Hope this helps to refresh your "A" Level Economics!

The title of this blog post is exactly the same as the title of an email sent to me by a reader, Paul.  I like how it neatly encapsulates his good intention with a dash of cheekiness. I try not to take myself too seriously most of the time. Haha... I have reproduced his email with his permission:

Ways to Boost National Income

As we have learnt in basic economic theory, C+I+G+(X-M)=Y, I will now discuss issues which are restricting the major economies such as US and the EU to grow, and some of the policies which have been undertaken by them.

C stands for domestic consumption. In recessions, consumption is usually hit badly. As the consumers are busy deleveraging to pay off their debts, they cut down on their income elastic consumption which is normally the luxury goods.

I stands for investments, aka private sector. During recessions, there is a lack of incentives for investment by the private sector due to excess capacity therein. Furthermore, margins could thin due to lack of pricing power in times of recession. In addition, due to consumers deleveraging, there could be a lack of demand from consumers.

G stands for government spending. In normal recessions, a country's government is able to execute expansionary fiscal policies through spending in sectors such as infrastructure, education, health or military. These deficits could be financed by previous budget surpluses (which many of these big countries do not have), or borrowings through issuance of government bonds. Most countries adopt the issuance of government bonds approach to finance their government spending. However, as mentioned in an earlier post, governments in major economics like the UK, Japan and the USA have been incurring budget deficits for the past few years, which limit their ability to borrow more money. In the case of the US, the government debt is expected to double over the next decades, with majority of the debt caused by interest payment. The austerity program adopted by the major economies limit the governments' ability to prop up growth.

(X-M) is net export. One of the most basic ways to boost the (X-M) component is to have a weaker currency, which would make a country's exports relatively cheaper compared to other countries. Currently, governments worldwide are turning to this as a solution. Instead of focusing on productivity to boost exports, governments take the easy way out, by “manipulating” the strength of their currencies. For example, USA forced the revaluation of the Japanese Yen in 1985 to boost their exports. Currently, USA is trying to do the same to the Chinese RMB.

In this world, there is never a case of a balanced trade accounts, there will always be imbalances, some countries having surpluses, some having deficits. Trade account surpluses and deficits are not a problem in economic studies. But for political reasons, it has been a problem. Recently, Japan central bank also intervened in the FOREX market to weaken the yen. This has led to what is called "competitive devaluation", a race to the bottom, where countries will try to make their currencies relatively weaker to boost exports.

Another method to boost (X-M) is the implementation of trade barriers, which would again result in trade wars. Already, there are signs of protectionist measures in the USA through the “Buy Made in US” campaign. Trade wars would hamper global economic growth, especially those of emerging markets which are reliant on exports.

When there is a recession caused by a financial crisis, it takes longer than usual to recover due to the freeze in credit lines and financial system. Actually, US is doing comparatively better than the recovery from previous financial crisis led recession.

In the case of Singapore, we are fortunate enough to have a good public financial system. Any sales of Singapore assets such as land are being kept in the “treasury” under the care of the President and not the government. 50% of the returns from investments such as those from GICs are also channeled into this “treasury”.

Hence, when the Singapore government want to tap into this reserve in 2008 or 2009, it had to seek permission from the President. The budget surpluses which are usually stated by the government, do not include the increase in the reserve funds. Therefore, “short term pain, long term gain” has served Singapore well in saving for the rainy days and having the fiscal policies to help the economy. Most western economies do not have this privilege due to the asymmetrical nature of fiscal policies. Easy to cut taxes, hard to raise taxes, which sort of validate Singapore government's stand on retaining the GST even during the economic hard times.

Related post:
USA, a rock and a hard place: Paul opines.

Bribing a Malaysian cop (UPDATED JULY 2018).

I just came back from a day trip to Johor recently and this was one of the things we talked about.

Singaporeans are a fortunate bunch but being in Singapore most of the time also makes us sheltered and somewhat naive.

Just look at the number of Singaporeans who got scammed in the years past, for example.





--------
I just read that "A Singaporean man has been sentenced to a day’s jail and fined S$4,300 (RM$10,000) for attempting to bribe a Malaysian traffic policeman with S$21 (RM$50)."

I remember how almost 10 years ago, I exceeded the speed limit on the North South Highway by some 20km/hr and was caught in a speed trap.  





The police officer smiled at me and told me I was speeding.  

He asked for my driver's license and I gave it to him.  

He did not proceed to issue me with a speeding ticket but continued smiling at me.  

I looked at him and asked him how much was the fine.  





He looked puzzled and looked at a chart and told me RM200 (thereabouts), if my memory serves me right.  

I just said "OK, please give me the ticket".  

His smile went away as he issued a speeding ticket.





My friend who was in the car with me gave me a scolding after I drove off.  

"Couldn't you see he was waiting for you to bribe him?" 

and 

"You could have settled it with just RM50!"  





I simply replied that I always do the right thing or try to anyway.  

I got another scolding when I spent a couple of hours the next day trying to locate a police station in Klang to pay the fine.  "See how much time we have wasted?"  

It didn't help that the policeman on duty was dozing and the receipt was manually issued which took an inordinate amount to write.





A couple of years later, my dad drove the same car into Malaysia and was stopped by a policeman who claimed that the fine was never paid!  

My dad called me on the phone then and I told him that I laminated the receipt and he would find it in the glove compartment. 

I had taken precaution just in case something like that happened. 

It's Malaysia. 

Malaysia boleh!

(You have to watch the video by ABC NEWS.)











This Singaporean guy who was trying to bribe the traffic policeman, if you asked me, was just "suay" (bad luck) since what he tried to do is something which many (Malaysians and Singaporeans) have always done and are probably still doing.  

The Chinese have a saying: 

"Kill the chicken to show the monkeys".  

He happened to be the chicken in this case.





Read the full story here.

