Friday, 31 August 2012

Can Malaysia Trust 'Mat Rempit'?

First of all, Happy Merdeka to all Malaysians. Yup, we love peace and prosperity as mentioned by our beloved prime minister. 55th years of independence would not come true without unity of people from various races. No doubt, we Malaysians are from various background. Yet, we have come together, good or bad, to shape our nation until what we already achieve today. Anyway, Finance Malaysia hopes our nation can transform itself by realizing the 2020 vision "Developed Nation".

Just when everyone was celebrating today, I came across one news titled "Mat Rempit to help fight crime" and my writing instinct once again being activated. Fighting crime by collaborating with Mat Rempit? This is the first reaction I believed many readers would asked!!!

Don't we know that Mat Rempit were those who rides their motorcycle dangerously?
Don't we know that Mat Rempit were those riders that endangered the life of other road users?
And, I really don't know how and why our government came out this "think-out-of-the-box" idea!!!

Two Immediate Side Effects

Okay. We try to be neutral now. Maybe Mat Rempit really can help us to fight crime, and maybe they got "lubang" to detect crime, we have come out with these few immediate side effects once launched.
  1. Privileged. They got these special privilege to join police personnel. How about other "gang"? Are we accepting them in our society as a good rempit?
  2. Pride. Exactly, don't you think that being a Mat Rempit in Malaysia was so "cool"? This was like a statement to recruit more people to join them rempits everywhere. I'm not sure how effective they can in fighting crime, but what i'm sure of is this would attract more youngsters to rempit.

If they are really good, why in the first place become a rempit? Why don't they join our police personnel to formally fight crime? And the last point was this idea was first mooted by one political party to engage with mat rempits. And now this was mooted by Home ministry, in other words Malaysia Government. Hey dude, how did foreigners look at Malaysia on this matter? Positively or negatively? I think majority of Malaysians have the unpleasant answer...


Tuesday, 21 August 2012

What's wrong with Malaysia in terms of GDP per Capita? (2012)

Addressing the issue, which Finance Malaysia thinks was critical at a time of globalization heats up, Malaysia needs to formulate and take action immediately without much hesitation. But, before we jump into action, we need to know the root of the problem. Right?

Exactly, we must find out the reason why we left behind other countries in terms of GDP per capita, which refers to the country's gross domestic products at purchasing power parity (PPP) per capita. According to Wikipedia, it was the value of all final goods and services produced within a country in a given year divided by the average population for the same year.

Why not using nominal GDP to measure national wealth?
Comparison of national wealth are also frequently made on the basis of nominal GDP, which does not reflect differences in the cost of living. Using a PPP basis is arguably more useful when comparing generalized differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of the countries, rather than using just exchange rates which may distort the real differences in income.

Singapore is now the richest country in the world.
Where is Malaysia?
According to sources, some of the factors contributing to Singapore's forecast performance are its 'human capital' -- a skilled and educated labour force, the dynamic business environment, openness to trade, capital mobility and foreign direct investment. Also, it is worth noting that there is a global eastwards shift in economic activity -- Singapore is perfectly positioned to take advantage of this.

However, everything is not going well for Malaysia, although we are Singapore's closest neighbour. In terms of GDP, we moving nowhere for past few years amid competitive global environment. But, in terms of population, we believe we accelerated for past one year after government legalized some 1.6million foreign unskilled labourers. Please noted that they are non-taxpayers who consume all the benefits funded by us Tax payers.

On the other side, our brightest and brilliant are forced to mass migrate to other countries. This is a fact which is dampening the future of our country. It's sad because Malaysia supposedly was high on the list in terms of GDP per capita, given the plenty of natural resources that we had and strategic position we located in. Why?

The main reason lies within us, Malaysians. Don't blame the government. Don't blame other countries. Don't blame the statistic. Just blame ourself, Malaysians. A government was formed by its own people, and elected by us. All the while, we have this wrong mentality that we are blessed with valuable resources which can last us for a long long time. Does that mean that we do not need to compete?

Facebooking is a new norm in workplace now.
If you were to ask, Finance Malaysia would take the blame on our mindset, especially youngsters nowadays. Most of them didn't bother about the country and their future. These people go to work for the sake of working only. They follow instructions, without reinventing the way we work. How are we going to excel? Don't even think about competing. It's about time to change for a better tomorrow.

