TheStar
THERE is a certain group of retailers that always seems to incur losses in the stock market. If we look into the reasons behind those losses, you will notice that instead of building up the right investment habits, they get caught up with a lot of bad investment habits.
In his book The Winning Investment Habits of Warren Buffett & George Soros, Mark Tier listed down 23 winning investment habits. Even though we disagree with the author on certain habits, we think there are six critical habits that can help investors make gains from the stock market.
Habit 1: Be risk-averse and preserve your capital
Some retailers have the misconception that being risk-averse in the stock market means making less money. Based on our observation, risk-averse investors are the ones that are able to make some gains despite the recent slump in the stock market.
In fact, risk-taking investors have been suffering huge losses lately. We believe investors need to be risk-averse and try your best to preserve your capital.
Even though investing in the stock market cannot guarantee returns, by being a risk-averse investor, you can still make good gains and have less risk of losing your capital.
According to Warren Buffett, buying good fundamental stocks can give high gains with lower risk. Risk-seeking investors normally get low returns while taking high risk. Hence, an investor that takes higher risk does not necessarily get compensated by higher returns.
Habit 2: Only invest in the business that you understand
A lot of investors do not understand the business of the companies that they invest in. They believe that they do not need to know that much detail as they can make fast money by listening to market rumours.
However, they do not realise that by the time they get the so-called first hand “insider information”, the market has already reacted to it and there is not much upside left to profit from.
Even worse, if after the purchase price goes down, the investors will be forced to either sell at a loss or hold for a longer term. If they understand the business, at least they would not end up buying poor fundamental stocks. The chances of good stocks appreciating in price are definitely higher than for the poorer ones.
Habit 3: Develop your own personal investing system
Some retailers are looking for a foolproof stock investing system that can consistently beat the stock market. They are willing to pay huge amounts of money to acquire that knowledge. We believe every investor should develop his own stock investing system that suits his individual needs and constraints.
All investing systems, whether based on fundamental or technical methods, require high levels of discipline and efforts. Unfortunately, most investors do not like to do homework. They believe there is someone somewhere who can beat the market all the time and all they need to do is to find him.
Hence, they will follow this so-called “guru” in buying stocks but are reluctant to follow his advice to cut losses. As a result, they will end up with a lot of poor fundamental stocks.
Habit 4: Always search for new investment opportunities
Investors need to develop the habit of always seeking new investment opportunities. In Malaysia, sometimes you may need to look at 10 stocks before you find one or two that are suitable for long-term investment.
The best available information on any company is always the annual reports and public announcements. Investors need to spend time analysing the information and then make their own calculation and check whether it is cheap to buy those stocks at the current price.
Habit 5: Have patience to wait for the right time and right stocks to invest
Sometimes, certain investors believe that they have to predict the market’s next move to make big returns. According to investment gurus like Benjamin Graham and Warren Buffett, do not try to time the market, as you will always fail in predicting the next move.
Instead, what the investors really need to know is the value and the stock price of a company, rather than trying to predict market movement. Investors need to have the patience to wait for the right time and right stocks to invest.
As long as the stock price is selling far below the intrinsic value of the stock, you may consider buying those stocks even though the market may still be on the downtrend.
Habit 6: Able to hold on good fundamental stocks for long term
We believe all investors should own a portfolio of stocks that they will hold for the long term. As long as the businesses have the potential to grow and the companies are paying good dividends, investors need to develop the habit of holding the stocks for a longer term.
They should not be tempted to sell those stocks even if they may sometimes be trading at higher prices.
Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Wednesday, July 2, 2008
Tuesday, July 1, 2008
Bank Negara: Vital to sustain domestic demand
BusinessTimes
BANK Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz says soaring food and energy prices may hurt household spending and damp economic growth, slowing expansion this year to below its March forecast.
"The important consideration in this scenario is to sustain domestic demand," Zeti said in an interview yesterday in Basel, Switzerland.
The economy may grow between 4.5 per cent and five per cent this year, she said, citing "preliminary" estimates. The central bank had forecast in March expansion of 5-6 per cent.
Slowing growth may make it harder for Malaysia to follow Vietnam, Indonesia and the Philippines in raising borrowing costs this year to tame inflation even as oil doubled to a record US$142.99 (RM468) a barrel last Friday and rice and wheat reached unprecedented levels.
