Did we miss out something?

Sometimes, we are engrossed in the matured markets and may miss out chances in some of our emerging markets, in this case - Malaysia? 

Notably Malaysia has been performing relatively well in the IPO markets for this year with homegrown palm oil firm Felda Global Ventures’ ~$3.3 billion listing in Malaysia, IHH (Q0F.SG) dual listing in Malaysia and Singapore on 25 July and the next big IPO to look forward is 1Malaysia Development Bhd, said to plan to raise as high as $2 Billion in its IPO of its power assets (full article here).

Here's an article from Fundsupermart on some insights as well:

Full article here: Malaysia: Near All-Time Highs, What's Next?

While market is on the uptrend, we advocate investors to examine the fundamental factors that support the rally before they jump into the market. Our advice to investors after examining the fundamentals is to consider switching some of their investments to 5 star markets such as China, Hong Kong and South Korea.
 Key Points

• Imports growth for major trading partners has been softening;this indicates that Malaysia’s exports are likely to slow given the poor external demand
• Domestic consumption and private investments are expected to remain as the only major contributors to economic growth
• Sturdier current income, better outlook for income and employment as well as easing in inflationary pressure are most likely to support the expansion in consumer spending going forward
• The roll-out of projects under the Economic Transformation programme is likely to sustain the private investment
• Putting this all together, Malaysia is expected to grow by 4.0%-4.5% in 2012 after expanding 5.1% in 2011
• Bank Negara Malaysia (BNM) is expected to maintain an accommodative interest environment to support the economic growth with Overnight Policy Rate (OPR) remains unchanged at 3.0% for the remainder of 2012
• We believe that the current level of FBM KLCI has priced in the negative impacts of economic slowdown and lower earnings growth
• With forward PE of 15.3x, 13.8x and 12.7x based on consensus estimated earnings for 2012, 2013 and 2014 (data as at 23 July 2012), the upside potential for 2012 seems to have normalised based on a fair PE of 16x
• In the near term, external headwinds from the European debt crisis as well as the uncertainties that may arise from the 13th General Election could create a short-term consolidation, especially given the strong recent run-up in the Malaysian market
• Our advice to investors: rebalance their portfolio and to consider switching some of their holdings into more attractive markets such as the Greater China region and South Korea

Almost 3 Weeks of Fresh All-Time Highs

After the mild correction in May, the Malaysian equity market (represented by the FBM KLCI) regained its momentum and continued to trend up. The FBM KLCI closed at a fresh all-time high on 3 July 2012 and continued its rally to new record highs for almost every trading day. On 19 July 2012, FBM KLCI climbed to its highest level of 1647.94 points on an intra-day basis (refer to Chart 1).

Chart 1: FBM KLCI and trading volume

As at 23 July 2012, FBM KLCI gained 2.3% on a month-to-date basis and the rally was supported by heavy index weighted telecommunication, plantation and banking sectors. Over the same period, these three sectors gained 5.8%, 3.7% and 3.0% respectively. Year-to-date, telecommunication sector surged 23.3%, while plantation and banking sectors gained 7.8% and 7.1% respectively as compared with a 6.9% gain in FBM KLCI (refer to Chart 2 and 3). 

Chart 2: Month-to-Date returns

Chart 3: year-to-Date returns

Stocks End Higher for 6th Week; Apple Jumps

Dow has been threading up for the past one week with thin volume and major Europe indexes has hit new highs. Are we expecting more good news to come for this quarter?

Quote from CNBC:
Stocks finished higher in a tight-range session Friday, with the Dow and S&P 500 logging gains for the sixth-consecutive week, following a pair of better-than-expected economic reports.

All three major averages have rallied more than 10 percent since hitting their intraday lows on June 4.

