Monday, March 16, 2020

Fear & Greed

Thought this was pretty interesting. Chanced upon the CNN Fear & Greed Index and showing extreme fear here as you can see. (red red red!)

Interestingly, the index is based on a myriad of factors: spread between investment grade bonds and junk bonds, market volatility, stock price strength and breadth, safe haven demand and etc. Notably, during 2008 GFC, the index hit a low of 12 but now it's 3. Looks like a good chance to buy now.

Now is indeed a time of extreme fear, with wild price swings everyday and breaking new records in terms of drops and rises.

P.S. Dow Jones dropped 3,000 points the previous day, best (worst) record ever...

What do you think?

Monday, March 9, 2020

Thoughts on the red market

Monday was a bloody day for STI, having dropped 6.03% (haven't seen this since global financial crisis!) As I am writing this, US markets are down a good 5-6% cos of the double whammy caused by virus fears and oil uncertainty.

But for me, I think this is a good chance to look at stocks that are normally expensive and now relatively cheaper to buy.

I have quite a number of picks but for now I am looking at DBS.

Currently priced at 21.15 (monday’s closing price) and based on a annual dividend of 1.32, dividend yield is a cool 6.24%.

A few factors I am noting for myself:

First: the Federal Reserve announced a pretty extreme rate cut which will affect banks in terms of factors such as Net Interest Margin (NIM). I think this is a pretty good read here, but effectively, a low fund rate at Federal Reserve will reduce NIM and banks can potentially suffer a lower profit as yields on mortgages might be lower. The DBS report states potentially 6-8% lower profit, which can mean that we should not take the current dividend for granted.

Second: the current oil crisis is also another area of concern. I am pretty worried DBS's exposure to the oil and energy sector and crude oil falling to $20-30 levels should not be taken lightly.

Third: of course the coronavirus is the top of the list. This directly affects the economy, consumption will go down and holidays cut. This uncertainty of the damage to the economy should keep DBS's share price even lower in the interim.

I am looking at levels below 20 for now to enter as my bullets are limited, but we will see again!

Lastly, I saw this article and thought it was pretty interesting that the advice now is not to enter due to uncertainty. But perhaps uncertainty is opportunity too. What do you think?

 Take care and trade well! Hoping all your trades are good. ($$$ below for everybody)

P.S tuesday market quite green now

Sunday, February 16, 2020

CPF Top Ups

I took a leap of faith and decided into topping up my CPF Medisave Account yesterday.

Amidst the frenzy market movements so far, I always wonder if giving up this liquidity was actually worth it. But since the button has been pressed, I think there is no need to look back.

Just a few points to summarize my thought process:

1) Was thinking between topping up Medisave and topping up Special Account. To qualify for tax relief, the limit for topping up Medisave is $37,740 minus compulsory CPF contributions. (provided your Medisave doesn't hit the Basic Healthcare Sum of $60,000- as of 2020) Special Account top ups on the other hand is subjected to a limit of $7,000 which we can deduct from our tax bill.

2) I particularly like this point: if Medisave hits the Basic Healthcare Sum of $60,000, any extra money will be transferred back to Special Account. Example: if we have hit this amount, any subsequent Medisave contributions will be effectively channeled into Special Account. Same goes for interest, where at a quick glance we are looking at $60,000 x 4% = $2,400. This gives better flexibility as we have to top up our Medisave as long as we are working and it is better to hit the Basic Healthcare Sum as soon as possible. (we will hit this amount anyway if we work long enough) Since Medisave contributions will be a larger % when we get older, this point will be even more salient.

3) Medisave gives better flexibility as we can effectively use it for medical expenses, whereas Special Account can only be used at least after age 55.

4) Both topping up your Medisave and Special Account reduces your income tax bill. Both accounts have a basic interest rate of 4% so I think this is a pretty safe haven cushion, since the Singapore government has a current rating of ‘AAA’.

But of course, this means giving up some short term cash in the moment, but for now it’ll be just going back to work and working even harder for more cash. Cheers!

Sunday, February 9, 2020

Coronavirus and Thoughts

I haven't been posting in a while because of my new job, but I think it is always good to take a step back and formulate my thoughts about recent news.

The best incident to fall back on while considering this issue would be the 2002-2003 SARS outbreak because both incidents are largely similar: SARS started around November 2002 and ended around May 2004. A quick look at the STI:

We can see that from the period from November 2002 to May 2003 there was a clear downtrend in the STI before rebounding decently into 2004.

