Malaysia Post Election

Let me tell a story of what I see and listen before I link it to the economy and finance.

I pass by a street call Desa Setapak. It was a crowded street at the time I study around that area. I go back and walk along the street, there are eight main corner of the shop were previously famous with delicious food now demolish seven of them and left one corner. These places are the food supply for most of the people and students who stay and study around.

I chat with some of the hawkers around there what happen to the other hawker stall and the food courts? They say government send town board (DBKL) to demolish and army to guard the protestors without giving any notices to them. Their prompt action ruins the income source for most of the families and laborers.

I ask them whether they have any permit or license to open stall and do business there. They said all of them have permit and license. They get the approval from the previous party who win that area. This election result the previous party of that area loss to the opposition. What is interesting is, all the people and folks say they never see government work so hard that never rest and work so complete. Those demolishing worker can ruin all the structure one by one and before they leave, they make sure everything is fully damage and scrap. All the cement, walls, fences, floor, and stalls were break and damage by heavy machinery. The only left is the dust and rubbish they didn’t clean it up. Next day, these under mission worker can come back to continue break and confirm all the structure are collapse and break. One of the farmers tells a similar story that last time his area loss to opposition in the election, the government sends people some and cut all the vegetables and every single vegetable were split at least four pieces. This is to make sure the farmer cannot sell the vegetables anymore.

Well what make the folk there angry is the newspaper wrote and publish that these hawker didn’t have any losses because the authorize person let them move out the things that belongs to them. Besides, all these news were reported not clear, not detail, and bias to government.

What I see and curious are, why some of the stall and are didn’t demolish and damage by the government? These stall is just beside and some of them are in the middle of these demolish structure. The only differences I can observe for a long time are, those remain are not good business compare to those demolish. Those remain are Malay while demolish are all Chinese.

After the long story, now is time to share what is in my mind. Country economy is depend on the productivity and how well the business in the country. This phenomenon let me fell that government is revenge on the result they loss in the election. They don’t care economy and development but they only care their power in hand. They can give reasons to stop the development structure in the opposition area. They can demolish buildings or structures by no reasons or discussion given.
Here is an interesting phrase I read in the newspaper today, Domestic Trade and Consumer Affairs Ministers Datuk Shahrir Abdul Samad says “Don’t think only of profit”. Does it mean in government mindset, they don’t want “profit” but other things?

When those people who suffering from no income, they don’t have things to eat, what they can do? The next is social problem will rise. The security of the country is now another concern.

If government can do this kind of action on the small business, I cannot get other reason that government will not do this to bigger business in the country. That’s why the economy future of the country is now a doubt and worry.

What is the World Economy Future?

Myanmar cyclone on 2008.05.04 ruins the country and wipe out lot of crops, China earthquake on 2008.05.12 collapse most of the building in Sichuan and they need lot of raw material to rebuild, and the crude oil price hit USD135 on 2008.05.22. There is an inflation worry.

All these will bring inflation fear and lot of things is under pressure to raise the price. When the prices rise, it will hit the sales volume. Everybody may start to reduce spending. The sales drop will pull down the company result. This chain effect will hit the economy world wide.

The rise of food price is also due to the fighting resources of crops and the biofuel plants. The commodity price of the biofuel related plants sustain high and it can cover the high fertilizer price while if the price of food crops don’t rise, farmer will switch to grow commodity rather than grow crops.

China earthquake will need lot of energy and raw material to rebuild their home. The building material and energy such as steel, cement, timber, and fuel will have great demand and it will bring up the price of these raw material if the supply cannot fulfill the demand. The rise of these prices will hit construction, properties, and other manufacturing sector and their cost will increase dramatically. Their profit will be thin down and giving them forces to increase the price too.

In Malaysia, the political tsunami seems still haven’t over yet. The unstable of the government and worry behind the scene will keep the investors side line. Most of the investor is looking each other’s reaction, watching what will happen then, and waiting for the economy report and company result.

Economy slow down and advice only invest in selective sector and buy as low as when it dips. Remember to take profit once it goes high.

