Saturday, July 31, 2010

Random thoughts.....ICAP and market worries

Have been away from the country for a few days. Got sick during the trip and has been on the bed for the whole day. Felt much better after taken medicines and much needed rest.

The first thing that I picked among a stack of unattended letters was iCapital 2010 annual report.

Despite of him claiming his bullishness and employing value investing-style, there is no denial that he is also a market timer. Just look at his cash YoY, gone up from 37 mln to 103 mln after selling a lot of the holdings. Cash/total net asset %, 2009 was 19% risen to 44% 2010. No need to bash him but just exploit the fact that he has short term worries. It's also mean that iCAP NAV will be likely flat in either direction of up or down.

One of the divergences that I observed but has not been able to figure out was direction Japanese Yen strength, usually an indication of risk aversion or may be just undergo a bottoming process?

Copper rallied, a good sign that global economy is okay.

Solid earnings from Fedex and Ups signaling the world is okay.

Gold corrected, a sign that risk appetite should be improving.

To be honest, most data looks very okay except Japanese Yen strength is nagging at me for the last few days. I hope things will be clearer in 5 - 10 trading days.

Tuesday, July 27, 2010


On the road this week, no time to make commentary. Just post as it is today.

(Bloomberg)FedEx Corp. and United Parcel Service Inc., two bellwethers of the U.S. economy, are signaling durability of a global recovery powered by growth overseas rather than demand at home.

Both freight companies raised profit forecasts in recent days on the strength of cross-border shipments, especially from Asia, reflecting confidence in trade flows even as the European debt crisis threatens to weaken global demand.

While rising international deliveries suggest that a “double-dip” recession is unlikely for the global economy, they reinforce forecasts for export-driven growth amid a lengthy period of unemployment around 9 percent in the U.S. The reliance on foreign demand bolsters a theory espoused by Pacific Investment Management Co. that the world’s largest economy is in a “new normal” phase of slow growth.

“The international marketplace is what’s driving growth at FedEx and UPS and any other big company that has international exposure right now,” said David Campbell, an analyst at Thompson Davis & Co. in Richmond, Virginia. He recommends buying shares of both FedEx and UPS.

Saturday, July 24, 2010

Would you put your money on the line for Citi-bank?

There are two call warrants traded on Bursa Malaysia:

(1) CITIGRP-C3, strike US $ 3.1, conversion ratio 15:1, 211 days to expiry date(22-02-2011). It was traded for about 10% premium.

(2) CITGRP-C4, strike US $ 4.0, conversion ratio 20:1, 230 days to expiry date(10-03-2011). Traded about 20% premium.

Before you to pull out money out from your wallet, listen to some fundamental reasoning first.

1. Restructuring
C has restructured its business into Citi Corp(good bank) and Citi Holding(bad bank or ShitCo if you like to call it). Here is the latest quarter financial results.

Citi Holdings is the one that is holding all the distressed assets. They have shrunk its toxic assets by almost 40% to reduce their exposure. Their ultimate plan is to unwind Citi Holdings.

C will finally go back to its root of banking with core business of regional consumer bank and institutional clients group. I would say they will focus more on retail banking eventually.

2. Growth prospect/valuation

You can see the level of pessimism is rather high. Just look at the earning estimate 90 days ago vs. current.

Analysts expect them to earn around 0.38 in 2010 and 0.46 next year. I would say there could be surprise on higher end due to lower credit costs, write-down and stronger international business.

Valuation wise, their book value is about US $ 5.33 in Q2 2010. They used to sell for 2-3 times P/BV when they were high flying. I am not that optimistic that C price can go back to US $ 10 - 15 within short period of time. It will take a long time to regain investors' confidence. For argument sake, let's just say they sell for roughly 1X book value, it will be valued around US $ 5 - US $ 5.5.

Back to our Bursa call warrants, should you put your money on the line? Like what I posted yesterday, the US Treasury department will continue to cash out. While I don't think the stock price will crash but flushing down a big block will certainly keep the price subdue for a while. Let's say the stock price lying flat for next 90days, your hope to make some money hoping the stock price to reach US $ 5 - US $ 5.5 certainly is not very good.

The temptation to bet on strong sentiment hoping rising DOW will lift C price together is a risky one. This is a 60-40 risk-reward situation. I would rather punt on some other penny stocks than taking on this one. Pass, no thanks.

U.S. to further sell down Citigroup interest.........

WASHINGTON (MarketWatch) -- The Treasury Department announced Friday that it intends to sell more Citigroup Inc. shares as the agency moves toward closing out a chapter of the government's $700 billion bank bailout.

The Treasury said it intends to sell 1.5 billion additional common shares of Citigroup /quotes/comstock/13*!c/quotes/nls/c (C 4.04, +0.02, +0.50%) , about 30% of the remaining 5.1 billion shares that it owns.

The government has already sold 2.6 billion of the Citigroup shares in return for $10.5 billion in gross proceeds.

The Treasury said the trading plan will end on Sept. 30 even if all shares have not been sold by that time because of the blackout period set by Citigroup in advance of the release of the New York banking giant's financial results for the third quarter.

The government received 7.7 billion shares of Citigroup common stock last summer, the result of several bailouts of the financial-services giant.

