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!

Chinese New Year Rally

The retailer investors had not jumped into the stock market in a big way - yet. . The situation can change in the next few weeks as the three major fears begin to recede. You can feel the heat of them warming up

The first fear was the US fiscal cliff which I though it was over-hyped. The second fear was the Euroddegon but now the region is showing some signs of stabilization  The mother of Euroddegon fear Greek was turning around. The rate of Euro zone PMI has shown gradual recovery though it is still in the contraction zone of 47.2 in December. The third fear was China hard landing. It is appear that factory orders too are showing improvement and more data is supporting a soft landing.

The risk appetite is  getting stronger. People is moving money out from safe haven. The US 10 year treasury yield is inching up everyday. Whether it will march towards 52-week high of 2.38% is something to watch closely.

Some of the very unloved markets like Vietnam has breakout from its consolidation range and very possible to test 52-week high of last year March of May.

Back to our local stock market. The small cap index that has been moving sideways for the last 7 - 8 months seems ripe for at least trying a 10% rally. You can feel the heat as the overbought situation was quickly neutralized.

At this point of time, the retail investors are still very nervous. A few points dropped in the KLCI will trigger them to take profit or sell down their holdings thinking the market will collapse. It is unlikely that the market will collapse when they are thinking collapsing all the time.  If you are looking at the same small cap chart, there could be a window of sharp gain like early of last year. That window may be open for 3 - 4 weeks.

My view of this post is strictly based on sentiment analysis and for trading purpose. Meaning, I accept cut loss if I am wrong. I have been debating with myself whether I should write this piece because I worry people can lose their hard earned bonuses. But I concluded that I am not that persuasive......

Back to the bonus thing, most people think it is money drop from haven, thus easy comes easy goes. Not trying to sound preachy but just may been half-sen worth of view. Spend it the old fashion way. If you have debt, pare it down. If you have been eyeing on something nice the whole year, don't hold it back -- do yourself a favor -- reward yourself. If you still have some money left after doing these, punting on stock market conservatively is okay. The word CONSERVATIVE is the key.

Turtle Portfolio Update. Happy New Year

Happy New Year to you.

I hope most of you can still remember me after absent from the blogsphere and market for a while. I hope to write more gradually but it will take me another few more months to warm up my fingers. Many of you know that I am waiting for KLCI to have more meaningful corrections before deploying cash for Turtle portfolio.

I have just done some updates for Turtle portfolio. From a humble beginning of RM 3,000 and monthly saving of RM 888, this portfolio stood at RM 59,088. The performance in the last 2 years were lagging badly but the portfolio was still able to generate annual compounding return of 2.57%. The consolation, this portfolio has never suffered a single year of negative return while dabbing his fingers in stock market.

However, however, however........

Please have mercy and do not laugh at the relative performance for its lagging the fixed deposit benchmark of 3%. If one were to compare to performance of bond or REIT which typically generating 5 - 8%, the under-performance is even glaring.

The moral of the story is diversify, diversify and diversify. Another point is no matter how skeptical you are on the 30 stocks on FBM-KLCI, when it go down, you got to own some.

As of now, the fiscal cliff fear is behind us. That should convert a few more skeptics bears to join the bulls. How far the markets can continue to rally does not concern me. The markets around the world mostly in good moods. At the personal level, I have some exposure especially Chinese related stocks. Those purchases were made before the market rallied sharply. Days and nights, I have been waiting to sell those holdings. Yeah, only sellers should cheer when markets are zooming up.

For buyers? For now, it is better off spending more time with family, hobby projects, golfing, fishing..........whatever......

The stocks will be cheaper by at least 15 - 20%,  6 to 9 months down the road.

For the rest of the day, I hope to continue my reading on Dan Brown's The Lost Symbol. I was making a commitment to finish that book before the new year. Age is really catching with me, while reading on my wife's new tablet, I dozed off before I can welcome 2013.

How real is $400 million debt recovery by MUI?

Saw this in the Star

PETALING JAYA: The Kuala Lumpur High Court has ordered the winding up of companies owing monies to Malayan United Industries Bhd a total outstanding receivables of RM427.75mil.

In an announcement, the company said that the debtors consisted receivables of RM245.6mil as principal and accrued interest of RM182.1mil as of Sept 30. “At this stage, the company is not able to estimate the exact time period for recovery of the outstanding sums,” it said.

The questions run at the back of my mind were who are the debtors and do they have the ability to pay back ?

The answer to the first question. Hope Foundation or Yayasan MUI who has been alleged that Khoo transferred $ 400 million to this foundation a long time ago during his down fall -- that I could not verify. You may want to read this here

 http://www.malaysia-today.net/mtcolumns/40479-tan-sri-dato-dr-khoo-kay-peng

The second part of the question, which is more important, do Hope Foundation has the money? It is seems that KKP has made a series of calculated moves trying to unlock the value in PMI and also their holdings in MUI. Hope foundation has been disposing shares from the height of 441 million shares in MUI down to zero in September 2011. That itself at average price of RM 0.25/share would have raised at least RM $ 110 million. They disposal in PMI is estimated around $ 20 - 30 million. Hope Foundation would have raised at least $ 130 - $ 140 million. I suspected Hope Foundation subsidiaries must have more assets or money that hidden somewhere to be unlocked. The liquidation may take some time and let say MUI manage to recover at least 75% of $ 427 million, that will work out to be around RM $  0.14 / share.

