Why All of Us Must Care about 1Care Malaysia?

Heard about 1Care Malaysia healthcare plan? If no, then you must read this article thoroughly word by word. Because the the proposed healthcare system will drastically change the way we seek for treatment in the future. The main issue was "Is it viable to implement 1Care?".

Well, the intention is good for our community. The plan had a very beautiful definition as below:

But...

Concern is always there whenever Government want to implement something and that thing is managed solely by Government. Experience? Got (bad experience). Money? Got, but already drained somewhere (normally). You can't prevent Malaysians from worrying, especially when 1Care touches each and everyone of us for life.

What are the concerns?

1. Each person in different sector have different risk level. How to determine the amount of contributions of each contributor?
   
   
2. Subsequently, how to determine the benefits package each individual entitled to? If the benefits was based on the amount of contribution, then, our existing insurance system already functioning very well now.
   
   
3. Then, you can say that it was community-rated, not risk-rated. That's mean rich are subsidizing the poor, economically active to passive system. But, doesn't rich already pay taxes to government to subsidize them currently?
   
   
4. Level of services of hospitals and choices of hospitals. Can we seek treatment at any hospital, be it general or private hospitals? If not, it will again limit our choice.
   
   
5. Choice? Emm. The proposed 1Care is being made compulsory to all employees and employers to contribute (except government servants). Wait!!! Does this mean that private sector is subsidizing public sector?
   
   
6. A government agency was being set up to manage the pool of money collected from all of us. OMG!!! We are talking billions of ringgit per year. It's a huge huge huge amount which could bought over CIMB bank!!!

Once 1Care was implemented, the following sector will suffer:

1. Private sector. If the said 10% mandatory contribution by each employee is true, most salary based person will switch to personal loan, I think.
   
   
2. Retailers will suffer badly from less disposable income after the mandatory deduction of salary. No more 25% drop in car sales anymore. It's probably 90%.
   
   
3. Property market will slump. Don't forget that our loan applications now is based on net salary, which means deducting your 11% EPF + 10% 1Care + Socso + Tax. How much left?
   
   
4. Private healthcare system. Private hospitals have to lobby smartly to get involved in 1Care system to remain in business. Monopoly game means you have to "pay" more? Good Luck.
   
   
5. Private insurance companies and its agents. A big chunk of their medical policies will be terminated and a big chunk of premiums will flow to the new set up government agency. Thousands of agents will struggle to survive.

Then, why Government proposing 1Care Malaysia? Emm. I got many input from friends and professionals and below could be the 3 reasons behind 1Care:

1. Diversifying the problems of public healthcare system to private healthcare, so that private healthcare was forced to collaborate.
   
   
2. Reducing Government's burden, thus reducing budget deficit, by imposing mandatory contribution from everyone. For us, it's just like another form of income tax.
   
   
3. Hijacking the lucrative insurance business which was dominated by foreign companies (etc. Great Eastern, Allianz, AIA, Prudential, ING...) especially on medical policies. With 1Care, it could effectively grab the market share from them, entrusting government agency as the undisputed largest insurance company in Malaysia.

Finance Malaysia blog is just voicing out the concerns of general public for betterment of Malaysia going forward. Readers were welcome to give comment or feedback. Thanks.

RHBRI: 4Q11 Earnings Review and Market Strategy

In tandem with the moderating economic growth trend, corporate earnings remained weak in 4Q 2011. Of the 113 reported earnings that we cover, 55 of the results (48.7% of the total) were within our expectations, 33 below projections (29.2% of the total) and 25 above forecasts (22.1%) (see Table 1). Against the consensus numbers, 44.2% of the reported earnings were within expectations, 38.1% below and 17.7% above projections (see Table 2). Sequentially, net EPS for the FBM KLCI stocks under our coverage weakened back to +1.7% qoq and +2.8% yoy in the 4Q, from +8.9% qoq and +12.4% yoy in the previous quarter (see Chart 1).

