Confession of a Gambling Investor

STI down 7% today. I can feel the ground trembling.... REITs, Banks, property coys, industrial coys. Everything was not spared. Another 7% will bring us closer to 1800. Then we should see the bottom sooner than later. A friend working in the bank said that the loan to valuation in Singapore is still very safe. Below 50%, I think. Unless, the property price take a dive down 20%, i believe the property investors, having made some money over the past 2 years, still have buffer to spare. Regards

thanks..MacGyver if the loan to valuation is 50% even a 30% drop in valuation will still be ok for the banks... I\"m now keeping a close eye on Ho Bee. this seems to be beaten down to the core even though earnings will be pretty visible for the next 2 years. After that who knows but it is really trading at 0.4 RNAV.

Property coys? I would keep a pole distance away from ALL property coys. Have you talked to any property agents? This is turning into a nightmare for most of them. The home-owners market has turned into a tenant market in the space of 5 months. There is absolutely limited buyers in the market as everybody expects the prices to drop more in 2009. More are turning to rentals. I got a property out in the market for 2 months and only just managed to rent it out, although below my expectations. But I thank my lucky stars that the rental will take care of the mortgage payments and I no longer have to fork out additional cashs to finance the mortgages.

CIMB said recession will trigger earnings contraction for 2 years. Deep panic, shaping up to be a global depression if this goes on. We have cut our GDP forecasts for Singapore, recognising the risk of a global recession. The slowdown in OECD economies is likely to affect private consumption. Singapore is particularly vulnerable in Asia, as it is trade-dependent. Exports of goods and services to GDP are a high 2.5%. We expect the knock-on effects from a sharp fall in global trade to trigger Singapore’s worst recession ever in the next two years. The most severe quarters of contraction should occur in 1H09. Recession typically triggers earnings contraction for two years. Singapore’s latest 2Q08 GDP figures (-0.5% yoy) officially pull the republic into recession zone. The government has revised its 2008 GDP growth to +3%, but our economist expects lower growth (+2.5%). We already expect negative earnings for 2008 but there is significant risk to 2009 earnings too. 1997 and 2001 provide precedence. A rapid deterioration of the economic outlook in 3Q of those years was followed by two years of earnings contractions, from the onset of recession. It is now inevitable that 2008-09 will end off with negative EPS growth. We are in the process of cutting our earnings estimates. Downside risk to banking and property earnings when unemployment rises. Market earnings typically contract when a recession happens. This time will be no exception. STI earnings are predominantly propped up by the domestic banking and property sectors. 1H08 property earnings were still reflective of an environment of a standoff between buyers and sellers. As global equity prices melt, sellers have become more desperate and are more willing to take discounts to sell out. Eroding prices in the secondary market will have an impact on the primary market and the current turmoil clouds the outlook for developers all the way till 2009. For banks, the key risk for property-related lending is rising delinquencies due to the unemployment rate. From our understanding, banks do not typically ask for capital top-ups when the values of collateral fall. As long as monthly payments continue, NPLs are not be recognised. Trouble arises only when payments lag. This typically unfolds when unemployment rises. On the ground, we are hearing of the beginning of job cuts in the financial sector. Worst is not over, exploring downside targets for FSSTI when property-related defaults start. We have been cautious since the end of 2007, but the way the world has broken down exceeds our most pessimistic expectations. While we are reviewing our target prices for banks and property, we explore downside targets for the FSSTI. Our analysis shows that big-cap property stocks can fall to an average discount of 70% to RNAV, as during the Asian financial crisis. In other bear markets, the discount for big-cap stocks averaged 50% to RNAV, as in 2001 and 2003. Singapore banks fell to an extreme low of 0.53x P/BV during the Asian financial crisis. In other bear market periods, banks troughed at 1.05-1.27x P/BV, in 2001 and 2003.

Heard a couple of investors wrote in to complain to SGX about Research Houses\' reports quoting ridiculous target prices. The Target Price can change 200% in the space of a few months... All the cock and bull stories. SGX, please be impartial and look into these complaints. Dont give us the nonsenses of corporate governance being on the top priority list and yet don\'t bother to listen to retail investors. :woohoo:

Looks like another week of slaughtering ahead. STI could be heading for 1,200 before we see any meaningful rebound.