This article will introduce us to the pricing and risk of structured warrants. It will show how the price of a warrant relates to the underlying share and identify significant features that contribute to the valuation of a warrant. It will also stress some important risk aspects that investors must be aware of.

How the price of a warrant relates to the underlying share

Generally, a warrant's price is closely connected to the behaviour of the underlying share. By behaviour, we mean bow volatile the underlying share is and whether it is moving in a favourable direction for the warrant holder.

However, we must appreciate that the way the underlying share affects the price of the warrant is not consistent. Warrants are not priced as a result of a simple balance between supply and demand (like ordinary shares). They are priced according to a formula - often some variant of the Black Scholes method. The critical inputs for the formula are:

• Whether the warrant is in, out or at the money (determined by the underlying share price and the strike price)
• How long the warrant has until maturity and
• How volatile the underlying shares is expected to be.

Other less important parametersof the formula are interesr and dividend rates. With so . many influences on a warrant's price, it is easy to get lost. But if we master the above in simple terms, we can trade confidently.

What a warrant is worth

A warrant can be in the money, out of the money or at the money. An example of a warrant that is in the money is China Construction Bank's structured call warrant which expires on Nov 26,2010.

It has a strike price of RM2.268 but the underlying share was already trading at RM2.912 as at Sept 18, 2009. We would expect these kinds of warrants to be more expensive. Toyota Motor Cop-C3, an out of the money call warrant that expires on Nov 26,2010, has a strike price of RM135.38 when the underlying share is only trading at RM100.54. These types of warrants are likely to be trading quite cheaply. An at the money warrant will have a strike price that is very close to the underlying share price.

Time until maturity - how this affects the price of a warrant

The right to buy or sell at the strike price, but not the obligation, is always worth something even if the warrant is not currently in the money. For example, the Toyota Motor Corp-C3 warrant mentioned above is clearly out of money but it is priced at 27.5 sen on Sept 18, 2009, because no one knows what the underlying share price will be at expiry. This can be construed as the time value of the warrant.

Nevertheless, as we get closer to expiry, the uncertainty falls and the time value decays. Technically, this is referred to as the "theta", the rate at which a warrant loses value as time passes.

Time decay is not constant and speeds up towards the end of the warrant's life. For this reason, one must be wary of trading an out of the money warrant that is approaching its expiry. One can lose money because of time decay just by holding onto the warrant a few more days.

Volatility- how it affects the price of the warrant

Think of share price volatility as the degree of uncertainty surrounding a share's returns. A young biotech company's shares can easily rise or fall by 30% to 50% in a week. In contrast, we don't expect a stable utility company to behave in this fashion. Say, we hold call warrants on both these two companies, with strike prices 30% above the current share price. The higher volatility of the biotech company means there is a better chance of its share price moving in large magnitudes, leading to a higher possibility of the warrant being in the money. That is why you will find that the warrant with a higher volatility in the underlying share costs more.

Important risk factors

Besides the rapid time decay or theta mentioned above, other important aspects are the delta, gearing and elasticity.

1. Delta

The delta implies how sensitive the warrant price is to the movement in the underlying share price. It is measured by the change in the warrant price divided by the change in the underlying share price. However, remember that the delta says nothing about the percentage change in the warrant versus the share price. The percentage change in the warrant price is normally larger than the share price.

Delta = change in option price/change in underlying share price

You will observe that a warrant that is deep in the money, with a few weeks from expiry, really functions as the underlying share itself and will normally have a delta of 1.0. For example, if the underlying share rises 10 points, we can expect the warrant to rise 10 points as well.

For an at the money warrant, the delta is usually around 0.5. When the underling share price changes 10 points, the warrant changes only five points. For an out of the money warrant, the delta is even smaller. Any change in the underlying share price has very little effect on the warrant's price.

2. Gearing

We've just seen that the delta does not tell you the percentage rise in the warrant that you should, expect from a 1 % rise in the underlying share. To work this out, you need to know the warrant's effective gearing or elasticity. All warrants are geared - owning a warrant gives you the same exposure as owning more than one share in the underlying equity, typically between 5 and 15 shares. You can calculate the gearing by simply dividing the price of the underlying share by the price of the warrant.

3. Elasticity

If your warrant has a gearing of eight and a delta of 0.5, then the effective gearing or elasticity is gearing x delta: 8 x 0.5 = 4. Using this example, if the underlying share goes up 1 %, the warrant will rise 4%.

Does elasticity stay the same over the life of the warrant? Of course not, because the delta will change and so will the gearing. So, it will be good to monitor the elasticity of the warrant. As the elasticity gets higher, we'd like to be more careful and closely monitor the warrant as it is extremely sensitive. Intuitively, a deep in the money warrant is usually more elastic than the others.

Conclusion

This series of articles attempted to illustrate the concept of the structured warrant, how it behaves, significant factors that affect its price and the risk it bears. We've also observed how the product can be enhanced for the retailer, with a tighter bid-offer spread and model-based pricing. If the savvy investor comprehends the pricing and risk aspects of this product, it's a very thrilling experience when he is able to make out why the price of his warrant moves in a specific manner.

