Let's Tackle This Major Issue - Foreign Workers

Is foreign workers good or bad for Malaysia? This is not just coffee shop talk, and while we are at that, ... my Nepalese friend is bringing me my duck rice while my Indonesian friend is asking me if I want kopi-o or kopi-o ping. I am saddened that our government, obviously, have not given much thought to the economic ramifications of excessive foreign labour.



The towkays would say, fine, bring them in, they are filling jobs locals do not want. BULLSHIT, you fat asses!!! Locals do not want the work because of the stagnant pay and horrendous working conditions. Please check how many Malaysians go "jumping ship and planes" to work as farm labourers in the US and Australia, that's because they pay RM30 an hour, not RM30 a day for that kind of work.

Our government have taken the easy way out to suppress cost for businesses. That's why we have the largest contingent of foreign workers as a percentage of our labour force in Asia. Its to keep us competitive, they say. I say more B.S. .... maybe the government do not understand the economic ramifications of such a major policy. That is the really sad part.

When foreign workers total 30% of your labour force, you are basically forcing down the salaries for everyone else. But you forgot that salaries are but one component of the overall cost of goods and services - can you also import cheaper land??? That's why graduates salaries have been the same now and 15 years ago, unbelievable, but the cost of housing have tripled.



You may be able to control the basic necessities such as rice, flour, sugar and even fuel and gas - but thats because we are subsidising them. Can you also get foreign workers to dig oil out at the same cost for the past 15 years? Suffice to say, our subsidy cost has tripled over the past 15 years and we can no longer afford to do that, thats why fuel prices have to keep going up even with subsidy. Its the same for all commodities. Unless you can impart the same cost savings in all matters of land, housing, food and commodities ... suppressing wage bills has been making most Malaysians finding it harder to make a living. Tell me if I am wrong. I wish I was.

Simply put, a country's economic progress is only as good as our natural resources, the way we allocate and invest our surpluses and the collective productivity and efficiency of our workforce. This is the most important point to this issue - the more we rely on foreign workers, the more we suppress our wages, hence at the same time we are seeing a greater brain drain of our capable citizens to foreign shores for better pay.

See if Singapore will crumble without Malaysians, of course it will. See how many of our capable people are working now in the Middle East, HK, China, Australia and of course Singapore. WE ARE BASICALLY REPLACING ALMOST EACH OF THOSE "BRAIN DRAIN-ED" WITH FOREIGN WORKERS!!! How do we not expect our economic progress be limited or even stunted over a prolonged period of time??!!

I have nothing against foreign workers, they just have to make a living. If its not Malaysia, its somewhere else. Malaysia already is the TOP DESTINATION for Asian migrants who account for 8.4% of our population. The economic disservice is that they are only contributing at the lowest levels of work stratum; PLUS they are remitting tons of money back to their home country - if they were spending and reinvesting into Malaysia, then its a different kettle of fish. Any economist can see that this is a bad thing for the economy.



So we are replacing skilled workers with unskilled workers - wages stagnant but other cost of living components rising like nobody's business. Malaysia has been able to tolerate that disparity for so long because of our natural resources, but its getting a lot tougher. Ask the government finance department and they can tell you that "oops, its not balancing out that well".

Reverse that policy immediately:
- implement a RM500 monthly levy for every foreign worker for a start immediately, be they in construction, plantations, services or even maids.
- increase that levy to RM1,000 a month per worker from 2013 onwards. Then you can see employers shifting their thinking and business model.

Yes, wage bills will rise, but its a necessary evil for a start. The economy will become more equitable as more money flows through the system. Yes, public service wage bills will jump and so too will graduates starting pay. Yes, we will end up paying a lot more for goods and services but things should even out a lot better for all Malaysians over the longer term.

We have to seriously do this NOW because the consequences are pretty dire if left the way it is. Its not the hardware, but the software that needs upgrading, people.

I have posted before on Malaysia's middle-income trap:
http://malaysiafinance.blogspot.com/2010/08/malaysias-middle-income-trap-or-is-it.html

Asset Class Returns As At end-March 2010

Although it may not look as exciting, most asset classes performed well, but there is a certain hollowness. The exception being the revival of property and REITs in the US. Just looking at the 12 month performance and the stupendous 1 month performance, the bottoming out process is truly valid and sustainable.

