Federal Reserve may not start tapering QE in Sept

I post warning  on Aug 2 (STI @3254) and Aug 13 (STI @ 3244).I hope you share my concern.

Markets are going down as more concern on Federal Reserve may taper QE in this month. But I think the possibility is low. Today 10 year Goverment bond yield 2.9%. If it happen, bond yield may go beyond 5%. Both USA government and Economy could not afford this. Therefore Feberal Reserve would continue to buy bond till it's yield stabilised at 2%. But this will allow foreign banks and central banks to off load their USA bond back to Federal Reserve's account. And further inflate Federal Reserve's asset holding.

Strategy : HOLD. Price are too high to buy. QE's effect are temporary. Once QE is tapering. Markets will not look good.

BTW, I like Cambridge Industrial REIT. It is trading at $0.65 (NAV price). I downgrade my forecast target price from $0.63 to $0.60.  Industrial properties are too expensive. After many round of cooling measure, properties price will stabilise. i.e. REIT's future earning will be affected. And I shall deserve more discount.

STI looks OK. But not for HSI and DJI. Unless STI could perform outstand both HSI and DJI. Otherwise, this is not right time to buy

DJI at the beginning of an correction. If QE will continue, the adjustment shall be restricted.

Stay away from Singapore Stock market now

Last night USA DJI closed at 15419 around 239 off 52 week high 15658 or 1.5% below peak. 1 year ago DJI was 13169. It increased 17% this year.

Nikkei 225 index is trading at 13867 now. On 1 Jan, it was 8885. This year Nikkei go up by 56%.

Strategy : Stay away from Stock market now. Waiting for price to come down. Up side is restricted but down side could be painful

Nikkei is too high. Any adjustment will trigger sell off for profit taking. Biggest Risk is Japanese Government may delay increase in GST. Or economy may grow slow after GST increase. If it was happened, market would respond and drove STI down together.

The best scenario would be Japanese increase their GST without slow down economy grow. But this is a remote possibility.

QE is very expensive tools "to buy time"  . The longer QE policy was running more painful to withdraw. Japanese's problem is their population ageing which can not be resolved by QE policy. People are getting older everyday. Japan started their QE in 2000. It did not help. Now they want stronger QE. I see no different.

From my point of view, Japanese are paying for very high price for short period of prosperity. Bigger QE require Bigger borrowing. Not too soon they could be running out of fund. Bond interest rate could rocket and Japanese had to rise tax and cut spending. And Japan would be forced into a deeper recession.

STI lose direction

Singapore Stock market continuously affected by USA Japan and China.

USA economic slow down. i.e. QE shall continue in short term. QE is easy to start but difficult to tail off. QE provide temporary boost in economy during bad time only. But it will not change fundamental. Once QE tail off. Economic will perform according to their fundamental. Before 2010, USA economy had to power up their war machines. And housing bubble provided the support. Now USA army are withdrawing from oversea. And military expenses may reduce. Can USA economy rise again after housing bubble bust ? I hope the answer is Yes....

Japan failed in their 1st round QE which was started in March 2001. They started their 2nd round of QE recently. But Japan Government debt is too high. Their tax revenue not enough to pay for increasing debt interest. Unless they could increase their tax revenue e.g. increase GST.

Japan interest rate is always near zero. Their M2 GDP ratio is 240% while USA is only 89.9%. Japanese have too much money supply  in Japan. In this case, QE will have little effect over  interest rate. QE may lower down exchange rate. If it happen, inflation increase. Material and energy cost will also increase. With increase in production cost, export price may not lower as much as expected. Therefore increase in export may not be too excited. When companies earning can't compensate the loss in exchange rate. Foreign investment will be reduced. Japanese companies will be motivated to invest oversea instead of Japan.

QE will not improve Japanese fundamental. Every round of QE will result in more government debt and it will be more difficult for the next round of QE. Unless Japanese could improve their economy fundamentals at the same time. This round of QE will only provide a short period of good time in the expenses of their next generation.

China is slow but steady. I will continue to invest on Chinese banks

Singapore market is slow and lose direction. REITs price are going down. We shall monitor closely and I shall start to buy if price discount for further 10% e.g. Cambridge if fall to 0.62. I will start to buy.

Singapore Stock strengthened by China's PM Lee 7% grow bottom line statement

Asia stock markets were strengthened by China's 7% grow bottom line statement.  China's economic may avoid hard landing. And China Government could inject more projects e.g. railway network expansion to power up economic grow.

