Saturday, June 20, 2015

Straits Times Index: Will MERS cause STI to do a SARS?

On 20 May, South Korea reported the first case of MERS in the country and since then it has spread throughout Asia with Thailand being the latest country to be affected. Singapore’s Lee Hsien Loong has also warned that it is inevitable that MERS “will reach our shores”.

To see if there are any clues how the stock market has and will perform in a period of highly infectious disease, I have in the above chart, superimposed the STI on the corresponding trading day that Singapore reported its first SARScase (1 March 2003) with the trading day when South Korea reported its first MERS case (20 May 2015). Based on 2003 historical trends, I have projected that period’s performance onto the closing STI on 19 June 2015 to create a forecast.

For the 60 trading days before MERS was reported in South Korea, the STI performed in a volatile and mostly positive manner. When news of MERS in South Korea broke out, the index was rather unmoved but has been on a downwards trend since then.
For the corresponding period in 2003, the STI was similarly volatile but in a negative manner. When SARS broke out in Singapore, the index suffered a same day plunge but quickly recovered. It then fell for the next 20 trading days before staging a broad market recovery.

Judging by the immediate trading days before SARS, should MERS hit Singapore, we can expect the STI to plunge rather sharply. However, the market is expected to rebound short-term. However, unlike in 2003, I caution against expecting a longer term recovery because that 2003 period coincided with one of the greatest secular bull markets of our time.

Therefore, the verdict therefore is that you should look at the bigger picture. MERS will benefit day-traders as it provide the catalyst for short-term massive fluctuations as fear initially permeates and sets in. After a while, this information should be priced into the market, with broader factors dictating its longer-term movement.

Thursday, June 18, 2015

KrisEnergy 42-for-100 rights issue:

KrisEnergy has called for cash. The company will issue 42 rights share for every 100 existing share at an issue price of SGD 0.385, representing a discount of 13.5% to its closing price when the announcement was made.

I can use my existing cash reserves to subscribe to the rights issue. I am entitled to 8,400 rights shares based on my current shareholding. But I am also in the red with my average purchase price 10 cents lower than the current market price. This would mean that should I subscribe to my entitlement, I would be putting in more capital at a time where markets are generally skittish, if not heading for the inevitable slump. At the same time, the oil and gas market looks with weak, with a recovery at least 1-2 years out. Russian bear.

Notwithstanding my vested interest, generally, I would not subscribe to rights issue because companies that do call for cash, tend to underperform the market, even after adjusting for dilution. I have only participated in one rights issue, that of GMG Global, and am still waiting for my super-sized returns after many years.

Having said that, I am very likely to subscribe to the rights issue because the alternative would mean either dilution or taking a hit by selling my shares. I will update on any future action.

Saturday, June 13, 2015

Stitches off.

Just more than 2 weeks after the operations, the sutures were removed. What's left is a thin red line and red dots resembling staple marks. 

Going into week 3 of post-op, my left shoulder feels much more mobile and I am able to put on clothes and wash my hair with greater ease. There is a patch of skin below the operation site that feels "dead" because some of the nerves were damaged during the surgery to put the titanium plate in. I was warned about this. 

Meanwhile, the only exercises that I have been doing is weightless bicep curls, pendulum swings as well as running my hand up against a wall to ensure the shoulder retains its range of motion (ROM). However, I dare not lift my left arm straight over my head from the side (like you would in a jumping jack) because it would mean moving my entire left collar bone in a manner it has not been able to do for the last 9 months.