This article first appeared in Wealth, The Edge Malaysia Weekly on January 25, 2021 - January 31, 2021
In just a couple of weeks, we will be shooing the Year of the Rat away and welcoming the Year of the Ox on Feb 12. Given that the Year of the Rat was a disastrous one, many are hoping that the new lunar year will usher in better tidings.
Going by how things have been developing in January globally,
it looks like the Rat is not going to exit the scene on a quiet note as it draws close to the finishing line. Domestically, we saw a huge spike in Covid-19 infections, the imposition of another Movement Control Order (MCO) and a declaration of Emergency, the first in 52 years.
What will the Year of the Ox bring? Will things improve, or are we in for another rough ride?
Wealth asks personalities from the business and fund management community for their views. The consensus? A year of recovery and hope (that the vaccines will work), but the economic environment will stay volatile and challenging. To get a different perspective, Wealth also spoke to three feng shui masters, and their reading is that a real upturn will only happen in 2024! Read on to find out more.
Hard work is part and parcel of Chinese culture. It is characterised by the ox, an animal that was important to the early Chinese, who were mostly farmers. An ox works extremely hard to plough the fields. In this way, families were provided with food, wealth and happiness.
That being said, this Year of the Metal Ox is poised to be different from others. The defining factor is, of course, the Covid-19 pandemic and its ensuing disruptions.
This is where hard work and perseverance are even more important. No one knows this better than Datuk Eric Lee Kong Sim, managing director of LSK Group Bhd (LSK). After all, Lee grew up hearing stories about how hard his father worked in the early days when LSK was just a small-time furniture wholesaler in Klang, Selangor.
Lee believes the outlook for the year still remains uncertain, even with Covid-19 vaccines becoming available. “This year is uncertain. We don’t know how effective the vaccines are. There are so many of them,” he tells Wealth in an interview.
The business environment, he says, remains challenging. “People are sharing that malls are empty. The crowd is less than 5% of normal numbers. Some of my friends in the tourism industry are totally gone. Those in F&B, too … we can only keep our fingers crossed that the vaccines will work.”
Lee is not new to managing crises and has played a key role in many of LSK’s game-changing decisions. Since its inception, the company has had to reinvent itself several times, moving from furniture trading to manufacturing laminated foam and mattresses. Today, LSK is the largest natural latex bedding manufacturer in the country with a market capitalisation of about RM160 million (as at Jan 14).
To Lee, when the going gets tough, the tough get going. Like that of many family-owned businesses, LSK’s story is one of mostly hard work and, perhaps, a bit of luck.
“Businesses were all run based on trust in the early period. Many things weren’t written down in black and white. My father had to gain the trust of the suppliers, so they would give him credit to be paid back later,” Lee says.
He learnt from his father that hard work is very important during the initial stage of a business. “It’s like an aircraft. When it first takes off, it needs so much power to take off. Probably 90% of the energy generated by the fuel is used for this.
“However, after the aircraft takes off and reaches a certain altitude, it is just cruising. The main thing here is no longer lifting its body, but to know and follow the right direction so that it ends up at its destination,” Lee points out.
Lee, 46, is the second-generation leader of LSK Group. He was also the key figure in the company’s transformation drive in the mid-2000s. With a degree in accounting, he joined his father in 1997. Later, he took charge of the finance department. The company’s core business, at that time, had shifted to the manufacturing of laminated foam and mattresses.
It was also a time when sales of Proton cars took off, and LSK was providing laminated foam for Proton car seats. But LSK soon found itself having to look further afield when demand for Proton cars started to decline. “That was when we shifted to foam mattresses. Back then, we were focusing very much on the low-end market, selling mattresses at RM100 to RM200,” Lee says.
The low-end mattress business was very competitive. Faced with the threat of price wars, LSK had to rely on business volume to survive and very soon, found itself swimming in a sea of red.
In the mid-2000s, Lee, who was born in the Year of the Tiger, proposed a plan that could turn around the company. For one, he wanted to improve its profit margin through the distribution of high-quality bedding products of a premium brand, Tempur.
He also suggested that the company invest heavily in manufacturing natural latex mattresses, a more sophisticated product that commands higher profit margins. Such a move was also in anticipation of a rise in market demand for environmentally friendly products.
As simple as it may sound, Lee had a tough time convincing his father and elder brother Kong Yam about his plan. “We were selling one mattress for about RM200. And then, we wanted to move to the high-end market, selling a pillow at RM500 to RM600. It was like, you were selling Perodua Kancil, and now you wanted to sell Rolls-Royce. Could you? They were doubtful.”
Lee managed to win approval for his plan and convinced distributors to start selling premium products over time by providing them with incentives. Additionally, he set up LSK’s own outlets to distribute products directly to consumers. “It was a bold move. Such an idea wasn’t common back then as we would risk offending our customers (the furniture shops) by competing directly with them.
“However, I told them (his father and brother) that if we were to transform our business, we would have to do it the right way and see it through. Our future was at stake. If we didn’t change, we would hit a wall,” he says.
Today, LSK has established a healthy financial footing. The company, with more than 60% of its shares held directly and indirectly by the Lee family, has adopted a dividend payout policy of not less than 30% of its consolidated profit after tax since 2018.
Under Lee’s leadership, LSK’s group motto is EIIE — effectiveness, improvement, integrity and efficiency.
“Of the four values, I always tell my employees that effectiveness is the first word they should bear in mind. Working effectively means you’re working towards the desired direction.
“Efficiency means you’re producing fast work with good quality but what’s the use if you are working efficiently in the wrong direction? You have to make sure what you’re doing is effective first before making sure that it is efficient.
“Yes, you should work hard like an ox. You should keep ploughing the land until it bears results. But if you want to achieve more than that, you can’t just be working hard, blindly,” Lee says.
The older generation tends to emphasise the importance of working hard because many of them were facing survival issues, he notes. “Many from the older generation wouldn’t have had anything to eat if they didn’t work. They would even work two or three jobs to put meals on the table for their family. The younger generation is different. If they don’t like a job, they can easily find another one. And they should work smart.”
Lee, who has three children, with the eldest aged 13, does not intend to pass on much of his wealth to the next generation. He wants them to fight for their own careers and future.
“I always tell my children that your father has got some money, but that’s my money, not yours. I don’t plan to pass on my wealth to my children. I will provide them with the support they need.
“They have to equip themselves with knowledge and experience, and learn and manage their own money. I don’t want to make them think they will inherit my wealth sometime in the future, so there is no need to work so hard.”
Like many business leaders, Kelly Teoh reckons that the Year of the Ox will be one of challenges and uncertainties.
“This is a year for reflection and realignment of business strategies for greater sustainability. Businesses must recognise that they are stewards of financial resources, and they should use these wisely to bring even more benefits to society. Aligning the business with the United Nations’ Sustainable Development Goals is one such good move, to ensure that wealth is generated sustainably and not at the expense of humans and the environment,” she says.
Teoh, just 26, was recently appointed executive director of Pecca Group Bhd, a listed car leather upholstery maker. She also helms Rentas Health Sdn Bhd, a sister company of Pecca that produces personal protection equipment (PPE), face shields, masks and Covid-19 test kits.
Teoh sees opportunities in crises. In fact, the Covid-19 pandemic gave Pecca the chance to kick-start its face mask business last year. “As the saying goes, there is opportunity in crisis, and we should adapt nimbly to identify such opportunities and continue working hard to achieve the goals we have set,” she says.
“Rentas contributed about RM500,000 in revenue to the group in its first month of operations last August. To be honest, we have made great strides.”
Locally, Rentas’ health products are mainly found in outlets of Aeon Wellness, Watsons and Jaya Grocer. Having obtained the necessary certifications, the company plans to export its products to the US and Europe.
With growing competition, Teoh is steering the company towards producing high-quality face masks that command a better profit margin. Apart from government tenders, she plans to market these face masks by promoting a lifestyle concept and selling them to the man in the street.
“These lifestyle masks will be as good as surgical face masks and are trendy and cute,” she says. “For instance, some people may not like the white liner on top of a face mask. So, we have this yellowish, natural beige face mask without the white liner.
“Sometimes, you may not be in the mood, so the mask is just nice to cover your unhappy face. You can hide behind it and still look cute and trendy.”
Teoh holds a Bachelor of Economics degree from Pepperdine University in Los Angeles, California. She was working at a law firm in the US and would not have returned to Malaysia had it not been for her father.
“Honestly, I refused to come back at first. I liked it in LA. And my dad told me that considering my standard of living, it would take a while for me to climb the corporate ladder [there]. In Malaysia, I have a higher stepping stone. So, why not come back and try it out?”
Today, Teoh leads a team of about 130 people at Rentas. “Creating a new team and managing people is another key challenge for me as a young successor. This is especially so when there are people with a lot of experience working under you. You have to gain their respect so that they listen to your lead. This is really not easy.”
Nevertheless, she has risen to the challenge over the past six months with grit and guidance from her seniors. She has also upheld the values her father instilled in her. “My father always says, ‘Success is 90% hard work and 10% talent’. And luck is a dividend of hard work. The harder you work, the luckier you get.”
Yet, it is not enough to work hard. It is equally important to make sure that things are completed according to schedule. Teoh shares a story her father told her when she was just a child.
“He was once a contractor for a Singaporean leather brand. He would receive raw materials from the brand owner and deliver the finished goods to them. One time, he delivered the goods late and was scolded by the brand owner. My dad explained that the goods were late only because the raw materials provided to him came late.
“However, the brand owner scolded him with vulgar words, basically saying that: ‘You don’t give me such an excuse. Because of excuses like these, you’re a loser!’ And all this happened in an open office hall where everybody saw and heard it.
“From this incident, my dad learnt that it is true that when someone hires you, you are there to help solve problems. He should have followed up closely with the brand owner and made sure things were delivered on time. You don’t give excuses. You keep following up and making sure everything is done perfectly. When there is a problem, there is an opportunity for us to present a solution.”
As a second-generation business leader, Teoh believes the key to preserving family wealth is by having a good understanding of the value of wealth. The younger generation should know how money is earned and how it can be deployed to generate sustainable returns. “Being hardworking is definitely a key value to preserving family wealth,” she says.
However, this does not mean that a person should not enjoy the finer things in life. While a portion of wealth should be kept in the vault, another part should be used to reward oneself for working hard.
“I believe in working hard and playing hard. I would work hard, and then relax and recharge after working hours. I think it is important to have a work-life balance to reach greater heights in the long term,” says Teoh.
“The key is to spend within our means and spend responsibly. It is completely fine to satisfy some of your wants, but you only do so after saving and fulfilling your obligations.
“Many people say that my spending is above the normal standard, but they don’t know that I save too. And I work harder to earn more money. As my grandma said, ‘You need to learn how to earn, and also how to spend. Sometimes, those who spend more are motivated to earn more.’”
Feng shui consultant and founder of Xuan Jixuan Feng Shui Consultation Centre
Summary: 2021 will be better than last year, but not without much turmoil and chaos. The stock market could perform better in May and June before retreating again in July and August. Sectors with the elements of Fire and Wood — which include technology, packaging, pharmaceutical, education and furniture — are expected to perform well.
On Feb 3, at about 11.08 am, the Year of the Metal Ox will begin. It will be a year where all of us, including investors, can take a breather for a short period. It will be a better year than 2020, but will also have a lot of ups and downs.
According to the BaZi, we are now at the late stage of the Eighth Period, which started in 2004 and ends at 2024. The later stage of each period (which starts from one to nine) tends to be filled with turmoil and chaos. There will be three more years to go before the Ninth Period starts, which will see the world and markets usher in an era of prosperity.
Meanwhile, during the Year of the Ox, the stock market is expected to perform better in May and June (the summer period). However, it is likely to start retreating again from July onwards. It is not a good year for speculation, but more suitable for long-term investors to accumulate the shares of good companies.
The element of Water is strong this year. As such, the elements of Fire and Wood are much needed to balance out the strong Water element. Hence, businesses that fall under these two elements will do well this year.
Sectors containing the Fire element include information technology and electronics, while others containing the element of Wood are packaging, education, pharmaceutical and furniture.
Meanwhile, the element of Earth does not help in balancing out the influence of the Water element. Hence, sectors such as agriculture, construction and property are not expected to do well this year.
Sectors that contain the element of Water and Metal are not expected to do well either. These sectors include tourism, hotel, metal-related commodities and heavy equipment.
While Metal is the dominant element this year, it does not mean that sectors that contain such an element will perform well. The element of Metal can be seen as the king of all five elements this year. While it does look good on the surface as it has a wide-ranging power over its subjects, being a king is no easy feat as he has many things to juggle and balance. A king faces many constraints and limitations.
In Chinese culture, an ox is a very important animal in an agricultural society. There are many things farmers cannot do without them. It is also an animal that is faithful, quiet and stubborn.
As such, we need to remember the shortcomings of the ox and become better this year. We have to be more open-minded and engaging this year. And we have to be willing to co-operate and explore new partnerships with others to do well.
Yap Boh Chu
Feng shui master
Summary: The Malaysian economy and market will remain slow, or even bearish, before they start heating up again in 2024. Of the 10 Asean countries, Malaysia will be among the slowest in economic and market recovery. Our market is expected to start recovering only after August this year. Promising sectors include technology, energy, healthcare and beauty, while the financial, travel and food industries are not expected to do well this year.
The economy of Malaysia will not see a significant rebound in the Year of the Metal Ox. It will be more of a game of survival for most industries rather than growth. The energies this year are not very positive. Coupled with the Covid-19 situation, it is certainly a year to be careful.
Meanwhile, slight improvements in markets will only start showing towards the end of the year after August. Things will be relatively better than last year but, overall, activities will remain quite slow. Investors should be in a position where they can move their money swiftly when markets start heating up again in 2024.
The Asean markets will be slow to recover, with Malaysia being in the lower half. Markets in East Asia will be volatile but will finish well at the end of the year. The European and US markets will be volatile but they should not close too badly at the end of this year.
Promising industries this year include those related to technology, energy, personal health and beauty. The property market will remain soft. Shares of property developers and companies will not be a good investment. However, this year is a good time for investors to purchase real estate and investment properties.
The financial, travel and food industries are not looking too good this year. Primary food producers will maintain their business, but the outlook for downstream food industries will be challenging.
Gold, as usual, remains as a safe haven in challenging times. Its price will stay at the current levels this year and will not rise too much.
In general, investors will have to be careful and be very prudent with their investing decisions. This year is more about being defensive and preserving wealth in adverse conditions instead of building wealth.
However, despite the slow, or even bearish markets, there are opportunities to be seized. One has to be very calm and disciplined in one’s investment decision-making to reap good returns. This is not a year to be driven by emotions, which can only lead to disastrous outcomes.
Chief researcher and consultant at Good Feng Shui Holdings Sdn Bhd
Summary: It is a year of major turnaround where various industries are poised to recover from the recession last year. The stock market will be volatile in January, June and December, but it could perform well in February, May, July, September and October. All sectors will fare better than last year, especially those with the elements of Wood and Fire. Investors need to increase their investing and industry knowledge amid major technological disruptions this year. They will also need to remain flexible.
I would call 2021 the Year of the Golden Bull. It is a year of turnaround where companies and individuals are trying hard to improve their products and services, as well as cooperating with those from various fields. I foresee most industries beginning to recover this year.
The Malaysian stock market will see big waves of ups and downs, which will provide us with many good investment opportunities. It is expected to be more volatile in January, June and December, where investors have to be extra careful. Local and foreign investors are expected to be more bullish in February, May, July, September and October.
Industries with the element of Wood and Fire will have greater business opportunities. Those with the element of Wood include furniture, agriculture, healthcare, education and so on. The prices of various raw materials and commodities will also increase.
Industries with the elements of Fire, which include electronics, telecommunications and energy, will also do well. Other high-level technological applications, including the Internet of Things (IoT), artificial intelligence (AI) and outer space exploration activities, will gain huge traction. More people will venture into social media platforms such as YouTube and Tik Tok.
Industries with the Metal element, such as banking and finance, legal, iron and steel, will also be having lots of good opportunities from the end of July. Financial technology (fintech) will grow rapidly. The recovery of these sectors will be underpinned by improving consumer sentiment, supportive policies from the central bank and government and tax deduction schemes from related authorities.
Water-related industries including tourism, aviation, logistics and transportation and Earth-related industries such as mining, property and real estate will fare better than last year as the economy recovers.
However, there is no denying that there will be many ups and downs this year with significant disruptions taking place. Long-term investors will find it hard to manage and stick to their portfolios. They must always improve their knowledge in the industries to keep up with these changes.
According to feng shui, the Ninth Period begins in 2024. From then, we will experience a lot of new and good things in various fields. In general, we will be living in a better world from 2024 as the Nine Purple Star extends its more auspicious Qi in all aspects of our lives.
Ismitz Matthew De Alwis, Executive director and CEO of Kenanga Investors Bhd
Summary: The global economy is expected to rebound this year while interest rates remain at decade-low levels globally. Investors with a moderate risk profile can allocate 80% of their investment money in bonds and 20% in equities.
Investors should see a synchronised global recovery this year with all regions bouncing back from the pandemic-induced recession last year. Global GDP is expected to rebound to 5.2% from a 3.9% contraction in 2020, according to consensus on Bloomberg.
