A new campaign is born! Banking on something better with MoveYourMoney UK

I tried to spend Christmas day at the London Occupy camps, but truth be told, I couldn't stay there long and ended up wondering the City instead. Maybe I was just melancholic at spending another solitary Christmas, but I couldn’t help feeling that the original dynamism of Occupy was lost. I sat on the stairs of St. Paul’s and looked at a tent calling for everyone to become a vegan. There’s something slightly futile about that message. There's also something highly prescriptive about it, allowing little space for those who might sympathise in principle with the broad critique of finance, but who don't feel included in the ragtag countercultural facade. The Occupy movement is showing real signs of losing steam, and part of it is simply down to the fact that, when push comes to shove, it doesn't really offer that much to the everyday person.

That’s why I’m so pleased MoveYourMoneyUK arrived on the scene today. The campaign asks people to withdraw their money from the huge 'big 5' UK banks (Barclays, HSBC, Lloyds, RBS & Santander), and to deposit some or all of it into co-operatives, mutuals, credit unions and ethical banks. Coming on the heels of the more abstract Occupy-related campaigns, MYM seems to offer a wider range of people the chance to do something highly concrete, and which can make them feel included in an exciting process of incremental positive change.

CHRIS CLARK lays the smackdown on his Santander Card

While Occupy has offered some people a chance to take part in working groups on alternative economics, those always end up being  long on theory and short on practice, effective at making people stop and think for a moment, but not effective in holding them to any action. Indeed, most people are not pissed of with banks because of something imprecise like ‘neoliberalism’. People are pissed off because of specific issues like bonuses, tax avoidance, unethical investments and speculation, all of which are a step away from the ideological arguments about grand economic structure. A simple action like moving money is a practical step that is available to almost anyone to take part in, because even if people don't agree on all the epic ideological questions (like whether we should have a steady state economy etc.), the banking oligopoly has managed to do specific things that annoy the shit out of most people in some way or other.

I was involved in writing some contributions for the website (including a piece on commodity speculation). The overall narrative regarding the problems with banks has been designed to be as simple and intuitive as possible, and I've sketched it out in the diagram on the left. It goes roughly as follows: We deposit money into banks. Those banks claim that they’re committed to supporting small business and productive enterprise, yet most of their lending seems to go into socially useless activities and speculation. They’re notoriously lax in their ethical policies, investing in shite projects and dubious regimes. Through all of this they’re supported by government subsidy that enhances their profits, and they then take the piss with the huge bonuses, which only serves to distort behaviour and increase systemic risk. To top it all, there are the not-so-small issues of tax avoidance and mis-selling scandals.

The campaign lays this out and then lays out the alternative options for people: Put your money into mutuals and ethical banks that will steer clear of risky speculation, and that focus on supporting SMEs and prudent, socially useful lending. The campaign doesn't claim that alternative banks are perfect, but points out, that unlike the major incumbents, they at least make a lot more effort to be sustainable.

What I like most about this campaign is that it is not just a defensive reaction against the current banking system, but also a chance for people to proactively support and build the alternative. You might not have the time or inclination to be actively involved in policy discussions around financial reform, but you can help animate change by steering your money towards those challengers that are forging a new path against the stagnant and complacent banking status quo. It’s as much a creative vote of confidence in the ability to build something new as it is a protest against the old, and I’m fascinated to see how it might affect the alternative banking institutions.

Anyway, that's enough theorising. Please get involved and pledge to move some or all of your money in March 2012! I've already pledged, not that I have much money to move, and since doing that the high street suddenly looks full of exciting opportunities. Should I move to a big alternative like the Co-op Bank, or maybe a building society like Nationwide, or something much smaller like the London Mutual Credit Union? Watch this space for more on that, and in the mean time, check out the cool new MYM UK video...

BNM Further Liberalisation on Forex (Jan 2012)

As part of continuous efforts by Bank Negara Malaysia to enhance competitiveness in the economy and to develop the domestic financial markets, Bank Negara Malaysia wishes to announce the following liberalisation measures, with effect from 31 January 2012:

1. To further spur the domestic foreign exchange market through greater product innovation, licensed onshore banks are permitted to trade foreign currency against another foreign currency with a resident.
2. To further deepen the domestic interest rate derivatives market, a licensed onshore bank is allowed to offer ringgit-denominated interest rate derivatives to a non-bank non-resident.
3. Towards enhancing the asset liability management of residents, flexibility is permitted for a resident to convert their existing ringgit or foreign currency debt obligation into a debt obligation of another foreign currency.

