OH - MY- GOLD!

Salaam and Good Blessings,
Some of you are already an active investor in AU METAL (i.e. GOLD), CONGRATULATIONS

In recent times, there has been a plethora of reports written by local and foreigns analyst of the prospect of this commodity. This posting is not an attempt to reproduce them but it is just to share (in brief) some recent common outlook.

The rush for GOLD has not eased and it has driven prices to test new levels close to 1980s inflation-adjusted records. This is further fueled by many fund managers taking a "safe-insurance" position with this commodity against the back drop of unstable macro economic challenges of developed countries, including threats of financial systematic risk, including concerns for double dip inflation and low interest rates.

The outlook for GOLD is favorably bullish with targets of US$1819 per ounce by 2012. (1 kg equals 35.274oz). Morgan Stanley even reports that they believe there is an 85% chance that GOLD will trade US$2085 per oz next year.

As mentioned in previous posting, it is recommended that you add GOLD into your basket of investment portfolio. Its capital preservation benefits will be a solid anchor during a period of economic storm and financial system fragility.

PUT YOUR FINGER INTO GOLD!

Eid Mubarak...

have a safe journey if you are traveling and may you feast sensibly...!

STOCKS PLUNGE...GOLD SOARS!

Several postings back, I shared about the prospects of investing in GOLD. I mentioned about it being the best preserver of value, well this call is still strong now especially under the circumstances the global economy is going thru.

At time of writing, the FBMKL is trading at 1460.19, 36.8 points off - which equals 2.45% down. This is a continuation from yesterday's sell down where the index lost 27.44points or equal to 1.8%....this is also over 100 points off from its highest recorded mark of 1594.74.

Other losing market at this time are KOREA, -6.2%, HANG SENG - 5.54%, NIKKIE - 3.73%

Apparently blood is not only flowing in certain cities in UK because of the riots...but in the BURSAs too!

GOLD prices has been CLIMBING over the last 11 years and it looks to continue this trend. It touched USD1700 (RM5134) an ounce yesterday at the back of growing concerns of the global economic meltdown. With the biggest economy in the world (US) looking frail, ill and "on drips" much like a critical patient in ICU...the fear factor that is abound is causing a value wipe out of USD5.4 TRILLION! Europe is also in sick bay with doctors and nurses keeping watch of the pulse. But it has not been good news so far.

But...there is some pleasant news to most domestic equity investors - in that the MALAYSIAN market has seen the least value lost during this challenging period. This is perhaps due to the fact that most of the global funds managers and investors view Malaysia as offering the best of the worst economic environment and they have actually "flown-into" our shores with the substantial increase in FDI over the last 10months.

More and more investors are seeking "safe homes" for their money. There is just too much pessimism or nervousness associated with the economies and currencies of major nations. And they will continue to seek the GOLDen horizon.

Even the CHINESE government have recently called on all major governments to GO BACK TO more stable currency backing reserves...they meant GOLD!

This call was already BLARED loud and hard many years back when TUN M was our PM. Whether this will help the situation or not is debatable but in any case individual investors must take serious consideration to add GOLD in their portfolio if they have yet to.

Public Mutual declares income distributions for 10 funds

Public Bank’s wholly-owned subsidiary, Public Mutual, declared distributions
totaling more than RM286 million for ten of its funds. The gross distributions
declared for the respective funds for the financial year ending 31 July 2011 are as
follows:

Fund Gross Distribution (sen per unit)
Public Growth Fund 6.00
Public Australia Equity Fund 2.25
Public Optimal Growth Fund 1.75
Public Far-East Property & Resorts Fund 0.50
Public Islamic Opportunities Fund 3.00
Public Islamic Select Enterprises Fund 2.00
Public Bond Fund 5.25
Public Islamic Select Bond Fund 5.00
Public Islamic Income Fund 3.50
PBB MTN Fund 1 4.00

According to Lipper dated 20 July 2011, Public Growth Fund has generated a one-
year return of 24.64% for the period ended 15 July 2011 which is above its
benchmark return of 18.23%. Public Growth Fund is open for EPF Members
Investment Scheme.

Meanwhile, Public Australia Equity Fund which was launched in September 2009,
gives investors the opportunity to capitalise on the long term growth potential of the
Australian market, given the country’s strong position in natural resources and its
diversified services sector. This fund has generated a one-year return of 18.72% for
the same period which is above its benchmark return of 14.67%.

