I just recently invest in the counter.... Not in BIG SUM fortunately.

the value drop more than 8% . What should I do ?



http://www.fundsupermart.com.my/main/resea...?articleNo=1719

This post has been edited by Irresistible: Nov 5 2011, 08:46 AM

Going by that, if you can hold on, there is a chance the NAV may recover partially from this.

Note that another bond fund, non-Islamic RHB Bond Fund did something similar - ie recorded 2 sharp drops in the past few years.

Makes you wonder.

really ? u bought it too ?

wonder about what ?

Makes you wonder why when normally bond funds do not drop like that, but the RHB ones seems to do so.

It means that the bond fund is not as defensive as you might think, and is taking risk way beyond allowable limits. In the prospectus they are only allowed to purchase BBB and above rated bonds, which is suppose to be very financially strong. So how does a fund like that can end up owning Tracoma bonds which is rated D? Also >20% of their other assets are also rated below BBB. Looks like very bad risk management for a bond fund, which is directly flaunting the allowable limits listed in the prospectus.

So next time before you buy anything, READ THE PROSPECTUS & ANNUAL REPORT.

Anyway since you have a foot into it, keep until the company liquidation is complete which can take anywhere from 6 months to a few years to recover some little cash. Remember, debtors get paid first, then whatever remains only given bondholders.

Anyway quoted from wiki...

Rating BBB: An obligotions rated 'BBB' has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligations to meet its financial commitments.

Rating D: has defaulted on obligations and S&P believes that it will generally default on most or all obligations

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Added on November 5, 2011, 10:20 amBacause they are flaunting or exceed their investment mandate as per listed in their prospectus, thus their risk factor goes up exponentially. Play with fire and get burned.

Most other bond funds in Malaysia generally only hold A - AAA grade bonds, which is investment grade.

This post has been edited by gark: Nov 5 2011, 10:24 AM

Went beyond what the prospectus said?

Just noticed this:


This post has been edited by howszat: Nov 5 2011, 10:38 AM

This fund has exit fee of 1% if redeemed less a year.


Why you should be so nice to incompetant fund managers?

This is what happen when invest $5 millions in 7.2% Tracoma sukuk rated D and committed more 10% of capital


how much can expect to recover from Tracoma,
when it has 2 lawsuits from Lembaga Hasil Dalam Negeri claiming more than $2.6 millions for payment of tax and late payment penalty anf the company itself has huge losses and cash deficit?

Profit Sharing : 15/85
Any capital loss tanggung sendiri

Tailou hedge fund charge 20% but any capital it must recover it first before it can continue to charge management fees


What Gark pointed is informative, but how many really read thru and understand fund annual report, just check out the management fees one page said this amount another page later said another bigger amount which one is correct? 300K a year worth it?

its mean shariah is not that safe as claim

Look at previous record...by RHB bond, 70%-80% claim rate?

Write-down of RHB Islamic Bond Fund Holdings

Memory Tech Sdn Bhd Owes- 5,054,883 Recovered - 58,778
Ingress Sukuk Bhd Owes -212,767 Recovered - 212,767

The recovery from memory Tech is only about 10%. For Ingress, it is lucky as the company did not end up bankrupt.

RHB Islamic Bond bought the $5M nominal value 7.2% Tracoma Holdings Bhd at a discount for $4.38M

There is another $8M nominal value 9.30% Ample Zone Bhd in its portfolio bought at cost $8.17M facing a recent downgrade.

A few week back

MARC has lowered its ratings on Ample Zone Berhad's (Ample Zone) RM9.65 million Class B Sukuk Ijarah (sukuk) and RM75 million Class C sukuk to BB+IS and B-IS from A-IS and B+IS respectively. The outlook on the ratings remains negative. The downgrades reflect a heightened risk that upcoming payment obligations in January 2012 will be missed, based on the unsatisfactory progress to date in collateral disposal. The negative outlook incorporates substantial uncertainty over the marketability of the collateral properties and execution risks with regard to the disposal of the collateral properties, as well as the approaching payment date for the sukuk.

Ample Zone is dependent on the realisation of the transaction's collateral to meet its forthcoming January 2012 obligations on both classes of sukuk totalling RM88.5 million, of which RM84.6 million relates to principal repayments.

Well, due to invest too much on the bond which incurred credit crisis really impacts the fund..

I just pump in some money b4 u guys reply this ...

I thought BBB & above is strong .... (from its prospectus). How to I know it did not follow its rules ?

