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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.

Sunday, June 21, 2015

Sunday Lite: The New Cold War?

The original post is from the Economist :
[1] http://www.economist.com/news/leaders/21654058-keep-its-fighting-edge-america-needs-spend-more-technology-sharper-blade
[2] http://www.economist.com/news/international/21654066-military-playing-field-more-even-it-has-been-many-years-big


  • Although the United States is still by far the world’s strongest martial power, others are catching up particular China.
  • In the past America has harnessed technology to offset its rivals’ advantages. Nuclear arsenal for deterrence (in the 1950s), "deep strike" systems (from the late 1970s) and smart munitions, battle networks and electronic warfare (1991 Gulf war).
  • But these technologies have now proliferated, China that worries American strategists the most.
  • Growing more sophisticated and its government is becoming more assertive towards its neighbors. 
  • China is determined to prevent American aircraft-carriers from operating close to its shores, and could even threaten American bases in the region. 
  • Built up an array of land-based precision-guided missiles; submarines and fighter aircraft equipped with anti-ship missiles; and electronic, cyber- and anti-satellite weapons intended to disrupt and blind America’s command-and-control networks.
  • China’s aim is to deter any American president from coming to the aid of allies subjected to threats or bullying from Beijing.
  • China's defense budget that tends to grow by more than 10% a year.
  • The Chinese call their objective “winning a local war in high-tech conditions”. 

From The Economist

  • China aims to make it too dangerous for American aircraft-carriers to operate within the so-called first island chain (thus pushing them out beyond the combat range of their tactical aircraft) and to threaten American bases in Okinawa and South Korea. American strategists call it “anti-access/area denial”, or A2/AD.
  • America has been distracted. 13 years of counter-insurgency and stabilization missions in Afghanistan and Iraq, More focused on churning out mine-resistant armored cars and surveillance drones than on the kind of game-changing innovation needed to keep well ahead of military competitors. 
  • The US Pentagon late 2014, began the quest for a new range of breakthrough technologies—what it calls a “third offset strategy”.
  • These are likely to include stealthy unmanned planes and underwater vehicles that can operate autonomously (and thus survive enemy disruption of their data links). Tireless drones, long-range strike aircraft to penetrate the toughest air defenses, directed-energy (laser) and electromagnetic weapons (fire projectiles using electricity) to defend ships against missile attack.
  • It is unlikely that a third offset strategy will secure Western military dominance for as long as the first two did. Technology spreads much more quickly these days, partly thanks to the internet, which the Pentagon helped to create and which now helps rival powers steal America’s military secrets. 
  • American power is not always wielded wisely. But it remains the best guarantee of the rules-based international order, from which nearly all countries benefit—and not just America’s allies. That order is already impaired. If America loses its technological edge, it will only fray faster.


My thoughts : In the long run, if you want to lead the world militarily you have to lead it economically as well so far China is a long way from achieving this, perhaps not in the coming few decades.

Living in South East Asia, I do not like China's flagrant violation of international law by claiming
the entire South China Seas as hers. It is pure bullying, macam 'samseng'.

Very unlikely there will be an all out war. China and the US have more interest in common than conflicts at odds. At $550 b in trade in 2014, they are the second biggest trading partner to each other and this will only keep growing.

We should only be afraid of miscalculations or accidental provocation that could lead to a short term military crisis. E.g. Soviet Cuban Missile Crisis or an accidental firing on a civilian plane like MH17 (over Ukraine-Russian meddling). This is how it indirectly affects us - normal citizens.

I hope America would accept China as a growing rising power just like Britain did (which was the former world power) when US was eclipsing it. In return it is in China's best interest to treat America as a partner in world's affair to gain more influence & acceptance. The world is big enough. Meanwhile we are busy...


From FinanceTwitter

Thursday, June 18, 2015

Malaysian REITs in 2015 (Some Opportunities Exist)

Source: Dynaquest SPG, Kenanga Research, MIDF Research.

Potential Upside/Downside = Current Price/Net Asset Value
OP = OutPerform (more upside potential than downside risk)
UP = UnderPerform (more downside risk than upside potential)
MP = Market Perform (limited upside)
***My order of evaluation: Yield > Prospects > Discount/Premium Rate. Below are key highlights that I extracted from various sources as indicated above. And I generally ignore smaller REITs due to them being too illiquid & boring (ARREIT is an exception, covering it for a friend).

KLCCP Stapled Group (Diversified, Market Cap: RM12.583 billion)
Gotten shareholder's approval to raise funds of RM1.2b supposedly for potential asset acquisitions within KL's Golden Triangle (Suria KLCC only 60% owned, KLCC Convention Centre, Traders Hotel and Impiana Hotel. A key positive factor is PETRONAS being sole lessee of two key assets (Twin Tower & Menara 3 Petronas) under triple net lease arrangement for 15 years providing very good stability of income. OP because of acquisition prospects & triple net lease arrangement.
Kenanga Research RESULTS NOTE - KLCC STAPLED GROUP - 06 MAY 2015


Pavilion REIT (Malls, Market Cap: RM4.55 billion)
Da Men is expected to be completed in 3Q15 and Pavilion Extension done by mid FY16. The management still views the outlook for 2015 to be challenging amid weaker consumer sentiment due to GST and significant increase in the supply of new retail space in the Klang Valley hence MP rating (mall REIT usually commands a premium based on my 5 years data)
Kenanga Research RESULTS NOTE - KLCC STAPLED GROUP - 06 MAY 2015


IGB REIT (Malls, Market Cap: RM4.59 billion)
Owner of Mid Valley Megamall & The Gardens Mall. IGBREIT is unlikely to make any acquisitions in the near term despite their low gearing level of 0.32x. MP rating due to GST and retail space oversupply (mall REIT usually commands a premium based on my 5 years data)
Kenanga Research RESULTS NOTE - 29 APRIL 2015


