2008 has been a rather fruitful year for me. As this point of time, STI has declined by around 49% since the beginning of 2008 while my holdings of equities is currently slightly up by 4%. This is because I stayed out of the market for most of the time and I only entered near the interim bottom formed in October and since then, STI has rebounded slightly although it is in a consolidation phase now.
I'm not sure what 2009 will bring. Whether the bottom made in October will turn out to be the final bottom for the STI or it will continue to plunge, I'm not that sure either. What I'm sure is that if it plunge even more, I will be ready to scoop up more equities at a cheaper price.
As I recalled on how I made my purchases in equities, I guess some part of it can be attributed to luck although proper planning is still important. When the market peaked in October in 2007, my plan was to split my capital into 3 portions. I will then use each portion of the capital to buy in when STI has declined 30%, 50% and 60% from its peak respectively. This will help to average down my buying price and reduce the risk of putting all my capital into equities, only to see the market plunging even further.
As it turns out, when STI declined 30% from the peak, I was rather hesitant about buying in because I reasoned that a decline of 30% from the peak is rather low for a financial crisis that has been compared with the Great Depression. After all, the STI actually declined by slightly more than 60% in the Asian Financial Crisis thus I gave it a miss in buying when STI declined 30% from the peak.
Not long after, STI declined 50% from its peak and this time round, I was fearful of buying. Irrationally, I thought that since STI has declined by such a huge percentage, it can continue to plunge even further. On hindsight, this way of thinking is rather illogical. I should be thinking that since STI has declined 50% from its peak, it is the time to buy since equities are at huge discount now. However, I gave it a miss again once again and I still think it is foolish of me to do so since I could be running the risk of the market rebounding off the bottom without me.
Finally, STI declined by 60% from its peak. This time round, I was too tempted by the huge undervaluation of equities and I plonked part of my capital in promptly. It turns out that STI has found an interim bottom at a level which is slightly more than 60% from its peak.
Thus I was pretty fortunate that my holdings are still slightly positive at this point of time. If the market continues to plunge further, I will continue to scoop up more equities. I guess it is important to plan and know what to do when the market reaches there and continue to stick to your plans. In this way, one will feel less fearful and will be able to carry out his plan successfully. Let's hope that 2009 will turn out to be a better year for all of us.
Wednesday, December 31
Tuesday, December 30
Monday, December 29
Sunday, December 28
Saturday, December 27
Friday, December 26
Wednesday, December 24
Saturday, December 20
Biosensors: An example of a BB trap
3 comments
A few weeks ago, I was chatting with Musicwhiz and others in La Papillion's chatbox on his website. We were talking about some of the counters in the past that were being speculated wildly by the market to sky high prices before plunging down again to a fraction of their peak price and how the marketmakers work in such a situation to profit from the market. Biosensors is one such counter which belongs to this category.
To start off with, what is a BB ? A BB stands for big boys and that is a term that is often used in the local stock market circles. It refers to those who have the funds to move the price of a counter and that include funds, syndicates of investors or any investors who has a significant amount of shares in this counter. Collectively, I will simply call them as the marketmaker.
So what kind of business is Biosensors involved in ? As taken from the SGX website, Biosensors develops, manufactures and commercialises innovative medical devices used in interventional cardiology and critical care procedures. Since 1990, Biosensors has manufactured and marketed critical care catheter systems and related devices that are used during heart surgery and intensive care treatment and monitoring. In the year 2000, the Group entered the interventional cardiology market with the introduction of their proprietary coronary bare-metal stent, along with stent delivery balloon catheter system, followed by an expansion of the product line to include angioplasty balloons and catheters.
The Group has internally developed technology to address each component of a drug-eluting stent system, including a stent,, a stent delivery catheter, a polymer and a proprietary drug. The Group is pursuing two drug-eluting stent programs independently, and has licensed aspects of its drug-eluting stent technology to four licensees.
A quick look at the financial statements reveal that Biosensors is not an attractive company at all to own from an investment point of view. It has been making losses year after year and in fact, this company has no retained earnings at all ! Cash flow from operating activities has been negative and most of the cash in Biosensors are being raised through financing activities such as the issue of convertible bonds. Futhermore, this company has no sustainable source of revenue from its operations and relies mainly from borrowing to finance the research and the operations of the company.