Remisier Trading versus Online Trading

Some body wrote this article and pass to me recently. It clearly describes the differences between trade via Remisier or Online. Below is the full article.

In this article, we will look into whether we should buy shares Online or use our existing Remisier’s services to execute trade

COMMISSION rates for Internet trading and cash upfront transactions will be fully negotiable next year.

Although the full details on the actual implementation are not available yet, if the commission on internet trading drops to a low of 0.15% (it may be even lower for some stock broking firms), retailers may be tempted to execute the online transactions themselves without going through their Remisiers.

Based on the existing structure, most retailers are paying a brokerage fee of about 0.6% per transaction. Assuming some stock broking companies are willing to offer commission rates of 0.15% for Internet trading, there will be savings of 0.45% for retailers who trade online.

Nevertheless, we need to understand that transaction costs have two main components: “Explicit Cost” and “Implicit Cost”.

Explicit cost is the direct cost of trading, such as brokerage commission, stamp duties and clearing fees. Implicit costs are indirect trading costs like opportunity cost, market impact and missed trade costs.

Opportunity cost is the loss of opportunities due to the time retailers are required to spend on executing stock transactions instead of focusing on their main business or their work. If you are working and have limited time to monitor the stock market, you may still need the Remisier’s services to execute stock transactions.

I personally feel that it is really not productive to stay in front of the computer just to execute a few stock transactions. Sometimes, it can be quite time consuming getting the best price.

Any retailer who wants to trade online needs the necessary skills to be able to read market movements. He needs to know whether the current price is the best price to buy, or wait for a while because he may get a cheaper price later.

Market impact is the realized profit or loss reflecting the price movement of a share from the price decided on to the execution price.

Since Remisiers follow market movements throughout the day, they should be able to read those movements better than we do. They may not be able to get the best price in every trade but if they are able to save one or two bids lower than your intended purchase price, the cost saving can be quite substantial.

For example, your Remisier is able to get one bid lower for you when you want to purchase a stock priced at RM1.50. You will save 1 sen over RM1.50, which is 0.67%.

Assuming your Remisier is able to do that in eight out of 10 trades, the average cost saving will be 0.53% (8/10 x 0.67%).

This saving will still be greater than the commission of 0.45% that you would have saved through online trading.

Besides, you have not taken into consideration the time you could have saved and the opportunity loss on your current business if you spend too much time on share trading. The extra 0.45% that you pay is for your Remisier’s skills.

As mentioned earlier, besides opportunity costs and market impact, there are other implicit trading costs, like missed trade costs.

Missed trade costs arise from the failure to execute a trade in a timely manner.

Investor, Trader, Gambler

Nowadays there are lots of investment tools in our society. Stock and share is one of it. In every investment, some times it is not easy to differentiate invest, trade, or gamble. But different of it will have different result and risk. Before you make your decision to step into the field, you must evaluate the risk you are able to take for the result as a return. Similar to those drive in the highway, if you cannot take the risk to drive with speed of 400km/h, drive with the speed you can handle although 400km/h can reach to the destination faster. In investment, it is not how fast your investment capital appreciates; it is how sustainable your investment is.

Investor is those people who think on their investment from business point of view. They put in the money after doing lot of research and analysis that they are confidence that they can earn back the money with lower risk. Some times, investor has to analyze their investment top down or bottom up. They have to understand macroeconomic and microeconomic as well.

Trader is people have the characters of investor but some time they take higher risk. They can buy today and sell tomorrow once there is profit margin. They take opportunity in the company share that they familiar. They may use technical chart, or possibilities, insider information, psychology and so on to buy and sell in very short time. Similar, if they sense the problem, they will also sell immediately to lower their losses.

Gambler is easy to define and get in the market. They are greedy and take high risk. They might not know what is the company doing of their investment or just heard from other people that this company price will go up.

Just similar to lots of cases in the history in almost every stock market, lot of people loss huge amount of money because they misuse margin facility, borrow money, or so on. Always invest within the capability and take into the consideration of risk.