Source : The Edge

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New Contracts Coming in Drips. KNM’s 9MFY09 results were below expectations due to the delay in new contract awards, which limited its orderbook replenishment, margin compression - especially for its low to mid end products - and higher operating costs. Going into 4QFY09, KNM’s performance will continue to be sluggish, unless it secures some of the contracts pending award by its customers. These are contracts for the JV Verwater project, Jubail refinery and Gorgon LNG process equipment awards. Thus we are downgrading our FY09-10 earnings forecast by 23%-32%. However, we maintain a Buy on KNM, but with a lower target price of RM0.93 (previously RM1.27).

Below expectation. KNM’s 9MFY09 results were below consensus and our expectations, making up 58% and 55% of FY09 forecasts respectively. The poorer 9MFY09 results were caused by slow new contract awards, which hit replenishment of its orderbook replenishment. The slower topping up has to some extent affected its results because KNM recognises about 10%-15% of a project value upon receiving an award. This enables it to start ordering raw material and carry out preliminary engineering works. Both its 3QFY09 and 9MFY09 net profits were down 55.3% q-o-q and 20.4% YTD. Operating costs went up while EBIT margin dropped by 8.8%-pts q-o-q to 9.2% q-o-q as a result of margin compression, especially for its low to mid-end process equipment.

4QFY09 to be sluggish. Unless some of the contracts pending award by its customers are secured, we do not expect a good 4QFY09 for KNM. From what we understand, these potential contracts include: 1) RM500-RM600m from the Verwater JV; 2) a portion of the awards by Saudi Aramco to Technip to build a refinery in Jubail, and 3) potentially some jobs coming from the Gorgon LNG plants. Earlier, we had expected the company to at least secure the Verwater job, but it has unfortunately not gotten anything yet so far.

Downgrading FY09-10 earnings forecasts by 23%-32%. Our downgrade is in line with the slower-than-expected pace of securing new jobs.

Maintain Buy. However, our target price for KNM has been downgraded to RM0.93 (previously RM1.27) based on an existing PER of 10x FY10 EPS. Going forward, we believe that the company is still supported by strong orderbook and tenderbook worth more than RM2.5bn and RM14.0bn respectively. Its orderbook is expected to keep the company busy over the next 1 year.

Source : OSK Research

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Public Bank recently relaunch their PB Smart Rebate II promotion which introduced in October 2009 and rename it to PB REAL Cash Back Promotion. They are still offering 10% Cash Rebate but in much better terms this time. Its similar to their first PB Smart Rebate I promotion in June 2009. I believe Public Bank is trying to retain their credit card holders by providing them with better promotion. Or else they may cancel their cards due to newly introduced tax.

Under this promotion, Public Bank credit card holder who made their spending either local or overseas will entitle 8% cash rebate on retail transactions. Additional 2% cash rebate will be awarded if the transaction made overseas, sign up for new Zero Interest Instalment Plan (ZIPP) and new balance transfer. The promotion is valid from 1st December 2009 to 31st March 2010.

If you interested to participate in this promotion, you have to register your Public Bank credit card via SMS. To register send SMS through your mobile number by typing "PBCB {space} 16-digits card no" to 32968. It is one time registration and you will be charged 30cents.

These are the details regarding the cash rebate promotion,

• The Promotion is only open to all Principal PB Credit Cardmembers except for PB Visa Electron Debit, PB Visa Day2Day, PB UTAR, PB TARC, and PB ING Debit MasterCard Cardmembers.
• SMS registration is compulsary but for only one time. RM0.30 will be charge.
• To enjoy the 8% cash rebate you need to swipe at least 8 times in a calender month and no minimum transaction amount is required
• 8% Cash rebate is applicable for retail transactions except for online purchase, auto-debit, flexipay, recurring payment (inclusive of utilties, direct marketing and insurance premium), cash advance and quasi cash.
• For 8% rebate, each cardmember only entitle for maximum of RM50 cash rebate per month.
• For 2% rebate each cardmember only entitle for maximum of RM30 cash rebate per month.
• Cash back are in addition to the generic Cash Megabonus & Reward Point.
• A maximum total of RM450,000 Cash Back is available each month under this promotion and based on first come first served basis.

On top of this promotion, card holders who has newly approved application via online, will enjoy 8% cash rebate on all transaction without the need to do 8 times transaction. Maximum, cash rebate is RM80 & only applicable for the first month following the approval.

Click here for Public Bank promotion page.

Click here for Terms and Condition.

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The havoc wreaked by the unwinding of yen carry trades in 2008 in financial markets may be a distant memory for some of us in the wake of the current rally in global equity markets.

However, it is a scene that could be replayed some time down the road and this is not good news for a recovering global economy. Only this time, the currency with the starring role is the US dollar.

In recent months, the rapid rise in US dollar carry trades has set alarm hells ringing. These trades have been flooding emerging markets with liquidity and driving up asset prices to levels that do not commensurate with economic fundamentals.

Asset bubbles are building up in equities and commodities, and over the longer term, inflation will become a threat. Asian currencies have been appreciating so far this year as a result, led by the Indonesian rupiah, South Korean won and Indian rupee.

Of late, we have been hearing more and more talk that some central banks in emerging markets are considering imposing some form of capital control to battle the surge in the inflow of short-term capital, or hot money.

Last month, Brazil did just that when it imposed a 2% levy on foreign investment in equities and fixed income assets. Taiwan, meanwhile, is reported to have imposed a ban on overseas investors placing funds in its time deposits.

Indonesia has postured that it is studying limits on foreign ownership of central bank certificates to tame the volatility of the rupiah.

