Bursa M'sia says market fundamentals intact

Bursa Malaysia Bhd said Malaysia's market fundamentals remain strong and it is maintaining its optimistic outlook on the local market's performance over the medium term.

23-02-2007: Mixed trading, but KLCI at new 14-year high

Mild profit-taking activities continued on Feb 23, as the market digested its recent strong gains and surge in trading volume. However, a late minute spurt of buying pushed the KLCI to a new near 14-year high of 1,283.5.

Stock market the 8th wonder by Teo Yin Zhi

MYSTIFYING indeed is the power of the stock market. In the 1993 Bull Run, our very own Bursa Malaysia (or Kuala Lumpur Stock Exchange, as it was then known) demonstrated perplexing supremacy in propelling ordinary Joneses into instant millionaires.

On the contrary, it also turned imprudent billionaires to paupers during the Asian financial crisis. The crucial question is: How could we triumph in this precarious yet potentially rewarding stock market?

The power of knowledge

My stock portfolio value has increased at a compounded annual growth rate (CAGR) of 22.7% for the past five years by investing in Bursa Malaysia. The experience has taught me that investment knowledge is the focal factor in determining one’s ultimate triumph or downfall in stock investing.

The market is now dominated by institutional play. Hence, only prices of fundamentally sound companies with bright prospects would be northward-bound. – APpic
This is followed by adequate capital and patience, as time is needed for the market to ratchet up undervalued stocks’ prices. Relative to knowledge, capital and patience, luck plays a minimal role in long-term investing success.

In this complicated contemporary investment climate intertwined with issues such as high crude oil price and terrorism, selection of stocks is of paramount importance.

The heyday of across-the-board stock prices increase in 1993 is over. The market is currently dominated by institutional play. Hence, only prices of fundamentally-sound companies with bright prospects would be northward-bound.

Speculative interests may send prices of stocks rocketing but irrational exuberance is short-lived. If investors fail to disengage themselves from the whirlwind of rumours, they will end up being victims of the inherently deceptive market by buying high and selling low.

Insatiable appetite for investment knowledge is essential as it helps in unearthing undervalued gems in Bursa Malaysia i.e. stocks trading at low price-earnings ratio (PER), high dividend yield and significant discount to net tangible assets (NTA).

This is where investment knowledge comes in handy in warding off unnecessary alarm caused by intermittent stock prices fluctuations.

Opportunities are everywhere

Crises offer excellent bargain-hunting opportunities for intelligent and courageous investors who adopt logical contrarian approach.

Such opportunities arose during the Iraq war, followed by the severe acute respiratory syndrome (SARS) outbreak where panic selling caused the Kuala Lumpur Composite Index to drop to 619.22 points on March 11, 2003.

During those periods, I scanned vigorously for companies trading at undervalued prices with perpetual business demand, insulated by geopolitical and pandemic catastrophes.

I found a few companies that fitted the criteria perfectly and bought their shares. My patience paid off when institutional players started supporting theses hidden gems, steering their prices to a new high.

Do some homework

In assessing a company’s intrinsic value, investors must read thoroughly its financial statements. Due to supply and demand mechanism, market prices will at times fail to reflect the stocks’ exact worthiness.

Some investors select companies for their low PERs, attractive dividend yields or growth prospects. Buying a stock simply because it is an investment fad may be an investor's lethal blow. It is very important not to overlook the quality of the management team.

In addition, investors have to respond quickly to adverse fundamental changes in companies and sell the stocks albeit at a loss. Or else, the losses could be heftier as time passes.

Borrow to invest?

Ever thought of borrowing to invest in the stock market? Many would shudder in fear. We borrow to purchase properties and cars. Why not borrow for stock investments?

Borrowing to invest is viable for stocks with consistently high dividend yields exceeding interest rate for margin account. However, these stocks should only be bought during the ebb of market sentiment and only if they are truly undervalued.

It is paramount for such companies to have commendable forward earnings to support dividend-paying capability. If prices reach unwarranted lofty levels or a global recession is imminent, it would be wise to cash out to settle your debts.

In conclusion, Bursa Malaysia is likened to a gold mine for intelligent investors. I urge the investing public to be disciplined and avoid speculating on news in the grapevine, otherwise Bursa could be a financial graveyard for them.

There is no easy money. With sufficient investment knowledge, adequate capital and a sprinkle of luck, you are en route to reaping bountiful harvest from the eighth wonder of the world.

Before I end, here are some words of wisdom from me on investing in the stock market:

Bursa Malaysia an investment haven,

Unknown territory for those who haven’t,

Rays of wealth for value investors,

Spectre of loss for speculators,

Aren’t stock markets the eighth wonder?

Many references for you to read,

Arm yourself with knowledge, it’s a need.

Learning through mistakes, it’s not a shame,

Above average profits, that’s what we aim.

Your investment effort will soon bear fruits,

So would those with value investing roots.

Isn’t everyone seeking for a wealth outlet?

Ample opportunities in Malaysia’s stock market!

·Disclaimer: The views and opinions expressed in this article are strictly those of the author.

