FinTips - April 2012

Finally, Spain has sounded the horn! About time if you ask me. With the escalating pressures on its economy, it is interesting to know that it took the nation such a long time to seek the aid that they now seek. And trust me, things are not going to look “peachy” just yet. 

I do not want to be the bringer of bad news (as I have been perceived by quite a few since my article on the  impending doomsday), but NASA just sent out an alert that we might actually be facing a global catastrophe on the 21^st of Dec 2012 and governments have been urged to take needed precautions. With the increased frequency of solar storms and its dangerous magnitudes, there are going to be interesting “global climate related” events that are bound to take place. Well, if it ends, it ends… But, let’s make money until then shall we?

As most of you already know, I have been introducing many different kinds of investment mechanisms and portfolios since 2010. Starting off with just mutual funds, the search for more investment avenues continued and brought forth new and unique investments like gold, silver bars & coins, land, local and foreign property market investments and the occasional fixed deposits. And now, I’m glad to say that I have been granted the license from the Colombo Stock Exchange in Sri Lanka and am able to trade for the National Development Bank of Sri Lanka in Malaysia! This means, I can now offer opportunities for individuals from Malaysia to partake in the growth of the Sri Lankan capital market, financial sector and the various other industries. This would also include fixed deposits, IPOs (of which I get first dips to!), stock market and mutual funds.

I know that quite a number of the readers would be saying (in a relatively calm fashion) the following with due concern:

“SRI LANKA?!  IS HE NUTS?! WHY ON EARTH SRI LANKA?! ISN’T THAT A WAR PRONE ZONE?!”

Well, for those who have been following my articles for the past year and a half would know by now that I have the habit of backing my statements with a fair amount of research. And what research has shown is that with an expected GDP growth rate of over 7% in 2012 in comparison to a rate of over 8% in 2010 and 2011, the macroeconomic environment in Sri Lanka looks encouraging.

Construction sector development, healthy growth levels in both agriculture and tourism industries are expected to maintain credit growth in the banking industry. However the recent measures introduced by the Central Bank to avoid the economy from overheating would bring down the credit growth to around 20% in 2012 compared to over 30% in 2011.

 To understand the growth of the Sri Lankan economy with respect to other countries, I have created a table to compare the real GDP growth of Sri Lanka with that of some others. For those who are wondering, the Real GDP (Gross Domestic Product) is the GDP minus Inflation. To put it into perspective, if a country had recorded a GDP growth of 5% and an inflation of 6%, this would mean that the Real GDP grew by  -1%.

·         GDP – Inflation = Real GDP

·         5%    -    6%       = -1%

Real GDP Growth Table

COUNTRY	YEARS (Real GDP Growth Rate %)
	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
SRI LANKA	3.7	5.6	-1	3.2	5.5	5.2	6	7.5	6.8	6	3.5	9.1
HONG KONG	1.8	10	0	-3	3.3	7.9	7.3	6.8	6.4	2.4	-2.8	6.8
MALAYSIA	5	8.6	0.3	4.2	5.2	7.1	5.2	5.9	6.3	4.6	-1.7	7.2
CHINA	7	8	8	8	8	9.1	9.1	10.2	11.9	9	9.1	10.3
NEW ZEALAND	3.1	3.6	3.1	4.4	3.5	4.8	2.3	1.5	3.1	0.2	-1.7	1.5
AUSTRALIA	4.3	4.7	4	3.6	3	3.5	2.7	2.7	4.3	2.3	1.2	2.7
INDONESIA	0	4.8	3.3	3.5	4.1	4.9	5.6	5.5	6.3	6.1	4.5	6.1
U.A.E	2.5	4	5.6	2.4	5.2	5.7	8.8	8.9	7.5	7.4	-2.7	3.2
U.S.A	4.1	5	0.3	2.45	3.1	4.4	3.2	3.2	2	1.1	-2.6	2.8
JAPAN	0.3	1.3	0.3	-0.3	2.7	2.9	2.6	2.2	2	-0.7	-5.2	3.9
U.K	1.9	3	1.7	1.6	2.2	3.2	1.9	2.8	3.1	0.7	-5	1.3

With the availability of natural resources and workforce, it is pretty obvious that Sri Lanka has huge potential of becoming a proliferating economy in the world. Just as how many were skeptical on countries such as Indonesia and India, it was the splendor performance of those countries’ economy that had shown the skeptics of how powerful these countries truly are. Logically speaking, with the ready availability of natural resources and workforce, combined with the low cost of production, it would be sufficient to say that global investments would gravitate towards them as time goes by. 

