Den of The Lion Investor

On Saturday morning, I was at Pan Pacific Hotel to listen to Craig Russell, Saxo Bank’s Chief Market Strategist, share some of his market views. Craig has over 20 years of experience in the global currency, equity and futures markets and is based in China.

For some reason, I was a bit lethargic during the session and therefore didn’t really manage to pen down in an organised manner what Craig talked about.

Nevertheless, I did manage to record down some of the sectors in China that Craig was particular favourable about. These include:

• Materials sector - Cement and steel; shortfall in concrete.
• Banking stocks - Possible consolidation in the banking industry.
• Energy companies - Go for the infrastructure companies rather than the producers.

Craig also commented that China was heavily investing in Africa for resources.

An important pickup for commodity traders was on a report issued by the US Commodity Futures Trading Commission (CFTC).

This report is called the Commitments of Traders (COT) report and is refered to by professional commodity traders. Most amateurs don’t have a clue to its existance.

The COT report provide a breakdown of each Tuesday’s open interest for market reports in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. These are broken down into long and short positions (both commercial and speculative).

An experienced trader can make use of the reports to help him in his trading positions. As to the best way of using the report, I’m not really sure. I suppose a search on google should provide some ideas.

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Another talk that I attended on the first day of the Invest Fair was by Tom Gentile, the senior vice-president and chief market strategist of Optionetics. The title of his talk was “Terminating Inconsistency in 5 Minutes“.

Tom Gentile spoke about the use of a trading system, where it’s

• 100% mechanic with no human inteference.
• Based on repeatable and tradeable patterns.
• Able to be back tested.
• Able to be scanned for efficiency.

He then shared with us a system that he uses. It’s pretty easy to implement.

1. Look for a volume spike of more than 300% on any particular trading day. Record the price limits for that day. We shall call them L (low price) and H (high price). The range (R) is calculated as H - L.
2. After a volume spike, the market tends to move in momentum one way or the either.
3. Following the volume spike day, wait for a day until the price breaks either L or H.
4. If H is broken on the upside, initiate a long trade. Stop loss is at L. 50% profit level at H + R.
5. If L is broken on the downside, initiate a short trade. Stop loss is at H. 50% profit level at L - R.

Actually, I was expecting Tom to touch a bit on psychology, since it’s one of the major contributor to trading inconsistency. I suppose there’s a limit to how much he can cover in one hour.

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In the National Day Rally held a few days ago, PM Lee Hsien Loong announced that the government will be giving out $256 million in view of the higher inflation and uncertain economic outlook.

This will be in the form of a 50% increase in the remaining installment of Growth Dividends (GD) which was supposed to be given out in 1st October 2008.

There will also be another Utilities-Save (U-Save) rebate (on top of the two previously announced) which will be given out to HDB residents in November 2008. This amount will range from $40 to $110 per household depending on the size of your house.

For more details on the payouts, you can refer to this circular from the Ministry of Finance.

Following the lead of DBS and OCBC, United Overseas Bank Limited (UOB) might be the third local bank to issue their own UOB preference shares during this period of financial turmoil.

Newspaper reports indicated that the yield might be 5.05%, which is slightly lower than the 5.1% offered by OCBC recently.

UOB has confirmed that they are currently considering issuing the preference shares and had already submitted a listing application to The Singapore Exchange Securities Trading Limited.

Once the necessary approval has been obtained, more details will be posted here of the UOB preference share offer.

I had some time between Steen Jakobsen’s talk and the panel discussion, so I decided to attend one of the talks on trading psychology. It turned out to be a complete waste of time as the speaker seemed to be more interested in impressing on the audience his trading records than sharing any knowledge.

Two-thirds through his presentation, I gave up and proceeded to the room for the panel discussion. The lists of panelists for this round of discussions include:

• Johnny Ching from UBS
• Ooi Lid Seng from Societe Generale
• Song Seng Wun from CIMB-GK Research
• Steen Jakobsen from Saxo Capital Markets
• Terence Wong from DMG & Partners Securities

Unfortunately, I was very tired for this session and couldn’t really take down a lot of notes. However, there is a good chance you can catch the webcast on the Invest Fair website if they followed this year’s practice of showing the previous panel discussion online.

Nevertheless, these were some of the comments (in fragmented order) that I managed to capture:

Steen Jakobsen

• With the slowdown in growth, there will be lower retained earnings.
• Pharmaceuticals are trading at only 17-20 PE instead of the historical 30-32 PE.
• Technology and alternative energy are also worth considering.
• If you have to buy financials, buy the bond instead of the equity.

Terence Wong

• Subprime much bigger and worse than expected.
• A lot of volatility in the Singapore market.
• S-Reits giving an average of 7% yield and are attractive.
• Other possible considerations include the telcos, SPH and ST Eng.

Ooi Lid Seng

• There will be earnings contraction.
• Construction sector hit.
• No clear sign of which sector to go into.

Johnny Ching

• Spoke about one their products, the Callable Bull-Bear contract.

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