MSM: So Far So SWEET (30th June 2011)

New Bursa Malaysia comer, MSM is the leading sugar producer in Malaysia, with a total market share of 57% in 2010 (based on production volume). It is one of two sugar refiners in the country, the other being Tradewinds (M) Bhd. Following its listing, MSM will be the only directly listed sugar refiner in Malaysia.

It has two sugar refineries in Prai, Penang and Chuping, Perlis with production capacity of 1.11m tonnes per year, as well as the only sugar cane plantation and mill in Malaysia. MSM’s sugar cane plantation is 4,454 ha in size, while its sugar mill has a capacity of 5,500 tonnes/day.

No wonder MSM had gained 26% on its debut, albeit profit taking the following day. Yet, many investors are pouring their interest in this counter maybe for the following reasons:

1. A potential beneficiary of a free market for sugar soon – in view of the Government’s moves to reduce subsidies for sugar over the last year and a half;
2. Beneficiary of the Government’s long-term contract for raw sugar – given that raw sugar comprises 80% of its production costs;
3. Beneficiary of weakening US$ - given that MSM imports 98% of its raw sugar requirements;
4. Focusing more on export markets to grow margins and profitability - given that margins in the domestic market are relatively stable due to the price ceiling in place; and
5. 36% growth in capacity within the next five years to cater for export opportunities given the widening spread between raw and refined sugar prices.

OSK Research

MSM produces various products including fine granulated white sugar, coarse granulated white sugar, coarse brown sugar, soft brown sugar, icing sugar, caster sugar, super fine white sugar and molasses. White sugar comprises the majority of its sales volume. MSM’s sugar is sold under the brands of “Gula Prai” and “Gula Perlis”. MSM breaks down its sales into four categories:

1. Domestic – which comprise sales to the domestic market and which is entitled to a subsidy from the government;
2. Local export – which comprises sales to domestic industrial customers, who use the sugar to manufacture products for export;
3. Export – which comprise sales to export markets like Singapore, Australia, New Zealand and Pakistan and are made via traders; and
4. Other – which is made up entirely of sales of molasses.

Valuations and Fair Value

OSK Research: We peg MSMM to 13.0x FY11 EPS, which gives us a fair value of RM5.16. We are basing our valuation on 3 other non-government linked sugar refining companies with similar FY10 net profit and refined sugar production capacity. However, we think that MSMM should trade at a premium to its peer average PE of 11.7x given its link to Felda Group, which confers it the benefits that come with having a GLC as a majority shareholder. MSMM plans to pay out at least 50% of its earnings as dividend. Assuming a 50% dividend payout ratio, the stock offers dividend yields of 5.9% and 6.1% for FY11 and FY12 respectively.

Regional Peers Comparison - OSK Research

RHB Research: For valuation purposes, we have compared MSM to its regional listed peers. In our view, although Tradewinds is the only other sugar refiner in the country, we believe MSM is not directly comparable to Tradewinds, given that Tradewinds’ business comprises sugar, rice and palm oil. Based on our analysis, MSM’s regional peers are trading at an average PER of 11.6x FY11 and 10.6x FY12. As such, we attribute a target PER of 11x FY12 to MSM’s earnings, in between its regional peers’ valuations for FY11 and FY12, and obtain a fair value of RM4.90. This implies a 40% upside from the IPO price of RM3.50/share. At our fair value of RM4.90, investors would also benefit from a dividend yield of 4-5% p.a.

Source: OSK Research and RHB Research

House Rent Blues: On legal loansharks and crowdfunding

So I haven’t managed to get a blog post out for a couple weeks. That’s partly because I’ve been having some cash-flow management problems, due to some crap planning on my part and some unfortunate payment delays. This is an ongoing issue in freelance life, to smile through gritted teeth when someone at an organisation tells you the admin guy went on holiday and forgot to process your invoice. In a situation when one’s reserves are marginal, small frictions in the system can wipe you out.

Needless to say, when my landlord sent me an sms a few weeks ago saying ‘You haven’t paid your rent, and you have six months of bills to pay too,’ I got a deep down chill. My landlord is a cool guy. He only has one name, and our contract is informal at best, built on trust and belief in human nature rather than legal structures. That’s why he gave me some leeway, and that’s also why I didn’t want to abuse that trust. So I called up my friend George, and asked him what I should do. He wrote a song for me with some suggestions about how to deal with the house rent blues:

It’s an ancient blues, the house-rent blues, and financial services for people suffering from cash-flow irregularities are probably as old as the moon. Short-term loans attached to long-term shackles have long been the speciality of a certain class of societal demon called the Loan-Shark. I’ve been seeing the Loan-Shark in my dreams, under a bridge, at the crossroads of Highway 61 and Highway 49, right there in Clarksdale where John-Lee Hooker wrote the song. In that dream the Loan Shark says “35% interest per month, secured on your soul” and hands me a contract to sign. “That’s pretty steep” I say, “Are you regulated by the SEC?” He’s taken aback. “Hell no brother, but you can count on me.” I look at the small print on the contract. It says: “You can check out any time you like, but you can never leave.” Yes it’s true, the Devil uses clichés from the Eagles.

