Moving on...

Dear readers,

I have decided to merge my two blogs into one.

Therefore, this blog will no longer be updated an all new postings will be published on this blog :

MY musings: Finance, politics and such

It will contain the same mumbo-jumbo. See you there :-)

Twitting value - the value of twitter

Twitter is going for listing and the learned mr Damodaran has done a valuation 'study' on his blog. I took a liberty of extracting a graph to show how much and how fast the value have grown. From $6 million to billions of dollars.

Amazing huh?

 

http://aswathdamodaran.blogspot.com/2013/09/twitter-announces-ipo-pricing-game.html

Applied Mergers and Acquisition

Mergers and acquisitions are a mainstay of corporate finance, which can cause company shares to go either way. The “Applied Mergers and Acquisitions” workshop is designed to give participants a firm grasp of the economics, process and funding of M&As, so you can make an informed decision on your next move in an M&A exercise. 

Come one, come all...and bring a friend :-)

Gold futures trading in Malaysia?

The STAR reported that Bursa Malaysia will be introducing a Gold Futures contracts to trade on the futures market. This is great news as the counterpary  and credit risks associated with gold trading will be managed and regulated by Bursa Malaysia at all times. I quite look forward to this development.

However, as it will be traded on the futures market, you would need to open a trading account with one of the stockbrokers in town. I wonder how would the regulators make this offering available to the wider mass - those who never traded on a stock/furtures exchange before.

In any case, this will be a great complement to the existing gold savings/investment accounts offered by the banks, which I have discussed earlier here: http://newentrepreneursmalaysia.blogspot.com/2013/09/gold-investments-in-malaysia.html

In any case, it must be remembered that GOLD DOES NOT HAVE CASH FLOW, hence it is a pure trading instrument. It could go down as well as up to better be careful when making your investment.

The reproduction of the STAR article is as follows:

GEORGE TOWN: Bursa Malaysia will introduce gold futures trading in local currency on Oct 7 in a move to stamp out illegal gold trading activities in the country.
According to industry players, Bursa Malaysia’s decision to introduce gold futures trading is due to the popularity of such trading in the country and the recent crackdown on illegal gold trading activities.
On Oct 7, the new gold futures counter will remove the need for Malaysian participants to purchase foreign currency to trade, thereby eliminating exposure arising from foreign currency fluctuations.
According to the Bursa Malaysia website, each gold futures contract is equivalent to 100 grams of gold bullion.
“The small size is designed to provide accessibility to all and also flexibility for those wanting greater exposure.
“For the retail player wanting smaller exposure, it provides affordability. For the industrial user requiring larger exposure, the contract can be traded in multiple lots at a time.
“As a cash-settled contract, no delivery of physical gold is required. Instead, the gold futures contract would be settled on expiry using the cash equivalent of the amount of gold purchased,” the website said.
The gold futures contract allows market participants exposure to international gold price movements at a lower entry cost.
Bursa Malaysia will hold a press briefing on the new gold futures counter tomorrow.

Eyeing the ETF - Tracking the tracker

In my previous posting I mentioned that ETFs are trackers of the market. If you need a primer on ETF then you could read here. Basically it means that ETF is supposed to go up and down together with the market, hopefully in the same proportion. So if one thinks that the market is going up, he can take a position in the market by buying an ETF from a (familiar) stock market instead of buying the individual component stock or hitting the futures market.

But lets us take a look at what happens in the reality and try to make sense out of it all. 

Let's take last Friday, the 20th of September 2013.





On a daily basis it is interesting to note that on the 20th, the KLCI index improved by 0.5%. However, the tracker ETF, the FBM30 did not move at all in terms of pricing, stuck at RM1.77 per share/unit.

Does this mean that the ETF is not tracking the index? The answer is the ETF is still tracking the index and we can see from the NAV of the FBM30 which improved by 0.49%, almost identical to the changes in the KLCI. But the price might not be so sensitive to the changes due to several factors, including:

1. The tick, the minimum price movement. The minimum price movement for shares above RM1.00 is 5 sen. In this case, a 5 sen movement would translate to a 2.8% movement to the price of the shares, way above the actual movement in the value of the ETF.

2. The demand and supply for the ETF.

The DJIM seems to have an inflated effect on the price of the ETF. Not only is it trading at a premium to the NAV, the price moved significantly compared to the movement in the NAV. This divergence is also partly due to the same reasons mentioned above.

I don't know about you, but this is really interesting !$!

Disclaimer: 

This is not a recommendation to invest at all, this is to give you more information so that you know more about investing. This is EDUCATIONAL