Yesterday my friend told me about the phenomenm rise of Adam Khoo, a forex trader.
Today my friend forwarded me an article of the fall of Boaz Weinstein, once one of Wall Street's hottest traders, speaks volumes about why financial firms still are reeling from the shattered global markets.
Again it is proven that trading cannot really works over long term. one big fall will wipe off profit accumulated over the years. Bob is a brilliant man, as shown in his resume
- chess master, poker and blackjack devotee and top trader at Deutsche Bank AG, Mr. Weinstein made big bets using complex financial instruments, generating large returns for the bank and about $40 million in annual pay for himself. But in 2008 the group he ran saddled the bank with $1.8 billion in losses, erasing more than two years of trading gains.
to me, trading is still beyond my comprehend and my taste.For layman investor, i still prefer just choose and hold. The Haio debacle last month really gives me some shock, when it fell heavily. Today, it has recovered to RM7.48 again. I'm again the paper profit region. i happy to stick with this model as of now. more important is to continue my income stream as 'bullet' to buy up more stocks along the way
Thursday, December 17, 2009
Tuesday, December 15, 2009
possible asset bubbles at Hong Kong
I got this email from my broker, which reads of possible asset bubble at Hong Kong.
HK and S'pore property price has recovered lots of lost ground ever since the crisis. Malaysia, on the other hand, pretty unmoved (neither drop too much and subsequently not going up). We have a lower standard deviation but lower return. so, which property market is better?
*******here is the text*********
Asset bubbles rather than inflation will be the key concern for the financial stability of Asian economies next year, according to Hong Kong Monetary Authority chief executive Norman Chan Tak-lam.
Chan told the Hong Kong Economic Summit yesterday that although there was no asset bubble in Hong Kong as yet, it was important to prevent any from forming because it would be more difficult to mitigate the effects later
He added that as a small economy, Hong Kong could not merely respond through an interest-rate increase as that could have the adverse effect of triggering even more liquidity to flow into the market.
More than HK$640 billion has flowed into the city since October last year, with 20 per cent of that directed at the property market, pushing home prices up for 10 consecutive months.
HK and S'pore property price has recovered lots of lost ground ever since the crisis. Malaysia, on the other hand, pretty unmoved (neither drop too much and subsequently not going up). We have a lower standard deviation but lower return. so, which property market is better?
*******here is the text*********
Asset bubbles rather than inflation will be the key concern for the financial stability of Asian economies next year, according to Hong Kong Monetary Authority chief executive Norman Chan Tak-lam.
Chan told the Hong Kong Economic Summit yesterday that although there was no asset bubble in Hong Kong as yet, it was important to prevent any from forming because it would be more difficult to mitigate the effects later
He added that as a small economy, Hong Kong could not merely respond through an interest-rate increase as that could have the adverse effect of triggering even more liquidity to flow into the market.
More than HK$640 billion has flowed into the city since October last year, with 20 per cent of that directed at the property market, pushing home prices up for 10 consecutive months.
Monday, December 14, 2009
Warrent Buffett and Interpretation of Financial Statement
A friend of mine has just read Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage
Accordingly, the book is nice to read. The bookstore Popular is offering discount now and it cost around rm7X. normal price RM89
here is a link to the book at amazon
As i glanced through the table of contents, it covers a lot of financial statements (means look at the account) and it does looks to be comprehensive. Indeed, i have had a book by Morningstar which touches the same topic. Reading the accounts give you a sword at least at avoiding companies which less sound fundamental. For example, i avoided Megan Media (which was popular on local forum few years back but subsequently gets suspended due to account fraud) partly due to observing its accounts that the debt is increasing in higher pace than revenue and a doubtful manipulation of ratio such as ROE through accounting means.
Accordingly, the book is nice to read. The bookstore Popular is offering discount now and it cost around rm7X. normal price RM89
here is a link to the book at amazon
As i glanced through the table of contents, it covers a lot of financial statements (means look at the account) and it does looks to be comprehensive. Indeed, i have had a book by Morningstar which touches the same topic. Reading the accounts give you a sword at least at avoiding companies which less sound fundamental. For example, i avoided Megan Media (which was popular on local forum few years back but subsequently gets suspended due to account fraud) partly due to observing its accounts that the debt is increasing in higher pace than revenue and a doubtful manipulation of ratio such as ROE through accounting means.
