Singapore Stock Market News

Flipping through the newspaper everyday, I see so many dreams asking us to fork out top dollars to make them come true. Proprietary trading systems to help you trade and earn big money, ways to become millionaires, weight loss to a perfect figure, teaching methods to make your kid a genius, and many more others. Most of the time, they don't work, bcos if they did, they won't need these advertisements, people will just flock to their shops by the truckloads.

But the sad truth is, people still pay top dollars to go through these useless programs bcos they are buying a hope, hoping that somehow these programs will make their dreams come true. Humans are given the gift of hope such that in the most desperate of times, we can mentally survive bcos we know things could be better. In prehistoric times, cavemen needed hope to tide through winter, our grandparents needed hope to survive the wars. Today, this has become a marketing tool to entice people to buy hope that their dreams will come true.

Alas, you reap what you sow. How can you expect to lose weight by just paying money while you continue your 3,000 calories diet every day? How is it possible that your investment will make you money if you don't devote time to study what kind of investment you bought? We live in a world of cause and effect. One has to put in the right effort in order to get the desired results. So even if someone told you that the programs did work, it is more bcos they themselves put in the effort to cause the change. Or they may be just lucky.

To make money from investment is just about that: putting in the effort to learn, to think and then execute, ie buy the right securities. Most of it is free. The learning can be found all over the internet and needless to say, on this blog! The thinking is up to you, whether you like mental workout or just let your brain rot. Like most of us let our bodies rot by slouching in front of the TV after a hard day's work. The execution, well, competition among the brokers have brought commission down. So it's not expensive anymore. Unless of course you get some relationship managers or private bankers to service you and you actually get enticed to buy their high cost, high commission investment products. Then sorry lah, you might be paying 5% or even more of your capital for buying stocks or other securities.

The bottom line is this: don't pay top dollars for investment seminars, brokerage services, private banking services, don't pay top dollar for trading systems, learning to invest or any other programs for that matter. The great lessons in life are usually free.

Investment advice, CFA tuition, stock analysis, value investing, financial statement, financial ratios, earnings drivers, SWOT analysis, secular trends, stock screens

After 48 years, the Singapore women table tennis team finally got through the nerve-wrecking semi-finals to end the medal drought. It was the most fascinating experience watching the semi-final game live. And hence the inspiration to draw parallels between table tennis and investing.

For those who missed the game (btw it was office hours, so most diligent, career-focused Singaporeans were actually working hard), let me just briefly summarized what happened. Feng Tianwei won the first match easily and it looked like the rest of the game should be a breeze for Singapore. But Li Jiawei lost the 2nd match after 5 tough games. Singapore came back to win the doubles, then Wang Yuegu lost the 4th despite putting up a very strong fight and it has to come to the 5th match. Of course our heroine Feng battled all out in the last match and finally broke the Koreans.

The Koreans are very defensive players, they chopped the balls all the time and simply waited for the Singaporeans to make mistakes. That was how Li Jiawei lost. She was not on form and her successful smash rate was definitely below par. But needless to say, when she succeeds, the smash was a sure killer. Feng, on the other hand, smashes with higher success but seldom kills the opponent, ie they managed to defend. And from my laymen point of view, Feng is definitely more patient, only smashing when she is sure the ball will hit the table.

In investing, this concept is actually pretty important. Buffett used to remind us, "Imagine you only have 15 bullets in your life, do you shoot everything that pops out, or do you go for the big turkey?" Li Jiawei goes for the kill at the slimmest chance, she misses a lot but when she hits, its a grand slam. Yes, the opponent get killed spectacularly, but it's still just one point.

In investing, Jiawei's strategy can work if that grand slam is a 10 bagger, and you recover all your losses from the other 9 losing bets. This is how Venture Capital (VC) works. But my guess is you will have better luck with Feng's strategy. And this ties in with patience. Don't simply buy stuff on a spur. Cosco has dropped 50%, it is definitely a buy now! SPC dividend yield is 10%, buy!

There are reasons why they dropped so much in the first place. Exercise patience, strike when your chances of success are very high, not just when it is hot.

Back to the matches, it occured to me that it should be quite unlikely whereby someone is down by 2 games and then comes back to win the next 3 games and win the match. Similarly, if you are lagging by even just 2 or 3 points and your opponent is at game/match point, it is quite difficult to win. Psychology is at work here. In order to counter this, a lot of mind training is needed. In this aspect, I would say the Singapore team was quite good, but the Koreans were better. Of course, world No.1 Zhang Yining, is probably the best at this.

In investing, your opponent is the market. Most of the time, you are down by 2 to 3 points bcos it is very hard to beat the market. 90% of all professional fund managers underperform the market. So you need to train your mind and be calm. Otherwise, emotions cloud everything and you make stupid mistakes. Trading rules some times help. E.g. stop loss levels, profit taking levels. Needless to say, right-sizing the bets is equally important. If your investment is too big and you are losing sleep, you need to scale it down.

