Singapore Stock Market Blog 30 november 2009
The biggest news that has happened over the past few days would have to be that of Dubai World (Dubai government controlled holding company), which is something like Khazanah in Malaysia or Temasek and GIC in Singapore, requesting for delay in loan payment amounting to USD59 billion dollars. On a broader scale it is estimated that the Dubai government may have debts of up to USD80 billion.
Global financial markets reacted swiftly as there were some uncertainties initially as to the potential ramification. Asian stock markets fell between 3-5% last Friday while Singapore, Malaysia and Indonesia markets were closed for public holiday so they will have to play "catch up" today when market resume trading.
The million or billion dollar question is whether this incident may trigger another round of financial melt down similar to those caused by US financial giants not so long ago. So far, most market commentators believe the Dubai incident will most likely be a more contained incident since Dubai has the wealthy cousins of Abu Dhabi sitting on USD500 billion of sovereign wealth funds. It is also more likely that rather than a default occurring, the loans will eventually be re-structured and perhaps with a hair-cut as well. And finally, Dubai does have assets estimated worth USD90 billion.
I recall when the potential loan bubble first surfaced in US, market commentators keep saying everything have been revealed and the worst over....and it took about 18 months for the worst to be over. Hopefully we will not have to go through another round of 18 months market correction.
Monday, November 30, 2009
Wednesday, November 04, 2009
Singapore listed Chinese Companies - S Chips
Some of my friends asked me what i think of Singapore listed Chinese Stocks know as S chips, I shall do a brief writeup about my personal views :
Many of the S chips listed in Singapore are now trading at low PE (share price to EPS ratio) or near cash per share because :
1. Despite some signs that the global financial crisis may be over, recent reported financial results remain weak (eg profit continue to decline or margins have not recovered)
2. Confidence were badly shaken due to the accounting scandals or corporate governance issues affecting some S chips
Let’s look at the above 2 points separately.
Point 1 - this is a more general reason which can affect all companies, not just S-chips, so all we have to do is do more homework and analyze the financial results of the companies, and look for signs of recovery. One of the early signals which I use sometimes is look for “sequential” earnings recovery, rather than year-on-year recovery. Sequential means comparing the latest net profit (eg 3Q09) to that 3 months ago (eg 2Q09) and if you see the company profit improving due to better operating performance (rather than forex gains or unusual items like writebacks) than this is the first thing that will get my attention.
Point 2 - i personally think that the entire S-chips sector have been “over-punished” by the actions of a few bad apples. Bear in mind that be it accounting scandals or frauds or corporate governance issues, all these happen to all stock markets, even in Hong Kong and US stock markets. But the interesting part is how the people “react” to it when it happens.
In Hong Kong, when you see certain negative news about the market, the press will just report it (usually in smaller column) and move on. Hong Kong press seldom devote a large section of the newspaper to play up the issue. In Singapore, I saw the press devoting half a page to highlight certain things and continue to highlight these issues for many days. Doing it and over-doing it is a fine line…….. to me hong kong press just do it but singapore press may have over-done it.
If the press over-report certain negative aspects, then it will hit the core of investor confidence, that they will think ALL S-chips are bad and this will bring down the valuations of ALL S-chips.
In Hong Kong and even US, we have seen the press reporting certain fraud cases but they do not over-report it and quickly move on to other matters. Investors take these incidence as part and parcel of the stock market, fraud are things that have happened and will continue to happen in the financial markets. One should not react as though it is incomprehensible that fraud can happen to listed companies in Singapore. This is one of the possible reasons why the PE of china companies in hong kong has recovered much “faster” compared to those China companies PE in Singapore. I use the word “faster” because HK listed china companies PE are usually higher than S-chips.
What’s done is done, so what to expect next for Singapore S-chips…..
If you look at the PE S-chips are at now ie trading 3 to 5x pe, these valuations to me are pre-ipo valuations and we know that pre-ipo valuations means High risk High returns.
These means “some” of the s-chips may yet blow up due to the high risk associated with but “some” who survive will give high returns later from the low valuation they are at now. One good example would be an S-chip called Sinotel. The lowest price was around 7c (when EPS was about 10c) this means the stock was trading below 1x PE haha, we can laugh now in hind-sight. But when smart money realize the rediculous under-valuation, the stock price start to recover and recently went to as high as 70c (10 bagger is the high return some pre-ipo projects may give).
So when we look at S-chips now, we should adopt they way PE (private equity) fund invest in pre-ipo project…..they expect high risks and high returns, so they DIVERSIFY.