Monday, December 7, 2009
Stock or property?
My friend has just came back from his Singapore visit and brought back a word, Singaporean's buying power really si beh gao lak. To give you a picture, people que to buy LV Loius Vuition and Prada. That's truly beyond my imagination. His Malaysian turned Singaporean friend told him 'where got recession'... Well, actually there are some similarities in Malaysia, actually still see the same number of crowd in shopping mall, although in term of salary one does feel the pinch last year (with either no increment, pay cut, or forced leave). Compared to 1998 when i was still not working, that crisis the effect i actually couldn't feel at all. Conclusion from here, asian still loves to shop, and still have money to shop. So, the retailers, who have seen their stock price drop, should see bright days ahead.
My friend got another word from his friend, that rich people buy property and poor people buy stock. To be fair, investing in property, to be in lesser risk, does need the investor to be cash rich. Otherwise, you expose yourself to leveraging. I have a rich relatives, she buys property but she also buy stock. So i wouldn't say that saying that my friend got is true. Conclusion, there are many roads to ROME. Just stick to your own liking.
My friend got another word from his friend, that rich people buy property and poor people buy stock. To be fair, investing in property, to be in lesser risk, does need the investor to be cash rich. Otherwise, you expose yourself to leveraging. I have a rich relatives, she buys property but she also buy stock. So i wouldn't say that saying that my friend got is true. Conclusion, there are many roads to ROME. Just stick to your own liking.
Thursday, December 3, 2009
OSK seminar on investing in foreign market (Singapore, Indonesia)
Yesterday i attended a seminar by OSK Investment Bank at Cititel Penang. OSK has its partner from Singapore (DMG) and subsidiary from Indonesia (PT OSK NusaDana) giving some insights in stock investing at their countries. I have never directly invest into foreign stock exchange, except indirectly through unit trust.
Well, i have always stick myself to investing in Bursa, as it is free from forex risk and i'm only familiar with companies in Malaysia. However, bursa (actually calling the old name KLCI sounds nicer) current market PE of 19.7% is at premium of 12 years average PE of 16.63%, suggesting that it is likely that stock price is somewhat ahead of fundamental. That's why i think it is not bad to divest a bit to foreign country. In fact i have just made my first foray to Hong Kong, having transfered some money to Public Bank Hong Kong. However i find it somewhat weird to have to search HK stock by stock number. It is still hard for me to browse for information easily. So i haven't done anything yet.
Back to yesterday talk. For Singapore, sectors like REIT and transportation is covered. I haven't invested into neither of this two sectors before, as such what the analyst mention during the talk does serve the purpose for me to see how they value such stocks. I found that the presenter, a he, likes to use P/B to compare REIT. He highlighted some stocks, namely CDL, cambridge and suntec reit. Singapore is currently having an office supply and demand mismatch, and rent has come down a lot since the heyday in 2007. The matter is complicated by another more than 4 million sq feet of new office space next year, with at most 1.2 million sq feet of space to be taken up. Hence, all the reit he recommended is in the industrial and retail. An interesting is that retail demand has maintained somewhat strongly. Not sure if we should take this as a sign that perhaps directly investing into retail consumer stocks are good or not. In fact, personally i have always like consumer stocks as their product i can see in shopping malls and i'm the direct user. For example, one will still see Padini (a garment & fashion franchisee in Malaysia) shops are still pack with people. I haven't been to Singapore of late, but i still remember how jam pack the retail malls shoplots are when there are the so called 'SALE' going on. Check out on Singapore SALES, which is happening now :) Back to the island state stock, the last stock mentioned by the analyst is SMRT. It has defensive business with dividend yield in the region of 5%. Its growth correlates strongly and will be underpinned by the continuous population growth. It is a not exciting play though. The reason the analyst bring out such defensive stocks is that he feels that the market is bit 'hot' right now, with lots of carry trade from foreign country such as US, where interest is to remain low well into 2010, as mentioned by Bernanke. As such it is more cautious to take a defensive position.