The dark desert highway of the Loan Shark extends around the world. You find them in Brazil, you find them in them in South Africa. In Bangladesh you’ve got the ‘5-6’: The guy that loans you 5 taka in the morning, and gets 6 taka back from you at night. That’s 20% interest in one day, which is about 7200% interest annually, uncompounded. That what you call raping the time value of money.

Anyway, in dealing with my cash-flow problem I decided to stay away from Brixton’s loan sharks and to take a look at the legal pay-day loan services. Payday loans are like advances on a salary. You show them proof that you will be getting paid at some point. They advance you the money. You pay the money back with interest when you salary comes through. It’s a way to tide you over liquidity crises.

There’s a big new payday loan outlet that recently opened up by the Brixton Academy, opposite the St. Barnados Charity Shop. I had to wait for a while to get served, and watched a women in her early 30s sort of plead with them for a two-day extention on a £200 loan that she couldn’t quite pay back yet. I’m not sure there was a pleasant story behind her situation, and the lady who served her was gently refusing. It can’t be an easy job dealing with people on the thin-edge of financial stability.

LO-FI FINANCE

When my turn came, I got served by a young guy who was quick to tell me that the company is actually American, and that they have six outlets in the UK, the Brixton branch being a flagship of sorts. As for the terms of their payday loan: 25% per month, which is 300% per year, more modest than the classic loan shark, but ridiculous costly nevertheless. In order to get a £625 pound advance on your paycheck, you’d have to pay them back £780. I asked what would happen if I didn’t pay back in time. He said the matter is then passed on to their payment delinquency service, who would organise an ‘alternative payment plan’.

I reckoned I might check out some of the online payday loan services instead. Payday UK comes top of the search results. Again, the terms of the loan are 25% interest per month. Yep, for a £400 advance, you pay back £500 in a month. Wonga is another one, only this time it has a deceptively cuddly name and even worse terms: For £400 loan, you pay back £525 within a month. This really does not seem like a sustainable business model and people looking for £400 advances aren’t really the kind of people who should be spending £125 on liquidity management. There must be social enterprise models waiting to emerge in this space…

Out of curiosity I visited the pawn shop. Pawn shops allow you to pledge gold or jewelry as collateral in exchange for a loan. I didn’t actually have anything valuable to pawn, but if I did, their deal was better, at 6% interest per month. 

WILL YOU ACCEPT MY AMULETS AS COLLATERAL?

The lower interest rate is a due to the fact the loan is secured on some valuable bounty, so if you don’t pay back, they just keep your stash. Collateral lowers your ‘cost of capital’ because it provides protection to the lender, and it’s one of those unfortunate realities that those who possess collateral tend to be wealthy individuals. Some might say that that’s a reason why wealth tends to concentrate around existing wealth… ahem, Mr. Marx.

So what do you do when you don’t have collateral to base a loan off? You label yourself an entrepreneur, and you raise money against the fabulous future wealth that you claim you'll create. That’s what I was thinking when I went to a talk on crowd-funding, given by Theresa Burton from a company called BuzzBnk. The idea behind crowd-funding is that you attract small-scale (philanthropic) investors to contribute to your cause. You need a catchy story to get people to invest in you though, and ‘Can you guys give me £400 so that I can pay my landlord’ is not going to cut it. On the other hand, ‘Can you give me £3000 so I can finish my book’ just might…. Did I mention that I’m writing a book? (more on this topic later)

In the end, time constraints required that I turn to the most powerful and ancient financial service: Angel investors…. By which I mean friends, the great providers of flexible and low interest loans. Thanks guys.

The moral of the story then is that I continue to live an unsustainable life and have a great new idea for an unprofitable business: A freelancers’ co-operative to help London’s army of freelance workers deal with the ordeals of invoice delays. This sounds like a good idea, to sink my energy into something which will have… um …. marginal and sporadic cash flows attached to it, at best.

But who needs stability when you have one bourbon, one scotch, and one beer…

As for how I defeated the Loan-Shark, I had another dream last night: 

New Fund: OSK-UOB Capital Protected Dual Opportunities Fund

While inflation fears in China is a dominant factor, signs that China's growth is holding up well despite this concern will certainly fuel further growth. Traditionally in China, a higher inflation tends to exhibit a positive correlation with Chinese companies price-earnings ratios and nominal earnings growth. Having said that, the consensus view is that the government will raise borrowing costs to contain inflation and prevent the economy from overheating.

With such growth euphoria and inflationary concern, a new fund is structured to take advantage of the current inflationary economy in China. This is a 4-year close-ended capital protected* fund which aims to provide income and capital appreciation over the medium term whilst protecting investors’ capital* on the Maturity Date.

Where is the Fund's return comes from?

The Hong Kong (HK) Option is designed to provide investors with potential annual coupon payments that are based on the performance of Chinese companies’ stocks and potential returns from its exposure to a gold investment at Maturity Date. Hence, the Fund’s name “Dual Opportunities” reflects the two opportunities available under the HK Option.

The HK Option is denominated in US Dollars and thus, the Fund’s return from the HK Option is subject to US Dollars / Ringgit Malaysia exchange rate risk. The Fund has 100% participation in the HK Option payout. The HK Option will provide the Fund with exposure to the performance of a fixed basket of 5 Chinese companies’ stocks listed on the Hong Kong Stock Exchange (“Underlying”).

However, the performance of each of these stocks under the HK Option is capped at 8% per annum. The final Underlying which will always be comprised of 5 stocks will be determined on the Commencement Date of the Fund.

The HK Option will pay the Fund a potential annual coupon payment that is based on the performance of a basket of 5 Chinese companies’ stocks which are expected to perform during this inflationary period.

In addition to the performance of the Underlying, the HK Option is also structured to pay a gold return, if any, at the Maturity Date. The HK Option’s exposure to gold return would depend on the annual performance of the Underlying and also on the performance of gold prices between the Commencement Date and the Maturity Date.

Indicative Asset Allocation of the Fund

The Fund is suitable for investors who:

• have a low risk tolerance;
• seek capital protection;
• have a positive outlook on China's growth potential;
• have a positive outlook for gold prices;
• have a medium term horizon and seek regular income.

Source: OSK-UOB Investment Management

Click here to download Prospectus

How to prevent Credit Card fraud?

Nowadays, people are using "Plastic Cash" (credit card) to shop and pay for almost everything. With the ease of payment, comes with the ease of fraud. As a wise consumer, we should know how to prevent credit card fraud, thus safeguarding our "plastic money".

Credit card fraud is a serious crime which can cost you and credit card issuers huge losses. Credit card issuers have taken security measures to protect you against such possible frauds. However, you can also take the proper safety measures to avoid from being a victim of fraud.

Here’s what you can do to minimize your risk of being a victim of card fraud:

Safeguard your credit card

• Sign on your credit card immediately after you received it.
• Keep your credit card in the same place in your wallet or purse so that you will notice it immediately if it is lost or stolen.
• Do not lend your credit card to anyone.
• Do not provide your credit card details to an unknown party.
• Do not write down your PIN number on the back of your credit card or keep it in your wallet. Always memorize your PIN number instead.
• Keep the telephone number of your credit card issuer so that you can immediately report lost or stolen cards, unauthorized transaction or disclosure of PIN to a third party.
• Cut your expired credit cards into two when you get a new one.

Check your credit card transactions to avoid unauthorized transactions

• Check all details on the charge slip before signing or confirming the transaction.
• Keep all your charge slips and check it against your credit card statement as soon as you receive it.
• Notify your credit card issuer immediately of any error or possible unauthorized transactions and follow up in writing as soon as possible.
• Destroy all your charge slips before throwing them away.

Source: Banking Info

Why Maybank and CIMB gave up on RHBCap? (23 June 2011)

Merely less than one month of battle (not even pulling off the gun), both Maybank and CIMB today respectively announcing to abort the merger talks with RHBCap. Funny oh? First, the news of aborting was first reported by a Singapore newspaper, not Malaysia, and why not Malaysia? Second, both contenders had set end of June's proposals, announced just only last week. So fast change mind?

Both CIMB and Maybank are turning their heads away from RHB now.

Of course, between the dates, Abu Dhabi Commercial Bank (ADCB) made a significant headline when it sells its 25% stake in RHBCap to its sister company, Aabar Investment, for RM10.80 per share, which value RHBCap at 2.25 times RHBCap book value. Does this really affecting the merger talks?

What CIMB says?

In a statement Thursday, June 23, CIMB group chief executive Datuk Seri Nazir Razak said that based on its discussions and assessment of the present expectations of key stakeholders, the bank did not believe that it would be able to arrive at a value creating merger.

“Merger negotiations are both resource consuming and distracting for staff and stakeholders.

"Therefore, we prefer not to prolong our discussions unnecessarily, allowing all parties to return to ‘business as usual’ as soon as possible,” he said. (TheEdge)

What Maybank says?

“In light of recent developments and following further deliberations, the board of directors of Maybank has decided not to pursue the possible merger at this juncture,” Maybank said on Thursday, June 23. (TheEdge)

Who knows? RHB's investors should sell their holdings above RM10 previously.

What Finance Malaysia says?

"The merger talks most probably is still on-going, but behind the board room. ADCB's RM10.80 did set a hindrance for both parties to proceed with the merger talks, in order to convince other shareholders."

