Saturday, 21 March 2020

In Limbo: How Low Can It Go?

From 2010 to 2018, there were 3 times when KLCI fell significantly but did not officially enter bear market.

The first time was from July11 to Sep11, when KLCI dropped from about 1,595 to 1,365, or 230 points (14%)  in 3 months.

At that time, I just started this blog in May11 and didn't really know what was going on. I didn't sell any shares, only bought shares as I was just starting to build my portfolio.

The second time was a correction from Jul14 to Dec14. KLCI dropped 9% or 170 points from 1,885 to 1,715.

The third time was from Apr15 to Aug15 when KLCI dropped from 1,865 to 1,575 points. This 290 points or 16% drop was still short of 20%.

All three "correction" did not fulfill the definition of bear market. I just held tightly and did not panic sell any shares. 

This time in 2020, of course it is totally different. From my previous "pattern" I would have held the shares tight and refused to sell any of them.

Fortunately I didn't do that this time. I sold more than half of the shares in value.

Unfortunately I didn't sell all of them.

I think no one would have anticipated the stock market to fall so much in such a short period of time. It can be described as ferocious.

Last time out in 2008 it took 10 months to reach bottom, losing 600 points or 40%. Now it's only 2-3 months, KLCI has already fell 400 points or 25% from 1,600 to 1,200. Are we already reaching the bottom?

If it is a big bear, another 400 points decline is not impossible at all. We might be only half way through this mess.

Even though KLCI "only" declined by 25%, most stocks already fell more than 50% in this short period of time. Will they fall another 50%?

Everyday the share price falls 15% and looks like no end to it. I already feel "numb".

My current portfolio can be described as "no eye see". Perhaps this can provide some consolation to others who are suffering too.

Anyway I'm not too worry as I think I have ample cash in hands.

For those stocks which are "trapped", I only consider them as being placed in EPF or PRS fund, which I can only withdraw after 3-5 years.

At this moment, when the share price drop a lot, especially those in my watch list, I feel happy and excited. When the share price goes up, I feel a bit "worry and uneasy".

I believe that those investors who are waiting for a good timing to buy cheap have the same feeling.

We don't want to miss the boats that sail north.

However, if we're not careful enough and take the wrong boats that continue to sink like Titanic, then we will still get drowned no matter how much cash we have now.

At this time, may be it's a good opportunity to do contra or short-term trades. As share prices are fluctuating wildly, one can easily earn 10-20% in one or two days time.

Even though Malaysia is implementing movement control order now, I still need to work. I don't have the luxury to sit at home for 2 weeks to monitor the share price closely.

Personally I don't feel the worst of Covid-19 is over, especially in Malaysia.

At this moment Malaysia has 1030 confirmed cases, with 3 deaths. We are already the fourth highest in Asia after China, Iran & South Korea.

Though for the last 5 days the total daily cases did not surpass the record 190 cases per day, it does not reflect the true situation as the Covid-19 test results which normally take 24 hours now take much longer to release because of the sudden huge load.

With the help of private labs now, the results should be able to be released faster so it's not a surprise if we see a spike in cases later.

Government hospitals which are almost always full before the outbreak, will not be able to cope with this surge in Covid-19 patients if it continues to rise like that.

As for stock markets, after a deep fall 2 days ago, most regional markets including KLCI see a spectacular rebound yesterday. Notion jumped more than 30%!

Will it stage a V-shape quick recovery from here? Or is it just a breather before it dives even deeper?

Whatever it is, lets pray that this Covid-19 pandemic will be brought under control as soon as possible.

But, where are those 2,000 Rohingyas??!

Monday, 16 March 2020

To Buy or Not To Buy

Last week, US stock market just recorded the biggest single-day jump since 2008, with DJIA up more than 9%.

Today, KLCI dropped another 64.12 points or 4.77% to close at 1,280 points. Another bloodbath day.

Either you have a bit of cash or lots of cash, surely you are asking yourself:

- When is the best time to buy stock?
- What is the best stock to buy?
- This stock's share price has dropped 50%. Can I buy now?
- That stock's PE ratio is just 5x. Can I buy now?

