Inflation, the cost of borrowing future money

Inflation causes the poor to be poorer and the rich to be richer. Cost of food and transportation have increased with time, and the cost of them will continue to increase as long as we are living in the world of borrowed money.

Future money, and lots of future money were borrowed to meet GDP growth expectations and create jobs for the people. US introduced quantitive easing to erase borrowed future money that cannot be repaid. By keeping interest rates low, they allowed rich corporations to become even richer because companies can now borrow money at rates close to zero.

Apple had $194 billion in cash, which is enough to buy 2 McDonald's corporation.
Source : http://techcrunch.com/2015/04/27/apple-now-has-194-billion-in-cash/#.39s1m0:e9Vj

More countries are either erasing debts or printing more money in the world today, and these polices have desirable results to improve the overall economy. However, these achievements have been successful at the expense of consumers which is the middle and low income bracket household. Things either became more expensive like food, transportation and services or cheaper like communications and electronics. Companies or small medium enterprises faced increased in costs which hopefully can be passed on to consumers or customers.

These scenarios are evident of the inflation structured economy today that we live in. And if we still keep our money in the bank, the value of our money could end up depreciating faster than we could imagine. A bowl of noodles now cost $3-4 may soon be $5-6 in two to 3 years time. MRT rides that cost $0.79 will soon be $1.

This is the cost of borrowing future money which affects us in an invisible way.

BreadTalk Group

This company issued a number of buybacks on 16-17 Apr, 22-23 Apr since its release of its full year 2014 financial statement.

It is currently holding $95 million in cash and its debts stood at $154 million. Its debt is 1.62 times its cash, which still looks healthy on their balance sheet.

Management states its intention to explore opportunities to grow their business in India, Myanmar, Cambodia, Japan and Australia and lastly, China.

Its main business derives from consumer demand, and therefore is resilient against economic downturn.

With the buyback mandate issued by the company, is could be an indicator of a good buy in this stock.

M1, a relatively stable Blue Chip Stock

M1 is relatively stable, given its consistent payout of dividends and rolling out of its 4G network. Although it only focuses on non-tv business, it experienced a healthy net profit growth of 6.6% in its 1st quarter of 2015 as compared to 2014.

It reduced its borrowing from $52 million to $3.8 million, a 92% reduction and also see its cash flow reduced by 83% from 103.9 million to $17.8 million.

Without the need to concentrate on TV business unlike Starhub and Singtel, it should have more resources to its 3 core services namely Mobile telecommunications, International call services and fixed services.

RIP Lee Kuan Yew

Condolences to our founding father Mr Lee Kuan Yew, who passed away on the 26 Mar 15 at the age of 91.

It is no doubt that the success of Singapore are fruits of the seeds you sow many years ago.

My ideal US portfolio

Apple

Not only because its Iphone target the upper class market share, Apple had put in a lot of effort to develop an ecosystem within its products. One of the example is iCloud which links all the data of the mac products together.

Visa

One of the highest market share in online / non-online payment services which i see as a very defensive stock.

3M

Developed products that are very durable and its excellent manufacturing quality is curved within its brand that is not easy or rather quite impossible to duplicate.

Disney

Targets the kids around the world with fun, entertaining and educational media which mature with them through adulthood , and they spare no effort to constantly market their brands.

Undervalued stock, Nam Cheong

Nam cheong seems to be one of the very undervalued stocks that is affected by the slump in oil price. Recently, it had sold 2 of its vessels for US $58m and its book orders stood healthily at $635 million ringgit.

Source: http://www.businesstimes.com.sg/companies-markets/nam-cheong-clinches-us58m-orders-for-two-vessels

It has a PE ratio of 5, with a 5% dividend growth rate and its price stood at 1 year low.

Source: http://www.bloomberg.com/quote/NCL:SP


Assessment

Since it sold 2 vessels in USD and its financial statements deal in ringgit, it is very likely that this deal will cause a spike in earnings.

Indicators of a possible interest rates hike

There had been some speculation of Fed raising interest rates. There are some indicators to suggest that interest rates are indeed about to rise.

Below are some of the news to indicate rising interest rates

• Beware of Apple Bond Sales: Company Has Knack for Calling a Top
• Time to haul off and buy junk bonds

SIBOR rates have risen

According to todayonline.com, SIBOR rates hit a 7 years high in Singapore. Seems like new properties have to slash their prices even more to make up for the rise in SIBOR.

Cooling measures from the government are still in place for properties, but whether it will be lifted after a rising SIBOR rates is unknown. As for now, property companies with developments in Singapore could be hit the hardest from this.

Source : http://www.todayonline.com/singapore/homeowners-hit-sibor-rises-highest-seven-years

REITS are in the danger zone if interest rates continue to rise. It is now the best time to keep some cash and wait for something to happen.

What stocks would i buy now?

After Isetan lost $3.1m due to surging rental and keen competition from other new malls. Its future prospects were faced with challenges of increased online shopping.

Source: http://www.channelnewsasia.com/news/business/isetan-lost-s-3-1m-last/1685270.html

As more consumers move to online shopping, there will be more demand for logistics sector in terms of warehouses for storing goods and courier services to deliver goods.

3 sectors for growth (Online shopping)

• Online payment services
• Logistics and warehousing
• Insurance (to protect online consumers)

There are a few stocks that i see opportunity in but not all of them are cheap at the moment.

• Singapore post - Established a good online platform for online shopping and a leading provider of mail, logistics and retail solutions in Singapore
• Global Logistics Property - Invest and own logistic warehouses around the world, also owned or partially owned by state-run wealth fund
• Mastercard (US. listed)  - Provides to a bulk of online and offline payments around the world

ES group a potential takeover target?

In its FY2014 report, the group explained about its direction for growth.  "The Group remains on the lookout for opportunities to expand its core business while exploring possible mergers and acquisitions with a view to enhance shareholders’ value in the long run."

Source: http://infopub.sgx.com/FileOpen/ESGroup_FY2014_Results_27Feb15.ashx?App=Announcement&FileID=336684

Although revenue decreased by 18%, net profit increased by 218%. This company is expanding fast with very little debt and having a lot of customer backlogs to fulfill. It is in my opinion a fast growing small company with very little or low risk despite a falling oil price.

A right decision to sell Pan United

I bought Pan united on the 1 Oct 12 and sold it on 16 May 14. Initially, i see this company as a dominant supplier of basic building materials in Singapore, coupled with huge government initiatives to upgrade infrastructure and build public housing.

