CapitaMalls Asia: TA and FA.

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.

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.

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.