"Other than that, EPF's role is crucial for all parties to consider now. Sooner or later, EPF must divest its stake to below 20%. By then only can EPF remove itself from the day-to-day operations of RHB Bank. Remember, EPF's role was supposed to invest, not managing a company."

"Thirdly, Maybank and CIMB may think that the merger talks would takes a long time to consider, and it may affects the day-to-day operations of RHB Bank. Just like EONCap, many of their staffs are turning to other banks while Hong Leong Bank is launching and fighting its merger plans."

Hemma igen!

Konferensen var bra och Grekland var vackert. Vad gäller den grekiska (och den europeiska) ekonomin tänker jag inte säga mycket. Min åsikt borde vara känd vid det här laget. Inga positiva överraskningar bjöds heller under resan.

Det uttryck som bäst sammanfattar det hela är nog det lokala Wien-dialekt uttrycket Blädeschicht (ursäkta stavningen, jag har aldrig sett det i skrift). ”Trist (framtida) period” tror jag man kan översätta det hela med, fast det österrikiska uttrycket sammanfattar det hela bättre tycker jag!…

New IPO: Eversendai

En-route to Main Board of Bursa Malaysia on 1st July 2011, Eversendai Corp is a structural steel specialist with operations predominantly in the Middle East, Malaysia and India. Currently, the company is bidding for RM1.5 billion worth of infrastructure, high-rise building and power plant projects in Southeast Asia, India and Middle East after being invited by public and private sectors.

Its outstanding construction order book stood at RM1.4 billion as at 16th May 2011, while owning 4 fabrication plants in Malaysia and Middle East with a combined annual capacity of 119,000 tonnes.

What is so attractive about Eversendai?

According to RHB Research, Eversendai's key appeal to investors lies in:

1. It being a rare "outside-looking-in" home-grown construction company that has excelled in the international market, particularly, the Middle East, based on its own strength, practically almost indifferent to the local construction cycle;
2. The recognition by key international contractors as a highly reliable structural steel contractor from past assignments puts Eversendai in a sweet spot in the sense that it is often named the structural steel subcontractor by most international contractors participating in the same international tenders;
3. Its strong market position in UAE and Qatar by virtue of its 26.5% market share in terms of fabrication capacity; and
4. Its good earnings visibility underpinned by RM1.4 billion outstanding order book and strong likelihood of securing about another RM1 billion worth of new jobs by end of the year.

Eversendai's expertise in power plant was gained from the construction of the Tanjung Bin, Manjung and Jimah power plants several years ago. In India, it has 4 on-going power plant projects.

Source: Business Times

Source: RHB Research

Maybank Investment Bank Bhd is the sole adviser, underwriter and book runner for the IPO. Meanwhile, RHB Research is projecting the earning per share (EPS) of Eversendai to grow by 15.1% and 12% in FY12/12-13, assuming it is to secure RM1.4bn, RM1.5bn, and RM1.6bn worth of new contracts in FY12/11-13. As such, it arrived at an indicative fair value of RM2.27 for Eversendai based on 14x FY12/12 EPS.

If that is true, there is a 33% upside from the RM1.70 IPO price. Would it be a good BUY?

Update:
Eversendai final retail price fixed at RM1.62 per share, while institutional price at RM1.70.

How to select a Medical Plan?

While celebrating Father's day, I have a meaningful story to share with you. I visited a hospital in KL recently and to my surprise, I came across a little boy who was diagnosed with leukemia. More surprising, his age was only 8 years old. Oh my god, this little boy doesn't even know what leukemia was, and he had to suffer from such a young age!!! Through these torturing times, I believe his father's love is what he needed the most. God bless him.

Do you know that almost 9/100 Malaysians aged above 35 suffer from diabetes?

Do you know that over 1/5 are expected to get cancer in their lifetime?

The fact is, because of the stressful and unhealthy way of life today, lifestyle diseases are on the rise. Do you have any real example from your own little circle?

We can, however, spare our self and our loved ones a lot of anxiety with comprehensive medical plans, which provide a financial cushion in times of need. Although these plans cannot prevent illnesses, it can help us to go through those rough times - financially.

Most Malaysians are unprepared for the rising cost of medical care

It was a fact. The Government spent a huge proportion of the public's bill with health expenditure which runs into billions of ringgit yearly. Luckily, more and more people are aware of the importance of insurance. I know you do, right? Insurance not only makes healthcare affordable, but also offers access to better and more timely medical attention at private and public institutions.

If you have medical insurance, you have the option to selected the hospital of your choice to enroll in. If not, you can only surrender yourself to government hospital. With a plan in hand, you have the peace of mind to focus on recovery. Do you want yourself worrying on medical bills while laying on the bed?