To start off with, what is a BB ? A BB stands for big boys and that is a term that is often used in the local stock market circles. It refers to those who have the funds to move the price of a counter and that include funds, syndicates of investors or any investors who has a significant amount of shares in this counter. Collectively, I will simply call them as the marketmaker.
So what kind of business is Biosensors involved in ? As taken from the SGX website, Biosensors develops, manufactures and commercialises innovative medical devices used in interventional cardiology and critical care procedures. Since 1990, Biosensors has manufactured and marketed critical care catheter systems and related devices that are used during heart surgery and intensive care treatment and monitoring. In the year 2000, the Group entered the interventional cardiology market with the introduction of their proprietary coronary bare-metal stent, along with stent delivery balloon catheter system, followed by an expansion of the product line to include angioplasty balloons and catheters.
The Group has internally developed technology to address each component of a drug-eluting stent system, including a stent,, a stent delivery catheter, a polymer and a proprietary drug. The Group is pursuing two drug-eluting stent programs independently, and has licensed aspects of its drug-eluting stent technology to four licensees.
A quick look at the financial statements reveal that Biosensors is not an attractive company at all to own from an investment point of view. It has been making losses year after year and in fact, this company has no retained earnings at all ! Cash flow from operating activities has been negative and most of the cash in Biosensors are being raised through financing activities such as the issue of convertible bonds. Futhermore, this company has no sustainable source of revenue from its operations and relies mainly from borrowing to finance the research and the operations of the company.
I noticed that this counter was under speculation during last year and saw how the marketmaker made use of news to profit from the market speculators. In general, the markemaker will accumulate this counter prior to the release of bullish news. At that point of time, the market would be waiting for news such as the Conformite Europeene (CE) mark approval, which is an international symbol for medical devices that adhere to strict quality assurance standards issued by the European Union. The CE mark approval is of significance because it must be obtained before the stents can be allowed to be sold in the European Union. Furthermore, the approval process for the other regions such as Asia are less difficult thus if the CE mark can be approved, it will help to pave the way for approval in other regions.
I have attached the chart for Biosensors. If you take a look at the chart, you will notice that there are regions of peaks and throughs. The movement can be summarized below;
1. Consolidation will take place with light volume and the sideway movement of the counter. This is the time where the marketmaker will buy this counter slowly and quietly at a low price in anticipation of the next rally. This is known as accumulation. Since the marketmaker will try to accumulate this counter at a low price, it cannot buy too much of this counter within a short period of time. Otherwise, the price of the counter will start to move up and the price will no longer be low enough for the marketmaker to purchase. Furthermore, it may also trigger off bullish speculation or rumours in the market, causing the price of the counter to increase.
2. Upon the release of bullish news, the marketmaker may try to buy this counter in large quantities to lure the market to buy more and push the share price up. Even though the marketmaker may buy in large quantities at this stage, the average buying price will still be rather low due to previous accumulation of this counter in the consolidation stage. This is the stage where the share price will rally and it can be seen by huge price movement of the counter coupled with heavy volume.
3. Once the share price reached its peak, the marketmaker will try to sell off this counter slowly to take profit. This is also known as distribution. It is done slowly to maintain the high share price in order to maximize their profits.
4. After the marketmaker have sold off this counter, the market will be left holding the counter. Since the markemaker is not buying the counter anymore, the price of this counter will start to plunge. Once the price is low enough, the marketmaker will start to accumulate this counter again and the whole cycle will be repeated again.
So what are some of the important lessons which I have learned from my observation of the movement of this counter ?
1. If one can identify that there is a marketmaker moving a counter, one can buy the counter during the accumulation phase and sell them off during the distribution phase. This is rather difficult to do as identifying the accumulation and distribution phases can be quite hard. In the case of Biosensors, this counter moves with a predictable pattern of peaks and troughs which coincides with the release of certain news thus it is quite easy to see what the marketmaker is doing.