The above measures which are in line with the broad thrust of the Financial Sector Blueprint will contribute towards increasing the liquidity, depth and participation of wider range of players in the domestic financial markets.

Frequently Asked Questions:

1. Can a resident buy and sell foreign currency against another foreign currency for any purpose?
• Yes. With this liberalisation, a resident is allowed to buy and sell foreign currency against another foreign currency for any purpose including for trading. However, such transactions shall only be undertaken with a licensed onshore bank.
2. Does the liberalisation include trading of foreign currency against ringgit?
• No. The liberalisation is only for transactions involving foreign currency against another foreign currency for any purpose.
3. What are the prevailing rules on investment in foreign currency assets?

4. Who are the licensed onshore banks?
• licensed commercial banks in Malaysia;
• licensed Islamic banks in Malaysia; and
• licensed investment banks in Malaysia.
5. What are the prevailing rules on foreign currency credit facilities obtained by a resident?

For further information and enquiries on the measures, members of the public may contact Bank Negara Malaysia via Toll free line : 1 300 88 5465 (BNMTELELINK)

Source: BNM website

Arthneeti Dec,2011 Issue

Dec,2011 Issue

Dear Readers,

2011 has not been the best of years for world's economy. Both developed
and developing part of globe struggled to sustain the growth.It all started
with frequent bad news from Euro Zone, followed by declining growth rate
back home. Outlook for year 2012 also seems to be uncertain.

Click here to download pdf version.

Finance Summit - FISCUS 2011

Finance Summit “FISCUS ‘11” was held on 1st October at Indian Merchants Chambers (IMC), Mumbai. FISCUS ’11 brought together students and finance stalwarts on a common platform to discuss a vital issue in the field of finance. The list of speakers included eminent personalities from the world of finance.
The Morning Session on“Financing the Corporate Needs of India Inc” was chaired by Mr. Gautam Patel, Advisor, Battery Ventures & Managing Partner, Citta Capital. The other Panelists included Mr. Manish Arora, Executive Vice President, Country Head-Product Development & Sales Effectiveness, Yes Bank, Mr. Bharat Sampat, CFO, DCB Bank, Mr. Sunil Sapre, CFO, CEAT, Mr. Vikram Gupta, CFO, Essar Shipping Corporation and Ms. Jayashree Ramaswamy, CFO, Dun & Bradstreet.

The Afternoon Session on “Developing the Indian Capital Markets”was chaired by Mr. B. Madhuprasad, Vice Chairman, Keynote Corporate Services. The other eminent speakers included Mr. Prashant Shetty, CEO, IDFC Capital, Mr. Rajiv Anand, CEO, Axis Mutual Fund, Mr. Sunit Joshi, Head-Capital Markets Group, SBI Capital Markets and Mr. Subrata Ray, Sr. Vice President, ICRA. There were Keynote Addresses by Mr. Viney Kumar, Executive Director, IDBI Bank and Mr. Sanjay Jain, Managing Director, head-Global Capital Markets, JM Financial on both the topics respectively.

Any Hidden Agenda Behind the Sales of POS and PROTON?

Lately, there was a slew of divestment by Khazanah Nasional Bhd (Investment arm of Malaysia Government). And, the most recent one was the divestment of Proton stakes to DRB-Hicom. But, the strange part was DRB-Hicom was the winning bidder for Khazanah's stake in POS Malaysia last year too.

Questions have been pouring in to Finance Malaysia regarding this issue, such as, are there any linkages between the two national deals? Other than DRB-Hicom, there was none other better suitors? As such, we would like to give our opinion on this matter. (Just for your reading pleasure)

You have the Questions, We have the Answers

First, both POS and Proton were considered as "sunset" companies in their respective industry. Both were not managed well and fallen from their glamorous days. Just as many investors written them off from investment radar, DRB-Hicom comes into the picture. Frankly speaking, the only asset both companies have was Government's backing.

While POS has the monopoly status in its services, Proton being the national car maker was trying to monopolize too by merging with Perodua. It's been a hot debate on whether Proton and Perodua should merge for better synergies. Anyway, we think that they should remain status quo to creates a healthy competition for consumers benefits.