"The bottom line for economic growth is seven percent, and this bottom line must not be crossed," China's PM Li told a meeting earlier this month, the Beijing News reported.

http://www.channelnewsasia.com/news/business/international/china-s-pm-li-says-7/753080.html

 Monday STI is stronger than expected. And it close above the support levels.


                 23 June closing               Moving average 10/5 cross over          Stochastic drop below 80%
STI           3253.56                          3235                                                   3232

Technical Analysis show that STI are 20 point above turning points. Unless STI could hold above 3235, Singapore market could turn weaker.

Technical Analysis are measuring market moment to forecast market trend. But it can't predict surprise events / policy changes. Monday STI went up was happy surprise

Singapore Stock STI - is turning weak.

In my 1st July post STI at 3147, Technical analysis predicted an uptrend and suggested to buy. And market went up to 3258.

Today Technical Analysis show an advance warning that STI may turn downward.  STI is 3208 now but Stochastic 80% is 3231. And 5 days moving average may fall below 10 days on coming Monday 22 July 2013.

I sell stock today. I sell China Bank ICBC and Geylang Bond to increase my cash level.

STI chart show market may start to go down

HSI also show similar weakness. Monday could be market turning point.

DJI are strong but it is too high. And investor may profit taking

Today is the DAY - market go up confirmation

Today HK HSI re open after 1st July public holiday.

Latest HSBC China PMI below 50% i.e. China's SME slow down. HSI go down 0.39%  at 12:26pm. As long as HSI don't close below 19900. Today will be the day of reverse confirmation. Market will go up.

Singapore Stock signal rebound

There are too many external force affecting Singapore stock market. We can't just look at our own market while it is driven by external factors. Let's look at HK's HSI  

Hong Kong HSI closed at 20,803 in thinner trading volume. However, performance is better than expected. If Monday stock did not fall below 19900, 10 days and 5 days moving average will be across and sign rebound.

Yesterday's HSI trading volume is HK$2.3 billions. Which is 89% of 10 days' average volume. DJI closed lower on Friday. Market stock may go lower. However, as long as HSI end above 19900. Market will continue to recover.

Better data from Japan last Friday.

China's cash crunch is improving.  China central bank will keep Chinese Banks' cash flow at lower possible level. And force banks to withdraw their money from Shadow Banking system and other finance vehicles. It will stabilize Chinese Bank in long run. But short term pain is lower non interest income.

USA GDP grow slower than expected. Federal Reserve may delay tapering QE and let easy money to flow into world markets longer time.

Markets are heading toward brighter future. I find Singapore Stock's PE and Price/ NAV are NOT too attractive. I will continue to buy Bank of China and ICBC. I am expecting 20% return in one years.



  

Could start to buy in Slowly

Market start to rebound. Stochastic analysis show market start to rebound. Unless HK HSI fall below 20000, MACD shall turn into rebound signal in next Wednesday. And this will confirm market rebound.
 
I am busy buying in. Allow me to explain further during week end.

Singapore stock index STI fall below 3100 - too early for bottom fishing

STI closed at 3074. Hong Kong HSI closed at 19813. On my previous posts dated 16 and 20 Jun 2013, I suggested investors to wait.

My suggestion is the same today. Wait until technical indicator to show rebound signal. (refer to my post on 20 June)

Today's bigger news is Chinese Banks credit crunch. Interbank Rate went up to 10% (may be over 10%).  China central bank PBOC instead of inject needy cash into banking system. but they drain away more cash by issue new bond. Apparently PBOC want to teach all Chinese banks "Watch how you lend" lesson. In order to reduce the size of "shadow banking" system. PBOC have all necessary tools to contain the problem. It shall not turn into crisis.

Investment fund is exiting Asia. Downside risk is high. Too early for bottom fishing

Don't buy Singapore REIT drop now - too early for bottom fishing , wait for technical rebound signal

I remind the risk of capital outflow and inflated Asia asset in my previous blog. I recommended to sell in May. And I sought some of my stock before crash. In my latest post. I suggested to wait for confirmation indicator before buying. 
 
Singapore Stock is affected by US Federal reserve Chairman's QE tapering announcement. Which is an external factor.

Hong Kong Hang Seng index are commonly used as Asia stock indicator (Asia outside Japan).

From my technical analysis.

