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Friday, May 22, 2009

Opportunity! (22/5/09)

At 4:03 AM, the daily Dow Jones (America's CI) fell another 129.91 points to close at 8,292.13. So what we will see this morning in Bursa is that most share prices will plunge in a knee-jerk reaction to the changes in the equity market of the US. My advice is that be patient and wait until the force-selling momentum fizzle out, then only you go in and get yourself some valuable gems among the stones, dust and debris. Good Luck =)

Thursday, May 21, 2009

Is it the right time to invest?

Veterans who experienced the 1997 crisis which triggered an equity meltdown will tell you to be patient and wait as they had seen KLCI (Kuala Lumpur Composite Index) plunged to a new historical low of 262.7 points on the 1st of September 1998, when investors had strong confidence that the worst was over after a rally of 267.79 points to 745.36 on February 26, 1998. They are pessimistic over the current market condition and fear that the stock market's rallies which surpass the expectation of most investors are actually the beginning of another nightmare.

When the KLCI hit 964 points on 29th April 2009, worried investors were reluctant to give comments on whether the CI will penetrates the psychological resistance level of 1,000 points as the recovery of the current economic crisis was still vague. Although the sharp declines in economic activity appeared to have abated, it is not impossible that the CI might dip below 964 points. Therefore, most investors prefered to wait for a not-so-tentative indicators which could boost up their confidence level to retake their position in the market.

What happened the next week was really unexpected. Stock market were being very enticing during the first week of May as the CI gradually increased to 1,026.78 points. More than 100 of penny stocks (Share which market value are less than RM1.00) had their market price skyrocketed as much as 50 - 100%. Bilions of shares were transacted and people were confident that it was a starting of a slow and steady bull rally.

However, with IPI (Industiral Production Index) for March down by 14.4% compared with the same month last year, there were a group of investors who had a strong conviction that it was just another deceiving bear market rally . Even Maybank Investment Bank Bhd's CEO, Mohammed Rashdan Yusof said that Malaysian economy will not recover so soon albeit economic indicators were showing signs of bottoming out and that the local stock market may be overbought. What do you think?

Let's look at some figures.

11/5/09 - KLCI dropped 1.28 to 1025.50
12/5/09 - KLCI dropped 2.48 to 1023.02
13/5/09 - KLCI dropped 0.18 to 1022.84
14/5/09 - KLCI dropped 10.85 to 1011.99
15/5/09 - KLCI rised 2.22 to 1014.21

18/5/09 - KLCI dropped 2.20 to 1012.01
19/5/09 - KLCI rised 11.48 to 1023.49
20/5/09 - KLCI rised 19.14 to 1042.63
21/5/09 - KLCI dropped 7.07 to 1035.56

As you can see, 2/3 of the trading days were gloomy for investors. But even so, KLCI ended higher at 1035.56 points compared to 1026.78 points on the 8th of March 2009. The CI seems to be "reluctant" on dipping below 1,000 points. A sharp increase of CI on the 19th and 20th May indicates that more people are interested in blue chips (companies with stable earnings and no extensive liabilities) such as Maybank Banking Bhd, Axiata Group Bhd (Formerly known as TM International Bhd). However, this doesn't mean that people are shying away from the second liners. Prices of penny stocks can still shoot up as most of it had been severely undervalued in the past due to global recession.

That is why I personally thinks that this is the best time to grace your investment portfolio with a number of shares which have an upside potential. Technical correction is ought to happen following Tuesday and Wednesday's bumper gain and true enough the CI fell 7.07 points today. Nobody knows what will happen tomorrow. Both CI and share prices might continue to plunge or start to climb back to its highest value since September 2008. Anyhow, you should be poised to emerge as a shareholder when Bursa Malaysia starts to trade tomorrow morning. If you miss this great opportunity of getting shares at low prices, there's no telling when will the next chances come and knock on your door.

Sunday, May 17, 2009

Rights Issues

It was on the 5th day of March that Maybank proposed rights issue at RM2.74 per share (43.2% discount to the closing price of RM4.82 of Maybank Shares as at 5th March 2009) on the basis of 9 shares for every 20 existing shares.