Fortunately, or unfortunately, for Malaysia, depending on how you want to look at it, such speculative capital inflow has not been as heavy as for other markets in the region. It is unfortunate, one must say, because yes, there is a return of hot money, but it isn't coming this way. The ringgit has appreciated 4% against the greenback since the end of May - from RM3.51 on May 28 to RM3.369 on Nov 25. In comparison, the rupiah has risen 9.2% - from 10,351 to 9,395 - over the same period.

It shows that foreign investors are ignoring our markets and we have to ask ourselves why. A fund manager just back from New York and London lamented last week that it has been very difficult selling Malaysia these days.

On the other hand, it is fortunate for Malaysia because hot money has not chased up asset prices to unrealistic levels yet.

The heart of the matter is, will the US dollar carry trade hurt global markets just like the yen carry trade did in 2008 when it started unwinding?

A currency carry trade is the selling of a currency with low interest rates and the buying of a different currency that provides better yields. In the 1990s the yen carry trade was prevalent because the Japanese central hank maintained a very loose monetary policy, keeping rates at around 1% to boost growth.

As a result, investors took opportunity, selling the yen for other currencies and investing in assets that provided better yields, especially in the US, Europe and Australia.According to news reports, the yen funded some US$6 trillion in overseas assets.

But the crunch came in 2006 and 2007, when the US banking system went into a tailspin and the US dollar depreciated. There was an exodus from these currencies and a flight back to the yen, the full impact of which was felt in 2008.

This time round, the US dollar is at the centre of the carry trade because the US undertook a quantitative easing policy more than a year ago to pump-prime growth. This means investors have been able to borrow US funds at zero cost and put them into assets in the emerging markets with higher yields.

The International Monetary Fund (IMF) warned recently that the US dollar is serving as the funding currency for carry trades and is putting upward pressure on the currencies of emerging markets as well as the euro. This is potentially explosive as it can create asset bubbles and lead to another global financial crisis, it noted.

"Capital flows driven by yield differences are complicating monetary response in emerging economies," it warned, noting that some countries were already resorting to the use of capital controls. Other policy responses include raising reserves and allowing the currency to appreciate.

Up to this point in time, the US dollar carry trade has yet to play itself out. When the crunch will come is anybody's guess, but when it comes, financial markets will have to brace for yet another financial crisis that could quickly derail the fragile recovery in the global economy, some economists have warned.

In this regard, emerging markets are vulnerable because most of the speculative funds have come to this side of the world, largely because Asia is expected to emerge the fastest from the recession and post some of the highest growth rates in the world.

US dollar carry trades are not sustainable because US interest rates are not likely to stay at zero forever. In fact, with the US economy showing some green shoots of recovery in the third quarter of this year, focus has begun to shift towards defining an appropriate time for the exit of economic stimulus plans.

Be that as it may, there is consensus that the US is not likely to reverse its quantitative easing any time soon. But when interest rates start to rise again - and they will - that's when things can become hot. By then, it may be too late to panic. So perhaps, some form of capital control at this point in time may not he such a bad idea after all.

Source : The Edge

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Improving Prospects. Although Pelikan’s cumulative earnings fell 47.4% y-o-y, its annualized earnings was above our and consensus expectations. The lower earnings were attributed to weaker sales volume due to the sluggish consumer spending in Europe. The lower sales volume was insufficient to offset its high fixed cost resulting in 9MFY09 EBIT margin falling to 7.9% from 11.5% in the previous corresponding period. The proposed acquisition of Herlitz would further strengthen the group’s financial and market position with Pelikan expected to realize M&A cost savings. Given the better than expected results, we raise FY09 earnings by 10.6% but maintain our FY10/11 forecasts for now. Reiterate BUY with TP of RM2.57.

Better than expected. Although 9MFY09 topline of RM941.2m and bottomline of RM44.2m fell 11.3% and 47.4% respectively against the backdrop of the sluggish consumer spending in Europe, annualized earnings actually surpassed our full year forecast of RM40.5m and consensus estimate of RM45.7m.

Consumer spending still weak in Europe. Although sales contractions were observed across the board with the exception of Latin America that posted a 16.9% growth y-o-y, sales in Germany (48.4% of the total revenue pie) fell 12.3%. On a q-o-q basis, group revenues and net profit were both lower at RM312.6m (-8.9% q-o-q) and RM9.3m (-65.2% q-o-q) as sales in the previous quarter were bolstered by the back to school season in Europe. The lower sales volume was insufficient to cover the high fixed cost resulting in the compression in 9MFY09 EBIT margin, from 11.5% in the previous corresponding period to 7.9%.

…but should recover in 2010. While Germany posted positive GDP q-o-q growth of 0.7% in 3Q09, consumer spending remains somewhat sluggish. As the country is expected to post better GDP growth in 2010, we believe consumer sentiment and hence consumer spending would recover in tandem. This bodes well for Pelikan which is involved in the sale of basic necessities. Additionally, the proposed acquisition of Herlitz group would further strengthen the group’s financial and market position with Pelikan expected to realize M&A cost savings.

Maintain BUY. Given the better than expected results, we raise our FY09 earnings by 10.6% to RM44.7m but maintain our FY10 and FY11 forecasts for now. Given that the 4Q09 sales volume is seasonally lower and our expectation that the group should be able to break even in the following quarter, we are keeping our BUY rating and TP at RM2.57 based on 8x FY10 EPS.

Source : OSK Research

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Falling into the family of indirect taxes, the GST is intended to replace the Malaysian service tax and sales tax. GST will be introduced gently and at a rate that would not burden the poor or the middle-class.