"Bank Negara Malaysia does not want to be trigger-happy cowboys shooting straight from the hip at the very first sign of danger," said Suhaimi Ilias, an economist at Aseambankers Malaysia Bhd, who expects the central bank to hold rates steady until the year-end.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
BANK Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz says soaring food and energy prices may hurt household spending and damp economic growth, slowing expansion this year to below its March forecast.
"The important consideration in this scenario is to sustain domestic demand," Zeti said in an interview yesterday in Basel, Switzerland.
The economy may grow between 4.5 per cent and five per cent this year, she said, citing "preliminary" estimates. The central bank had forecast in March expansion of 5-6 per cent.
Slowing growth may make it harder for Malaysia to follow Vietnam, Indonesia and the Philippines in raising borrowing costs this year to tame inflation even as oil doubled to a record US$142.99 (RM468) a barrel last Friday and rice and wheat reached unprecedented levels.
"Bank Negara Malaysia does not want to be trigger-happy cowboys shooting straight from the hip at the very first sign of danger," said Suhaimi Ilias, an economist at Aseambankers Malaysia Bhd, who expects the central bank to hold rates steady until the year-end.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Prudential unveils International Bank Target 8 Fund
BusinessTimes
PRUDENTIAL Fund Management Bhd (PFMB) has launched its latest product - International Bank Target 8 Fund, a two-year close-ended fund that aims to provide a steady stream of income accounted quarterly but paid only on the maturity date or earlier, if the early termination feature takes place.
Chief executive officer Mark Toh said International Bank represents the theme of the equity derivatives linked to a basket of international banking stocks, while Target 8 represents the eight quarters of possible early termination that the fund offers over its two-year tenure.
"In the wake of the subprime crisis, prices of financial stocks in Europe and US have dropped about 33 per cent from its 12-month peak of May 2007. We believe the markets could have factored in the expectations from most of the affected investment banks in US/Europe (which have announced and have written off losses).
"On this landscape, our investment specialists are optimistic over the revival of financial conglomerates thus offer investors an avenue of a potential upside with the debut of our latest product," he said.
A total of 200 million units of the fund are available for subscription until August 13 at a price of RM1 per unit for a minimum investment of RM5,000.
Interested investors can subscribe through authorised distributors of Prudential.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
PRUDENTIAL Fund Management Bhd (PFMB) has launched its latest product - International Bank Target 8 Fund, a two-year close-ended fund that aims to provide a steady stream of income accounted quarterly but paid only on the maturity date or earlier, if the early termination feature takes place.
Chief executive officer Mark Toh said International Bank represents the theme of the equity derivatives linked to a basket of international banking stocks, while Target 8 represents the eight quarters of possible early termination that the fund offers over its two-year tenure.
"In the wake of the subprime crisis, prices of financial stocks in Europe and US have dropped about 33 per cent from its 12-month peak of May 2007. We believe the markets could have factored in the expectations from most of the affected investment banks in US/Europe (which have announced and have written off losses).
"On this landscape, our investment specialists are optimistic over the revival of financial conglomerates thus offer investors an avenue of a potential upside with the debut of our latest product," he said.
A total of 200 million units of the fund are available for subscription until August 13 at a price of RM1 per unit for a minimum investment of RM5,000.
Interested investors can subscribe through authorised distributors of Prudential.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Ethoas Capital fund surpasses target by 40%
TheStar
KUALA LUMPUR: The response to Ethos Capital Sdn Bhd’s maiden fund, Ethos Capital One, has been overwhelming, surpassing the original RM150mil target by over 40% to RM215mil.
Ethos Capital general partner and chairman Rohana Mahmood said it would be no surprise if a second fund, that could well be above RM500mil, could be in the offing.
However, she was quick to point out that “we have to focus on the maiden fund and make sure it performs.” The second fund could be introduced late next year when 75% of the maiden fund would have been invested in growth companies.
Yesterday, Second Finance Minister Tan Sri Nor Mohamed Yakcop officially closed the maiden fund, which was first launched in March last year. Also present was Deputy Prime Minister Datuk Seri Najib Tun Razak.