Somemore, it is in Supermart recommend list.

haiz....

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Added on November 5, 2011, 8:46 pmWhere u guys get this info ?

This post has been edited by Irresistible: Nov 5 2011, 08:46 PM

for now, just hold n hope for the best. i guess ppl won't be complaining if it was doing well ..

lol, i don't even notice till i saw this thread.

take this as a lesson that bond fund is not as safe as 'fund manager' claim...

u are the one that recommend me this fund ....

Frankly, if drop 0.8 % ,its acceptable .

Bond fund ,conservative. but, now is drop 8% in one day.

ya off course, it's always one's discretion to purchase it or not.

so if it's doing well, would you have praised me here?

not anyone to blame la....

No show angry face expression'

i ask u buy amdynamic u dont 1

Good lessons for everyone to know what are the risks associated with bond funds.

Seems like RHB doesnt have good management on selecting their bonds. PM bond funds and Amdynamic bond are quite ok i guess.

OMG, never thought bond fund can drop like that....

I actually consider to buy amdynamic initially per ur advice, & ask advice from Kucingfight.

He said amdynamic is expensive.

Then, end up with RHB islamic bond.

bro, for bond funds, the NAV is just a number. bond is like buy and keep. Not really for trade.

If value drop & drop, u still hold meh ?

I mean, for bond fund, I don't expect a drop more than 3%.

8% is not easy to recover....

bro, please don put words in my mouth. u asked for advice/recommendation n i was merely sharing my thoughts.

i didn't mention amdynamic is expensive, i said there was a 1% exit fee. So, if u were ok with it, go on, no one's stopping u from investing.

again,coincidentally that this happened n u come crying out over spilt milk. so, IF amdynamic suffered the same thing, u would come blaming Mnet too?

just too bad it happened, n it's up to u to cut lost/keep it. i myself hold on to it, n yeah not all decisions are always rite.

If invest initial not big sum, maybe you can consider to top up..

Seems Public mutual is better in picking up the bond funds.

I never blame u la....

Its myself wan the cheaper alternative.

U just provide me info, I m the one that make the choice !

since it has dropped more than 8%, can we buy now?

It is not like the price dropped becos of market trend but bad investment decision on the fund manager's part. It is about doubtful bond. So would you invest on this fund base on the fund manager's ability?

possible make investment and then when they recover the debts, new holders will get the piece of cake too?

The person buying the bond fund should take responsibilty after all Supermart website was mentioned, failing to do own research

Dividend History

2001 7.0sen
2002 7.5sen

13 Jun 2008 2.14sen
26 Sep 2008 3.2sen

30 Apr 2009 2.5sen
30 Sep 2009 3.0sen

30 Oct 2010 1.5sen

30 Sep 2011 2.5sen

Just look at last two years distribution payout, isn't it clear that keep all your money in Maybank 1 year FD get better returns and never have to worry about your deposit capital getting less?


Pls take note most of the time "high post count" == mou lou, tarak otak advise/comments

This kind of ppl no matter how clever/good also very very limited lah

Yes bond fund have risk, but this RHB management is directly flaunting the mandate given by it's unit holders. By holding >20% in BB or less bonds, the fund manager is taking a higher risk bet than he is allowed to. If it pans out, then the fund will reap high rewards, if not then they suffer. Than is the meaning of risk/reward, it can cut both ways.

Ahem, although AmDynamic bond is doing well, about a year ago it too went beyond it's prospectus, it was also holding BBB and BB bonds in 2008-2010, but the bet paid off, that's why you see such big performance jump then. If the bet failed, you all will be cursing AmDynamic now...

Now they have reduced the risk substantially by holding A and AA bonds. Anyway the management is 'smart' to reduce the risk when the opportunities arrive. But RHB did not...

Before you buy bond funds there are several items you need to consider.

1. Rating from AAA to D, which signify the risk factor
2. Bond Duration, the longer the duration, the higher risk it takes.
3. Interest Rate, bond prices are generally inverse with Interest rate

Don't be mistaken, bond fund can be managed to be 'safe' or more 'risky' than the equity market.

Big multi billion companies that has bankrupt because of badly managed bonds holdings includes. LTCM (Russian bonds) and MF Global (Italian Bonds). Ever heard of company bankrupt because of investing in share market?

If you all want 'safe' but reasonable performance bonds look for the following criteria.

