CapitaMalls Asia: Pre-emptive strikes failed.

Quite a few regular readers and friends are perplexed why I was buying shares in CapitaMalls Asia when it is clearly in a persistent downtrend. I replied that I was pre-empting a possible reversal as it looked like a positive divergence could emerge. Today, that possibility went out the window as the MACD formed a lower low as price weakened.

So, the technical reason I had for buying more shares in CapitaMalls Asia is no longer valid and I will not add to my long position anymore until the picture changes. Will I cut loss? I will only do so in a rebound. I will not do so as price goes lower. That has been my practice.

Prices rarely go up or down in a straight line. They climb a wall of worries and go down a river of hope. With CapitaMalls Asia, a rebound in share price could see gap filling at $1.325 per share. Whether this will happen or not, nobody knows for sure. If it happens, I will reduce my exposure.

Fundamentally, I still like the company's exposure to the growing middle class in China. These people have greater discretionary spending power and shopping malls in China will see strengthening demand over time. This will translate to higher asking rents and higher valuations for malls.

I also like how the RMB is likely to strengthen in time and this would mean that the NAV of the company will only go higher in S$ terms. How long will this take? Your guess is as good as mine.

Only one person knows for sure and he is Mr. Market. He will decide when the share price of the company will trade higher. Having failed to pre-empt Mr. Market's movements successfully, it is now back to basics while I wait for clearer signs.

Related post:
An elaboration on my methods.

Win a pair of tickets to Italy!

When star racecar Lightning McQueen (voice of Owen Wilson) and the incomparable tow truck Mater (voice of Larry the Cable Guy) head overseas to compete in the first-ever World Grand Prix, Mater gets caught up in an intriguing adventure of his own: international espionage.

Click on this link and stand a chance to win a pair of tickets to Italy and many other movie premiums:
http://www.churpchurp.com/AK71SG/share/cars2-sg

Good luck!

Should we be staying invested or in cash?

All of us know how pathetic interest rates on savings are for quite some time now and with the U.S. Fed pledging to keep interest rates low for another two years or so, it does seem as if low interest rates are here to stay, even in Singapore.

We also know that the ultra low interest rate environment is pushing up prices of almost everything. Inflation? You bet. Is this going to persist? It certainly could. If it does, then, my decision to sell my properties in recent months might not be that brilliant after all.

However, if we remember basic economics, we will recall that prices are a function of supply and demand. With many more new homes to be completed from 2012 to 2015, we could very well face a supply glut in future. This is probably quite well documented by now but I will run through the numbers once more:

Year 2012: 
15,457 new homes to be completed.
Year 2013: 
17,111 new homes to be completed.
Year 2014: 
21,680 new homes to be completed.
Year 2015: 
22,520 new homes to be completed.
We should also bear in mind that, currently, there are still more than 30,000 completed homes unsold.
(Sources: URA, DTZ and Nomura.)

As long as demand remains strong, the supply could be well-absorbed. This would depend on the state of the economy and the level of confidence amongst buyers, of course.

To add to the supply glut concern, the very well publicised recent decision by the government to build more HDB flats and to build them faster is likely to weigh in on the matter. Read HDB has promised 25,000 more new flats next year, based on what it said the construction industry can handle.

So, when people ask me for my opinion on whether it is a good time to buy that investment residential property in Singapore, I usually would reply in the negative. However, when people ask me if it is a good time to buy their first home, that is a bit trickier. It really depends on how urgently they need that first home. Sometimes, if we have to pay a premium, we just have to do it. Who knows? Price could keep going higher although I do not think it likely through 2015.

What about me? I get the sense that many readers are wondering what I am going to do with the cash that will be coming in from the divestment of my properties. To be quite honest, I am not going to keep too much cash in my savings account for too long as inflation would rapidly erode its value. To that, some might say that because they are in cash, their cash is now able to purchase many more shares than it could a month ago. This is certainly a valid point as well.

So, what to do? I must have said this a few times before but there is no other option for me than to stay invested but have a war chest ready. We want our money to work hard for us. At the same time we want our money to be able to purchase more shares at lower prices. Why? So, that our money could work even harder for us. Therefore, in the final analysis, whether we stay invested or in cash, the objective is the same: to make our money work for us.

While I was holidaying this weekend, I noticed that I have a lot more white hair. Family and close friends know that I think a lot. I think I think too much. ;)

Sabana REIT: Recent developments.

The REIT has proposed the acquisition of 39 Ubi Road 1. The property has a remaining tenure of about 40.4 years and is valued at $32m. The vendor, Ascend Group Pte. Ltd., will take a master lease of the entire premises for a term of 5 years. Extension works is ongoing and will add approximately 41% to the building's existing gross area. The acquisition will be funded by debt and will increase gearing level from 25.1% to 27.7% upon completion. My thoughts? With what information is available at this point in time, I like it as it would probably bump up DPU marginally for unitholders without asking us for more funds while gearing level remains very comfortable.  See announcement here.

Al Salam Bank Bahrain BSC increased its investment in the REIT by 1,909 lots at a price of 94c per unit on 2 August 2011. It now holds a 5.14% stake in the REIT. See announcement here.


The REIT received a 'BBB-' long term corporate credit rating from Standard & Poor's Rating Services. This reflects "Sabana REIT’s moderate leverage with good access to diversified funding channels and stable cash flows. The ratings also take into account the quality of Sabana REIT’s industrial property assets in Singapore and minimal capital expenditure needs. The stable outlook was based on the REIT’s balanced business risk profile as well as its adequate cash flow protection measures" and "is a significant first step that will allow Sabana REIT to access investment grade Shari’ah compliant debt and capital markets." See announcement here.