Idea of the year: Combining POS and Proton via Stamp?

Where is the money comes from?

Another question was on the financial soundness of DRB-Hicom to acquires both companies. We as investors knows that DRB-Hicom does not have much cash in hand (even after excessive borrowing). The 32.21% stake at RM3.60 per share in POS costing RM622.79mil. Then, how about the Proton stake which amounted to over RM1bil? It's like a snake swallowing a cow, then a buffalo within few months!!! Can you imagine?

Any Hidden Agenda?

After all this, Finance Malaysia comes out with a guessing questions on the two deals between DRB-Hicom and Khazanah. Anything to do with the upcoming general election? (Seems like everything was linked to GE nowadays) Does the Government scared of losing the next general election and preparing to divest some of its assets first? Then, to whom they should divest to? Of course, their allies, right? DRB-Hicom?

But, what if they won again and POS and Proton was sold? No worry, because their good ally will always be able to sell it back to them (potentially with good investment gains too). Then, Khazanah can re-list again both POS and Proton proudly. Is this the case?

Well, we're guessing only. And, once again, this is for your reading pleasure only. Don't take it seriously. Happy Guessing.

CLSA Feng Shui Index 2012

In conjunction with the coming Chinese New Year, Finance Malaysia would like to bring to you another popular research report - funny and interesting - by CLSA. This year is called "Water Dragon" year. Is it a good or bad dragon? What does water means to this dragon? And most importantly, what's the predictions of markets from the angle of feng shui?

Prediction pattern patent pending

Past performance, as the tiny type whispers, is no guarantee of future behavior. After all, it may be no guarantee, but it's pretty much all we've got to go on. No matter how mathematically marvelous the model, how impossibly rational the behavior or how serial the killer instinct, not too far beyond the smirk and mirrors, precedent is invariably at play.

That the past is present in the future is fundamental to feng shui forecasting, which is why we slipped on the archaeological geomancy fancy-pants and took the pith helmets to pore over the charted remains of the most recent Wyrms Past - a sort of reverse inter the Dragons. Sadly, there's not much to seer among dem dry bones. A few scraps of scapula, but nothing oracular. Humerus? Not around this joint.

Would KLCI this year's pattern turn out to be like this?

We doubt that even market historian Yale Hirsch could discern any distintive Draconic DNA in the squiggles and highlights left and south. That they mark the start of every third Presidential Election Cycle doesn't help us much, especially given that Hirsch's theory has fallen flat of late. At the risk of straying into 'one hand clapping' and 'unknown unknowns' territory, perhaps that's the pattern: Dragons are simply predictably unpredictable.

Elemental Health Check:

Metals Sector:

Financials, Gold, Resources, Autos, Banks, Broking, Computer Hardware, Currencies, Dental, Engineering, Legal, Steel.

Wood Sector:

Retail, Agriculture, Education, Fashion, Forestry, Furniture, Garments, Packaging, Pulp and Paper, Plantations, Politics, Printing, Textiles, Traditional Media, Soft Commodities.

Water Sector:

Gaming, Transport, Fishing, Beverages, Marketing, Tourism.

Fire Sector:

Oil and Gas, Technology, Telecoms/Internet, Utilities, Accounting, Advertising, Aviation, Economics, Electrical Entertainment, Energy, Fast Food, Foundries, Petrochems, Services.

Earth Sector:

Agriculture, Building Materials, Cement, Chemicals, Construction, Developers, Government, Hotels, Human Resources, Cosmetics, Insurance, Management, Pharmaceuticals, Property.

Source: CLSA

Ska vi tro på fastighetsmäklarna? – Del VI

Det har gått ett knappt halvår år sedan jag skrev om bostadspriserna (i Malmö) sist så nu är det dags att ta en titt igen. Se Ska vi tro på fastighetsmäklarna? - Del I-V.

Denna gång hittade jag ungefär 1300 lägenheter till salu i Malmö (1500 i sept 2011). Av dessa hade ungefär 150 (175 i sept 2011) någon gång under den tid de legat ute fått se sitt pris sänkt och 10 (10 i sept 2011) fått se sitt pris höjt (de är alltså fortfarande till salu). Genomsnittsprishöjningen var 6.5% (10% i sept 2011) och genomsnittssänkningen var –9% (-9% i sept 2011).

