Malaysia's Property Prices To Rise As Much As 20% Within 6 Months?

According to Datuk Michael Yam, President of Real Estate and Housing Developers' Association
Malaysia (REHDA), prices of residential properties will rise 10-20% over the next six months because of cost and inflationary pressures! He added that the current housing market is simmering, and there is neither boom nor bust, but property prices will rise. The increase will be in high-rise and landed properties in all price categories across Malaysia! The issue of rising property prices was partly due to an imbalance of supply and demand as more migrants move to land scarce Kuala Lumpur.

Interestingly, in a recent survey of 133 Rehda members, 81% expect price hikes by as much as 20% in the next six months!

Can you ever imagine a terrace-linked house being sold for about RM1.6 million? Well, that's happening in the upper-class enclaved Desa Park City!

Nevertheless, there are views that Malaysia's property prices are still under appreciated by foreigners. Some experts attributes this to a lack of liquidity in the market and competition from Hong Kong and Singapore where capital appreciation is better due to price volatility. In addition, when other important consideration comes into play, such as public transportation, the branding of the city and KL is considered provincial when compared to London, Hong Kong or Singapore. In simple terms, KL needs to be seen as world class and provides better livability.

For the full article on the above, click this link.

Back In The Black, For Now At Least...

Malaysia has just reported a strong growth of 10.1% for the 1st quarter of 2010, led by strong recovery in exports! On the other hand, Central Bank has also raised the OPR (Overnight Policy Rate) or the official interest rate by another 25 basis point. That means Bank's BLR will go up likewise, by the same token at the very least.

Seems Malaysia represents only the handful countries in Asia that keeps pushing up interest rates...

In a way no surprises to me, given BNM's normalization process as economy recovers. In fact, I expect another rate hike coming around July after the announcement of 2nd quarter GDP.

Does this mean all are hunky dory from now on? Not quite. Much will still depend on how the current European (PIIGS) sovereign debt crisis pan out. Greece has been bailed out no doubt, but that could well be just the tip of the iceberg!

If things turn out for the worst, then we should expect economy to start turning down again in the second half of this year.. Expect to have an eventful second half! In the midst of another potentially looming crisis, the consolation is that we can at least sit back and enjoy the upcoming football World Cup.....It will be another set of drama for sure!

How To Invest in Individual Stocks Using EPF Money

Phillip Capital Management (PCM) is one such company licensed by Securities Commission and an approved Fund Manager for EPF. In order to invest your EPF money with Phillip Capital to buy individual stocks, you will need to first of all satisfy the criteria set by EPF as summarised in my previous article "Can You Invest In Individual Stocks Using EPF Money?"

Calculation example:

Procedure:

1. Fill up the application Form KWSP 9F (AHL) which you can download from EPF website or visit your nearest EPF office.
2. Download or obtain a copy of the latest EPF statement
3. In the Form, indicate the amount you are entitled to withdraw and submit it to PCM, together with a copy of your MyKad, and that's about all!
4. PCM will then submit the relevant documents to EPF for processing, which is expected to complete within 2 to 4 weeks.
   
5. Once completed, the funds will be transferred into your PCM trust account.
   
6. You may start to purchase any of your desirable stocks using PCM's online trading platform.

Upon disposing the stocks, the funds will be returned to the PCM trust account. Upon termination of account, the funds will be reverted back to your EPF Account 1.

Other noteworthy Terms & Conditions:
- upfront fee of 3% chargeable by PCM. Withdrawal from EPF is free of charge;
- annual management fee of 1.5% is chargeable by PCM;
- normal on-line trading brokerage & admin charges at about 0.55% of transaction amount is payable;
- minimum holding period is 1 year. Termination only upon one month's written notification thereafter;
- minimum investment is RM30k but can be broken down into trunks starting with RM10k, as long as the minimum amount is satisfied within one year;
- Stocks are only applicable for equity stocks, excluding warrants or any other preferential stocks

Do manage your risks before investing! Best to adopt defensive strategy as EPF money is not meant for excessive speculation!

Can You Invest In individual Stocks Using EPF Money?

Many people are probably aware that they can withdraw money from their EPF (Employees Provident Fund) savings to invest in ministry approved Unit Trust funds. However, many are probably not aware that there is also a way to invest the EPF money on individual Bursa Malaysia stocks!

Some people prefer the idea of leaving the tough decisions on choosing the right investments with Unit Trust Fund Managers but in doing so, they effectively relinquish control over how the money will be invested. Ironically, the objective of Fund Managers are often to safeguard their jobs, instead of looking after investors' best interest, i.e., make money and return on investments!

On average, EPF's average annual rate of dividend is between 5% to 6%. The rate of return is no doubt better than Fixed Desposits (FD) return but for the savvy or wise investors, this sort of return is barely sufficient to counter inflation! (By the way, forget about the so-called officially reported inflation rate of 2% to 3% because the reality is much higher than that!)

