Stocks no longer cheap: Ace fund managers
Stock Report August 6th, 2009
ndian shares are no longer cheap after recording their biggest annual rise since 1991, investment strategists overseeing the country’s top performing equity funds for 2009 said on Tuesday.
Indian shares rose 81% in 2009, driven by a flood of foreign funds, stretching 12 months forward price to earnings multiple of India’s benchmark index to nearly 17 times, one of the most expensive in Asia.
“Markets are not cheap any longer… the earnings have come on the back of substantial fiscal and monetary stimulus,” Sankaran Naren, equities chief investment officer at ICICI Prudential Asset Management said in the Reuters Trading India chat room. “International valuations are cheap compared to Indian markets.”
In large caps, stocks are pretty fairly valued, so one does not see pure value picks there. However, in midcaps, there are some value picks,” Rajat Jain, chief investment officer of Principal PNB Mutual Fund, overseeing Rs 8,000 crore of funds, also said in the chat room.
While Naren, who manages Rs 7500 crore of equity assets, said his main bets were in the healthcare, telecom and utilities sectors, Jain prefers financials, consumer firms, construction, industrials and some infrastructure companies.
Principal’s funds, including its Emerging Bluechip Fund which rose 147.3% in 2009 as the top Indian fund, holds shares such as state-run State Bank of India and private sector lenders ICICI Bank and HDFC Bank.
Bad loans are not a serious concern and could even surprise positively, said Jain.
Sankaran Naren, whose ICICI Prudential Discovery Fund gained 134.3% in 2009, said he was overweight telecom as it is the sector which is seeing a cyclical downturn due to competition. “My belief is that it will work, there is too much crowding in other themes,” he said.
His funds hold shares such as Bharti Airtel and Mahanagar Telephone Nigam Ltd.
“Pharma is very cheap given the certainty of earnings,” he said, adding he liked power utilities as a defensive bet.
Drug firms Cadila Healthcare and and FDC are among his discovery fund’s top-5 picks. His investments from the utilities sector includes Tata Power Company and Indraprastha Gas.
Shun realty
Real estate was the one sector both the fund strategists said they were wary of.
“The sector is new to the stockmarket and we do not know how to value landbanks,” said ICICI’s Naren. “The sector is too volatile for investors.”
Jain added that the problems of real estate firms were not behind them and they still faced execution challenges.
These concerns were aired hours after Godrej Properties surged nearly 20% after listing at a 5.05 percent premium on its debut on Tuesday, in a first listing by any property firm in over two years.
Asian stocks advanced, led by Japanese automakers, and the risk of defaults in the region dropped on signs the U.S. economy is improving.
The MSCI Asia Pacific Index rose 0.4 percent to 124.08 as of 11:45 a.m. Tokyo time. The cost of protecting bonds in Asia and Australia from default fell to the lowest level since May 2008, CMA DataVision prices show. In Japan, bond risk fell to a two-month low. Oil traded near $82 a barrel as snowstorms blanketed most of China, Europe and the U.S. Eastern Seaboard.
Auto sales in the U.S. climbed 15 percent in December, led by Toyota Motor Corp.’s 32 percent surge. Sales gains are helping to slow the pace of job cuts in the U.S. Economists surveyed by Bloomberg News project the government will say on Jan. 8 that payrolls were unchanged in December.
“Demand is on a steady recovery worldwide,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees $94 billion. “The market and economy will be better in 2010 than last year.”
About five stocks advanced for every two that fell in the MSCI Asia Pacific Index. The Topix Index climbed 0.9 percent in Japan, where Kyodo News said the government will accept the resignation of ailing Finance Minister Hirohisa Fujii. South Korea’s Kospi gained 0.5 percent. Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The index added 0.3 percent yesterday after factory orders rose 1.1 percent in November, more than twice as much as economists had estimated.
Sales Gains
Toyota Motor Corp., which gets 32 percent of its sales from North America, rose 2 percent to 3,880 yen. The company’s December sales climbed to 187,860 autos from 141,949 a year ago.