Major U.S. Indexes

	Last	Today's % Change	1 Week % Change% Change	MTD % Change	YTD % Change
Dow	13275.20	0.19%	0.51%	2.05%	8.66%
NASDAQ	3076.59	0.46%	1.84%	4.66%	18.10%
S&P 500	1418.16	0.19%	0.87%	2.82%	12.77%
Russell 2000	819.89	0.84%	2.29%	4.19%	10.66%
CBOE VIX	13.47	-5.74%	-8.62%	-28.84%	-42.44%

The Dow Jones Industrial Average gained 25.09 points, or 0.19 percent to close at 13,275.90, but a few points below its closing high of December 2007. The blue-chip index traded in a tight 36-point range, its narrowest in more than two years.

The S&P 500 eked out a gain of 2.65 points, or 0.19 percent, to finish at 1,418.16. The Nasdaq climbed 14.20 points, or 0.46 percent, to end at 3,076.59.

Full article here: Stocks End Higher for 6th Week; Apple Jumps

Facebook Second-Worst IPO Performer After Share Lock-Up

Facebook (FB) Inc.’s 6.3 percent drop yesterday, after the end of restrictions on share sales by its biggest investors, was the second-largest post-lock-up decline among companies that have gone public since January 2011.
Only social-game maker Zynga Inc. (ZNGA) tumbled more, losing 7.9 percent, on the first day that insiders could start selling their stakes, data compiled by Bloomberg show. That was the largest one-day post-lock-up descent among the 20 biggest initial public offerings since January 1, 2011. The slump yesterday left Menlo Park, California-based Facebook at a record low after a 60 percent increase in the number of shares available for trading.
Under restrictions worked out with IPO underwriters, early investors agree not to sell their holdings for a preset period after a market debut to keep from flooding the market with shares. Facebook’s decline reflects concern that more sales will follow in the coming months as additional lock-ups expire and as the company struggles to wring sales from a growing customer base, said Rory Maher, an analyst at Capstone Investments Inc.
“Anytime you have a lot of shares come out on the market like that, it’s going to put some pressure on the stock,” Maher said. “They’re still figuring out the best way to optimize their core business. And they haven’t quite done that yet.”
Facebook, the world’s largest social-networking service, advanced to the equivalent of $20.13 at 11:20 a.m. in German trading (FB2A), after dropping $1.33 to $19.87 at the close yesterday in New York.

Lock-Ups End 

 

The shares freed up yesterday represent 14 percent of the 1.91 billion that will become available for sale in the coming nine months. The next expiry comes between Oct. 15 and Nov. 13, when restraints are removed on about 243 million shares. Lock-up expires on about 1.2 billion shares on Nov. 14, and for 149.4 million shares a month later. A final round comes May 18, 2013, with 47.3 million shares becoming available.
Early Facebook investors such as DST Global Ltd., Goldman Sachs Group Inc. (GS), Elevation Partners and Accel Partners could start selling part of their holdings yesterday, Menlo Park, California-based Facebook has said in filings. The restriction was lifted for early investors, excluding Facebook Chief Executive Officer Mark Zuckerberg, who sold part of their holdings in the IPO.
Facebook shares have lost 48 percent since the May 17 IPO. Even so, some investors probably aren’t convinced that the stock won’t fall further, said Erik Gordon, a professor at the Stephen M. Ross School of Business at the University of Michigan.

Yelling ‘Fire’ 

 

“It might not be rational for the shareholders to sell all at once, but when someone in a theater yells ‘fire,’ people don’t act rationally, they stampede to the exits,” he said. “It might be fatal to your career to be viewed as the last chump to get out.”
Microsoft Corp. (MSFT), based in Redmond, Washington, will probably hang onto its stake after the lockup-ban lifts, a person with knowledge of the matter said on Aug. 10.
Microsoft views Facebook as a strategic partner in the combat against Google Inc. (GOOG), rather than as a near-term moneymaker, said the person, who requested anonymity because the plans are private.
Other investors have been preparing for potential sales. Director Peter Thiel, who sold in the IPO, has given himself added flexibility to unload more holdings, according to a regulatory filing. Thiel, one of Facebook’s earliest investors, converted more than 9 million shares to Class A from Class B. Class A shares are easier to sell on the public markets.