Selena from DMG is the second presenter who is presenting stocks on SGX. She covers plantation. SGX plantation companies are somewhat 'new', as all the while Malaysia is more famous for plantation stocks, with giants such as Sime Darby (huge in size but with mediorce ROE and efficiency) and IOI. At first i find it somewhat weird to try to listen to someone talking on plantation stocks from a country that has no oil palm plantation at all. It is noteworthy to know, however, that some giant plantation counters does list on SGX, like Wilmar (with operation spanning the bulk of South east asia and China) and some Indonesian plantation player. However, those stocks does not enjoy valuation as high as their Malaysian counterpart. Anyhow, she does provide some good insights. Since i am not well verse with plantation companies (although i used to have IOIcorp for some short time). She cover from basics of the palm oil production, like CPO comes from the fruit, and palm kernel oil comes from the brown color 'kernel'. CPO has a very strong correlation with crude oil movement, and recently the southern oscillation index has a strong -16, suggesting a likely El Nino that will affects CPO yield and hence its price. CPO also has a demand higher than supply. High demand growth is seen from China and India, with India having 12.7 kg/capita and 5.3 million tonne annual consumption, china having 22.4 kg/capita and 5.8 million tonne. US at 54.2 kg/capita and 0.9 million tonne and Europe 58.2kg/capital at 5.1 million tonne. The figure are interesting, say China is continuing to reach the level of kg/capita as Europe, the demand for CPO easily double. India's growth is expected to be 12 years behind that of China, but combined, the two giants will consumes more than what the current market player can supply. As such, over long term, CPO should be viable. I have always don't know how to judge the cyclic nature of plantation counters but looking at such market demand supply situation gives me some form of interest to relook into the counters. i have no interest, though, to look at plantation counters in SGX, including the First Resources that she recommended.
The analyst from Indonesia give me some feel on the Indonesia stock market, which is very much different from bursa and SGX. They have many mining companies in the top 10 biggest blue chip companies, at which Malaysia has none (to be fair, Petronas is one big company in Malaysia but it is not listed). The other bluechips are the traditional stocks, such as banks and telco. Of the many stocks that he fly us through, none is consumer stocks, which puzzles me. Indonesia is one of the world country with highest population at 234 million yet consumer stocks are no where near the blue chips? Well, actually i'm too bias, Unilever is in their top 10, which is a multinational manufacturer of food, home care, and personal products. The analyst recommended Inco, which mine for nickel and offers the world highest grade nickel. The big 3 cement players (one national, one from Swiss and another from some European country i can't remember) are also expected to do well due to less competition. Some very 'fresh' thoughts are that over the last 12 years, Indonesia has only built 12km of toll highway annually, suggesting how underdeveloped the country infrastructure is. NPL of the banks are pretty high, at 4.6% level generally. Inflation is low at 2% however take note that it has a high of 12% few years ago. He cites the country as politically stable, but to me that is different story. Anyhow, i think my minimal exposure to Indonesia via my unit trust is good enough.
The last analyst is from Malaysia, and he is talking on Genting Singapore, which has seen a 87% rise in stock price YTD. It is noteworthy to note that it is trading at 50% premium to its peer (the other casino gaming counter), although Genting enjoys a much less competition, in fact it is duopoly in Singapore (which is expected to have 6.2million chinese captive market) and its parent monopoly in Malaysia (2.2 million captive chinese market). It is surprising that he has put a much higher expectation on Genting Singapore than its Malaysian parent, with growth expectation in the region of 40%, and matching that of Macau. He does cautious investor that of all the 3 last listed stock on Macau, 2 of them see price dropping post casino commencement of operation. The 'support line' of Genting Singapore is at 87cent level (currently it is $1.29)
End of the story is that OSK has done a good job at organizing such seminar, which on top of trying to have bringing more business, is beneficial to the customers. Recently bursa has also organized some talks via some investment banks. I'll try to attend one locally to see how good it is. But from the topic it seems rather plain vanilla.
