Wednesday, 21 December 2011
ASB 2011
ASB finally announced their dividend for 2011. Not bad though, slightly better than last year. Dividend 7.65% and Bonus 1.15%. ASB investor can check their dividend in any Maybank, RHB bank or CIMB bank branch and post office or PNB outlet on the 3rd of january 2012.
Friday, 16 December 2011
Bursalchemy Pasar Malam Theorem
Has been a long time i didnt touch my blog. I would use a simple way to explain some knowledge of investment through my learning outcome.
Pasar malam theorem.
Arbitrage
Let say Abu went to Sunway Pasar malam saw a nice T-shirt was selling at rm10. The demand is quite high over there, everyday also sell until stock out. After that, he went to visit Pasar malam in setapak, the same brand and design of T-shirt was selling at rm9. Then he bought the T-shirt in bulk at credit in setapak's pasar malam and sold it at rm10. Since the demand is there, he can easily secure the sales at rm10 or lower. Any price range above rm9 he can still make some small profit rm1 or lower.
In the capital and currency market, this is usually occured due to pricing imperfection. Our capital market are efficient but not perfect. Due to supply and demand, the price fluctuate everyday. In the short run, our irrational market is a voting machine. However, it will be a heavyweight machine in the long run. Therefore, arbitrage is totally risk free. However, this kind of opportunity is rare, since nowadays markets are all computerised, any inefficiency will soon be corrected by the market shortly.
Warrant
Let say Abu went to Setapak's Pasar malam and saw a T-shirt he likes, but he doubt rm10 is a fair price and he also not sure whether the merchant will raise the price somewhere higher than rm10. To secure his position, he would like to give the merchant rm0.50 premium to hedge it at that price. So that the he can buy at that price next day if Setapak's pasar malam shown adverse pricing.
The second day, he went to setapak pasar malam and saw the t-shirt was selling at rm9. Since the price is cheapo, therefore he will not exercise the warrant in sunway's pasar malam because he can get the same shirt in setapak market. He would let the offer lapse. Then total cost of the t-shirt would be rm9.50 for Abu. He can save rm0.50 from buying at sunway since it was selling at rm10. The sunway's merchant also would be happy to keep the rm0.50 premium free paid by Abu to insured against the fluctuation of price.
Warrant is similar with option. It is traded in the secondary market. It is sometimes act as equity sweetener. For investor, they are said to have risk a small amount of premium so that they can get certain number of ordinary shares after exercising the warrant in the future. They will make a gain, if the security price is traded higher than current price.The prices are subject to fluctuation everyday. You either call or put an option. However, Investment bank will usually issue warrant (put option) when the overall stock market is in bull. They will bet the stock will plummet in near future, investor who call the option are speculate against the price will rise in the near future. Investment bank will still make profit even when market slump. As an investor, we should make our own judgement whether it is worth calling the option. There are 2 types of warrant in the market.
European style warrant- Investor can only exercise the warrant upon maturity.
American style warrant- investor can exercise the warrant at anytime without time control.
Think. risk control.
Pasar malam theorem.
Arbitrage
Let say Abu went to Sunway Pasar malam saw a nice T-shirt was selling at rm10. The demand is quite high over there, everyday also sell until stock out. After that, he went to visit Pasar malam in setapak, the same brand and design of T-shirt was selling at rm9. Then he bought the T-shirt in bulk at credit in setapak's pasar malam and sold it at rm10. Since the demand is there, he can easily secure the sales at rm10 or lower. Any price range above rm9 he can still make some small profit rm1 or lower.
In the capital and currency market, this is usually occured due to pricing imperfection. Our capital market are efficient but not perfect. Due to supply and demand, the price fluctuate everyday. In the short run, our irrational market is a voting machine. However, it will be a heavyweight machine in the long run. Therefore, arbitrage is totally risk free. However, this kind of opportunity is rare, since nowadays markets are all computerised, any inefficiency will soon be corrected by the market shortly.
Warrant
Let say Abu went to Setapak's Pasar malam and saw a T-shirt he likes, but he doubt rm10 is a fair price and he also not sure whether the merchant will raise the price somewhere higher than rm10. To secure his position, he would like to give the merchant rm0.50 premium to hedge it at that price. So that the he can buy at that price next day if Setapak's pasar malam shown adverse pricing.
The second day, he went to setapak pasar malam and saw the t-shirt was selling at rm9. Since the price is cheapo, therefore he will not exercise the warrant in sunway's pasar malam because he can get the same shirt in setapak market. He would let the offer lapse. Then total cost of the t-shirt would be rm9.50 for Abu. He can save rm0.50 from buying at sunway since it was selling at rm10. The sunway's merchant also would be happy to keep the rm0.50 premium free paid by Abu to insured against the fluctuation of price.
Warrant is similar with option. It is traded in the secondary market. It is sometimes act as equity sweetener. For investor, they are said to have risk a small amount of premium so that they can get certain number of ordinary shares after exercising the warrant in the future. They will make a gain, if the security price is traded higher than current price.The prices are subject to fluctuation everyday. You either call or put an option. However, Investment bank will usually issue warrant (put option) when the overall stock market is in bull. They will bet the stock will plummet in near future, investor who call the option are speculate against the price will rise in the near future. Investment bank will still make profit even when market slump. As an investor, we should make our own judgement whether it is worth calling the option. There are 2 types of warrant in the market.
European style warrant- Investor can only exercise the warrant upon maturity.
American style warrant- investor can exercise the warrant at anytime without time control.
Think. risk control.
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