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Waiting to increase exposure to AIMS AMP Capital Industrial REIT and First REIT.

Sunday, August 7, 2011

Continuing from my last blog post, which I said we should get ready and be greedy, I am interested in accumulating more units of AIMS AMP Capital Industrial REIT and First REIT as well if prices should weaken in the next few sessions.

AIMS AMP Capital Industrial REIT, as mentioned in my last blog post, has the honour of closing with its unit price unchanged in a sea of red in the last session.

I suppose Mr. Market recognises the REIT's stronger numbers and astute management. However, Mr. Market is also known to be whimsical. If there should be a sell down, I am ready to buy more. Buy? At what price?

Since April, price moved higher as the MACD formed lower highs. A negative divergence. So, buying recently at 22c or 22.5c would have been unrewarding. In fact, selling some would have been a good idea. A correction is to be expected.

Where is a strong support? I see 20c as a very strong support. Apart from being a nice round number, it is also where we find the 138.2% and 150% Fibo lines approximating, both golden ratios.


Fundamentally, 20c would be a very nice price to add to my long position as well. That would give a distribution yield in excess of 10% per annum and it would be purchasing at a 30% discount to NAV.

Regular readers would remember that I divested some of my investment in the REIT recently as I balanced its weighting in my portfolio with that of Sabana REIT. With its stronger numbers which includes a higher DPU and plans to redevelop 20 Gul Way, accumulating on weakness is what I will be doing.

However, many are also queueing to buy at 20c. So, one bid higher? 20.5c? Why not?


As for First REIT, its very low gearing and defensive quality of its assets are very attractive. The management also has a very good track record to boot. Closing at 79c, it is now offering a distribution yield of more than 8% per annum once more.


The uptrend on the MACD has been broken in the last session. Could price go lower? It could and if it does, I expect strong support at 77c next. That is a natural support level as it was the top of an interim basing process. It is also where the rising 100dMA will be approximating soon. Buy more at 77c? Probably.

Related posts:
AIMS AMP Capital Industrial REIT: Higher DPU and 20 Gul Way.
First REIT: 2Q 2011 results.

STI down 3.6% on heavy selling! Be fearful? Get ready and be greedy!

Friday, August 5, 2011

Today, almost all of the counters in my watchlist registered a loss. Almost? Yes, although none of the counters registered an increase in share price, one counter closed unchanged. That honour goes to AIMS AMP Capital Industrial REIT.  This demonstrates the relative resilience of the REIT's unit price. Given the bloodbath seen in the stock market today, this is impressive.


The action in the stock market was so exciting that I actually wrote two blog posts in the late morning today. There was a lot of fear to the point of being petrifying. However, if we have already planned for a scenario like this, just execute the plan and there is really nothing to fear.  What? Nothing to fear? Yes, why fear opportunities to collect on the cheap?

In my opinion, the only people who would fear a sharp decline in the stock market are people who are fully invested in the stock market and who

1. Borrow money to invest.

OR

2. Use money which they need for other purposes in the near future to invest.

If we are 50% invested or less and if we are not using borrowed funds or funds we need in the near future, I do not see why we should panic. Stay calm and rational.

As revealed in my two earlier blog posts today, I bought more units of Sabana REIT at 92c and more shares of CapitaMalls Asia at $1.265. Could prices go lower next week? They could, of course. Who can be sure?

Looking at CapitaMalls Asia's chart, we see a huge gap down at the start. Price hit a low of $1.25 before closing at where it started the session at $1.28. That is a nice long legged doji and a bullish one too. It is a bullish reversal signal.


In case you are whooping for joy, remember that signals could fail. If we see price opening higher than $1.28 in the next session, the signal is most probably confirmed and we could see price closing the gap at $1.325. Otherwise, be prepared for possibly more downside.


Sabana REIT's unit price also gapped down in the morning but by the end of the session, it closed at 92c, the same price it started the day at, forming a dragonfly doji in the process.


