I still remember 7 years ago, when I buckle up the courage to embark on a career switch from Malaysia to Singapore, all I was certain was that the value of my monthly pay will be much higher than my Malaysia salary.
But never did I think a new passion would have spun out of this move.
Stock investing filled up the free personal time that I had, as I found myself diving deeper into the rabbit hole of investing.
I came to Singapore as a newbie stock scalper with 100% of my portfolio in Malaysia stocks.
Fast forward to today, Malaysian stocks make up less than 20% of my total portfolio.
And it will go down more as time goes by.
I don’t plan on adding on any more Malaysia stocks. In fact, I am looking to reduce my current holdings.
You might ask, why a Malaysian like me, has chosen to slowly forsake the Bursa market.
I became a disciple of value investing
After coming to Singapore and getting exposed to listed companies all around the world, I have found myself gyrating towards value investing.
Back then, I thought I knew what was value investing. I thought I knew what were quality companies.
Nestle Malaysia Berhad (KLSE: NESTLE) and Inari Amertron Berhad (KLSE: INARI), those are the stocks for value investing that Malaysians swear on. Right?
But going through annual reports and quarterly reports of companies like Meta Platforms Inc (NASDAQ: META) really opened my eyes to what is a true economic moat and competitive edge of a company.
What value and growth investing really means.
And even though my years of investing aren’t that long, I have seen how companies like Microsoft Corp (NASDAQ: MSFT) grow new business initiatives like LinkedIn and Azure to household or corporate necessities.
Even if we put aside individual stock picking and focus just on the index itself, the S&P500 which holds stocks of the best 500 companies in the US, versus the KLCI and even STI, we see a stark outperformance of 241.8% versus a loss of -7.56%.
I don’t know about you, but to me, the KLCI looks like the Ringgit, on a depreciating trend over the long term. The businesses have not grown at magnificent strides. (p.s i’ll be sharing my personal tips on how to protect your wealth from a depreciating Ringgit here)
They used to be good during our parents or grandparents’ days. They are still good. But when compared to other companies globally, they are nowhere creme de la creme.
I wouldn’t want to bet my retirement on stocks that are just normal at best.
1) Post-IPO growth is non-negotiable
It pains me to say this bluntly – but most companies that launch their initial public offering see it as a means to cash out their holdings.
Most companies in the Malaysian market are what we call Jaguh Kampung – national champions. They have humble beginnings and grew to be a national brand loved by Malaysians.
But when they finally have the opportunity to raise more capital via IPO to grow bigger, the growth momentum stops. That doesn’t imply that their revenue suddenly drops or goes down, but the growth momentum seems to sputter.
There are too many instances where the management of local companies reward themselves with ludicrous amounts of dividends, and take on loans and leverage while using IPO proceeds to bring down the gearing and leverage ratio.
Contrary to much fanfare every time a Malaysian company announces plans for an IPO, their prospectus rarely excites me.
Don’t get me wrong. There are still local Malaysian companies that have a renowned reputation and a business at a global scale. But they are mostly mature, and stable, and do not come cheap.
2) Dividend supremacy
The key to great dividend investing is never via the dividend yield as a yardstick. But rather, if a company has a great track record of growing its dividend per share.
To illustrate this, let’s look at Public Bank Berhad’s historical EPS and DPS.
Year in and year out, every share, every piece of ownership of Public Bank is reaping more earnings and dishing out more dividends. A hallmark of a good banking stock.
But what if we pit Public Bank with, let’s say DBS Group Holdings Ltd (SGX: D05)
Over the last 10 years, Public Bank reported a 3.74% CAGR growth for its earnings per share and a 6.07% CAGR growth for its dividends per share, which is decent.
However, their achievements pale in comparison when compared against DBS. A 8.76% CAGR in earnings per share, and a whopping 11.14% CAGR for dividends per share!
Limited to just a population of 6 million, DBS chose to expand its footprints geographically while Public Bank still has most of its businesses in Malaysia.
3) Currency risks
Yes. Investing globally means you are exposed to currency risks. Your stock portfolio valuation might go up in home currency, but not so if converted back to a reporting currency.
But if we were to look at how the Malaysian Ringgit has fared, together with the returns of KLCI, I think Malaysians are facing a double whammy.
Not only does the general market not provide better returns when compared globally, but these returns, when marked to the USD, shrink down the returns more.
For Singaporeans investing globally when the SGD is strong, it would be fairer to say that they are more liable to foreign exchange risks.
Although I still mark my total portfolio value back to Ringgit, I would focus more on its valuation in USD and SGD, since 80% of my portfolio is now spread across US, SG, EU, and HK.
Should Malaysians buy Bursa stocks or Foreign stocks
This is by no means a call nor advice to ask you to invest internationally just because I am doing it.
The “Why” is important.
My “Why” is to become a full-time investor and educator. And applying the principles and requirements of value and growth investing, only quality businesses can help me reach my goal faster.
The route to do so via Bursa stocks might be possible, but it would most probably take a longer time.
And we have limited time in our lifetime on this planet.