“But what about the movement that is gaining momentum to impeach the President of Sri Lanka on his ‘war crimes’?” 

Well, that is a logical concern. Over the years, the Sri Lankan economy has been relatively resilient toward the civil war. But over the last 3 years, more growth had been recorded as there is more room for development that has come to be realized by global investors. And that is exactly what is going to happen in the coming months. With the global economic turmoil that Is occurring, and with investors seeking new venues to realize gains, this political and civil movement to impeach the President, has made most countries turn their view towards Sri Lanka. Whether or not the President would be impeached is not the point that I am driving at; But rather the action that has forced everyone’s attention towards the country. Many (even from Malaysia) have started venturing into the business sector of Sri Lanka and have started realizing gains, while the rest hold onto their money with raging skepticism and unwavering emotional conflict. The choice of being the sheep or the shepherd truly lies with the individual.  As I believe and have always believed, perspectives need to change with time, otherwise, we shall never see the opportunities that come by.  

Prepared By,

Ashveen Chakravarthy Sekaran

14 April 2012

The Unknown

 I was in the hormonally enraged, all knowing - god complex age of 16. I had good grades; I was top in my extra-curricular activities, traveling the state and nation for different competitions. Life was good for me… as an individual. As for my social life? That’s where the problem was. Don’t get me wrong! My friends were nowhere near being classified as the “wrong crowd”. They were all good in their academics and quite a number were also well inclined in the extra-curricular activities in school. The problem was simple. Not many could understand me.  I constantly felt dismayed that they couldn’t see things the way I saw them. So much so, that the bond was slowly waning away. 

I had had somehow successfully programmed myself to feel uncomfortable with my surroundings. Uncomfortable with my friends for not being “serious” enough, uncomfortable by the lack of “maturity” in certain teachers, uncomfortable by the “affection” some girls were portraying, etc. And naturally I kept it within and let it manifest. One fine day, while I was talking to a teacher of mine, the cork that was keeping all these “feelings” bottled within decided to burst open and without much hesitation I divulged all that I felt uncomfortable about. And she listened patiently (enough) to everything I had to say. 

After I had completed my ranting, she asked “So, you want to change the world, based on your ideals, so that it is “comfortable” for everyone to live in?” For which I said “YES! Wouldn’t things be better and more orderly that way?” And she said “Maybe for you, yes. Tell me, have you tried to perhaps change yourself?” For which I blatantly asked, “Why should I change? Shouldn’t people accept me for who I am?!” For which she smiled and asked “why should the world change? Shouldn’t you accept them for who they are?” For which I humbly replied “WOW! That’s a bitch slap!” and she went “LANGUAGE YOUNG MAN!” But the lesson was well learnt.

 

She went on to say that the change she meant was not a revamp of my character or behavior, but rather my perception of things. She said “change your perception and you will see the world changing before you. Grow to accept things – it makes life worth it!” I guess I was privileged to have such wisdom imparted to me at such an age. Taking her advice, I decided to look at things in a different light. And to my surprise, I did see the world changing in front of me. The “not so serious” nature of my friends enabled them to have the best of their youth and made them creative as they weren’t mentally conformed to the social rigidity. The “lack of maturity” shown by certain teachers was actually a conscious effort of the teachers to bridge the gap between students and teachers, which created a support system within the school that helped reduce social problems. The “affection” shown by the girls was simply because they were comfortable to talk and confide to a guy who was mature enough and not an utter jerk which earned me their respect and a wonderful lineup of cheerleaders for the competitions I went for (and I TRIED to not let it get to my head). Eventually, I learnt that, when a person is willing to change his perception, he develops the willingness to learn. And when he develops this willingness to learn, he then would grow to notice the opportunities that are around him. And when he grows to notice these opportunities, his is the world and everything that’s in it as he would learn to accept things for what they truly are. 

