Cover Story: Will the market roar in year of the tiger?

This article first appeared in Wealth, The Edge Malaysia Weekly, on January 31, 2022 - February 06, 2022.
Cover Story: Will the market roar in year of the tiger?
-A +A

Many of us will only be too glad to see the end of the Year of the Ox, a tumultuous period that saw the worst of the Covid-19 pandemic and one of the most devastating floods in the country since the 1970s.

We are hoping that the lunar Year of the Tiger will bring better tidings and for 2022 to be a turnaround year, with the global economy staging a strong recovery.

Interestingly, the last two Tiger years of 2010 and 1998 saw a stark contrast in fortunes. The global economy grew 6% in 2010 — the year the world emerged from the global financial crisis, which struck two years before. It was a huge improvement over 2008 and 2009 when global growth contracted by 2.46% and 3.52% respectively.

Meanwhile, in 1998 — the year after the Asian financial crisis began — Malaysia’s gross domestic product contracted by 7.4%, the worst performance since 1961. The country, however, staged an impressive comeback by growing 6.1% and 8.9% in the next two years.

As for this year, the World Bank and the International Monetary Fund expect the Malaysian economy to grow by 5.8% and 6% respectively, while various investment banks and rating agencies have projected growth as high as 7%.

In this Chinese New Year issue of Wealth, we talk to a senior executive, a banker and an entrepreneur who were born in the Year of the Tiger to find out what they think is in store for them as well as their outlook for the year.

They are Datuk Joe Yap, group executive director of NCT Alliance Bhd; Freddy Kong, vice-president of equity capital markets at AmBank Group; and Mei Tan, co-founder and CEO of Innovatif+, a platform to empower next-generation family businesses across Asia. 

All three of them expressed optimism for 2022, albeit cautiously. After all, this Tiger year contains the element of water, which represents fluidity and uncertainties. It could be a year when investors and businesses will be required to remain flexible to overcome new challenges.

 

Observe and strike when the timing is right

Mei Tan, 36, is the co-founder of Innovatif+, an online platform that aims to empower second-generation family businesses in Asia. She is also the heir to Asia Green Group, a real estate and timber company owned by the Tan family. 

Based on her knowledge of feng shui, Tan has a more cautious view of her journey this year. “I was born in the Year of the Fire Tiger, and this year is the Year of the Water Tiger. It is a year of two clashing elements. It won’t be an easy time. It could also be an exciting one when the yin (represented by water) meets the yang (represented by fire).”

The clash of opposite elements implies that various challenges could arise. Thus, it is a crucial year for Tan to prove herself as a leader in the organisations she leads by rising above those challenges.

“I will have to work harder as a leader and try my best to manage my people well. It is a good year for those inspired to be a leader. But it could also be a tough one. It really depends on how you look at it. Feng shui provides you with guidance on what is in store for you. But your fate is in your own hands,” she says. 

As for the country and economy, Tan remains cautiously optimistic as water is the dominant element of the year. It represents fluidity and movement, which could mean uncertainty and volatility. 

“This year is a little tricky. The economy is recovering but it could be temporary as things open up. People are hanging out and spending. But the question remains whether or not this will last. With the presence of Omicron and other Covid-19 variants, the situation is somewhat uncertain.

“I think the market could shoot up at some point only to go crashing later on. It could happen this year,” she cautions.

So, Tan’s investment strategy is to remain flexible and patient, like water. But she will not hesitate to deploy cash into the market when the timing is right.

When is the right timing? She says investors and entrepreneurs need to be sharp in observing the markets. “You need to be more patient. But when you see the food in front of you, you must pounce on it without missing the opportunity.” 

Let’s not forget that the tiger, regardless of the elements, is an animal that is brave and confident. Tan, who believes she has inherited such traits, says she is also forward-looking and always on the lookout for new trends and technology.

For instance, she is learning more about the metaverse, a virtual world where people can interact with each other and conduct various activities that they do in real life. She wants to know if there are investment opportunities in the metaverse and whether Innovatif+ can adopt it for the second generation of family businesses to meet, learn from one another and attend various events online.

“It is more challenging to organise big events these days. Sitting in front of the computer screen for hours a day isn’t ideal. So, I’m exploring the metaverse to see if we can incorporate it into our events moving forward.” 

In the future, the concept of the metaverse could be adopted by property developers to build a digital real estate empire. 

“There are many questions about whether this trend is going to last. Some might not think so. But if you talk more to the younger generation, you would see that they accept it. Living in a virtual world or buying a piece of digital land is possible for them,” says Tan.

“Remember that we are not talking about people like me who are in our thirties. Our world is about social media like Facebook and Instagram. Those who are younger than us, their future could be something new, which is really interesting.”

Tan is a believer in the environmental, social and governance (ESG) trend that has been one of the hottest topics in town in the past two years. “I’m focusing more on ESG when it comes to my personal investments. I want to build a sustainable portfolio, and I’m sure many people are also looking at this.”

She believes that cash is king when it comes to personal investments. Last year, 60% of her portfolio comprised cash while the rest was invested. She plans to increase her cash holding to 70% this year to ride through the uncertainties and only deploy it when the outlook of the economy and market becomes more visible.

“I always believe in having a strong cash flow when it comes to investing. I could be aggressive [and deploy the cash] as I’m born in the Year of the Fire Tiger. But I try to control my fire,” she quips.

 

Regardless of feng shui, do your best

Freddy Kong believes that the Year of the Tiger will be an auspicious one when the economy and market recover. It is not without good reason that he feels so.

