Selling shares of Capitaland and CapitaMalls Asia.

I did a contra on the shares bought earlier in the week for Capitaland and CapitaMalls Asia yesterday. To me, the way in which the share prices were moving higher on lowering volume did not look sustainable.

Downtrends are rivers of hope, no doubt, but I would not get too hopeful especially if the technicals hint of a weak rebound. Lock in some gains and let others take on the higher risk of holding the shares in the downtrend.

If prices should go higher, congratulate the buyers. They took on greater risk and if they were to make money in the process, they deserve it.

Capitaland:

CapitaMalls Asia:

If prices were to move higher next week to test resistance provided by the longer term MAs, I would move to cut my long positions in these two counters, bearing in mind that their downtrends are very much intact.

I cut losses if prices rebound to test resistance and not when they are moving lower.

Related post:
The long awaited technical rebound.

Balancing AIMS AMP Capital Industrial REIT and Sabana REIT.

I have been kept busy the last couple of days. By the time I took a shower and called it a day, it was technically night since it was already past 11pm. It is the same thing today. Hopefully, I will be more settled in another week or so. Till then, I can only hope to blog more regularly.

So, what have I been doing in the stock market?

I increased my investment in Sabana REIT while reducing my investment in AIMS AMP Capital Industrial REIT. Having these REITs in equal weightage in my portfolio is an aim of mine. This is something I said I would be doing in an earlier blog post too. If you missed it, read it here. That was just last month.

At that time, AIMS AMP Capital Industrial REIT was trading at 20.5c/unit while Sabana REIT was trading at 91c/unit. Today, they are trading at 22c/unit and 93c/unit respectively. In the last few weeks which saw a bloodbath in the stock market, they have appreciated in price. How's that for resilience and, dare I say, capital gains?

More importantly, it has made the reason to balance my investments in the two REITs more compelling. A gain of 1c from 20.5c to 21.5c is a gain of 4.88%. A gain of 1.5c from 91c to 92.5 is a lesser gain of 1.65%. So, partially divesting AIMS AMP Capital Industrial REIT and buying more units of Sabana REIT makes even more sense now (i.e. sell the former at 21.5c and buy the latter at 92.5c).

The DPU of AIMS AMP Capital Industrial REIT is 2c. With unit price increasing from 20.5c to 21.5c, it means distribution yield decreasing from 9.76% to 9.3%.

The DPU of Sabana REIT is 8.81c. With unit price increasing from 91c to 92.5c, it means distribution yield just decreasing from 9.68% to 9.52%.

See how the distribution yield of Sabana REIT is now higher than that of AIMS AMP Capital Industrial REIT when just a few weeks ago it was lower? This is attractive to me as Sabana REIT's numbers are stronger and more of its properties are of better quality too. You can also say that the lower distribution yield of AIMS AMP Capital Industrial REIT tipped the scales even more in favour of Sabana REIT now.

I have been putting sell orders at 22c for AIMS AMP Capital Industrial REIT but they were, unfortunately, not filled. At 22c, its distribution yield would be 9.09% and even if I were to buy units in Sabana REIT at 93c, the distribution yield would be a more attractive 9.47%.

Finally, if you are wondering how I managed to buy any Sabana REIT units at 92.5c today when it traded at 93c, I didn't buy any today. I bought yesterday and the day before.

The long awaited technical rebound.

I keep saying that downtrends are rivers of hope and that prices do not go down in a straight line. This is quite natural but in despair and desperation, it is all too easy to give up and throw in the towel. This is capitulation.

Capitaland and CapitaMalls Asia are both in downtrends. This is quite obvious. With no signs of reversals to the upside, I recently added to my long positions with the simple believe that they are very oversold and technical indicators were prime for a technical rebound.

Of course, there was no way to know if or when the technical rebound was going to take place. However, the feeling was that any further downside could be limited in case a rebound did not take place anyway.

Now that the rebound has happened, it is important not to become delusional to think that prices could continue going up to hit the old highs. With the downtrend intact, the thing to do is to sell if resistance levels are tested. The question is at what price levels do we sell at? Well, my way is to search out the resistance levels and I see $2.91 and $2.94 for Capitaland.

Wait a minute, do I not think the share price could go higher to test resistance provided by the trendline which is approximating $3.20? Well, it could, of course, but that is a long shot and, bearing in mind that I added to my long position recognising the strong downtrend the counter is in, the thing to do is to lock in gains and to reduce exposure.

What about CapitaMalls Asia? Well, I am still hopeful that its share price could do a gap cover at $1.55. However, I also recognise that we could find resistance at $1.50 to be quite significant.

Therefore, locking in gains at $1.50 would be a good idea if it were to be tested. Let's see how things turn out tomorrow.

Related posts:
Capitaland: Average buy price of $2.81.
CapitaMalls Asia: Bought at $1.37.

STI rises 1.3% to 3,053.51 at closing
Tuesday, 21 June 2011

© 2011 - The Edge Singapore

CapitaLand to double portfolio in China in 5 years, Lim says: Update
Tuesday, 21 June 2011

© 2011 - The Edge Singapore

Win a Lancome Maqui Miracle Liquid Foundation.

Maqui miracle natural brightening creator is a foundation with 12 hour long wearing formula with high UV protection. It gives your skin a natural inner healthy glow with the Aura-Bright technology!

Win a Lancome Maqui Miracle Liquid Foundation worth $72.00! One lucky winner will be picked every week!

Contest ends on 30th June 2011. Take part today!

Win $30,000 worth of prizes

Plan a Family Day Out on 25 June 2011 at Waterfront Promenade @ Marina Bay.

Stand a chance to win $30,000 worth of prizes in our lucky draws at Family Day Out!

