Thursday, April 24, 2008

What Do You Think of ICap's Recent Disposal Of Shares Held?

I would like to focus on Mr. Tan Teng Boo's market views here.

Posted Jan 5th 2008,
Corridors of catalysts

  • Capital Dynamics Asset Management managing director Tan Teng Boo, who is presently a net buyer of equities, opines that equities should fare well: “The CI performance should be good. The investment exposure in Malaysia is slightly different. We have palm oil that is doing well, and you don't get palm oil in any other part of the world.”

    He adds: “The success of palm oil will filter down to society, to the Felda settlers first for instance, and then to the consumers. While consumers will feel the pinch from high oil prices, on a net basis, private consumption should be resilient,” he says.

    Crude palm oil futures recently rose to a historic high of RM3,097 per tonne on Dec 27, spurred by the spike in crude oil prices to US$97 a barrel mark.

    Rising consumer spending

    Last year, there was an estimated 12.6% growth in consumer spending – the strongest since the 13% growth recorded in 2000. This was also on the back of a recovery in passenger vehicle sales since mid-2007.

    Tan adds that wages are also rising, and this is one reason why oil prices have held at current levels.

    Consumer's disposable incomes have risen, and that is why oil prices have held. If those incomes did not rise, oil prices would not be sustainable, and we would have seen a slowdown in the economy,” he says.

    Aseambankers Research economist Suhaimi Ilias says the slow pace of the 9MP implementation has turned out to be a blessing. Presently, less than a third of the RM200bil development spending allocated have been utilised.

    “With robust private expenditure growth in 2007, the Government had the luxury to refrain from over-stimulating the economy. Given the higher downside risks to growth as we enter 2008, the Government can therefore use its outlays as a counter measure. In addition, there is the expected rollout and commencement of more major infrastructure projects from 2008 onwards,” he says.

    In addition, the Government has unveiled three major economic regions – the Iskandar Development Region, Northern Corridor Economic Region and Eastern Corridor Economic Region with total development expected to exceed RM640bil over the next 13-18 years.

    Corridors of catalysts

    Tan says that if the corridors are implemented efficiently, it can be a strong catalyst for the market.

    “The Iskandar Development Region (IDR) looks good on paper, especially with some of their ideas, for example allowing qualified foreign professionals to come into the IDR without passports. That would make the IDR very attractive.”

    The main issue here is when the Government will actually start the spending. “Will it take another year, maybe 2009 or would all end-up in 2010?”
Posted Jan 19th 2008: Analysts and fund managers weigh in on scope of Dow’s impact
  • Tan Teng Boo
    Managing director
    Capital Dynamics Asset Management

    Whether the Dow would continue to fall or rally depends on the Fed, which should be more aggressive in cutting the interest rates. The continuous fall in the Dow currently is due to weak investor sentiments as a result of poor economic fundamentals and expectations of more interest rate cuts.

    The KLCI is resilient as it is not over-valued with sectors such as palm oil, which is doing well. The KLCI would continue to perform despite a slowdown in the US.

    We expect China and India to continue to grow despite the US issue and help sustain other world markets.

Posted on March 8th 2008, Dare to be contrarian

  • If there is a contrarian view currently playing out in Malaysia in relation to the prognosis of the US economy, it’ll have to come from and not surprisingly, the frank and candid Tan Teng Boo – a man with a wealth of experience on equities who currently heads Capital Dynamics Asset Management Sdn Bhd.

    And it is for that reason that while many market pundits have written off Asian equities for the time being, he remains unabashedly bullish.

    His take is largely premised on the fact that the US is not faced with a doomsday scenario but a slow-paced softening in economic conditions that is easier to stomach for the rest of the world.

    “Firstly, the subprime problem remains just that – subprime. Secondly, while many large financial institutions have been badly hit, the central banks have successfully averted a credit or liquidity crunch scenario. Thirdly, the US economy is certainly slowing down but a recession is only a possibility, and not certain.” (do read rest of the lengthy article
    here )

So Mr. Tan does sound rather bullish on the market, yes?

And since Mr.Tan's I-Capital has a massive following, I was rather interested in its quarterly earnings announced last night.

