a stock, the step by step mental process and tools I use to consider.

However, possibly the most exciting part should be the extended Q&A session planned at the end. It should be a lot of fun, and hopefully we all get to learn something new from each other. See ya!!!

+ Please note that this is NOT a talk whereby stock tips will be given out. It is a collection of investing rules, opinions, clarifications on myths and some useful pointers on equity investing.

Some of the topics covered: Getting the big-picture first ~ Bottom-up for certain type of stocks ~ When to use PE ratios, and when not to ~ What I look for in reading Annual Reports ~ Sector and industry research under-analyzed and under-appreciated ~ How and when to use NTA / NAV in investments ~ A defensible business model ~ The trader’s view of investing ~ The long term buy and hold mentality, is that for you? ~ Everyone must diversify? ~ Over 90% of all fund managers fail to outperform their benchmark indices? ~ Spotting the 2, 3 or 4 baggers ~ Letting winners run and cutting losses ~ Why research reports are generally useless ~ Sell In May & Go Away ~ I am so smart but not making money from the stock market? ~ Reaction patterns in a panic / crisis situation ~ Buffett’s “Our favorite holding period is forever” b.s. or golden rule ~ Understand the flimsy ways we make decisions (e.g. anchor & adjust, media power, analysts) ~ Value investing vs Momentum investing ~ Economics, like most economists, are basically useless tools ~ Malaysia’s own bubbles and cycles ~ Sunsets, rainbows and pots of gold ~ Accumulate gems, trade rubbish, spring clean your portfolio – How important is management in stock selection ~ Why dollar-cost averaging is for imbeciles ~ Technical analysis and chartists are from Uranus ~ Should you invest overseas?


p/s photos: Haruna Yabuki

Is This Rally Too Much?

Is this rally or bear market rally or recovery rally just a tad too much, ... too much hot air, too exuberant, too optimistic? Is the market running way ahead of itself. I found the following chart from dshort.com which places where we are in the recovery process, compared to the most severe crises of the past. The current path is marked in BLUE. The current recovery is already more "exuberant" than the recovery path taken by the internet/tech implosion in 2000. However, it is still within fairly safe territory when compared to the recovery path taken following the nasty oil crisis in the early 70s. Bottom line, its not too exuberant ... (yet).

While many were jumping up and down that we are headed for the Depression again, well the gray line tells us what hell they went through in the 30s.

Our economic and financial crisis will always be there and will haunt us every few years, but the recovery process in the present days will ensure that the recovery process will be relatively quick because: we have a much better understanding of the usage and effects of monetary and fiscal policies; we have a more transparent decision making process by most governments, and whose decisions will be critiqued and deliberated instantly via the net and media - urgency and clarity; and we have most governments being more proactive and willing to attack economic and financial crises together.

[via dshort]

p/s photos: Haruna Yabuki

Survey Results & Analysis

The 10 hour survey had a very good response rate. Usually less than one quarter of blog visitors will ever complete a survey on a site. Mine had a completion rate of 56% resulting in over 700 completed responses.

The first question was obvious. Even though you cannot get everybody to "like" you, it still hurts a bit when they answered "No, at any price" ... sigh... The good bit would be that there was 59% positive respondents, which meant that out of 700 surveyed, 413 would be positive about attending - imagine if I can get a few of the girls featured on my blog to act as ushers!!?? The 20% that answered "other" were mainly those seeking for the talks to be free - aiyah... must make it worthwhile for me to get out of bed la.

I will be doing the Career Talk on Financial Markets first, which is aimed at A-level students, biz college students and fresh graduates, people considering a mid career change to financial markets, and concerned parents. Following that, I will look into the Investing Talk. It will be basically my own thoughts on investing, things that one should look out for, things to improve our investment decision making skills, etc...

.

Would you be interested to attend an investment talk by S Dali, about 3 hours long?

