Thursday, 29 November 2007

China train

DBS Vicker analyst went to visit Nanjing Puzhen Plant of MIDAS and issue another buy report.

Outlook over the next 3-5 years is very bright. We believe that Nanjing SR Puzhen is in the process of looking at bidding for 4 to 5 more projects with a total potential 700-800 cars, which could lead to a doubling of Nanjing SR Puzhen’s current order book of RMB3.5bn. Whilst we can expect more clarity on the delivery of trains in FY08 for Nanjing SR Puzhen only in 1Q08, we are very confident about its prospects in FY09 and beyond (when most of its current order books will begin delivery).

Reiterate BUY and S$1.84 target price, which is based on 24x FY08 earnings, translating to 0.4x PEG on EPS CAGR of 50% over FY06-FY09F. We continue to like Midas as a play on China’s booming railway sector.

>> It is no secret that China government is set to spend lots of money in building the railway infrastructure across the country. MIDAS would be a key benefiary of this plan. The advantage of this investment theme is, it is unlikely to be affected by internal economy slow down or US slow down. Valuation has came down and become more reasonable now.

Tuesday, 27 November 2007

if you want to buy a bank now

If you want to buy a bank now, what should you buy? First name come to my mind is citigroup. I know people would say about the problems it has - massive write down and leadership problem. But, that's the time you can pick up a financial group cheaply, isn't it? They have a strong franchise some more.

The capital base was weaken by the recent write down. Today, it announces the capital injection by Abu Dhabi fund. It proves that people have confidence in the brand.

Recall when Amex had the trouble and Warren Buffett went in to buy the company. Because they have strong franchise and it present a rare opportunity to buy cheaply. I think the situation is similar here. Of course, you need to have holding power for the counter for long term. When the financial market sorts itself out, it would come back.

Only pity thing is the stock is listed in US. Not convenient to buy from Singapore. It might drop some more depends on the degree of problem. One can accumulate over different period. Do your own home work first!

Monday, 26 November 2007

Sport player, priced for perfection?

A short note on today's Kim Eng report on China Sports Intl. China Sports is rolling out new product and plan to raise retail price. They also sponsoring the Slovakian Olympic team and raising advertisement spending. The outlook remains positive.

In last paragraph, "While China Hongxing’s recent placement has dampened sector sentiment somewhat, we believe the sportswear sector will still do well. It is a matter of balancing growth and costs, taking into account stock valuation as well. While both companies are participating in the sector’s growth, CHHS is priced for perfection and cannot afford to slip up. As such, we believe the risk-reward is tilted more in CSI’s favour."

"Priced to perfection" is what usually the market do, when people become overly enthusiastic with the company and the story it is selling. It does not protect one with the margin of safety advocated by value investment guru. How true it is! At the peak, one could not afford to slip up too much. While at the bottom, room for going down is limited, but there is high probability to charge upwards.

Saturday, 24 November 2007

Inflation has caught us

These two weeks, the news topic which I come across most often is inflation. The situation is turning bad now.

US inflation hit 14 month high, driven by higher fuel cost. The falling US dollar cause the imported good and oil price to go higher. By right, to curb the inflation, Fed should increase the interest rate. But, given the current subprime problem, they are likely to cut the interest rate instead. This could give rise to faster inflation which threaten the economy. I really hope US won't end up in recession but only to slow down.

In China, situation is no better. Inflation has picking up, driven by the food price increases. A very good example is the pork price, which has increased a lot. Consumer price index rose 6.5% in Oct. The economy remains red hot and further cooling is needed.

Singapore's inflation is targeted to hit 5% next year, driven by the housing cost increase. The economy is doing very well. We see tight labour market, congested road and rising rent. The wage has increased, but the cost has gone up quite significantly also. In fact, the whole Asia's inflation has picked up some what.

These two years of fast economy growth in the region, has increased the demand for commodity like soy bean and oil. Low interest rate also contribute to the excess liquidity which flowing through Asia and prop up the asset price. We really need a global slow down to cool the fast rising price.

