One Year
By Yiannis G. Mostrous
FALLS CHURCH, Va.–Today marks one year since Silk Road Investor’s launch. Although I don’t plan to commemorate each year that goes by, having made it through the first indicates that you find something worthwhile here and therefore support the effort.
Thank you.
I recommended exposure to Singapore in the early issues of SRI, based initially on the market’s good valuations and high dividend yield. And the government’s conservative fiscal policies and gradual move toward lower taxes were also of great consideration.
On the economic side, it was becoming increasingly obvious that a property recovery was starting in Singapore. The government declared then that investors putting SD5 million (USD3 million) or more into the country’s financial instruments could become permanent residents; up to SGD2 million (USD1.2 million) of that amount could be used to buy property. This decision illustrated that Singapore’s effort to increase its appeal as a desirable destination for entertainment and high living standards, thus attracting the affluent from across Asia seeking a personal getaway, was a serious one.
As the year progressed the changes became more apparent—high-end residential and office space prices continued to rise. I then recommended increasing exposure through developers and industrial companies. The market performed well last year, so well that many question whether the end of the game is near, whether it’s time to move on or even short Singapore.
These folks, not convinced that things have changed in Asia, underestimate Singapore’s transformation. I am convinced that Asia’s recent change has been drastic and largely positive, and that it will continue. This belief is the foundation of the SRI approach.
The Singapore story is intact, although investor worries regarding a potential pullback are understandable and appreciated. Note that in the context of a synchronized selloff, profits will be taken from the big winners. Singapore is home to many of them.
Nevertheless, there’s more upside to the story. In fact, the story’s broadening, aided by a strong economy that’s creating jobs, reducing unemployment and boosting industrial production. As anticipated, the high-end property market led the way in price and demand increase–money managers and big corporations did in fact seek new space.
The non-high-end residential market is still 30 percent below the peak established 10 years ago. But now it’s moving upward. According to the Urban Redevelopment Authority fourth quarter 2006 residential house prices increased 3.7 percent over third quarter 2006 prices, which compared favorably to the 2.7 percent increase in the third quarter over the second quarter.
That said, office rents have doubled from USD3 per square foot to USD6, with the high-end segment seeing rents of USD8 per square foot. Office supply should be limited until 2010, so expect rents to remain elevated for the foreseeable future.
The Stocks
Given the characteristics of Singapore’s economic development, banks and real estate companies have been, and will continue to be, the big beneficiaries. The Portfolio has exposure to both sectors, directly and indirectly.
United Overseas Bank has been a long-term favorite and I continue to view it favorably; the bank will benefit from continuous strength in loan growth.
Keppel Corp is an indirect play in the property market, as well as in global economic growth with its exposure in marine and energy operations. Keppel Corp’s 52 percent stake in Keppel Land, which has one the highest exposures in office space, represents 50 percent of net asset value (NAV). The rest is represented by exposure to the mid- and high-end residential segments in Singapore and overseas (mainly China).
Keppel Land has been able to sell its latest residential units at excellent prices and in record times, usually no more than two weeks per building. The highly anticipated opening of its latest venue, Reflections @ Keppel Bay, is coming in the next couple months.
City Developments is the Portfolio’s most leveraged play on the Singapore story, with 28 percent of NAV exposed to the office segment and 35 percent to low-, mid-, and high-end residential properties.
Singapore Telecom remains one of the pillars of the Long-Term Holdings, because of its solid and sustainable dividend yield as well as its strategic exposure in other high-growth markets like India and Indonesia.
Portfolio Mechanics
As a reminder, Portfolio recommendations should be taken at face value, in the sense that, if a stock is recommended as a buy and trades below the price indicated in the Portfolio tables, then the recommendation stands for new readers as well as longer-term ones.
Occasionally, I recommend–as I did quite often toward the end of 2006 and the beginning of 2007–that long-term readers take profits off the table. In December, I wrote:
I’d like to make a couple clarifications. Regarding mechanics, I expect investors to look at their profits (i.e., how much money they’ve made above the initial investment) and then calculate how many shares they need to sell in order to take these profits off the table. Second, if you’re not a “long-term reader,” chances are you probably don’t have profits to take from the specific stock–you’re unaffected by the recommendation. The fact that I haven’t advised selling the stock outright indicates that it remains a good long-term holding.
