Metaphors of Ninja & Samurai In The Market

24 April 2016
 

Dear Fellow Investor,

I would like to thank all of you who attended our Asian market outlook at the Istana Hotel.

For those who were unable to attend, I will summarize the key points:

Mr Phua, Phillip chief market strategist gave his outlook on Japan: In search of Samurai and Ninja. The Samurai is a direct threat and something that we see. He is obvious.

 

The samurai is a metaphor for shares in plain sight that everyone knows about such as Toyota, Canon, Panasonic and Mitsubishi. These are shares in the popular press and recommended in most broker research reports.  We do not have an investing edge dealing in these types of shares.   Every factor influencing the price is discounted.

On the other hand for us to be profitable we must be like the Ninja.

 

A Ninja hides in the shadows and is a hidden threat. A Ninja does not reveal himself and waits until the odds are in his favour before striking.  This would be a metaphor for less researched   companies not popular with the investment crowd.

 

 

They could be smaller companies involved with the sharing economy such as tourism, restaurants, transportation with concepts of touch, taste, feel, pretty, health and comfort.  One example Mr Phua mentioned was Santen which offers a unique method of eye drop delivery. This product is very popular with China tourists.

 

Because tourism is a major growth catalyst in Japan and the majority of tourists come from China, Taiwan and Korea companies catering to their needs are performing well.

 

Many offer growth, quality management and rising sales and earnings. They profit no matter what happens to the huge multinational big caps. PE in Japan is only 12.2 which are the lowest in developed markets.

 

This theme also applies to investing in Malaysia, Thailand, Hong Kong and Singapore.   Be a Ninja and strike when the odds are in your favour.

 

Mdm Pikun, a fund manager with Phillip in Thailand spoke about opportunities in Thailand. FDI is the lowest in Asia and sentiment is overwhelmingly negative.  The severe El Nino drought has effected crop production, political uncertainty continues, infrastructure projects have been delayed due to bickering by politicians but the Thai index is up by 10 % this year driven by tourism and bargain hunting.  She recommended Threil an insurance company and    SVI a contract electronics manufacturer.

 

She also confirmed my decision to buy Thai Beverage, an established spirits and beer company. I bought these 3 years ago for some of my PGWA clients and continue to add for my new clients.  It has performed handsomely.   

 

Charles Lee, Portfolio Manager of Phillip Singapore spoke about opportunities in Singapore dividend shares. Singapore offers the highest dividend yields of the Asian markets. He likes selected Reits including Parkway Life Reit and Ascott Reit. Tourism arrivals he said are picking up so he likes hospitality Reits. 

 

He also likes SGX, the operator of the exchange as well as OCBC and DBS Bank, and Silverlake, a technology, Software Company.

 

The property market is picking up due to policy easing by the authorities and mild depreciation of the   Sing Dollar.  He showed a chart of the SGD/RM exchange rate and showed that because of the price correction this is an attractive time for Malaysian investors to enter the Singapore share market.

 

The last speaker was Mr Louis Wong, Director of Phillip Hong Kong.  He presented a positive outlook for China showing that property prices in the cities are picking up as there have been 6 interest rate cuts, 5 reserve requirement cuts and relaxed home purchase requirements.  Power consumption is also up 3.2 % last quarter, PMI is up to 50.2 % which shows expansion and consumer spending is up 10.5 % last quarter.

 

He said more than 40 different business sectors benefit from house price increases which is a crucial growth driver. As property prices recover, fiscal revenue increases for the government.

 

He recommends exposure to China via Hong Kong. He likes Bank of China Hong Kong, China Mobile, CLP and CKI Holdings which we hold for our PGWA accounts.  Peses in HK are also 1 standard deviation below mean which show there is value.

 

I do hope this summary is of value to you.  Should you wish to diversify some of your assets to these markets for currency stability and growth prospects do not hesitate to contact me.  They key is to be like a nimble Ninja and not get slaughtered by the Samurai.

 

Invest well and grow your wealth,

 

Bill

 

 

From 11 to 19  May,  Dolly and I will visit Taiwan on a Reliance Tour and it will be interesting to learn more about this place.   Many of you have recommended us to visit Taiwan so will keep you posted. The food looks clean, fresh and  delicious.

