STI investing
"IHH Healthcare, the world's second-biggest listed healthcare provider by market value, has replaced container shipping firm Neptune Orient Lines as a constituent of the Straits Times Index (STI) after a half-yearly review. The STI is the key benchmark for the Singapore stock market and is used as the basis of financial products including exchange traded funds, futures, warrants and other derivatives. STI constituents account for about 60 percent of stock market turnover and 65% of full market capitalisation, according to stock exchange data."
You can see that the glorious days of NOL was in 2007-2008. It has not seen daylight in recent years with losses piling up.
I never like the shipping industry as it is very cyclical and earnings are pretty volatile. Anyway, the message today is how to invest in STI.
You can invest in STI via STI ETF. ETF stands for exchange traded fund. In other words, you buy units of STI ETF and the fund manager is supposed to use the money which you have invested to buy a portfolio that mimics the STI component stocks. In this recent instance, the fund manager is supposed to start selling NOL shares from its portfolio to switch into IHH Berhad shares. This will probably explains why when a stock is removed from the STI component stocks, the share price will come under selling pressure and if it is added, there will be buying interest in the stocks.
Even Warren Buffet spoke about Index investing and why it is good for "common investors".
If you want to participate in Singapore's growth story and has no time to monitor the market, one way is to start buying STI ETF at regular intervals. You can find more information about Singapore ETF here. Basically it works like buying any stocks, just tell your broker you want to buy STI ETF and the ticker code is ES3.SI.
Since the components stocks will change periodically, it means that they will cull away the not-so-good stocks and usually replaced it with more promising counters. I may consider some STI ETF for my SRS portfolio one day but at this juncture, the yield of less than 3% doesn't appeal to me to put into this portfolio.
Happy investing.
actually cyclical business have an advantage by investing it via market timing. use the Investment Clock to your advt, and you can gain massive cash via the various time period. Take for exmaple, NOL, the no of times it went below $1 and the timeline whenever it prices close or above $2. someone actually did an analysis that over a 20 yr period it went below for abt 6 times, and double its price within 2 years. over a 10 yr period, it went below like 3 times, and hover abt $1 3 times, I think. it will then double its price within 2 years. Cyclical business like airlines, shipping etc. are best invested by looking at its via the trough and peak.
ReplyDeleteInteresting. So is it time to load up NOL ? :)
ReplyDeletewait for it to drop closer to $1, or even below.
ReplyDeleteI believe you will gain massive cash then.