You will also find that stocks in developed and emerging markets rose as well, but this was more on the bottoming of US property, the bottoming of unemployment there, for want of a better phrase, stocks just had to rise even though it may not want to.

In this circumstance, there are still shorts around, but they may be temporarily pulling back, and not pulling the trigger just yet as stocks just had to rise with the more vibrant employment, industrial production and property economic data.

The main exceptions were commodities overall, foreign government bonds in developed markets and investment-grade U.S. bonds. The fact that commodities in general failed to pick up alongside the better industrial production and unemployment figures showed that most producers and users are more willing to work down inventory levels rather than make optimistic future orders. This ties in with a a slow recovery globally rather than a more active one.

A Major Boost To Local Healthcare Industry

NST: Hospitals in Malaysia are expected to benefit from the Singapore government's ruling which enables its provident fund contribution to be used for medical treatment abroad.

It is understood that at least 12 hospitals in Malaysia under two hospital groups will benefit from this relaxation as more seek treatment across the causeway. The Singapore Ministry of Health on Wednesday announced that from March 1 2010, its residents can use their Medisave, equivalent to Malaysia's Account 2 in the Employees Provident Fund, to help pay for their hospitalisation abroad.

Medisave usage will be extended to hospitalisation and day surgery. However, outpatient treatment is excluded. Prior to this, the use of Medisave abroad was strict and could only be used for emergencies. The overseas hospital must also have an approved working arrangement with a Medisave accredited institution/referral centre in Singapore and patients must be referred through these centres.

The scheme will start with two providers - Health Management International (HMI) and Parkway Holdings Pte Ltd. HMI will work with Mahkota Medical Centre in Malacca and Regency Specialist Hospital in Johor while Parkway will partner nine hospitals under the Pantai Group and the Gleneagles Intan Medical Centre in Kuala Lumpur.

HMI group executive director Francis Lim Poon Thoo when contacted said that both its hospitals in Malaysia can expect long-term benefits from this liberalisation.

"The cost of procedure and stay at a six-bedded ward in a government restructured hospital in Singapore can be the same as paying the same procedure in a single-bedded room in a private hospital in Malaysia for a single room in a private hospital," Lim said.

This will also provide an opportunity for Malaysian doctors to treat Singapore patients which is a reverse of what is happening now.

Regency Specialist is under Mahkota Medical Group, which also operates the Mahkota Medical Centre in Malacca. HMI holds 48.95 per cent of the group, while Bumiputera-owned Maju Medik Sdn Bhd owns 38.42 per cent and the remaining 12.36 per cent is held by local doctors.

Lim, who is also the chief executive officer of Mahkota, expects group revenue to grow by 20 per cent in 2011 following this ruling. It is aiming for RM150 million revenue in the year ending June 30 2010.

Meanwhile, Pantai Holdings Bhd is wholly owned by Pantai Irama Ventures Sdn Bhd, which in turn is 60 per cent held by Khazanah Nasional Bhd and 40 per cent by Singapore's Parkway Holdings Ltd. Khazanah also has a 24 per cent stake in Parkway. Pantai Holdings chairman Tan Sri Mohamed Khatib Abdul Hamid said its cooperation with Parkway complies with the conditions set by the Singapore government and is a natural extension of the existing synergy between the two organisations.



Comment: So where does this leave KPJ, being the largest local player. Surely they will not be left out of the equation. This gives the earlier rumour that KPJ may be placing out new shares to a new strategic shareholder, more credibility. Medical tourism now accounts for only 4% of group revenue, but management is optimistic of expanding the business with support from govt initiatives. Currently only three of its hospitals are involved in medical tourism — Klang Valley, Kuching and Johor. It would be beneficial to both sides if KPJ places a substantial amount of new shares to Parkway or Pantai Holdings.

It makes a lot of sense if Parkway or Pantai were to maintain its grip on the region's healthcare industry. KPJ is a jewel to any regional player. KPJ aims to ride on robust domestic demand by adding 2 hospitals per year to its existing network of 19 in Malaysia. In the Private Healthcare Facilities & Services Act, which took effect in May 2006, limits competition with zoning — ie, new private hospitals are not to be built within a certain radius from each other. In this regard, KPJ has been actively procuring new projects to establish the first mover advantage.