There are nearly 29 billion Citigroup shares outstanding, according to FactSet Research.

On the heels of rising 3% to close at $4.09 on Thursday, shares of Citigroup sank more than 1% in pre-market action

The capital market seems to be healing at amazing rate. When someone like the US Treasury department dumped almost 2.6 billion shares or 10% of total outstanding shares over a period of last 3 months, the share price seems to be able to withstand it very well. I don't see any impact of further "cashing out" will have an impact on its share price.

Thursday, July 22, 2010

Is uncertainty good for bull run?

(Market Watch)"It is pretty obvious looking at the way markets have been trading of late that there is a lot of uncertainty over the growth outlook. But for the Fed chairman to admit it in such a direct manner does not exactly inspire confidence among investors," said Khoon Goh, senior economist at ANZ Bank in Wellington. "It is clear that the Fed will not only continue to stay on hold for a long time, but there is a chance that the Fed may have to do more to provide support to the economy."

Uncertainty of the economic growth will have two possible effects:

One, the higher the uncertainty, the less risk the Fed will want to take to derail recovery. The lesser risk they want to take, the longer they keep the rate low. The extended period of time of low rate will leave the whole system awash with liquidity. Plenty of liquidity will drive the financial asset prices up. Bubble again?

Two, the higher the uncertainty, the less attractive the developed market becomes. Thus the speculation and love of emerging markets will be back. Carry trade will be back in a big time and will be back in a very stylish way. Decoupling theory again?

Wednesday, July 21, 2010

This should be given free

(Business Times)CIMB Securities has launched an advanced online equities and futures trading platform called “i*TradePro@CIMB” on Saturday.

The new electronic platform is a customisable desktop trading management system and is equipped with enhanced technical charting system with over 40 technical indicators.

“It provides powerful analysis and comparison studies on multiple stocks from a single interface,” CIMB Securities said in a statement yesterday.

With the i*TradePro@CIMB, customers can also submit their trading orders and have instant access to Bursa Malaysia Securities and Derivatives’ live prices from anywhere with an Internet connection.

Read more: CIMB Sec launches online trading platform

Like my title said, this should be given away free to its clients. Beside some research reports, which most will not bother to read 90% of the times, I don't see they add much value to their clients. Their current charting software is really sucks, so if they want to charge for this service, I think their marketing strategy is sucks too!

Monday, July 19, 2010

Commentary on CIMBX25 purchase

Yes, you know already that I am maximum bullish China. Many worried about China property market will spill over to equity market. Why am I going against the tide? First I think the Chinese government has taken enough measures to cool the property market. More importantly, for lightning to strike twice back-to-back is a low probability event. The wounded memory of how property market brought down American to its knees will motivate the Chinese government to avoid bubble at all cost.

China Shanghai A share has corrected enough and many pointed out that it's already in a bear market. That is precisely right, buy during bear market and sell when bull is almost exhausted itself. Will it become cheaper, I'm glad to be wrong, this represents only 1/3 of my target $ 6,000 exposure for this index. I can average down in case I'm wrong on the timing.

I do not want to confuse you with A share because CIMBX25 is tracking 25 most liquid H Share - large Chinese capitalized stock listed in Hong Kong stock exchange. The reason I'm mentioning A share is that if we think they are reasonably valued, then H share by comparison is even cheaper.

A quick calculation at the back of envelope of their top 10 holdings, it's is selling roughly around 10 times of 2010 earnings. This is very cheap historically. If you believe the earning can grow by just 8% in-line with China GDP, the stock is selling for a single digit based on 2011 forward earning.

KLCI: 1333

Turtle bought 2,000 shares CIMBX25 @ 0.99

Comment will be released after the market closed......

Saturday, July 17, 2010

Some perspectives please!

GE earnings came in nicely but revenue missed estimate. The market jumped into conclusion that the economy is going to be damned slow.

Then whole bunch of financial stocks suffered bungee jump. Not sure they were complaining no growth or worried that they will be fined by the government too, after the wall street taiko Goldman Sachs settlement of US $ 550 mln.

If we buy and sell stocks reacting to these kind of day-to-day news, capital will dwindle very fast as we keep cutting losses. If you do nothing, one fine day, some stocks you like to own will just move up by 5 - 10 %, leaving you with huge regrets, sigh, If I know this earlier.......... It's really damn if you do, damned if you don't..........

Some very interesting comments by John Hussman in his weekly commentary on the current market of rent and not own mentaliy. I disagree with the rest of his bearish assessment but agree 100% with his perspective on the renting mentality.

(John P Hussman) Perhaps the best way to begin this week's comment is to note that in decades of market analysis, I can't remember a time that I've heard so many analysts quoting some support or resistance level as being "critical" for the market. Some are eyeing the 1040 "neckline" on the S&P 500 "head-and-shoulders" formation. Others are eyeing the downward trendline that connects the April and June peaks for the index. Still others point to the "death cross" between the 50-day and the 200-day moving average, near the 1100 level, as being crucial. Even Richard Russell - who deserves more respect than most - has put the full weight of his analysis, over the near term anyway, on whether or not the Dow Transportation average remains above the closing level of 3792.89. The object of discussion has increasingly turned to the implications of this particular chart formation or that, as if some magic number or another absolves investors from having to think about the big picture.

