Friday, May 29, 2009

Oil and Singapore

Sorry readers for the lack of updates. Have been rather busy lately with work and stuff. Will be going to the US in a few weeks for a project, so am preparing for all the required adminstrative stuff.

Anyway, I saw this page in The Straits Times, money section on Wednesday May 27 2009. It is basically a page fully dedicated to oil/energy.

These are the 3 head lines
  1. S'pore set to boost status as energy hub
  2. Oil and Gas firms face difficult year
  3. PetroChina out to be price-maker with SPC deal
All which are oil related.

S'pore set to boost status as energy hub
  • This is more of converting Singapore into a leader in energy TRADING hub. Currently we are 3rd in the world. ( This will defintely help our economy in the long run. Imagine if SGX is the exchange that is used for these transactions. Its stocks will run like crazy if Singapore becomes Asia's trading hub!)
  • Having a commodity exchange based in Asia and catered to Asian's need and specifications will increase trading activity in Asia, as the time zone will be catered to us, and not follow America's one. ( I think this would encourage traders to in Asia to increase trading!)
  • The Singapore Mercantile Exchange will make its debut later this year. Offer essentially all the commodities and futures contracts. ( However I feel that if it were not publicized effectively to all the Asians countries, it will definitely fail. As the Singapore market is not big enough to provide the liquidity for such trades. And only a few more popular commodities like oil, gold will succeed. I can't imagine myself trading 'pork' just yet.)
  • Singapore Government is gather all the leading companies in trading over here. Some examples are
  1. Opet Trade
  2. Sahara Internate Koc Group
  3. Socar Trading
  4. Tricorona
  5. BP ( oil giant has also recently set up a carbon trading team )

Oil and gas firms face difficult year
  • Estimated 100 million barrels of crude may be stored on sea tankers
  • Lower demand as there is low growth
  • Price volatility
  • HOWEVER, assuming population and economies to grow, its expected the oil price to go up to US$70-US$90
Seems like a very pessimistic article. Implying that the present market rally will not be able to sustain, as most people expect the economy to be weak.

PetroChina out to be price-maker with SPC deal
  • PetroChina is bidding for SPC with US$2.2 billion
  • SPC is a major source of fuel supply where most of Asia's oil prices are determined.
  • SPC owns half of Singapore Refining Company (SRC) while the remaing is held by US major Cheveron
  • PetroChina has already long term deals to supply fuel to regional importers like Vietnam and Indonesia
  • With all this 'control' of fuel, they will have more say in setting the price in the market
We are looking at the new oil leader in Asia if PetroChina is able to follow through with its plans. However I feel that things will not be as simple. This is because its refining capacity of 2.6 million barrel per day lags behind rival Sinopec 4.3 million barrel per day. What makes you think that Sinopec will sit back and not do anything to protect its best interest. Its just a speculation of mine, but I think Sinopec will come up with new policies to challenge PeroChina once its profit margin is at risk.

Having PetroChina leading the price of oil and Singapore as the leading energy trading hub will definitely help Singapore's economy. However that is provided everything goes as plan. With the tough economic conditions presently, and my speculation of Sinopec's possible actions. We can never be too certain!

Wednesday, May 20, 2009

Temesak lose BILLIONS!

The market has been exceptionally bullish for the last few days. And sadly to say, if I had actually shorted as I mentioned for my previous posts...I would had made a really big lost.

Anyway, lots of things has happened for the past week. The biggest one being Temasek selling its stake in Bank of America, with a staggering lost! Singapore news reports it as US$3 billion, while other online sources reported it as US$4.6 billion. Either way, its really a HUGE loss.

However, we cannot deny the fact that the whole world in general took a huge hit. But losing so much of the people's money is still painful to see.

Some reasons behind the sale was that Bank of America's vision is not inline with that of Temasek. Initially Temasek was suppose to be a major shareholder in Merrill Lynch, which is an investment bank. However, after Merrill Lynch was taken over by Bank of America (which is out of their control), Temasek essentially is now a minor share holder in a bank that does simple home loans etc. With such a big change in company philosophy, it wouldn't be surprising that they would eventually sell off their stakes in Bank of America if they initially bought into Merrill Lynch for its business.