Volume was relatively high and yet volatility was very low as we saw units changing hands at 92c and 91.5c only. This says something about support for the REIT. If its unit price should retest the 90c low, I will probably buy many more units.

Stay calm and get your warchests ready. There could be many more buying opportunities if the selling persists. Good luck.

Related posts:
A sea of red! Have a plan and execute it!
CapitaMalls Asia: Bought more at 161.8% Fibo line.


CapitaMalls Asia: Bought more at 161.8% Fibo line.

Just two sessions ago, I bought shares of CapitaMalls Asia at $1.335. Then, I commented on the very high volume behind the long black candle and wondered if price could go lower.

I used Fibo lines to estimate where the stronger supports would be in case of further selling and $1.265 is where the 161.8% Fibo line approximates.


My overnight buy order at $1.265 was filled this morning as price gapped down following the drastic overnight sell off in the US and European stock markets.

$1.265 is beyond the lower boundary of the MA envelope and if volume remains relatively low at the end of the day, things would look more benign.

Panic and sell now? No.

A sea of red! Have a plan and execute it!

US stock market plunged 5% overnight. European markets plunged overnight. The Singapore market opened some 100 points lower. Such ferocity in selling, I have not seen in some time.

Panic is palpable. Fear can be petrifying. However, if we have a plan, fear could be less so.


My plan is to continue investing for income and I like AIMS AMP Capital Industrial REIT and Sabana REIT.

Today, I bought more units of Sabana REIT at 92c. Looking at the chart, 92c should be a natural support level but we have to see how it closes this evening.

If it is unable to close above 92c this evening, we could see price going lower to test 91c and 90c for support. I would buy more then. Good luck.

HPH Trust: 2011 Interim Financial Results.

Thursday, August 4, 2011

On and off, I would look at HPH Trust because there seems to be so much interest in this business trust from readers. Anyway, as I invest primarily for income these days, HPH Trust fits into my strategy but is it attractive enough for me?



Before I continue, I will say that  I do not like the fact that it is denominated in a foreign currency and in US$ to boot. On my investment journey, I have only once bought a non S$ denominated stock, TCIL, and that was in HK$. It is a bit messy having to take into consideration exchange rates.

These days, with the S$ strengthening against the US$, chances of exchange rate losses are even higher. So, for me to be strongly interested in HPH Trust, there must be a bigger margin of safety. This, fundamentally, would take the form of a higher distribution yield at the most basic level.

HPH Trust released 2011 Interim Financial Results recently and declared a DPU of HK 14.3cents. It has a NAV/unit of HK$ 7.80.

Closing price on 3 August was US 73.5cents.

Now, isn't this one confusing counter? We have to contend with US$ and HK$. Of course, being in Singapore, we have to convert everything to S$. Wah, I am getting a bit giddy already!

US$1.00 = S$1.174
HK$1.00 = S$ 0.15056
(Source: UOB, 4 August 2011)

Unit price:
US 73.5cents = S$ 0.853

DPU:
HK$ 0.143 = S$ 0.0215

Well, let us see if HPH Trust is able to deliver the full year DPU of US 5.9c as per their forecast. This would be a DPU of S$ 0.0693 or a distribution yield of 8.12% at the unit price of US 73.5c.


If we were to believe that HPH Trust would deliver as per forecast, I would not enter at the current price either. Why? Well, I can get more than 9% distribution yield from Sabana REIT and AIMS AMP Capital Industrial Trust without all the messy foreign exchange calculations now anyway. A 8.12% yield from HPH Trust does not even come close.

Then, fundamentally, would I ever be interested in HPH Trust? If it were to offer a 10% distribution yield, why not? That would give me the larger margin of safety I am looking for. Everything else remaining equal, it would mean a unit price of US 59c before I get my feet wet. Wishful thinking? Well, I shall wait and see.

See financial statement here.
Added (1 Feb 17):
http://www.hphtrust.com/distribution.html

CapitaMalls Asia: TA and FA.

