If you do track foreign exchange (forex) closely, you should realise that Ringgit (RM) has performed strongly against most foreign currencies, including the US dollar, Japanese Yen, Indonesia Rupiah and Thai Baht.
In other words, our local currency now has more buying power when we go abroad.
So, perhaps it's time for us to travel overseas? hm...before that...
2007 marks the 50th anniversary for Malaysia, and hence, our government has launched a year long celebration called "Visit Malaysia Year". We also have our version of London eye in KL called "Eye on Malaysia". It's a lovely observation wheel situated on Lake Titiwangsa, overseeing the beautiful skyline of KL City.
Visit Malaysia Year 2007 is one of the major theme this year that should give KLCI a nice boost. When it comes to an increase in tourism, the first thing that pops up in an investment mind should be "which sector will benefit the most?"
Yup, you're right. Consumerism and Retail, Hotel, Transportation related etc etc...
hey,that's quite a number of sectors! Ok, let's filter down. Which's KL most famous landmark?
KLCC TwinTower! yeah, i know. But how do i make money out of this? If you believe in this theme, and you wanna "get a piece of" KLCC, perhaps KLCC Property would worth a look since they own KLCC.
Since it's a tourism year, some would say that the industry which will have the most positive impact would be the airport and airline. Hm...that's true. For most international travelers, their first gateway to Malaysia will be the airport. Let it be KLIA International Airport or LCC (low cost carrier terminal), both of them are owned by Malaysia Airport Holding Berhad (MAHB). Tak lain tak bukan, of course, in terms of airline, MAS and AirAsia should pop up relatively fast enough in our mind. If not, then they have done a lousy job in terms of advertising! Key note here: which one pop up first?
Airasia, one of my all time favourite company, is currently giving away 1 million free tickets and finally they are planning to fly over the 4-hour radius region!
MAS, as a measure of survival and being competitive, has follow suit and rolled out some low fares strategies as well. Good news for us travelers!
so, is it time for holiday?
if you have been wanting to go overseas for holiday, perhaps this is the time since our Ringgit is strong and tickets are relatively cheaper.
if you want to go holiday sometime later, but wanna make a gain out of this appreciating RM, great, perhaps you could purchase some foreign currencies now and hold on to it till the day you go abroad, but of course, please bear in mind that you won't be making any interests on the foreign currencies that you're holding in hand or under your pillow. :)
Another way to make full gain of this is to open some sort of foreign fixed deposit account with banks, which will convert your RM to forex, place them in foreign banks' FD, and upon maturity, you can reinvest in other foreign FD or covert them back to RM. But to do this, you should be hoping that RM will not appreciate any further!
if you want to make more, and for instance, if your son / daughter is studying in overseas, perhaps you could send more money over, deposit them into the foreign banks FD and gain some yield pickup from currency gain and higher deposit rate! ( I know most savvy mom dad investors have been doing this since ages ago...)
if you don't have any foreign exposure or not going anywhere abroad for holidays... well, perhaps VMY '07 investment theme should keep you occupy for awhile. :)
Good Luck investing!
p.s. Disclaimer: this article does not constitute a buy or sell advice. You should do more analysis before putting your money in!
Sunday, January 14, 2007
Tuesday, January 9, 2007
Investment 101 - benchmark
Let’s talk about investment.
Rule #1 of investing, you must know your own benchmark.
i.e. when you get your return on investment (ROI), you must be able to see, whether has it been a profitable investment, or otherwise.
For instance, in Malaysia,
- The inflation rate is about 3% a year, whereas
- 12-months fixed deposits (FD) give you about 3.70% per annum.
-Unit trust A, with 100% equities exposure gives you 8% return a year.
- Direct investment in stock B listed on KLCI 15% p.a. (tell me if you can find one!)
- 1 banana is selling for RM1. (c’mon, tell me you do have some sense of humour!)
Ok, so what does all these numbers and facts mean?
Let’s start with a simple scenario. You’re 25 years old. Work your arse off for 2 years and manage to save up RM 5,000. What an achievement.
But you know for sure RM5k savings won’t bring you anywhere. So you have decided to take a bold move and ready for some investment.
Naturally, and traditionally, most of our “investments” are in Banks’ FD. Correct?
If, and only if, you keep your savings underneath your pillow, so what have you actually “lose”?
CASE 1:
Beginning of 2007 you have RM5k, in terms of purchasing power, you can afford to buy 5,000 bananas. Wow. Ok, then you decide to put 5k underneath your pillow.
After 1 year, you dig out your RM5k notes, go to Giant or Tesco and want to reward yourself with 5k bananas, only to find out that due to inflation, 1 banana now costs you RM 1.03.
