This is a question that many investors asked from time to time. Since the behaviour of the stock market and that of its participants never change throughout the years, the answer to this question would best be found from a study of past market behaviour. While no two bull markets behave exactly the same way, they do share certain common characteristics.
The market always alternates between bull and bear cycles while the market participants alternate between emotional fear and greed. At this juncture, the Singapore market seems to fit in rather nicely with the typical PHASE TWO of the Bull Market, the characteristics of which is generally as follows: [Phase 2. The "Wall of Worry Phase"- This middle stage is where the general public becomes aware that this new market is moving higher. It is also typically the longest of the three phases. The financial and stock reporters on TV start to cover this new sector and interview the experts. To make it "fair" they find someone from each of the bull and bear camps. Each expert has a compelling argument as to why the other "expert" is wrong and why the price of this new market should go in the direction that they think it should. The investing public usually finds it difficult to take action at this point because there is so much uncertainty. They have just recently become aware that this market is moving higher, but in the back of their minds they keep remembering that not too long ago this market was going down year after year and they keep thinking of the "arguments" as to why investing in this market is risky. Examples of this phase include the stock markets in the mid-to-early 1980's and mid-to-early 1990's. Most of the public was aware that the stock market was making gains but were slow to aggressively invest in it because the pain of the past bear markets were still fresh in their minds. The term "wall of worry" refers to the saying that "A bull market has to climb a wall of worry but a bear market slides down the slope of hope".This is an important concept to understand. As a bull market is advancing it doesn't feel good to the investors during this phase. The naysayers are everywhere publicly explaining away the recent advances in this market and explaining why this investment class will soon drop away. An investor that chooses to invest anyway has to decide for himself that this is where they want to be, invest, and hang-on. Only after a long period of consistent gains do the naysayers start to lighten up on their negativity and allow the participants to start feeling good about the investment they have made. When the media combines this new upbeat attitude with a chart of the gains that have happened so far then the mood shifts for the better and the market enters the next stage. ]
Since the STI hit a low of 1,455 in March 2009, it had been scaling from one high point to the next higher point. It reached a closing high of 3,313 on 9 Nov 2010. There were also no lack of bad news and uncertainties (or “wall of worry”) accompanying the STI’s climb. It is to be noted that following the outbreak of European financial crisis around May this year, the STI had hit a low point of around 2,650 in end-May. There were worries over the recovery of US economy, double-dip recession, China asset bubbles, some analysts forecasting a market pullback in 2H 2010, etc but the Singapore market continued its upward climb to its present day level only to be interrupted by the latest “Korean war scare”. If we are indeed in the second phase of the bull market, we should be able to see the STI rising beyond the recent high of 3,313 soon [may be during the likely New Year Rally in Jan 2011?]. USEFUL REMINDER
“STOCK MARKET IS THE NAME
DECEPTION IS THE GAME
WHEN WHAT YOU SEE IS NOT WHAT YOU GET
YOU’VE BEEN FOOLED, ONCE AGAIN”
Observer2, I think you are spot-on. This is a bull market which will become more evident in the next few weeks and months.
Having said that, I would zoom in on S-chips. One by one they are fleeing Singapore for higher valuation in HK, Taiwan, Korea. Many of them are cheap and good - and if anyone reads The Edge, you can go to the article on famed fund manager Anthony Bolton whose fund is up 27% betting on China stocks. More interestingly, he talks about the once-in-a-lifetime opportunity to invest in a major economy enjoying rapid growth. He has even spent $12 million on a property in HK at a time people think the market is overheated!
I share your approach to go for S-chips (also any penny stocks with good fundamentals and cheap valuation), Yeh.
This is one of the rare opportunities to collect selective stocks with low downside risks but offering huge potential capital gain – thanks to the general phobia for S-chips. It is a well-known fact that S-chips do have considerably higher risks than blue chips but they also offer considerably higher rewards to those willing to take a calculated risks. They are certainly not for the risk-averse people and “blind followers” or those not doing their homework. Those who buy S-chips must also know when to get out from S-chips. "Buy and Hold Strategy" (without time limit) is simply inapplicable and highly risky.
Dello, I agree with your remark that ZIWO is one of the better companies around (especially among S-chips). Although its share price has appreciated a fair amount, I believe there is more room for further appreciation as the company is still on a growth path and is likely to see a further rise in its revenue and earnings. The company is debt free and CIMB and Phillip Capital have a target price of 43 cts and 47 cts respectively for the stock. As all investment entails taking on risks of varying degree, Phillip Capital has also highlighted certain risks in investing in Ziwo. It is for each individual to take into account his/her investment resources, risk appetite and comfort level in holding the stock before making a decision to invest.
