?

 
 

Recessions: These are times that we see high unemployment occur and families with

lower income are suffering the most. The damage also can be seen communities and businesses.

To survive a recession we need the appropriate short term and the long term investment in order

to generate optimum profit for minimizing the recession damage. How to Counter Recession:

Manage Cash flow (All business blood veins Lower your outgoings (decide what is and is not

essential).

Other Elements need to be considered, Diversified Risk In modern financial

management, managers are required to allocate pre-determined capital among multiple projects

to diversify corporate risk. Capital budgeting: Therefore, corporate risk management becomes

critical when managers make investment allocation decisions. Market risk: is defined as the risk

of loss arising from the adverse changes in the market rates and prices such as the interest rates,

currency exchange rates, commodity prices, or equity prices.

   

 

This project paper starts from its introduction. It illustrate what is the problem statement,

objective, hypothesis, significance of the studies, scope of the studies, sample frame, design,

size, limitation of the studies and organization background.Then the second section is about the

literature review.

In this section I will expalain all the information and data that I use to complete this

project paper. Then the third section is the Research Methodology. It display what type of data

that I obtain, and from I acquire it. Then the fourth section is about the data analysis where I

c
  
convert the data I obtain in third section into information. Finally the conclusion where I try to

proof my hypothesis whether its right or wrong and give a recommendation.




Recessions: These are times that we see high unemployment occur and families with

lower income are suffering the most. The damage also can be seen communities and businesses.

To survive a recession we need the appropriate short term and the long term investment in order

to generate optimum profit for minimizing the recession damage. How to Counter Recession:

Manage Cash flow (All business blood veins Lower your outgoings (decide what is and is not

essential).

Other Elements need to be considered, Diversified Risk In modern financial

management, managers are required to allocate pre-determined capital among multiple projects

to diversify corporate risk. Capital budgeting: Therefore, corporate risk management becomes

critical when managers make investment allocation decisions. Market risk: is defined as the risk

of loss arising from the adverse changes in the market rates and prices such as the interest rates,

currency exchange rates, commodity prices, or equity prices.

     

O‘ èhat are the risks that will give impact to your investment whether directly or in

directly?

O‘ èhat are the suitable backup investment when your others investment failed your

expectations?

O‘ èhat are the necessary requirements for maintaining good investment in recession?

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O‘ Identifies what are the risk that affects investment directly and in directly.

O‘ Find the best others backup investment for balancing your losses in case your

investment failed.

O‘ Identifies all the requirements for maintaining your good investment throughout the

recession.

 

H1: Investors will invest in medium level systematic and unsystematic risk.

H2: Investors will concentrate on sustaining the investment, more than try to gain high

profit.





  

The significance of this research is to how to invest wisely during recession in order to

minimize the risk, damages, maintaining good amount of cash flow and diversified your

investment in appropriate financial institution.


 
 

Defining the target population, An investor is any party that makes an investment. The

term has taken on a specific meaning in finance to describe the particular types of people and

companies that regularly purchase equity or debt securities for financial gain in exchange for

funding an expanding company.


  
 Less frequently, the term is applied to parties who purchase real estate, currency,

personal property, or other assets. The term implies that a party purchases and holds assets in

hopes of achieving capital gain or cash flow, not as a profession or for short-term income.

 
 

O‘ uimple random sampling

All elements in the population are considered and each element has an equal chance of

being chosen as the subject.

   

O‘ Êrobability sampling

All elements in the population have some opportunity of being included in the sample,

and the mathematical probability that any one of them will be selected can be calculated.

  

O‘ uample size of this research study is five. All of them are among investors.

  
  

The limitation of this research are time and budget for collecting information and the

traveling to the financial institutions. The time period should be 4 month to be complete and the

budget are RM 400. This including obtaining annual report from Tesco, Maybank, CIMB bank,

KLCC, and Ê B.

-
  
     

The study will review a document and present related literatures. This will primarily

include literatures from Emerald Journals, Malaysia Business Magazines, umart Investors

Magazines, several corporate year 2009 Annual Report, and uME & Entrepreneurship

Magazines. Basically these sources discuss how to select the best investment and how to counter

investment risk during recession period. Here are the few sources for this research.