However, the company acquired Changshu Changjiang International Port (CCIP) for RMB436.5m in Feb 14. The news was bad in my perspective because port facilities will incur more expenses to maintain.

I like its supply of basic building materials business in Singapore, but do not like that fact that it is acquiring a port and not focusing on its profitable business. With so much assets to handle, this company may not be able to concentrate on what's most profitable to itself as well as to shareholders.

The image below is taken from SGX website show a review of its FY2014 performance indicating that CCIP was part of an increase in interest costs and depreciation expenses.

2 company that reported good earnings

Chip Eng Seng - year to year increase of 282.6% in net profit.

• Developer
• Investments in hospitality/property

Future prospects

Its investment efforts are targeted at recurring income for future growth. Although future is promising for this, a spike in interest rates may affect this company due to high borrowings.

TREK 2000 INTERNATIONAL LTD - year to year increase of 137.85% in net profit.

• Consumer electronics manufacturer

Future prospects

The future of IT electronics sector remains uncertain as to whether the company can continuously keep up with innovation and reap from its R&D efforts.

MBSB Bursa a Strong buy

Malaysian Building Society Bank (MBSB) saw its net profit climbed to RM1.02 billion, a 70% increase in its 2014 full year as compared to 2013. There was a news that MBSB was the fastest growing enterprise in Malaysia 2014.

MBSB was about 70% owned by Malaysia's EPF, which is seen as a government-linked entity.

I think this company will continue to grow, and given its new 5 year growth strategy from 2015-2019 of changing its retail to corporate exposure from 85:15 to 70:30, it will acclaim more revenue from corporate customers, which are bigger slices of the pie.

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 :)

Oil price have dropped, but demand is picking up as well

Source: http://www.bloomberg.com/news/articles/2015-02-11/goldman-here-s-why-oil-crashed-and-why-lower-prices-are-here-to-stay

As the chart hit the February period, demand has picked up as well. The justification for the increase in demand is unknown. Our vehicles do not consume more fuel than before, or rather that fuel prices have gone down that we can travel cheaply. But yet that do not justify the vast increase as well, unless oil consuming countries like India, China and US are aggressively buying them into their oil reserves.

The cheap oil prices could also improve profitability of the transport sector as well. A long decrease in oil prices could allow transport companies, utility companies to reduce their expenses.

Global Logistic Properties

Source: Bloomberg

After a number of corrections, the price seemed to have reached a level where geopolitical risks seemed to have been factored in.

However, whether this stock has reached the lowest is unknown. However, i am optimistic that this stock will be a long term future growth stock due to the portfolio of assets supporting e-commerce companies.

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

Buying indicators for Swissco

Firstly, from 26 Dec 14 to 22 Jan 15, there was about 5 instances of insider buying.

Secondly, it is hitting close to its 1 year low.

Source: Bloomberg

How warrants can reduce your risks in the stock market

This is a video by Macquarie Investor Academy to show you how warrants can reduce your risk exposure to the volatility of the stock market.

Structured Warrant Video by Macquarie Investor Academy

Positive indicators on Maybank

I am extremely positive on Maybank, the largest bank in Malaysia. Although Malaysia is the worst performing markets last year, it seemed that Bursa could be on the oversold side which could project attractive buying for investors as US markets becomes expensive.

These are 3 reason why i am bullish on Maybank.

Firstly, Maybank's insurance arm Etiqa reported lesser profits due to insurance payouts for MH17 and MH370. The current market price for Maybank have priced in that factor.

Secondly, although it reported lesser profits, Singapore operations grew by 5% and its Philliphines operation grew healthily at 31%. Natural disasters had struck Malaysia with floods and Philliphines with typhoons that destroyed homes and companies. The demand for loans will be huge as these people seek to find shelter, food/daily essentials and services.

Thirdly, Maybank is at a discount to foreign investors due to the weaker ringgit and bearish Bursa.

Good time to pick up oil and gas stocks

If you have a good balance portfolio and do not have oil and gas related stocks, now is a good time to grab them at a discount with the free falling of crude oil prices.

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)

Is it a good time for REITs now?

A very small portion of my portfolio consists of REITs, which can be a stable asset to hold on to. A typical REIT can give you returns of up to 10% a year as dividends, which comparing to bank rate of 1% is pretty attractive. However, if you buy REITs when interest rates are high, you probably got a good discount for it. But as interest rates had remained low for a while, the price of REITs has inflated a bit. Risk of interest rates hike remains. Therefore now should be a time to wait at the sidelines for the media to blow up an interest rate hike issue for REITs to be attractive again.

Strong indicators of a buy in Keppel Corp

Keppel Corp's share buy back today valued at close to $8 million. 3 days ago, its share buyback valued at about $3 million.

On 11 Dec 14, it made 2 consecutive share buy back programs valued at close to $10 million. To date, it had spent about $21 million in total on buying back its shares.

Loh Chin Hua, an unknown investor increased his/her stake today from 0.44% to 0.99%.

I am not exactly bullish on the crude oil price now but i think $8 could be one of the lowest buying points Keppel Corp can go.

Portfolio Diversification

Portfolio diversification is a good way to measure the risks of your investments in stocks. For example, having more exposure to the oil and gas sector may be affected by low oil and gas prices because this will cause a slowdown in the sector.

The portfolio below shows the type of portfolio below demonstrates high risks to the oil and gas sectors.

If your portfolio have a higher exposure to property for example, then if property prices nosedive, your portfolio value will nosedive too.

Therefore, it is important to have a strategic asset allocation that will allow your portfolio to endure hard times in an even of a slowdown on a particular sector.

The portfolio example below is an example of how to diversify your portfolio.

Property	30%	Betting on long term increase of property prices
Healthcare	30%	Buffer against Crisis
Finance	30%	Center of Growth
Oil and Gas	5%	Potential for growth
Technology	5%	Potential for growth

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

Our first Invest in SGX logo

Falcon Energy makes an offer for CH Offshore

Falcon energy owns about 29% of CH Offshore and wants to increase to 50%. As part of their expansion plan, CH Offshore provides them with a more diversified fleet of vessels to cater to more customers. Currently, CH Offshore has a fleet size of 15 AHTS vessels.