In other news, Market rallying seems to be unstoppable recently. I guess that many people who were sidelined are actually now trying to inch their way into the market. Buying into any small drops, hence supporting the market. However I am still skeptical, because I feel that the situation is not really getting any better. People are still focusing on every little bit of good news to give them a reason to let the stock market rally and denying all the bad news. Logically, this should not be happening.

Also, I just read that south Korea has lifted the ban on short selling. With this, I think more countries are going to start lifting the ban. Which would mean.....if the market were to turn bearish, it will be a VERY quick process. So I would suggest to people who are trading the Singapore market to be wary once Singapore lifts the ban on short selling. I personally think Singaporeans love to be 'shortists'. I.e they like to short the market.

Thursday, May 14, 2009

75% chance to make $$ tomorrow according to my TA

If you followed my post 2 days ago and buy the STI put warrants just before the market closes today(because the STI is below 2128), according to my analysis, you will have a 75% chance of making a profit tomorrow..

These are the probability according to my statistics.

Today (Day 1) : STI closes below 2128
Day 2: 75% chance STI will close below day 1
Day 3: 50% chance STI will close below day 2
Day 3: 74% chance STI will close below day 3

Lets see how it will be like over the next few days..

Wednesday, May 13, 2009

STI to GAP down tmr?

There is a high chance for the STI to gap down tomorrow, due to the formation of a shooting star today. ( These are candle sticks trading terms)

Pardon the recent increase in technical analysis posts. This is because I believe that it is really time to start trading the market. Signals that I have observed so far are relatively accurate (not 100%, but good enough to earn $$).

If you would like to discuss any possible trades and stuff, do post comments on my posts, or my shout box on the right.

Time to earn $$! *But do be careful..$$ will be lost in the process. TA is never 100% accurate! But if done right, profits should come in, in the long run.

Tuesday, May 12, 2009

Trade Analysis

If you have sold the stock as per my last post when you start to realize that the STI is unfavorable (in the morning), you would have made a profit of 5%.

Though its a profit, but for my TA, its a lost. Because, I am expecting at around 4 days whereby the STI would be dropping. And had you not taken profit,you would have made a 5% lost already.

Looking at today's charts, there is a hammer formation, which is suppose to be bullish for tomorrow, but its a weak signal.

The Strong Signal that I am expecting is: If the STI closes below 2128 tomorrow, you can more or less happily short the market, or buy STI puts, because chances of the market correcting is VERY high.

Monday, May 11, 2009

My STI Trade

Looks like STI is losing strength.

  • Trigger: STI is below 2220 at 4.50pm
  • Stock to buy: STI1900SGAePW090929
  • Target Price: By duration. Max 4days.
  • Cut loss limit: Wait for T+1 (this means the day after you buy your stock), if STI gaps up, cut loss on open.

My STI Trading Target

Paper Trade for upcoming week

  • Trigger: STI Hits 2436
  • Stock to buy: STI1900SGAePW090929
  • Target Price: Index to drop to 2238 (essentially an STI put warrant, meaning the price will increase of the STI drops)
  • Cut loss limit: Wait for T+1 (this means the day after you buy your stock), if it gaps up, cut loss on open.

Sunday, May 10, 2009

Be wary of market

If you have not bought into the market, like me, do not be tempted to buy in now. Instead, wait for the next correction to buy in. It shouldn't take too long from now...

Also, I have set up a few blogs on finance related stuff that some of you people might be interested in. They are categorized according to:

Thursday, May 7, 2009

US Stress test summary

Got this in email.