All of this suggests that this is a "rent, not own" market being driven by technical traders who uniformly and somewhat predictably pile on to the sell side or the buy side when particular levels are hit. Last week, we observed the obligatory rally to prior support, closed a "gap" in the S&P 500 chart from a couple of weeks ago, and kissed the 20-day moving average. Based on this sort of "critical level" chatter, a move above the 1100 level could trigger a powerful but short-lived burst of short-covering on the relief of the "death cross", while a move below 1040, and particularly a break in the Transports below 3792.89, would most probably cause all hell to break loose. Simply put, over the very short term, market fluctuations are likely to be driven by masses of technical traders, nearly all acting on precisely the same signals.

The key issue here is the sustainability of these moves. To the extent that an upside breakout is accompanied by a substantial relief in near-term economic concerns (e.g. a move in the ECRI Weekly Leading Index growth rate back to positive territory, or three to four weeks of plunging new claims for unemployment), one might anticipate a positive follow-through over the intermediate term. In contrast, a downside breakout accompanied by further deterioration in reliable economic indicators or poor corporate guidance would prompt a more sustained period of deterioration. Lacking such confirmation from "real" indicators of economic and corporate activity, the immediate response of breakouts or breakdowns is likely to be confined to a short burst of concerted selling or short-covering.

The world has not come to an end. I will keep my technical analysis tool back in my drawer and switch more to valuation now. Most of people have no idea when they talk about "IMPORTANT" key psychological level. Unless DOW, S&P 500, etc break down 20% from a high, or goes below 2009 low, etc, they are just noise.

First the market said we are going to have 1930s depression. That has not happened yet.

Then they talked about double dipped recession of late 1930s. That they said has low chance of happening.

Now they talk about sub-par growth. Well, they just can't make up their mind.

I'm more comfortable to quote Benjamin Graham now as we are not in an environment of mass deleveraging, normal value investing rules should apply.

“In the short run, the market is a voting machine, but in the long run it is a weighing machine.”

Thursday, July 15, 2010

The last thing we want is a herd mentality!

(Business Times, July 15)INVESTORS have turned bearish in their outlook for the global economy and corporate earnings and are shifting from equities into bonds, according to a global survey of fund managers.

A total of 202 fund managers managing a total of US$530 billion participated in the global survey.

The survey also shows that investors are scaling back their positions in equities and shifting into bonds in the past two months, even though they acknowledge that equities are increasingly undervalued and bonds increasingly overvalued.,4985,,00.html?

Big investors and small investors are alike, they still run like hell away from something is undervalued and charging ahead that they know is overvalued.

Fed's assessments, Ringgit Strength and market implications

At current price of Dow 10,000, I would think the market already discounted this information. The risk will rise significantly if its rises further to 12,500.

(The Blommberg)Federal Reserve officials saw no need to boost stimulus to the economy while trimming their forecasts for growth and noting that risks to the recovery had increased, minutes of their June meeting showed.

“The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside,” minutes released today in Washington said. “The changes to the outlook were viewed as relatively modest and as not warranting policy accommodation beyond that already in place.”

Slowing inflation, constrained household spending and contracting credit prompted Fed policy makers last month to restate a pledge to keep the benchmark lending rate at around zero for “an extended period,” the Fed’s statement showed.

The minutes indicated that U.S. central bankers were concerned about lingering high unemployment and risks that inflation could decelerate further. If the outlook worsened, the committee would need to consider whether additional stimulus was appropriate, the minutes said.

On Malaysia front, anticipation for one more OPR rate increase plus relatively strong earning season will continue to push the market higher.

(TheEdgeMalaysia)KUALA LUMPUR: TENAGA NASIONAL BHD [] posted net profit of RM1.11 billion in the third quarter ended May 31, 2010 versus RM1.02 billion a year ago.

It said on Wednesday, July 14 revenue was RM7.72 billion versus RM7 billion a year ago. Earnings per share were 25.51 sen versus 23.6 sen.

Tenaga reported foreign exchange translation gain of of RM569.1 million in the third quarter. It added that the ringgit strengthened agains the yen and the US dollar.

Of its RM21.57 billion in borrowings, the power giant said RM5.1 billion were in yen and RM4.78 billion in US dollar.

The market is pricing in Ringgit strength now, if you look at some of heavy beneficiaries of Ringgit strength like Nestle, F&N, Dutch Lady, Star and etc. They have been showing up as top gainers or bouncing off lows for the last few sessions.

Tuesday, July 13, 2010

Mainland China Property Speculation Resumes?

Was the slowing property price triggered the market speculation that the Chinese government will relax the tightening control or was the Chinese government actually signalled it would relax the policy(improved bank lending on property mortgages)? Market, market.

(TheStandard, July 13)inland property stocks soared yesterday on reports that banks in first-tier cities resumed mortgage lending for third-home purchases - a signal that authorities may ease tightening measures.

China Overseas (0688) rose 4.4 percent to HK$16.08, China Resources Land (1109) 2.2 percent to HK$15.86, Evergrande Real Estate (3333) 3.3 percent and R&F Properties (2777) 3.2 percent.

