ACCUMULATING WEALTH – Opportunities in the Bubbles (Part 3)

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Opportunities in the Bubbles

The US stock market has resumed its uptrend.

The US’s three main indexes have only corrected around 10-13% despite the worsened COVID-19 condition. At the time of writing, the Dow Jones Industrial Average (DJIA) has re-challenged its previous high at 29000 before settling at 28503. Overall, the US market still looks bullish and poised to break new highs. However, other regions do not share the same scenario. Apparently, the European and Asia markets have seen their indexes fall into the bear territory since February 2020.

On the local front, the Malaysia Composite Index FBM KLCI has been bearish, thanks to the political uncertainty and the emergence of third wave of COVID-19. On top of this, the end of loan repayment moratorium on 30th September 2020 has seen the market liquidity decreasing. Coincidentally, more people are staying at home nowadays because of the re-introduced CMCO. Would it lead to the comeback of market liquidity? We will see.

While it is difficult to predict the market, the macro condition would give us some hints. So let us see how the macro, which is U.S market before we explore further.

Source: https://www.Investing.com

Disclaimer:

The companies or strategies mentioned in this article are meant for study purpose only. It doesn’t constitute any ‘buy’ or ‘sell’ recommendation. Please consult your financial professional if you want to make any decision.

The Dow Jones Industrial Average (DJIA) chart on 15th October 2020, shows that the latest candles are still standing well above the pink (MA50) and golden (MA200) lines. Both lines are trending upward means the uptrend remains strong. Its immediate resistance is 29000. Once it has overcome this level, it would break beyond 30000.

Opportunities in the Bubbles

When the US indexes are near to the peak, it signifies higher risks. When the pandemic is worsening, there is stronger hope for the vaccine. Therefore, investors could look into companies that are working on the vaccine development. In Malaysia, there a few companies that have engaged with foreign pharmaceutical companies for vaccine marketing and distribution. One of them is Kanger International (0170).

Kanger International (0170)

Kanger International specialises in the manufacturing and trading of bamboo flooring, bamboo furniture and related products for the residential and commercial markets. Its manufacturing plant is located in China and has sales offices in Shenzhen, Hong Kong and Kuala Lumpur. In addition to mainland China, Kanger exports their products globally, with exports constituting approximately 50% of annual revenue in the past five years. Interestingly, Kanger has ventured into gloves manufacturing followed by vaccine distribution this year. Below are the highlights of Kanger’s development:

1) According to Kanger’s 2019 annual report, the relocation of their bamboo processing and manufacturing plant from Ganzhou to Jingzhou will free up land, enabling them to embark on commercial property development for long-term rental income. From Bursa Malaysia, Kanger will start leasing two properties, namely the Hotel Commercial Building and AutoCity Building, from 1st December 2020 onwards for 20 years tenure. The combined rental income for both properties is about RM10 million per annum.  This means the company will generate good recurring income for 20 consecutive years.

2) The relocation of its bamboo plant will see the company becoming one of the largest bamboo products producer in the world, for its new plant and R&D centre was developed in collaboration with the local government of Jingzhou in Hunan Province, which the government will inject a bamboo plantation concession totalling an estimated 8,431ha over three phases. This means the company does not need to purchase raw bamboo from external sources, and will result in huge savings.

3) Kanger has ventured into glove manufacturing with a Dubai-based Constellation Holdings Ltd, which is the procurement agent for personal protective equipment (PPE) and medical equipment for the United Arab Emirates’ (UAE) Ministry of Health & Prevention. The group also announced that it has acquired some 2.24ha of land in Kuala Selangor for RM6.8 million for a new rubber glove manufacturing plant for Kanger Glove.

4) On 29th September 2020, Kanger has entered a collaboration agreement with Sinopharm relating to the distribution of COVID-19 vaccine and medical equipment products in Malaysia. Following China foreign minister’s recent visit, Malaysia has been included in the list of priority recipients of COVID-19 vaccine. This means Kanger would start distributing the vaccine very soon.

Conclusion

The above is another example amid bubbles and crisis. In extraordinary times, good business could also mean that businesses offer products or services that can meet the global demand timely.

 

Binyuen is the founder of BY Enrich Resources and the author of ‘Life beyond the Comfort Zone’ and ‘Profit from Share Investment’. His books are available in the National Libraries in Malaysia and Singapore or online http://www.teybinyuen.com/profitfromshareinvestment