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Choivo Capital

Author: Choivo Capital   |   Latest post: Sun, 13 Jan 2019, 02:51 AM

 

(CHOIVO CAPITAL) The unique characteristics of the Malaysian Equities Market

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One of the most commonly said phrase in this forum is how the Malaysian Market is different from everywhere else, and how value investing cannot be implemented here.

By definition, all intelligent investing is value investing. Anybody with a brain will want to buy one ringgit for fifty cents. We just have different ways of identifying value, which can give rise to very different figures.

The one overpricing on growth says “I know its damn expensive, but..”.

The one overpricing on cheapness says “I know it’s a shit business, but…”

Having said that. There are some things that are very unique to the Malaysian market, due to certain structural factors. I will first list them out, and explain a little, before combining all of them to show how they really affected things.

 

 

  1. Malaysian Market is small.

    The total market capitalisation of the KLSE is roughly RM1.5 trillion. Or about USD 0.34 trillion, with about 900 companies. In contrast, the US stock market is roughly USD40 trillion, with about 25,000 companies.

    The only markets smaller than us are a few in the African nations and undeveloped Asean countries. Singapore just over took us if I’m not mistaken. And in terms of individual market participants, it actually isn’t that high here.

 

  1. This website, I3investor.

    Most, if not all markets, does not have one single online forum such as this one, where every single market participant congregates. And is formatted in such a way that makes it such a convenient aggregator of information.

    The US market is far too big, and have so many different outlets. Alphaseeker, Gurufocus, etc etc. To be a sifu there, you need billions of dollars. And even then, you are nothing.

    Here, every single market participant is in one single forum.

 

  1. www.malaysiastock.biz

The third factor is this website. None of the other markets, literally none, have one where you would be able to see quarter results, and in such an intuitive way and impactful way.

You literally see it via green or red arrows, the instant the results come out, and can compare it right away to the previous quarter and the previous year’s quarter.

In addition, you get to see 5 years’ worth of profit and revenue, instantly, and have the key information such as PE, ROE etc in the same page.

Make no mistake, one can get this service in other markets, for a price. Because most exchanges charge a relatively hefty price for API access.

But most people do not pay for such services.

 

 

The Loolapoalooza Effect

Charlie Munger, used to have a phrase called “The Loolapalooza Effect”. Where a confluence of different factors, merge together and create an incredible effect.

With the small market size and low number of market participants, as well as a single forum where all the market participants come together, it creates an effect, where it becomes easy for pretty much anyone, assuming they are interesting enough, or have persuasive enough arguments, to grab the spotlight in front of every single market participant.

This is not even close to the case in the US or even Singapore. In the US, billionaires only move the stock a few percent once their purchase is known. Here, just knowing OTB or Coldeye (both of whom are really just small ciku when it comes to their size relative to capital markets) is in it, can shoot up prices by tens of percents. In Singapore, they don’t really have a forum as influential market wise as i3investor. Or as easy to peruse and get new inspiration.

And then we have the incredible, malaysiastock.biz. With the sheer impact shown by the little green or red arrows. Along with the quick analysis one can immediately do once you click the pages, along with summaries of announcements, splits, and news.

This created an incredible focus on companies with beautiful revenue and profit charts, and most importantly, an incredibly intense focus for the prediction of next quarters.

Combine small markets, low number of participants, a single source where all market participants get their ideas from, and information from websites structured (purposefully or accidentally) in such a way as to place a high focus on next quarter results.

And we have today. A gigantic group of IYI’s, intellectual yet idiots, going around predicting quarters and playing market dynamics.

Where, as Koon Yew Yin puts, he does not care if the company is good or not, he just wants to see pretty quarters.

It’s incredible really, the power of incentives.

Yes, most markets are focused on quarterly, but not to the extent of Malaysian markets. I would say Malaysian markets are far more efficient that say China markets, but it is much less accurate.

 

 

 

The Opportunity for Investors

As previously said, this creates a situation where it really rewards shrewd traders, who read sentiment well, as well as market predictors who can write convincing arguments, and pump and dumpers.

However, this also creates a lot more opportunities for value investors.

As the market is so focused on next quarter results, that fantastic companies or good companies with near term results that may not be as pretty, become severely undervalued. And if by accident, they get an unexpected fantastic results, they shoot up like a rocket.

