Where are we in the cycle?

The yield curve has almost flattened and even both immediately before and just after Fed Reserve jacked up the interest rates by 25 basis points, the US 10-year treasury yield remained much lower than psychological level of 3 percent instead of moving up. The 10-yr yield is now around 2.78 percent --- defying the Fed’s effort of getting it to move up. I think this is an ill omen to the US stock market in that:

1.  When the interest rates keep moving up, as long as the rates are still “tolerable” by the market players, it means the US economy is doing well and investors have confidence that the stock market should be doing well going forward. The declining 10-yr yield is suggesting otherwise now.

2. Fed Reserve jacks up interest rates primarily to tame inflation and secondarily to cool down the market. But now the US market has been so cold that it becomes a mockery for Fed to do just the opposite. Trump was somehow right to try to get Jerome Powell not to hike the interest rates in that sense but the latter knew he could not heed his President’s advice for fear of Mr Market’s negative sentiment as all would think that the u-turn means recession is fast approaching.

3. When the yield curves flatten, it foretells with certain respectable probability that the recession will come sometime later. Historically, the flattened yield curve will lead the recession by 15 months on average.

4. The 10-year treasury yield is another leading indicator for the stock market. If it has lost its upward momentum and retreated, it has signalled in all probability a slowing economy.

Reasons for the current situation

It is actually not difficult to find the causes of this phenomenon: Trump initiated a trade war with China. Mr Market knows that the US has a slight advantage in the trade war, but the outcome of the trade war will be a lose-lose proposition for both countries. The reason why the China market has dropped much more than the US market during the initial phase of the trade war was because of the US tax cuts. But the tax cuts enjoyed by the US listed companies was a one-off event and Mr Market knows too well that this catalyst will evaporate in 2019 and he is now exerting this hard-truth on the US market. Trump’s sledgehammer tactics have come home to roost.  

China, with its market already hovering around its trough, should rebound faster than the US. My crystal ball has been telling me to have patience to wait for its signal.

What is the stage of the current market?

The US market has enjoyed 10 years of growth and with contraction in profit margin, trade tariffs, rising wages, higher interest rates, higher uncertainties caused by Trump’s mercurial behaviour, the good times should be behind us. It is difficult to see the light at the end of 2019 tunnel.

For contrarians, it should present a golden opportunity going forward.

Superphang
https://superphang.blogspot.sg

No light at the end of the trade war tunnel?

Which of the following choices is the best when you do business with your trading partner?

(1) I win big you win small.

(2) We win equally.

(3) I win you lose.

(4) I lose small you lose big.

(5) We lose equally.

The answer really depends on your attitude.

I would like to interpret the positions of the US and China in their current trade tensions as follows:

(1) is the current position China has been in with the US as her trading partner. But the US is not happy and Trump, the US President, thinks that China is in (3). Trump is now trying to upend the status quo and put the US in (2) by imposing tariff on Chinese imports worth US$200 billion. China has no choice but to retaliate so as to reach (4) ultimately if the US proceeds with raising the tariff. The trade tensions have impacted on the world economy and we are all in (5).

Am I correct in the interpretation? It is not really important to me.

I must be able to guess correctly the timing of the trough for my perfect entry point. My sizable war chest is on standby to seize the opportunity when it presents itself.  

Superphang

https://superphang.blogspot.sg

Handsome Profit from AEM

Read my earlier post on AEM dated 1 Aug 2018:
https://superphang.blogspot.com/2018/08/aem-reported-very-solid-1h2018results.html

Divested all my positions today, 16 Aug 18, in AEM and made a handsome return.  

My thought:
1.  Any one of the many current world-wide threats may escalate into a black swan event.
2.  Reliability of TA in a gloomy market will be reduced greatly.
3.  It needs a breather after surging so much.
4.  I anticipated insiders to be more aggressive in buying the shares these past few days but it was not to be.

I will go in and grab AEM again if another golden opportunity presents itself.

