Archive for the ‘Market Review and Trends’ Category

Posted on September 1, 2010 - by kevinscully

Double dip or mild recovery in the US…..the uncertainty is causing a boom in the bond market and low volumes in equities……

I had an informal lunch with some academics and fund manager veterans last week to test the waters.

It is timely in that we have Fed Chairman Bernanke Bernanke, in his Aug. 27 speech to central bankers and economists in Jackson Hole, Wyoming, indicating that the US economy is not growing as fast as expected and added that the Fed was ready to step in to avert a recession.  This apparently caused a rally in the US markets last Friday.  The slowdown in US GDP growth happens to coincide with the ending of fiscal stimulus packages.  This means that domestic consumption is not stong enough to offset the absence of fiscal spending but domestic consumption is still growing albeit modestly.

The chart above doesnt seem to be that worrying but for the fact that expectations for Q2-2010 GDP were for more than 2% GDP growth…..this is now down to 1.9%.  Unemployment is also likely to remain high.   Chad Evans, Fed Chief for Chicago feels that the risk of a double dip have risen but this is not yet the likely scenario. Read more…

Posted on August 30, 2010 - by Market Uncle

Stubborn HDB Property Bubble?

Some of my friends painfully resisted buying a flat for the past few years, hoping that the property bubble will pop when the global recession erupted. But to their disbelief, the prices and cash over value (COV) continue to defy gravity and broke new highs. This prompted me to take a closer look at this bubble, why is it so stubborn!?

Demand

Looking at the past prices (available data from 04 to present):
src: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatResaleIndex?OpenDocument

it can be seen HDB resale prices hit the bottom and remained there after ‘97 Asia Financial Crisis to late 2006. Though this period included the dot com bust (2000 to 2002) and SARS crisis (2003), there is still generally good economic and population growth (local + foreign). Thus it is quite unthinkable that demand for flats will remain stagnant for nearly 10 years! Read more…

Posted on August 25, 2010 - by kevinscully

InvestFair 2010……some questions posed to the panel on Themes for 2010….from Genting to where the STI Index will be by the end of 2010

InvestFair 2010 was held at Marina Bay Sands……the YOG made getting their last Saturday a bit difficult for me because the roads were closed and only opend at 1pm.  Finding parking at the Convention Centre wasnt difficult especially when your daily rate could be as high as S$30.00.  The building is still under construction so signs and directions were a problem.

Our session was well attended….the hall was full with standing room only.  I thought I would share some interesting questions here:

Genting Singapore

Gabriel originated this question by saying that investors shouldnt trust analyst recommendations given that many analysts who had calld sels on Genting were now calling BUYs….with some citing the “luck” factor as a basis of the recommendation.   At current levels, he said that Genting was the most expensive listed casino in Asia…..I take that to mean that its a bit to pricey now….for investors who dont own the stock.

I dont follow the stock directly but have followed Genting Bhd and Resorts World before.  I think the main issue with Genting is whether the revenue it reported is sustainable…..when a casino opens and is new, especially in Singapore, our first, there is what I call the novelty effect.  We saw this in Sands Macao which recouped its investment costs in nine months.  What is more important to me is sustainable revenue and profit and we are likely to only see this in year 2 or 3 when the novelty wears off and also in the face of competition from the region.

Intutively, I agree with Gabriel, that if its the most expensive listed casino in Asia…..the risk reward doesnt favour medium investors entering at these levels. Read more…

Posted on August 18, 2010 - by Kay Toh

Why rising property prices are not healthy for the majority

At the end of the previous month, HDB just released the latest update of the Resale Price Index (RPI) and this latest update shows that the RPI has increased by another 4.1% in the Q2 of 2010. The chart above shows the historical RPI and as you can see, the RPI is some way above the previous peak already.

I noticed that many have the misconception that rising flat prices are beneficial since it makes them richer, or at least on paper. After all, the current flat prices are way higher than the original buying price. But that is only true if you own more than one property. Read more…

Posted on August 16, 2010 - by Adrian Khiat

3 minutes investment updates – 08/10

July is a month of relief as we see a reprive of the market indices after the downturn in May and June. For my clients who had switched in during July, you had made small gains with the 10 to 20% reallocation back into equities during the month. Despites saying these, the outlook ahead are still very very uncertain. Pls go through the next 3 minutes with me.

First minute – Let us go through the indices
a) The country indices are beautiful for the month of July. I’d mentioned about Russia during my last 2 updates and in July, they rose 12.2%. Emerging markets did well and rose 8.3% and Asia Ex-Japan rose 5.7%. The surprising part is that US rose 6.9%. (more…)

Posted on August 10, 2010 - by Jeflin

Buy On The Dips For Next Phase of Stock Market Rally

The past month has been kind to the stock market as investors hoped on to a nice lift after the World Cup distraction. August will present a tense period though in terms of market movement. While April’s high beckon tantalisingly, the stock market could fall flat or lose steam as there are not much good news left to propel the rally.