Learn Early

Before I study finance and stock market, I heard lot of people say trade on stock and share is only for those retire man who have lot of free time and retire money. No doubt, it is suitable for retire person because investment need time and money. When I get expose deeper in the stock financial sector, I realize it is not true.

Investment is a skill and technique which involve some financial knowledge and psychology. Investment skill actually involve in every decision we make. For example when we make a decision, we will analyze the allocation of time, energy, or capital before the decision final. We don’t realize the existence of the investment skill is already involved in our daily life.

Why the statement “invest in stock market is for retire person” is not suitable? Let say a person never learn and expose to any financial investment especially stock market, he or she will have to learn from the beginning. The risk to learn is there because they are lacking of experiences. Once they loss money, since they are retire, they may unable to recover their losses easily. Besides, most of the retire person hold a lump sum of money and the amount can be big and there investment will automatically bigger compare to new person who just finish study and start works. Let say retire person have lot of time and they have plenty of time to study and learn investment before they start invest, the problem I see is, their learning ability drops. Their eye cannot sustain long time to reading; brain cannot remember lot of things in one time, and so on.

The reason why Warren Buffet encourage start investment as early as you can are, the value of the market will be keep on improving, younger person start with smaller capital which is lower risk, can still recover losses once make a mistake, gain more experience from the investment decision, able to learn fast at the younger stage, and learn how to manage the money on your hands.

Fertilizer Related

Inflation hit the entire world from the energy resources and food supply. Technology breakthrough which use plant to extract biofuel compete with food crops for fertilizer and nutrients.

No. - Stock Code - Short Name - Company Name

1. 4758 - ANCOM - ANCOM BHD
2. 2879 - CCM - CHEMICAL COMPANY OF MALAYSIA BHD

To be comfirm,

1. 3298 - HEXZA - HEXZA CORPORATION BHD
2. 7084 - QL - QL RESOURCES BHD

Insurance

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. It is either a financial tool or an expenses is depend on how you define it. Formally, it is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium.

There are lot of different type of insurances can be found in our society. What I want to say here is the life and medical insurance. Life and medical insurance is a personal financial tool that it is quite useful to every person. Why say so? It is because lot of things nowadays, they have factored in the insurance element into their price. If you do not have insurance coverage especially in medical line, you are more risky and costly than those who under life and medical insurance coverage.

I do not know what the condition in other country is, but in Malaysia, when a person has committed in an accident and sent to the hospital, hospital will need to get a deposit to start their action. They want to be sure they can receive the payment. Let imagine what if the person unconscious and hospital people cannot get a medical card in the person wallet? This happen to my friend experience before, luckily he is unconscious but at least he has medical card in his wallet.

Recently one of my friends has some sickness and she needs to have a surgery. Hospital needs to get the full payment before they conduct the surgery operation. It is an emergency surgical operation but hospital refuses any negotiation on the payment date. In this case, they have to collect the huge amount of money in a very short time for the operation. What will happen if they cannot get the huge amount of money in a short time? End up they borrow the cash from all the relatives and friends for emergency use.

Sometimes, you are rich, you have lot of properties or own huge company or have high pay, but accident come suddenly without notice and emergency means every second count can be different result, you cannot take out the cash means that time you are poor. You are poor of the ability to safe your life. Insurance can lower the exposure of the personal risk for the emergency use, just like the fire extinguisher in the kitchen. It is useless for cooking, but it is useful when accidentally caught fire. This is an example of risk management in financial world.

I admit there are lots of fraud cases in the society. Before you sign and agree to the policy, read and understand carefully or you get a good insurance agent who you can trust him or her on. Some times insurance also provide investment trust, insurer use your money you deposit for investing in the equity market. Insurance policy is almost same; the different is the person you choose to be your insurance agent.

How to choose and buy insurance? It is similar to invest in a stock market, do research and understand well before you act. When you buy, don’t have to put all eggs into the same basket. When you invest in profitable mutual fund or unit trust, you choose a right fund manager, to buy a good insurance; you also need to choose a good agent. This is why insurance is one of a personal financial tool.