Flash Alert

 27 April 2022

Dear Fellow Investors,

The Macro Environment

News flow is extremely  negative. Inflation continues to rise.  Shanghai lockdowns are disrupting supply chains, The war in Ukraine  is escalating. Nato, the US and Europe are committing multi billions in weapons funding and Russia is threatening nuclear attacks.   There is a new proxy war between the US and Russia. Add to this food shortages and the possibility of energy disruptions  which all contribute to inflation, no wonder most stockmarkets world wide are selling off.  

However Malaysia and Singapore are exceptions and continue to be well supported due to trade surpluses, high CPO and oil prices and better economic management.  

The agenda of most central banks is to continue to print money and use their tools to maintain liquidity. They will use the on going crises as an excuse to print. Janet Yellen, US treasury secretary  has asked for multi billions of new funds to be given to the IMF to bail out countries such as Sri Lanka.Jamie Diamond of JP Morgan has asked for 1.2 trillion of government funds to address the world food crises.   The list of politicians and business leaders with their hands out for free money  keeps growing.   War is the best excuse of all to create money out of thin air. The defense lobbyists and contractors are lined up in Washington DC getting their pockets filled with all this free money. 

          

            Weekly Volatility or fear index traded on the NYSE

The higher the number the greater the fear. The stock market meltdown in March 2020 saw a rise to over 90. This was caused by monetary tightening. The Federal Reserve quickly reversed their policies to QE and markets recovered.    In  my opinion the same thing will happen again as there is a major US  election in November. If Biden loses power in the congress, his opposition on the first day will open up the oil pipelines  and give drilling permits to the oil companies.  This will immediately lower energy prices and reduce inflation. 

One reason the VIX has not broken out to extreme fear levels is that the market is anticipating a Biden loss of the US Congress in November.   The US 10 year bond yield has also stabilized and is not spiking which could slow the pace of interest rate rises. Weekly and monthly chart support in the Nasdaq and Dow Jones are also showing stability.  Hedge funds with their vast financial resources are buying value at a discount.

I am leaving to Langkawi tomorrow for a short break. Any questions please email me. I will not produce a market report Saturday. 

Stay the course.

Bill

Opportunity is right in front of us.

 16 April 2022

Dear Fellow Investors,

Road to Recovery

The Singapore Malaysian borders are reopening after having been closed for 20 months since March of last year.  76 % of Malaysians have been vaccinated out of over 95 % of the population. and all but 2 states in the country have been classified in the final state of recovery.   
 

With the loosening of restrictions companies such as Heineiken on the last March earnings reported Q on Q a 40 % gain in core net profit and a 78 % gain in revenue which is evidence of easing movement restrictions.  Other quality consumer stocks such as Nestle and Ajinomoto  show improving results. Recovery is on the way and beginning to accelerate. The latest budget is supportive of consumer stocks.

Malaysian exports have had a good year. Exports have risen RM 1.2 trillion achieving 99% of 2025 target 4 years ahead of schedule.  Technology companies such as Inari should benefit in this space. 

The last 20 months have been challenging but our focus on high quality dividend paying companies has paid off.   

Malaysia is also the leading gateway to the Islamic economy surpassing even Saudi Arabia with a 48 % share of global sukuk issuance.

Maybank Islamic, a subsidiary of Maybank is the 4th largest islamic bank in the world in terms of assets held. Companies such as F & N are taking notice in the recent acquisition of the halal certified Sri Nona on the growth potential of halal certified foods.  Our investment in Maybank has finally broken even if we count the dividends. 

Plantations are also benefiting as our shares in United Plantations in last reporting showed great results with rising revenue, earnings and profit. They also declared a handsome dividend of 85 sen. The turmoil in Ukraine should continue to benefit plantation companies.   

Singapore is also in recovery as tourists return, restaurants fill up and shopping traffic improves. Despite the volatility in most world markets, Singapore and Malaysia are presently well supported but we must be very selective in our investment choices.  