Nintendo Co. jumped 5 percent to 24,070 yen in Osaka trading. U.S. sales of the motion-sensing Wii game console probably exceeded 3 million last month, the Kyoto-based company said on its Web site. The company sold 2.15 million Wii players in the U.S. during December 2008, according to estimates by research firm NPD Group.
Toyota and Nintendo were the biggest and third-biggest contributors to the MSCI Asia Pacific Index’s advance. The gauge has climbed 37 percent in the past 12 months as lower borrowing costs and spending packages around the world pulled economies out of recession.
In Seoul, Hynix Semiconductor Inc. gained 2 percent to 23,850 won. The United Arab Emirates government offered in November to buy a stake in the company, the Electronic Times reported, citing an unidentified South Korean government official. Park Hyun, a Hynix spokesman, declined to comment.
JAL Drops
Japan Airlines Corp. sank 4.4 percent to 86 yen. The Development Bank of Japan, the company’s biggest creditor, and the Finance Ministry favor bankruptcy proceedings to restructure the airline, Nikkei English News reported.
China’s Shanghai Composite Index fell 0.3 percent. A rally may fade from the second quarter as inflation triggers “significant policy tightening” by the government and the U.S. economy weakens, Deutsche Bank AG said. The MSCI China Index may still end the year 15 percent higher, Ma Jun, Deutsche Bank’s Hong Kong-based China economist, said in a note to clients.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2 basis points to 88 basis points, the lowest since May 2008, ICAP Plc and CMA prices show.
The Markit iTraxx Australia index fell 1 basis point to 79.5 basis points, also the lowest since May 2008, Citigroup Inc. and CMA prices show. The Markit iTraxx Japan index declined 3.5 basis points to 127.5 basis points, a two-month low, according to Morgan Stanley and CMA prices in Tokyo.
Spreads Narrow
The difference in yield to own bonds in developing countries instead of Treasuries narrowed 2 basis points to 2.73 percentage points, close to a 19-month low, according to an index compiled by JPMorgan Chase & Co. It dropped 4.16 percentage points last year.
The Philippines is competing with Indonesia and Vietnam to be the first nation in the Asia-Pacific region to sell U.S. currency debt this year. Turkey yesterday sold $2 billion of 30- year bonds, its longest-dated international debt since February 2008, to take advantage of borrowing costs near the lowest on record.
The yen weakened against higher-yielding currencies on speculation gains in Asian stocks spurred demand for riskier investments.
Japan’s currency fell versus 14 of its 16 major counterparts after the cost of protecting Asia-Pacific corporate and sovereign bonds from non-payment dropped. Australia’s dollar strengthened after a government report showed home-building approvals rose at a faster pace than economists estimated.
‘Funding Currency’
“We continue to see the case building for the yen returning to its role as a funding currency to a degree not seen since 2007,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “With risk appetite still buoyant, as witnessed by further declines in CDS premiums, and strong emerging markets, we see more downside risk for the yen.”
The yen fell to 83.90 per Australian dollar from 83.63 in New York yesterday. It slipped to 12.391 against South Korea’s won from 12.435. The Australian dollar rose to 91.34 U.S. cents from 91.19 cents.
The number of permits granted to build or renovate houses and apartments in Australia increased 5.9 percent from October, when they dropped a revised 1.8 percent, the Bureau of Statistics said in Sydney.
Oil traded near a 14-month high in New York as an industry report showed a decline in U.S. crude stockpiles and cold weather bolstered the outlook for fuel demand in the world’s largest energy-consuming nation.
Weather Effects
Temperatures in the U.S. Northeast, which consumes 80 percent of the country’s heating oil, are forecast to remain below normal through Jan. 14, according to the National Weather Service. U.S. crude supplies dropped 2.27 million barrels last week, according to the American Petroleum Institute.
Crude oil for February delivery was at $81.62 a barrel, down 15 cents, in electronic trading on the New York Mercantile Exchange. Yesterday, the contract rose 26 cents to $81.77, the highest settlement since Oct. 9, 2008. Before today, oil had climbed for nine days, the longest winning stretch since July.
Copper for three-month delivery on the London Metal Exchange advanced 1.1 percent to $7,568.25 per metric ton, the highest level since August 2008, on investors’ optimism that the global economic recovery will be sustained. New York and Shanghai futures for the metal used in cables also advanced.