2. One should always exit his position if the direction of the movement of the counter is not moving according to how one is expecting it to move. This is because if the marketmaker decides not to move this counter anymore, the price of this counter will simply plunge. If one continues to hold on to his position, it is likely that he will incur a huge loss. This is especially true when one is doing any speculation. One should always get out of a losing position when your opinion proves to be wrong.
I have attached the chart for Biosensors. If you take a look at the chart, you will notice that there are regions of peaks and throughs. The movement can be summarized below;
1. Consolidation will take place with light volume and the sideway movement of the counter. This is the time where the marketmaker will buy this counter slowly and quietly at a low price in anticipation of the next rally. This is known as accumulation. Since the marketmaker will try to accumulate this counter at a low price, it cannot buy too much of this counter within a short period of time. Otherwise, the price of the counter will start to move up and the price will no longer be low enough for the marketmaker to purchase. Furthermore, it may also trigger off bullish speculation or rumours in the market, causing the price of the counter to increase.
2. Upon the release of bullish news, the marketmaker may try to buy this counter in large quantities to lure the market to buy more and push the share price up. Even though the marketmaker may buy in large quantities at this stage, the average buying price will still be rather low due to previous accumulation of this counter in the consolidation stage. This is the stage where the share price will rally and it can be seen by huge price movement of the counter coupled with heavy volume.
3. Once the share price reached its peak, the marketmaker will try to sell off this counter slowly to take profit. This is also known as distribution. It is done slowly to maintain the high share price in order to maximize their profits.
4. After the marketmaker have sold off this counter, the market will be left holding the counter. Since the markemaker is not buying the counter anymore, the price of this counter will start to plunge. Once the price is low enough, the marketmaker will start to accumulate this counter again and the whole cycle will be repeated again.
So what are some of the important lessons which I have learned from my observation of the movement of this counter ?
1. If one can identify that there is a marketmaker moving a counter, one can buy the counter during the accumulation phase and sell them off during the distribution phase. This is rather difficult to do as identifying the accumulation and distribution phases can be quite hard. In the case of Biosensors, this counter moves with a predictable pattern of peaks and troughs which coincides with the release of certain news thus it is quite easy to see what the marketmaker is doing.
2. One should always exit his position if the direction of the movement of the counter is not moving according to how one is expecting it to move. This is because if the marketmaker decides not to move this counter anymore, the price of this counter will simply plunge. If one continues to hold on to his position, it is likely that he will incur a huge loss. This is especially true when one is doing any speculation. One should always get out of a losing position when your opinion proves to be wrong.
Friday, December 19
Lowest Brokerage Fee
28 comments
I have compiled a list of the brokerage fees offered by the local brokerages for buying local stocks and made a comparison of which brokerages is offering the cheapest brokerage fees based on the contract value.
For the minimum brokerage fees, Citibank has the lowest brokerage fee at $22. Otherwise, Saxo Capital seems to be offering the lowest brokerage fee at 0.18% of the contract value for any contract value below $100,000. However, you will need to put up a sum of $15,000 to open an account with them. For contract value above $100,000, Citibank, Lim & Tan and Philips are also offering a brokerage fee of 0.18% of the contract value.
Citibank
DBS Vickers
iOCBC
Kim Eng
Lim & Tan
Philips
Saxo Capital
UOB Kayhian
For the minimum brokerage fees, Citibank has the lowest brokerage fee at $22. Otherwise, Saxo Capital seems to be offering the lowest brokerage fee at 0.18% of the contract value for any contract value below $100,000. However, you will need to put up a sum of $15,000 to open an account with them. For contract value above $100,000, Citibank, Lim & Tan and Philips are also offering a brokerage fee of 0.18% of the contract value.
Citibank
DBS Vickers
iOCBC
Kim Eng
Lim & Tan
Philips
Saxo Capital
UOB Kayhian
Thursday, December 18
Tuesday, December 16
Philips Share Builders Plan
16 comments
SBP which stands for Share Builders Plan, is a Dollar Cost Averaging or DCA in short, plan offered by Philips Securities. The whole idea behind the SBP is that you will contribute a fixed amount of funds every month and they will use that amount of funds that you have contributed to purchase shares on your behalf. Any remaining funds not used in the purchase of the shares will be carried over to the next month. Currently, there are 19 counters which are available for purchase under this SBP and the STI ETF is included in it too along with the other blue chips.
