In Limbo: How Low Can It Go?

From 2010 to 2018, there were 3 times when KLCI fell significantly but did not officially enter bear market.

The first time was from July11 to Sep11, when KLCI dropped from about 1,595 to 1,365, or 230 points (14%)  in 3 months.

At that time, I just started this blog in May11 and didn't really know what was going on. I didn't sell any shares, only bought shares as I was just starting to build my portfolio.

The second time was a correction from Jul14 to Dec14. KLCI dropped 9% or 170 points from 1,885 to 1,715.

The third time was from Apr15 to Aug15 when KLCI dropped from 1,865 to 1,575 points. This 290 points or 16% drop was still short of 20%.

All three "correction" did not fulfill the definition of bear market. I just held tightly and did not panic sell any shares. 

This time in 2020, of course it is totally different. From my previous "pattern" I would have held the shares tight and refused to sell any of them.

Fortunately I didn't do that this time. I sold more than half of the shares in value.

Unfortunately I didn't sell all of them.

I think no one would have anticipated the stock market to fall so much in such a short period of time. It can be described as ferocious.

Last time out in 2008 it took 10 months to reach bottom, losing 600 points or 40%. Now it's only 2-3 months, KLCI has already fell 400 points or 25% from 1,600 to 1,200. Are we already reaching the bottom?

If it is a big bear, another 400 points decline is not impossible at all. We might be only half way through this mess.

Even though KLCI "only" declined by 25%, most stocks already fell more than 50% in this short period of time. Will they fall another 50%?

Everyday the share price falls 15% and looks like no end to it. I already feel "numb".

My current portfolio can be described as "no eye see". Perhaps this can provide some consolation to others who are suffering too.

Anyway I'm not too worry as I think I have ample cash in hands.

For those stocks which are "trapped", I only consider them as being placed in EPF or PRS fund, which I can only withdraw after 3-5 years.

At this moment, when the share price drop a lot, especially those in my watch list, I feel happy and excited. When the share price goes up, I feel a bit "worry and uneasy".

I believe that those investors who are waiting for a good timing to buy cheap have the same feeling.

We don't want to miss the boats that sail north.

However, if we're not careful enough and take the wrong boats that continue to sink like Titanic, then we will still get drowned no matter how much cash we have now.

At this time, may be it's a good opportunity to do contra or short-term trades. As share prices are fluctuating wildly, one can easily earn 10-20% in one or two days time.

Even though Malaysia is implementing movement control order now, I still need to work. I don't have the luxury to sit at home for 2 weeks to monitor the share price closely.

Personally I don't feel the worst of Covid-19 is over, especially in Malaysia.

At this moment Malaysia has 1030 confirmed cases, with 3 deaths. We are already the fourth highest in Asia after China, Iran & South Korea.

Though for the last 5 days the total daily cases did not surpass the record 190 cases per day, it does not reflect the true situation as the Covid-19 test results which normally take 24 hours now take much longer to release because of the sudden huge load.

With the help of private labs now, the results should be able to be released faster so it's not a surprise if we see a spike in cases later.

Government hospitals which are almost always full before the outbreak, will not be able to cope with this surge in Covid-19 patients if it continues to rise like that.

As for stock markets, after a deep fall 2 days ago, most regional markets including KLCI see a spectacular rebound yesterday. Notion jumped more than 30%!

Will it stage a V-shape quick recovery from here? Or is it just a breather before it dives even deeper?

Whatever it is, lets pray that this Covid-19 pandemic will be brought under control as soon as possible.

But, where are those 2,000 Rohingyas??!

To Buy or Not To Buy

Last week, US stock market just recorded the biggest single-day jump since 2008, with DJIA up more than 9%.

Today, KLCI dropped another 64.12 points or 4.77% to close at 1,280 points. Another bloodbath day.

Either you have a bit of cash or lots of cash, surely you are asking yourself:

- When is the best time to buy stock?

- What is the best stock to buy?

- This stock's share price has dropped 50%. Can I buy now?

- That stock's PE ratio is just 5x. Can I buy now?

Everyone dreams of buying at the lowest point, AND catching the stock which rebound the most. Yes it can be done, only in dream.

Stock market is like a roller coaster recently. Today the market fell the most since so many years, then the next day it jumped the most in recent history.

This morning you saw the stock market dropped like hell and you felt relieved that you didn't buy any shares yesterday.

Later in the afternoon all the stocks shot up 10-20% from low and you regretted not buying in the morning.

Then the next day those shares fell to new low and you felt very lucky that you didn't buy yet.

Investors' emotion are also riding on a roller coaster.

