Singapore Property Cooling Measures - Buy on Dip?

Current Market Theme:

Mass market residential property to be worst hit given the additional measures aimed to further curb speculation in this category by hot money flowing through the financial system. Measures seem most drastic in the 7th round of property cooling but as with all past measures, it has shown that the government's steps have been well balanced and aimed to prevent a sudden collapse in prices in the near future should monetary easing start to reduce worldwide.

Going by history, as long as hot money is kept circulating in the global financial system (highly likely given the tepid growth experienced in US and Europe), property counters will still enjoy upside albeit less pronounced in the near future. Effects of measures present a buying opportunity to accumulate property counters.

[Previous post: Weekly Update - NOL, Yangzijiang, Swiber]

1. Capitaland

• Gap down on Monday, first day of the week, declining to a day low of  $3.61 before returning to $3.73.
• MACD - positive divergence declining and MACD turned downwards for the first time in 6 months.
• RSI (25w) - hit 70% to face resistance.
• Would be buyers at ~$3.45 after testing $3.42 key support to catch the property momentum.

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2. Keppeland

• Faced key resistance at $4.38 last week. Gaped down opening today at $3.97 to close at same price.
• MACD - MACD turning downwards after peaking at highest levels in 2 years.
• RSI (25w) - hit 70% to face resistance.
• Prices are currently sandwiched in the middle of nowhere between key support and resistances. Would be buyers at ~$3.6 when prices cool down further as that coincides with the 20w average.

3. Ho Bee

• Big dip on first day of the week, erasing almost 6.5% off its share prices. Prices seem firmly support at $1.8 levels.
• MACD - MACD turning downwards with 3 weeks of declining positive divergence.
• RSI (25w) - Overbought RSI finally heading down for some cooling.
• Expect to buy at ~$1.8. Possible to wait for $1.8 resistance to be tested before entering. 

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4. Wing Tai

• Big dip on first day of the week, erasing almost 10% off its share prices.
• MACD - MACD turning downwards after weeks of low positive divergence.
• RSI (25w) - Overbought RSI finally heading down for some cooling.
• Expect to buy at ~$1.7. Possible to wait for $1.7 resistance to be tested before entering. 

Focus on the Demand & Supply + Momentum

I have been tuned to the podcasts (via iTunes) provided by JP Morgan Asset Management department where they have frequent updates of speakers who share the core and fundamental principles that the investment bank employs to trade this rocky market. The one most important strategy that stands out has to be emphasis on price momentum and high demand for the asset. 

Fundamental analysis works theoretically but it does not matter if the market works, ironically here, inefficiently and not price that extra value that you see. But with a fundamental thesis, stock market demand & supply as well as price action not only will provide vindication but also ascertains a valid period of entry. This is what I find extremely telling and acute to my own investment strategies. Sometimes what I feel works fundamentally is not replicated by the market no matter how long I wait and I get fed up with it after awhile. Whereas there are some high in demand stocks that always end up moving up (high beta) with the overall market when times are good. 

Convinced or not, there is clearly one important sector that stands out to me over the year start rally and the recent 2-week-premature rally - Property. 

The SGX MyGateway portal has rightly caught up on this trends of activity for the first half of the year and translated it into a nice writeup that you should be able to access via SGX MyGateway pretty soon (the email update for this came 25 June 2012 and my guess is it should be up on the website in a few more days). Meanwhile, check out the article below.

Source: SGX MyGateway

Property is still Singapore's favourite hobby isn't it? Still, they are people thronging to grab these counters at supposedly discounted values especially counters like Capitaland and Keppeland that have done tremendously well YTD. This is where I will put my money obviously where the market fundamentals (overlooking the cooling measures which are supposed to do good than harm to property market) and demand aligns. Clearly, the returns will not lag the market when it rebounds. 

Weekly Stock Call - Ho Bee Properties

Ho Bee has a strong presence in Singapore largely servicing the higher-end residential market with a strong footprint in Sentosa Cove areas. It also has some 40% of is revenue derived from China, mentioned by a Maybank analyst report 21 March 2012. With the property sector leading the rebound in this jittery but yet upward-trended market over the short term (at least), Capitaland, Kepland, Yanlord, Ying Li have all clocked huge gains over the last week. Even Yanlord and Ying Li with huge presence in China have began to see more market buying pressure despite the cooling measures that the market has perhaps already discounted. In that light, Ho Bee, and OUE as well, is presenting a very solid case for continuation of the property rebound given it being still shy of the limelight and trading at considerable value. Is it time to get into a seemingly undervalued property counter to join in the rebound?

