On BDSM, SG Gov Bonus and Bursa Malaysia.

Do you know what financial bloggers talk about when invited to a casual meal by a broker ?

BDSM, of course !

BDSM is not too different from investing. In investing there are TA investors, FA investors, Quants and crazy folks who buy anything based on what their broker say. We found out that BDSM is equally diverse - you can be a Dominant, Submissive, Switch or Curious.

Financial bloggers also teased me about my affinity for Malaysia. This holiday, everyone is sharing about their wonderful holidays in Hokkaido, New Zealand or Prague.

Unlike all the beautiful people on social media, I did not take the high road.

In fact, I spent so much time in Kulai eating beef noodles, the financial bloggers proposed that I adopt a BDSM nick with the word "Kulai" in it, like "KulaiBeast666".

Tomorrow I will begin my third journey to Malaysia this holidays to finally use up my SG GOV bonus. So far,  I have about $150 MYR left after two trips. The plan is to meet up with my kids in Kulai and then journey with my in-laws in KL. Over in KL, I will split from from the main party and take a few relatives on my mum's side for a meal or two. I was hoping to visit a 24-hour bookstore in Cyberjaya to see if they have a credible finance book section.

On a more serious note, I was able to backtest to see whether if some valuation factors translate to Bursa Malaysia because my brother in law asked me to figure out how a Malaysian portfolio would look like if I were to buy stocks in Bursa Malaysia.

( Take this section of the article with a pinch of salt because I have no interest in taking on Malaysia's political risk right now. )

Investing in all 942 counters in Bursa Malaysia in equal shares, a 15 year backtest with annual rebalancing would result in fairly good returns. You will get about 8.56% with a downside risk or semi-variance of 12.51%.

Suppose you are a yield pig and want a similar portfolio in Malaysia. You then invest in the top 30 dividend counters in Malaysia. My backtests show that the Malaysian markets will punish this behavior - your returns would drop to 6.93% with an increased semi-variance of 18.02%.

Clearly it does not pay to be yield pig in Malaysia. Apparently, they have their own APTV-like stocks within their own markets.

In BDSM, there is a concept of the "safe word". This is word use you to stop being punished in a BDSM activity. We discovered that safe word SG BDSMers use is "Yellow"

In dividends investing, the safe word is "FreeCashFlow". If you do not want to be punished for picking high dividend Malaysian stocks, you need to select counters where Free Cash Flow exceeds Dividends issued.

Once we filter out for companies that give out dividends that are bounded by their free cash flow, we end up with only about 200+ counters. Taking the top 10 dividend yielding stocks, we get a much nicer return at 16.11% with a semivariance of 13.45%.

It is good to know that a good quantitative methodology translates across national borders.

I'm sharing a screen shot of the 10 counters not to encourage anyone to buy them since I do not have Malaysian brokerage account myself.

I would like to encourage Malaysian investors and gurus to comment on this this list.

Let me know whether these are shit stocks.

This blog will take a short break and we will continue during the Christmas holiday season.