China's bank policy, Hong Kong property tightening measures, Ireland debt woes

There are talks about three main issues that all investors should know over the weekend. I will try my best to summarize them which will give you a better head start to this week's market movement. Below information are from Bloomberg and CNBC.
Europe debt woes continued when Ireland uncover the need of a bailout package to rescue itself and the rest of the banks. Fortunately, they received financial assistance and US futures gained as a result of the announcement.
Irish Prime Minister Brian Cowen said on Nov. 21 in Dublin that he expects talks on the details of financial assistance for Ireland to be completed in the "next few weeks." Finance Minister Brian Lenihan said the loan will be less than 100 billion euros ($137 billion). He declined to give further details at a press conference in Dublin.
The Bank of China has increased the required reserve ratio by 50 basis points and till date, the required reserve ratio has hit a record high of 18.5%. This move is an attempt to control credit issuance and money in the financial system. As a result, China stocks was badly hit over the past few days.
Hong Kong has increased the stamp duty to 10% for properties resold within 6-12 months and 5% for properties resold with 12-24 months. Deposits increased from 40% for homes costing HK$12 million or more and 30% for those within HK$8-12 million. Officials has also stopped stop offering residency to foreigners in the city area and will increase the land supply to curb the current property speculation. Hong Kong Property Index fell 7.6% since Nov 8th.
Developers and property counters in Singapore stock market has also dipped, in reaction to the release of the Hong Kong property measures. In a report by Credit Suisse, the lower end segment of the housing market was indeed(Singapore), affected by the recent rounds of government measures to curb the property speculation. Price increase for private non-landed homes has also soften with the gradual increase of housing supply
STI still exhibits a bullish wedge pattern. CIMB holds support at 3155, next level at 3000. Technical indicators shows correction mode as investors worry about the China Bank Lending policies and property curbs in Singapore.

DBS: We maintain technical view for STI to attain 3438 by 1Q11. Near term support levels at 3200 (23.6% downward retracement) and a firmer at 3125 (38.2% downward retracement). Post 3Q10 results, our analysts have revised up earnings in FY10 and FY11 for our basket of stocks by only 1% each year. Earnings growth for FY10F and FY11F is now 21.2% and 12.4% respectively. Earnings upgrades were seen in Consumer Services, Industrial and Banks while Oil & Gas, Consumer Goods and Telecommunications suffered the steepest cut in earnings.

There are talks about three main issues that all investors should know over the weekend. I will try my best to summarize them which will give you a better head start to this week's market movement. Below information are from Bloomberg and CNBC.
Europe debt woes continued when Ireland uncover the need of a bailout package to rescue itself and the rest of the banks. Fortunately, they received financial assistance and US futures gained as a result of the announcement.
Irish Prime Minister Brian Cowen said on Nov. 21 in Dublin that he expects talks on the details of financial assistance for Ireland to be completed in the "next few weeks." Finance Minister Brian Lenihan said the loan will be less than 100 billion euros ($137 billion). He declined to give further details at a press conference in Dublin.
The Bank of China has increased the required reserve ratio by 50 basis points and till date, the required reserve ratio has hit a record high of 18.5%. This move is an attempt to control credit issuance and money in the financial system. As a result, China stocks was badly hit over the past few days.
Hong Kong has increased the stamp duty to 10% for properties resold within 6-12 months and 5% for properties resold with 12-24 months. Deposits increased from 40% for homes costing HK$12 million or more and 30% for those within HK$8-12 million. Officials has also stopped stop offering residency to foreigners in the city area and will increase the land supply to curb the current property speculation. Hong Kong Property Index fell 7.6% since Nov 8th.
Developers and property counters in Singapore stock market has also dipped, in reaction to the release of the Hong Kong property measures. In a report by Credit Suisse, the lower end segment of the housing market was indeed(Singapore), affected by the recent rounds of government measures to curb the property speculation. Price increase for private non-landed homes has also soften with the gradual increase of housing supply
STI still exhibits a bullish wedge pattern. CIMB holds support at 3155, next level at 3000. Technical indicators shows correction mode as investors worry about the China Bank Lending policies and property curbs in Singapore.

