No Point Diversifying?

There are still some who think it is worthwhile to diversify their stock holdings into various countries. If we were to look at the falls from highs to lows during the subprime crisis (USA) in 2008-2009, and the recent sell down owing to the Euro-crisis (July till now), there is really nowhere to hide.



The drop from highs to lows during the USA Subprime mess:

AMERICAS

United States (SPY): -47%

Canada (EWC): -54%

Mexico (EWW): -59%

Brazil (EWZ): -59%

Chile (ECH): -51%

Comment: The US markets actually held up pretty well, it is their neighbours that fared poorly. I guess if you are smallish and is largely dependent on trade/tourism/consumption by the bigger affected country, you will be marked down heavily.

EUROZONE

Germany (EWG): -54%

France (EWQ): -51%

Italy (EWI): -60%

Netherlands (EWN): -57%

Spain (EWP): -57%

Austria (EWO): -64%

Belgium (EWK): -62%

Comment: Surprisingly, Europe fared a lot worse that the US. There could be a multiple of factors, some of the subprime mess did occur in EU nations and a large number of big EU banks were involved as well. However, methinks the biggest pull down must be due to a selling of equity positions to stem the tide of outflow of funds to compensate those who withdrew monies from managed funds. Again, the smaller you are, the bigger the hits (Austria, Belgium, Italy).

EUROPE

United Kingdom (EWU): -53%

Switzerland (EWL): -44%

Sweden (EWD): -50%

Russia (RSX): -74%

Comment: Herein lies the big difference for countries which chose NOT to be in the EU. They did remarkably better. Yes, they did not have as large a banking exposure (even though UK did) but each country gets their report card assessment based on their own economics and their ability to adjust and tweak their financial levers - something the EU countries could not do so easily. Russia is a completely different kettle of fish of course.

MIDDLE EAST AND AFRICA

Turkey (TUR): -66%

Israel (EIS): -40%

South Africa (EZA): -53%

ASIA

China (FXI): -52%

Japan (EWJ): -39%

Hong Kong (EWH): -48%

Taiwan (EWT): -46%

Malaysia (EWM): -34%

Singapore (EWS): -53%

South Korea (EWY): -57%

Australia (EWA): -54%

India (EPI): -54%

Thailand (THD): -51%

Comment: Most also will fall in tandem. Japan fell the least, probably because it was already falling for the past 15 years and did not really perk up prior to the crisis. Plus the yen was seen as the next best safe haven after the USD. Malaysia fell the least after Japan, wonderful fundamentals? I believe it says a lot about the "lack of foreign institutional investors" in Malaysian stocks. Secondly, the way big local funds have been controlling more and more of the indexed stocks. Both are highly not positives.

The drop from highs to lows from July 2011 till now:

AMERICAS

United States (SPY): -21%

Canada (EWC): -28%

Mexico (EWW): -27%

Brazil (EWZ): -34%

Chile (ECH): -37%

Argentina (ARGT): -41%

Colombia (GXG): -23%

Peru (EPU): -25%

Comment: The Euro-crisis is just dragging along everything.

EUROZONE

Germany (EWG): -38%

France (EWQ): -36%

Italy (EWI): -39%

Netherlands (EWN): -30%

Spain (EWP): -32%

Austria (EWO): -44%

Belgium (EWK): -29%

Ireland (EIRL): -27%

EUROPE

United Kingdom (EWU): -23%

Switzerland (EWL): -23%

Sweden (EWD): -34%

Russia (RSX): -42%

Norway (NORW): -35%

Poland (EPOL): -41%

Comment: This time around a Euro-crisis will drag also those which chose not to be in the union, so the markets are affected whether you are in it or not, at least the country would not be burdened with "funding the bailout".

MIDDLE EAST AND AFRICA

Turkey (TUR): -33%

Israel (EIS): -32%

South Africa (EZA): -25%

Egypt (EGPT): -38%

ASIA

China (FXI): -34%

Japan (EWJ): -19%

Hong Kong (EWH): -30%

Taiwan (EWT): -26%

Malaysia (EWM): -23%

Singapore (EWS): -30%

South Korea (EWY): -34%

Australia (EWA): -28%

India (EPI): -33%

Thailand (THD): -32%

Indonesia (IDX): -58%

New Zealand (ENZL): -24%

Vietnam (VNM): -26%

So, there is really no good reason to diversify anymore? I guess you must still diversify, but NOT across countries. You need to diversify and pick the industries. If you are in developed nations banking, you are dead. But if you are in palm oil, you are still OK.  Diversification has a lot more to do with the industries you select rather than the countries you invest in. 


The other thing to remember is that correlation will be very high during the initial weeks and months of extreme volatility, investors will only try to distinguish between valuations proper after the volatility has subsided.



Diversification for currencies exposure, thats a potent subject. I think its only worthwhile to consider that if your portfolio is more than a couple of million USD. Safest havens: the HKD, the SGD, the Ringgit. HKD because it is still stupidly pegged to the bloated USD, thus undervaluing the real HKD effectively. Very soon, they will have to switch the HKD peg to a basket of currencies which will include the yuan, the euro and the yen - which in effect will be a sizable revaluation.

Liquidity Creeping Into The Markets

One sure fire way to anticipate a bull run is access to liquidity. I have been hearing this more than a couple of times over the past two weeks, bankers are flying in from Singapore and HK to offer decent loans to listed corporations at highly undemanding rates.



The last 6-7 years saw much of the liquidity in Asia gravitating towards supporting property loans. Hence equity markets did not get much of a boost from the excess liquidity in the system. There has been a dramatic shift in property outlook in HK, Singapore and Malaysia. Most have gone neutral or hold from buys. What that means is that banks are too flushed with liquidity and have to keep them working.

