Monday, June 22, 2009

Revision To The Minimum Bid Structure For Securities Market

Bursa has set 16th July 2009 as a tentative date to implement the new minimum bid structure. This is part of the efforts to improve overall competitiveness and trading efficiency of Bursa Malaysia securities market.

See belows proposed structure :-

Price Range----------Current Tick-----Proposed Tick
Below RM1.00------------0.005------------0.005
RM1.00 to RM2.99--------0.01-------------0.01
RM3.00 to RM4.99--------0.02-------------0.01
RM5.00 to RM9.99--------0.05-------------0.01
RM10.00 to RM24.99------0.10-------------0.02
RM25.00 to RM99.99------0.25-------------0.02
RM100.00 and above------0.50-------------0.10

Do you think this is a bad ideas ??
Previously a tick for RM5 stock to make money, now you would need 5 ticks to achieve that.

Monday, June 15, 2009


Oil slide back a bit, likely profit taking set in, however, still remain positive that the oil price will remain high in near term.
I have taken step to reduce some of my holdings to lock in some profit first, amongst the counters disposed today are PANTECH, HUAAN, PANAMY, YUNKONG & remaining HEKTAR.
With the disposal, managed to reduce 15% of my holdings. Would likely channel this fund to other potential counters, however its very much depend on current market sentiment.
Till then, happy trading.

· The table was turned yesterday, as all indicators were negative compared to last Friday’s. Crude oil prices eased to USD70.62 compared to USD72.04 a barrel a day earlier, while DJIA fell 2.1% to 8612 points, signaling a still uncertain economic environment.

· In the US, manufacturing activities in the New York region fell at a faster pace to 9.4 points this month compared to 4.5 last month, as sales and inventories declined. The NAHB housing sector index also unexpectedly declined to 15 points compared to 16 last month, indicating a slow recovery from the housing slump.

· Foreign direct investment in China in the first four month of the year contracted by 20.4% to $27.67bn, while price pressure eased further, as showed by the 7.6% YOY fall in wholesale prices. Spending cut by the private sector is somewhat offset by the government’s fiscal stimulus to weather the world’s worst financial crisis since World War II.

· Other unpromising news include a fall in Eurozone’s employment by 0.8% in 1Q, and the contraction in Singapore’s Apr retail sales by 11.7% YOY, mainly due to lower car sales.

Friday, June 12, 2009

China offers 9 pct export tax rebate on steel products

Reuters, Monday June 8 2009

SHANGHAI, June 8 (Reuters) - China is offering a 9 percent value-added tax rebate on exports of several high-end steel products, the Ministry of Finance said on Monday, in what analysts saw as the latest move to support domestic steel mills.
The country, the world's biggest steel maker, will refund the tax on flat-rolled steel products and hot-rolled ferro-alloy products effective from June 1, the ministry said in a statement on its website.
The rebate cuts more than half off the value-added tax rate of 17 percent, giving producers a strong incentive to export the products covered by the rebate.
Chinese steel mills are facing losses this year, as exports have shrunk due to weakened overseas demand and relatively high export costs, since the central government had capped rebates in the past few years to try to restrict production.
"I think many steel mills can take advantage of this. They can apply for rebates on products if minor metals were added during production," said Henry Liu, an analyst at Macquarie Bank in Shanghai.
The China Iron and Steel Association, the industry group that monitors all China's major steel mills, has urged the government to adopt more generous export tax rebates for steel products to bolster the industry.
China has already encountered friction with its trading partners over its steel export tax rebates, including an anti-dumping investigation over steel pipe imports in the United States.
The collapse in export demand cut China's shipments of steel products to the rest of the world by 60 percent in the first four months of the year and left China in an unusual position -- as a net importer of steel products -- in March and April.
Losses at 72 large and mid-sized Chinese steelmakers in the first four months of this year reached 5.18 billion yuan ($758.2 million), compared with 63.40 billion yuan in profit last year. ($1=6.832 Yuan) (Reporting by Alfred Cang and Tom Miles; Editing by Ken Wills)

Wednesday, June 10, 2009

Commodities help world markets advance

Commodity price rises help world stock markets advance

On Wednesday June 10, 2009, 6:35 am EDT
LONDON (AP) -- World stock markets rose sharply Wednesday amid higher commodity prices and renewed hopes about the state of the U.S. banking sector.