CapmallsAsia, SGX

CapitaMalls Asia recently announced 3Q net profit at $68m (+14.0% yoy but -39.8% qoq) on 22% drop in revenue to $42.5m (-41.8% qoq). OCBC Sec notes weaker results due to divestment of Clarke Quay & 3 M’sian malls to its Reits. Highlights joint bid for Bedok site with parent CapitaLand marks CMA's 1st investment in Spore post-IPO. Some houses like CMA's retail expertise, large cash balance of $1.4b & significant debt headroom (no net gearing), which will fit its plans to invest $800m-1b in new projects in Spore, China, M’sia.
Management expects to complete 3 more malls in China in 4Q10. Stock is trading at close to support at $2.13.

Houses Target Price
OCBC 2.40 (under review)
Daiwa 2.65 (under review)
JPM 2.60
Deutsche 2.53
Normura 2.20


Different houses have very different views on SGX.
At the moment, It is still uncertain if the deal would go through. If the deal is off, the current price of SGX now would be very attractive to the fund managers and investors. If the deal is through, we may see more selling pressure as the price to pay for ASX is very high.
Technical indicators suggests the selling pressure is still on. Support for SGX would be it's resistance at $8.45.

Short Term
SGX is facing selling pressure due to the high investment cost of ASX. ASX receive A$22 in cash per share and 3.473 SGX shares for each ASX share. This is a 37% premium to the traded price before the announcement. SGX will shift from net cash position to a net *gearing(see below for definition) of 45%. This may even result in equity raising exercises which may deter investors from being vested.

Long Term
Since stock exchanges relies greatly on the volume and liquidity, the merger would have a positive effect in the long run. The merger will result in an additional 2000 over listed companies and more financial products.
These few days, we see a lot of reports from various houses on their views on SGX. To summarize, these are the target prices of the various banks and research houses.

Kim Eng TP of 8.33
DBS TP$11.40
Credit Suisse: $7.50
CIMB $8.21
DMG $8.33
OCBC $8.97
CLSA: $9.00
J.P. Morgan $7.40
Citibank $10.50
Deutsche Bank $8.55

Value investing.....

Watched the movie, Wall Street last week but didn't really think it was up to my expectation. Maybe I was expecting more secrets revealed about the dark side of the market rather than understanding the emotions of family disputes and disagreements.

In the show.... there was one part which intrigues me... and hence, i googled.. Tulipmania...
Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.[ -wikipedia- I think it's a very interesting story and it teaches about greed and speculation, which is the cause to every economy crisis. We argued that if the sale price is far more than the intrinsic value, then the item is overpriced... using credit limit to buy over priced item is speculation but in a bull market, what is expensive to the traders who can sell off their shares for higher value??

I apologise for the less frequent blogging now.. send reports to clients on a daily basis so needed more time to compile their reports. Here, I will not give any corporate infomation because most of it are easily obtained from the internet. However, I would still like to share my opinions.

Read a lot of investment books recently, only interested to know how investors can be successful... if only 5 out of 100 people make money from the stock market, I am of course interested to learn and guide my supportive clients in their directions.

Warrren Buffett, Benjamin Graham... They have few traits in similar.. they are frugal and save for rainy days. They are value investors which means they only use $0.60 to buy a share that is worth $1.00.. they learn to read the fundamentals of a company and understand before they purchase the stock...

This is important as with the case of XXX company...
There is a reason why we should never touch penny counters if we are merely a retail investor. It is very easy to manipulate a counter if the market capitalization is small. If the below counter selldown, to just 8 cents, 100 lots can cause a contra loss of $7000.00. The fundamentals of this company is ambigous...
XXX S$0.14-XXX.SI
􀁺 It is trading activity in stocks like XXX that causes us concern.
􀁺 A placement of 42 mln new shares at 4 cents a share were placed out to 2 individuals, and the stock surged.
􀁺 On Monday Sept 20th (day before the placement news), the stock was trading at 15.5 cents

Market is dominated by big players... As retail investors, we must learn to trade with care and practise value investing...

