Monday, 25 July 2016

Can S-REITs go up further?


All of the big 3 S-REITs (CMT, CCT and Ascendas) have registered about -2% drop today, as a result of some profit-taking action, after the rally post Brexit. 

Technical charts indicate that further price easiness in near team could be possible, especially for CCT. ( see charts below) Will this be a bump on the rising trend? or a reversal? My instinct is that the price will be range bound for now.  The final answer will be depending on how bond yield behave in future, and how FED make its rate decision in the remaining of the year.  The recent mini bull run for S-REIT is almost purely due to bond yield compression. Two logic paths both can explain the bull run for yield product especially REITS. 

I. Brexit--- economic uncertainty---central banks maintain or strengthen money easing policies --- more liquidity ---asset price up. 

II. Brexit --- risk of economic recession --- money seeks safe haven--- bond price up, yield down --- yield spread increase --- extra money move into yield products, especially big cap safe REITs. 

Even the third possible ( or more desirable) path could benefit REITs also.

III. Brexit --- new deal work out by capable leaders, political risks decreased --- economy up---employment and inflation improves---FED happily raise rate--- financial market adjustment---REITs price corrections due to new base scenario,but holds steady and grows as improved economy and rising inflation tend to draw money back into property.

So in any case, hold on to your REITs! Right?


It worth noting that some US REITs ( Realty Income Corp, or "O" , one of my long term US REITs holding, and some US Reits ETF) have gone up much more  than S-REITs during last few weeks' "bond yield compression bull run". The large cap S-REITS are more correlated probably due to big money funds exploiting arbitrage, while the small cap ones are mostly still back water.

But compared to liquidity, the more important thing to long term income investor is still the earning power of the assets, the quality of the management among other things such as supply-demand condition in property segments.

Only when the tide fades, we can see which REIT emerges with real value, which REIT is rubbish.  If I have to bet, I would use common sense to put my dollar into the stable counters with relatively low yield to grow fund slowly and steadily, rather than to try find "mis-priced opportunities" in high yield counters. It is important that with your investment, you feel relaxed and can have a sound sleep at night.


1. Big cap S-REITs had a nice run up, and needs to take some rest now.

2. Some mid or small cap seems like back waters, not stir up as much, but steady.

3. Rubbish will be rubbish.

Monday, 27 June 2016

S-REITS, safe haven in the age of turbulence?

Yes. A black swan! BREXIT happened!

Although both sides of the ill-conceived Brexit campaign stood chance to win, according to the reported poll figure before the referendum, the decision"To leave EU" made by the British voters on 24 Jun 2016 shocked the financial market nevertheless. 

Pound crashed over 10% upon the news within minutes to the level that has never been seen since 1980s! And is expected to go much lower. Some started to talk GBP/EUR parity or even GBP/USD parity. Surprised?

Once the disturbing news was out, Asian and European stock markets plunged! Bank and Financial sectors were hit the hardest! Share price for major UK banks were down 20-35% in a day! Hours later, US stock market opened, and behaved in the similar manner. 

Singapore stock market also went down last Friday of course. STI went down about 2%. Not too bad, you may say. Compared to 7% for Japan, 6-8% for Germany, France. 3% for UK ( the Bank of England intervened, it was lower before market close). 3-4% for US stock indexes. 

Meanwhile, safe haven assets went up, including Gold, Japanese Yen, Sovereign Bonds of major stronger economies, such as US, Germany and Japan.  Almost all major economy's national short and medium term bond yield went into negative territory except US. 

To many's dismay, the over-bloated national bond market bubble, far from bursting, is now growing bigger and bigger. Scared money just keep running into these perceived safe haven to chase a little pathetic or even negative yield: You need to pay interest to German, Japanese, or Swiss government to hold their national bond!

The facts just rendered every lesson I learnt in the class ridiculous, for example, time value of money?


Would it be a one time selling off as knee-jerk reaction to bad news, or would it be a start of a long painful bear market?

Right now, US stock market is hovering at several years high after GFC. The US economy is recovering but at decreasing lower rate than ideal. US, EU (UK included) and Japan are all suffering from stubborn and harmful deflation. China is facing tough economic restructuring, impending problems of mounting debts, and the seemingly uncontrollable property bubble. Once burst, it would send strong shocking waves to Asian Pacific, especially HK, Singapore, and Australia where rich Chinese property buyers likes to shop.

It is now supposed by many observers that US Federal Reserve might not increase Fed fund rate at all in 2016. Just in Dec'15 when Fed started first rate rise, market expected interest rate to rise 4 times in 2016. That number was then reduced to 2 times, and 1 time due to the deteriorating US economic data unfolded in 2016 so far. Now the unprecedented BREXIT Event totally destroyed any hope for Fed to raise interest rate in 2016. Some even started to talk about cutting rate in Jul or QE4! 