Superphang

https://superphang.blogspot.sg

Crisis in Singapore property market is brewing

The cruel facts about Singapore property market

In the first half of 2018, there were 35 collective sales with amount exceeding $10 billion, while for the whole of 2017, there were 27 deals totaling $8.13 billion. From 2000 to 2017, about 80 percent of new homes came from plots sold through the Government’s land sales. But for 2018 and 2019, about 75 percent of new homes are expected to be built on lands that were acquired by developers through en bloc sales.

The new additional units are about 36,030 and those unsold inventory is about 23,500. The current unsold inventory and new supply totalling more than 59,500 units are sufficient to meet demand for about six to seven years but the new units will take only about 4 years to build.

In addition, prices of private property have risen 9.1 percent in the last four quarters. Before that, prices had declined for 15 straight quarters, falling 11.6 percent by the middle of 2017.

The latest cooling measures introduced by the government on 5 July 2018 was described by some analysts as draconian and high-handed. But to me, it came a bit late as this time, not only some uninitiated buyers during this U-turn of private property index (PPI) were trapped, but most of the en bloc sales developers were also made to bear the brunt. The problem is that it may not have dawned on them yet that they have been trapped.

My Prediction

There is still a real demand for retail residential property for the next half a year. However, the problem is that prices of resale property market have remained stagnate even when the PPI has gone up by 9.1 percent since mid-2017. This has been artificially caused by irrational prices of new launches. Sellers have to be realistic in their offer price as the window to sell is about half a year before the situation becomes worse.

I estimate that 75% of developers of en bloc sales done within 2017 and 2018 will scramble to sell their mostly yet-to-be-launched units within 4 to 5 years from now so as to run faster than their competitors. I can foresee that developers will give more and more discount as time goes by before their developments obtain the temporary occupation permits. Coupled with the impending stock market crisis and interest rates hike, the PPI should plunge by about 30% by 2Q2022.

If you have patience to wait till four years later in 2022, you should be able to buy your private condominium unit at a price 40 percent lower than that of today if you work hard enough to look for it. I believe by which time the government will have removed all ABSD and SSD.

HDB prices will not drop that much because of government's very effective control mechanism. When the crisis is within our government's control, they should be able to slow down the speed of the drop, precisely like what they achieved from mid-2013 to mid-2017. But if the decline is due to an international crisis caused by the US or the China market crash or some downturn equivalent to the scale of the previous 1997 Thailand's meltdown, our government cannot do much.

I was able to buy my investment property at the trough in 2004 and sold it at the peak around end of 2012. I am confident that I can repeat the feat to buy a bigger unit at the next trough in 2022.

Superphang
https://superphang.blogspot.sg

AEM Plunge Was Overdone

AEM reported very solid 1H2018 results in the evening of 30 July 2018 but the share price kept plunging for two consecutive days.  

I made big money in 2017 on this stock and I had no positions in it. I think the precipitous plunge was overdone due to:

1. The forward p/e is now about 5.4x

2. Too fierce the decline when its Q2 performance actually improved.

3. Volatility as mentioned by the CEO does not mean the share price has to come down. It may mean it can go up too.

4. The insiders will likely go in and buy the stock very soon again. Once people see this, some confidence will return.

5. The reasonable price level should have been 98 cents.

6. The big volume achieved in these two consecutive days can mean all weak hands have been flushed out.



When others are fearful, you must be greedy especially when the reasons for the extreme pessimism are unfounded.

I went in to get my first tranche at 75 cents. If it dares to drop further, I will buy more.

Superphang

https://superphang.blogspot.sg

Trading in a Trade War

Shanghai Composite Index has been in a bear market since 13 April as it has priced in the full-scale impact of the US-China trade war. The weakening of RMB against USD since mid-April has resulted in the continued decline. Within a short span of three months, the RMB has weakened more than 6% against USD.  