Gold nearing US$1,300 an ounce.

Gold is currently at US$1,293.50 an ounce and silver is at US$21.05 an ounce, even higher than just a week ago when I said "I see immediate support for gold at US$1,260.00 an ounce and immediate support for silver at US$20.20 an ounce.  Gold is now challenging resistance at US$1,270.00 and if it does break this, it could go much higher."

The Fed seems ready to increase liquidity in the US economy and this could possibly cause the US$ to depreciate further. What this might translate into is greater inflationary pressure in the USA in time and I have been a staunch believer of this eventuality as informed by Dr Marc Faber and Mr. Jim Rogers.

The worst thing to invest in would be the US government bonds (treasuries) as bondholders would basically be seeing their wealth eroding away as the US$ depreciates in value.  This is precisely why the Chinese government is so concerned since they are the world's largest holder of US$ debt, after Japan. However, in the short term, they could see bond prices bumping upwards because the Fed would buy bonds to keep interest rates low in an effort to encourage borrowing by the private sector.

Could gold go much higher?  It is my believe that it would but it would not be a straight line up.  The real value of gold is closer to US$2,000 an ounce and this would take time to materialise. So, for anyone who is thinking of having some exposure to the precious metal, it is my opinion that buying on pullbacks as supports are retested would be the way to go.

Related posts:
Gold and Silver highest in the last 12 months.
Real value of gold.

K-REIT: Volume expansion.

Just yesterday, I mentioned that "the attempt to move higher in price was on the back of relatively low volume.  In fact, we could see a negative divergence between price and volume clearly.  Price is rising on lowering volume.  Not too promising." and "Of course, things could look much rosier if we have an expansion of volume the next day while price moves higher. TA is only about probability after all."  Well, today, volume expanded significantly.  In fact, it expanded so much that it negated the negative divergence observed yesterday.  The buy signal on the MACD histogram delivered the goods and proved the skeptic in me wrong.

OBV has climbed sharply indicating strong accumulation activities while the MFI rose towards overbought territory.  Demand is strong but the fact that there is a long upper wick in today's white candle suggests the presence of some selling pressure beyond $1.30.  Looking at today's trade summary, however, we find that of 4,334 lots traded, almost half of these (2,164 lots) were buy ups at $1.32.  If this buying momentum continues, we could see price moving higher.  Expect $1.33 to be the immediate resistance although it could be a weak one if the buying momentum continues. Immediate support at $1.28.

Related post:
K-REIT: Moving into the next band?

K-REIT: Moving into the next band?

On 14 Sep, I suggested that "K-REIT seems to be trading in a 6c trading range recently: $1.16 to $1.22 and $1.22 to $1.28".  I also said "in the event that $1.28 resistance is taken out, one could therefore expect $1.34 to be the next resistance level."

Today, K-REIT traded at and above $1.28 the whole session.  It touched a high of $1.30 before closing where it started the session at $1.28, forming a gravestone doji.  The sell queue at $1.30 is formidable. Could $1.28 be the new support?  Frankly, a gravestone doji does not inspire much confidence.  Furthermore, the attempt to move higher in price was on the back of relatively low volume.  In fact, we could see a negative divergence between price and volume clearly.  Price is rising on lowering volume.  Not too promising.

However, OBV shows accumulation mode in full swing.  MFI is rising gently and not overbought.  RSI is however in overbought territory and suggests that buying could be overdone. Very interestingly, the MACD histogram has turned green, a buy signal but notice that the distance between the MACD and the signal line has been narrowing.  So? Caution.  It would not be a good idea to buy into K-REIT now.

Of course, things could look much rosier if we have an expansion of volume the next day while price moves higher. TA is only about probability after all.  Whether $1.28 is now support needs confirmation.  That there is a strong support at $1.22 has been established earlier.

Related post:
K-REIT: Trading bands.

Courage Marine: White candle day.

On 15 Sep, I asked, "Is Courage Marine awakening? If the resistance at 19.5c is taken out convincingly, it could very much be the case." Today, this took place on rather high volume. Of the 3,882 lots traded today, 2,999 lots were buy ups, of which 2,172 lots were buy ups at 20c.  Could the remaining sell queue at 20c be mopped up tomorrow? Perhaps.

The MACD is rising in positive territory signalling a return of positive momentum. The OBV shows a sharp move upwards suggesting increased accumulation. The MFI formed a higher low several sessions ago and has risen into overbought territory.  The RSI has the same trend.  Demand and buying momentum are both positive but seeing the indices being in overbought territories sends a cautionary note.  Any upside could be limited.  If 20c is take out, the next resistance could be at 21c, the high of 22 Jun 10.

However, in exceptionally bullish situations, both MFI and RSI could stay overbought for much longer. Could it happen in the meantime? It could but it does not seem very probable.

Related post:
Courage Marine: Awakening.

Golden Agriculture: Which way would it go?

CPO price spiked 4.31% today or RM112 to close at RM2,708.  It is on track to challenge the previous high, it seems. Strong buying by Chinese purchasers and short covering were cited as the reasons.

Palm oil shipments to China will likely rise 3% this month compared with August, as low stock levels of around 400,000 tons at ports in China spurred buyers to increase purchases, a Beijing-based vegetable oils analyst said. 

-By Shie-Lynn Lim, Dow Jones Newswires,
September 17, 2010 06:55 ET (10:55 GMT.

Golden Agriculture's share price gained 1c to close at 59c today. This was, however, on the back of rather modest volume. I have suggested in earlier posts that its share price seems to be trapped in a symmetrical triangle. Immediate support is at 57.5c, a many times tested candlestick support and coincides with the rising 20d and 50d MAs. If this goes, 55c should be a very strong support as that is where we find the 100d and 200d MAs.  It is also where we find the uptrend support line now.  To move higher, price has to overcome resistance at 60c.  This is also where we find the upper line of the symmetrical triangle which would present some strong resistance.

