A Tale of Two Countries – Singapore Vs. Malaysia

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Recently there was an article in the Legal Affairs magazine about Malaysia. The article mentioned that researchers have concluded a country’s legal system is a major that determines its success or failure in overall growth. Thoughtfully they agreed that this factor was in addition to other traditional factors like political system, economic policies, etc.

The article mentioned that Malaysia has advanced so much when compared to Indonesia though they share many things in common such as Islam as the main religion, former colonies of major powers, commodity based economy, etc. The reason for Malaysia’s success was attributed to its legal system which is based on the British legal system since Malaya used to be a colony of Great Britain.

On the other hand, Indonesian legal system is based on the Dutch legal system. Holland used to be the colonial master of Indonesia.The Dutch legal system is based on the Napoleonic French legal system which is considered inferior to the British one. Hence Indonesia which followed the Dutch system remains a poor country whereas Malaysia has prospered after Independence from UK.This kinda made me thinking about another question:

Why does Malaysia lag Singapore in terms of economic growth?

Singapore is a tiny island city state neighboring Malaysia. But Singapore is today considered a first world country where Malaysia falls under the emerging market category.

I think Malaysia lags Singapore in many aspects because of its political system which is influenced heavily the predominant religion. Malaysia has been unable to invest and promote high tech “knowledge” based industries such as IT. The famous Petronas Towers in Kuala Lumpur was built to house many of the IT and other hi-tech companies that were to start operations. But that never materialized and today the majority of the building is occupied by the oil company and other regular foreign multinationals. Today Malaysia remains a commodity driven economy based on oil palm and other natural resources. Malaysia recently discovered oil offshore and hence is a net exporter of crude oil. Malaysia is an example to prove that a country does not need more land or people to become a first world nation.

Singapore has not much land at all. The island can be crossed from one end to the other in less then 30 minutes. The population is small as well. When Singapore broke off from Malaysia and became an independent country, it implemented many successful economic policies the fruits of which are evident today. The country is not democratic by any means. It is tightly ruled by a kinda of dictatorship but there are some freedoms. Media is heavily controlled by the government. However Singapore invested in the right industries such as marine shipping, finance, IT,trading, etc. to become a global powerhouse today. Many top banks of the world are setting up shops in Singapore as it tries to attract capital from other capital friendly locales like Switzerland, Isle of Man, Bermuda,etc. The country’s success can be attributed to its statesman Lee Kuan Yew who implemented the economic policies when he ruled the city state with an iron fist for many years.

Comparison of ETFs – EWS Vs. EWM:

The iShares Singapore ETF has an asset base of about $1.5B compares to iShare’s Malaysia ETF EWM which has asset size of only $479M. About 50% of EWS are made up of financials. EWM has about 30%. YTD EWS is down 8.6%. EWM is down 17.6% YTD due to the crash in commodity prices world-wide.

The 5-Year Performance Chart of EWS, EWM and S&P 500 Index:

5-Year-EWM-EWS-SP500-Chart

Due to the reasons mentioned above, Singapore is a better investment destination than Malaysia. Readers – What is your opinion?.

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Top Banks of Canada

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In this post, lets review the top banks of Canada.Specifically we will analyze the Canadian bank stocks that trade as interlisted stocks in the US.

Toronto

Photo: Toronto Skyline

The following are some of the large banks in Canada:

1. Royal Bank of Canada
2. Bank of Nova Scotia
3. Bank of Montreal
4. TD Canada Trust
5. Canadian Imperial Bank of Commerce (CIBC)
6. ING Direct Canada
7. President`s Choice Financial
8. Business Development Bank of Canada (BDC)
9. National Bank of Canada
10. HSBC Canada

In the above, ING Direct, HSBC Canada and President`s Choice Financial are online banks.Business Development Bank of Canada is for National Bank of Canada trades in the Toronto Stock Exchange (TSX) only with ticker “NA”.Business Development Bank of Canada is a government bank that offers loans and other services to businesses. Besides the above banks there are many credit unions such as the Desjardins group based in Montreal,Quebec.There are many other local and smaller banks and credit unions in the country.

Out of the above ten banks, the first five are the top national banks with each having thousands of branches all over Canada. Fortunately all these banks trade as interlisted stocks as well in the US for the benefit of US investors.

The TOP BANK in Canada is the “Royal Bank of Canada” due to the following reasons:
1. Most Profitable bank.
2. Largest Market Capitalization.
3. Largest Asset base.
4. Consistent long-term performance of stock.
5. Excellent dividend yield and dividend growth rates.

The next top bank is Bank of Novo Scotia.

Canada is a large country blessed with bountiful of natural resources. Canadians save a high portion of income compared to Americans.This savings flow and the funds received by Canadian companies from exporting the natural resources all end with the top five banks.One big problem for the cash-rich Canadian banks is that there is not much room to
grow in Canada.The population is small and the market is already saturated.So these banks head to other countries to invest their capital.That means they try to grow in places that they feel comfortable dealing with such as the US, Caribbean, Chile, Mexico, etc.

Canadian banks have heavy exposure to US since they have acquired many US banks,brokers and have operations here.For example, Bank of Montreal owns the Harris Bank in Chicago.TD Bank bought Commerce Bank in the North East and a few other banks.And it owns the former Ameritrade now renamed as TD Ameritrade.Royal Bank owns the Centura banks in North Carolina. Scotiabank has a major presence in the Caribbean countries, Mexico and Chile.CIBC has operations in the Caribbean countries.
All these banks have big investment banking operations as well like RBC Capital Markets of Royal Bank.