So instead of keeping all your money in EPF or leave the money with someone else, why not consider moving some money from EPF to investing in individual stocks of your choice? Without doubt, there are risks with this approach because one can potentially lose this hard earned money if the wrong choice of stocks is chosen! With the stock market being so volatile, you may think that this is extremely risky!

To mitigate the risk, one of the key success factor is through first of all doing a little bit of homework up-front and selecting stocks or companies that possess good quality and fundamentals, plus supported with decent dividend yield. To be comparable with the annual rate of dividend from EPF, one should look for dividend yield that can at least match EPF's if not better. A scan across some of the quality Bursa stocks will reveal that a number of companies under REITs and consumer businesses generally do fit such criteria!

So how do you qualify to withdraw funds from EPF for the above investment? Let's list down some of the salient points:

1. savings of at least RM5,000 more than the Basic Savings amount required in Account 1, and must be equal or below 55 years old. The basic savings is the minimum amount you must have in Account 1 before you can apply under this scheme. The table below shows the different minimum savings required for people of different ages:
   
   
   2) 20% from your savings in excess of your Basic Savings amount in your Account 1, that means the minimum amount for investment withdrawal is RM1,000.00, given the condition set in point (1).
   
   3) Formula of eligibility = (Account 1 – Basic Savings) x 20%.
   4) Investment can be made at the intervals of 3 months from the date of the last transfer, subject to the availability of the required balance in Account I.
   5) Investment must be through appointed external Fund Manager by the Ministry of Finance. Click here for the complete list.
   
   I hope this gives you an idea of an alternative form of investing, for your hard-earned savings that you can't simply screw up, i.e., EPF. In my next post, I shall touch on precisely how you can invest in individual Bursa stocks using your EPF funds and the inherent costs that you should be aware of.
   
   Here's the link to EPF should you require further clarification.

The Inevitable...Postage Rate Hike

After much speculation, I just got the confirmed news that POS Malaysia will increase the tariff or postage rate effective from 1st July 2010! Frankly, I foresee the rate hike is a matter of time, given that the last hike was way back in 1992!

As per the information that I have gathered so far, the postage increase will affect domestic postage stamps for standard mail below 50gram, non-standard mail below 100 gram, periodicals, and PosDokumen.

Here's the quantum of increase....
- For standard mail weighing up to 20 gram - RM0.60 to 0.70 (from the present RM0.30 to RM0.40).
- For others in general, the quantum of increase is 75%.

The higher postal tariffs effectively paves way for POS Malaysia to raise employees’ salaries (which is currently reported to be below the average government servant’s salary) by 30%.

In addition, the higher earnings will also pave the way for the company to undertake it's aggressive transformation plan such as potential mergers & acquisitions, revamping operational efficiency and cost reduction exercise.

No wonder it's share price has also shot up the past few days...let's take a look. "Someone" obviously knew this is coming for sure!

Is US stock market on verge of another big rally?

Some experts say investors are starting to believe that the U.S. stock market is on the verge of another big rally.

The fact is, Dow Jones Industrial Index have just posted new high above 10,800 compared to previous high posted in January 2010.

US's National Association of Realtors reported a drop in homes sales last month that wasn't as steep as forecast.

However, the report on housing was typical of recent economic numbers that have been somewhat better than expected but still point to a weak economy.

For now, it appears the sales numbers aren't disrupting hopes that the economy can recover even if there is only a slow stabilizing in the housing market.

A month ago, investors shrugged off an 11.2% drop in sales of new homes.

The market's continuing advance has been welcome but analysts are divided over whether stocks have run too far or if they have more to gain because of improvements in the economy. The story on investors is that they are afraid of missing out on further gains, after seeing the Dow making new highs.

On the other hand, investors seem optimistic about the health of corporate earnings for the January to March quarter.

Also, unlike the developed nations, Asia (excluding Japan) is still growing and certainly is the place to be at least for the next couple of decades. So despite America's and Europe's problems, it's a mere fact that there are certainly plenty of light at the end of tunnel elsewhere! It's a certainty that American companies will follow suit where the money is.

However, the issue on sovereign debts of Dubai and Greece has still not gone away, despite plenty or reassurances from various party.

As always, there are two sides of the coin to look at. One can be optimist or pessimist. May be one more for being neutral? Whatever it is, I always believe in following the trend, and that's where the smart money is. Current trend obviously still point to the north (up trend), supported by relatively strong volumes, amidst intermittent signals of danger looms!

Why do I say so? Well, simply the hot money (or better termed as liquidity) is still there, no matter what people say. The smart money has come to the realization that money has to be invested and parked somewhere (to counter inflationary stress), no matter fundamentally it's right or wrong!

However, the musical chair will stop one day of course....So until then, let the party moves on.