However, the downgrade to upgrade ratio has improved significantly to 1.07 times, from 1.65 times in the previous quarter. Overall, 2011 has been a year where Corporate Malaysia suffered from slowing sales and falling utilisation rates. This, coupled with the trend of higher costs, resulted in falling margins for many companies under our coverage. Consequently, normalised net EPS growth for the FBM KLCI stocks under our coverage slowed sharply from 20.9% in 2010 to +4.7% in 2011. The sharp slowdown in EPS growth, however, partly reflected the higher base effect as well as the plunge in Tenaga’s earnings arising from the gas curtailment issue. Excluding Tenaga, our 2011’s normalised net EPS for the FBM KLCI stocks has slowed down less significantly to +10.1%, from +21.2% in 2010.

Businesses Turning More Upbeat

What’s worth highlighting is that Corporate Malaysia are becoming less pessimistic and expect their business prospects to be stable with prospects of it turning up gradually as the year progresses. Likewise, we expect almost all sectors to record flat or improved earnings in 1Q 2012, with the exception of transport and semiconductor sectors. In our view, earnings of the transportation companies will still likely to be weighed down by slower economic growth and rising fuel costs. Whilst we also expect the semiconductor industry to suffer weak earnings in the 1Q, its outlook should improve from 2Q as cost rationalisation and stronger chip sales will likely translate into a significant improvement in earnings thereafter.

Meanwhile, we have seen more aggressive inventory write-down by companies, particularly amongst the steel product manufacturers. At the same time, banks could have also made pre-emptive provisions for loan impairment. Consequently, barring unforeseen circumstances, the downside risk to corporate earnings may not be as significant moving forward and analysts have turned less pessimistic in their assumptions for earnings projections.

Earnings Revised Up

Overall, we have adjusted some of the assumptions, translating to an upward revision in our 2012’s normalised net EPS growth for the FBM KLCI stocks under our coverage to +12.3% (see Table 3), from +10.3% previously (as reflected in our 2012 Market Outlook & Strategy Report dated 16 December, 2011). Excluding Tenaga, our 2012’s normalised net EPS for the FBM KLCl stocks has also been revised up to 8.8%, from 7.8% two months ago. The upward revisions in earnings were more significant in the oil & gas, consumer and utilities sectors (see Table 4). Similarly, our 2013 earnings estimate for the KLCI benchmark has been tweaked up slightly to 7.9% (+7.0% ex-Tenaga), from +7.3% (+5.5% ex-Tenaga) previously.

General Election Will Create Volatility,

Not Likely To Be A Game Changer

On the local front, a key event that will have significant bearing to the equity market is the impending general election. There are strong market expectations that the country’s general election (due in March 2013) will be held any time soon. Given what happened during the previous general elections on 8 March 2008 where the ruling coalition, Barisan Nasional (BN), lost two-thirds majority, there are fears that if BN were to lose a simple majority, the local bourse could suffer a major temporary setback. This is on account of uncertainty in the continuity of the country’s economic policies that could slow down the implementation of the economic Transformation Programme (ETP). We, however, believe that the likelihood of this happening is low.

Market Strategy :

Buy On Dips With Increasing Focus On Recovery Sectors

Whilst not all the external risk factors have gone away and the impending general election locally could also create uncertainty for the local bourse, the global economic recession risk is receding. Consequently, we are turning more positive on the market. Nevertheless, as fundamentals are just starting to improve, earnings will still need to play catch up for stocks with rich valuations before the market can scale new heights.

Consequently, the risk of a market pullback and consolidation in the near term is still high although we believe that any volatility in the market would provide opportunity for investors to accumulate fundamentally-robust stocks on weakness. We are also turning more positive on cyclical sectors that are poised for recovery, although investors’ risk perceptions can still change very quickly should situation turn out to be worse than expected. As a result, we would still recommend investors to hold some defensive stocks that have strong cash flows to pay sustainable dividends. A list of our top picks is reflected in table below, which includes “buy on weakness” tactical holdings.

