Thursday, March 11, 2010

Tips on how investors could build a large portfolio

OWING TO the global economic downturn, some investors may have to put aside their aim of wealth accumulation lately.

For now, wealth accumulation seems to be far away given their current low salary level, worsened by lower bonuses received or no salary increment.

As a result of the uncertainty arising from salary reduction or getting retrenched, some may even need to tap into their savings to survive through this period of difficulty.

We can fully understand this situation. However, we believe that we should consider building a portfolio at this time.

We may not want to rush in to buy stocks now in view of the current high prices. However, we need to prepare ourselves to “fish” good quality stocks at reasonable price levels if the market turns down again.

We will regret if we are not investing during this period because usually the best opportunities are discovered during a downturn.

Nevertheless, some investors think that it may not be realistic for them to invest now given that they are already having difficulties making ends meet.

However, we believe that we need to start somewhere. Every big portfolio always starts from a small one. If we never sit down and start thinking about building a portfolio, we will never get a big portfolio. Hence, we should start now and start small.

When our portfolio is about RM10,000 in size, a 10% return means a return of only RM1,000. However, when our portfolio grows to RM1mil, a 10% return means RM100,000!

Some investors may have the intention of building a portfolio but they do not know how to do so. In fact, some may depend on wealth advisers on this issue.

However, even if we get a very good, knowledgeable and responsible wealth adviser, we also need to equip ourselves with some knowledge in this area to make sure we make sound investment decisions; after all, we need to be responsible for our future.

We can gain this knowledge by reading books related to this topic or attending some training courses.

Know what we want to achieve

T. Harv Eker says in his book, Secrets of the Millionaire Mind, that “the number one reason for most people who do not get what they want is that they don’t know what they want.”

For example, if we want to have a good retirement, we will have to know how much we need for our retirement and plan ahead for it. To give you some ideas, there are quite a few websites that can provide free advice on how to determine your retirement needs.

Once we know how much we need for retirement and set it as an objective, we need to focus on growing our net wealth to achieve it.

Sometimes investors are too focused on their current income level and short-term gain that they end up neglecting the long-term growth of their net wealth.

High income does not mean high net wealth if your expenses are higher than your income level. Hence, we need to control and monitor our expenses in order to have a net positive cash inflow instead of outflow.

If possible, we should have a cash budget that will guide us on the expected income to be received as well as the expenses to be incurred in the coming periods. We should try our best to stick to the plan and be committed to build our wealth.

Lately, some investors have been affected by high credit-card debts, which may be due to high expenses that cannot be supported by their current income.

During hard times, we need to plan carefully for big expenses and, if possible, we should delay expenditures which are not critical.

Given that nobody will know when our economy will recover, it is safer to spend less and try to reduce our debts.

In fact, if we have cultivated good spending habits from the start, regardless of economic situation, we will not have the problem of having to trim down unnecessary expenses during bad times. We have seen a lot of successful people living below their means and being very careful in spending money on luxury items. We should learn from these examples.

Don’t look down on low returns

Sometimes, a guarantee of low returns is better than the uncertainties of high returns, depending on the risk tolerance level of individuals. Always remember that risk and return go hand-in-hand. Not every investment product suits our return objective and risk tolerance level.

Therefore, we need to understand the characteristics and nature of investment products that we intend to invest in before we make any investment decisions.

We cannot always think of big returns without considering the potential risks that we need to encounter.

For those who like to play it safe, it will be wiser to go for defensive ways of investing, which means looking for stocks that pay good dividends and have solid businesses.

Remember, we need to be patient, go slow and steady. If we can avoid making losses during this period, we should be able to achieve our financial goals when the economy recovers again.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting

Thestar

Tips on how to choose unit trust funds

UNIT trust funds offer an attractive alternative to retail investors, especially those looking for the benefit of diversification with a small pool of capital while enjoying the possibility of earning higher returns compared with conventional savings.

However, a lot of people have the misconception that the diversification nature of these funds means that the risk of investing in unit trust is low and they can just close their eyes and simply pick any of the funds that come along.

This misconception has led to many paying high prices in learning that as in any type of investments, investing in unit trust funds requires some basic understanding and research before we commit our hard earned money to it.

In general, we can classify the unit trust funds in the market into two major categories: income funds and growth funds.

·Income funds usually are characterised as providing consistent income to the investors. These funds invest in income-producing stocks or bonds or a combination of both. Bond funds, equity income funds and money market funds are included in this category.

·Growth funds generally are more aggressive than income funds but have the possibility of earning higher returns by focusing on the objective of long-term capital appreciation rather than income producing or short-term gain. Examples of growth funds are small-cap funds, commodity funds, index funds and gold funds.

Before we start evaluating the funds to invest in, there are two main considerations which are our investment objectives and risk tolerance level.

Every investor invests for his own purpose. If you are investing for your retirement and are already close to retirement age, you should look for income funds that are more predictable.

However, if you are still young and want to save for your children’s higher education, which will be 10 or 15 more years, you may want to look for growth funds that generate higher return but with higher level of risk.

Once we are clear on what we are looking for in the investment, we can narrow down our selection to either income or growth category and move to the next step of identifying the most suitable funds within the selected category.

Here are a few key factors to look into when evaluating unit trust funds:

·Investment strategy, policy and holdings: Every fund has its own investment profile. Investors should have a clear understanding of the investment strategy taken in each fund that they are considering to ensure it is consistent with their personal investment objective and risk tolerance level.

Even the funds within the same category may have significant differences in risk exposure due to the difference in the investment holdings.

For example, the risk exposure in large-cap growth companies is definitely much lower than for penny stock funds.

·Past performance: Investors may look into the past performance trend of the fund to gauge its future performance.

However, do bear in mind that good past performance may not be repeated in the future and we should not be overly excited to see one year of good results if the fund is only newly established.

A good fund should be the one that has been consistently out-performing its peers, be it during good or bad times.

·Cost: Investors must be aware that when they buy or sell the funds, there are fees and expenses embedded in every transaction.

For example, the expense ratio of a small fund tends to be higher than a large fund while a regional or global fund usually will carry higher costs compared with a domestic fund.

·Fund management: The fund management is very important to ensure continuity and consistent performance.

If a fund changes management too frequently, it will be very difficult for us to gauge the performance of the fund as different managers will have different styles which may affect the performance of the fund.

For example, if the manager tends to have higher portfolio turnover, then the expense ratio of the fund may increase even though the nature of the fund holdings remains the same.

By having good understanding of the above factors, we may be able to make meaningful comparisons among funds that we are interested in to identify the ones that suit us most.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

thestar

Wednesday, March 10, 2010

Sniffing for market opportunities

THE year of the Ox, which ends on Feb 13, has turned out to be a robust period for the global stock market.

But after ten months of almost straight gains fuelled by the abundance of cheap money, the Year of the Tiger, according to consensus, is likely to be a more challenging time for bullish investors.

According to RHB Research Institute, the recent market pull back suggests investors’ have turned cautious, while at the same time sustained market volume indicates higher churn rate as investors’ investment horizon gets shorter.

The research house advocates investing in healthy companies with sound fundamentals to ride through the volatility.

CLSA Asia Pacific Markets sees the year being fought out in a tug-of-war between liquidity and fundamental factors.

This, it said, will result in choppier market conditions. To ensure outperformance, CLSA Malaysia head of research Clare Chin says investors should buy on dips.



OSK Research, in its outlook for the year, also foresees a bumpy ride ahead for investors. It is of the view that the optimism on corporate earnings and the equity market in the past few months as somewhat “misplaced.”

However, the firm’s head of research Chris Eng believes that the tide of liquidity will continue to support the market.

While investors continue to fret over the risk of tighter monetary policy in 2010, JP Morgan opines that Malaysia is unlikely to raise rates or curb asset growth anytime soon.

It says conditions are still conducive for domestic funds to remain invested in riskier asset like equities rather than sitting idle on cash. Trawling through recent strategy reports by local and foreign brokerages, the consensus view is that equity prices, both at home and abroad, are no longer cheap on historical basis. The overall uptrend for the market, however, is still intact.

StarBizWeek has selected 10 stocks representing diverse sectors polled from various analysts and fund managers (we have avoided the 25 stocks picked out by Standard & Poor’s as they have been published in an earlier article).

While reputable blue chip stocks will continue to hog investors’ radar, we see value in under appreciated smaller sized firms.

Stocks such as Malayan Banking Bhd and Malaysian Pacific Industries Bhd, which have turned a corner, have yet to fully convince the market about their recovery prospects, while Hartalega Holdings Bhd and SapuraCrest Petroleum Bhd have the making of a global champion.