Outlook - Buy with a longer time horizon; laggard play. Technical indicators are aligning to put this stock on a upward trajectory at least for the next 1-2 weeks. Good risk to profit ratio observed that makes the plan more attractive. Finally, Ho Bee has been lagging in this property rebound and begins to present a cheaper valuation alternative to the already more expensive peers of Yanlord and even the big guys such as Capitaland and Keppel Land. But do not expect fireworks from this stock as it is still pretty quiet from the public eye; prepare to hold for lasting effect.

• MACD - Is trending upwards for last trading week for both daily and weekly charts.
• RSI (25d) - Just rebounded off the 30% levels and steadily trending upwards to the 50% level.
• Bollinger Bands - Prices have rebounded off the lower bollinger band on 8 June. From today's close to the lower bollinger band is a -4.7% downside. Risk is well managed.
• 20d MA - the 20d MA has clearly stabilised in the downward direction and there is some good suggestion of a local minimum.
• 200d MA - Prices are still 5.7-6% away from the 200d MA as compared to most property stocks that have prices already crossing the 200d MA. In this jittery market, anything can happen and it will be more attractive to pay attention to undervalued peers.
• Major Support - Prices seem to be resisted by a diagonal support line that provides an even better risk management framework to go into the trade with clear stop loss at around -5-6% trade value.
• Volume - A huge surge in volume occured today (18 June) indicating a possible bigger move in time to come.

Property Sector Play Hots Up!

As it seems, property stocks are on the rise given the highly volatile market conditions that have ensued on Wednesday's trading. They have been quite lagging in the blue chip rally last month given the impact of the stamp duties that really brought their prices way down in December. But things seem to be getting rosy for the counters and I have compiled snapshots of Capitaland, Keppeland, Ho Bee, Yanlord and Wing Tai.



Bullish. Capitaland has just broken out of a minor resistance line (of a peak in mid July '11) and is steadily on an uptrend towards 3.25 of a fib projection 100% level.
MACD histogram has been 3 days in green and positive. MACD line is trending up.
RSI is in overbought territory but well supported by the 70 support line (formed by a trough 18 Feb)
Volumes match price action.

Bullish with caution. Keppeland price has been trending very rapidly towards $3.43ish, facing its first test of confidence in a period of a year. Expect some resistance from that resistance line and if it breaks, more upside is expected. For now, it does not seem like a true buy call yet.

MACD histogram has been 4 days in green and positive. MACD line is trending up.

RSI is in overbought territory but well supported by the 70 support line (formed by a trough 6 Feb)

Volumes match price action.

Bullish. Ho Bee has been trending upwards significantly since mid Jan and prices have recently crossed the 200d MA line. Very well supported trend on the diagonal major support so looking very healthy as a clear trend trade.
MACD histogram has been 3 days in green and positive. MACD line is trending up.
RSI is in overbought territory but well supported by the 72 support line (formed by a trough 17 Feb)
Volumes have been increasing but not too significantly.






Bullish with caution. Yanlord has been trending upwards steadily since start Jan and prices have recently broke through a resistance line formed one plus year ago. Very clear uptrend but headwinds lie ahead from a $1.50 resistance line from a year ago as well as being supported by a fib projection of 100%.
MACD histogram has been 3 days in green and positive. MACD line is trending up.
RSI is in overbought territory but well supported by the 70 support line (support has been test on 13and 17 Feb)
Volumes have been increasing but not too significantly.

Bearish. Wing Tai is seeing a crossover between the 12d EMA and the 20d SMA lines as well as a trend reversal seen after hitting a peak resistance at $1.33.
MACD histogram has been 5 days in red and negative. MACD line is trending down.
RSI just reentered the 'safety' zone which is also an indication for many traders as a short call.
Volume on Wednesday has increased to match the bearish candlestick suggesting real price moving down.