Outlook at Week 50 Year 2010

Q: Do you think we still can go into the market?
A: The index shows we are at the high side, it has been long time since our last adjustment.
     Let us look at US market, Dow Jones & S&P 500 is already at 52 weeks highest.
     The Market is seeking for an adjustment before it can go up again.
     From the bollinger band, it still have some windows to go up. But it depends on you whether to take this opportunity lost or you will want to save your bullet (cash) and make a better shoot in coming adjustment.

Q: Why should we concern on US Market, instead we are in Asia?
A: US market is consider international market.
     Most of the international trading still using USD, although it is mention for sometime that the traders does not like the volatile of USD lately.
     In Asia, Japan is the 1st who open market, then follow by Singapore, Malaysia and HongKong will be later. If you monitor the trend, HongKong having the most influences in Asia. If HangSeng open in high, it will bring up Singapore and Malaysia market, Nikkie also might follow.

Q: Do you have any suggestion for our investor?
A: It is always good to keep cash, because it is always the King. The market is uncertain in this condition, there is window for going up; but there is also risk for adjustment. For market, we always come back to a theory, which ever go up must come down; which ever come down must go up. So it is better for us to keep cash in this moment, and wait for the adjustment.
We will always have opportunity on keeping cash. We can wait a clearer view to get a better shoot.

Q: When will be the right time to go into the market?
A: When the market had come down and calm. The market always need energy to go up. Look into the PE Ratio. It always can tell a better story.

Q&A for Pchem - WA

Q: What is Pchem - WA?

A: Pchem - WA is an Europe call warrent at RM 5; the term is 5:1. Expiration date is at Aug 2011. and cash settle.

Q: What is that means?

A: Europe Call Warrent meaning, you can only Exchange the warrent to the mother share on the expiration
    date.

    Term 5:1 meaning, 5 warrent is to exchange to 1 mother share

    Expiration date meaning, the Warrent will expire. or de- listing at Aug 2011.

    Cash Settle, at the expiration date, you will not get any share, it is all cash settle.

    So the fair value to calculate for this warrent to be equal to mother share is:

    5 x W + RM5 = Mother Share (Pchem)

Q: Why people buying this warrent?

A: Warrent is a way to invest, whereby you can use small money to earn big money. Example, according to
     fair value, the warrent is currently at 0.20; and the mother share at RM 5. Let say mother share goes up
    0.10; the return is just 2%. The warrent should go up by 0.02; and the return is 10%.

S&P vs Future (/ES)

/ES is future for S&P 500.

Normally ES is lowe then SPX. This is because of a common theory, that you are buying something that only will deliver to you in future and is not now..

ES come with an expiration date. When the new ES contract started, the price different is bigger. When time goes, the expiration date become nearer, the price will move nearer to SPX.

Fair Value is a number that "think" what should ES be. For Example, Let say SPX is at 1230, the time to reach the expiration is 3 months. After some calculation, ES Fair Value should stay at 1225.

Normally ES won't move too much from SPX and Fair Value.

Happy investing..!!!

Sunway REIT Evaluation

Property Involve

1. Sunway Pyramid                           RM 2,300,000,000

2. Sunway Carnival                           RM    250,000,000

3. Suncity Ipoh Hypermarket            RM      50,000,000

4. Sunway Hotel                               RM    480,000,000

5. Pyramid Tower Hotel                   RM    270,000,000

6. Sunway Hotel Seberang J             RM      56,000,000

7. Menara Sunway                           RM    138,000,000

8. Sunway Tower                             RM    185,000,000

Total property value : RM 3.729 billion

Current Liability       : RM 1.01 billion

Fund by                      : 2.62billion units

NAV per share         : RM 0.97 per share

IPO : 1.655 billion units (62%)                              Company holding : 1 billion units (38%)

Let us compare Sunway REIT and some other REIT in Malaysia

Conclusion

Based on this analysis, Sunway REIT is not so attractive in cash flow gain (lowest div yield) compare to other REIT.

But Sunway REIT did very well in capital growth. The NAV of their properties growth 318% in 4 years time.

Since this is the IPO, probably Sunway REIT will offer at price near to NAV. In Malaysia, most of the REIT price is lower than NAV. This will probably affect on Sunway REIT market price when they start trading in Bursa Malaysia.

Note: All data source from Bursa Malaysia. This is all personal opinion and understanding.

June Information

Low P/B Ratio

1. Gula Perak
2. Petaling Tin
3. Kenmark Industrial Co
4. Advance Synergy
5. Majuperak Holding
6. Karambunai Corp
7. Golsta Synergy
8. Komarkcorp
9. Focal Aim Holdings
10. Pasdec Hldgs

Industry Average P/E Ratio

1. Consumer - 14.6
2. Construction - 15.4
3. Finance - 18.5
4. Hotel - 27.7
5. Industrial Product - 12
6. Infrastructure - 18
7. Plantation - 20.4
8. Property - 10.9
9. REIT - 6.7
10. Trade / Service - 17.3
11. Technology - 16.9

Low P/E Ratio

1. Lion Forest Industries - 1.6
2. Ranhill - 1.8
3. LCL Corp - 1.8
4. Harvest Cort Industries - 1.9
5. Advance Synergy - 2.1

High Dividend Yield

1. Hup Seng Industries - 15.8%
2. M'sia Bulk Carries - 13.5%
3. Complete Logistics Svcs - 12%
4. M3 Tech - 11.4%
5. Tek Seng Hldgs - 11.1%

The source of these information is from SHARES investment Magazine (Malaysia Edition)
http://www.sharesinv.com/

Note: Please look for the latest info update in the Monthly Info Page

Technical Analysis

If you are investor that going into Trader Model; This is a very important topic you MUST know.