Malayan Banking Bhd

The country’s largest banking group was a laggard compared to its rivals in the past 10 months. But after two consecutive quarters of solid performances that wowed the market, Maybank is set to roar in the Year of the Tiger.

“With strong organic growth from domestic operations, Singapore and especially PT Bank Internasional Indonesia (BII), the negative impact from the expensive acquisitions (of BII and Pakistan’s MCB) would be more than nullified as financial year ending June 30, 2011 (FY11) earnings per share (EPS) is expected to exceed pre-acqusition levels,” says RHB Research Institute.

Consensus estimate put Maybank’s earnings at 44.4 sen per share for FY10, and assuming that it would return half of the profits as dividends, current yield for the stock stands at above 3%.

Malaysian Resources Corp Bhd

Seven out of 10 analysts who track MRCB have a “buy” call on the stock, despite concerns over earnings dilution arising from the sale of rights shares to raise RM508mil in fresh capital.

MRCB has earmarked RM300mil from the total proceeds for future acquisition and landbank expansion. It has been linked to several potential land deals in the Klang Valley, but details are scanty at this juncture.

Analysts say MRCB’s “irresistible angle” will keep investors glued to the stock. MRCB is recent years has completed its restructuring and streamlining initiatives, putting itself in a stronger position to take on new projects.

Malaysia Airports Holdings Bhd

MAHB is a lower risk proxy to its biggest customer AirAsia Bhd, which contributed 44% of its total passenger traffic last year, and as a proxy play of Malaysian Airline System Bhd’s recovery.

The airport operator has also discovered how profitable retail business can be, having retro-fitted KLIA to boost retail space by 60% and the refurbished Subang Airport looks like a shopping mall.

MAHB, the cheapest airport operator in the world, is trading at just 11 times its projected EPS for this year versus the global average of 18 times, according to Credit Suisse.

With its concession agreement with the Government sorted out, significant risk to earnings has been removed. A re-rating catalyst would come from a possible further sell-down from Khazanah Nasional Bhd, which currently owns 67.7% of MAHB.

SapuraCrest Petroleum Bhd

SapuraCrest is fast becoming a major player in the region’s oil and gas industry’s deepwater pipe-laying segment.

Through various joint ventures, SapuraCrest has build up an orderbook in excess of RM15bil to keep it busy over the next five years. The company is eyeing for new jobs in India and Australia, where capital spending on new oil and gas projects are on the rise.

SapuraCrest reported a record net profit of RM115mil for the year ended Jan 31, 2009 (FY09). CIMB Research projects that SapuraCrest’s net profit will continue to rise over the next three years at a compounded annual growth rate of 30%, which is the highest in the sector.

Deputy executive chairman Datuk Shahril Shamsuddin, through his family holdings, controls 40.3% of SapuraCrest, followed by Norwegian Seadrill Ltd (23.6%) and the Employees Provident Fund(8.25%).

CSC Steel Holdings Bhd

The outlook for steel miller CSC Steel is favourable over the next few quarters underpinned by rising flat steel product prices that will sustain inventory replenishing activities by steel stockist.

The group’s balance sheet is healthy, with a net cash position of RM303mil as at Dec 31, 2009 against RM145mil recorded a year ago. Trading at about seven times to its trailing 12-month EPS of 24.4 sen, the stock valuations are attractive compared to the broader market.

The company has proposed a final dividend of 13 sen per share and a special payout of 7 sen for year ended Dec 31.

This translates to gross dividend yield of 12.5%.

Daibochi Plastic and Packaging Industry Bhd

Daibochi is the biggest listed plastic flexible packaging (PFP) maker in the country with a 30% market share.

In the past, earnings for PFP makers had been erratic due to swings in raw material cost.

Since last year, PFP makers like Daibochi have put in a “cost plus” arrangement in contracts with customers to smoothen out the volatility. This allows Daibochi to sustain its current pre-tax margin, and the group’s net profit has been inching up from RM5mil in the first three months of 2009 to RM6mil in the last quarter of the year.

Hartalega Holdings Bhd

Hartalega is the global market leader in the nitrile glove business, which gives the company some pricing advantage over its rivals. With 10 new high capacity production lines to come on stream in stages over the next 12 months, Hartalega’s production is expected to reach 9 billion pieces per annum by March 31, 2011 (FY11) from 6.5 billion pieces currently. A healthy cash pile of RM43mil, or 18 sen per share, gives the company flexibility to fund expansion, or pay shareholders higher dividends.

Analysts say that local glove makers have proven to be “recession proof” businesses, with demand expected to reach 150 billion a year in 2010.

IJM Land Bhd

The company was established following the merger of IJM Corp Bhd’s premium brand and Roadbuilder’s extensive landbank. Analysts estimate that IJM Land’s current 5,300 acres landbank, located in key areas in the Klang Valley, Penang and Johor.

Current unbilled portion amounts to about RM1bil, which is around consensus turnover projection for this year.

IJM Land’s potential to become a major property player is somewhat under appreciated by overseas investors given that foreign shareholding in the company stands at around 13% compared with parent company IJM Corp’s 32% and rival SP Setia Bhd’s 26%.

Malaysian Pacific Industries Bhd

MPI plans to triple its capital expenditure (capex) to around RM300mil for financial year ending June 30, 2010 to boost capacity and enhance test capabilities.

The capex, acording to CIMB Research, will result in a RM170mil rise in annual revenue, as well as improved margins.

MPI’s strong balance sheet places the company in a good position to ride the current upturn in the semiconductor industry, although questions remain on whether the global recovery is sustainable.

CI Holdings Bhd

CI Holdings derives 92% of its turnover from beverage sales, with current revenue split of 65% from carbonated drinks and 35% from the non carbonated segment. The company made a net profit of RM21mil in finacial year ended June 30, 2009 (FY09), up from RM14.5mil in FY08.

Half year earnings in FY10 has already reached RM15.9mil. At 8 times its trailing 12-month EPS, CI Holdings is valued at half price compared to rival Fraser & Neave Holdings Bhd.

Tight stock liquidity means CI Holdings will probably continue to trade at a discount to its bigger rival, but its prospective dividend yield of about 6% is above average.

Thestar

给孩子买保险 10个小技巧

投资保险就是投资明天,投资保险就是投资希望、梦想和祈祷。

教育投资已经成为几乎每一个家庭支出的一个“大投资”。尽管少年儿童保险(一般指18岁以下的未成年子女)的教育基金,相对于其他基金回报率较低,但从长远规划来看,是为孩子准备了一份学费。

孩子目前已成为家中的核心,尽管呵护备至,但孩子的自我保护能力和健康免疫系统毕竟比成年人脆弱很多,发生意外和感染疾病的几率也会更大。而孩子的一切医疗费用全部由家庭负担,这笔支出费用很大。因此,孩子们未来的“金饭碗”,就是投资少儿保险。

少儿保险是规避风险的投资,随着保险品种的日益多样化,保险的功能会越来越多。

择少儿保险必须注意以下10点:

1儿童的受保年龄

大多数儿童保险的投保年龄都以0岁作为开始,但在保险行业章程中,这个0岁不是儿童的自然年龄,指的是儿童出生满28天。保险公司是不是有此规定,最好要问清楚。

2缴费期不必太长

可以集中在孩子未成年之前,在他长大成人之后,可选择自己合适的险种为自己投保,但是保障期可相对较长。

2切忌重复购买

如果孩子已经上学,学校一般上会为他们购买集体意外险,而一些福利好的公司也会为员工的子女承担一部分医药费。因此,家长在为孩子投保前,一定要先弄清楚,孩子已经有了哪些保障,还有哪些缺口是需要由自己买保险来弥补的。

清楚细节才签约

4“白纸黑字”要看清

保险公司也会在保险宣传单上刊登重要的注意事项,比如“除外责任”、“收益不能保障”之类。只不过,这类文字的字体经常是小六号,比宣传单一般字体小一倍。因此一定要留意字号最小的部分,而往往这些才是“精华”所在。

