Rightways to Success

Monday, 12 July 2021

Why should investors get out of the stock market?

3 influential factors that can make or break your stock market investment

My sole intention for writing this piece is to prevent investors from losing more money in the stock market.

Allow me to tell you briefly my back ground so that you can accept my advice to ask you to cash out from the stock market.

Dato Yap Lim Sen, my collegemate and I were the original founders of Mudajaya, Gamuda, IJM, IGB, Rubberex, MBM Resources, major controlling shareholder of Perodua Cars.

I have been investing in the stock market for more than 50 years. This is the first time I have practically sold all my stocks holdings and cashed out.

When you buy a stock, you hope to gain from share price increase and also dividend yield. In Malaysia all listed companies give out very small dividend. On record, Public Bank gives out the best dividend yield of about 5% per year. So, unless the stock price goes up, investors cannot make money.

What pushes the share up?

Among all the stock selection criteria such as account balance sheet, cash flow, NTA, no debt or cash rich etc, profit growth prospect is the most powerful catalyst to push up share price. Never buy any stock that has no profit growth prospect.

Why investors must believe in price chart?

Price chart cannot lie because it is a record of the daily trading. Down trend means there are more sellers than buyers in most days. Never buy a down trending stock.

A stock price can only go up if the company has reported increased profit. But if it reports reduced profit, its share price would drop because there would be more smart sellers than stupid buyers.

In the last 6 months, almost all the listed share prices have been dropping as shown on the KLCI Chart below. Why?

There are 2 main reasons for the listed companies’ share prices to drop.

1 Covid 19 pandemic

Covid 19 pandemic frequent lockdown restricts people’s movement and all listed companies’ business operation. Workers cannot go to work and business activities are reduced. As a result, almost all listed companies cannot report increased profit in the next few quarters until Covid 19 pandemic is fully under control. Many medical experts predicted that the pandemic will not be under control for at least 1 or more years. That simply means our stock market will be depressed for at least 1 or more years. The above KLCI chart shows that it has been dropping for the last 6 months and it will continue to drop for another 1 or more years.

2 Political Uncertainty

Investors do not like political uncertainty. In the last general election about 2 years ago, Pakatan Harapan won the right to form the Government and Dr Mahathir became the Prime Minister. Within a couple of months, he resigned suddenly and Muhyiddin became the PM by the back door. Currently he is seriously terminally ill with cancer in KL Hospital. Apparently, he has pancreatic cancer.

Who will be the next PM?

As you know, Politicians make rules and regulations which often affect business operation and their balance sheets which is creating more difficulties in making investment decisions.

That is why many investors especially foreign institutional investors are constant net sellers and some of them have already left the stock market.

Yesterday I posted my article namely “A safe strategy during the pandemic” in which I said the Covid 19 pandemic lockdown is affecting everybody’s movement. Workers cannot to go to work and all business operation will naturally slow down. Almost all the listed companies will not be able to report increased profit in the next few quarters until the Covid 19 pandemic is fully under control which will take at least 1 or more years.

For example:

All the steel products manufacturers have reported increased profit in their latest quarter due to the steel price increase. Currently, due to Covid 19 pandemic lockdown, workers cannot go to work to make steel products and construction workers also cannot go to work. Contractors will not require to buy steel products. As a result, all the steel products makers will report reduced profit in the next few quarters. Many smart investors already could foresee this situation. That is why Leon Fuat, the most profitable steel company price chart is showing down trend as you can see below.

Leon Fuat’s last traded price is 99 sen and its latest EPS for quarter ending March 2021 was 11.65 sen. Even if I assume its EPS for the next 3 quarters is the same as 11.65 sen, its annual EPS will be 46.6 sen. Leon Fuat is selling at PE 2.

Other Industries also suffer the same fate

In fact, almost all other industries also suffer the same fate as steel companies. For example, Supermax and Top Glove have to close down a few times because the government authorities found Covid 19 cases in their factories.

Supermax price chart below:

Investors must always remember price chart is the more important investment consideration than financial analysis. Down trend price chart means there are more smart sellers than stupid buyers.

