Sembcorp

22-September, I posted that SembCorp will be launching an IPO on Muscat Securities Market (Oman) on August 28, 2013.  And I highlighted the listing price (bolded) at approximately $5.17.  Thing like this, if that counter price is too low, there will always be someone out there pushing up the price close to its listing value or even higher.  We see that on SembCorp.  Its price went above $5.17 as its IPO closed on 26-September which was oversubscribed with strong levels demand from investors across the Sultanate, the GCC and Europe, raised around OMR53 million (approximately S$173 million), making it the biggest share offer in Oman so far in 2013. It is expected to commence trading of its shares on or around 10-October 2013.

 Prior to the listing, Sembcorp Salalah was 60% owned by Sembcorp’s wholly-owned subsidiary Sembcorp Utilities, 35% owned by Oman Investment Corporation (OIC) and 5% owned by Bahrain- based BDCC Investment Company. Post-listing, Sembcorp Utilities now holds a 40% stake in Sembcorp Salalah, while OIC and BDCC hold 21.9% and 3.1% respectively. Following the IPO, Sembcorp will recognise a total gain of approximately S$117 million, comprising a S$37 million gain on its 20% equity interest sold through the IPO and a fair value gain of S$80 million on re-measurement of its remaining 40% equity interest in the company.  We should be seeing an increase on their EPS for their full year financial report.

Now, let's look at their price.  They have couples of resistant out there.  The first resistant is at 5.42.  Can they break?  Couples of things to watch out.  Commencing trading on 10-October, STI and their third quarter performance.  Watch out Sembmarine too.  As it contribute a huge amount inside the SembCorp financial report. 

 

Delay Tapering

A lot of people asked me, FED had delay the tapering but why is it that on Friday, DOW dropped by 185 points. 

5-August to 27-August (in 3 weeks time) DOW dropped more than nine hundred of points.  Then it started to turn and went up nine hundred of points.  Covering what DOW lost in August and even breaking its history record, hitting 15,676.  This was what I said and meant about riding on roller coaster. 

Investing in stock market, we need to understand this "buy on rumour and sell on news".  Remember I said that Bernanke wouldn't want to become the  历史罪人.Economists, traders and investors knew that as well.  Because of the "buy on rumour and sell on news" and "历史罪人"  big fishes went in, moved the market before the small fishes act.  And they sold after the announcement/news released.   Look at the Friday volume was 2.5 times greater than what we see over the normal trading days.  So small fishes, whom are you actually buying these stocks from?  Yes, those professional investors and traders. Just rewind back when Bernanke announced QE3, that few days and weeks, market went up or down. 

The pulled back is good.  We need consolidation.  Base on TA, market is an up trend.  However, as I said we are riding on a roller coaster, German Election result which will be releasing soon, debt ceiling, which we may see drama going on.  And after this what next?  Tapering is being delayed and not cancelled.  Trade with care. 

What about STI?  It hit 3260 resistant.  Therefore, we see a pull back.  How will the  market move over the next 4 months?  Three possibility.  I shall not make any guesses, instead, letting the market tell me everything.  TA shows up trend today doesn't means a week later still showing up trend.  Just trade with care.  Don't be a goalkeeper.  Do not buy from the traders and investors who are selling. 

Tapering

See how stock market moved last week, just like riding on roller coaster.  One day STI down by 39 point and the next day up by 24 point.  Syria war, tapering and numbers of important reports released from the US moved the index high and low.  Lots of investors and traders just confused and did not know what to do.    

How I looked at Syria war was posted earlier.  Today, let’s look at some of the US reports numbers.

	Actual	Forecast	Previous
ISM Manufacturing PMI	55.7	54.2	55.4
Unemployment Claim	323K	332K	332K
ISM Non-Manufacturing PMI	58.6	55.2	56
Non-Farm Employment Change	169K	178K	104K (162K)
Unemployment Rate	7.3%	7.4%	7.4%

July non-farm employment change was revised down from 162,000 to just 104,000.  This number was the lowest in more than a year.  August number was 169,000, versus forecast 178,000.  This brings the average monthly job growth for 2013 to 160,000, which is just barely enough to keep up with the US population growth.  Friday, DOW came down hundred over point to 14,789 before the release of employment data.  After number was released, DOW went up and closed at 14,922.  Economists, analyst and investors used this opportunity to push the index back to track as they anticipated that the US economic recovery is not yet robust enough to sustain itself without the additional help of the FED.  Probably tapering may not kick off so soon. 