1st bullish indicator when HSI break through 20815 (stochastic 15 days) 
2nd bullish indicator when HSI break through 22579 (moving average 5 days cross over 10 days)

HSI today is around 20300. 1st indicator 20815 looks ok but it is too far away from 2nd indicator 22579. 
We should wait till HSI above 1st indicator and close to 2nd indicator.

Don't buy now.

Buy Singapore stock below 3100 ? - wait

On 2 May - I agreed with" sell in May". On 28 May I sold 30% of my stock. On 6 June I predicted that STI would drop below 3100. and it happened on 14 June.

And I suggested to monitor foreign fund flowing by Philippine Peso exchange rate.

PHP drop further from 42.2 on 5 June to 42.85 today. Foreign investment fund continuously flow out from Asia.


We can't decide unless we knew what was happening. 

Foreigner invested Asia trust funds. And those fund were trading both Asia stock and currency. In 1H2013, funds bought Japanese companies share and selling Yen. They drove Nikkei up more than 50%. Yen went below 100

Asia trust fund earned a lot money. It worked so well until 23 May. Yen reverse it's falling and went up. Yen exchange trading cause huge loss. They were selling share to cover their loss. And Nikkei fall. Foreigners withdraw from trust funds. It caused Asia markets to go down further. 

Japanese bond crisis become our new focus.

In past 20 years, Japanese Government relied on issuing bond. Total Government debt is around 250% GDP.  In the past, interest rate was low which was around 1%. But the total debt amount is huge. Therefore bond interest cost 25% of total Government revenue. 

The new PM decided to drive interest rate down further by double the amount of their QE progromme to 7 T Yen. Lower interest rate would promote spending and investment. It could reverse deflation into 2% inflation. Small amount  of inflation may promote economic grow.

Government bond with less than 1 % interest. If inflation would go up to 2%, bond holder's real interest rate will be 1% - 2%= -1%. Investors want to sell their bond immediately. Central bank's 7T bond purchasing can't meet sellers demand. Bond seller drive up both interest rate and currency.

Only when Bank of Japan could buy all seller's bond. Interest rate and currency will remain at high level. 

No quick fix available. And market should go down further. 
  

Nikkei 225

Strategy : Actually monitor market and waiting for technical analysis market reverse confirmation. e.g.  Nikkei 225  Stochastic value go beyond 20. Buy slowly



  

When does Singapore Stock - STI bottomed out ?

When does Singapore Stock market STI bottomed out ?

Foreign fund exit from ASIA. We may not know actual amount immediately. But Asia currency exchange rate could be an indicator. I choose Philippine Peso which shall have lesser central bank intervention than our almighty SGD.

Today Peso exchange rate stay at low level 42.2 PHP to 1 USD. It may signal foreign investment fund continuously outflow from Asia.

When does STI bottomed out ? I may start to buy when STI go below 3100. 3000 shall be very strong support level

Similarly to HSI, I will start to buy when it reach 21000. Strong Support at 20000

 Beware of big Chinese banks book closure date. They are concentrated on June. They only pay dividend once a year. Banks share price may drop 5% after book closure date. HSI will drop accordingly. I factor in those effect.

Beginner's guide for new stock investor - Stock selection

  Beginner's guide for new stock investor

- Timing - refer to my previous post

- Stock selection

They are hundreds of stock trading in Singapore Stock exchange. You can start your select from

1. Company you like ? e.g. if you like beer, you may like F&N
2. Company you are know? e.g. banks, MRT....
3. Company within STI index components.

Don't buy company which you don't know their business ? e.g. High tech research company. You can buy Google which you know their business. 

After you shortlisted some companies, you shall start to do your homework i.e. fundamental analysis.

1. PE                      Not more than 15 lesser is better
2. Dividend Yield    Not lesser 3%  more is better
3. Quick Ratio       Not lesser than 0.5, more is better
4. Price / NAV      Not more than 1.5, lesser is better

If you can talk with companies' customers about their business, it will be better. Read their reports especially their market Outlook page. Never buy stock only because you believe that it will go up. e.g. someone suggest a company to you, you shall do your homework. Don't just rely on someone.

If you use fundamental analysis to compare between Facebook and Google. They can tell which one is better. I pick a number of companies from analysis. And wait for buying opportunity

When the TIMING is right, you could use technical analysis methods e.g. probability, stochastic chart ..... to determine your buy in  price. Technical analysis can improve your earning. However, overall market position are more important than technical analysis.  