5仔细阅读相关条款

之所以大多数人觉得购买保险是一件麻烦的事,主要就是因为保险中繁杂的条款和专业术语。

而业务人员推销保险时仅仅对险种作大概介绍,所以家长作为投保人,一定要仔细阅读条款,特别要注意保险责任、责任免除、保费交付、退保等章节。

如果遇到不明白的地方,一定要在签订合同之前弄清楚,叫代理逐一解释清楚。

6遵守“先近后远,先急后缓”的原则

少儿期易发的风险应先投保,而离少儿较远的风险就后投保。没必要一次性买全了,因为保险也是一种消费,它也会根据具体情况而发生变化。

7购买豁免附加险

需要注意的是,在购买主险时,应同时购买豁免保费附加险。这样一来,万一父母因某些原因无力继续缴纳保费时,对孩子的保障也继续有效。

8保险期限不宜太长

对于很多资金不是特别宽裕的家庭来说,尤其是大人自己的养老金尚没有储备足够的情况下,考虑孩子的养老问题确实无甚必要。因此,为孩子买保险时,保险期限应以到其大学毕业的年龄为宜,之后就应当由他自食其力了。

9对号入座自己算

尤其是对一些理财、投资类产品,预期收益往往都是建立在一种最理想的状况,比如公司常年高额分红等等,遇到这些很有诱惑力的数据,家长不妨把预期缴纳的保费、每年的收益状况代入其条款算一算,得出比较切合实际的收益值。

10保额不要超限

为孩子投保以死亡为赔偿条件的保险(如定期寿险、意外险),累计保额不需要过高。

为孩子买保险10大理由

1保费便宜

绝大多数人寿保险,年龄越小,交费越低。例如投保健康险,一个30岁的成年男性所交保费是一岁男童所交保费的二至三倍。

2承保机会大

小孩在出生或者年幼身体健康时,一般不会被保险公司拒保或加费承保。

但随着年龄增长,生病的概率加大,有些疾病会影响未来,严重者便会被拒保。所以,越早投保承保的机会越大。

3风险转移

保障家庭生活安定,14岁以下人口中,0至4岁的儿童发病率高,死亡率高。疾病、意外伤害、传染病等威胁着孩子的健康成长,投保少儿保险,能避免家庭因此陷入经济困境。

4积累教育金或创业基金

依据子女上小学、中学、大学等不同阶段,提供保险给付或大学教育金,创业基金等。

5保险给付可扣税

按我国所得税法规定,保险给付的各种款项,可以按照一定比例扣缴所得税。

6投资理财的一种方式

人寿保险除了传统的保障功能以外,还具有较高利率、免税,甚至分红等功能。

7训练子女责任感

培养小孩良好的价值观,长大后协助分担保险费,培养责任感。

8减少子女将来的负担

随着老龄化社会日趋严重,子女赡养老人的担子越来越重。当子女成年时,保险费接近或已经交满,不须再缴纳保险费,即可拥有终身保障。

9转移财产给子女

用给子女买保险的方式,将财产转移到子女名下,特别是我国一旦开征遗产税,保险是最好的保全家庭财产并合法避税的方式。

10关爱生命

体现爱心保险是少儿成长期间的保护伞,父母抚养子女期间的备用胎。

●南洋商报

须加快步入职场 大马女性财务要自主

今天正是一年一度的三八妇女节。国际三八妇女节今年步入100周年,100年来,由于女性社会生活中的地位不断提升,在家庭中的角色也在逐渐转变——女性拥有了独立的经济自主权。


不过,在马来西亚,我国职场还出现一个令人百思不得其解的现象,目前我国女性的就业率,迄今还不超过50%。

女理财规划师黄培美对《理财第一》说,女性要达到经济自主权,先决条件就是要有收入,就是要有工作。大马女性连工作都没有,如何有家庭财务自主权?

国际女性就业率的标准水平是80%,美国以86%高居榜首。根据联合国 “2007年亚太经济与社会” 的调查报告显示,亚太区两性就业率的鸿沟高达30至40%,而女性就业率最低的地区领包括了马来西亚,印尼和印度。

我国当时对女性就业比例,竟然只有区区47%,和泰国及菲律宾等邻国80%以上的女性就业率,几乎落后近一半。根据研究,之所以如此,与外劳大量涌入有关;而大马迈向高技术方向发展,也使一些妇女工作起来感到吃力。

《第九大马计划中期检讨报告》指出,政府要在2010年提高女性就业率至50%,尤其目前由外国工人提供的服务行业。

据悉,另外一个大马妇女远离职场的原因是结婚生子。大马妇女在30岁以前“工作踊跃”;只是结婚或年过三旬放弃工作者多多,拖累妇女就业率。

根据研究报告,如果大马妇女就业率提高10%,则能为大马国内生产总值(GDP)作出2.88%的贡献。

大马企业应多雇用女性

黄培美指出,大马的企业应该增加福利,以吸引妇女就业,包括婚后重返职场。

除了女性就业率低,大马女性在关键领域的决策权也不过,这也影响了她们的收入和表现。

根据人力资源调查公司Manpower Staffing Services (马)私人有限公司所做的调查报告显示,我国不论是公共领域还是私人界,都出现同工不同酬的男女性别歧视问题,而且女性担任决策成员的比例一直无法取得突破。

此外,根据世界经济论坛日前公布的2009全球性别鸿沟指数,大马的排名进一步滑落,在115个受调查的国家中,我国的排名下跌4名,排在第101位。这项年度调查报告,是检视一个国家如何在男女群体中有效利用他们的资源和机会。

表现最好的北欧国家,包括冰岛、芬兰、挪威及瑞典都占据前面几名;亚洲表现最好的是菲律宾。

反观在马来西亚,女性和男性的就业比例是0.57,而女性担任律师、高级主管及经理的比例,还不到30%。

女性理财和年龄有关

黄培美也指出,不同年龄的女性理财目标不同,可选择的理财产品就不同,应采用的资产配置也不相同。   

她建议,对20至30岁的女性来说,应重在培养理财习惯,打好终身理财的基础。在这一阶段的女性,可以考虑起点很低的基金定投,每月在固定时间投入固定金额的资金(比如300令吉至500令吉),长期投资则会形成聚沙成塔的效应。

同时,这一阶段的女性有着年轻的资本,喜欢冒风险,因此可以通过多学习理财知识,做些小额度的纸黄金、外汇等等,这些理财产品可以帮助女性朋友了解全球经济形势,增强对世界经济走势的判断。不过,这方面的投资不可以超过每月所得的15%。

30至50岁的女性已经有了一定的经济积累,在理财上追求稳健,同时也拥有一定的风险承受能力。她建议这些人可以做些债券、保险产品、基金、股票,当财富积累到一定程度,可以进行一些较高风险的投资。当然,面对诸多理财产品,合理的资产配置是非常重要的。

对于50岁以上的女性朋友来讲,稳健理财才是最大保障,因此,银行存款、债券、货币基金、银行理财产品等是比较好的选择。

黄培美:赚钱要趁早 女性自主精明理财

黄培美表示,现代女性大部分已经走入职场,女性手里开始有钱,但要消费更要理财,女人勤俭便能持家的观念已经成为过去式。现在,女性要想活得充实,活得幸福,一定要把自己修炼成理财的多面手。

她说:“精明女人就是要让钱生钱,就如出名要趁早一样,赚钱也要趁早。要成为有钱的女人,一定要规划财富和生活。”

把握原则重中之重

黄培美透露,把握原则是女性理财的重中之重。如果能够遵循一些理财原则,合理的去理财,就有机会轻松跑赢通货膨胀、享受理财带来的可观收益也不是大问题。

那么,女性理财要遵循哪些原则呢?

黄培美的建议如下:

(1)消费和投资要分开。女性天生爱消费,如果消费过多,收入永远少过支出,则必然无财可理。建议女性一定要按照比例分开消费和投资的钱,这样才能保证有“钱生钱”的钱,也不至于在想消费时却出现财务危机。

黄培美说:“记得一位哲学家说过:女人永远少一件衣服。不得不感叹这位哲学家对女人的深刻理解,但我相信女人们一定还想再补充几句,女人永远少一件衣服、少一双鞋、少一个包包……一本英国的时尚杂志的调查结果显示,女人每5秒就要想到一次购物,这种痴迷甚至超过了与自己的伴侣相处。可见女性与购物之间或许有着某种天然的联系。”

她说,既然女人爱购物是天性,那么就必须把投资的钱,和消费的钱分开。

(2)定期做风险评估。每个人的风险承受能力是变化的,在人生的不同阶段,对理财的安全性、流动性和收益性,大家的追求都不同,因此建议女性朋友一段时间做一次专业的风险评估,及时调整理财产品的配置。

她举例说,国家银行上个星期才宣布调高利率0.25%,投资者必要时可以改变投资策略,尤其是定期存款,可以改为1月期或3月期,尽量不要长达1年或以上,因为国行随时还会调高利率。

