CIMB Top Picks

This is the list of top picks and top short ideas from CIMB. If you havent opened a CFD account, perhaps you should really consider opening one. Phillips Securities is one of the pioneer for CFDs in Singapore and Kim Eng has recently started CFD trading this year. The foreign players in CFDs are Saxo, Igmarkets, CMC markets. The advantage of having a CFD account is that it allows you to play both long and short positions and operate like a hedge fund. It will help you "cure" your biasness towards a "long-only" trading strategy and widen your trading options.

Wealth Creation Technique for Traders

Today i learn a new "wealth creation technique" for traders from Fergus. I wonder why i havent thought about it before.

For example, he said that some of his clients will buy 20 lots of ABC stock and if the trade is a profitable one, he will then sell 19 lots away when he exit the trade and keep the 1 "free" lot. I think that this is an excellent wealth creation technique because it allows you to be vested for a long time when you know that the entire portfolio of stocks is a "free" one. This will also be a source of passive income going forward if there are dividends declared by the company. Perhaps it might even give you a free lunch next time when you are retired and is free to attend the AGM! (not to mention the free annual reports which you can sell to rags-and-bone man).

I think this is an excellent wealth creation technique for traders who trade stocks and may generate the 'passive income' for you next time. I will try to adopt this principle in my trading.

Equity Curve

I have been looking through my old trades for the last few days. This is the equity curve of a "long-only" $50,000 margin account which i managed for a good friend since Dec 2002. I almost doubled the capital over this period and the return is around 18% per annum if i average it out. The return is nothing spectacular if you consider the bull run which we went through from 2005-2007 but i guess it became "spectacular" if you include the current 10 months in 2008. I have not been trading actively in this account since November last year as it is difficult to trade a 'long-only' account in a downtrending market.

These trades revealed some interesting points which i would like to share with you:

1. Most of the trades in this account are swing trades that last for only a few days to weeks.

2. There are not many trades during June and Dec where i usually take my holidays. :P

3. There were extensive periods of time which i didnt trade. For example when i am either busy with work or travelling overseas.

4. Some stocks you just have no luck. Every trade i make in that stock lost money. :(

5. You can see that i was breaking even in the initial 10 months of trading that account. (Prior to Dec 02, i have been making losses in my own account when i started trading actively from 2001).

6. Drawdown in the equity curve is inevitable. My equity curve is not a straight line upwards. I have to pay refresher course to Mr. Market every now and then. But the trick is not to let any drawdown wipe you out completely.

7. Trading is a marathon, not a sprint. I have many friends who made a lot of money during the bull run from 2006-2007 but gave everything back (with interest) within a short span of 10 months in 2008. I think the first 10 months of 2008 is the defining moment on what kind of trader you are. Everyone is a genius during the bull run.

My trading journey can be summarised in this manner:

June 2001 to Dec 2002. 18 months of constant losses and learning more about myself each day. Most trades lost money as i trade on rumours and news. After much losses, I spent a lot of time reading up books on trading and investing. I learn something new about myself each day, what kind of character i have and what kind of rules i should adopt in trading the market. As mentioned to you before, "Trading for a Living" was one of the few books which helped me in my trading journey. I will share some of the other books that helped me another time.

Dec 2002 to Sep 2003. 9 months of breaking even. Equity curve fluctuate up and down as i had some initial success only to see drawdowns due to lack of discipline in money management. Many profitable trades are wiped out by a few losing trades.

Oct 2003 onwards. I finally start making consistent profits. I start to use the same indicators which i am comfortable with. I have certain trading set ups which i like and have enjoyed some success. Money management is in place and i can cut loss without feeling anything. I will actually feel worse when i know i should cut loss but didnt.

My friend thanked me for "not trading" her account actively for the last 10 months. She was also thankful that i advised her against buying the property she was eyeing early this year. You can say that she is now my "die-hard" fan but she is the only account that i will manage for others now as she has stood by me during my initial difficult years. I have recently decided to help her manage her $80,000 CFD account. Let's see what kind of performance i can deliver now that i can behave like a 'hedge fund manager' and can trade both up and down direction. I will keep you updated again but hopefully you can draw some inspiration from this posting and find a path that suits you most.

Trading for a Living

I attended Dr. Alexander seminar on Saturday and managed to get him to autograph his new book "Sell and Sell Short" for me. Dr. Alexander Elder is the author of the book "Trading for a Living" which sections on Mind, Money and Methodology helped me during my initial years of trading. However, my trading methodology has since 'differed' from him and it is good because as i mentioned, trading is a very personal journey which you have to walk yourself. If you fully rely on your broker or your friends to give your tips on what and when to buy and sell, then trading is not for you. You have to walk this path yourself and pick and choose a style that suits your character. You must know yourself first before you can embark on a trading journey.

