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Tuesday, April 6, 2010

Yes, It's a V-Shaped Recovery: Risk of Double-Dip "Relatively Low", Liz Ann Sonders Says.
Posted Apr 05, 2010 10:05am EDT by Aaron Task

"I'm amazed people still say it's not a 'V'-shaped recovery, which to means they're simply not looking at the charts," says Charles Schwab's chief investment strategist.

Bear Market in Bonds Could Trigger "Melt-Up" in Stocks, Sonders Says.
Posted Apr 05, 2010 11:50am EDT by Peter Gorenstein


The Dow Jones Industrial Average is on the verge of 11,000 for the first time in 18 months on the back of Friday's positive jobs report and Monday's better-than-expected reports on pending home sales and ISM services, a private trade group measure of the U.S. service sector.

Charts in brief: 6 April 2010.

CapitaMalls Asia: No follow through on the reversal signals seen in earlier sessions.  This is becoming a habit for this counter. The ugly black candle formed today is on the back of lower volume and the price closed at the support provided by the 50dMA at $2.28. MFI and OBV have gone flat in the meantime.  This counter is likely to trade sideways for a while if such conditions persist. Such a consolidation period took about a month to play out from late January to late February.

Golden Agriculture: MFI and OBV continue to rise.  Positive momentum and accumulation are very much the order of the day.   Trendline resistance is at 63.5c.  If this breaks on much increased volume, price action could go parabolic like what happened in early January this year.  If this holds, a retreat to the channel support is likely.

Saizen REIT: Some sceptics I know are now convinced that Saizen REIT is a buy based on its compelling valuation. Today, Saizen REIT traded at one price and one price only, 17c.  At 9.35AM, the entire sell queue of 1,237 lots at 17c was snapped up in a single transaction.  A friend who stubbornly refused to buy any at 16.5c and was waiting at 16c for weeks has missed his chance, it would seem.  Saizen REIT's longer term uptrend is intact.  The rising 100dMA is now at 16c and the rising 200dMA is at 15c.  The MACD is beginning to pull away from the signal line on the upside and we might be witnessing the beginning of more upside to come but given Saizen REIT's slow motion rise so far, I wouldn't hold my breath.  However, I believe patience will be rewarded.

Healthway Medical: Traders are getting tired of waiting for this counter's price to move up. The excitement that surrounded the news of plans to grow the business in China and the buy calls by DMG and Partners has become a distant echo. Many have thrown up their hands in despair. Today, we see the OBV going through an obvious decline, the first since 25 March. The fact that this happened as MFI turned up is somewhat ominous. Price touched a low of 16c and closed at 16.5c on much higher volume compared to the last session. The MACD continues to approach zero and more near term weakness is likely. I will wait and see if the support at 16c holds up.

SPH: OBV is rising sharply, suggesting strong accumulation. MFI, although not overbought yet, is tapering off, suggesting that buying momentum is mellowing a bit. I maintain an eventual target of $4.00 which would probably be hit once price is able to close above $3.90 convincingly.

AusGroup: Not being able to close above resistance provided by the merged 100d and 200d MAs at 63c, price retreated to 61.5, a resistance turned support. Whether 61.5c could hold up as support will need confirmation. Good news? The pullback happened on lower volume than the buy up yesterday. If 61.5c breaks, immediate support is at 60c. Recap: Ausgroup: An update.

Related post: Charts in brief: 5 April 2010.

Charts in brief: 5 April 2010.

Monday, April 5, 2010

CapitaMalls Asia: Buy signal confirmed on the MACD. OBV continues to rise, signalling accumulation.  MFI rose, signalling a return of buying momentum. Stochastics has turned up from the oversold region.  Price action formed a black spinning top with price closing at $2.31, still resisted by the 20dMA.  Volume remains anaemic and needs to expand to have a meaningful move up in price. Recap: CapitaMalls Asia: A late reversal?