Public Optimal Growth Fund is an equity fund which generated a one-year return of
17.76% for the period ended 15 July 2011. The fund was launched in June 2010 to
provide income and capital growth by investing in stocks which offer attractive
dividend yields and growth stocks in the domestic market.

Public Far-East Property & Resorts Fund on the other hand, focuses its investments
in property, hotel and resorts stocks, and Real Estate Investment Trusts (REITs).
The fund generated a one-year return of 16.28% over the same period which is
above its benchmark return of 14.81%.

Public Islamic Opportunities Fund and Public Islamic Select Enterprises Fund have
generated one-year returns of 11.30% and 26.88% respectively for the period ended
15 July 2011. Public Islamic Select Enterprises Fund is open for EPF Members
Investment Scheme.

On bond funds, Public Bond Fund, Public Islamic Select Bond Fund and Public
Islamic Income Fund, recorded one-year returns of 9.34%, 4.77% and 5.67%,
respectively for the period ended 15 July 2011. Public Bond Fund is an award-
winning fund, having garnered a total of 25 awards to date, while Public Islamic
Income Fund is open for EPF Members Investment Scheme.

PBB MTN Fund 1, on the other hand, is a close-ended wholesale bond fund which
generated a one-year return of 5.46% for the period ended 15 July 2011. The fund
was launched in November 2009 to provide a steady stream of income returns
through investment in subordinated medium-term notes issued by Public Bank
Berhad.

All of the above funds are distributed by Public Mutual unit trust consultants except
for PBB MTN Fund 1, which is distributed via Public Bank branches nationwide.

Public Mutual is Malaysia’s largest private unit trust company with 87 funds under
management. It has over 2.5 million accountholders and as at 30 June 2011, the
total net asset value of the funds managed by the company was RM44.3 billion.

Public Mutual declares distributions for 13 funds

Public Bank’s wholly-owned subsidiary, Public Mutual, declared distributions for 

13 of its funds. The gross distributions declared for the respective funds for the 

financial year ended 30 June 2011 are as follows: 

Fund Gross Distribution / Unit 

Public Far-East Consumer Themes Fund 

4.00 sen per unit 

PB Growth Fund 

8.50 sen per unit 

PB China ASEAN Equity Fund 

6.00 sen per unit 

PB Asia Equity Fund 

3.50 sen per unit 

PB Singapore Advantage-30 Equity Fund 

0.65 sen per unit 

PB Islamic Asia Equity Fund 

0.75 sen per unit 

PB Balanced Fund 

7.50 sen per unit 

PB Islamic Bond Fund 

5.75 sen per unit 

PB Fixed Income Fund 

5.25 sen per unit 

PB Infrastructure Bond Fund  

3.25 sen per unit 

Public Islamic Money Market Fund 

2.50 sen per unit 

PB Cash Management Fund 

2.50 sen per unit 

PB Islamic Cash Management Fund 

2.25 sen per unit 

Public Mutual Chief Executive Officer Ms. Yeoh Kim Hong said the above funds 

have performed well and have delivered respectable returns in its categories for the 

period ended 10 June 2011.  

According to The Edge-Lipper Fund Table dated 20 June 2011, Public Far-East 

Consumer Themes Fund has generated a one-year return of 16.03% for the period 

ended 10 June 2011. 

Meanwhile, PB Growth Fund, PB China ASEAN Equity Fund, PB Asia Equity 

Fund and PB Singapore Advantage-30 Equity Fund have generated one-year returns 

of 23.14%, 12.99%, 12.91% and 10.17% respectively for the period ended 10 June 

2011. PB Growth Fund is an award-winning fund, having received a total of seven 

awards in its category from The Edge-Lipper Malaysia Fund Awards and The 

Star/Standard & Poor’s Investment Fund Awards Malaysia. For the same period, 

PB Islamic Asia Equity Fund generated a one-year return of 12.98%. 

 Meanwhile, PB Balanced Fund has generated a one-year return of 16.76% for the 

same period. PB Balanced Fund is also an award-winning fund, having received a 

total of 17 awards in its category from The Edge-Lipper Malaysia Fund Awards, 

Morningstar Fund Awards (Malaysia) and The Star/Standard & Poor’s Investment 

Fund Awards Malaysia.   