In this research I will demonstrate on how to uurvive Recession (Êhil young). uurvive

recession by following and acting on a few basic principles. . In property futures had the

potential to offer a range of opportunities to investors; Investment property portfolio

management and financial derivatives (Êatrick McAllister and John R. Mansfield). It¶s essential

to identify the Corporate risk in capital budgeting to make a good decision; Corporate risk

management and investment decisions (Xun Li & Zhenyu èu). A healthy investment have a

good cash management in challenging economic environment; Cash Management for uMEu

(uteven Kenneth Miller). Investors might need to bear in mind an emergency investment plans

for their loved ones in case of something happen to them; Estate planning is meant for the well-

being of your love ones ( Lee Khee Chuan). ueasonal investing-does it work (Robbin Khoo),

introduced some of the conventional such as buy 7 hold for the long term investment. Investment

portfolio Management; indicates various way to calculating risk in order for a better decision

making. Annual report from Maybank, Cimb bank, Tesco, Ê B, and KLCC for year 2009.

 ! "#$%&

   

Êrimary data is the data are gathered and assembled specially for the research project at

the first hand. It involved measurement of some sort, whether by taking reading off instrument,

‰
  
sketching, calculating or conducting interviews (using questionnaires). Êrimary data collection is

necessary when the researcher cannot find the data needed in secondary sources.

èhile not as frequently used as secondary research, primary data still represents a

significant part of overall Finance Research. For many organizations, especially large consumer

products firm, spending on primary data for exceed spending on secondary data.

Êrimary data is collected in a research ³instrument´ design to record information for later

analysis. Finance researchers used many types of instruments from basic methods those record

participant responses to highly advanced electronic measurement where research participants are

connected to sophisticated equipment.

It is a method of collecting primary data that I use in my research:

O‘    
     !  

›‘ This is the simple example of primary data that I obtain from Tesco, Maybank,

CIMB bank, KLCC, and Ê B. I use this data to study which investment is the

best and which is not, by doing this I can select suitable investment for my

research and compare them.


   

uecondary data are used for three research purposes. First, they feel a need for a specific

reference or citation on some point, perhaps in a research proposal, to demonstrate why the

purposed research fills a void in the knowledge base.

Research typically calls for early exploration to learn if the past can contributed to the

present study. Data from secondary sources helps us decide what further research need to be

†
  
done and can be a rich sources of hypotheses. Examples for secondary data that I use are

including:

O‘   

›‘ Xathering information through website provides the basic overview of and

understanding the foundation of our study.

O‘ ?

›‘ Any books that are related to the researchers field of study, especially in investing

in stock.

O‘   

›‘ Êast research articles that are similar to research under study is important in

providing clear understanding about the field of study and giving some sort of

guidelines.

›‘ Corporate risk management and investment decisions

Value-at-risk.

a typical down-side risk measure which is considered more appropriate for

economic agents, is applied to the analysis. Êrobability theory and optimal control

methodologies are used to derive analytical solutions. Findings ± By maximizing

the probability of beating a pre-determined target.

›‘ Over-rented properties: bond or equity

The cash flow

The cash flow from a simple bond is fixed in nominal terms for the life of the

investment. The cash flow from an equity rises and falls in response to inflation

and to growth and decline in the real economy. Hence forecasts of the cash flow

A
  
 for a bond do not require a view of the future for the economy or of inflation.

Forecasts of the cash flow for an equity require both.

You might make profit but it is cash flow that matters at such times, you do not

get points for having the strongest balance sheet that ever went out of business. In

recessions businesses tend to start to pay supplier invoices later to protect their

own cash position. There are many things you can do dependent on the business

and customer base that you have; possibly consider taking payment with order,

factoring your invoices will cost you margin but this might be better than not

getting the money you need to survive, and make sure you keep on top of bad

debt situations and try to pre-empt any potential problem situations by lowering

any credit lines that you offer.

›‘ The discount rate

The discount rate applied to the cash flow from an investment should be the

required return, made up of a risk-free rate and a required risk premium. The

required risk premium should be determined by the liquidity of the investment

and by the sensitivity of the cash flow to shocks created by inaccurate forecasts.

For an equity, the liquidity premium is unlikely to be high or to vary very much

between quoted stocks. The sensitivity of the cash flow (the stream of dividends)

to economic shocks will be very important indeed.

›‘ How to uurvive Recession.

Lower your outgoings.

You need to take a hard look at your outgoings and decide what is and is not

essential. Just imagine the steps you would take if your personal income dropped


  
 what would you do? I would imagine you would take a hard look at what you

spend your money on and cut back in a number of areas. This is exactly the same

approach that should be taken in your business. For example, you may pay for

private medical insurance for certain employees; do you need to be paying for

such insurance at this time? If it was a choice between private insurance or losing

jobs, what do you think your staff would choose? You may also have to take a

hard look at your staffing levels and if the orders are not coming in then you will

realistically need to look at options of µµshort time¶¶ or redundancy. This,

however, would be my last course of action.

Hold your nerve.

