What Stocks have Foreigners Been Buying?

Take a look at Credit Suisse’s latest report on a summary of What Stocks have Foreigners Been Buying in Malaysia.

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Biggest increase in foreign shareholding:-

1. Malaysian Airports, +13.7pp
2. Gamuda, +8pp
3. Maybank, +5.4pp
4. CIMB, +4.8pp
5. Sime Darby, +2.7pp

Reduced Foreign Holding:-

1. Air Asia, -9.6pp
2. Karex, -3.0pp
3. Tenaga, -2.4pp
4. IOI, -0.5pp
5. Telekom, -0.5pp

Price Ceiling or Fixed Price for Petrol?

You might have already known that starting end of this week, the government would be introducing a price ceiling with a weekly revision for petrol prices at the pumps. Either its weekly or monthly, I believe that the effects are the same for petrol operators with high turnover on their inventory. Having too much inventory opens up pricing risk for an operator and this needs to be managed well.

Likely for the first months or so, petrol stations would follow the price ceiling set by government just to be safe than sorry. But as the months go by, some operators who are bigger and has a higher turnover might be more daring to tweak their margin in order to fulfill more sales. It takes one station to start adjusting prices somewhere on a congested road and you might see stations along the way adjusting their prices to compete as well.

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In the future, this might turn into a familiar sight in front of petrol stations showing current selling price.

Deriving Price at Pumps

To derive prices that we are paying for at the pumps, the mathematical formula comes out to something like this.

Price at Pumps  = MOPS + Oil Company Margin + Petrol Dealer Margin

MOPS stands for Mean of Platts which is denominated in SGD (that’s why you see petrol going higher when ringgit weakens)

Oil Company Margin is likely going to be standardized but for bigger petrol station operators, a bulk discount might be offered when a station buys up the full content of a refueling tanker. A station operator might pass this benefit down to customers.

Petrol Dealer Margin is where the magic happens. This would be fully adjustable to the operators’ preference.

So Fixed vs Ceiling?

In economics, we try to promote competition among retail to derive the best equilibrium price possible which benefits the economy as a whole. This is why we felt that having a price ceiling mechanism would benefit consumers in the long run.

Moreover, petrol companies would need to step up their game to sell more products to stay on top. Clearly the price ceiling mechanism is a way the government passes the ball on to the petrol companies to provide lower prices to the public rather than re-introducing subsidies in the short term. Obviously, we have yet to know if subsidies would be returning when oil rallies again.

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From the illustration above, if the petrol retailer is selling below the ceiling price, it definitely benefits the consumer as you can see the lower prices creates consumer surplus. Eventually the excess demand shows as well that retailers would be able to sell more and lower margins could by offset by a higher volume on sales.

Let’s see what happens to the petrol retailers and the fight that would likely rage between oil companies. Our local Petronas could finally go against the internationals like Shell and Caltex fighting it out in the open market.

But for now, we should welcome the price ceiling mechanism starting end of this week then!

CIMB on Digital Free Trade Zone

So… Jack Ma came last week and when he is here, it’s definitely e-commerce related development. Indeed, the plans by our government to establish the Digital Free Trade Zone (DFTZ) requires Jack Ma’s expertise making it the world’s first special trade zone that will promote the growth of eCommerce by providing a state-of-the-art platform for SMEs and enterprises to conduct the businesses and services.

The end product for this establishment would be KLIA Aeropolis which would turn into a logistics hub and Bandar Malaysia which turns into a digital hub for internet related companies.

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From payment agents to marketplace owners and logistic partners, all would benefit from this effort as it creates a whole new economy for Malaysia.

Take a look at CIMB’s report on the beneficiaries of DFTZ.

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CS Recommends Buying Malaysia

The underperform rating on Malaysia had already been taken off and now its a neutral recommendation for Malaysia.

Well that’s common case for most investment banks to be a step behind the action… The best is to digest the data and given and take contrary thoughts on the recommendation by these research houses.

That will save you a lot on chasing the market!

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Credit Suisse 2017 Malaysian Strategy

Highlights

Starting with ringgit, the biggest problem with it is foreign bondholders dumping our Malaysian Government Securities which equals a weaker ringgit ahead. There isn’t any near term catalyst other than oil price rise that would help the ringgit at the moment. We would likely see weaker ringgit for 2017.

Election is here and it would likely be this year since the Barisan collation is at its strongest since the last election. KLCI historically shows that it perform all markets in the region 3 months before election and underperforms all countries in the region one month after election.

Malaysian GDP forecast for 2017 at 4.5% compared to 4.17% for 2016. This showed that economics of the country is still improving but that isn’t reflected in our currency.

Credit Suisse gave a very cautious target of 1670 for KLCI which is actually 22.5 points or 1.36% from today’s close…

See the rest which includes sector recommendations in the report below!

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