(3)用目标锁定回酬。黄培美强调说,没有人能够比市场更聪明,也没有人能够追逐利益的最大化,即使专家理财也不会为投资者做所有的事,避险和获利都是相对的,投资者要学会主动管理风险,这就要求投资者明确目标。因此,用“目标来锁定回酬或利润”则成为投资人的通用法则,比如获利10%一定撤出,亏损5%一定止损等等。

亚太女性 收入显著增加

配合国际“三八”妇女节的来临,总部在美国纽约的全球信用卡公司万事达3月4日发布了2010年度的万事达卡女性进步全球指数,调查显示亚太地区的女性普遍感觉自己在各方面有所进步,其中实质收入有明显增加。

该指数旨在显示男女地位差距改善状况,以数字100表示男女完全平等,如果指数低于100表明男性更受优待,高于100则表明女性更受优待。

万事达公司针对14个亚太国家和地区的调查显示,2010年度,亚太地区的女性进步指数平均得分从去年的84.47上升到85.57,半数受访女性感到,她们的社会经济地位与男性相比有所改善。

亚太地区有更多的女性进入大学。认为个人收入超出平均收入水平的女性指数也从去年的75上升到80。

这项针对亚太地区14个国家和地区(澳洲、中国、香港、印尼、印度、日本、韩国、马来西亚、纽西兰、菲律宾、新加坡、台湾、泰国和越南)进行的调查显示,其中7个国家和地区的指数有进步,包括印度、印尼、韩国、马来西亚、纽西兰、菲律宾及台湾。

纽西兰第一大马第四

这次共有3306名女性和3316名男性参与了2010年度万事达卡女性进步全球指数在亚太地区的调查。根据万事达公司的调查,纽西兰女性的进步指数在亚太地区排名第一,紧随其后的是泰国、印尼、马拉西亚,中国大陆排名第五,香港排名第十,台湾排名第十三,日本女性的进步指数在亚太地区排名最低。

中国轻微回落

而中国市场的指数则出现了轻微回落,由2009年的93.44跌至今年的90.88,在亚太地区排名第五,低于纽西兰(97.37)、泰国(97.36)、印尼(96.79)和马来西亚(93.51)等。

调查显示,亚太地区认为自身收入高于平均水平的女性与男性比率,由2009年的75:100小幅攀升至80:100。

万事达卡国际组织亚太、中东及非洲区公关部副总裁陈俐仙说:“女性在就业及接受高等教育方面继续取得长足进步,这种进步正在使得女性对于自身获取收入的能力变得更为自信。或许这也说明为什么有更多女性认为自己是家庭中主要财务决策者。”。不过,报告也显示,中国大陆妇女与男性的收入差距在拉大。

中国的万事达女性进步平均指数从去年的93.44降低到了 90.88,虽然大陆女性接受高等教育的指数较去年有所上升,但自认为收入超过平均值的大陆女性的指数从去年的68.41降到了65.68,远低于2007年的80.44,显示出中国女性与男性经济地位的差距在拉大。

家庭财务支配权 女性自主权加大

2010年度万事达卡女性进步全球指数的调查也显示,更多的亚太女性在家庭财务决策上扮演了更关键的角色。

在受调查的14个国家和地区中,有11个取得了进步。

其中,澳洲的进步最大(+35%),其次是香港(+31.7%)和马来西亚(+30.5%),比去去年,这些国家的女性在家庭财务上有更大的自主权和控制力。

万事达卡国际组织亚太、中东及非洲区公关部副总裁陈俐仙说:“妇女持续加大了自己在劳动力市场的参与率,以及教育安排的主导权,我们非常高兴看到他们在收入能力加强之外,在其他方面也有进步。这让人觉得,女性越来越获得授予权力。”

“女性在就业及接受高等教育方面继续取得长足进步,这种进步正在使得女性对于自身获取收入的能力变得更为自信。或许这也说明为什么有更多女性认为自己是家庭中主要财务决策者。”

万事达卡国际组织进行的女性进步指数调查,是采用男女性“劳动参与”及“受高等教育比例”、对于其工作“是否为管理阶层”及“收入是否高于平均值”等“四大指标”,来测量女性与男性的平等状况。

调查,亚太女性在劳动参与率上已逐渐追上男性 ,接受高等教育的程度更是超越男性。

中国女性经济地位下降

旅居美国的经济学者何清涟也认为,近年来,中国大陆女性的经济地位呈下降趋势:

“对亚太地区其她女性的调查情况怎么样我并不太清楚。但是它对中国的调查,如果反映的是中国女性经济地位下降,这点我想是接近实事的。因为过去几年来中国经济情况并不好。不像外面所说的那样好。尤其是就业市场上对女性的歧视特别严重。很多女大学生在大学毕业之前已经急于找对象结婚。把它当作一种就业。而且调查还显示,一些女性认为进入职场太辛苦,不如嫁得好。所以她们把自己的眼光放在嫁人而不是找工作上。”

“倒也不是中国女性自甘堕落,我认为这是整个社会环境、就业形势迫使中国女性不得不采取如此下策。所以去年《蜗居》播了以后,大家对那个海藻傍上一个有钱有势的官员宋思明做爱来。因此住豪宅,有很多钱用,逛豪华店,进入豪华消费行列。很多年轻女性表示羡慕。而且最奇怪的是,从老太太到十几岁的女性,都喜欢宋思明这个角色。这里说明什么?就说明中国女性地位下降,大家都把自己的未来放在一个男人的身上,自己就是一个副角吧。”

南洋商报

How to pay less personal tax

THE 2009 tax-filing season for individuals has arrived. For many of us, April 30 will be just another day (perhaps accompanied by scrambling for our just-in-time filing) to settle our dues with the Inland Revenue Board by submitting the Form e-BE and paying any balance tax.

Before clicking the button to complete the e-filing, take a second look at the figures keyed in. Is the amount of tax calculated the lowest it can be? Here are some tips on saving tax that would not get you in trouble with the law.

1. Know your income: What is taxable and what is not.

Gone are the days when you agonise over the delay in receiving your Form EA from your employer. It is now a law for employers to issue the Form EA to their employees no later than the end of February. The key point to note is not all income in your Form EA is taxable! Scrutinise all the items in Form EA to see if there is any which should be tax-free. For example:

Travelling allowances

If you receive travelling allowance, up to RM2,400 for your travels from home to office is tax-free. What this means is if you receive an allowance of RM12,000 for such travel, you can deduct RM2,400 and only RM9,600 is taxable. Further, travelling allowance of up to RM6,000 for official duties is tax-exempt.

Meal, parking and childcare allowances

Many employees receive these allowances, do you? You would be happy to know that you can enjoy such perks with no worries about paying tax thereon (up to RM2,400 in the case of childcare allowance).

2. Make the most of all tax-free benefits.

Medical benefits

Medical benefits for traditional medicine including ayurvedic, plus maternity benefits are also tax-free.

Interest subsidies

Your employer may have subsidised interest on your housing, car and education loans. In the past, these subsidies would be taxable on you. Now you would be glad to know such interest subsidies are tax-exempt (so long as the total loans do not exceed RM300,000).

Broadband and telephone benefits

Who can leave home without the iPhone, Blackberry or PDAs nowadays? Getting such a device from your employer plus reimbursement for broadband and telephone bills are tax-free. So take advantage and enjoy the latest gadgets and services.

3. Know your limits.

Just as in drinking and driving, stay within the limits to avoid any trouble or triggering tax.

If you have enjoyed any staff benefits like discounts on your company’s goods or services and kept within the RM1,000 a year limit, you should enjoy tax exemption thereon.

Did you receive a small token from your employer on your achievements in service excellence, innovation or productivity which brought on a smile? Don’t blame your employer if they kept the awards below RM2,000 as no tax should be levied on you. Neither is the award for your long service with the company (for more than 10 years) forgotten. As long as your employer kept the value of all awards to you within the RM2,000 limit, the smile should remain on you.

4. Look for more tax-free income.

Bank interest income

You will note a subtle difference in your bank statement nowadays as it no longer shows the amount of tax withheld. Bank interest income is now tax-exempt.

Dividends

Dividends need not be entirely taxable. Have a good look at the dividend voucher. If it states that the dividend is “tax-exempt”, then it is not taxable anymore.

5. Gain more deductions.

Purchase of sports equipment

If the slimming fad has caught on with you, keep the receipts of your purchases of any sports equipment. A claim of up to RM300 is a small incentive to shape those curves and muscles in a big way!