So, when is the best time to buy shares in this situation?

No one will know the lowest point for sure. Today might be the lowest point, you buy now you win. May be Dec 2020 will be the lowest point, you buy now then it's not ideal.

During 2008's bear market, KLCI started to drop from its height in early Dec 2007 and only reached the bottom in early Oct 2008. So it took 10 months to reach bottom.

It then lingered at the bottom for around 5 months until early Mac 2009, when it began its uptrend journey and met its previous high in May 2010.

Financial crisis 2008 took 10 months to drop, 5 months to rest until it showed sign of bottoming out.

So, isn't it ideal to enter the market during the 5-months trough?

Currently, even though KLCI has its previous high of nearly 1,900 points in April 2018 which is almost 2 years ago, the actual bear market feeling only started from Jan 2020 when the KLCI was 1,600 points.

In 2008, KLCI dropped approximately 40% from 1,450 to 850 points. If it were to drop in similar magnitude, we might see KLCI drop another 300 points to 1,000 points.

If Covid-19 is the main culprit of current bear market. Is the worst over? Far from over.

Europe's numbers are rising alarmingly, so does Malaysia.

Yesterday there was 190 new cases of Covid-19 in Malaysia. Today there are another 125 new cases, bringing the total to 553 cases.

We all know what is the situation like now, the virus has already spread among the public. We should see many more cases being confirmed in the coming weeks.

It might be a matter of days when our numbers exceed 1000 and grow exponentially.

We don't have the luxury to hospitalized all confirmed cases by then, and we need the discipline of self-quarantine. 

We won't have enough ventilators to support those who are ill with severe pneumonia as well.

How about the other countries with relatively low count now? Is that logically possible? I think it is only possible because there are not many screening or contact tracing done. If those countries explode, the neighbouring countries might get second wave or third wave of outbreak.

The virus threat will surely go away one day, just like what we witness in China & South Korea. By then, how much damage will it do to the world, and how long will it take to recover?

How many orders deferred or lost? How much the sales drop? How many loan repayment defaulted? How many companies will go bankrupt? How many people will be jobless?

Now, more & more leaders come out to warn that this time it will be as bad or even worse than previous financial crisis. Such acts only make the market plunge deeper.

For me, while it definitely does not look good at the moment, once the fear of Covid-19 subsided, people will continue to travel and shop right? Will we see a quick rebound?

Anyway, what we can do now is to play our part in fighting Covid-19 so that it will end early.

To Sell or Not To Sell

Today is the worst day of Bursa Malaysia since the 2008 crisis. KLCI surrendered 74.68 points or 5.26% to close at 1320.96 points.

At this moment, some investors might have already sold ALL of their shares.

Some might still hold a few stocks, either already kept for months or years, or just bought recently during the drastic drop but only to see them drop deeper.

If you still hold shares now, you might have a doubt:

- Should I sell now to minimize loss since it's likely to drop further?

- Should I just hold since it has dropped so much and unlikely to drop further?

These are very difficult questions to answer, as I think the answer should be individualized.

We have different stocks, different cost price, different risk appetite, different mind strength, different cash level & cash flow etc. So it's good to work out a plan that suit you the most.

I can't remember very well exactly when I started my stock market investment. I started working in 2004, and bought my first unit trust fund in the same year.

If not mistaken, I should have bought my first stock around 2006 and I can remember the first 2 stocks I bought were WCT & Mahsing.

Even though I started to join the stock market before the 2008 financial crisis, frankly speaking I don't have a clear memory what happened to me during the market crash.

I don't have any painful memory, nor any exciting memory. In the other words, I seem to learn nothing from that bear market in 2008.

Perhaps I was not that active in stock market or did not hold lots of stocks at that time.

Now it's definitely different, I have so many stocks in hands going into year 2020. I must have a plan when bear strikes.

If you read my blog recently, you should have known that I have a plan to sell stocks to trim my portfolio, and also in anticipation of potential bear market.

Even after clearing 5 stocks, now I still have 11 stocks with me which I decided earlier not to sell first. Holding so many at this point of time, too bad isn't it?

Out of those 11 stocks, I think Matrix & BAuto are well-managed companies supported by fantastic dividend yield. Both are not that overvalued as well that's why I decided not to sell.

Anyway, share price of both stocks still fell significantly but I'm not too worry about them. Financial crisis will affect their sales but low interest environment should benefit them.

Scientex is also a magnificent company which is traded rather cheaply while it's still growing its business. After it announced its latest financial result few days ago, I had a dilemma whether I should sell it first to lock in the gain, and buy back later as almost certainly the share price will drop.

