Category Archives: Investment

Investment, Personal Life

An analysis of CIMB’s Daily Trading Ideas

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Sometime this year CIMB Securities started sending me a Daily Trading Ideas report every day by email. They’ve been touting it as investment advice that is immediately actionable. Now, CIMB’s analysts’ reports have a rather poor reputation and are often the subject of mockery on the LYN investment forum, mainly because of their extremely optimistic price targets assigned to stocks. But it’s hard to objectively assess how wrong they are since in theory it is perfectly possible for stock prices to deviate from what they ought to be worth even across extended time frames.

Technical analysis is a different matter. I may not know much about the subject and I certainly don’t know how to do it, but I do know that its supposed to predict market movements in the very short term based completely on momentum factors that are not directly connected to stock fundamentals. This means that it should be possible to assess the accuracy and usefulness of their stock tips. To be safe, I collected price information for their stock picks for the Malaysian market only for 21 days following the publication of each report beginning in around July 2015.

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Investment

Malaysian equity funds consistently beat the index

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One of the most common ways that people arrive on this blog is apparently by searching for Malaysian index funds to invest in. Many more visitors than usual have arrived in recent weeks, no doubt due to the current volatility in the market. Apparently my two posts on the subject, this one and this one, rank quite highly on Google when these keywords are used. It is also evident many of these people, no doubt having read research about how index funds due to their low costs are better over the long run, are interested in finding more information about Malaysian index funds.

My own conclusion is not to bother and in fact empirical data indicates that the top equity funds in Malaysia really can beat the KLCI over the long term, even after costs. For example, working with the database available at Fundsupermart.com.my, I extracted the following for its recommended Malaysian equity funds. Note that all of these are annualized returns:

Recommended Malaysian Equity Funds at FSM

Fund Name1 Year2 Years3 Years5 Years10 Years
FBM KLCI-4.25%6.63%6.11%6.724%6.911%
Kenanga Growth Fund12.36%9.52%17.748%20.404%15.843%
Eastspring Investments Equity Income Fund4.47%7.15%15.109%14.835%10.837%
Kenanga Syariah Growth Fund0.01%7.73%10.921%15.395%13.372%
Affin Hwang AIIMAN Growth Fund0.01%10.10%14.061%12.828%10.038%

As a rationalist, it does frustrate me that such seeming anomalies exist. Not every equity fund outperforms the index, but as far as I can tell, most actually do over the long term, which is surprising according to the literature. I don’t pretend to know how this can be possible and I’ve already discussed some of the possible reasons in those old posts. But it’s hard to escape the conclusion that the Malaysian stock market must be very inefficient at uncovering market information.

A disclaimer: currently I am not personally an investor in any of the funds listed above. I do invest with FSM but only in their international funds. I instead have Malaysian equity funds in Public Mutual for legacy reasons and invest in the local stock market on my personal account. My data for my personal investing record is limited but a preliminary indication is that I outperform the KLCI as well but underperform the best equity funds.