Sales Slowdown 

 

Facebook has grappled with concerns about its valuation after reporting sales growth of 32 percent in the second quarter from the year-ago period, down from 45 percent in the first quarter and 55 percent in the fourth quarter. The second-quarter gain was dwarfed by a surge in spending on marketing and sales, which ballooned to $392 million.
Part of Facebook’s challenge is making money from the growing slice of users who access the social network over mobile devices. During the second quarter, the number of ads delivered in the U.S. dropped 2 percent from a year earlier even amid an increase in total daily users.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net
 
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

Source: Bloomberg 

It's been a while..

since i posted any information and updates in this blog due to my new job and working hours has been longer and longer. Even so, I do still look at the markets at times and will be posting some insights shortly during my free time!

Idea of the Week: Looking For a Singapore Equity Fund? [10 August 2012]

Despite the strong year-to-date performance of the Singapore equity market (+18.3% year-to-date as of 7 August 2012, in SGD terms including dividends), the market still sports attractive valuations: the STI currently trades at estimated PE ratios of 13.9X, 12.8X and 11.5X based on 2012, 2013 and 2014 earnings respectively, a hefty discount from the 16X longer-term average.

Investors seeking exposure to the Singapore equity market have a huge array of products to choose from, with 15 funds invested in Singapore equities available on the platform at the time of writing. In this week’s Idea of the Week segment, we highlight a few interesting product ideas amongst the Singapore equity fund offerings on the platform which may appeal to different investors.

1. A High Conviction Fund with a Strong Track Record: Aberdeen Singapore Equity

Investors seeking a Singapore equity fund with a strong track record may wish to consider our recommended Singapore equity fund, the Aberdeen Singapore Equity. The fund has outperformed the STI in 2012, delivering a 23.7% year-to-date return, outperforming the STI’s 18.3% gain (on a total return basis). Longer-term, the fund has delivered strong alpha over its benchmark, the STI, and was also the best-performing Singapore equity fund over five years (as of end March 2012) in our recent recommended funds assessment exercise.

Chart 1: Outperforming the STI over 5 years

The managers adopt a high conviction approach to stock selection, with the fund’s latest factsheet (as of 30 June 2012) indicating that the fund’s top 10 holdings made up a hefty 65.2% of the portfolio. Fortunately, such concentration has not hurt the fund’s resilience in the past, and investors will note that the fund’s holdings tend to deviate significantly from the benchmark, endearing it to fans of active management. As an example of the manager’s willingness to be benchmark-agnostic, the fund managers have not held shares of DBS Group (in spite of the stock having one of the largest weightings within the STI) since 2001, when the bank made a costly acquisition of Dao Heng Bank, prompting the managers to pare down exposure to the bank. The managers only initiated a small position in DBS Group more recently in 2010, and currently, the fund’s latest factsheet indicates a 4.5% allocation, lower than the benchmark’s 9.5% weight.

2. A Low Expense Singapore Equity Fund: Nikko AM Shenton Thrift Fund

Amongst the many Singapore equity funds on the platform, the Nikko AM Shenton Thrift Fund stands out by having the lowest expense ratio. For the financial year ended 31 December 2011, the fund had an expense ratio of just 0.83%, a function of the low 0.75% ongoing annual management fee charged, the lowest amongst its peers. Benchmarked against the STI, the fund also has one of the longest track records (the fund was incepted in August 1987) for funds on the platform. Cost-conscious investors may thus find the Nikko AM Shenton Thrift Fund suitable for their investment needs, while the fund’s $500 minimum initial investment amount should also endear it to younger investors who are just starting out.

3. Dividend-focused Singapore Equity Fund: Nikko AM Singapore Dividend Equity Fund

The Singapore equity market’s 2012 dividend yield is estimated at 3.2% (as of 10 August 2012), fairly high in the context of historically-low 10-year government bond yields (1.40%), and is also higher than dividend yields on markets like the US (estimated at 2.2% for 2012) as well as the Asia ex-Japan region (2.74% for 2012). Our research has also indicated that dividends have made up a significant proportion of total returns from the Singapore equity market over the long term (see “The Importance of Reinvesting Dividends”), while the presence of a fairly large REIT market has increased the availability of higher-dividend equity securities on the Singapore exchange.