The below is a snapshot from their earning notes.




Oh my. ICapital during this period, has disposed securities worth 50.999 million!!

Do not get me wrong here. As a closed end fund, there is nothing wrong with ICapital selling securities at all.

However, don't you think these action simply contradicts, as everyone in the market knows that Mr.Tan is a rather bullish on Malaysian equities and he's been quoted so many times in the media.

So don't you think it's rather strange that he tells everyone he is a bull but on the other hand, he's been a seller?

How?

Do you like what you see?

13 comments:

KP said...

He has always been bullish.

It is perhaps useful to track back and check if ICap has been net buyers or sellers of shares in the preceding 3 or 4 quarters.

Moolah said...

John,

My reasoning is simple.

The screenshot highlighted what ICapital said in its quarterly earnings announced last night.

And that quarterly earnings is for the period ending 29th Feb 2008.

So I then compared to what he said in Jan.

For example, on Jan 5th 2008, Corridors of catalysts, Mt. Tan was quoted to be saying "The CI performance should be good. The investment exposure in Malaysia is slightly different. We have palm oil that is doing well, and you don't get palm oil in any other part of the world."

And somewhere during this period, some 50 million worth of shares were sold by ICapital.

Makes you wonder doesn't it?

Why tell the press you are bullish when at the same time you have been selling shares like crazy? (50 million worth of shares is a lot, yes?)

KP said...

Let's see. Is RM50m worth of shares a lot?

ICap has a 140m shares in issue. NAV is about RM2.00? So the market cap is RM280m.

RM50m works out to approx 17.86%.

Quite high indeed.

KP said...

Sorry, not market cap, but total NAV.

Unknown said...

If my guess correctly,he sold umw,pet dagangan and utd m'cca.These counters may be over-priced and running ahead of fundamental.Icap pocket a handsome return and will buy other value stocks such as suria,tongher,and many on the selldown recently.

Moolah said...

Jitseng: "If my guess correctly,he sold umw,pet dagangan and utd m'cca.These counters may be over-priced and running ahead of fundamental..."

My point is simple.

I have nothing against is selling or whatever.

My point is why he is telling everyone he is BULLISH on the market when deep underneath it all, he is a huge seller?

That's not too right, yes?

rgds

Kino said...

moola,
I think u think 2 much.
Bullish on the market doesnot mean icap cannot sell any stocks that are overvalue or pricy.

Moolah said...

Kino,

------------------------
I think u think 2 much.
Bullish on the market doesnot mean icap cannot sell any stocks that are overvalue or pricy
-------------------------

Is it a crime to think?

Let me think from a different perspective.

For the current quarter ending Feb 29th 2008, ICapital had sold some 50 million worth of shares. And during this period, he publicly told the press that he's bullish on the market.

So isn't it strange that an honourable person like Mr. Tan would tell the world he's bullish but at the same time, he's selling shares in the very same bullish market? Kinda contradictory, yes?

I mean when you are selling tons of shares in the market, it's not too nice for you to tell everyone you are bullish, yes?

Last but not least, let me repeat what I had said in my original post, just in case you failed to read. "Do not get me wrong here. As a closed end fund, there is nothing wrong with ICapital selling securities at all."

Opine said...

Most are missing the point, bluntly put "He is saying "Buy" when he is selling and "Sell" when buying.."

Notice how this is true with most mainstream "analysts" as well...

Btw - Nice blog Moola.

madcap said...

Moolah, you have always pride yourself in looking beyond the obvious. In the quarter ending Feb 2008, when do you think ICap sold? Don't you think it is naive to assume that ICap was a consistent net seller in a month from the fact that it was a net seller in a quarter? The first article says he is a net buyer at that time. Was that an outright lie? Fact is, you assumed from the fact that ICap sold in that quarter, that he must be a net seller in January. Could he have sold in February? Honestly, I don't know that.

Was TTB advising on long term trend or was he giving advice on short term market timing? Look at his reasoning and tell me if he is implying that markets will go up in the next month. If TTB is bullish long term, does this mean that he should not trade in the short term? Is he implying that people who listen to his advice should not trade?