Min (helt ovetenskapliga och föga förvånande med tanke på medierapporteringen) slutsats är därmed att avmattningen som kunnat noteras i Malmö en tid vad gäller lägenhetspriser tycks ha fortsatt!

Överlag har den genomsnittliga prissänkningen hos de objekt som sänkts legat mkt konstant sedan 2008 på -9% och jag vet ej vad det beror på. Ökningen för de (få!) objekt som prishöjts är dock på en all-time-low just nu (6.5%). Vidare, att antalet lägenheter som är till salu har minskat jämfört med september har jag ingen förklaring till. Det kan vara min datainsamlingsmetod som påverkar denna siffra men det kan också vara ngt annat i görningen, t.ex. säsongsvariationer. Sedan hösten 2008 har denna siffra fluktuerat mellan 1000 och 1800.

Credit Suisse's 2012 Malaysia Outlook

After looking into all those research reports on 2012 market outlook by local securities or research houses, it's time for foreign research houses. In this series of 2012 outlook, we kick start with Credit Suisse's report, in which a section of it was written specifically on Malaysia. And, below is the excerpt from it.

Malaysia’s GDP growth to outperform its regional peers'?

Real GDP growth expanded 5.8% yoy in Q3, led by strong private consumption (7.4% yoy) and fixed investment (6.1% yoy), and a surge in government consumption (21.8% yoy). On a seasonally adjusted basis, we estimate that GDP expanded 4.6% qoq annualized in Q3, stronger than that of Korea, Thailand, Singapore, the  Philippines, Hong Kong, and Taiwan. Malaysia remains highly exposed to a sharp slowdown in the developed world, but, on a relative basis, we think its domestic demand will hold up better than that of the other small open economies in the region. We expect private consumption growth to remain robust, partly due to high palm oil prices. In addition, fiscal spending from the government should continue to help boost spending in the next few quarters. We think there is upside risk to our 2011 real GDP growth forecast of 4.6%. Our 2012 GDP growth forecast remains unchanged at 4.8%.

Fiscal boost ahead of the next general election?

With revenues coming in much higher than budgeted this year as well as the backloading of the planned expenditure, the government has room to boost spending in the next few quarters. The

government spent RM154bn in the first three quarters of the year. Its revised 2011 budget suggests that it plans to spend another RM76.8bn (9% of GDP) in Q4, which is 20% yoy more than it spent in Q4 last year. Moreover, in its 2012 budget, the government announced one-off cash transfers to the poor, bonus payments and pay rises for civil servants, as well as various tax exemptions. Most of these are scheduled to happen in early 2012, which should provide a boost to sentiment and private consumption. The ‘people friendly’ budget suggests that the general election, which needs to be held by March 2013, might be near. We expect the government to continue to pump prime the economy before the next general election.

The result of the general election will determine the prospects for structural reforms. The government announced in the budget speech that it will liberalize another 17 services sub-sectors in 2012, including medical, architectural, engineering, accounting, legal, education and telecommunications services. However, there has been no news on subsidy reform or the goods and services tax. We think Malaysia has made some progress in its reforms, as reflected in improved rankings in the global competitiveness index (calculated by the World Economic Forum) and ease of doing business survey (published by the World Bank). However, the less popular reforms have been postponed and appear unlikely to happen before the general election. Its ranking on Transparency International’s Corruption Perceptions Index has also slipped in recent years. Our base case scenario is that Prime Minister Najib will win the general election, but fall short of regaining the two-thirds majority lost in the last general election. The quality of the win will determine whether Najib will stay as prime minister and gain

enough support to push through further changes, in our view.

Monetary policy to stay defensive

With risks surrounding the euro zone remaining high and inflation likely to fall below 3% yoy in Q1 2012, we think BNM will remain data dependent and be ready to cut the policy rate if needed. Our forecast suggests BNM will keep the policy rate on hold until end-2012. However, if the global growth outlook deteriorates in the coming months, we think BNM has both the scope and willingness to cut the policy rate. Similarly, we think the ringgit will continue to trade in line with its regional peers in the near term. However, we think BNM might allow some ringgit out-performance if and when the euro zone situation stabilizes, given that Malaysia’s current account surplus remains strong, domestic demand resilient, and there are signs of pick-up in US economic activity. Domestically, the election result should also be an important determinant of capital flows. A poor outcome for the ruling party could lead to heightened political uncertainty and capital outflows.