Is this a replay of Lehman Brother in Sep 2008?

3. S-REITs

S-REITs went up today after Friday's knee jerk reaction of selling off. I was not surprised to see S-REITs went up today.The bond markets had given me a clue of how yield counters would probably perform in short time. The established S-REITs ( A-Reit, CMT, CCT. Mapletree-families,etc) were acting as safe havens again in the time of market turbulence. ( See screen shots from SGX website below). 

However, neither macro conditions nor S-REITs' micro fundamentals warrant continued rising in price. I expect the price volatility to remain heightened until the Brexit situation become clearer. I do not expect S-REITs price to continue going higher. Instead, I am prepared to see S-REITs price dropping down another level if situation changes from bad to worse in future. 

Should investors be too concerned to sell S-Reits holdings and leave the market now? 

Personally, I hold half of my Reits fund in cash and half in Reits now. I would buy more S-REITs should their price go down in sheer panic. Right now, this sort of rising due to risk aversion would not entice me to chase high, but on the other hand I would not sell any of my holdings, as where else to go for a stable income?  

simply believe that no matter what happens, factories needs space to operate although some will die out, companies require office space for their business despite now they are willing to pay less rental, consumers still go to shopping malls for fun after they happily shopped on-line. 

If indeed it is a replay of 2008, I only wish the storm to turn out stronger!

Sorted by % change.

Sorted by value.

Thursday, 21 January 2016

Bear rules! Every Rebound is a Window to Escape!

Since GFC, first time that every major market is or soon-to-be entering technical bear market! Knives are falling everywhere! Do not catch! 

Market is in crash mode, and will continue for some time. Do not expect it to finish any time soon!  Although the next few days and weeks could see rebound, but before long another round of panic selling will follow again. Target is first at 2011 low, and then 2008 low. 

For investors who started investing since the bull market post-GFC, this is the first time when they find everything has changed.  

SG markets has heavy weight on Banks and Real Estates, featured with many counters from O&G and a variety of REITs. ALL of them are facing tremendous pressure. Crude oil future price seems determined to test its new low. There are serious talking in the market that $10 is not far!

Contrary to common belief, blue chips are not risk heaven. Instead, they are the major victims as big hot money are concentrated in these counters which are now escaping. This is why you see many counters, such as CityDev, that are trading at big discount to its value, can still fall. 

Don't try to be a smart ass and use your nerd-box value analysis to fool your mind, blind your vision, in order to comfort your wretched heart. The BEAR rules now! Never attempt in any way to fight with bears. (好汉不吃眼前亏!)

If you think the price is unbelievable, far below your deemed value level, you must prepare to see it go lower. There is no supporting level that can not be broken. On the contrary, in a bear market, once a new low price level is attained, more often than not, a lower target can be expected. So every rebound is a chance to escape. Just the opposite of bull market. 

Unless you are convicted long term investors with big stomach for paper loss, and big cash in hand to keep loading with lower and lower price. Do not fight with the trend. Do not take the attitude that " I am a value investor. I buy more if price drop more!" or you could run out of cash before you should be!

Hold your fire! Hold it!Don't be tempted by new lows. Wait and wait and wait and wait and wait and wait and wait and wait! Don't lose patience. 

Don't be afraid of bear. Don't be fooled by temporary rebound! If you missed the GFC, here is another once-a-decade-opportunity. Make sure you have MONEY when the market is truly hitting bottom,which could be in 2H 2016. 

Let the storm be stronger! 

Friday, 11 December 2015

Thoughts On APTT's Price Plunging...

I posted two posts about APTT before. 

Analysis of Asian Pay Television Trust (APTT)- Why it is a trap for investors!

APTT's share price has dropped 5% today, 20% in one months, or 34% since IPO.  In Nov, the counter was still traded around 0.8. Yesterday its closing price was at 0.68. Today it plugged another 5% to 0.64. There is no big-event news release recently. Nor are there any profit warning issued by the company. The risks, such as interest rate rise, NTD depreciation, slower growth, increasing cost, are not unknown and are not proportional in explaining the price plunge. 


So what the hell has happened? 

Thursday, 30 July 2015

Bottom Fishing or Catching a Falling Knife? - Anchoring Trap in Behavior Finance.

"The first thing every investor must learn is to do absolutely nothing. Nothing at all, unless there is something worth doing.  Most investors, they can't. They must keep acting." - Jim Rogers

" The greatest profits is not made by trading, but by sitting. " - Jesse Livormore

"In the stock market, you don't have to swing at everything. You wait for your pitch."  - Warren Buffet

The above famous quotations tells us one thing. Investing in stock market works differently from working on other area. In the stock market, chances can't be evenly distributed in a calendar year. Most of the time, you need to do nothing. Either holding your stock position and see the market rise, or holding cash to wait for market fall. 