The insinuation here is that the man is deceitful, not that he gave bad advice - that he was selling when he gave bullish comments - and I think that it is unsubstantiated.

Finally, you quoted March 8. Take a look at KLCI from March 8. If I took his advice, I would probably be making money. So, do you think he continued to sell in March?

His long term call has yet to be proven right. You can challenge him on that. But to insinuate someone to be deceitful with flimsy assumptions is wrong.

The Hunter said...

lalalalala...

actually, mm is not looking beyond the obvious on this one... he is looking at the obvious :)

ethics.ethics.ethics. we always say to other people to put money where your mouth is... err, this one can ah? :P

Seng said...

I would like to add my 2 sen worth here, since this topic was discussed at length in my chatbox.

madcap, as john mentions here, "(TTB) has always been bullish". There are many times where he publicly declares that he is bullish. Usually made in a very confident, sometimes, arrogant manner, almost always with no qualification that he has always been bullish.

Now, we must remember that TTB has a wide following. He is looked at as a leader in the local investing world. His words carry significant influence. Many people will take that with confidence and act on it.

At the same time as he is making bullish pronoucements in an almost arrogant fashion, he silently sells. $50 million. This selling is only reported a few days ago from the QE Feb 2008 Quarterly Report.

The amount of selling is not small. Nearly 20%. It is his largest selling yet.

Of course you can try to confuse the issue by saying he is a trader and we don't know exactly the exact timing, he has the right to silently change his minds, etc.. But that's not the impression he gives to the world when managing ICAP. The impression is that he is a Buy and Hold Value Investor. Most people would assume that.

So, it is this inconsistency - almost lack of integrity - that when he maintains his bullishness repeatedly, he sells behind the scene. That is what Moo is trying to point out here. Not other things.

Now, why can't he tell the world that he is "generally" bullish, but will consider/not hesitate to take profits when he feels it's over-priced? Or tone down the arrogance to allow for exceptional cases when some pockets might be overpriced (and thus justify selling)? Wouldn't this be a better and more accurate approach to make? I for one would prefer to see him tell it realistically, rather than maintaining his almost arrogant bullish stance but selling significantly and silently.

Don't get me wrong - one behaviour doesn't make the man. I still have high respects for Uncle Tan especially his investing skills. But my concern is if this gets repeated, that behaviour might become habitual, and one day, you could see a man with a totally different character than the old TTB we thought we knew before.

And of course, if you are the owner of ICAP, then, you would be pleased that he practices sound and prudent money management. But this is NOT the issue here. The issue is the discrepancy between Talk and Action. Some people calls it lack of integrity.

Seng.

madcap said...

I must say I am quite disappointed to read your response, Seng. If you tell people that you believe Parkson to be fundamentally sound and you are bullish on Parkson's prospects ("TTB has always been bullish"), but you continue to trade Parkson based on your read of market trends and charts (TTB net seller in last quarter, buying back in this quarter), are you being deceitful?

You have claimed "fusion" investment strategies. And TTB cannot do the same?

TTB gives the impression that ICap will be buy and hold? People assume so? Now they see that he also sells. And he is deceitful? Note your words - "gives the impression", "assume". I remember reading somewhere someone being surprised at the amount of buy and sell he found in TTB's portfolios in the past. As you have pointed out, ICap investors will probably be happier to discover that he applies trading techniques to enhance their fund (like Seng discovering the power of trading).

If TTB says in January that he believes KL markets is still sound. Sells in February. Buys back in March. He is deceitful? I don't know if this is what he actually did. But neither do you know that he sold in January and February. Right? So don't say I am trying to confuse the matter if I say so.

I think TTB is arrogant. I also think that he has a hard time acknowledging his bad calls. Perhaps that is the quality of an adviser of trends and analysis. (I am not even interested in defending him. I am just pointing out bad analysis and judgement here.) You may even say that you think he is a bad advisor. But arrogance is not deceit.

But I don't see evidence of deceit. And I think it is wrong to pressure BB (in your chatbox) to come to this conclusion when the evidence is flawed by a time frame mismatch.