Wednesday, June 30, 2010

Malaysia Forecast To Be ‘young and poor’ by 2030

KUALA LUMPUR, June 29 — Malaysia’s relatively high population growth rate will see the country remain comparatively young over the next two decades but economic growth is not expected to keep pace with population expansion, according to a report by Bank of America Merril Lynch.
Most developed countries experience lower population growth than developing countries and thus become older as they grow richer but China and Thailand however, are forecast to grow old before they can become rich with more than 15 per cent of the population aged above 65 years in the next 15-20 years.
The forecasts are part of an analysis by Bank of America Merrill Lynch on the impact of demographic trends on investment opportunities.
It also found that the population in Hong Kong, Korea, Singapore, Taiwan and Australia are growing old fast but they are expected to remain among the wealthiest in the world.
By 2015, Malaysia is forecast to have an elderly dependency ratio (EDR) — population aged above 64 divided by population aged between 15 and 64 — of 10 with a GDP per capita calculated on purchasing power parity (PPP) basis of US$20,000 (RM64,950). Current young and rich countries such as Australia, Singapore and the US have EDR’s of between 15 and 25 with a GDP per capita of between US$50,000 to US$70,000.
By 2030, Malaysia’s EDR is expected to be about 15 with a GDP per capita of about US$50,000 while Australia, Singapore and the US are expected to have an EDR of between 30 and 40 and per capita GDPs of US$110,000 and US$160,000.
The report also suggested however that based solely on the ratio of prime savers — defined as population aged between 40 and 64 — to the rest of the population, the stock markets of China, India, Indonesia, Malaysia and Philippines are expected to outperform those of Australia, Hong Kong, Korea, Singapore, Taiwan and Thailand in the next 20 years.
It added that in advanced economies such as the US and the UK, the stock market “can rationally factor in the demographic trend, usually a few years ahead”. It said that there is a risk of that relationship becoming “self-fulfilling” leading to decades of bear markets in those countries.
“The stock markets and financial assets are arguably most influenced by the mid-aged people,” said the report. “Hence, it is not surprising that the correlation between Mid-Young ratio and the aggregate value of stocks traded is quite high for most Asian countries.”
The report said that there were investment opportunities in the education sector in China, India and the Philippines unlike Australia and Korea which have the most highly education labour force.
It also said that Australia and Thailand have room for development in the private healthcare sector and that India, Philippines and Singapore lag in terms of public spending on healthcare.

Wednesday, June 23, 2010

Yuan Move Spurs Demand For Ringgit

Asian currencies from the won to the ringgit are luring two of the region’s largest investors on speculation China’s decision to end the yuan’s peg will increase demand in the world’s third-biggest economy.

Mitsubishi UFJ Asset Management Co, a unit of Japan’s largest bank, says Asian central banks will allow appreciation by reducing dollar purchases. AMP Capital Investors Ltd, Australia’s second-biggest money manager, predicts the region’s currencies will gain as much 15 per cent in the next year as China’s move underscores the strength of the global recovery.

The yuan rose the most in five years yesterday after the central bank said June 19 it would increase the currency’s “flexibility,” scrapping a two-year peg against the dollar aimed at shielding exporters from the global financial crisis. The Bloomberg-JPMorgan Asia Dollar Index climbed 0.7 per cent, the most in six weeks. Policy makers from the Philippines to Thailand said the change would spur regional trade.

“Asian central banks will probably ease their grip on intervention as competitiveness becomes less of an issue,” said Hideo Shimomura, who helps oversee the equivalent of US$55.4 billion at Tokyo-based Mitsubishi UFJ Asset. “Authorities in Asia see the move as confidence by the Chinese authorities in its economic state.” Shimomura said he may add to holdings of Asian currencies including the Singapore dollar.

The yuan strengthened 21 per cent in the three years before policy makers halted gains at about 6.83 per dollar in July 2008. It fell 0.2 per cent to 6.8095 as of 12:36 p.m. in Shanghai after rising 0.4 per cent yesterday. South Korea’s won gained 2.6 per cent yesterday, the ringgit appreciated 2 per cent and Taiwan’s dollar rose 0.6 per cent.

