Russia's war with Ukraine slowly grinds on into the 5th month, with failure not an option to Putin. With this war, food, crop and oil price escalated, causing high inflation unseen in many countries globally. To combat high inflation, central banks have been aggressively raising interest rate (June - 0.75%, forecast July - 0.75%, forecast September - 0.5%), hoping to cool the economy down. This however, have a damping effect on equity, as rising interest rate means a drop in consumer consumption (Yes, all your loans on floating rate are going to get more expensive!) which has a high risk of tipping the economy into recession. Currently, analyst is predicting a 40% chance of USA entering recession in the next 12 months and this is reflective in NASDAQ (entered bear 2 months ago); S&P 500 (entered bear 2 weeks ago); DJI (narrowly avoided bear 1 week ago by 400 points).
FYI: Bear Market refers to a drop of at least 20% from the index peak.
With the war seemingly not ending anytime soon (only God knows when and how this will end), let us spend a few mins in prayer for the people of Ukraine. May God in His sovereign will put an end to the Russian act of aggression and this unjustified war. May God in His mercy bring light to the people of Ukraine suffering the effect of war in this dark hour. May God also bless the people of the world with great health and protection against the Covid-19 virus that is ravaging the face of the Earth. Amen
Face with market uncertainty and volatility, I guess it is time we go back to the company fundamentals, where good and sound company will eventually pull through any crisis. DJI ended at 30775, a decrease of 3903 points (-11.25%) compared to 1Q 2022. For Singapore, STI ended at 3102, an decrease of 306 points (-8.98%) compared to last quarter. Singapore market are not spared from the high inflation rate concerns and rising interest rates, moving in line with the USA market, though for banking counters (accounting for 43.3% of STI weightage), rising interest rates is a positive for them as they stand to earn more profits from the widening NIM. For this quarter, not much actions from me except taking opportunistic additions for counters that I deem have high growth potential:
Transaction 1: Bought 2 batch Grab shares in April and May.
US investors still seem to not have confidence in Grab, continuing dumping its share to an all time low of $2.32 on 26 May 2022. For me, given they have won the digital bank license for Singapore and Malaysia speaks volume. Anyway, Grab will be focusing on returning to profitability by cutting down on consumer incentives. From end user point of view, this has seem to take effect after 19-May as the discounts given is not as high as per 3 months ago. Example: Self collect on GrabFood is now only entitled to 15% discount compared to previous 20%, unless you purchase their subscription, then you are entitled to 20% discount. Anyway, GxS bank is preparing to start operation soon in Singapore in the next few months. Hopefully, this will contribute to their bottom line profit.
Transaction 2: Exit Amara totally in June (at a loss).
High number of director resignations, plus the review for their flagship hotel in SG is not that great on major hotel booking websites, guess I better run first before more problems start surfacing. Having held this counter for close to 9 years, I don't think the management will be privatizing the company anytime soon.
Transaction 3: Bought 1 batch OxPay Financial shares in June.
I got won over by this up and coming business plan. Basically, they provide Merchant Payment Services (MPS) and Digital Commerce Enabling Solutions (DCES). Whenever a customer uses their system for payment, they will get a portion of the fee (~0.5%) as payment. Think of the card terminals and the software facilitating the payment between the customer, merchant and their banks. As long as their customer base is huge, this should be a stable cash generating machine to provide dividends.
Transaction 4: Bought 1 batch DBS shares in June.
Interest rates are rising, which will increase DBS Net Interest Margin (Profits) due to increasing loan interest rate. It was already reported a few days ago that all SG banks has revised their home loan interest rate up. Buying to hold for long term with the hindsight that business are growing and dividends declared are increasing yearly.
Marriott has restarted their dividend payout, and share buybacks will soon follow. I was right about Marriott TP. It did rise to $190.30 (>$185 which I predicted) on 20-Apr-22, before Putin's war destroyed everything. Oh well, guess I have to hold the shares a little longer. That is all for now. See you all in Q3 2022 update and thank you for reading thus far.