Banks in Beijing and Shenzhen started providing mortgages for third homes after Shanghai, Nanjing and Hangzhou loosened controls on mortgage lending, the Securities Times reported yesterday.

Branches of ICBC (1398) in Shenzhen are providing mortgages to buyers of third homes, a customer services officer told the paper, but the downpayment has to be no less than 50 percent."

Most other banks in Beijing and Shenzhen demand the same level of downpayment, with the interest rate set at 1.1 times the benchmark rate or higher, the Times added.

Yet Evergrande chief executive Xia Haijun said he did not see any signs that tightening measures will be relaxed in the near term. Xia expects the upward trend in home prices will end in the second half of the year. But he does not rule out more tightening measures if home prices rise higher.

Evergrande raised its full-year contracted sales target by 10 percent to 40 billion yuan (HK$45.92 billion), up 30 percent from 2009.

The developer's sales in the first six months fetched 20.98 billion yuan and the gross floor area sold totaled 3.34 million square meters.

The State Council said in April that banks should suspend lending for third homes as part of measures to cool the property market.

Beijing's efforts to rein in soaring prices and curb speculation have eased sales, while price rises have slowed.

Home prices in 70 major cities rose 11.4 percent in June from a year ago, but the pace was slower than in May (12.4 percent) and April (12.8 percent), data from the National Bureau of Statistics showed.

On a monthly basis, home prices last month dipped 0.1 percent from May.

Hopes that Beijing will ease its tightening policy lifted the Hang Seng Index 0.4 percent to 20,467.43 points. The Shanghai Composite Index gained 0.8 percent to close at 2490.72 - its highest in two weeks.

Sunday, July 11, 2010

Tapping young investors

(The Star May 29, 2010)Recent market research commissioned by the bourse found that there’s a generation gap in the Malaysian share investing arena.

The findings are presented in a booklet published as part of Bursa Malaysia’s Rethink Retail project.

According to Omar Merican, the exchange’s chief operating officer, the project’s aim is “to reach out to younger audiences to create more awareness on the capital market and how they can become more involved”.

The research has determined that investors aged between 20 and 29 make up almost 30% of the investing population but only 12% of share investors. Most of the other share investors (nearly 60%) are at least 40 years old.

It’s not that the young don’t have the money to invest in shares. They prefer to seek returns from other avenues – savings accounts, unit trust, investment-linked insurance and property.

Says Yusli in the booklet’s foreword: “We believe the future growth lies with the young Malaysian segment that is the untapped potential for the growth of this industry. There is, however, a challenge in getting more youngsters interested in viewing share investing as an option to building their investment portfolio.”

There’s a perception problem here. The research shows that the majority of young potential investors are intimidated by the risks associated with shares. They think investing in futures, options and foreign currency is less risky.

They see share investing in Malaysia as having “a strong speculative character”, and some liken it to gambling.

Just where did they get that notion? We should look at the dominant component of the share investing population – those who are 40 and above. And most of them are, in fact, parents.

Are these moms and dads teaching their children about investing in the stock market? Are they imparting the skills and knowledge that come through the experience of riding the ups and downs of the market?

If the parents cum share investors are not doing enough to help their children develop a firm understanding of share investing, the likely issue here is that they’re poor at engaging with and relating to the kids. Or maybe the parents don’t know all that much about investing in stocks.

Or could it be that parents think that share investing is so tough and perilous that don’t fancy the idea of the children going into it, in the same way that a smoker won’t encourage his child to start lighting up? If that’s the case, that’s just bad parenting – “Yes, I do it, but that doesn’t mean you should.”

There’s another possible reason for the young people’s aversion to share investing. They do passively learn about it from their parents, except that they largely pick up on the negative aspects.

The Rethink Retail booklet hints at that: “The speculative image (of share investing in Malaysia) is further fuelled with the emotional success and failure stories told by friends, family, colleagues and others”

And let’s not forget that some investors don’t rely on fundamentals and diligence. Instead, they trade based on tips and rumours. What conclusions will a child form about share investing when he often hears his parents spouting lines such as “Can still go in. They’ll push it up to RM4.30.” or “The general election is coming. The share price will surely fly?”

Bursa Malaysia has plans to convert youngsters into share investors.

In the booklet’s conclusion, the stock exchange says: “If we are able to reach out to potential investors, especially the young investors, we can change their perceptions of share investing and make shares an option to savings, deposits, property, unit trust and investment-linked insurance.”

Just some short comments, may be not.

I discovered some very interesting advice posted on Bursa Malaysia website(you can see the screenshot). Some may want to swear already. How can they ask people not to buy-and-hold. O yeah, at least they are honest recognizing our bursa can destroy wealth. It’s also imply that our bursa is highly speculative of which I do not know how they are going to reconcile the realities addressing young investors’ worry.

I am not sure why bursa making a fuss out of it if these young investors investing via mutual funds. As we all can see that mutual fund/market cap grew tremendously from 7% in '99 to 20% in '09.

I think this a worldwide phenomena. So they should not continue to bark at the wrong trees.