Golden Agriculture:  Volume expanded as price pushed higher but it formed a bearish inverted hammer as price closed at 61c after hitting a high of 62c.  In the event of a pullback, it would be interesting to see if 60c could be a strong support.  Expectation is that it is early days yet for it to be so.  Expect strong support at 57.5c, a many times tested candlestick resistance and 50% Fibo line.
Recap: Golden Agriculture: Further divestment at 60c.

Saizen REIT: A nice bump up in price, closing at 17c and forming a dragonfly doji. This is the first time since 21 January that Saizen REIT has closed at 17c or higher.  All the momentum oscillators are rising and it might not be too much to hope that Saizen REIT would be moving higher sooner than later. Recap: Saizen REIT: 1627 lots bought up.

Healthway Medical:  A couple of readers asked me if I am still vested in Healthway as I have gone quiet on the counter.  I still have a smallish position in the company and I still look at its charts daily but there is nothing much to say.  The uptrend has clearly stalled and the counter is currently consolidating.  The 20dMA at 17c is now the new resistance and immediate support is at 16c, which is provided by the 50dMA.  The MACD continues to fall but the OBV is flat.  This suggests that buying momentum is weak but there is no obvious distribution.  So, I don't expect the price to crash but the consolidation could go on for a while. Recap: Healthway Medical: Touched 16c.

SPH: Closed at $3.88, high of the day, an obvious breakout from the very long term resistance at $3.82.  $3.82 was a support level that was breached in July 2008 and finally gave way in September 2008.  This is the first time since then that SPH has closed above $3.82.  It has been 18 months!  We will need confirmation that $3.82 is now resistance turned support.  Eventual target is S$4.00 in such a case.

Credit Suisse on the Japanese economy and JPY.

Credit Suisse thinks that the Japanese economy will continue to improve for the rest of 2010 and that the Yen will strengthen.  Is this also a reason why Credit Suisse is now a substantial unitholder of Saizen REIT?  I wonder.

31 March 2010

Related post:
A tale of two reversals and Saizen REIT.

Foreigners' views on Japanese real estate.

Sunday, April 4, 2010

These are some clips I found on YouTube which show recent perspectives of foreigners on Japanese real estate.  It is gratifying to see how they feel that the prices of Japanese real estate are reasonable and that there are great opportunities to be found in a real estate market that has suffered deflation for 20 years.  Marc Faber isn't the only contrarian in the world, after all.

07 Dec 2009
Someone from Perth bought a house in Japan and thought it a bargain.

21 Dec 2009
A video clip from Jones Lang Lasalle in Japan on Corporate Real Estate (CRE)  and how the returns in Japan can be big and is something to think about.

01 April 2010
This one is really interesting.  A group of English teachers in Japan are developing residential real estate in the country and are trying to get more foreigners to invest in Japanese real estate saying that "it is a very satisfying investment area".

Related posts:
Buy Japanese real estate.
Saizen REIT: A symmetrical triangle.
Saizen REIT: March 2010 presentation.

Courage Marine: Riding the waves of recovery.

Saturday, April 3, 2010

Admittedly, I have always thought of the shipping industry as a very difficult one.  Huge capital expenditure is required and the ongoing maintenance expenses are substantial as well.  I also do not like how its huge capital expenditure is on assets which are depreciating in nature.  Furthermore, its fortunes are tied inextricably with those of the global economy.  So, during difficult times like the recent crisis, shipping companies suffered badly.  Anecdotal evidence tells of hundreds of ships anchored off the shores of Singapore, idling away as there is too much spare capacity.

However, I am very much aware of the global economic recovery which is now well underway.  I targetted mainly three stocks in the second half of 2009: Healthway Medical for its defensive growth model, Golden Agriculture for the increasing demand for CPO and Saizen REIT for the compelling valuation and a contrarian play.  This year, I also increased my exposure to LMIR and AIMS AMP Capital Industrial REIT. Lately, I became interested in CapitaMalls Asia as I believe it would benefit from the rise of the Asian consumers.