Crude Oil prices to stabilise in 2015

According to bloomberg, Rosneft has a $14 billion debt due in 2014 and Novatek has $46 million of debt to be repaid before Apr 2015.

Vnesheconombank also had $1.3b in public debt due in 2015. Russian companies face $3.93b of dollar-bond maturities by year-end.

Source: http://www.bloomberg.com/news/2014-07-17/rosneft-bonds-sink-most-on-record-as-sanctions-shut-debt-markets.html

These bond maturity dates could be factors of why crude prices fall because of an economic attack by US. Since US started flooding the markets with oversupply of oil, oil prices had been in the decline from $100 a barrel to $60-70 a barrel.

As Russia's economy largely depend on the export of crude oil and gas products, the reduction in these commodity prices may weight down on their profitability and thus, affecting their ability to settle their debts.

Drop in oil price, good for global economy in the long run

The U.S is very successful with this strategy of bringing down oil price from $110 to about $70 a barrel.

The US dollar strengthened with the halting of quantitative easing, and with the shale gas bloom, they started flooding the market with more crude oil.

The oversupply of the crude market caused the oil price to drop and at the same time dealing a huge blow to countries like Russia, Iran, ISIS. They export oil for profit and ISIS used the money to fund to expand its war chest and expanding its global terrorism threats.

Russia had been aggressive on the Crimea war against Ukraine, which were globally criticized. The MH17 incident made the situation worst.

Iran's issue about nuclear energy is clearly not in their favor with the dropping of oil prices. The low profitability issue may reduce their negotiating power on the table.

However, with the weakening of currencies in countries like Japan, Malaysia, EU, Australia. Global economies is set to pick up even faster with more exports as US is starting to exercise its strong USD.

In general, the economy is slowing down because of certain political factors, but in the long run is set to enjoy higher growth in 2015 and 2016.

Why i sold SIA Engineering

The company is still making profits with reasonable amount of debts. Fundamentals remain intact in its Singapore business.

However, its overseas ventures are facing stiff competition and profit margins are heavily affected. This problem will have a long term impact on its profit growth.

While the stock have declined, it does not mean that this company is not doing well. While Changi Airport in Singapore are expanding to accommodate more aircraft, SIAEC should have this constant revenue stream given its already dominant position here.

STI might be building up for a crash

STI had gone up a fair bit this week while US had stopped its quantitative easing program. Investors are waiting for news of interest rates hike.

If interest rates go up in US and Singapore, banks may have their profits affected as general loans may go down. It is because people find it more expensive to take loans.

While the hike may not be steep, it may take a longer time for the effect to kick in. Meanwhile, enjoy the smooth ride for STI. It may not be a good time to pick up stocks now, i believe there are still stocks that offer discounts.

STI index stocks like DBS, OCBC, UOB have gone up while Jardine C&C is still holding them back a little.

Oil stocks like Sembcorp Marine and Keppel Corp have gone down due to low oil prices.

Generally, now is a time to hold cash while the STI index soar. While the higher interest rate hikes kick in, it will be the time to enter the market to buy.

How to value companies

Hi everyone, in this article, i will talk about 1 method i use to value a company. The company i will be using is Falcon Energy.

Let's look at its net income for the past 4 years.

Source: SGX

The breakdown in net income in million is as shown below:

• FY2011 - 3.274 (price $0.67)
• FY2012 - 10.429 (price $0.27)
• FY2013 - (2.387) (price $0.42)
• FY2014 - 60.768 (price $0.335)

In FY2011, the net income is about 20 times less than FY2014 results and yet the the price is about 2 times lesser.

If their earnings can sustain at 60 million, their share price be valued more than $0.67. At the current market price of $0.31 is very undervalued.

This is one method you can use to value a company.

Thanks for reading everyone. :)

Discount on Azeus

Bloomberg

Azeus hit a 1 year low in price, while its growth is ascending. This stock price is undervalued.

A falling star, Make a buy

Oil prices have been declining for 3 months and dropped $4 in 14 Oct. The largest single-day fall in more than a year. Brent oil at its peak in June costs about $115 while now it dropped to $85 a barrel.

Source: http://www.economist.com/news/finance-and-economics/21625819-oil-price-tumbling-good-or-bad-news-world-economy-both

The sudden drop in oil prices does not indicate an oversupply, however telegraph had mentioned that according to Citigroup, Saudi Arabia will cease to be an oil exporter in 2030.

Source: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100019812/saudi-oil-well-dries-up/

Jim Rogers mentioned that the huge drop in oil prices was due to OPEC driving down prices because of shale competition in the US.

Source: http://economictimes.indiatimes.com/news/economy/indicators/recent-decline-in-crude-oil-price-artificial-jim-rogers/articleshow/44833118.cms

Great discounted stocks to watch in SGX

• Keppel
• Sembcorp Marine
• Ezion (high growth fuelled by debts)
• Falcon Energy
• MTQ Corp

Go for Growth, Dividends or Capital Gains

After a series of bad investment choices this year, i got myself thinking about my own portfolio restructuring

As there are many opportunities in certain periods, it is always good to have certain stocks that are able to ride through the storm to provide us with growth and dividends in cash or shares. 

Growth stocks

As a beginner in stocks, i am always keen to learn from different people about their investing perspectives. One of it was to invest in Singapore banks like UOB, OCBC and DBS. These 3 stocks have good growth and will constantly distribute dividends yearly. 

I begin looking at higher value stocks like Jardine Cycle and Carriage because someone told me that a person who buys the stock knows about investing. Initially, i did not know why people choose this stock. Out of curiosity, I went to check out their business and ask around. I managed get answers that are able to justify the good value of this stock. Jardine C&C distributes Mercedes Benz, one of the premier luxury brands of car in Singapore, Malaysia and Myanmar. Apart from Mercedes, the group also distributes other brands. Their business consists of car distribution and maintenance. The maintenance portion of their businesses are recurring in nature, and thus able to provide a constant flow of income. 

Dividend stocks

Dividend plays are good as well because they provide you with good cash flow to reinvest and expand your portfolio. A person who played dividend stocks well is Dividend Warrior. He adhered to a patient strategy for good dividend yield stocks which seemed to be going well comfortably.

Capital Gains

Since SGX cap the lot size to a 1000 shares, penny stocks are one of the apple for investors looking for short term capital gains. In order for this to work, you have to correctly predict the the ups and downs of the stock.