This is one of the crucial difference between investor and salaried worker. Investors are rewarded by making smart decisions in a few critical points, not by working hard every day! (frequently buying/selling) 

This is because market tends to move in trend (human behavior). Uptrend, Downtrend, or Flat. Investor need to understand the power of a trend. Do not fight with trend. Dance with it. Make friends with it. If the stock tells you that I am catching a flu. Then don't get too close until fully recovery. Warrent Buffet said one should be greedy when everyone else is fearful. True. But ask yourself, is everyone else fearful already? Or are they as greedy as you to think all others are fearful now? 

We heard that just because a stock price is rising, it is not the good reason to buy. But empirically, the opposite is more true. In a trend, most of the time, a trend continues itself. Only at few junctions, trends reverses. When a downtrend forms, you should examine the reasons behind. Is the downtrend warranted? If the stock goes bad fundamentally. It should drop. You should short sell it, instead of bottom fishing. In many cases, downtrend has its valid reason as the stock is or has turned lousy. Hence, investors should respect market, not boldly challenge it. Even if the downtrend goes excessively, should you bottom fish? Remember: Buy good furniture at reasonable price. Don't buy lousy furniture at low price.  As Hong Kongers say: 宁买当头涨,不买当头跌!( (if must act stupidly once), rather chase a stock when it is rising, than bottom fishing when it is going down.)  

We know that price is fluctuating. But so is the value. One must not fall into the anchoring trap described in the behavior finance. - Anchoring means investors attaches (anchors) our thoughts with the recent reference points. 

For example, SembCorp Ind. When it was trading at narrow range around 5.0, how many would believe it could drop to today's price level? How many "value investors" had been caught in this down trendInstead of embracing the oil catastrophe, we should steer away from it. We should sit tight with money, until, as Jim Rogers said, something worth doing. Many made the mistake because they fell into the trap of anchoring behavior. 

Semb Corp is just an example. Other oil counters are leaking too. Keppel had break out the critical support level of 8.0, which opened a whole new room for short-seller. We will see new lows after new lows for some time.

See my early post :

Offshore and Marine Sector ---The leaking oil...

Another example is the Noble, another commodity player. 
Today its price dropped more than 11% one day! to a new low of 0.52. 

Another vivid demonstration that when a trend forms, it intends to go as far as possible.
See my early post : Short Noble Until its death?

The other two sectors that could be joining the debacle, to a lesser extent, are Telcos and REITS. 

The great REITs run post-GFC seems finally losing its power. Indeed office REITs have dropped significantly already. Is it time to bottom fish? I can't comment. But I remember Jim Rogers once said" great bottom is not 3 or 4 years low, it is 10 or 15 years low. " Take CCT for example,  Is it a good stock? Yes! Can its price go lower? I say why not? Given the oversupply situation in CBD offices, rising interest rates, and fading confidence in REITs sector, it can well test new lows before truly finding bottom. 

Are telcos better? The low we had seen recently probably are not the lowest point in this cycle. Starhub and M1 have more room to fall. Singtel could be more resilient, but not much better. In the case of Starhub, some think the 3.7 on the flash dropping day as a supporting level. I call it a frontier for new lows. Watch once if the price closes below 3.7. It could turn a resistance level. New lows can be expected.

No reason to panic though. This is the beauty of stock market. Only in the great crisis, are there great opportunities. We wait for the clear sign of rebound. We must allow some time for the downtrend to finish its course. Patience is the key. Whenever there are still idiots eagerly jumping into a downtrend, the down trend is not finished yet. Only when the whole market are full with pessimism or sheer panic, we start to shop.

Just like in the case of China Stock Market, when Shanghai composite index at 2000 for many years, retail investors shun it like shits. When it went up to 5000 this year and corrected a bit, many thought it was opportunity and jump in! 

Many of those, who avoided the peak, were caught in the mid-level of the downtrend. ( 没死在山顶,死在半山). Many used leveraging. Hence 10% or 20% correction ( common in China) can force position closure, and take away all their money. Even after that market rebounds a bit, they were dead already. China governments, so powerful in controlling economics, can not save it. If you can read Chinese, pls read here. A story about a young Shanghai entrepreneur who made a fortune of 8 mil in business, and lost all in stock market in a month. Tragic.

The only lesson history teaches us is that people don't learn the lessons from history!!

Thursday, 23 July 2015

S-REITs --- sell now and buy back later when market crashes?

