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19-05-2012, 07:26 AM
What irresponsible advice from Phillips Capital! Then again, readers should probably know what motivates them - brokerage fees from frequent trading! (See para highlighted in BOLD).
The Straits Times
May 19, 2012
Patience the 'best' stock strategy
Market has lost gains from Q1 and analysts expect prices to fall further
By YASMINE YAHYA
THE market has lost most of the gains it made in the first three months of the year but patience is still the best strategy right now.
While stocks are much cheaper than in February or March, analysts say they are likely to fall further.
The benchmark Straits Times Index (STI) has lost 8 per cent of its value since reaching 3,026.4 on March 14 - the highest point this year.
ABN Amro's vice-president of equity research in Asia, Ms Neo Chiu Yen, said the index could slide by another 5 per cent to 10 per cent over the next few months.
'Broadly speaking, fewer companies in the first quarter reported results that fell below our forecasts as compared with the fourth quarter, so that's positive, but the global economic outlook has deteriorated so sharply that there is a downside bias,' she said.
ABN Amro's technical team expects that the STI would reach its next support level somewhere between 2,521 and 2,648.
PhillipCapital's head of research Lee Kok Joo agreed, saying there will likely be more volatility ahead as the market grapples with increasingly pessimistic views out of the euro zone.
'Definitely, a lot of stocks have come down from their peak prices so it looks like they are priced at a bargain right now, but if you take into account the level of uncertainty in the global economy, then I would say they are not bargains.'
His advice: If you must play in the stock market, engage in short-term trades - buy and sell within a few days - instead of buying and holding.
And even then, only trade stocks with good fundamentals - a strong business and a solid balance sheet.
'Names such as SIA Engineering and ST Engineering, and other stocks that pay good dividends, are better in this climate,' he said.
'So even if the whole market is not doing well, at the end of the day the fundamentals of these companies are still sound and even if their capital values fall, you would still earn returns from their dividends.'
ABN Amro's Ms Neo likes shares in the tourism, food and beverage and technology sectors.
The growing affluence of the Asean consumer will continue to propel earnings in the hospitality, gaming and retail sectors, she said.
'The Asean consumer is still very strong, so even if Singapore visitor arrivals moderate, there will still be good inflows of tourists.'
As with the tourism-related companies, food and beverage firms will be lifted by the increasingly rich Asean consumer, while also benefiting from declining raw material prices, she added.
'If you look at the commodities index, that has been trending down so food and beverage firms will have a cost reprieve there, which will help their margins.'
She is also positive on technology firms that have manufacturing plants in Singapore and Malaysia.
Since last year's earthquake in Japan and floods in Thailand, more international firms are outsourcing part of their production to Singapore and Malaysia, which are seen as stable and safe areas, she said.
Companies with production lines here would benefit from these orders.
Fundsupermart's investment planning manager Cheong Chee Kin advises diversification through unit trusts in this rocky market.
'Valuations are compelling, but it's not the best time to do bargain hunting,' he noted.
Instead of picking individual stocks, he said, it would be better to buy a unit trust with stocks representing various industries.
'We take a long-term view and we believe that earnings of Singapore firms will remain strong over the next several years, and these earnings will drive the stock market.'
yasminey@sph.com.sg
The Straits Times
May 19, 2012
Patience the 'best' stock strategy
Market has lost gains from Q1 and analysts expect prices to fall further
By YASMINE YAHYA
THE market has lost most of the gains it made in the first three months of the year but patience is still the best strategy right now.
While stocks are much cheaper than in February or March, analysts say they are likely to fall further.
The benchmark Straits Times Index (STI) has lost 8 per cent of its value since reaching 3,026.4 on March 14 - the highest point this year.
ABN Amro's vice-president of equity research in Asia, Ms Neo Chiu Yen, said the index could slide by another 5 per cent to 10 per cent over the next few months.
'Broadly speaking, fewer companies in the first quarter reported results that fell below our forecasts as compared with the fourth quarter, so that's positive, but the global economic outlook has deteriorated so sharply that there is a downside bias,' she said.
ABN Amro's technical team expects that the STI would reach its next support level somewhere between 2,521 and 2,648.
PhillipCapital's head of research Lee Kok Joo agreed, saying there will likely be more volatility ahead as the market grapples with increasingly pessimistic views out of the euro zone.
'Definitely, a lot of stocks have come down from their peak prices so it looks like they are priced at a bargain right now, but if you take into account the level of uncertainty in the global economy, then I would say they are not bargains.'
His advice: If you must play in the stock market, engage in short-term trades - buy and sell within a few days - instead of buying and holding.
And even then, only trade stocks with good fundamentals - a strong business and a solid balance sheet.
'Names such as SIA Engineering and ST Engineering, and other stocks that pay good dividends, are better in this climate,' he said.
'So even if the whole market is not doing well, at the end of the day the fundamentals of these companies are still sound and even if their capital values fall, you would still earn returns from their dividends.'
ABN Amro's Ms Neo likes shares in the tourism, food and beverage and technology sectors.
The growing affluence of the Asean consumer will continue to propel earnings in the hospitality, gaming and retail sectors, she said.
'The Asean consumer is still very strong, so even if Singapore visitor arrivals moderate, there will still be good inflows of tourists.'
As with the tourism-related companies, food and beverage firms will be lifted by the increasingly rich Asean consumer, while also benefiting from declining raw material prices, she added.
'If you look at the commodities index, that has been trending down so food and beverage firms will have a cost reprieve there, which will help their margins.'
She is also positive on technology firms that have manufacturing plants in Singapore and Malaysia.
Since last year's earthquake in Japan and floods in Thailand, more international firms are outsourcing part of their production to Singapore and Malaysia, which are seen as stable and safe areas, she said.
Companies with production lines here would benefit from these orders.
Fundsupermart's investment planning manager Cheong Chee Kin advises diversification through unit trusts in this rocky market.
'Valuations are compelling, but it's not the best time to do bargain hunting,' he noted.
Instead of picking individual stocks, he said, it would be better to buy a unit trust with stocks representing various industries.
'We take a long-term view and we believe that earnings of Singapore firms will remain strong over the next several years, and these earnings will drive the stock market.'
yasminey@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
