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Decided to make adjustments on the way I blog & share due to time constraints and other commitments. In the coming weeks you should see them. Short updates but more frequent & concise.

Thursday, December 29, 2016

January Forecast of Pump Oil Price (Ron 95)

**It is easier to forecast the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the exact compute mechanism.**

December 2016
Oil prices have gained 25 percent since mid-November, helped by expectations for OPEC's supply cut and solid U.S. economic figures that have also bolstered equity prices. Nevertheless the market is still taking a wait-and-see approach on the official start of the landmark deal reached by the Organization of the Petroleum Exporting Countries (OPEC) and several non-OPEC members to reduce their output. The deal is set to kick in from Jan. 1. OPEC and non-OPEC producers are expected to lower production by almost 1.8 million barrels per day (bpd), with Saudi Arabia, OPEC's largest producer, agreeing to bear the lion's share of the cuts. If there's any misstep or any indication of disagreement to (the deal), we would see crude prices dropping back.

The Malaysian ringgit has fallen to its lowest since the 1998 Asian Financial Crisis, as dollar bullishness and domestic economic weaknesses weigh on the beleaguered currency. The US Federal Reserve raised its target federal funds rate to a range of 0.50 to 0.75% on Dec 14 contributing towards Ringgit's weakness. The Fed, which raised interest rates last week, has penciled in three rate increases in 2017. Malaysia's central bank, Bank Negara Malaysia, has also been moving to clamp down on non-deliverable forward trades to curb speculative activity on the offshore market, causing some concerns in the currency trade and prompting outflows. The currency also came under pressure due to the political scandal in the country over Malaysia's deeply indebted sovereign fund. Investigations and court cases were continuing globally into allegations that billions of dollars were looted from Malaysian state development fund 1Malaysia Development Berhad (1MDB).


Aboi's Jan'17 Forecast Analysis

MYR continues to slide downhill yet again (4.32 to 4.46). This time it really is a double whammy as the average oil price went up from $49.12 to $56.69 so the RM/L between November and December weaken: 1.78 vs 2.12. I am forecasting that fuel price to go sky high as much as RM2.20 (up by up to 30 sen) for RON95. This isn't my first with such a big forecast, back in July 2016 the same was made but was slightly raised by 5 sen. Would the coming announcement be the same case? Very...very unlikely.

Below is a table of my previous forecasts since the beginning. My forecasts are based on Tapis crude oil price, performance of Ringgit and domestic political matter.


**It is easier to forecast the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the exact compute mechanism.**

Tuesday, December 13, 2016

It's Dec, Load Up Your PRS and Save RM720 in Taxes!


Did the title grab your attention? :) Well it is true that you can save RM720/RM570 if you are earning at least RM80k/RM60k annual chargeable income before RM3,000 PRS Relief.

Recently Fundsupermart wrote a good article on An Overview of PRS Fund Performance (2 Dec 2016) (see link) which I concur of their analysis. Here's a summary of it and some of my own comments:


Growth Fund
CIMB-Principal PRS Plus Asia Pacific Ex Japan Equity-Class C (highest Sharpe 0.89 but highest volatility 10.2% - China/HK exposure). This fund feeds into 100% of CIMB-Principal Asia Pacific Dynamic Income Fund-MYR. Aboi has holdings in this fund.

Balanced Fund

Affin Hwang PRS Moderate Fund (highest Sharpe 0.56 with volatility 4.7%). This fund feeds into [1] 25% of Affin Hwang Select Asia Pacific (ex Japan) Select Balanced Fund [2] 25% of Affin Hwang Select Bond Fund [3] 19% of Affin Hwang Select Dividend Fund [4] 11% of Affin Hwang Select Asia (ex Japan) Opportunity Fund and [5] 10% of Affin Hwang Select Balanced Fund.

Conservative Fund
AmPRS-Tactical Bond Fund-Class D (75% exposure to MYR denominated bonds, Sharpe 0.66 with volatility of 3.4%). This fund feeds into 100% AmTactical Bond- Class B (MYR).

Others (REIT)
AmPRS - Asia Pacific REITs - Class D (property Asia including Japan). This fund feeds into 100% AmAsia Pacific REITs - Class B (MYR). Aboi has holdings in this fund.


Notes
- The choice of funds have overseas exposure which is better in terms of distributing risks as well as more diversified investment opportunities.

- In lieu of Trump victory and higher likelihood of inflation to return, AmPRS Tactical Bond Fund wouldn't be a good choice given the current investing climate where possibility of an interest rate hike is almost certain. Bond prices have an inverse relationship with interest rates.

- In Budget 2017, our dear Bijan increased the Youth Incentive (see link) from RM500 to RM1000! With an initial investment of RM1000 you can afford to lose 50% and still retain your initial investment. It never occurred to me that our Supreme Leader would actually do something beneficial for the Rakyat.

- Cross checked Morningstar Fund Quickrank for PRS (see link). Public Mutual PRS funds did not outperform any of the above in their respective categories. (3 year period). Sorry agents I know I'm not doing you any sales favour here.

- Public Mutual/Manulife funds have the highest TER (total expense ratio). This actually eats away your annual fund return rate like a virus.

Tuesday, November 29, 2016

December Prediction of Pump Oil Price (Ron 95)

**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the exact compute mechanism.**

November 2016
OPEC is trying to bring its members and non-OPEC producer Russia to agree on a coordinated cut to prop up the market, beset by a two-year glut in supplies, by bringing production into line with consumption. See link:
http://www.marketwatch.com/story/heres-how-ugly-it-could-get-for-stocks-if-opec-cant-reach-a-deal-2016-11-29. Anyhow I think the oil market is likely to remain oversupplied for some time yet even after the OPEC meeting, especially since U.S. oil production will soon start rising again. Price to remain subdued.

Emerging market assets have tumbled in general in the wake of Trump's upset win, as the dollar surged and U.S. Treasury yields jumped - Malaysian Ringgit is no exception. Also markets have been pricing in Trump's aggressive rhetoric on curtailing global trade with the U.S., which would disproportionately hurt trade-dependent emerging economies. To add salt to the wound our BNM's attempt to use moral suasion to support its currency threatens to backfire, increasing pressure on the ringgit and potentially hurting growth. Perhaps there is not much we can do since foreign-exchange reserves are uncomfortably low after having been run down in 2014 and increasing interest rates right now is politically suicidal for a possible GE14 next year.


Aboi's Dec'16 Prediction Analysis


A Trump victory was not very good news for us and this was combined with a central bank that did not handle Ringgit volatility very well. MYR continues to slide downhill (4.17 to 4.32). Fortunately average oil price went down from $53.51 to $49.12 so the RM/L between October and November strengthen: 1.87 vs 1.78. I will predict that fuel price to be maintained @ RM1.95 for RON95. There is a remote chance it might be reduced by 5 sen.

Below is a table of my previous predictions since the beginning. My predictions are based on Tapis crude oil price, performance of Ringgit and domestic political matter. My total savings to date: RM 50.75. As for YTD: RM 12.00.


**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the exact compute mechanism.**