It is assumed that the Royal Malaysian Customs would be the authority in charge of administering the GST.

The GST, also known as a consumption tax, is a tax levied on supplies of goods and services. To the man on the street, it is incurred only when money is spent.

If no consumption occurs, no GST is suffered by the individual. This can be contrasted with an income tax which is payable when income is generated.

Hence, some have viewed the GST as a more equitable means of collecting revenue for the government as it matches the tax with the ability to pay.

A number of countries including Singapore, Thailand and Australia, have already adopted a similar type of indirect tax.

The mechanics of GST are similar to the value added tax in the UK and Europe, so this tax although new to Malaysia has an established place on the world tax scene.

Mechanism of GST

Conceptually, GST is imposed on the value added to goods or services by each separate processor in the production and distribution chain.

The value added is the value that a producer (whether a manufacturer or distributor, etc) adds to its raw materials or purchases before selling the new or improved product or service.

Upon selling the product or service, the manufacturer or distributor will include a charge for GST at the relevant rate on the value of the supply made.

The manufacturer or distributor will pay the GST collected on its sales (also known as output tax), to the Royal Malaysian Customs, but after deducting the GST it suffered on its purchases (also known as the input tax). And the cycle goes on.

Hence, in reality, GST is a multi-stage tax on the increase in the sales price of the goods or services as they pass through the chain.

The consumer ultimately bears the burden of the tax. This can be seen in the simple illustration chart (right).

Input tax and output tax

In order for a taxpayer to impose GST, the taxpayer must be registered with the Royal Malaysian Customs.

There will generally be a minimum threshold (e.g. based on turnover) before a taxpayer is required to charge GST. The registered taxpayer would be required to submit periodic GST returns. If the output tax is greater than the input tax, the taxpayer will have to pay the excess.

Conversely, if the input tax is greater than the output tax, the taxpayer could seek a refund from the Royal Malaysian Customs.

GST rates and taxable supplies

It is envisaged that not all goods and services will be subject to GST. In the UK for example, there are four types of supply for GST, namely standard rate (15 per cent), zero rate (0 per cent), exempt supplies as well as the reduced rate (5 per cent).

The table above shows an example of the four classifications of supplies in the UK:

It is important to know what category the supplies fall in. This is because where a registered taxpayer is supplying standard rated or zero-rated supplies, the registered taxpayer will be able to claim an offset for input tax suffered on supplies it acquired. However, if the registered taxpayer's supplies are exempted, the taxpayer will not get a refund on the input tax suffered.

Similarly, the taxpayer's customer will not have any input tax to set off against its output tax. This may be an important factor in determining the business competitiveness of the taxpayer.

What can be expected next is the release of the GST Bill. However, as GST is industry-based, there would be accompanying Regulations to implement the system effectively and these regulations are likely to be quite extensive.

It would be interesting to see the various rates of GST and the extent of the taxable supplies. And as everybody will be affected, it is important to understand not only how the system works but what actions need to be taken in the run up to GST.

Running through the checklist below could be a good starting point.

Getting prepared for GST

Checklist for businesses:

• Check whether you need to register for GST - If yes, what are the compliance requirements
• If yes, what are the compliance requirements - Prepare a costing/ pricing analysis as well as pricing strategies
• Prepare a costing/ pricing analysis as well as pricing strategies - Notify your customers/ suppliers on your GST status
• Notify your customers/ suppliers on your GST status - Update your invoices
• Update your invoices - Educate your staff
• Educate your staff - Check IT capabilities
• Check IT capabilities - Review long-term contracts
• Review long-term contracts
• Checklist for final consumers:
• Check whether the goods and services you consume are taxable and the relevant rates - Price of goods and services post-GST may or may not change. Hence plan your budget wisely

Clearly, preparation for the implementation of GST is essential for businesses and at the same time understanding the implications of GST on consumption is vital for consumers.

The writers are executive directors of KPMG Tax Services Sdn Bhd

Source : Business Times

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Exchange traded funds (ETFs) are versatile investing instruments that provide investors with a low-cost way of gaining diversified exposure to asset classes or specific sectors.

When the stock markets collapsed last year, investors flocked to extremely safe assets to stash their wealth. Since then, some form of stability seemed to have appeared across global markets and many are looking at ways to invest opportunistically in specific sectors based on a secular trend or macroeconomic theme.

Short-term gyrations of the market, a common characteristic of the global financial crisis, often leave certain sectors or subsectors trading at less than its intrinsic worth. Investors may also find it easier to time industry allocations based on the business cycle as opposed to timing the purchase and sale of individual securities.

A big deterrent to investing in a sector is the cost involved in acquiring a sufficient representation of the desired sector. Buying shares in several companies requires large amounts of capital while thematic or sector based unit trust funds levy sales charges and yearly management fees.

To overcome these hurdles, investors in matured financial markets have turned to exchange traded funds (ETFs) to invest in a particular sector. As a result, ETFs have grown increasingly popular with both institutional and retail investors.

Since 2002, assets held in ETFs around the world increased more than fivefold while the number of global ETFs increased more than eightfold. According to Lipper Inc, US$125 billion (RM438.75 billion) moved out of unit trust funds, in Europe, during the first eight months of 2008 while ETFs received net inflows of US$48 billion (RM168.48 billion).