Imagine if you could get the indication from the market on Right Time to Buy in and Right Time to Sell out.
I know everyone would say buy low sell high; But when will you know the price that you buy is low enough, and the price that you sell is high enough.

Technical Analysis shows an indication that the price will most probably going up or going down.

This is the list of Technical Indication:

1. Accumulation / Distribution
2. Average Directional Index (ADX)
3. Average True Range (ATR)
4. Bollinger Bands
5. Candles Sticks Formation
6. Chaikin Money Flow (CMF)
7. Commodity Channel Index (CCI)
8. Guppy Multiple Moving Average (GMMA)
9. Momentum
10. Money Flow Index (MFI)
11. Moving Average (MA)
12. Moving Average Convergence Divergence (MACD)
13. On Balance Volume (OBV)
14. Parabolic Stop and Reversal (Parabolic SAR)
15. Price and Volume Trend (PVT)
16. Rate of Change (ROC)
17. Relative Strenght Index (RSI)
18. Stochastics
19. Williams' %R

We will discuss in details on what does these means and how can they assist us in technical analysis.
Thanks to Chartnexus; we can install the software for FREE and all this data will be available for you in your computer.

Bond and Loan

Boan and Loan act very different according to the agreement.

Basically bond and loan is issue when the company is need of money and want to borrow money from the share holders instead of borrowing money from bank.

In bond / loan; the company will agree on a fixed interest rate pay to the loan / bond share holder. BUT normally this interest rate is low and is not attractive.

Because the company does not want to pay out cash on the expiry date;

Normally Bond and Loan will issue the Irredeemable Convertible Unsecured Loan Stock (ICULS).

And this is the part that make loan / bond more interesting.

ICULS is totally based on the aggrement; it can be structure in:

i)  Loan / Bond + Fixed Price to exchange to mother share at the expiry date
or
ii) Fixed Number of loan / bond to exchange to mother share
or
iii) Any other method based on Agreement

Again, example will give a better picture:

Berjaya Loan - ICULS

Loan share holder can exchange to mother share with

i) 2 warrant convert to 1 mother share at the expiry date
or
ii) 1 warrant + RM 0.50 to exchange to 1 mother share at expiry date

This gives a various way for you to determine the FAIR PRICE of this loan

Case 1
Let say Currently BJ Corp at RM 1.50

If we use (i) method; the FAIR PRICE of this loan should be
RM 1.50 / 2 = RM 0.75

If we use (ii) method; the FAIR PRICE of this loan should be
RM 1.50 - RM 0.50 = RM 1

IF THE ACTUAL MARKET value this loan at (i) method, RM 0.75; then everyone might want to buy it because once you are having the share; you can choose the (ii) method to exchange on the mother share

So, the Fair Price in this case should follow on (ii) method which is RM 1

Case 2
Let say Currently BJ Corp is at RM 0.80

If we use (i) method; the FAIR PRICE of this loan should be
RM 0.80 / 2 = RM 0.40

If we use (ii) method; the FAIR PRICE of this loan should be
RM 0.80 - RM 0.50 = RM 0.30

IF THE ACTUAL MARKET value this loan at method (ii) RM 0.30; then everyone might want to buy it because once you are having the share; you can choose the (i) method to exchange on the mother share

So, the Fair Price in this case should follow on (i) method which is RM 0.40

Note: In Bond / Loan Market, the agreement can be different. And you can only redeem the mother share at its expiry date. You will need to monitor closely on the mother share value according too the agreement.

Exchange Trade Fund

Exchange Trade Fund (ETF) is a fund to buy into all the shares according to the index.

A simple understanding of ETF is; an index stock.

In Bursa Malaysia, we have FBMKLCI. This is the index stock of KLCI. The price of FBMKLCI will move according to KLCI.

Let say today KLCI closing at 1294 points; then FBMKLCI will close at RM 1.294

If you does like index a lot; this will be your choice of stock to invest. You can trade like other stocks.

Having this stock is like investing in all shares in KLCI index (Please remember KLCI is just based on TOP 30 company)

ETF will trade freely in the market; But the price is very very near to the NAV of the index

ETF will announce the NAV daily; and will give out dividen in a fixed period.

Warrant

Warrant is a “Structured Share” of the mother share in a certain of period

The structure of Warrant consists of 2 kinds of price
i)  Fixed price
ii) Market Price

It is a bit hard to explain in defination; so let us just pick an example.