1 No, at any price			20%
2 Yes, provided its btw RM 70 - 110 pp			48%
3 Yes, even if its btw RM 120 - 180 pp			11%
Other, Please Specify			20%

2. The FBM-KLCI index is now hovering at 1136, where do you think it will be end of the year 2009? 1 -1000 or lower 15% 2 -1050 9% 3 -1100 8% 4 -1150 15% 5 -1200 25% 6 -1250 or higher 24% Other, please specify 4%

3. How do you feel about the female photos being featured in my blog?

1 Don't mind them, not the main reason I come to your blog.			39%
2 Prefer you not to put them up, its a distraction and it cheapens your blog.			9%
3 The photos are excellent and blends well with your information, both equally important.			31%
4 Without the photos, I will visit your blog a lot less, sorry but its true.			14%
Other, please specify			7%

As for the markets prediction, this is a very strong indicator. Some 49% of respondents think the local bourse will finish at 1200 or higher by year end. If I were to ask the same question in February 2009, I am pretty sure the percentage would be more than halved. The 49% figure shows that there is a strong underlying belief that things are turning around globally and locally we are not that badly affected.

This surveyed figure is all the more important because the visitors to Malaysia Finance are more attuned to business and finance matters than the general public. Rightly or wrongly, this survey looks at a supposedly more "knowledgeable" populace.

As for the female photos, its very very clear: 39% + 31% + 14% = 84% ... the photos stay!!! I can afford to lose the 9%.

As for what to write more of, or less of :

1	More on market views and market information
2	more market outlook and world wide economy development and what about your tropic on investors mistakes ?
3	keep to your current mixes. Do not want it to be overly focused in any particular area.
4	What you are doing is fine. Keep it up.
5	what you are doing presently is okay maybe a bit more on the economic situations
6	stocks pick
7	You are excellent. Thanks for all the very informative and interesting articles.
8	more on asean & china
9	your own investments.
10	Please write more of your views on our local stock market and the stocks you favour. I notice that your comment on certain stocks do have impact on the market price. Cheers
11	continue to write about the "behind story" of the each broker/analysist report as they are mostly biased
12	comments on specific listed companies
13	more on klci direction. buys or sells pick. ongoing macro readings of malaysia as well as Asean and the world. oil and gold direction.
14	General economic condition. Retail data survey, consumption pattern..and also holiday destination
15	A suggestion: Post those photos according to the temperament of your postings. :)
16	Quality of Malaysian share
17	Sometimes a bit of humility goes a long way, as some of your calls are good, some are very bad, do admit mistakes when calls are wrong....
18	your blog is heaven sent. if ppl want you to write other stuff, they might as well visit other blogs. and keep the girls pls.
19	It is good as it is now. Very helpful.
20	write more foreign stocks, less of american economist view
21	Locally context-related.
22	more on malaysian stocks
23	Write more on investment perspectives.
24	market gossips
25	Property market.

51	continue with what you are doing. it's fine with me.
52	up to you,it 's yr blog remember?
53	Good food. A hard day's labour to be compensated with a fine man's dinner
54	More on global economy, malaysian stock market.
55	More investment ideas.
56	More of your analysis, not just of regurgitating what others wrote.
57	Undervalue stocks and those stocks which are worth more dead than alive like for example Oriental Holdings Bhd
58	analysis of the market trend with respect to international on going issues, local political aspects etc. I am a malaysian who have not in malaysia for the past 20 years but still investing from time to time, in case I will retired in Malaysia, which is still consider a home for me.
59	It's yr blog, u can write what u know. tks
60	More on counters selection (or de-selection) and why.
61	the same
62	Very informative with the fact support .
63	Nothing
64	u are very good at stock market
65	more of - market updates; learn more about investment; understand what to and what not to look for in share investment. less of - no preference as alright with all your postings so far
66	CONCENTRATE ON KLSE
67	Write more on oil and gas exploration/production companies.. I believe that with good research, there are gems waiting to be discovered. Also more words on why you like the females that you feature?
68	Keep the things you do....
69	more of rumours
70	Your choices are ok except I wish you have less Roubini's article. He's too pessimistic. Maybe bring in somebody who's a bit more optimistic for a change? Or at least some positive note. :)
71	local regulatory changes in the investment industry
72	more tips, you have been very accurate so far. Regret I did not hear of your blog sooner. your general info is good also.
73	local economy, real estate and stock market outlook....
74	I would prefer to share with us which particular stocks to buy and sell (with price mentioned).
75	local market

The above are just a sample, ... how to please anybody or even a majority, or even just a substantial number of you??? Its all over the place. Everybody has their own objective and interests. What I write may go over the heads of some, or be too simplistic to others. Its a hard line to walk. Still, I will try to take some of the suggestions though. Thanks.


p/s photos: A tribute to Miss X'cellent Discovery 2008 Haruna Yabuki, and the new Miss X'cellent Discovery 2009 Reon Kadena, I am sure you readers would agree with the choices.