The key difference in our mindset is that i prefer to trade in the direction of the trend whereas Dr. Elder prefers to do counter trend trading. Remember, "The Trend is Your Friend". Trading with the trend allows you to have wider stops and better profit potential. Whereas counter-trend trading requires strict money management and has less room for error. Why bother to catch a falling knife? You will cut yourself inevitably one way or another. The inability to cut loss is what kill most traders and investors and i have to stress that for anyone who aspires to be a trader, cutting loss is THE most important lesson which he or she has to master.

The current market is a very volatile one. It can be up 5% one day and down 8% another. DBS hit my target of $10 within one week after my posting last Sunday. What can i say? Am i a Guru? Of course not. If I am , i would have shorted DBS with all my available cash already last monday. hahaha. As you know, there are 3 positions you can take in the market. Long position, Short position and No Position. Many people failed to realise that No position is a position itself. That is one of the reasons why i dont like unit trusts. Fund Managers has to be vested in equities all the time. Even if they are 'bearish' on the market, they cannot sell the shares in the unit trust unless there are redemptions to be met. They can only keep at most 5% of the portfolio as 'cash' and hold the rest in equities. Hence if you like to invest in unit trusts, you have to know when to enter and when to exit the unit trust yourself. The Fund Manager is not going to help you with that decision.

The violent fall in market in recent weeks will result in a equally violent rebound as well. The rebound will be just as swift and sharp as shortist and hedge fund managers start to cover their positions in the market. So watch out for it. My personal view is that the markets will likely to stage a significant rebound in the coming weeks before they crashes again..... but for the nimble, if the rebound rally comes, make hay while the sun shines.

DBS Hi Notes 5

I read with sadness the cases of so many retirees who put all their life savings into the structured products and lost it all. All they wanted was to 'renew' their fixed deposits.

While i have written an article on the "risk" of fixed deposits before, it is really sad to read about people who are 'pressured' into buying an investment which they were "told" that it was very 'safe'.

I remember my own encounter whereby i was depositing the cheque from my sale proceeds from the sale of property at a POSB branch in Dec last year and immediately the teller asked if i need any financial planning and whether i am interested in investments which will give me a higher return. I politely turned down her "kind gestures" and told her that i managed my own finances.

In any case, I think DBS will be bearing the full brunt of their 'folly' in marketing the DBS Hi Notes 5. If the MAS start doing what the Hong Kong government is doing by making the banks 'pay back' the amount lost by the investors, then DBS will have to fork out millions in compensation. Unfortunately, since DBS's majority shareholder is THE Governement, i really doubt MAS is going to make DBS compensate for the losses of Singaporean investors who bought into the Lehman minibonds or the DBS Hi Notes. Looking at the chart of DBS, i think we can see more downside ahead. My view is that it could be heading towards the $8 to $10 support zone in the coming months.



In life, timing is important. There is a saying in Chinese "风水轮流转" and this is what cycles are all about. I believe that if one wants to be rich, one will have to catch the cycle. Remember my previous posting in July on the run in commodities coming to an end? While i am happy that my petrol bills are finally coming down, i am sad that many retail investors are once again caught in the euphoria of "chasing bubbles" and losing tons of money in the commodities fund. I have also shared my view with you on the pending "breakdown" in Singapore property prices in Oct and i read in The New Paper today that many property owners are starting to cut their losses on their properties after being burnt in the stock market and are trying to get out before the TOP of their properties as they are either unable to get mortgage loans or that the falling rentals will not be sufficient to pay for their mortagages. There is an interesting chart at salary.sg where the URA property prices and the STI index is 'superimposed' and we can see a 'pending crash' in the property market here as well.

Take care and happy investing. Hold your cash tight and make sure you are there where the property market crashes so that you can scoop up some nice bargins.... Happy Investing :)

URA Price Index

Source: URA quarterly updates

Ok. Finally what I have been waiting for.... the "downturn" in the private property market. As mentioned before, things move in "cycles" and property is no exception and if it is tradeable, you can probably 'trade' the URA private property index as well. I bought an investment property during the consolidation period in Q205 under the deferred payment scheme and sold it off in Q307 when the first sub-prime news came out. But while the stock market has crashed in 2008, the property market was still stable and laggging behind the stock market but it finally showed the first 'negative price growth' in Q3 08. My personal view is that the price will start to come down in the next few quarters and head towards the "140" levels. Remember to "save up" and dont miss the next property cycle. Happy investing and wishing you success in your pursuit of financial freedom.

Singapore Grand Prix

I attended all 3 nights race of the Singapore Grand Prix last week. I am very proud of our city skyline and the way which we hosted the race. The 'festive' mood at the race was a big plus. You can find many nice pictures here. It is money well-spent. It create the image that Singapore can 'party' and is a "cool" place to visit. I really think we have to look at the big picture about the "millions of dollars" spent by the govt and stop whinning about how the money could have been better spent. With the IRs coming up in 2009 and 2010, the Grand Prix can only be much better for Singapore and more tourist will come... :) Well done!