Source: Credit Suisse

Annual Strategy 2012 by TA Securities

2011 had triggered a wave of unwanted chain effects, which would not languish but resonate further into 1H12. While Japan is recovering from the worst ever tsunami and nuclear disaster, and oil prices stabilized after the unrest in the Middle East, conditions in Europe are expected to worsen before stabilizing.

Global Economy – Risk Factors Extending into 2012

Positive news flows on drastic measures to restore confidence in Europe and maintain the credit ratings of core economies could boost market sentiment in early 1Q12 and push the index to test the all‐time high of 1,597. However, the reality check on the implication of European austerity measures and rising market risk premium due to the 13th General Election (GE) could push the index around 1,200 levels in 1H12 based on a minus two standard deviation from its last decade’s historical mean of 16.6x.

A revival should ensue in the following months due to oversold conditions and anticipation of a subsequent recovery in Eurozone economy by mid‐2013 as markets move ahead by about six months. Our end‐2012 target is 1,520 based on a mid‐cycle PER of 13x.

Malaysia – Not Insulated

In the first nine months of 2011, the Malaysian economy registered a modest growth of 5.1% YoY thanks to the robust domestic demand and strong exports. In some ways, despite the turbulent external environment, rebuilding and reconstruction activities in Japan had helped spur Malaysia’s exports advancement during 3Q11. Nevertheless, the external sector is expected to remain challenging in 4Q11 before embracing a slowdown in 2012 amid the budget deficit cuts in the European Union, the slow economic rebound in the US and the anticipated softening of China’s economy. Hence, we expect Malaysia’s economic growth to narrow to 4.6% in 2012 following a 5.2% growth expectation for 2011.

On the fiscal front, the financial status of the Federal Government may continue to improve in tandem with the embodiment of fiscal prudence and boost in revenue. Overall consumer prices are expected to increase by 2.5% while monetary policy is expected to remain accommodative (OPR stable at 3.0%). A potential wild card is the reform agenda initiated by Prime Minister Najib Tun Razak. Factors that would accelerate reform include:

1. increasing political consciousness and demographic shift,
2. reenergizing investment in the local economy, and
3. strengthening fiscal credibility. Sectors that could benefit are Banking, Property and Power.

Political Risk?

We strongly believe the country’s 13th general election will be due in 1QFY12, especially before the parliament convenes in March. This could be a major dampener upon dissolution of the parliament as investors would exit and remain on the sideline until the outcome is known and the implications are digested. The ruling coalition is expected to retain its victory but its grip on parliamentary and state seats are expected to weaken. Thus, the effectiveness in implementation of policy reforms and domestic expansionary measures could be compromised and will be closely watched in 2012. With the backdrop of slowing external demand, spending on domestic infrastructure, construction and oil & gas sectors would be the key focus in 2012.

Investors should take profit on any rally over the next three months and wait to cherry pick. Traders should take short‐term positions to trade, mainly on blue chips, in anticipation of a year‐end and New Year rallies and exit by March. We expect higher downside risks in 1H12 as the flow of negative economic data, earnings downgrades and possible 13th general election hurt investor sentiment.

Top Picks for 2012

We reiterate defensive approach in stock selection in current uncertain period and bottom up approach in choosing value picks. Preferred buy picks are KIANJOO (TP: RM2.58), SEG (TP: RM2.51), SUNWAY (TP: RM3.16), BJTOTO (TP: RM4.92), BSTEAD (TP: RM6.21), KPJ (TP: RM5.04), GENM (TP: RM4.50), SAPCRES (TP: RM4.93), GAMUDA (TP: RM3.71) and SIME (TP: RM10.12).

Source: TA Securities

Unbelievable 1Malaysia Amanah Rakyat Scheme?

Did you watch TV news just now? There is a good news for Malaysian who are looking for higher saving rate for their monies. Yes. I am talking about the fresh from oven 1Malaysia Amanah Rakyat scheme. The scheme was launched by Prime Minister, which aimed at helping those with a monthly household income of RM3,000 and below.

Unlike the previous series, the new scheme was a hybrid of a unit trust investment and loan product, capable of generating a consistent cash flow or monthly income. It will be made available from Jan 30. But, the best part is it comes with a Guaranteed return. Unbelievable?