Have receipts or evidence to support more deductions

Medical expenses for your parents certified by a medical practitioner (restricted to RM5,000);

Medical expenses for serious diseases for self, spouse or child (up to RM5,000), including a complete medical examination for self, spouse or child limited to RM500;

Basic supporting equipment for disabled self, spouse, child or parents (ceiling of RM5,000);

Disabled person (self) (RM6,000);

Disabled husband/wife (RM3,500);

Education fee (self) up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications for a masters or doctorate level, undertaken for the purpose of acquiring any skill or qualification (limited to RM5,000);

Purchase of books/journals/magazines/similar publications for self, spouse or child (up to RM1,000);

Net deposit in National Education Savings Scheme (ceiling of RM3,000);

Purchase of personal computer for individual (maximum deduction of RM3,000 allowed once every three years);

Premiums on life insurance plus EPF and other approved fund contributions (subject to RM6,000 restriction);

Premiums for education or medical insurance (restricted to RM3,000);

Relief of up to RM10,000 on the housing loan interest paid (conditions apply);

Payment of alimony to former wife (maximum total deduction for wife and alimony payment is RM3,000);

Zakat other than monthly zakat deduction from salary; and

Fees/levy paid by a holder of an employment pass, visit pass (temporary employment) or work pass.

The rule of the “game” of keeping your tax liability to the minimum when preparing your tax return Form e-BE is to do it right within the law. For a start, make the website of the Inland Revenue Board, www.hasil.gov.my, one of your favourites from now until April 30 to access its easy to read guides. Happy e-filing!

Ang Weina is executive director and global employer services leader with the tax practice of Deloitte Malaysia.

Thestar

Should one invest in bonds?

MOST retail investors in Malaysia may not be familiar with bond investing. We may have come across bond funds in our unit trust funds investment, but, not many really understand why and how to invest in bonds.

A bond is basically a loan to government units or corporations that issue the bond. When you invest in bonds, you become the lender to the issuers. In return, you will periodically be repaid a pre-specified percentage of interest for the use of your money and when the bond reaches the maturity date, the principal that you invested earlier will be paid back to you.

For example, if you have invested in Bank Negara’s Bond Simpanan Merdeka 2009, which has three-year tenure and pays 5% of interest per year, you will receive a stream of interest income on a monthly basis and at the end of the third year, you will also get your principal back.

However, bond funds differ from individual bonds in many ways. While the interest income from the fund changes over time, the interest payments from individual bonds are usually fixed.

As a bond fund is made up from a pool of bonds, it usually does not have a fixed maturity and its yield is based on current income relative to its net asset value (NAV) while individual bonds are quoted in current yield or yield-to-maturity. In addition, bond funds normally make interest distributions monthly or quarterly, whereas individual bonds pay interest semi-annually.

The main purpose of investing in bonds or bond funds is to provide portfolio diversification, which in effect, helps lower your overall investment portfolio risk.

In general, bond funds have lower risk compared with equity investment and normally, bonds have low correlation with equity investment. While equity tends to perform well in high inflation rate and high interest rate environment, bond performance is unsatisfactory under such circumstances.

However, when the economy is bad and equity is not performing well, a lower interest rate tends to spur the economy, and at the same time, benefits bond returns. So, in most periods, it has negative correlation with equity interest.

The price movement of a bond is driven by a few factors. However, the main determinant is the interest rate. When the prevailing interest rate goes up, the price of the outstanding bonds will fall and vice versa. Therefore, the highest risk in bond investing is also the interest rate risk.

Duration is a measure of interest rate risk, which is defined as the weighted-average time it takes for a bond to pay back its interest and principal. By taking the duration of a bond or a bond fund times the change in interest rates, you will get the approximate percentage change in the bond’s price or the bond fund’s net asset value.

For example, if a bond fund’s duration is 10 and interest rates fall (or rise) by 0.5 of 1%, the fund’s NAV will increase (or decrease) by about 5%. As the duration of a bond is its average maturity, it measures interest rate risk.

When the inflation rate of a country increases, it will also result in higher interest rates to counter the inflationary pressure. Due to the recent global financial crisis, countries like China implemented stimulus packages, which in turn caused these countries to face potential inflationary pressure from higher asset prices.

Given that some economists have predicted that our interest rates may go up again, it is safer to buy bond funds with shorter duration because the bond funds will suffer a lower drop in prices with higher interest rates.

Other than interest rate risk, investors must also be aware of any potential credit risk of the bonds held by the bond funds, which is the possibility of the issuer failing to meet its obligations under the indenture or the risk of a bond being reclassified as a riskier security by credit rating agency.

It is a major problem during economic crisis or financial crisis, especially in the case of corporate bonds. However, given that our economy is currently at its recovery stage, credit risk may not a major issue.

As investors, before we invest in any bonds or bond funds, we must at least make the effort to understand the basic characteristics of the bonds that we are going to put our money in. Even though it is said to be safer than equity investments, there are still certain risks inherent in bonds investments that we must be aware of.

● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

How to improve your investment skills

WE have been asked by many readers on ways to improve their investment skills. In fact, for all of us who invest, it is one of the essential skills that we need to acquire in our lifetime. Like it or not, we need to have it if we need to generate returns for our investment.

All investors want good returns from their investments. However, most of the times, instead of generating returns, retail investors are suffering from losses from their investments. We feel that one of the key differences between an intelligent investor versus a normal investor is that the intelligent investor will be aware that he may make mistakes in some of his investment decisions while a normal investor tend to overlook the fact that he will make wrong decisions no matter how good he thinks he is.

Despite extensive research on certain listed companies, due to some unforeseen changes in certain fundamental factors, even good value companies may suffer losses. Under such circumstances, an intelligent investor will admit that he had made a mistake in his investment decision and will cut losses fast.

However, the problem with most investors is that they refuse to face their mistakes; some are not willing to cut their losses even though they are aware of their mistakes.

Hence, rule number one in investing is that we must be fully aware that regardless of whether you are an investment guru or an average investor, everyone will make mistake in his investment decisions. That’s why some experts say: “When somebody mentions that they have more experience than you, they mean that they have incurred more losses than you in stock market.” The key is to learn from our mistakes.

In order to avoid incurring losses in stock market, we need to develop our own investing system that suit our needs, skills, knowledge and risk tolerance level. The investing system can be adopted from the fundamental analysis, technical analysis or combination of both. If we ask some remisiers, they will most likely tell you that they need two to three years to develop their own investing system that can help them to generate returns from stock market.

One of the fastest ways to acquire investing knowledge is through reading books relating to investment. There are many good investment books in the market. However, since every investor has different preferences, the best way is to visit bookstores and look for investment books that he or she can understand and can offer the skills needed. For beginners, always start with some basic investment books that explain well on key investment concepts.

Here are some good investment book titles for consideration: The Intelligent Investors (by Benjamin Graham), The Essays of Warren Buffett: Lessons for Corporate America (Warren Buffett and Lawrence A. Cunningham) and Rule #1 (Phil Town). For advanced investors, you may consider Security Analysis (by Benjamin Graham and David Dodd), which is still one of the best investment books in the world.

Apart from reading books, investors need to read more business news in newspapers and magazines to keep themselves updated on the latest happenings. In addition, many newspapers, magazines and websites also publish good articles for the purpose of educating general public on investment. For example, investors can get good investment knowledge from website like www.min.com.my, by Securities Industry Development Corp.

Reading analysts’ research reports will enhance our understanding on some issues and factors in valuation as well as comments on some corporate strategies and developments. This knowledge is crucial in helping us making better investment decisions. Besides, for those serious fundamental investors, they may consider buying books like Stock Performance Guide (by Dynaquest Sdn Bhd) and Shares (Pioneers & Leaders (Publishers) Pte Ltd), which will provide all the essential investment information like companies’ background and some key critical investment information.

Another way to acquire investing knowledge is through attending investment training classes. There are many types of investment training classes, for example, classes on fundamental investment, technical analysis, currency trading or option trading. Given that a lot of these classes are quite expensive, we need to check whether investment training suits our needs. We believe some of those classes may be able to help investors generating returns, however, they require higher level of discipline and commitment.

Before we start investing with “real” money, one of the ways to gain experience and at the same time test out our skills is by building up a “virtual” portfolio and investing using “virtual” money. We can always try out our investment skills through playing a simulated investment game and monitor the investment returns before putting the real money into the stock market. Besides, we should also start young. If we acquire these investment skills at younger age, the losses that we may incur will be much lower than trying them when we are getting nearer to our retirement age.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

How do you measure a company’s financial health?

Altman’s Z-Score helps investors determine the bankruptcy risk of a firm

DESPITE the recent strong stock market rally as a result of the current tough economic environment, some investors may still doubt the financial health of some listed companies.