SBP which stands for Share Builders Plan, is a Dollar Cost Averaging or DCA in short, plan offered by Philips Securities. The whole idea behind the SBP is that you will contribute a fixed amount of funds every month and they will use that amount of funds that you have contributed to purchase shares on your behalf. Any remaining funds not used in the purchase of the shares will be carried over to the next month. Currently, there are 19 counters which are available for purchase under this SBP and the STI ETF is included in it too along with the other blue chips.
The brochure is rather easy to understand thus I would like to point out some other issues which you should take note if you are interested in the SBP.
1. Odd lot shares
Stocks in SGX are usually traded in board lot size. The board lot size is 1000 shares i.e. 1 lot = 1000 shares except for a few exceptions. For these exceptions, there will usually be a number in the name of the counter. For example, the size of 1 lot of SBS Transit 500 is 500 shares and the size of 1 lot of SIA 200 is 200 shares. There are two markets in SGX and they are the common market and the unit share market. If you wish to buy whole number of lots i.e. 1 lot, 2 lots, 3 lots, 4 lots etc, you can buy it on the common market and that is the market which most people will go to purchase stocks. However, if you wish to buy anything other than whole number of lots such as 200 shares of 800 shares which are also known as odd lots, you will have to buy it on the unit share market. Do take note that the unit share market is a totally different market from the common market. One potential problem that can arise is the lack of liquidity. A lack of liquidity will make it harder for you to buy and sell shares since there can be a lack of buyers and sellers for the shares. Furthermore, the difference in the buy price and the sell price can be rather significant and that can result in the purchase and sale of shares at an unfavourable price.
2. Custody of shares
Take note that the shares bought under the SBP is under the custody of Philips Securities and not CDP. If you check your CDP account, the shares which you have bought will not be reflected in there. When you wish to sell your shares, you will have to inform your trading representative before you can sell your shares. Do take note that if you inform your trading representative to sell your shares, you will be subjected to a minimum brokerage charges of $40 currently. If you wish to transfer your shares to CDP, you will have to pay $10.70 to CDP and $10.70 to Philips Securities for each counter that you wish to transfer.
3. Charges
The handling fee can be quite expensive if the amount of funds that you wish to use each month to buy shares is rather small. For example, $500 is set aside every month to purchase 2 counters. The handling fee for the purchase of 2 counters is $6.42 thus the handling fee in terms of percentage will be $6.42 / $500 * 100% = 1.28% and this is rather high. The percentage will be even higher if the amount of funds being set aside every month to buy shares is smaller than $500.
There are also other charges under the SBP. Even though the charges are quite small, they are still rather significant if added together. There are some charges you can avoid such as the Hard Copy Statement charge by opting for an Electronic Statement instead and Insuffcient Funds charge by ensuring sufficient funds in the designated bank account. Some charges are unavoidable such as the Dividend charge and Cash Offer, Rights Issue & Other Corporate Action charge.
4. Buying price of the shares
It is stated in the information sheet that the shares will be purchased on the 18th of every month on a non-discriminatory and non-preferential basis. If the 18th of every month falls on a trading day, the shares will be purchased on the next available trading day. In my opinion, there is a loophole with this. How can one determine whether the shares are purchased on a non-discriminatory and non-preferential basis ? There is always a possibility that they can purchase the shares at a lower price than what is being reflected to you and thus they can profit from the difference between the prices.
Despite of all the issues that I have mentioned regarding the SBP, it is still a rather useful plan. SBP enables the investor to develop some form of discipline by investing in a fixed amount of money every month. Furthermore, it also helps an investor by eliminating the problem of timing the market. Some of the blue chips such as DBS and Keppel Corp are very expensive to purchase since buying just one lot of these counters can cost a lot thus the SBP is a rather feasible plan that enables investors to own these counters by accumulating the odd lot shares over a period of of time.