Wednesday, August 3, 2011

CapitaMalls Asia sank lower although it is still trading cum dividend. I added to my long position at $1.335/share today based on the following considerations:

1. Fundamentally, CMA has a NAV/share of $1.52. At $1.335, it is trading at a 12+% discount to NAV. CMA is likely to do better in time.

2. Technically, the MACD seems set to form a higher low as the counter's share price forms a lower low. A positive divergence is almost a given.


Flip side of the coin?

A. Fundamentally, CMA's increasing exposure in China is a double edged sword. China's efforts to temper inflationary pressures could lead to a slowing down in its economy which could affect CMA's business negatively as retailers feel less confident taking up more space in the malls.

B. Technically, after a gapping down and the formation of a long black candlestick on the back of very high volume, we could see price going lower in the next session. The selling pressure is very strong, no doubt about it.

In case we see a reversal in price action, we could expect gap cover at $1.395 to take place. A quick trade once again? Perhaps.

In case price declines further? Let me use Fibo lines to see where we might find stronger supports.


See how price hit the 123.6% Fibo line before closing a bit higher today? However, this is not a golden ratio and further weakness could see price testing $1.30 (138.2% Fibo line),  $1.285 (150% Fibo line) or $1.265 (161.8% Fibo line) for support.

Good luck!

Choppy, choppy, chop, chop.

Tuesday, August 2, 2011

Global stock markets weakened today after strengthening the session before on news that the debt ceiling in the USA would most likely be raised successfully. Why?

Fundamentally, raising the debt ceiling means that the USA would not default and they will be able to continue paying their bills. Sounds like a good thing. However, closer at hand are still many problems which are worrying Mr. Market.

1. US credit rating could still suffer a downgrade. This could make borrowings more expensive.

2. Manufacturing has weakened in global economies. This could make debt problems worse.

Read full article here.

3. With all eyes on China as the bastion of economic prowess, news that its manufacturing growth slowed in July tempered sentiments.

Read full article here.

In response to a reader who said that the USA is the strongest country in the world since the day he was born, I put forth the question as to whether it still is the strongest country in the world today.


It is clear to me that USA's strength is an illusion built on borrowed funds and borrowed time. In fact, Putin calls USA a parasite which is unable to live within its means.

"Putin was insistent Monday that the world should be seeking new reserve currencies for trade and savings." Read full article here.

What about the Chinese? They are the largest holder of US Treasuries worth some US$1.16 trillion (more than a third of its US$3.2 trillion reserves).

A declining US$ is most damaging for the Chinese and they are not impressed by efforts in the USA which it says "was hiding "risks and troubles" for the world economy" and that "its sovereign debt problems remain unresolved". Read full article here.

If anything, global stock markets are likely to continue seeing choppy action. It is important for us to remain calm and collected in the midst of this.

I am ready to add to my long positions if I see value. If there should be some crazy run up in price, I am ready to reduce my long positions.

Anything else? I think that's about it for retail investors like us.

Sheng Siong's IPO and the American debt ceiling.

Monday, August 1, 2011

I received two emails today from readers. The first asked me about Sheng Siong's IPO and the second commented on how the Americans have come to a compromise on raising the debt ceiling.

To the first reader, I said that it has been a long time since I took part in any IPO, believing that they do not offer good deals for investors most of the time. I rather wait and see if I could get the shares when they provide better value for money.

Many believe Sheng Siong's business to be recession proof and that is probably correct. However, the business might be recession proof but the share price could be less so.

The business could be quite robust but negative sentiments in the broader market could drive prices down all the same during hard times. Mr. Market is given to extreme emotions, after all. I would buy if the shares become undervalued.

To the second reader, I said that I would not be too sure about the Americans raising their debt ceiling successfully until President Obama signs on the dotted line. After all, remember how "rebels" within the Republican ranks were unhappy with the compromises made?

Now, how will the Democrats react to some concessions made by President Obama to the Republicans? Apparently, he gave in and agreed not to increase taxes on the rich.

Of course, I am playing the Devil's advocate here but, like I always say, never say never. We can only hope for the best.

Read article here.


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