搜狗拼音

这是我第一次用中文写日记。没想到搜狗拼音真的很好用！如果您想很快的输入中文字，就应该立刻把搜狗拼音输入法下载到电脑里。

This is the first time i tried to use "chinese" to enter a blog entry and i must say that the software by sogou is really good. I stumpled about this software while searching an easy to use software for my dad and most importantly, this program is FREE!!!

I have also changed the delivery timing of my emails for this blog to 7am~9am slot to make the email subscribers receive the updates on this blog on a more timely manner.

I had coffee with a local boutique fund manager today and we were having a discussion on the current investment climate. It is boom time for PE firms (with cash) right now as the valuation of companies are cheap and instead of looking for pre-ipo deals, this particular fund manager is looking at listed S-chips that are trading at very cheap valuations and projected to grow at >30% over the next 2 to 3 years. This fund manager that i spoke to were looking at Sinotechfibre, China XLX and China HX. He didnt like China Sky though.

I must agree that pre-ipo market for Chinese companies are rather tough right now due to the low valuation of the S-chips. As you can see, the climate is so tough that there are hardly any IPOs launched and my last blog posting on Singapore IPOs was done on 27 Aug 2008! A check with MAS Opera showed that Zhenzhong Auto has been withdrawn! The IPO sentiments is so bad that many underwriters refused to "work" or launch the IPO unless the placements shares are already fully subscribed. (why call yourself underwriters in the first place?!?!, might as well change name to undertakers. hahaha)

I know of several IPO consultants who have to source for their own placees as well as for the 1,000 shareholders. And in order to entice "big placees" to take up the placement shares, the shares were also being offered at a slight discount to IPO price to ensure that the IPO can proceed and most of the time, this big placees are doing the IPO consultant and underwriter a favour so that they will remember them when the IPO market is "hot" again.

Warrants trading

It was a dramatic last week with the failure of Lehman Brothers and possibly AIG but i finally picked up the "courage" to trade warrants last week. I bought STI2500BNPeCW081230 on Thursday at 19 cents and sold them on Monday at 29 cents and followed with a second trade by buying STI2500BNPePW081127 at 25 cents and selling off at 30 cents today. As this is my first few trades in warrants and i wanted to 'test' the market makers (after hearing so many horror stories about them) so i didnt buy much, only 30 lots for each trade.

The advantages of trading warrants is that i know from the onside the 'maximum' loss which i will suffer if i am wrong but i can enjoy some leverage if i am right. Whereas in futures trading, my losses can be unlimited and i may not be able to ride out the volatility in such market conditions. The experience with BNP has been good as i choose very high volume warrants that are slightly in/out of the money. In addition, i am actually a very short term trader so warrants will suit me just fine as i will not have to suffer too much "time decay". I do know of many who have been badly burnt by trading warrants, hence i am always very skeptical and wary of this trading instrument.

Let's see how this warrant trading adventure will go on but i guess i will stick to trading index warrants like HSI and STI warrants for now.

S-Chips (FT China Index)

Lets do an update on my posting on 11 Aug 2008 regarding the breakdown of support level in FT China Index. The chart has deteriorated quite badly since then. It will take a long while for it to recover! This is how to chart looks today.





The best position one would have right now will be to have short positions in the market (either via futures, CFDs or warrants). Sadly, i didnt have the guts to short the market, and this is an area which i should 'work on' as a trader. Somehow, there is this mental barrier towards shorting in me which i have yet to overcome. :(

As i mentioned in my earlier posting, always try to trade in the direction of the overall trend because the trend is your friend. Always remember that because markets moved in cycles. To make $ from the market, one must be in tune with the cycle. My article on "never catch a falling knife" is a gentle reminder of that principle and China Energy is trading at 21 cents as of 15 Sep 2008.

The few principles which i will repeat over and over:

1. The trend is your friend. (adopting different strategies for trend and counter trend trading).
2. Money management. (position sizing and cutting losses quickly)
3. Methodology. (how to pull the triggers).

Despite the financial turmoil...do look at the brighter side.. our chance to financial freedom will be here again. Sieze the chance as it appears but to sieze this chance, you must have the 4 letter word... (scoll down below)















C - A - S - H

:)

A day at the Singapore Flyer

Spend the Saturday morning on the Singapore Flyer (got 2 complimentary tickets from my National Day stay at Ritz Carlton).

Surprisingly, the Flyer is not as slow as it looks and the 30 mins passed by rather quickly as it is quite scenic. It should be much better when the IR is completed. Not bad if you have kids to tag along. HSBC card holders have 20% off and frankly for a family of 2 adults and 2 kids, it will set you back by approximately $98 before the discount (very expensive). I would not have gone if not for the free tickets... but it might be a good place to bring your overseas friends if they are here for the first time...