So in terms of purchasing power, your RM 5k no longer can buy you 5k bananas, but only RM 5k / RM 1.03 = 4,854 bananas, 146 bananas less than one year before!
So in the end, you still have your money in hand, but, it has lost its value. Thanks to the erosion caused by Inflation!
CASE 2:
Same scenario as before, but you use the RM5k at the beginning of 2007 to buy RM5k worth of bananas, i.e. you have 5,000 bananas in store. Assume that you can store it in superb condition for a year (ignoring storage costs……); at the end of the year, you sell all the bananas at market price of RM 1.03. End of 2007, you have RM 5,000 * RM 1.03 = RM 5,150.
Oh wait, have I made 150 bucks for trading bananas? Not bad eh! But wait a minute, something is not right here.
Actual return on investment = RM 150 / RM 5000 = 3% = inflation rate p.a.!
So you thought you made some, but in the end, you only manage to hedge your savings!
CASE 3:
So instead of buying bananas, you put your money into FD. Smart move.
After one year, you have RM 5,000 plus 3.70% interests = RM 5,185. Not bad.
You withdraw all the money from the bank and go get yourself some banana.
At the end of year banana price of RM 1.03, you can buy RM 5,185 / RM 1.03 = 5,034 bananas! Crikey! 180 more than case 1, 34 more than case 2!
That’s investment!
You want more bananas?
CASE 4 & 5:
Just lump the two investments together, basically they will tell the same story.
Instead of putting in the FD, you have decided to buy Unit Trust A or direct investment into stock B.
Maybe it’s pure luck or maybe you’re inspired by financial geeks, you get 8% return back from investment A and / or 15% back from investment B. Bravo!
So how much have I made? You asked yourself. Let’s get back to the real finance and stop playing so much with bananas.
You should know by now that inflation will eat into the amount of bananas that you can buy at the end of year. Good.
So now you have made 8% (15% for B). But which benchmark do you compare against?
Both the investments have beaten inflation rate of 3% like how Bruce Lee smashes financial_cicak. If you lose me here, it means that you can buy yourself a lot more bananas.
But is that your real benchmark? You should be smart enough to put your savings in FD.
Instead of putting your money with the bank which gives you 3.70%, now you’re investing in unit trusts or share.
So by not investing in FD has become an opportunity cost for you! Is it really worth it?
Absolutely. Investment A gives you an extra 5% return while investing in stock market gives you a handsome 12% return!
Thus your actual benchmark is … your next best investment opportunity! In this case, FD.
But hey, are we missing out something here? I am afraid so.
Rule #2 of investing – Risks vs Return
The above example has one major flaw. It has totally ignored one of the most important elements in terms of investing. RISK!
Basically the illustration here assume that all the investments, either in bananas, hide underneath pillow, FD, A or B have similar risks. Is this the case?
No no… so how do we measure risks?
More to come in my next entry. It’s time for me to enjoy my bananas…
Rule #1 of investing, you must know your own benchmark.
i.e. when you get your return on investment (ROI), you must be able to see, whether has it been a profitable investment, or otherwise.
For instance, in Malaysia,
- The inflation rate is about 3% a year, whereas
- 12-months fixed deposits (FD) give you about 3.70% per annum.
-Unit trust A, with 100% equities exposure gives you 8% return a year.
- Direct investment in stock B listed on KLCI 15% p.a. (tell me if you can find one!)
- 1 banana is selling for RM1. (c’mon, tell me you do have some sense of humour!)
Ok, so what does all these numbers and facts mean?
Let’s start with a simple scenario. You’re 25 years old. Work your arse off for 2 years and manage to save up RM 5,000. What an achievement.
But you know for sure RM5k savings won’t bring you anywhere. So you have decided to take a bold move and ready for some investment.
Naturally, and traditionally, most of our “investments” are in Banks’ FD. Correct?
If, and only if, you keep your savings underneath your pillow, so what have you actually “lose”?
CASE 1:
Beginning of 2007 you have RM5k, in terms of purchasing power, you can afford to buy 5,000 bananas. Wow. Ok, then you decide to put 5k underneath your pillow.
After 1 year, you dig out your RM5k notes, go to Giant or Tesco and want to reward yourself with 5k bananas, only to find out that due to inflation, 1 banana now costs you RM 1.03.
So in terms of purchasing power, your RM 5k no longer can buy you 5k bananas, but only RM 5k / RM 1.03 = 4,854 bananas, 146 bananas less than one year before!
So in the end, you still have your money in hand, but, it has lost its value. Thanks to the erosion caused by Inflation!