I think we are at the critical juncture now. If the thing is not managed properly - subprime, oil price, interest rate, inflation. We would have more surprises ahead. It is now inappropriate to risk more capital in the market. Because if the liquidity dried up, asset price could fall a lot. Better if the picture could become clearer. Consider to invest only on fundamental solid company with strong cashflow to weather the storm. Cheaper price could go cheaper, buy/trade with care. Having said that, of course, the best time to buy is when the stock is down.

Friday, 23 November 2007

Personal finance part 2 – Protect what is important

The next step to do is to have protection in the form of insurance.

Why everyone needs protection? One is bound to have dependent like parents, husband/wife or children. If one is the bread winner of the family, what would happen if disaster strike? Even you are single, what happen if unfortunate event like permanent disability happen? When that happens, would you have enough financial resource to cope with it?

If you don't have any policy, suggest you find an insurance agent to access your insurance need. Typically people would get insurance for
  • Death
  • Permanent disability
  • Critical illness
  • Hospitalisation
Get yourself enough cover. You can go through the calculation with insurance agent. Nowadays, Singapore insurance agents have morphed into financial planner/adviser. There are two types of adviser. One is tied to the insurance company, another type is from independent financial planning company. Depends on your preference, an ethical adviser won't just push product but to access your need. Typical insurance product like whole life insurance, endowment plan or investment linked insurance.

Seriously I don't like whole life plan, endowment plan or investment linked plan. I would advocate buy term and invest the rest in unit trust. What happen when you buy a whole life plan? The premium is split into two parts. First portion used to pay the term premium, another portion is used for investment. The investment portion is the part which they used to return you the premium after 20 years. But generally, the investment return for whole life policy is low, around 3-5%. A term insurance should be cheap and have a bigger coverage.

Rule 2 - Buy enough insurance coverage

In the next part, I would discuss about investment.

***Updated 26 Sep 2008


Wednesday, 21 November 2007

Sea of red

Today is another sea of red. In the morning bus, when I saw the early East Asia trade, I knew this is going to be another day of sell down. As I am busy at work, I don't bother to look at any market news.

The current problems(or excuses) are
- Weak economy outlook in US
- Afraid of more subprime loss
- Unwinding of yen carry trade amid rising risk

You name it, they have it. At the sametime, there is a wide spread of pessimism in the forum also. It is as good as tomorrow the world would be in total recession. Next year, US is either going to slow down or go through a recession to correct the excess. Few years down the road, the bull would be back again, although I won't say it has died already. In the coming century, Asia is still where the action is.

Stock market tends to overshoot. Just as you think it is doom and gloom, we might be at the bottom and ready to resume the upward trend. Or just you think all is well, surprise would come. I believe after another few round of sell down, maybe looking at STI 3200, it would be worthwhile to start buying in different tranches. We must overcome the human instinct to buy high sell low. After all, behind a stock is company, behind a company is a business. Business grows over time!!

Let's find some examples. Around 21 Nov 06,

Olam, 2.0+
China Hongxing, 0.4+
Ezra, 1.8+

Despite the current sell down, they are unlikely to go back to previous level. Because business has grow, stock price would follow. The thing that fluctuate is the valuation. When market is optimistic, you get high PE valuation. Otherwise, it is the other way.

Have faith, focus on valuation and pray. The risk of buying low is less than buying high.

Monday, 19 November 2007

Company update 19 Nov 07

There are really lots of company news these two weeks. The economy is booming and every company wants to expand.

Update for Olam

From CIMB. Wilmar and Olam to form 50:50 JV to invest in integrated palm oil, natural rubber and sugar assets in Africa. Maintain target price of S$3.83; reiterate Outperform. We have estimated that Olam will make about S$600m in investments in FY08. YTD investments, including Nauvu, amount to S$245m, within our forecast. We have kept our earnings estimates intact as we earlier incorporated such acquisitions in our model as mature existing businesses grow at a slower rate. Maintain target price of S$3.83, still based on DCF valuation (WACC of 9.4% and terminal growth rate of 2%).

From DBS, We maintain our BUY recommendation, leaving our target price of S$3.80 intact, which is based on 30x FY09 earnings. We continue to like Olam for its strong earnings growth prospects, driven by both organic expansion and via acquisitions.