PE fund usually try to go in at 2-4x pe before ipo and wait to make few baggers when the ipo goes through.
But if the ipo is stucked or failed, their money may go up in smoke.
So they usually try to spread their money evenly in a few projects such that as long as some make it, they will still make money at the end of the day.
In summary, look at s-chips as pre-ipo projects (high risk high return), and learn to diversify when you put money in s-chips with the expectation that some may still blow up in your face ;)
Before I sign off, let’s not forget the quietly growing number of I-chips (Singapore listed Indonesia Owned) listed in Singapore share market and the “thrill” that they are giving us now………hmm sounds familiar eh
Happy Trading
Rooney
Some of my friends asked me what i think of Singapore listed Chinese Stocks know as S chips, I shall do a brief writeup about my personal views :
Many of the S chips listed in Singapore are now trading at low PE (share price to EPS ratio) or near cash per share because :
1. Despite some signs that the global financial crisis may be over, recent reported financial results remain weak (eg profit continue to decline or margins have not recovered)
2. Confidence were badly shaken due to the accounting scandals or corporate governance issues affecting some S chips
Let’s look at the above 2 points separately.
Point 1 - this is a more general reason which can affect all companies, not just S-chips, so all we have to do is do more homework and analyze the financial results of the companies, and look for signs of recovery. One of the early signals which I use sometimes is look for “sequential” earnings recovery, rather than year-on-year recovery. Sequential means comparing the latest net profit (eg 3Q09) to that 3 months ago (eg 2Q09) and if you see the company profit improving due to better operating performance (rather than forex gains or unusual items like writebacks) than this is the first thing that will get my attention.
Point 2 - i personally think that the entire S-chips sector have been “over-punished” by the actions of a few bad apples. Bear in mind that be it accounting scandals or frauds or corporate governance issues, all these happen to all stock markets, even in Hong Kong and US stock markets. But the interesting part is how the people “react” to it when it happens.
In Hong Kong, when you see certain negative news about the market, the press will just report it (usually in smaller column) and move on. Hong Kong press seldom devote a large section of the newspaper to play up the issue. In Singapore, I saw the press devoting half a page to highlight certain things and continue to highlight these issues for many days. Doing it and over-doing it is a fine line…….. to me hong kong press just do it but singapore press may have over-done it.
If the press over-report certain negative aspects, then it will hit the core of investor confidence, that they will think ALL S-chips are bad and this will bring down the valuations of ALL S-chips.
In Hong Kong and even US, we have seen the press reporting certain fraud cases but they do not over-report it and quickly move on to other matters. Investors take these incidence as part and parcel of the stock market, fraud are things that have happened and will continue to happen in the financial markets. One should not react as though it is incomprehensible that fraud can happen to listed companies in Singapore. This is one of the possible reasons why the PE of china companies in hong kong has recovered much “faster” compared to those China companies PE in Singapore. I use the word “faster” because HK listed china companies PE are usually higher than S-chips.
What’s done is done, so what to expect next for Singapore S-chips…..
If you look at the PE S-chips are at now ie trading 3 to 5x pe, these valuations to me are pre-ipo valuations and we know that pre-ipo valuations means High risk High returns.
These means “some” of the s-chips may yet blow up due to the high risk associated with but “some” who survive will give high returns later from the low valuation they are at now. One good example would be an S-chip called Sinotel. The lowest price was around 7c (when EPS was about 10c) this means the stock was trading below 1x PE haha, we can laugh now in hind-sight. But when smart money realize the rediculous under-valuation, the stock price start to recover and recently went to as high as 70c (10 bagger is the high return some pre-ipo projects may give).
So when we look at S-chips now, we should adopt they way PE (private equity) fund invest in pre-ipo project…..they expect high risks and high returns, so they DIVERSIFY.
PE fund usually try to go in at 2-4x pe before ipo and wait to make few baggers when the ipo goes through.
But if the ipo is stucked or failed, their money may go up in smoke.
So they usually try to spread their money evenly in a few projects such that as long as some make it, they will still make money at the end of the day.
In summary, look at s-chips as pre-ipo projects (high risk high return), and learn to diversify when you put money in s-chips with the expectation that some may still blow up in your face ;)
Before I sign off, let’s not forget the quietly growing number of I-chips (Singapore listed Indonesia Owned) listed in Singapore share market and the “thrill” that they are giving us now………hmm sounds familiar eh
Happy Trading
Rooney
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