Let’s rewind back.  Back in late May, global markets fall after Ben Bernanke announced its QE tapering.  The markets rebounded in July but started falling again in August with stock market and Asia currencies like the India, Indonesia…. which was badly hit.  Some economists believe that tapering will kick off in September, while others think that it should be October.  With so much speculating plus the uncertainty from Syria war, the market is just moving high and low like the roller coaster. 

If we look how the stock market, currencies…..moved over the past 3 months, in fact FED officials have already been preparing investors for the inevitable, which is why stock markets are falling and money was leaving the emerging markets.  In other words, market is catering in those bad news.  And given the way on how Ben Bernanke handle the stock market, I believe the first round of tapering will kick off before Ben Bernanke step down/retire.  The questions is how much will be push out for the first round of tapering.  If the numbers is minor, lesser than economists predicted, market may move up instead of going down.  However, a major adjustment will cause the market to tumble.  Having say that, Bernanke wouldn’t want to become  历史罪人 .   As what I said, let’s see how the politicians and big fishes move the market up and down.

Property

Government came out with numbers of cooling measure, one after the other.  Yet people are still thinking of buying property.  Whatever cooling measure government implemented, property prices still keep going up.  Investor gurus keep warning that the property price in Shanghai, Beijing, Singapore……are too high, but yet till today the price has not come down.  So these people do not want to miss the boat. 

Bank interest is so low that people think of ways to grow their money, to fight inflation/depreciation.  Property is one of the investment products that people are looking at.  Those people staying in HDB and can afford, they will purchase a condo, stay there and rent out their HDB unit.  Well, it makes sense.  Some, upgrade to condo.  But the question is here.  How much are you paying, in terms of the unit price and monthly installment? 

Last year, I saw one condo which is located in a non-mature estate with 99 years lease, calling for $2.2 ~ $2.5 million.  The area is about the size of a HDB 5-room unit.  To be frank, I won’t consider buying that, a 99 years lease with a price of $2.2 million.  Crazy.

A friend of mine bought a condo at a price of $1.2 million.  Few years later, he sold it at a price of $1.4 million.  Wow, a profit of 0.2 million, not bad right?  What do you think after deducting those bank interest rate, taxes……….how much profit has he made?

Since I started my blog mentioned about 3-rooms flat, I shall take that as an example.  Residential property has done up over the past 8 years.  Let’s rewind back what was the price of a 3-rooms unit before the crisis in 1997.  Average price for one 3-room unit reached a high of $265 thousands.  Then we saw the Asia crisis - stock came down, oil came down………and of course, property.  Y2003, 3-rooms flats dropped to an average low of $165 thousand.  A drop or some people called it as a correction of more than 30%.

Nowadays, bank interest is pretty low.  Some are paying their loan interest rate at 1.2%, 1.3%......Our general saving interest rate is at 0.05%  Do you think bank interest will stay at this low level for life?  Have we considered what will happen when the interest rate increases?  Some people said yes both Europe and the US are having problems but then look at the stock market like the DOW, S&P………..breaking record high and property prices keep going up, in regardless of what cooling measure the government implement. 

All this streams down to QE and low interest rate.  Past 2 years inflation was about 5%, bank saving interest, 0.05%, so people find places to park and grow their money.  QE1, QE 2 and now QE3.  Property was one of the areas that the money flowed to.  We are going to see the tapering soon.  When time comes by, we are going to see an increase of interest rate.  Some countries have started to increase their interest rate.  The recent one, Indonesia.  In Singapore, if you guys check around, some banks have increases their interest rate too.  They also came out with a few numbers of new products with a better interest rate return of around 1%.  You can see that everyone is preparing for that.  So, property buyers, have you all prepared for that?  Have you guys prepare when loan interest rate goes up to say 2.5%, how much more money you need top up on top of what you are paying right now.  Worst comes to worst, the property prices drop lets by say, 20% and bank ask you to offset the difference. 

Some people said that Singapore has limited land space, no matter what, the price will still go up and it will be higher than what they are purchasing right now.  Agreed but again, if I can buy it at a lower price like say 20% lower, why not?  Thirdly I ask myself how much more can the property price go and how much can the property price drop when crisis hit.  What is the ratio between the 2?  Then I look at the whole economic market.  The cycle of property, stock……….to conclude is it the right time to purchase now.   Why government keeps implementing cooling measure one after the other.  Think about it. 

Watch out when loan interest rate hit 3%.  And watch closely on some cities residential property movement like the Shanghai, Beijing, Hong Kong…….