ETFs are baskets of stocks, bonds or commodities based on an index. This instantly offers broad diversification and does away with the risk involved in owning stock of a single company. ETFs are listed and traded on a stock exchange. With units in an ETF, investors can gain exposure to a geographical region, market, industry or sector, commodity such as gold or oil, or even a specific investment style such as growth or value.

To identify the exposure that investors will obtain by buying units of an ETF, look at its underlying benchmark as this reveals the assets held in the ETF. For example, Asia’s first Syariah-compliant ETF, MyETF-Dow Jones Islamic Market Malaysia Titans 25 (MyETF-DJIM25) trades on Bursa Malaysia and tracks the Dow Jones Islamic Market Malaysia Titans 25 Index. This indicates that MyETF-DJIM25 holds the 25 leading syariah-compliant listed companies in the country.

A key difference between ETFs and unit trust funds is in its objective. ETFs are passively managed and closely follow the performance of its underlying index. Unit trust funds are actively managed and aim to outperform its benchmark index. This creates a difference in the cost to invest for both investing vehicles with ETFs being relatively cheaper without sales charges and a fee for active management.

Unlike unit trusts, ETFs trade during market hours and are more transparent as investors can see the assets held by the ETF on a daily basis. In comparison, unit trust funds publish their holdings on a monthly basis.

Nevertheless, ETFs are not a “one-size-fit-all” solution for everyone. Successful investing in a sector via ETFs still requires research and knowledge.

Investors must know exactly what the ETF is tracking and how it complements their portfolio (refer to box). As with any other investment, it is good practice to establish an entry and exit strategy and to consider the risk involved.

While investors can hope for the best, they should prepare themselves for the worst. Avoid impulse purchases or avoid jumping into a ‘hot’ sector that has already seen a marked increase in value. Instead, consider looking at long-term business fundamentals as this can indicate sectors that have the potential to appreciate.

Asset Allocation with Malaysian ETF’s

A right mix of stocks, bonds, cash, and commodities in a portfolio that is well diversified within each asset class reduces risk of a portfolio.

To boost returns, investors usually make tactical asset allocations which can be sector, industry or market specific. In both situations, exchange traded funds (ETFs) which are low-cost and broadly diversified can be used. For example; the two equity ETFs trading on Bursa Malaysia offers exposure to the large-cap segment of the Kuala Lumpur Composite Index (KLCI) while the only bond ETF in the country holds government securities.

These ETFs can be used by investors to diversify between different asset classes and to invest in the broad market. Small or mid-cap ETFs which provide a way to invest in different sectors may be available in the future and then, can be used for tactical asset allocation based on an outlook.

Source : Business Times

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This is not new, as you can do this since 2007. I just create this page for easy reference.

I manage to get myself my prefered @live.com email address. However if your @live.com was taken, don't worry as there are many other @live.** email address available. If you are following normal procedure, you can only create email address base on the country you stay. In order to create @live.** you have to follow the following links.

Country	Link	Language
Arab Countries	@windowslive.com	English
	@windowslive.com	Arabic
Argentina	@live.com.ar	Spanish
Australia	@live.com.au	English
Austria	@live.at	Deutsch
Belgium	@live.be	French
Canada	@live.ca	English
	@live.ca	French
Chile	@live.cl	Spanish
China	@live.cn	Chinese (Simplified)
Denmark	@live.dk	Danish
Finland	@windowslive.com	Finnish
France	@live.fr	French
Germany	@live.de	Deutsch
Hong Kong	@live.hk	Chinese (Taiwanese)
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Korea	@live.co.kr	Korean
Malaysia	@live.com.my	English
Mexico	@live.com.mx	Spanish
Netherlands	@live.nl	Dutch
Norway	@live.no	Norwegian
Philipphines	@live.com.ph	English
Portugal	@live.com.pt	Portugese
Romania	@windowslive.com	Romanian
Russia	@live.ru	Russian
Singapore	@live.com.sg	English
South Africa	@live.com.za	English
Spain	@hotmail.es	Spanish
Sweden	@live.se	Swedish
Taiwan	@livemail.tw	Chinese (Taiwanese)
Thailand	@windowslive.com	Thai
Turkey	@windowslive.com	Turkish
United Kingdoms	@live.co.uk	English
United States	@live.com	English
	@windowslive.com	Spanish

If you would like to migrate to @live.** & transfer all your emails & contacts to your new @live.** email address then follow this link.

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Prudential BSN Takaful (PruBSN), introduced its latest medical plan, Takaful Health. It is the first for the Takaful industry in Malaysia that comes with annual No Claim Bonus (NCB). PruBSN is a joint venture company between Bank Simpanan Nasional (BSN) and Prudential PLC (Prudential).

Takaful Health provides comprehensive hospital and medical coverage until the age of 80. This new plan also has the highest lifetime claims limit in the industry, at 10 times the annual limit of the plan chosen.

However, unlike other medical plans, Takaful Health also pays its customers to stay healthy through its innovative NCB feature of up to RM500 per year, depending on the package.

Basically, it means that if the policy holder don't make a claim, they will received money that comes from the NCB.

For more information kindly browse through PruBSN webpage.

Takaful Health product brochure can be download here.

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In conjunction with first year anniversary for Max InvestSave, CIMB is having a special promotion which will ends on the 31st December 2009.

For those who ae not familiar with Max InvestSave investment, below are the description about this investment. Details on the promotion is at the end of this article.