Japanese Shiba Inu dog, about 6 months old to let

Dear Fellow Investors,

A friend has a Japanese Shiba Inu, about 6 months old, male and beautiful condition.  These dogs sell for over RM 3000 at the pet shop but is FOC  for the first person interested.

Please let me know as soon as possible.

Bill 

012 685 1207

Why I am bullish for the next few months until the US November election.

16 April 2016

 

Dear Investor,

 

I would like to congratulate those who registered for our Asian Market Conference to be held on Saturday 23 April from 9 AM to 1 PM at the Istana Hotel.  We have 4 prominent fund managers who will share their insights from Hong Kong, Thailand, Singapore and Japan.  

 

There is no charge. For more info and registration details please visit my blog or contact me.

asianequity.blogspot.com

 

A major profit principal of successful investors understands the background.  Are we investing during signs of weakness or signs of strength?  

 

These signs can be fundamental as well as technical.

 

A fundamental sign was revealed last week. It happened with the Chinese Yuan.

China is the dominant force behind Asian equity investing.  What happens in China effects markets worldwide and particularly Asia?

 

George Soros is described by the Chinese PM as a giant crocodile whose main reason for being is to devour weak prey. Soros lost some of his flesh in the last 3 months as China is a bigger crocodile.  

 

Soros and his hedge fund friends bought USD 8 billion of put options   on the Yuan betting that the Yuan would collapse against the US Dollar. A put option is a bet on price decline. Soros lost big time as the options expired worthless and the Yuan strengthened.

 

Soros also bet that Asian currencies would also decline and Asian stocks would collapse. He was wrong again.

As Asian markets have recovered from their January losses, foreign funds have been heavy equity buyers across the board. Asian currencies including the Ringgit have also recovered to fund purchases of Asian equities and bonds.  

 

 

Weekly Straits Times Index from January 2016 to present.

Notice the underlined price bars after the 1000 point sell down. It took 6 weeks to absorb the selling as shares were taken up by strong hands. One fund manager joked that Singapore sentiment was so bad some traders thought Singapore would sink into the sea!  

 

The Straits Times index has recovered 394 points as of Friday 15 April.

 

This is a classic Volume Spread Analysis pattern of sign of strength (SOS) that happens after a major liquidation/ panic selling. Notice the narrow range bars on moderate volume and the building of support and then a major line break on high volume and wide price spread.

 

Signs of strength tend to persist.  If you look at the other Asian markets including the KLSE there are also signs of strength and that is why I am bullish for the next few months until the US November election.

 

Invest well and grow your wealth,

Bill

 

 

 Xing Xing, is a giant panda living at Zoo Negara enjoying some bark. He is on loan from the China Gvt for 10 years; Xing Xing means prosperity and the Chinese being a major trading partner to Malaysia and Asia should bring us prosperity. If you have time I highly recommend you visit Xing Xing. The best time is during the weekdays as there are fewer crowds

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The upcoming event next week

Dear Fellow Investor,

 

It is with great pleasure that we wish to invite you to our Investment Talk which will also provide an update on the Phillip Portfolio Masters (PPM). Exclusively delivered by various speakers from Phillip Hong Kong, Thailand and Singapore who will impart their knowledge during the half-day event?

 

The above event will be held as per below details:-

Title: Phillip Portfolio Masters - Opportunities in a Low Interest Rate Environment.

Venue, Date & Time:  Hotel Istana, Kuala Lumpur, No 23 Jalan Raja Chulan, 50200 Kuala Lumpur. 23rd April 2016 (Saturday), 8.00 am to 2.00 pm

Accreditation Point:  5 CPE Point (CMSRL) & 4 CPD Point (FIMM) Approved

 

Registration will be free if RSVP before 20th April 2016.

 

Details of the speaker as below:

  

What are you waiting for?

Dear Fellow Investor,

 

In the last 18 trading days the KLSE has been stuck in a narrow trading range from 1699 to 1725. 