>> Fantastic. Having missed the Olam ipo at 60c, scared of the high valuation of 80c, didn't buy during the pull back at 1.80. Olam is one of the stock I want to own but dare not have the courage to take up. One notable about the company is the business model, which is hard to find and consistently increase the earning. At the current PE, I still won't buy, only wait until it is more reasonable. Normally, when people cannot justify the buy call using PE, they would use other means like discounted cashflow, enterprise value etc etc. However, the final return won't be great either, and you are subjected to the PE de-rating if something does happen to the company.

Update on China Hongxing again.

From CIMB, Target price lowered to S$1.32 from S$1.48; downgrade to Neutral from Outperform. Our new target continues to price the stock at 27 CY09 fully-diluted earnings, which is at a slight premium to the average valuation for the sports-shoe sector. Given the limited upside to our target price, we downgrade the stock to a Neutral. However, we continue to like Hongxing as a key beneficiary of the Olympics and China’s rising consumption spending.

From DBS, Valuations now look stretched against larger, more established peers. Downgrade to HOLD. The stock is now trading at 32x FY08 and 24x FY09 earnings, which is similar to Anta’s 32x FY08 FY08 and 23x FY09 earnings. As such, with valuations now at par with Anta, which is a larger and more established peer, we believe that valuations for China Hongxing are now fair and downgrade the stock to a HOLD, TP S$1.25 (24x FY09 PER).

>> Like I mentioned early, the risk has increased. Both to company and investor. Company faces the aggressive expansion risk and investor face the share over hang & earning dilution. Having said that, I believe the company is doing the right thing. They might become the sport shoe giant.

DBS on Boustead. We have resumed coverage on Boustead with a fair value of S$2.74, based on sum-of-the-part valuation. This would translate to 15xFY08 PER and 13xFY09 PER and offers 21% potential upside. Recommend Buy.

>> When company is doing well, analyst would come back to cover it. At current price, and given the project risk(project always face unexpected situation), wait for a better entry point. I was caught by the recent property down turn by a small amount. This proves that the theme play could swing very fast. For example, shipping, technology, oil & gas, who knows? I think the consumer stocks are more resilient.

Old Chang Kee Pte Ltd – The curry-puff maker is headed for an IPO. The food and beverage group announced Friday that it has lodged its preliminary prospectus with the MAS, and intends to list its shares on Sesdaq, the secondary board.

>> Unless you aspire to support the local brand, I see no reason to subscribe to this issue. F&B business is tough. Just look at the peers listing on SGX, and you would know the answer.

SembCorp Industries – Intends to increase its piped Indonesian gas imports by 26% to meet growing demand for natural gas from petrochemical plants on Jurong Island, and expects to conclude a gas sales agreement for this by the first quarter of next year.

>> The petro chemical industry is growing in Singapore. If you are keen on the idea, can explore which are the companies doing business in Jurong island. The support industry should get the major deals and increase the earning. Base on recent report from Kim Eng, they still view Rotary as the primary beneficiary of this boom.

According to zaobao news today, Brothers Holdings' "Singapore City" at Shenyang China received an overwhelming response on the first five days. More than 250 units already sold with 70% of buyers are the city's people. The project is a mid to high end integrated property project, leveraged on Singapore good brand name.

>> I expect the project to do well. However, I have yet to have time to study fully on the company. It should be a worthwhile bet. After I have done my research, I shall post my finding here.

Sunday, 18 November 2007

Market review 18 Nov 07

I was really tied up for the past one week, not able to monitor the market. Sometime, it is good also, because as fundamental investor, you shouldn't really keep watching stock price. As it would prompt you to execute unnecessary buy/sell order.

Last Friday, STI close 36.63 points lower. Fears have slowly taken control, there is more fear of the yen carry trade unwinding starts again. At Friday close, US manage to close higher, I think it would provide an opportunity for rebound and it would head lower again. How ironic the thing is! Just as the market recover quickly from sub prime fear, and now the fear has taken control again as predicted.

I think this would persist for a while. Waiting for clearer direction now, before committing fresh capital into the market. Meanwhile, if a good stock is selling at good price, might consider to pick up some.