1. Bond Grade - A to AAA only
2. Duration - 3 to 5 years
3. Buy when interest rate is high....

This post has been edited by gark: Nov 7 2011, 10:52 AM

Not sure if anyone read it, but in the Interim Report dated 24 May 2011 on FSM, RHB Islamic Bond had 7.5mil and 4.6mil in B+ and BB & below grade investments.

Out of that, the 4.6mil is solely related to Tracoma Holdings Bhd, rated D (along with accompanying notes). That by itself should be a flag already.

This post has been edited by Dias: Nov 7 2011, 10:49 AM

1st - You are not sure of the recoverable amount and the asset write down. Some assets can only be sold as junk...

2nd - The liquidation can take from 6 months to >5 years depending on the 'saleability' of the asset and completion of ALL the court cases which is associated with bankruptcy. All the bank creditors, suppliers, LHDN, former employees will start suing if they are owed money.

Can wait so long?

This post has been edited by gark: Nov 7 2011, 10:51 AM

The remaining of 92% is B+ and above ..

Should be safe to invest lo... I think.

haiz, I just look at the top 5 holdings previously. Never look into its report.

Now, learn a lesson.

You should be asking why Ample Zone Bhd is rated B+ (non-investment grade). 7.5 mil is not a small amount to be sneezed at, considering the impact of the 4.6 mil Tracoma investment on the fund's NAV. The picture ain't pretty based on MARC's Oct'11 report.

http://www.marc.com.my/ratbase/pub.report....oid%3DAMPLEZONE

http://www.marc.com.my/home/userfiles/file...Definitions.pdf

Now maybe so.. but looking at the track record of the manager, if in the future he decide to gamble again by buying junk bonds then how?

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Added on November 7, 2011, 2:41 pmNegative outlook, have been downgraded 3 times and "heightened risk that upcoming payment obligations in January 2012 cannot be met", means might not have enough money to pay debt in Jan 2012.

It remains a time bomb at RHB Islamic Bond fund...

This post has been edited by gark: Nov 7 2011, 02:53 PM

What's the advice , switch ? Cash out ?

Even if it can't repay on January Repayment, it won't written it off , so fast, right ?

This post has been edited by Irresistible: Nov 7 2011, 10:49 PM

switch to equity

Why I can 't more info about Ample ZOne bhd.

Is it listed ?

What is its STOCK name is bursa Malaysia ?

u can google the company. I have posted about Ample Zone Bhd's info 6 months ago to advice visitors to look into this firm, despite the good performance of RHB Islamic Bond Fund

google, only get the info about its credit rating.

It is a subsidiary of Talam ?

B+ is not good lo. It is highly speculative bond, according to wikipedia.

An alternative to RHB Islamic Bond Fund, investor may consider Public Islamic Strategic Bond Fund.

Top 5 holding of PISTBF (as at 31 Oct 2011)

1) Malakoff Corporation / 2022/ (Rating : AA3) (Industry: Power Plant)
2) Special Power Vehicle/2015 (AA3) (Industry: Power Plant)
3) Sarawak Energy Bhd/ 2018 (AA1) (Industry: Diversified Holding)
4) Gulf Investment Corporation/ 2016 (AAA) (Industry: Finance)
5) Encorp Systembilt Sdn Bhd/ 2014 (AA2) (Industry: Construction)

The top 5 holdings are quite good. This fund has foreign exposure (i.e. Gulf Investment Corpo) so the price of the fund usually updated on the next day noon.

Sources:
1) https://www.zawya.com/sukuk/Story.cfm/sidZAWYA20110729052042
2) http://www.marc.com.my/home/userfiles/file...ober%202011.pdf
3) Public Mutual Funds Q3 Report
4) Public Mutual PISTBF 6 months report.
5) bond fund rating: http://en.wikipedia.org/wiki/Bond_credit_rating

If it's me, I will switch out half of my holdings, not everything yet. Reduce the risk factor by half.

Talam Corp never failed to impress me ('negatively') , don't know about others....

Everytime there are news in Malaysia about bad debts, bad ratings, anything related to bad things in the debt market or capital markets, this name will surely surface, and will involve Kumpulan Europlus too. Really amazing these two companies. And now they start involving IJM too, I wonder why IJM would want to associate themselves with bad apples ?

Back to the subject, if Ample Zone is a subsidiary, even a distant one with T, then switch all. Very, very low chances to recover. The people behind are merciless against investors' money !!!!!!!!!!!

This post has been edited by Hansel: Nov 9 2011, 12:42 PM

Cause got very-very big "NAGA or Dragon" seat in BOD since 2003......

Right,...

