It’s the long funds who are selling the Singapore market....not the hedge funds!
Posted by Kevin Scully 23 October 2008
Have been meeting up with Hedge fund managers over the last few days. They are still short in the market but not naked short. According to them - we have seen selling from Long funds since early October hence the increased volume and weakness in blue chips such as the local banks. The total value of trading in DBS shares yesterday alone was more than S$100mn....that cannot be from hedge funds. This means more fund redemption is on the cards.
A broker confirmed this view today when he said that his retail clients were buyers of some blue chips and the sellers with the Global investment banks such as Merrills and UBS. We are also seeing the sell side of these broking houses now coming with strong sector under-weight recommendations. There is now no more talk of decoupling between Asia and the US/EU using the strong engines of Asian growth (India and China). The numbers speak for themselves, the US, Japan and the EU economies are US$15trillion, US$5trillion and US$18trillion compared to US$5trillion for China and India combined. 10% growth in China/India would be equivalent to 1.3% growth in the US,Japan and EU.
The problems of global banks is well documented but we are now beginning to see sovereign stress from countries such as Iceland, Eastern Europe and Pakistan.....on the brink could economies such as Korea.....Does the IMF, World Bank or Asian Development Bank have enough money to help everybody....I doubt it !!
We read about the problems at Las Vegas Sands.....and how this could impact our Marina IR project. What the hedge funds are worried about is a large corporate default in Asia which could curb bank corporate lending significantly. This could lead to a wave of corporate failures which in turn could lead to a wave of individual mortgage failures because of the loss of jobs. Their view, which I agree with is that it would take time for economies and markets to work through these problems. There is no “V” shaped rebound but more downside on softening volume.
If someone tells you to BUY a stock because its cheap....he is out of touch with the current market mood. The “E” (earnings) is no longer in play because it has become unpredictable. The more important analysis is now one of solvency and capital protection - so you should be looking at price to book, gearing levels, interest cover and more recently whether the debt is short or long term as short term credit is quickly drying up.
I have been looking at OCBC today which closed near its intra-day low....its hit my technical support of S$5.50 (see my earlier Blog)....if the selling eases up from the long funds it could offer a nice trading opportunity or if you were the hedge fund - you would wait for the retracement and then short the stock again.
It’s the long funds who are selling the Singapore market....not the hedge funds!
ReplyDeletePosted by Kevin Scully
23 October 2008
Have been meeting up with Hedge fund managers over the last few days. They are still short in the market but not naked short. According to them - we have seen selling from Long funds since early October hence the increased volume and weakness in blue chips such as the local banks. The total value of trading in DBS shares yesterday alone was more than S$100mn....that cannot be from hedge funds. This means more fund redemption is on the cards.
A broker confirmed this view today when he said that his retail clients were buyers of some blue chips and the sellers with the Global investment banks such as Merrills and UBS. We are also seeing the sell side of these broking houses now coming with strong sector under-weight recommendations. There is now no more talk of decoupling between Asia and the US/EU using the strong engines of Asian growth (India and China). The numbers speak for themselves, the US, Japan and the EU economies are US$15trillion, US$5trillion and US$18trillion compared to US$5trillion for China and India combined. 10% growth in China/India would be equivalent to 1.3% growth in the US,Japan and EU.
The problems of global banks is well documented but we are now beginning to see sovereign stress from countries such as Iceland, Eastern Europe and Pakistan.....on the brink could economies such as Korea.....Does the IMF, World Bank or Asian Development Bank have enough money to help everybody....I doubt it !!
We read about the problems at Las Vegas Sands.....and how this could impact our Marina IR project. What the hedge funds are worried about is a large corporate default in Asia which could curb bank corporate lending significantly. This could lead to a wave of corporate failures which in turn could lead to a wave of individual mortgage failures because of the loss of jobs. Their view, which I agree with is that it would take time for economies and markets to work through these problems. There is no “V” shaped rebound but more downside on softening volume.
If someone tells you to BUY a stock because its cheap....he is out of touch with the current market mood. The “E” (earnings) is no longer in play because it has become unpredictable. The more important analysis is now one of solvency and capital protection - so you should be looking at price to book, gearing levels, interest cover and more recently whether the debt is short or long term as short term credit is quickly drying up.
I have been looking at OCBC today which closed near its intra-day low....its hit my technical support of S$5.50 (see my earlier Blog)....if the selling eases up from the long funds it could offer a nice trading opportunity or if you were the hedge fund - you would wait for the retracement and then short the stock again.