When the small investors, especially the young one, got burnt in one of these incidents(see article by the Star below). How can they not shun stocks? Bursa, please tighten your gates, small and big companies, with no exceptions. Bursa, your objective for velocity may destroy some young and bright people.

(The Star, July 3, 2010)IN what seems like a recent flurry of cases involving corporate misdeeds, the fact remains that the Malaysia market is still perceived as one which lacks enforcement against white collar crooks. The situation was even more worrisome in the past. In the mid-1990s, before the 1997 financial crisis, Idris Hydraulic (M) Bhd, Aokam Perdana Bhd, PWE Industries Bhd and Hwa Tai Industries Bhd were some of the more infamous companies where share price manipulation was believed to have taken place.

Following that, the second board used to be rife with excessive speculation as share prices soared to unimaginable levels.

Repco Holdings Bhd was the most infamous of such cases. Its share price prior to the Asian crisis in 1997 hit a high of RM140.50. The stock has since been delisted.

Biscuit maker Hwa Tai Industries Bhd’s share price had tipped over RM200 a share prior to the 1997 crisis. Hwa Tai closed on Thursday at 45.5 sen.

In 2005, the Fountain View Development Bhd case took centre stage and caused huge losses among brokers.

In 2006, there was Iris Corp Bhd, which saw its share price rocket from from a paltry 12 sen to a bold peak of RM1.38 in five months. More recently, there were the cases of Kenmark Industrial Co (M) Bhd, Linear Corp Bhd and Axis Inc Bhd, all emerging in the space of several weeks and which have renewed concerns over corporate governance and shareholder protection issues.

Here’s a take of what transpired in some of the more significant cases in the past to present:

Idris Hydraulic

The current fiasco involving Kenmark Industrial Co (M) Bhd is is not the first time that Datuk Ishak Ismail has run into trouble with the Securities Commission (SC) and has been involved in court action.

His name is synonymous with Idris Hydraulic, which had its fair share of retail investor interest in the early 1990s bull run.

Ishak entered the corporate scene at the time when he led a takeover of Idris Hydraulic that paved the way for the latter to undertake lucrative timber concessions in Sabah.

Idris Hydraulic held various timber concessions in Keningau, Sabah, which were collectively known as the Sagisan Concession, spread over 256,000ha.

To leverage on its concessions, it had entered into a joint venture with Aokam Perdana Bhd in 1992, partnering its owner, Teh Soon Seng.

Ishak also had stakes in Parit Perak Bhd, the Malaysian operations of hypermarket chain Carrefour, and KFC Holdings (M) Bhd (KFCH). Nonetheless, in the wake of the 1997 financial crisis, Ishak’s fortunes took a huge blow. He lost Idris Hydraulic in a debt restructuring exercise.

After surviving earlier tussles, Ishak then fought the Johor Corp’s Kulim (M) Bhd over KFCH. In 2004, Kulim took control of KFCH through QSR Brands Bhd.

As KFCH director, he was fined RM400,000 by the court in 2001 for submitting false information to the SC, thereby resulting in him being barred from holding any directorship for five years.

In 2003, Ishak, as a director of Idris Hydraulic, was also compounded RM400,000 by the SC for misusing RM50mil of the proceeds raised from the disposal of Kewangan Bersatu Bhd, resulting in the court case against him being withdrawn.

Aokam Perdana

In the early 1990s, Teh Soon Seng got investors’ hearts racing with his many corporate moves. Apart from his own company, Aokam Perdana, and a majority stake in Golden Plus Holdings Bhd, Teh snapped up small stakes in high-fliers like Idris Hydraulic and Granite Bhd.

Investors would jump into whatever stock Teh was purportedly in, and the stock would fly. That was the power and charm of Teh.

However, a negative analyst report brought the stock crashing down. In April 1993, Phileo Peregrine Securities said Aokam Perdana’s share price of RM13.30 was grossly overvalued.

It argued that since the key to Aokam Perdana’s future earnings was the Sagisan timber concession in Sabah, the share valuation had to reflect that. The research house said valuing Aokam Perdana on a price-earnings basis would overstate its true worth. As its assets were on a depleting basis, the discounted cash flow method was the accurate way. It thus valued the shares at RM4.06 on a fully diluted basis.

The report caused panic among the funds. Aokam Perdana’s share prices fell by RM3. Teh personally bought into the company until the share price recovered. It touched a high of RM31.50 at the height of the subsequent bull run.

But the fluctuations in timber and plywood prices started to hurt Aokam Perdana’s bottomline. Its shares started to fall from late 1994. The stock plunged to a low of RM6.15 on May 12, 1995.

Teh eventually sold Aokam Perdana and resigned as managing director on March 8, 1997, before the Asian financial crisis erupted. He subsequently left Malaysia for good.

Teh was also suspected of being involved in the short-selling of Aokam Perdana shares. The SC investigated him for “possible breach of securities law”. They interviewed him for two days in Kuala Lumpur in 2003. Teh has maintained his innocence to this day.

Omega Securities

During the go-go 1990s, Datuk Tony Tiah Thee Kian stood at the top of the stockbroking heap. TA Enterprise Bhd was the largest stockbroker in town, with over 700 remisiers and a huge client base.

