Time to invest in individual stocks that perform well
WITH the stock markets generally on a downtrend, it may be timely to look at individual stocks that have shown consistent performance on their own.
“These are stocks that are not moving in line with the market. They are individual stocks whose returns do not depend on the market direction,’’ said Pong Teng Siew, head of research, Inter-Pacific Securities.
With a recent “buy” call on Luxchem, he said the stock’s risk profile had been steady, with a tendency to not track the market trend.
As for Teo Seng, Pong said it had strong returns on shareholders’ funds while experiencing good demand for eggs for which prices were climbing.
Kossan was another consistent performer, Pong said, while Hartalega could be considered a long term stock.
Vincent Khoo, head of research, UOB Kay Hian, is looking at plantation stocks with IOI Corp being his top pick. Even though IOI Corp is trading at above 100 times price earnings (PE) ratio, Khoo maintains that historical PE is irrelevant; one has to look forward to better earnings from IOI Corp based on optimism over crude palm oil (CPO) prices as well the company’s potential re-entry into the syariah list.
After making a loss in the third quarter of financial year (FY) 2015, IOI Corp registered a profit of RM155.7mil for the fourth quarter of FY 2015.
How long will this plantation stock wave last? The El Nino spell that brings about substantial dry weather may possibly last six months, according to an analyst.
Besides the El Nino factor boosting palm oil prices, revenue from sale of CPO, denominated in US dollars, will be good as long as the value of the ringgit is falling faster than the US dollar value of competing oils, according to Pong.
Some recommend a mixed portfolio with markets at current levels.
This could comprise some dividend stocks and some with potential upside such as utilities, plantations and construction, said Chris Eng, head of research, Etiqa Insurance & Takaful.
Eng still sees some newsflow in construction, some strength in CPO prices while utilities remains oversold.
There may be some stocks that are relatively more stable than others although in general, stocks are not spared from the recent volatility due to sentiment and liquidity issues, according to Danny Wong, CEO, Areca Capital. These more stable stocks include REITS, port operators, special purpose acquisition companies (SPACs), companies in healthcare, pharmaceuticals and non-consumer sectors.
Currently, there are only oil- and gas-related SPACs listed on Bursa Malaysia; these are cash rich Cliq Energy and Reach Energy.
Non-consumer sectors deal with companies producing basic necessities such as Nestle and Dutch Lady.
On top of that, the thematic performers for the year are glove, electrical and electronic as well as technology companies, said Wong.
Prices of completed non-landed private homes in Singapore fell 0.6% in August this year over July, said the Singapore Business Times (SBT), quoting the National University of Singapore flash estimate for its overall Singapore residential price Index.
This was after the index dipped 0.2% month-on-month in July, based on the revised index value for that month.
BNP Paribas expects Singapore’s housing market to shift towards oversupply from 2016, with prices bottoming out in 2018/19 due to record high supply, tight immigration policies and rising interest rates that dampen demand, said the SBT.
The excess supply could build up and peak in 2020, before easing, analyst Chong Kang Ho was quoted as saying of the base case scenario.
The fact that Hong Kong home prices are the highest relative to shares of the city’s publicly-traded developers in almost two decades is a sign that the property market is about to drop as much as 20%, according to Bloomberg, quoting Bocom International Holdings Co analyst Alfred Lau.
The Hang Seng Properties Index slumped 15% this quarter, even as a gauge of Hong Kong housing prices compiled by Centaline Property Agency Ltd rose to a record.
The stock gauge was at the lowest compared with the real estate measure since 1998, when the city’s last property bubble was bursting, said Bloomberg.
“We’re just at the beginning of the correction cycle for physical property prices,” Lau was quoted as saying. “We expect a 10 to 20% decline in prices. Shares are already pricing in a 10 to 15% decline.”
The number of property transactions in Hong Kong tumbled 37% from a year earlier amid concern about China’s economic outlook and the prospect of higher borrowing costs as the Federal Reserve prepares to raise interest rates.
Analysts, including JPMorgan Chase & Co’s Cusson Leung and Morgan Stanley’s Praveen K Choudhary, are calling for Hong Kong property prices to slide as much as 10% next year, according to Bloomberg.
In Malaysia, secondary house prices have taken quite a beating, down by 50% in isolated cases, said Pong of Inter-Pacific Securities.
“There is also a big slide in transaction volumes in the Kuala Lumpur and Petaling Jaya areas,’’ said Pong. Generally, the outlook for the Malaysian property sector has turned somewhat sour, with cuts in sales targets, delays in new launches, and rescission of land deals among local developers becoming the order of the day, reported StarBiz.
Columnist Yap Leng Kuen looks forward to more affordable homes.