The global economy continues chugging along.

Manufacturing is key to advancement in a developing/emerging country. Is this a generic true statement? That has been the standard since the industrial revolution & prior to that it was advancement in agriculture that made up the bulk of any country’s economy growth. How about today? What do countries and businesses need to focus on to continue driving growth? Globalisation In Retreat, a short video, is a very interesting idea that answers the above questions, put forth by Professor Bruce Greenwald of Columbia Business School;

https://www.youtube.com/watch?v=oCMB41bdTP0

In short, his longterm advocation; localisation/domestic domination in business, is key to being successful i.e. Walmart that has done tremendously well in its home ground, the U.S. and relatively bad overseas (e.g. in China). 

Dominating local market(s) is essential prior expanding overseas. 

As for globalisation, more countries is projected to focus on producing goods locally once robots can make up the bulk of the workforce. Robots have already filled in uncountable manufacturing jobs, hence the lack of wage growth via employment in manufacturing in particular the auto industry. The future according to the short video will be in education, travelling, healthcare and retirement related industry.

One is of the opinion, businesses that focus on dominating their local markets and maintaining/advancing their products will be around for a long time to come. In example, in a small town in Penang, Malaysia, there was once a very famous restaurant ‘mamak’ X which is still in business after 40 years plus in service selling roti canai among others. Within that 40 years, countless restaurant ‘mamak’ popped up and replicated/franchised themselves across the country some dominating successfully certain niches i.e. indian food. This 40 year old restaurant could have easily dominated their local state as they had the resources, great product and the goodwill however poor resource allocation skills have led them to stagnate in size. 

In short, globalisation wherein the cheapest resources available are employed by countries, will be in full retreat once countries can manufacture cheaply via machines locally. Locally based businesses will still be around as long as they maintain their goodwill and quality of service. Of course which business will grow into successful giants will depend on many other factors spoken in the past.

Stocks In View 

TUNE PROTECT GROUP BERHAD (5230) 

The CEO and CFO have recently resigned due to stated “personal reasons” even though the company has grown continuously in their hands with many projects in sight. The company this year has started marketing to a wider target market. The actual reasonings for resignation is very much of concern; could the asset quality of the premiums/float be increasingly in jeopardy due the expansion in new products underwritten. 

PARKSON HOLDINGS BERHAD [S] (5657)

The company is continuing its turnaround now with their many, 50-100 over partnerships with merchants i.e. restaurants like Ayamas that offer special discount when presented with a Parkson card. This link shows all of the new merchants that have recently joined Parkson’s Lifestyle Brand strategy; 

http://web.parkson.com.my/whatson/parkson-card/ 

[ click on Merchant Partner Privilages and then any of the following categories 

i.e. Dining;  http://web.parkson.com.my/whatson/parkson-card/dining/ ]

Parkson’s cash flow from operation has declined in health. New stand alone stores brands, join venture brands, own brand strategy are to help with the recovery as long as customers and shoppers enjoy & accept the new lifestyle brand being offered as compared to Parkson’s competitors that are also ramping up their unique point of sale strategies. 

BRITISH AMERICAN TOBACCO (MALAYSIA) BERHAD (4162)

Good dividends, depressed price (more than -10% past 1 week), extensively high tax base, illicit cigarette problem, communal health issue. 

PROPERTY STOCKS - MALAYSIA

A reduction in rates should be a boon however, still the industry is experiencing a slowdown, liquidity in the local financial sector could be an issue, still tight lending policies by banks & high sub-sale offer volume. In the longer term, strategic locations i.e. Penang should do well for property owners and/or positioned developers. The property market mainly relies on credit hence any deterioration in the credit market will impact new property sales hence affecting developers. That being said, domestic property market size is big and transactions are likely to continue. Lower price range developers are likely to benefit as previously recommended.

Until next time, happy value investing.

[DISCLOSURE: The writer currently owns minority stake in Parkson Holdings Bhd among the mentioned stocks as of 31/07/2016 under his personal account. JR Capital LLP has no minority interest in mentioned stock as of mentioned date.] 

[DISCLAIMER: Everything stated in this blog is purely the opinion of the writer and any decision taken should be based on sound judgement with risks fully born by the decision maker. The writer shall bear no responsibility for any losses due to adherence of advices blogged by the writer or any commenters.  Informational discrepancies are possible and will be corrected if any.]