Investors who are interested in a fund which focuses on higher dividend-paying equities within the Singapore equity space may thus be interested in the Nikko AM Singapore Dividend Equity Fund, which recently (in February 2012) changed its investment focus to invest primarily in Singapore-listed equities which offer “attractive and sustainable dividends”. As a result of the fund’s new focus, the fund recently held 31.6% of its assets in Singapore-listed REITs (as of 30 June 2012), while the fund has also delivered strong outperformance over the STI in 2012, with a strong 27.5% year-to-date return (as of 7 August 2012, including dividends).  

Source: Fundsupermart

CITI Singapore Morning Pack, Thursday, September 09, 2010

Singapore Press (SPRM.SI): Buy: Company Visit; Attractive Despite Strong YTD Performance

Singapore Press (SPRM.SI -1L -S$4.18)

Market Cap S$M 6,663.36

Target: S$4.40

· Maintain Buy - After our meeting with mgmt, we remain upbeat on the stock and remain comfortable with our EPS forecast. Although stock has outperformed STI by c.10% YTD, we continue to like it as a defensive play and for its high yield.

· Print advert trend - Mgmt noted display ads' buoyant trend - consistent with Singapore's strong GDP growth - and is the key driver. Classified growth remains moderate while circulation stays lackluster. Despite concerns core earnings will slow with softer economic growth in 2011, we have already factored conservative growth assumptions for FY 2011-12E (2-3% YoY growth).

· Managing margins - Higher turnover, however, will be partially offset by increments in newsprint cost (US$529/ton in 3Q10 vs. current spot US$640/ton and US$612 in 4Q09) and reinstatement of variable bonuses. The rise in news print costs should be continual but gradual; SPH has locked in costs till Mar 11.

· Improving cash flow - The negative working capital position should reverse. In addition to the c.20% cash proceeds from its Sky@eleven project as at end May 10, receipt of another 65% following attainment of TOP will reduce trade receivables (3Q10: S$664mn vs. FY09: S$434mn) by year end, with remaining 15% to be received a year later. SPH has consistently positive free cashflow

· Retail Malls to be focus of Property segment - Mgmt noted focus will be in the commercial space, with less emphasis on residential projects. The preference for Retail Malls stem from the better margins involved and group's experience with Paragon and Clementi Mall. This is consistent with SPH's belief it can invest and capitalize on Singapore's population growth in the long term. Recently, SPH's bid for a mixed residential-commercial site in Bedok Town was 17.5% short of highest bid (S$789mn) tendered by 50-50 JV between Capitaland and CapitaMalls Asia.

StarHub: FULLY VALUED S$2.52; Bloomberg: STH SP

Perils on both ends;
Price Target : 12-Month S$ 2.20
By: Sachin Mittal +65 6398 7950

· We attended StarHub’s conference yesterday and came out assured about its preparedness in the consumer market.

· However, StarHub needs to be cautious of new entrants in the low-end SME market. In the high-end corporate market, StarHub may not have all the ingredients of the recipe yet.

· SME and corporate market account for an estimated 15%-20% of group earnings. Continuing with 20 cents DPS may turn group equity negative in 2012F. Maintain Fully Valued.

New products, services plus hubbing advantage. StarHub would launch a new device “StarHub Wireless Home Gateway” which would provide wireless connectivity for all Internet devices at home. The Company intends to launch “Internet TV” with content from its pay TV, so that its program can be viewed over PC or TV anywhere in the world. StarHub would also introduce
a new portal with latest multiplayer online games including F1 racing. In our view, StarHub’s content-experience and hubbing is a huge competitive advantage. SME and corporate market is a bigger challenge. StarHub will maintain its existing fibre network of over 2000 km in addition to the new National Broadband Network. The company plans to offer managed services through
alliances with various IT vendors as opposed to in-house IT competency of SingTel.