Lucky enough, I didn't manage to get the China New Town ipo and it got clocked down to 0.69. I would monitor the progress, if it is selling at a good discounted price, it would be worth to pick up and hold for long term. But, short term volatility would likely persist.

Another surprise is the fresh call of capital by China Hongxing. The earning is growing very well for the past few years. Look at the current balance sheet strength, they are actually raise the fund to expand the number of store. However, the aggressive roll out would increase the risk and the dilution of new share (18% of current share base) would cause the share price to drift lower in the coming period.

Site layout updated

Spent quite sometime to update the blog layout. The standard blogger template layout is quite boring and waste lots of space. This new layout give more space to the blog post and utilise the rest of space better. I hope the visitor, you, would like it.

Thursday, 15 November 2007

Company result update 15 Nov 07

Today, there are really lots of company result update. Took quite a while to digest all the news.

Sino Env

Note from UBS. We derived our price target using a DCF valuation, assuming 9.1% COE and 3% terminal growth rate. Our price target implies 16.9x 2008E earnings. We value the core business at S$2.25 and the option on desulphurisation at S$0.35.

>> Desulphurisation get delayed. Generally, project always get delayed. When you have factored in the future earning into price, and it doesn't come, that's the part it is going to be a little bit nasty. With hindsight, I didn't chase the high above 3.2. With the crash, it is still not safe enough to enter. Look at it below 2.

MIDAS

Note from Lim & Tan. At forward PE of 29x against growth rate of 40-50% and closest peer Hong Kong listed Zhuzhou CSR's 40x PE, we maintain BUY.

Note from OCBC. Resume with BUY. We resume coverage with a BUY rating using a PE based methodology as we believe that earnings will be the key share price driver in the future. Pegged at 30x FY08 PER, our fair value is S$1.85 cross checked with an undemanding 0.5x PEG ratio. Midas offers investors an opportunity to ride on the ongoing rail transport boom in China, and we project 52% net profit CAGR in our FY07-09 forecast period.

Note from DBS. We maintain our BUY call and target price of S$1.84, which is based on 24x FY08 earnings, translating to 0.4x PEG on EPS CAGR of 50% over FY06-FY09F. We continue to like Midas as a play on China’s booming railway sector.

>> I always think that its business is "safer" compared to others. The government already laid out the infrastructure spending plan. It is only a matter of time on when they would get the share. The rumour is unfound and the business profile still good. Buy if drift lower.

Ching Hongxing

Note from CIMB. Target price nudged up to S$1.48, maintain Outperform. We see continued demand for sporting goods in China, particularly from locals in 2nd and 3rd tier cities. Although the stock has done well recently, we believe there is room for more upside. Execution remains as a major risk. Maintain Outperform with our new target price of S$1.48 (previous $1.47) based on 24x CY09 earnings, which translates into 27x FD CY09 earnings.

Note from Kim Eng. Downgrade to HOLD, prefer China Sports
At S$1.25, CHHS is valued at 31x 2008F fully diluted EPS or 0.63x 3-year PEG, still below the valuations of Anta (36x 2008F EPS, 0.5x PEG) and Li Ning (44x 2008F EPS, 1.1x PEG). It has been a great run but we are not comfortable with the rising risk profile. We also believe CHHS’s growing funding need, in-line with its aggressive market expansion, could lead to EPS dilution. A 20% dilution, the maximum allowed under the share issue mandate, will push 2008F fully diluted PER to 36x (33x basic EPS) – fairly valued in our view. With less than 10% upside to our new target price of S$1.35 (33x 2008F EPS), we are downgrading to a HOLD until we are comfortable that future growth will be balanced, risks-wise. We prefer China Sports.

>> Different people have different view. Generally, given so high the PE, I would be reluctant to put the money in. Usually, the idea case is business performed as expected, then the valuation keep roll over. However, one quarter of surprise is enough to pull it back to ground.