Everyone dreams of buying at the lowest point, AND catching the stock which rebound the most. Yes it can be done, only in dream.

Stock market is like a roller coaster recently. Today the market fell the most since so many years, then the next day it jumped the most in recent history.

This morning you saw the stock market dropped like hell and you felt relieved that you didn't buy any shares yesterday.

Later in the afternoon all the stocks shot up 10-20% from low and you regretted not buying in the morning.

Then the next day those shares fell to new low and you felt very lucky that you didn't buy yet.

Investors' emotion are also riding on a roller coaster.

So, when is the best time to buy shares in this situation?

No one will know the lowest point for sure. Today might be the lowest point, you buy now you win. May be Dec 2020 will be the lowest point, you buy now then it's not ideal.

During 2008's bear market, KLCI started to drop from its height in early Dec 2007 and only reached the bottom in early Oct 2008. So it took 10 months to reach bottom.

It then lingered at the bottom for around 5 months until early Mac 2009, when it began its uptrend journey and met its previous high in May 2010.

Financial crisis 2008 took 10 months to drop, 5 months to rest until it showed sign of bottoming out.

So, isn't it ideal to enter the market during the 5-months trough?

Currently, even though KLCI has its previous high of nearly 1,900 points in April 2018 which is almost 2 years ago, the actual bear market feeling only started from Jan 2020 when the KLCI was 1,600 points.

In 2008, KLCI dropped approximately 40% from 1,450 to 850 points. If it were to drop in similar magnitude, we might see KLCI drop another 300 points to 1,000 points.

If Covid-19 is the main culprit of current bear market. Is the worst over? Far from over.

Europe's numbers are rising alarmingly, so does Malaysia.

Yesterday there was 190 new cases of Covid-19 in Malaysia. Today there are another 125 new cases, bringing the total to 553 cases.

We all know what is the situation like now, the virus has already spread among the public. We should see many more cases being confirmed in the coming weeks.

It might be a matter of days when our numbers exceed 1000 and grow exponentially.

We don't have the luxury to hospitalized all confirmed cases by then, and we need the discipline of self-quarantine. 

We won't have enough ventilators to support those who are ill with severe pneumonia as well.

How about the other countries with relatively low count now? Is that logically possible? I think it is only possible because there are not many screening or contact tracing done. If those countries explode, the neighbouring countries might get second wave or third wave of outbreak.

The virus threat will surely go away one day, just like what we witness in China & South Korea. By then, how much damage will it do to the world, and how long will it take to recover?

How many orders deferred or lost? How much the sales drop? How many loan repayment defaulted? How many companies will go bankrupt? How many people will be jobless?

Now, more & more leaders come out to warn that this time it will be as bad or even worse than previous financial crisis. Such acts only make the market plunge deeper.

For me, while it definitely does not look good at the moment, once the fear of Covid-19 subsided, people will continue to travel and shop right? Will we see a quick rebound?

Anyway, what we can do now is to play our part in fighting Covid-19 so that it will end early.

Friday, 13 March 2020

To Sell or Not To Sell

Today is the worst day of Bursa Malaysia since the 2008 crisis. KLCI surrendered 74.68 points or 5.26% to close at 1320.96 points.

At this moment, some investors might have already sold ALL of their shares.

Some might still hold a few stocks, either already kept for months or years, or just bought recently during the drastic drop but only to see them drop deeper.

If you still hold shares now, you might have a doubt:
- Should I sell now to minimize loss since it's likely to drop further?
- Should I just hold since it has dropped so much and unlikely to drop further?

These are very difficult questions to answer, as I think the answer should be individualized.

We have different stocks, different cost price, different risk appetite, different mind strength, different cash level & cash flow etc. So it's good to work out a plan that suit you the most.

I can't remember very well exactly when I started my stock market investment. I started working in 2004, and bought my first unit trust fund in the same year.

If not mistaken, I should have bought my first stock around 2006 and I can remember the first 2 stocks I bought were WCT & Mahsing.

Even though I started to join the stock market before the 2008 financial crisis, frankly speaking I don't have a clear memory what happened to me during the market crash.

