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| By N2H | ||||||||||||||||||||||
As at 6th Jan 2012, our local market is valued at a P/E (Price per earning) of about 14.8x on 2012 earnings. In the other words, it is currently lower than the 10-year average P/E ratio of 16.7x. So, it would be good opportunity for investor to make own assessment and decision in the present market condition.
P/E ratio is commonly used by stock traders to value a company. It reflects whether a company’s share price is overvalued or undervalued.
For any organizations of any size, it is required to take staff turnover into account. This is to calculate the cost of doing business. Basically, it is a calculation of wastage whereby you take the number of employees who leave the company, to the total number of employees in one company.
For example,
Company Y: Employed 1,000 persons in January 2010. By January 2011, 300 had left. This gave a high turnover of
In my opinion, China could overtake US as the world’s largest economy if it maintain annual growth of 8% over the next 20 years.
Last year, I had already overtook Japan as the number 2 economy, and set a growth target of 8% for 2011 and is aiming for 7% per year from 2011 to 2015. The reason why I said that China can become the largest economy by 2013 is because it has the potential market which measured by purchasing power parity.
P/E ratio is a good way for investor to calculate how expensive or how cheap a stock is relative to its earnings. In the other words, you can get a sense of whether a stock is overvalued or undervalued.
The ratio is calculated as follows:
P/E = Market Price per share / Earnings per share (EPS)
The earnings per share (EPS) can be obtained in the company financial statement. The lower the P/E, the cheaper the stock is and vice versa. However, high P/E ratio can also be a good thing or a bad thing. It depends on how you look at from different perspective. The low ratio also means that the company stock is currently undervalued, so if you can invest during this period then you can make some handsome profit when the share price go up later.
For example, if the company’s share price is RM1 and the EPS is only RM0.10, then the P/E ratio would be 1/0.1 = 10. If looking at the P/E ratio point of view, the higher the P/E ratio, the more overvalued the company is. Thus, do you think is it risky to buy that share? In this scenario, you should always follow the guideline to determine whether it’s overvalued or undervalued. Refer the guideline as follows:
With stocks plunging in Aug & Sept, we think there is a bearish trend for our global market. The financial problems in Europe will harm the global economy, as it is major importer of goods from US and China. So, what is happening in Europe is not single event. But, it’s a contagion to the global economy.
Another negative impact caused by the S&P unprecedented downgrading of the US Treasury debt to AA+ which added to the pessimistic outlook. The US job market seen another downturn with unemployment rate hovering at 9.1%.
In 2008, the markets haunted by the sub prime crisis and skyrocketing fuel prices as well as high food prices. Today in 2011, we are now faced with a problem that seems to be inevitable. We are faced with an imminent problem which is credit crisis.
The Central Bank of America or Federal Reserve tries to stimulate the economy that was believed by many to be headed for disaster. But, most of the time the result was a short term boost in the stock market that lasted only a few weeks. Now, much economist fears that we are headed for a economic slowdown.
Although recession can create many problems for our economy, it still can allow investors to make some money. Before making any investment during a recession, you have to know how the market behaves first. In general, the following things are usually observed:
i. The stock market is the first to be affected. During a recession, household income decreases, this will cause household spending to be reduced. When people spend less money to buy products, companies will suffer, and as a whole they will make less money and lower earnings. Lower company earnings will in turn reduce its stock price.
In handling the Budget 2012, our government major challenge is how to minimise the financial burden on people effectively. At the same time, it also needs to avoid transferring the people burden to the government in order not to destroy our economy. Therefore, while introducing citizen friendly measures to minimise their burden, there must also be measures to stimulate nation economic growth.
According to a Bureau of Statistics survey, out of a sum of 5.8million Malaysian households, a staggering 60% of them have household incomes of less than RM3,000.