23-02-2007: Mixed trading, but KLCI at new 14-year high

Mild profit-taking activities continued on Feb 23, as the market digested its recent strong gains and surge in trading volume. However, a late minute spurt of buying pushed the KLCI to a new near 14-year high of 1,283.5.

22-02-2007: Mild profit taking, but volume hits new high

Mild profit-taking activities set in on Feb 22, a day after the KLCI rose to a near 14-year high and trading volume hit a new record. Given the momentum of the rally and extent of gains so far, some intermittent profit-taking activities are only to be expected – and is healthy for the market.

21-02-2007: Post-holiday rally

Investors returned from the long Chinese New Year holidays in full force. The lack of adverse external developments during the holidays and pent-up buying demand lifted the KLCI to a near 14-year high, while trading volume hit a new record high with a hefty 4.7 billion shares changing hands.

19-02-2007 : The Edge

Grand-Flo Solution(Feb 13, 54.5 sen) - BUY
Mudajaya Group Bhd (Feb 13, RM3.06) - BUY
Southern Steel Bhd (Feb 13, RM1.75) _ BUY
Titan Chemical Corp Bhd (Feb, RM1.55) - BUY
Muhibbah Engineering (M) Bhd (Feb, RM3.52) - BUY

Visit our biz partner website for more detail

16-02-2007: OSK Research: KFCH a buy at RM7.50

OSK Research is maintaining its buy recommendation on KFC Holdings (M) Bhd (KFCH) with a revised target price of RM7.50, after the company achieved a 4.6% improvement on its full year turnover with net earnings rising by 15.6% y-o-y and nearly broke the RM100 million mark.

Have intelligent investment strategy

Last year the Securities Industry Development Centre (SIDC) organised an essay competition titled My Investment Experience with the objective of getting investors to share their investment experience, good or bad. This week, we feature a winning essay by GAN HONG LEONG from Bentong.

"INVESTMENT is most intelligent when it is most businesslike.” Benjamin Graham, widely known as the father of value investing, taught Warren Buffet this philosophy.

Based on this wisdom, Warren Buffet invested in the stock market. Today, he is the second richest man in the world. Learn from him, learn from his success, and you too can become rich.

The stock market was virtually a virgin jungle to me when I bought my first share. That was in 1960, and I was 21. At that time, I was as naive and ignorant as a schoolboy regarding stocks and shares.

So long as the price was low I would call it cheap. Undervalued stocks, fairly priced stocks, or overvalued stocks are all the same to me. The chaff and the grains have no difference.

However, I was lucky to insist that the stocks which I bought must give good dividend yield. Buying shares on a cum-dividend basis was my preference.

I would sell whenever I had a good capital gain of more than 50%. I continued to invest in that manner which turned out to be profitable. Little did I realise I was actually buying fundamentally sound stocks at fairly low prices. My investment strategy was businesslike.

In April 1993, the Malaysian stock market had a super bull run. From a low of 645 points, the KLSE Composite Index hit its all-time high of 1,332.

Speculation was rampant. Price rise was spectacular. The market was a hive of activities. To get a seat to watch the market in the broker firm, you need to queue up as early as 7:30am!


Warren Buffet invested in the stock market based on the philosophy ‘investment is most intelligent when it is most businesslike’
In every corner of the town, people were talking about the market. There were no losers. Everyone was a winner. I sold at the later stage of the bull market and made a windfall.

By February 1997, the value of my portfolio appreciated to RM300,000 from RM48,000 about 20 years ago. However, I was still none the wiser about the stock market.

The years 1997 and 1998 were traumatic. The KLSE Composite Index was at 1,279 in February 1997. I bought the shares of an investment holding company listed on the main board and the share price was around RM15 per share in early 1997. By August 1997, it had declined to RM7.70 per share.

After I bought some at that price, the price kept on declining. Against the principle of wise investing, I started averaging down whenever there was a small decline.

By November 1997, it had declined to RM1.83. I thought it would stop there. Alas! It was not to be. The price continued to decline. By August 1998, it reached a low of 40.5 sen per share.

Meanwhile, my portfolio depreciated from RM300,000 to a mere RM50,000. Suddenly I realised that buying in a downtrend and holding on to a falling stock was extreme stupidity. “Never catch a falling dagger!” became my favourite phrase.

After the introduction of exchange controls in Malaysia in September 1998, the country slowly nursed itself back to health.

By then, I had become smarter, having learned fundamental and technical analysis. My investment was starting to become intelligent and more businesslike.

In April 2001, I started to accumulate some stocks based on fundamentals. I chose companies that had excellent management and great potential for growth. If it pays good dividends and the company was undervalued, I held on to the shares.

By September 2003, the stocks that I had bought had appreciated and together with the dividends received, I got another windfall.

Success in any field requires your labour. The stock market is no exception. To be successful, ensure that you have the knowledge and wisdom to plan your strategies, the discipline to carry out your plans, the patience to wait, the perseverance and temperament to endure, the capital to implement, and above all, the will to win.

Incidentally, these are traits of a successful businessman; hence, the usefulness of Graham's advice.

Investment in knowledge pays the best dividends. I share this philosophy.