At this moment I haven't sell Scientex's shares as I just feel not right to sell. Will its business affected by Covid-19? I don't think it has direct long term negative effect but I know that low crude oil price should benefit it.

DKSH is a company which is also not traded at high PE ratio and has decent dividend yield. I think it is undervalued and plan to add. How can I sell if I have plan to add more shares?

My cost for Notion is quite low at 40sen. I can sell all at above 80sen and take home a handsome 100% profit. However, I decided against selling them because I have plan to "average up" if the price fall to lower level.

Notion's share may fall to 60sen and even 40sen or lower, then surely I will regret my decision not to sell early but what to do? No one can predict the market precisely.

These 5 stocks above are my "winning stocks" that I decided earlier against selling. Now of course share prices of all of them have dropped and BAuto and DKSH suffer paper loss.

The rest are deep in trouble.

Before that I have 3 high PE tech related stocks. These type of stocks have been pushed up high and are risky to fall harder.

I have cleared Inari & Frontken, but left Krono behind.

If I can foresee that Krono can drop to 40sen, I will definitely cut loss at above 60sen and buy back at 40sen. However, even Feng Shui Master Joey Yap also can't foresee this to happen.

After Krono's FY19Q4 result, I have a bit of doubt whether its business and profit can grow as expected. I'm also not sure how Covid-19 can affect it in short term.

This makes me a bit hesitant to average down Krono. I think I might need to wait for another quarter.

When I bought Geshen last month at 43sen, I thought I got a good price as its shares are really hard to buy due to low liquidity.

Because of this, one sell transaction can see the share price drop by more than 10%, another buy transaction can raise the price 10%.

Geshen might be at higher risk of being affected by Covid-19 and all these supply-demand disruption issues. Though it seems like the company has invested a lot on new machinery and capabilities in its Malaysia & Vietnam operations, I might have bought it too early.

Hibiscus should be able to make profit even if the crude oil price is at USD40. I think crude oil price will not stay at low level for a long long time. Once it rebounds, so will Hibiscus's share price.

Perhaps I should have sold all Prolexus & LeonFB shares just like Latitude. All these feel like "dead wood" because it seems not easy for them to grow well from here. Everything seems tough for them.

Both are deep in paper loss. They have dropped so much but still can drop further. Since they are still doing business as usual, it looks weird if I sell now at big loss.

Lastly I would like to announce the winner of "The best performing stock" in my current portfolio in 2020 - Daya. It doesn't drop!

Those 6 stocks (Krono, Geshen, Hibiscus, Prolexus, LeonFB & Daya) are losing stocks. After giving so much explanation and excuses of why I didn't sell yet, the main reason is "unwillingness to realize loss", haha.

Some of you might think that I should sell all those hopeless losing stocks in my portfolio, get the cash and put them in better quality stocks which can rebound faster than others.

Ya, I agree and this sounds very logical. However, I don't do it due to various reasons, at least for now. May be I will change my mind in the near future, I don't know.

With ample cash in hand, next question will be: When and what should I buy?

破屋更遭连夜雨，漏船又遇打头风

"Broken house meets torrential rain, broken boat meets strong wind"

Covid19 spread, supply chain worries and politics drama are not enough, here comes the sensational crude oil price collapse in a day.

Brent oil price plunged 30% from $45 to $31 in a single day today, thanks to the price war between Saudi & Russia. 

This is the worst intraday drop since Gulf War in 1991, and it might drop further according to some "experts".

So, are we witnessing the once-every-10-years major financial recession now, despite a slight delay?

Almost all stocks traded in Malaysia fell sharply. Without a doubt oil & gas related stocks suffered the most with a drop of 20-40% in a day.

Hibiscus which is directly affected by the oil price fell 42% to 41sen. This looks like an attractive price but I think I better wait for the dust to settle first before deciding to average down.

Oil price might continue to drop but should not be depressed for too long.

My portfolio has shrunk in value significantly. Even though I sensed that market will not be good in near term, I still decided to keep those stocks and only have myself to blame.

If not because of those stocks sold last month, my loss will be much more year-to-date.

Investors with lots of cash must be very happy as this is a golden opportunity to buy shares at great discount.

Currently my cash:stock ratio is about equal, but I need to be more cautious before buying any shares.

Anyway, if you're suffering temporary loss, it's quite "normal" and don't be too depressed. History has repeatedly shown that after a bear market, bull market will follow.