Statistics shows that in the stock market, there are about 70 % of investors lose money, 10% of investors break even and only 20% of investors are real winners. But under the current condition all investors including myself are losing money.

All investors must examine their track record to their performance. Even if they have been winners, they should sell all their holdings as soon as possible before they lose more money and get out of the stock market completely.

My mistake

I must admit my mistake in recommending Leon Fuat recently because I did not foresee earlier how Covid 19 lockdown and our political uncertainty can cause serious damage to the stock prices. That is why I sold practically all my stock holdings and cashed out of the stock market.

A best strategy during the pandemic for all investors is to cash out because all listed companies will not be able to report increased profit in the next quarters..

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THE GLOCALISATION OF HUMANITY

https://youtu.be/oS5QqS9C_xw

Few Westerners see the irony of a supposedly closed China celebrating the 100th anniversary of the founding of the Chinese Communist Party (CCP), when communism was born but essentially rejected in the West. What was it about Marx that resonated with Chinese civilisation that prided itself with its own ancient and enduring philosophy? (PIC: Chinese President Xi Jinping waves as he attends a gala in connection with the anniversary - AP)

"Globalisation is interpreted as universalisation of American or European values and standards. But the fact remains that these standards and rules were imposed historically by conquest, colonisation and force".

China Does Not Recognize The Rule-Based International Order imposed historically by Conquest, Colonisation and Force !

https://youtu.be/_ThU1vvW0A4

China has never interfered in the internal affairs of other countries and never obstructed their development. It will never accept any country interfering in China's internal affairs and obstructing its development. Today's China has long been different from the China of 100 years ago. No one and no force should underestimate the Chinese people's firm will and strong ability to defend national sovereignty, security, and development interests.

WHY is Marxism thriving in China and not in Marx’s place of birth? Why is Buddhism more practiced in East Asia than in India? Why has Islam more followers outside Saudi Arabia?

Ideas and religion spread through globalisation, but it was really their localisation that created more believers and followers.

What succeeded was not globalisation, but glocalisation, the internalisation of universal ideas and beliefs by the many, and not just the few.

Few Westerners see the irony of a supposedly closed China celebrating the 100th anniversary of the founding of the Chinese Communist Party (CCP), when communism was born but essentially rejected in the West.

What was it about Marx that resonated with Chinese civilisation that prided itself with its own ancient and enduring philosophy?

London School of Economics Emeritus Professor Megnai Desai, writing on “Marx’s Revenge”, made the shrewd observation that the Chinese Revolution in the 20th century was very different from the French and American Revolutions in the 18th century.

The French Revolution was a domestic rebellion against the monarchy and the landed gentry, whilst the American Revolution was rebellion against British foreign domination

Both created republics and preached equality, liberty and freedom, but both went on to create empires, one by conquering lands from the native Indians and Mexico, and the other through Napoleon’s rampage in Europe.

The Chinese Revolution was different because it was simultaneously a struggle against foreign invasion (Japanese and earlier Eight Nations Alliance) as well as the Nationalist government that favoured the capitalist and landed classes.

The CCP won because it represented the rural peasantry, rather than adopting the Comintern strategy of starting the revolution from the cities. In short, the CCP localised universal Communism with Chinese characteristics. It was practical rather than ideological.

By the time of the fall of the Qing Dynasty in 1911, Chinese thinkers struggled with what would replace the old order.

The country fell into warlordism. The Nationalist Party under Sun Yat-sen struggled to balance the conservative wing that represented the landlords and capitalists, and the left wing influenced by Communism and socialism.

Chinese revolutionaries followed closely the Russian Revolution in 1917, because it was then the most recent model of social transformation. The Chinese elite understood that the rebuilding of China from the collapse of the old order was a monumental task. The country was backward and the uneducated masses were unprepared for modernity, vulnerable to foreign conquest.

Even though they felt the burden of history, they also understood that there was no parallel in history on the scale of Chinese transformation.

The Chinese Left took to Marxian thinking because Marx gave both a historical and political economy perspective on how capitalism would evolve, as well as a philosophical tool in terms of Hegelian dialectics.