Source: RHB Research Institute report

OSK's March 2012 Outlook and Strategy

While Malaysia remained a laggard compared to the rally in developed markets, the global rally that had started in January finally dragged the local bourse kicking and screaming up during February with a rally of more than 3%. Globally, markets continued to rise despite the patchy fundamental landscape. Thus, while we had anticipated a potential rally in the 1st half of February, our expected market retraction in the 2nd half failed to materialize.

Top Gainers for February were dividend plays such as Carlsberg or companies with corporate activities such as Hartalega with its bonus issue or potential targets such as RHB Cap and MBSB. Smaller plantation companies such as TH Plantations and RImbunan Sawit also had a good run.

On the flip side, companies with poor results such as Maybulk, MAS and KNM got sold down. On a broader sectoral basis, telcos were the dominant play. It was the return of the Big Caps in February as the catch-up played by the KLCI meant that big caps ran up with the inflow of foreign funds.

KLCI year-end target set at 1,620 pts!!!

Moving forward, we unveil our KLCI year-end target at 1,620 pts. This is derived from the average of our 2012 and 2013 fair values at 1,466 pts (13.5x PER) and 1,775 pts (15.0x PER) respectively. We still believe that weak fundamentals justify a lower PER than the historical average of 16.6x for the KLCI. While we remain unconvinced of the current rally’s fundamentals and still see a risk of market correction, news flow with regards to large infrastructure investments should help the KLCI post a stronger 2H2012.

The derivation of our target is as such:

• There is no change to our 2012 KLCI fair value of 1,466 pts based on 13.5x PER on 2012 numbers
• We still believe that weak fundamentals justify a low PER for 2012 and that there may be mid-year weakness in global markets
• We derive our 2013 KLCI fair value of 1,775 pts based on 15.0x PER on 2013 numbers
• The higher PER of 15.0x is based on 0.5 std dev below the historical average 16.6x PER of the KLCI
• We are still holding back from applying a historical average PER as we remain concerned on overall global economic fundamentals
• Nonetheless, the global liquidity fuelling the current rally could continue to drive markets and the news flow with regards to large infrastructure investments should keep the KLCI buoyant in 2013. Hence, we apply a higher PER compared to 2012
• Our 2012 KLCI year-end target is the average of the 2012 and 2013 fair value which gives a figure of 1,620 pts

Upgrading market call to NEUTRAL

Rolling forward our investment outlook horizon and nothing that the year-end target gives some 3.2% upside to the market, we upgrade our call on the market from Sell to NEUTRAL. Given our view that this is a Liquidity-Driven Rally with risk of correction, we recommend investors take a Balanced approach to the market for the remainder of 2012. As the market could still turn south in the middle of the year, we keep some Defensive stocks among our Top 10 Buys. At the same time, the burgeoning news flow on Construction and Oil & Gas means we recommend investors take some positions in these sectors. We, thus, expand our Top Sector calls from Consumer and Telcos to also include Construction, Oil & Gas and Banks.

Top Buys are a balanced mix

Our revised 2012 Top Buys represent a balanced mix of Defensive and Cyclical stocks with a range of deep value to reasonable yield plays. Our Top Buys are Maybank, CIMB, Axiata, TM, Gamuda among the Big Caps and Dialog, KPJ, QL, Padini and KimLun among the Mid and Small Caps.

For March, given the uncertainty remaining in the market, we introduce a balanced Big-Small-Cyclical-Defensive portfolio. As such, we select Maybank, CIMB, Axiata, Gamuda and KPJ as our March top buys.

Source: Excerpt from OSK Research report

Is it Viable for EPF to support Subprime Loan? (Feb2012)

In 2008, we have seen the catastrophic effect from the subprime mortgage loan in US. Even now, US is still struggling to fully recover from their worst financial crisis since Great Depression. The problems doesn't build in one day, in fact, it took years to snowball the problem. And, yet Malaysia seems like wanting to catch up with them by supporting the subprime loan. But, the unique part of our version is "using EPF monies"?