Example:

JCY issue a warrant to the market,

i)   Fixed price of warrant is RM 1.00
ii)  Let say the exchange ratio is 2 warrant : 1 mother share
iii) The Fair price of this warrant in the market is 25sen. (Market might value it a bit higher or lower)

If JCY go up to RM 1.60; the Warrant will be value at RM 0.30

BUT, if JCY went lower then RM 1.00, let say RM 0.90; this warrant will be worthless.

All warrant come with a due date.
If the warrant reach its due date; and the Mother share price is lower then Fixed Price, then this warrant will be expired worthless.

Opportunity and Treats

Because of the fixed price; warrant is issue in low price
Price movement of warrant will be similar to mother share

Percentage of price movement in warrant will be big compare with the mother share

Eg.

JCY up 10sen; the warrant also up 10sen
ROI of JCY = 10 / 150 = 6.7%
ROI of JCY warrant = 5 / 25 = 20%

Of course, if price goes up the earning % is high; if price goes down the losing % will be also high

As mention above; if the due date approach and the mother share is lower then the fixed price; this warrant will be Expired Worthless. Someone might ask how could this be.

Eg.

JCY market price is RM 0.90
If you want to execute your warrant; you will need to pay RM 1.00(with 2 warrant share) to exchange for 1 mother share INSTEAD of buying in the market for RM 0.90
Of course you will not execute in this trade. So it just expired worthless.

Closed End Fund

Close End fund is similar with mutual fund;

Closed End Fund is a stock invest into a Fixed Investment Fund.

For Example,

i Capital Biz (is the only Closed End Fund in Bursa Malaysia) is investing a fund of
RM 1,000,000 and they issue 1,000,000 shares
IPO for this fund is RM 1/share

Through out the years, the fund become bigger, let say it grow to RM 2,000,000
So, the NAV for this share is RM 2/share

Since this Fund is list in the stock market, the price may be different from the NAV. It can be higher or lower then the NAV.

Closed End Fund is a share that only based on investment. The NAV is calculate based on the investment portfolio devide by Total Shares.

Closed End Fund vs Mutual Fund
If we compare with Mutual Fund, Mutual Fund is consider as Open End Fund. The Fund portfolio is open (before reaching its high limit); where by this fund can be growing if more people put money into the fund; and it may become smaller when the people draw out money from this fund.

Mutual Fund only can trade between the unit holder and bank / fund manager.
Closed End Fund can trade in Bursa Malaysia to all traders.

Mutual Fund is trade in NAV;
Closed End Fund is trade based on buying and selling price in the Trade Market.

Real Estate Investment Trust

The diagram above shows an example and explain the concept of REIT. In this case, we use KLCC as an example, but in reality, KLCC is not under REIT.

When you buy REIT, you are consider as owner of the building. This fund, hire a management team to manage this building.

Duty of Building Management include:
1. Maintain the building
2. Rent out the space
3. Collect Rental from tenant

REIT is different from other stocks, they have a policy that; REIT MUST pay out 80-90% of the rental profit (rental – management fee) to all share holder in dividend through period of time (quarterly, half yearly, or yearly).

Owning a REIT is like owning a part of the building.

Benefit of REIT
1. Stable; having a property as the Main Asset Value
2. Still under value (most of the REIT in Malaysia still 30% under of its NAV)
3. High cash flow return (around 8% for commercial REIT, eg Amfirst, Axreit, Stareit)
4. Easy to quit compare to buying an Property
5. Low commission fee compare to Mutual Fund (just need to pay broker fee as normal share trading)

Types of Stocks in Bursa Malaysia

Do you think all stocks listed in Bursa Malaysia is the same? Then you are wrong.
There is kinds of Stocks in Bursa Malaysia that offer you different kinds of investment tools according to different kinds of investment strategy and target.

Here, we will brieftly tell you about Types of Stocks that you can trade in Bursa Malaysia. We will explain more in specific later.

A. General Shares / Company Stocks

Normal company that list in Bursa Malaysia. They have to full fill the public listing requirement. Once you own the stocks, you are one of the owner in the company.

These stocks devide into 11 industrial:

1. Consumer Products
2. Industrial Products
3. Construction
4. Trading / Service
5. Technology
6. Infrastructure
7. Finance
8. Hotel
9. Properties
10. Plantation
11. Mining

B. REIT (Real Estate Investment Trust)

This is a fund on Real Estate (Buildings). This fund hire a management team to manage on the buildings, rent out the building and collect rental. The earning of rental payment will convert to dividend and pay off to the fund owner (share holders).

C. Closed End Fund

This is exactly same as mutual fund. Normal mutual fund can only buy and sell to the Trustee (Bank). The buying and selling price is fixed; and is represent the NAV of the fund. And the dividend they pay will be deduct from the NAV.

For Closed End Fund, you can trade in Bursa Malaysia. The price is depends on the market (buyer and seller). It can be higher or lower then the real NAV. It will give dividend in term basis, but it won't deduct from your primary stock price. It depends on the market movement.