Marx used the profound insights of the Prussian philosopher Hegel that transformations come from contradictions of opposites, in which change will not happen in a smooth line, but through revolution or discontinuity.

Marx’s discovery of dialectic materialism – in everything, the contradiction and interaction between opposites lead to the destruction of the old and emergence of the new – was music to the ears of those who sought a path out for the New China.

Furthermore, the fundamental ideas of dialectics were very similar to the Chinese yin-yang philosophy of the I Ching and Dao Dejing. As Lenin put it, “dialectics is the study of the contradiction within the very essence of things. Development is the struggle of opposites.”

Having theory is one thing, but putting these ideas into practice is another. We can only appreciate China’s miraculous transformation from a backward economy to the second largest economy in the world by understanding that this was done through essentially three dictums: “seek truth from facts”, crossing the river by feeling the stones” and “it doesn’t matter whether a cat is black or white, as long as it catches mice.”

In other words, make fact-based decisions, always try or test under uncertainty, and above all, be practical and have an open mind. Change is a process between conflicting contradictions. There is no absolute black and white.

Historian Ray Huang, one of the finest sinologists of his generation and a former Nationalist soldier, wrote in the Preface to his classic “China: A Macro-History”: “Chinese history differs from the history of other peoples and other parts of the world because of an important factor: its vast multitudes.

In the imperial period as well as in the very recent past, practical problems had to be translated into abstract notions in order to be disseminated.

In turn, at the local level the message had once again to be rendered into everyday language.”

It is the reduction of very complicated policies into simple language that the Chinese people had to understand and own that enabled them to buy into the transformation, despite the huge sacrifices at the individual and community levels. The people’s eyes are clearer than those of the elites.

The US-China rivalry has done the world a favour by contrasting very fundamental worldviews. When the West preaches a value and rules-based order, what is meant is that freedom, democracy and individual rights are absolute – essentially a zero-sum “my way or no way.” Globalisation is interpreted as universalisation of American or European values and standards. But the fact remains that these standards and rules were imposed historically by conquest, colonisation and force.

When China, Russia, India or any other country deviates or disagrees with that, then they must be contained, confronted or sanctioned. Localisation or being different is almost seen as deviant rather than a celebration of diversity.

Civilisations reach their highest levels through tolerance and openness. When they become inward-looking, fundamentalist and mono-thinking, fragility and decay sets in.

The world is simultaneously becoming more global in inter-connectivity, even as regionalisation, fragmentation and localisation speeds up.

Glocalisation, the simultaneous contradiction between global and local, is to be welcomed, rather than feared.

The future will always be open, uncertain and contradictory. Such diversity is the nature of humanity.

Andrew Sheng comments on global affairs from an Asian perspective. The views expressed here are his own

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Footage of a brutal gang attack on Asian students |Daily Mail ...
https://www.dailymail.co.uk/news/article-9751931/Footage-brutal-gang-attack-Asian-students.html

The much larger group attacks the three Asian students outside an Inala shopping centre (pictured) as one girl is pulled to the ground by her hair

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Saturday, 10 July 2021

Malaysia Is Staggering Down the Road to Failed Statehood?

The country used to punch above its weight on the global stage. Now, white flags seem like a surrender to dysfunction.

Tilda Kalaivani waves a shirt as a white flag from her apartment balcony in Kuala Lumpur.

A white flag hung outside a house in Malaysia — Photographer: Mohd Rasfan/AFP/Getty

What started as a cry for help by Malaysians during rolling lockdowns and galloping Covid-19 infections has come to epitomize the descent of their once-proud nation. The Southeast Asian country lost its status as a role model for the developing world some time ago. Now, it may be relegated to the lane of also-rans that shone during the heyday of globalization but failed to capitalize on a strong start.

Malaysians in distress have taken to waving the white flag from windows and driveways. At the most basic level, it’s surrender and a plea for assistance: food, a bit of cash to help pay the rent. Thanks to social media, the banners have taken on an emblematic life of their own. Not quite a movement; people have no hope, and not much desire, to overthrow the government, and it isn’t clear these days that there’s one to topple. It’s more of a shorthand for discontent at the atrophying state and troubled economy.