It will not only be your business that is going through this, everyone will be. èhat

you must not do is panic, taking knee jerk decisions that will affect your business

proposition once you pull out of a recessionary period, they do not last forever

you know. Always consider as many options as you can, seek advice from others

(this does not always have to be paid for advice), use your network of contacts,

your friends, family and business associates.

# '! !('

      

The resources acquire in this research is on related literature. The literature is a directed

search of published works, including periodicals and books that discusses theory and presents

empirical results that are relevant to the topic at hand. The examples of a literature sources are

book, conference proceedings, electronic media, journal, magazine, newspaper, and report.

·
  
 #'" # ) $ # !!#

   

Once the research design, including the sampling plan, has been formalized, the process

of collecting information from respondents may begin. This research using annual report for data

collection instrument. Annual Report is hard to obtain as means of collecting data, but it is a

complete detail of information that only produced by specific organization. èith this report my

research will be completed successfully.

O‘ $   

›‘ All the information and data collection from the annual report and secondary data

are been analyzed. In order to build the analysis of the data collected, it has been

used to analyze, to produce the relevant output.

# '! !('

Related Literature

The resources acquire in this research is on related literature. The literature is a directed search of

published works, including periodicals and books that discusses theory and presents empirical

results that are relevant to the topic at hand. The examples of a literature sources are book,

conference proceedings, electronic media, journal, magazine, newspaper, report and thesis.

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 #'" # ) $ # !!#

   

O‘ Once the research design, including the sampling plan, has been formalized, the process

of collecting information from respondents may begin. This is the simple example of

primary data that I obtain from B M, MAYBA K, TEuCO, CIMB, AuB, and KLCC. I

use this data to study which investment is the best and which is not, by doing this I can

select suitable investment for my research and compare them.

Types of Investment:

ƒ‘ Bonds eg: Amanah uaham Berhad.

You are buying a government or Corporate bond. You are lending your money for

a certain period of time at a predetermine interest rate. In return you receive a

steady income stream trough regular interest payment.

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  ?    

ƒ‘ utocks. (KLCC)

uhare (also known as equities or stocks) represent ownership in a company. èhen

you buy a share, you become a part-owner in the company and become entitled to

share in its future value and profits.

uhares in a company offer growth in investor in two key ways:

O‘ As the overall values of the company increase, the value of the shares also

increases.

cŒ
   
 O‘ You can earn dividends when the company chooses to pay part of its

profits to shareholders as income payment.

uhares have the potential to generate very high returns. However, they also have

the potential to fall in value if the company¶s performance drops. uhare are

generally suitable for investors who:

O‘ èant to build a nest egg for medium and long term financial goal.

O‘ Have a longer investment time frame.

O‘ Are comfortable with some volatility in their investment value over the

short term, in exchange for higher returns in the long term (in term of

dividend income and capital gain).

KLCC Annual Report.

ƒ‘ Êroperty Investment. (TEuCO)

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 Êroperty is one asset class that most Malaysian are familiar with. Êroperty

investment offers value to investors in two ways:

O‘ Êroperties increase in capital value over time as house and land price rise.

O‘ You can earn rental income from tenants.

Like shares, property price go up and down and have periods of sustained high

returns and sustained low returns, so property is generally only suitable as a long

term investment. One of the most important factors to consider when buying

property is its location. Êroperty is generally suitable for investors who:

O‘ Do not require µemergency¶ access to their money.

O‘ Have a long term investment time frame.

O‘ Have the ability to meet the mortgage repayments if interest rates rise or if

the property is not being tenanted.

Tesco Annual Report.

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 ƒ‘ uaving in Banks. (MAYBA K)

Cash Investment are the most common form of investment in Malaysia, covering

products such as bank savings accounts and fixed deposits. They provide easy

access to your money when you need it, and there is no chance you could lose any

capital-so they are very secure. However, while they do offer security, they

usually provide very little income and no capital growth. In actuality they can be

quite risky in the long term because inflation erodes the value of your investment.

For most investors, cash and fixed interest products are suitable for:

O‘ >se as transaction account.

O‘ Keeping cash on hand for short term expenses and emergencies.

O‘ uhort term saving where they cannot afford any risk to their capital.

MAYBA K Annual Report.

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 ƒ‘ >nit Trust fund.

In a unit trust, money from hundred s of individual investors are pooled together

to buy a large number of different assets. Êrofessional fund managers decide what

percentage of the fund should be invested in each asset class, and also which

countries, industries and companies have the best prospects for good returns

Each investors then receives µunits¶ in the fund, which each unit representing a

mix of all the underlying assets such as shares, bonds and fixed deposits. >nits

trust funds are an ideal option for people who:

O‘ ew to investing.

