Could not get back to sleep after watching the Champions League finals. I guess it is all the adrenaline pumping in my veins after watching Barcelona outclass Manchester United. What a great result. Lay in bed for 1 hour and decided that it was really a waste of time trying to get back to sleep. Decided to start writing the post and maybe catch up on the sleep a little later.
This week, we had another weak showing for the markets even though we had a slight rebound towards the end. Is this the turning point for the markets? I do not think so. Volumes are still low and expect more volatility ahead.
We also saw the privatisation offer for Allgreen this week. At a hefty premium indeed. Analysts scurried around after the deal trying to find the next property play that may be taken private. So typical of them, trying to sell the story that more M&A in the property sector is in store. I do not disagree that more privatisation offers are on the way but it will not be constrained to the property sector. I actually find S chips attractive as M&A plays because of their lack of popularity and low valuations. If you used Bloomberg to filter the SGX listed companies, using p/e, p/b, cash to liabilities, ROE and debt to equity parameters, you will see a whole list of S chips companies. Why is that so? You really cannot blame market participants who are skeptical about S chip companies especially after the likes of China Aviation Oil, Ferrochina, China Milk, Fibrechem and the list goes on and on. S chips have really not done well for a long time and credibility has been flushed down the toilet.
What made things worse was the worrying news of Cosco's parent having audit issues and from what I know since meeting Cosco Singapore's management, I would not be surprised if this company has many more audit and credibility issues going forward. China Chaoda, the largest independent vegetable producer in China plunged more than 20% in a day last week because an article in "Next" magazine wrote about how the company has overstated its arable land on its books. There are also some bad press on the US listed chinese ADRs, how do you expect Chinese companies outside of China and Hong Kong to do well?
What I totally intend to do is to start investing some money into those S chips which I like and trust because investing when there is fear is somewhat of a speciality for me. Maybe I should set up a fund investing just in S chips. I believe if you have a medium to longer term view, you will be handsomely rewarded. Remember what Buffett always say, "be fearful when others are greedy, be greedy when others are fearful". Be rationale and look at those companies that have delivered according to whatever they have promised and have steered clear of negative press since their listing. Low profile companies which have high management ownership tends to be safer bets. Will write more if I find any interesting ones.
The property market is still booming. Considering the number of transactions listed on "The Edge Singapore", it really shows that the market is still booming and does not look like abating any time soon. Plenty of market watchers are speculating that there are more policy action to come in the near future. I do not deny this is a possibility but I still maintain my stance that the liquidity flood in the market is not allowing the property markets to cool down. Interest rate is the key to stopping this rampaging property market in its tracks and no matter what draconian measures are made, they will only be temporary in terms of slowing down the market. The government has to also consider the risks of over implementing policies and totally affecting the market and causing the market to crash rather than correct in its own cause. The destruction of wealth and the wealth effect is something which the government understands that will not help the economy in any way, that is why they would be more cautious with regards to policy action going forward.
Another point I would like to make this week is on Goldman's reversal on their call to sell commodities. Last month, they made the call to cut resource exposure and suddenly this week, they raised their target price for oil causing commodities to make a turnaround and move upwards. That is just down right disgusting. Personally, I just feel Goldman's move was their ploy to lower prices to accumulate before pushing for higher prices. Poor investors who placed their faith in them. What a shameless move.
This week, I would also like to pay a special tribute to my favourite CNBC anchor, Mark Haines who passed away suddenly last week. I really liked his frankness and his hard line approach to asking questions to questionable CEOs and analysts on screen. Good reporting is already rare this days, to lose a great anchor man like him means financial journalism has taken a big step back. Well rest in peace, Mark Haines.
Ok I have written what I wanted to write this week. Nothing special to talk about because the market volumes are low and this is definitely not a trading environment because sustained moves in the market is going to be hard to come by. If you are looking to trade the market be wary, if you want to buy and hold, please do so because this is a good time to accumulate.
Thats all for this week.
Have a good week ahead.
Best,
SVI
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