It will also bring about a much better valuation for KPJ as its trading at just 13x 2010 PER while Parkway is at 20x. Even Bangkok Dusit and Raffles Medical are at 16x and 18x 2010 earnings respectively. What gives? Especially when you consider that KPJ is still a huge growth stock. The more respectable EV / ebitda for 2010 shows the same undervaluation: Parkway at 15.5x and Raffles Medical at 14.2x, while KPJ is at 9.2x. It makes a lot of sense to buy "cheaper earnings" into your books for Pantai or Parkway. KPJ may even get away with issuing new shares to them at a premium.

No matter how you look at the news flow, KPJ is still very much a value play and a long term investment.


p/s photos: Nia Ramadhani

Sharing The Music

Many of you might not miss my Radio Jukebox by Imeem. For those who do, the reason why I took the thing out was that Imeem finally settled with the music companies, in that when users put the jukebox outside of Imeem, they will only play each song for 30 seconds, which is quite annoying. So, I took it off. If you want to hear the full songs and playlists, you have to listen to them at the Imeem site. As in most things in life, they are a lot better when shared out. Those who liked my selections (I think I have over 30 playlists), you can access the songs through the site via my account:



http://www.imeem.com/

Click LOGIN

email: malaysiafinance@gmail.com

password: Salvatore

Click CREATE

(wait for 30 seconds)

It will then load all my songs playlists. Left click on any playlist will reveal the songs. Right click on the playlist, then click VIEW PLAYLIST will play the songs in a new tab.

Enjoy!!!


p/s photo: Nia Ramadhani

Marky Mark On Markets

Well, we have two Marks. Marc Faber, the famous Dr. Gloom and Mark Mobius, the Yul Brynner wanna-be from Templeton Emerging Markets. Surprisingly, both sounded pretty similar this time around. I generally agree with both, but 20% in 2009 is a bit low to me.

Marc Faber: China and other emerging markets offer value over the next two years as growth picks up, investor Marc Faber said. Investors should buy stocks and other assets in China after the market falls to its 2008 low to profit from an expected recovery, Faber said in an interview with Bloomberg Television. China is the world’s best-performing stock market this year.

“Rapidly growing countries have setbacks from time to time,” Faber, the publisher of the Gloom, Boom & Doom report, said in Hong Kong. “I think we’re going to test the lows again, but over the next two years, it’s probably a good time to invest.”

The MSCI World Index has retreated 18% this year, extending last year’s record 42% slump, amid concern the widening financial crisis and global recession will sap corporate profits. The Shanghai Composite Index, which tracks the larger of China’s two mainland exchanges, has gained 16% in 2009.

China is betting that a 4 trillion yuan ($900 billion) stimulus package and interest-rate cuts will help it reach its 8% growth target this year. The global economy is expected to expand at a 0.5% expansion, according to the International Monetary Fund. Industrial and precious metals are attractive investments after the Reuters/Jefferies CRB Index of 19 commodities “collapsed,” Faber added. The CRB Index has dropped 8% this year, adding to the 36% retreat in 2008.

“Asset markets have already discounted a lot of the bad economic news,” he said. “ Some assets like commodities are very, very inexpensive.”

Faber had advised buying gold at the start of its eight-year rally, when it traded for less than US$300 an ounce. The metal topped US$1,000 last year and traded at US$932.78 an ounce today. He also told investors to bail out of US stocks a week before the so-called Black Monday crash in 1987, according to his website. He continues to favour gold, which has gained 19% in the past six months because currencies including the US dollar are “not desirable”. Stock markets are “not particularly expensive” and investors should consider buying them in anticipation of a recovery, Faber advised. The MSCI global index is valued at 11 times reported earnings, half its 10-year average multiple of 22.

“We also have a lot of equities that are not particularly expensive because they’ve collapsed,” Faber said. “These are relatively sound companies and whenever the recovery will come, they will be in a strong position.”

Mark Mobius: Veteran fund manager Mark Mobius sees a potential 20% rise in emerging market stocks in 2009 and views extreme investor pessimism as a signal to gradually start buying equities. "The danger we face now is being too pessimistic," Mobius, the executive chairman of Templeton Asset Management, a division of San Mateo, California-based Franklin Templeton Investments, said in a telephone interview with Reuters.

“We are seeing that slight bottoming out, that we have to be cautious of because if we are caught with too much cash, specifically when we are looking at very good bargains, then we are going to be in trouble with our investors,” he said.