“The general feeling of optimism is spreading” said Wang Haifeng, an analyst at Shanghai Liangmao Futures Co. “The Shanghai, London and New York copper markets are feeding off each other, and taking turns to drive one another higher.”
Gold: Alternative Investment of more wanted
Gold Investing August 6th, 2009
You’ll remember a commercial bank some time ago about an investment offer? The ad tells some of the investment made old people earlier times, one of them is to buy gold.
No doubt since the gold had indeed become one investment vehicle that attracted many people. Why? There are at least three reasons why gold became one of the growing alternative investment demand.
1. Gold is a commodity that from day to day getting the gold price rises. This is because gold has a limited supply and unlimited demand.
2. The existence of indiscipline in maintaining currency value, in particular currency that is not in the gold-backup. Indiscipline makes the currency is always decreasing. This makes the natural conditions in the community to protect the initiative from the decline assetnya currency by investing in gold.
3. Gold Investment is an investment that can manage themselves and not depend on the performance of third parties.
Gold investment is not a passive investment, instead of gold investment is an investment that can be activated. Gold investment could be used as collateral / security at the Pawnshop. On Pawnshop, there KCA Products (Credit Secured / Conventional) and Sharia Pawning Items by Rahn & akad akad Ijara which can optimize the Gold Investment Working Capital, both for the short term (KCA) and for Long-term needs (Krasida).
If you are interested to start investing in gold, there are important considerations you need to know. Buy gold in the form of gold coins or bars. In the form of gold is the most appropriate form when will serve as a means of investment, compared with the gold in the form of jewelry. Gold in the form of jewelry has a selling price lower than gold bullion. This is because the value of gold jewelry sale will cut the cost of manufacture.
Then where you can buy gold coins and bars? Gold coins or bars can be purchased at outlets PT. Antam Metal Waste, Mining and stores nearby Sharia nearest gold around you, with due attention to the following when making a purchase of gold, namely:
- There is a certificate Antam
- Read 99.99 not 99.98 carats
- Match the id number of the certificate with the number of noble metal gold.
So if you’re still afraid to speculate in large-scale investment, gold investment may be the right investment for you.
US Dollar and Japanese Yen stayed the strongest
Forex August 6th, 2009
Japanese yen and the US dollar were the strongest of the majors on a day when US stock indices pushed more than 2.5 percent. This shows that market relationships and hazard aversion are active. Actually, the CBOE’s VIX instability index, one of the major market alarm measures, went up over 30 for the first time since July. FX carry trades went down the most, as NZDJPY dropped sharply by 3.74 % whilst CADJPY and AUDJPY both lost just more than 3 %. Similarly, NZDUSD fell down 2.2 % whilst AUDUSD dropped 1.8 %, and the sour sentiment went opposite to US economic news. Certainly, personal profits and personal expenditure analysis were corresponding to anticipation for the month of September, as revenues stayed the same whilst expenditure dropped 0.5 %, the most severe decrease since December 2008.
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Choosing the Cheapest Bank Shares
Finance August 6th, 2009
The simplest principle of stock investment would buy at the cheapest price and sell at the highest price. But in reality, few are able to execute.
Naturally, market trends always move in the direction diperngaruhi by many factors. Although the ends always shaped wave pattern, where there is always the highest point and there is the lowest point, but in reality difficult to determine where the wave amplitude limit.
Various methods of technical analysis, trying to make a statement to investors could recognize signals to sell or buy before the incident. Especially for the daily traders, the ability to read graphs meticulous technical methods and the ability to read trends of the bid and offer positions is a must.
But for investors who prefer fundamental analysis methods, certainly has a different perspective. For a fundamental investor, the daily movement of an investment is not a reference but rather the calculations regarding the physical aspects of the company’s performance in the long term.
In a column this portfolio, detikFinance trying to bring these tips to find stocks that are included in the category of cheap, especially in the banking sector, by using methods of fundamental analysis.
According to PT Optima Securities analyst Haryo Koconegoro, there are 6 methods that can be used to find out which bank stock is considered cheap, namely:
Price to book value (P / BV).
Price to earnings ratio (PER).
Price to Pre-provision profit (P / PPP).