Shanghai Composite Index in a Bear Market since 13 April 2018

Weakening of RMB against USD since mid-April 2018

On the other hand, the US market has been consolidating well in a bull market, with S&P 500 VIX at a very safe level of around 13.

However, I think Federal Reserve should be more concerned about the rapid rise in US CPI than the US-China trade tensions as it is easier for President Trump to tame the trade war than to tame the CPI.

As it is, US CPI rose 0.1% in June 2018, and in the 12 months through June, the CPI increased 2.9%, the biggest gain since February 2012. The underlying trend continued to point to a steady build-up of inflation pressures that could compel the Federal Reserve on a path of rapid interest rate increases. Furthermore, the retaliation from China to increase tariffs against the US goods can only add fuel to the fire.

Given that Trump will not want the US stock market to be in a bear market, before the US stock market plunges to a level that he cannot really contain, it is prudent that we can assume the US market’s near-term correction, if ever there is one, will be the most 10% and that is the point for our entry, not retreat.

Superphang
https://superphang.blogspot.com/

Potential multi-baggers in a volatile market: AMAL and Burwill

I have invested in Burwill (24.HK) and Alliance Mineral Assets Limited (AMAL) for their future growth, partly because of rampant insider trading in Burwill and the China government’s policy to force the car industry to produce more and more electric vehicles (EV) going forward. For Burwill, I have already reaped about 20% unrealised profit. I am sure very soon I will have paper profit from AMAL too.

AMAL has been a designated stock with almost all Singapore brokerages for a long time and Phillip Securities just lifted this trading restriction after lunch break today, 7 May 2018, and I know my patience will pay off sooner rather than later. 

Fundamentally, AMAL’s forward p/e can hit 1x in less than two years which means conservatively it can potentially be a 6-bagger or better based on the closing price of today, i.e. 37.5 cents.

AMAL daily chart at end of 7 May 2018

Technically for AMAL, bullish belt-hold candlestick pattern just appeared, breaking past its 50-day moving average too! It has broken the nice consolidation phase and from my simple calculation, it should hit 43 cents before it finds its resistance.

Comparison between share prices of Tawana, Burwill, AMAL and Jiangxi Special Electric Motor

The comparison revealed one thing: All the four related stocks are now moving up!

To me, for AMAL, no $2.00, no sell!

Superphang
http://superphang.blogspot.sg

More opportunities if you are a contrarian

2018 is a relatively difficult year for finding multi-baggers partly due to the following threats:

1. S&P 500 still trades at a trailing price-earnings multiple of 24, significantly above the 10-year average of 15.7.

2. The possibility of a US-China trade war
3. Tariffs on imports will raise costs to US consumers, reducing consumption and raising inflation
4. US 10-year treasury yield has been close to 3 per cent --- a level which a lot of analysts think would signal a significant reversal in equities.
5. The World cup in June 2018 will likely bring down the market by an average of 8.6% if history is something to go by.
6. The likelihood of regulations on social media and technology companies because of mounting privacy issues
7. A rise in geopolitical risks
8. Ongoing tensions in Syria

However, unless you do not have the knowledge to separate the wheat from the chaff, volatility itself can be good to those who know how to respond to it.

I still think there is still quite some time, at least a year or so, for the market to move up but the trajectory will be much more arduous this time compared to 2017. What we can do is we can wait for some quality stocks to be artificially corrected by the market and we can buy them on dips.  

I bought Valuetronics on 30^th April 18 at 74.5 cents apiece when its share price slumped by more than 25 per cent since its Dutch MNC customer reported a 1Q18 earnings miss due to weak sales at its home lighting division. Weak earnings announced by its peers as well as soft sentiment in the electronics and semiconductor sector also contributed to the share price decline. I am confident that I will make a good return being a contrarian.

