The STI index had finally broken the 2300 barrier last Thursday or Friday after the end of the market rally which kept the index at a luke warm 2200 plus range. Investors have been cashing out under the doubt of sustainable growth of the economy.
SGX listed STI ETF had its prices drop below the 20 day moving average during the last 2 weeks, levelling out the upward sloping trend. Now that prices have passed the average once more, we will expect to see a slow and gradual increase in index as the market starts to build momentum over the coming week.
An optimistic prediction would see the ETF hitting at least $2.50 by end July, with direction of future movement heavily dependent on market sentiment. Judging from the performances between a portfolio of mid cap stocks and a one with small caps, it seems that the former is building up momentum more quickly than the latter.
With no major setback, the new support level should rest around the late 2200s.
Sunday, June 28, 2009
Wednesday, June 24, 2009
ETFs
Let me take this entry to talk about Exchange Traded Funds (ETFs).
ETFs essentially peg themselves to the market index of the particular market and are actually made up of a basket of selected stocks. In other words, the ETF of a market is somewhat similar to a unit trust in terms of structure. Your broker would tell you, invest $200 a month in Unit Trust A and I'll use my expertise to gather returns from Company B based in Country C and Company D in Country E. You get the idea.
Unit trusts are necessarily more diverse, and you normally hear brokers raving on and on about how their funds are located across the globe. But how many people who buy mutual funds actually know and understand the companies their money is being put into? Personally, I wouldn't allow someone else manage my capital without truly having understanding and control (I shall elaborate later) over any fund.
The S&P 500 index in the US market for example, achieves an annual compounding return of about 12% over the long term. A mutual fund tagging companies around the world could earn more, but there is a significant chance of earning less either.
Of course, there are plenty of funds in the market that basically 'buy' the index, which begs the question of why anyone would choose to invest in an index fund rather than an ETF. Afterall, a mutual fund has higher management fees, as you are hiring someone professional to manage your funds on a regular basis, with all the paperwork thrown in. More importantly, an ETF, which comes in the form of a regular stock counter in the market, provides full control over when you can buy or sell, so long as there is a buy demand for the stock. This is different from mutual funds, which normally requires a minimum holding period and a longer process of redeeming your capital and returns.
Liquidity is key, and you want to have sufficient capital at any point of time to move from a less valuable asset class to another, or simply from one equity to the next.
ETFs essentially peg themselves to the market index of the particular market and are actually made up of a basket of selected stocks. In other words, the ETF of a market is somewhat similar to a unit trust in terms of structure. Your broker would tell you, invest $200 a month in Unit Trust A and I'll use my expertise to gather returns from Company B based in Country C and Company D in Country E. You get the idea.
Unit trusts are necessarily more diverse, and you normally hear brokers raving on and on about how their funds are located across the globe. But how many people who buy mutual funds actually know and understand the companies their money is being put into? Personally, I wouldn't allow someone else manage my capital without truly having understanding and control (I shall elaborate later) over any fund.
The S&P 500 index in the US market for example, achieves an annual compounding return of about 12% over the long term. A mutual fund tagging companies around the world could earn more, but there is a significant chance of earning less either.
Of course, there are plenty of funds in the market that basically 'buy' the index, which begs the question of why anyone would choose to invest in an index fund rather than an ETF. Afterall, a mutual fund has higher management fees, as you are hiring someone professional to manage your funds on a regular basis, with all the paperwork thrown in. More importantly, an ETF, which comes in the form of a regular stock counter in the market, provides full control over when you can buy or sell, so long as there is a buy demand for the stock. This is different from mutual funds, which normally requires a minimum holding period and a longer process of redeeming your capital and returns.
Liquidity is key, and you want to have sufficient capital at any point of time to move from a less valuable asset class to another, or simply from one equity to the next.
Monday, June 22, 2009
A quick Monday update
I have been busy with rehearsals and singing recently, hence the lack of updates. Anyway, this is a short article taken from TODAY June 22.
US home sales, consumer spending rise
Consumer spending in the United States probably rose last month for the first time in three months and home sales increased as Americans became more confident the recession would end this year, according to economists in a Bloomberg survey.
Purchases advanced 0.3%, according to the median of 58 estimates in the poll, ahead of US Commerce Department figures due on Friday. Combined sales of new and existing homes likely improved to 5.18 million, capping the first back-to-back increase since 2006, the survey showed.