Currently, the STI seems to be in the infant stage of a downtrend which suggests some potential buying opportunities. I came across this article which aptly compares the two outbreaks.

Further points to take note:

1) China's economy is much bigger now than it was during the SARS outbreak period so the impact is gonna be pretty painful as trade between China and Singapore is quite extensive.

2) Banks will be affected as they have exposure to China; OCBC has the highest exposure here.

3) Airlines are affected too as flights are being cancelled here and there. Example: Hong Kong Airlines being on the verge of bankrupt. Note to self- SIA.

4) REITs with China exposure are already feeling the pain - Mapletree NAC, CapitaChina, Sasseur.

5) Generally, retail should continue to deteriorate as everybody will most likely be minimizing their outside movements. (CapitaMall, Suntec, Mapletree Com, Starhill)

But otherwise, I think it would be a good time to look at the market to consider entry points. Cheers!

Sunday, October 6, 2019

Recent Market Situation- HK banks

Recently, I have gained interest in HK banks as they are trading rather attractively to warrant an entry.  Here are some statistics which I quickly worked out to have a clearer picture.

We see that HK banks are trading to a premium to NAV and have attractive dividend yields as compared to SG counterparts. However, we must be well aware of the underlying risks that are entailed.

The main risk here is the HK protests which saw an escalation in tensions after a 'mask-ban' was introduced by the government. In my opinion, I think a resolution (at least in the short term) is highly unlikely and we might see more funds pulling out of HK. Perhaps the steep discount of HK stocks might warrant us to have a second thought about buying HK banks.

Naturally, the second risk is the trade war where HK is likely to be hit hard too in terms of exports, especially due to its high reliance on China capital.

This might of course be a good bet, if the tensions do cool down and HK banks will indeed rally hard. But your guess is good as mine.

What do you think? 

Sunday, September 22, 2019

Negative Government Bond Yields- Why?

Recently, I was reading about negative bond yields and how they have swelled to $17 trillion globally. I was quite intrigued by this phenomenon because it essentially means you are paying a premium to park your money in these assets and I did wonder what the rationale behind these acts. Because if you do hold these bonds to maturity, why not just hold cash in a savings account (but some saving accounts are yielding negatively too like Switzerland) or hoard cash under your bed?

As of now, the bulk of negative yields is concentrated in Europe and Japan which means we are talking about currencies such as the euro, yen, swiss franc, krona and etc.

One reason rightfully pointed out for the motivation of buying negative bonds, because the hope that the price of the bonds will appreciate (albeit that means more negative yields coming and probably more than $17 trillion).

Another reason might be cos these assets are safe haven assets, which brings back to the first reason so that the price will rightfully rally in times of economic turmoil.

Personally, I won't be buying these bonds because I think there are better things to buy at this time like Singapore Bonds (especially SSB) but it will be good to hear about insights about why to buy and so.

Are you going to buy a bond with a negative yield?

Wednesday, August 28, 2019

OCBC Scrip Dividend

It has come to the time again where we must decide about whether to take the scrip dividend. This time, I think it is a good consideration to take up the offer which is $9.57 per share, which was cheaper than the last scrip dividend offer. It is also below the current NAV of $10 which looks good. Current price is about 10.49 and the last offer for scrip dividend was $10.55.

It would be great if you can leave a comment if you will be taking up the offer. Cheers!

Thursday, August 22, 2019

Mapletree NAC Thoughts

I am of the view that there will be a short term drop in Mapletree NAC's price.

Chief of all, the growing instability in HK is something to worry about. which impacts its main property Festival Walk, which constitutes 62% of our reit's NPI (based on the most recent annual report). This might lead to lower sales in the mall and lower NPI, which will affect our dividend payout.

Secondly, USD looks poised for a rate cut soon, and if we assume the USDHKD peg to hold, then HKD should depreciate against SGD, which might also contribute to a lower NPI.

Thirdly, the RMB has weakened quite a fair bit to 5.12 against SGD which will also adversely affect the NPI for China properties in the reit's portfolio.

On the other hand, the drop might be mitigated by Japan properties, where JPY appreciated sharply against SGD due the yen being a safe haven currency and everybody flocking to it during trade war concerns. The takeup in yen is so extensive that nearly all of their bonds are now having negative yield which signals the extensive demand for yen.

Of course, let us not forget that approximately 69% of forex conversions have been hedged, so we are dealing with approximately 31% of risk here.

Currently, NAV is at 1.438 which is about a 13 cents premium from its current price of 1.3. I will be looking to wait for it to drop to its 52-week low of 1.07 (although might be too difficult to wait for).