This idea/philosophy/smoking-weed-talk can be reflected in almost everything we do. As change is the only thing that is constant in our lives, not wanting to understand these changes would leave any individual to decay in his path, becoming “worthless” to the current world. When we shed some economic or financial light onto this ideology, we see that change of perspectives and the fluidity of the mind are quintessential when dealing with the current economic climate. Conforming to the old line of thoughts has come to be very costly to many nations. The fear of the unknown has left many first world countries crippled while the ones who took the effort to know the unknown have started to emerge as formidable entities in the global economy. 

So, try having a new perspective on life; change your outlook on things. It really doesn’t cost you a thing…. But you might just have something valuable to gain! If you think education is costly, try ignorance…

Prepared by,

Ashveen Chakravarthy Sekaran

22^nd March 2012

Dim LAMP Needs More Shine

With the mushrooming of rallies and “concerned” shout-outs by politicians, the Lynas Advanced Materials Plant (LAMP) a.k.a the Lynas project has stirred up quite the controversy in our country as of late. But how many people truly understand the issue at hand? Chances are just a handful understand while the others are just following the crowd because that is what people generally like doing. So, here’s the scoop on the whole Lynas issue…

Lynas Corporation Ltd, founded in 1985, is an Australian rare earths mining company which is listed on the Australian Securities Exchange. Basically, it’s a big fella! What Lynas has decided to do is to open a rare earths processing plant in Kuantan, Malaysia. Actually, this plan was done in 2008 and work had been underway since.  The Kuantan plant is going to be processing lathamide concentrates (rare earth) from Australia that will contain thorium & uranium (radioactive stuff… a.k.a stuff that would make you glow in the dark… literally!) The reason as to why people are protesting against it is because of the potential dire consequences that might radiate from the radioactive wastes that are going to be produced by this plant.

For those who feel that these people rallying and protesting are just over reacting and that they should allow such industries to start in Malaysia, you might be right to some degree. As the global economy has been drastically evolving through the recent years, we need to find ways, new ways to sustain the national economy. While Lynas comes with a heavy price tag, the income generated would help Malaysia generate a good source of income…. If not for the 12 year tax exemption that is being granted! To put it into perspective, Lynas is expected to generate AUD$ 6.2 billion (RM 20.1050 billion) in pre-tax profits during its first year of operation. With a corporate tax of 25%, Malaysia would be generously letting go of AUD$1.55 billion (RM 5.0258 billion) in tax from Lynas. So basically, if anyone is looking at buying a $25 million dollar diamond studded ring, that would be 201 rings flushed down the toilet. That is a LOT of rings!

Besides the “sound” economic decision of the 12 year tax exemption, the Lynas plant and its creation in Kuantan seem to have some serious problems. Well, for starters, the Preliminary Environment Impact Assessment (PEIA) for Lynas does not cover the radiation and health concerns that may emanate from the plant. When one goes through the report, one may notice the vague notes that are being made on those issues. There are two review processes that taking place which may very well question the linearity of the findings. The Environmental Impact Assessment (EIA) within the Ministry of Natural Resources & Environment (MNRE) and the Radiological Impact Assessment (RIA) under the Atomic Energy Licensing Board (AELB) within the Ministry of Science, Technology and Innovation (MOSTI) are being conducted in a parallel fashion that may contaminate the findings and not produce the thoroughness that is needed to make sound decisions that this project truly demands. 

While the plant is at a 91% completion, the Malaysian Nuclear Agency (MNA) is still in the midst of determining the radiation safety issues pertaining to lanthanide concentrate storage, handling & transport. With such vital information still not at the ready, it would only work to make anyone jittery about the operations of the plant. Speaking of operations, Lynas has only received the sitting and construction licenses while there is a Temporary Operating License (TOL) being granted as of recent.

