Sunday, 23 June 2013

Rogers, Malaysia, Enforcement and Volatility

According to this article in The Sun Daily, Jim Rogers made a 180 degree turn regarding investing in Malaysia:

Famed investor and co-founder of Quantum Fund, Jim Rogers (pix), took to the stage at Invest Malaysia 2013 yesterday to say that he is now back in Malaysia to invest and believes that the "positive dramatic changes" undertaken by Prime Minister Datuk Seri Najib Abdul Razak have put Malaysia on the right track.

"Malaysia is making positive dramatic changes. I am extremely optimistic about Malaysia and Asean. In fact I don't see any countries in Asean going the wrong way,'' he told a packed ballroom here yesterday.

.... Rogers had once said that he would never return to invest in Malaysia after getting burnt during the 1998 Asian financial crisis.

The problem with Malaysia is, that one can never be sure if changes are for real, or if it is all mere "sandiwara" (shadow play). Enforcement has been increased over the last 15 years, but hardly any big fish has ever been caught.

However, there might be some change lately. KiniBiz reported: "SC fines Naza brothers for Jetson affair":

The Securities Commission (SC) slapped a RM500,000 fine on SM Nasarudin SM Nasimuddin, SM Faliq SM Nasimuddin, and Ahmad Ibrahim last month, for failing to “carry out a mandatory offer for the remaining shares in Kumpulan Jetson Bhd”,

The article (full version only for subscribers) continued:

"The penalty is believed to be related to the brothers’ 2010 exit from Jetson, reportedly due to disagreements with other shareholders. The exit came a year after buying into Jetson via their private vehicle Superior Pavillion in August 2009."

"....This is not the first instance of failure to undertake a mandatory offer at Jetson, and ironically is preceded by a case involving Teh himself. In 2008, the Commission directed Teh [Managing Director and co-founder of Jetson] to disgorge his profits to a charity of his choice after failing to make a mandatory offer for the remaining shares in Jetson after acquiring control in the group."

Hopefully for the minority shareholders of Jetson it will be third time lucky.

I can't find any other link in the media to the above fine and reprimand, the link on the website from the Securities Commission can be found here.

It is very rare for Malaysia that VIP's like the Naza brothers are reprimanded and fined. So may be there is still hope for Malaysia after all, this looks like a step in the right direction.

If the fine itself (only a fraction of the company valuation) is sufficient is another matter. Punishment for blue collar cases are notoriously light.

The timing of Jim Rogers' bullish speech might however not be the best. In developed countries markets go up through the escalator and down through the lift. In emerging countries this is even much more true. "Hot money" can be reversed in an instant and both equity markets of emerging markets and their currencies will suffer. There is a lot of volatility lately which seem to indicate outflow of funds and heightened risk.

Bursa Malaysia was hit by six (quite good quality) counters that went limit-down this Friday at or near the close:

Bursa Malaysia responded that the orders were "valid and genuine", but who in his or her right mind would dump shares like this?

"Where is Ze Moola" finds it nonsensical trades and I have to agree with that. Even stranger is that 2 other counters (The Star and JCY) were traded up that day.

Monday will give a more clear picture what is going on.

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