Currently, the MFI and RSI are both bordering on overbought and OBV is flat. Technically, the picture is not strong. An appreciation in price on higher volume is required to break resistance at 60c, probably.  However, it would also push the MFI higher into overbought territory.  If this happens, I expect to find strong resistance at 62c.  This is a many times tested resistance level in April 2010 but ultimately proved too strong to be taken out.

Related post:
Golden Agriculture: Trading Buy by OSK.

ASTI: Breakout, almost.

A friend called me and asked if it is too late to buy some shares of ASTI.  Yesterday, I said "I see resistance at 12c which was tested several times in recent months.  It is, however, also interesting to note that we might be seeing the formation of an ascending triangle here with 12c being the top of the formation.  If  the resistance at 12c is taken out, I see immediate resistance at 13.5c with a near term target of 15c." Today, 12c resistance was weakened as price briefly touched 12.5c before ending the day at 12c.  This means that 12c is still resistance and we need to see if it could be taken out in the coming sessions.

So, should my friend buy some shares of ASTI at 12c? Buying at 12c would be buying at resistance. Not a very good idea. However, the very high volume today which accompanied the buy ups is encouraging.  Of the 20,050 lots that changed hands, 15,573 lots were buy ups. 10,369 lots were bought up at 12c.  Could this momentum continue? Let's look at the momentum oscillators for clues.

The MFI has formed a higher low.  So has the RSI.  The MFI is just going into overbought territory while the RSI has spiked into overbought territory.  OBV has also spiked upwards.  Demand is rising. Buying momentum is strong but overdone.  Accumulation is in full swing.  Overall picture looks good.  There is a good chance of a follow through and if it happens, we could see 13.5c tested.  Otherwise, supports could be tested once more. It would be safer to buy in then.

Related post:
ASTI: A doubling of share price in time?

Nil-paid rights and excess rights: Some numbers by LP.

LP, blog master of Bully the Bear, and owner of the infamous cbox therein, has this to share:

I think that people don't understand that the price of the nil-paid rights (right shares that are entitled to you based on your holdings upon XR of the mother share) is priced as this:

Price of mother share - 0.155

If it's lower than the above formula, it opens a chance to arbitrage the difference by buying the nil paid rights or shorting the mother share. Either way, equilibrium will be achieved to bring the price of the nil-paid rights back to the stated formula.

So, if the mother share is trading at 0.225, the nil-paid rights will be priced at 0.07. You pay 0.07 PLUS brokerage to get the nil-paid rights, then you pay at the atm 0.155, so the price will be 0.225 excluding brokerage.

Or on the other hand, if you can buy the nil-paid rights at 5 to 6 cts, you are buying the mother share at 0.205 to 0.215. Good deal to me even if you have to pay brokerage!

If you don't want to do this during the nil paid rights trading period, you can always opt NOT to pay any brokerage and paying 0.155 to apply for excess rights. But you might not get it.

Tea with AK71: Income from blogging.

I have blogged about this before but it is timely that I revisit this topic as JW (aka momoeagle), the blog master of Wealthbuch, took it really hard when Adsense decided to stop working with him recently.  I believe that he would look past this unpleasant episode in his life as a blogger and soldier on in good time. :)

I started blogging out of curiosity and boredom last Christmas Eve and I have been hooked since.  I suppose I really enjoy writing and I enjoy sharing my ideas with people. On 10 March 10, I blogged that "I didn't know I could make money from blogging. However, I did discover quite quickly that there are many ways of making money through a blog."  Adsense, it seems, is the predominant way for most bloggers to derive some income from their blogs.

LP, the blog master of Bully the Bear was one of the first people I made contact with in blogosphere.  He told me how he was unceremoniously banned by Adsense.  Later on, I was told the same thing by my friend and blog master of Time to Huat.  So, you don't see any Adsense ads in their blogs.  So, fearing that I would suffer the same fate, I decided to remove Adsense from my blog.

I enjoy blogging and if I do make money out of it, I consider it a bonus. However, since I do not make much from blogging, it would have a lower priority when compared to other activities which I derive most of my income from.  We live in a world which runs on money.  So, we have to be realistic sometimes, if not most of the time.  The day I could derive an income of mid $X,XXX from blogging every month like some famous blogging personalities in Singapore, blogging might be the only thing I'd do. In fact, I was told that Xiaxue could make $XX,XXX per month from blogging!

The fact is I am a financial blogger and we have a very small niche.  Financial bloggers in Singapore have even a smaller niche. 20,000 pageviews or more a month like Xiaxue's blog?  Not in my lifetime, realistically.  Well, I suppose if I colored my hair like Xiaxue and wrote catchy songs about floods in Orchard Road like Mr. Brown, I could improve my blog's readership numbers. Hmmm, I wonder... Nah.

I can only hope that my readers would visit my sponsors (Nuffnang's ads), give my ZUJI banners a chance when planning to go on an overseas trip and feel generous enough to make a donation (Donate to AK71 pocketmoney fund on the left sidebar) towards my blogging efforts.  So far, I have received small sums of money from all three avenues.  Thank you for the bonus. ;-)

Related post:
Planning to travel? Check out ZUJI.

ASTI: A doubling of share price in time?

I recently bought some shares of ASTI Holdings Limited.  This company is engaged in the provision of solutions and technologies in the backend (ie assembly, test and finishing) arena of the semiconductor industry as well as the distribution of electronic components and products plus the provision of semiconductor application in consumer electronics, computer peripheral and communication solutions. The description of  ASTI's business is taken from its homepage.

Anyone who knows me well would be somewhat surprised at this move of mine since I am not in tune with high technology at all and IT is as Greek to me as, well, Greek. However, I am not a hermit and I do keep in touch with the real world.  There is much news of how the cyclical demand for semiconductors has been ramping up and that this momentum has yet to run its course.