CIMB Max InvestSave is a long-term investments which allow the investor to meet future financial needs such as retirement, education fund or to protect from inflation.

Unlike ordinary investment accounts, Max InvestSave locks-in the highest returns refer by Reference Index Value (RIV) achieved during your chosen tenure. At maturity, you are protected on your maximum returns as well as from any adverse fluctuations that may have occurred. The graph below explain the concept.

CIMB Max InvestSave Features are

• Deposit any amount, any time (minimum of RM50). No deposit allow 5 years before maturity.
• Withdraw any amount, any time at the market price. No penalty will be charged upon early withdrawal.
• Redeem in part or in full (minimum 0.01 units).
• Choose from tenures of 15, 20, 25 or 30 years.
• 100% principal protection if held till maturity.
• Covered by the Malaysia Deposit Insurance Corporation for up to RM60,000.
• Max InvestSave is based on Restricted Mudharabah concept with profit sharing ratio of 95% (Depositor) : 5% (Bank).

The performance of Max InvestSave will track the dynamic investment strategy of the CIMB Evergreen Index. This will allow the investors to gain higher potential returns, even under different market conditions.

CIMB Evergreen Index tracks a wide range of markets across major economic regions and asset classes. It will adopts a Risk/Return Optimisation strategy by finding the best possible asset class allocations to maximise returns with controlled volatility (Standard Deviation) of around 10%.

CIMB Evergreen Index also adopts a Long/Short strategy which proactively trades when markets are bullish or bearish.

Basket of multi-assets are selected and may be substituted. Among the assets that part of the baskets are equity, commodity, property and currency market.

The graph below shows the index performance since introduction in 2002 with comparison with Major Indexes. The return to date is 144%

CIMB is doing a Monte Carlo simulation on the fund performance based on historical data. The parameters used to generate the 3 scenarios are more conservative than the actual realised historical parameters since 6 June 2002. The table below are the expected retun if the investor invest RM100 per month until 5 years before maturity with no early redemption.

Back to the promotion, there are 4 different promotions going on concurrently. They are,

1. Bonus Units - earn free bonus units of up to 30% for every investment or top-up made during the promotion period. Only applicable to new Max InvestSave accounts opened between 1st October to 13th December 2009 with a minimum of RM 5,000.
2. Anniversary Rewards - Receive FREE BP Healthcare discount voucher worth RM300 and a CIMB Clicks Octo soft toy when you open a new Max InvestSave account with a minimum of RM 5,000 or just top-up a minimum of RM 1,000 for existing Max InvestSave customers.
3. Periodical Payment Instruction (PPI) Booster - customer will receive a free RM 10 McDonald’s voucher for the minimum amount of RM 200 monthly PPI and above.
4. Max InvestSave + Why Wait (1-month tenure) Promotion - Invest in Max InvestSave and get cash upfront of up to 6.98%p.a. on new Why Wait 1-month tenure placements. The minimum combined amount for Why Wait and Max InvestSave is RM 25,000 with a fixed allocation of 60:40 (60% in Max InvestSave, 40% in Why Wait).

What are the catches

1. It is not capital protected if depositors make an early redemption prior to maturity.
2. Bonus unit is forfited is depositors make an early redemption prior to maturity.

Looking at the promotion especially the bonus unit and the latest RIV which is lower when compare during the introduction, I guess it is worth to try this investment. Bear in mind the this investment is introduce just before the stock market crash, so that explain why the current RIV is lower.

For me I already subscribe to this fund since the fund introduction & still eligible for bonus unit until 13th December 2009 as well. Will looking to do more topping up before the bonus unit promotion ends. Together with low RIV and bonus unit, it is very tempting.

More information about Max InvestSave investment & latest RIV kindly proceed to CIMB webpage.

What do you think about this fund?

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What is the real value of gold? Gold has industrial uses, especially in the electronics industry where it is used for electrical wiring due to its high conductivity. However, close to two-thirds of its demand is for jewellery, particularly in India and China.

Increasingly, it is being used again as a store of wealth as investors lose confidence in paper money, hedge against inflation or worry about economic and political turmoils. Other than buying physical gold, investors can invest in gold exchange traded funds (ETFs). SPDR Gold Trust, the largest gold ETF with a market capitalisation of over US$41bil, holds over 1,100 tonnes of gold.

Money could as well be in the form of sea shells and indeed Pacific islanders used sea shells as money. Before paper money, what constituted money came in many forms – sea shells, salt, leather, copper, silver and gold. Money was used as a store of wealth which could be used to purchase goods and services without resorting to barter trade. It was in the world’s oldest civilisation, Mesopotamia (in modern Iraq), where metal coins were introduced around 2500 BC. Gold is valuable only because it is perceived so in the collective psyche of the human race, hence its value is subjective and relative to other alternatives. To be valuable, something has to be rare and desired.

In all of history, only 161,000 tonnes of gold have been mined, barely enough to fill two Olympic-size swimming pools, according to a January 2009 National Geographic article. To be valuable and used as money, it has to be something durable. That would exclude fair maidens as their perceived value in the eyes of lustful men may diminish with age. Still, without the demand of gold from the fairer sex, its value would be much lower.

In Einstein’s theory of special relativity, time is relative to speed but if we apply the theory of relativity to the perception of value, the relative value of goods and services is determined by comparing the desirability of one versus another just as we compare the relative attractiveness of bonds, real estate, gold and stocks.

