Market Turmoil - What Should We Do?

Not long ago, KLCI achieved its height at 1392 on 24-Jul-07. After approximately two weeks, the KLCI falls more than 100 points closed at 1287 today. Many investors (speculators) are panic with such volatile market and wonder whether is the bear coming.

Most analysts have blamed the turmoil as a result of the sub-prime mortgage default problem. One should note that the name of the "sub-prime" is already indicating its high-risk nature. With the higher crude oil and interest rate, it should not be surprised to see the increasing default rate. It is basically a mis-pricing of the credit spread and it is healthy for the market to have such correction.

Looking back to our Asian region, any potential problem that could lead to such a recession? So far, I don't see any. With the booming economy and rising middle classes, China is definitely going to be another super economy and India is the next one. Locally government has launched several mega projects, waived the RPGT, increased government servant payroll to further stimulate local consumption. These measures will help cushion the impact in the event the economy turned down.

So what should we do? My opinion is that market will continue fall in the short-term. Why? Simply because more and more investors will withdraw from the hedge funds and hedge funds will be forced to unwind position. Expect more bad news to come in the coming weeks.

Advice:
1. Take this opportunity to do stock analysis
2. Look for companies that are under-valued, net cash (low debt) and having sound business model
3. Suggest utility and high DY companies.
4. Consider resource/commodity-based companies if the valuation is low enough
5. Personal recommendation: DIJAYA/ PLENITUDE/ TALIWORKS/ LITRAK/ MTDINFR/ MFCB/ PPB/ IJMPLNT/ AEON/ DIGI

NEWS - A Bigger LCCT

PUTRAJAYA (August 9, 2007): A new low-cost carrier terminal (LCCT) that can handle up to 30 million passengers per year will be built, said Deputy Prime Minister Datuk Seri Najib Razak.

Located within the KL International Airport (KLIA) area and close to the main terminal, the project will take four years to complete.

Najib said the cost and the actual location of the new terminal which will be connected to the main terminal by rail service has not been finalised or identified.

Until this new facility is ready, he said the current LCCT near the KLIA, will be extended and upgraded, including work on the aprons and parking lots.

He said this after chairing the cabinet committee meeting on transport today.

Asked as to why a new terminal needed to be built when the current one will be expanded, Najib said it can take only between 10 and 15 million passengers per year, even with the extension.

It is learnt that with the projected pace of growth in low-cost control here and around the world, a bigger and better LCCT was needed.

"An immediate study will be done on the current LCCT's extension and upgrading works. An allocation will be finalised once the study is completed," Najib said, adding that the decision was made by the committee today.

He said that once the new LCCT terminal was completed, the old one will be convert for other use. He did not elaborate.

He said AirAsia would operate the new LCCT.

Transport Minister Datuk Seri Chan Kong Choy, who is also a member of the committee, said the new location "is within KLIA and closer to the main terminal".

On other matters discussed, Najib said the commitee agreed in principle to build new bus terminals, walkways and park-and-ride system in Kuantan, Kota Kinabalu, Tawau and Sandakan.

He said the Transport Ministry would do a study on this within a month before anything was done.

The committee also approved RM72 million for Sabah to buy locomotives and rolling stock for 30 level crossings.

"(Of the sum) RM57 million will be in the form of an easy loan, and the rest will be a grant," he said.

Source: TheSunDaily


My comments:
1. The current LCCT was constructed in June 2005 and fully operational in Mar 2006. After operating less than two years, Malaysia realized that the current LCCT cannot handle the increasing passenger volume(?!) What happened to the feasibility study conducted prior to the construction of LCCT? Looking abroad, we have already seen the tremendous success of low-cost carriers such as Ryan Airline, Virgin Blue & etc. Shouldn't Malaysia be foresight enough before start off with any projects?

2. Quoted from Star:"Transport Minister Datuk Seri Chan Kong Choy, who was at the meeting, said the current LCCT, which was first designed as a warehouse, would be converted into a cargo terminal when the new LCCT starts operations". Oh no, the LCCT is originally a warehouse!

3. I sincerely hope that the Transport Ministry can conduct a (really) comprehensive study for the new LCCT. Learn from other countries' experience and avoid expensive mistakes. We're a small country, but ambitious enough to carry out so many projects (IDR, NCER, Bakun & etc) at one time. Hope we're not over-stretching ourselves.