In the short term, bulls have an upper hand in momentum and risk appetite to breach minor resistance at 1120 while bears have to exert themselves strengneously for stock market indices to tumble under the 200-day moving average. In fact, some analysts expect SPX to clear 1180 before a correction.

So far it has been a good second quarter. Earnings have mostly surprised on the upside and it is encouraging to see businesses improve cashflow and repair their weak balance sheets. Huge cash hoards put them in a strong position to expand, reinvest and hire new staff.

On the economic front, things are looking up for Asian countries like Japan, South Korea, Taiwan, thanks to a robust recovery in exports. Singapore forecasted a GDP growth of 13-15% for 2010 and is set to be the world’s fastest growing economy. (more…)

Posted on August 4, 2010 - by Adrian Khiat

Did property prices rose for good reason?

I’m very concern to see how fast property prices rose over the past 2 decades especially over the last 5-6 years. Such trend will likely put on a very heavy burden on newer generations like those below 30 yrs old. I remembered that my parents purchased their 5-room HDB flat at around $70,000 back in 1990 and today, the same property rose to as much as $450,000, not including the Cash over Valuation(COV) if they are to sell the house. This means that over the past 20 years, property prices rose 6.5 times at around 10%p,.a.

Though I don’t have the concrete figures, I believe the wage increase in Singapore for a middle income family to be around 3%p.a. Assuming the typical Singaporean wage to be $42,000p.a in 2010, it may means that the average annual wage in 1990 to be around $23,000. If my estimated figure is true, it means that our parents in the past need about 3-4year of their income to pay off their HDB flat. For our generation, it takes 10-11 years of our income to pay it off. (more…)

Posted on July 28, 2010 - by kevinscully

Singapore’s June 2010 industrial production rose 26.1% (below forecasts of 36.7%) caused mainly by Biomedical…

…but I am more interested in the electronics data

On a month on month basis, industrial production declined by 23.4 mainly because Biomedical grew only at 29.8% from more than 100% in May 2010.  More details can be found at the EDB website here.

Back to electronics – this is important to me because 40% of my Stock Picks are electronics/technology stocks.  The electronics data for June 2010 expanded by 46.8% – led by a 74.9% rise in semi-conductor equipment.  data storage declined by 9.4% mainly from the relocation of capacity out of Singapore.   I remain bullish on the electronics and technology sector – although some moderation of the heady growth in the first half of 2010 is expected in the second half of this year.  In a recent investment seminar, our analysts reviewed the electronics sector and recommended nine stocks in the sector (four more than in my Stock Picks).  Read the slides and understand what factors are driving electronics and also the downside.  The rerating and rebound in the US markets over the last few days has been on the back of the Q2-2010 reporting season.  I believe the same will drive the Singapore market and in particular the electronics stocks higher.  Broadway results are due this Wednesday…..keep an eye out for them. Read more…

Posted on July 27, 2010 - by Tan Kin Lian

Wait for market correction

If you have cash that is earning 0.5% per annum, and you are worried about the current level of the stock market and the uncertainty in the global economy, which option would you prefer?

• Invest the money for 5 years to get a guaranteed return of 10% (i.e. 2% per year)
• Keep the money in cash and wait for the market to drop by 10%, i.e. ST index of 2,600
• Wait for the market to drop by 20%, i.e. ST index of 2,350
• Invest in preference shares or REITS to earn a yield of 4% p.a. or more

Posted on July 26, 2010 - by kevinscully

Stock markets are currently directionless!

…this explains the low volumes as investors try to digest the mixed signals and even double dip concerns

I have been bullish about stocks despite the Euro debt crisis mainly because I felt the Euro problems were mainly confined to the PIGs which were small countries and the largest among them, Spain, had no problems with its recent Government bond auctions.  The recent strength in the Euro probably signals that this view is growing that while we may have austerity cuts, the weaker Euro will promote services and exports which should offset some of the public sector spending cuts.

But economic growth in some of the major economies has started to falter…..as fiscal and monetary packages started to end.  The biggest concern was from the US where a recent comment by Fed Chairman Bernanke in his semi-annual briefing of the Senate Banking activity, signalled a weaker than expected US economy but NO remedial action yet.  There were two Bernanke comments which spooked investors: a) “somewhat weaker outlook for the economy” ; b)  “unusually uncertain” economic outlook.  While he did acknowledge that the FED would take action if the economy started to falter……he added that no action was required now !.   This to me means more moderate growth but not negative growth…….which is why I am bullish because it means that the Fed and other Global Central Banks would need to keep interest rates at near zero levels for at least another year.  This is good for stocks who are all now trading at earnings yields in excess of 8% and on historically low PERs. Read more…