Conclusion

My personal opinion would be to go for both growth and dividend stocks to ensure constant earnings over a longer period. The capital gains method would require constant monitoring and technical analysis to improve your prediction. 

Alibaba's a growth stock

Alibaba is a growth stock that grew tremendously over the past 3 years. It made $0.44 per share in 2011, $1.68 in 2012, $3.57 in 2013 and $10 in 2014.

Since its IPO on 19 Sep 14, its share price had soared from $68 a share to $93, an increase of 36% in a single day.

Growth is one of the main factor that drew many investors. From 2011 to 2014, its earnings have grown about 30% per year. E-commerce, like search engine companies are growing as more people gain confidence in online shopping.

Alibaba is definitely one of the stock to have.

Straits Trading

Recently, a friend told me he bought Straits Trading in August 13 at the price of $4.4. However, the price now have dropped to $3.

In this blog post, i will explain why it dropped dramatically due to the earning results. In HY2013, the company made a profit of $80.4m, which most of it is due to a gain on disposal of WBL shares. However, HY2014 did not see much income coming in besides their tin mining, smelting and hotel business.

While they earned $343m including a gain from the disposal of investment properties, its expenses offset most of its the earnings. Its tin mining and smelting business incurred $301.4m and their other, financial expenses and exchange losses amount to $26.5m.

After deducting all expenses, they reported $4.9m in net profits, which was 1636% less than last year. The stock price see itself moving up since Jun 13 and started dropping in September 13. The half year reports were released in Aug for both years.

The most important thing to highlight here is the fact that the major gain on disposal in 2013 does not determine the company's ability to grow given its huge expenses on their tin mining and smelting business. Although, its current price have factored in the negatives, i don't expect the company to grow much given its high operating expenses.

Value penny stocks have gained momentum

KS Energy
Centurion Corp
Pacific Radiance
Swissco Holdings
Nam Cheong

These stocks reported good results, mostly came from the ship chartering, ship building servicing the oil and gas sectors. These sectors have been doing well and did not see demands dropping.

Centurion Corp's business lies in its consistent revenue from worker dormitory rental yields but its media business have been dragging down its profits. More value can be seen when it divest more of its media business and focus on its dormitory accommodation.

KS energy recently sold some of its assets and gained about $55m. It is now able to distribute this income as dividends to shareholders or make other acquisition to gain better market position. According to the recent release of its financial result, the demand for oil and gas sector remains positive. This translates into positive future growth potential for the company.

Planning for Retirement

It is possible to invest in stocks for retirement. The power of compounding investment gives you the power to increase your assets over time. In this section, i will talk about how you can hit your retirement goal in steps.

The safest way to build up your assets in SGX is to look into Real Estate Investment Trusts (REITS). REITS are made up of a collection of properties and their income depends on the rental yields. After which, they will pay out majority of their net profits as dividends to shareholders. REITS are stable play when interest rates are low because they are normally high in debts.

A typical REIT company may give you about 4-6% depending on their performance. Lets assume it gives about 5% out as dividends every year.


First 100k in Stocks

• Earnings of 5k per year
• $416 per month

in progress...

Improving your portfolio

Improvements to portfolio is no one time effort in a long term perspective. Market conditions are ever changing, similar to the political situation that is happening around the world.

Conflicts
Israel-Gaza war have became worst after the kidnapping of 3 teenagers. The conflict between Ukraine and Russia have not resolved itself. Furthermore, MH17 was brought down by Ukraine rebels which caused the intervention of other countries. China was getting more aggressive in the claiming of islands that caused unhappiness in the South East Asia region.

So much happenings around the world and stock markets react differently at different periods. Stocks may move because certain funds pump in lots of money to buy it. The big players are powerful enough to control the direction of the markets.

Therefore, retail investors like us have to be vigilant in the type of stock we choose.

Enhancing your portfolio
Most people sell stocks when they are high and buy stocks when they are low. That is not what i think should be the right approach to long term investment, because long term investment depends a lot on stock performance consistency. For example, i bought Vicom 4 years ago at $2.60, today's price closed at $6.68. Earnings per share is valued at $4000.

From this lesson, i inferred that stocks that do well consistently are more likely to continue doing well due to their business model. Therefore, instead of selling stocks that do well, you should sell stocks that are not doing well and buy stocks that have been doing well so that it will continue to perform well.

Do not take deliberate advice from brokers because brokers do not have any responsibility with regards to the money you earn or lose, they only earn the commission when a trade is executed. Therefore, it is important to do your own portfolio management and decide what is good for your portfolio in the long run.

Cutting losses
Do not be afraid to cut losses because when a stock is not doing well, it is harder for it to recover. Take a poor person for example, how long do you think he needs to be rich if he does not have enough money to make money.

This theory applies similar to companies that are not doing well. Therefore, it is essential to cut losses when necessary.

Approaches to Portfolio Management
There are a lot of stocks out there that performed really well over the last few years, and achieved a certain level of consistent performance. Although i agree that high dividend stocks are sometimes risky and therefore company is able to pay out high dividends to allow investors to take up some of the risks. However, there are still companies which are backed up by fundamentals and yet rewarding for shareholders.

In this section, i will talk about how i continue to invest in the type of companies that are both rewarding and less risky.

Portfolio management means that it is a continual process of managing your basket of stocks, stocks that will do well and what stocks that have under performed.

Stocks selection
I will list down some of the more important details in stocks selection

1. Good Branding
• Possess advantages that people will choose over other competitors
2. Demographic advantage
• Favorable to the increasing population (Healthcare, Telecoms, Transport, Food, Services)
3. Political
• Government owned companies that are favorable to win key contracts (Temasek Holdings related)
4. Excellent financial position
• Less debt (Debt to Equity Ratio less than 1) or no debt
• Consistent annual profit growth to prove good business

Basis to sell/switch
Stocks that are burdened by debts and high operating expenses are facing a lot of challenge . Therefore, it is important to constantly follow up on their quarterly financial reports. Their reduction in net profit growth and high operating expenses are indicators to consider a sell in the stock.

1. Loss of competitive advantage / slower in foresight
• Switched OCBC with DBS after Wing Hang Acquisition because DBS made the move 12-13 years earlier with the acquisition of Dao Heng Bank.
2. Increase in debts, operating expenses leading to reduction in profits
• Sold Hyflux due to high debts and operating expenses.