At present, apart from some common financial ratios such as debt-to-equity and interest coverage ratios, investors are looking for a ratio that can provide an indicator on the potential bankruptcy risk for any listed companies.

In this article, we will look into a method called Altman’s Z-Score, which can help us determine the bankruptcy risk of a company.

The Altman’s Z-Score Method was developed by Dr Edward I. Altman in 1968. It is a multivariate formula to measure the financial health of a company on whether it will enter into bankruptcy in the coming two years.

This method uses five common business ratios: earnings before interest and tax (ebit)/total assets ratio; sales/total assets ratio; market value of equity/market value of total liabilities; working capital/total asset ratio and retained earnings/total assets.

The Z-Score is computed using a weighted system based on the formula below:-

Z= 3.3X1 + X2 + 0.6X3 + 1.2X4 +1.4X5

Where:

X1 = ebit/total assets

X2 = sales/total assets

X3 = market value of equity/total liabilities

X4 = working capital/total assets

X5 = retained earnings/total assets

According to Altman, if the score is 3.0 or above, bankruptcy is not likely. If the score is 1.8 or less, potential financial embarrassment is very high.

A score between 1.8 and 3.0 is the grey area where the company has a high risk of going into bankruptcy within the next two years from the date of the given financial figures.

Hence, we can conclude that we should look for companies with higher Z-Scores for investing.

We have computed Z-Scores for two listed companies, Company A and Company E. Company A is consumer-based whereas Company E is property-based. We notice that Company A has a strong Z-Score value of 5.78 versus a very low 0.62 for Company E. Based on Z-Score, Company A is very unlikely to go bankrupt (5.78>3.00) whereas the chances of Company E going into bankruptcy is very high (0.62<1.80).

The reason behind the very low Z-Score value for Company E was because it had a very low market value over its total liabilities as compared to the high market value for Company A. In fact, Company E is currently having financial difficulties and is under PN17 (Practice Notes 17).

In short, companies with higher profit margins, sales, market value, working capital and retained earnings against their total assets will command a higher Z-Score.

This method is popular in the Western countries where some accountants found it quite reliable and accurate.

In the Malaysian context, according to a user manual published by Dynaquest Sdn Bhd, they found that the cut-off at around 1.5 is a better measurement of the likelihood of bankruptcy as compared to the 1.8 stated by Altman.

It may appear that companies selling at higher market value are safer than companies with lower market value. However, sometimes we may be tempted to nibble companies with lower stock prices.

We should be aware that the current very low stock prices for certain companies may indicate to us that the coming financial results of these companies might be quite disappointing.

However, we should be aware that Z-Score does not apply to every situation. We may want to use additional financial ratio like debt-to-equity ratio to complement this method.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

How to screen overseas stocks

Four criteria to look at when choosing counters that are suitable for long-term investment

LATELY, interest has grown in overseas stock investment. Given the foreign markets’ relatively high volatility of returns compared with the local market, a lot of retail investors find it more exciting to invest in overseas stocks.

However, a common problem most investors face is how to filter, from among all the listed companies in the respective markets, the right stocks that are suitable for long-term investment.

Market capitalisation

One of the most important selection criteria is buying stocks with big market capitalisation. The market cap of a listed company can be computed by multiplying the number of its outstanding shares with the current share price.

In general, we should buy stocks with big market cap because they are normally well-established blue-chip stocks with higher turnover and widely-accepted products and services.

Even though some academic research shows that buying into small market cap stocks can provide higher returns compared with big market cap companies, unless we are quite familiar with the stocks available in those overseas markets, it is safer to put our money into bigger market cap stocks.

It is not difficult to find out which companies have the largest market cap in any stock exchange.

Such information is available in most major newspapers in that particular country or the stock exchanges themselves.

For example, if we intend to buy some Singapore stocks, we should pay attention to companies that are ranked in the top 30 in terms of market cap. One can get the rankings by market cap for the Singapore Exchange in StarBiz monthly.

Price/earnings ratio

Once we have filtered out the blue-chip stocks, the next selection criteria is the price/earnings ratio (PER), which should be lower than the overall market PER. This is computed by dividing the current stock price by the earnings per share (EPS) of the company. It represents the number of years that we need to get back our money, assuming the company maintains identical earnings throughout the period.

Even though some published PER may use historical audited EPS compared with forecast EPS, given that our key objective is to do stock screening, the PER testing will provide us with a quick check on the top 30 companies – whether they are profitable and selling at reasonable PER compared with the overall market PER.

If we cannot get access to the overall market PER, we may want to consider Benjamin Graham’s suggestion of buying stocks with PER of lower than 15 times.

Dividend yield

A good company should pay dividends. We strongly believe that this is one of the most important ways for the investors to get any returns from the companies that they invest in.

Our rule of thumb is that a good company should have a dividend yield that at least equals or is higher than the risk-free return, which is usually based on the fixed deposit rates.

The dividend yield is computed by dividing the dividend per share by the current share price. In general, most blue-chip stocks do have a fixed dividend payout policy and reward investors with a consistent and growing dividend returns.

Based on our observation, most smaller companies may not be able to pay good dividends as they may need the capital for future expansion programmes.

Price-to-book ratio

Most investors would like to invest at a market price lower than the owners’ costs in the company. The book value of a company represents the owners’ costs invested in it.

In a normal business environment, unless the company has some problems that the general public may not be aware of, it is quite difficult to find stocks selling at a price lower than the book value of the company.

As a result, we may need to purchase at a market price higher than the book value. According to Graham, the maximum price one should pay for any stock is the price which gives a price-to-book ratio no greater than 1.5 times. This means that we should not pay more than 1.5 times the owners’ costs invested in the company.

Lastly, the above four selection criteria are merely a preliminary quick stock screening process. Even though investors may be able to find stocks that fit the criteria, we suggest investors check further the fundamentals of the company, such as the balance sheet strength, its gearing, future business prospects and the quality of the management before deciding to invest.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

Structured wisdom

“WHEN an old man dies, a library burns down.” A client, Mr C had attributed this to an old Kenyan saying. It refers to the wealth of experience, knowledge, skills and wisdom that is lost when an elder dies.

Of course, if the elder had been passing on his learning to the younger generation, then the death of his wisdom need not follow with his passing. Is this too idealistic? Perhaps, but many who have had the opportunity to learn from good mentors would agree that wisdom can be “inherited”.

Experience and learning can be imparted, but they have to be “updated” to be relevant with modern times. It is not about blind learning from the past, nor a total rejection of past experiences.

From the aches of the current financial crisis, many lessons will be learnt. One such important lesson is in the context of financial products – complex structured products.

Goldman Sachs chief executive Lloyd Blankfein said this recently – “The industry let the growth and complexity in new instrument outstrip their economic and social utility as well as the operational capacity to manage them.”

But are all structured products “bad”?

Let me share a personal experience, one which relates to learning from a mentor, about deriving a particular wisdom concerning structured investments.

Between 2003 and 2005, I was holding the appointment of head of investments and treasury business for a consumer bank in Singapore.

My mentor, who was my boss’ boss and the head of Global Investments Business, is a distinguished elderly gentleman, Kenneth Dowd Jr.

I remember distinctively on one occasion when we had a face-to-face meeting with about 6-8 persons.

The topic of CDO (Collateralised Debt Obligations) came up. In a sudden change of mood from relative cordial to one of suppressed anger, he uttered something along the lines of, “in Asia there are about a dozen people who truly understand the risks of CDOs, and half of them are in this room. I will never approve such a product for retail distribution, PERIOD!”

I am sure he was being sarcastic and definitely by exaggerating the situation, he was making an important point – never peddle or buy a product you cannot understand!

This wisdom goes beyond CDO, it covers all investments products.

In this crisis, structured products took a beating but the reality is, not all structured products are bad.

The lesson to be learnt is the need to identify and weed out bad apples, rather than throwing out a whole barrel of good ones because of a few rotten fruits!

Fundamentally, it is about fully understanding the products that we, the Bank, are approving for retail distribution, and also about the ability to educate clients so that they too understand the products.

This is the collective responsibility of our profession. His wisdom had been very clear to me, and has since been a guiding beacon in my professional life.

First and foremost, do we understand the risks of the products? If we don’t, then we have no business doing that business.

And even if we understood the risks, we must be able to explain it in equally comprehensive terms to the end investors.

I am proud that I have never supported or approved any CDO underlying structured investment products.

This, despite many investments bankers having put forth good strong arguments to support the CDO-backed products. I could not launch a product which, I felt, cannot be easily explained to the retail investors.

