Reducing investments as the economy weakens

A successful investor looks for clues in Singapore and China in these uncertain times

By V Bharathi

Many Malaysian investors were wiped out in the market crashes of 1997 and 2008, and many have learnt their lesson. They are being more careful with their investments, now that the market is showing signs of the volatility similar to the ones that preceded those two crashes.

Investors are carefully reading charts and research reports and keenly listening to comments by industry leaders in their search for signals that may point them to ways in which they could profit while safeguarding whatever wealth they have already acquired.

KC Wong, a long time businessman in Klang, is one such investor. He got a clobbering in 2008, but has since structured a RM50 million investment portfolio in stocks and properties. He feels there’s an element of bearishness everywhere these days, but he’s not panicking. He wants an orderly downsizing of his funds.

Over the years, he has developed an intense desire for information and an abiding interest in permanence in the markets. These qualities have been instrumental in helping him decide which stocks and properties to invest in.

He is a client to many remisiers. One of them says Wong is innovative, has his ears to the ground and is often ahead of the curve. Apparently, he sniffed the first subtle signals of trouble when reports that the property sector was weakening began to emerge some time last year. When the reports became more frequent, he sold all his properties in Johor. However, he decided to hold on to properties strategically located in Penang and the Klang Valley.

He has been divesting his equity stakes gradually. By June this year, he had disposed almost 40% of those stakes. But he is holding on to many blue-chip stocks that are good paymasters. His other stock holdings are in sectors where currency and cyclical factors play roles in raising profits.

Wong claims he is not an expert at spotting trends and vital market signals. The humility is disarming, but it is honest and is the precise reason for his interest in gathering information that would help him understand a complex financial landscape.

Wong is looking beyond borders to understand developments in Singapore and China, where one can find leads to world business conditions. China has become a powerful economic centre in world trade, and Singapore runs one of the most efficiently managed economy around.

According to RHB Institute, China’s Purchasing Manufacturing Index edged up by 0.1 point to 49.8 last September, but only after staying in contractionary territory for two consecutive months. The signs are there to show that its manufacturing sector is moderating. There is also caution for the pace of recovery in China’s industrial sector, given weak readings from industrial production, railway freight and industrial profit.

Singapore’s non-oil domestic exports sank by 8.4% year-on-year, dropping sharply from its revised -0.7% reading in July and +4.5% in June. The significant underperformance was due to weakening exports in both electronic and non-electronic items.

There are retractions everywhere which investors worldwide are following closely. This will also pose problems for Malaysia, whose major export markets are Singapore (accounting for 13.8%) followed by China (12.9%), Japan (9.8%) and the US (9.3%).

By September, Wong had disposed almost 65% of his investments, basing his decisions on his understanding of economic developments in China and Singapore. He feels comfortable with that.

V Bharathi is an FMT columnist