Technical Issues
SRI has one main portfolio, the Long-Term Holdings, and an alternative, the Alternative Holdings-Permanent Hedges. Investors should look first to the Long-Term Holdings for asset allocation in the markets I cover.
In the Alternative Holdings-Permanent Hedges Portfolio, readers can track permanent hedges and shorter-term recommendations. It also includes companies I’ve recommended for longer-term or more fundamental reasons but haven’t added to the Long-Term Holdings; for example, Lukoil provides extra exposure to a favored theme.
A new feature has been added to the Web site. On the left-hand side of the screen, under the title “Portfolio Performance,” readers can get a snapshot of the SRI Portfolio’s return compared to other major indexes. You’ll also find an explanation of the way I view the investment process. (This is especially helpful to new readers.)
On the Portfolio page, you can click on the asterisk next to each holding to review the original commentary and recommendation. We plan to enhance the Portfolio table with extra features as soon as our IT guys give us the OK.
Many readers have requested information on brokers that can better execute SRI recommendations. Click the headline “Resources” and see “Brokers & Services.”
E*Trade is a mainstream broker that can now handle some international trading online. Commissions are slightly higher, but the Web site is particularly easy to use and includes solid news and quote feeds for most foreign markets.
According to a recent Wall Street Journal article, Fidelity has seen a fourfold increase in customer requests for international stock purchases. As a result, it’s beefed up its customer service staff to handle the transactions. You can buy foreign stocks through Fidelity by calling the broker directly.
If you’ve had positive experiences buying foreign stocks with other brokers, please drop me an e-mail and I’ll include them in an upcoming issue. And if you plan on getting into some of my non-US traded stocks, be sure to check out your current broker’s capabilities.
FALLS CHURCH, Va.–Today marks one year since Silk Road Investor’s launch. Although I don’t plan to commemorate each year that goes by, having made it through the first indicates that you find something worthwhile here and therefore support the effort.
Thank you.
I recommended exposure to Singapore in the early issues of SRI, based initially on the market’s good valuations and high dividend yield. And the government’s conservative fiscal policies and gradual move toward lower taxes were also of great consideration.
On the economic side, it was becoming increasingly obvious that a property recovery was starting in Singapore. The government declared then that investors putting SD5 million (USD3 million) or more into the country’s financial instruments could become permanent residents; up to SGD2 million (USD1.2 million) of that amount could be used to buy property. This decision illustrated that Singapore’s effort to increase its appeal as a desirable destination for entertainment and high living standards, thus attracting the affluent from across Asia seeking a personal getaway, was a serious one.
As the year progressed the changes became more apparent—high-end residential and office space prices continued to rise. I then recommended increasing exposure through developers and industrial companies. The market performed well last year, so well that many question whether the end of the game is near, whether it’s time to move on or even short Singapore.
These folks, not convinced that things have changed in Asia, underestimate Singapore’s transformation. I am convinced that Asia’s recent change has been drastic and largely positive, and that it will continue. This belief is the foundation of the SRI approach.
The Singapore story is intact, although investor worries regarding a potential pullback are understandable and appreciated. Note that in the context of a synchronized selloff, profits will be taken from the big winners. Singapore is home to many of them.
Nevertheless, there’s more upside to the story. In fact, the story’s broadening, aided by a strong economy that’s creating jobs, reducing unemployment and boosting industrial production. As anticipated, the high-end property market led the way in price and demand increase–money managers and big corporations did in fact seek new space.
The non-high-end residential market is still 30 percent below the peak established 10 years ago. But now it’s moving upward. According to the Urban Redevelopment Authority fourth quarter 2006 residential house prices increased 3.7 percent over third quarter 2006 prices, which compared favorably to the 2.7 percent increase in the third quarter over the second quarter.