The limit is RM5,000 and it can be bought through savings or investment loans from selected financial institutions, such as Maybank, CIMB, RHB and BSN. Investors would get a guaranteed RM134 monthly and for those who borrow, they only need to pay RM84 a month and still get RM50 in profit.

Too Good to be TRUE?

Let's us calculate the return on investment. If investors fork out RM5,000 themselves to invest, the return would be RM1,608 per annum (RM134 x 12 months) and was equivalent to 32%. You don't have to calculate again. It's 32%, some more guaranteed.

Well, how about by borrowing the RM5,000 investment capital? If you borrow to invest, based on the RM50 net profit per month, it works out to be RM600 profit per year or equivalent to 12% return. Still consider very good. Nope, it was infinite return though because basically you pay nothing up-front to make 12% return, right?

Comparing to Fixed Deposit rate of only 3.25% per annum currently, 32% is 10 times that figure. Example, if you put your money into the new scheme, it was equivalent to putting your money into 12months FD for 10 years!!!

How did PNB guarantee?

Frankly speaking, Finance Malaysia really do not know. We're cracking our head hard now, and yet still do not have any clue. I think only PNB and Government know. Maybe, this is just another way of dishing out money to the hand of Rakyat. The special part is Government giving out beautifully this time indirectly (but, it still very obvious for us).

Maybank 2012 Outlook & Issues: Tilt to Safety

2012 will be another volatile year, we expect, tracking closely headline news from abroad given unresolved macro conditions brought forth from 2011: high debts but low growth at the eurozone and US. Confidence continues to wane on a resolution to the debt crisis which is negative on sentiment and will destabilize growth.

We maintain our 2012 year-end KLCI target of 1,500 pts based on one standard deviation below mean on expectation of turbulence still at the external markets impacting sentiment and global growth. At the home front, it will be a year with potentially two major elections:

1. an early 13th general elections (13GE) and
2. UMNO party elections for the top posts in 4Q 2012, where the elected party president will helm the country’s premiership position

Air Pockets Ahead?

That eurozone’s debt crisis has stayed unresolved means that there is still default risk. We expect higher bouts of volatility in 1H 2012 where much of the PIIGS and US government bonds will mature. Other risks are potential deleveraging by the European banks which could lead to a credit crunch, which is recessionary in nature. The other risks are likely social uprising from tough austerity measures in the troubled economies and eventually, the fate of the euro itself.

Malaysia to out-perform, nonetheless. We expect Malaysian equities to out-perform again against a back-drop of external uncertainties and volatility. Cushioning the downside risk will be further traction on the ETP implementation, a resilient corporate earnings profile which is largely domestic focused, healthy corporate balance sheets, high domestic liquidity, stable foreign holdings, and strong participation of government linked investment funds in Malaysian equities.

Catalysts and news flow

• Macro blueprints will be fewer in 2012 after the New Economic Model (NEM), Government Transformation Programme (GTP), Economic Transformation Programme (ETP) and 10th Malaysia Plan (10MP) were unveiled in 2010, followed by the Strategic Reform Initiatives (SRI), 2nd Capital Sector Masterplan (2CSMP) and Financial Sector Blueprint (FSB) in 2011. 2012 will be a year of implementation for these blueprints, in our view.
• Nonetheless, the Malaysian market will not be dry of action with 3 major IPOs lined up in 1H: Gas Malaysia, Felda Global Ventures Holdings (FGVH) and Integrated Healthcare. Also, the possible re-listing of Astro’s domestic operations and Malakoff, the listing of AirAsia’s Indonesian and Thai associates and AirAsia X, and the REIT-ing of KLCC Property and Kris Assets’ assets.

• M&As will remain in flavour if market conditions stay, with the SapuraCrest-Kencana merger to complete in Mar 2012, creating a group of RM11b-RM12b in market value, either the 3rd or 4th largest in the oil & gas sector after Petronas Gas, Petronas Dagangan and Bumi Armada. We expect M&As to extend in the financial services (investment and Islamic banking) and oil & gas service providers.
• Government’s equity divestment will also continue, including on Khazanah’s holdings. In the news presently is Khazanah’s potential sale of its stake in Proton (it now has a 42.7% holding). Also, MAHB may see new equity issuance, thus, diluting Khazanah’s 54% stake. These measures will raise the liquidity of the Malaysian bourse.