People are so focus on evenly increasing profits, that good companies that grow, but have lumpy results, due to one off profits or losses, or change in year ends, become basically ignored.

Wonderful net asset companies, whose assets are actually worth something, and often more than book, and is often also growing, becomes woefully undervalued. In most countries, NTA plays are rubbish frozen corporations. Here, we have dividend paying companies with good and conservative management, and deep hidden assets selling for a song.

The key to success in fishing, is to fish where the fishes are. And the key to success in investing, is to go where the great value investments are.

The average investment manager in the US is much smarter than the ones in Malaysia, and much larger in number. And the paradox of skill says that when the outcome of an activity combines skill and luck, as skill improves, luck becomes more important in shaping results.  As people get better, the variation between the highs and lows become much smaller.

Considering the lack of skill here, where even someone like me can appear outstanding, and the sheer amounts of mispricing thrown up by an inefficient markets. Its like shooting fish in a barrel.

God I love Malaysian stock markets.

 

 

Conclusion

In investing and to a large extent life, where to best apply our focus and skills depends partially on where others are applying theirs.

Everyone else, please predict quarters more, play TA etc with each other, looking at chart and computer screen all day long and focus on winning in the zero sum game. Please go find out where steel, currency, and palm oil price are. Whether it is making HBI or KNN.

Leave the rest to me!

Value investing does not work in Malaysia! Let me be the only sorchai following it!

And unlike other people, i dont need anyone supporting the price of my investments!

 

 

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

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  5 people like this.
 
probability while others sail with wind direction...Jon chose to drift with ocean currents

good to have less competitors (for the sailors)
31/08/2018 04:54
CharlesT How old are u? If u r really 20+ years old i think u could be the smartest young chap i hv ever seen....

If u could be a little bit more adventerous u can do very well in stock mkt i believe
31/08/2018 07:05
CharlesT Hopefully u wouldnt be the second kcchong...anyway lately kc also started to enjoy the fun of punting....in lionind making use of koon's index
31/08/2018 07:07
soojinhou Welcome to the market, hope you achieve the investment returns you seek, we are all competitors in the market. I like your conservative strategy, dull but safe. Most suitable for working adults that don't have much time and attention other than work. As for me, I live off this, I need to work to get extraordinary returns, I'm not contented with a conservative approach. I have learned that speed to execute fast makes me more money, even though that means I'm successfully competing against people who employs a conservative strategy, that doesn't make me evil for moving money from your pocket to my pocket because markets are competitive.

You may find PetronM most suitable for your portfolio. Highly defensive retail market that's gaining market share. People associate them with refinery but that's totally incorrect because in FY2016 (I've avoided FY2017 because it is a bumper year), refining profit is less than 20% of gross profit. Sure there will be maintenance in q3, but at most that will hit only 1/5th of business. Net cash, but heavy capex coming up for refinery. What the heck lah, trading at PE 6 only.
31/08/2018 08:04
British_better After QR season(PH in power) over only banks and Bursa can buy is my opinion.
31/08/2018 08:07
3iii >>>The one overpricing on growth says “I know its damn expensive, but..”. The one overpricing on cheapness says “I know it’s a shit business, but…”>>>


Comment: Like the above statement.



>>>This website, I3investor.

Most, if not all markets, does not have one single online forum such as this one, where every single market participant congregate and gathers.

Here, every single market participant is one single forum.<<<<


Comment: Did not know of its impact. Now I have to look at this forum differently.



>>>>Where, as Koon Yew Yin puts, he does not care if the company is good or not, he just wants to see pretty quarters.>>>>>


Comment: I am still trying to understand how he selects his stocks. I fail to see a common criteria other than what he said about higher earnings in each subsequent quarters. Even then, his golden rule is often broken by himself. Many of his stocks which he shared failed him terribly too destroying the premises he shared for liking and buying them.



>>>>As previously said, this creates a situation where it really rewards shrewd traders, who read sentiment well, as well as market predictors who can write convincing arguments, and pump and dumpers.

