Charts of the day

Beautiful charts. 

No words needed. 

Just stare.

EPF risk profile has changed

The investment returns for the last few years certainly had been tough for many fund managers. EPF has done well navigating the turbulent investment sea for the last few years. Fair is fair. Here are the dividend rates for the last few years:

2012 6.15%

2011 6.00%

2010 5.80%

2009 5.65%

2008 4.50%

How did they did it? First, note the asset under management. It has grown from slightly more than RM 300 billion to over half-a-trillion. While the assets under management has grown by more than 60%, I am glad to see they held MSG, loan and bond and properties relatively constant. Thus almost constant in dollar but shrinking % to total assets. That is a consolation at least our money did not gone into more and more wasteful mega projects. 

The obvious uptrend is equities exposure. As a percentage, it has grown from 20% to about 40%. Equity has grown from RM 87 billion to almost RM 204 billion, slightly more than double. Like I said, I would rather to see them invest in companies rather than putting more money into bond. EPF's equity position of RM 204 b over RM 1.2 trillion[total bursa market cap] is about 17%.  17% is high but not that alarming yet. Members need to be aware of this composition and any down year in equity market will have an impact on dividend payout but I hope 4.5% would be the minimum. 

The reason I point out this shift is to alert people who are making argument based on old facts to get updated   and argue their case ( personal finance planning, policy debate, etc) intelligently. 

Turtle portfolio certainly will buy something ......

It has been quite unusual that I have this strong urge to write. The recent developments in the markets have been very interesting. There have been a lot of talks by people like Jim Rogers, Marc Faber, Art Cashing and even investment research reports(BofA, UBS, etc) are getting uneasy with the current stock market indexes  DJI or S & P 500 registering  many all-time-highs.

Of many of materials available widely on the internet, I like this video very much that described the current condition. It was a great debate whether it's fundamental or money printing. Check this out.

http://video.cnbc.com/gallery/?video=3000147363

I agree with Jim. It is money printing. I came to realize that it is futile to resist the Fed and other central bankers. The US, ECB and the latest was Japanese.........   The money printing pledges will keep the credit universe to expand pretty much like what Bill Gross had written his superb review: Credit Supernova ( http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx ). Though it is more of metaphor rather than literal, the eerie feeling always make me feel uneasy.

We are kind of in the middle of a big paradox. If the Fed and central bankers will only back-off from money printing when they see stronger growth, lower unemployment, etc....... Q Eternity may be going to be around for a while, implying the bull run will continue to charge till it pops.

A well respected research house like Brinyi Associates says the bull run is entering in the final phase which is Exuberance. This phase can be very volatiles and certainly can soar violently. March Faber recalled that prior to 1987 great crash, DJI went up by 40% from January. But, he is not sure whether this can repeat in 2013.

It is very tempting to think that the central bankers can "manipulate" the markets but they may one day found out  that the markets can run out of oxygen and spark a sell-off. At that time, the markets will be greater than central bankers. 

One more chart for your perusal.

http://www.zerohedge.com/news/2013-02-12/sentiment-more-bullish-99-all-prior-readings

Whenever there is a reversal from extreme bull index devised by Bank of America, the average pull back is around 12% but I think it should get closer to 20% this time. Whether this scenario will materialize or not is not important to me. What is important to me is to avoid a dumb mistake like pulling out money from piggy bank and start buying now.

I will surely buying something because I see great values begin to emerge on many small caps(minimum 100 million market cap)  in our Bursa Malaysia. There is tremendous liquidity sitting on the sidelines as our local funds and retail investors started to sell a lot of stocks over last few months. This will provide some cushion post-GE.

I am getting excited as the time of buying is drawing near.

Opposition 13th GE Winning Formula: 35-80-50

First why I choose to use the word Opposition as oppose to Pakatan. I like to use Opposition as it reflects the spirit of under-dog or black horse. Saw this comment from Malaysiakini posted by MP Bukit Bendera this morning. Good luck brothers. Let's do it. 

(Malaysiakini) COMMENT Johor is the last bastion of the BN, but the coming general election may prove that the fortress may turn out to be merely a sand castle.

If Pakatan Rakyat gets the support of 35 percent Malay, 80 percent Chinese and 50 percent Indian voters in Johor, 20 parliamentary seats will fall like dominoes.

And, therefore, Pakatan may well gain the much-needed 112-seat threshold to form the next federal government, with just the seats from Peninsula Malaysia.

In the two rounds of seat re-delineation exercises in 1994 and 2003, many multiethnic mixed seats were created for BN to maximise its multiethnic appeal and to make the most out of the opposition's inability to win across ethnic boundaries.