Valuetronics daily chart

Superphang
https://superphang.blogspot.sg

Privatisation of China Vast is on the cards

Insider trading records for China Vast

Just checked the insider purchases of China Vast and the latest figures may signal a privitisation of the company could be on the cards:

China Orient Alternative Investment Fund and China Orient Asset Management Co owns about 8.3% of China Vast. WANG Jianjun and ZHAO Ying own about 72.39%, and Central Huijin Investment Ltd China Construction Bank Corporation together own about 7.81%.
The three groups together own a total of 88.5% combined stake in China Vast. The free float is really very dry now. I think WANG Jianjun will find difficulty to nibble more shares from the open market now.

I will hold my position in 6166.HK until he announces privitisation of the company!

Superphang
https://superphang.blogspot.sg

A long marubozu for Excelpoint’s weekly chart!

Refer to my post of 13 Feb 2018:

http://superphang.blogspot.sg/2018/02/excelpoint-eagely-waiting-for-its.html

and my post of 14 Feb 2018:

https://superphang.blogspot.sg/2018/02/excelpoints-stellar-fy2017-performance.html

Yes, 70 cents now! Up 9.375% since my 13 Feb 2018's recommendation.

Excelpoint's weekly chart with 50w moving average

A long marubozu with sizable volume in the weekly chart after my comments. Anyone huat together with me and get a big angbao for this prosperous CNY?

Superphang

https://superphang.blogspot.sg

Excelpoint's Stellar FY2017 performance

Refer to my earlier post of 13 Feb 2018 on my estimation of the good FY2017 result for Excelpoint and the recommended timing of entry:
https://superphang.blogspot.sg/2018/02/excelpoint-eagely-waiting-for-its.html
Yes, it went up 3.5 cents, up 5.47% and  closed at 67.5 cents. 

Excelpoint just released its stellar FY2017 result on 14 Feb 2018. The highlights were:

• Strong operating performance for FY2017 with record revenue (up 16% yoy)
• Improved balance sheet with increased shareholder equity
• Strategic focus on segments related to the Internet of Things (“IoT”) to explore new growth areas
• Net profit increased 14.8% yoy
• Better dividend declared: A total of 4.5 cents (ordinary + special), 0.5 cents more than the preceding year. The dividend yield based on the closing price on 14 Feb 2018 is 4.5/67.5 = 6.67%. 

The management is confident in its business growth

"The outlook for the electronics and semiconductor industry continues to be positive in 2018. We continue to see business opportunities arising in the markets we serve. Increasingly, technology applications require more electronic components than before, and this is one of our key growth drivers. The recent Consumer Electronics Show held in Las Vegas in January 2018 showcased many new and exciting developments, which will fuel additional demand for technology solutions and applications especially in wireless connectivity and sensors, which are vital segments to the entire Internet of Things (“IoT”) infrastructure. We believe that these developments will support our business growth for FY2018."

Solid p/e and PEG ratio

Based on the closing price of 67.5 cents on 14 Feb 2018: 

p/e is 7.455x.  

PEG ratio is 0.504.

This is easily a 2-bagger.

Conclusion
I will get the 6.67% dividend first while patiently waiting for Mr Market to adjust its price upward to come closer to its fair value of $1.35. 

Superphang

https://superphang.blogspot.sg

Emperor Capital boss bought again and again!

Yes, CEO/Managing Director of Emperor Capital (717.HK) Daisy Yeung and her father Albert Yeung together acted again. This time they bought a total of 6.996 million Emperor Capital shares on 12 Feb 2018 at an average price of HK$0.571 for a total outlay of HK$3.995 million or an equivalent of S$665.8k.

They have given me confidence that my target price of HK$1.00 will be met soon. I wish them 恭喜发财！

Superphang

https://superphang.blogspot.sg

Emperor Capital's boss strikes again!

Very good news from Emperor Capital for this coming CNY!

Refer to my earlier post dated 18 Oct 2017 on Emperor Capital (717.HK) :

https://superphang.blogspot.sg/2017/10/get-good-dividend-while-waiting-for.html

CEO/Managing Director of Emperor Capital (717.HK) Daisy Yeung and her father Albert Yeung together bought a total of 9.996 million Emperor Capital shares on 8 and 9 Feb 2018 at an average price of HK$0.5779 for a total outlay of HK$5.77688 million or an equivalent of S$980k. This is the signal that better thing will come.