However, this also creates a lot more opportunities for value investors.<<<<


Comment: It was obvious in many of the pump and dump stocks, there were MORE losers than winners. Losers remain silent (generally). Winners thus seemed more vocal and misleadingly "in abundance". In stocks where the price actions over a short time horizon were similar to those of Hengyuan, a lot spilt their blood at the end of the dump. Looks like Jaks, Sendai, and Lionind have similar price actions too. Who were the promoters?



>>>The key to success in fishing, is to fish where the fishes are. And the key to success in investing, is to go where the great value investments are.<<<<

Comment: I am wired properly and blessed. I am able to recognise the great values in growth stocks. Cannot say the same for dishonest raider who saw a lot of risks in the same stocks over the last 10 years. It is either I am wrong or raider is right!



>>>Value investing does not work in Malaysia! Let me be the only sorchai following it!<<<

Every time a person wrote that Buffett's method is not applicable to Bursa for him, I wished to understand the experience and psychodynamic that led him to write so. Of course, value investing works wonderfully provided you know how. Risk is not knowing what you are doing. Yes, to be fair, some find the other methods very rewarding too. An author was promoting her book on Technical Analysis. She said she was a follower of deep value investing of Buffett in her early years and she lost money in the Bursa. Since then she abandoned this strategy and now she has written a book on Technical Analysis. I am not sure how well she is doing in Bursa today but some authors, remisiers and related people in the industry make more from commissions, fees and royalty than from their actual stock investing.
31/08/2018 09:07
Alex™ Yay smart ah jon... Monday hoot what stock? Lai~
31/08/2018 09:17
soojinhou Haha... less sailors please lol, ppl like you icon8888 really force me to work harder, come come, competition welcomed. I tell ppl don't be so fixated on kyy. Market is always competitive. If you are not competing against him, you will be competing with other invisible tycoons as well. There's no running away from competition in life, you go to school you compete, you go to work oso you compete. Want superior returns, compete lorr. Just have to be sharper and faster.
31/08/2018 09:35
3iii >>>Posted by soojinhou > Aug 31, 2018 09:35 AM | Report Abuse

Haha... less sailors please lol, ppl like you icon8888 really force me to work harder, come come, competition welcomed. I tell ppl don't be so fixated on kyy. Market is always competitive. If you are not competing against him, you will be competing with other invisible tycoons as well. There's no running away from competition in life, you go to school you compete, you go to work oso you compete. Want superior returns, compete lorr. Just have to be sharper and faster.<<<


The stock does not know who owns it.

You are competing with yourself.
31/08/2018 10:03
Icon8888 deleted my comments. Feel bad being too harsh on the Young Ciku

let him has some fun... what the heck...
31/08/2018 10:05
CharlesT Hopefully he can spare some small money for punting...everyday talk abt WB book stories very sien....

WB has unlimited funding fm his insurance co..bsides he also quitely do a lot punting biz...just that he never tell u only
31/08/2018 10:09
value88 CharlesT said it well. If Jon can be more adventurous and not that conservative and rigid in stock investment, he would do very well with his knowledge. I can also benefit by following his picks.
But with what he is now, I would not be interested in his picks.
31/08/2018 10:10
value88 Jon reminds me of Ricky Yeo, I suppose they are from the same sifu.
31/08/2018 10:24
VenFx Haha jon the adventurous legend.
Walk the path
Baru cross check with theory
Better if u can earn your own formula

Anyway like to your story juga.
31/08/2018 10:26
calvintaneng Value investing does not work in Malaysia! Let me be the only sorchai following it!


Hahaha!

Now i got company at last

Thought calvintaneng was called the hollandking? The number one sorchai of i3?

Now i got company at last

SO GOOD!!!
31/08/2018 15:04
Choivo Capital Icon, there is no way that you can be harsher than I am with myself. Haha

I'll be honest, I always thought you were pretty sharp, but sometimes I just feel like your experience and talent is wasted.

Having said that, you're articles were quite profitable for me, ewint etc, just for the sake of a quick punt.

But Investments wise, I'm sad to say Ive never gotten a single inspiration from you. A pity really. Because I think your perspective for investment will be very fascinating.

===
Icon8888 deleted my comments. Feel bad being too harsh on the Young Ciku

let him has some fun... what the heck...
31/08/2018 10:05
31/08/2018 18:28
Outliar Why did you delete his comments then? Would've like to see what Icon said
31/08/2018 19:10
Choivo Capital I never deleted anyone's comments. And i dont think i can do it, its not like facebook. He deleted it on his own accord.