D. Warrants

This is a Fixed Condition Trade Agreement. The warrants must come with the mother share. Warrant give you an option to buy back the mother share by adding certain amount of value.

E. Bond and Loan

This is the loan from the company. The company will pay you interest as agreed in the bond. The agreement upon bond can be different. It can be a fixed price upon maturity, convert to mother share with a secondary condition, payment according to mother shares and many more.

You will need to read on the agreement on the Bond Loan when you purchase this shares.

F. Exchange Traded Fund

This is trade againts the index. This fund operate as the index value. The NAV will move according to the index value. When you buy this stocks, you cna imagine you are buying the whole industry; or all shares that include in the index.

Note: All kinds of stock is trade in Bursa Malaysia. Price will be depends on the market. But the nature of stocks will act differently. We will discuss all kinds of stocks in details.

Risk Profiler

Answer below questionnaire to find out risk profile of yours:

1. Do you believe luck is important in making your investment decision?
a. Yes
b. Sometimes
c. No

2. When you hear unexpected adverse or bad financial news, you
a. Stay calm
b. Rarely overreact
c. Panic

3. Would you invest in a stock based on a friend’s tip?
a. Yes
b. Maybe
c. No

4. Between a new position offering greater job security with lesser pay and another with a higher pay but less job security, which would you select?
a. Higher pay
b. Not sure
c. Greater job security

5. Would you borrow money to make an investment that might double your money?
a. Yes
b. Maybe
c. No

6. If you have invested in a stock that rose 30% within 6 months after you bought it you would
a. Do nothing or buy more shares
b. Sell some shares
c. Sell all your shares

7. If you could increase your chances of improving your returns by taking more risk, you would
a. Take more risk with 20% of your money
b. Take some risk with 10% of your money
c. Unwilling to take much more risk

8. What percentage of your household income (after tax) is spent each month paying off credit card bills, car payments and either on rent or mortgage payments?
a. More than 50%
b. Between 25% and 50%
c. Less than 25%


9. Which one of the following statements best describes your feelings about investment risk?
a. I prefer to take higher risk for better returns
b. I prefer to select a balanced mix of investments to lower my risk
c. I prefer to stay conservative with low returns

10. Do you expect your future earning over the next five years to
a. Increase
b. Stay the same
c. Decrease

11. Would you invest in individual stocks or equity (stock-base) unit trusts?
a. Yes
b. Maybe
c. No

12. If you know investing EPF fund could potentially gives you higher return, would you invest?
a. Yes
b. Maybe
c. No


SCORING
For all questions,
a = 3 points
b = 2 points
c = 1 point


Total score             Investor Profile
12-18 points               Conservative
19-29 points               Moderate
30-36 points               Aggressive

Note: By knowing your Risk Profile and Risk Capacity, you can decide your Strategy of Investment.
We will discuss about the risk capacity in next topic.

Tax in Stock Investment

Some people might still confuse on Tax paying on Stock Investment. Here we will share the Taxing in Stock investment.

There is 2 kinds of income in Stock investment. (We don't discuss about lost, because there is no Tax in losing money)

1. Capital Gain
This income generate when you buy a share in a lower price and sell it in a higher price. You can only get this income when you sell off your shares.
This kind of income is TAX FREE!!! We does not need to pay any tax on capital gain. (If you are having an investment company that manage a fund, that is a different case)

2. Cashflow Gain
This income generate when the company decide to pay our a dividend. Normally the divedend will be Tax Deduct upfront. And the Tax deduction is on a maximum rate - 25%(except for REIT and some other kind of share).
In this case, it is better if you report your Dividend in your Income Tax Submition. Because you already paid all the Tax in a maximum rate.

(Malaysia is having a regulation that all the Tax will be deduct upfront before giving dividend starting on year 2012. This means all dividend also will be TAX FREE as well. Because the government already Tax it when the company make profit.)

Eg.
Maybank is giving 11sens devidend in year 2010. And you are having 1000 units.
The cheque that you will get is 11sens x 1000 - 25% = RM 82.50
And you had paid Tax for RM 27.50
Let say your Taxible income highest rate is 14%;
So when you report this Dividen in your Income Tax, you also report the Tax Paid (RM 27.50).
In a way, LHDN need to return you 11% of the tax collected in your divedend = RM 12.10

After all is your duty to report the Tax correctly. Happy investing and paying Tax.

Evaluate Stock by PB ratio

In previous article, we had discussed in PE ratio. In this chapter, we would like to discuss another important indication - PB ratio.

PB ratio stand for Price / Book value ratio. Book Value meaning the Net Asset Value for the stock.

In the financial report or some other sources, you can get the NAV for the share. The NAV is determine by Total Asset Value / Total share.

Eg.
Airasia
Total Asset Value is RM 2,676,586,000
Total Share Issued is 2,759,368,000
NAV or Book Value per share is RM 2,676,586,000 / 2,759,368,000 = RM 0.97 per share.
Current Price is RM 1.17
PB ratio is 1.2; meaning the market price is higher then the NAV for 20%

Please dun mistaken that PB ratio >1 meaning the share is over value. This is just one of the analysing factor. Because a lot of business does not own Asset but still valued. Especially for Nasdaq company (IT company). Normally for this kind of company they own Intellectual Properties (IP) which is not count as Asset in this case. So normally their PB ratio is very high.