Rohana said Ethos Capital felt “good” that the fund exceeded its original size and that showed that the “Malaysia story was positive” and the economic fundamentals intact.
Foreign-based funds and corporations made up 40% of the investors for the fund while the remaining were locals. US funds made up a large portion of investors for the foreign block, with the others from Hong Kong, Indonesia and India. Of the local portion about 20% were individuals.
Ethos Capital is a private equity firm that launched the fund, which made its maiden investment of RM13mil in Masterskill Sdn Bhd, a nursing and allied health college in the country.
Ethos Capital was looking to make three or four more new investments to achieve the target of 75%. Rohana said the company was now actively assessing specific opportunities in a few industries, including education, plantation, consumer products and services as well as oil and gas.
In a statement, Ethos Capital said the fund would invest primarily in Malaysia and the Asean region.
The fund was industry agnostic and targeted operating companies with proven financial track record, sustainable and innovative business models and strong growth potential, it added.
“Notwithstanding the current market sentiments, as an active value investor, we believe this is an exciting period for private equity players in Malaysia and the region.
“(We at Ethos Capital) are dedicated to helping entrepreneurs maximise the potential of their companies,” Rohana said, adding that Ethos Capital expected double-digit returns on its investments.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
KUALA LUMPUR: The response to Ethos Capital Sdn Bhd’s maiden fund, Ethos Capital One, has been overwhelming, surpassing the original RM150mil target by over 40% to RM215mil.
Ethos Capital general partner and chairman Rohana Mahmood said it would be no surprise if a second fund, that could well be above RM500mil, could be in the offing.
However, she was quick to point out that “we have to focus on the maiden fund and make sure it performs.” The second fund could be introduced late next year when 75% of the maiden fund would have been invested in growth companies.
Yesterday, Second Finance Minister Tan Sri Nor Mohamed Yakcop officially closed the maiden fund, which was first launched in March last year. Also present was Deputy Prime Minister Datuk Seri Najib Tun Razak.
Rohana said Ethos Capital felt “good” that the fund exceeded its original size and that showed that the “Malaysia story was positive” and the economic fundamentals intact.
Foreign-based funds and corporations made up 40% of the investors for the fund while the remaining were locals. US funds made up a large portion of investors for the foreign block, with the others from Hong Kong, Indonesia and India. Of the local portion about 20% were individuals.
Ethos Capital is a private equity firm that launched the fund, which made its maiden investment of RM13mil in Masterskill Sdn Bhd, a nursing and allied health college in the country.
Ethos Capital was looking to make three or four more new investments to achieve the target of 75%. Rohana said the company was now actively assessing specific opportunities in a few industries, including education, plantation, consumer products and services as well as oil and gas.
In a statement, Ethos Capital said the fund would invest primarily in Malaysia and the Asean region.
The fund was industry agnostic and targeted operating companies with proven financial track record, sustainable and innovative business models and strong growth potential, it added.
“Notwithstanding the current market sentiments, as an active value investor, we believe this is an exciting period for private equity players in Malaysia and the region.
“(We at Ethos Capital) are dedicated to helping entrepreneurs maximise the potential of their companies,” Rohana said, adding that Ethos Capital expected double-digit returns on its investments.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Monday, June 30, 2008
The two worlds of inflation
TheEdge
Across the emerging world, rising food and energy prices are forcing many central banks to tighten policy. These pressures are more severe in some economies than others, with South Asia a particular worry, as seen from recent further tightening in India and Pakistan. Yet not all countries are resorting to higher rates.
Some, like China, prefer tighter loan quotas, as they are fearful of attracting inward speculative flows if rates increase too far. But China, India and a number of other countries also need to face up to the issue of energy subsidies, as they continue to subsidise the full cost of higher oil prices from feeding through into their markets.
Whilst credit crunch worries overhang markets in the West, firm growth and rising costs are pushing central banks across the emerging world to tighten policy. Across the emerging world, where growth is strong, interest rates have either risen or need to rise further.
Whether it is South Africa, across South Asia, the Middle East or parts of East Asia, tight or tighter monetary policy is needed. There is no argument.
Across Asia, whilst the immediate inflation threat should not be underestimated or played down, di-flation may be a better description of the conflicting issues being seen across the region.
