New Fund: AmAustralia Fund

Looking good on Australia, AmMutual is launching a new fund to capture the potential of Australia. The fund seeks to provide income and long-term capital growth by investing in Australian equities and Australian dollar fixed income securities.

Note: The fund's main focus is on income and to a lesser extent, capital growth.

"Australia's economy is resilient and has posted an impressive positive gross domestic product growth over the last 18 years, even outperforming all other advanced economies during the global financial crisis," said Datin Maznah Mahbob, CEO of Funds Management Division, AmInvestment Bank Group. (Business Times)

Investment Strategy

The fund generally maintains equity exposures within a range of 50% to 100% of the fund's NAV. Then, the balance may be invested in Australian dollar fixed income securities and liquid assets. 

It will derive its income primarily through investments in relatively higher paying dividend stocks and bonds. However, it may also invest in growth stocks to participate in an actual or anticipated stock market rally.

As such, Credit Suisse AG, Singapore Branch has been appointed as the Sub-Investment Manager to manage the fund's Australian portfolio.

Process & Selection of Equity

Process & Selection of Fixed Income Securities

Investor's Profile

1. Income and Long-term capital growth on their investments,
2. Long-term investment horizon,
3. Participation in the upside potential of Australia

Key Data of the fund

Source: AmMutual

Post-Japan Disaster: After Timber, it's Glove Sector?

As per our previous posts (How Should Investors trade after the Japanese Disaster?), we wrote about timber counters, and it's proven the right sector investors should look at. And, below is the performance of those mentioned counters.

www.financemalaysia.blogspot.com

All of them outperformed KLCI, which recorded -2.20%. Why WTK outperformed its peers? Simple answer is its cheaper share price and better liquidity. In fact, TaAnn and WTK is the main focus because they export 80-90% of their products to Japan. This puts them in the limelight of stocks investors should look at for the moment.

Why should you look at Glove sector next?

After timber, glove sector should outperformed the generally weak market sentiment. Investors are scared. Those who already bought was stuck-in there. Those who already sold was staying sidelined. And, those who dare to buy now is focusing on timber stocks only - and today glove.

Main reasons were:

1. Demand for medical glove is expected to increase substantially. After the disaster, Japan should be facing another problem - outbreak of diseases. Because of the wet and dirty condition after tsunami, diseases tends to spread easily and this could intensify the demand for gloves being used by medical personnel and public in general.
2. Stronger USD. One of the setback for our glove makers is weakening of USD which could harm the export market to US. Post-Japan disaster, USD was expected to strengthen in line with "flight to safety" strategy employed by global investors. This is an advantage, or in fact, the turning point for our glove makers.

www.financemalaysia.blogspot.com

With these two important factors, glove sector should be on investors' radar in the near future. Indeed, you do not have much choice in this kind of market where everything seems going down hill. Either you stay sidelined, or brace the storm to invest in these counters. And, my personal stock-picks would be Supermax due to its attractive valuation and good liquidity.

Finance Malaysia urged all Japanese to stay strong, and we will support you from afar. We are living in the same planet. We are 1 actually.

Pension Obligation Bonds

A short video raising some important questions about pension obligation bonds.

How should investors trade after the Japanese Disaster?

Special edition from Japanese Earthquake on 11/03/2011 (black Friday?).

Duped as Japan's deadliest disaster in more than a century, 10m high tsunami crushing on the coast line, and yet to be confirmed - world's worst nuclear disaster in 25 years. I'm sitting in front of computer screen, reading the news while monitoring the share market that Friday. The more I read, my heart is bumping faster, and the share market is going downhill.

Modified Tsunami picture

In fact, KL is raining for whole day, signaling the bad situations would appeared somewhere, and it materialized in Japan shortly. In the morning session, KL market is rather quite. I asked myself: "Today, traders are still in bed due to the favorable sleeping weather?".

To recap, below is the performances of major market on Friday.

Bloomberg

What should investors do?

And, how should investors trade going forward?

Personally speaking, I don't think this is a good time to accumulate. We never know the bottom. Catching the falling knife is very dangerous, and it's not worth to take the risks. Let's gauge it with the previous major earthquake in Japan, the 1995 Kobe temblor. According to Macquarie Group Ltd, Japanese stocks fell 8% in the week after Kobe temblor.

Meaning, with 1.72% down on last Friday,  there is another 6.28% to go. But, the aftermath is more serious this round, thus, at least 10% slump is justifiable. Japanese yen strengthen considerably on Friday, as investors pull money out from share market and into government bonds or money market.

Sorry to say that the Japanese outlook is very bleak currently. Being the world's most indebted country, and with a negative growth in 4Q2010, Japan needs time to rebuild and time to restore investors' confidence.

Malaysia timber companies to do well?

However, timber companies should do well in the expense of Japan's disaster. Stocks to watch is Ta Ann, WTK and Jaya Tiasa. Japan is the single most important market for local timber companies. As such, the main catalyst for timber sector now is the reconstruction of affected area in Japan in the coming months.

 

What is Statutory Reserve Requirement (SRR)?

Everyone is buzzing about SRR lately, since Bank Negara Malaysia's statement which stated its intention to raise SRR in the near future. Actually, what is SRR? And, what is the effect of higher SRR imposed? Why BNM using SRR right now? Finance Malaysia hopes to clear everyone's doubt and would appreciate if you can share this out.

What is SRR?