I read an article in The Straits Times (22 Aug 10) by Tan Ai Teng on why tech stocks are a good buy then:

1. Tech stocks are in a period of strong earnings recovery.

2. The second half of this year would have been stronger if not for a shortage of components.

"I am bullish on the semiconductor equipment related business. According to Semiconductor Association's (SEMI) forecast, global semiconductor equipment sales are expected to climb 104% this year... and rise a further 9% next year."

Since I am so unfamiliar with tech stocks, I was wondering which company's shares offer good value.  As luck would have it, I read an article in Next Insight where NRA reported on Innotek and ASTI.  Both companies seem promising. However, Innotek's share price has appreciated enormously while ASTI seems like a laggard. 

The following factors drew me to ASTI:

1. A share price of 10.5c then with a PER of 3.8x and NTA/share of 16.9c.

2. Improving balance sheet with its gearing level falling from 22% to 8%.

3. Gross margin (GP) expanded from 7.1% to 22% year on year.

Read article here.

As per my usual style, I looked at the chart to find a fair entry price.  ASTI bottomed in late November 08 with price touching a low of 4.5c.  It made a higher low of 6.5c on 16 March 2010. It broke above the 200dMA in April 2010 and has been trading above this MA since. Using candlesticks and the 200dMA as references, strong support at 9c is spotted.  Seeing how the 20d, 50d and 100d MAs are bunching together at around 10.5c, however, I decided to buy some at 10.5c as a hedge.  Price might or might not retest  support at 9c.  If it does not, I'm already in.  If it does, I would buy more as the uptrend is intact.  Looking at the OBV, it is obvious that there is longer term accumulation going on and once all the sellers are done selling, the share price could rise.

NRA has a target price of 21c for ASTI.  That is a 100% upside from my entry price of 10.5c.  Nice but I see resistance at 12c which was tested several times in recent months.  It is, however, also interesting to note that we might be seeing the formation of an ascending triangle here with 12c being the top of the formation.  If  the resistance at 12c is taken out, I see immediate resistance at 13.5c with a near term target of 15c. Over a longer term, we could even see 17.5c, a support level which broke in early 2008, tested.  Of course, in extremely bullish circumstances, prices could go parabolic in which case all resistance levels identified could be destroyed like butter cut by a hot knife. Then, it would be time for me to let go and run for the hills.

Overall, ASTI looks rather promising.  Wish me luck. :)

This video describes how the semiconductor industry may experience shortages due to capacity constraints, increased demand, and low inventory levels (June 14, 2010):

P.S. I am having trouble saving charts from ChartNexus in Lim&Tan. So, I am unable to put up the chart for ASTI here.

Roads to wealth creation in the stock market.

I have a friend who is very risk averse and views the stock market as being fraught with danger. He basically thinks it is a jungle with snake pits and poisonous gas bogs. I am inclined to agree with him which is why it would be most advantageous if we could find a guide who would walk with us.

Having read some personal finance blogs, my friend decided that he wants to try to grow his wealth by investing in the stock market. A commendable change in attitude, if I do say so myself. He wondered if he should try his hands at trading the market and maybe he could grow his wealth quickly that way. I told him candidly that he could make a lot of money that way, the operative word being "could".

I shared with him how I made a lot of money from March 2009 to January 2010.  However, that was a once in a lifetime opportunity to make a lot of money and I was lucky to have participated. Was I smarter than the average investor during the months of March 2009 to January 2010? I don't think so. I was probably just at the right place at the right time. I also told him how I lost a lot of money as well prior to the aforesaid winning streak. So, to me, it's quite simply all about timing.

I told him he might want to invest in some companies and REITs which could give him a yield of 6 to 10% per annum.  This took into consideration his risk averse personality and the current high prices of stocks. I believe that investing in some companies and REITs with strong fundamentals and high yields would be best for him. I also impressed upon him that these companies and REITs could see their share prices fluctuate but since he is investing for income, he should not have to worry too much about the day to day fluctuations in price.  This is a big advantage of this strategy.

How much could he afford to invest?  After doing some calculations with him, setting aside some money for emergencies and daily expenses which amounted to several months of his salary from active employment, he had a capital of about $100k to invest with. I suggested a basket of REITs and companies which he could invest in when prices next pull back (as prices do not usually go up in a straight line). Even then, don't put in all his money at one go but split his funds into 4 or 5 tranches.  This is hedging in case prices do fall lower.  If he has some knowledge of TA, he would be able to spot supports and trends and would be able to decide if he should pump in more funds each time prices fall or if he should wait.  So, learn some TA, he shall.

After saying all these, he was quite pleased but at the back of his mind, there remained a nagging thought that he could grow his $100k to $500k in the next 10 to 20 years if he traded actively. I simply smiled and told him to go learn TA and trading strategies.  There are courses, websites and blogs aplenty.  Could I not teach him? I told him honestly that I am not a very good trader. I use a combination of FA and TA, FA to spot undervalued stocks and TA to spot entry and exit prices. The high yield counters I am vested in could possibly go higher in price as they are mostly undervalued.  I am quite confident and comfortable with my approach. It might or might not be for him.

I also suggested that he could simply wait for the next crash before going into the market. Buy at a time when there is abject pessimism and when most have given up on the market. Is it that simple? Well, it could be, I said. Why bother to trade actively (especially if we are not very good at it)? Just save his money and continue saving as much of his monthly salary as he could.  When the next crash comes, he would be ready.  Load up then and get ready to see his wealth double ... or even triple.

The Chinese have a saying that "one type of rice feeds a hundred types of people". There are many strategies to wealth building and we simply have to find a strategy that works for us.  Age and how much money we have to start out with have a part to play, perhaps, but I believe that ultimately, we must be able to sleep well at night with our decisions in life.