We should not let products’ complexity outstrip their economic and social utility.

With this statement, I support “going back to basic”, particularly on Structured Products.

It is not about more regulations, but about greater transparency and clarity.

The hallmark to a good structured product is to keep it as simple and concise as possible.

Below, a simple guide if you are investing in structured products:

> You must know exactly how you are going to get the returns. Generally, a structured product would have a transparent payout formula and your banker should explain how this is computed. If you are not clear or do not understand, seek clarification until you do.

> You must know exactly the risks and trade-offs. Structured products are about trade-offs and there is no free lunch. For example, where there is more principal protection, there will most likely be less exposure to the market and vice versa. Understand that there will be limitations; principal protection is usually provided if you hold till maturity but not during the tenure. There will also be costs including fees payable to the product manufacturers and distributors.

I do see reasonable value in structured products in the realm of wealth management.

Well-structured products do have the flexibility to achieve desired outcomes. In my personal investing, I too invest in a couple of structured products where they provide access to investments that I am unlikely to have direct access to such as Berkshire Hathaway and China-A Shares, while protecting my principals.

Just this week, we mark the first “death” anniversary of Lehman Brothers on Sept 15. With the 158-year-old organisation’s passing, we need to ensure its wisdom is kept alive. And we should also not forget Lehman Brothers’ cause of death and how it triggered a global crisis.

Tay is senior vice-president and senior head of UOB’s personal financial services division

Thestar

Stocks that offer dividend yields higher than fixed deposits

DUE to the current low interest rate environment, a lot of investors may be wondering whether there are investments that can provide returns higher than fixed deposit (FD) rates.

Despite the current high stock prices on Bursa Malaysia, there are still many stocks providing dividend yields higher than the current FD rate of about 2% to 2.5%.

Based on our estimation, the average dividend yield for all stocks on Bursa Malaysia is about 3.5%, which is higher than the current 12-month FD rate of 2.5%.

Nevertheless, investors need to have critical financial information, adequate investment skills as well as be willing to spend time researching information.

There are many research companies providing information on Main Market companies on Bursa Malaysia based on their highest dividend yield, lowest price-earnings ratio (PER) as well as lowest price-to-book ratio (P/BV).

For serious investors, they need to familiarise themselves with these terms. In addition, investors need to know how to analyse the information.

In this article, we will explain how to use the dividend yield ranking. The table shows the top 10 Main Market companies according to highest prospective dividend yield.

Prospective dividend yield is calculated by taking the market price divided by the estimated current year dividend per share (DPS).

For example, Hektar Real Estate Investment Trust (Hektar REIT) shows a prospective dividend yield of 9.53%, which was computed based on the market price of RM1.07 (as at Oct 18) and estimated 2009 DPS of 10.2 sen.

The latest actual dividend yield of 10.01% for Hektar REIT was computed based on the same market price but divided by last year’s actual DPS of 10.71 sen.

Even though the dividend yield for 2009 is anticipated to decline slightly to 9.53% from 10.01% in the previous year, it is still much higher than the current FD rate of 2.5%.

However, investors need to be careful as some of the high dividend yields may be due to one-off special dividend payments.

The companies may not repeat these dividend payments in the following year. Besides, we need to make sure that the latest PER is lower than the overall market PER.

This is to prevent us from paying too high a price against its earnings level. For Hektar REIT, its latest actual PER of 9.45 times is lower than the current market PER of about 11 to 12 times.

This method does not require a lot of time to carry out research. Once we identify good fundamental companies that are paying high dividends every year, we only need to monitor them.

We may not even need to sell the stocks for a long period of time if the companies continue to reward good dividend yields that are higher than FD rates.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

How to analyse company statements and reports

Analysts usually judge the quality of a company’s management team by looking at the comprehensiveness and truthfulness shown in the management statements

FOR the next few weeks, investors will start to receive annual reports for companies that have their financial year ended Dec 31. Even though the majority of investors may not look at those reports in detail (in fact, some investors may not even open the envelope containing the annual reports), some people will still spend time analysing the whole report. One of the key sections that investors will analyse in detail is the chairman’s statement and management discussion or operations review. In this article, we will label the above statements as management statements.

Most of the management statements will explain the companies’ immediate past one-year financial performance, external environment, major corporate developments as well as the companies’ future prospects.

Based on our observations, the majority of companies will try to explain and highlight a lot of positive elements that happened in the companies. It is very rare to find negative issues that affect the companies’ performances being discussed in the statements. Even though we cannot conclude that those companies that are willing to highlight their financial problems as good companies, at least these companies show their effort in trying to be truthful to their investors. This will provide a lot of plus points to these listed companies.

Analysts usually judge the quality of a company’s management team by looking at the comprehensiveness and truthfulness shown in the management statements.

Nowadays, if there are areas that a company does not comply with the accounting standards, the external auditor will highlight those areas inside the auditor report. Hence, investors need to read the management statements and financial statements together with the auditor’s report.

The management statements will normally provide the reasons driving the companies’ overall performance, whether good or bad. However, there are certain companies that tend to focus on higher sales and avoid mentioning the profitability when ever they report lower profits during the year. They will try to avoid the reasons causing the reduction in profits, for example, higher operating costs, raw material costs or stiff price competition.

Some times, some companies will claim they have managed to maintain profits at the same level as the previous year. However, if we further analyse the financial statements, we will notice that the profit had included a lot of exceptional items, such as gains from the disposal of fixed assets as well as investments. Hence, we should not rely on the explanation given by the management in the chairman’s statement.

In fact, we need to investigate further the driving factors for the profitability of the company, especially if it had included some exceptional gains or losses, which are not part of the company’s normal operations. These details can be found in the notes to the accounts. Normally, most companies will list the key items that affect their profitability in the notes to the “profit before tax”.

We can get a summary of key corporate developments that happened in the company in the “corporate development” section. If you have been following the company’s corporate developments, this section may not provide you a lot of new information.

Nevertheless, certain companies may provide the latest status of their corporate developments, such as any new projects being initiated or certain approvals from relevant parties being granted for their critical projects.

As for the section on the company’s future prospects, investors should not place too much weight on it. Based on our experience, a lot of Malaysian companies have the same statement on future prospects by saying that “the company will perform better in the future”.

There are companies that have reported losses every year but the chairmen will still say the companies would perform better next year without the backing of solid grounds to improve profitability.

Hence, a good company statement should provide a fair account of the actual happening in the company. In reality, it is quite difficult for listed companies to hide their problems as the level of financial literacy of the general public has improved over years.

There are some mature investors and analysts who are able to detect the problems faced by the company by analysing the notes to the accounts in addition to making comparison of the current financial statements versus the statements or quarterly financial statements of past years.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

How to handle market uncertainty

AFTER the strong rally over the past seven months, the market is finally undertaking some corrections. Some investors may not fully comprehend why the stock market moved up when the companies reported bad financial results, but tumbled when the companies started to show better financial performance.

We need to understand that the market had discounted the good news. Some of those good financial results were already reflected in the stock prices. The stock market cycle always moves ahead of the economic cycle.

During the Great Depression in 1929, the stock market recovered eight months ahead of the real economic recovery. Even though some investment experts say the worst is far from over, we notice that a lot of economic indicators are pointing to an economic recovery.

However, the economic growth may not move as fast as the stock market. As a result, while the economy continues to recover, stock prices need to come down to reflect the fundamentals of the companies.

This explains why once investors started to realise that the stock prices could not be supported by the fundamentals of some companies, especially blue-chip stocks, the stock prices had to come down to reflect the true value of companies.

Nevertheless, based on our analysis, most listed companies in Malaysia showed great recovery in their second quarter of 2009 financial results against the results in the first quarter as well as the fourth quarter of 2008.

We need to understand that there are many disturbing factors that affect the stock prices, but not reflect the fundamentals of companies. From the perspective of behavioural finance, investors’ expectations and emotions have great influence on stock prices. Two factors influence investors’ expectations – past experience and new information.

In the absence of new information, investors will use past trends to extrapolate into the future. As a result, the stock prices may persist in trend for a while before the next market reversal. This may cause the market to overreact to good financial results as shown by some companies.

According to Fischer Black, some investors tend to be affected by noise that makes it difficult for them to act rationally. He defines noise as what makes our observations imperfect as well as keeps us from knowing the expected return on a stock.

Some investors, due to lack of self control and proper financial training, may misinterpret economic information and sometimes be carried away by the stock market emotion. Investors may feel uneasy over the recent strong market performance. However, they will still choose to follow the market trend even though they feel their judgment may be wrong. In behavioural finance, we label this as conformity in which we are inclined to follow the example of others even though we do not believe in the action.

