Singapore Equity Market Buzz And Round Up : Collateral Damage
No respite for shares in Singapore as I present the “double offenders”, shares that have hit their 12 month low more than once in the past 5 days.
Just when you think they have stopped Swiber bashing, the attention turns to Vallianz and we see some blue-chips turn red-chips in there (which I have coloured a peach colour for differentiation).
O&G suffered a triple blow, for besides the record 5 year low in oil prices, Universal Terminal announced a delay in their SGX IPO for S$1 bio, planning to start their offering during the Chinese New Year period of 2015. (The company is 65% owned by Hin Leong and 35% owned by Petrochina.)
The 3rd blow would be Indonesia considering disbanding or relocating their Singapore oil trading arm, Petral, on account of corruption which would deal a devastating blow considering that Indonesia imports about US$ 27 bio in oil based on 2013 numbers. http://news.asiaone.com/news/business/indonesia-may-disband-or-relocate-spore-trading-unit-corruption-crackdown
Today’s list of losers has a few more names than usual with a sprinkling of non commodity related counters such as Maxi-Cash, Food Empire, semi conductor firms and engineering names.
All I can think of is CONTAGION.
It brings to mind the concepts of cross shareholdings, buy sell-back deals gone sour and the idea of forced liquidation that is the result of possible liquidity squeeze.
And we are seeing more companies embark on share buybacks which should bolster stock prices and not drive prices lower like in the case of Marco Polo Marine which has been buying back shares since 24 Nov but was unable to avert a 12 month low on 3 Dec.
For the names that are trading at their lows for no obvious reasons such as Sabana Shariah and Maxi Cash, a combination of low liquidity and large sellers ?
The usual collateral assets would be real estate, stocks and bonds. For the stocks that are used as collateral, blue chips would weather much better than small and mid cap companies that have little market depth.
And that is perhaps the reason why not all the stocks that have lost 40% or more in the past 3 months are the O&G affiliated industries.
I extracted a list and this is what I found.
Singapore listed companies whose share prices have fallen >40% in the past 3 months.
Nonetheless, investors are not deterred from the IPO market with no less than 4 IPOs priced last week, including the second largest IPO from Keppel DC Reit at $0.93 for SGD 513, with many investors probably aware that the Keppel DC data centre probably houses SGX data as well and any future power supply failures that is market disruptive better be avoided at all costs. http://business.asiaone.com/news/mas-rebukes-sgx-trading-glitches
The Business Times reported that funds raised by Catalist companies hit a new high of $285 million which is a good sign as movie company MM2 Asia joins in the flock and now we have Fundsupermart.com cashing out via their iFast IPO which would value the company at S$243.4 mio. That is, errr, more than about 523 other companies listed in the SGX and over companies like Geo Energy (mkt cap 242 mio), Yongnam (240 mio) and more.
For a good and positive write up on Fundsupermart : https://www.fool.sg/2014/12/07/5-things-you-should-know-about-ifast-corporations-upcoming-ipo/
I feel that I should highlight that IPO performances this year has been mostly, lacklustre, starting with the largest IPO of the year, Accordia Golf Trust which is down 21% since its launch.
Pacc Offshore Services’ $388 mio IPO in April is also just 54% lower since.
The little ones do better, I observe, in names like Zico which raised only $14 mio and is up 50%, along with Talkmed Group (+380%) issued earlier this year.
I do not see a massive revival in the SGD IPO markets because the strong SGD story will be on the back burner for a while as the world sorts out their problems and SGD will not be so safe haven when Malaysia is facing new deficit problems and rest of commodity dependent EM comes under threat of lower oil prices.
That is not to say that capital markets will shut down. We are seeing DBS, not content with their purchase of Soc Gen’s Asian private banking arm earlier this year, now considering to make an offer for Coutts, which would mean the Queen of England would be banking with Singapore. http://www.bloomberg.com/news/2014-12-03/dbs-said-to-work-with-citigroup-to-study-possible-coutts-offer.html
And we have Blackstone making a cool US$ 2 bio profit in selling their IndCor properties to Singapore’s GIC. http://for.tn/1tHShSD
The stocks that have out performed in the past 3 months are those scarcely covered names, that unless you have been lucky enough to follow their development closely, or even luckier to know their owners, you will hardly stand a chance.
Stocks whose prices have risen 30% or more in the past 3 months.
Like I said last week, there is wealth destruction at work as oil assets get devalued. https://tradehaven.net/market/equity-thursday-wealth-destruction-butterflies/
With wealth destruction, comes collateral damage.
And the most vulnerable collateral would suffer most in the first wave.
Agreed, small caps taking the largest hit while STI stocks with the exception of Kepcorp, Sembcorp Marine/Industries and commodity plays like Olam are holding up well led by the banks.
Probably the effect of margin calls for those who bought O&G small cap plays like ezion and swissco.
P.S. Well done on Asia Fashion! 🙂
I did not buy Asia Fashion although I spotted it.
The problem is that the liquidity is really thin on such stocks and their mkt cap is so little, it is easily cornered and controlled like alot of them out there.
given, the weakness in Oil and Gas space, what would be a good O&G bonds to look into buying?
Hey Joseph,
JP Morgan expects that 40% of high-yield energy bonds could default if oil prices stay at US$ 65 per barrel. http://on.wsj.com/1y9tQnr
None of our SG names are trading at distressed levels (or even close) yet but it is good to know that people like you are starting to look at them because pockets of demand exists for the desperate sellers. I am personally not comfortable with most of our local issuers versus the other markets.
Take your time, sellers still out number buyers and remember, name your price and don’t be fooled by the levels they give you.
Good luck !