Friday, 17 August 2012

New Fund: AmGlobal Sukuk

After AmMutual's asia pacific dividend fund early this month, AmIslamic also don't want to lag behind its sister company by introducing AmGlobal Sukuk. The Fund aims to provide capital appreciation by investing primarily in Sukuk both locally and globally.

To achieve the investment objective, the Fund will undertake active management to enhance and optimize returns from investing in sovereign, quasi-sovereign and corporate Sukuk. The sectorial weightings may be adjusted to maximize the performance. There is no minimum rating for a Sukuk purchased or held by the Fund.

What's so special about this Sukuk Fund?

Value-add of the Fund is derived from active tactical duration management, yield curve positioning and credit spread arbitrage. Credit spread arbitrage and yield curve positioning is part of relative value approach that involves analysis of general economic and market conditions and the use of models to analyze and compare expected returns as well as the assumed risks. The Investment Manager will focus on Sukuk that would deliver favourable return in light of the calculated risks.

In addition, the Investment Manager may also consider Sukuk with favourable or improving credit outlook that provide the potential for capital appreciation for these investments. The Fund may invest in Sukuk of varying maturities. The Fund’s investment maturity profile is subject to active tactical duration management in view of the interest rate scenario without any portfolio maturity limitation.

AmGlobal Sukuk is suitable for investors who :
  • want steady growth in value by investing in Sukuk as an asset class;
  • have Medium to Long Term investment goals; and
  • are willing to assume additional risk associated with investing in Sukuk with longer duration and lower credit ratings.
Source: AmIslamic Funds Management
Click here to download the fund prospectus

GM and Fannie & Freddie and Spain

The taxpayer stepped up to the plate in the fall of 2008 to underwrite General Motors and FNMA and FMAC requiring a commitment of $ 250 billion plus.  We are now approaching round two.  Government Motors, as most people now call GM, is rapidly on a glide path to another bankruptcy, which will cost taxpayers approximately $ 50 billion and require, at a minimum, another $ 25 billion to protect the unions' juicy benefits.  Fannie Mae and Freddie Mac have an unlimited lifeline and their losses, now over $ 200 billion, are essentially unlimited.  But both GM and FNMA and FMAC have created many more millionaires as government-appointed bureaucrats, lawyers and accountants feast at the taxpayer's expense.  This is what happens when the government gets involved.

Europe has its own version of this.  Propping up banks in Spain, France and Germany has simply made matters worse in the Eurozone and has weakened, not strengthened, the banks.

GM and Fannie and Freddie and the European banks should have been permitted to fail.  By now, a new automobile company financed and organized by the private sector would have emerged and would be competing globally in a way that GM will never be able to.  Propping up Fannie and Freddie has prevented a housing recovery and cost the taxpayers hundreds of billions of dollars.  Had there been no bailout (and no Dodd-Frank), housing would now be in its second year of a strong recovery.  Pretending that Spain's banks are saveable has cost the Spanish government and European taxpayers several hundred billion euro -- so far.  Meanwhile unemployment in Spain surges past 25 percent.

Simply letting companies fail when they make bad decisions or when they are the victim of bad luck is the proper response.  Getting government into the act has never worked and it never will.  It only makes matters worse.

Thursday, 16 August 2012

Free Markets or Bureaucratic Dictatorship

Much of the political debate today is simply a question of whether one thinks capitalism is a good idea or not.  Many westerners seem to believe that the profit motive is fundamentally evil. Defenders of free enterprise are often thought to be morally suspect.  This is where the real struggle is being waged in today's politics.

The discussion about Bain Capital brings into sharp focus the debate on the merits of capitalism.  Should people risk their own capital to make money or should, instead, the government take people's wealth and 'make investments' with it.  That is what this debate is really all about.

A similar debate about free markets rages about health care.  Should a panel of educated and enlightened people appointed by polticians decide on your health care or should you purchase the health care and the insurance that you need and make such decisions yourself with consultation with health care professionals?  That some people are poor seems to weigh heavy in this debate.  But, this argument applies to everything, not just health care.

At the end of the day, this is an argument about whether free markets are going to survive.  Obamacare tosses out what is left of free market health care for a mandated system that forces every American to do what Obama wants or else.  Making your own health decisions is not an option under Obamacare.