At the same time, PB Islamic Bond Fund, PB Fixed Income Fund and PB Infra- 

structure Bond Fund have generated one-year returns of 11.80%, 6.95% and 5.93% 

respectively for the same period. PB Islamic Bond Fund won awards from the 

Dubai-based, Failaka Islamic Fund Awards 2010 and Morningstar 2010 Fund 

Awards (Malaysia) 

As for our money market funds, Public Islamic Money Market Fund, PB Cash 

Management Fund and PB Islamic Cash Management Fund have generated one- 

year returns of 2.57%, 2.51% and 2.43% respectively for the same period. The 

money market funds provide an option for investors with low tolerance to risk who 

wish to park their money on a short-term basis while waiting for opportune time to 

investing in or switching back to equity, balanced or bond funds.  

PB Growth Fund, PB Balanced Fund, PB Islamic Bond Fund, Public Islamic Mon- 

ey Market Fund and PB Cash Management Fund are open for EPF Members 

Investment Scheme. 

All funds are distributed via Public Bank branches nationwide with the exception of 

Public Far-East Consumer Themes Fund and Public Islamic Money Market Fund, 

which are distributed by Public Mutual unit trust consultants. 

  

Public Mutual is Malaysia’s largest private unit trust company with 86 funds under 

management. It has over 2.4 million accountholders and as at 31 May 2011, the 

total net asset value of the funds managed by the company was RM43.95 billion. 

Feeding Off Buffett’s Formula

This article below was extracted from Calibre, a monthly publication by Public Mutual for its clients. Some of you may have received a copy and read it. It is a great read and I hope you don't mind that I reproduce it here.


"Warren Buffett’s management record is even more successful than his phenomenal investment record. He uses a management strategy that is surprisingly simple yet promises successful outcomes to newcomers and seasoned professionals alike.


Warren Buffett is widely regarded as one of the most successful investors in the world. Often referred to as the "legendary investor," he is ranked the third wealthiest person in the world as of 2011. He is also the primary shareholder, chairman and CEO of Berkshire Hathaway, a conglomerate holding company that oversees and manages a number of subsidiary companies.


Why Emulate Buffett’ Management Style?


Besides being a genius at investing, Buffet is also a genius of a manager. His record speaks for itself. His company, Berkshire Hathaway, employs 233,000 employees around the globe with over eighty-eight CEOs of different companies reporting directly or indirectly to him. The company’s operational annual net income grew from USD18 a share in 1979 to USD4,093 a share in 2007. This equates to a compounding annual growth rate of 21.39 percent - substantially better than Berkshire’s investment portfolio that grew at an annual compounding rate of 19.78 percent in the same period. This record clearly illustrates that Warren and his managers are doing a fantastic job of minding the store.
What management philosophy underscores this success? Mary Buffet and David Clark give us an insider’s view of his managerial style by culling his most important strategies into a book titled ‘Warren Buffett’s Management Secrets: Proven Tools For Personal And Business Success.’ Here his managerial philosophy is distilled into five primary segments that combine to create a winning formula:


1. Pick the Right Business


Buffet is clear on the fact that not all businesses are created equal. The first step to success is to own, manage or work for the right business with the right economics working in your favour. To zero in on the right businesses look for those that tend to burn considerably less capital than they earn. This is usually because they produce a brand-name product that never has to change (e.g. Coca-Cola ) or because they provide a key service which gives them better profit margins that amounts to a durable competitive advantage.


2. Delegate Authority


If there is a single management skill one could pin on Buffett, it would be his willingness to delegate authority way beyond boundaries that most CEOs would be comfortable with. In his words, “We delegate almost to the point of abdication.” The norm of managers is to try and control as many events and people as possible. But micromanaging leads one to juggle too many tasks at once and the end result is neglect or lack of competence in undertaking many of these tasks.