Basis to buy

Stocks that will perform in the long run will likely start from the current position. It is because companies with good business model will follow them through for a long time.

1. Less or no debts in their balance sheet - Allow them to earn pure profits and will slowly grow to a cash cow company
• Azeus Holding, SGX are 2 stocks that have minimal or no debts in their company
2. Good rewards in dividends in cash or shares
• Banks (DBS, OCBC, UOB), MTQ Corp, Silverlake Axis 
3. Consistent profit growth
• Vicom, Silverlake Axis

ES Group

ES group have been one of the most ignored penny stocks in SGX. The volume of this stock is low and also has very limited amount of analyst commentary on this stock.

ES group is a prominent sub-contractor of marine and offshore structures and vessels of all types and sizes. It is well known for its safety track records and have been in business with big players like Sembawang Shipyard Pte LTD and Keppel FELS and ST Marine Ltd.

The Company also owns a 70,000-square-metre shipyard with fabrication grounds in Thailand. Its FY2014 outlook states that more orders were secured for its Thailand yard and therefore its outlook remains positive for 2014 despite a slowing shipbuilding sector.

Buying STATSChipPAC is not value investing

This company has been going up a lot because of news that Temasek Holdings is looking for buyers to take over this company.

In mid 2013, STATSChipPac closed a KL factory due to profitability concerns, and to consolidate its operations in China over several phases.

In a highly competitive semiconductor industry, STATSchipPac have to constantly invest in new technology to meet its customer needs. And if their foresight in technology goes wrong, it may end up like Blackberry or Nokia.

Source: http://www.straitstimes.com/breaking-news/money/story/stats-chippac-close-kl-plant-laying-1100-workers-20130628

The risks to invest in such company is not going to generate good returns over the long run because the risk over rewards might not be worth it. It has to constantly pump in cash flow to purchase new technology to keep up, and as competitive become stiff, prices of semi conductor products may decrease.

My advice is to stay away from this stock if you are a long term investor. Why would its parent want to sell this company away? The risk just isn't worth it.

Singpost recent rally

Singapore post's recent rally had gone up fast after Alibaba announced a acquisition of 10.35% stake in singpost. The news announcement came strategically 2 weeks after singpost release its positive FY2013/2014 results.

Its effort in the e-commerce sector had began to gain traction after it announced its net profit of FY2013/2014 increased of 2.9% as compared to last year and saw its cash flow increased by 14%.

My view to invest in Singpost at the current price of $1.645 may be too rash as the rally lasted for 2 weeks consecutively. The company showed promise with their transformation into the e-commerce logistics solution and i think that is the direction that should benefit investors in the long run as Singaporeans are big shoppers online. In 2011, a survey by Paypal showed that Singapore's online commerce grew 30% from S$1.1 billion in 2010 to S$1.4 billion in 2011.

Source: http://www.asianewsnet.net/Sporeans-are-big-online-shoppers-50429.html

My entry price for this counter should range around $1.10-$1.30 as the rally was a spark of overwhelming media coverage.

Sectors to invest for the future

Statistics shows that the number of elderly people are set to rise.

Below are key sectors to invest in:

• Healthcare - more elderly people need to see doctor
• IT - tackle manpower shortages

Falcon Energy Group, an undiscovered gem

Falcon Energy reported a full year profit of US$102.084 million as compared to losses of US$2.15 million a year ago. Its cash flow increased from US$12 million to US$40 million from good operating income and loans from banks.

The US economy interest rates remains close to zero % and Falcon energy leveraged on its low interest rates to grow the company. However, risks of hiking interest rates remains as US has yet to raise the interest rates. 

Its jack-up rigs are expected to be ready by mid-2015 to mid-2016, which are expected to be in high demand. The company now still have recurring income businesses in the Oilfield Services Division. 

Price now remains cheap given its improved profitability. Furthermore, it leveraged on cheap loans to fund future expansion, which makes good sense for the company. 

SATS solid operating cashflow ensures stable dividend payment

SATS strong operating cash flow had enabled its company to consistently ensure stable payout of dividends to shareholders. In the unaudited results for 4th quarter and full year ended 31 mar 14 statements, it displayed strong operating cashflow of $246.9 million and used 68% of it to payout dividends. It also saw its foreign translation losses reduced by 42% to $14.8 million from $25.6 million.

The aircraft passenger numbers in Indonesia is expected to see an increase in 15-20% per annum, according to its minister.

Source: http://www.antaranews.com/en/news/93840/indonesia-can-become-an-aircraft-maintenance-center-minister

With the acquisition of the largest gateway services of aircraft in Indonesia, SATS had positioned itself strategically for growth in SEA's largest economy.

Pan United's acquisition dragging down on profits

Pan United 1st quarter 2014 results saw a reduced earnings of 14% as compared to 2013. The acquisition of 90% interest in Changshu Changjiang International Port Co., Ltd (CCIP) saw the increase amount of debt the company incurred. CCIP recorded a loss of about $5.1 million being a new port.

However, the increased in finance costs and the dragging down in net profits by CCIP makes this counter less attractive for me. Although it had risen in share price from my purchase price of $0.6 to about $1.

The CCIP business does not sound too attractive of an acquisition for the company.

2 possible gems

Financial statements released by Hiap Hoe and Silverlake Axis had certainly sparked my interest in the 2 stocks.

After Hiap Hoe acquired Superbowl, it had stated that there will be additional streams of revenue coming from rental, hotel operations and leisure business. Earnings for the three month period was $354.2 million, a significant increase on the $10.2 million recorded a year ago.

Silverlake Axis also did very well in its 3rd quarter with a decent 28% rise in net profit. It has been performing consistently well given its high PE ratio, but however have been giving a dividend of about 4%. 

Its sale software and hardware products gained more than a 100% while runner up maintenance and enhancement contracts rise steadily at 22%. Lastly, its software licensing business grew 16%. 

Similarity between Swissco Holdings and Centurion Corp

Swissco Holdings's ship chartering business and Centurion's dormitory assets are both businesses with risks that are far lower than other businesses like ship building or construction because Singapore faced a tight labour supply.

And businesses that are passive income yielding are more attractive due to their defensiveness in nature. 

Both Swissco and Centurion share the same rental model that do not require much labour supply and therefore proved to be attractive. This translates to the increase of their share prices.

Raffles Medical

Despite its property expansion plans, Raffles Medical still have the ability to grow its net profit and at the same time, finance its growth plans.