Emperor Capital will only announce the result on 23 May 2018. From past patterns, it could be only the start for them to keep buying their company shares from the open market. 

The daily chart has already two white soldiers. The third one will be marching in! 恭喜发财！

Superphang
https://superphang.blogspot.sg

Excelpoint: Eagely waiting for its earnings announcement

The current situation of Excelpoint presents a confluence of positive factors for investors and traders alike:

1)      Good fundamentals with solid p/e and expected good growth amid the strong China 2017 GDP

2)      Tight stop loss due to the tight-range consolidation

3)      Likely a great jump after breaking out 

4)      Price touching the uptrend 50w MA

5)      Earnings announcement likely to be released within the next two days

6)      盘整了一年有余！横有多长，竖就可以有多高

Excelpoint weekly chart: Solid chart for the long haul!

Superphang
https://superphang.blogspot.sg

Lee & Man Paper, 理文造纸 (2314.HK)

Many positive factors have prompted me to buy this stock and also recommend it here: 

1.    Expected FY2017 EPS growth year-on-year is 75%. Expected p/e is 8.2x, PEG ratio = 0.109. Simply stupendous.

2.    Boss bought in last 3 months shares with a total value equivalent to more than Singapore $2m.

3.    Company also bought back shares with a total value equivalent to Singapore $6.6m in recent months and the treasury shares have been deleted from the outstanding shares.

4.    Company is expanding its paper-making production capacity by 15% and tissue paper production capacity by 70% to catch the big wave of demand in China.   

5.    The threshold of going into quality tissue paper is very high and it gives economy moat to 2314.HK.

6.    Selling price of paper has been ratcheting up too. Stock price has been consolidating for a good period of 4 months and is ready to rocket up to retest previous high of $10.90.

7.    FA and TA are both bullish. Too many good factors not to give 2314 a serious look.

8.    The HSI was down on 5 Feb 18 by 0.88% but 2314.HK bucked the trend to move up by 2.62%. You just have to give due respect to its prowess.

Conclusion: My target price for Lee & Man Paper (2314.HK) is $13.1, which gives 39% upside from the 5 Feb 2018's closing price of $9.40. This will likely be achieved by June 2018.

Superphang
https://superphang.blogspot.sg

The Inexorable AEM

Read my 28 Dec 2017 post on my accurate prediction of AEM price movement: http://superphang.blogspot.sg/2017/12/when-will-aem-hit-my-current-target.html

I mentioned in the post that AEM investors will get an Angpao two weeks before Chinese New Year and it is happening. It closed on 1 Feb 2018 at $5.50, surging 10.66% after the company lifted its one-day trading halt with some announcements. 

The climb was so steep that huge profit taking will bound to happen. The transacted volume was high, and it will need to have an even greater volume to sustain the momentum of uptrend or the latest price gap will have to be covered soon.  

AEM daily chart at the close of 1 Feb 2018

As my current position in AEM, bought at $2.80 apiece, has been from house money, I am relatively at ease to make my decision to hold AEM till it hits my new target price of $6.35, corresponding to a forward p/e of 12x, unless the chart can warn me of imminent danger ahead.

Superphang

https://superphang.blogspot.sg

HK market is the happening place

The introduction of "H share holistic circulation" (H股全流通) and "shareholding rights" (同股不同权) reforms by the Hong Kong Stock Exchange will give Hong Kong stocks two extra weapons as far as the mainland investors are concerned.

Holistic circulation of H-shares means that mainland domestic-funded shares that could not be traded in the Hong Kong stock market previously will become tradable. This reform will involve funds with a total market capitalization of about HK$2.6 trillion, and most of them belong to State-owned shares. The total circulation of H shares will provide the China government a channel to solicit funds from investors from the HK Stock Exchange. Apparently, it is far-fetched that the China government would want to see a stock market plunge or any turmoil in the HK stock market this year to undermine their golden plan.