Recognising that the global economic recovery is going to strengthen in 2010, it would be pure bigotry for me not to consider the shipping industry as a logical beneficiary. Latching once more on the theme that Asia is leading the world in this recovery, I decided to look at shipping companies with more of an Asian exposure.

Having learned some valuable lessons from this past crisis, I decided that the company I invest in should not have high gearing and it should be one that could control its costs well.  These factors are crucial for the survival of a company in hard times.  In this last crisis, many companies issued rights and even NOL went to shareholders with hat in hand despite having a powerhouse shareholder like Temasek Holdings:

"NOL's proactive capital raising will strengthen its balance sheet, enhance its financial flexibility and allow it to seize investment opportunities," Ong Beng Teck, managing director of investments at Temasek said in a statement. June 2, 2009 (REUTERS).

By some stroke of luck, the first shipping company I looked at in detail, Courage Marine, a dry bulk shipping business, has many of the qualities I am looking for. Established in 2001, the company has exposure primarily in Greater China.  This is their niche in the industry and fits well with my aim to look for a company which will benefit from a stronger and recovering Asia.

Being wary of the large capital expenditure that shipping companies have to make, I was very pleased to find that Courage Marine only buys and operates second hand vessels.  This maximises return on investment and minimises depreciation cost. Of course, what I then worried about was the cost of maintenance but they have been able to manage this as well, keeping cost of maintenance low.

I suppose this is the same rationale that buying a second hand car makes more sense than buying a new car for us common folks most of the time.  A new car depreciates rapidly in the first three years of its life.  If the cost of maintaining a second hand car is less than the premium we have to pay in order to buy a new car, it's a no brainer.

Next, I looked at gearing.  Courage Marine has very low gearing.  Gross gearing as of 31 Dec 2009 was at 6.2%, a reduction from 8.5% a year ago.  Taking into consideration that they have cash and cash equivalents of more than US$43m and total debt of only US$6.8m, Courage Marine is in a net cash position!

Courage Marine is not immune to economic slowdowns but through prudent management, it managed to reduce its debts and declare a dividend of US 0.47c per share for the year ended 31 Dec 2009.  Based on the last done price of S 20.5c, that is a yield of 3.1% (based on US$1 = S$1.37).  Not too attractive but try looking at the preceding three years when it declared dividends of US 1.888c, US 3.115c and US 1.41c.  Sounds more interesting?  This is a company that shares its profits with its shareholders.

Courage Marine has a NAV of US 10.41c per share.  At an exchange rate of US$1 = S$1.37, the NAV is S 14.26c per share.  At the last closing price of S 20.5c, it is now trading at a premium of 44% above NAV which I do not think is expensive.

Finally, what really caught my eye is the strong return to profitability in the fourth quarter of 2009.  Compared to a year ago, gross profit in the fourth quarter increased 523% and net profit margin improved to 25.9%!  I fully expect its revenue and profits to continue improving in 2010.  Taking last quarter's EPS as a guide, assuming that things stay stagnant, Courage Marine would have an annual EPS of US1.08c or S1.48c which, based on a share price of 20.5c, gives a PE of 13.85x.  Not expensive.  EPS is more likely than not to improve in 2010.

Courage Marine is a company that has a niche in the shipping industry.  It capitalises on its expertise in that niche and concentrates on what it knows best.  It is excellent in managing costs and it is conservative when it comes to financing new capital expenditure.  All these characteristics, I believe, translate into a strong competitive edge and business resilience.

When I arrived at this conclusion on 26 March, the next step was to look at the charts.  Its price closed at a high of 21.5c that day.  To me, 21.5c looks like the top of a base formation and I decided to wait and see if it would break out or retreat.  The next day, it went on to touch a high of 22.5c.  I thought I had missed the boat (pardon the pun) after all the FA that I did.

Fortunately for me, the price weakened to 20c on 31 Mar and seeing that it's where the flat 200dMA is and seeing how the rising 20dMA might just push up the price, I bought some then.  There is a chance that price might weaken further seeing how the MFI is in the overbought region but as the OBV does not suggest any heavy distribution activity, I believe that downside should be limited, perhaps to 19c, the confluence of the 100dMA and 50dMA.  A retest of the previous low would mean a floor of 17.5c although I do not think this likely.