Real Estate Investment Trusts(REITs) - Information from the Pulses, August issue

While writing this article, I am also learning about the REITs which I would like to share with all of you.

REITs started in 2002 and went all the way up to 2007 when they saw the reversal during the crisis.

Whats makes REITs attractive?
1. Transparency
As compared to other stocks, it has less uncertainty and less ambiguity. For examply, when we talk about a manufacturing company, a lot of factors can affect the share price.. This includes the level of competition, sustainability of demand of the services and products.. NAV of the company may not be the same as the book value due to the real machine liquidation value. As technology improves, the prevailing machine may no longer be able to produce the new product. Obsoleted machines has less value.
2. Lack of real information
Do we really know what really goes inside the company? Is the picture really as rosy as what is printed in the reports?

REIT- a simple model
RAISE CAPITAL -> Buy and manage revenue generation property

BENEFITS:
Transparency
1. Cost of Caipital is known
2. Revenues generated from property is known as rental are locked for three years.
3. A trip to the mall will give you an idea of how the mall is performing
4. The management fees is fixed.

Real Estate Vs REITs/STOCKS
No doubt it is true that real estate offers high returns for little outlay when the market is hot. There is also a steady rent income unlike REITs and stocks where the dividend is paid semi anually or anually.

However, to invest in property, one has to come up with a large sum of capital outlay and it is less liquid taking some time to sell as compared to the stocks and REITs which is traded in the open market daily. Stocks and REITs are also more affordable as they are sold in smaller lots and hence, more affordable. Property transaction usually takes a longer time to complete... say about 2-3 months while stocks and REITs is about four days.

There are hefty transaction costs involve in buying a property like the agent commision, stamp duties, legal and administration fees, unlike brokerage which is only 0.275%.

Property is taxed but property stocks and REITs are not taxed.

You can diversify your portfolio if you own shares of bigger developers like Capitaland as they hold properties across the residential, commercial, retail and hospitality sectors...

STI cross 3000... August marks a new start...

Yesterday really marks a very bright and good start for the month of August with STI opening above its resistance at 3011.

As the saying goes, a rising tide raises all boats.

Yesterday, banks are also performing well with DBS leading the pack ... UOB cross $20.00 this morning. Keppel corp is going to trade XD on the 4th of August, dividend is at 0.16 per share. If you have no intention to hold this counter, let it go before the XD date.
After the rally yesterday, we can see profit taking this morning which has caused the market to pullback. STI touched 3003 but managed to come back from support. Currently STI is trading at 3013, still above the psychological level. STI resistance at 3037, 3050. ..
Price of Genting Singapore was driven down from the sell down by the fund manager and the houses this morning.. dropped from 1.30 to 1.24.. Big volume selldown does not look positive for this counter.
If you are holding capitaland, do take note.
Capitaland - Cautiously bullish. RSI indicator reading at overbought level.

KIM ENG Lunch Bites - FJ Benjamin Top volume featureFJ Benjamin (FJB SP, $0.365) – FJB stands to benefit from Singapore’s robust GDP growth and this may be reflected in its 4Q results on 23 August. Prices are above the uptrend line with rising RSI suggesting momentum is gaining strength. Volume is rising with candlesticks well above the moving averages. Tight support level holds at $0.35.

Lunch bites

KIM ENG
Lunch Bites - Cosco Corp Top volume featureCOSCO (COS SP, $1.63) – Cosco’s volume has picked up after it announced a groundbreaking drillship order worth more than US$500m. We have upgraded Cosco to a BUY. Technically, it is poised for more upside with the breakout of an ascending triangle. RSI is positive and support is at $1.56.