Here they are, reproduced from my email.


"That makes him feel good mah. I can imagine he lives in his Buffett Bubble House looking out, saw us walking away with tonnes of cash in our hands and he giggled to himself "what a bunch of fools, you guys have no ideas what you are doing"

"I am thinking of writing an article "the difference between Jon lohsoh and soojinhou"

"Jon lohsoh is heavy on opinion weak on analysis, soojinhou is the opposite"


I'm always a little irritated when i get comments that are essentially personal attacks, or pointless and illogical mocking, especially if i they are from people with brain like Icon8888.

Because this means, i am probably right, as he would have criticized logically otherwise, and it also means i now learn nothing.

Its irritating really. I always have such hope that icon8888 teaches me something whenever i see a notice that he commented.


===
Outliar Why did you delete his comments then? Would've like to see what Icon said
31/08/2018 19:10
01/09/2018 23:57
Choivo Capital When his capital was smaller, he punted alot on catalyst events, and did arbitrage on M&A.

He also punted on currency and most notably silver. On the first, he expected USD to drop, and so hedged it by buying great bonds or companies, denominated in foreign currency. And so made it on both the investment and the currency appreciation.

For silver, he predicted a demand outstripping demand, and really shocked the silver market when he first bought, because nobody knew who was buying so much suddenly. In his words, his analysis was right, but he bought too early and sold too early. Hahahaha

He also did long dated contracts that basically said he needs to pay if 30 years down the line, if S&P was below a certain price.

He punts, but very intelligently.



===
CharlesT Hopefully he can spare some small money for punting...everyday talk abt WB book stories very sien....

WB has unlimited funding fm his insurance co..bsides he also quitely do a lot punting biz...just that he never tell u only
31/08/2018 10:09
02/09/2018 00:01
Choivo Capital Thank you, not easy to get a compliment from you hahaha.

I just happened to spend alot more of my time than others in this area. And i also happen to speak very very loudly and publicly on these things, im fairly certain they are much smarter ones than me, especially in India, China and US.

Some of the research by young fellows, i really cannot even compare. We come to the same conclusions or similar ones. But their research is way way way more comprehensive.

Having said that, most of the research reports in those countries is useless for my purposes.


====
How old are u? If u r really 20+ years old i think u could be the smartest young chap i hv ever seen....

If u could be a little bit more adventerous u can do very well in stock mkt i believe
31/08/2018 07:05
02/09/2018 00:08
stockraider THE MAIN THING WRONG OF DISHONEST 3iii, IS ASKING PEOPLE TO BUY HIS OVERVALUE STOCKS WITH LOW DIVIDEND YIELD...CITING QUALITY LOH..!!

EVERYTHING HAS A PRICE OR VALUATION...IF IT IS OVERVALUE...LIKE BEN GRAHAM SAID JUST AVOID LOH...!!
DO NOT LET MR MARKET CON U LOH....!!

Posted by 3iii > Aug 31, 2018 09:07 AM | Report Abuse

>>>The one overpricing on growth says “I know its damn expensive, but..”. The one overpricing on cheapness says “I know it’s a shit business, but…”>>>


Comment: Like the above statement.

>>>This website, I3investor.

Most, if not all markets, does not have one single online forum such as this one, where every single market participant congregate and gathers.

Here, every single market participant is one single forum.<<<<


Comment: Did not know of its impact. Now I have to look at this forum differently.

>>>>Where, as Koon Yew Yin puts, he does not care if the company is good or not, he just wants to see pretty quarters.>>>>>

Comment: I am still trying to understand how he selects his stocks. I fail to see a common criteria other than what he said about higher earnings in each subsequent quarters. Even then, his golden rule is often broken by himself. Many of his stocks which he shared failed him terribly too destroying the premises he shared for liking and buying them.

>>>>As previously said, this creates a situation where it really rewards shrewd traders, who read sentiment well, as well as market predictors who can write convincing arguments, and pump and dumpers.

