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3: Malaysia REITs - Looking For My 2nd Durian Runtuh
4: Is Insurance Really Necessary?
5: Everyone Must be A Millionaire

Head to the watch list on the above tab to see my what's on my radar and foreseeable future postings =)

Decided to make adjustments on the way I blog & share due to time constraints and other commitments. In the coming weeks you should see them. Short updates but more frequent & concise.

Wednesday, March 30, 2016

April Prediction of Pump Oil Price (Ron 95)

**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the compute mechanism.**

This is the 9th time I'm posting my prediction in a blog posting. Please bare that I will repeat some lines for new readers :) Also I always care to post my predictions before any official news or other analysts have given their views (typically too late after the queue starts at the stations).

Why is this sort of important? Say every month you know ahead of official price announcement and let's assume there is a price swing on average of 10 sen per month and you can fill in 35 litres. 0.10 x 35 x 12 = RM 42 savings a year. Obviously you don't feel it's a lot but every year you will always call and beg for credit card waiver of RM50 on govt service charge? Ironic isn't it? :) My total savings for 2015 is: RM 50.75 and YTD: -RM 1.75.

April 2016
Short update for this month as I am not feeling well these days. Oil rallied to around $40 per barrel largely due to oil talks between Russia and Saudi to cut production to boost price and with America's oil inventories dwindling.

However MYR got a boost as foreign investors are bringing funds back into Malaysia. See the news today: Foreign funds have poured about RM4.4 billion into Malaysian equities in 2016.

Some asked why did the price of crude oil drop in 2015?
- Strong US dollar; all commodities are priced in dollar and that includes oil.
- Organization of Petroleum Exporting Countries (OPEC); refuses to cut production in order to maintain market share.
- Oversupply of crude oil; thanks largely to US shale oil producers which is now the world's biggest swing producers.
- Declining demand; world's no.2 economy China is slowing.
- Iran nuclear deal; removes Western sanctions and thus allowing country to export oil once again.
- Successful Paris climate change breakthrough talks; marks the beginning of the end of the fossil fuel age.

How come our pump fuel price did not drastically drop in 2015? 
- This is primarily due to weakening MYR to the USD.

Aboi's April'16 Prediction Analysis

RM/L between Feb and Mar jumped almost 15%!: 1.23 (Feb) vs 1.41 (Mar). Oil price edged up from $35 to $41 (17%) but this cannot be offset by stronger MYR (4.17 -> 4.08), of only 2.15% gain. As such I will predict that fuel price will be increased to RM1.75 for RON95 (a jump of 15 sen). Price highly NOT likely to go down so fill your tank before 1st of April 2016 (Friday).

**There is an uncertainty however. Back in May 2015 when two 'buy' elections were held prices were expected to increase but did not. The same thing could happen because of the looming Sarawak state elections so it's a 50/50 chance. Nevertheless there is no harm to fill it earlier as explained above**

Below is a table of my previous predictions way back to the beginning of 2015. My predictions are based on Tapis crude oil price, performance of Ringgit (added after Mar) & domestic politics (which was added after May). My total savings to date: RM 50.75. As for YTD: -RM 1.75.

**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the compute mechanism.**

Friday, March 25, 2016

Aboi's Updates For Malaysian PRS Funds for 1H'2016

If you need to know what is PRS I suggest reading my earlier post here: Private Retirement Schemes in Malaysia. I decided to put money into PRS in Nov 2014 due to several reasons [1] income tax RM 3000 rebate until 2021 [2] youth incentive 30 years & below of RM500 [3] long term forced investment for retirement because if you withdraw earlier it is taxed.

What do you need?
[1] Provider’s joint account opening form cum transaction form. Initial subscription only for each provider. PRS Forms (not the full list of all fund houses)
[2] A copy of Malaysian NRIC or passport for foreigners. The front and back of the Malaysian NRIC must be on a single page.
[3] Additional RM10 for the opening of a PPA account for first-time PRS contributors.
**The above is via Fundsupermart platform (might be different if purchase directly). Fundsupermart offers 0% sales charge which is great.

Performance review
I am currently invested in PRS for funds with exposure to Asia exc Japan because that is what I am looking for so I wouldn't be touching a lot on other categories; just a brief run down of them. The data below is obtained from Morningstar PRS Screener.

I have a stake in CIMB Principal PRS Plus Equity Asia Pacific ex Japan Equity Fund (+16.09%, 1.3 years holding period) and will continue to contribute. Thanks largely to the RM500 PRS youth incentive scheme, this year's losses due to China's selling rout in January is greatly minimized. With a risk factor of 9/10 it is therefore expected that volatility this huge -5% at certain times is not a big surprise. I might also be looking into splinting half my PRS contribution into AmPrs Asia Pacific REITs (launched in Nov 2014) as it has exposure to Asia Pacific region.

