Safety in volatile market

Many blue chip stocks have dropped today. Banks are facing an increase number of risks in relation to the economy.

Oil and gas companies and commodities companies had experienced a lower prices on their commodities. This may slow down loan growth in banks and also companies's ability to pay up.

Property stocks like GLP, Capitaland and HK Land, have dropped due to the weakening of the Chinese currency, with fears that a conversion back to Singapore currency will reflect lower profits.

Cargo volumes dropped, indicating a slowdown in overall economic activity. Companies with lesser profits result in their ability to pay back loans. This factor could lead to a slowdown in bank earnings.

The launch of Singapore bonds on 1 October 2015 will also reduce the amount of cash deposits held in banks as close to about $1 billion a month of Singapore bonds will be issued out in October.

Amid volatile markets and a possible correction, these 2 stocks provide safety in volatile markets:

1. M1
2. Q&M Dental

M1

• Oversold
• 6% dividend yield at current price
• Offer cheaper plan to scoop up bottom markets to scare off 4th telco

Q&M Dental

• Aggressively acquiring clinics in Singapore, Malaysia and China
• Closest to becoming monopoly in Singapore dental industry
• price to earnings growth stood at 0.3(PEG is undervalued if less than 1)  after Q2 2015 results

Beware of China markets

This article explained that the Chinese government are allowing the people to buy stocks with borrowed money, and they can even use their house as collateral to buy stocks. This move is aggressive and not sustainable.

Source: http://www.bloombergview.com/articles/2015-07-06/chinese-imitate-western-steps-with-stock-market-interventions

Although Goldman Sachs and DBS CEO said that the china markets are not in a bubble yet, it could probably be the case of easing the public about the dangers of the China market.

Source:
http://www.smh.com.au/business/markets/goldman-sachs-stays-bullish-on-china-stocks-20150708-gi7cjs

Today, Chinese government told China state-owned firms not to sell shares despite stock market plunge with hope to stablise share prices.

Source:
http://www.straitstimes.com/business/companies-markets/china-tells-central-government-owned-firms-not-to-sell-shares-as-stocks

If there is too much reliance on the government to influence share prices, markets may move up or down corresponding to government decisions rather than fundamentals.

As of now, i think that retail investors should still look into SGX stocks. Although SGX had reported failling liquidilty in the markets. However illiquid SGX may be, it based in Singapore and supported by a stable currency.

As SGX is highly regulated by MAS, it is for now safer to invest here than China.

20k Portfolio in Blue Chips SGX stocks

My perspective of a $20k blue chip stocks for retail investor. Below are a list of stocks that would construct a retail investor portfolio.

Prices of Stocks

• STI ETF ($3.38)
• M1 ($3.25)

4000 shares x STI ETF = $13,520

2000 shares of M1 = $6500

Total cost is = $20,020

STI ETF provides excellent diversification in the event of a single sector crash. Its top 5 holdings include 3 relatively strong Singapore banks namely DBS, OCBC and UOB.

Source: Bloomberg

Current Dividend Yield 2.75%

Over a 10 year period, the STI ETF provided a return of 9.06% including dividends and 5.89% excluding dividends

Source: STI ETF Annual Report

M1's recent drop in price due to news of a fourth telco had became an attractive buy with a dividend yield of 5.83%.

Source: Bloomberg

Its recent first quarter financial statements, M1 slashed off 16% of its debt. Lesser company debts keep M1's balance sheet healthy. 

19 Jun 15, chairman of M1 bought 50,000 shares at $3.23 each. This could be an indication of a slightly undervalued share value.

Top 5 Blue Chip Stocks to buy in 2015

• Raffles Medical - Room for growth when hospital expansion is completed
• Keppel Corp - Low oil price and cheap acquisition of Keppel Land
• ComfortDelgro - Stable and very good long term prospects
• Silverlake Axis - Consistant annual growth and a heavy cash cow
• UOB - prefer UOB which have lesser exposure as compared to DBS and OCBC

Wishing all a happy chinese new year! I'll looking forward to a remisier role around June period. 

If you like my blog, do support me by opening an account with me :)

Be careful of China

China's growth story can be bullish but the amount of debts that could be haunting the country is worrying.

Source: http://www.ft.com/cms/s/0/085e0368-a534-11e4-bf11-00144feab7de.html#axzz3QX7IXZuC

Bank stocks in Singapore like DBS and OCBC have been soaring as well and both banks have exposure to China.

Since the change of lot sizes from 1000 to 100, investors can now have the option to switch DBS and OCBC for UOB, which have lowest exposure to China among its peers.

Source: http://sbr.com.sg/commercial-property/news/chart-day-heres-how-risky-singapore-banks-china-exposure-can-get

What to buy when times are good

Source: Bloomberg

The STI index shot up from 3200 to 3350, about 4% in 1 week. Stocks on the STI Index became more expensive in a week.

When the graph is up, downside risks get higher. Stocks like Jardine Cycle and Carriage, DBS, OCBC, UOB have gone up quite a bit.

However, even if these high cap stocks going up, buyers can still look for bargains in the market, especially low cap stocks.

A sector to look at is the property sector. Property stocks have gone down since the cooling measures implemented by the government to slow down or prevent a property bubble in a low interest rate environment.

As Singapore dollar strengthened against the Aussie dollar, a lot of property companies in Singapore have moved their focus to Australia.

Below is a list of some of the low cap property/construction stocks.

• Heeton Holdings (Market Cap:155.8 million PE Ratio:11 Book Value:0.5)
• Hong Fok (Market Cap:660.87 million PE Ratio:2 Book Value:0.4) 
• Centurion (Market Cap:386 million PE Ratio:6 Book Value:1.2)
• Wee Hur (Market Cap:344.72 million PE Ratio:3 Book Value:1.5)

Keppel Land

Property market has been suffering from government's cooling measures. But Keppel Land is a stock worth looking at.

It has a PE ratio of 6 while DBS, one of Asia's biggest bank, has a PE ratio of 11. It means that Keppel Land stock is still priced at a discount as compared to a blue chip stock.

Keppel Land recently sold 2 of its data centre assets to Keppel DC REIT and realised a net gain of S$65.9 million. 

Source: http://www.businesstimes.com.sg/companies-markets/keppel-tt-proposes-listing-of-keppel-dc-reit

This net amount could translate to better earnings for the next quarter results as it had reported a 10.6 percent drop in net profit in its previous quarter results.

Keppel Land, on 3 Dec 14, announced that it had entered a JV with a Myanmar company to develop a 23-storey office tower in Yangon. The office tower is located in the central business district in Yangon. The development is estimated to be at S$61.6 million, which is coincidentally close to the net gains on the sale of 2 data centers to Keppel DC Reit.

Source: http://sbr.com.sg/commercial-property/news/keppel-land-inks-616m-jv-office-tower-in-yangon