Remember the LORD for it is he who gives you the ability to produce wealth and so confirms his covenant... Deut. 8:18

Saturday, November 28, 2009

U.S. Hotel owners behind on payments

MIAMI (AP) - Like many home owners in the U.S., hotels are starting to drown in debt. They have been enticing travelers all year with sweet deals: credits for in-house spas and restaurants, up to 50 percent off five-star rooms, even free nights.

But all that discounting hasn't stopped occupancy from dropping an average of 10 percent. The result? Hotel loans have begun falling into delinquency faster than any other kind of commercial real estate debt.
The rising defaults paint a grim picture for an industry with increasingly more rooms than guests, and more hotels still opening every day. It's a problem that could get worse before it gets better, with demand expected to remain weak and ambitious new projects planned before the meltdown worsening the room glut.

The oversupply means room rates should stay low for at least another year, good news for consumers but not so great for hotel owners and the banks that lent them the cash to build or buy.
The rise in delinquencies is sharp. Five times more hotel loans are behind on payments this year than in 2008, according to mortgage data firm Trepp LLC, which tracks those traded by investors. In October, 8.7 percent were distressed, compared with 1.5 percent last year.

Wednesday, November 18, 2009

Rally's Low Volume Prompts Question: Whither Buyers?

November is just half way over and already the markets are worrying about December.
The theory, among stock traders and others, is that some investors have had such a good year that they are ready to shut the books and sit it out until 2010, creating a liquidity vacuum.

"There's somewhat of a debate...There is a concern about liquidity drying up in a meaningful way in December, but that is yet to be seen," said Morgan Stanley chief U.S. credit strategist Greg Peters. "There's a concern from bankers and syndicate folks that if you want to bring a deal you have to bring it soon."

For that reason, there's been a flood of corporate debt issuance this week, totalling $17 billion in investment grade in just two days. More deals are expected through the end of the week. Also on tap for markets Wednesday are the consumer price index, as well as housing starts and building permits, all at 8:30 a.m.
Tuesday's markets were fairly quiet. The so-called "risk trade" was out of whack, as the dollar rose, commodities rose, bonds rose and stocks rose slightly. Typically, the dollar trades countertrend to the risk assets, like stocks and commodities.

Whither Buyers?
The low volume nature of the nearly 8-month old market rally has been an ongoing concern, but now the absence of institutional players could be an issue.
Jack Ablin, CIO of Harris Private Bank, said he watches the action in the last half hour of trading for clues about the market, and he is getting concerned. "It used to be we lose ground in the morning and rally back in the afternoon. Now it seems we're losing steam in the last half hour. That's the time usually reserved for institutions," he said.

"It looks like a lot of the thrust form the biggest players is beginning to wane. The good news is because values are full, we're not stretched, it's not a bubble. I think there's enough support around the edges. That's why if we had anything, it would be a 10 percent correction at most, and an opporutnity for those on the sidelines to get back in," he said.

Morgan Stanley's Peters said there's a feeling that some funds could just sit out for a while. "My sense is liquidity will be choked down, but what I think you'll actually see is an up move. I think it could lend itself to a down trade or an up trade, but I think the tendency this time around will be an up trade, which is why you're seeing on the equities side, people start to traffic in the large caps and also a lot of options trades as well. It tells you liquidity is a concern, and they're also worried about a powerful move to the upside," he said.

Ablin said if there is a correction, it would most likely be early in the year. One of his favorite indicators is flashing a warning -- the Smart Money index, which subtracts the S&P 's move in the first half hour of trading from its movement in the last half hour of trading. The first half hour is mostly influenced by order flow from retail investors, while the last half hour is when institutions are active.

He said the index bottomed in October, 2008, and it is now beginning to weaken.
"I don't think we're in a bubble, but I would start to get a little more squeamish if this market goes up a lot.. We may have to wait until after year end. (for a correction) We actually could sees a little pop of upsurge at year end as some of these mutual fund mangers throw in the towel and square in positions for year end," he said. "Maybe they do a flurry of buying and window dress the end of the year. That could provide a tail wind..that's my sense. (Patti Domm, Market Insider)

Friday, November 13, 2009

Southern Steel

Recently reported its third quarterly profit, eps 8.3 sen with declaration of 2.5 sen tax exempted dividend going ex. 25th Nov.
Dividend yield = 10/190 = 5.2%
PER = 190/32 = 6
Either Ann Joo is overpriced or Southern Steel underpriced.
I'm buying for med to long term since I've sold all my Ann Joo
Looking for Kinsteel at below 90 sen and Lion Div below 46 sen

Monday, November 9, 2009

The Sentiment is Sell

Sold off IJM Land for a gain. Poor liquidity in the last 2 weeks. Property stocks trending down since the proposed RPGT. Price action of Gamuda and IJM suggest that construction sector stocks are also on the decline. Volume generated are not buyers but sellers dumping their holdings.
Financials (led by HLBank) and plantations (led by Sime) trending up. But CPO output/harvest expected to be reduced/poor.

