Monday 7 July 2014

A note to readers

Thank you for your comments, feedback and interest on this blog. You would have noticed that the blog is less active lately.

We have been working on a new project, incorporating news, big data technologies, and anticipatory analytics to enrich your knowledge of the capital markets.  This is consistent with the vision of The Edge - Enriching Lives!

We expect to showcase this by August this year. By then, this blog will cease and I will continue to write in the new platform.

From now, other than the short synopsis of certain articles from The Edge, this blog will focus on the stock market, in particular my sharing with you on my trading portfolio.

I must emphasize that it is by no means a recommendation or a solicitation or expression of views to influence you to buy or sell any stocks. I am just sharing openly on what I am doing with my stock portfolio.

Those who have followed this blog will know that we are cautious on the stock markets given the relatively high valuations driven by excess global liquidity.  It gets increasingly difficult to invest long term.  My shift in emphasis is to explore potential shorter term opportunities, reflecting my personal opinion.  I will also try to find relatively better-valued investments.

Further, I like to remind all investors that investing is not just about the profits or returns. You will inevitably suffer stock losses too. You need to understand your own investment objective, risk appetite and the amount of loss you can afford to bear.  So, while many investors talk only about absolute returns, I will also share the computed risk-weighted returns of my portfolio.

Enjoy and share with me your thoughts and ideas too.

Tong Kooi Ong 

Friday 4 July 2014

The ODD mathematics of The World Cup

The recent second round playoff matches of the FIFA World Cup in Brazil have been very exciting,  with many of the deciding goals scored in the very last minutes of the matches, and often during overtime.

Two of the eight matches were decided by penalty shoot-outs, which were by themselves nail-biting. This included the match won by Brazil where Neymar scored the decisive penalty against Chile.

As a compulsive analyst, I was intrigued by the mathematical probabilities of the results of the playoff  games. Here are some of my observations:

    1. Using the pre-game betting odds as the indicator of the favorite team to win each match, I found that every match was ultimately won by the favorite team. What is interesting, however, was how the matches were won. 
    2. Of the eight matches played in the second round, five of them were won by the strong favourites as per the pre-game betting odds indicated in the table. These five winning teams were Argentina, Germany, France, Brazil and Belgium. But surprisingly, only one of the five matches (France versus Nigeria) was won during the 90 minutes of regulation (plus injury) time.  You would have thought that all the heavy favourites would have been able to win after 90 minutes. 
    3. By contrast, of the three matches where the odds were more balanced – meaning no clear favourites -  two of them were won during regulation time. The exception was the match between Costa Rica and Greece, which went into the exciting (for fans) but dreaded (for players and managers) penalty shoot out. 
    4. In the eight matches played, the average time to score a goal was 68 minutes during regulation time. Interestingly, it took only 13 minutes to score during extra time.
    As betting odds and payouts are different for the scores at the end of the 90 minutes regulation time, and for the final outcome - including extra time or penalty, if any – I wonder if the results of the second round matches can be a useful betting guide for the remaining matches of World Cup 2014.

    Looking at the pre-game odds for the quarter-finals, will the match between Brazil and Columbia and the one between Holland and Costa Rica go into extra time since both Brazil and Holland are strongly favoured to win?

    Well, as football fans are happy to say, the ball is round and anything can happen.

    Friday 27 June 2014

    Mid Year Review and Outlook

    In February, we published The Edge’s inaugural State of the Nation report, outlining our thoughts on the economy, stock market and key sectors. This was followed by weekly State of The Nation updates, where we track major economic and stock market trends.   

    This week, we review what has happened in the first half of 2014, and what lies ahead. 

    Many of our analysis and predictions have come to pass, and some are continuing to unfold. Malaysia’s high levels of large household debt have affected consumer spending, lending and the property sector. Corporate earnings growth has slowed and the Malaysian stock market has underperformed its regional and global peers. 

    However, our prediction that the stock market will weaken as liquidity is withdrawn due to the tapering of Quantitative Easing (QE) in the US, has turned out wrong. Or rather, the effect is being delayed by new events.

    Stock markets in emerging markets have continued to rise (although very modestly for Malaysia) due to newly introduced monetary easing measures in Europe and Japan, which have added new liquidity and helped offset the effects of the QE tapering exercise in the US. 

    The FBM KLCI is up a modest 1.2% this year to 1,890. 

    Will the uptrend continue? What lies ahead? We take a closer look at the economic and corporate prognosis including the impact on interest rates, currency, property, stock market and global liquidity.

    For the full report, read The Edge this week.