So when you want to compare on PB ratio, you must compare with the same nature of business (as mention in PE Ratio Analyse).

PB ratio create a "Safe Impression". If the PB ratio is near to 1 or less then 1; then if anything happen, this company still can sell of its Asset and create that value to the share holder.

In most case, the Asset value is created by Product Stock of the company, building, machine, etc.
When you are using PB ratio as analysis, please also consider the nature of the business. If this business collapes, will the "Asset" decrease in value?

Note: PB ratio cannot be use as the only analyse index. Some NAV might over valued by the company to show it is more interesting.

Evaluate Stock by PE Ratio

What is PE Ratio

PE Ratio stand for Price / Earning Ratio

Eg. Airasia current price is RM 1.21; on last financial year, they report a RM 0.224 as the Earning Per Share (EPS)

PE ratio for current price will be 1.21 / 0.224 = 5.4

How can we use PE ratio to evaluate the company?

For all company that making profit, they have the PE ratio. (Again it is come back to your strategy - long term or short term investment.)

Another way of looking at PE ratio is the Return of Investment (ROI). Let say Airasia make a profit of 22.4 sen per year and the current price is RM 1.20. Your ROI on investing this share in this price is
0.20 / 1.2 = 18.67% p.a

Of course, PE ratio is based on last year financial performance. Most of the company will annouce Financial Statement every Quarter. You can based on the latest financial status and calculate on the PE ratio.  You can also look for past few years.

For Eg.

Glomac

The EPS for this share is very consistent. Based on current Financial Report; EPS for 3rd Q in year 09/10 is 9.86sens From calculation, we expect EPS to be 13.15sens.

Current Price is RM 1.25; that means the PE ratio is 9.5 (Expected)

If we based on last year performance; the PE ratio is 10.9 (As publish)

And your can calculate your ROI based on the current price. You will decide whether the ROI is good enough or not.

Of course, we have to evaluate the stock based on their business nature. It may not wise for us to compare PE ratio for Glomac and Public Bank. The movement of the price is different based on the nature of the business.

It will be more proper for us to evaluate Public Bank (11) vs Maybank (70) vs CIMB (17). or Glomac (10) vs UEM land (40) vs Gamuda (30).

This shows you which stock is more worth to buy.

Why not just based on current Price?

For stock, current price might not mean the real value.

Maybank current price RM 7.50 ; PE ratio is 70 ; ROI = 1.43%

Public Bank current price RM 11.7 ; PE ratio is 11 ; ROI = 9.09%

Can you tell me which stock is more worth to buy? Maybank or Public bank is over valued?

HISTORY

Rapco Holding in 1997 price went up to RM 140.50 per share. The highest PE ratio goes up to 370!!!

If you had know about PE ratio, will u pick up this stock? which your ROI is less then 1%

In 2001, the  price is Rm 7.10; Now Rapco already delisted from second board.

PE ratio is a very important index; it will be useful even your strategy is for short term investment. You can evaluate the risk taken if you want to invest this stock as a short term investment.

Note:

Besides PE ratio, PB ratio is also a very important index. We will share about PB ratio in next article.

Trading Page

This time, we will share a standard view when you start a trading. This TRADING PAGE is an online view. Perhaps this Trading Page can help you to understand more on common term.

The yellow dotted column 1 shows the Buying Q and the Buying Price. Byuing Q meaning the number of shares is Q'ing  to buy at the Buying Price

At the left bottom column; it shows a few Buying Q and Buying Price of CIMB.

Column 2 shows the Selling Q and Selling Price.

Column 3 shows the Last done Price.

Column 4 shows the Changes compare to Opening Price for the day. (For CIMB; this day is the Ex date for Bonus, so althought yesterday closing price is 14.42; but the actual equivalen price is 14.42 / 2 = 7.21 Because CIMB give out 1:1 bonuse share.)

Column 5 shows

L-V is last done volumn (how many share traded on the current price on last trade)

Vol is the volumn of the day. Take a look at GLOMAC, till this time there is still no trading for this share, so the volume is 0.

Column 6 shows the buying rate for today. When buying rate is high - meaning buying transection is high.
Eg. Total trade is 1000shares; 700 share is done on Selling Q (meaning people buy on the selling price) and 300 shares is done on the Buying Q (people buy the share by Q'ing) so the Buying Rate is 70%.

Column 7 is PE Ratio - Price / Earning Ratio. This is my favorite topic. This is one of the very important index for you to evaluate and analyse. We will discuss this topic in a later part.

As you can see there is Green "Buy" column and Red "Sell" column at the top right. This is column is to click if you want to start this trading. You will need to key in the Buying / Selling Price and the volumn on the next pop up.