CASE 2:
Same scenario as before, but you use the RM5k at the beginning of 2007 to buy RM5k worth of bananas, i.e. you have 5,000 bananas in store. Assume that you can store it in superb condition for a year (ignoring storage costs……); at the end of the year, you sell all the bananas at market price of RM 1.03. End of 2007, you have RM 5,000 * RM 1.03 = RM 5,150.
Oh wait, have I made 150 bucks for trading bananas? Not bad eh! But wait a minute, something is not right here.
Actual return on investment = RM 150 / RM 5000 = 3% = inflation rate p.a.!
So you thought you made some, but in the end, you only manage to hedge your savings!
CASE 3:
So instead of buying bananas, you put your money into FD. Smart move.
After one year, you have RM 5,000 plus 3.70% interests = RM 5,185. Not bad.
You withdraw all the money from the bank and go get yourself some banana.
At the end of year banana price of RM 1.03, you can buy RM 5,185 / RM 1.03 = 5,034 bananas! Crikey! 180 more than case 1, 34 more than case 2!
That’s investment!
You want more bananas?
CASE 4 & 5:
Just lump the two investments together, basically they will tell the same story.
Instead of putting in the FD, you have decided to buy Unit Trust A or direct investment into stock B.
Maybe it’s pure luck or maybe you’re inspired by financial geeks, you get 8% return back from investment A and / or 15% back from investment B. Bravo!
So how much have I made? You asked yourself. Let’s get back to the real finance and stop playing so much with bananas.
You should know by now that inflation will eat into the amount of bananas that you can buy at the end of year. Good.
So now you have made 8% (15% for B). But which benchmark do you compare against?
Both the investments have beaten inflation rate of 3% like how Bruce Lee smashes financial_cicak. If you lose me here, it means that you can buy yourself a lot more bananas.
But is that your real benchmark? You should be smart enough to put your savings in FD.
Instead of putting your money with the bank which gives you 3.70%, now you’re investing in unit trusts or share.
So by not investing in FD has become an opportunity cost for you! Is it really worth it?
Absolutely. Investment A gives you an extra 5% return while investing in stock market gives you a handsome 12% return!
Thus your actual benchmark is … your next best investment opportunity! In this case, FD.
But hey, are we missing out something here? I am afraid so.
Rule #2 of investing – Risks vs Return
The above example has one major flaw. It has totally ignored one of the most important elements in terms of investing. RISK!
Basically the illustration here assume that all the investments, either in bananas, hide underneath pillow, FD, A or B have similar risks. Is this the case?
No no… so how do we measure risks?
More to come in my next entry. It’s time for me to enjoy my bananas…
Sunday, January 7, 2007
Are we done yet?
Omedeto! Welcome to financial geeks!
I'm financial foorensu.
Before we start, what's foorensu?
It’s actually フレンズ, japanese for the word Friends. Yeah, i know, the actual romanji should read fu-re-n-zu, but what da heck, just gotta give it a slight twist to make it ... more me!
'nuff about the nick. Ok. Let’s see what we have here. Today is 5th of January 2007. In financial terms, today is the 3rd trading day of the year.
As at 5pm, Malaysia KLCI stands at 1,120pts, continue to up 2 points after the strong bull run 2 days ago. not too bad as this is a healthy consolidation.
The investors' sentiments are very positive due to the recent Bull Run. Even the Christmas and New Year eve parties are more happening in KL than before. KLCI was below 900pts back in May 2006, but then it surged past 980, 1000, 1050, 1080, and now, broke through 1100. Omedeto!!!
But hey, wait a minute. Isn't there a saying sounds like this?
"what goes up, must comes down"
If you asked any fundamentalist like the great Warren Buffet or even Sir Isaac Newton who has discovered the law of gravity will agree with the abovementioned statement. What goes up can't go up forever. Similarly, what goes down can't go down forever.
Therefore the million dollar question is this, "Are we done yet???"
Today on Bloomberg TV, Bear Sterns Chief Strategist believes that 2007 will be a bull year for US equity. Similarly, Bill Gross from Pimco also predicted that US Fed Fund Rate will be cut to 4.25% by year end from its current level of 5.25%. (note: rate cut? what the heck? well, we can explore this in more details in my next entry perhaps).
This news is very positive for the stock market. The rationale is that US economy growth is expected to slow, and thus, an easing monetary policy is expected to be in place in order to stimulate the slowing economy.
The key word here is Expectation.
finance #101: Prices Fluctuates based on Expectation.
simple illustration:-
Expectation of slowing economy ---> central bank is expected to cut rates ---> more friendly business environment ---> better earnings ---> increase in firms' values ---> increase in share price.
