Dear fellow readers,
Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :
Website / Blog : http://www.tradeview.my/
Facebook : https://www.facebook.com/tradeview101/
or Email me to sign up as private exclusive subscriber : tradeview101@gmail.com
Telegram channel : https://telegram.me/tradeview101
__________________________________________________________
31st
August 1957 will always be a historical and meaningful day in the
hearts of all Malaysian. Whenever I see the chants of Merdeka by Tunku
Abdul Rahman, there is a feeling of nostalgia and great pride that
flutters in my heart. I am not able to explain that emotion. It closely
resembles the moments when I witness our Malaysians athletes competing
at Olympics.
I
have much admiration of the leaders and founding fathers of our
country. The hardship and journey endured to bring up a small diverse
nation like ours is extremely difficult. What makes it harder is
liberalising the country from the shackles of colonisation of the
British Empire and forging an uncertain future. Here we are now 2020,
the start of a new decade where the world is divided, volatile and
fearful in the face of Covid-19 pandemic, Trade War between US &
China and protests raging on in various parts of the world. Will there
be a resolution to these issues we are facing?
A
global pandemic of this scale was not what I imagined how the new
decade would begin. Domestically, a change in government mid way through
a 5 year term was a rude awakening. Then came the global lockdown of
unprecedented speed to contain the pandemic came underway. This showed
the resilience of mankind. No matter what challenges were thrown at us,
we adapt.
KLCI
Index was trading at 1554 points as at 2nd February 2020, it then
plunged to a low of 1207.8 points on 19th March 2020 before rebounding
to a high of 1618 on 29th July 2020 and settling at 1525 as of 28th
August 2020. What a roller coaster ride for the market and investors.
We
have witnessed records being made as well in KLCI with the highest
every retail participation for the year. Bursa volume hit record high
on 11th August 2020 with 27.8 Billion shares traded whilst Bursa value
hit record high on 4th August 2020 with 10.45 Billion. August 2020
was even a Bursa historical record high in volume and value for the
month with 264 Billion units traded and RM 128 Billion value traded. What
does this signify? Well, if any investors were able to buy / invest
shares during the March plunge and hold it through to August months,
they would probably have made one of the best returns from the share
market in their lifetime. At least for me personally, I can say, this is
the best year in investment returns in the shortest span of time since I
started investing my first dollar.
I
would bet my dollar that 90% participants in the share market must have
invested or held gloves stocks at any one point in 2020. Most would
make money. Similarly, I would also bet that the number of those
invested in gloves stocks have reduced following the onslaught of
negative news flows from Russia's Covid-19 Vaccine, Maybank's Windfall
Tax Research Report, AmBank Downgrade of Glove Sector to Neutral, JF
Apex Cutting of Gloves Stocks Target Price, Bloomberg Negative Comments
on Profit Taking from Fund Managers and so forth. This would have cause
substantial anxiety to other investors who are still holding on to the
Glove stocks. With MSCI Inclusion, Bonus Issue and Top Glove results in
mid September, those who are invested must have a deep conflict whether
to continue holding or just lock in profit and move on. At least, I have
received the plenty of questions on this.
I
have written on the Gloves Sector extensively before. I wont repeat
here in detail, for those who missed it, you can read it here again : http://www.tradeview.my/2020/06/tradeview-2020-in-conclusion-is-glove.html
The
Glove Sector was not built overnight. Today, Malaysia controls 65% of
world supply with the next country being Thailand & then China at
18% and 10% respectively. Malaysia's industry developed through sheer
competitiveness, innovation and entrepreneurial spirit. In short, it is
real "Kung Fu", not fly by night con job tactics. The Glove Sector is
also not the face mask or PPE sector. It is not easily replicated, it
has high barriers of entry and there is no supply glut / potential
supply glut. Unlike Face Mask & Covid-10 test kits :
Ex : face mask has a ceiling price which the government revised multiple times downwards. There is a supply glut in China.
Ex
: Covid test kit is now affordable and fast with the latest being from
Abbot Labs which cost only $5 per test kit which gives results in 15
minutes.
Hence,
it is right for investors to be fearful if they have chosen to invest
in companies that ventured or announced MOU on producing face mask /
distributing Covid-19 test kits. The same is not applicable to Gloves.
The industry consolidated from 300 players in the 1990s to only about 40
players today in Malaysia with 20 world class suppliers. The industry
went through intense R&D innovation with little support from
Government, safety & quality standards certification and goodwill
building with clients globally. Even the sector as a whole has evolved
from vinyl plastic gloves to latex gloves to nitrile gloves. We all know
Nitrile Gloves are what set us apart from our Thai and China
counterparts. The king of Nitrile Gloves are right here in Malaysia -
Hartalega, Riverstone, YTY, Kossan, Supermax and Top Glove.
Gloves
Sector is the only true bright spot in KLCI. It is also the glove
stocks that single handedly lifted our index back to positive territory
with substantial weightage today. Who would have thought that gloves
(which is sold $10 sens per piece) would surpassed banks, casinos,
plantation, utilities, telco, consumer and tech stocks in both value and
volume invested? Hence this is why, Malaysia has a something unique to
offer to the world which cannot be found elsewhere. Gloves did the
extraordinary and placed Malaysia in global stage - for the betterment
of mankind in the fight against Covid-19 pandemic. Personally,
I am happy to root for the run to continue not only because I am
invested but because this is one the rare occasions that Malaysia has a
significant role to play in contribution towards mankind &
humanity.
Decision - To Take Profit or To Continue Riding?
I
think before making any decisions, one must always know what is the
pros & cons. This must be done in light of your own personal
situation / background and recalibrate that fact with the pros &
cons before deciding. One should not blindly follow newsflows. Just as
there are good analysts & lousy analysts, there are also competent
& incompetent fund managers and there are accurate newsflows &
inaccurate newsflows too. Also, please do not listen to tips or follow
prominent investors. You
must consider holistically before deciding making your investment
decision. I will share a few simple example which I hope can shed some
light on making the right decision :
1.
If you have substantial position invested in Gloves, you can consider
taking 50% profit and ride the balance. This way you can protect your
profit and enjoy the potential upside as well without having to run the
full risk along the gyrations and volatility.
2.
If you do not have a meaningful size in Gloves, you can consider to
just continue riding all the way past Bonus issue and into the future
quarterly results. This is because your position is small to make a dent
in your overall portfolio, there is no harm riding.
3.
If you have invested early and sitting on substantial profits (profits
you have never experienced in your life), you are contented with the
profits and do not want to stomach the risk of gyrations, then please
sell all your holdings and enjoy the fruits of your investments.
I was
reading an article from a local newspaper over the weekend equating
gloves with face mask & PPE, calling it game over for Gloves. This
is the ignorance of people in position to influence market participants.
There will be even more such negatives newsflows along the way. For
me, I am of the view that the market has not fully understand the
impact of the earnings of the Glove sectors. Currently, with only 2
quarters into supernormal profits in an unprecedented global pandemic
with future earnings lock in for at least another 4 quarters, whilst the
entire economy is in shambles, it is too early to throw in the towel.
_______________________________________________________________
Telegram channel : https://telegram.me/tradeview101
Website / Blog : http://www.tradeview.my/
Facebook : https://www.facebook.com/tradeview101/or
Email me to sign up as private exclusive subscriber : tradeview101@gmail.com
Food for thought:
