Select Page

Rising Above Financial Storms

Top Advice from Asia’s No.1 Investment Guru

This book is about equity investing. It provides many gems of wisdom on how to be a successful investor, even amid financial crises. Here, author Dr. Tan Chong Koay, founder of Pheim Malaysia and Pheim Singapore, sets out his investing philosophy, which is based on his many decades of investing in emerging and developed markets.

Dr. Tan’s view is that successful investing need not be the exclusive domain of a few. The object of this book is to help the reader invest in equities, particularly in the ASEAN region, taking into consideration the volatile nature of emerging markets.

Most can invest successfully by following a set of rules, Dr. Tan says. To illustrate, he shows the thinking behind some of the stocks he picked and some of the discipline in play that has enabled the funds he managed to consistently outperform both the relevant benchmark indices and competitors in the long run.

It’s not a pure “how-to” book as it also details Dr. Tan’s journey; it’s not about just the many successes but also the heartbreaks and lessons learnt.

About the book

  • I believe the stock market is not efficient. If you believe the equity market is efficient, you will never be a star.
  • I strongly believe that stock markets in the ASEAN region move in big swings every one to three years. Over the 1985-2000 period, for example, the Malaysian stock market experienced at least eight meltdowns. As such, market timing makes a significant difference in a fund’s performance. I approach cycle peak and bottom with contrarian thinking. Investors must make every eff ort to track the changes in the major trends if they wish to outperform.
  • Small to medium-sized companies are not necessarily high risk. Many of them are dark horses bearing big rewards. You need to assess them with diligence and discernment, particularly their innovation, commercialisation and market penetration.
  • Do not buy when the market is too high and do not rely on future earnings too much, as it may never materialise. One who buys too high can only sell lower.

Page 32

You’ve got to sell a bit early. You’ve got to be sharp. Your ability to read the major trends right is also very important. Because when the market comes down, it can come down very sharply. Value is in the eye of the beholder. That is where you have mass psychology coming in. You need to have a feel for when the market is becoming too expensive. And if you really have that strong belief, you need to get out. You also need to focus on it. If you are not focused, it can be over in a matter of weeks. Even as the price runs up, it runs even faster down.

If you are fully invested at all times, particularly if you go in when the economy is doing well and the market is high, it is difficult to make good money out of Asia. If you’re trying to handle volatility, you cannot be fully invested at all times, because if you are, and you remain so at the highest point, you’ll get hurt to the maximum. Having the cash to take advantage of the opportunities that volatility brings is the key to investing in Asian (ex-Japan) markets. If you look at our Pheim ASEAN Fund, near the highest point of the market index in 2007, we were 53% in cash. And when the market came down, we reinvested and by the end of 2008, we were less than 10% in cash.

And we thought the market was going to run, so we remained quite fully invested until the end of 2009. We did very well. If you are fully invested at the high point, you will get hit badly. If you are investing in a high-volatility environment, you defi nitely do not want to be fully invested at all times. An investor who has the skills and wisdom to take advantage of the market’s peaks and troughs is a true value investor. When they talk about the problems (the sovereign debt crisis) in 2011 engulfi ng Europe: I say, never mind Europe, I only care about a few outstanding companies at discounted prices.

People say they think longer term; I say, why don’t you think long term when times are bad or when the markets are most depressed? People often become over-optimistic when the market is doing well. They don’t realise the market is already overvalued because they are very optimistic. But you should be a strong believer that if the market is overvalued, it will come down. Value investing is a common approach, and we want to tell the world that this is also the approach we adopt but with our own philosophy.

Page 51

This experience, and my success in maintaining a good position in the process, boosted my confi dence tremendously. It earned me a reputation of being a contrarian, the fund manager who loves market crashes. Analysts were already declaring a recession with the 1987 crash, and predicting that it would take two to three years for the market to turn around. Such was the short-term view of many in the market at that time; many still react with similar short-term thinking today.

But I prefer to take a longer-term perspective. I saw that the market had fallen by 50% to 75%, and shares were just too cheap to let go. I began buying in the market, when others were still selling. I had confidence and faith in the Malaysian economy. My hunch proved correct, and the KLCI began to work its way upwards by year-end. I believe very few, if not none, know the lowest point. Buying near the low is the best you can do. Many investors do not want to buy during a declining market because they do not like to buy and temporarily underperform even though the market is grossly undervalued.

The year 1987 was a watershed one for me. It was a foundation, so to speak, when I was unknown. I was basing my decisions on the philosophy that when the price of a share is too high, it will soon come down to earth.

Page 75

What makes a great investor?

Investment guru Peter Lynch in his book One Up on Wall Street, states that the market ought to be irrelevant. What he means, I suppose, is that our investment decisions should not be based on the market, but on what we know about the companies we invest in. Fair point. But is this really the sum of parts?

I think perhaps not. My view is that we should know the point at which to buy, which is not when the market is hot, and the point at which to sell, which is not waiting and waiting for the stock price to go yet even higher. This has something to do with “timing”. It is quite a common thing for investors to behave in a pro-cyclical fashion — or “go with the fl ow”, as one would say. But one does not beat the market by following it. To quote Benjamin Graham, “Buy when most people, including the experts, are pessimistic, and sell when they are actively optimistic.” A great investor must be one who knows when to buy at discounted price but also when to sell near the peak.

Page 180

Testimonials

I have known Dr Tan Chong Koay for more than 20 years. He is a person of high integrity and exceptional capability who built his company, Pheim Asset Management, into a rare successful home-grown fund manager.

…Over a period of 15 years, the results were good, both in terms of investment returns and compliance with the operating standards which GIC expects of its fund managers.

Ng Kok Song

Former Group Chief Investment Officer , Government of Singapore Investment Corporation Pte Ltd

 

I have known Dr Tan Chong Koay for more than 30 years. I was his colleague when he was Head of Arab-Malaysian Merchant Bank’s Investment Services Department in 1981.  In 1994, Dr Tan started his own fund management company, Pheim Asset Management Sdn Bhd, and a year later, Pheim Asset Management (Asia) Pte Ltd in Singapore. As CEO of the Employees Provident Fund (EPF), I had the opportunity to work with Dr Tan again, as his company was one of our external fund managers.

Dr Tan is one of Malaysia’s “home-grown” fund managers who has a long-term track record with the EPF. His expertise in value investing coupled with his dedication contributed significantly to the growth of the fund management industry locally.

On a personal basis, I have found Dr Tan to be an honest, professional and grounded man.

Tan Sri Azlan Zainol

Chairman of RHB Bank and former CEO of the Employees Provident Fund of Malaysia

Dr Tan Chong Koay, Foundaer and CEO of Pheim Asset Management, is an outstanding fun manager. Funds under his management have consistently outperformed the market and our expectations, even in periods of market down cycles and financial upheavals. His investment philosophy of not being fully invested at all time shows deep understanding of value, market cycles and turning points.

Choo Chiau Beng

Former Chief Executive Officer, Keppel Corporation

I got to know Dr Tan Chong Koay through his involvement as CEO and Chief Strategist in managing portfolio under CDAC (Chinese Development Assistance Council). CDAC appointed Pheim Asset Management (Asia) Pet Ltd as the external fund manager from 2003 till March 2012.

During this period, Dr Tan showed himself to be an outstanding fund manager with a great passion for his work.  In my dealings with him, I have found him to be reliable and competent in delivering quality performance in the midst of economic upheavals. I have found him to be on the level in all his dealings with CDAC.

Stephen Lee Ching Yen

Chairman of Singapore Airlines and former chairman of Singapore Business Federation

Dear Dr Tan,  I finished reading your book a couple of days ago. I must congratulate you for making it extremely readable for a layman. An excellent insight into the philosophy and strategy of your investment practice.

The great value of Pheim Investment Philosophy that is proven to be able to weather market crisis by not fully invest at all times, the sharing of long years of experience and wisdom to handle the market volatility, the rare real examples of company visits that lead to successful investing based on Pheim Investment criteria.

The Best investment book from an Asian Investment Guru that is able to handle the volatile market environment. I am really proud of the accolades and awards you received all these years. Well done and congratulations again.

Subri Abdullah

Managing Director, Emerio (Malaysia) Sdn Bhd

Buy the book

Digital

amazon-kindle-resize

In order to download this book, you need a Kindle account.  If you don’t have one, you can click here to create a Kindle Account.

International

kinokuniya-logo-resize

Awards