By Rebecca Christie and Alex Tanzi

May 6 (Bloomberg) -- Following is a summary of the capital requirements
of 10 banks resulting from U.S. regulators’ stress tests, according to people
familiar with the matter. The Federal Reserve is scheduled to release the
results of the tests on the 19 largest U.S. banks tomorrow:
Company Capital Requirement
Total $65.5 Billion
Bank of America Judged to need roughly $34.0 Billion in additional capital
Wells Fargo Judged to need roughly $15.0 Billion in additional capital
GMAC Judged to need roughly $11.5 Billion in additional capital
Citigroup Judged to need roughly $5.0 Billion in additional capital
Morgan Stanley Judged not to need to raise additional capital
Goldman Judged not to need to raise additional capital
MetLife Judged not to need to raise additional capital
JPMorgan Chase Judged not to need to raise additional capital
Bank of NY Mellon Judged not to need to raise additional capital
American Express Judged not to need to raise additional capital
Company Government Capital Injections by Firm
Bank of America Targeted Investment Program $20 Billion on 01/16/09
Capital Purchase Program $10 Billion on 01/09/09*
Capital Purchase Program $15 Billion on 10/28/08
Wells Fargo Capital Purchase Program $25 Billion on 10/28/08
GMAC Automotive Industry Financing Program $5 Billion 12/29/08
GMAC has also received other financial assistance
Citigroup Targeted Investment Program $20 Billion on 12/31/08
Asset Guarantee Program $5 Billion on 01/16/09
Capital Purchase Program $25 Billion on 10/28/08
Morgan Stanley Capital Purchase Program $10 Billion on 10/28/08
Goldman Sachs Capital Purchase Program $10 Billion on 10/28/08

Company Government Capital Injections by Firm
MetLife None
JPMorgan Chase Capital Purchase Program $25 Billion on 10/28/08
Bank of NY Mellon Capital Purchase Program $3 Billion on 10/28/08
Note: Dollar figures in billions
*This transaction was included in previous Transaction Report with
Merrill Lynch listed as the qualifying institution and a 10/28/2008
transaction date. The purchase of Merrill Lynch by Bank of America
was completed on Jan. 1, 2009 and this transaction under the CPP was
funded on Jan. 9, 2009.

Sunday, May 3, 2009

Case study: SARs on the economy

GDP Implications

SARs occurred in 2003. The first case was reported in China, Nov 2002.
As for most of the countries, I.e Hong Kong, Canada, Taiwan,Singapore, Vietnam etc. The first case was detected in Mid Feb 2003, and the last case reported was around Mid May 2003.

As you can see, effectively there was only 4 months of 'serious activity' from Mid Feb 03-Mid May 03. This is supposedly the time frame where the economy is responding to the crisis first hand.

Above is the GDP variations of the different countries during that time frame.

Looking at the statistics above, there is no doubt that during the outbreak period, GDP is bound to drop. However recovery follows soon after the last case is reported.( However at that moment in time, we will not be able to tell if the reported cases are going to stop. )

This means that it is highly unlikely that the economy is going to get better if the disease is not under control and/or if new cases are found.

Stock Market Implications

The diagram above shows the STI during the SARs period.

Looking at the stock market, generally sentiments is that, during the period of disease outbreak, expect little advances in the market (makes sense, cos the GDP is negative). Hence it is definitely more favorable to do shorting than trying to go long.

In addition, it looks like the impact of the first reported case and the depth of the market is not immediate too. There is a time lag as seen in the diagram above. First case in Singapore was detected on 25th Feb 03, and the lowest point of the market occurred on 10 Mar 03. Which is a lag time of around 2 weeks.

So..a possible trading strategy could be to buy put warrant on the STI, or short the index, with a time frame of maximum 2 weeks when the first swine flue case occurs in Singapore. If history repeats itself, you should be rewarded.

*Trade at your own risk

Friday, May 1, 2009

Swine Flu and its impact on Singapore

I am sure most of you are aware that swine flu is causing a worry in the world now. Like many other reports I agree that this flu will cause the economy to slow down like the period during SARS. However, similar to the SARS period, there are still certain sectors which are considered defensive.. such as

  • telecommunication (cos people travel less and businesses will do video conferencing more often)
  • Health ( Just look at the newspapers, everyone is selling mask and thermometers, even the flu medicines are selling like hot cakes, though they don't prevent swine flue)
On the other hand, you can start shorting stocks (via CFDs) on companies like SIA, and generally most retail companies too.

The above two methods should be profitable once the first case is detected in Singapore. ( Yup I know its morally wrong, but in economic sense, this should happen)

*Good thing I feel about this swine flue, is that it might cause all the companies to drop harder and faster leading to a faster recovery, instead of the expected slow and long recovery.

Meanwhile, do take care of your personal hygiene, drink more water and stay healthy! Have a good May day!