Things to take note of on Medical plan:

• Is it Guaranteed Renewable?
• How much is the Room & Board rate allowable?
• Any co-insurance / co-payment? How was it calculated? If any, are there any maximum limit for your part?
• What is the annual limit and lifetime limit?
• Renewable until what age? 70 or 80 or 100 years old?
• Lastly, ensuring that the above answers were written clearly on the quotation or policy. Please DO NOT trust the words spoken by insurance agent. See for yourself to prove it.

Basically, all of the medical plans offered in Malaysia have annual limit. However, some insurer may waive the annual limit, subject to certain condition or with a rider. With an additional rider, it commensurate with a higher premium. There is pros and cons to this. And, you should be able to justify the increase charges just to waive the annual limit. If the extra premium is high, you may consider taking up a higher annual limit medical plan, or buying another standalone medical card to supplement it.

New Fund: AmASEAN Equity Fund

If Singapore and Malaysia market only is not enough to feed your appetite, then you may consider the whole ASEAN markets. ASEAN was being targeted by international investors again since the 1997 Asian financial crisis given its high growth rates and more stable economy.

AmASEAN equity fund seeks to provide capital growth over the medium-to-long term by investing 70% to 98% of the fund's NAV will be invested in a diversified portfolio of equities and equity-related securities which are Shariah Compliant, issued by companies listed in the ASEAN countries, and including securities listed in non-ASEAN countries but with their core business in the ASEAN markets.

Core business in this respect means the major business of the company, where majority of the company's revenue (at least 50%) is derived from the ASEAN countries. ASEAN member countries comprise of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

Investment Criteria or Strategy:

• Above average growth potential
• Undervalued stocks relative to its earnings growth potential and/or its fair value
• Combines top-down asset and sector allocation process with a bottom-up stock selection process
• Active asset allocation strategy depending upon the equity market expectations
• Stock selection based on improving fundamentals and growth at reasonable valuations

Source: AmMutual

Click here to download prospectus

New Fund: Public Singapore Equity Fund

Singapore is into a new era now after opening its door to casinos, which attracted massive foreign direct investments. The small little island poised to grow further boosted by various industry, not only gaming.

"The fund enables investors to participate in the growth prospects of Singapore's resilient economy and attractive valuations. Investors can ride on the potential upside of the Singapore dollar over time," said CEO Yeoh Kim Hong.

About the fund

The fund seeks to achieve capital growth over the medium-to-long term mainly by investing in Singapore stocks, though it may invest up to 30% of its NAV in global markets. As such, the fund will invest in a diversified portfolio of blue chips, index stocks and growth stocks.

"The fund would focus on sectors with resilient growth prospects such as banking and finance, properties and real estate investment trusts, consumer, offshore and marine engineering groups, services and commodity sectors," added the CEO.

Investments that may also included:

• Listed warrants and options to enhance its returns
• Unlisted equities with attractive potential returns, particularly in companies that are expected to seek listing on the Singapore, domestic and global markets within a time frame of two years
• Collective investment schemes with similar investment objectives in the Singapore, domestic and global markets
• Domestic and foreign fixed income securities such as sovereign bonds, corporate debt and money market instruments to help generate returns

Source: Public Mutual

Click here to download prospectus

Suitpossum does Food Speculation: Farmers, Hedge Funds and the Ecologist

On Thursday I made my first appearance in the Ecologist, by all accounts one of the world’s leading environmental publications, founded in the 1970s. Yeah, airpunch!

The subject of the article was food speculation. It sounds obscure, but concerns around speculation on agricultural futures have been seeping into the mainstream agenda over the last few months in the context of rising global food prices. There is rising suspicion that the activities of financial players in commodity futures markets could have a distorting effect on futures prices, and thus that food price increases might be linked to computer algorithms running in some hedge fund in Mayfair.

WHEATBIX FUTURES

Having had experience in the world of derivatives, I’m always prepared to accommodate the idea that irrational behaviour in financial markets could distort prices. That said, I’ve remained cautious about populist arguments about why speculation must necessarily be a negative force. Thus, in late 2010, I attended a talk on agricultural speculation organised by the World Development Movement (WDM), who were one of the first to make a scene about this issue. I asked some difficult questions to the speakers and got thinking about the argument. Several months down the line, I ended up working with WDM on a report, and found myself joining a chorus of veritable shitstirrers raising awareness about the potential dangers of this issue.

The debate started a few years ago in the context of the 2008 commodity price spike. In the US, advocacy group BetterMarkets have been a leading critical voice advocating heightened regulation and position limits in agricultural futures markets. The US think-tank, IATP, has also been outspoken, recently releasing a compendium of useful articles they’ve published on the subject of excessive speculation. In the UK, WDM have been a trailblazer on the radical front for the last couple years, but more mainstream UK institutions have recently been catching onto this as well. Last month, Christian Aid added a bit of righteous anger in their report Hungry for Justice, and Oxfam is getting uneasy about it too. Then last week the UN global trade body, UNCTAD, added their stamp of disapproval towards ‘financialisation’ and poor transparency in commodity markets, with a hard-hitting technical report on the matter.