Won Gains

China, including Hong Kong, is the biggest export market for economies such as Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.

“This is a good opportunity for Thai exports to China,” Deputy Governor Bandid Nijathaworn told reporters in Bangkok yesterday. Spencer Lin, the head of foreign-exchange at Taiwan’s central bank, said today that yuan’s appreciation “will be good for countries selling goods to its domestic market.”

The yuan policy change signals that “the recovery in the Chinese economy is on a more solid footing,” Philippine central bank Governor Amando Tetangco said in a June 20 interview. “This bodes well for intra-Asian trade and consequently growth for our economies.”

Solid Recovery

China’s central bank said it was prepared to resume appreciation because the “upturn in the Chinese economy has become more solid” and that a stronger yuan would help curb inflation. Gross domestic product expanded 11.9 per cent in the first quarter from the same period of 2009.

“The move by Chinese authorities has given investors more confidence on China’s growth trajectory as it has reduced the need for aggressive tightening,” said Nader Naeimi, a Sydney- based strategist at AMP, which has more than US$90 billion of funds under management in Sydney. “Asian currencies are leveraged to China’s growth profile. We are increasing our allocation.”

AMP’s favors the Taiwan dollar, the Korean won, the Singapore dollar and the Malaysian ringgit.

Floating Rate

People’s Bank of China said that a floating exchange rate will help the nation to focus its economy on domestic demand, curb inflation and reduce trade imbalances, according to a question-and-answer document published June 20. The bank ruled out “large changes” in the exchange rate and said it will prevent “excessive” fluctuations.

The won led declines in Asian currencies today, falling 1 per cent, on speculation policy makers will seek to limit appreciation as they assess the economic impact of an expected rise in the yuan.

Regional currency rallies may prove short-lived, as China’s central bank will limit gains while Europe’s debt crisis worsens, according to DBS Asset Management Ltd. and Daiwa SB Investments Ltd.

“If you ask me if this yuan news will make me specifically load up on Asian currencies over and above what we already own, then the answer is no,” said Desmond Soon, a portfolio manager at DBS Asset Management Ltd, which oversees the equivalent of S$7 billion (US$5.1 billion) in Singapore. “The yuan is not substantially undervalued in its trade-weighted basket.”

‘Gradually, Slowly’

Asian currencies have already priced in yuan appreciation and may not keep rising, said Kenichiro Ikezawa, who oversees about US$3 billion at Daiwa in Tokyo.

“It is very clear that China will only let the yuan move gradually and slowly,” Ikezawa said. “So, when the yuan rises only gradually, the rest of Asian currencies won’t keep strengthening.”

After China abandoned a peg and revalued the yuan on July 21, 2005, the Taiwan dollar and South Korean won rallied to peaks by mid-August of that year and dropped 4.7 per cent and 0.8 per cent, respectively, in the third quarter.

Bank of Korea Governor Kim Choong Soo said a rising yuan may pose difficulties for South Korea by spurring gains in the won, which advanced the most in two weeks yesterday.

Demand from China has supported exports during the global recession. South Korea’s shipments to China surged 50 per cent in the first 20 days of May, helping drive the 42 per cent increase in overall exports reported for the whole month, official figures show.

“The other central banks will be more relaxed in letting their currencies move, because their competitiveness with China will change,” said Endre Pedersen, who manages about US$16 billion of Asian bonds at MFC Global Investment Management. “It’s going to encourage other assets to come in Asia. People who were shaking their heads in May are now getting back in again.” -- Bloomberg

Monday, June 14, 2010

Singapore, Malaysia Lead Global Wealth Recovery

Singapore and Malaysia led a recovery of global wealth to pre-crisis levels as the number of millionaires grew by about 14 per cent in 2009, the Boston Consulting Group said.

The number of millionaire households increased to 11.2 million, according to the study released yesterday by the Boston-based firm. Singapore posted a 35 per cent gain, followed by Malaysia, Slovakia and China. In 2008, the number of millionaire households fell about 14 per cent to 9.8 million.