For while inflation is evident in food and energy prices, there is still intense competitive pressure in many other areas. Although inflation appears to have only become a recent concern, the reality is that inflation has been an issue for some time, although not in the headline price indices.
In recent years, we have seen a combination of factors lead to low headline inflation and, in turn, relatively low interest rates, particularly in the West. Whilst headline inflation rates were low, there was inflation in terms of asset prices, particularly real estate. Yet given that central banks in the West had not kept monetary policy tighter amid the positive supply-side shocks, asset price inflation became evident. Some might argue that this means central banks should tighten policy in response to rising asset prices. But what it really suggests is that central banks should be aware of the impact of positive supply shocks and should have aimed to keep headline inflation lower.
One could use a similar line of argument to suggest that governments should run fiscal surpluses in times of economic boom; cyclically adjusted. Now, we are seeing inflation in terms of rising food and energy prices. This poses big problems for not only central banks but governments across Asia, as rising food prices hit the poor.
Whether higher food and energy prices feed through into higher inflation depends crucially on wages and to some degree on inflation expectations, and also on whether central banks accommodate the pick-up in inflation. If wages do not increase, then rising food and fuel prices will reduce the amount of money that people have to spend on other items. This, in turn, would likely see retailers and corporates take any increase in costs, such as fuel, on their margins. Hence, the di-flation word that is used currently across some Asian countries.
However, if one looks at manufacturing and other areas there is intense competitive pressure. Supply chain optimisation is taking place, as firms try and squeeze costs. According to US import price data, China is getting more expensive, though not the most important source of import inflation. However, if the Chinese yuan appreciates further, then goods coming out of China will become even more expensive. Yet, the goods in China are taking market share, displacing others. Overall, China has moved from being deflationary to being modestly inflationary in terms of what it produces. And in terms of what it needs and consumes, as the economy grows and income levels rise, it is becoming more inflationary.
But in the West, the situation is more different. Although cost push inflation is back, the financial and economic environment is very different. Yet, it is the rise in costs that has recently created a gathering bandwagon for higher interest rates in the West. The European Central Bank (ECB) talks tough, signalling a one-off rate hike, as does the Bank of England. Even the Federal Reserve has appeared more hawkish. We believe there is a genuine risk of higher rates in Europe and the UK, but we don’t think the US can afford a hike any time soon, though it may like to be seen as ready — probably for the sake of lending support to the dollar. Although parts of the US economy are doing well, such as big firms, the export sector and many farmers, the fragile financial sector and poor prospects for consumers should still concern the Fed; the jobs data, in particular, strike us as of key importance.
In recent years, CPI figures around the world should have been renamed China Price Indices, such was the impact of that country on global inflation. Strong deflationary pressures were exported. Faced with such a positive supply side shock, central bankers in the West should really have had tighter monetary policies. They didn’t. As headline inflation stayed low, asset price inflation was rampant.
Now we have a negative supply-side shock in the form of high food and energy prices. Some believe it makes a case for higher rates in the US. But two wrongs do not make a right! Because rates were too low in good economic times does not mean they should be pushed too high in bad economic times!
Yes there has been a small rise in inflation expectations and that needs to be taken into account. But where are the rampant wage increases? After most people have paid their higher food and fuel prices they have little to spend! In this environment many firms will have to take higher energy costs on the chin, and see their margins squeezed. Higher rates in the UK or US now would hit hardest those unable to cope, whether small firms or hard-up households, and probably for no real gain.
Thankfully, the Fed’s mandate explicitly takes this into account, but not the Bank of England’s or the ECB. Politicians in the West should watch closely to ensure that central banks behave in a responsible way that merits their independence and their mandate.
Gerard Lyons is the Chief Economist and Group Head of Global Research at StanChart
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Across the emerging world, rising food and energy prices are forcing many central banks to tighten policy. These pressures are more severe in some economies than others, with South Asia a particular worry, as seen from recent further tightening in India and Pakistan. Yet not all countries are resorting to higher rates.
Some, like China, prefer tighter loan quotas, as they are fearful of attracting inward speculative flows if rates increase too far. But China, India and a number of other countries also need to face up to the issue of energy subsidies, as they continue to subsidise the full cost of higher oil prices from feeding through into their markets.