Ok. Let's analyse it in a simple way. If the market value of a product which you are selling stands at RM5.00, and you are selling it at RM2.80, what will people think? There must be something wrong with the quality of the product that leads to selling of the products at fire-sale prices? This is what most people would think of during economic downturn.

Yes it is true that Maybank is facing a deluge of problems which are yet to be solved and that is why it plans to raise RM 6 billion through rights issue. These problems include chalking up RM 9 billion worth of debts over the past few months and expensive acquisitions in Inodonesia and Pakistan. HwangDBS Vickers Research said that it is concerned on Maybank's ability to consolidate the recent bank purchases and on further impairments it may have to make, especially for MCB (Pakistan) and BII (Indonesia). In addition, investors are worried that the issue of rights would dilute the banking group's earnings per share by 27% to RMo.38 at 2010 (For those who do not understand, do not worry as my next post will be talking on EPS ^^).

So what happened the next day was the share price fell RM0.28 to close at RM4.54 and it continued to drop for the next few working days until it hit RM4.00. Some investors were dismayed. If you are holding 2,000 Maybank's share which you bought at RM5.00, how would you feel (The value of your share had just dropped by RM2,000 in total) and what will you do?

Some investors tend to sell their shares at low prices (Scenario 1). What they had in mind is that its better to lose RM2,000 than to lose more. Others might want to take a risk by holding on to their shares but are not willing to take up the issued rights because they are afraid that they might lose more (Scenario 2). Are you thinking one of these ways?

You shoudn't be one of them. You should hold the shares you had, and get more shares at low price (if you have the capital), and lastly take up the rights issue (Scenario 3). Let me put in some figure to depict a clearer picture.

Scenario 1 - Say Byebye to your RM2,000 + Commissions. Then you will curse when you see the share price rise till RM5.00 on the 7th May 2009. =P

Scenario 2 - On the 7th May 2009, the share closed at RM5.00. If you sell at this price, you are still losing money as you need to pay Commissions.

Scenario 3 - You buy another 2,000 shares @ RM4.00 per share and take up all the rights issued to you on the 7th April 2009 (1800 shares @ RM2.74 per share). In total, you actually buy 5,800 shares at RM22,932. Which MEANS that you have 5,800 shares @ RM3.95 per share! So if u sell all your shares on the 7th May 2009 at RM5.00, your are getting a gross profit of RM6,090!!!! Isn't that great?

Now, some might ask me why am i so confident that the share price will not drop but instead increase? Price falling will beget further losses. I can tell you why. Because it's MALAYAN banking bhd. The government will not let a bank which hold the name of our country falls like Lehman Brothers. If it falls, it is like telling the whole world that "Malaysia tak boleh". Undertaking of rights issued were secured where nearly 90% of the rights shares were taken up by major institutional shareholders which includes PNB, EPF and certain unit trust funds managed by ASN Bhd. If you are in Scenario 3, and even if you manage to sell all your shares only @ RM4.00 per share on 7th May 2009, which you can do so around 2 months ago, you still make a gross profit of RM290! HAHA, so wat is there to worry about? =)

Saturday, May 16, 2009

Short Introduction

Basically this is an educational blog. My main purpose of creating this blog is to share knowledge among my friends.

I find people at my age are not too keen to read on books written by successful investors, famous economists and FOREX speculators. Not because they do not want to know the secret behind their success, but because of the hard-to-understand economic terms - which most teenagers are not exposed to at this age - that erode their interest in it. Some people do not even understand a single thing when he/she read the business column of a newspaper.

Well, I'm not looking down on those people who had no interest in economies, but living in this "no money no talk" world, its imperative that one has adequate knowledge in economies to ensure a better earnings in the future. With sufficient knowledge, one can invest in various market, ranging from assets and properties to stocks, commodities, FOREX or even REITS. Additional investment will top up our pocket money and ensure a cosier life.

How and where to learn? HERE! Haha, I'm not VERY good, but I'm doing research frequently on all sorts of investment and i shall share with all of you important rules and tricks and lessons that I have learned. I shall make it as simple as possible so that most people out there can understand easily what I'm trying to share. Do drop by more to learn more things to enrich ur life. =)