Sunway REIT (Diversifed, Market Cap: RM4.81 billion)
Sunway Putra Mall (SPM)'s official reopening (refurbishment) with at least 50% occupancy -> 70% by Aug15. Sunway Putra Hotel (SPH) refurbishment almost completed while refurbishment for Sunway Putra Tower (SPT) is still ongoing and is expected to be fully completed by 4QCY15. Acquisition of Sunway Hotel Georgetown was completed on January 2015. MP rating due to GST (mall REIT usually commands a premium based on my 5 years data)
Kenanga Research COMPANY UPDATE - SUNWAY REIT - 16 JUNE 2015


CapitaMallsMalaysiaTrust (Malls, Market Cap: RM2.49 billion)
The acquisition of Tropicana City Mall (TCM) and Tropicana Office Tower (TCOT) is expected to complete by 3Q15. Earnings to be reflected in FY16. Strong income growth from East Coast Mall is expected to cushion the negative impact from the MRT work discruptions to Sungei Wang Plaza. Proposal for placement of new units to raise up to RM395.5m to fund its purchase of both TCM and TCOT (which have been priced at RM565.0m) is ongoing. MP rating due to GST (mall REIT usually commands a premium based on my 5 years data)
MIDF Research CMMT - DECENT 1Q15 RESULT


Axis REIT (Diversified, Market Cap: RM1.94 billion)
AXREIT has completed the acquisition of three assets, namely; (i) Axis Shah Alam DC3, (ii) Axis MRO Hub, and (iii) Axis Shah Alam DC2, and has already signed the SPA for the Industrial facility in Johor. However, the Prai asset is the only remaining asset yet to be acquired, and the due diligence is expected to be completed in 2Q15. Dividend payout increased in CY14 largely due to gains arising from disposal of Axis Plaza, this will not repeat in CY15. AXREIT also announced a 1:2 share split on 3rd March 2015, which is pending approval from SC, and to be followed by approval from unitholders. UP rating due to high premium rate leading to low yield. Way below the average REIT yield figure.
Kenanga Research RESULTS NOTE - AXIS REIT - 21 APRIL 2015


YTL Hospitality REIT (Tourism, Market Cap: RM1.35 billion)
Trust's property asset value of ~RM 3.0 billion comprising hospitality assets located in Malaysia, Japan and Australia and has more than 50% of investment in properties (by asset value) located abroad. Proposed increased in fund size from 1.324 billion units up to max of 2.125 billion units.
OP due to prospects of better earnings (weaker currency from all three countries good for tourism) and providing the best yield among all REITs.


AmanahRaya REIT (Diversified, Market Cap: RM510 million)
Earnings will be surpressed due to non-payment of rent by SilverBird Factory (11% of gross rental income) and shortfall of rental income from Wisma Amanah Raya Bhd after CIMB-IB tenancy ended in 2013. Acquired Wisma Comcorp for RM30 m in Dec 2014. Better to err on the side of caution until more information on earnings is clear. For CY15 it will be boosted by the disposal of Kontena National Distribution Centre 11 for RM34 million. Maintain MP due to uncertainty, however the good yield and discount more than offset the uncertainty.

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.

Weekly Market Highlights June (3)

Source: Amp Capital (here for full market update) & iCapital biz (subscription required)

United States
Economic data continues to provide evidence growth is picking up. Retail sales up strongly in May, consumer confidence up, small business optimism up, jobless claims remaining low, job openings up strongly in April even
though the hiring and quits rate was down fractionally and mortgage applications to purchase up strongly. The Federal Reserve Bank (the Fed) will be the big focus in the week ahead. Recent improvement in US economic
indicators have come too late, and the labour market improvement is not yet strong enough, to bring on a rate hike at Wednesday's Fed meeting, but the Fed is likely to signal that it remains on track to hike rates later this year (my bets on September) providing economic data continues to improve giving confidence that inflation will rise back to target (I think it's a 2% target).

Eurozone
Greece nearing the end game. Ball is now in Greece's court to accept offer at end of June or face dire consequences for not avoiding a default. The June 18 Eurozone finance ministers’ meeting is the next deadline to watch. The pressure on Greece is now immense as recent turmoil has helped plunge it back into recession.  So Greece is likely to remain a source of volatility. But even if Greece does end up leaving the Euro, the threat of contagion to other peripheral countries is low compared to the 2010-12 period as they are now in better shape and the ECB is now providing stronger support.

Asia
Chinese shares’ inclusion in MSCI benchmark indices on hold but inevitable. Foreign investors still bit convoluted, will need time to make foreign access easier and when that occurs global demand for Chinese shares will be boosted. This will in turn inject a more significant and much needed foreign institutional element into the Chinese share market helping to balance out speculative retail investors and making for a more stable market.

Chinese economic data for May provided signs of a stabilization in growth after the soft patch early this year. Imports and fixed asset investment were weaker than expected, but growth in industrial production, consumer spending, exports, property sales and money supply improved and credit came in stronger than expected. At the same time though inflation was weaker than expected and producer prices are continuing to fall highlighting that monetary policy still remains way too tight, so further PBOC easing is still likely. 

Japanese economic data was good with March quarter GDP growth revised up to a strong 1% quarter on quarter driven by strong investment, strong machinery orders in April indicating that the strength in investment may be continuing and further falls in bankruptcies and Tokyo office vacancy rates.

Over in Malaysia, the stock market has of late been hit by heavy foreign funds selling. With US economic growth expected to make up for seasonally weak Q1, more foreign funds selling is to be expected. I've said before when putting my comment on Kenanga Growth Fund (change from BUY to HOLD rating) a week ago because there is lack of any catalyst in the Malaysian market.