Its 2014 1st Quarter saw an increase of 8% in net profit after tax with a healthy cash position of $98 million. Its healthcare sector grew by 14.3% and its main revenue stream from hospital services grew by 4.8%.

This results in turn translates to Raffles Medical's ability to perform consistently, giving value investors a very positive signal for this stock.

I am in favour of the management's ability to grow the company in present and future.

Good mid-cap stocks have appreciated in value

Stocks like Centurion, Swissco Holdings, Nam Cheong, Penguin International, Pan United and MTQ Corp have risen in value over the past few months due to their strong balance sheet and strong fundamentals.

Penny stocks in particular have gained much popularity due 1000 shares per lot restriction imposed by SGX, making expensive blue chip stocks much less affordable by the public. Profit margins for penny to mid-cap stocks are higher as compared to expensive blue chips. Their price movements could be upwards but very slow like a turtle.

Although there are still good mid-cap stocks, but they are harder to find nowadays or rather have not appreciate in value until analyst reports about them are released.

Why DBS

Nov 2013
DBS sold its remaining stake in Bank of Philippine Islands for S$850 million to focus on key financial hubs like Singapore, Hong Kong. A realised net gain of S$447 million came from the sale.

Source: http://www.bloomberg.com/news/2013-11-12/dbs-sells-philippine-bank-stake-for-681-million-to-gic-ayala.html

Mar 2014

DBS redeemed preference shares early, returning $895 million. The returning of debt shows that DBS is in a financially stronger position for growth opportunities ahead.

Source: http://business.asiaone.com/news/dbs-redeeming-preference-shares-early-returning-895m 

At the same month of March, DBS had constantly been doing share buybacks of about S$5 million a month

My prediction of future occurance

Business Owners

According to tradingeconomics.com, Singapore's corporate tax rate in 2014 stood at 17% while US corporate tax rate stood high at 40%. 

Investors

Singapore do not have capital gains tax as compared to US. Fool.com states that for short term capital gains, taxes can go up to 39.6% while long term capital gains tax range between 15-20%. High-income tax payers in US, whose income ranges more than $200,000 or $250,000 joint filers, get an extra 3.8% on capital gains tax, which made selling or buying even more costly.

Dow Jones Industrial Average (Yahoo Finance)

Straits Times Index (Bloomberg)

Conclusion

It makes more sense to be a Singapore citizen to be an investor as no capital gains tax is being charged for buying or selling of stocks. Foreign investors are also not liable for capital gains tax in Singapore. Furthermore, the US stock markets are constantly on the upward trend with no sign of correction while the Straits Times Index suffered periodic correction. 

High net worth individuals in US might not like that tax system in the country and could avoid high taxes in US by becoming a Singapore citizen as they need to pay more taxes as a owner of a business and also an investor there.

I predict a correction in US stock markets as a result of higher interest rates and higher tax rates. The funds from selling could be diverted to Asia as stock markets here remain low, namely the STI in Singapore and also the rest of Asia (Hong Kong, Malaysia, Thailand, Vietnam, Indonesia, South Korea)

My take on falling yuan

In a scenario of a falling yuan can translate to profits from the Chinese government or even the investors in China.

Here's an example:

Chinese government and its investors make use of strong yuan to purchase strong currency assets in London or maybe Singapore. When yuan started falling, these assets translate into more yuan and thus become profits for the Chinese government and its investors.

A weaker yuan could also lead to a weaker rupiah as Indonesia needs to export coal to China. Singapore listed firm, XMH holdings could be affected due to reliance on the Indonesia coal exporting industry.

recent share buyback, SATS

SATS recent share buyback could indicate that the price is being under-recognized by investors. Its recent acquisition of Indonesia's key gateway provider could give itself a larger slice of the gateway pie.

Preparing for the next phase of growth

Both of Temasek owned shares are buying up stakes in companies that could set themselves up for the next phase of growth.

OCBC raises stake in bank of Ningbo from 15.34 per cent to 20 per cent, and is currently discussing on a possible acquisition of Wing Hang bank.

SATS, on the other hand bought 41.65% of PT Cardig Aero Services for S$118.3 million, repositioning the group to focus on growth in a country whereby demand for gateway services will increase, especially in a large country of islands separated by waters.

GLP, a rising emperor

2 of the the world's high growth markets namely China and Brazil had committed huge sums of investment as a sign of confidence in the growth prospects of warehouse leasing business.

A group of chinese investors which includes major players like Bank of China Group and private equity firm Hopu Funds will invest $2.35 billion in GLP. E-commerce in China is starting to bloom which saw in increased in demand for lease warehouses.

GLP Brazil Development Partners I fund, had raised an extra 538 million reals ($227 million).

Source: http://www.worldpropertychannel.com/asia-pacific-commercial-news/asian-warehouse-operators-see-influx-of-capital-demand-for-logistics-properties-global-logistics-properties-goodman-group-ming-mei-paul-mcgarry-8029.php

While GLP still had good valuations after a recent drop in share price from $3+ to 2.8+, it will not stay low at the level of demand for warehousing facilities. 

Top 5 undervalued stocks

Top 5 undervalued stocks

- Penguin International
Good balance sheet with zero or close to zero debts. Capable management to reduce cost and maximise profits

- XMH
Good balance sheet with zero or close to zero debts. Solid cash flow to have flexibility to explore greater growth opportunities.

- Falcon Energy
Its offshore drilling business is starting to rip the rewards and showing promise of further profitability. Demands for drilling rigs are expected to increase.

- Heeton
Constantly exploring joint venture opportunities and growing its recurring income portfolio

- Hiap Hoe
Good value with construction of projects and investing in value property portfolio overseas.

Why is it interesting to stay invested in sgx

In 2009 stock markets crashed when Lehman brothers defaulted on their debt and collapse, leaving many people with huge losses on investment products. People who invested in the stock market also saw huge decline in their asset value.

However, buyers from that period benefited a lot from the cheap asset prices and the rich become richer.

In 2012, the eurozone crisis cause a global decline in stock markets as Greece defaulted on its debt. Spain and Italy were also in a bad debt situation and these countries needed help from Germany, who possess one of the strongest economy in the world to revive them.

After the eurozone crisis, the fed brought out its money printing policy in attempt to recover the labour market in us and to bring about a faster global economic recovery. And by repurchasing bonds at 85billion a month, it kept global interest rates low for companies and consumers.