Well, i have always stick myself to investing in Bursa, as it is free from forex risk and i'm only familiar with companies in Malaysia. However, bursa (actually calling the old name KLCI sounds nicer) current market PE of 19.7% is at premium of 12 years average PE of 16.63%, suggesting that it is likely that stock price is somewhat ahead of fundamental. That's why i think it is not bad to divest a bit to foreign country. In fact i have just made my first foray to Hong Kong, having transfered some money to Public Bank Hong Kong. However i find it somewhat weird to have to search HK stock by stock number. It is still hard for me to browse for information easily. So i haven't done anything yet.
Back to yesterday talk. For Singapore, sectors like REIT and transportation is covered. I haven't invested into neither of this two sectors before, as such what the analyst mention during the talk does serve the purpose for me to see how they value such stocks. I found that the presenter, a he, likes to use P/B to compare REIT. He highlighted some stocks, namely CDL, cambridge and suntec reit. Singapore is currently having an office supply and demand mismatch, and rent has come down a lot since the heyday in 2007. The matter is complicated by another more than 4 million sq feet of new office space next year, with at most 1.2 million sq feet of space to be taken up. Hence, all the reit he recommended is in the industrial and retail. An interesting is that retail demand has maintained somewhat strongly. Not sure if we should take this as a sign that perhaps directly investing into retail consumer stocks are good or not. In fact, personally i have always like consumer stocks as their product i can see in shopping malls and i'm the direct user. For example, one will still see Padini (a garment & fashion franchisee in Malaysia) shops are still pack with people. I haven't been to Singapore of late, but i still remember how jam pack the retail malls shoplots are when there are the so called 'SALE' going on. Check out on Singapore SALES, which is happening now :) Back to the island state stock, the last stock mentioned by the analyst is SMRT. It has defensive business with dividend yield in the region of 5%. Its growth correlates strongly and will be underpinned by the continuous population growth. It is a not exciting play though. The reason the analyst bring out such defensive stocks is that he feels that the market is bit 'hot' right now, with lots of carry trade from foreign country such as US, where interest is to remain low well into 2010, as mentioned by Bernanke. As such it is more cautious to take a defensive position.
Selena from DMG is the second presenter who is presenting stocks on SGX. She covers plantation. SGX plantation companies are somewhat 'new', as all the while Malaysia is more famous for plantation stocks, with giants such as Sime Darby (huge in size but with mediorce ROE and efficiency) and IOI. At first i find it somewhat weird to try to listen to someone talking on plantation stocks from a country that has no oil palm plantation at all. It is noteworthy to know, however, that some giant plantation counters does list on SGX, like Wilmar (with operation spanning the bulk of South east asia and China) and some Indonesian plantation player. However, those stocks does not enjoy valuation as high as their Malaysian counterpart. Anyhow, she does provide some good insights. Since i am not well verse with plantation companies (although i used to have IOIcorp for some short time). She cover from basics of the palm oil production, like CPO comes from the fruit, and palm kernel oil comes from the brown color 'kernel'. CPO has a very strong correlation with crude oil movement, and recently the southern oscillation index has a strong -16, suggesting a likely El Nino that will affects CPO yield and hence its price. CPO also has a demand higher than supply. High demand growth is seen from China and India, with India having 12.7 kg/capita and 5.3 million tonne annual consumption, china having 22.4 kg/capita and 5.8 million tonne. US at 54.2 kg/capita and 0.9 million tonne and Europe 58.2kg/capital at 5.1 million tonne. The figure are interesting, say China is continuing to reach the level of kg/capita as Europe, the demand for CPO easily double. India's growth is expected to be 12 years behind that of China, but combined, the two giants will consumes more than what the current market player can supply. As such, over long term, CPO should be viable. I have always don't know how to judge the cyclic nature of plantation counters but looking at such market demand supply situation gives me some form of interest to relook into the counters. i have no interest, though, to look at plantation counters in SGX, including the First Resources that she recommended.