"There's more optimism as we get further away from last year's financial-market chaos," said Mr Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
"Spending on the part of consumers seems to be picking up after a soft patch. It looks like the housing has bottomed." - BLOOMBERG
Sign of the things to come? Americans are heavy consumers, both imports and domestic products. An increase in consumer demand will boost demand for raw materials and employment, a good step in the recovery of the economy. Optimism and positive sentiment is the key to economic recovery, and lies in the mindset behind producers, consumers and investors. Afterall, the equity market is usually one step ahead of indicating what direction the economy is heading.
The STI remains sugglish for today, carrying on from last week's steady decline to Friday's 2273 level. Market sentiment is pretty weak and actually a good time to wait out as the moving averages are slowly leveling out and might go into a slight decline.
US home sales, consumer spending rise
Consumer spending in the United States probably rose last month for the first time in three months and home sales increased as Americans became more confident the recession would end this year, according to economists in a Bloomberg survey.
Purchases advanced 0.3%, according to the median of 58 estimates in the poll, ahead of US Commerce Department figures due on Friday. Combined sales of new and existing homes likely improved to 5.18 million, capping the first back-to-back increase since 2006, the survey showed.
"There's more optimism as we get further away from last year's financial-market chaos," said Mr Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
"Spending on the part of consumers seems to be picking up after a soft patch. It looks like the housing has bottomed." - BLOOMBERG
Sign of the things to come? Americans are heavy consumers, both imports and domestic products. An increase in consumer demand will boost demand for raw materials and employment, a good step in the recovery of the economy. Optimism and positive sentiment is the key to economic recovery, and lies in the mindset behind producers, consumers and investors. Afterall, the equity market is usually one step ahead of indicating what direction the economy is heading.
The STI remains sugglish for today, carrying on from last week's steady decline to Friday's 2273 level. Market sentiment is pretty weak and actually a good time to wait out as the moving averages are slowly leveling out and might go into a slight decline.
Wednesday, June 17, 2009
Lessons learnt so far
The past few days have been days of reflection on my current portfolio. The bear market rally is over and unrealized profits have fell quite considerably. This brings me to several lessons I have learnt and what should have been done.
1)Investing 100% of my capital at one point of time
As prices were low and relatively affordable over the past month, I had invested all of my capital. The bear market rally saw some nice returns on paper but the past week, when the rally ended and prices started to drop, I had no more capital to buy in more stocks now that prices were lower. It's not nice to feel cash strapped especially when an opportunity comes knocking.
2)Not selling all of a stock when deciding to cash in
Investing for the mid to long term as a primary objective, I also do active trading from time to time. One thing I have started to understand about myself is that I place huge satisfaction on ownership alone. It is also in those instances when I release all of a certain stock only for it to rise later when I feel like stabbing myself. Of course, it might fall and selling all at that time would be great, but I didn't like how I felt when the former happened, so I always make it a point to keep at least one lot of a certain stock at any point of time, only selling when a downward trend is imminent.
3)My serious problem of over-diversifying
Having my capital spread thin over 40 counters, I begin to realise that it is a grossly wrong strategy that I have been taking. Capital spread thin will mean that potential profits are spread way too thin and I was actually spreading my exposure to risk. WRONG...It is about time I become more discerning in my purchases and streamline the portfolio SIGNIFICANTLY.
4)The problem of micro-managing
I did not have the time to manage all the counters efficiently which resulted in less understanding and control over every single one. Again, a streamline is absolutely necessary in this case.
What I should do now..
Since the indexes have been down, I am betting on the support level of around 2100 for the market to start rising (if it ever does) before cashing out and reinventing my portfolio. I used to have this concept of a 'Winning 6' which I should get back soon hopefully. Ideally, this should be done before the market actually starts building due to stronger fundamentals rather than on sentiment.
1)Investing 100% of my capital at one point of time
As prices were low and relatively affordable over the past month, I had invested all of my capital. The bear market rally saw some nice returns on paper but the past week, when the rally ended and prices started to drop, I had no more capital to buy in more stocks now that prices were lower. It's not nice to feel cash strapped especially when an opportunity comes knocking.
2)Not selling all of a stock when deciding to cash in
Investing for the mid to long term as a primary objective, I also do active trading from time to time. One thing I have started to understand about myself is that I place huge satisfaction on ownership alone. It is also in those instances when I release all of a certain stock only for it to rise later when I feel like stabbing myself. Of course, it might fall and selling all at that time would be great, but I didn't like how I felt when the former happened, so I always make it a point to keep at least one lot of a certain stock at any point of time, only selling when a downward trend is imminent.