Currently, it is even more pressing to introduce the reform of accommodating different rights in the same share of a stock, otherwise the giant new economy stocks, such as Alibaba and Baidu before the reform, will go for IPO in the United States.

HKEx (388.HK) has been tasked with this national mission to get the most promising stocks to be listed in the HK Stock Exchange. If there is a crash in the HK market, the mission of HKEx is difficult to be accomplished.

Singapore Stock Exchange (SGX) has also announced its intention to introduce dual-class shares and unveil debt issue plans. But HKEx is definitely ahead of the game with Shanghai-HK Stock Connect （沪港通）and Shenzhen-HK Stock Connect （深港通） and its total market capitalisation is more than five times that of SGX's. 

HKEx (388.HK) daily chart: Bullish!

From fundamental analysis, the valuation of HK stocks is still cheap. When HSI was at its peak of 31,908 in 2007, the average p/e was 21.5x. The average p/e of today’s HSI of 32,254.89 is only 15x. The earnings yield is 6.67% which is much higher than the risk-free fixed deposit interest rates with commercial banks. 

The current uptrend of the stock market bellwether, 388.HK, is the confirmation of the bullishness of the HK market which has been and will be the happening market for a long time to come.  There are still laggards to be picked for the bullish ride. Read my earlier posts to get some of them, e.g. 717.HK, 2828.HK,  85.HK and 6166.HK.

I strongly believe that any pullback will be an opportunity for investors to jump on the fast-moving bandwagon. Happy investing!

Superphang

https://superphang.blogspot.sg

Promising Stocks in the HK Stock Market

Emperor Capital (717.HK)

Emperor Capital (717.HK) broke above the BIG cup with good volume amid the background of crazy surges in HK listed brokerages today and the bellwether HK Exchange (388.HK) since the start of 2018. The speed of surge will rise even faster from here with many positive factors being developed in HK stock exchange and funds flowing from mainland China to the HK market.

See my two earlier posts on 717.HK:

https://superphang.blogspot.sg/2017/10/get-good-dividend-while-waiting-for.html dated 18 Oct 2017:

and

http://superphang.blogspot.sg/2017/12/stellar-fy2017-earnings-performance-of.html dated 7 Dec 2017

I still maintain my target price of $1 by 28 February 2018.

HS H ETF (2828.HK)

See my earlier post on 2828.HK:
https://superphang.blogspot.sg/2017/08/time-to-invest-into-hk-etfs.html dated 6 Aug 2017.

HS H ETF (2828.HK) closed at $132.1 today, 18 Jan 2018. The surge since the start of the year is 11.76%. As most of its big market cap component stocks will be included in the basket of 222 large cap A-shares which are soon to be included into MSCI EM index in June this year, there is still quite a distance for it to run before it hits my target price of $138. Hold it tight so that you can enjoy the quick spike of this 9G-force fighter jet!

2828.HK daily chart at the closing of 18 Jan 2018

Conclusion

The impending US interest rates hike, the next probably in June, will help stock markets all over the world to keep breaking new highs as it just shows that the economy is booming. Make no mistake: As long as the US Federal Reserve is still contemplating to hike the interest rates, keeping your money in the stock market is the right move.

When you have acted based on these key leading indicators, merely sitting and waiting will make you rich!

Superphang
https://superphang.blogspot.sg

KKK of Federal bought shares again

Koh Kian Kiong, Executive Chairman and CEO of Federal Int(2000) Ltd, bought 233,300 shares on 9 Jan 2018 at S$0.39429 per share for a total outlay of $91,988, increasing his shareholding in the company to 19.31%.

老板时不时吃货

死股即将会复活

如果你还没满仓

良机将白白错过

I am patiently waiting for good news to be announced.

Superphang
https://superphang.blogspot.sg