If you are looking for quick return, the above method will not work. When someone sell their stock to you, they may think that is good price. You can have quick profit only if seller is wrong.

Company are growing. Share price will normally go higher with their profit grow. Therefore It take time to grow investment return.

Buy low, review companies' finance ratio and allow time to grow your return.

Why Singapore REIT drop so badly ?

Today Singapore industrial REIT drop around 7% e.g. Cambridge industrial REIT.
Fortune Reit a dual listing stock in both HK and Singapore drop nearly 7%.
The Link REIT one of the bigger commerical properties REITs in HK. It drop nearly 4%.

I invest heavily in Singapore industrial trust since 2010. I never experience such heavy drop.

Causes of  correction.
1. Margin call is NOT the main reason. I confirm with my stock broker that most REITs investors are cash rich. They buy in cash not margin trading.
2. Profit taking. REIT perform too well recently. Any correction will trigger profit taking
3. Outlook for properties are health. However,with after Singapore Government's cool down measures.  And market is expecting that US federal reserve may reduce size of QE. In result, Singapore properties market will not grow as quick as past 2 years. But REITs are trading 20 to 30% above their Net asset value. They may be consider as overvalue. Although their PE is only 10, REITs always include property value increase as their earning. If properties price don't appreciate as quick as last year, REITs earning will reduce. i.e. PE will go up.
4. Foreign investment outflow

US$ exchange rate peak at 23 May and today. Industrial REIT dropped 7% on 23 May and so also today. US$ exchange rate peaks and REIT drop on the same day. US dollar and stock are going up. Which may look more attractive than Singapore REIT. Foreign fund Sell REIT and buy US$ to send oversea.

My opinion is that correction could slow down when stock price is reasonably reflect its' net asset value. It could be 10 to 20% down from today.

Strategy:
 Sell in May. Hold on with your cash and bond. 

Sell in May - Part 2 stock sold

On my 1st post "Sell in May" dated 2 May. I recommended to sell stock and buy bond. And my another  post dated 23 May "Withdraw of QE will not crash USA market" . My opinion was "market over react" to Federal Chairman's announcement. I bought REIT with 7% discount instead of selling.

After market recover on Monday and Tuesday, I sell 30% of my stock included REIT.  My opinion remain in "Sell in May". Reasons are

1. USA market reach record high, upside is restricted but not downside. World markets are interacted. Singapore market will follow.
2. Markets are expecting that US$ go up further. US asset will look more attractive. i.e. investor may sell Asia $ asset to buy US$ asset
3. China share ,especially all major Chinese banks, their dividend book closure date are concentrated on June. They pay dividend once a year. Therefore dividend amount are more than those shares pay 4 times a year. After book closure, dividend will be deducted from Share price. Share price will look like drop 3 to 5%. It may trigger margin call selling. Besides, China share will normally go down after book closure. This year may be the same.

My strategy

 Sell in May. Maintain high cash and bond level.  Buy Bank of China after book close on 7 June 2013 

Shall we buy SPH Reit ?

SPH will put 2 Malls into their new Reit. "SPH plans to hold 70 per cent of the units in SPH REIT, whose assets are the Paragon shopping mall in the city-state's prime Orchard shopping district and Clementi Mall in a western suburb" - asiaone.com


My option is that it is good for SPH shareholders. SPH net asset value and cash will increase.

Whether SPH REIT be an good investment ?

Paragon Shopping Mall will be leased 99 Yrs to REIT. Valuation of free hold properties are high in result rental return ratio is lower. SPH REIT major investment will be Paragon. Which may hint to lower distribution yield ?

Too many shopping malls in Orchard Road. Paragon Mall located further away from Orchard MRT station. Paragon's car park is always full. It is not easy for shoppers to go to Paragon Mall. My guess to SPH REIT yield could be around 3 to 4%. It may be difficult to grow rental in Paragon especially Orchard Road. Rental increase could be 1 to 2% per year.

New SPH REIT announcement may help to improve sentiment after last Thursday 7% drop in REITs price. I will be concentrating in well perform industrial REITs. Which provide 6% rental yield. Industrial rental is cheaper than any other properties. $3 psf increase 10% is $3.3. It is still affordable. Industrial REITs yield will continue to grow faster than any other REITs. 


http://www.asiaone.com/News/Latest%2BNews/Singapore/Story/A1Story20130527-425476.html
http://www.fool.sg/2013/05/its-a-deal-sph-to-spin-off-properties-into-reit/

Please visit my sponsor website
www.cncmaid.com  One of the best maid agency

Withdrawal of QE will not crash USA stock market

Today Federal reserve announce that it may withdraw from QE. Asia markets drop

My 1st post on 2nd May "Sell in May". I predicted correction will happen. And on my "Inflated asia asset" dated 7 May. I recommended to sell stock and buy bond.