Whipsawed...

China XLX was really volatile on Tuesday and i had to cut my loss when it dropped below my cost in sudden sell down only to see it end up closing at the 53.5 at the end of the day..... :( in any case, i also sold off my position in Li Heng at 55c to "offset" my losses in China XLX.

Really a waste of time and effort and money trading in this kind of down market. It seemed like playing on the 'short side' will be more profitable.

China XLX & Li Heng

Bought some China XLX at 53.5 cents. Initial target around 60c to 64c and cut loss below 50c. Let's see how it goes.



Bought some Li Heng at 53 cents. Initial target 56c to 60c. Cut loss around 48c. Let's see if can make some pocket $.

Happy trading.

Market "Gurus"

A leopard never change its spots. That is what exactly is happening right now. Kelvin Han is conducting 'live' trading sessions just after his release from prison. You can see from his earlier posting that he is not sorry at all for losing the money and still claims that he is the 'victim'.

I remember crossing swords with him very frequently when he was still known by the nick of toptrader10 in Shareinvestor.com. At that time, his traits of irresponsible calls and stock picks already showed and that really irks me and frankly, i wasnt surprised or shocked as i know it is a matter of time he will end up in jail.

If Kelvin Han is teaching people how to lose money, then i wouldn't have called him a cheat and a fraudster. AND if he loses his own money, i wouldnt have care much either but to lose $700,000 of other people's hard-earned money, i call that total irresponsibility and a man with no morals. I would have thought that he have learned his lessons after serving time in jail but apparently i am wrong and his "passion" to con people is stronger than ever. For the sake of yourself, please trade with your own money and stop worrying about paying back the bad debts. I am sure your ex-"investors" have already written off their losses and your future potential investors will probably thank you for it...

Let me quote you a paragraph from "Trading for a living by Dr. Alexander Elder".

"Many losers think that they would be successful if they could trade a bigger account. All losers get knocked out of the game by a string of losses or a single abysmally bad trade. Often, after the amateur is sold out, the market reverses and moves in the direction he expected. The loser is ready to kick either himself or his broker: Had he survived another week, he might have made a small fortune!

Losers take this reversal as a confirmation of their method. They earn, save, or borrow enough money to open another small account. The story repeats: The loser gets wiped out, the market reverses and "proves" the loser right, but only too late - he has been sold out again. That's when the fantasy is born:"If only i had a bigger account, i could have stayed in the market a little longer and won."

Some losers raise money from relatives and friends by showing them a paper track record. It seems to prove that they would have won big, if only they had had more money to work with. But if they raise more money, they lose that, too - it is as if the market were laughing at them!

A loser is not undercapitalized - his mind is underdeveloped. A loser can destroy a big account almost as quickly as a small one. He overtrades, and his money management is sloppy. He takes risks that are too big, whatever the size of his account. No matter how good his system is, a streak of bad trades is sure to put him out of business." - Dr Alexander Elder.

For those who is prepared to pay the $98 'session', may i suggest you spend $338 to attend this seminar instead or read his book. It might just change your trading life and you will thank me for it.

Formula One

I collected my Formula One "entrance pass" today for the Singapore Grand Prix. :) Let's be part of the historical moment in Singapore history! If you havent get the tickets, i think there are still some tickets available on the website.

I was watching the re-run of the Beijing 2008 Olympics Ceremony, if i have the tickets, i would have loved to attend the Opening ceremony. The entire show was majestic and grand and i think China sure have done herself proud. Some of my friends are in Beijing right now, watching some games "live" in action.... wish i am there... hahaha.. Anyway, one of my friend just came back froom the opening ceremony and showed me the goodie bag (similar to what we had for our national day celebration).

Olympic Goodie Bag

The goodies in the goodie bag for participants of the opening ceremony.

Olympic Hangover?

Deutsche Bank private wealth management issued a report on "Bearing in on an Olympic Hangover" and concluded the following:

"Some may call it coincidence but historically commodity prices have rallied in the run up to the Olympics. Since 1980, when commodities have rallied in the year preceding the start of the Olympics (1980, 1988, 1996, 2000), returns were negative in the following year. The only exception was in 2004 as the commodity strength continued after the Olympics. In 1992, commodities strengthened after the games but lacked a rally in the year before the Olympics."

Anyway... the conclusion is attached... and you may want to read my previous write up on the Commodities.

FT China Index

FT China Index broke its recent low and my advise to all is to 'siam' S-chips. S-Chips is likely to be cheaper in the coming days and this is led by the Shanghai Index which has already dropped 60% from its high. Not sure if it is China or US that is having this sub-prime woes?!

Celestial - Exit

Portfolio Update

Today i exit from my position in Celestial with a loss. Amazingly the stock staged a remarkable recovery and closed with a nice hammer. :( I will "lend" the money i lost to Mr. Market and take it back from him another day. No positions on hand for now.