Olam

Note from CIMB. Target price raised from S$3.83 to S$3.72; maintain Outperform. We maintain our earnings estimates but raise our target price to S$3.83 as we roll forward our DCF (WACC 9.4%, 2% terminal growth rate) target price from end-CY07 to end CY-08. The group’s fundamentals remain strong with management having the track record and clear strategy to deliver organic and inorganic growth. Maintain Outperform.

>> Although not cheap, Olam is one of the few which has a stable earning profile. They earn a cut from the whole supply chain and is one of the largest supply chain manager. If a sudden crash occurred, it is worth to pick up some.

Boustead

Note from Philip. BUY on Boustead. Our fair value of S$2.69 represents a 13.2% upside and we reiterate our positive recommendation on Boustead. We change our method of valuation1 so as to reflect better the earning streams coming from Boustead’s diverse businesses – the 4 core business segments

>> I started notice the company, when one of the fund manager start buying it. However, at that time, I am not so sure what it does(even now), didn't consider buying. The business is doing really well, Philip has a strong call on the company. Worth study during free time.

Swiber

Note from CIMB. Maintain Outperform; higher target price of S$5.05 from S$3.95, as we roll forward our 15x P/E to CY09. Swiber is trading at undemanding valuations for its 117% 3-year CAGR in earnings. Our valuation excludes earnings contributions from the drilling barge. Short-term catalysts could include a stronger 4Q07, contract wins and margin enhancement. Key risks are delays in fleet deliveries, loss of key management and a sudden collapse in offshore E&P spending.

>> Another set of excellent result. However, the target price is a bit unrealistic. The risk is still high as they are wondering into unchartered water. I hope they would be a bit more correction to bring the valuation down to attractive level. If you got deep pocket, can consider it for long term.

Wilmar

Note from DBS. We have adjusted our forecasts to take into account higher merchandising and processing segment profits, other operating income as well as higher minority interests, resulting in EPS upgrade of 26.7% for FY07, 25.3% for FY08 and 29.0% for FY09. Our valuation on the company has consequently been raised to S$5.55/share – based on 10-year DCF (using WACC of 7.4% and terminal growth of 3%), implying 22.9x FY08 EPS. At the current price, the stock still offers upside potential in excess of 15%, excluding dividends. Maintain Buy.

>> Sometime people say big is beautiful. In this case, most would argue it certainly is. Caveat! The earning outlook is linked to CPO price. CPO is also correlated to oil price. At the current dizzy level, the room to go higher has narrowed. I expect a pull back for oil and the CPO.

Wednesday, 14 November 2007

Stock investment key learning point in 2008

Being a stock investor is a constant learning journey. No matter how experienced you are, you have to keep learning or keep remind yourself not to forget what you have learned. From the super bull this year to the bearish outlook now. It is worth to note down a few points that I have learned.

  • Be your own man. I guess it is a human nature to be influenced by people. We tend to believe other people's argument more than our own research. Back your idea with solid research, it is worth to hold on to your belief.

  • Keep your buy list handy. Do the proper research during your free time. Once you are convinced the stock is worth a buy, set your target entry price and wait for opportunity. Don't buy base on other people's hot tip. The hottest stock now could cool down few months down the road.

  • Don't buy too expensive. When a big news is released, the stock price often react to it and eased off gradually. You buy at the peak, it would take quite a while to reach another peak.

  • Every dog has its day. An average company would have few quarters that is doing very well. A good company would have few quarters that is doing average only

  • Project based company is dangerous. The earning could be impacted by project delay etc. On the contrary, consumer goods company's earning tend to be more stable.

  • Set your portfolio allocation ratio right and stick to it

  • Stay away from electronic and technology stock. If you think you can catch the cycle, think again.

The list does not end here, so as the quest to become a good investor. I would need sometime to do a good reflection and consolidate the idea again.


Welcome to share your thoughts in comment.

Tuesday, 13 November 2007

FJ Benjamin FY08 Q1 result

Today, FJ Benjamin announces 1st quarter result for FY08. CIMB and Kim Eng both maintain a buy on the company.

Key highlights:
Revenue and net profit growth 43% and 33%
Gross margin increased from 37% to 42%
Rental cost jumped 96% yoy with new store opening

My view is the management is still doing all they can to growth the company. Increase the brand they managed, move the in house brand RAOUL to higher level, and together with coming Singapore tourism boom(or even Asia). There are still plenty room for growth. At current price, it is trading at FY08 forward PE 18. Given volatile market condition, buy only if a good price emerged.