Statury Reserve Requirement is a monetary policy instrument available to Bank Negara Malaysia (BNM) for the purposes of liquidity management. Effectively, banking institutions namely commercial banks, merchant/investment banks and Islamic banks are required to maintain balances in their Statutory Reserve Accounts (SRA) equivalent to a certain proportion of their eligible liabilities (EL), this proportion being the SRR rate.

Why BNM uses the SRR as its "tool"?

Since SRR is available to BNM to manage liquidity and hence credit creation in the banking system, it was used to withdraw or inject liquidity when the excess or lack of liquidity in the banking system is perceived to be large and long-term in nature. Currently, BNM believes that our banking system is lack of liquidity, thus it may raised the SRR to "store" more money in banks.

Effective 1 March 2009, the SRR rate for banking institutions is 1% of EL. As of 1st September 2007, the EL base consists of ringgit denominated deposits and non-deposit liabilities, net of interbank assets and placements with BNM.

Previous adjustments to the SRR rate

What is the effect of higher SRR?

As explained above, higher SRR means that banks in Malaysia will have to keep more money as their reserve. This translates into lower loans growth for banks. Normally, banks wiould imposed stricter loan approvals for borrowers, because less funds are available for lending.

Normally, higher SRR translates into lower profit growth for banks. Banking stocks are the hardest hit. But, raising the SRR from a record low of 1% is unlikely to have any significant impact on credit growth. Finance Malaysia see this as an opportunity to accumulates banking stocks if they are battered down because of higher SRR.

Source: OSK Research

Source: OSK Research

Source: OSK Research

Source: OSK Research

Source: Bank Negara Malaysia

Related Posts:

Motor Insurance to cost more starting 2012?

Extractions from BNM monetary policy statement (Jan 2011)

How BNM OPR hiking affecting the market? (March 2010)

My First Home Scheme: Home of Trouble Ahead?

Once again, to address the affordability issues of properties, MyFirst Home Scheme (My1st) was launched by government on 8th March 2011. Thanks for addressing the problem faced by young Malaysians working adults. But, does it really worth to even think about the scheme?

Of course, owning a house at young age is a good start to family planning. In fact, we're living in a society where buying a new house tights closely to starting a family. But, this is not necessary a MUST to everyone of us. We must do proper planning before committing for such a long-term loan with such huge amount. Buying a house is not buying an iPad or iPhone.

Only apartments are likely with less than RM220,000 price tags in Klang Valley now

Highlights of My First Home Scheme...

• For those earning less than RM3,000 monthly
• Working in private sector
• Confirmed employees with a minimum of 6 months in the job
• Joint applications are allowed (both in private sector and are family members)
• 100% loan financing for first house purchasing
• Eligible houses: Between RM100,000 and RM220,000
• Both under construction or completed properties
• Repayment period of up to 30 years
• Monthly loan repayment must be < 1/3 of applicants' monthly gross income
• 25 participating banks / financial institutions

Burning questions to participating banks...

1. Does the participating banks offering the same rate as currently practiced?
2. Does the banks really allocate sufficient funds for such loan?
3. Would the bank perform stricter credit checks since many borrowers are young and categorized as higher risk group?

Burning questions to borrowers...

1. Are there any houses out there you still think that is not overvalue? Still berbaloi?
2. Assumed that you found one, does it fit into your desired picture? Safe surrounding?
3. Assumed that you also found one, are you quick enough to snap it?

"Trouble Ahead"?

Assuming that loan rates as BLR-2.2% (BLR currently is 6.30%) and a 100% loan amount of RM220,000, the monthly loan repayment is RM1,063. If an eligible guy take the loan with maximum salary of RM3,000 allowed, the take home pay after EPF deduction was RM2,670 only. This translates into 40% of net income!

Example calculations of monthly loan repayment

Do not forget the legal fees, stamp duty, fire insurance, MRTA, cukai pintu, cukai tanah and renovations fees! I think most of our fresh graduates will buy a new car first. Assuming that the car loan installment is RM500 monthly, this would add up to 58% of net income!

To make trouble bigger, please take note of the changing interest rate environment, which means the BLR would possibly revised upward in the future. Then, your loan repayment will be adjusted higher accordingly. Can you afford your loan repayment then?

Related posts:

3 Wrong Perceptions on Malaysia Properties

70% Loan to Value (Nov 2010)

Why China Raised Interest Rate? And, what's the effect?

New Fund: PB Asia Pacific Enterprises Fund

Looking good on the long-term growth potential Asia Pacific region, Public Bank is launching its equity fund, the PB Asia Pacific Enterprises Fund on March 8. Managed by Public Mutual, the fund will focus on companies with market capitalization of US$ 1 billion and above in domestic and Asia Pacific, through a diversified portfolio of companies.

By investing in mid-to-large corporations, investors would be better positioned to benefit from the resilient activities in the Asia Pacific region. These type of companies tend to perform better given their leading positions in their respective industries and established market shares, especially during challenging market conditions just as now.

What did Public Mutual's CEO said?

"After a strong rebound in 2009, global and regional equity markets continued their uptrend in 2010 amidst improving economic activities. Despite the recent spike in oil prices, regional equity markets are expected to remain underpinned by reasonable valuations and resilient economic growth prospects over the medium-to-long term."

Fund Features

• The fund may invest up to 98% in selected Asia Pacific markets
• Equity exposure: 75% - 98%
• Exclusively distributed by Public Bank
• Suitable for investors with aggressive risk-reward temperament

www.financemalaysia.blogspot.com

Related Posts:

Public Islamic Alpha-40 Growth Fund

PB Indonesia Balanced Fund

Public Optimal Growth Fund