I don't have any painful memory, nor any exciting memory. In the other words, I seem to learn nothing from that bear market in 2008.

Perhaps I was not that active in stock market or did not hold lots of stocks at that time.

Now it's definitely different, I have so many stocks in hands going into year 2020. I must have a plan when bear strikes.

If you read my blog recently, you should have known that I have a plan to sell stocks to trim my portfolio, and also in anticipation of potential bear market.

Even after clearing 5 stocks, now I still have 11 stocks with me which I decided earlier not to sell first. Holding so many at this point of time, too bad isn't it?

Out of those 11 stocks, I think Matrix & BAuto are well-managed companies supported by fantastic dividend yield. Both are not that overvalued as well that's why I decided not to sell.

Anyway, share price of both stocks still fell significantly but I'm not too worry about them. Financial crisis will affect their sales but low interest environment should benefit them.

Scientex is also a magnificent company which is traded rather cheaply while it's still growing its business. After it announced its latest financial result few days ago, I had a dilemma whether I should sell it first to lock in the gain, and buy back later as almost certainly the share price will drop.

At this moment I haven't sell Scientex's shares as I just feel not right to sell. Will its business affected by Covid-19? I don't think it has direct long term negative effect but I know that low crude oil price should benefit it.

DKSH is a company which is also not traded at high PE ratio and has decent dividend yield. I think it is undervalued and plan to add. How can I sell if I have plan to add more shares?

My cost for Notion is quite low at 40sen. I can sell all at above 80sen and take home a handsome 100% profit. However, I decided against selling them because I have plan to "average up" if the price fall to lower level.

Notion's share may fall to 60sen and even 40sen or lower, then surely I will regret my decision not to sell early but what to do? No one can predict the market precisely.

These 5 stocks above are my "winning stocks" that I decided earlier against selling. Now of course share prices of all of them have dropped and BAuto and DKSH suffer paper loss.

The rest are deep in trouble.

Before that I have 3 high PE tech related stocks. These type of stocks have been pushed up high and are risky to fall harder.

I have cleared Inari & Frontken, but left Krono behind.

If I can foresee that Krono can drop to 40sen, I will definitely cut loss at above 60sen and buy back at 40sen. However, even Feng Shui Master Joey Yap also can't foresee this to happen.

After Krono's FY19Q4 result, I have a bit of doubt whether its business and profit can grow as expected. I'm also not sure how Covid-19 can affect it in short term.

This makes me a bit hesitant to average down Krono. I think I might need to wait for another quarter.

When I bought Geshen last month at 43sen, I thought I got a good price as its shares are really hard to buy due to low liquidity.

Because of this, one sell transaction can see the share price drop by more than 10%, another buy transaction can raise the price 10%.

Geshen might be at higher risk of being affected by Covid-19 and all these supply-demand disruption issues. Though it seems like the company has invested a lot on new machinery and capabilities in its Malaysia & Vietnam operations, I might have bought it too early.

Hibiscus should be able to make profit even if the crude oil price is at USD40. I think crude oil price will not stay at low level for a long long time. Once it rebounds, so will Hibiscus's share price.

Perhaps I should have sold all Prolexus & LeonFB shares just like Latitude. All these feel like "dead wood" because it seems not easy for them to grow well from here. Everything seems tough for them.

Both are deep in paper loss. They have dropped so much but still can drop further. Since they are still doing business as usual, it looks weird if I sell now at big loss.

Lastly I would like to announce the winner of "The best performing stock" in my current portfolio in 2020 - Daya. It doesn't drop!

Those 6 stocks (Krono, Geshen, Hibiscus, Prolexus, LeonFB & Daya) are losing stocks. After giving so much explanation and excuses of why I didn't sell yet, the main reason is "unwillingness to realize loss", haha.

Some of you might think that I should sell all those hopeless losing stocks in my portfolio, get the cash and put them in better quality stocks which can rebound faster than others.

Ya, I agree and this sounds very logical. However, I don't do it due to various reasons, at least for now. May be I will change my mind in the near future, I don't know.

With ample cash in hand, next question will be: When and what should I buy?