The BN-controlled media made PAS to be seen to the non-Malays as an anathema to their interests, while DAP as a threat to the Malays. Before 2008, PAS supporters rarely voted for the DAP and vice-versa.

The 2008 general election saw PAS benefiting from outpouring Chinese and Indian support for the "anything but Umno" call while some urban Malays voted for DAP for the first time in their lives. Many multiethnic seats in the states north of Negeri Sembilan and on the west coast of the peninsula fell to the opposition.

How Pakatan can win Johor

Sabah and Johor are the two most crucial battlefields in the 2013 election. While Sabah attracts substantial attention, it could be hampered by seat negotiation and cooperation among the opposition groups. Johor is where the BN representatives may fall like dominoes.

Of Johor's 26 parliamentary seats, only eight have more than 60 percent Malay votes that will be harder to win with the current level of support for Pakatan. No seat in Johor has more than 60 percent Chinese voters.

On the one hand, without 25 percent Malay support, even if the non-Malay swing to Pakatan is huge, the entire momentum may just fizzle out with very few seats gained. Pakatan received only about 20 percent Malay support in Johor during the 2008 general election.

On the other hand, if 35 percent Malay voters support Pakatan in this election, anything could happen. While it is tough to get 35 percent Malay support, it is never impossible.

I am told that a recent opinion poll shows Malay support for Pakatan in Johor to have exceeded 30 percent, though the support varies among parties. The support for PAS is much higher than average while DAP's Malay support is lower than average.

Working together the key to victory

The poll also shows that support for Pakatan from the Chinese is around 70 percent, though it varies among the component parties, with DAP exceeding the average while PAS getting lower than average. The poll shows the support from Indians about be about 50 percent.

As the election approaches, I believe the gaps will narrow if PAS and DAP, with the help of PKR, are able to convince supporters to vote for each other in the context of the coalition.

From a purely mathematical simulations, this chart on the left indicates the possible scenarios in Johor. This is based on the assumption that Indian support for Pakatan is constant at 50 percent.

Of course these are just simulations on paper. But it shows that Barisan Nasional's castle may crumble if a perfect storm comes into shape. It is also a fresh tsunami alert from the people of Johor to the government who refuses to reform.

---

LIEW CHIN TONG is the member of Parliament for Bukit Bendera.

13th General Election

At this point of time, I believe the level of retail participations in the stock market is quite low. What it means is this -- many would have sold down their holding. The general strategy is to sell down their stake and buy them back after 13th General Election. Not surprisingly many local funds including EPF have been selling down their holding even though the general consensus is expecting BN to hold on to their power but with reduced parliament seats.  Let's run the numbers based on 2008 GE results.

In the 2008 GE, BN captured 140 out of 222 parliament seats. If Opposition component needs to capture Putrajaya this time, it will need to capture at least 112 seats. Based on 2008 GE results, assuming our opposition party does not lose any of 82 seats, they will need to get another 30 seats. As you can see from the table, our opposition capture very high % of the seat in Kedah, Kelantan, Penang, Wilayah Persekutuan - Kuala Lumpur and Selangor. In business lingo, they have very high market share. 

To win another 30 seats, they will have to capture additional market share in Johor, Sabah or Sarawak. These 3 states have a tally of 82 seats or 37% of total available seats. For BN to lose 30 seats mean they are losing almost 37% of their support.

I was surprised with Najib allowing himpunan hijau recently. I was equally surprised with him saying ok with RCI on project IC. When I look at the tally again, I should not be surprised after all. Najib has nothing to lose because BN already lost. Allowing opposition doing more in high penetration states do not equal to more seats.

We should not underestimate Najib though he appears to be a weakling. Allowing RCI on project IC is fine.  The real question is, can we reverse the citizenship that was granted? Without the reversal, can opposition swing the votes, especially the "aliens" outnumber the local? Many of them feel indebted and also tasted the bantuan rakyat 1 Malaysia?

I have been scratching my head why the hell Najib wants to spend time and resources in Penang. Bringing in Psy to perform Oppa Ganggam style in the coming Chinese New Year may appear to be weak or a sign running out of substance. On a second thought, he may not be that stupid after all, his offensive strategy may distract our opposition to guard on what they have and spend less time in area that can contribute another 30 seats. Our opposition should have organized the himpunan hijau in Johor, Sabah or Sarawak to shock the local. 

This post by no means to discourage anybody who wish for a change but to confront the realities. We need to be on our toes all the times and not to fall into the trap of BN. We only get this one shot to change our Malaysia destiny forever. Let's do it right.

See you all after the GE. 

Keong He Fatt Chai!