Straits Times Index

STI was on the verge of breaking 2,800 level today but it staged a remarkable recovery to end the day with a long tail. The support at 2800 is once again protected and the tail comes with rather high volume traded (double the usual trading value). The indicators which i use are rather mixed right now and are bearish bias except for the candlestick - hammer plus high volume. This is an early indication that the market is trying to find its footing. However, if 2800 support breaks, the next support level will be 2,750 and if this support zone gives way, it could mean the start of another down leg and this correction will be extremely painful to the "long bias" investors.

National Day Parade 2008

This is where i spent my weekend with my family doing national day service and contributing to the economic growth of Singapore... the 2D1N stay at Ritz Carlton on the 29th floor contributed $650 to the GDP of Singapore. The highlights for me was definitely the performance by Black Knights (look at the nice heart shape) and the fireworks at 8pm. The kids had a great time. Count on me Singapore... :0)

Portfolio Update - Exit Straits Asia

I am out of Straits Asia this morning at 273 (bought at 260) as it hit my trailing stops. Time to enjoy the weekend ahead.... i will watching the 2 Aug national day parade! Time to feel proud to be a SING-GA-POR LANG...

Portfolio Update

Celestial - This company really starts to irritate me... seems like i may have to cut loss soon if 725 gives way. The results announcement is coming up shortly...

Market Depth



I have not been trading actively since Nov last year and i lost my 'free entitlement' to market depth... I got that back in July this year. Yippee... feels like getting an arm back. As least i have better insights to the pre-opening and closing prices as well as better gauge where to place my buy and sell orders more effectively. iOCBC is the 'cheapest' way to get your market depth for free among all trading firms.

Straits Asia

Bought some Straits Asia shares today. The chart looks okay with possible triple divergence and MACD cutting up. Once the parabolic is triggered, it should head towards the 280-300 mark.

Portfolio Update

Ferrochina - Sold my Ferrochina when market opens today around 137. Enough for me as it approachs the 140 resistance. Bought at 128 region.

China Sky - Sold everything at 82 cents today. Tired of the low volume and waiting for the 'breakout'. I may live to regret this later. :P

Sinotech Fibre - Exit at 56 cents today with loss of commission. Tired of waiting and search for better looking charts.

Ferrochina

Today i bought Ferrochina. Was asked by a friend to load up on Friday due to some positive news but i 'ignored' him. hahaha today paid the price for late entry and see a shooting start appearing. :( It is okay to trade on 'rumours and news' even if you are not an 'insider' as long as you have money management in place. It would have been perfect if it can close at its high today but alas...our world class market disappoints as usual.. Let's see if the market sentiments can improve once the Olympic starts...

Portfolio Update

Celestial - Of my entire portoflio, i dislike the technical picture of this counter the most. Every buy-ups are met with strong selling resistance. I will get out if it spike up again.

China Sky - Needs a huge dose of volume to push this stock up to 90c... in the meantime, enjoy sleeping....

Sinotech - UOB Asset Management has been paring down its stake. I guess will have to wait for a while longer...

Strait Times Index - looks weak..and still in a downtrending mode.. we need the sentiments to improve quickly if we are to see a meaningful technical rebound on STI and the overall market...z.z.z.z.z....

Portfolio Entry - Celestial, China Sky, Sinotech

2Y Capital entered 3 positions in China stocks today in anticipation of the "Olympic rally". The China stocks have been in correction mode for almost 2-3 months and i think we are in time for a technical rebound that could possibly have some 'meat'. As this is a counter trend rally, it would pay to be nimble and to cut loss if the initial views are wrong.

Sinotechfibre



Enter some positions at 56c. Cut loss around 50 cents. Possible targets are 60c -> 70c -> 80c.

China Sky



Enter some positions at 78c. Cut loss around 74 cents. Possible targets are 85c -> 95c -> 105c.

Celestial Nutrifoods



Enter some positions at 78c. Cut loss around 74 cents.
Possible targets are 83c -> 93c -> breakout .

Commodities run coming to an end?

I havent been updating this blog for a while and to be honest, i am plain lazy. In addition, with the stock market in a bearish mood, I have no buy trades to share as well except perhaps to take a short position in the market occassionally. Frankly i really admire those who have the discipline and passion to share their lives to the world. I have no wish to let the world know who i am, that i had crab bee hoon for lunch today and who i had lunch with....

Anyway back to my topic for today, is the commodities bull run coming to an end soon? Let me share with you my experience with the 'tech bubble' back in year 2000. I remember in 2000, the technology sector in US was extremely hot and everyone is talking about how much money they made from the tech stocks on NASDAQ. Suddenly all the banks start to offer unit trust that invest in the US technology sector and these funds were in great demand and oversubcribed. I remember putting a few thousand in the United Global Internet Fund at its launch but I sold off the unit trust at >50% loss after a few years. These are some of the initial school fees which i pay to the market and luckily, they came at a point when I dont have much cash to lose. I will share my views on unit trust another day (when i have the mood to write) but dont expect me to say anything nice about it. :) I am not saying that unit trust is totally that bad but you will need to know its advantages and disadvantages and the mechanism of it.