Among the best minded in Investment & Business strategy

http://www.pbebank.com/corporate/cnt_press347.html

The Company is pleased to announce that t Ample Zone Berhad (Ample Zone), a special purpose vehicle and also a subsidiary of Talam as proposed to raise Sukuk Al-Ijarah of RM150,000,000 (Sukuk). The Securities Commission (SC) has approved the Sukuk via its letter dated 30 December 2004 which was received by the Company on 3 January 2005. Malaysian International Merchant Bankers Berhad (MIMB) is the Lead Arranger and Primary Subscriber for the Sukuk.





RHB Islamic Bond Fund (Fundsupermart Risk Rating: 1-Lower Risk)

RHB Islamic Bond Fund ranked top among Malaysia Bond funds for the past one-year period ended March 2011. It was also the best performing Malaysia Bond fund in 2008 and 2010. The fund ranked third under our performance criterion out of the 17 Malaysia Bond funds. In terms of resilience, the fund has high resilience during market downturns as it ranked third under our risk criterion. The fund’s expense ratio was lower than the average of its peers. We like this fund for its consistent performance, high resilience and low expense ratio.

credit risk are expected to be low as the fund is invested wholly in Malaysian bonds with investment-grade ratings.

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Added on November 9, 2011, 3:47 pmI m considering to switch to Ambond ? (no exit fee)

Any comment ?

This post has been edited by Irresistible: Nov 9 2011, 03:47 PM

If you switch now, means you take the 8% paper loss into actual loss straight away. If you stay put in the RHB Islamic bond fund you will at least recover your loss, and possibility of getting a write-back to the fund. This will take approximately 1-1.5 years based on previous performance However if you are scared of more write down, then switch your money to another fund.

Your future money can then be put into another bond fund. If you want to put in AmBond it is ok, as it is a more conservative fund than AmDynamic, and should be less risky. Other than that take a look at bonds funds by Public Mutual as they are reasonably run and have lower management fees of (0.75%) than other bond funds.

I hold
1) Public Sukuk Fund.
2) Public Strategic bond fund.

This RHB is part of my investment in Supermart. Interested in its Kenanga growth fund.

Frankly, I worry write down of RHB islamic bond. The Ample Zone Bhd due repayment on Jan 2012 (consist 12%).
But, I also wan the write back of the fund. In dillema.

When King MIdas touches an object, it changes to gold. When T Corp and the T boss touches anybody, "gone case".

thanks u guys

WHAT IS OUR CONCERN?

As at 30 September 2011, RHB Islamic Bond Fund (the Fund) has an investment in Ample Zone Class C sukuk of RM5 million and RM3 million holdings in nominal value which were purchased on 13 May 2005 and 18 May 2005 respectively. Ample Zone Class C Sukuk is the largest holdings of the Fund and constituted 13.65% of the fund size.

The credit rating of this Class C Sukuk has been downgraded by Malaysian Rating Corporation Bhd (MARC) from B+IS to B-IS to reflect that there is a heightened risk that the Class C Sukuk may fail to honour repayment when it matures on 27 January 2012.

WHO IS AMPLE ZONE?

According to MARC, Ample Zone is a special purpose vehicle established in 2005 for the sole purpose of raising fund via issuance of RM150 million Sukuk (refer to Table 1).

Table 1: Breakdown of Ample Zone Sukuk
Class A
RM50 million
Class B
RM25 million
Class C
RM75 million
Total
RM150 million
Source: MARC, iFAST compilations
The proceeds from the Sukuk were used to acquire four properties, namely,

Menara Maxisegar
Wisma Talam
Midpoint Shopping Complex
Pandan Kapital Shopping Complex
The properties were subsequently leased back to the respective sellers, which includes three subsidiaries of Trinity Corporate Bhd (Trinity - formerly known as Talam Corporation Bhd) and one private company.

As Wisma Talam was disposed in January 2008, the RM50 million Class A Sukuk and part of Class B Sukuk were redeemed at the same time. The remaining properties supporting the Sukuk are Menara Maxisegar, Midpoint Shopping Complex and Pandan Kapital Shopping Complex, which are now leased to Trinity.

HOW IS THE SUKUK STRUCTURED?

Based on MARC, Ample Zone Class C Sukuk was structured based on expected cash surplus from the rental payments, after profit payments to the Class A and B Sukuk and all relevant expenses of Ample Zone. An Option Agreement is given by Trinity to the Sukuk Trustee, where the Sukuk Trustee can require Trinity to purchase the properties if the sellers fail to honour their payment obligation.