Whilst credit crunch worries overhang markets in the West, firm growth and rising costs are pushing central banks across the emerging world to tighten policy. Across the emerging world, where growth is strong, interest rates have either risen or need to rise further.
Whether it is South Africa, across South Asia, the Middle East or parts of East Asia, tight or tighter monetary policy is needed. There is no argument.
Across Asia, whilst the immediate inflation threat should not be underestimated or played down, di-flation may be a better description of the conflicting issues being seen across the region.
For while inflation is evident in food and energy prices, there is still intense competitive pressure in many other areas. Although inflation appears to have only become a recent concern, the reality is that inflation has been an issue for some time, although not in the headline price indices.
In recent years, we have seen a combination of factors lead to low headline inflation and, in turn, relatively low interest rates, particularly in the West. Whilst headline inflation rates were low, there was inflation in terms of asset prices, particularly real estate. Yet given that central banks in the West had not kept monetary policy tighter amid the positive supply-side shocks, asset price inflation became evident. Some might argue that this means central banks should tighten policy in response to rising asset prices. But what it really suggests is that central banks should be aware of the impact of positive supply shocks and should have aimed to keep headline inflation lower.
One could use a similar line of argument to suggest that governments should run fiscal surpluses in times of economic boom; cyclically adjusted. Now, we are seeing inflation in terms of rising food and energy prices. This poses big problems for not only central banks but governments across Asia, as rising food prices hit the poor.
Whether higher food and energy prices feed through into higher inflation depends crucially on wages and to some degree on inflation expectations, and also on whether central banks accommodate the pick-up in inflation. If wages do not increase, then rising food and fuel prices will reduce the amount of money that people have to spend on other items. This, in turn, would likely see retailers and corporates take any increase in costs, such as fuel, on their margins. Hence, the di-flation word that is used currently across some Asian countries.
However, if one looks at manufacturing and other areas there is intense competitive pressure. Supply chain optimisation is taking place, as firms try and squeeze costs. According to US import price data, China is getting more expensive, though not the most important source of import inflation. However, if the Chinese yuan appreciates further, then goods coming out of China will become even more expensive. Yet, the goods in China are taking market share, displacing others. Overall, China has moved from being deflationary to being modestly inflationary in terms of what it produces. And in terms of what it needs and consumes, as the economy grows and income levels rise, it is becoming more inflationary.
But in the West, the situation is more different. Although cost push inflation is back, the financial and economic environment is very different. Yet, it is the rise in costs that has recently created a gathering bandwagon for higher interest rates in the West. The European Central Bank (ECB) talks tough, signalling a one-off rate hike, as does the Bank of England. Even the Federal Reserve has appeared more hawkish. We believe there is a genuine risk of higher rates in Europe and the UK, but we don’t think the US can afford a hike any time soon, though it may like to be seen as ready — probably for the sake of lending support to the dollar. Although parts of the US economy are doing well, such as big firms, the export sector and many farmers, the fragile financial sector and poor prospects for consumers should still concern the Fed; the jobs data, in particular, strike us as of key importance.
In recent years, CPI figures around the world should have been renamed China Price Indices, such was the impact of that country on global inflation. Strong deflationary pressures were exported. Faced with such a positive supply side shock, central bankers in the West should really have had tighter monetary policies. They didn’t. As headline inflation stayed low, asset price inflation was rampant.
Now we have a negative supply-side shock in the form of high food and energy prices. Some believe it makes a case for higher rates in the US. But two wrongs do not make a right! Because rates were too low in good economic times does not mean they should be pushed too high in bad economic times!
Yes there has been a small rise in inflation expectations and that needs to be taken into account. But where are the rampant wage increases? After most people have paid their higher food and fuel prices they have little to spend! In this environment many firms will have to take higher energy costs on the chin, and see their margins squeezed. Higher rates in the UK or US now would hit hardest those unable to cope, whether small firms or hard-up households, and probably for no real gain.
Thankfully, the Fed’s mandate explicitly takes this into account, but not the Bank of England’s or the ECB. Politicians in the West should watch closely to ensure that central banks behave in a responsible way that merits their independence and their mandate.
Gerard Lyons is the Chief Economist and Group Head of Global Research at StanChart
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
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