Anyway, back to my story of unit trust, usually they will be launched only when there is demand for it. As such, you dont see new unit trusts being launched when the market is 'cold' and you will also see a certain 'themed' unit trust launched only when there is demand for it. With such a background understanding, you will understand why the Global Internet Unit Trust was very hot when it was launched back in year 2000 and it was just one of the many unit trusts relating to the tech sector launched by Asset management firms that year. You can see what happened after that, the market went down and was in doldrums for many years. As of todate, many of the funds are still barely above water since its inception.

I can see a uncanny similarity in the commodities market right now (versus the tech bubble in year 2000). Many special themed commodities funds are being launched by asset management firms this year and frankly, while i am not sure about the global dynamics of demand and supply of commodities, it just gives me some strong vibes that the commodities bull run cycle may be coming to an end soon. Of course, i may be wrong so just take it as one of the indicators that is flashing red right now. As in all bubbles, the masses must rush in before the bubble will pop and you will see the same things happening in property bubble, stock market bubble...

Back from Holidays

Sorry i didnt had time to update my IPO blog as I had a short vacation last week and came back only on Monday. I had sold off my Tat Hong at $2.28 prior to my holidays last week and surprisingly Tat Hong closed below my entry price today and looked rather weak. Let's see if there is a chance to get into this counter again.

Pre-IPO deals

I received a few emails on how to 'get into' the pre-ipo deals and i am actually evaluating one pre-IPO deal right now and is doing a book-building exercise for this deal. Since i am on this topic of pre-ipo deal, i will first explain what a pre-ipo deal is and why companies do a pre-ipo round instead of going directly to IPO.

Pre-IPO investments are usually the 'fund raising' round just before the Company goes for an IPO. The IPO will usually occur 6 to 18 months after the Company receives the pre-IPO financing. You may wonder why Companies bother to do a "pre-IPO" round and not a "IPO" immediately. Well, the key reasons are as follow:

The Company usually needs cash urgently for expansion and for working capital, however, it is too time consuming to raise funds from an IPO and the Company can raise money quickly via a Pre-IPO round to help ease the cash flow.

In addition, by raising a pre-IPO round, the Company is raising the minimal amount that it needs to ramp up its sales and profitability. If it manages to ramp up its sales and profits by using the pre-ipo funds, it will be able to command a better valuation at the time of the IPO and that will be even better for the Company and its owners.

In some situations where the IPO market is 'dead' (like what Singapore IPO market is in right now), it is difficult to raise funds from the public due to weak sentiments. The Company may opt to do a pre-ipo round now to meet its needs and then try to go for a listing again when the sentiments turn better and when IPO valuation are higher (i.e. they can list at a higher valuation).

There are many technical terms in a pre-IPO deals which i will not elaborate further. I will discuss more on 'how to get into a pre-ipo deal' on another day.

Adios.

Tat Hong

Today i entered Tat Hong at around 2.18. My entry could have been better at 2.14 but i was busy the whole morning and was able to look at the market only after lunch. Tat Hong is poised to announce its results for the Financial Year ending 31 March 2008 on May 28. With the Bollinger Band tightening and all the indicators cutting up, the first target is around $2.40-$2.50, followed by $2.80-$3 if the price breaks above the $2.50 resistance. The target prices of the investment houses are as follow:

5 May 08 Citigroup $3.15
23 Mar 08 Goldman $2.80
17 Mar 08 UBS $3.38
13 Mar 08 Credit Suisse $3.50
22 Feb 08 CIMB $4.43
14 Feb 08 DBS Vickers $2.70

CH Offshore - I missed this counter today although i wrote it down in my trading journal. :)

Biosensors - Hit my first target today.

Biosensors

Biosensors seemed to be showing interesting signs of a potential rebound. First target is 78c-80c and second target is 85c-90c and the cut loss is around 67c. Results will be out on 26 May and based on the UBS report, the results for year ended 31 March 2008 is likely to be a loss of US$28 million. There are 4 analysts that issued reports in 2008:

13 May 08 Citigroup $1.13
23 Apr 08 OCBC $1.23
22 Apr 08 UBS $1.25
4 Apr 08 Credit Suisse $1.20

While i have never like the Fundamentals of this Company, the Technicals are actually looking quite good.

Urgggh...

Last week was an extremely frustrating week for me. The new OCBC platform wasnt 'ready' and i missed 2 trades which i had wanted to buy and even "alerted" my trading group to look at it. First it was Celestial at 77.5 cents on last Thursday and KS Energy at 1.87 on last Friday. Urggh... in any case, i have resolved my log-in issues and managed to log into the new OCBC platform with the new user ID and passwords over the weekend and i am all ready to start trading and investing again.