The FTSE 100 index of leading British shares was up 80.44 points, or 1.8 percent, at 4,485.23 with heavyweight mining and oil companies leading the march higher. Germany's DAX spiked 100.09 points, or 2 percent, at 5,097.95 while France's CAC-40 was up 51.87 points, or 1.6 percent, to 3,348.60.

Wall Street futures gained, suggesting a stronger session in the U.S. Dow futures rose 94 points or 1.1 percent, to 8,836 while the broader Standard & Poor's 500 futures climbed 11.3, or 1.2 percent, to 950.90.

Earlier in Asia, stock markets advanced too, with Hong Kong's main index closing 4 percent higher.

After a three-month advance, global markets have showed a lack of direction in recent days as investors fretted about whether the rally would continue through the summer months.

However, the rise in commodity and oil prices has helped mining and oil stocks around the world, while the confirmation from the U.S. Treasury Department that ten of the country's biggest banks will repay nearly $70 billion of bailout money has helped buoy demand for bank shares.

Particularly striking has been the rise in oil prices above $71 a barrel -- a 2009 high -- as investors poured money into crude as a hedge against a weakening U.S. dollar and inflation.

Oil has jumped more than 100 percent in three months as traders have cheered news showing the worst of a severe U.S. recession is likely over, and have brushed off data -- such as a 9.4 percent unemployment rate in May -- that suggest crude demand will remain weak. Even growing inventories have not checked crude's rise.

Benchmark crude for July delivery was up $1.35 at $71.36 a barrel by noon in European electronic trading on the New York Mercantile Exchange. On Tuesday, it jumped $1.92 to close at $70.01.

"There's an overriding hope that the commodity rally is signaling a recovery," said Kirby Daley, senior strategist at Newedge Group in Hong Kong. "But some of the fundamental decay at the core of the economy is still there, so I think investors may be getting ahead of themselves."

Stock markets have rallied strongly over the last three months largely on better than expected economic data, particularly out of the U.S., as well as hopes that the financial sector was stabilizing.

As stocks usually start rising 6 to 9 months before actual recovery emerges in the official economic data, investors have bet that the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.

Despite the improvement in the economic data, concerns linger about the global economy. With interest rates on government bonds edging higher, unemployment continuing to rise and oil prices back near six month highs, investors are concerned about the sustainability of a potential recovery.

As a result, there are worries in the market that if economic data around the world starts to disappoint expectations, then investors may have to revise their recent optimism.

And though the financial system may have been saved from collapse, investors still want more evidence that banks are once again lending to businesses and households. So far, there's very little to show that the lenders are doing anything other than improving their balance sheets.

"Equities are likely to bounce around for the next three months responding to good and bad news on a daily basis before a strong rally in the last quarter," said David Buik, markets analyst at BGC Partners.

Earlier in Asia, Hong Kong's Hang Seng surged 727.17, or 4 percent, to 18,785.66, while Japan's Nikkei 225 stock average gained 204.67 points, or 2.1 percent, to 9,991.49.

Investors in Japan shrugged off news that core machinery orders, a closely watched indicator of corporate capital spending, tumbled to a 22-year low in April as uncertainty about an economic recovery kept companies cautious.

In South Korea, the Kospi advanced 3.1 percent to 1,414.88, Australia's benchmark climbed about 2.3 percent, while Shanghai's main index rose 1 percent.