Correction happen today. But I think markets are over reacted with the news. QE will not slow down in next 3 months. USA employment rate start to recover. But it is too early to confirm the trend. QE will be continued until employment market turn more health. It may happened in 4Q 2013. Employment rate is related with companies performance. Health employment rate require health companies earning. QE will withdraw at the same pace as earning and employment improvement. The effect of QE withdrawal shall be little. Federal Reserve will not allow QE withdrawal to crash the USA market.

Federal Reserve's statement signal low interest rate driving is nearly over. And Market shall be powered up by improving cooperate earning.

I buy REIT (Cambridge, Sabana) in Singapore Market today. With 7% discount, it seem to be good deal. I guess Monday 27 May 2013 market shall be stable. REIT will recover some of their lost. I shall have enough time to unload my stock and buy bond.



 

Beginner's guide for new stock investor - Timing

Beginner's Guide for new stock investor

Timing

 

I concluded all my painful lessons in investing. Timing in my top priority.

 

If market index was near 52 weeks high, you should stop buy in any stock. It could be too expensive. However, many investors think otherwise - buy high will go higher. This could be true for a short period of time. But it was so expensive, upside would be little but downside was terrible.

 

If market index was near 52 weeks low. You should buy in actively. Market could go down further. But upside is rewarding. There must be reason to be afraid. Investor are willing to sell to you at lower price when market believe it would go lower. 

 

It need a lot of courage to buy at low. Test yourself  in next market low (May be in 2013 July ?)

 

 

Beginner's guide for new stock investor

There are a lot of books about investment. Beginners are drowned with information. So I try to put this guide as simple as I can

1. Timing - Buy at low. Wait for the right timing

2. Source for the right company share to buy. Low P/E and Low Price/ NAV ratio. But high dividend

P/E shall be around 10
Price / NAV less that 1.5
Dividend Yield shall more than 3%

3. Buy at low price and hold on for long term benefit.

Inflated Asia asset

With excessive liquidity and low interest rate, Asia asset e.g. home price, stock ... are inflated. Some Asia government e.g. Singapore, Hong Kong and China put restriction in loaning.

But it is not good enough. Asset price was pushed up by low interest rate. Government restrictions slow down transactions. Some investor plan for quick profit. But now they can't sell due to government restrictions. They can hold on as long as interest rate are low.

However in 2 years time, a lot of new units will be completed. While interest rate may go up. Some investors will not able to serve their loan with high interest rate. Non perform loan will increase. And banks tighten new house loan. Property price will go down further. Company profit affected by high borrowing cost and falling property price. Share price will go down together with property price

Strategy: Sell stock & property, buy Singapore bond and China stock

Save the trade imbalance world - Arise! All those who don't want to be slaves! -

Chinese lyrics : Arise! All those who don't want to be slaves!

ECB cuts its main refinance rate to 0.5%. Devaluing Euro, USD and Japanese Yen will slowly improve trade imbalance. However, the world trade imbalance will be not fixed until "arise" of Chinese consumers.

China export many products at very good price. Countries will be continue importing from China. Only when Chinese internal demand increase. China will increase their import. And their export price will be  driven up by strong domestic demand. As a result, export will slow down and import increase. Trade imbalance will improve.

Shall we give our blessing to all Chinese consumers ? I think I will ...

My recommendation: Maintain 20% cash 30% bond 50% stock

Sell in May. Yes history may repeat this year in Singapore

Sell in May, run away. Will it be the same this year ?

Most companies released their 1Q result and their dividend book close in April. No further good news to push Singapore stock market.

I guess market will correct in May as last 3 years.

But bear in mind world economic are slowly recovering.Unless WAR or SARS like disease outbreak. This year's correction would be mild.

Investors are taking precaution. OLAM bond R9JZ go up from S$0.95 to S$0.99. Genting Bond P9GZ go up to S$1.05. They are switching from stock into bond to lock their profit.

My focus is bond / REIT ... old man stock .. Ha Ha