The UNCTAD report should hopefully add some more fire into the debate, which since 2010 has been somewhat stifled by an academically controversial, but politically safe report commission by the OECD. The OECD report’s authors, Scott Irwin and Dwight Sanders, claim to have found no connection between the increased participation of financial players in commodity markets and the crazy 2008 commodity spike. I’m all for healthy skepticism, but there’s something vaguely reminiscent of climate change denialism in the way that conservative pundits have latched onto this work as if it’s the final be-all-and-end-all of the matter. In real academic life, nothing can be settled with a single study, and the extensive critiques of this piece have been strangely ignored by the mainstream economic fraternity.

Certainly, this issue has the potential for highly polarised opinions. In January, Murray from WDM went head to head with Scott Irwin on CNBC, and to my mind, lays the smackdown on him. I mean, I’m sure Scott is a cool guy to hang out with at the pub, but he makes almost no attempt to engage here. 

A similar level of disinterest is found in Terry Duffy, the chairman of the CME group, in his debate against the UN's Olivier De Schutter on BBC’s HardTalk in March. Terry says there’s no problem. Olivier says there is. Terry behaves like a condescending dick. Olivier doesn’t. Who should I believe?

For my part, I took part in a wheat price debate on the Farmers Guardian website last week. I suggested that farmers concerned about wheat price volatility should lobby financial institutions to spend less time investing in food prices, and more time investing in agricultural innovation and productivity. Failing that, I suggested farmers should band together, form a hedge fund, and use their superior knowledge of agricultural realities to outclass the precocious pseudo-farmers sitting in Barclays Capital. I got some enthusiastic responses to that.

I’d love to see that happen. What I don’t want to see happen is for this issue to go unscrutinised, only to lead to seriously serious fallout five years down the line. We've got to get the precautionary principle into action, so please do take a read of my Ecologist article, join the debate, and feel free to leave comments.

Oh my beloved PSD Graduates, where are You?

When writing this article, I am proud to say that I am a local graduate working locally and repaying my PTPTN loan monthly. Who said that graduates can't perform as best as others? Do we necessary needed to obtain hundreds of thousands of loans to study oversea? If I can survive here, why can't you?

Of course, I can't deny that some professional courses offered here are not competitive enough. That's why many professionals opt for oversea universities. By graduating oversea as a doctor or lawyer or engineer, it definitely costs you a hole in the pocket. Please bare in mind, it is not your pocket, but your parents' pocket. This is when Public Service Department (PSD) scholarship comes into the picture to fulfill Malaysia's dream to groom our talents, and your parents' dream too.

Why don't you come back?

Then, this question popped up. Yesterday, it was reported that 65% of PSD scholars did not return home. Surprised? And, most of them is doctor. Although there are thousands of reasons for them to not returning, I would like to stress one thing only here - responsibility. Yes, whatever you take is whatever you give. PSD gave you so much money, supporting your dream to be a successful Malaysians, realizing your parents' dream, is that the way you return the favors of Malaysia Government?

Practicing what you learn from the 1st day?

Even when we were young studying in Kindergarten, we taught to be a responsible person. And, you're professional now. Do you practiced what you have learn all these years? If you do not like the Malaysia's way, why you took up the PSD scholarship in the first place? Instead, you can take your parents hard earned money. Then, you can disappear yourself, and no one will bother about it.

However, if you took PSD scholarship and do not return back to service, this is considered as "investment loss" of Government. This is public money. Meaning every Malaysian can blame you. Even if you succeed in life, you're spiritually failed. Please be responsible to yourself, your family, and your country. Respond now!

New Fund: OSK-UOB US Legendary Fund

Failed to be Warren Buffett? How about exposing to the performance of his investment company, Berkshire Hathaway? Not a bad idea though.

The latest fund, launched by OSK-UOB, aims to provide capital appreciation over the short-term (18 months) whilst aiming to preserve investors' capital on the Maturity date. This is not a capital guaranteed or protected fund.

This is a wholesale fund which was structured to capitalize on the performance of Berkshire Hathaway Inc., such that the positive performance of the company and its out-performance against the Standard and Poor's 500 Index will provide the fund with returns during the recovery and rebuilding of the US economy.

Structure...

The fund will invest 100% of its NAV in a non-capital protected RM denominated structured investment issued by a domestically incorporated financial institution with a rating of at least 'A' by RAM Rating Services Berhad or its equivalent rating by any other reputable rating agency.

The Structured Investment has embedded options (comprising the underlying reference i.e. the Berkshire Hathaway Inc-Class B shares and the S&P500 index) with a payoff determined only at Maturity Date.