Synear - still a buy

Synear just announced the 3rd quarter result which comes below expectation. The key point is unexpected quick fall of the margin. Given that it just experienced the margin expansion during last period, this big fall comes as a surprise to me. However, this is understandable, since the raw material price has increased a lot during this period. With the pork price expected to stabilize, the pressure might ease for the next quarter.

They are spending a lot on the promotion and advertising, ahead of Olympics. This could yield a long term gain for the company. At the same time, an aggressive production capacity expansion plan has been put in place. They have also implemented some cost control and moving towards higher margin product. Analyst is forecasting a forward PE of 21.

Given the company is one of the top brand in China and well defined expansion plan. I would still think it is a buy. It might be a better time to buy during a minor set back, then chase it when it is going through the roof.

Sunday, 11 November 2007

Personal finance part 1 – Building the foundation

After I graduated from the university, one of the first few finance/investment books that I read is Robert Kiyosaki “Rich dad, Poor dad”. Many people have read that and benefited from it. However, the degree of benefit depends on whether how well do you understand or believe the concept. If you always think, well, I got such little capital, that's not for me. Then, how can you become financial independent?

The concept is actually not new. There is this book called “Richest Man in Babylon” which is much earlier and talking about the same thing. In the old days in Asia, the term “financial planning” is unheard of. Nowadays, people get more wealthy and more aware of this concept. Government is also actively promote it. Despite the wide promotion of financial planning concept, I noticed that only some of my friends practice that. So, I intend to highlight some fundamental things that you should be doing for your financial well being.

Build a solid foundation, no matter at what stage of life you might be. If you are already following the rules, congratulations. If you still don't know anything about it, quick, get started now.

First, let's start with book keeping. Open a note book or excel sheet, start writing down your monthly income and expenses. Observe how much you earn and where do you spend money each month. Notice the expense amount required to support your lifestyle. Keep your expenses low.

Rule 1 – Keep 6 times monthly expenses aside and don't touch it.

This would become the rainy day's fund to protect you against unexpected job loss, misfortune or any unexpected. A good place to park the fund would be at fundsupermart Cash fund or Lion Capital Money Market fund. I don't advocate putting in fixed deposit which offer pathetic interest. As least the money market fund is very low risk and earn good interest. Another plus point is you can cash out within a few working days. Some people might choose to split between the FD and money market fund.

Look at your income and expenses, see whether can you increase the income or reduce the expenses? To increase the income, one has to find different way to achieve it. Other than the part time job which many companies don't allow, you can generate some passive income from other sources. For the expenses, try to cut down on the unnecessary things. Things like impulse buying, excessive personal indulgence can be reduced. Every dollar spent is an opportunity lost. But that does not mean that you need to stop eating, watch movie or travel. It just simply means spend within your means. Best way is to have a budget to control, how many shopping trip you go a year or how many restaurant meal you eat per month.

At this stage, you have the rainy fund set aside, income and expenses made clear. It is pretty solid now.

*** Updated 26 Sep 2008

Thursday, 8 November 2007

China New Town Dev IPO

China New Town Development is making an IPO on SGX. The company would offer 12,000,000 shares to the public at 0.83 per share.

From the prospectus,

China New Town Development is a leading new town developer in the PRC. Working
closely with local governments, we are principally engaged in the planning and
development of large-scale new town projects of at least 5 million square metres. We
focus mainly on developing new towns that are located in the suburban areas of China’s
major cities.

- One of the fi rst privately-owned companies to plan and develop new towns in China
- Distinctive business model
- Close cooperation with local governments
- Diversifi ed sources of revenue
- Experienced management team

Growth strategies
- Enhance geographical diversity of our business
- Adhere to international best practice
- Dedicated to improving our profi tability
- Cooperate with leading international property development and management companies

Risk
- Neither we nor our joint venture partners control the timing or the price of the sale of land use rights in new towns we develop
- Our business operations are subject to extensive government regulation
- We do not anticipate generating positive cash flow during the construction period of our projects and will need further financing for future projects
- We face increasing competition that could adversely affect our business and financial position

>> Looking at the offer size to public, there should be high chance to get the IPO. Judging from the institution investor demand, this IPO could possibly do well during the opening. However, given the current uncertainty in the market, it is possible to go the other way also, given the high valuation attached to it. It would be worth subscribing if you have the holding power.