However, this also creates a lot more opportunities for value investors.<<<<

Comment: It was obvious in many of the pump and dump stocks, there were MORE losers than winners. Losers remain silent (generally). Winners thus seemed more vocal and misleadingly "in abundance". In stocks where the price actions over a short time horizon were similar to those of Hengyuan, a lot spilt their blood at the end of the dump. Looks like Jaks, Sendai, and Lionind have similar price actions too. Who were the promoters?

>>>The key to success in fishing, is to fish where the fishes are. And the key to success in investing, is to go where the great value investments are.<<<<

Comment: I am wired properly and blessed. I am able to recognise the great values in growth stocks. Cannot say the same for dishonest raider who saw a lot of risks in the same stocks over the last 10 years. It is either I am wrong or raider is right!


>>>Value investing does not work in Malaysia! Let me be the only sorchai following it!<<<

Every time a person wrote that Buffett's method is not applicable to Bursa for him, I wished to understand the experience and psychodynamic that led him to write so. Of course, value investing works wonderfully provided you know how. Risk is not knowing what you are doing. Yes, to be fair, some find the other methods very rewarding too. An author was promoting her book on Technical Analysis. She said she was a follower of deep value investing of Buffett in her early years and she lost money in the Bursa. Since then she abandoned this strategy and now she has written a book on Technical Analysis. I am not sure how well she is doing in Bursa today but some authors, remisiers and related people in the industry make more from commissions, fees and royalty than from their actual stock investing.
02/09/2018 11:54
stockraider IT IS VERY SIMPLE LOH....TO TRACK DISHONEST 3iii JUST MARK THESE SHARE PRICES & REVIEW IT AT THE END OF THE YR 2018 LOH...!!

Posted by stockraider > Sep 1, 2018 02:11 PM | Report Abuse X

these are past growth stock, now saturated loh....it is overvalue loh...if u buy 10 yrs ago ....then u get good return...but if u buy now u r looking for stagnation....bcos it is overvalue now loh...!!

The correct approach is start looking for new growth stock mah...!!

Never overpay loh.....!!

Posted by 3iii > Sep 1, 2018 01:58 PM | Report Abuse

Hartalega Holdings Bhd
Market Cap share price rm 7.10
9.1.2009 0.42 b
25.8.2018 23.41 b

Press Metal Aluminium Holdings Bhd
Market Cap share price rm 4.98
09.1.2009 0.25 b
25.8.2018 18.78 b

Top Glove Corp Bhd
Market Cap share price rm 11.14
09.1.2009 1.1 b
25.8.2018 13.83 b

Hap Seng Consolidated Bhd
Market Cap share price rm 9.98
09.1.2009 1.33 b
25.8.2018 24.5 b

Public Bank Bhd
Market Cap share price rm 25.12
09.1.2009 31.33 b
25.8.2018 96.67 b

Nestle (M) Bhd
Market Cap share price rm 147.00
09.1.2009 6.39 b
25.8.2018 34.59 b

Tenaga Nasional Bhd
Market Cap share price rm 15.68
09.1.2009 27.09 b
25.8.2018 89.15 b

Fraser & Neave
Market Cap share price rm 38.00
09.1.2009 3.19 b
25.8.2018 14.02 b

Petronas Dagangan
Market Cap share price rm 27.2
09.1.2009 7.25 b
25.8.2018 26.51 b

Petronas Gas
Market Cap rm 18.70
09.1.2009 19.49 b
25.8.2018 36.6 b

I own 8 of these 10 stocks in my portfolio for many years.
02/09/2018 12:11
stockraider In other words be brave do not cave mah;

Talking about investing specifically, I am reminded here of the Feb. 2016 memo from Howard Marks where he wrote this –

My buddy Sandy was an airline pilot. When asked to describe his job, he always answers, “hours of boredom punctuated by moments of terror.”

He goes to explain how investing follows a similar pattern – hours of boredom punctuated by moments of terror. Now, both these situations make us vulnerable. In the former, we are vulnerable to losing money. In the latter, we are vulnerable to missing opportunities.

But it’s upon us how we deal with such vulnerability. Do we buckle under the fear of the unknown or have the courage to face up to it? And if we decide to face up to our fears, all we must do is to play our parts well and let go of what we don’t control.

Nature will take its course then, and a few years later, we may be surprised at what we were able to achieve just because we allowed ourself to be vulnerable.
02/09/2018 12:30
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04/02/2019 13:25


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