Now comes the other interesting part. Some whistle blowers who were part of the building process of the plant had stated that some cheap material and low grade materials might have been used during the building of the plant to reduce cost and also speed up the process. Although the validity of the statements might be questionable, it does seem suspicious that the Lynas project was approved in 2-3 weeks of submission, considering the complexity of the project involving radiation hazards with a very vague waste management, storage and disposal proposal. But of course, recently a politician comes up by saying that they would not be processing rare earths but only chemicals in the “rare earths plant”. And the only thing that I could think of was “Wise men say something because they have something to say and idiots because they have to say something”

The only way out of this mess would be for the involved parties to make the information of the plant available and justly evaluated by relevant sources. With the question of health hazards looming in people’s minds, it is only fair to answer the questions of the people especially if one is looking at scoring for the coming elections. As there is also proposal of using the waste products as fertilizers, concrete, plasterboards, for roads and etc., adequate information needs to be dispersed through the system to inform all parties (including the people) of the effects on the environment. The ability for the general populace to understand such information may be a good question… But one might want to consider the repercussions of not giving any information, before siphoning out the information from the reports that would be disseminated to the public. 

Last but not the least, politicians, no matter which party they come from, should refrain from making claims or endorsements of any sort on this project unless they know EXACTLY what they are talking about, or until a proper study (a non biased study) on the project is being made. The government should also reconsider the 12 year tax exemption granted to Lynas as that amount of money can help in the sustenance of the national economy in the upcoming years.  

FinTips - Jan 2012

HAPPY CHINESE NEW YEAR!!! Well, here we are at the start of the year of the “Water Dragon”. And true to its name, it seems to be all gloomy and wet in Kluang. However, I don’t see that spoiling the festivities. Spirits are still soaring high and celebrations are still taking place all over the neighbourhood. It certainly is good to be back home after quite a while. 

The Year of the Water Dragon….Let’s start of by knowing what the dragon actually means. The dragon, in the Chinese astrology chart symbolizes power. It was also the symbol of the emperor. The dragon is known for its unpredictable and temperamental nature. But it is also known to bring luck and fame to many, as it is surrounded by “mystical forces”.

So what does the year 2012 entail for us in terms of the economy? Well, it certainly is going to resonate with the essence of the dragon by being very unpredictable in the macro sense. But on the micro sense, it is time to make money on the short term market gains. Granted that we are not going to experience a market boom like that of 2010, but there are going to be little spikes here and there that will benefit the investor. The market’s unpredictable nature will be due to the new skeletons emerging from the first world closets.

With the Eurozone having already met 5 times since the start of the year with sound financial decisions yet to be made, the Eurozone slump is going to dampen the global market as a whole. This, like I have been saying since last year, is going to enable Asia to recapture glory. And some of the countries in the Asian region have indeed taken excellent steps (some way ahead of the others) in addressing the potential crisis that looms in 2012.

Indonesia was one of the first to act on it. Having reduced their interest rate around the 3^rd quarter last year, Indonesia had generated funds to provide liquidity in the market to urge more investment spending within the country. With more money for investments within the country and the strengthening of their local demand and supply, Indonesia has gone the distance where many might reach, only after a VERY long time. As cost of production weighs down the many countries as their market demands aren’t met, it seems to be more feasible to outsource production to countries where the cost is just but a fraction of their actual production cost. And here is where the Asian region jumps into the front lines. 

Besides Indonesia, there are other countries that are looking at growth this year. Truth be told, anything beyond the national inflation is a very reasonable rate of growth at this point in time. The countries that might be experiencing such growths will be those like Indonesia, Malaysia, Sri lanka, India and China. Well, I’ve already spoken on Indonesia and I bet many would have had a mixed feeling upon noting Malaysia’s name in the lineup.

Truth be told, Malaysia actually has excellent room for growth. But that potential would only be reached when the penned plans are put into action. Malaysia has rather blatantly announced of a reduction in

interest rates. Chances are many may have missed it (or did you?) Before the end of the year, the Malaysian National Bank @ Bank Negara Malaysia (BNM) had introduced new notes to the public. Many had gotten excited and had made tedious efforts towards getting their hands on the first print of these new notes and coins. They had announced that this money shall be coming into circulation by the middle of this year. So naturally, they are going to be printing more money. When more money is being printed, there will be more supply of money than demand which would decrease the interest rate; but this would only be temporary. This would urge more investment spending in Malaysia. However, where these funds are going to be channeled would determine the rate of growth in the nation. The reduction in interest rates would affect the fixed deposit rates in the banks. As it would cost lesser for banks to acquire loans from BNM, there will be a lesser demand for public money; which would negatively affect the fixed deposits. Loans are going to be available but banks are going to be very stringent as they are still very weary of the global financial crisis. 

