Trading With A View

Tradeview Commentaries - A Time of Reckoning & The Battle of Titans

tradeview
Publish date: Mon, 14 Dec 2020, 06:38 PM
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Author of Once Upon A Time In Bursa : The MONEY Equation. A corporate strategist, lawyer & avid investor who has two great passion in life: Financial Markets & Real Estate. A true fundamentalist and financial writer motivated to tip the scale in favour of retail investors. Believe the stock market can be force for good.

Contact for update : tradeview101@gmail.com
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Malaysia is a blessed country with abundant of resources, human capital and potential. Before the Asian Financial Crisis of 1997 / 1998, Malaysia was regarded as a "Tiger Economy" and even Bursa (then known as KLSE) was the third largest stock exchange by value after Tokyo and Hong Kong Stock Exchange. Today, countries which were once behind us have surpassed our country in terms of economic strength, competitiveness and stability. Countries such as China, South Korea, Taiwan, Singapore are far ahead with Vietnam, Thailand and Indonesia catching up. Thankfully, Malaysia still have strong economics fundamentals laid down from our forefathers with SME forming the backbone of the economy. However, with the Covid-19 pandemic onslaught, SME segment was badly impacted with SME association forecasting close to 100,000 to shutter or on the brink of closing down by end 2020. Official figures from SSM shows 30,000. The huge discrepancy is likely due to the delay in official reporting.  
 
The stock market has however performed extremely well comparing to regional peers throughout the year. At today's closing of 1662 points, Bursa is up 4.66% YTD. This is unbelievable considering what is actually being felt in the real economy. I think regulators like BNM, SC, Bursa has done well to support the stock market. Another major reason is because Malaysia is blessed with a competitive Technology and Glove Sector which sustained our stock exchange during the triple whammy of oil price crash, government change and Covid-19 pandemic. 
 
In fact, thanks to glove makers, Bursa, hit record high retail participation and attracted some foreign investments. Of late, due to the announcement of vaccines such as Pfizer, Moderna and its ongoing rollout, the healthcare index took a beating especially the glove and tech sector. The rotation of funds from growth to value stocks and beat down laggards was swift. Banks, Steel, Construction, Telco, Plantation, Tourism, Oil & Gas rebounded strongly while technology and glove stocks was hit The market rally has drawn continuous retail participation, comparable to local funds and more so than foreign funds. This has kept the stock market lively and vibrant with average daily value above RM 4 billion. 
 
This spectacular stock market rally can be seen all over the world, not only Malaysia. However, it is impressive considering our country went through an unprecedented regime change midterm. I believe this would not be possible if not for the strong retail participation and remarkable earnings performance which led to share price ascend of glove makers. If we were to look at the entire stock market of Bursa today, the only sector with strong earnings visibility and sustainability is the glove sector. Nevertheless, the sector has been thrown into the limelight for good and for bad. Praise were given for their contribution to the world supply of gloves in the battle against Covid-19 (65% of market share globally), resolving PPE shortage. Criticism being zoomed in on labour issue, Covid-19 outbreak in workers hostel, welfare and extraordinary windfall in income. I have covered various angles of glove sector in the past 9 months and do not want to repeat further. I have however, a friendly advice to fellow readers who are either in the investment banking research fraternity, media or authorities / politicians, in everything we do in life, be fair, reasonable and objective. Do not make judgments, comments or opinions with a coloured lens. The glove sector of Malaysia is one which should be proud of. I know these days any articles or news on glove sector attracts huge number of views. I know it because I can see the statistics in my blog & channel. Do not for the sake of attention and populist agenda destroy an entire sector that was organically grown through entrepreneurial spirit, hard work and grit. This sector is a golden goose of our country. We must preserve, protect and help improve it.
 
Today, Tun Dr M and Tengku Razaleigh join hands during a press conference to share their advice input on the state on the nation including potential hint on tomorrow's Budget 3rd & final reading where a vote will be required of all 222 MP. This has led to last minute selldown of the market close to 1.3%. I believe the stock market will continue to be impacted and profit taking will continue across the board until a political resolution is in place or the budget 2021 is passed without hiccups. For investors, be prudent, hold sufficient cash and do not chase blindly. Avoid loss making stocks, whatever recovery theme it may be & focus on earnings or yield as your north star in these foggy times ahead. If you do that, I believe the worst will pass and eventually, you will see the light again.  
 
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Food for thought: 
 

 

 



 

 

 
 
 

 

 
 
 
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Discussions
2 people like this. Showing 7 of 7 comments

Agjl

Hi tradeview, whats ur view on the soon to be lifted RSS? The end of gloves?

2020-12-18 09:40

CynicalCyan

Avoiding loss-making recovery plays like Airasia or Genting would have cost investors the rare opportunity to profit handsomely from bottom-fishing.

2020-12-19 13:14

zhangliang

genting ok la, plenty of cash. Airasia, onli gullible ppl believe in the company. Even b4 covid oredi doing badly AAX, Airasia. Govt cable help thema lot.Otherwise long time game over. Whoever buy now making mistake.

2020-12-19 14:16

Erudite

Tq 4 sharing.Politik isu over now can buy? still bullish 2021? Window dressing?

2020-12-19 14:18

VenFx

Glove Surely will come back and roaring again.
I just sit quietly and wait for that moment.

How much more to the furthur pressurised level ?
10% or 15 % ?

Am happy to slot in my 1st battalion
If a furthur drop of 7% from 18.12.2020 Friday closing.

Supermax & Careplus my monitor counters.

2020-12-19 14:24

Sslee

https://klse.i3investor.com/blogs/Sslee_blog/2020-12-19-story-h1538283970-Glove_sector_behind_the_profit_growth_story.jsp

A normal profit growth is by capacity increase thus sales increase, revenue increase and net profit increase but NP margin stay almost the same.

Under unnormal condition like covid-19 where demand spike and fear of shortage causing buying frenzy and price increase thus revenue increase, net profit increase drastically because NP margin increase by many folds

The 3X or 10X is an ethical question of how much the selling price allowed to increase before the question of taking advantage of a situation to make excessive or unfair profit arise?

The next question is what will be the NP margin once the demand spike by covid 19 is over and with the increase capacity and many newcomers joining the game?

2020-12-19 14:55

Kimly2

Pity guy, bought high keep to low
bless u, dude



VenFx Glove Surely will come back and roaring again.
I just sit quietly and wait for that moment.

How much more to the furthur pressurised level ?
10% or 15 % ?

Am happy to slot in my 1st battalion
If a furthur drop of 7% from 18.12.2020 Friday closing.

Supermax & Careplus my monitor counters.
19/12/2020 2:24 PM

2020-12-20 18:19

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