The idea is that there is an enlightened elite that knows what all of us should be doing, what we should buying, what should be our energy sources, our health care providers, our bankers, and on and on.  That enlightened elite can do this better than the free market is the argument.

Has this been tried before?  Yes.  The Soviet Union, the China of the twentieth century, modern Cuba, modern Venezuela, modern Argentina are excellent examples of how an enlightened elite can perform.  Except for the governing elite, these societies were free of inequality (and greed, one supposes).  The governing elite, of course, lived (and lives) in palaces.  After all, the enlightened who guide us, should live well and they do.  As for the rest of us, we should be comforted that everyone else is as miserable as we are.  That seemed to be the ethos of the old Soviet Union.

How do people get to this bizarre idea?  Poor people are almost never in the vanguard of the movement to eradicate capitalism.  Friedrich Engels and Karl Marx lived luxurious life styles, certainly compared to the mass of their contemporaries.  Only from the rarified environment of the London Museum could Marx have concocted the absurd idea that a 'dictatorship of the proletariat' could bring anything worth having to anyone.  Real folks in the real world know that this is ridiculous.

Rich folks, movie stars and academics can engage in the luxury of dreaming that by imposing their views on everyone and substituting their views for individual freedom and free markets, the world will be a better place.  Everyone else is too busy trying to find a job and support their families to indulge in such nonsense.

Monday, 13 August 2012

New Fund: CIMB Islamic Al-Azzam Equity Fund

Launched on the same day with AmMutual new fund, the CIMB Islamic Al-Azzam Equity Fund is an open-ended fund that aims to achieve consistent capital growth over the medium to long term.

The asset allocation strategy for this Fund is as follows: 

  • between 70% to 98% (both inclusive) of the Fund’s NAV will be invested in Shariah-compliant Malaysian equities; and 
  • up to 30% of the Fund’s NAV in other Shariah-compliant investments and Shariah-compliant liquid assets, with at least 2% of the Fund’s NAV to be maintained in Shariah-compliant liquid assets.

For this Fund, the investment into Sukuk must satisfy a minimum credit rating of “A3” or “P2” by RAM or equivalent rating by MARC; “BBB” by S&P or equivalent rating by Moody’s or Fitch. In line with its objective, the investment  strategy and policy of the Fund is to rebalance the portfolio to suit market conditions in order to reduce short-term volatility and provide consistency in capital growth.

More on Investment Strategy...

CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB-Principal analyzes the direction of gross domestic  product growth, interest rates, inflation, currencies and government policies.

CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at “reasonable valuations”. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples.

Who is suitable for this Fund? They are investors who: 

  • have a medium to long-term investment horizon; 
  • want a portfolio of investments that adhere to the Shariah principles; 
  • want a diversified portfolio that includes Shariah-compliant equities and Sukuk; and/or 
  • are seeking capital appreciation over medium to long-term.

Source: CIMB-Principal Asset Management
Click here to download the fund prospectus

New Fund: AmAdvantage Asia Pacific ex Japan Dividend

Wanted to diversify your investment portfolio especially on dividend based investments? You may look into this newly launched fund by AmMutual named AmAdvantage Asia Pacific ex-Japan Dividend Fund, a fund managed by AmInvestment Services Berhad.

The Fund is a feeder fund, which will invest into the  HSBC Global Investment Funds  – Asia Pacific ex Japan Equity High Dividend (the “Target Fund”), a sub-fund of the  HSBC Global Investment Funds domiciled in Luxembourg. The Fund seeks to provide income and long term capital growth by investing in the Target Fund which has an investment focus on Asia Pacific ex Japan equities.

The Fund seeks to achieve its investment objective by investing a minimum of 95% of the Fund’s NAV in the distribution share class in the HSBC Global Investment Funds – Asia Pacific ex Japan Equity High Dividend at all times. This implies that the Fund has a passive strategy.

More about the Target Fund

The Target Fund was launched on 5th November 2004 and the total fund size of the Target Fund is  USD  170.78  million as at 31st December  2011. The Target Fund is regulated by Luxembourg Supervisory Authority, the Commission de Surveillance du Secteur Financier. 

Other than that, what's more important than the fund's past performance?

AmAdvantage Asia Pacific ex Japan Dividend is suitable for investors who seek:
  • regular income in their investment; 
  • long term capital growth on their investment; 
  • participation in the upside potential of the Asia Pacific ex Japan market; and 
  • medium to high risk investment vehicle. 