Low interest rates provided channels for cheap money to flow out of us into emerging markets and Asia, where the return of investments are greater. The prices of stocks also rise as a result of increase buying.

These events that happened around the world provided good lessons for me to relate with sgx and kept me looking forward to every market opening day in curiosity. Knowing that happenings around the world will affect the stock market every day will keep myself busy keeping up with the news.

I thank all readers for keeping up with my blog.

Have a great bullish day!

Higher correction, higher bull

What goes up must come down, and what goes down must come up. Based on historic records, markets had been acting on ups and downs.

What is set for a correction now, may be paving way for a bigger bull later. Interest rates are set to rise while the Fed started cutting back its bond purchases by $20 billion.

Property investors may face headwind ahead of rising interest rates, which means they have to pay much more interest if they are taking up huge loans. Same goes to property stocks as well.

However, there are no clear indications why markets are correcting now. And the fact that they are correcting means there are many good opportunities to pick up good stocks.

While interest rates are set to rise, try to stay away from stocks with huge debts, especially property counters.

Penguin International

Penguin International is a good stock to own. Their business includes designing, building, owning and operate crew boats and fast supply invention vessels. One of their strength is that they have zero debt and yet holding on to good cash flow which grants them the edge to invest or expand at a better position.

They delivered a strong 3rd quarter results showing profits 337.8% more than last year's. Their cash flow stood strongly at S$28.242 million, a decrease of 4.2% as of last year's.

The management reports that their core businesses continue to be key drivers for earnings for the rest of the year and expects to sell more crew-boats, secure more new-build orders ad increase offshore charter revenue.

Stick to fundamentals

Stock markets in US dropped due to the further tapering of bond repurchases by Fed from $75 billion to $65 billion.

The initial sum of bond buyback was at $85 billion and was cut to $65 billion, a decrease in $20 billion. The total sum of the repurchase efforts are estimated to be about $4 trillion, according to CBC news.

Source: http://www.cbc.ca/news/business/u-s-fed-to-taper-bond-buying-program-to-65b-a-month-1.2515564

Gold and silver prices saw themselves decline tremendously, even though inflation rates are rising. The safe heaven for hedging inflation did not prove to be useful in current economic trends. No one knows when or how the direction of the precious metal will go but it is like a waiting game to hold on to these sitting ducks.

Stocks like Singtel are still holding on to the strong resistance price of $3.5. M1 and Starhub seen their prices appreciated or maintained in good or bad circumstances.

Margins of safety

Sick to companies with low or no debts and good cash flows.

Growth

Banks or property counters with assets of highly scarce supply. However, it is a challenge to manage risks that comes with these stocks. Good or bad news will likely push the stocks up or down. Market prices are determined by investors like you and me and does not justify the true value of the stock. A good growth potential stock might be dropping in price but may rise higher in the long run.

Dividends play

REITS with good dividend yield and low net gearing ratio.

Top 5 blue chip stocks to buy in 2014

Comfort Delgro

It's expanding taxi fleet size in 2014 and furthermore, divested parts or fully its China, operations which was loss making.

SGX

Consists of 2 business components namely the securities and derivatives. By reducing lot size from 1000 to 100 shares, the volumes of securities traded may increase with more flexibility for investors to manage their funds. While share prices may be cheap now, people are still afraid of this strong blue chip counter with zero debts and payout of dividends via profits. Not understanding what is going on here but it is a safe company to be invested in with the current price of $7.

M1

Its recent results show a significant increase in cash flow which lead to the saying 'Cash is King', and opening more rooms for opportunity and growth for the company.

OCBC

Its recent acquisition of Bank of Ningbo and in a process of acquiring Wing Hang Bank for $5 billion suggests its major shift of focus to the China region where it sees huge potential growth for its business. Although its share price had seen itself dropping recently, it may see its profits rolling in after the acquisitions and synergy with the OCBC business. Not forgetting its highly lucrative Bank of Singapore parked under OCBC. The potential for this bank is huge, which also means higher risks involved.

Hong Kong Land

With its profits soaring while the share prices are dipping does not justify the value of the stock. Hong Kong was named by bloomberg as the best place to do business and while land is scarce in Hong Kong, the land and property prices will not be allowed to nosedive at the expense of the country. Although there is a possibility of it occurring, it is not of the interest of Hong Kong and the leaders to welcome such event.


Wish you all a HAPPY CHINESE NEW YEAR IN 2014 AND MAY YOUR PORTFOLIO HUAT MORE THAN 2013.

Cheer:)

Bearish STI

Although the Straits Times index had gone down quite a bit, i am pretty bullish on the Singapore stock market.

Firstly, i think that Singapore is a tax heaven for investors in the United States and they might flock here to avoid heavy investing taxes in their country. US citizens are taxed for both capital gains and dividends.

Secondly, interest rates are kept low to maintain a slow and constant rate of inflation in the country. A healthy rate of inflation will boost spending in the country because cheap money can easily be available.  According to Jesse Colombo, majority of the loans in Singapore comprises of housing loans and is in a risk of a a property bubble burst in a situation of an interest rate increase. However, since the recent property cooling measures by the Monetary Authority of Singapore, property prices have said to stabilise.

Source: http://www.forbes.com/sites/jessecolombo/2014/01/13/why-singapores-economy-is-heading-for-an-iceland-style-meltdown/

Lastly, prices are low now in view of the upcoming results announcement for the various companies. Interest rates have been kept low to spur growth. Property companies have ventures out of singapore to Australia and other parts of the world as land prices soar. OCBC seek to acquire Wing Hang Bank at almost twice its book value. Low interest rates might be helping these companies to expand to greater China where more growth might be.

As the STI index hit one of the low now, buying could be evident in many counters. This is a good time to buy because no major crisis had led STI to drop. Singtel, DBS, OCBC, Hong kong Land are a few counters that comprises in the STI ETF.

So much cheap money, why are we still holding on to cash.

Fed's bond buying program had reached $4 trillion worth in assets and they are not ready to stop yet. People who have not invested in the stock market may see their value of the cash or savings getting lower as commodity prices increase along with the cheap money floating around the world.

Source: http://online.wsj.com/article/BT-CO-20131219-710800.html

Next year, SMRT announced that they may increase fares to keep their business sustainable. This is an indicator of inflation.