If Trinity are unable to honour its obligations on exercise of the Option Agreement, property agents will be appointed by Sukuk Trustee or Ample Zone to dispose off the properties in order to raise proceeds to meet the payment obligations for the Sukuk.

WHY AMPLE ZONE MAY MISS THE REPAYMENT?

Due to the continued non-payment of rentals from Trinity, the Sukuk Trustee has exercised the option given by Trinity to require Trinity to purchase the properties. However, due to its strained financial position, Trinity will only be able to honour its obligation by disposing the properties to external parties.

Referring to the announcement from MARC, the Sukuk Trustee has initiated the disposal of the remaining three properties since 1Q 2010 but has not been successful in concluding a sale of any of the three properties. Ample Zone, the issuer of the Sukuk, is dependent on the disposal of properties to meet its repayment obligations that are due on 27 January 2012. As such, failure to dispose the properties before the payment date may trigger Ample Zone to default on its repayment. Total repayment for Class B and Class C Sukuk amounted to RM88.5 million, of which RM84.6 million relates to principal repayment.

WHAT ARE THE IMPACTS TO RHB ISLAMIC BOND FUND?

As there is insufficient information on occupancy rates, rental rates and tenant diversification, current market value of these three properties cannot be estimated. Based on MARC’s valuation in 2006, the market value and the forced-sale value of the three properties are RM176.0 million and RM139.2 million respectively. This is more than enough to cover the RM88.5 million of repayment.

Table 2 shows the possible treatments of RHB Islamic Bond Fund in recoginising the Sukuk Value under different assumed situations.

Table 2: Impacts to RHB Islamic Bond Fund under different assumed situation

Situation
Possible Treatment
1. Manage to dispose the properties before payment date and the proceed is enough to repay RM88.5 million.
No default on Ample Zone Sukuk
No impairment and write-down
2. Manage to dispose the properties before payment date but the proceed is only enough to repay part of RM88.5 million.
Partial default on Ample Zone Sukuk
Possible impairment or no action taken
3. Not manage to dispose the properties before payment date.
Default on Ample Zone Sukuk
Possible impairment or write-down or no action taken
Source: iFAST assumptions
We believe that situation 2 and 3 are likely to happen going forward. The adverse impacts to RHB Islamic Bond Fund are much depended on the treatment of the Fund in recognising the Sukuk value after the default. The Fund may impair or write-down the Sukuk value after the default or may have no action taken due to the reason that the Sukuk is pledged by properties, which could be disposed later and subsequently repay the Sukuk holders.

Having said that, we remain unclear on whether RHB Islamic Bond Fund will do any impairment or write-down if Ample Zone fails to repay its repayment in January 2012. Any impairment or write-down will trigger a sharp decline on the Net Asset Value (NAV) of the Fund.

REMOVE RHB ISLAMIC BOND FUND AS RECOMMENDED FUND

Going forward, the outlook for RHB Islamic Bond Fund remains uncertain and the Fund faces the risk with regards to impairment or write-down of the Ample Zone Class C Sukuk. As such, we advise potential new investors not to buy into this Fund. Meanwhile, we will also remove the Fund as our Recommended Fund under the category of Malaysia Bond Islamic.

In our previous article, Dissecting The Recent Drop in RHB Islamic Bond Fund, we advised existing unit holders of RHB Islamic Bond Fund to hold on the Fund. Our advice for existing unit holders, after considering the potential default of Ample Zone is to switch to another Islamic bond fund. Fund to consider is AmBon Islam.

Besides RHB Islamic Bond fund, the next bond fund that most likely will default will be RHB Bond Fund. The later has 17% Ample Zone Bhd Bond, the 21 Oct 2011 report by MARC depicting that most likely Ample Zone will not able to pay their dividend that due next month Jan 2012.

Before the RHB bond write off the debt, if u still holding the bond fund, should quickly sell it. RHB islamic bond is a clear good example already.

Do u mind to share your views on amdynamic bond? I already read the report and everything seem to be normal. They dont really hold bad rating credit

Would the bond or any share, increasing during election i.e PRU13?

The portfolio of Am Dynamic Bond fund seems ok, mostly are banking bond, default risk is quite low. The killing point of this fund is back end charges. Withdraw fee of 1% regardless how long u hold the fund, and the annual management fee is 1% p.a. (compared to Public Mutual bond series 0.75%p.a.). If u r ok with the cost, Am Dynamic Bond Fund is investable...most of the outperform bond funds in PM already closed for suscription.