Source: AmMutual
Click here to download the fund prospectus

Saturday, 11 August 2012

Romney Shows His Serious Side

By picking Paul Ryan, Mitt Romney has elevated the national debate.  Whether one agrees or disagrees with the Ryan budget plan, it is the only serious plan put forth by any elected official in the US.  Ryan is courageous and smart.  This has to change Romney's image with his conservative base.

One wonders if the Democrats will continue to look for irrelevant issues -- Bain, for example, or Romney tax returns for another -- or will the Democrats finally engage on the real issues of our times.

This election will become a true test for the American electorate.  I suspect Americans will rise to the occasion.

Friday, 10 August 2012

Debt Isn't The Only Problem

Even if there was zero sovereign debt in Europe, Europe's economic troubles would not be over.  Unemployment would still be high and the Euro-economy would still be mired in stagnation.  It is very hard to start a business in Europe and hiring workers is just plain stupid.  Since you cannot legally fire employees in most countries in Europe (as a practical matter), there will always be very, very high unemployment across the European plain.  Unemployment is a way of life in Europe and is becoming a way of life in the United States for pretty much the same reason.

It is very expensive in Europe and in the US to hire an employee even if the employee were willing to return every dime of their take home pay back to the employer.  The mandated costs and potential litigation make an employee, especially those of relatively low income, uneconomic.  This fact will be a persistent and continual drain on the economy of the US and Europe.  The antidote for this, according to most politicians, is bigger government which further sucks the life out of free markets and makes the body politic more and more beholden to government and less interested in promoting free enterprise.  What you end up with is modern day Greece. 

Few Greeks today believe in free enterprise.  Instead most Greeks believe that somehow magically by taxing the rich they can live a life of leisure with high per capita income and little or no work effort.  Why not? It has worked that way for the last two generations.   If only the rich would pay higher taxes!  So, the Greeks vote for increasingly polarized political parties of the far left and far right.  Either a neo-nazi or neo-communist regime is likely the political future of Greece.  Democracy hasn't much of a shot because it cannot deliver an economy that works.  So voters look for someone else who can deliver the good life and there are plenty out there who claim that they can do just that.

It is very difficult for free markets to survive in an open society.  People see problems and they want to fix them.  The fix is always bigger government, more regulations, less freedom.  Eventually, free enterprise is simply overwhelmed and economic stagnation takes over.  That's where we are.

So, debt is one thing but by no means the biggest thing.  People go bankrupt and live to rise again and so do countries.  But snuffing out hope for the future through big government, through excessive regulation and taxation can keep a country from returning to true prosperity.  That's where we are.  If all the US and Europe suffered from was excessive debt, then the future would be bright indeed.  Unfortunately overwhelming sovereign debt is not even remotely the biggest issue that is bedeviling the economies of the western world.

Wednesday, 8 August 2012

Bain, Private Equity and All That

What is the economic role of private equity?  Private equity firms buy or invest in businesses, mostly private businesses, sometimes public companies.  The usual pattern is that a private equity investment helps a fledgling company expand by providing funding and often management expertise.  For public companies, private equity is often the source of turning a poorly run company into an efficiently run business.  With rare exceptions, private equity enhances shareholder value.

Absent private equity, private and public businesses alike are less valuable.  Why?  Because private equity funds are a source of equity capital, a liquidity provider (through the sale of a company to a private equity fund), and an enhancer of value (by providing management and consulting expertise).  Because of the existence of private equity funds, business large and small are more valuable.  More valuable businesses hire people and are the engine of economic growth in a free enterprise economy.

Politicians who have nothing else to brag about have been attacking private equity as if there is something evil about the industry.  If you despise free enterprise and prefer government control of business, then you probably will not like private equity.  But, if you like free enterprise, job creation and a health economy, then you will love private equity.  President Obama has made his views clear.  He is no fan of private enterprise, job creation, or free markets.  It is hardly a surprise that Obama does not like private equity.

Tuesday, 7 August 2012

Buy Bonds -- The New Cure for Government Excess

Markets and politicians are clamoring for the Fed and the ECB to buy sovereign bonds, presumably to make it easier for absurd debt levels to get to even more absurd levels.  Great policy.  It's almost reassuring to see Tim Geithner in support, since he has a perfect record -- he's never been right once regarding economic policy.