That said, office rents have doubled from USD3 per square foot to USD6, with the high-end segment seeing rents of USD8 per square foot. Office supply should be limited until 2010, so expect rents to remain elevated for the foreseeable future.
The Stocks
Given the characteristics of Singapore’s economic development, banks and real estate companies have been, and will continue to be, the big beneficiaries. The Portfolio has exposure to both sectors, directly and indirectly.
United Overseas Bank has been a long-term favorite and I continue to view it favorably; the bank will benefit from continuous strength in loan growth.
Keppel Corp is an indirect play in the property market, as well as in global economic growth with its exposure in marine and energy operations. Keppel Corp’s 52 percent stake in Keppel Land, which has one the highest exposures in office space, represents 50 percent of net asset value (NAV). The rest is represented by exposure to the mid- and high-end residential segments in Singapore and overseas (mainly China).
Keppel Land has been able to sell its latest residential units at excellent prices and in record times, usually no more than two weeks per building. The highly anticipated opening of its latest venue, Reflections @ Keppel Bay, is coming in the next couple months.
City Developments is the Portfolio’s most leveraged play on the Singapore story, with 28 percent of NAV exposed to the office segment and 35 percent to low-, mid-, and high-end residential properties.
Singapore Telecom remains one of the pillars of the Long-Term Holdings, because of its solid and sustainable dividend yield as well as its strategic exposure in other high-growth markets like India and Indonesia.
Portfolio Mechanics
As a reminder, Portfolio recommendations should be taken at face value, in the sense that, if a stock is recommended as a buy and trades below the price indicated in the Portfolio tables, then the recommendation stands for new readers as well as longer-term ones.
Occasionally, I recommend–as I did quite often toward the end of 2006 and the beginning of 2007–that long-term readers take profits off the table. In December, I wrote:
I also advise long-term readers to take profits from ICICI Bank and Dr. Reddy’s Laboratories–without selling the stocks outright. Take any gains you have and leave the initial capital invested.
I’d like to make a couple clarifications. Regarding mechanics, I expect investors to look at their profits (i.e., how much money they’ve made above the initial investment) and then calculate how many shares they need to sell in order to take these profits off the table. Second, if you’re not a “long-term reader,” chances are you probably don’t have profits to take from the specific stock–you’re unaffected by the recommendation. The fact that I haven’t advised selling the stock outright indicates that it remains a good long-term holding.
Technical Issues
SRI has one main portfolio, the Long-Term Holdings, and an alternative, the Alternative Holdings-Permanent Hedges. Investors should look first to the Long-Term Holdings for asset allocation in the markets I cover.
In the Alternative Holdings-Permanent Hedges Portfolio, readers can track permanent hedges and shorter-term recommendations. It also includes companies I’ve recommended for longer-term or more fundamental reasons but haven’t added to the Long-Term Holdings; for example, Lukoil provides extra exposure to a favored theme.
A new feature has been added to the Web site. On the left-hand side of the screen, under the title “Portfolio Performance,” readers can get a snapshot of the SRI Portfolio’s return compared to other major indexes. You’ll also find an explanation of the way I view the investment process. (This is especially helpful to new readers.)
On the Portfolio page, you can click on the asterisk next to each holding to review the original commentary and recommendation. We plan to enhance the Portfolio table with extra features as soon as our IT guys give us the OK.
Many readers have requested information on brokers that can better execute SRI recommendations. Click the headline “Resources” and see “Brokers & Services.”
E*Trade is a mainstream broker that can now handle some international trading online. Commissions are slightly higher, but the Web site is particularly easy to use and includes solid news and quote feeds for most foreign markets.
According to a recent Wall Street Journal article, Fidelity has seen a fourfold increase in customer requests for international stock purchases. As a result, it’s beefed up its customer service staff to handle the transactions. You can buy foreign stocks through Fidelity by calling the broker directly.
If you’ve had positive experiences buying foreign stocks with other brokers, please drop me an e-mail and I’ll include them in an upcoming issue. And if you plan on getting into some of my non-US traded stocks, be sure to check out your current broker’s capabilities.