Investing in PRS is a long term game as such I on hold to my strategy that is it in Asia Pacific with it's young population and rising middle class that will fuel the world economy for decades to come.

Thursday, March 17, 2016

Aboi's Updates For Malaysian Equities Mutual Funds for 1H'2016

TER is the total expense ratio, a measure of total cost (purchase, redemption, auditing, management fees) of a fund to the investor. The lower the better.

[1] Again due to the nature of risk in equities the top rankings between 2H'2015 vs now is not close. Overall 2015 was a challenging market for Malaysia. It is very clear now which funds perform better under stress (during bad times, e.g. Msia market dropped due to cheaper oil and weakening myr, China's panic selling; twice in fact and GST's impact).
[2] Only Estpring Small Cap and Kenanga GF performed well under stress which managed to eke out 11.76% and 6.55% returns. My other picks under Equity Asia Pacific ex Japan did not do well; not surprising due to Emerging Market outflows owing to stronger USD.
[3] As of this writing, I continue to own Kenanga Growth Fund (+64.89%, 3 years holding period) which has been performing above my expectation. Now the fund has a high level of cash 20% as such I expect it to wait for opportunities to accumulate during bad times.

[4] I also own Aberdeen Islamic World Equity Fund (+5.14%, 2 years holding period). This fund (TER of 1.31%) is now 3 years old and there is really still no useful data to show e.g. 5 years data. In due time I will share of course. However the fund did not do well this year as it's stock selection in the UK was a key detractor, led by Weir Group. The engineering services provider was hurt by the continued sell-off in the oil & gas sector.
I will continue to hold and weather the storm. 
Aberdeen Funds in Malaysia..Are They "Iron" Clad Investments?
Aboi To Finally Invest In Aberdeen Islamic World Equity Fund

[5] Lastly I also own CIMB Principal PRS Plus Asia Pacific Ex Japan Equity Fund (+17.90%, 1.4 years holding period). This fund is a feeder fund and it feeds of CIMB Principal Asia Pacific Dynamic Income Fund.

Here's risk-adjusted returns measure using the five principles of risk measures; alpha, beta, r-squared, std deviation and Sharpe ratio. I will just explain what they represent rather than showing hefty equations.

Alpha: A +ve of 1.0 means the fund has outperform its benchmark index by 1.0%. The opposite goes for -ve.
Beta: A +ve of 1.2 means the fund is 20% more volatile than the index. The higher the beta suggest it offers the possibility of higher returns but also posing more risk. The opposite goes for -ve. 
R-squared: A higher R-squared will indicate a more useful beta value (85 to 100) aka good correlation. A low R-squared value means you should ignore the beta. It's a measure on well the fund is measured against an appropriate benchmark.
Standard deviationA large dispersion tells us how much the return on the fund is deviating from the expected normal returns.
Sharpe Ratio: The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. It describes how much excess return you get for extra volatility you endure in holding riskier asset.

Source: MorningStar - Rating & Risks section for respective fund

Now I have accepted the fact that Small Caps funds naturally have higher Std Dev due to their risk profile. This explains why the Preservation rating of Small-cap is lower around 1-3. By comparing Sharpe ratios the crown belongs to Eastspring Investments Small-cap though I must caution the degree of volatility +- 18.70%, question is can you stomach it?

Second. Long gone are the Sharpe ratios of 2+. The Malaysian market has plateaued with more downside risks than upside potential due to political uncertainties, weakening myr, GST's impact and low oil prices. My ratings still stand with Kenanga Growth and Equity Income but I already have KGF so there is no need for me to increase my exposure to the lackluster Malaysia equities market.

I continue to hold my view that investing in Asia (exc Japan) is still the way to go - LONG TERM. America's equities market is still not that cheap. The US Fed interest rate hike should be very gradual in 2016 which does not go well with equities. Europe is now battling with Brexit so the market will have some noise in 1H'2016. China is reforming its economy to be more inward, they will need more time to reform their financial sector. From now on it is a lot more difficult to get the returns we once did during the bull run from 2009-2013. I do not expect record high returns. It is still best to hold cash and wait. Feng Shui says something bad will happen in April 2016 all the way to early July.

My five rules of choosing funds:
#1 Avoid choosing big sized popular funds!
#2 Compare fund expenses!
#3 Information on the fund manager!
#4 Good funds don't advertise.
#5 Avoid the usual past performance > riskiness of fund > manager's rep (some don't) > fund expenses > popularity of fund.  Look from the opposite direction and do your filtering from there.

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.