Hopefully you had learned the basic from this page. Happy investing. If you have any question; you can always contact us on

mmstockmastermind@yahoo.com

Happy investing.

Margin Trading

On previous post, we had introduce for normal trading. In this post we will touch on Margin Trading.

Margin Trading is a trading that can gain / lost money without keeping the share and not using your capital money. The profit / lost made through the difference (margin) of buying and selling the share within the payment due period (Normally is T +3).

For all trading, we need to pay to the Broker Company on T+3days. If you buy and sell the share within this date, you does not need to pay to the Broker Company on the share you buy; instead you will gain / lost the difference of the trading.

Example:
Case 1
Monday - buy 1000 units of ABC in RM 1.00
Tuesday - sell 1000 units of ABC in RM 1.10

The difference is RM 0.10 x 1000 units = RM 100
The Broker Company will bank in RM 100 - all broker fee to you by next Monday (T+3 from Tuesday).

Case 2
Monday - buy 1000 units of ABC in RM 1.00
Tuesday - sell 1000 units of ABC in RM 0.90

The difference is RM 0.10 x 1000 units = RM 100
You need to bank in / pay to the Broker Company RM 100 + all broker fee by next Monday (T+3 from Tuesday).

Some Broker Company offer more margin day up to T+5; this is depends on the offer the company give to you. But common is T+3.

Intra Day Trading is to trade your share within the same day. Most of the Broker Company will give you an offer of lower Broker Fee such as 0.2% per trade. The profit is made on the difference (Margin) as well.

This kind of trading is to make money with no capital, but the risk is high. This is totally a very short term investment.

Technical Data Analysis is a very important analysis tools in this case. We will discuss on Tech Data Analysis in later part.

Start Trading in Bursa Malaysia

1. Open a Trading Account
Open a trading account from the approved securities / broker company. This will come with your CDS account (account to record your share in Bursa Malaysia).

This is the securities / broker company that approved by Bursa Saham Malaysia.
http://www.klse.com.my/website/bm/brokers/equities/list_of_brokers_alpha.html

To open an account, you will need to fill in the form and a copy of your IC. Some company will provide free account. If not, you will need to pay RM 10 to open a CDS account.

There is 2 kinds of account:
a) Direct Account
b) Pledge Account

Pledge Account, where by the broker company will manage all your dividen, form to sign on rights, annual reports. The company will send everything to the Broker Company. And this Broker company will receive and respond on behalf. If there is any deviden, the Broker Company also will bank in to your account.
Normally if you register with Bank as your Broker Company will provide you this type of account.
And this also include some service charge by the Broker Company.

Direct Account, where Bursa Malaysia will directly link to you. The dividen of the company, Purchase form for Rights, and any other material will directly send to your mailling address.
Normally independent Broker Company will provide you this account.
There is no extra service charge in this kind of account.

2. Do your research / study
As mention in few articles, you need to do studies, know your investment plan.

3. Start Trade

a) DIY Online Trading
A lot of Broker Company provide online trading service. And normally this is cheaper in broker fee (around 0.3% per trading).
You just need to log in to the online trading page, select your stock, and click BUY.
Key in the units that you want(minimum 100 units) and the price that you want.
If your desire buying price is not achieve, then you can see that you are in the buying q.

b) Call your Remisier
This is a very simple way. Just call up your remisier, and tell the remisier on the stocks name, buying unit and desier price.
Normally the remisier will call back if your trade done.

After buying on the stocks, and you can also sell on the desier price.

4. Payment

Of course you will need to pay for the stocks that you buy. Normally, payment is require on T+3.
T means for Trading Day, 3 is the days after trading.
Let say you buy the stock on Monday. Monday is your Trading Day. Thursday is the due date for your payment.
If you sell off your share before or on Thursday, you does not need to pay on the share price. BUT you will pay / receive on the difference of the price or we call as Margin. (Explain more in Margin Trading)
If you plan to keep the share, you will need to pay on Thursday. Else, the broker company will sell off your share and you will pay / receive the margin and a Penalty.

5. Monitor and Respond

If you plan to hold on the share, you will need to monitor. Depends on your strategy, you can buy / sell the share. Some of the company activity might need your responce. (Eg. Rights issue, Bonus, Dividen)

Note: This is the BASIC trading method. We will share on more kind of trading ways and strategy in other topics.

HAPPY INVESTING

Annual Report Highlights

Every public listed company need to send in their Annual Report to all share holders and Bursa Saham Malaysia.

Annual Report content a lot information about the company. Normal Annual Report having more then 100 pages. Here we will share on reading the highlights in Annual Report.

1. Director Profile
You are going to invest your money into this company. You will need to know who is running on your money.

2. Company Structure
You will know what is this company about. How they doing their business, their product / service.

3. 3 to 5 years Financial Highlights
This represent the history of the company. You will know is this company consistantly making profit or just making profit by their luck.

4. Chairman StatementThis tell you on the future development in the company. Imagine the Chairman of the company is presenting his company to you. You are the investor of the company, of course you need to know what is he going to do.