Most other world markets have chopped around in a similar manner but made little progress.
 

The last months trading ranges in the KLSE setting up a one eyed Joe

These narrow trading ranges show uncertainty, lack of commitment, and a wait and see attitude by many participants.  This is the famous One-Eyed Joe pattern from the Richard Wycoff days. Wycoff was a rich and successful trader/ investor from the 1930’s who popularized price and volume trading and related the story of One Eyed Joe.

 

Joe was a veteran floor trader in Chicago who traded corn, wheat and agricultural commodities.  He specialized in price and volume trading and kept accurate price charts.  He only had one eye.  But this eye was a powerful eye.

 

It could see things on his charts that other traders missed. His was also a patient eye that only traded when the odds were overwhelmingly in his favour.  When he caught a big trend that lasted perhaps 60 to 90 days he took his big reward, lived a comfortable life and traders did not see him for the next few months.  He returned refreshed and waited for the next big trend triggered by his one- eyed Joe pattern

 

 

One eyed cat which I am sure is an expert rat catcher.

  

Joe waited for a situation where almost all the analysts were bearish, sentiment among the crowd was negative and volumes were low but prices held in a narrow triangle pattern.  Fundamentals and values were bullish but unrecognized.

 

Joe would take a position in relatively quiet conditions when no one else was interested and wait for an explosive move.  If the break was down he would exit with a small loss.  If his bullish analysis was correct, he would sit on his position for potentially large profits.

 

Joe did not believe in waiting for a breakout and follow the momentum because that is a crowd following method and the risk increased.

 

There are many fine quality KLSE shares now that are trading at attractive valuations and pay dividends.  The KLSE is trading at a price to book of only 0.8 which is at 2008/ 2009 levels.  This is 20 % undervalued.

 

What are you waiting for?

 

Invest well and grow your wealth,

 

Bill

 

 

Clients ask me who I support for the November US election. As an investor, I support the candidate who will benefit our bottom line and benefit Malaysia/ Hong Kong and Singapore where we invest.  I might not personally like a particular candidate but my focus is on profits/ protecting and growing our capital and I am for the candidate who answers our financial needs.    

Latest trip to Penang for company visits

3 April 2016

 

Dear Fellow Investor,

 

We just returned from Penang where we visited 2 companies for possible investment.  Both are promising.

One is PBA which is the licensed water operator servicing Penang for its water needs.

 

PBA is well managed with cash on the balance sheet and is the most efficient water utility in Malaysia based on the water wastage metric.  They are trading at a price to book of only .5 and are undervalued.

 

Penang according to the MD of PBA has never had water rationing or service interruption and that serves the needs of the pharmaceutical and semiconductor industries. Many of these companies have made Penang their base as they cannot suffer water shortages and interruptions. This will result in increased demand for water. 

 

PBA is presently out of favour by most traders and speculators because of a rise in material costs and a hold on a water tariff increase.  Penang, however; has the lowest water tariff in Malaysia so there is room to increase the tariff.

As Penang is growing, the demographics are favourable for PBA.

 

The other company we visited was Inari, a manufacture of smart phone components.  They also have cash on the balance sheet, are well managed with increasing revenues and cash flow.  Money is moving into companies like Inari as sales of smart phones worldwide continue in an upward trend.

 

On the ground research in the Penang malls show the 2 best businesses. One are restaurants and the other are smart phone sellers.  Clothing and consumer outlets are starving for customers.  This is also true in Singapore where we visited a month ago.

 

For 2016 we must follow the smart money. Foreign funds are pouring into Asia. The RM is the strongest world currency for 2016.

 

Smart money is coming to Asia/ Malaysia to escape the low growth economies and negative interest rates in most of Europe and Japan.

 

Singapore is also benefiting from China trade and a shift of capital out of Europe.

 

Invest well and grow your wealth,

 

Bill

 

 

There is gold in Penang. There are undervalued off the radar screen companies and finding them is like treasure hunting. If you have time on your next trip to Penang do visit the new PG gold museum on Lebuh Bishop St. It is open 7 days a week. When you see all the gold that will motivate you to make more money.