3)My serious problem of over-diversifying
Having my capital spread thin over 40 counters, I begin to realise that it is a grossly wrong strategy that I have been taking. Capital spread thin will mean that potential profits are spread way too thin and I was actually spreading my exposure to risk. WRONG...It is about time I become more discerning in my purchases and streamline the portfolio SIGNIFICANTLY.
4)The problem of micro-managing
I did not have the time to manage all the counters efficiently which resulted in less understanding and control over every single one. Again, a streamline is absolutely necessary in this case.
What I should do now..
Since the indexes have been down, I am betting on the support level of around 2100 for the market to start rising (if it ever does) before cashing out and reinventing my portfolio. I used to have this concept of a 'Winning 6' which I should get back soon hopefully. Ideally, this should be done before the market actually starts building due to stronger fundamentals rather than on sentiment.
Monday, June 15, 2009
Singtel launches Amped music service
Singtel has launched an online music store in conjunction with Universal Music to provide new and existing customers with unlimited downloads from the new music portal, which currently offers about 500000 songs.
This is the first of such a service provided by a telecommmunications service provider, as previous 'music stores' were only offered by specific phone companies such as Sony Ericsson.
So 'What lies behind Singtel's latest music foray?' - Business Times 15 June
The motivation behind the move by Singapore's most dominant telco is not about uncovering a new source of revenue, at least not for the short term, but to strengthen its existing market share.
Singapore's mobile penetration rate currently stands at 133.2% or 6.45 million cellular subscriptions within a population of 4.5 million. This market is already saturated, as it seems and product and service differentiation plays key in sustaining or growing market share.
Singtel is going in the right direction though, with the Iphone being in its stable and monopolistic ownership lasting till end 2010 at least. This service makes up for the absence of an Itunes store locally, and it gives budding users another reason to purchase an Iphone if bundle packages are competitively priced.
We should expect the 2 other telcos to come up with more competitive packages and prices to retain or win any potential customers in the face of Singtel's new competitive advantage.
Growth should be rather slow, however, given the nature of the sector, but stable. At below $3, the stock presents great value for long term holding. Afterall, we are looking at the dividends/yield of this stock, and the capital gains, secondary.
This is the first of such a service provided by a telecommmunications service provider, as previous 'music stores' were only offered by specific phone companies such as Sony Ericsson.
So 'What lies behind Singtel's latest music foray?' - Business Times 15 June
The motivation behind the move by Singapore's most dominant telco is not about uncovering a new source of revenue, at least not for the short term, but to strengthen its existing market share.
Singapore's mobile penetration rate currently stands at 133.2% or 6.45 million cellular subscriptions within a population of 4.5 million. This market is already saturated, as it seems and product and service differentiation plays key in sustaining or growing market share.
Singtel is going in the right direction though, with the Iphone being in its stable and monopolistic ownership lasting till end 2010 at least. This service makes up for the absence of an Itunes store locally, and it gives budding users another reason to purchase an Iphone if bundle packages are competitively priced.
We should expect the 2 other telcos to come up with more competitive packages and prices to retain or win any potential customers in the face of Singtel's new competitive advantage.
Growth should be rather slow, however, given the nature of the sector, but stable. At below $3, the stock presents great value for long term holding. Afterall, we are looking at the dividends/yield of this stock, and the capital gains, secondary.
Sunday, June 14, 2009
REITs
UOB-Kay Hian has called a buy on Frasers Centrepoint Trust (FCT), Ascendas Reit and K-Reit Asia. Apparently, the optimistic view on this sector has been related to lower inflation and lower refinancing risks, despite falling rents.
REITs or Real Estate Investment Trusts, have been one of my areas of focus recently. Having bought in several REITs such as CapitaComm(CCT), Suntec, Saizen and K-reit, I feel that the diversity in commercial, industrial and residential properties that these REITs cover should be a good long term equity investment.
Properties never go out of 'style', and generally stable given the nature of property holding and investment. The next 2 years should see gradual growth in this sector as the economy recovers and derived/end demand returns. The low interest rate should also see people putting their money in other asset classes other than in fixed deposits, and one of these might be in the property market.
Last month, CCT and Suntec Reit announced that they had secured loan facilities of $160 million and $825 million respectively, so refinancing should not be much of an issue in the short term.
