Short Position - Retail investors

Retailers made up around 40% of total trades this week, with daily buying in the region of between RM1.5bil to RM2bil. But the amount retailers are selling is similar to their buying, indicating a large presence of day traders.

Retail investors

The current stock market run, dominated by interest in stocks claiming to benefit from the coronavirus outbreak, has a strong retail participation.

Retailers made up around 40% of total trades this week, with daily buying in the region of between RM1.5bil to RM2bil. But the amount retailers are selling is similar to their buying, indicating a large presence of day traders.

No wonder Bursa Malaysia Bhd shares are up around 10% this week alone, likely due the increased trading volumes.

Where is all this money and interest coming from?

After all, shouldn’t investors be worried about the looming economic slowdown, if not a global recession of epic proportions?

One wonders if the high retail participation on Bursa Malaysia has got anything to do with the fact that punters have not been able to make their track up to Malaysia’s only casino in Genting Highlands?

This is because the casino is still closed under the conditional movement control order (CMCO). Recall also that all number forecasting operators have ceased their operations. So there is a possibility that some of the liquidity that used to flow into those betting outlets have found their way into the stock market.

If so, it is hoped that these investors take the time and effort to analyse more the background of the companies they invest in. Investors ought to keep track of developments in those industries and company’s earnings numbers as well as the guidance that they sometimes give.

Reading analyst reports is also a good idea along with keeping abreast of daily news flows from credible sources. One final piece of advise: buying companies when they are trading relatively cheaply is a cornerstone of long term investing.

Getting confidence back is key

When Malaysia announced its first quarter GDP number of a growth of 0.7%, there was a temporary sigh of relief.

Avoiding a negative number for the quarter meant the country will stave off a recession for now but it was no more than cosmetics on the ongoing problems caused by the Covid-19 pandemic globally.

The second quarter will be bad. A contraction if forecast and going by what we are seeing now locally and globally happens, then there is very little chance of avoiding a recession altogether.

But the third quarter will be key in terms of signals of a rebound. Malaysia has a sliver of a chance of avoiding a recession if third quarter numbers hold off a contraction when all of the containment efforts by the government will basically kick in.

Right now there is little confidence among consumers for that to take place.

People are generally reluctant to spend and if they are willing too, they have to put up with long queues and registration before entering premises to buy goods.

Using technology should be the focus here as that will eliminate the hassle of physically filling up a form before making any purchase or even browsing through a shop.

The government is aware of the loss of confidence and that is equally as important as fiscally pumping in cash into the system.

If people do not have the confidence to start buying then the economy, which is basically 60% based on consumption, will take a hit.

What needs to happen is to make Malaysians feel secure enough to venture out and start buying. The efforts with contact tracing should be seamless and people should feel that. Shopping or buying experience, even after adjusting for the new normal, should reflect as much as possible past encounters when making purchases.

Then there is the export market. Until that recovers, Malaysia will have a hard time addressing the economic woes. That too goes with business confidence to start investing in creating opportunities and jobs by companies.

Restarting the economy is just the start towards normalcy for the country.

There is always the threat of a rise of infections again and Malaysians have to be extra vigilant to ensure that the troubles that landed us in this predicament are well contained in order to rebuild the economy back to a decent level of effectiveness.

Yee Lee’s second attempt

It is not unusual for major shareholders to fail in their attempt to take a company private in the first attempt. If they do not succeed, they would make another attempt – with a higher price.

However, the exception seems to be Ipoh-based Yee Lee Corp Bhd, the edible oils producer and distributor.

Just about a year ago in April 2019, the company together with a Singapore-based fund made a general offer to take Yee Lee private at RM2.33 per share.

Yee Lee owns 30.27% of Spritzer Bhd, the mineral water producer and distributor.

The distribution network of edible oil and mineral water was a venture any private company would want to have a stake in.

It offers a distribution network that runs wide and to every nook and corner of the country.

At the launch of the offer, the major shareholders of Yee Lee already had 47.9%.

To take the company private, they needed to get the acceptance of the 90% of the remaining shares they do not own.

Yee Lee together with the private fund, Langit Makmur Sdn Bhd, ended up with 89.94% of the company, falling short of the 90% threshold.

If the acceptance had touched 90%, Yee Lee would have been suspended for not fulfilling the public spread and the remaining shareholders would most probably have given up.

Earlier this week, another attempt was launched to take the company private.

The major shareholders together with Langit Makmur, made an offer for RM2.06 per share for the remaining 10.06% it did not own. What’s puzzling is that the offer is lower than the earlier offer of RM2.33.

A day after the offer on May 12, the company received acceptances to the level of 90.08%. In the next few weeks, in all probability, the remaining shareholders would accept the offer of RM2.06 sen per share.

This is probably one of the few times when the major shareholder gets a bigger hold of the company by offering a lower price than their previous privatisation attempt.

The question is why were the remaining shareholders, holding the 10.06% block, holding out for so long?

And would they accept the latest offer which is lower than the previous offer?

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Rtail investors , Bursa , economy , Yee Lee , takeover ,


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