Market cap to deposit.
Dividend yield compared with the risk free rate of return.
ROE compared to the cost of equity.
P / BV
According Haryo, this method is a tool commonly used valuation for bank stocks. P / BV is usually used to see the real value of a bank’s net assets alias net liabilities owned.
“Investors are usually willing to buy stocks with P / BV, ROE 2 times when at least by 15% or willing to buy the P / BV, ROE 3 times if at least 20%,” he said.
Based on research results Haryo, shares of PT Bank Central Asia Tbk (BBCA) and PT Bank Pan Indonesia Tbk (PNBN) quite expensive, while shares of PT Bank Negara Indonesia Tbk (BBNI) and PT Bank Bukopin Tbk (BBKP) into shares of the cheapest with this method .
PER (price of shares compared with net income)
This ratio is also frequently used by Haryo as P / BV. But the difference, PER is usually used to compare the stock with PER PER PER industry or market.
Haryo said the weakness of the PER calculation is easy distortion by revenues that are not related to operations such as foreign exchange earnings etc., that could affect net income position outside the operational performance.
“PER banking in 2010 reached 20 times, inline with the market PER in the range of 12.5 times,” he said.
With this method, the shares belonging to the most expensive is the BBCA and PT Bank Internasional Indonesia Tbk (BNII). Shares are classified as the least expensive is PT Bank Danamon Tbk (BDMN) and BBKP.
P / PPP
The ratio P / PPP is used to measure the operational performance of the company. Net income volatility caused by the imposition of provisional costs and tax costs can be avoided with this method is only focused on the company’s core business.
“However, there was criticism of this method, because the cost of provision should be also important to be taken into account to reflect the quality of bank management,” explained Haryo.
The lower the value of P / PPP a bank stock, then it is said the bank’s stock price is considered cheap. With this method, stock BNII BBCA and classified as the most expensive stock. BBNI BBKP shares into shares and cheapest.
Market Cap to Deposits (market capitalization compared with DPK)
This method is used to see how far the representation of the potential growth prospects of the bank. The logic used in the application of this ratio is deposits represent funds that can be used by the bank to be channeled into productive assets, particularly loans channeled into high yielding.
“The measurement of this ratio will only be valid if the conditions of both the banking sector and not in a financial crisis because it is assumed that there are deposits that the banks could largely be channeled as loans,” said Haryo.
With this method, shares classified BNII BDMN and most expensive bank stocks, while classified BBKP BBNI and least expensive.
Dividend Yield Compared with the Risk Free Rate Return
Compare the dividend yield (dividends divided Expectations current stock price) with the risk free rate (Government Bond Yield 10-year period = 9.5%) is the valuation method used to accommodate some who argue that buying a stock is only worth doing if the dividend yield can offer a yield above that offered by the risk free rate.
“The weakness of this method is not accounting for the possibility of price increases, especially for countries in category of emerging markets such as Indonesia, which has the capacity to provide the return on investment high enough just from the appreciation in price. Therefore, investors in Indonesia more tend to want to profit from price multiples, compared to the dividend income, “he explained.
With this method, shares classified BNII BBCA and most expensive stock, while shares BBNI and BBKP be the cheapest.
ROE Compared With Cost of Equity
Rationality that is used in applying this ratio is, if the ROE of the banks under her from COE (The number of return or minimum required return of investors to invest in a stock) then the better the investor funds were invested in other banks more profitable.
“Like the other ratios, this ratio also has the disadvantage of the risk premium and beta coefficients are used (For simplicity, we generalize this time risk premium = 5%, beta = 1, and the Risk Free rate = 9.5% for all banks). Meanwhile, the weakness of the ROE calculation is the difference of the quality of net income used to calculate the ROE and capital keoptimalan (Equity) bank owned (whether too little or too much) that can affect the level of ROE banks concerned, “said Haryo.
By using this method, stock PNBN BDMN and considered as the most expensive, while the shares of PT Bank National Pension Savings Tbk (BTPN) and PT Bank Rakyat Indonesia Tbk (BBRI) is the cheapest stock.
Well, for investors who want to invest in banking stocks may use research results in the consideration before making the investment measures