I hope this post can prove to be useful for those who are interested in the SBP. Do think about it seriously as with any investments if you wish to take part in the SBP. If I have miss out on anything, feel free to leave comments and I will try my best to get back to you.
Monday, December 15
STI Technical Analysis 15th Dec
No comments
The volume for the past two trading days of the STI, which were down days were relatively light and that is a good sign. A gap was formed on 9th Dec at around 1683 and I am expecting STI to test this gap as a support level soon. If this testing is successful, there will be a good chance that STI will resume its move to the upside or will at least be consolidating.
The volume for the past two trading days of the STI, which were down days were relatively light and that is a good sign. A gap was formed on 9th Dec at around 1683 and I am expecting STI to test this gap as a support level soon. If this testing is successful, there will be a good chance that STI will resume its move to the upside or will at least be consolidating.
Saturday, December 13
Thursday, December 11
When to buy the STI ETF
2 comments
This post is part of a series of posts that discuss about the STI ETF in detail. To access the other posts in this series, click here
When is the correct time to buy the STI ETF ? This is an important question which we must ask ourselves. To demonstrate the importance of this question, let me ask a question. If you had bought the STI ETF on November 1999 at a level where the STI is around 2200 points, how long would it take to achieve a positive return ? In the picture below I have highlighted the period for which one bought the STI ETF on November 1999 with a green circle.
The answer to the previous question is 5 years and 3 months ! I have highlighted the period which the STI approaches the level of 2200 with a red circle. If you had bought near the peak of the STI, it will take you a very long time just to achieve a positive return. Moreover, if you had held on to the STI ETF which you had bought on November 1999 up to this present moment, you will be sitting on a paper loss since the current level of STI which I highlighted it with a blue circle is around 1700 and this is lower than your entry point of around 2200. Thus it is important to decide on when to buy the STI ETF.
Logically, one should choose to buy the STI ETF when the market is at its lowest level or when the market turns bearish. In this way, the STI ETF will be able to generate a positive return when the market recovers. However, this will prove to be difficult for the majority of the investing public to do so. This is because when the market is bearish, we would be surrounded with bad news such as economies going into recession, increasing unemployment rate, job retrenchment and so on. This will often induce fear and pessimism into the investing public and thus many will be afraid of buying at this point of time. You can click here to see a picture that describes the emotions experienced by the investing public in a humorous way. If one can overcome the fear of buying when the market is at its lowest level, he or she will certainly be able to achieve a good return on their investment.
When is the correct time to buy the STI ETF ? This is an important question which we must ask ourselves. To demonstrate the importance of this question, let me ask a question. If you had bought the STI ETF on November 1999 at a level where the STI is around 2200 points, how long would it take to achieve a positive return ? In the picture below I have highlighted the period for which one bought the STI ETF on November 1999 with a green circle.
The answer to the previous question is 5 years and 3 months ! I have highlighted the period which the STI approaches the level of 2200 with a red circle. If you had bought near the peak of the STI, it will take you a very long time just to achieve a positive return. Moreover, if you had held on to the STI ETF which you had bought on November 1999 up to this present moment, you will be sitting on a paper loss since the current level of STI which I highlighted it with a blue circle is around 1700 and this is lower than your entry point of around 2200. Thus it is important to decide on when to buy the STI ETF.
Logically, one should choose to buy the STI ETF when the market is at its lowest level or when the market turns bearish. In this way, the STI ETF will be able to generate a positive return when the market recovers. However, this will prove to be difficult for the majority of the investing public to do so. This is because when the market is bearish, we would be surrounded with bad news such as economies going into recession, increasing unemployment rate, job retrenchment and so on. This will often induce fear and pessimism into the investing public and thus many will be afraid of buying at this point of time. You can click here to see a picture that describes the emotions experienced by the investing public in a humorous way. If one can overcome the fear of buying when the market is at its lowest level, he or she will certainly be able to achieve a good return on their investment.
So are there any other ways of knowing when to buy into the STI ETF ? In my next post, I will discuss on how can one implement Dollar Cost Averaging or in short, DCA which is a method of buying in for the STI ETF.
Wednesday, December 10
Tuesday, December 9
Monday, December 8
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