I had lunch with a "semi-retired" remisier on Friday. He made a few millions last year investing in just a few stocks and he is only in his early 40s. Seems like i have a long way to go but i am working towards it.... He told me that his secret is to 'whack big big' in that few stocks which he has confidence in the management and has done thorough due diligence on the Company.

One good news that i have received in May was that the pre-ipo "J" investment which i have made in early Jan this year has submitted to SGX for listing approval. Hopefully, it will receives the "ETL" letter soon. "ETL" stands for Eligibility to List.... My plan is that once "J" is listed in June on SGX, i will be investing in another pre-IPO company.

The Long and Short list

After scanning through the charts, this is my primitive 'long' and 'short' list based on today's closing prices without any consideration to its 'fundamentals'....

Long list:
Armstrong 29.5 cents
Beauty China 80.5 cents
Gallant 69.5 cents
IndoAgri $2.40
Metro Holdings 74.5 cents
SIA Eng $4.08
Wanxiang 13 cents

Short list:
Ausgroup 88 cents
Ascendas REIT $2.36
China Hong Xing 57.5 cents
China Sun 29.5 cents
Fibrechem 72.5 cents
Sinotech 69.5 cents
Tiong Woon 54.5 cents.

Life's crossroads

There are many defining moments in one's life and the decisions which one makes at that point in life will affect him or her for the rest of your lives. For example, which course to study at university, which job to take on after graduation, which guy or gal to marry, whether to have kids after marriage, should i take up the overseas posting, should i change my job, should i trade full time for a living..... etc.

Everyday, we are faced with decisions that will have an impact on our lives (like what to eat, where to eat) but on some days, the decisions will have a greater impact on our lives than others and i call them life defining decisions.

It was funny that in February i started my own fund management firm but in March, a global firm headhunted me back into the corporate world again. I found the global platform irresistable as it manages billions of dollars across various funds as as private equity, infrastructure, real estate, distress, etc and my little adventure to be my own boss came to a pre-mature end.

I am not one who shy away from making decisions and i firmly believe that each decision which i make will chart a new chapter in my life. And here I am again, charting a new chapter in my life and climbing the corporate ladder once again. The only difference is that i am there because i want to and hopefully, not to run the rat race again.

China Energy Update

Further to my post on 12 March 2008, China Energy has dropped from 61.5 cents to 35.5 cents! A whopping 42% in market cap was wiped off from China Energy and the shareholders must be really angry and frustrated. :(

Never catch a falling knife...China Energy

When i first started out trading the stock market, i always look for stocks that has corrected severely. I thought i am getting 'value for money'. But somehow after buying the stock, the stock price continue to drop and the company because more and more "valuable" until my short term investment became a long term one. After paying lots of school fees and reading tons of books on trading, I avoid such stocks altogether. That is the reason why i share with you one important lesson, the trend is your friend.

China Energy is one such stock which i will avoid buying unless i am shorting it. I have no idea why the stock price is so weak but my advice to you will be not to catch a falling knife until you see potential signs of reversal...(and you die die have to buy this stock).

Out of Midas

Midas opened at 96 and went all the way to 98 before profit taking sets in. I put in a trailing stop at 95.5 cents after 9 am and was taken out at 95 cents when the price came down. A trailing stop is useful when I want to let my stock runs and maximize my trade but under such volatile trading conditions, it is always difficult to decide if you want the trailing stop to be close by or further away or to take the profit while Sun is out (it is raining heavily now at my office...)

Midas Touch

Midas used to be a favourite of many until it lost that 'midas touch' a few weeks back. Today is one of the rare occassion that i bought a stock after many months of staying 'in cash'. I bought Midas this morning at 85 cents after it formed a doji yesterday and announced a JV contract that is worth S$300m. I guessed I managed to get in at this price due to the poor showing by US overnight. The oversold stochastic and increased in volume seemed to bode well for a technical rebound back to the S$1 level. Since the overall trend is still downwards, this trade will be a for quickie only.

SINGAPORE: Midas Holdings has secured a S$300 million deal to supply 32 metro train sets, an equivalent of 192 train carriages, for the Shanghai Metro Line 2 Eastern Extension Project. The orders are expected to be fulfilled between 2009 and 2010. Midas ' joint venture firm, Nanjing SR Puzhen Rail Transport (NPRT), will have an estimated two-thirds share of the contract. This is the second contract won this year by Midas , which manufactures aluminium alloy extrusion products. - (Source: Channel News Asia).

Malaysia Stock Market Crash

Further to my posting yesterday, the KLCI triggerred the limit down 'circuit breaker' for the first time since it was introduced during the Asian Financial Crisis. Now that 1,200 level support has been breached, the next target will be the support at 1,100.