“Given the severity and magnitude of the crisis, I’m surprised at how fast global wealth has come back,” Bruce Holley, a senior partner in the firm’s New York office and topic expert for wealth management and private banking for the US, said in a telephone interview before the report was released.

Global wealth rose by 11.5 per cent after falling 10 per cent in 2008, as assets under management increased to US$111.5 trillion, close to the annual study’s record US$111.6 trillion in 2007. North America, defined as the US and Canada, had the greatest gain in assets at US$4.6 trillion to US$35.1 trillion. The US also had the most millionaire households at 4.72 million, the survey said, while Europe remained the wealthiest region, with US$37.1 trillion.

Asia-PacificWealth in the Asia-Pacific region, excluding Japan, is expected to rise at almost double the global rate, the study said. Global wealth will increase at an average annual rate of almost 6 per cent from year-end 2009 through 2014, which is higher than the 4.8 per cent annual growth rate from year-end 2004 through 2009.

Asia-Pacific will increase its share of global wealth from 15 per cent in 2009 to almost 20 per cent in 2014, with China and India the engines of growth. Together, the two countries will make up 75 per cent, or almost US$9 trillion, of the increase in assets managed in the region over the period.

Singapore also had the highest proportion of millionaire households at 11.4 per cent, followed by Hong Kong and Switzerland. The fourth, fifth and sixth spots were in the Middle East -- Kuwait, Qatar and the United Arab Emirates. The US was seventh-highest at 4.1 per cent.

“The model is about how the wealth jam is being spread, based on the underlying GDP,” said Roman Scott, managing director of Singapore-based Calamander Capital Pte, which advises private banks. “The fuel that feeds the private-banking industry is the amount of wealth that’s being created. In Asia, it’s not a huge stock of old wealth, but rather, lots of newly created wealth from economic activity.”

Current numbers may differ from those in last year’s report because of currency fluctuations and newer available data, said Peter Damisch, a BCG partner and a co-author of the report. The study looked at 62 countries representing more than 98 per cent of global gross domestic product.

Wealth RecoveryThe recovery in wealth last year was a result of resurgent financial markets and increased savings, the report said. The Standard & Poor’s 500 Index rose 20 per cent in 2009 and the US savings rate averaged 4.2 per cent compared with 2.6 per cent a year earlier.

Global wealth dropped in 2008 for the first time since the survey’s 2001 inception as the credit crisis sent stock indexes tumbling and slashed the value of real-estate holdings, hedge- fund and private-equity investments. Last year’s survey had said total wealth wouldn’t return to pre-recession levels until 2013.

Less than 1 per cent of households globally were considered millionaires, which is defined as investable assets of more than US$1 million, exclusive of real estate and property such as art. Wealth became more concentrated with millionaire households controlling 38 per cent of the world’s assets compared with 36 per cent a year earlier, the study said.

‘Still Feel Burned’The amount of offshore wealth, defined as assets housed in a country other than the investor’s legal residence, increased to US$7.4 trillion after declining to US$6.8 trillion in 2008 as global regulators pressured countries such as Switzerland to cut down on bank secrecy. Switzerland remained the largest offshore center, with about 27 per cent, or US$2 trillion, of assets, the report said.

The offshore business is expected to grow driven by emerging markets, even with increased regulatory pressure. It will grow at above 6 per cent, versus the 2 per cent growth in traditional markets, the report said.

The report’s authors also looked at the performance of 114 wealth management firms worldwide and found revenue declined by an average of 7.3 per cent as assets under management increased an average of 14.3 per cent. Reasons for decreased revenue include fewer transactions, tougher price negotiations and a shift to lower-risk asset classes and investments that are liquid and simple, the study said.

Investors feel frustrated and distrustful following the market events beginning in 2008, despite the increase in wealth, Holley said.

