What Has Happened?  On 24 October 2011, the Net Asset Value (NAV) of RHB Islamic Bond Fund dropped 8.323% from RM1.2459 to RM1.1422 as a result of the 100% write-down of Tracoma Bond, which RHB Islamic Bond Fund (the Fund) holds RM5 million of it and amounted to 8.323% of the total fund size.

As the Fund still holds the Tracoma Bond, it can recover some of the bond value through the liquidation of Tracoma’s assets. However, to comply with accounting standard and best-practice, the Fund needs to write-down the value of the bond to zero to be conservative.

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.

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.

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

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? 

i ask u buy amdynamic u dont 1

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

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.

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? 

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? 

---

Added on November 7, 2011, 2:41 pm

Negative 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... 

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

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.