The analyst from Indonesia give me some feel on the Indonesia stock market, which is very much different from bursa and SGX. They have many mining companies in the top 10 biggest blue chip companies, at which Malaysia has none (to be fair, Petronas is one big company in Malaysia but it is not listed). The other bluechips are the traditional stocks, such as banks and telco. Of the many stocks that he fly us through, none is consumer stocks, which puzzles me. Indonesia is one of the world country with highest population at 234 million yet consumer stocks are no where near the blue chips? Well, actually i'm too bias, Unilever is in their top 10, which is a multinational manufacturer of food, home care, and personal products. The analyst recommended Inco, which mine for nickel and offers the world highest grade nickel. The big 3 cement players (one national, one from Swiss and another from some European country i can't remember) are also expected to do well due to less competition. Some very 'fresh' thoughts are that over the last 12 years, Indonesia has only built 12km of toll highway annually, suggesting how underdeveloped the country infrastructure is. NPL of the banks are pretty high, at 4.6% level generally. Inflation is low at 2% however take note that it has a high of 12% few years ago. He cites the country as politically stable, but to me that is different story. Anyhow, i think my minimal exposure to Indonesia via my unit trust is good enough.
The last analyst is from Malaysia, and he is talking on Genting Singapore, which has seen a 87% rise in stock price YTD. It is noteworthy to note that it is trading at 50% premium to its peer (the other casino gaming counter), although Genting enjoys a much less competition, in fact it is duopoly in Singapore (which is expected to have 6.2million chinese captive market) and its parent monopoly in Malaysia (2.2 million captive chinese market). It is surprising that he has put a much higher expectation on Genting Singapore than its Malaysian parent, with growth expectation in the region of 40%, and matching that of Macau. He does cautious investor that of all the 3 last listed stock on Macau, 2 of them see price dropping post casino commencement of operation. The 'support line' of Genting Singapore is at 87cent level (currently it is $1.29)
End of the story is that OSK has done a good job at organizing such seminar, which on top of trying to have bringing more business, is beneficial to the customers. Recently bursa has also organized some talks via some investment banks. I'll try to attend one locally to see how good it is. But from the topic it seems rather plain vanilla.
Tuesday, December 1, 2009
sharpe ratio for haio
Let's try to calculate Sharpe ratio of Haio
The definition of the sharpe ratio is ("Average return over 3 year" - "Risk free rate")/"Stdev over 3 years. so, sharpe ratio is a function of time too
From here we side track a bit
The risk-free rate is used to see if you are being properly compensated for the additional risk you are taking on with the risky asset. Traditionally, the risk-free rate of return is the shortest dated government securities such as MGS in Malaysia. While this type of security will have the least volatility, some would argue that the risk-free security used should match the duration of the investment it is being compared against.
Let's use 3% as the risk free rate.
Year 2007 2008 2009
Adjusted return 122.69% 12.08% 131.99%
Stdev Sharpe Ratio
66.71% 128.79%
The adjusted return is a sum of capital appreciation + dividend + free share over the login price annually
Good sharpe ratio means low in deviation, high in return that gives you the comfortable of the respective investment. This is because we are investor and not trader. we need to have a good certainty rather than gambling
from Haio as example, one can see that if both return and stdev is high sharpe ratio also will be high. There is no typical sharpe ratio value that we can target at. To yield a high sharpe ratio, it must has a high return with low STDEV
The definition of the sharpe ratio is ("Average return over 3 year" - "Risk free rate")/"Stdev over 3 years. so, sharpe ratio is a function of time too
From here we side track a bit
The risk-free rate is used to see if you are being properly compensated for the additional risk you are taking on with the risky asset. Traditionally, the risk-free rate of return is the shortest dated government securities such as MGS in Malaysia. While this type of security will have the least volatility, some would argue that the risk-free security used should match the duration of the investment it is being compared against.
Let's use 3% as the risk free rate.
Year 2007 2008 2009
Adjusted return 122.69% 12.08% 131.99%
Stdev Sharpe Ratio
66.71% 128.79%
The adjusted return is a sum of capital appreciation + dividend + free share over the login price annually
Good sharpe ratio means low in deviation, high in return that gives you the comfortable of the respective investment. This is because we are investor and not trader. we need to have a good certainty rather than gambling
from Haio as example, one can see that if both return and stdev is high sharpe ratio also will be high. There is no typical sharpe ratio value that we can target at. To yield a high sharpe ratio, it must has a high return with low STDEV
Sunday, November 29, 2009
using key financial ratios on analyzing stock, particulary haio
Financial ratios are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance. It provide an apple to apple comparison for the various listed stocks.