When news first broke out last month that EPF would be channelling RM1.5bil for a special public housing scheme, alarm bells sounded off for many contributors. Maybe EPF already knew the result for last year performance, it announced later that contributors are getting a decade-high dividend rate of 6%. Salute to EPF. Since EPF are doing so good even without the said "loan", then, why EPF have to take the risk to loan out to this scheme?

Afterthat, EPF published a statement claiming that the money is loaned to the Government, not to individuals. All the proceeds will go through a special purpose vehicle of Federal Territories Foundation (SPV FT Foundation) where terms and conditions are set.

YOU must be kidding, very obvious the end borrower was individuals, not Government. Where does the risk comes from? Ultimately, the individual borrowers are the one who determine the survival of the scheme.

What EPF gets?

For us, the most important detail that's available is 5.5% profit. The rest, it's very surface only without much details, such as the process of borrowers selections, criteria for loan application, and a lot of what if... Transparency is not there either.

No worry, Government can GUARANTEE the scheme mah!!! Yet, another question comes in. How does Government guaratee it? If something goes wrong to EPF monies, Government will use its money to compensate EPF?

Wait... Doesn't Government money belong to us too?

Antalet besökare på bloggen nu fler än på hemsidan!

Antalet “besökare” på min blog sedan starten 2007 är nu 63000. Detta är för första gången mer än antalet besökare på min officiella hemsida på Nationalekonomiska institutionen i Lund! Hemsidan har “bara” besökts av 62000 personer!!
Även om detta inte är några astronomiska siffror tycker jag detta är kul då bloggen är min egen skapelse så att säga. Dessutom har ju bloggen bara existerat en tredjedel så lång tid som hemsidan.

TheEdge - Lipper Malaysia Fund Awards 2012

The highly regarded The Edge-Lipper Malaysia Fund Awards 2012 was held at the Kuala Lumpur convention Centre on 20 February 2012. This award is given out to honor the unit trusts and asset managers that have excelled in delivering consistently strong risk-adjusted performance, relative to peers. 

For those who missed out the show, below is the list of awards and its recipients.

Wait... Where is Public Mutual?
Please read the full article below.

Who can Save GREECE? (Feb 2012)

It's the time again for Greece to convince its counterparts that they are serious in cutting budget deficits. By doing so, Greece was to put on the lifeline (bailout) by European Union (EU) once again. The discussion of whether to save or not to save Greece had been dragging for one week time now. Why?

In Chinese, we say "we cannot see people die by not lending our hand". That's why China said they will help when the time arrives. The question is when is the right time? Until Greece go bankrupt? Or,  until Greece left EU?

Who can save Greece?

The answer to this very important question is very obvious. In Christian, they always emphasize on "we should take responsibilities on what we did", right? So, the solution lies in Greece hands. Not the country, but, the citizen, the people of Greece. It's time for them to come back to reality. Let's take Malaysia as a benchmark, they are working fewer hours than us, yet they are earning much better than us. GDP per capita of Greece is more than twice of our figures. How are they going to sustain whatever they are having now, such as attractive pension scheme and healthcare?

Technically, Greece already bankrupt with Debt to GDP of over 140. What does this mean? For every RM1 they earn, they spent RM1.40. It's overspent, it's over leveraged. It's time for Greece to unite together, shoulder the responsibilities with their Government, by taking pay cut, reform the pension scheme and healthcare system. By doing so, then only Greece can come out from debt crisis. Although the period is difficult, they must did it, don't procrastinate anymore. The longer they drag, the debt may snowball until a stage where "too big to burst".

Finance Malaysia really hopes Greece can come out of the bad times by themselves proudly. This goes to Italy, Belgium, Ireland, and Portugal too. We shall support Greece by visiting the beautiful country (of course, until all the riots were end).