Even within the same asset class like stocks, we apply the relative yardstick – should we buy DiGi or Maxis? The relative attractiveness is determined by supply and demand, interest rates, growth and dividends for stocks, personal preferences and many other factors. The fact that the prices of stocks, bonds and commodities quoted on exchanges are so volatile is a reflection of not only genuine supply and demand but also human psychological factors which cause irrational exuberance or pessimism.

The Chinese introduced paper money during the Tang Dynasty (618-907) and with that they also invented hyperinflation when a large amount of paper money was introduced.

How does printing money cause inflation? In a simple hypothetical world where US$100,000 of paper money can only buy you a bar of gold or a house, doubling the paper money to US$200,000 does not create new wealth but merely causes the value of the bar of gold and the house to rise from US$100,000 to US$200,000, an inflation of 100%.

Wealth transfer

Printing of money merely results in a wealth transfer from the saver (who can buy less with paper money) to the government (as it can use the freshly created money) and borrowers (decline in the real value pf debt). Gold is perceived as an inflation hedge and a store of value. (See chart) Its price spiked in the late 1970s when the US and world inflation surged. The price is surging again due to diminishing confidence in paper money.

World governments are all undertaking fiscal stimulus to counter the economic slowdown. These large budget deficits eventually have to be financed by higher taxes but with unemployment in the United States at over 10%, politicians with an eye on getting re-elected may be tempted to print money to finance the budget deficits and bailouts.

Hence it is not surprising that with the United States, British and Japanese governments printing money, investors are flocking to buy gold or commodities which are a better store of value as their supply does not grow as fast as printed paper money.

The printing of money by the US government also puts other currencies at risk as over 60% of foreign reserves are held in US dollars. As the gold standard has been abolished, paper money cannot be converted to gold. No wonder the Indian government has decided to sell some of their US dollar reserves for gold. Perhaps the currencies of larger countries like Australia are relatively safer as they are sitting on large yet-to-be-mined gold reserves even as their US dollar reserves lose value.

So, should the fair price of gold be relative to paper money? Though the value of gold may be subjective in the minds of investors, the reality is that the amount of gold in the world is finite, but there is no limit to the quantity of paper currency which can be issued.

Therefore it is not surprising that the value of gold is at a record high as more money is being printed. All this is premised on the assumption that we will continue to treasure gold, which is likely to be the case as we have done so for millennia.

Choong Khuat Hock is head of research at Kumpulan Sentiasa Cemerlang Sdn Bhd

Source : The Star

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Subsequent to the launch of a number of put warrants by AmInvestment Bank and OSK Investment Bank Bhd recently, much was said about structured warrants. This article will attempt to provide more insight into the product itself and its potential in Malaysia.

What is a call and a put?

Calls give you the right to buy a share for a determined price (called the strike price) at a determined date. For example, a call warrant may give you the right to buy one share in ABC for RM1 on June 18, 2010 (that RMI figure is the strike price).

If you buy the warrant, and come mid-June 2010 ABC's shares are trading at RM1.20, you can exercise your right to buy the shares at RM1 apiece, and then sell immediately at the prevailing market price of RM1.20. If ABC's shares fall to 80 sen on June 18, 2010, your warrant will be worthless. Why use your "right" to buy at RM1 when anyone can buy at 80 sen on the open market?

Puts work in the reverse. Here, the warrant gives you the right to sell a share for a given price on a given day. For instance, say the issuing investment bank offers a put on XYZ shares that expires on June 10,2010, at RM2. So when you buy that put, it gives you the right to sell XYZ shares at that price in eight months' time, regardless of what the market price is for the shares. You may buy a put warrant if you are bearish about XYZ's prospects and think it will move below the strike price. If you are right, then on the expity date you could buy the shares on the market. ootenuallv for RM1.80 each and then use your right to sell at RM2. Warrants are typically settled in cash. This means that if you hold the warrant until expiry, you immediately get the cash equivalent of the transaction (RM2 minus RM1.80).

What are structured warrants?

Ordinary warrants (sometimes referred to as company issued warrants) are issued by the underlying companies themselves, often in conjunction with a fund raising exercise. For example, YTL Power issues call warrants on its shares at a strike price of RM1.20 which expires on July 11, 2018. As the warrants get exercised, they will be converted into new shares resulting in an increase in the company's shares.

Structured warrants are not issued by the underlying companies. They are instead issued by other issuers (like investment banks, such as OSK, AmInvestment and CIMB). The exercise of the structured warrants will not have an effect on the number of shares in YTL Power.

Intuitively, with structured warrants in the market, the investor with limited capital will have a wider choice of companies to invest in for speculation or hedging.

The term "structured warrants" seems to be used only in Malaysia: in the UK, they are referred to as covered warrants. Covered warrants have some additional features. Bid-offer spreads on the warrants are dictated by the stock exchange rules and they are quite strict on how wide they can be. The maximum is 10% (or 1p in the UK). Investors sell the warrants back to the issuer at the offer price that is always in existence.

This is possible as the warrant issuer always hedges its exposure one way or another, so the potential losses for the issum. are "covered. The pricing of the covered warrants is based on a standard model,such as the Black Scholes model used by market practitioners. In essence, covered warrants manage to overcome the problem of liquidity and pricing in the market.

How are traded options different from structured or covered warrants?

A warrant is a kind of option, only with higher liquidity and is relatively safer. From the liquidity aspect, one can sell the (covered) warrant back into the market at any time. With a traded option, you have to go through a specialist, who then searches for liquidity.