On Oct 12, 1990, as part of a restructuring exercise, TA Enterprise acquired TA Securities. A month later, TA Enterprise was listed on the then Kuala Lumpur Stock Exchange (KLSE). In March 1991, TA Enterprise acquired Botly & Co Sdn Bhd.

On March 30, 1990, AT Securities Sdn Bhd, an outfit started by Tiah and his wife, changed its name to Omega Securities Sdn Bhd. Both Omega Securities and Pahang-based WK Securities were acquired by Omega Holdings Bhd on March 8, 1991.

While Omega was thriving and Tiah was busy expanding his business beyond Malaysian shores, there were hints of a scandal emerging.

In a July 1993 news report, for example, Tony Tiah came out to deny that TA Securities was in any way linked to the Union Paper Holdings Bhd scandal.

The Union Paper case involved the massive short-selling of the company’s shares on the KLSE, which resulted in the exchange having to buy in Union Paper shares. Tiah also denied that TA had suffered large contra losses due to a rather significant correction in the market then.

In 1997, things got more serious. Other names were being linked to the Tiahs, names such as businessman Datuk Soh Chee Wen.

On March 23, 1998, Tiah resigned from the KLSE committee, citing health reasons. Three weeks later, on April 9, he withdrew his resignation.

In June 1998, Omega Securities’ trading licence was terminated after it had failed to meet the KLSE’s minimum liquid funds requirement. Eleven other brokerages were placed under trading restrictions.

Tiah and Soh were charged with defrauding Omega Securities of RM424mil in a share transaction in August 1999.

Soh admitted to conspiring with Tiah in providing false statements to the stock exchange pertaining to 44,592,000 shares of Omega Holdings, between Sept 2, 1997 and Jan 12, 1998.

Tiah was fined RM3mil, in default 30 months’ imprisonment, on each charge. Soh admitted guilt to the second of two principal charges of defrauding the now-defunct Omega Securities of RM95.97mil.

On May 11, 2002, Tiah resigned as executive chairman of TA Enterprise and his wife took over the stewardship of the company. He returned to the post in August 2007.


Who can forget Ekran Bhd, a company controlled and led by Sarawak businessman Tan Sri Ting Pek Khiing? Its magnificent rise in corporate Malaysia in the mid-1990s hit a peak after it had been awarded the contract for the multi-billion ringgit Bakun hydroelectric dam project.

It got its fair share of controversy, most of which centred around the project’s potential impact on the environment and the “closed” manner in which the contract was awarded. Following the 1997 financial crisis, the Bakun project was put on hold, and with that, Ekran’s grand plans came crumbling down like a ton of bricks.

Fast forward a decade later, and Ekran still has not managed to restructure and re-strategise. Due to its ailing financial condition – it had defaulted on loan payments – it was categorised as a PN1 and PN17 company for at least four years. Regulators lost patience with Ekran, and finally on Jan 28 this year, Ekran permanently made its exit from Bursa Malaysia.

Perhaps the biggest outstanding issue is the RM712.9mil in advances given by the company to Ting for the injection of some of his private assets into Ekran.

According to announcements to Bursa, the advances granted to Ting have been long overdue and he has defaulted in cash repayments. Ting still owes Ekran some RM408mil.

Ekran entered into a fourth supplemental settlement in March 2009. The new settlement allowed Ting to postpone the last cash payment, which was due in September 2004, by six years to December this year. Hence, the cash will only start coming in by year-end, assuming Ting keeps his word of repaying the sum owed.

As Ekran is now a non-listed entity, it will be even more difficult for minority shareholders to keep track of the company’s financial condition, what more its debt collection status. It may be hopeless for investors to think they can recoup their investment losses.

In November 2009, Bursa publicly reprimanded Ekran’s seven directors and fined them a total of RM630,000, including a RM500,000 fine for Ting, for breaching the exchange’s listing requirements.


The deal involving United Engineers (M) Bhd’s (UEM) put-and-call option raised many unanswered questions. It can be traced to November 1997, when UEM purchased a 32.6% block in Renong Bhd, its parent company, from the market at RM3.24 per share. The total cost came to about RM2.34bil.

The deal sent the whole market fretting. From whom UEM purchased the shares is still not known.

Hence, former Renong executive chairman Tan Sri Halim Saad, in an effort to appease UEM’s minority shareholders and the regulator, entered into a put-and-call option, giving an undertaking to buy back the shares from UEM at RM3.24, inclusive of the holding cost. The entire amount would come up to RM3.2 billion on Feb 14, 2001, when the option was due.

When the put option expired, there was however no settlement. In fact, Halim resigned from the Renong/UEM group in October 2001.

Khazanah Nasional Bhd took UEM private in 2001 and later cancelled the option. UEM’s chief executive then, Abdul Wahid Omar (now Datuk Seri), told reporters that the option was cancelled on Nov 16, 2001, because “UEM needs to retain control of Renong”.

So Halim got off without paying a cent of what was then valued at RM3.2bil.

And more recently ...

Kenmark has definitely hogged the limelight of late, with the bizarre saga starting from the sudden disappearance of its Taiwanese managing director, James Hwang, in late May. His disappearance created chaos, and the company’s share price plunged from over 80 sen to 4.5 sen in a matter of days.