Latin America and Asia are the two favoured regions with China and Brazil among the top country picks. Select countries such as Egypt and Turkey stand out among harder hit regions. “Eastern Europe is pretty much a disaster”. He believes China’s stimulus plan will help it achieve its 8% GDP growth target this year, helping pull up Asia which increasingly sells more of its goods to the world’s third largest economy. Brazil’s diversified economy and growing consumerism also make it attractive, he said.

Mobius manages roughly US$20 billion in emerging market assets out of the firm’s US$377 billion assets under management. Asked how high emerging market stocks might go by year-end: “If you really press me I would say 20% would not be unlikely, and the reason I would say that with some degree of confidence is that we have already come up.”

MSCI’s emerging markets stock index fell 54.48% in 2008. While the index is down 9.46% year-to-date, it has risen more than 15% from its four-year low in October. The Templeton Developing Markets Trust, the main US registered fund Mobius manages, is down 11.44% so far this year after dropping over 57.77% in 2008, according to Reuters data. Cash levels for his portfolio fluctuate between the preferred level of zero and 7% he said. He characterises them as “normal, or certainly not higher than normal”. During the 1997–98 Asian financial crisis, cash levels in his funds reached 20%.

While market volatility may not be over, a market bottom could be in place, Mobius said when asked at what point in the next 12 months investors might claim they’ve cleared a hurdle. “I’m saying that now. I'm feeling that now because of the incredible pessimism that you see everywhere. That usually is a pretty good sign that we are over the hump,” he said.

“Almost universal pessimism is usually a very good time to be buying equities because equities lead the economy,” by six months to a year he said. Famous for his globe-trotting and “on the ground” research, Mobius said of a recent trip to Latin America that while companies were preparing for the worst, customer orders were still coming in and “a lot of them” are maintaining steady investment programmes. On the ground things look OK but with a slower pace. That is on the investment side. The valuations now are very very attractive, even if we do a big markdown on earnings,” he said.

p/s photos: Nia Ramadhani

Buying Things In Current Times

Most people are not really that badly affected by the current market turmoil, because it did not happened overnight,.... almost everyone could see it coming a mile away... only those who musta, gotta have a trade every week would have been caught a bit, even then the pain would be minimal if they employed a true trader's instinct.

Booyah... due to the time difference, I got to catch 10 minutes of utter crap and mayhem with Cramer on TV... booyah mah ass... What to buy... cash is king... cash is king but also cannot put into any banks... banks now failing at a higher rate than planes not leaving on time when you fly MAS. So, like my fellow bloggers said, keep in Milo tin ... but not chinese milk powder tin though, also got melashitminnie... you don't want to be using notes tainted with that shit later... you know the velocity of money... Stock indices did not follow the usual rules of performance and valuations... nobody told the stock prices that they had to follow certain rules on value ... the market is telling the rest of us that markets are made-up fantasy football game-like things... they will give 20x PER as long as there are bidders for them ... they will give the same almost zero PER if there are no buyers left... People with cash hoarding them... despite the massive capital injection by central banks, the banks themselves are also no lending them out. What about gold then, even that thing does not make sense anymore... it is telling us that its just a shiny yellow metal that does very little to our well being. In the end we need to buy food to keep us from hunger... ah, yes... food over gold other metals... next to food would be fire, back to cavemen tactics, need fire to cook some of the food and warmth, fire also allow us to spot danger, them robbers will come to steal our food... no more share scrips, no more share markets...

Many readers send me private emails to answer, please don't do that, I am not an advisory service... if you have a question, make sure you don't mind sharing with the rest... Is it time to buy... if you haven't already, its an OK time to buy in three or four stages, so that you can get a good average price. Do not be lulled by the 11% jump in the US, that was on low volume on Columbus Day holiday... did you also know that the top few daily all time high spikes happened around the 30s Depression as well. Yes, they had 16% daily gains then even... sellers exhaustion... whatever you call it... its OK I think, I think the Dow will try to make 10,000 as a new base to consolidate. Same with KLCI at 1,000. Then we should spend some time at these levels.

The US government saying they will buy stakes in banks is as close to ensuring that banks will lend to one another. The crisis of confidence and debilitating counterparty risk fears should subside. Its OK but do not go overboard.

p/s photo: Nia Ramadhani