A record making year in 2013 and welcoming aftermath of 2014

A record breaking year for many stock indices around the world. Local front we have also seen a history on this. Does all companies growth exponentially or it is a result of money becomes smaller? QEs invited fierce currency devaluation. Cost transferred from supply chain to consumer pushed revenue and some earnings higher. Looking back into 2014, will the economy automatically steer to an healthy level with reduce QEs? That will be an interesting year ahead together with our local front price adjustment exercise by our government.

We wish all a Happy New year and lets begin the countdown tonight! Most important, nothing is more important than your passion, health, family and helping those in need.

Once again Happy New Year!

MBSB Right issue, we will go ahead for full subscription.

We continue to like MBSB except whether they can control if there is a potential increase in loan quality issue. As most of the loan is government servants and back by EPF. Recent price drop with discounted cash call is a good option to further increase holdings. We recommend a full subscription with a mid to long term target price of RM 3 – 4. Still, it make no sense if EPF is not merging RHB and MBSB eventually.

Will Chinese new year power-up a traditional rally this year?

We think there is a 50% chance or higher for a long missing Chinese New Year rally. In 2014, the only concern is inflation that the effect will fill the street probably start 2nd Quarter. As stocks are also a key inflation beneficiary if interest remain unchanged. A rare scenario where interest rate still low but supply chain cost increase due to government policies. Corporation will transfer all or part of the cost to consumer.

Modern necessities will benefit in this round of inflation. E.g. Food related company where cost can be transferred to consumer. Non necessities like Gold, fashions or travel may got some hit. E.g. Poh Kong, Reliance, Cheetah, Padini will find uphill challenge to increase revenue and maintain profit margin.

However, we recommend a sell if prices over certain PE. But will be a good chance to take certain Chinese owner related stocks.

The strategy is buy in 1st and 2nd week. Sell if with a profit 1 week before new year. Alternatively without unforeseen circumstances, we should have a gain day after Chinese New Year as well.

Probably the bargain of X’mas

If there is something I definitely need to buy for investment during X’mas.  Probably will be Gold, Aussie Dollar and Success.  As may prices are not cheap now.  These are the only bargain around in town.

We have completely disposed Stemlfe at RM 0.465

As a further step to adjusting our portfolio, we have sold all balance Stemlfe that has a Earning ratio more than 20 times. Although we like their industry and its recent M&A but we feel that price is trading too high.

We switched to Cheetah, Alaqar Healthcare and YTL Corp for all PE 10 and below prudent earnings stocks.

Ringgit is not doing well to any FED response

For months that we noticed RM is not performing well whenever a time FED is considering reducing QEs. That’s not good news as a matter of fact FED will be long term reducing its QEs. RM will have a persistent pressure and we worry about RM now.

Climate Change Portfolio 2014

It is difficult to identify sound and undervalued climate change related portfolio in the markets. It is either trading far over valued or it is not profitable at the moment. After 3 months monitoring in the market, we have the following list we like and will increase our holding time to time.

1. Analabs – TP RM 2.50
2. Cypark – TP RM 3.00
3. 英達公路再生科技 – TP HKD 4.00
4. Union Steel – TP SGD 0.200
5. HHH Corp – TP RM 0.200
6. EcoWise – TP SGD 0.010

Everything looks good but the book is not balance

QEs strategy by all world center banks look generate some result lately. However, if the book is not balance. It will be a matter of time things will get burst.

We do not believe many securities house call for forward earning of 15 times as reasonable. This means current PE may traded at 17 – 20 times. It is always a probability game in the market. Given an anticipated inflation due to removal a subsidies. We believe 2014 is not going to be an outstanding year. KLCI may grow but not significant. Downward risk is much higher if any issue arises.

Our 2014 investment strategy remained the same. However, we added a criteria where part of our focus will be into weather change related.

1. Identify companies that will grow in global climate change.

2. Continue invest in agricultural and food related companies or its related supply chain.

3. Asset related investment as part of the portfolio or it’s related supply chain.

4 Reduce debt ratio and increase stable income.

5. PE 10 or lower will be the first criteria to reduce risk. If not fall into high growth industry that we like in climate change.

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