Many S-REITs have released latest quarterly results recently. Most results are in line with expectations.  ( S-REITS results analysis) 

However, dark clouds ( impending interest rate rise) are hanging above the heads of the seemingly well-behaved REITs. What will the dark clouds bring? A storm or a quick thunder shower? I put up some thoughts about the impact of rising interest rates on REITs. See my earlier posts: 

What will happen to S-REITS in 2014?
Can S-REITS still shine in 2015?
Staying focus requires great strength

Firstly, I would like to say that interest rate does not affect REITs alone or the most. All asset class will be affected. As of now, commodity prices, from oil to gold, have already retreated significantly from their post-GFC high. Of course, there are specific reasons for each commodity, ranging from oversupply to China economy slowing down. But probably one common factor here is that USD is gaining strength again, in response to incoming rising interest rate!  Although property markets are more driven by local factors, property prices in many countries (SG included) had passed its peak for this cycle. Apart from various country specific reasons, rising interest rate is expected to rise property's cap rates, and hurt potential mortgager's affordability.  After several years of bull run,stocks prices all over the world are not cheap either. For local stock markets, not only REITs are inherently sensitive to interest rate, but also all other stocks. Many local stocks' gearing level and interest expenses are higher than REITs. Besides, risk-free interest rate is the price (opportunity cost) paid for holding cash. It is the benchmark for all prices. If the interest rate rise, one should expect re-pricing happens to all asset classes, other thing equal.  To investors, it means new few year things could be very different from last few years with near-zero interest rate. 

The near zero Fed Fund rate coupled with three rounds of quantitative easing has inflated asset prices and made dividend paying counters such as REITs exceptionally hot. Is the music about to stop? 

The initial interest rate rise will start the process of interest rate normalization. which is an infection point for world economy. Fed Chairman Ms Yellen have taken pain to stress that interest rate rise would only take place step by step i.e. no sudden jump is expected.  But whether capital markets will also move tenderly step by step is not warranted. Capital markets including stock markets are famous for their frenzy behavior driven by investors' greed and fear. When interest rate finally normalizes, no one knows for sure how will market react initially. One thing for sure is that the volatility will increase for some time. Volatility is generally seen as risks. But volatility also gives birth to opportunities. When opportunities abound, important thing is that you have cash in hand. (See early post: 7 common mistakes in dividend stock investing. ) 

So what should you do with your REIT holdings? 

There is nothing wrong to sell your stocks to take profits. There is nothing wrong to ignore fluctuation and hold quality stocks for long term. 

However, the general rules must apply according to individual circumstance, i.e. investment objectives, horizon, risk tolerance, and also your initial reason for investing. 

If you had bought good steady REITs at fairly low prices and are holding mainly for income, do you abandon all your holdings because current price could see correction? It is easy to sell and lock in profits, but what if the price/income does not plunge, but only have mild correction? Sell at high and buy at low again? Theoretically sound, but not that easy to implement. No one should expect to catch all the price moves. If you expect that, then you are speculators/traders (nothing wrong with that though), not investors. Even legendary traders Jess Livormore once said profit is made by sitting, not trading. 

If you had unfortunately paid high price to buy REITs, and later found that the premium you paid for disappeared in new environment, should you be holding on to such mistakes? Don't call yourself a long term investor if you made a miscalculation, were caught in the high price and forced to hold for long term only wishing to break-even after collecting dividends. Even you finally break even, how about the opportunity cost? Things get worse if the miscalculated position consumes sizable portion of your investable fund. 

From now to 17 Sep (believed to the the earliest time window for Fed to announce interest rate rise), I would think any large position purchase ( not just REIT, any stock) as unnecessarily risky. Since such an unprecedented event can potentially rock all capital markets, holding on to cash is more sensible now. Even if you do see good opportunity, why must jump on to it now? Just wait another two months for clearer picture. To clarify, the stocks(reits included) or any other assets price may not drop, or drop as much as you wish, but at least you do not let yourself be prone to miscalculating the risk/reward ratio. 

However, having said all that, it's important to realize that REIT, as an asset class, has been proven historically to be able to deliver above stock-market-index returns in long terms. The business model is fool-proof, transparent, relatively simple to analyze. Besides, REITs' mandatary regular dividends payout is one feature that makes them always relevant to income investors. After all, what are other business models that are better than property leasing in terms of generating predictable, recurring and steady income and providing hedge to long term inflation?  If you believe in buy-and-hold strategy in physical property investment. You can do the same for REITs as an asset class, baring stock-specific risk of course. Long term investors really do not need to eye on the daily price fluctuations like hawks. ( See my early post: REITs' better liquidity than direct property ownership is a risk?

So will you hold on to good REITs, or would you rather sell now and buy back later? Well. For me, I guess I will be somewhere in between. 
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