Then the market saw the emergence of Datuk Ishak Ismail, with a 32% stake in Kenmark. However, that was not to last. Just over a week later, Ishak dumped his entire stake and Kenmark slumped again to the 10 sen level.

On June 16, the SC obtained an ex-parte injunction to prevent Ishak from dealing in the RM10.2mil proceeds from the sale of his Kenmark shares.

In the Linear Corp case, the central allegation is that almost all of its cash was taken out by one director. On Dec 29 last year, Linear had been awarded a massive RM1.67bil contract to build a district cooling plant, also known as the “King Dome” project in Manjung Perak by Seychelles-based company Global Investment Group Inc.

Linear’s former director Alan Rajendram paid out its entire cash hoard of RM36mil without board approval. In June, startling discoveries showed that there was no evidence of any significant progress towards the execution of the contract, and no documentary evidence to demonstrate the overall viability of the King Dome project.

Meanwhile, Axis Inc, a PN17 company, said on June 9 that a whole load of documents, including purchase and delivery orders, bank statements and cheque butts, some dating back to 2004, had gone missing, prompting it to make massive write-offs. Most of these documents were related to its dealings with questionable contract manfacturers.

Mid last year, auditors questioned the sharp rise in receivables from contract manufacturers, mainly in Cambodia, from RM11mil in March 2007 to RM105mil in March 2008. It still still remains to be seen who these “contract manufacturers” are, and how they were walked away with some RM100mil.

Wednesday, July 7, 2010

CIMB launches first two foreign ETFs

CIMB will launch first two foreign ETFs on this Friday, July 09:-

(1) CIMB FTSE Xinhua China 25

(2) CIMB FTSE ASEAN 40 Malaysia

The reception has been extremely cold. You won't see any coverage by the major media. I hope that my highlights will bring about some awareness.

Fund facts

I am not going to narrate on the charts as I think my smart readers are very good at it.

(click on the images to enlarge).

I welcome CIMB moves to launch these two foreign ETFs.

This is a good news to small investors who want to buy foreign stocks with limited capital. Participation can be as low as RM 2,000 vs. at least RM 15,000-20,000 per transaction for cross border transaction.

Transaction cost is around 0.84-1.4% round trip for paying brokerage charges. Foreign mutual funds will have an initial charge of 5.5%.

Low management fees. They charge 0.6% annual management fee for FTSE Xinhua 25 but did not mention for ASEAN 40 fund. I do not expect the fund management fees for ASEAN 40 fund more than 1%.

These funds are suitable for both active(trade) or passive(buy and hold) or dollar averaging.

Chances of your fund go to zero value is NIL unlike playing with some speculative penny stocks when they visit PN 17 jail.

The benchmark value will always determine the true value for investors as reference. Unlike some closed end fund, trading for deep discount to NAV is almost impossible or unheard of . This will provide liquidity to exit with little penalty.

Monday, July 5, 2010

Too big to fail by Andrew Ross Sorkin

If you like the book Barbarians at the gate, you are going to like this book. Both books tell how greed manifested in different forms but same substance, same result -- destructions!. Barbarians at the gate summed up the 80s decade, a decade of LBO and mega mergers. And this book summed up the decade of 00s, how derrivaties show its true color of weapons of destruction. I picked up this book recently from a bookstore when I was transit in Changi airport. I munched slightly over a quarter plus pages of the book and find it entertaining and lively. The book deals with what happened and not so much why it happened. If you have time for only one summer reading, read this one.

(Business Week)There's no paucity of books about the financial crisis. Journalists, academics, economists, and pundits seem to have chronicled every event surrounding the drama on Wall Street. Some bite off just a piece, as did Wall Street Journal reporter Kate Kelly in Street Fighters, which looks at the last three days of failed investment bank Bear Stearns. Others, such as journalist Duff McDonald's biography of JPMorgan Chase (JPM) CEO Jamie Dimon, Last Man Standing, consider a single player's role. And a raft of works chronicle the roots of the meltdown, including the forthcoming How Markets Fail by New Yorker writer John Cassidy.

But Too Big To Fail by New York Times (NYT) columnist Andrew Ross Sorkin is among the first to tackle the broad crisis, starting with the days after JPMorgan agreed to buy Bear and ending shortly after the government decided to inject tens of billions of dollars into the country's largest banks in October 2008. The book is exhaustive—if somewhat exhausting in its length—and details the fascinating interplay between Wall Street and Washington in the eight critical months that brought the financial system to the brink of collapse.

Sorkin's reporting chops show. He interviewed more than 200 people, spending some 500 hours with top government officials, Wall Street luminaries, and others privy to critical moments. He also gained access to personal e-mails and confidential documents. Among these is the resignation letter Lehman Brothers CEO Richard S. Fuld sent to the chairman of the Federal Reserve of New York, relinquishing his position on the regulator's board in the days before the investment bank filed for bankruptcy.

As a result, readers feel as though they're in the midst of the action. Sorkin recreates intimate conversations and high-level discussions. For example, the author describes a Saturday morning meeting in July 2008 at the Rye (N.Y.) mansion of Morgan Stanley (MS) chief John Mack, during which Lehman's Fuld drops hints about the possibility of a marriage between the two firms. After Fuld departs, a bewildered Mack asks: "Was he offering to merge with us?" Obviously no deal was ever consummated, and Lehman went under just two months later.