Sometime in April this year, MUI announced that they will sell their insurance arm MUI Continental to Tokio Marine for RM 180 million. MUI owns 52% of MUI Continental and that will work out to be around RM 90 million or 0.03 / share.

There are a series of other properties that have not be revalued 20 – 30 years ago. I have done a calculation a few years back it was worth close to RM 1.1 billion or RM $ 0.375/share.

Just ignore on other items, this itself already worth close to $ 0.545/share.

The last part of the question, so what if you have unlocked the value? Will you return the cash to shareholders ? KKP and their friends have a large holding in MUI and looking at the moves intensity that they are making, I do not think they will want to do all the hard work for nothing.

Disclosure: I have some picked up some shares recently below RM 0.22.

iCapital.biz

Tomorrow will be an interesting day for iCapital.biz shareholders. Based on what I read on-line, both Tan Teng Boo and Andrew Pegge seem to get very emotional. We have to brush aside the emotion and analyze things that are affecting our money on the line.

iCapital posted performance of Laxey Partners on their website. Here is this

First it says that the fund that Laxey Partners manage lost almost 70% of its value and the closed end fund discount at one point as bad as 40%. So the argument that if Laxey Partners were to take an active role, where will it be heading? It will be a disaster for iCapital.biz shareholders.

Fund discount or premium is a reflection of investors' sentiment. When the market is hot, people tend to pay for premium. When it cold, people will tag discount simply because there are more sellers than buyers. The real long term issue is the performance of the fund manager. If the fund manager can deliver long term results, say 15% 5 years from today, its NAV will be around $ 5.92. Even you tag a discount of 20% the projected market price will be around $ 4.73. Depending on the market price you pay, you will still make money. If Tan can perform, it will be a loss to investors.

The second short term issue on my mind is to consider the impact of regardless Lexey Partners succeed or fail. Since they(Lexey and City of London Investment) have accumulated the shareholding over 18 million shares, what is the impact of they start to dispose shares? If they have accumulated the shares over 2 years, I think the average price is around $ 2.25. If they are willing to absorb 10% loss, $ 2.00 will be the floor.

Let's take a look at United International Securities, a global closed end fund listed in Singapore exchange where Lexey Partners tried to make a similar attempt but failed. The chart below shows the blue is the price of UIS and red is STI index. UIS price fell sharply but STI was also fell in parallel. It was not really a concern since we may think that it is more of general sentiment. However, STI is recovering, UIS price was stuck. One can safely say that someone is trying to exit gradually.

Back to iCapital. If they choose to sell down gradually it will take a while to distribute that 18 million shares. That will take at least 9 - 12 months exit.

What if Lexey Partners successfully elected themselves on the board of directors. It will be a cheer to short term investors but a loss to long term investors.

Back to risk-reward thing. At yesterday closing price of 2.45, risk is 0.45(2.45-2.00) if you lose and reward is 0.51(2.96-2.45). So it is like 0.88 risk reward ratio. At this price, I will not go aggressively.

Meanwhile let's see the plot unfold.

Why make trade call while stay bearish?

Some of you must be wondering what the heck am I doing --- making trading calls while stay bearish, right?

Did I miss the last 1 year bull run so badly that I need to make up at the last minute?

The answer is no. The reason is simple. Did anyone actually make money while staying in the market?

If you look at FBM-Small Cap, unless you manage to get in late of 2011 and get out early February, the gain is as good as doing nothing. This index was about to have a golden cross but then telco came in and halted the party.

I feel that we are at last leg of the bull run before we have a more significant correction(15-25%). Usually the last 3 months before the bull run ends, the correction is usually brief and a new high is make in a relatively short time. After 2 - 3 rounds, the market participants tend to get complacent and keep thinking correction equals to new high.

One more sign that I found in my studies, the perceived safest stocks will have the last run. As you can see that ICAP was making the new highs about the same time KLCI was making its way to peak. I don't have the data on hand now but I was remembering that the so called many little "buffetts" came out and drove the stock to all time high way above its NAV in late 2007. If the history were to repeat a 10% premium to RM 2.96 NAV will equal to $3.25. I was being conservative and just call for $ 3.00 as the target.

There is another stock that frustrate its long term shareholders enough. Even patience investors like iCap, real insider Cheng, EPF and whole lots pared down its holding. Guest what? It just had a breakout recently. That is what I called capitulation! After all these big investors had nothing to sell, the rally tends to be sharp just like what you have seen in Alam. The other stock that mirror Alam is Sealink.

Disclosure : I have icapital loaded below $ 2.25, Parkson at $ 4.70, Sealink at $ 0.38. I am going to hang on to it for another 2 - 3 months. I quit Alam around $ 0.65 and may consider to reenter if it can pull back between $0.65 ~ 0.68. Since it is such a short holding, that is the reason why I did not load it into Turtle Portfolio. You are welcome to join the ride. However if you are feeling I am promoting the stocks, just ignore these postings. See you in December.

If trade you must ----- ICAP

Let me keep it short and sweet. If trade you must, ICAP is a good bet. Good luck.