While StarHub has access to only 800 buildings compared to over 20K buildings in Singapore, we can safely assume that StarHub would have covered the bigger customers first. In our view, many SME customers would incline towards lower pricing where smaller players like M1 and LGA have an advantage, as they do not have existing margins to protect. In the high-end corporate market, customers prefer managed services involving IT and global connectivity. Our talks with industry players suggest corporate customers prefer vendors with strong in-house IT competency, as independent IT vendors typically work with multiple operators to maximize their returns.

(Document link: Singapore Research)

Shanghai May Levy 1.5% Property Tax on May 15, Hexun Reports

By Bloomberg News

May 13 (Bloomberg) -- Shanghai’s municipal government may levy a tax of up to 1.5 percent of the value of properties on May 15, Hexun.com reported on its Web site today, citing a developer who declined to reveal his name.

Several Shanghai-based developers have received “hints” that new policies are poised to be issued to cap property prices, and have begun to sell their properties, the Chinese-language news website reported.

--Luo Jun in Shanghai. Editor: Eugene Tang.

1 trillion dollar bailout for Europe

As what CNBC has shown, the bailout package for Europe is about 1 trillion! Does that sound familiar? I remember vaguely about the 700 billion bailout package about 1 year ago in USA and it has lead the market-dollar rally till now.

Anyway, this bailout package has caused the dollar to plunge massively to around S$1.377 which is near the initial FX rate I changed.

Currently with the US markets opened, it was up at 400+ points but right now at 9.49pm, it has only around 260+ points gained for Dow. Quite an exciting night though for the market as we embrace this bailout package..

History was created yesterday

If you stayed and see the US market yesterday, you would have witness history. Probably first time ever, dow plunged to a all time low of -980+ points before bouncing back. Not even lehman's collapse caused such a big fall.

Apparently there's alot of speculation that it was due to error trading. In fact, we can see that if it was an error trade, apparently most of the traders have their trade all computerized nicely to see trigger to domino effect. Once it broke past a certain level, every computer starts to sell, from A to Z! I guess not even any circuit breaker in NYSE could have prevented that auto trigger of selling though.

After this mega mistake, we could learn some good experience on this. I'm very sure alot of panic selling was triggered in various affected counters like P&G, Accenture. Accenture was the scary one though, dropping from $40 to $0.01! If i was holding or trading that, my heart will also fly out!

Recently my work project has cut over, thus I didn't have much time to update the daily market news from our local market, but nevertheless, our market cannot survive this massive plunge and has broken down back to the 2800+ range.

Do take note that we took about 3-4 months to even reach to this stage of closing in to 3000 mark. It took only less than a week to break it down? This feeling of depression seems to be kicking back into the markets, like in the month of end January and close to end 2008.

While the trigger was about Greece again, do take note that the news have mentioned Greece for like the 4th time at least over the past 7-8 months? I vaguely remembered the PIGS were mentioned in Oct 2009 and it caused quite a correction back then. Second time came in around Jan 2010 and in Mar 2010 as well if I remember correctly. This time round, the europe markets has really reacted strongly to the news from Greece and alot of thinking can be derived from this episode.

Greece is only like 1% of GDP in the whole of Europe, why would it cause so much damage to the markets? One being as a country, having a country to so call declare bankrupt is a big thing already. Next, the social unrest that it caused is limitless. Look at the rising riots that are happening in Europe due to this issue. My take is it is going to be a repeat of what the US govt did back then in 2008. Time to bail out the bankrupt countries by printing more money. Look at the Euro; it has plunged to a all time low to the USD. Apparently, most people have flee back to Gold and the dollar for safety havens.

I myself have bought some USD and have an average dollar of S$1.38 against US$1. Right now it is exchanging at around S$1.40 and I am predicting it to hit at least S$1.42 before some pullback occurs. If Europe is not solving this issue, I can see USD strengthening again while investors flee the euro zone.