Tong's column this week in the Edge explains very well how the investment landscape has changed. He details how rising interest rates, inflation, geopolitical turmoil and supply chain disruption will impact our investments.  He has downsized his US market investments, increased China exposure and maintained his Malaysia portfolio. 

Take care
Bill 

Opportunity is right in front of us.

Volatile market

 9 April 2022

Dear Fellow Investor.

Malaysia and Singapore are diverging positively from most world stock markets. Reasons include opening of borders, decline in Covid and resumption of foot traffic to restaurants and malls. Malaysia is benefiting from high crude oil and palm oil prices which bring much needed revenue into the economy. Singapore shines because of their strong fiscal position, prudent spending and world class currency. Higher interest rates help the banks and financial institutions which dominate the SGX.   

In this period of increased volatility and uncertainty there has been a shift to value stocks and commodities. Value stocks such as selected high quality reits are in favor. A reit pays a steady predictable distribution and is a highly visible investment. You can see the property or properties, touch them and know if they are prospering. A few years ago, I attended a reit seminar in Singapore. The instructor said the way to judge management quality is to research their ROE or return on equity over a long time frame. If  is is gradually rising it means the management is doing a good job. A CEO can paint a rosy picture but the ROE tells the true story.  All the reits we hold for you pass the ROE test.

    Weekly CRB Index traded in New York represents  a basket of             leading world commodities. 

For the last 2 years the CRB has been in an uptrend.  Warren Buffet has been buying commodity related value shares for his Berkshire.B  fund and that is one reason his fund has done well this year. His shares in his Berkshire fund are mostly boring simple businesses which pay decent yields and are a good defense against inflation and higher interest rates.

Foreign funds continue to buy Malaysian and Singapore shares as valuations are reasonable and these markets have been out of favor for the last few years.  

Take care
Bill

Eagle feeding in Langkawi. Will soon be traveling to Langkawi for a short holiday. A friend recently returned and told me it was uncrowded and imported chocolate  is now available which they have a wide variety. Now there are many special prices on hotels and air flights

Market Review

2 April 2022

 

Dear Fellow Investor,

Resilience characterizes price movement in our local market as well as Singapore. With extreme volatility in developed markets such as the US, UK and most developed markets the KLSE and SGX have been relatively stable.  A major support has been low inflation rates.  Annual inflation in Malaysia is well contained and according to Bank Negara is at 2.5 %. Singapore is higher at 4 % while in the US according to Bloomberg is at 7.9 % . Reasons include lower money supply growth and more conservative monetary policies. Malaysia has benefited because we are a  net exporter of crude oil and crude palm oil. and we are able to maintain trade surpluses.  The subsidized price of Ron 95 makes petrol the cheapest in Asia. 

Large inflows of foreign funds into Asia, China  as well as Malaysia and Singapore are evidence of smart money buying beaten down quality shares  trading at reasonable valuations compared to shares in developed markets.

This week Mark Mobius in the Edge recommends Asian shares as he sees inflation gradually rising and quality equities in this region offer the best inflation protection and offer reasonable risk to reward.  He likes shares with pricing power and ability to pass on costs to consumers. His funds are participating.

Every week I scan the sectors to identify where money is flowing. Flow is returning with the reopening of the borders and hospitality, tourism, retail and aviation are benefiting.    One very high quality Reit we hold for some clients is Sunway Reit. Occupancy rates are up, customer traffic in their malls has increased and they will benefit from the influx of tourists.  

Plantations should continue to benefit. The war in Russia/ Ukraine, supply chain disruptions, sanctions will lead to higher grain prices and shortages.   Now even Europe who has been anti palm oil for years has changed their tune and is buying palm oil.  Our holdings in United Plantations and Kim Loong should participate in this trend. 

To all our Muslim friends and clients we with you a safe and Happy Ramadan.

Bill