US dollar as funding currency to boost volatility, high yielding assets

For students of finance: this article on "Dollar carry-trade"

Wednesday, November 4, 2009

Fed sees rates near zero for "extended period"

WASHINGTON: The U.S. Federal Reserve on Wednesday, Nov 4 expressed growing confidence that an economic recovery was building, even though it stuck to its commitment to keep borrowing costs near zero for "an extended period", according to Reuters,

As expected, the central bank closed out a two-day meeting with a decision to keep benchmark overnight interest rates in a range of zero to 0.25 percent. The vote was unanimous.

In a statement announcing the decision, the Fed said the U.S. economy had "continued to pick up" since its last meeting in September, but it expressed concern that the economy's recovery was likely to be muted.

"Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit," it said. While still emphasizing risks, the Fed was a bit more upbeat than it was in September, when it had simply said spending was "stabilizing.

The Fed was more explicit than it had been about why it expects to be able to keep overnight rates "exceptionally low" for a long time, citing "low rates of resource utilization, subdued inflation trends, and stable inflation expectations."The central bank, wary of undercutting the fragile recovery by withdrawing its monetary support too soon, has also been on guard for any indication that its emergency lending efforts could fuel an unwelcome bout of inflation down the road.

But top Fed officials, including Chairman Ben Bernanke, have said the U.S. recession, the most painful since the 1930s, has left a legacy of high unemployment and idle factories that should keep price pressures in check.
The government on Friday is expected to report that the drop in employment is abating, the jobless rate is forecast to rise to a fresh 26-year high of 9.9 percent.The world's largest economy grew at a faster-than-expected 3.5 percent annual rate in the third quarter, which effectively signaled the end of the downturn. - Reuters


Maturity date 24 Oct 2014, therefore exercise/ conversion period = 5 years
Exercise/strike/conversion price = RM 4.00
Exercise/ conversion ratio = 1:1

Unisem. TSM Global

Unisem at RM1.63, semiconductor assembler w/ market cap of RM 845 million (na 177 eps 10 pe 16). Pays dv 2.5 sen.
52 weeks: low RM0.45 high RM1.80

TSM Global at RM1.90, wire/cable harness w/ market cap of RM100 million (na RM2.31 eps 38 pe 5). Pays dv 5 sen t/e on 6th Aug 09
52 weeks: low RM0.97 high RM1.96

Banking on Higher Mortgage Rates

The proposed 5% RPGT recently announced in the Government Budget has already dampened interests in the property stocks and tangible investment in the property market.

Today, with most leading banks poised to raise their mortgage rates, institutional investors may further reduce their holdings on property, construction and automobiles and switch their favour towards banking stocks.

Tuesday, November 3, 2009

Dividend yield stock

Here're some dividend stock among many others, not too expensive for consideration.
Hap Seng at RM2.45 ( na RM4.09 eps 55 pe 5 ) typical dv tax exempted 5 sen Aug, 7 sen Feb. Therefore dividend yield = 12/245 =4.9 %
Even if eps is reduced to 2o, pe still stands at 12 which is not too high.

HS Plantatiion at RM2.15 (na RM2.06 eps 16 pe 14 ) typical dv tax exempted 5 sen June, 4 sen Oct. Therefore dividend yield = 9/215 = 4.2 %

Apex Healthcare at RM1.84 (na RM1.90 eps 19 pe 9) typical dv 4 sen May, 5 sen Sept. Therefore dividend yield = 9/184 = 4.9 %

Rubberex at RM1.93 (na RM1.78 eps 11 pe 19) dv tax exempted 6 sen. therefore dividend yield = 6/193 = 3.1 %

Axis REIT at RM1.94 (na RM1.75 eps 16 pe 12) typical dv 4 sen May, 4 sen July, 4 sen Sept, 4 sen Feb. Therefore dividend yield = 16/195 = 8 %