China Hongxing: Testing support.

China Hongxing's share price has been declining since hitting a high of 22.5c in mid September. The lower highs and lower lows formed since then have created a down trending channel. Today, price touched 15.5c, a strong support level provided by the 200dMA.

Will price decline further? Well, that momentum is negative is quite clear as the MACD is below zero and still declining below the signal line. However, the MACD histogram has turned green which is a buy signal.

However, any upward movement in price is probably a rebound and not a trend reversal. Any rebound could hit the channel resistance and could be capped at 18c or so. Before that, expect resistance at 17c, which is where the declining 20dMA and the rising 100dMA will be approximating soon.

What hints of the possibility of a rebound is the low volume pull back (i.e. as price retreated, volume has generally been reducing). The selling lacks conviction. Looking at the OBV, we do not see any signs of distribution. Stochastics currently in oversold region and looks like it could be upturning next.

Good for a trade? Possibly.

Tea with AK71: Fallen tree paralysed traffic.

These were a couple of photos I took when a tree fell across all the lanes on Jalan Bukit Merah after an early morning thunderstorm. It brought traffic to a standstill. This was on 18 May and I blogged about it in "Tea with AK71: Life".

Here, we see a car making a u-turn going back the way it came. There was also an entire line of SBS buses on the extreme left lane as they could not move on. All the passengers had to get off the buses and look for alternative transportation.

Working hard to saw up the fallen tree to unblock the road. It must have taken at least a couple of hours before the road was cleared of debris. The metal fencing on the center divider was totally destroyed.

The weather has been getting more extreme lately and we have been told that it would get a lot worse in December. Reminds me of all the movies about climate change.

See "Tea with AK71: Just storms?"

Email exchange with a reader on some REITs.

I have been receiving more emails from readers in the last few weeks. Although I try to answer all of them in a timely manner, it might get harder to do so in time. So, apologies in advance for late replies.  

Having said this, certain emails posed questions to which the answers could be found in my blog. Just use the Search function at the top of my blog and chances are you would find the answers. Thanks for helping me to help you. :-)

Here are some bits from an email exchange I had with a reader recently on certain REITs which might be of interest to some of us:

Reader (R): 

I was wondering about Saizen, with the price at 16.5c now.. is it still feasable to enter or is it too high? 

AK:

Saizen REIT? Well, at 16.5c, I am still not a seller but I am not a buyer too as I am already vested. If I were not vested in the REIT now and if I am happy with a 6.5% yield on freehold Japanese properties, I would buy some first. That's just me. Disclaimer applies.

R:

Hey ak very sorry i have so many questions :) May i know how the 6.5% yield for saizen reit is calculated? Thanks. Appreciate it.

AK: 

See this blog post for details:
http://singaporeanstocksinvestor.blogspot.com/2010/11/saizen-reit-1q-fy2011-results.html

R:

Hey thx!! Yea saizen would be more affordable for me than first REIT.. Which is stronger from ur point of view? Thx :)

AK:

Stronger? Hmm.. They are in two different sectors and countries. Cannot compare. They have different benefits and risks.

R:

Also, Another small question would be, do you think that the jpy/sgd exchange rate will affect the earning numbers for saizen reit in the near future?

AK:

I expect the JPY to stay strong against major currencies in the near future. Over a longer period, it is harder to say. Stay nimble.

R:

I see, i agree with that, lets say i have 10k investable assets atm how much would u say i put into reit?

how much of each reit do you own? Im really interested in Saizen and Aims but im not too sure which would be better.

AK: 

If you have $10k in cash and it is money you do not need in the next few years, you could consider putting all of it into REITs if you are after a regular income.

Saizen REIT is my largest investment although its distribution yield is estimated at only 6.5%. This is because I think the Japanese real estate market has limited downside from here and things would get better very soon.

It is also because the properties are freehold in nature. So, they are perpetual income generators. Once the last CMBS is refinanced, it would probably lead to an upgrade by rating agencies and we could see some capital appreciation too. It should trade at a 5% distribution yield in line with most REITs in Japan which means there could be a 20% upside in unit price.

AIMS AMP Capital Industrial REIT is my second largest investment. Its forecast DPU for 2011 is 2.08c.  At the current unit price of 22.5c, distribution yield is a nice 9.24%. This could possibly explain partially the recent buying interest. Many pension funds are invested in this REIT. These are long term investors and provide stability to the REIT's price. 

However, we have to remember that the REIT is invested in relatively short term leasehold properties in Singapore (where most industrial properties have land leases of 30 years). The REIT has to continually renew its leases but this could take the form of acquisitions to keep the average lease of its portfolio healthy. More fund raising? Yes, I think so. 

So, the yield of 9.24% is not real and we have to give some of that back. However, comparing apples with apples, if Sabana REIT is able to price its IPO at $1.05/unit which means a yield of 8% or so, we could see AIMS trading closer to an 8% yield eventually and this means there could be a 10% upside in price.

I would not put all my money in a single REIT or in any one single company. That is risky. You have to decide how much you would put in each. Good luck.

AIMS AMP Capital Industrial REIT: Buy ups continue.

Out of 2,642 lots which changed hands in the last session, 2,022 lots were bought up at 22.5c and 23c.

DTZ also said there has been a slight shift in investment prospects across sectors. Industrial properties, which have been buoyed by a strong recovery in exports, now offer more opportunities than retail. However, offices still remain the most attractive real-estate segment in Asia Pacific. Read article here.

Technically, the 20dMA has flattened while the longer term daily MAs continue to rise. The Bollinger bands have been narrowing. The RSI, a measure of buying momentum, has been forming higher lows. If I were to hazard a guess, we could see the price of this REIT going higher in the not too distant future. The immediate target I have remains at 26c. Support at 22c seems rather strong. If it should fail to hold, the rising 100dMA should provide a stronger support at 21.5c and you might see me going on a buying frenzy then.


Related post:
AIMS AMP Capital Industrial REIT and Singapore's 5.8%  growth in October exports.