My Portfolio Feb20

Summary for February 2020

Feb-20
Numbers of stocks	12
Share Sold	Frontken @ 2.35 (all)
	PPHB @ 0.88 (all)
	Latitude @ 2.73 (all)
	Inari @ 1.56 (all)
Share Bought	Geshen @ 0.43
Overall 2020
Portfolio Return Feb20	-10.40%
KLCI Return Feb20	-3.16%
Portfolio Return YTD20	-1.26%
KLCI Return YTD20	-6.68%

Stock Portfolio @ End of Feb20

Stocks	Avg	Jan20	Feb20	Div20	Feb20%	Overall%
ADVENTA	0.58	0.745	0.590	7.0	-20.8	1.7
BJAUTO	1.92	1.85	1.78	2.75	-3.8	-7.3
DAYA	0.035	0.005	0.005		0.0	-85.7
DKSH	2.500	2.550	2.750		7.8	10.0
GESHEN	0.430		0.400			-7.0
HIBISCUS	1.050	0.850	0.750		-11.8	-28.6
KRONO	0.76	0.785	0.635		-19.1	-16.4
LEONFB	0.505	0.430	0.390		-9.3	-22.8
MATRIX	1.42	1.91	1.94		1.6	36.6
NOTION	0.40	1.210	0.990		-18.2	147.5
PRLEXUS	1.15	0.715	0.710		-0.7	-38.3
SCIENTEX	2.735	9.05	9.00		-0.6	229.1

I have a list of stocks to kick out from my portfolio in Feb20. I decided to know their latest quarterly financial results first.

For some stocks, I hope to see better results so that I'll be able to dispose at higher price.

For some stocks, if the financial result does not "perform" up to expectation then I will sell.

In the end, only DKSH & Matrix posted good results. While Hibiscus & Notion didn't look too bad, the others were not quite up to expectation.

Amid the height of political turmoil & Covid19 fear, almost all stocks in my portfolio dropped as a result just like the companies are going bankrupt soon.

So I finally cleared a few stocks, but not in the way that I wanted to.

Those 4 stocks I cut in February (Frontken, PPHB, Latitude & Inari) were actually winning stocks, just that I earn less after the price dropped.

Frontken is one of the stock I wish to sell. The reason is I feel it is fully valued and has limited room to grow especially during this hard time. I was hoping for good FY19Q4 result so that I can sell at higher price. However, market didn't like the result although it's not too bad.

For PPHB, I was thinking to keep for few more days or weeks if the FY19Q4 results beat the previous quarter, and sell if it's not that good. So, it's obviously a sell for me but I didn't expect the share price to fall that much.

Inari & Latitude are a must sell to me, after holding them for so many years. Finally I manage to sell all, albeit at lower share price than initially hoped for.

For loss-making stocks such as Prolexus, LeonFB, Hibiscus & Krono, may be I should sell early but at current level, I feel that it's just too low for me to sell as I still have some faith in them.

Matrix, BAuto & DKSH have rather good dividend yield and the latter might still have room to grow. So I think they might be good to hold at this moment.

Adventa's latest result was not bad if there was no one-off items. Its hospital supply business is picking up though home dialysis business does not seem to make good progress.

Notion's operating PAT of RM5.2mil was not bad as well and I think I better hold until the bonus issue expected in April.

Scientex is the stock that I initially think I might hold for life, but now I guess no stocks are immune to be sold. 

I bought Geshen in anticipation of a turnaround in its business and earning, but it might need more time if it's affected by the virus.

Now we're going into the second week of March. Stock market fell further and the virus fear grows globally. I foresee tough months ahead and bad Q1 & Q2 financial results for most companies.

Am I pessimistic about the stock market now? Yes.

However, I'll still sell stocks even if there is no virus or political issue, as I already have a plan in place to trim my portfolio to less than 10 stocks first, with a target of maximum 5 stocks.

I still need to sell but looks like I'm a bit "stuck" now. 

Anyway, even with more cash on hands, I'll not simply buy as I feel that current issues might last longer than expected.

Notion: On Hyper Growth Phase

"Hyper Growth Phase" is according to its chairman, not me.

For its latest FY20Q1 (Oct19-Dec19), Notion achieved its highest quarterly revenue since 2012 at RM70.3mil with a net profit of RM14.2mil. 

In the next 2 trading days after the release of this financial result, its share price fell 20% from RM1.24 to RM0.99.

Those who follow Notion for a while and study its financial report carefully should be aware that for the last 2 quarters & FY2018, its financial results have been "beautified" by insurance claims and one-off item.

So it's not surprise for the share price to fall especially when it coincided with extremely bad market sentiment that day.

Without those special gains, Notion's bottom line should hover around slight profit and loss in the last few quarters.

Nevertheless, investors buy Notion's shares because of its bright-looking future, as explained by its chairman.