The country’s prime ministers were once given grudging credit for stable leadership, albeit with authoritarian traits. However, lawmakers have proven breathtakingly unable to coalesce around a figure or program to guide Malaysia through this plight. The nation is beset by multiple crises — social, economic and political — fed and worsened by each other. It may only be a slight exaggeration to invoke the dreaded label of a failed state.

Civic life is suffering from numerous misadventures. The latest twist in a saga that’s been running since at least early 2020 came in the small hours of Thursday. The United Malays National Organization, the party that led Malaysia from independence until losing power in 2018 in the aftermath of the 1Malaysia Development Bhd. scandal, declared it will leave the ramshackle coalition presided over by Prime Minister Muhyiddin Yassin and urged him to quit. That may not be the end of the machinations; UMNO itself is split between a group that wants to reclaim its dominant position and lawmakers willing to keep nice cabinet posts that Muhyiddin has given them.

There isn’t an easy way out of this mess. Malaysia’s travails go beyond any one person. No prospective leader appears to have sufficient support in parliament, let alone a mandate from the population of 32 million, to replace the weak prime minister and provide stable administration. An election is supposed to be held once the pandemic subsides, a determination that’s hard to quantify. The monarchy, rotated among hereditary sultans of nine states, is being forced to leave the ceremonial shadows to referee, something that the royal households appear less than comfortable doing.

So, the surrender flag captures the end of a strutting, can-do mentality, or “boleh.” Citizens are stepping in where authorities have failed as the pandemic has delivered seemingly endless misery. Southeast Asia has been rocked by the delta variant. On Thursday, Malaysia added almost 9,000 Covid cases. Only a bit more than 8% of Malaysians have received both vaccine shots, as of Monday. Some of the strictest lockdowns have been in Kuala Lumpur and the nearby commercial powerhouse of Selangor state, and taken a toll. At their worst, factories have been shut, public transportation has run on a skeleton schedule, and the military has manned road blocks.Some measures have been eased, but large parts of the country remain shuttered.

Asia, writ large, is in the midst of a strong economic upswing. However, that recovery has yet to fully visit Southeast Asia, a region of more than 650 million people. In its last World Economic Outlook, the International Monetary Fund forecast growth in Malaysia of 6.5% this year. Gross domestic product plummeted by more than 5% in 2020, the worst performance since the Asian financial crisis in 1998. To meet such a bullish projection or even get close to it, the second half of 2021 needs to be stellar. Further interest rate cuts and fiscal outlays are almost assured. But whatever the numbers say, many Malaysians aren’t close to feeling the benefit. Even rubber glove makers are worried; they appealed to authorities this week to lower Covid restrictions and let them continue to produce.

The last decades of the 20th century offered a different route. During Mahathir Mohamad’s premiership from 1981 to 2003, Malaysia was an emerging-market icon. The country grew rapidly with relatively low inflation and stable budgets. Mahathir loved to poke at the West, but he opened markets and privatized state companies. He resisted aid from the IMF and challenged orthodoxy by imposing capital controls and fixing the exchange rate during the Asian crisis. Contrary to predictions that the efforts would fail, they shored up Malaysia.

But it started to go wrong. Boondoggles like an ostentatious new airport and the soaring twin towers funded by state oil giant Petronas suggested waste. One of Mahathir’s successors, Najib Razak, bungled the disappearance of Malaysia Airlines Flight 370 in front of the world’s cameras. Najib led UMNO to defeat in 2018 and has been convicted of corruption related to 1MDB. Mahathir’s return at the helm of an opposition bloc offered a brief moment of renewal. But he couldn’t give up on political wheeling and dealing — even well into his 90s — and opened the door for Muhyiddin to edge him out of office.

Longstanding ethnic and religious fault lines have been worsened in recent years by an urban-rural divide and a generation gap that no political organization has come to grips with. The credibility of the ruling class will keep eroding the longer it takes to vaccinate against Covid and for a recovery to take hold. The current intrigues sadly seem far removed from the daily needs of business, finance and even putting food on the table.

No country can continue on this course indefinitely and be a model for anything other than dysfunction.-Bloomberg

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