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Can You Take The Risk?
Perspective | 20 March 2008
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By: Angeline Cheong
Articles (4) Profile

At times like these – when investors shun the stock market and analysts begin to issue a string of ‘downgrade’ calls – it is rather disheartening to look at the stock screen where a sea of red greets you nearly every morning.

Even the optimist, who is on the lookout for bargains, would probably be hit by a familiar sinking feeling, watching the price of the targeted stock fall to yet another new low. The few, who are still smiling gleefully, are perhaps those who have exited the market earlier last year. But then again, with low interest rates, those who are cash rich would still be on the lookout for good opportunities to re-enter the market.

So the million-dollar question is: Where is the bottom? While each person would have his or her opinion on this matter, the truth is no one really knows.

During such volatile times, it is good to get back to basics. A disciplined approach to investing pays off in the long run. Therefore, review your investment and asset allocation strategy. Are you adopting a buy and hold strategy or a constant mix strategy, which requires rebalancing of portfolio to the targeted asset allocation? Are you prepared to take in more downside risk? The answer to these questions will depend very much on your view of the market outlook.

The year 2008 did not start off well. The months that followed only saw the market moving lower with the passing of each month. Even calendar anomalies like the January effect, where markets generally rise markedly during the month of January, failed to materialise.

With a cloud of negativity looming over the markets, investors have a tendency to overreact to bad news. A recent example was the 43% plunge in the share price of First Resources on news of corruption charges involving Martias, the founder of First Resources, over the granting of land rights. At risk were properties, which made up approximately 22% of the company’s total planted hectarage. This news brought the palm oil company to a new low of $0.80 or 27% below its IPO price of $1.10, even though Martias is no longer involved in company matters. In addition, other plantation stocks like Wilmar and Golden Agri-Resources, which were previously holding up well amid the storm also saw their share prices finally surrendering to the heavy market selling pressure as crude palm oil futures tumbled.

Red chips, in particular, were severely battered. Since January, the FTSE ST China Index fell 37% compared to a 15% decline in the FTSE ST All Share index over the same period. Stocks favoured by investors not too long ago like Jiutian Chemical, Synear Food and Yangzijiang Shipbuilding were hit by negative earnings outlook. Even COSCO Corp was not spared the bloodletting, with its stock down a whopping 40% from January.

Indeed, the market is going through a rough patch with economists lowering their forecasts for economic growth and increasing that of inflation. The recent MAS’ Survey of Professional Forecasters has revealed an increase in the forecast for the CPI inflation indicator to 5% while the growth forecast for the full year was cut to 5.6%. In January, inflation soared to a 25-year high of 6.6%.

Nevertheless, opportunities abound in times of crisis, waiting to be exploited by the brave and market savvy. It is not for those who buy on the cheap blindly. Only those skilled in timing the market and separating the wheat from the chaff can play this game well.

Jiutian Chemical Group  0.082 -0.001 -1.20%   
Business: Principally engaged in the mfg and pdtn of methanol, dimethylformamide and methylamine.

Insight: Aug-17, 1H17 revenue rose 65.9% because of both hi... Read More
Yangzijiang Shipbuilding (Hldgs)  1.710 +0.010 +0.59%   
Business: Co is one of the largest non-state owned shipbuilder in China. [FY16 Turnover] Shipbuilding (69.7%), trading (21.5%), investments (7.1%), others (1.7%).

Insight: Aug-17, 1H17 revenue jumped 48.6% to Rmb8.5b altho... Read More
Golden Agri-Resources  0.380 +0.005 +1.33%   
Business: Co is engaged in cultivating & harvesting oil palm trees, processing fresh fruit bunches (FFB) into crude palm oil (CPO) & palm kernel (PK), & refining CPO into industrial & consumer pdts.

Insight: Nov-17, 9M17 revenue grew 10.1% primarily due to h... Read More
First Resources  1.860 -- --   
Business: Co engages in the cultivation and maintenance of oil palm plantations. [FY16 Turnover] Refinery and processing (51.3%), plantations & palm oil mill (48.7%).

Insight: Aug-17, 1H17, Co achieved a 127.5% surge in net pr... Read More
COSCO Shipping Int'l (S)  0.545 -0.010 -1.80%   
Business: Engaged in shipping and other logistics services. [FY16 Turnover] Ship repair, ship building & marine engineering (98.8%), shipping & others (1.2%).

Insight: Nov-17, 9M17 net loss narrowed 51.2% due to lower ... Read More


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