Meanwhile, interest rates should remain at decade-low levels globally while the US Federal Reserve and the European Central Bank continue to expand their balance sheets with various asset-purchase programmes. We should see a positive environment for risk assets going into the first half of the year, at least.
Given that the global Covid-19 vaccination efforts are now underway, we expect the local and global equity markets to strengthen. Stock markets should continue to provide investors with attractive returns. However, the turning point will depend on factors such as wide-scale availability of vaccines and economic growth momentum.
Risk-averse investors can allocate all of their investment money to bond funds. Those who are able to tolerate a mild degree of investment risk can opt for an 80:20 asset allocation ratio in bonds and equities. Investors with a high-risk appetite who can stomach higher levels of volatility can be fully invested in equities.
Also, a mix of 50% foreign and 50% local equities would be good for diversification. The most important thing is to stay diversified and focus on your personal financial goals.
Raymond Tang, CEO of Eastspring Investments Bhd
Summary: Investors should ride the global economic recovery this year and allocate more money to equities, especially those in Asia. Chinese technology companies and the environmental, social and corporate governance (ESG) theme are the main focus this year. Asian bonds, including Malaysia’s, are expected to perform well amid the low-yield environment.
As global growth recovers as a result of effective Covid-19 vaccines, equities and other high-yielding assets are expected to benefit from it. Due to better management of the pandemic, Asia’s economic growth is expected to be more resilient compared with other regions. The expectations of a weaker US dollar would also drive foreign inflows into the region.
There are many opportunities across various sectors of the Asian market, which include consumer, energy, utility, property and financial. However, we like healthcare, education and technology stocks in the region, especially in places like China.
Technology innovation will drive structural shifts in the country and sectors like semiconductors, new energy vehicles, software and automation will continue to deliver strong earnings growth. The ESG theme will likely attract more investors moving forward.
Low interest rates globally will support the search for yields, which increases investor appetite for Asian bonds. The interest rate difference between Malaysian bond yields and developed market government bond yields will continue to underpin the demand for local bonds. Higher-quality real estate investment trusts (REITs) will likely do well too.
Generally, investors should have a higher allocation to equities in their portfolio compared with bonds. That is because the path of “normalisation” towards better GDP growth and corporate earnings recovery is likely to propel stock markets upward in the medium term.
Investors with a higher risk tolerance may even consider a small allocation to alternative assets apart from conventional equities and bonds.
Devan Linus Rajadurai, Co-founder, CEO and CIO of MTC Asset Management
Summary: Invest in good-quality companies globally, especially value and growth stocks in the mid- and large-cap sectors. Favourites are the Malaysian banking sector and the US technology sector.
When the world turned topsy-turvy in 2020, investors may not be blamed if they permanently distanced themselves from the gut-wrenching volatility of the stock market. But those who avoided the market completely would have missed “the mother of all recoveries”.
Good vaccine news and signs that the bearish forecasts were hopelessly wrong have boosted global equities all around. At the moment, we try not to predict how the market will perform. And we believe investors should continue to stay fully invested in 2021.
For us, global equities — specifically value and growth stocks in the mid- to large-cap sectors — would be where we would find the best bang for our buck. Buying good-quality stocks, defined as a high return on equity and low debt, would be the most ideal way to invest with a three- to five-year horizon.
In Malaysia, our view on the banking sector is still very positive in the long term. Therefore, we believe that companies such as Malayan Banking Bhd (Maybank) can provide good returns and stability for investors.
However, if you are looking to invest outside of the more conventional and traditional sectors, investing in the disruption theme could yield better growth and returns. Investing in blue-chip technology companies such as Microsoft, or the FAANG (Facebook, Amazon, Apple, Netflix and Google) stocks is something we would consider. However, the valuations of these companies are something investors need to look at more closely before pulling the “buy” trigger.
The pandemic has amplified the need for businesses to speed up their digitalisation efforts. So, the recurring investment theme that we will see in 2021 and beyond is the acceleration of various digitalisation trends. These include online shopping. Investors will have to identify and invest in disruptive companies that reinvent their businesses and find new audiences through technology.
However, one with very little time to conduct research and analysis can invest in index or exchange-traded funds. In fact, those who invested in the Nasdaq-100 Index at the peak of the crash in March last year would have earned a good return. They would have made a gain of about 40%.
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