So what is the logic behind asking the Fed and ECB to buy sovereign debt?  Basically, to make it easier to sell more of that debt by increasing the demand.  Where will the Fed and ECB get the money to buy the debt?  Ah, that is the question.  How about -- out of thin air!  What we used to call the printing press.  In modern times, the printing press has been replaced by digital creation, but is there any real difference?

So Europe and the US are reduced to hoping that running the printing press to put more money into circulation will rescue their stagnant economies.  Let regulatory overkill, oppressive taxation, and massive government bureaucracy continue unabated.  Instead, let's just print dollars and euros.  That's the new policy for the Geithner-Obama-Monti-Draghi generation.

The only thing we know for sure is that inflation -- a lot of inflation -- is in our future.  For Europe, inflation will be accompanied by economic and political chaos reminiscent of the German situation in 1923.  For the US, it could be the same.  The US has an alternative available in November.  But, if that comes and goes, the US will follow the European route.

Re-instituting free markets and reducing the reach of government are the only tickets to economic expansion.  Printing money, as a cure-all, simply exposes the desperation of the modern politician who has run out of bullets.

Christie Delivers

New Jersey Governor Chris Christie, with bi-partisan support, has delivered once more for the average citizen in New Jersey.  Yesterday Christie signed a law that finally begins to put some accountability into the public schools in New Jersey by requiring annual reviews for public school teachers and makes it easier to remove incompetent teachers.  Naturally the unions fought this reform, preferring incompetence and unaccountability to a successful future for New Jersey children.  Together with Scott Walker of Wisconsin and Bobby Jindahl of Louisiana, Christie has shown what can be done when you try -- even in states that are normally heavily Democratic.

Contrast the leadership of Christie, Walker and Jindahl with that of McDonnell and others who take no political risks to help the average citizen.  McDonnell's conservatism seems to stop at the church door.  He actively opposed having employees contribute to their own retirement during his first year in office, a position exactly opposite that of Christie in New Jersey.  McDonnell has never shown any inclination to take on the VEA, Virginia's public school teacher's lobby.  Quite the contrary.  McDonnell seems to have placated the VEA at every turn.  McDonnell's main legacy is likely to be his aborted attempt to remove the first female president of the University of Virginia in its history, while pretending to stay aloof from the process.

Republicans and Democrats alike are beginning to wake up to the fact that empty rhetoric and no action do not produce reform -- reform that almost every state in the United States desperately needs.  The fiscal problems and public employee largesse, issues that are intertwined, need to be addressed.  Courageous leaders address them.

Thursday, 2 August 2012

Waiting on the ECB

Markets are focusing on the ECB this morning, wondering if Draghi really has some plan to resolve the European insolvency crisis.  One thing for certain: whatever plan Draghi can produce will not involve any government expenditure reductions or government revenue increases anywhere in the Eurozone.  Absent either of these two measures, sovereign debt in Europe will only continue to move catastrophically higher.

Shifting the deck chairs on the Titanic is the Draghi model, one supposes.  Having the ECB buy Spanish or Italian debt may spur a one day market rally, but cannot possibly put a dent in the real crisis.  In fact, it only makes matters worse by encouraging the political forces in Spain and Italy to continue to avoid real reform in the vain hope that somehow, somewhere things will improve.  They won't.

The solution to the problems in Europe is obvious:  reform.  But, reform is not on the table -- never has been.  The left is so addicted to entitlement and bureaucracy, both in Europe and in the US, that they refuse to see where this is all headed.  Keep an eye on Illinois and California.  This disaster is headed our way for pretty much the same reasons.

Wednesday, 1 August 2012

How To Destroy Opportunity

Senator Jim Webb of Virginia and others have introduced a bill in Congress to raise the minimum wage from the current $ 7.25 to $ 9.80.  Why stop there?  Why don't they cut to the chase and raise the minimum wage to $ 20 per hour?  After all, people need more money don't they?  In fact, I would think that $ 100 per hour would solve all of our problems.  At $ 100 per hour, we would no longer have to worry about problems like poverty or inadequate income.

We should probably look into other things like guaranteed paid three month leaves of absence for all employees.  Put that on top of guaranteed health care.  How about free transportation to and from the office?  A day care center free for the children of employees?  There must be some more things that we can mandate.  This is very progressive thinking!

Great ideas!  Way to go Jim Webb!!