Related posts:
Risks and rewards: TA and FA.
Excuse me, are you an investor?
Seven steps to creating passive income from the stock market.

AIMS AMP Capital Industrial REIT: Target price?

Closing at 23.5c on higher volume shows a continuing and heightened interest in this REIT.  This is especially true when we remember that this is after the counter has gone XR!  Buying at 23.5c and with an expected DPU of 2.08c, the yield works out to be 8.85% per annum.  Apparently, many feel that this yield is still attractive for them.  If we think of it objectively, it is still rather high, relative to some "blue chip" REITs, for example.

MFI continues to climb higher but is not yet overbought.  OBV too continues its climb upwards.  Demand remains strong and accumulation is relentless.  RSI rose higher into overbought territory suggesting that the buying momentum is somewhat overdone but the MACD continues pulling away upwards from the signal line in positive territory.  Momentum is currently positive and in very bullish situations, the RSI could stay overbought for a while longer.

This is a long shot but if 23.5c should be taken out convincingly, we could even see 25c tested.  At 25c, a DPU of 2.08c would translate into a yield of 8.32% per annum.  Still attractive for some? Perhaps.

Related post:
AIMS AMP Capital Industrial REIT: XR.

Healthway Medical: 20c target.

Standard Chartered has suggested a target price of 20c for Healthway Medical. They arrived at this target price after highlighting a slew of difficulties the company faces:

1. Opening chain of clinics in China and setting up specialist center in Singapore are facing challenges in execution.

2. The group has not delivered good execution in its specialist services in the past and has limited experience of organic expansion.

3. Mass exodus of prominent specialist doctors from Healthway’s employment is also troublesome. 

4. Cost pressure mounting due to aggressive expansion.

I am almost 100% divested and I am still waiting for its share price to fall to a more reasonable level before I load up once more because if the management does deliver on its expansion plans, the company's share price would fly. At the current price, valuation is simply astronomical.

Standard Chartered's target price of 20c implies a PE of 36x!  This is almost as ridiculous as Q&M Dental Group's valuation when they first listed!  Please bear in mind that my considerations here are based on FA.  There is no accounting for sentiments.

Related post:
Healthway Medical: Second quarter results.

SPH: $4.20 is still resistance.

On 9 September, I said "although a correction could be avoided if volume expands in the next few sessions as price pushes upwards, such a move would have a formidable sell queue to clear at $4.20. If ever this resistance was cleared, SPH's share price could fly.  At the moment, chances are slim that this would happen".  Well, $4.20 is still the resistance to watch.

Today, another black candle was formed, the third in a row, as price touched a low of  $4.13 before closing at $4.16.  The MACD seems set to form a bearish crossover with the signal line while the OBV continues to decline. Distribution is underway. The MFI has emerged from the overbought region which suggests that demand is no longer zealous.  The RSI although declining is still in the overbought territory and this suggests that we could see buying momentum slow down further.

The rising 20dMA should provide immediate support at $4.10 and this was also a natural candlestick resistance level. Would $4.10 hold as a support? We would have to wait and see.

Related post:
SPH: Touched $4.20.

AIMS AMP Capital Industrial REIT: XR.

This REIT went XR today. Closing at 22c, it shows a great deal of resilience and is much better than the expected TERP (theoretical ex-rights price) of 21c. If we look at the trade summary, of the total 3,307 lots which changed hands today, most of these, 2,487 lots to be exact, were bought up at 22c.  There is still a great deal of demand for this REIT.  In fact, anyone who went ahead and bought some at 22c or 22.5c when the counter first went CR would be in the money now.

We will get 7 rights for every 20 units which we currently hold. If we had bought these 20 units at 22c, we could sell these 7 rights when the nil-paid rights start trading on 23 Sep.  Since the price to pay to convert these rights is set at 15.5c, theoretically, they are worth 6.5c a piece (22c - 15.5c = 6.5c).  This would bag a gain of 6.5c x 7= 45.5c.  Based on an initial investment of 22c x 20 = 440c, 45.5c represents a gain of  more than 10% if we sell away the nil-paid rights! Detractors' aplenty but I believe the numbers here speak for themselves. Of course, bear in mind that these calculations are done assuming that this is a perfect world (which it is not).  So, it would be realistic to expect some deviation.

The question some might have on their minds is whether this is still a good time to enter?  Well, the estimated DPU, XR, is 2.08c per year.  This gives a yield of 9.45% at the current price of 22c.  If that is good enough for you, why not?

Personally, I would wait to see what the the nil-paid rights might be trading at come 23 Sep. I do not expect the nil-paid rights to trade below 5.5c since 5.5c + 15.5c = 21c which is the expected TERP and would enjoy a yield of almost 10% per annum.  However, if I were proven wrong and the nil-paid rights do trade at 5c or less, I would probably end up buying more. The yield would be simply irresistable at more than 10% per annum.

See slides from EGM here.

Related posts:
REITs: Simply explained?
AMPS AMP Capital Industrial REIT: Sell the rights.

China Hongxing: CD.

China Hongxing went CD today and the market rewarded its share price in a most sporting way as it touched a high of 22.5c before closing at 22c. The 19.5c target identified earlier this month is probably resistance turned support at this point.

Volume expanded significantly as price formed an impressive white candle. The OBV turned sharply upwards suggesting strong accumulation.  With volume so high, there could be a follow through. 22c target was based on the 138.2% Fibo line. We could see the 161.8% Fibo line tested next and this is at 23.5c.

Although the sell signal of the previous session as seen in the MACD histogram was negated today, the MFI and RSI are both in overbought territories. So, although price could push higher, this counter is rather overbought and anyone choosing to go long at the current price would have to be very nimble and might have to settle for smaller gains. The risk premium is definitely higher.

Related post:
China Hongxing: New target.

Courage Marine: Awakening.