5. Financial Report - Director ReportYou will know who is holding the share in this company. Imagine if you hold a share where their directors is just holding a very small portion of share in the company, will you invest in this company? This can show the confident level of the Directors in the company.
You also will know is there any conflic of interest; is any director having another company that making business with this company.

5. Income Statement
This is a VERY VERY important statement that you MUST READ.
This tell you how the company make / lost money. Look into the revenue, cost, number of shares, earning per share.
There is a NOTE column. This Note Column will lead you to the details on the number stated in this portion.
If you feel weird on how this company making / losing money, you can refer to the note, such as Revenue, Cost of Sale.

6. Balance Sheet
You can know what is the Asset that this company own (please refer to the note and identify is that the true value).
Here you also can know the loan that this company is taking. Long term loan and short term loan.

Lastly, we would like to share a common statement:

NOT all Annual Report are what they appear. Annual Report is one of the PR tools. Company might make some not true statement. BUT this is not right in the LAW.
You can refer to the audit company. Perhaps the reputation of the Audit company can helps you to increase the confident level.

You can get all the Annual Report in KLSE website:
http://www.klse.com.my/website/bm/listed_companies/company_announcements/annual_reports/index.jsp

Note: You are an investor. You will invest your money in this company. It is totally worth for you to read through the Annual Report before decide to invest in the company.

Trader Model

This model, you believe that current rumors or news about the company and/or the sector will power-fully create a rapid increase or decrease in the price and that you can take advantage of this momentum by buying at the rumor stage and selling when the news comes out, or shortly thereafter. Therefore, you are not necessarily buying real value. You are taking quick ride on the tide.

You can develop a systematic approach that allows you to get in early and get out quickly. If you do not believe that you need to get the maximum profit, you will be happy taking you foot-foot Ring Toss/”Quick and Easy” profit.

Through a system of getting in, taking advantage of the accelerated pace of price increases, and quickly selling for a profit.

To be advance in Trade Model, you can use Technical Data Analysia to observe the movement of the stock. There is indication for the time to BUY in and SELL out.

This Model Require

1. Ability to quickly identify market momentum and news-related price increase/decreases;
2. Ability to make quick, powerful, and congruent decisions;
3. Risk taking, it can take months to build something that can be destroyed in minutes.

Strength

1. This model offers immediate return.
2. This model allows you to maximize your profit in the shortest amount of time.
3. This model strengthens your decision-making capabilities.
4. It requires that you think defensively – a good strategy for all business.
5. Use advance investment tools such as Options Trading, Margin, Margin Financing
6. You will need to expose yourself in Technical Data Analysis; to get know on Global Market all the time.
7. Since all your return is in Capital Gain; you does not need to pay Tax - Tax Free

Weakness

1. This model requires more time and focus.
2. This model has increased volatility – even more than stocks. What goes up, can come down even faster.
3. You have the potential for greater loss because you are buying market psychology, not real value.
4. What you are buying may have no long-term value. Since you purchased the stock base on momentum, you may have overpaid.

Ownership Model

This model is buying qualities companies, and holding onto them and EXPECT their value appreciates over the long-term, eventually providing long-term income (from dividen, bonus, etc).

To use this model, you buy stock in a company only if you BELIEVE that you are buying something of value that will be worth much more over the long-term. If you are intelligent, you will develop a systematic approach. Some systems are more precise than others.

The model requires:

1.Intelligent evaluation of a company;
2.Willingness to have patience;
3.A strong stomach. Remember, the average stock price fluctuates 50% over the course of a year; however, the rewards over the long-term are immense, if you’ve done your homework.

Strength
1. This is a proven model that makes you money over the long-term when applied with precision, because profit is a measurable commodity and long-term profitability supersedes any market fluctuations.
2. When applied properly, this model frees you from the emotional roller coaster of worrying about the market or economy. (It offers the potential for peace of mind).
Weakness
1. There is little or no immediate rewards. You must give yourself the pride of ownership. This is the most significant downside and the reason so few people truly apply it.

2. This model is capital investment – in order to produce a sizeable cash flow, you must invest a great amount of capital.

3. This model requires a strong stomach. (Remember, the average stock price fluctuates 50% over the course of a year).

4. This model can cause you to miss the ongoing potential for profit (e.g., Timecom fluctuated from 35 to 45 several times in one year, thus providing many opportunities to profit.)
5. You will need to pay Tax for the dividen / bonus given.

Understand Yourself as an Investor

5 simple behavior of being an Investor and NOT a Gambler in Stock


1. Opportunity vs Capital

–Selling too fast; worrying about making bad decision on selling too fast that making less money in a high earning stock

–Buying too slow; worrying miss opportunity in a Popular stocks that everyone buying (Especially on internal Tips)

Note: There is no selling too fast or buying too slow. Take time to analyse. Missing an opportunity is better then losing your capital.