Source: http://sg.news.yahoo.com/fare-hike-proposals-submitted--ptc-105820955.html

The amount of money printed is close to about 3 times of what they printed previously, erasing debts too much to be repaid. When debts are reduced, the banks keep the borrowing costs low for enterprises or state-owned enterprises to lend cheaply to boost economy. This could led to the increase in share prices across the world, but the only thing that does not change is the value of the currency and the fundamentals of the company.

Companies that take in more loans to try to increase profits may not be able to sustain. It is because when operation costs far outweighs the profit, no matter how much loan the company take to improve profit, in the long run it will still incur losses due to high interest rates and operating costs.

Therefore, it is very important to look at the past performance of the company. Fundamentally strong companies, with this historical excellent performance will continue to do well while weak companies will continue to deteriorate.

It is the same principle why the rich gets richer and the poor gets poorer.

There are still good deals out in SGX for grabs.

Tapering! Should i enter?

Should we as investors care about Fed's tapering even if stock prices has gone down quite a bit? Low interest rates has certainly improve earnings across companies. There are certain companies with low debts or rather no debts and still maintain constant earnings.

Tapering will only affect those companies with high borrowing rates and will affect less for companies with low or close to zero borrowings.

As economic outlook improves, tapering might kick in to maintain or improve the strength of the currency.

When it doubt do not enter the market, there are still uncertainties ahead and nobody knows what will happen next.

2 REITS have entered the Australian Market

AIMS AMP Capital Industrial REIT plans first Australian acquisition

Source: http://www.theasset.com/article/25629.html#axzz2lkKTuyag

Suntec REIT buys Sydney office tower for S$481 million

Source: http://www.todayonline.com/business/suntec-reit-buys-sydney-office-tower-s481-million

Australian's economic prospects

Australia's Treasury Secretary Martin Parkinson said it would be "prudent" to raise the legislated debt cap from 300 billion Australian dollars(US$282 billion) to A$500 billion, given a worsening economic outlook as the country grapples with the end of a decade long resources boom. But the Labor opposition, swept aside in September elections dominated by a slowing economy and rising unemployment, rejected the request, joining forces with the Greens party holding the balance of power in the upper house to block the move. They have offered to approve a A$400 billion cap on borrowing instead.

Source: http://www.nasdaq.com/article/australia-sees-grimmer-economic-outlook-amid-debt-row-20131120-00070#ixzz2lkPtQzXc

The increase in debt limit will means that inflation rates are set to soar in Australia while interest rates remain low which favored foreign investors, especially in the property sector whereby huge loans are required. The acquisition of Australian Property from Suntec and AIMS would also mean that they could be taking advantage of the low australian currency to make acquisitions which could profit or save the company money and these money could be used to pay the loan's interests.

When is a good time to buy?

I have no answer to my own question but i might be able to predict the period of dropping using graphs.

Let's look at 2 stocks that i might want to buy and based on a 5 year average determine the period to purchase the stock.

Color code indications:
Red - Aug-Sep
Black - Feb-Mar


HK Land

Source: Bloomberg

SATS

Source: Bloomberg

However, it does not always happen for all the stocks. It just happened that these 2 stocks show slight similarity in their drop periods.

Both stocks showed that their major drop in share prices happened between August to September.
It would be good now to wait till February to see if the tapering announcement in January really kicks in or will the Fed continue on their monthly bond purchases and keeping interest rates low.

China's hidden debt problem

China's shipping dragon rests where the Yangtze River flow towards the sea north of Shanghai, which was previously the rising nation's biggest private ship builder became quieter on a recent morning whereby China Rongsheng Heavy Industries Group Holdings Ltd's 38,000 employees went jobless as the the company struggled to stay afloat over the past 2 years. With 80% of the employees being sacked, the restaurants and shops serving them have since closed.

After accumulating $4.1 billion in debts, Rongsheng seeked a government bailout is a example of a company overly invested that have gone bust.

Source: http://www.businessweek.com/news/2013-11-18/credit-driven-china-glut-threatens-to-turn-into-bank-debt-crisis

Many of China's companies are facing these issues as the domestic consumption of the population remained low and bank funding to companies not being able to land in the correct place.

People of china sees property investment as the safest form and would save up to buy a property which have already inflated a bubble in the China's property market, therefore affecting domestic spending.

The company funds that were borrowed did not contribute effectively to the economy because of the lack of demand for products and services, but the CEOs and the directors were still being paid. These people became richer and those funds that they earned goes into other parts of the world while the company's financial position is in a bad state. This is one of a similar occurrence that happened during the Lehman Brother's financial crisis whereby bankers were so well paid that even if the company went burst, the employees benefited from it in the expense of the company.

The problem had been hidden by the China's government though, but when it became too big to be hidden, the financial world will take a huge plunge.

Suntec REIT buying an office tower in Australia

News of Suntec REIT acquiring an prime office tower to be developed in Australia for A$413.2 million cause the share price to drop ~2% on last friday.

A further 1-5% may be expected to drop next monday as this stock as the debt ratio nears 40%.

Although this acquisition is expected to generate more returns for unit holders, in the short term, will affect the group's net income as acquisition costs will be funded by borrowings. Coupon payments will be issued to unit holders during the construction phase of the tower to mitigate lower DPU.

Source: http://www.channelnewsasia.com/news/business/singapore/suntec-reit-acquiring/888214.html

Funds movement

Global fund movements might have caused the STI to be slightly weaker than it was suppose to be. Last friday, the Dow Jones  Industrial Average gained 1.08% while the STI dropped 0.78%.

More funds have been moved to the US in favor of the bond purchases by the Fed and  although investors are anxious about a taper in bond buying, they are still very positive about the US market. The continuous bull trend in the US might be causing a bubble that could burst anytime with a 5 year high Dow Jones, S&P 500 and NYSE. What goes up must go down.

If more investors get positive about the US markets, funds may be withdrawn from Asian markets as Asian stocks get more expensive.

Be on the lookout for some good deals in the STI if it continues to drop further.

Semiconductor companies report better earnings

Hi-P

Report quarter profit increase of 5.2%
YTD profit increase of 771.1%

Serial System

Report quarter profit increase of 35%
YTD profit increase of 40%

Source: SGX

These 2 companies may not be a good indicator that the semiconductor market will continue to do well in the next 5-10 years but is able to show some indication of a positive pickup in the industry in a short term perspective.