On 11 Sep, a reader, Wong, asked if it would be a good idea to accumulate more units at 18c.  I avoided giving a straight answer as usual and replied:

"If you have excess funds lying around and if you think that the shipping industry has turned the corner, 18c seems inexpensive.

"If you already have a large investment in Courage Marine, then, you have to question how comfortable are you to increase exposure to this company.

"In my opinion, Courage Marine is fundamentally sound. If there should be nasty surprises in the macroeconomic environment, Courage Marine would most probably survive because of its strong balance sheet. Shipping is a cyclical business. We have to ride the waves."

Courage Marine's share price has been trapped in a range between 18.5c and 19.5c for a long time and there are some whom I "overheard" in Bully the Bear's cbox being sick of holding on to the shares.  Patience is a rare commodity, after all.

With more people conversant in TA, charts are revealing its secrets to more market participants and there was a huge sell queue at 19.5c today as many recognise it as a strong resistance. However, there was heavy buying up in the first half hour of trading and 3,696 lots were bought up at 19.5c.  Trading volume is also impressive so far with a total of 5,247 lots changing hands.

Is Courage Marine awakening? If the resistance at 19.5c is taken out convincingly, it could very much be the case. Good luck to fellow shareholders.

Related post:
Courage Marine: Range bound.

Rights and wrongs: Charlesming's perspective.

Charlesming is the blog master of Time to Huat and also the person who introduced me to the world of Technical Analysis (TA). 

For anyone who might have wondered how a techno dinosaur like me would start a blog, well, although it was primarily because of boredom last Christmas Eve, Charlesming was the person who planted in my head the idea which led me to find out more about blogging during that night of boredom! Reminds me of the movie "Inception"! 

A comment from him recently shows the thinker that he is and I am putting it up as a separate blog post here:

I personally feel that not all rights issue are equal. Rights are issued for various reasons. The exercise price is important to find out if we are getting a good deal. Another important aspect is to figure out what the funds raised are for. I agree REITs need to continue to 'trade'. 

Ideally there is no need to buy and sell assets, save on the cost of doing so and just generate a stable yield forever. The world doesnt stay the same forever. With a large portion of the income distributed via dividends, REITs simply dont have the funds to make accquisitions. Question is, do we agree the accquisition they are interested in, is in good taste and value? If I deem so, I dont see a problem in supporting the rights issue. If I dont let go of 10c, how to gain $1? That is not to say that all rights issues are worth me putting up that 10c.

 So I feel it is inaccurate to downplay rights issue as a return of dividends. While partially true,there are some deals where I would like to pay them back some dividends so that they can grow and get more dpu for investors. On the other hand if they make a 'hopeless accuisition' where I cannot see how my 10c can be made to work harder to generate that $1 then I will not support it. I may sell the rights, and/or I may let go of the entire stake I own even.

 Taking it one step further, a rights issue gives me a choice. A placement to a private investor(s) gives me zero choice and I cannot help but watch my stake get diluted . This is where I may get a little annoyed.

It is inevitable rights issue (and in some cases placement) is a way of life in REITs and companies looking to expand their business. All are not equal and investors have to figure if the company is doing the right thing, at the right price, and ultimately, at the right time too (market sentiment).

 As for the word 'fool' I suppose it can be subjective depending on the context used. An investor, whether buying it at a cheap or overvalued price is a fool or not, could depend on many factors. Could we be fools who over analyze? Could we be fooling others and ourselves, with our own biased opinions? Fool or not, the market is the only one who is right.

One of the lil quotes that I like - "Listen to your heart. It is on the left, but it is always right'.

I prefer to think (as a trader and investor) if I profit after selling something and the price continues to head up, I just take it as its for someone else to profit. One of my own strategies is to take partial profit along the way up. This makes me a winner regardless of the price action thereafter.

 Just my 2 cents worth from my very limited knowledge. I hope to learn over the years.

Related post:
REITs: Simply explained?

Gold and Silver highest in the last 12 months.

Gold is currently at US$1,267.51 an ounce while silver is currently at US$20.42 an ounce. These prices are higher than in June 2010 when I blogged (again) about how we should hold some gold and silver as a hedge against all other forms of investments and against fiat currencies. What little exposure I have to these two precious metals is turning out rather nicely.

In the short run, I see immediate support for gold at US$1,260.00 an ounce and immediate support for silver at US$20.20 an ounce.  Gold is now challenging resistance at US$1,270.00 and if it does break this, it could go much higher.

On 20 June 2010, I blogged that "if we believe in charting, silver's longer term trend is still up and I would buy more on weakness." That view has not changed.

Related post:
Hedging and precious metals.

Gold hit $1,269.45 on the London Bullion Market on Tuesday afternoon, beating the previous record of $1,265.30 struck on June 21. Read article here.

Addition on 15 Sep 10:
Gold prices under the continuous contract set a new all-time high of $1274.60 per ounce, well above the previous all time high of $1266.50 per ounce. Silver prices continued their ascent as well. Specifically, the December contract for the precious metal hit $20.55 per ounce.

K-REIT: Trading bands.

It seems that the worst is over for office rentals in Singapore. There is a general expectation that things have stabilised and we could even see some upside next year.  I have a small position in K-REIT in my frozen portfolio and this small investment is actually enjoying a paper gain now.  So, when would I sell my stake?

We could do a very simple TA for K-REIT even if I do not have access to today's data on ChartNexus. Price touched a high of $1.28 before closing at $1.26. It opened at $1.27 and touched a low of $1.25. So, picturing it mentally, it formed a black spinning top today. That it touched a high of $1.28 is significant as it confirms $1.28 as an important resistance level. Volume was only half of yesterday's which suggests a lack of conviction by sellers today even as price action formed a black candle.  So, the indecision suggested by the black spinning top does not have strong downside pressure, I feel.  In case of continuing downside, where do I see support?

