This article first appeared in Capital, The Edge Malaysia Weekly on March 26, 2018 - April 1, 2018

IT is not easy being a contrarian investor and going against the flow. Datuk Seri Cheah Cheng Hye should know. He recalls when he was just six or seven years old, watching a movie in a cinema, when he heard shouts of “api” or fire. Everyone was panicking and rushing for the exits but he chose to remain in his seat.

“If I had joined 100 or so people and rushed out, I could fall ... I was just a small kid. My best chance was just to sit, let the others get out first, and then slowly and calmly walk out,” he says.

In the end, it turned out to be a false alarm, but the incident reveals much about the personality of Cheah, who was born and raised in Penang.

“This is the kind of guy I am ... it is my instinct to be different,” the 64-year-old tells The Edge in an exclusive interview at his office in the central business district of Hong Kong.

“When everybody walked out, I didn’t. It could have been a bad decision and I could have been killed. But fortunately, it turned out that I was right. I did not have to join a big crowd and take the risk of getting killed in a stampede,” he says.

In investing, he subscribes to the same principle of not following the crowd.

“We buy when people sell and we sell when people buy. We like things that people hate, we hate things that people like. That’s how we make money,” he explains.

Cheah is founding chairman and co-chief investment officer of Hong Kong-listed Value Partners Group Ltd and has been called the “Warren Buffett of Asia.”

With a market capitalisation of HK$14.2 billion, Value Partners is one of Asia’s largest independent asset management firms with assets under management of US$16.6 billion as at Dec 31 last year.

A quick check on Bloomberg shows that Cheah, who is also an independent non-executive director of the Hong Kong Exchange and Clearing Ltd, owns a 21% stake in Value Partners via Cheah Capital Management Ltd. Other shareholders include John Templeton Foundation, JP Morgan Chase & Co and Vanguard Group.

Sharing his thoughts on being a contrarian, Cheah says one of the biggest problems he faces is being too worried. However, he would rather go for boring stocks when other people are chasing exciting counters.

Most amateur and middle-class investors typically buy at the top and sell at the bottom because they don’t want to be left out when the stock market is at a peak and are too discouraged to buy anything at the bottom.

“At the top, it is very exciting, it feels great, you see all your friends and neighbours making money, and you tell yourself, ‘Oh, my God, I’ve got to join the party!’

“But when a taxi driver tells you how much money he has lost in the stock market, while the media comes out with stories everyday about how the world is messed up, nobody will dare to buy. That’s exactly when you should buy!” Cheah enthuses.

Over the years, not following the herd has paid off handsomely for him.

Last year, Value Partners’ net profit soared 1,390% to HK$2.05 billion — the highest in its 25-year history — from HK$138 million in 2016, underpinned by a surge in performance fees.

Cheah reveals that Value Partners makes 2,500 company visits every year. His fund managers and analysts spend as little time as possible in the office as he wants them to go out and come back with reliable information for him.

However, even an investment maestro can get it wrong at times.

Cheah admits that about a third of his investment decisions turn out to be mistakes, mainly because of poor evaluation of management’s trustworthiness and capability.

“My psychological profile suggests I am too optimistic and trusting of people. That’s just the way I was brought up — as a good Buddhist. I am very confident about the world and myself. But sometimes, if you are a fund manager, that’s not the best approach because there are people out there who see you as a source of money,” he says.

Rags to riches

Cheah’s rise to the pinnacle of the Hong Kong investment fraternity is a classic rags-to-riches story.

Born to a poor family in Penang in 1954, he had to sell pineapples when he was young. He also had a job folding newspapers so that they could be delivered more easily.

He remembers being hungry all the time when he was growing up. “We just didn’t have enough food,” he says.

“My father died when I was nine. Malaysia does not have a good welfare system, nobody cares and just assume that people like me are finished. People think we are rubbish ... It is a society of the fittest,” he says emotionally.

Being the eldest child, he became the family bread winner.

“When I was a little boy, I would sell joss sticks and candles to housewives at the Goddess of Mercy Temple. When they came down from the buses, I would plead, ‘Please, please, buy, two dollars!’ It was a very desperate, Third World [kind of] life,” he says.

In those days in the 1960s and 1970s, many Malaysians resorted to drugs as a means to escape life’s problems. Some of Cheah’s cousins and nephews overdosed on drugs.

“I wish more Malaysians would know about this part of the country’s history. I am not complaining ... don’t get the wrong idea. I am not bitter or upset and I don’t have any hard feelings because I’m sure there were hundreds of thousands of kids like me at that time,” he says.

Eventually, he became a journalist, starting out as a reporter at The Star. He then went on to become a sub-editor and subsequently, acting chief sub-editor.

In August 1974, he went to Hong Kong, which turned his life around.

“When I came to Hong Kong, the first thing I did was to make sure I ate very well. I always eat fast food, and I eat a lot of it ... I am not joking,” he says.

In Hong Kong, Cheah worked for the Asian Wall Street Journal and Asiaweek. He was also deputy news producer at Hong Kong TVB’s English channel.

In 1993, he started Value Partners with his partner V-Nee Yeh.

It’s all about discipline

With few interests outside work, Cheah worked from morning to night, seven days a week. He would devour annual reports from cover to cover.

He never went to college, so he is almost entirely self-taught. He even drew up a self-study programme to learn about accountancy, law and statistics.

He has always felt that everyone — from the president of the US to a regular guy in PJ — is equal in the sense that they are human.

“I don’t have to worry as I am fighting on equal terms with other people because we are all human. How much smarter can someone be than me? Even if he is smarter, if I work harder and with more enthusiasm, I can outperform,” he says.

Although Cheah had a tough childhood, he insists he is “very lucky” from a macro perspective, describing himself as a child of an economic miracle.

“When I started working in 1971, it was in the midst of one of the most prosperous chapters in the 4,000-year history of mankind. We lived in a magical time, wages went up by double digits every year and career prospects exploded,” he says.

“A guy like me, as a reporter, coming to Hong Kong, can’t speak Chinese, can’t read Chinese, but I got a nice job, and someone was always offering me a new job. I kept moving up.”

Cheah says people like him lived in a golden period whereas the new generation now has it much tougher amid stiff competition.

“The unlucky boy was very lucky, but he didn’t know it then,” he concludes.

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