What are your thoughts about the pluses and minuses? Please share!

Tuesday, August 13, 2019

Market Thoughts

Recently, there have been a lot of ups and downs in the market. The first thing that caught my eye was the falling yuan which broke the seven level against the US dollar, which signaled the current monetary policy in China. The casualties today were Mapletree NAC which dropped 4.48% and CapitaR China which dropped 1.99%. The drop in RMB also meant it dropped against SGD which means it will affect the two reits' profits.

Hong Kong also saw the escalation of protests in the airport where Cathay Pacific got the brunt in the falling HK market. It dropped about 7-8% these few days as flights were blocked.

But interestingly, US market has rebounded today due to simmering of US-China trade tensions and yields and stocks prices are soaring.

I am focusing on Bank of China at the moment which is 2.97 HKD and giving a 7% yield. At point of writing, SGDHKD is 5.67 which might go lower if USD is going to strengthen further this year (assuming if USDHKD peg remains intact).

Moreover, SIA seems to be an interesting point too since the HK airport protests will affect airlines (albeit not as much as Cathay),  but currently at 9.05 and today had a 52-week low of 8.95.

Probably HK market will rebound (briefly) due to the rebound in the US. But I believe in the short term the HK market is probably going to breach new lows as the protests do not seem to be subsiding.

Sunday, August 4, 2019

STI and HSI Red Amidst the Trade War

A short read today showed that the STI plunged 2% due to escalating tensions in the US-China trade war. This could be contributed to the tariffs which Trump promised on Friday, which includes a 10% tariffs on US$300 billion worth of goods. On the contrary, the Federal rate cut did not give the expected stimulus to the stock market, which might not be unexpected as based on current market conditions, a rate hike should have been more logical.

As I am very interested in the STI constituents, I decided to see which stocks were bearing the brunt today.

The first stock is SIA which is hovering near its 52-week low of 9.01. At this point of writing, its current price is 9.02.

The second stock (which I have mentioned before) is SATS which is hovering near its 52-week low of 4.55. At this point of writing, its current price is 4.74.

Other notable stocks include DBS which had a 3.2% drop today.

Another point of interest will be the HK market, where today, 5th of August, is notably the biggest strike in Hong Kong's history. I think it is a double whammy for HK as they have to deal with the twin reasons of the trade war and the ongoing protests.

I am currently looking at Bank of China, which has broken its previous 52-week low of 3.19 to 3.05, which makes it even more appealing to go in. (Let us bear in mind that BOC is actually based in China and is just a H-share) I will be looking at other HK banks but I will be probably avoiding those banks based in HK such as the BOC (HK) holdings and Hang Seng Bank etc.

Just a superficial thought.

Friday, July 19, 2019

SATS- Trap or Opportunity?

What caught my eye in the market was SATS, whose price took a great hit of 6% due to earnings dropping with a drop of 14.4% in net profit. However, the closing price of 5 on Friday was notably still higher than the 52-week low of 4.55. I previously wrote about SATS here a few months ago and many of the points I mentioned remain salient.

From my previous post:

'A superficial observation would be that SATS derives most of its income from airlines and the Singapore market. The airline industry has not been very rosy too, where higher oil prices have taken its toll in the industry. Airlines will then be forced to save up on costs, where SATS will continue to feel the pressure.'

'The largest risk here would be the trade war between US and China, which might blow up and affect SATS especially in its gateway services (air cargo services) where they will suffer from a decrease in trade volumes due to tariffs. Passengers travelling on business class might also be affected as less trade might mean less flow of passengers for business.'

Based on the UOB report here, main reasons for the drop in earnings include the grounding of Jet Airways, low volume of air cargo and the grounding of the Boeing 737 Max airplanes. I think the low volume of air cargo is an effect arising from the trade war but the first and third factors were pretty unexpected reasons in play.

EPS dropped from 5.7 cents to 4.9 cents but I think dividend payout should remain safe in the short term unless the three factors mentioned greatly exacerbate. At closing price of 5, dividend yield is 3.6%.

For me, the game plan is to enter below 52-week low of 4.55, perhaps at 4.5 levels for a 4% yield. If these factors snowball badly, a higher margin of safety is going in when the price hits 4. We will see if the trade war will still continue to persist or cease to exist.

Fear & Greed

Thought this was pretty interesting. Chanced upon the CNN Fear & Greed Index  and showing extreme fear here as you can see. (red red red...