Next week strategy – Buying a little from distressed market

Cheetah, Aeon Credit, Paramount (Malaysia) China Water (H-Shares) and Cambrigde REIT will be our acquisition target.

US debt – Best time to most KLCI back to reasonable values

At 1545, we believe it is close to a reasonable level but still not bargain. Indeed some stocks are emerged as value. We like AEON CR, Paramount and the recent pull back give us a great chance to buy in further. Again, we always stay away anything PE above 20 times. Simply we just do not believe in risk that a business is justified to pay a value with 20 years ahead especially in this much turbulence era.

We will start turn fairly defensive – when China wants to slow, US still lagger, Euro in trouble and Asean is slowing

All data fairly point to a definite slow quarter of 2011.  Indeed, before new data arises, since debt crisis are persist and we do believe commodities and REITs will do well.  Beside of local election, we do not see any reason that the market can be moving towards 1700 at forward PE of overall market at 15 times.  Where regional and internationally are at 10-12 times.

For the main street, things not looking good.  Even if US fix their debt issue, it is true, a huge spending cut will definitely slow down already hit situation.  Last 2 years, China is leading us out but China now also battling QE1 and 2 effects of huge inflation.  A definite slow down is required and hence we do not see any positive news of a major boost again to the market.

For the enxt 2nd half, if no election is announced, local front will trade between 1450 – 1600 as downward flat is expected.

When Public Bank is at PE 11-12, how can you justify others with 16-18 times?

CIMB and Maybank both traded at 16-18 times of PE.  Whereas other banks are trading between 11-12 times.  Some times, i just wonder is it because of CIMB and Maybank aggressive acquisition lead to a position fund managers believed that it worth this much?  If base on last three years, every quarters performance, Public do better then them.  If you look at regional peer, Agricultural bank, ICCB, DBS or even Citi are at the region of 10-12 times.  Some times, i mean really some times, how could analyst justify 16-18 times and even recommend a trading PE of 2012 at 18-20 times?

Unbalance price for Malaysia Property, Commercial property should be in focus

For many years, the phase “over supply” of commercial properties in Malaysia is the key reason about its price. Residential properties prices sky rocketing and in overall higher then commercial properties. Key reasons of residential properties price hike are because of foreign purchase, local investment and whatever you can name it according to local reports.

To me, it is a bit weird as I believe if there is not enough commercial activities, how do you have enough economy value to have good residential property price? Personally I believe this scenario pretty much due to our local developers and weird government policies.

Even though we still have a young population, I am not convince that they grow up just to stay at home but no need to be in office, factory, shops & etc. Foreign purchase will dry or at least slow down one day. Also, is our living environment much better then others. If high end properties are pretty much based on foreign expats. Then how could we justify a lower commercial properties in overall if they need to come here and work? Our house hold debt also shown more then 60% is in properties.

We believe evetually everything will be back to fundamental. Thus back to basis, commercial properties will eventually roar and do much better then residential. If Malaysia economy is going to do well under the ETP program. Not just in oil and gas alone!

Again, I am not buying the concept of over supply as even residential also got many in stocks. Just location depending. We foresee a soft or stagnant residential pricing for the next few years as digestion period and commercial should start adjust its value by itself.

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