“People still feel burned,” said Holley. “I think the numbers in the report suggest a much rosier experience than how people actually feel.” -- Bloomberg

Friday, June 11, 2010

10th Malaysia Plan Highlights

Following are the highlights of Prime Minister Datuk Seri Najib Tun Razak's speech when tabling the Tenth Malaysia Plan (10MP) at the Dewan Rakyat today:

* Theme: Towards Economic Prosperity and Social Justice

* The 10MP (2011-2015) is critical for the continuation of the national agenda to realise Vision 2020

* RM20 billion facilitation fund to be set up for public private projects.

* Electricity sector will be made more competitive, subsidies to be removed gradually

* Malaysia has earmarked plans to develop the Malaysian Rubber Board’s land in Sungai Buloh at an estimated cost of RM10 billion.The land covers an area of 3,300 acres, he said in his speech.

* Petroliam Nasional Bhd, Malaysia’s state oil company, plans to build a RM3 billion liquefied natural gas regasification plant in Melaka, south of Kuala Lumpur

* Malaysia has identified 52 high-impact projects worth RM63 billion to implement. They include seven highway projects at an estimated cost of RM19 billion. The government also plans two coal electricity generation plants at a cost of RM7 billion.

* 10MP targets the gross national income per capita to increase to RM38,850 (US$12,140) in 2015; requires the GDP to grow at 6 per cent per annum.

* Growth will be led by the services and manufacturing sectors, revitalising the agricultural sector towards higher value added as well as the adoption of ICT, biotechnology and other relevant technologies.

* The key challenge is to stimulate private sector investments to grow at 12.8 per cent or RM115 billion per annum.

* Government committed to reducing the fiscal deficit from 5.3 per cent of the GDP in 2010 to less than 3 per cent per annum in 2015.

10MP: 10 main premises
First : Internally driven, externally aware
Second : Leveraging on our diversity internationally
Third : Transforming to a high-income nation through specialisation
Fourth : Unleashing productivity-led growth and innovation
Fifth : Nurturing, attracting and retaining top talent
Sixth : Ensuring equality of opportunities and safeguarding the vulnerable
Seventh: Concentrated growth, inclusive development
Eighth : Supporting effective and smart partnerships
Ninth : Valuing our environmental endowments
Tenth : Government as a competitive corporation

10MP-Five Strategic Thrusts
First: Designing government philosophy and approach to transform Malaysia using NKRA methodology
Second: Creating a conducive environment for unleashing economic growth
Third: Moving towards inclusive socio-economic development
Fourth: Developing and retaining a first-world talent base and
Fifth: Building an environment that enhances quality of life

* 10MP allocation for non-physical infrastructure to be increased to 40 per cent compared with 21.8 per cent under the 9MP, focus to be given to skills development programmes, R&D activities and venture capital funding

* A world-class civil service college will be established to raise the competency of civil servants

Focus on 12 national key economic areas of NKEAs to be announced in October
(i) Oil and gas
(ii) Palm oil and related products
(iii) Financial services
(iv) Wholesale and retail
(v) Tourism
(vi) Information and communication technology (ICT)
(vii) Education services
(viii) Electric and electronic
(ix) Business services
(x) Private healthcare
(xi) Agriculture
(xii) Greater Kuala Lumpur

* A special unit, the Economic Transformation Unit, will be established to plan and coordinate the implementation and development of the NKEAs.

* A Competition Commission and Appeal Tribunal will be established to ensure more orderly and effective implementation of the law.

* The government will continue to strive to place Malaysia among the top five most competitive countries in the world.

* A Facilitation Fund of RM20 billion will be provided to help the private sector to finance public-private partnership projects.

* Through the Facilitation Fund, the government expects to attract private sector investments worth at least RM200 billion. Among the projects that are being considered are land reclamation in Westport in Port Klang, Malaysia Truly Asia Centre in Kuala Lumpur and Senai High Technology Park in Iskandar Malaysia, Johor.

* A special unit under the Prime Minister''s Department will be set up to set the direction and drive the National Innovation System and innovation policies and strategies.

* Government financing for public venture capital companies will be in the form of equity and not loans.