Local banks are doing the same but apparently the foreign banks are a bit more aggressive. Ringgit loans of RM50m to RM300m can be had at 2% or 3% below BLR. The juiciest one is USD loans can be had at just 0.1%. Many of the top tier companies do not really need the funds, so the bankers are going second tier and soon I think not so blue companies as well.


The natural chain of events would be that once they take the loans, they have to put it to work, usually expansion or asset acquisition, hence more corporate developments. I see this as the beginning of a bull run cycle and it would probably take another 2-4 months to ripen.


Liquidity is a massive force in charging a bull run. You have been warned.

My Favourite Japanese Restaurant In KL

To try to award a place as my favourite Japanese restaurant is a very tough ask.  There are so many decent places. Coco Tei (formerly Hajime) is right up there, especially for sushi and other creative stuff. Others that I strongly favour include Jyu-Raku at Subang (original co-owner of Rakuzen), I guessed the owners differed on whether to expand. To me, Rakuzen makes the owner a lot of money by opening numerous outlets, but for pure service, attention to detail, its the sole standing Jyu-Raku heads and shoulders above Rakuzen. 





Zipangu tries too hard, everything does not come off well and the service staff needs tweaking. Kampachi is too staid and predictable. Hanare @ The Intermark is doing most things right ... change the chopsticks dude for those prices.

After all that diatribe, my favourite Jap place does NOT serve sushi, no chawanmushi, no black sesame ice cream, no green tea ice cream, even wasabe is not on the table, no bloody dragon roll ... Having worked on and off in Tokyo for 3 years early in my career and been back there 4 more times since, I think I know a bit about Japanese food. So, its surprising as well to nominate a yakitori place as my favourite Jap place, as yakitori is a humdrum, low-end class of cuisine in Japan.


The word sumika translates to residence or habitat, and thats precisely apt indeed.

 The chef is a jolly guy named Kiyoshi Ota, and the rest of the staff are locals except for one Japanese girl. There are smoking and non smoking areas, but the place to sit has to be the counter surrounding the grill and the chef. Must book or else be prepared to be disappointed.


See that green bottle of sake, its a limited edition bought by the chef for a few select customers (ahem) from the countryside of Nagasaki where he hails from. 

I love the place because it has a very healthy drinking environment - healthy in the sense that you will find the majority of the patrons already having a big bottle of sake or sochu on their table. Thats the way to enjoy yakitori, with good company, great food served with sincerity and the drinks to go along with it.


You can get the best food served to you but the atmosphere must be right. Plus when you drink, everybody usually turns more than jolly. At least half the patrons are Japanese, it used to be three quarters but the locals have been discovering the place lately.

If you are not familiar with sake or sochu, just ask them to recommend a bottle, most will keep their bottles at the premises - they are not expensive, they range from RM120-RM200 a bottle. I think I have almost tried every single bottle that they have, except for 2.


As I am there at least once or twice a week, many local diners make the mistake of not knowing what to order, and they end up with the safe types, which is not really spectacular. Here are my list of MUST HAVE items:

The beef is very good (gyuniku, don't have it with miso sauce, plain), the gizzard is very good so is the liver (don't think of our local gizzard/liver taste, they are taken from much younger animals and hence taste a lot cleaner) ... but my favourites:
- the eggplant, brilliant with freshly chopped ginger and a delicate soya/sake sauce
- the Japanese sweet potato with butter and salt, you would think its boring but its heavenly
- nankotsu, chicken soft bone cartilage
- shishito, Japanese green chillies
- beef tongue
- the fantabulous beef tendon (ngau gun)
- plain roasted garlic and quail eggs
- grilled rice cakes with soy sauce, better than it sounds
- this final item is my top dish from Sumika, Tsubudai pronounce it correctly and get knowing glances from the chef and staff. I have asked before but no one knows the English name for the fish. Its grilled, its expensive at RM56 for half a side of fish thats frozen not live ... but its the sweetest tasting fish on earth with wonderful natural oils running through it and the crispy skin is to die for ... remember Tsubudai!!! (cher-bu-die)

Ask the wait staff for things not on the menu, you would be pleasantly surprised, they do an interesting grilled pig trotters, and the chicken blood vessels is hard to get (actually vessels near the chicken's heart) ... and the aficionado's only bonhiri (chicken's most southern part).


An Important Tip: DON'T ORDER EVERYTHING AT ONE GO, THAT'S NOT HOW TO ORDER AT A YAKITORI PLACE. ORDER 3 ITEMS OR SO ... FINISH, DRINK A BIT ... ORDER AGAIN, DRINK A BIT MORE ... ORDER AGAIN, DRINK A LOT MORE ... BREAK IT UP AT LEAST 3 TIMES. THIS WAY FOOD WON'T GET COLD, PLUS THE EXPERIENCE OF YAKITORI IS TO YAK-EAT A LITTLE-DRINK A LOT-YAK SOME MORE-ENJOY THE ATMOSPHERE-CHAT WITH STAFF-DRINK SOME MORE ...




Oh ... cash terms only, no credit cards ... dude, thats cool man... fucking piss me off nowadays where almost every restaurant in town will have special discounts with certain bank's cards, now unless you carry the 6 top banks plus Amex, you end up feeling shortchanged when you don't have the "right card" ... its getting to be ridiculous. You want to really get people to own your bank's credit card ... do this, when you use XYZ Bank's MachoVirile Card you get 10% off all your utilities bills... gas, phone, electricity ... now that card I want!!!

Sumi-Ka
19, 1st Floor
Jalan SS15/4
Subang Jaya
(only dinner from 6pm-11pm; closed on Mondays)
Reservations: 03-56329312 / 016-2249312