2. Realised Lost vs Capital Stuck

–Emotionally affected by the purchased price of stock. Feel embarrass on a loss.
–Having the concept of; never sell never lost

Note: A lot of people just keep holding on the stocks; and never sell until it make a profit or back to cost. And this people always mention, never sell never lost


3. Best Buying / Selling Price vs Buying / Selling in GOOD Price
- Always q in the buying price or best buying price of the day
- Hesitate to buy on the selling price OR sell at the buying price

Note: Keep q in a lower / higher price cause the trade undone. The price might make much more different on the next day / hour.

4. Anchoring

–Often assume that the market price is the correct price, rely on recent market views and opinions even though it differs from historical, long-term averages and probabilities
–DON’T anchor yourself into recent performance without taking into account true historical returns: the compound historical returns

Note: Normally people will buy stocks in good time. This is a lesson to analyse on the economy cycle, look into the history and predict the FUTURE.

5. Over confident
–Believe you can consistently time the market? WOW!
–In reality, there’s an overwhelming amount of evidence that proves otherwise
–Overconfidence results in excess trades, with trading costs denting profits
Note: The feeling of having a third eye to predict a stock price without proper analysis bring you to become the best GAMBLER...

Introduction to Stocks

What is Stocks?

Stock or share is consider part of ownership in the company.

For example Company ABC, if you are having 1,000 units of Share Company ABC, it means you are having 1% ownership of Company ABC.


Stock Market

Stock Market is a place to trade your shares; a place where people can buy and sell on various kind of shares.

In a simple way, imagine you have some money, and you can go to the Market to buy a piece of cake. After you bought it, you can also sell the cake in this Market place.



Stocks Trading




Person A is call a seller; where Person B is a buyer. The place that they trade is called as Stocks Market.

Because there is a lot of people trade in Market, so there is 3 kinds of price we normally see in the Market:

Last Done Price - Price for last trading / transaction
Buying Price - Person B offer price
Selling Price - Person A demand price

Analysis of Investment Vehicle

There is various type of investment tools in the Market. Before we go into some investment, we need to analyse whether the investment is suitable for us or not.

Here we analyse the investment tools using SWOT analysis.

S – Strenght
W – Weakness
O – Opportunity
T – Treats

We run this SWOT analysis for a few common investment tools – Stocks, Unit Trust, Gold, Forex and Properties.

We combine the Opportunity and Treats in here. Because a Treats can be an Opportunity for another party, it depends on which side are you in. You can also turn the Treats to an Opportunity. Eg. H1N1 is a Treats for company A because a lot of staff affected and cause the production load down. But this become Opportunity for Company B which producing mask, glove or vaccine for H1N1.

STOCKS

Strength
- Proven successful business (listing requirement)
- Small starting capital
- Easy and simple to enter & quit
- Having wide range of stocks to pick / choose
- Low trading fee (as low as 0.1%)
- Can choose as short, medium, long term investment
- Can get income in capital gain and cash flow (eg. dividen)

Weakness
- Price fluctuate fast (volatile)
- Cannot control company activity / decision
- Less liquid, need buyer
- High risk. Can be total capital lost
- Need to monitor closely

Opportunity / Treats
- Very sensitive to Major & Minor issue
- Very focus on company performance / change of Director


UNIT TRUST

Strength
- More stable price
- Small starting capital (depends on type of fund)
- More liquid, sell back to fund house any time. Easy to enter and quit (1 day processing)
- Lower risk. Safety through the spreading of risk: diversification (fund invest in local & overseas market, loaded and non loaded fund)
- Need less monitoring

Weakness
- Higher service charge (0.25% for bond and money market funds; 3-7% for equity funds)
- Less flexibility (fund come in package – focus in certain industry, country)
- Limited choice (number of funds < number of stock counters) - Normally consider as middle to long term investment tools - Capital appreciation, where distribution of units are not guaranteed Opportunity / Treats - Sensitive to Major issue, not so much effect on news happen on company - Re balance financial portfolio can be done with ease by performing fund switching GOLD (DEPOSIT TYPE) Strength - More Stable price - Easy to enter and quit - Need less monitoring - Can choose as medium, long term investment Weakness - High initial commission (>5%)
- Medium starting capital (starting in 10 or 100gram)
- Limited choice (Normally trade back with the same bank / institute; if sell to others will having higher sell back commission)
- Only can get income on capital gain

Opportunity / Treats
- Less sensitive with minor issues
- Price increase in unstable / economy down situation
- Always contain value


FOREX TRADING

Strength
- Low initial commission (~1%)
- Low initial start up capital
- Easy to enter and quit

Weakness
- Might lost more then capital (depends on type of account)
- Need very close monitor
- Very short term investment tools
- Very high volatile
- Income in capital gain type

Opportunity / Treats
- Potential gain high return / lost in short period of time
- Legal in Forex trading
- Only be sensitive to issues regarding to the country


PROPERTIES

Strength
- More Stable price
- Need less monitoring
- Can choose as medium, long term investment
- Can get income in capital gain and cash flow (eg. rental)
- Can have full control to operate (renovate, sell,..)

Weakness
- Need to get buyer / seller to enter or quit
- Low cash liquidity
- Need high initial capital
- Usually loan will involve in this kind of investment

Opportunity / Treats
- Less sensitive with minor issues