* A Mudharabah Innovation Fund (MIF)with an allocation of RM500 million will be introduced to provide risk capital to government venture capital companies.

* A Business Growth Fund with an initial allocation of RM150 million will be set up to bridge the financing gap between the early stage of commercialisation and venture capital financing for high tech products.

* The bankruptcy laws will be simplified to support a risk-taking culture, eliminate the stigma of failure and allow high calibre and credible entrepreneurs who fail to become active again.

* High speed broadband project to cover major towns, priority economic growth areas and industrial areas, broadband coverage for suburban and rural areas broadband service for the rural population through wireless infrastructure offering a variety of affodable packages

* East Coast Expressway from Kuantan to Kuala Terengganu to be completed in the plan period at a total cost of RM3.7 billion and to be linked to the Kuantan Port which will be upgraded

* The electrified double track rail project from Gemas to Johor baharu, estimated to cost RM8 billion, will be implemented to complete the electrified double track rail project from Padang Besar in the north to Johor Baharu in the south

* A sewerage treatment plant using green technology to be constructed in Lembah Pantai, Kuala Lumpur, similar plants throughout the country to follow.

* Focus on raising the income and quality of life of the bottom 40 per cent household income group where the Bumiputera form the largest number, that is 73 per cent of the 2.4 million households in the group.

* Subsidy rationalisation in stages, the lower income group and those who are most vulnerable will continue to be given assistance.

* Implementation of various economic programmes and provision of basic amenities to those living in the interior, especially those who live in long houses in Sabah and Sarawak, as well as the Orang Asli and estate workers in Peninsular Malaysia.

* A RM109 million allocation to provide water supply to 182 estates with up to 1,000 acres in size and located less than five kilometres from the water mains.

* AIM and TEKUN micro-credit facilities will be provided to address urban poverty and the loan scheme will be packaged together with entrepreneurship training.

* A fund of RM100 million to be provided to provide soft loans for 280,000 households in Chinese new villages to pay their land premiums and renewals of leasehold through Bank Simpanan Nasional.

* The proportion of graduate teachers in primary schools will be increased from 28 to 60 per cent to improve the quality of students.

* The performance of students in critical subjects , particularly, the National Language, English, Science and Mathematics, will also be improved by increasing the number of graduate teachers.

* The qualification requirement for appointment of preschool teachers will be raised to a diploma and bachelor''s degree.

* Candidates with Unified Examination Certificate (UEC) and Sijil Pelajaran Malaysia (SPM) will be considered for enrolment into the Chinese language programme in Institutes of Teacher Education to meet the demand for quality Mandarin language teachers in Chinese national schools and national schools.

* The same consideration will also be given to those who have Sijil Menengah Agama and Sijil Tinggi Agama and SPM to become teachers in J-Qaf and Islamic education programme.

* The number of high-performing schools will be increased to 100 by the end of 2012 and they will include primary, secondary, day and residential schools.

* A Trust School framework will be introduced to enable public-private partnership in the management of selected government schools and they will be provided with greater autonomy.

* RM280 million will be allocated to government-aided schools for 2011 and 2012. Each category of government-aided school, namely Chinese schools, Tamil schools, religious schools and mission schools, will receive an allocation of RM70 million for the first two years of the 10MP.

* The government will provide assistance to pat electricity and water bills of up to RM2,000 per month for each of the almost 1,900 government-aided schools.

* Financial allocation for universities will depend on the achievement of their KPI targets and the government will grant gradual autonomy to the universities to improve their performance.

* The quality of academic staff will be improved by increasing the number of PhDs with a target of 75 per cent in research universities and 60 per cent in other public universities.

* The MyBrain15 programme will be intensified to finance doctoral studies for the purpose of increasing the number of PhD holders to 18,000 by 2015.

* Salary packages will be reviewed to attract foreign lecturers and retired academic staff.

* Universiti Teknologi Malaysia (UTM) has been declared a research university, after Universiti Malaya, Universiti Kebangsaan Malaysia, Universiti Putra Malaysia and Universiti Sains Malaysia.