Wednesday, 7 November 2007

Emergency brake for QDII

According to news, China securities authority has requested the QDII fund to reduce the weighting in HK market. This triggered the Hang Seng 1526.02 plunge. At the same time, drag down the S-chip as well.

I think the main purpose is to prevent the bubble spreading to HK, which should be a good thing. Think of this, the money has already being accumulated, if they cannot invest too much in HK. Where does the money go? To the S-chip and South East Asia stock!

Monday, 5 November 2007

Forex vs stock trading

I attended a basic forex workshop over the weekend. The objective of the workshop is to give an overview of forex. The instructor walked through the history of forex and introduced some basic knowledge. There were a few points he actually keep emphasizing.

Key points:
- Forex trading is all about common sense
- History repeat itself

According to him, since the fluctuation of forex is swift and violent. They need to make decision in split second. Trader rely on common sense. When US data not looking good sell US dollar, when oil price hitting new high sell Yen. It is truly fascinating. It is something I never experienced before. No wonder so many people are into forex trading.

I see we can relate this to stock trading also. Trading stock (not investing) also needs a lot of common sense. When a piece of bad news erupted, sell the counter immediately. The first one get the profit. Likewise for good news. The price also move in anticipation. Like stock, price move in advance than the news.

History repeat itself in forex also. Just like stock, we studied a situation and gained some wisdom. When the same situation happens again, we are better equipped to deal with it. The recent sub prime problem is the result of creative financial product. In the future, as more creative product hits the market, we are bounded to see the same thing happen again. But morphed into another form. Whether you would be prepared for it, it depends on individual.

Saturday, 3 November 2007

Likely to be an uncertain week ahead

After the stock market got over with the interest rate cut celebration, they are again focusing on the sub prime problem. Market really has short term memory. Sometime I asked myself, what has changed in the past few months which cause the great fluctuation? Nothing. At least, I cannot find a strong valid reason myself, except risk aversion. Those are excuse for trader to come out to buy/sell the stocks. To a long term investor, it means chance to buy stock cheap. To a trader, time to make profit by shorting stock.

Having said that, of course market is a future predicting machine. People vote with the buy and sell action. If the US data does not come good, and the bank announces more losses/write down, they would vote against the market again.

These were said this week,

"The market is obsessed with these credit problems. People feel like they're standing in a mine field and they don't know where all the mines are," said Brian Gendreau, investment strategist at ING Investment Management. "We're looking for an opportunity to go back into equities. I just don't think next week is going to be the time. There's still just too much uncertainty."

Gendreau said the unfolding impact of the credit market mess on the sector have sparked speculation about whether firms are withholding bad news or "if the firms themselves know the extent of the damages."

Another characteristic of market, it is afraid of unknown. When the impact is unknown, there is no gauge, hence there is no end to selling. If it has became a certainty, the price goes up, people rushing in to buy.

Beside the above, a good article to round up this week. Why the Fed Will Cut and Cut Again.

Renewable energy

At the start of the year, I noticed a company China Enersave was involved in the biomass energy sector in China. The review was quite good, and indeed it had a good run till 0.20. Frankly speaking, I don't have time to do a very in depth research on the company, so just rely on the review and reports.

Since the recent market correction and announcement of several fund raising activities, the counter is going downwards at 0.105 now. A good entry price, subject to valuation check and the prospect didn't actually change.

Found a website which dedicated to renewable energy and had some news regarding the company.
Biomass Plant and Enersave.

I think it is good to place it under the watch list. Just in case it trended lower, it might be worthwhile to pick up some for future growth. High risk high return. Once they can make it, the return could be quite spectacular. This together with Guangzhao IFB are the two under my speculative list, which I would consider enter at very low price.