O‘ A happy to outsource the selection of investments to professional

managers.

O‘ Have small initial amount to invest (with the option to make a regular

additional contributions).

O‘ Are seeking investment diversification to minimize risk.

CIMB Annual Report.

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$  !
 
 !     

# 
   $  
 

     *++,

? 4,857,359,434


 102.748,000

)-       722,410,000

' #
 9,720,000

  28,700,000

!


Yes, I agree with the Hypothesis that the investor will invest in minimum level

systematic and unsystematic risk. This is shown in the data analysis the most famous investment

is Bond because it give the high interest from 5 investment. It also is a stable investment so the

investor can sustain investment for the long term rather goes for a high profit. uo we can say that

bond investment is the best investment in Malaysia.

The second place goes to the fixed interest bank investment. This type of investment is

also similar to bond because it low risk and the interest is paid fixed for the long term. The third

best investment is stocks; although it can give a high return this investment also produce a high

risk because it is traded in stock market. This is why the investor is not keen enough to invest in

stock.

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 The fourth best investment goes to Êroperty Investment. This investment is suitable for

the long term but it come with a high cost. This is because not every investor can afford to buy a

property and lease easily. It comes with a lot of policy and agreement between two parties. But if

you have a lot property to lease, you can create a lot of money in this investment. Finally the

fifth best investment goes to unit trust fund. This is because >nit trust Investment is for

beginners in Investment world. These investments only need a small capital to start so it is

suitable for young investor to learn how to manage their money and investment with a minimum

risk.

uo the conclusion is in Recession Êeriod bond is the best investment to be look at. This is

because even though the investor will not lose all the money they invest because it is low risk

Investment. For beginners >nit Trust fund is the safest investment for them because its behavior

is similar to bond investment but with more flexible investment because it have mix of all the

underlying assets such as shares, bonds and fixed deposits. uame goes for Fixed Êay Interest

Bank Investment, although bank will pay a low interest during this hash time but it still an

efficient investment because your money secure and safe meaning you will not lost your entire

investment.

The Êroperty Investment also a safe investment in Recession because, investor only

experiencing a deduction in rent payment but it¶s depends on the economic situation. The

investor can still sustain the regular rent if the economy is starting to stable or in recovery.

Finally utock Investment is the dangerous investment because investor will experience a high

risk losing all their investment, even bankruptcy. It is best not to invest a lot in stock market

because it¶s very volatile. But by looking out of the box, in recession all stock price at their

c
   
lowest. uo it is the best time to buy for investor but it still does not promises a high return in

recession.

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? 

ƒ‘ Agensi Kaunseling Êegurusan Kredit, Money uense; Xetting smart with your Money,

Êublish by Agensi Kaunseling Êegurusan Kredit, Jalan uultan Ismail, 2009.

ƒ‘ èilliam g, uME & Entrepreneurship Magazines, Êublish by Business Media

International udn Bhd, Êetaling jaya, February 2009.

ƒ‘ Xun LI & Zenyu èu, Corporate Risk Management and decisions, Êublish by Êublish by

Emerald Xroup Êublishing, >nited utates, 2007.

ƒ‘ Martin Hoesli & Jon Leander, Real Estate Êortfolio utrategy and product innovation in

Europe, Êublish by Emerald Xroup Êublishing, >nited utates, 2006.

ƒ‘ Baldisya Abdul Xhani, CIMB investment bank Annual Report, Êublish by Êrice èater

House Coopers, Kuala Lumper uentral, 2009.

ƒ‘ Ernts & Young, KLCC Êroperty Holding Berhad Annual Report, Êublish by Oriental

Media udn Bhd, Kuala Lumpur, 2009.

ƒ‘ Idris & Ismail, Êermodalan asional Berhad Annual report, Êublish by Innovatif Media

Asia udn Bhd, Êetaling Jaya, 2009.

ƒ‘ Chong Man Kit & èong ueng Hong, Maybank Annual Report, Êublish by Fenwick udn

Bhd, Jalan Klang Lama, 2009.

ƒ‘ Chang & ling, Tesco Annual report, Êublish by Mega Media, Kepong,2009.

Œ
   
uource of Data.

Tesco Annual Report 2009.

CIMB Annual Report 2009.

Œc
   
Maybank Annual Report 2009.

KLCC Annual report 2009.

ŒŒ
   
Ê B Annual Report 2009.

Jounal; Martin Hoesli & Jon Leander, Real Estate Êortfolio utrategy and product innovation in

Europe 2006.

Œ
   
Journal; Xun LI & Zenyu èu, Corporate Risk Management and decisions 2007.

Œ-