I believe that Courage Marine is a well run company that is riding the waves of recovery and the market will recognise this in the usual way.  I would accumulate on weakness.

CapitaMalls Asia: A late reversal?

Friday, April 2, 2010

I spent a few hours in Ion Orchard today shopping with a friend who just moved into his new home.  Always nice to shop for things for a new home and watching someone else spend money.  It's a very therapeutic experience without any real damage to my own wallet.  What was an eye opener was the crowd at Ion Orchard.  The place was CROWDED!

I have a knack for catching bits of conversations of passers by and I must say I was amazed by how many foreigners there were.  There were Koreans, Chinese, Indonesians and Japanese.  Of course, there were Caucasians too.  These foreigners are now an important part of our domestic economy.  Their consumption contributes to a healthier GDP for Singapore, I have no doubt.  More importantly for me, CapitaMalls Asia owns 50% of Ion Orchard.  That makes me happy.

Fundamentally, CapitaMalls Asia is a company with solid numbers and technically, it seems as if it has started a reversal process having hit $2.26 two sessions ago.  The OBV shows that no distribution is taking place.  The Stochastics is now in oversold region.  The MFI still shows a slowing buying momentum.  The MACD has flattened while the signal line continues to fall, suggesting a possible bullish crossover in the making.

Price action formed a white candle in the previous session and actually broke resistance provided by the 20dMA at $2.31 at one stage, hitting a high of $2.33 before closing the session at $2.30.  All these after I suggested that the inverted black hammer in the preceding session was a possible reversal signal.  A reversal is confirmed... again.  Why again?  Well, you would remember an earlier reversal signal was confirmed but there was no follow through.  The problem? Anaemic volume.

It is quite obvious when we look at the Bollinger bands that CapitaMalls Asia has entered a consolidation phase.  There really isn't any trend per se.  So, I would like to draw your attention to the Stochastics.  In the reversal signal which did not follow through successfully, the Stochastics was not oversold but now, it is.  The chances of a successful reversal is now higher.

It is quite obvious to me that the top of this basing process is at $2.41.  However, getting there is going to take some time given the falling buying momentum as suggested by the declining MFI.  However, the lack of distribution as suggested by the OBV precludes any drastic downward movement in price.  Thus, the low of $2.19 is likely to be a strong support if any further downside presents itself.

My reading: Limited downside at $2.19.  Immediate resistance at $2.31 provided by the 20dMA and this is followed by $2.41, the top of the base formation.  Eventual target is at $2.55, a many times tested candlestick resistance.  If price continues basing with an upward bias as per my expectations, what we might see forming would be a double bottom formation.  Important: Volume has to expand with any move to the upside and this would see the MFI reversing its decline.  Vested.

Related posts:
Replies from AK71: CapitaMalls Asia.
CapitaMalls Asia: Reversal confirmed.

Golden Agriculture: Further divestment at 60c.

Thursday, April 1, 2010

I hope Golden Agriculture made many happy today as the reversal signals seen a few days ago followed through nicely.  The price closed at 60c today, the previous high. My overnight sell queue at 60c was done towards the end of the day.

Looking at the chart, it is obvious that Golden Agriculture is firmly back in the uptrend channel.  Price action formed three wickless white candles in a row, reminiscent of a pattern which chart watchers call the Three White Soldiers and this pattern could signal more upside to come.

MFI rose above 50% convincingly, signalling positive buying momentum.  OBV continues to rise, signalling continuing accumulation.  The MACD has crossed the signal line in a bullish crossover.  All the momentum oscillators are bullish and also hint of more upside to come.