On Tuesday, the Dow Jones industrial average fell less than 0.1 percent, to 8,763.06, while the S&P 500 rose 0.4 percent to 942.43.

The dollar rose to 97.93 yen from 97.46 yen while the euro climbed to $1.4089 from $1.4053 late Tuesday in New York.

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

Wednesday, June 3, 2009

Advice: Be extra careful when buying into warrants near maturity

Good Piece of Information from TheStar :-

LATELY, as a result of better stock-market sentiment, investors are starting to pay attention to warrants. With their prices relatively lower than that of mother shares, warrants are viewed as an alternative to achieving higher returns and providing cheaper entry to the mother shares.

What is a warrant?

A warrant is a transferrable option certificate issued by a company that entitles the holder to buy a specific number of shares in that company at a specific price (or exercise price) at a specified time in the future.

Normally, a company issues warrants together with bonds to raise capital. Because investors can detach the warrants and sell them separately to get some returns, the coupon rates for these bonds will be lower.

As a result, we can treat this as a “sweetener” for investors to attract them to buy into lower coupon-rate bonds. Besides, capital raising through warrants will be less disruptive to a company’s earnings as investors are given a certain period to exercise their rights.

The intrinsic value of a warrant is the value that an investor will get if the warrant were to be exercised immediately. It is the difference between the price of the mother share and the exercise price.

A positive intrinsic value means the warrant is “in-the-money” and the investor may exercise his rights now given that he can buy the mother share at a cheaper price. A negative intrinsic value means the warrant is “out-of-money” and the investor will not exercise his rights as he has to pay higher than the current market price for the mother share.

Usually, warrants are traded at a premium because investors are willing to pay extra for the benefits that warrants offer. However, investors need to know the premium that they are paying. Premium can be computed based on the following formula:


For example, if Company A’s share price is RM4.50 and the exercise price is RM3.75, Company A’s warrant (Company A-W) price of RM1.36 will imply a premium of 13.6%.

Premium = (1.36 + 3.75 – 4.50)/4.50 x 100 = 13.6%.

For any given warrant, the higher the premium, the more expensive the warrant becomes. If an investor pays a premium to buy a warrant, the underlying share must rise by a percentage equal to the premium before the maturity date to break even.

The main reason for the preference shown by investors in buying warrants instead of their mother shares is the gearing factor. It is computed by dividing the mother share price by warrant price.

Based on the above example, the gearing factor for Company A-W is 3.31 times (4.50/1.36). It means that by buying into Company A-W instead of Company A (with the same amount of investment), the exposure to Company A is 3.31 times larger than investing in Company A (the mother share) itself.

Hence, due to the lower price relative to the price of the mother share, gearing can show how many times a warrant is able to outperform or under-perform versus the mother share.

Capital Fulcrum Point (CFP)

CFP combines premium and time-to-maturity to provide a compound indicator. It can be interpreted as the average percentage increase in the price of the mother share per year assuming all other factors remain constant.

It is computed based on the following formula:


Where y = the remaining years-to-maturity, ^ means to the power of

Based on the above example, if y = 5.82 years, CFP for Company A-W = [{3.75/(4.50 – 1.36)} ^ (1/5.82) – 1] x 100 = 3.1%.

It means that if Company A is able to grow by at least 3.1% a year, it will be cheaper to buy Company A-W than investing in Company A’s mother share.

In short, we can consider this CFP as taking the premium divided by the remaining time-to-maturity. When we take the above 13.6% premium and divide by 5.82 years, we will get 2.34%. Even though we cannot get the actual CFP, 2.34% can provide us with a close approximation to the correct CFP of 3.10%.

Due to the gearing factor, even though investors can get higher returns by investing in warrants instead of buying the mother shares, we need to understand the risks involved. Investors need to be extra careful when buying into warrants, especially those that are near their maturity.

Investors need to exercise the warrants or sell them into the market before the maturity dates because the warrants will become worthless after those dates.
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