Looking at the chart, it is quite obvious that $1.22 was a major resistance level and I expect this to provide immediate support in case of a move downwards. If this breaks, the next support is at $1.16.  Having said this, you could have noticed an interesting phenomenon. K-REIT seems to be trading in a 6c trading range recently: $1.16 to $1.22 and $1.22 to $1.28.  This is useful information for anyone who is interested in profiting from some range-bound trading.

In the event that $1.28 resistance is taken out, one could therefore expect $1.34 to be the next resistance level if this phenomenon continues to play out.

Singapore office plays better bet vs developers: Morgan Stanley
Tuesday, 14 September 2010

© 2010 - The Edge Singapore

Golden Agriculture: Trading Buy by OSK.

On 8 Sep 10, I mentioned that "I am vested in Golden Agriculture because I believe in its fundamentals." So, even if the technicals were somewhat directionless, I was willing to take the risk going long. Today, OSK upgraded Golden Agriculture's target price to 68c. Fundamentally, I think that is a fair price.  However, how does the technical picture look?

Today, its share price hit a high of 60.5c before closing at 59c, forming an inverted black hammer in the process. That this happened on much higher volume than the previous session is not promising.  On a brighter note, it does mean that price action broke out of the triangle suggested on 8 Sep 10 on the upside.  Could this be sustained?  I don't know about 68c but I spot a major resistance at 62c. This has been tested many times and price has closed above this level only once this year and that was on 11 Jan 10.  Many people who bought at 62c are probably waiting to break even at that price. Hence, the expected resistance.  So, if price does test 62c again, I would sell some.  In case of a further decline in price, I see immediate support at 58c.

I am not able to comment on the momentum oscillators or OBV this evening and I am afraid I do not have a chart to put up as, for some reason, my broker's version of ChartNexus has not been updated yet.

Golden Agri-Resources raised to Trading Buy by OSK. Expects "very strong" 3Q10 results after 2Q10 weakness due to dry weather, as production recovering.
Tuesday, 14 September 2010

© 2010 - The Edge Singapore

Related post:
Golden Agriculture: Triangle.

Alexa (Part 2) - Updated 2 Nov 10.

According to Alexa, my blog's traffic ranking in Singapore has improved.  However, its global traffic rank has slipped.  This probably means that although my blog is gaining in popularity in Singapore, there are many more websites in the world now and they are more popular than my blog on a global scale.

Our country's government is always telling local companies to go global and that the domestic market here is just too small.  Even if my blog becomes more popular locally, on a global scale, it is still insignificant and, in fact, is getting more so.  That's the message Alexa is sending to me.  This message from Alexa reinforces the perception of how small Singapore really is.


According to Alexa:
Singaporeanstocksinvestor.blogspot.com has a three-month global Alexa traffic rank of 730,608.  Visitors to the site view an average of 2.3 unique pages per day. Visitors to Singaporeanstocksinvestor.blogspot.com spend approximately two minutes on each pageview and a total of eight minutes on the site during each visit. Roughly 33% of visits to the site consist of only one pageview (i.e., are bounces).

Global traffic rank: 730,608 (was 667,393 on 28 July).
Traffic rank in SG: 2,506 (was 3,808 on 28 July).

Updated on 14 Oct 2010:

Singaporeanstocksinvestor.blogspot.com has a three-month global Alexa traffic rank of 684,209. Visitors to the site spend approximately two minutes on each pageview and a total of nine minutes (up from eight minutes) on the site during each visit. Roughly 28% of visits to the site consist of only one pageview (i.e., are bounces) - down from 33%. Visitors to Singaporeanstocksinvestor.blogspot.com view an average of 3.3 unique pages per day - up from 2.3 unique pages per day.

Global traffic rank: 684,209. 

Traffic rank in SG: 2,218.

Updated on 2 Nov 2010:

 

Singaporeanstocksinvestor.blogspot.com has a three-month global Alexa traffic rank of 630,248. Visitors to the site spend approximately two minutes on each pageview and a total of ten minutes (up from nine minutes) on the site during each visit. Visitors to Singaporeanstocksinvestor.blogspot.com view an average of 4.0 unique pages per day. up from 3.3 unique pages per day.

Global traffic rank: 630,248. 

Traffic rank in SG: 2,021 .

Related post:
Alexa


Visit Alexa: here.

Hock Lian Seng: Resistance broken.

On 9 Sep, I wondered if the 30c resistance level could be taken out soon and went on to say that "I believe so as the massive 30c sell queue was wiped out today."  Today, Hock Lian Seng touched a high of 31c before closing at 30.5c.

Although volume is lower than the previous session which saw the shares trading at only one price, 30c, we could have seen the effective weeding out of weaker holders.  30c could be resistance turned support.

OBV has continued its upward trajectory suggesting continual accumulation.  MFI shows formation of higher lows which suggests sustained demand.  RSI has lower highs which suggest that buying momentum is weak.  So, this counter has support but its share price is not going up in a hurry, it seems.  Another counter that requires more patience, perhaps?

Related post:
Hock Lian Seng: Ready to break resistance?

AIMS AMP Capital Industrial REIT: 23c support?

This REIT is attracting more interest as volume expanded again today as price rose to close the day at 23.5c.  23c resistance has been taken down.  Could we see 23c turn support this time round after it failed to do so in early August?

Taking a look at the momentum oscillators, the MFI has formed a higher low which signifies strengthening demand while the RSI has risen sharply into the overbought region which suggests strong buying momentum and that buying in now could bring with it higher risk. OBV has turned up sharply, suggesting accumulation.  All the technicals are promising and whether 23c could be the new support needs confirmation.

This REIT would go XR on 15 Sep, 2 days from now.  Expectations are for the price to weaken to around 21c (TERP) then.  It would be interesting to see if it pans out.

Related post:
AIMS AMP Capital Industrial REIT: Rights issue.

REITs: Simply explained?