Market strategy

We will continue to exercise caution expecting the dividend stocks with largely domestic focused earnings, to market outperform. Our top picks are Public Bank, Telekom, Berjaya Sports Toto and Axis REIT. We will add on selected ETP related thematics in oil & gas (top picks: SapCrest, Kencana) and construction (Gamuda, Hock Seng Lee), and the value stocks (Sarawak Oil Palms, TSH Resources, Hartalega) for medium-term gains. Sector wise, we are overweight on construction, gaming (number forecast operators), oil & gas and REITs.

Source: Maybank Kim Eng Research Report

RHB 2012 Market Outlook & Strategy: Another Challenging Year Ahead

As we head into 2012, a lot of uncertainty remains. On the external front, the euro-debt crisis remains unresolved despite five major attempts to stabilise it. Meanwhile, the economic conditions in the Eurozone are deteriorating rapidly with major indicators pointing to the region entering a recession. A deeper-than-expected recession in the Eurozone would leave few countries unscathed.

In particular, the US economy, which is still in low gear, will likely be severely impacted, while China may also be in for a more severe downturn as effects of potential policy easing will take time to filter down to the real economy.

Slower Eonomic Growth Envisaged For 2012?

The Malaysian economy will not be spared and will likely experience slowing export growth, though this will be cushioned by resilient domestic demand given the progress in the implementation of the Economic Transformation Programme. We expect the country’s economic growth to slow down more significantly to 3.6% in 2012, from +5.0% estimated for 2011. This points to weaker earnings growth, projected to slow from 10.5% to 7.8% during the same period for the FBM KLCI benchmark (ex-Tenaga).

Domestic Demand Likely Be More Resilient

With slowing economic growth, general election and multiple headwinds from the external sector, we believe investors will be in for another challenging year ahead. Given a number of significant risks in the horizon, our end-2012 FBM KLCI target is set at a conservative level of 1,480, based on unchanged 13x 2013 EPS. We expect a volatile 1H with sentiment gradually improving in the 2H as clarity on the global economy improves and investors begin to look forward to an economic rebound in 2013.

Non-election plays?

For investors looking for stocks that are less sensitive to the outcome of the election, we recommend KLK (one of Malaysia’s largest and independent plantation companies, with effi cient yields that have set the benchmark for the sector), Public Bank (large and defensive bank with a conservative and highly-regarded management), Digi (foreign-owned, well-run and in the broadly stable telecom industry) and Parkson (holding company for Parkson Retail Group listed in Hong Kong and Parkson Retail Asia listed in Singapore, with exposure to resilient retail growth in China, Vietnam and Southeast Asia). In addition, Sarawak stocks like HSL, Jaya Tiasa and Ta Ann are likely to be relatively immune, as the state election was already held in April, with two-thirds majority given to the incumbent Barisan Nasional-linked chief minister.

Strategy

As global headwinds remain strong and situations could get worse, we continue to advocate a defensive investment strategy, focusing on high dividend yielding stocks with reasonably good growth potential. Nevertheless, after a period of volatility, a recovery will undoubtedly follow and as such, we believe it pays for investors to accumulate fundamentally-robust stocks on weakness for tactical plays. Sector-wise, our key overweight are telecommunications, gaming, plantation, oil & gas and consumer.

Source: RHB Research Institute

Asinus asinum fricat

I have previosuly written about my worries for the ”Bermuda Triangle” of

private equity firms ------ CLOs ------ bankruptcies

See for instance “Hur mycket leveraged loan exponering finns det i det svenska finansiella systemet” from November 2008. In that article I stressed the problems private equity firms might face when people start to shun structured products such as CLOs, and the private equity firms, in turn, end up having trouble rolling over their loans. Or as I wrote, will we have the “1980s all over again”?

Well, now this scenario appears to have materialized itself! Many (leveraged) loans taken by private equity firms in order to finance their buy-outs prior to the crisis relied on a huge appetite of Collateralized Loan Obligations (CLOs). Now, many of these CLOs are about to the reach their maturity, i.e. they are being unwound, and this removes an important source of funding. In 2014, driven partly by new capital requirements on banks, almost no CLOs will remain, at least as new funding sources, and that will, I guess, put pressure on private equity deals.

Ecco, just another negative development in high finance and just another piece of bad news for the over-extended and over-borrowed part of the financial system!