About Berkshire Hathaway Inc. - Class B shares

Berkshire Hathaway Inc. is a holding company owning subsidiaries in a variety of business sectors. Berkshire's principal operations are insurance business conducted nationwide on a primary basis and worldwide on a reinsurance basis. Berkshire's other operations include The Buffalo News, aviation training, and retail furniture businesses, as well as shoe, candy and rug manufacturing.

Source: OSK-UOB Unit Trust Management Bhd

Click here to download Information Memorandum

Konferens i Grekland!

Jag ska till Grekland på finanskonferens. Titeln på min presentation är ”Does the Chinese Stock Market react to News?” och även om detta inte har ngt med Grekland att göra så ser jag fram emot att även studera den lokala ekonomin.

Jag hoppas inte de läst mina tidigare mycket kritiska inlägg om Greklands ekonomi bara, se t.ex. If Greece wants my money then I want their islands från februari 2010! :) Tanken att Grekland måste börja sälja av assets har ju sedan dess spridits flitigt i media och anses numer ganska rimligt. Se t.ex. Want to Buy a Piece of a Greek Island? från Wall Street Journal. När jag skrev min blog ansågs det dock av ngn anledning otänkbart. Media och politiker ligger som vanligt månader efter......

New Fund: RHB-GS US Equity Fund

Yet, another US fund is in town now. More and more new fund is focusing on the US market, given its relatively attractive valuations currently after the 2008 global financial crisis. If you want to invest in US market, you may consider this fund which is managed by the US "tai-ko" - Goldman Sachs.

The fund's objective is to seek to achieve long-term capital appreciation through investment in a collective investment scheme, which invests primarily in securities of United States of America companies. This a feeder fund, where 95% of the fund's NAV will feed into the Goldman Sachs US Equity Portfolio (Target Fund).

Information of the Target Fund

The Target Fund is a portfolio of Goldman Sachs Funds, a public limited company qualifying as an investment company organized with variable share capital, in which Goldman Sachs Asset Management International is the investment manager of the fund. The Target Fund is domiciled in Luxembourg and denominated in USD and regulated by Luxembourg Supervisory Authority.

Why is this fund different from other funds?

1. The Best of both worlds. A portfolio that balances the best ideas of Growth and Value to provide US market exposure without style bias.
2. A disciplined investment process. The Goldman Sach's Investment Committee constructs a US large cap portfolio thoroughly researched companies that exhibit quality characteristics and compelling valuations.
3. A proven history. The portfolio draws on the best ideas of the US Growth and US Value Teams with proven track records going back 30 and 11 years, respectively.

Source: Prospectus

As at 31 March 2011 (Goldman Sachs Asset Management)

As at 31 March 2011 (Goldman Sachs Asset Management)

Source: RHB Investment Management

Click here to download prospectus

What is the job of a student?

As I am writing this post, I know there must be many other student out there doing their part for the school. What I mean here is, these students are not studying or learning or enjoying their school life. Instead, they are told to "do sales" for their beloved school. Do you know that students are running across the town? Do you know that they are sweating under the sun? Do you know that they are wetting under the rain?

Doing Sales for the school?

Indeed, this is not a new phenomena in Malaysia, at least for the past 20 years. It had been practiced this way since my good old student days. Doing sales here meaning a student is going all out to persuade or convince public to donate money for their school. Is it doing sales? By promoting projects of a school, renovations, new hall, new lab, new school field, students are passionate enough to contribute their energy and time for the benefits of their school. If this is not sales, then what?

But, is this the right thing to do?

Please do not forget, the main objective we enroll into school is to study and learn. Although such actions by students is good in nature, schools should not encourage it. If the student is a volunteer, this is nothing wrong. What if it is not? He might feel that he is not loyal to the school, and feel he is being forced to do so. In the end, this particular student will hate the school and his studies.

Students are studying in library

Whose job is it actually?

Ok. Schools need money, especially private schools. But, who is going to get the funding? Finance Malaysia thinks that everyone of us should, except students. Just let student go to school performing their duties - study and learn. In contrast, headmaster and parents association and public at large should put in their efforts to get the funds needed. I would rather see headmaster going all-out to get donations instead of students in the future. Would this proved that the headmaster is good? Of course.

Environmental Finance: A Roadmap beyond the Dirty Dark Spread

Do you know what a dirty dark spread is? To work it out you take the price of wholesale electricity, and you subtract from that the price of coal multiplied by an efficiency factor. What you’re left with is an indication of the profitability of a coal-fired power station. And we call that the dirty dark spread.

HOW DO YOU LIKE YOUR DARK SPREADS?

But why ‘dirty’? We call it dirty because there’s a clean version of the dark spread, called the Clean Dark Spread. It's basically the same as the dirty one, except it adds the price of carbon dioxide to the equation. What you’re left with is an indication of the profitability of a coal-fired power station within a system that explicitly puts a price on carbon. It's lower, but the key question is 'how much lower?'