The Year of the Tiger, A Year Of Volatility?

The tiger is characterized by being energetic, optimistic, impulsive and restless. 2010 is the year of tiger in the Chinese lunar calendar (4708). People born in this year are believed to be adventurous, sensitive, emotional, risk-taking, smart, and straightforward by nature.

Chinese New Years falls on 14th February 2010. Celebrations start on the eve of the new moon and end 15 days later with the full moon lantern festival.

According to many Feng Shui master, 2010 Year of the Metal Tiger will be a Bad Year! Inside the Tiger, there is Wood, Fire and Earth elements. Here lies the "problem", ie., having no water element is the problem!

So, if the Feng Shui views were to be believed, then expect high volatility in the global stock markets for the year of 2010! Already we have seen glimpses of trouble started off by Dubai, followed by the PIIGS (Portugal, Italy, Ireland, Greece and Spain). With further tightening of lending by Chinese Government to curb speculative activities, and the imminent raise of interest rates by the U.S. in the near future, risk aversion will likely return to haunt the markets as USD-carry trades being unwinded.

Things can only return to the better unless the fundamental aspects of the real economy such as consumption, exports and employment return to normal.

Last but not least, I would like to wish all Chinese a Happy and Prosperous Chinese New Year!

New Roads to Travel,
New Skies to Conquer,,
New Dreams To Live,
New Hopes to Cherish,
It's the Beginning of Yet Another Year,
May it Be a Fulfilling Experience For You!
A Year of Excellent Health, Wealth, Happiness and Wisdom!
Happy 4708!

A Case of Reality Check

2009 was a stellar year for global stocks recovery. As I had written before, it was more hope than factual when global funds decided to take on an optimistic route. 2010 is expected to be a lot tougher, in the sense that what was expected last year must bear fruit this year, in order to sustain the bullish views across global economy and investments.

Last year (until the beginning of this year) we saw massive inflows of funds into emerging markets particularly like China, frenzily mopping up undervalued equity stocks and real estate properties. Property prices in Shanghai, for example, has even surpassed the previous highs made before the 2007 financial crisis! Things were beginning to look more bubblish and speculative than solid fundamental!

Problems began to emerge towards the end of 2009, in places like Dubai where they were not able to service their massive debts, to the point they need to be rescued by Abu Dhabi's sovereign funds.

Next in line comes some of the European countries commonly known as the PIIGS (being Portugal, Italy, Ireland, Greece and Spain) who appear increasingly unable to service their respective sovereign debts.

The key question in everyone's mind is that will this snowball into a global issue? Thus turning it into a double dip recession, as what some economists have predicted?

Worries about Europe caused the Euro to hit an eight-month low against the US dollar.

The perception of US Dollar may even turn to become a safe haven! Some analysts are also predicting a bullish rally on US Dollar this year against world major currencies!

China's Financial Market: Positive Reforms

China's latest decision in introducing derivative stock-index futures, short-selling and margin financing in equities are additional positive reforms designed to bring its markets in-line with other major global stockmarkets. Could this be also a further sign that China's financial markets are growing in maturity?

Personally, this is definitely setting the path to the right direction as China continues its effort to liberalize its markets, in order to become more competitive. However, in the short term, it may come at a cost to local Chinese investors as they require time to familiarize themselves with more sophisticated instruments. The degree of learning curve will definitely affect the outcome and return on investments too. For instance, margin financing may sound attractive to many people, in the form of easy availability of funds but if it's not managed properly and effectively, investors may find themselves landing in a bigger financial hole than they could ever imagine.

See related post "Is Margin Trading Right For You?"

Nevertheless, it is widely expected that the above reforms should help shrink the valuation gap that has kept yuan-denominated shares (A-shares) at a premium to similar shares listed in Hong Kong (H-shares) and Singapore (S-chips). The valuation gap between Hong Kong and China, for instance, could trade more than 50% such as what happened in August 2009.
The valuation gap between the two is often attributed to China's capital-account restrictions, which make it hard for average investors to buy shares in foreign markets.

With the availability of shorting mechanism, it will then be possible for qualified Foreign Institutional Investors to short the more expensive A-Share and buy cheaper H-share companies.

Short-selling refers to selling a particular stock first with the aim of buying back at a lower price later, for a profit.

HSBC have estimated the reforms will boost the amount of cash circulated on China's yuan-denominated stock markets by 200 billion yuan (US$29 billion) to 500 billion yuan during the next 12 to 24 months.

It will also be interesting to see if the H-shares will outperform Chinese stocks in the near future, once the above instruments were implemented.

With some believing that the introduction of index futures will help moderate share-price volatility, personally I have doubts that this will happen. Volatility will stay as long as there are abundance of liquidity in the market.

Nevertheless, one could certainly use index futures to hedge against stock holding risk, by shorting index future while being long on stocks.