OSK 2012 Outlook: Be Nimble in the "Way of the Market"

OSK have a Neutral outlook on the Malaysian market going into 2012 as the combination of uncertain growth outlook in the US and Asia coupled with a possible recession in Europe cloud the prospects for strong earnings growth locally. While Malaysia is likely to avoid slipping into recession, the deficit reduction exercises undertaken by Eurozone economies may well tip their slow growing economies into a recession.

In any case, for Malaysia, OSK see earnings growth slipping to between mid single digits and low double digits, a pale shadow of what it was in 2006, 2007 and 2010 when earnings growth came in between 20 to 30%. Newsflow on developments surrounding the handling of sovereign debt in Europe and US will also likely to lead to volatile markets worldwide. As such, in the short term, we are faced with volatile markets which will likely give way to a dampened economic outlook. OSK advise investors stay cautious into mid 2012 and focus on Defensive sectors such as Consumer, Telco, Healthcare and Media. OSK's 2012 KLCI fair value is 1466 points based on a PER of 13.5x or 1 standard deviation below the historical average of 16.6x given the uncertain market conditions.

But, there are opportunities to TRADE?

That being the case, despite the overall Neutral stance, the volatility expected should give rise to plenty of Trading Opportunities. OSK advise investors to Trade on Cyclical sectors such as Banks, Oil & Gas and Construction as the market dips or rallies strongly. The trading strategy to adopt is:

• Buy when the KLCI falls towards the 1300 points level as the broader market then offers a 10% upside to 2012 fair value. As Malaysia is not likely to enter into recession, earnings contraction was expected and value should emerge closer to 1300 points. A combination of still positive earnings growth, low foreign shareholding and the Economic Transformation Programme (ETP) should mean Banks (leading the economy), O&G and Construction (beneficiaries of the ETP) will present good entry points at that level of the market.

• Sell when the KLCI rises towards the 1500 points level as the market will be overpriced then. Fundamentals remaining weak. Although the 3Q2011 earnings season may have seen a slight improvement q-o-q, most of the improvement was focused on the Small caps where analysts have had time to pare down forecasts. On the flipside, Big caps continued to slide with the potential for more downgrades in the coming 2 quarters.

What are the sectors to focus on?

Which are the Top Picks?

Among the defensive stock calls, the Top 10 Defensive Buys are namely:

1) Axiata (FV: RM5.60) – The only listed Malaysian telco company that also offers a regional footprint in Indonesia, Singapore, India, Bangladesh, Sri Lanka and Cambodia. Still the cheapest Malaysian telco company at 13x PER.

2) Petronas Gas (FV: RM15.52) – Natural gas processor, importer and transmitter in Peninsular Malaysia with 80% of profits guaranteed by its mother company, Petronas. Growth catalyst in the form of new LNG import terminal in Melaka.

3) Telekom Malaysia (FV: RM5.15) – Incumbent fixed-line telecoms provider in Malaysia. Making waves via its new high-speed Internet offering Unifi that is acquiring new subscribers at a rate of 1,000 per day. Highest yields at 10–12%.

4) Guinness Anchor (FV: RM13.58) – Broadest brewery offering translates into defensive earnings in the event of an economic slowdown. Decent yields, coupled with the 2012 growth potential coming from the UEFA 2012 football tournament.

5) AirAsia (FV: RM4.57) – Largest Low Cost Carrier (LCC) in Asia; continues to outperform its regional airline peers. Potential IPO of regional associates and benefits from a partnership with MAS will be the catalysts for 2012.

6) KPJ Healthcare (FV: RM5.21) – Largest private hospital provider in Malaysia, which is growing its hospital chain by another five hospitals from the current 21 over the next three years. Growth areas are medical tourism and retirement care.

7) QL Resources (FV: RM3.62) – Largest manufacturer of surimi in ASEAN and second largest producer of eggs in Malaysia. It is replicating its business in Indonesia and Vietnam over the next 12 months.

8) Media Chinese International (FV: RM1.51) – Largest publisher of Chinese language newspapers in Malaysia. To benefit from falling newsprint prices in 2012.

9) Supermax (FV: RM5.50) – Second largest rubber glove maker in the world, which will benefit from a fall in latex prices, while demand remains resilient.

10) TRC Synergy (FV: RM0.76) – Leading Bumiputera contractor. Shortlisted for various packages in the KL MRT project and should be assured of some contracts over the next 12 months.

Source: OSK Research