Kong, 36, started working in 2008 as an auditor at PricewaterhouseCoopers. He witnessed how the subprime mortgage crisis plunged the global economy into one of the worst recessions ever, with millions of people losing their jobs and savings. 

However, the global economy turned around in 2010 and quickly got back on the growth track. Good news was splashed all over the newspapers and the world was once again feeling hopeful. “I hope this Tiger year will be the same,” he says. 

The last Tiger year also marked a significant turning point in Kong’s career. It was then that he decided to quit his job as an auditor to become a corporate financier at Affin Hwang Investment Bank Bhd. He later joined the equity capital markets (ECM) team at AmBank Group and quickly moved up the ranks to his current position — vice-president of ECM.

Last year, AmInvestment Bank Bhd was the joint bookrunner for the initial public offering of CTOS Digital Bhd and Swift Haulage Bhd. It was also the joint bookrunner for the private placement exercise of MyEG Services Bhd and Lagenda Properties Bhd. 

However, Kong tries not to read too much into feng shui and believes that a person is the master of his own fate. “I feel positive about the Year of the Tiger, but I don’t want to be superstitious. I want to do better every year. And I hope each year is a good year.”

Based on his observation, Kong says the Malaysian economy is shaping up well in the first month of the year. Indices on business and consumer sentiments are improving, and the economy is growing. 

He expects the economy to stage a sharp recovery if there are no lockdowns this year. It could also be a year when investors start looking at companies with strong fundamentals instead of perceived growth potential.

“For instance, companies with high cash levels will be more appreciated. The market won’t be saying things like ‘cash is trash’ anymore. They would want companies with more cash,” he continues.

Kong says companies that are perceived as having high growth potential but weaker fundamentals might not perform as well as before. Share prices of more speculative counters could also take a hit.

Blue-chip stocks that pay steady and potentially good dividends are trading at a discount at the moment. Meanwhile, interest rate hikes by central banks worldwide could be a dampener for companies with weaker fundamentals as the cost of borrowing increases. Companies with high gearing, especially those with floating rate loans, may need to restructure their debt, he notes. 

In short, his advice to investors is to reduce their risk and start focusing on fundamentals. “As long as you stick to the fundamentals, you will be in a better place in the next three to five years,” says Kong. 

However, the key risks are the resurgence in Covid-19 cases and political uncertainty. The US Federal Reserve could also be hiking interest rates faster than some had expected, which would disrupt the market, he adds.

 

Turnaround specialist expects a turnaround year

NCT Alliance Bhd, co-founded by the Yap brothers, is a property developer that specialises in turning around abandoned property projects. Group executive director Datuk Joe Yap says the company has, interestingly, always experienced breakthroughs in Tiger years. 

“The company has got off to a good start this year. We believe things will look even better in the second half of the year, especially in the property market. The market seems to have bottomed out, and it will have to rebound at one point.

“It could be a turnaround year and another turning point for our company, just like what we had experienced in the past two Tiger years.”

Yap, 60, says it was in 2010 that NCT embarked on a journey to transform itself from a main contractor of rehabilitation projects into a property developer. That was when the company applied to take over and revive one of the country’s largest abandoned projects at the time — Bandar Salak Perdana in Sepang.

The project involved over 300 acres of land and about 2,500 property purchasers. After various negotiations, some buyers decided to top up more than 30% of the original purchase price to let NCT complete their abandoned houses, while others opted out from their purchases and requested a refund.

According to Yap, buyers who stuck with NCT benefited from the company’s successful revival of the project. “They paid about RM210,000 for us to complete their properties. Some of them managed to sell their houses at more than RM400,000 after the completion.” 

He says NCT then deployed the profit it made from the project into various investments, including a property development project in Genting Highlands. 

In 1998, at the height of the Asian financial crisis, NCT not only emerged unscathed but stronger. It was the year the company recorded one of its highest annual revenues in its history.

“The crisis had hit the country badly. But it was the year when we did tiling works for the prime minister’s office and residence in Putrajaya. Our business was thriving,” says Yap. 

Unlike many other businesses that did not get paid during the crisis, NCT was a subcontractor under S P Setia Bhd, which was a good paymaster. 

It is with good reason that Yap feels optimistic about what this Year of the Tiger could bring for the company. He believes the company’s profit will be better than last year as about 480 of the 1,885 units at its Grand Ion Majestic project in Genting Highlands have been booked. The company will also be launching a property project this year at Batang Kali, Hulu Selangor, known as Ion Berlian Lake Garden. 

In the near future, NCT will be focusing on an electrical and electronics (E&E) industrial hub in Kuala Langat, about a 15-minute drive from the Kuala Lumpur International Airport. The hub is targeted at foreign manufacturers in the E&E sector and is expected to be a key growth driver for the company.

“The industrial hub will be one of our main focuses in the next seven to eight years,” says Yap. 

As for his personal wealth, he says most of it is tied to the company. The company must do well in the future, so that the wealth of the Yap family will grow too, he adds. 

“NCT was founded by my elder brother Datuk Seri Yap [Ngan Choy] and me. We started it to put food on the table, to feed ourselves. We came from a poor family, and I didn’t expect the company to grow to such a size. Most of our family wealth is tied to the company today. 

“My wish for this Tiger year is for the next generation of our family, including my son, to do better than us and steer the company forward. I hope that they can live and work with each other in harmony, which is something that my late mother taught us well,” says Yap.