The only reason we can make these distinctions is due to the existence of the carbon markets, brought into the fold through the Kyoto Protocol and the European Emissions Trading Scheme, perhaps the world’s most controversial market. 2010 though, saw the carbon markets tank amidst uncertainty over the future of global climate agreements, and last week’s Carbon Expo, held in Barcelona, undoubtedly saw carbon market participants doing some soul-searching. For quite some time, environmental finance has been associated with carbon markets, but the search for more holistic systems is leading to a shift away from pure carbon finance, to a broader focus on climate finance.

So tomorrow, the UNFCCC convenes in Bonn to talk climate in the run-up to December's COP 17 in Durban. The key question for passage-way conversations: How are we going to finance not only climate change mitigation efforts, which has been the focus of the carbon markets to date, but also climate change adaption? Another hotly controversial area is forestry finance. Two weeks ago, the Indonesian government finally signed a two year deal with Norway, in which Norway pays them $1 billion to limit licenses for forest logging. It’s the first major bilateral public climate finance deal, and a big step forward for the so-called REDD programme – Reducing Emissions from Deforestation and Forest Degradation. Nobody really knows how it’s supposed to work yet, but REDD is seen as a key pillar in any future climate finance systems.

The last few weeks have also seen some interesting progress in the UK, with the government launching the Green Investment Bank. The GIB will be in the business of project financing renewable energy and energy efficiency programmes, under the broader prerogative of moving Britain to a low carbon economy. Last week also saw the UK government releasing the National Ecosystem Assessment, an attempt at valuing the ecosystems of the British Isles. I have a vague feeling that, despite being at the cutting edge of economic research, trying to price an abstract concept like 'nature' will one day be looked upon in kind of the same way as we look upon eugenics, astrology, or other past pseudosciences. In the mean time though, it will, for better or worse, become part of the broader debate on ‘payment for ecosystems services’.

Outside of the arcane discussions about whether you can use financial options-pricing theory to value biodiversity, the real entrepreneurs are concerned with more practical matters. In the last month, I’ve been lucky enough to meet two guys separately working in the area of green bonds, credit instruments through which investors can lend money to environmental projects. These things are on the verge of going mainstream, with the IFC recently issuing green bonds to raise money for renewable energy. And that brings me to Luke, who I met whilst sitting in the Café at Foyles book store. Luke used to design algorithms for financial trading systems. Now he’s got a moleskine notebook with sketches for a new type of solar thermal tower which would use the sun’s energy to heat water to drive electricity-generation turbines. No mainstream bank is going to finance it – He needs renewable energy venture capital, an exciting and growing area of environmental finance aimed at the technology innovation market. “What I need,” he says, “is an old guy with too much money, and not enough time to spend it.” Maybe what he needs a government subsidy – like the feed-in tariffs – but the regulatory environment is getting pretty uncertain.

The most amazing thing about this all though, is that literally nobody has a clue on how it will all work out. We’re creating it right here, right now, ocean blueprints and forest greenprints. Will Luke’s solar project revolutionise the world? Will someone get venture funding to figure out how to harvest electricity from lightning? Will the green bond concept turn out to be a non-starting buzzword magnet? Will the carbon market exist in 10 years time? What innovation will emerge that we cannot yet conceptualise? Will Suitpossum be successful in designing a trans-generational environmental risk management system with almost no budget and a failing Wifi connection?

For more on all these topics, tune into the Suitpossum EnviroFinance series, starting tonight, and unfolding over the next several weeks on a computer screen near you.

New Fund: TA Global Technology Fund

Thinking about iPhone and iPad? Queuing yet can't get the latest products from Apple? Yes. This is the type of companies that the fund is going to invest. Maybe, this fund is attractive to iPhone and iPad addicts, where their gadgets is gaining popularity while setting the new benchmark on smartphone globally. Other than that, Google is expanding globally as you may noticed that it had just open its representative office in Malaysia recently. Let's find out more about the fund.

Basically, this is a feeder fund which invests a minimum of 95% of the Fund's NAV into the Henderson Horizon Fund - Global Technology Fund ("Target Fund") and the balance in liquid assets.

"Companies in the technology sector now have much healthier balance sheets and strong free cash flow generation. Also, there is a significant pent-up demand from enterprises for technology products. Demographic shifts are taking place which are driving technology adoption" said Mr. Wong Mien, CEO of TAIM.

What would investors getting?

Investors will have the opportunity to invest into attractive global technology themes such as E-Commerce, Online Advertising, Data Growth and Connectivity in both the established and emerging markets. Companies with strong barriers to entry will benefit from strong demand trends and sustained revenue growth.

The Target Fund Manager strongly believes that the technology sector is well placed to outperform as corporate continues to recover, prompting investment in technology. There are also a number of ongoing product cycles in both the corporate and consumer segments that should support growth.

Key Selling Point:

 

How is the performances of the Target Fund?

 

Source: TA Investment Management

Click here to download prospectus