As for the political scene being able to boost the national economy, it is going to end up being an old maid’s tale. As the postponement of the elections have been feverishly taking place since last year, the corporations funding these campaigns and corporations expecting funds from the political parties are growing faint. It is only going to be a matter of time in which they (the corporations) would decide to practice detachment. So basically, the Malaysian market is not going to be severely affected by the elections.  

As for a country like Sri Lanka, the rebuilding of the nation has become priority for the nation as they need to be able to generate their own funds to sustain in this currently sloppy market. Laden with natural resources and excellent investment opportunities for the many different sectors, Sri Lanka has become an interest to many investors globally. Of course, with the emotional stigma still existing due to the civil war, it has given the perfect opportunity to certain countries and races, which do not have much of an emotional connection with the populace of Sri Lanka, to pour in their funds. To be honest, it is these countries and individuals who are going to reap the best gains available. 

As for India and China, they have the population and the supply. So the market is pretty self sustainable. But they still have their drawbacks. India, with its political turmoil might be facing a little bit of a stagnant growth in certain sectors. And these sectors might drag the general economy of the country. China, still being moved by the US, is going to have restricted growth too. That is why; these countries have been actively channeling their money to other countries to reap gains from them. 

That’s the gist of the global economic scene for now. So, I would personally advise investors to partake in the continuous growth by staggering their investments and making a continuous stream of investments throughout 2012. Do take note, the best time to make money is to ride the markets when they are down, not when they are high. So let’s ride the dragon people! 

By,

Ashveen Chakravarthy Sekaran

Jan 24^th, 2012

Economic Transformation Plan

So much has happened throughout this year that it has left quite a number of us utterly flabbergasted and with so little to say. As the life span of “the truth” shortens with the unveiling global scenarios, making concrete statements is rather difficult. And that is probably the reason why we see a lot of statements being made today, revoked tomorrow or even politicians today, layman tomorrow…. And politician again the day after… Let’s switch gears now shall we?

About a month back, I got an invitation to attend a programme organized by Ernst & Young Malaysia. It was called Decoding the DNA of the ETP (Economic Transformation Programme) with the caption – Bringing Your Idea to Fruition. With strong government support and HUGE financial allocations, it is, I quote “ driven with the desire to create new jobs and drive GNI (Gross National Income) growth”. But before I proceed further, please read the following disclaimer:

Disclaimer: This article will be presenting my personal views on several issues and is NOT written with the ideology of conforming to the general youth fashion of scrutinizing everything that is happening. 

Directly under the Prime Minister’s wing, the ETP is aimed at putting Malaysia in the forefront of the global economic scene. Being creative, innovative and daring does give this plan a certain edge (on paper) . So with the 16 chapters of the booklet and handbook, plus the 54 page executive summary read, I went to decode the DNA of this ETP with much renewed enthusiasm! And here is my executive summary… There is much retardation in the gene pool… To be honest, they need to decode the DNA of the ETP again… and this time, with genetic engineers who have a business ideology, who are not just a bunch of number crunchers! 

While Dato Idris Jala was talking on stage about the ETP, I should say, things did look very promising. Geared at promoting the local industry while creating more job opportunities for Malaysians, the ETP did indeed show ways of making Malaysia a high income nation by the year 2015.  One of the main ways, according to Dato Idris Jala, was to create healthy competition in the market place. Knowing that competition in the market place is the only way to boost any economy, I was excited that the ETP is going to be the catalyst of it. He also went on to say that this is one of the key indicators that is going to drive Malaysia towards the global scene, as the competition would be conducted while implementing “ceteris peribus” in the market . The latin phrase Ceteris Peribus means “while all else is held equal”. That’s went I went “BRAVA!” But the excitement came to a premature end when he said that a special key indicator was created to focus on developing the Bumi SMEs in Malaysia. And my immediate reaction was “ceteris peri-what?!”