A New Era for Opposition in Malaysia?

BN sufferred its biggest loss in years where it lost 5 states. It is particularly humbling for the incumbent PM Abdullah who lost the state of Pulau Penang where he was born. Will the political unstability has an adverse impact on Malaysia? Looking at the KLSE, it looks like it is ready to tumble down towards the 1,200 support and if that breaks, it will look pretty bad for the investors.

People's Food Holdings Limited

People's Food Holdings reported a net EPS of 8.53 cents and gross dividend of 2.63 cents for the year ended 31 Dec 2007. At 109 cents, this imply a PE of 12.8x and yield of 2.4%. From the chart, People's Food appears to be bottoming out as long as it does not break the 95 cents support again. Amid the volatile and weak market, this is one of the more 'stronger-looking' stock around and i guess investors still like companies that pays annual dividend. A possible target will be 120-130 region if the 95 cents support holds.

The Trend Is Your Friend

(FS STI chart)

The Trend Is Your Friend. If there is anything of value which i can share with you, this will be one of it. Always respect the underlying trend in the overall market. This is one of the longest correction which the market (STI) has experienced (from early Nov to end Feb) 4 months and it is still counting. The previous corrections are in August 07 (one month), March 07 (one month), May 06 (2 months). It seemed like the overall market has already embarked on a downtrend. When the market trend is down (where all the moving averages are pointing and sloping downwards), the trading strategies will be to either short the market using futures, warrants, CFDs or Share borrowing, or to play quickies on the long side nimbly.

If there is another lesson which i can share with you, it will be to cut your losses quickly, especially when you have the advantage of being a small trader. If you are not in the league of Oei Hong Leong, then my suggestion is you cut your losses quickly when you are wrong. Investors like Mr. Oei really have my respect. He is really one of the best market timers around. I remember Mr. Oei getting out of his positions way back in 2007 when the market picture is still rather rosy. He has to do that early because he holds huge positions and need to get out while the market is bullish and liquid. I still have his article advising people to sell stocks and hold cash tightly lying somewhere around...

Are Fixed Deposits risk-free instruments?

I have been busy meeting lawyers, consultants, advisers and investors regarding my Fund for the last one week. I spoke to 2 individuals who always put their money into fixed deposits and the most often reason cited is that fixed deposits are 'risk-free'. Frankly are FDs really risk free? To me, putting money solely in FDs is actually very high-risk. I have not put money in FDs for a long time and in fact, i always offer to pay the FD rate to anyone who wants to 'loan' me their money.

If you are someone who aspires to be financially free, then putting $ into FDs will not lead you to financial freedom. With inflation at 6% last year and FD rate at 2% (figuratively speaking), you are actually losing 4% per annum in terms of your purchasing power. To me, putting money in FD is a high risk strategy if the inflation rate is higher than the FD rate.

In my personal opinion, FDs should only be part of your asset allocation. One should invest a portfolio of different asset classes like properties, commodities, stocks, bonds, cash etc but having said that, one must know the risk-return profile for each asset class and the investor must know his or her own risk appetite and profile so that the most appropriate portfolio can be structured.

Take care and happy investing.

Yongmao Allocation Result

Yongmao closed at 46 cents from its IPO price of 35 cents (+31%). Not a bad debut at all. It goes on to show that if the valuation is reasonable, the IPO debut will still be well supported. Anyway, my application was unsuccessful. :) Good for those who have gotten it. On closer look at the allocation result, it seemed that those who applied for 100 lots will stand a better chance of getting the shares than those who applied for 500 lots. Better luck next time :)

A new office

Today is my first day at my new office. I have started a fund management company with a few "sleeping" partners and i spend the whole day fixing up my laptop, printer and packing my tables. Basically, I am on my own now and it is quite a different "experience" doing everything myself but i somewhat enjoyed it. While i have given up a huge chunk of my "fixed salary", i gained time and freedom as this is my own business now. After all, i used to have an IT department to take care of my computing needs, but now i have to even go down to Funan to buy one printer cable. Apparently, the cable is no longer included with the purchase of the printer! :(

I applied for 501 lots of Yongmao. Lets see if this IPO is worth the effort.

2Y Capital Fund

2Y Capital Fund was officially launched on the auspicious date of 18.02.2008 at 8.18 am (hahaha) and I hope that through the sharing of my views on trading and investing, you will be able to draw your inspiration and seek your own path to financial freedom. There is no short cut to financial freedom but the day will come if you plan for it constantly. I was "lucky" in the sense that my financial freedom came approximately 10 years after i started work but I always believe that luck will favour those who are prepared and those who seek for financial freedom.

2Y Capital Fund is a fund that is managed by me. The Fund invests in pre-ipo companies as well as trade in listed shares, futures and forex. I will share the investments and trades made by 2Y Capital Fund and hopefully through the sharing, it will be able to help you in one way or another.