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.

Tuesday, July 16, 2019

Next US President- How will Financial Markets Fare?

The 2020 US election is coming and I am sure this is important as it will bring about effects to the financial markets.

As much as Trump is controversial, his policies have been beneficial to the US market with the tax cuts that were recently implemented, which brought an influx of corporate money into the markets. He might be lacking in other moral areas such as 'climate change being a hoax' and his womanizing but undoubtedly, his tax cut policies have benefited the stock market. The only risk he is bringing to the US markets is his constant threat of trade wars and his volatility of positions on certain pertinent issues.

Other popular politicians include Bernie Sanders, who is a 'socialist', and advocates for more socialist policies such as Medicare for All and minimum wage. He even proposes high taxes on Wall Street to cover the rising student debt. Morally, I will agree with his policies, but from a financial market perspective, if he is elected, I believe the market will spiral downward due to higher taxes imposed.

I am not too sure about the other candidates, but I believe Joe Biden will just be a mere continuation of the Obama days (which probably means less trade wars) which is good. I am not sure if Bernie will ensue trade wars with China though.

What do you all think?

Wednesday, July 10, 2019

Federal Rate Cuts Possibility

Had a good read today about the current situation. Indeed quite worrying to see the rate cuts persist when the current situation is about trade wars and other factors. 'If trade wars are what’s causing the uncertainty, the only solution is to resolve that uncertainty, not paper over it with cheap money. Neither the price of credit nor the access to credit is restraining the economy, so how does a rate cut help?'

But it looks like the rate cuts will persist due to Trump's pressure, which might further contribute to the increasing amount of debt in the market. This might not look well in the long term.

Another bet will be on gold which has already been trading above $1,400 since the announcement of the rate cuts. Other safe haven assets include Japanese yen and Swiss franc which might be good to hold due to their close to 0% rate policy. By their extension, that also means Japanese and Swiss equities. Lower rates also mean the interest rate spread is lower, which means these assets are more attractive.

This is my opinion now, would to love to hear other comments. :)

Wednesday, July 3, 2019

Treasury Yields Dropping- A Sign?

I was reading an article which mentions the drop in Treasury Yields towards 1.95%. In my opinion, I think this means an inclination towards safe haven assets. Reading this article too hints at a late bull market rally.

My portfolio now is inclined towards Singapore Saving Bonds, and I am thinking if I should up my stake there (however the rates aren't very appealing). Singapore REITs look expensive which might not be a best way to put my money. All my other ideas are pretty high now, therefore I am still holding onto my warchest. I think the closest thing I am interested in is actually Singapore banks and HK stocks at the moment.

Any ideas?

Thursday, June 27, 2019

G20 Today!

Quite meaningful to me, since I just came back from Osaka 2 weeks ago. This article really sums up how I feel about G20, probably another round of photos and talk but no action. Interestingly, the article is inclined towards holding gold and real estate, which may prove to be safe havens during a potential recession.

The debt in the market is so far quite worrying too which further supports the proposition of holding safe haven assets.

Personally, I am still waiting for a downturn which might happen sooner than we think. Singapore might not be spared too, where GDP growth will worsen this year. This can contribute to the downturn.

On a superficial glance, REITs now look very overpriced and I am steering clear of my previous picks of Suntec REIT and Mapletree NAC.

Still waiting while holding bonds!

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 ...