Why I am buying shares now ?

Dear Forummers,
It has been a bloodshed week for many. Only those who trade and short the market live to enjoy the weekend.
Over the past week, I have spent around 300k SGD to absorb some stocks which I felt have dropped almost to 52-week lows or at recent lows. These stocks are showing stable growth of 10-20% annually, good asset base and reasonable dividend yields. The share price has dropped around 15-30% over the past months but with declining volumes. I will continue to buy more in the coming weeks if the share price reached my target levels.
 
Some may ask me why am I so confident about the coming months. Have I not read the recent media articles about the economic troubles in the market?
 
To be honest, I am not as confident as I was last year when I was at Paris. I felt that the problems last year were not solved and were only postponed to the future. Financial difficulties at European countries still prevail and the US government is still printing money like no tomorrow. The Chinese government also has their hands full trying to curb inflation and unrest at the far away provinces.
 
There are 4 main reasons why I am buying shares today.
1) The market is selling on expectations of the end to QE 2 program. This is the common reason that I get from brokers and I agreed with them. Fund managers are finding an excuse to short the markets and recoup some profits from the losses that they have in the earlier part of the year. I expect more to come in the coming weeks. Having said that, there will be opportunities as they go into window dressing at the end of June.
2) The market is also selling based on the problems of the Chinese companies frauds that emerged in US, Hong Kong and Singapore. Investors are selling because they do not want to be the last to catch the falling knife. This problem will come and go. It takes time but the negative sentiments will go away.
3) The emergence of QE 3 program. An interesting observation that I have noticed is that there was hardly any mention of QE 3 program in the US media. This and some careful checks with friends in US led me to believe that there are some harsh negotiation going on now between the Republicans and the Democrats. Both do not wish to see the end of US economy when the Presidential election is next year. But both do not want to play up the QE 3 program when they cannot achieve their side of the bet. Conclusion -- It will come and when it does, this will just be the catalyst to push the market up again.
4) Chinese economic problems are over-hyped. I went to a few first and second tier cities in China a couple of weeks ago. I stayed in good hotels, had nice food with PRC friends and went shopping at their busy "Bu Xing Jie". I stopped to ask the shopowners about their businesses as well as the escalating costs. Conclusion -- The PRC economy has been over-hyped by the media. The PRC government will continue to appreciate RMB, but only at a gentle pace, to allow the local export businesses to adopt to the rising costs. In addition, the labour costs are controlled at around 5-8% increase in 2011. The worrying is the rental costs which according to the shopowners have jumped 50% in 2-3 years.
 
Many economists said that PRC economy is facing a major destruction. My personal opinion is that these guys are using the "open market" theory to do their calculations and estimates. PRC is a closed socialist economy where the government controls very tightly in almost all aspects. I expect the PRC economy to be good for at least the next 2-3 years.
 
All these are my personal opinions. They do not constitute a recommendation to buy shares or stocks in the market.
Cheers and have a good weekend!
 
 
 
 
 
 
 

Hey MacGyver, i'm following your interesting & enlightening comments recently. I'm wondering why u are spending so much money about $300K on buying shares which are falling now?I thought we should start to buy when the share price starts to go up? U know, my 70-yr-old uncle has bought 10 lots of SGX shares at $9 since last October & yesterday it closed at $7.12. I think u are "firing too many bullets" right now...Pardon me for my straight & naive talking. Wish u success.

Hey MacGyver, I would also be buying SGD300 if I had a greater risk appetite but .... I don't. Anyway, what have you bought aside from Artivision? Some S-chips?

Hi Macgavyer, Glad to hear that u are buying. Thought I am the lone forummer here who is siao enough to be buying qingmei and Fuxing only recently.. Although I do not have 300k, i still have some 50% of ammo and yes, I am also looking to add on to my holdings if the market falls further.. Many people who know that I am adding positions questions my sanity... Why not wait till drop further? Are u mad, they ask.. Frankly, I wasn't very sure like u.. Qingmei and Fuxing is holding up not too badly since I bought them at 19.5 and 13cents. Looking to add on like u when they reach my second price targets.. It's comforting to see others having similar ideas in trading. I do not think there will be a QE3, but I think the end of QE2 effect is overhyped because everyone knows it's ending, there is no uncertainity.. Euro and us recovery strength and the next targets of rating downgrades by rating firms will be the ones creating uncertainty. However, as my earlier post, I read jn papers today Germany has blinked. I hope and believe that us congress will blink Soon. That is 2 uncertainties out of the way. With japan trying to restart rest of offline nuclear plants, the disruption of supply chain should be coming to an end if any at te first place. Valuation has dropped when earnings are still holding up. Like an cataput storing for power.. Looking at the textile sector numbers in the PRC, there is no signs of a slowdown too. Yes expansion might be moderating but from export numbers, sales numbers, production numbers to the addition of machinery numbers, there is no suggestion of a soft patch or downturn in the textile sector. Even prices for raw materials such as EVA TPU and rubber has been stable although high. I buy because I done my homework. But it's not easy to be a contrian during the lull period of market, even if u predict it correctly at the first place that it will be coming. I however do hope that some longer term agreements can come up from euro and us and not just further kicking down the road...

Dear csltay8033,
The amount represents a certain percentage of my available fund for investment. I intend to buy gradually over the next few weeks if the share price hit my target level.
I wish I can forecast the bottom but I am not good TA. Only know enough to tell the differences between buy or sell. I am buying based on the information that I have gathered and made my own assumptions about what is likely to happen.
As long as no NEW problem arise, I feel the bottom is somewhat near but again it depends on many factors. I buy stocks which I believe can survive this crisis comfortably.
But I am definately not buying the Singtel. These types of stocks do not have enough upsides to save you from the rising inflation.
I am also not in favour of buying SGX. I feel that the Singapore Stock Exchange has tried a lot of things including bringing ADRs to list and now considering listing Government bonds. BUT it is clearly not working. Unless the ang mo CEO can find a solution to attract the bigger IPOs and increase the trading liquidity, SGX is losing market share to Hong Kong, China and even Taiwan.
You may like to look at stocks who can beat the inflation problems arising...

Dear Yeh,
I have bought some S-chips but I am only buying the market leaders or what the Chinese called "龙头企业".
If the big brothers of the industries cannot survive the crisis, then let's forget about the smaller boys. Look for companies who have certain market share in their respective industries. These guys are big enough to get loans from the local banks..
The credit tightening in China is terrible. The local banks do not give loans to SMEs anymore. There will be thousands of small PRC companies going bust in the coming year.
The credit system in China banking system is very unique. I have a friend who is the bank manager ("行长") of the big 5 PRC banks and he shared his interesting experience with me. Chinese have a way of doing things that even the ang mo cannot think about.