In traded options, investors can buy or sell the call or put. The main concern is when the investor sells the call or put, he is taking a huge risk as his downside is not limited.

To illustrate, a buyer of a call has unlimited upside when the price of the share is more than the strike price. However, his downside is limited to the premium he paid when acquiring the call. No matter how the share price falls, be only loses the premium paid. The seller, on the other hand, has a limited upside (the call premium) but unlimited downside when the

share price rises.

In structured warrants, investors are only permitted to buy, not sell. This ensures that the investor's downside is limited to the premium paid. The issuers are always the sellers.

Another security feature of structured warrants is that it is automatically exercised when it expires (it may be worthless or worth something at expiry), regardless whether the investor

does anything.

In essence, structured warrants are designed to be more liquid and safer as they are aimed at the retail investor, while options are targeted at institutional investors.

Future potential for structured warrants

There is a promising future for structured warrants in Malaysia as the underlying equity market

picks up and retailers get more active. Some improvements in the bid-offer spread and the pricing might be needed for discussions between the issuers and the stock exchange.

But with every promise, there is an underlying risk that needs to be understood by the savvy investor.

Source : The Edge

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Malayan Banking Bhd’s has launched a new capital protected investment plan called 1Malaysia Momentum (M3) Structured Deposit. It is a capital-protected investment plan for investors seeking potential gain regardless of the market conditions. The targets fund size is RM100mil. Closing date for the M3 is Dec 31, 2009, or earlier if fully subscribed.

The M3 is a five-year investment product issued by Maybank via floating rate negotiable instruments of deposit (FRNID) that comes with 100% capital protection if the FRNID is held to maturity or autocalled.

The product is offered to investors at a minimum investment of RM65,000, with additional investment in multiples of RM5,000.

This new product is based on a strategy represented by the 1Malaysia Momentum (M3) Index, which provides investors with the opportunity to gain exposure into underlying assets that are closely related to the Malaysian economy.

Malaysian equities is one of the underlying assets and commodities together with five commonly-traded commodities – crude oil, gold, natural gas, cocoa and palm oil.

This structured deposit aims to provide investors with consistent returns, irrespective of market conditions, where the strategy is expected to benefit from both rising and falling markets.

M3’s unique feature also offers investors with three chances to receive potential returns as long as the M3 Index performs above the initial index level or when it terminates early due to the autocall feature.

The autocall feature allows for early termination of the investment, thus enabling investors to enjoy gains earlier than the maturity tenure.

The principal amount is not guaranteed in the event of early redemption and the redemption amount will depend on the indicative bid price of the investment at the time of redemption in accordance with the prevailing market conditions.

Kindly proceed to Maybank webpage for more information.

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Hong Leong Bank recently re-launched Essential Credit Card which they firstly introduced a few years back. However, Hong Leong Bank stopped issuing it until the recent re-launched.

Hong Leong Essential Credit Card combines the best features of every credit card so you can enjoy the best of both worlds-the benefits of having multiple cards and the convenience of carrying just one.

The main benefit of Essential Credit Card are 1% unlimited cash back, low fee of 2% on cash advance, higher credit limit and Free for life.

The 1% unlimited cash back is on any purchase and has no maximum. To eligible for free for life annual fees, card holder have to spend twice a month or RM8,000 a year.

To apply for the cards, the minimum annual income is RM30,000.

In conjunction with the re-launched, from now until 14th February 2010 Hong Leong Bank is doing a promotion where new Essential Card Holder who apply during during the promotion period will enjoy,

• 6 months balance transfer at only 1% pa
• 6 months Flexi Payment Plan at only 1% pa
• 1 year annual fee waiver if the card is used within 45 days after card approval date.

For more information kindly proceed to Hong Leong Bank webpage.

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Bank Islam Malaysia Bhd launched a new Islamic structured investment product called Ziyad NID-i. This is the second Islamic Structured Investment by Bank Islam Malaysia Berhad. Ziyad NID-i is a 5 year investment in the form of Islamic Negotiable Instruments (INI) based on the concept of Mudharabah Muqayyadah.

Ziyad NID-i is designed for investors who hold the view that Asia’s equity market will recover in the medium-to-long term.

Ziyad NID-i will be invested in a basket of six stocks that are expected to benefit from massive stimulus plans undertaken by various Asian governments. The stocks are China Mobile Ltd and CNOOC Ltd from China, Panasonic Corp, Canon Inc and KDDI Corp from Japan, and Australia's BHP Billiton.

Some of the monies will also be invested in sukuk and Islamic money market securities to ensure profit.

It is anticipated that investors should receive a minimum profit of 7.35 per cent over the whole investment period, or about 1.47 per cent per year if held to maturity. Investors may potentially get higher yields up to the maximum of 22.50% additional Conditional Profit, depending on the performance of the chosen stocks.

The indicative Conditional Profit of 22.50% is based on the exchange rate between USD and MYR that are unchanged throughout all period

The minimum investment in the product is RM65,000 and subsequent investments are in multiples of RM5,000. The fund offers full capital protection upon maturity.

Individual who invest in this product did not require to pay Zakat on their investment as the Bank pays business Zakat which includes customers’ deposits that have become capital for the Bank’s business activities.

The Profit Sharing Ratio for Ziyad NID-i structured investment is 99.9% to the Investor and 0.1% to the Bank.

For more information kindly proceed to Bank Islam webpage.

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