The diversity of opinions in this world is what makes it colorful and interesting.  Everyone is free to express his opinions on diverse subjects.  We should remember, however, it is not just what is said which is important.  Of equal importance is how it is said.

I have been following a series of posts on the subject of REITs by a certain local blogger. Are his posts on REITs objective? I don't think so but I respect the blogger's right to express his opinions and I am sure readers will arrive at their own conclusions.  However, I do hope that this blogger would exercise restraint and not make insinuations beyond what is civil.

In his latest post, he took a quote from the writings of another blogger:

"For those existing investors who could raise the capital to subscribe for their rights, they are returning most (if not all or more) of the dividends they had collected back to the REIT. Don’t let the discounted price fool you as you are essentially paying just to maintain your percentage shareholding in the REIT." -Lion Investor

The blogger whom I am taking issue with went on to say:

I can't agree more with the truth on "the discounted price fool" as I recently overheard some joys near the Temple of Cows over AIMS AMP Capital Industrial REIT's right issues - discounted price fools?

Firstly, Lion Investor was expressing an opinion about how we should exercise caution and not let discounted price of rights fool us into thinking we are getting a good deal.  The word "fool" is used as a verb.  The blogger in question has twisted it and used it as a noun. Calling people names isn't very nice, is it?

Secondly, going beyond language, let us objectively evaluate what Lion Investor has said and consider the proposed rights issue by AIMS AMP Capital Industrial REIT in the same vein.  Are we paying more money just to maintain our "percentage shareholding in the REIT"? 

In the case of AIMS AMP Capital Industrial REIT's rights issue, the objectives are clearly communicated. 

We are putting down more money to participate in the REIT's income accretive activities which would benefit us as unit holders. 

We are paying more money but NOT just to maintain our percentage shareholding in the REIT. 

See: AIMS AMP Capital Industrial REIT: Rights issue.

At a level that is of greatest importance to most, unit holders could choose to participate and enjoy a higher yield in future or unit holders could choose to sell away their nil-paid rights when they start trading. 

This was what I said:

REITs are income instruments.  Therefore, we must remember that we are investing in REITs for regular income.  The DPU per unit would decline from 2.15c to 2.08c, post rights.  This is a DPU loss of 0.07c a year.  It is not dramatic.  We would also be able to sell away the nil-paid rights when trading starts.  At an exercise price of 15.5c and with expectations that price would see a modest decline to 21c per unit, post rights, we can expect the nil-paid rights to trade at around 5.5c each.  Selling these away would bag 30 months' worth of DPU (post rights) straightaway!  Now, is that such a bad thing?

On top of that, our current investment would still make an annual DPU of 2.08c!  This is provided that everything remains constant, of course.

Accept and pay for the rights or sell away as nil-paid rights, either way, unit holders end up winners.  There will always be detractors but as long as we are clear headed and know what to do in any given scenario, we will be fine.

Unit holders could sell away their nil-paid rights as compensation for dilution and their remaining units in the REIT would still enjoy a very high yield.  

Unit holders who choose to accept and pay for their rights would see their future income increase in dollar terms and at a higher yield.  They are paying more money for greater returns.

Respect has to be earned but sometimes we accord respect to people based on seniority.  Respect should also be reciprocated. Being civil is a great way to start.

Related post:
AIMS AMP Capital Industrial REIT: Sell the rights.

Be a real estate owner the easy way.

I have blogged about the importance of wealth building especially at a rate which would beat inflation.

I also mentioned that investing in real estate is part of a complete approach towards wealth building and how it could be a hedge against inflation.

I have shared on how this could be achieved and how there is no short cut.  Rome was not built in a day and for the vast majority of us, wealth building is an incremental process.

Recently, a customer whom I have known for many years had a conversation with me. He was quite excited and told me that there is a way to own real estate with no money or very little money. 

Right away, I remembered some ads I saw in the newspapers with some similar proposal.  I have always ignored the ads because there is simply no way one could own real estate without any money, or own anything for that matter without any money.

However, then, I was a captive audience and I listened as my customer went on to say all we had to do is to get 120% financing for a piece of real estate. Simple. With interest rates at record low and with rental yield at record highs, it is a no brainer. 

My customer is from Malaysia but I am not sure if he was referring to the situation in Kuala Lumpur. Rent out the property, pay the banks the required monthly repayment and the balance is ours to keep.  Simple again.  It sounds great from a cash flow perspective.


I asked if he would be buying a condominium unit using this method then.  He gave me a look that made me felt quite small and asked why only one?  Imagine the amount of money which could be flowing into our bank accounts every month if we had five or ten units! It is so simple!  It sounds irresistible from a cash flow perspective.

Easy money is always tempting but bearing in mind that there is no free lunch in this world, let us look at this proposal carefully.  Remember how I instinctively brushed away ads with similar proposals? 

Well, firstly, we cannot own anything unless we have paid in full for it with our own money.  If we had borrowed money to buy something, we do not own that thing, we simply have control and possession of it but we do not own it.  The lender could do a repossession if we failed to make repayments in a timely manner.

Secondly, 120% financing is leveraging in the extreme.  Yes, if the party continues for another decade, we could become quite rich.  The exact figures depend on how low the interest rate is for the loan and how high the yield could be from renting out the property in question. 

What if the party were to stop abruptly?

We would find ourselves suddenly under a ton of debt without any income. This would make Nightmare on Elm Street look like a walk in a park! Pardon my use of a piece of horror real estate as a comparison.

An environment of easy credit and rampant risk taking is helping to fuel inflation.  I continue to believe that we will see higher inflation in Asia (ex-Japan) over time. 

In Economics, linear relationships are the norm and this cycle will have its run.  Riding on this wave could be exhilarating but as any surfer would tell you, even the best surf would come to an end.

Related posts:
Grow your wealth and beat inflation.
Real estate as hedge against inflation.