Chinese Banks in spot light of their bad loan

Even strong profit results posted by most top lenders especially our favorite ABC – Agriculture Bank of China. ABC profits surged 15% to RMB 45 billions. However Non performing loan increases close to 3% as well.

We will keep an eye on the development but the current valuation at merely 6 times of its earning ratio around RMB 3.7 closing yesterday is still very low compare to local and regional banks.

For lenders beside of both Affin and RHBCap that may invite our interest. If we were to put money further in lender we will still like ABC.

Budget 2014 will hit hard to local property industry

We think the approach is too hard even though we do not agree to sky rocketing property’s prices. The root is whether it is speculative or other reasons that caused the price hike. We feel that it is because cost is increasing and developers have transferred the cost to consumer. Also as it is a highly related fact to quantitative easing strategy by most central banks all over the world.

If the second objective is to collect more taxes to balance the budget. We feel simply a 2-3% stamp duty share by both buyers and sellers may have achieved the goal plus mildly reduce speculative activities.

If property market react heavily to the approach and this may impact all chains related to property industry and we believe is quite widely spread.

Budget 2014 – Unexciting but at least cater for public

Our overall budget 2014 implications are Unexciting. As expected a little prudent but still did not drastically reduce fiscal deficit and use resource smartly.

We like budget where it does cater for some people in need. What we don’t like is the government still spending unproductive in handling out money.

Overall the worst segment should be property industry. Where RPGT revised upward across the range. Especially for corporate that may need to incur 5% even after 6 years. We see impact on new and used home. Mean time may certain degree discourage MREITS buy and sell their portfolios. DIBS will also impact some new developers projects where build then sell may be the encouragement of the policy beside of avoiding speculative activities.

We believed GST is fair given reduction in personal income tax and corporate tax are in conjunction together. We always like a prudent budget but what we don’t see is productive injection that can boost certain industry commercially.

We unloaded some Bonia and switched to Kawan Food

Bonia has done well but we mildly unloaded some above RM 3.60 as we think the current valuation a bit high.  However given the potential of the company. We will still hold some share for mid to long term unless valuation above 20 times.

We continue nibbling Kawa above RM 1.200 lower than RM 1.250 level.

KLCI moving upwards unusually and we added Kawan

There may be expectation on budget help for conglomerate by new policies and projects. TNB leading the upwards by speculation to allow adjusting power rate upward.

We are not sure these are foreign or local funds but given the volume on KLCI’s component stocks. These are definitely huge funds manager. Personally I don’t think foreign fund will come in before the budget and most likely to be local fund that snapped up the stocks. May be they know something we don’t know. Or purely emotional in support and welcoming the budget.

Overall, we remained neutral to slightly bias to downward for the market. Valuation is always back to basis.

We added Kawan and Kawan Warrant at RM 1.230 and RM 0.230 today.

Avoid to invest in any business that requires knowledge workers

Understand that labour resources are very tight currently in Malaysia. So do knowledge workers across all industries. If there is not enough resources or compete of resources and made cost higher. No business will be able to be profitable as a result. Avoid to invest in any counters required extensive resources.

Budget 2014 – A short term downward bias to KLCI

As known issue that surrounding 2014 budget is to ensure a better balance and lower deficit expectation. Budget 2014 will have no choice in overall to be prudent. We may see some increases in taxes at some angles and also some spending to other angles. Most important it cannot be expanding budget.

If it is widely expected as a prudent budget. We will see some pressures on GDP growth next year. If we see a expanding budget that may increase debt will prompt some selling pressures. Thus in short term there is no choice but KLCI will trade cautiously bias downward.

Of course this is the macro view and it will be always some good companies that will outperform the market and vice versa some underperform. It will be a surprise if market react positively. But our continuous practice of all weather conditioned portfolio is always hoping room to improve via turbulence market.

How to leap frog your net worth? We have a perspective.

Jim Roger – Market is going to end badly, sometimes 2-3 years from 2013 but he does not know exact date.

Steve Hawkins – Universe is always inflating and it is quicker then ever. Finanicial market will be the same. You may deflate or stagflate a while. But eventually will pick up inflation again.

Warrant Buffet – Pick the right stock, with the right management and the right mindset. Sit back and see how it grows across time. My ultimate holding time is forever if the stock is good.

Our theory – Slash your debts, stayed invested with dividend yielded stocks, pick a bit of Gold. Wait for the market pull back. Then think again, everything will back to universal law of inflation. Dare to buy back when people are worry. Most important, pick a good stock that will survive the recovery.

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