A brief overview of the five banks:
1. Royal Bank of Canada – RY
RY has a dividend yield of 4.41% and a PE ratio of 12.15.Outstanding shares total 1.3 Billion.The dividend growth for the past 3 years is 21.69% which is more than double the
industry average. In the $40 range the stock is attractive.

2.Bank of Nova Scotia – BNS
Another Canadian bank with almost a billion shares out- 987.7 M shares to be exact.BNS has a dividend yield of 4.09% and a beta of 0.9.The 3-year dividend growth is 16.5%. BNS has lots of potential to grow due to its overseas operations.Widely known by its cute name “ScotiaBank”.

3. Bank of Montreal – BMO
BMO has a dividend yield of 6.06% and a 3-year dividend growth of 19%+. The bank wrote down a lot of money some months ago due to losses in the subprime meltdown.Thats why the stock went down from 60s to 40s now raising the yield to this high.

4. TD Canada Trust – TD
TD has a dividend yield of 3.94% and about 804M shares outstanding.TD has not been affected adversely like BMO and other major financials. Stock is now trading near the 52 week high.

5. Canadian Imperial Bank of Commerce – CM
CM has dividend yield of 5.85% and a market cap. of about $21B. Like BMO, CM went down a lot recently.3-year annual growth rate has been 12%+.CM is probably the least popular stock among the five banks.

5-Year Chart of all Five Canadian Bank interlisted stocks.:

canada-banks-5-yr-comparison.png

Related Links:
The Best Banks of the World 2008
Wikipedia- List of banks in Canada
Canada Stocks List !!

Vinci SA – A Pure Infrastructure Play

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Vinci SA (VCISY) is an infrastructure company based in France. VCISY , the ADR for Vinci trades on the OTC market.

logo-vinci.gif

Vinci is a pure infrastructure play because it builds, maintains and operates many infrastructure things like roads, bridges, buildings, stadiums, transportation, etc. There are not many companies in this space which are available as ADRs.Firms like GE, ABB, etc. can be competitors for Vinci.

Listed below are a few important points about Vinci:

  • Operates in 4 business lines – Concessions, Energy,Roads and Construction.
  • Operations in France account for some 64% of revenue.
  • Europe accounts for 90% of revenue.
  • World’s largest toll roads operator.
  • Built the Charilaos Trikoupis Bridge in Greece (Photo above) , Three Airports in Cambodia including the one in Phonm Penh,Fredericton–Moncton motorway and Confederation Bridge in Canada.
  • Construction of roads and roads in Africa, Reunion Island, Vietnam, etc.
  • The 5 Year average annual return of Vinci Stock in the Paris market was 35% (from 2003 to 07).
  • Dividends per share increased three times in the same period.
  • VICSY dividend yield is 4.29%.

Five Most Traded Pink Sheet Stocks

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Frankfurt

Photo: Frankfurt, Germany 

The following are some of the most traded stocks on the OTC market. All the stocks listed below had trading volume of 300,000 today:

1.Company: OAO GAZPROM ADR
Ticker: OGZPY
Country: Russia
Sector : Oil

2.Company: Nestle
Ticker: NSRGY
Country: Switzerland
Sector : Food

3.Company:MACQUARIE GRP
Ticker: MQBKY
Country: Australia
Sector : Diversified

4.Company: Adidas
Ticker: ADDYY
Country: Germany
Sector : Shoes

5.Company: Nintendo Co Ltd
Ticker: NTDOY
Country: Japan
Sector : Games

Related Posts:
Pretty in Pink ADRs

All ADRs

A Few Frontier Market Investment Ideas

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The developed markets are in the bear’s grip for many months now due to the credit crunch. Investors looking for better returns went to emerging markets like Brazil,India, China, etc. last year and even early this year.But that strategy is not working anymore since the emerging markets have plunged as well.My friend Vlad highlights some of the emerging market indices in the article titled Emerging markets indexes.

So this year investors are going to unusual places to invest. These are countries like Vietnam, Egypt,Peru,Indonesia,Romania, etc. Together these extremely risky markets are called “Frontier markets”. Already this year, ETF providers have luanched many ETFs for the frontier market countries.

In this post, lets look at a few ADRs,funds to invest in the frontier markets:

1.Credicorp Ltd. (BAP)
Credit Corp is a banking company in Peru.The stock has had an incredible year run as the chart shows below.BAP has a PE of 13.05 and a dividend yield of 2.10%. Beta is 1.1.The average annual dividend growth for the past 5 years is 45.41%.

Chart: 5 Year Growth

bap-5-yea.png

2.Indonesia Fund (IF)
IF is a closed-end fund now trading at a discount of -11.24%.This a small fund with assets of just $106M.

3.Thai Capital Fund (TF)
TF is a closed-end fund now trading at a discount of -9.93%. This a small fund with assets of just $41M.TF is down YTD some 26%.

4.Turkish Investment Fund (TKF)
This CEF has an asset base of about $111M and it is down some 26% YTD.

5.Philippines Long Distance Telephone Co (PHI)
Telecom company in the Philippines.with a high dividend yield of 5.14%.

Again the above investment vehicles should be carefully evaluated before adding them to a well diversified portfolio.