The author seems to enjoy unusual access to sources. For instance, Too Big to Fail contains little-known accounts of how legendary investor Warren Buffett dispensed homespun wisdom to top Wall Street chieftains during critical moments. We read that talks between the Oracle of Omaha and Fuld over a potential investment in Lehman fizzled out in March 2008. Months later, we learn, Buffett sent a four-page letter to then-Treasury Secretary Henry "Hank" Paulson, outlining how the U.S. could buy up banks' toxic assets and make that effective.

Despite its 600 pages, Sorkin's work is highly readable and easily understood. Amid the detailed account of events, he weaves in quirky personal details and amusing anecdotes about the main characters and supporting players. These don't necessarily add a lot of insight, but they do keep the story lively—and make the work appealing to an audience wider than just Wall Street buffs.

In one instance, a longtime colleague of Paulson describes him as having no social skills. The point is later illustrated in a summer staff meeting at the Treasury Secretary's $4.3 million Washington (D.C.) home. When Paulson's wife interrupts the gathering to offer refreshments, Paulson shoos her away, saying "they don't want anything to drink." When she returns with water anyway, nobody takes any for fear of crossing their boss.

These strengths, however, may also be the book's weaknesses. Events are still fresh in the minds of those who have closely followed the financial crisis since 2008—and readers may feel little need for such an in-depth look right now. Some passages may even seem familiar. Sorkin relies heavily on magazines, blogs, and newspapers, including his own reporting for The New York Times. The "notes and sources" section runs to nearly 40 pages. There's also plenty of overlap with other accounts of the crisis: Several stories about Lehman, for example, also show up in A Colossal Failure of Common Sense by Lawrence G. McDonald, a former vice-president at the investment bank, and Patrick Robinson, co-author of the recent best-seller Lone Survivor.

Still, Too Big to Fail may have more staying power than other works. It could easily end up as required reading in college history or business courses—once the smoke has cleared a few years from now.

Sunday, July 4, 2010

Biggs Sells Tech Stocks on Concern Economy to Worsen

This man was bullish during 2008 melt down. And he was right. He was still bullish beginning of this year. He, however, reduced his equity position by 30-40% mainly on the US stocks recently but he thinks emerging markets will do just fine.

He was concerned of potential policy mistake as a lot of governments have been hawkish in G20 meeting on their stance of fiscal policies.

Sentiment wise, I think it has reached quite an extreme point, as bearish as March 2009 before the reversal.

In my mind, the markets already have been trying to price in a double dipped recession already. I don't think we should get too bearish.

Saturday, July 3, 2010

Turtle Portfolio results - July 2010

Received 888 saving for July 2010. It's about time I reveal my portfolio investment strategy. If I employ buy-and-hold strategy, I've got feeling that I would have performed a lot more worse. If you look at the right column of the table, the portfolio gained was 8% or $ 2,333. 80% of the gains were coming from my moves of reshuffled the portfolio. The volatility of the market forces me to under-weight buy and hold strategy(<40% of portfolio allocation), 40-50% short-term portfolio churn and 10-20% cash.

Thursday, July 1, 2010

Where is the second stimulus?

About one year ago, there were a lot of talks about calling for a second stimulus. I extracted this one-year old article talked about the need of a second stimulus.

(ABC News July 9, 2009)"I think that a second one may well be called for," Warren Buffett , the CEO of Berkshire Hathaway, told "Good Morning America" today. But, he added, "you hope it doesn't get watered down in many ways."

Buffett cautioned that a second stimulus package, like the first, won't be "a panacea," because stimulus packages take time to work. He criticized lawmakers' work on the first stimulus package, which contained $787 billion in spending.

"Our first stimulus bill ... was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in ... as if everybody was putting in enough for their own constituents," he said. "It doesn't have really quite the wall that might have been anticipated there."

Well they had better act fast as the market participants are almost entering the lost world.

(MoneyCNN)With the S&P 500 down more than 15% from the highs of late April and all three major indexes at more than 6-month lows, a bigger selloff could be brewing.

"By year-end we could be roughly where we are now, but between now and then, we could be substantially lower," said Karl Mills, president and chief investment officer at Jurika Mills & Keifer.

Going back to World War II, a decline of 15% off the highs has often turned a correction into a bear market -- a drop of 20% to 30% -- according to Standard & Poor's chief investment strategist Sam Stovall.

Late Wednesday, S&P cut its 12-month price target for the S&P 500 to 1,190 from 1,270, citing the "intensifying headwinds."

The Dow is down 7.6% year-to-date, with most of the losses coming in the past two months when the Dow lost more than 10% on worries that the European debt crisis and signs of slowing in Asia will send the U.S. economy back into recession.

"What we saw in May and June was investors trying to understand that it's going to be a tepid recovery at best," said Alan B. Lancz, president at Alan B. Lancz & Associates.

Quote of the day

"If you don't read the newspaper, you're uninformed. If you read the newspaper, you're mis-informed."

~ Mark Twain