Of course, most true blue value investors don't believe in trading rules and sizing of bets. They believe that if the stock is down, you should buy even more since it's cheaper now. And you should bet your house and car on it bcos that's how you maximize returns.

Investment advice, CFA tuition, stock analysis, value investing, financial statement, financial ratios, earnings drivers, SWOT analysis, secular trends, stock screens

This is a continuation of the last post.

Ok, so the bulls will say expats can pay. Now I do not know what is the average expat pay, but let's just assume the average expat gets the same salary of the top 10% of our population ie $12k per mth. If you are an expat earning $12k per mth, will you fork out 33% of your salary for rent? For me, if I were an expat, I know I am not going to be in Singapore forever, I would rather stay somewhere cheap, save the extra $1-2k on rental and spend it on touring Angkok Wat or something right? Of course that just me lah.

Btw the rule of thumb is roughly 20% of your salary on rental/mortgage. So going by this rule only expats earning $20k or above can afford this place. How many expats in Singapore earn $20k per mth, ie $240k per yr? Given that only 2,000 people earns more than $1mn in Singapore, my guess is roughly 7,000-8,000 people (including expats and Singaporeans).

How many rentalable condos in Singapore? About 300,000. So, sorry, charging $4,000 per mth for rental, it's a once in a lifetime chance, it won't last. Yes some hot locations can command this kind of rental today, but you cannot expect to charge this kind of rental for the next 20 yrs. At least not until Singapore GDP per capita further improves from here.

The other argument is that the company pays for the rent, not the expat himself. Now if you are the HR and you have your budget to work with, essentially the rental of $50k restrict your capacity to hire pple bcos you can only pay someone $50k less than what he should get. ie this expat suppose to get total package of $300k you can only give $250k bcos the other $50k goes to his rental. So this means less expats will choose to come to Singapore over time.

So the bottom line is this, $50k annual rental (which works out to be rental of $4 psf per mth) is not sustainable in Singapore today. It may be sustainable 10 yrs from now when our GDP per capita increases and our expat population increases tremendously. But not now. Our salary levels are too low compared to property prices today. Note that expat salary is also a function of our GDP per capita and our salaries, so as of now, $4 psf per mth is too expensive. That's my personal view.

So this translates to the fact that a $1000 psf for property price is to expensive. We are not even talking about those $3k psf yet... Ppty prices have to come down. FYI Singapore is now more expensive than Tokyo, New York and maybe Shanghai. We are only behind Hong Kong, London and a few whacky cities where psf is like 5 digits and above (in USD) like Moscow and Mumbai.

The time to look at property will be the time when prices are falling to $600-700psf in prime areas. ie pple who bought at $2,000-3,000 psf lose more than 70% of their property value and the whole world gets totally digusted with Singapore ppty as with in 1998. It may take some time, but now is the time for us to prepare and have to guts to buy when the time comes.

Investment advice, CFA tuition, stock analysis, value investing, financial statement, financial ratios, earnings drivers, SWOT analysis, secular trends, stock screens

In this post, I am going to give my two cents on the Singapore property market. As with people giving their two cents, usually it is worth about one cent, esp when people try to give their two cents in some arena where another 10,000 people already gave their answers to 6 million dollar questions. So always do your own analysis and learn to be an independent thinker. I think that should be everybody's goal and that means also you shouldn't be reading the rest of this post. Hehe.

But read lah, just for entertainment lor.

So back to the Singapore property market, I belong to the bearish camp, and the following would be my rationale:

Lets start with today's $1,000 psf, a sort of low benchmark for ppty in some prime locations. But we have to start somewhere, so let's just use $1,000 psf. This means a 1,000 sqf condo will cost $1mn. In order to justify $1mn on the property, I would say that the rental yield needs to be 5%.

Actually in the industry pple use 4% and they call this the cap rate, but I try to be conservative here. You can also think of this as assuming that the PER for the property is 20x, which will give an earnings yield of 5%.

As you can see, PER of 20x is not cheap at all, but if we use a lower PER or higher yield, in will only further prove my point: the property market has gotten too expensive. So let's just stick to this 5% yield.

With the yield at 5% it means that the property priced at $1mn should fetch you $50k rental per yr if you rent it out. This works out to be $4,000 plus per mth. The 90th percentile household salary in Singapore is $12,000, so basically only 10% of Singaporean household can afford to rent this place, assuming that they are willing to fork out 33% their household salary on rental.

Ok most pple won't, or rather couldn't, bcos they spend like 90% of their salary. Esp for Singaporeans, we hate to fork out cash for mortgage. And it is impossible to use just CPF to pay for a $1mn mortgage. Well the point here is that this property cannot be rented out easily to Singaporean households or foreign workers earning less than $12,000 per mth.

Link to Singaporean household income

Stay tuned for Part 2!

Investment advice, CFA tuition, stock analysis, value investing, financial statement, financial ratios, earnings drivers, SWOT analysis, secular trends, stock screens

Investment advice, CFA tuition, stock analysis, value investing, financial statement, financial ratios, earnings drivers, SWOT analysis, secular trends, stock screens