3. Find A Manager With The Right Qualities


When picking managers, he seeks out people with an internal locus of control. These are people who are in control of themselves and their environment, who take responsibility for their failures and in the process learn from their mistakes. He also looks out for people who love what they do as these personalities end up going the extra mile and inspire others to do the same. He places emphasis on honesty too. As he puts it, “You don’t want to be in business with people who need a contract to be motivated to perform.” Another management trait Buffett values is cost consciousness as a way of life and not just when the business is failing. He determines this criteria by seeing how managers handle the seemingly little costs. He explains, “If managers aren’t disciplined on the little things, they will probably be undisciplined on the large things as well.” Lastly he looks for a manager who is a great investor, responsible for investing the firm’s money in people, products and new businesses with a long-term perspective in mind. (Buffett is a firm critic of a short-term focus as he believes it tends to make managers poor allocators of resources.)


4. Motivate Your Workforce


In this respect, Buffett is a student of the Dale Carnegie school that uses praise and criticism in a very specific way. His rule is simple: praise by name but criticise by category. As an example, he is quick to praise an individual banker but if he is unhappy with the banker, he criticizes the banking profession as a whole. And if he has to criticise someone personally, he makes it a point to praise the person first. It creates a sense of trust and the recipient is subsequently more likely to accept and act on constructive criticism as a result. When he wants something done, he frames it in such a manner that he speaks to the other person’s wants and needs and therefore gets rewarded with the appropriate response.


5. Buffett’s Managerial Axioms For Different Problems


“Leverage is very tempting and always leads to trouble.” Buffet is an old - school manager reluctant to use debt to improve earnings.


“Only in fairy tales are emperors told that they are naked.” This one pertains to the danger of managers surrounding themselves with sycophants. Buffet’s solution is to surround himself with as few people as possible and when he does, they are people with a great track record of making good calls when they are called on to do so.


“We rub our noses in mistakes of omission.” This relates to missed opportunities. Even the best managers miss opportunities, but they ask the hard questions as to why they missed them. This primes them to spot and seize a good opportunity the next time it turns up.

Source: Calibre, May 2011

Japan Tsunami and Malaysian markets

It was the worst earthquake in over 100 years that hit JAPAN recently. Loss of precious and priceless lives, gone in a swoop of a wave the size of which one would never have imagined. 


Our prayers for those who survived and are still trying to deal with the calamity. 

Reconstruction cost is estimated to be in USD161billion! 

How does it impact us in MALAYSIA you may ask. Some analysis reports are saying the impact is generally limited given that major ports in JAPAN and it industrial areas have been spared by the calamity. 

However, some sectors will see benefits and some will need tremendous adjustments in corporate directives and policies.

The are some Winners and they include the Timber sector and to a lesser extent, Steel, as 

these are raw materials used in reconstruction efforts. 

The Losers will be sectors with products consumed by Japan such as O&G and Tourism/Aviation. Auto companies too could be impacted as many parts are still sourced from Japan. 

Several stock broking houses are not so pessimistic on MALAYSIA - post JAPAN tsunami - and are maintaining a "Buy into Weakness" call on the Malaysian market. 

  

Impact on Malaysia limited. 

While the devastation in Japan appears very significant, with most of its ports and industries still intact, the impact on Malaysia and Malaysian corporates seems limited for now. A point to note - Japan is Malaysia’s 3rd largest export market and 2nd largest source of foreign investment. 

Timber and steel could be winners. 

With reconstruction efforts required, the timber and steel sectors could benefit from the Sendai earthquake. Timber in particular could see heightened demand given that many Japanese houses are constructed with the use of significant hardwood timber and Malaysia is still the world’s largest exporter of hardwood timber. Sarawakian timber boys such as WTK (Not Rated) and Ta Ann (Not Rated) have significant exposure to the Japanese housing market. 

Autos, Aviation, O&G and Utilities among the Losers. 

On the flip side, the devastation will likely put a dent in the tourism and travel industry for some time and therefore impact airlines flying to Japan. 

Elsewhere, our Malaysian auto companies still import CBU kits as well as some CKD parts from Japan, and this could potentially lead to some delays for the auto companies. In O&G, we note that the price of oil dropped Friday as investors were worried that the slowdown in the Japanese economy would crimp demand for oil. 

This in turn could hit sentiment in the short term. Finally, the closure of the nuclear plants could see greater demand for fossil fuel power generation such as from coal, which could then lead to prices escalating further.  

Still advising a Buy into Weakness. 

With greater clarity on the scope of devastation, perhaps there is still some short term weakness in the market and this could continue as an opportunity to Buy into Weakness, with year-end 1680 pts KLCI target intact.   

So hang on to your investments and no need to panic yet.