Thus, one of the key risks going forward that will halt the bull run will be this:
The US growth does not slow as fast as expected.
If this materialises, what will happen?
Expectation of rate cut --- doesn't materialise, as there are no foundation for them to do so.
Expectation of better earnings --- might not materialise.
Share prices? --- fall back to its fair value.
So back to the question of "are we done yet?" The answer is no, not yet. Personally I believe that we could ride on this bull run for awhile more due to the January effect before something happen that turn the investors' sentiment from positive to negative. In Malaysia, we're abit luckier because the 9MP and Mergers talk will continue to keep our market supported for awhile.
Two set of numbers would provide us some clues if we do track it closely.
1) The volume traded on KLCI. Make sure that it is not on a declining trend. If it does, well, first sign of the tapering of investors' confidence.
2) US Growth number - i.e. the GDP (Gross Domestic Product). The magnitude of change would be the key focus.
Till then, will be back for more!
What’s your thought?
I'm financial foorensu.
Before we start, what's foorensu?
It’s actually フレンズ, japanese for the word Friends. Yeah, i know, the actual romanji should read fu-re-n-zu, but what da heck, just gotta give it a slight twist to make it ... more me!
'nuff about the nick. Ok. Let’s see what we have here. Today is 5th of January 2007. In financial terms, today is the 3rd trading day of the year.
As at 5pm, Malaysia KLCI stands at 1,120pts, continue to up 2 points after the strong bull run 2 days ago. not too bad as this is a healthy consolidation.
The investors' sentiments are very positive due to the recent Bull Run. Even the Christmas and New Year eve parties are more happening in KL than before. KLCI was below 900pts back in May 2006, but then it surged past 980, 1000, 1050, 1080, and now, broke through 1100. Omedeto!!!
But hey, wait a minute. Isn't there a saying sounds like this?
"what goes up, must comes down"
If you asked any fundamentalist like the great Warren Buffet or even Sir Isaac Newton who has discovered the law of gravity will agree with the abovementioned statement. What goes up can't go up forever. Similarly, what goes down can't go down forever.
Therefore the million dollar question is this, "Are we done yet???"
Today on Bloomberg TV, Bear Sterns Chief Strategist believes that 2007 will be a bull year for US equity. Similarly, Bill Gross from Pimco also predicted that US Fed Fund Rate will be cut to 4.25% by year end from its current level of 5.25%. (note: rate cut? what the heck? well, we can explore this in more details in my next entry perhaps).
This news is very positive for the stock market. The rationale is that US economy growth is expected to slow, and thus, an easing monetary policy is expected to be in place in order to stimulate the slowing economy.
The key word here is Expectation.
finance #101: Prices Fluctuates based on Expectation.
simple illustration:-
Expectation of slowing economy ---> central bank is expected to cut rates ---> more friendly business environment ---> better earnings ---> increase in firms' values ---> increase in share price.
Thus, one of the key risks going forward that will halt the bull run will be this:
The US growth does not slow as fast as expected.
If this materialises, what will happen?
Expectation of rate cut --- doesn't materialise, as there are no foundation for them to do so.
Expectation of better earnings --- might not materialise.
Share prices? --- fall back to its fair value.
So back to the question of "are we done yet?" The answer is no, not yet. Personally I believe that we could ride on this bull run for awhile more due to the January effect before something happen that turn the investors' sentiment from positive to negative. In Malaysia, we're abit luckier because the 9MP and Mergers talk will continue to keep our market supported for awhile.
Two set of numbers would provide us some clues if we do track it closely.
1) The volume traded on KLCI. Make sure that it is not on a declining trend. If it does, well, first sign of the tapering of investors' confidence.
2) US Growth number - i.e. the GDP (Gross Domestic Product). The magnitude of change would be the key focus.
Till then, will be back for more!
What’s your thought?
Friday, January 5, 2007
Welcome!
ladies & gentlemen, welcome to the financial geeks' blog.
we're a bunch of financial geeks and we would like to share our thoughts with you.
do bear with us for a while cause for a start, we would only cover malaysia market, which is the market that we're most familiar with.
so do drop by once in a while, or everyday if you like, for some investing tips and financial updates!
cya
Financial Geeks
we're a bunch of financial geeks and we would like to share our thoughts with you.
do bear with us for a while cause for a start, we would only cover malaysia market, which is the market that we're most familiar with.
so do drop by once in a while, or everyday if you like, for some investing tips and financial updates!
cya
Financial Geeks
Subscribe to:
Posts (Atom)