I have drawn some Fibo lines to determine the next resistance levels to watch in case of further upside.  I would like to draw your attention to 63.5c and 64.5c as these would be in closer proximity to the uptrend resistance in the course of the new week.  64.5c was also the closing and opening prices of the peak achieved in mid January on the 11th and 12th respectively.  This price would likely be fresh in the memories of market participants and would thus be a strong resistance.  I do not expect it to be taken out for now but I could be wrong.

Bugbear? Volume has not expanded in this latest move up in price and this suggests that we should not be too euphoric. I have put my remaining Golden Agriculture shares in the queue to sell in case its price hits the resistance levels I have identified in the preceding paragraph.

Certainly, from a fundamental perspective, the very strong showing by crude oil which is trading at almost US$85 a barrel as of now might have a spillover effect on crude palm oil and this would surely benefit Golden Agriculture.

Related posts:
Golden Agriculture: Reversal confirmed.
Golden Agriculture: Partial divestment at 57.5c.

Unique visitors: Crossing the 40,000 mark.

It might be a cliche but time really flies.  It has been slightly more than three months since I started this blog last Christmas Eve. Has it been so long? It feels like I just started blogging last week.  I guess we don't feel the passage of time when we are doing something we enjoy.

Blogging has introduced new groups of people in my life.  I used to simply share ideas with friends and family but I am now sharing ideas in cyberspace and reaching out to a wider audience.  I have made contact with fellow bloggers and I have many visitors to my blog, some of whom have left comments and exchanged ideas with me. My social life has become a tad fuller.

Today, the number of unique vistors to my blog crossed the 40,000 mark.  This is overwhelming and I am truly humbled by the support my blog has received so far.  I guess I must be doing something right here.  Although this is really a personal blog, your support and encouragement give me that little push to continue blogging and sharing my ideas.  Thank you very much and have a great long weekend. :)

Thank You Images

AusGroup: Update.

Wednesday, March 31, 2010

AusGroup seems to have some trouble breaking resistance at 61.5c. If we draw a trendline support from 9 Feb, we see the support at 59.5c today, it is quite clear that the uptrend is broken.

However, I would like to point out that volume was rather low and, in fact, it is true for other down days in the past few weeks. Volume has been generally lower on down days and higher on up days for AusGroup recently. This suggests that a longer term accumulation is underway and this is confirmed by the rising OBV in recent weeks. However, with the MFI turning down, I expect some weakness in the near term but I do not expect a crash in price.

If 58.5c gives way, the next supports are at 57.5c (50% Fibo) and 56.5c (38.2% Fibo).  If the price action moves above the trendline support once more, resistance remains at 61.5c.

CapitaMalls Asia: Inverted black hammer.

CapitaMalls Asia's volume expanded on a down day as the 50dMA was breached.  It closed at $2.26, forming an inverted black hammer in the process, which happens to be another possible reversal signal.

OBV has declined but the overall trend of accumulation is still intact.  MFI shows reduced buying momentum while the MACD has dipped below zero, signalling the end of positive momentum.  Having said this, the picture of a low volume pullback has not changed.

Drawing Fibo lines to determine where the supports are in case the price does continue to decline shows the next support levels at $2.25 and $2.23.  The low in February was established at $2.19 and should be a strong support if tested.  The downside is still pretty limited, therefore.


The Chinese people love to shop. Grand Gateway Plaza in Shanghai:

Golden Agriculture: Partial divestment at 57.5c. (Rabobank's John Baker speaks.)

Golden Agriculture breached the resistance at 57.5c and closed at 58c, forming a nice bullish white candle in the process.  In my usual style, I partially divested at resistance on the way up and it's 57.5c in this case.  I have put in a sell queue at the next resistance of 60c, the previous high.

Although price action formed a white candle today, the slight reduction in volume creates a bit of unease, especially when volume expanded on the STI as the index tumbled almost 46 points to close at 2,887.46.

OBV continues to rise and MFI has turned up, indicating continuing accumulation and a return of positive buying momentum.  This is comforting.  MACD has touched the signal line and a bullish crossover seems imminent.

Baker Says Palm Oil `Stands Out' Among Soft Commodities.
22 March 2010, Bloomberg.

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