All the while i have being interested with using financial ratios onto the stock i follow. Before i buy a stock, i look at their ratios, particularly Return on equity (ROE), dividend yield (DY), price earning ratio (PE).
Actually there are many more ratios. Many of them i also never use and don't know how to use them. For Malaysian stock, how do we get such ratio?
PE is rather straight forward. It is Price/EPS. All newspaper will publish the PE of a stock. As such getting it is straight forward
Many newspaper also publish DY. However, at times i found that it differ from paper to paper. Some publish wrong info. so it is good you have alternative source for this.
ROE is bit difficult to get, relatively. I used to get my ROE from www.osk188.com.my , my stock broker website. But now i find it pretty tedious to go through its pages, in addition its data not very accurate either. Another nice way i like is to look at Dynaquest data book, however it is belated by few months when it gets to the rack. Since 2 years ago, we have another alternative for printed data, in the form of Stock Investor, which is a monthly digest. One can also calculate the ROE himself, i use the variant of EPS/NTA. There are different model available
If one attend a CFP class, he will learn about using some financial ratios to value stock, and learn about DDM. In malaysia, the more complicated DCF (discounted cash flow) is not taught but you get to learn a little bit of the theory. Most analyst uses DCF. I've chosen not to use such a complicated DCF model, not only because it is tedious to work out the model, but it involves some presumptions which i think is adding a lot of inaccuracies and uncertainties to the model. To me, DCF is at best a little bit better, if not worse, than simpler DDM or even the simple purchase based on ratio. My friends who studied CFP and CFA have shared with me what they have learnt.
i think in future it may be worth for me to use slightly more ratio onto my stock. For example, i think i am gonna look at the sharpe ratio of my entire portfolio. I'll share the outcome and the steps in future.
PS: my title reads ... haio, but haven't touched anything on haio. i think i touch it in next blog. basically want to compare it with other stocks in my portfolio to see how good/bad it is. by the way, today Haio is RM6.61. seems like my move last trading day is not too bad, at least short term wise
All the while i have being interested with using financial ratios onto the stock i follow. Before i buy a stock, i look at their ratios, particularly Return on equity (ROE), dividend yield (DY), price earning ratio (PE).
Actually there are many more ratios. Many of them i also never use and don't know how to use them. For Malaysian stock, how do we get such ratio?
PE is rather straight forward. It is Price/EPS. All newspaper will publish the PE of a stock. As such getting it is straight forward
Many newspaper also publish DY. However, at times i found that it differ from paper to paper. Some publish wrong info. so it is good you have alternative source for this.
ROE is bit difficult to get, relatively. I used to get my ROE from www.osk188.com.my , my stock broker website. But now i find it pretty tedious to go through its pages, in addition its data not very accurate either. Another nice way i like is to look at Dynaquest data book, however it is belated by few months when it gets to the rack. Since 2 years ago, we have another alternative for printed data, in the form of Stock Investor, which is a monthly digest. One can also calculate the ROE himself, i use the variant of EPS/NTA. There are different model available
If one attend a CFP class, he will learn about using some financial ratios to value stock, and learn about DDM. In malaysia, the more complicated DCF (discounted cash flow) is not taught but you get to learn a little bit of the theory. Most analyst uses DCF. I've chosen not to use such a complicated DCF model, not only because it is tedious to work out the model, but it involves some presumptions which i think is adding a lot of inaccuracies and uncertainties to the model. To me, DCF is at best a little bit better, if not worse, than simpler DDM or even the simple purchase based on ratio. My friends who studied CFP and CFA have shared with me what they have learnt.
i think in future it may be worth for me to use slightly more ratio onto my stock. For example, i think i am gonna look at the sharpe ratio of my entire portfolio. I'll share the outcome and the steps in future.
PS: my title reads ... haio, but haven't touched anything on haio. i think i touch it in next blog. basically want to compare it with other stocks in my portfolio to see how good/bad it is. by the way, today Haio is RM6.61. seems like my move last trading day is not too bad, at least short term wise
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