Switch and click now!

CapitaMalls Asia: Bought at $1.37.

Similar to Capitaland, I am still waiting for a technical rebound in the share price of CapitaMalls Asia before reducing exposure. The counter is dreadfully oversold and a technical rebound is probably overdue. However, in extremely bearish circumstances, a counter could stay oversold for a very long time. As always, a huge dose of luck is required.

Today, I bought more shares of CapitaMalls Asia at $1.37 per share. Why? Is there a positive divergence? Nope. So, why am I buying when there is no reversal signal? The same reason why I bought more shares in Capitaland and if you remember, price went lower the next day. So, will price move lower tomorrow for CapitaMalls Asia? Your guess is as good as mine.

From the ADX, it is obvious that CapitaMalls Asia is in a downtrend and the trend is strengthening too. If we look at the MACD, it is set to form a lower low. However, if we connect the two earlier lows, the MACD could have hit support. As if to support this thesis, price action almost formed a white hammer today. On the back of high volume, price formed a doji as it closed at the day's opening price of $1.40 after hitting a low of $1.36.

After such a rapid and steep decline in price, the rebound could be equally forceful. We could perhaps see gap cover at $1.55 in such an instance. This would also approximate the position of the declining 20dMA. Wish me luck.


Daryl Guppy: A different reality in China. Despite the much-anticipated hard landing, bubble bursting and general collapse in China, the reality is a little different. The China market fills the growth gaps left by the US market for those companies smart enough to work in the Chinese environment, and meet the growing demands of Chinese consumers. This demand is fuelled by mandated wage increases and the structural shift towards a domestic consumer economy.
The EDGE, 20 June 2011.




Related post:
CapitaMalls Asia: Daily versus Weekly.

Golden Agriculture: A steeper trendline resistance.

Has Golden Agriculture's share price turned bearish? I would not say bearish exactly since the uptrend that started on 23 Feb 2011 is still intact. However, the inability to form a higher high is worrisome. Having said this, price could go as low as 66c in the next couple of sessions and the uptrend would still be intact.

Looking at the chart, the trendline resistance that started on 30 May 2011 has immediacy compared to the one which started on 11 Apr 2011. It is currently at 68c. There is more downward pressure in the current timeframe.

Is there no chance of a rebound? Well, although the Stochastics has just risen out of the oversold territory, we could be walking on thin ice here. If we believe in chart patterns, it seems that a symmetrical triangle is forming. If this triangle is valid, we should see a sharp movement in price in either direction two thirds of the distance to the apex. It could happen soon.

If price could find strong support at 66c and in the process forming a white candle which ultimately breaks resistance, there is a chance of further upside in price. If price should break support at 66c on the back of higher volume, we will probably see the start of a new downtrend.




Related post:
Golden Agriculture: Contra at 68.5c.

Staying positive on S-REITs.

In the recent weeks, shares of property developers, telecoms companies, commodities companies, shipping companies, gaming companies etc have mostly declined in price.

So, in a sea of red, is staying uninvested the way to go? Very probably, many are doing just that. Personally, I am staying invested and mostly in selected S-REITs. In an environment of greater volatility, S-REITs' unit prices have demonstrated resilience and my portfolio of S-REITs has remained relatively unscathed in the recent market weakness.

Some asked me if it is safe to invest in S-REITs now or add to their long positions. Truthfully, I cannot give any answer in the affirmative. I will ask you to instead consider the more discussed circumstances in which S-REITs could fail.

1. Interest rates suddenly shoot through the roof when the time comes for S-REITs to refinance.

2. Credit drying up, leading to S-REITs being unable to refinance at any price.

3. Tenants defaulting en-masse leading to S-REITs being unable to meet their financial obligations.

4. Value of properties declining to the point where gearing exceeds 40%.

Then, ask ourselves how likely are these events to take place in the next two years. I have given some thought to these points and I remain sanguine about the situation.

1. It is unlikely that interest rates would shoot through the roof overnight or over the next two years. We must see some pretty strong inflationary pressure before interest rates would go higher. U.S. interest rates being revised upwards by 0.25% every few months is hardly catastrophic. Unless funds are able to get higher returns with similar or lower risks elsewhere, I do not see S-REITs turning unattractive, all else remaining equal.

2. The Great Depression delivered a lesson which has not been forgotten if the actions by central banks around the world were anything to go by. Any businessman would know that credit is the lifeblood of the economy. Credit dries up, businesses come to a halt and great hardship would follow. Central banks will ensure that this never happens again. We came pretty close in the last great recession and already got a fleeting glimpse of what could happen if credit dried up completely.

3. The supply of industrial space is likely to remain tight in Singapore in the near future and I have blogged about this. If the economy takes a sudden turn for the worse, we could see some tenants defaulting but it is unlikely that tenants would default en-masse. Even in the last recession which was one of the worst I have seen, nothing that serious took place. With interest cover ratios of 5.7x or more, industrial S-REITs are not about to make me lose sleep at night.

4. Most S-REITs are conservatively geared. Even with a gearing level of 32%, we have to see property valuations dropping by some 20% before gearing would hit 40%. A 20% decline is pretty severe and I do not think it likely unless the current valuations are frothy. If we look at the current valuations of industrial properties S-REITs, they are still very much below the peak before the last recession.

Although I remain sanguine about the fundamentals of the S-REITs I am vested in, I do recognise that prices are driven by sentiments. If Mr. Market should go barking mad and is willing to sell to me at prices which would give me distribution yields in excess of 10% like it did in the last recession, I would gladly increase my long positions. Yes, that is my plan. Keep a warchest ready and seize the opportunity if it should present itself.

Related post:
Investing in REITs: A flawed strategy?