Don’t get me wrong by thinking I am racist in any level, but if market competition is to be created, the idea of equality needs to be a key player. THE MALAYSIAN RACE needs to be looked at rather than the ethnicities when it comes to driving our economy.  When a particular group is given a certain privilege compared to other groups, it tends to help that group for a short period of time. However, when the same group reaches its comfort zone, productivity would reduce and by then it would be too late for anyone to expect anything from that group. This is the same thing that has happened in many countries around the world which has led to quite the havoc in recent times. With so much happening in the world, I felt rather dumb founded that Malaysia would still focus on such issues when “the man” a.k.a the PM, is driving the 1Malaysia concept, is diligently advocating equality in Malaysia. I bet he would not have allowed this if it was directly under his wing… Oh wait… it is… *sigh*. Please read the following disclaimer:

Disclaimer: By the comment made above, I am NOT pledging my support to the oppositions. I reserve my right to remain impartial. As a matter of fact, I do not have time for parties/groups/movements that bicker on petty issues while there is a bigger picture that needs tending to. Fecal matter, covered in candy, is still fecal matter.

If Malaysia is aiming at becoming a high income nation, we need to level the playing field to allow more business ideas (despite ethnicity/class or creed) to flow through the system or basically apply liberal scrutiny. Liberal scrutiny (a term I just coined while writing this) would mean that the freedom of ideas is encouraged to flow through the system without taking into consideration race, class or creed while carefully analyzing (in this case) these ideas PURELY on the business and financial aspects. Otherwise, we would only know that Malaysia is a high income nation when our cattle farms are established in multimillion dollar condos and service apartments and sending these cattle on a half a million dollar vacation to Bali in order to increase productivity.  

Anyway, back to the ETP… The event went on with an exclusive forum with some of Malaysia’s prominent business and semi government entities. While many were voicing their strong opinions on the ETP and how Malaysia was conducting itself when it came to the implementation of the ETP, a particular entity baffled my brains by the “infinite wisdom” he displayed during the Q&A of the forum… The  CEO of TALENT CORP. Here is what happened:

He was sharing with the crowd, the ideas of Talent Corp in addressing the issues in the workforce in Malaysia. Here is what baffled me… They are going to spend millions and millions to bring back the Malaysian talent working overseas. And here is how they are going to do it:

a)      Match their pay in Malaysian ringgits (obviously it has to be more)

b)      Tax rate @ 15% (while we pay 28% personal tax or 20% company tax)

c)       2 Tax free cars / Tax reduced cars

d)      And other perks to keep them in….

And here is what I thought… While you are going to be spending millions and millions on bringing these diasporas back to the nation, you would be losing the many talented individuals and potentials within the country to other nations(and trust me, there are loads of them); they are going to be running out the back door (or if these guys are too blind, the front door). As an individual who made a conscious decision to come back to Malaysia, despite being offered various good positions in the US and Europe, I feel that I (and many others like me) have been taken for granted. If there is not going to be tax alterations and unnecessary spending of tax money, I don’t see the need to re-print money in Malaysia anytime soon.

Here’s the thing, by reprinting money, the value of the Malaysian ringgit will reduce as there will be more money supply. This could be a method that Malaysia is implementing to attract foreign investors to invest in Malaysia. One of the things they might be failing to take into consideration is the fact that these external investors might be running out of money due to the lack of money in the countries of the investors. Plus, the major economies in the world like Indonesia, China and India are looking at internalizing their markets to improve their global standing in the economy. With the “power house” title up for grabs, all the countries are off on the global economic rat race! (With the exception of the US as they are still deciding on who is going to run the race, and Europe as they are still discussing on the rules with the umpire (IMF).)

The ETP, like I first said, is an EXCELLENT plan… But the execution is rather questionable. Malaysia has to leverage on the strength of the MALAYSIANS as being ethnocentric is not going to get us moving anywhere; as a matter of fact, we might still be stuck behind at the refreshment tent, eating our santan (coconut milk) laced snacks while the rest are running the race. And when the winners are announced, we might just die of a heart attack – still at the refreshment tent!

By,

Ashveen Chakravarthy Sekaran

Dec 22, 2011