The above phenomenon of stock prices being valued beyond the fundamentals of the companies is applicable to some selected blue-chip stocks. Nevertheless, Bursa Malaysia does have plenty of second- and third-liner stocks which are still selling at cheap valuations. Investors may want to take the current market corrections to accumulate them for the long-term.

We need to relate the current stock prices to the intrinsic value of the companies. Some investment tools like price-to-earnings ratio, dividend yield and price-to-book ratio will assist us in filtering out some good companies for investment.

Even though there are a lot of uncertainties along the way to full financial recovery, we feel that investors may view the recent corrections as good opportunities to build their long-term investment portfolios. For those who have been looking for investment returns higher than fixed deposit rates, there are still a lot of stocks that are paying handsome dividend yield of more than 4% and yet selling at cheap prices.

One of the most important investing principles is to have the discipline to hold long term. We should not pay too much attention to the fluctuation of stock prices; instead, we need to focus on the earning power of the companies as it is one of the most important drivers in deriving the intrinsic value of a company.

As a result of the financial crisis, even though a lot of companies are showing great recovery, their performance and prices are still lower than their peak level during the year in 2007. If the overall economy and the companies’ performance recover to 2007 level, their current stock prices may be a good entry level.

● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

How to detect some early financial warnings in companies

Or how to smell a rat

TRADING volume on the stock market has recently been getting higher again. Some retail investors, who were absent from the recent rally, have started to get excited.

Over the past few months, investors were mainly focusing on good quality stocks, selling at a cheap level. However, attention has started to switch to poor quality stocks lately. Even though sometimes investors may be able to make money by betting on those stocks, we still need to be careful about the fundamentals of the companies. In this article, we will look at how to detect some early financial warnings.

A lot of companies like to make corporate announcements during the bull market. We agree that some of the announcements were genuine, but many corporate proposals were simply too good to be true.

If we analyse further, we will notice that the proposals might be way beyond the capabilities of the companies. Sometimes, the management’s projections of sales and profits were far beyond the past history. The capital expenditure requirements were well above the companies’ borrowing capacities.

Besides, the time required to turn the projects into profits might be too long. Nevertheless, as a result of the announcements, the stock prices would surge and normally, the main sellers behind might be the key owners.

We have also seen some proposals that turned out to be profitable. The companies did make profits in the first few years. However, the high growth in expansion stretched the capabilities of the top management, who might not have the experience and ability to run big businesses. They might have the experience to manage RM100mil turnover businesses. However, when the turnover surged beyond RM1bil per year, they might have problems. In fact, the main concerns to the companies were the top management team which lacked skills and experience to run big businesses.

We need to be careful if there are any changes to the key managers of the companies, auditors or accounting firms. The key managers are referred to the positions like chief executive officers and financial controllers. Besides, frequent changes in auditors provide serious financial warnings, especially the change from a reputable audit firm to an unknown one.

How to smell a rat or how to detect some early financial warnings in companies

Companies will soon start to report their financial results for the period ended Sept 30. In Malaysia, often good companies will try to announce their results before the deadline of Nov 30. However, if they are having difficulties in providing their financial statements, normally, we will expect some bad news to be announced. One of the possible explanations behind the delay is that the companies need more time to rectify certain financial problems.

Another potential sign of financial warning is when the companies venture into unrelated businesses. Previously, we saw many Bursa Malaysia second board companies going into financial distress in 1997/98 when they departed from their core businesses in manufacturing and ventured into property development activities.

We need to understand that when the company owners enter into areas that are not their core competencies, they might not be able to apply the knowledge and experiences accumulated previously. Instead, they would have to go through the entire learning curve again, which would result in the management taking a lot of time in managing those unrelated businesses.

In such situations, investors will need to pay attention and analyse whether those new ventures will be able to add value to the shareholders’ wealth. Some companies like to change their names after venturing into new businesses. Too frequent name changes may also imply that the companies have been shifting their core business focus and directions, which may not be good news to the shareholders.

Litigation is also another warning sign. We need to pay attention to companies that are involved in litigations, which may be either attributed to the companies being sued or they are suing someone else. These litigations may divert the management’s attention from day-to-day business operations. As a result, they may affect the companies’ performance as well.

One of the common questions asked by shareholders during any AGM is the directors’ fees. We need to analyse whether the fees paid are in proportion to the companies’ profitability. Sometimes, certain companies make excessive perks for owners as well as their employees or the lifestyle of the key owners is simply not consistent with the companies’ profitability.

The above are a few of the more common financial warnings that potential or existing shareholders must pay attention to when analysing the companies for investment. More importantly, we need to remain vigilant at all times and pay attention to the latest development of the companies.

● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Thestar

致富三部曲

李孙耀

在今天这个功利社会,致富已经是现代人的奋斗目标。为了达到这个共同目标,人们想出种种的方法来赚钱,方法之多不胜枚举。

总结一句话,那就是:八仙过海,各显神通。

每个人都拚命的赚钱,都想快点有钱。但是,今天,依贫富的比率来看,还是穷人多,富人少,可见致富的成功率还是少得可怜。

所以人们都以为,致富既然这样困难,那么肯定的,它必定是门很深奥的学问,所以,非用不寻常的方法才可以达致。

其实不然,真正的致富方法,只是三个步骤而已,那就是:

先苦后甜,胆大心细,积少成多。

这简单的三部曲就是就是许许多多白手起家的富翁的致富方法。

先苦后甜

顾名思义,“先苦后甜”就是把目前想要花的钱押后而已。要做到“先苦后甜”,首先就要战胜自己,控制自己的欲望。这样才可以控制开支,开始存钱。

如果以致富为目标,能够做到“先苦后甜”,比在职业上拼命的往上爬来得重要。

职位越来越高,薪酬也越来越高。但是,薪酬高的人不一定能够比薪酬低的人存更多的钱。如果生活水平也随着薪酬步步高升,结果还是一样的,存不到钱。

唯有能够做到“先苦后甜”的人,才能够真正的存到钱。

赚五千花五千,赚一万花一万,根本就没有做到“先苦后甜”,当然就存不到钱了!想要从无到有,就一定要踏出致富的第一步:先苦后甜。

胆大心细

先苦后甜,这道理人人都懂,但是执行起来却是辛苦,尤其是那些已经习惯了今朝有酒今朝醉的人更是如此。因为钱花惯了,想存就辛苦了。

辛苦归辛苦。

但是,这并不是一件困难的事情,只要有决心还是可以做得到的。

真正困难的事情是致富的第二步:胆大心细。

“先苦后甜”的目的是为了存钱,存钱的目的是为了投资。投资讲究的是“胆大心细”。

单单存钱在银行是不可能致富的。要致富一定要通过投资,要投资就要面对风险,要面对风险就要有胆量。

就是这胆量,决定了许多人的命运。

致富的第二步比第一步来得困难就是因为它需要用到胆量;但是,单单有胆量也是不能令人致富的。

没有计算清楚就拿出勇气,粗心大意的作出投资,这种纯粹靠运气的投资,不是真正的投资,只能算是投机。

投机不能令人致富;致富需要的是投资不是投机。只有 “胆大心细”的人,才有资格作出投资;只有作出投资,我们才有成功致富的机会。

但是,单单是“先苦后甜”和“胆大心细”还是不够的,要成功致富还是要依靠致富第三部曲:积少成多。

积少成多

投资致富是从无到有,这过程就是“积少成多”。“积少成多”靠的是时间,也就是耐性。致富靠的是复利,而复利却需要时间和耐性才可见功效。

罗马不是一天建成的。同样的,投资致富也不是一朝一夕就可以成功的。

缺乏耐性就无法做到“积少成多”,而缺乏耐性又是许多投资人的通病,所以耐性才是致富三部曲中最难的一环。

人生苦短,许多人都以为,如果要等到微小的本钱“积少成多”变成百万,人也差不多到了古稀之年,再多的钱也没用了。

但是请放心,“积少成多”并不是大家想象中的这么久。

通过复利的效应让资本开番,只要回酬可观,从无到有,也只是短短的十几年而已。一张报纸只要摺上42次,它的厚度就可以上到月球,懂得这道理的人就会知道复利的神奇,开番的奥妙。

但是,没有人需要这么多的钱,多到可以上到月球。

对许多人而言,有100万令吉已经是足够了。

那么100万令吉的钞票到底有多厚呢?

如果是面值100令吉的钞票,它的厚度也只是区区的1.25米而已,刚好是一个小孩的高度。


南洋商报