Furthermore, our local REITs will be buffered from the inflation from US's take on quantitative easing (printing cash) due to the strong Singapore dollar. The coming week will be an interesting one to see how the prices of Ascendas and Frasers go. Afterall, target prices from UOB-KH are $1.93 and $1.44 respectively. Could consider if the STI takes a dip.
REITs or Real Estate Investment Trusts, have been one of my areas of focus recently. Having bought in several REITs such as CapitaComm(CCT), Suntec, Saizen and K-reit, I feel that the diversity in commercial, industrial and residential properties that these REITs cover should be a good long term equity investment.
Properties never go out of 'style', and generally stable given the nature of property holding and investment. The next 2 years should see gradual growth in this sector as the economy recovers and derived/end demand returns. The low interest rate should also see people putting their money in other asset classes other than in fixed deposits, and one of these might be in the property market.
Last month, CCT and Suntec Reit announced that they had secured loan facilities of $160 million and $825 million respectively, so refinancing should not be much of an issue in the short term.
Furthermore, our local REITs will be buffered from the inflation from US's take on quantitative easing (printing cash) due to the strong Singapore dollar. The coming week will be an interesting one to see how the prices of Ascendas and Frasers go. Afterall, target prices from UOB-KH are $1.93 and $1.44 respectively. Could consider if the STI takes a dip.
Friday, June 12, 2009
GM Stocks Plunge After Shareholder Warning
11 June 2009
NEW YORK (AP) -- General Motors Corp. shares tumbled in over-the-counter trading Thursday after the automaker said that it is "highly unlikely" that its shareholders will be able to recover any of their investments when the company emerges from bankruptcy protection.
In morning trading, GM shares dropped 22 cents, or 13.8 percent, to $1.36, after falling to $1.28 earlier in the day.
The drop same after six-straight days of gains for the Detroit-based automaker, which filed for Chapter 11 on June 1 and was subsequently delisted from the New York Stock Exchange. In the last six days, GM shares have more than doubled to close Wednesday at $1.59.
"While GM does not control the market or its stock price, GM management strongly believes that any recovery for the common stockholders in the chapter 11 bankruptcy process is highly unlikely, even under the most optimistic of scenarios," the company said in a statement late Wednesday.
In a chapter 11 situation, shareholders generally only receive a return on their investment if all claims of the company's creditors are fully paid.
I sold my GM shares last night before the prices could drop below sub-normal profit levels. The bullish sentiments the previous few days had been probably related to positive sentiments about a new and leaner GM with the recent appointment of a new chairman. I had held the counter for a while, through the weeks when it had hit excess of $2, thereafter dwindling to the levels of $1 and subsequently $0.70 before the bullish weeks when it hit $1.60.
Though the sales might be seen as little late, I am glad I decided to recoup some capital before it got any worse. There is a possibility of course, that share prices might sustain and the stocks will continue to do well after a new GM emerges.
However, it is not a risk I'm willing to take as common shareholders after all, only get a share after everyone else receives theirs.
NEW YORK (AP) -- General Motors Corp. shares tumbled in over-the-counter trading Thursday after the automaker said that it is "highly unlikely" that its shareholders will be able to recover any of their investments when the company emerges from bankruptcy protection.
In morning trading, GM shares dropped 22 cents, or 13.8 percent, to $1.36, after falling to $1.28 earlier in the day.
The drop same after six-straight days of gains for the Detroit-based automaker, which filed for Chapter 11 on June 1 and was subsequently delisted from the New York Stock Exchange. In the last six days, GM shares have more than doubled to close Wednesday at $1.59.
"While GM does not control the market or its stock price, GM management strongly believes that any recovery for the common stockholders in the chapter 11 bankruptcy process is highly unlikely, even under the most optimistic of scenarios," the company said in a statement late Wednesday.
In a chapter 11 situation, shareholders generally only receive a return on their investment if all claims of the company's creditors are fully paid.
I sold my GM shares last night before the prices could drop below sub-normal profit levels. The bullish sentiments the previous few days had been probably related to positive sentiments about a new and leaner GM with the recent appointment of a new chairman. I had held the counter for a while, through the weeks when it had hit excess of $2, thereafter dwindling to the levels of $1 and subsequently $0.70 before the bullish weeks when it hit $1.60.
Though the sales might be seen as little late, I am glad I decided to recoup some capital before it got any worse. There is a possibility of course, that share prices might sustain and the stocks will continue to do well after a new GM emerges.
However, it is not a risk I'm willing to take as common shareholders after all, only get a share after everyone else receives theirs.
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