* Implementation of the high capacity Mass Rapid Transit system in Kuala Lumpur, covering a radius of 20km from the city centre with a total length of about 150km, will be able to serve up to two million passenger trips per day from 480,000 trips on current urban rail systems.

* Increase the percentage of public transport usage in Greater KL from 12 per cent in 2009 to 30 per cent in 2015.

* Public land transport system will be expanded to other cities with the introduction of the Bus Rapid Transit system in Iskandar, Johor, while the number of public buses in Penang will be increased by 200 buses to enable the expansion of 26 routes with an added capacity of 75,000 passengers per day.

* Construction of eight hospitals, including specialist hospitals, 197 clinics and 50 additional 1Malaysia clinics which are expected to be ready in the first half of the 10MP.

* Construction of 78,000 affordable houses under the 10MP.

* A fund of RM500 million for repair and maintenance works of public and private low-cost housing based on a matching grant basis where half of the contribution will be borne by the government and the other half by the management committee or residents' association.

Thursday, June 10, 2010

Surviving A Bear Market

Given the recent weakness of the stock market - coupled with the reality of recessionary pressures - it's past time to start acknowledging we're entering a cyclical bear market.

However, it doesn't have to be a major distraction. Bear markets are more than survivable with a few simple steps. They require faith and passive attention, but a bear market doesn't have to be the disaster the media makes it out to be.

To preface, this article is not going to define a bear market. The Internet is loaded with definitions of what a technical bear market is, how and why they start, and what the end result is. The scope of this discussion is only to examine what you as an individual investor can do to minimize the downside of a bear market...or perhaps even thrive in it.

Though there are more than five basic bear market rules, these five may be the most critical.

1. Understand that a bear market is not an upside-down bull market.
Bull markets are characterized by prolonged, gentle rallies, with modest (and somewhat predictable) corrections, or pullbacks. Bear markets are characterized by sharp, quick drops, and even quicker, huge rebounds.....though the rebounds don't revisit previous highs. In other words, bear markets are much more volatile - in both directions - than bull markets. Using the same strategy or philosophy during both can lead to mixed results.

2. Understand that not all stocks go down in a bear market.
Yes, it's true...some stocks still go up in a bear market - you just have to find them.

3. Understand that most stocks do go down in a bear market.
Here's the headache to rule #2...the odds are technically against you if you're a 'long only' investor.

4. Understand that you will get no meaningful help from the media or government regarding when the bear market has begun, or when it has ended.
A bear market is usually defined as a decline of 20% or more in stock prices. Who has 20% to give up? Moreover, there is no official beginning or end to a bear market, and opinions vary greatly as to when we're actually at one end or the other. Ultimately, the individual investor must decide.

5. Understand that the economy and the stock market are not synchronized.
Stocks tend to be predicitive of the economy, rather than - and contrary to popular belief - reflective of the economy. The market almost always starts to rebound right in the middle of a technical recession, so don't be afraid to go against the grain if it feels right. (Side note: The National Bureau of Economic Research didn't say until November of 2001 that the U.S had started a recession in March of 2001. They didn't say until July of 2003 that November of 2001 was the end of the recession. In both cases, the stock market was well ahead of the NBER.)

These certainly aren't the only rules of a bear market, but a good place to start if you're not sure how to navigate one.

Monday, June 07, 2010

KLCI: Byond 1500 or Blow 1150?

Since my previous coverage in Jan 2010, our KLCI index does not move much from the level of 1300. With the current world economic condition, financial issues in europe and the process of economy recovery, it was no doubt our market will behave accordingly. As for my personal view, the market still promising provided 1250-1280 level was strongly supported. This level will provide cushion for buying opportunities. In the worse case, if 1150 level been taken out, than it will be sad story for all of us here. BUT if the 1300 level was breakout for the 2nd time, than we may looking at beyond 1500 level and wish all that will come end of the year or 1st half next year. Hopefully! Be caution and stay alert. :-) Happy trading and good luck!

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