888next Q1 results PAT RM14.2 mil can be broken down into:

1) Insurance BIL claim RM9 mil after tax

2) Operations RM5.2 mil after tax

We still picked up relocation costs in Oct and Nov. The EMS could be better.

Project Nixon (EMS codename) we need 600k pieces of aluminium tubing for vacuum cleaners worth RM4.5 mil sales per month from June 2020 onwards. We need RM6 mil capex to build anodising line and extrusion lines.

Many other projects coming onstreamline in H2.

Project Stingray (Extrusion solutions codename) is a major expansion of the extrusion business from 200 tons per month capacity to 1000 tons capacity and billet furnace for upstream recovery of aluminium leftovers. Mainly for external customers.

We expect RM10 to 12 mil per month sales contribution from Stingray in FY2021.

We are transforming the group into an aluminium total solutions company more than precision machining or fabrication but complete integration in 3 years time.

If you are a short term term investor then you may be missing out on the longer longer term prospects.

But always caveat emptor ie do your own analysis and risk assessment.

Notion is on a hyper growth phase. But the global markets look unsteady so be careful.

From its FY20Q1 report, it shows that current quarter's BIL insurance claim is RM12.2mil before tax. So it looks like actually the claim only contributes RM9mil from RM14.2mil of after tax profit.

I think the RM5.2mil operating net profit is not bad at all at this stage. If it can perform similarly for the whole year, then it can achieve RM20mil PAT for FY2020, or EPS of 6sen.

This is supposedly still without all those "new projects" kicking in.

Another encouraging part is the 56% growth in revenue of its EMS segment which is expected to grow much further in the second half (H2) 

"As the demand of metal parts for the EMS appliances sector continue to grow rapidly over the next year, it will be the mainstay growth driver for FY2020 and even FY2021. As the group delivers in volume and quality, our EMS customer is supportive of localisation of parts and conversion of plastics to metal parts and new models development augurs well for this space."  - FY20Q1 quarterly report

Conversion of plastic to metal parts sounds interesting.

Anyway, since Notion management mentioned that H2 will be strong, I'll assume that its FY20Q2 result and even FY20Q3 will not be that spectacular. Of course Q2 will be much lower compared to Q1 without the insurance claim, but I don't expect loss unless it is significantly affected by Covid19.

At RM1, Notion's share price is not considered very low at the moment. So readers must study the risk and reward properly before investing in it.

Year 2020: Cautiously Optimistic?

February 2020 should be a forgettable month for most stock market investors.

If you're making loss so far in year 2020, you're definitely not alone. The loss might just be temporary and you might still register positive return at the end of the year. 

For me, surely I'm heavily affected. Even without calculation of the return I already knew that year to date I'm making loss.

I have a plan in place since Jan20 to trim my portfolio which has too many stocks. I already have a list of stocks in mind to clear.

However, I decided to wait until the latest quarterly report announcement in Feb20. This has proven to be a bad decision in hindsight.

Escalating concern over Covid19 worldwide, sudden political crisis and last but not least, out of expectation's CY19Q4 financial results all sent the stock price tumbling.

Is it a temporary setback with quick rebound, or will it be the beginning of a prolonged bear market?

Of course no one knows but if you ask me, I think generally year 2020 might not be a good year for stock market.

KLCI has dropped more than 20% from peak of 1,900 in mid 2018. Currently it stands at 1,482.

I'm still not sure to what extent Covid19 will affect the economy in Malaysia & worldwide. Some companies may benefit from it and vice versa. We can only get a glimpse of it in CY20Q1 financial results to be announced in May.

A lot of experts expect the Covid19 fear to subside comes May, as the weather gradually turns hot, just like SARS in 2003.

However, Covid19 seems to be highly contagious and definitely affected more people and countries. Up to today, more than 86,000 Covid19 cases have been reported in 64 countries, and we have countries like South Korea, Iran & Italy which reported exponential rise in cases recently.

In contrast SARS has affected only 29 countries with only 8096 cases reported. Fortunately, the mortality rate of Covid19 is not as high as SARS.

Anyway, we can be 100% sure that Covid19 impact will be over one day, just the matter of when. Two months later, six months later or even one year?

Airlines and tourism industries will no doubt be negatively affected. Those companies who depend a lot on China as customers or suppliers or producers might also feel the heat.

Regarding the political turmoil in Malaysia, it seems to be settled but it might not be in reality. I'm really sick of politics and won't make any comment here.

So far I have trimmed my portfolio a bit last week but not in the way I wanted to. I keep more cash now as planned. I don't know whether I'll regret that later.

I'll remind myself, fear in stock market gives opportunity.