Is the Singapore Stock Market Cheap or Expensive Right Now?
- Original Post from The Motley Fool Sg

Knowing how cheap the stock market currently is, can help us to simplify our investing decision.
There are two methods to find out if Singapore stocks are a steal or are in an overheated territory right now.
The first method is to compare the market’s current price-to-earnings (PE) ratio to the market’s long-term average PE ratio.
The second method is to determine the number of net-net stocks in the market.
With that, let’s check out if the local stock market is cheap or expensive.
The first method
The local stock market can be represented by the Straits Times Index (SGX: ^STI), or STI for short. It consists of the 30 biggest stocks in Singapore.
Since it is difficult to get the past daily PE ratios of the index, the PE ratios of SPDR STI ETF (SGX: ES3) can be used as a proxy. The SPDR STI ETF is an exchange-traded fund (ETF) that replicates the performance of the STI.
As of 14 May 2018, the SPDR STI ETF had a PE ratio of 11.6. Here are some of the other important PE ratios that we need:
1) The long-term average PE ratio: The STI’s average PE ratio from 1973 to 2010 was 16.9;
2) An instance of a high PE ratio for the STI: Back in 1973, the index’s PE ratio hit 35; and
3) An instance of a low PE ratio for the STI: At the start of 2009, the index was valued at 6 times its trailing earnings.
Based on the data above, it is realistic to say that stocks in Singapore are cheaper than average now.
The second method
In this method, we will look at the number of net-net stocks available in the local market.
A net-net stock is a stock with a market capitalisation that is lower than its net current asset value. The net current asset value can be calculated using the following formula:
Net current asset value = Total current assets – Total liabilities
In theory, a net-net stock is a steal as investors can get a discount on the company’s current assets, such as cash, after stripping off all liabilities. Moreover, the company’s fixed assets, such as properties, are thrown into the mix for free.
Logic holds that if a large number of net-net stocks than usual can be found in a stock market at a certain point in time, then stocks would likely to be cheap at that moment.
The following is a chart that shows the net-net stock count in Singapore since 2005:

Source: S&P Global Market Intelligence
Two things are worth noting about the chart.
Firstly, the second-half of 2007 saw the net-net stock count fall to a low of below 50. This was when the STI reached a peak before the Great Financial Crisis struck.
Secondly, the first-half of 2009 was when the net-net stock count hit a high of nearly 200. It was during this time that the STI reached its bottom during the crisis.
We can observe an inverse relationship from the chart – when the STI is at a peak, the net-net stock count is low, and when the STI is at a low, the net-net stock count is high.
As of 14 May 2018, there were 92 net-net stocks. This is comfortably between the net-net stock count’s peak-and-trough from 2005 till today.
A Foolish takeaway
We’ve walked through two ways to find out the state of Singapore’s stock market right now, and they both point to a similar conclusion. That is, stocks here are not that expensive, but they not in a deep bargain region either.
$STI(^STI.IN) $STI ETF(ES3.SI)

Read more
Attachment(s):
2 likes

Recommended & Related Posts

Oversea-Chinese Banking Corp Limited’s Stock Is Up By 25% Over The Last 12 Months: Is It Expensive Now?
- Original Post from The Motley Fool Sg

Oversea-Chinese Banking Corp Limited (SGX: O39) is one of the three major banks based out of Singapore.
Over the last 12 months, OCBC’s stock price has increased by an impressive 24.6% to S$13.05 currently. This raises an important question: Is it an expensive stock now?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing OCBC’s current valuations with the market’s. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
OCBC currently has a PB ratio of 1.42, which is higher than the SPDR STI ETF’s PB ratio of 1.21. It’s also a similar picture with the bank’s PE ratio (12.54 vs. the SPDR STI ETF’s PE ratio of 11.42). On the other hand, OCBC has a slightly higher dividend yield of 3.0% when compared to the market (a yield of 2.81%). The higher a stock’s yield is, the lower is its valuation.
When I put it all together, I can argue that OCBC is currently trading at a premium to the market, given its higher PB and PE ratios.
$OCBC Bank(O39.SI) $STI(^STI.IN) $STI ETF(ES3.SI) $OCBC Bank(O39.SI)

Read more
Oversea-Chinese Banking Corp Limited’s Stock Is Up By 25% Over The Last 12 Months: Is It Expensive Now?
- Original Post from The Motley Fool Sg

Oversea-Chinese Banking Corp Limited (SGX: O39) is one of the three major banks based out of Singapore.
Over the last 12 months, OCBC’s stock price has increased by an impressive 24.6% to S$13.05 currently. This raises an important question: Is it an expensive stock now?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing OCBC’s current valuations with the market’s. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
OCBC currently has a PB ratio of 1.42, which is higher than the SPDR STI ETF’s PB ratio of 1.21. It’s also a similar picture with the bank’s PE ratio (12.54 vs. the SPDR STI ETF’s PE ratio of 11.42). On the other hand, OCBC has a slightly higher dividend yield of 3.0% when compared to the market (a yield of 2.81%). The higher a stock’s yield is, the lower is its valuation.
When I put it all together, I can argue that OCBC is currently trading at a premium to the market, given its higher PB and PE ratios.
$OCBC Bank(O39.SI) $STI(^STI.IN) $STI ETF(ES3.SI) $OCBC Bank(O39.SI)

Read more
These 3 Straits Times Index Companies Repurchased Their Shares This Week
- Original Post from The Motley Fool Sg

Warren Buffett is someone who actively encourages companies to buy back their shares if the conditions are right.
He once said that when the shares of outstanding companies with strong financial positions are selling below their intrinsic value, no other action can benefit shareholders as share repurchases can.
On that note, let’s look at three Straits Times Index (SGX: ^STI) components picked at random that have repurchased their shares thus far during the week, as of market open today.
CapitaLand Limited (SGX: C31)
CapitaLand is one of Asia’s largest real estate firms with a global portfolio of assets such as integrated developments, shopping malls, and offices.
On 21, 22, 23 and 24 May 2018, the property outfit bought back a total of 5,081,300 shares at a price range of between S$3.53 and S$3.61 per share. The total cost came up to around S$18.22 million.
CapitaLand closed at S$3.56 per share on Thursday. This translates to a price-to-book (PB) ratio of 0.8 and a dividend yield of 3.4%.
Oversea-Chinese Banking Corporation Limited (SGX: O39)
Oversea-Chinese Banking Corporation, or OCBC for short, is the longest established local bank and is the second largest financial services group in Southeast Asia by assets.
On 21, 22, 23 and 24 May, OCBC repurchased 800,000 shares at a price range of between S$12.85 and S$13.14 apiece. The total cost was close to S$10.42 million.
Shares in OCBC ended at $12.99 apiece on Thursday, giving a PB ratio of 1.4 and a dividend yield of 2.8%.
United Overseas Bank Ltd (SGX: U11)
With more than 500 branches in 19 countries, United Overseas Bank, more commonly known as UOB, is one of the largest banks in Southeast Asia.
On 21, 22, 23 and 24 May, UOB bought back 181,783 shares ranging from S$29.20 to S$29.88 per share, translating to a total cost of around S$5.37 million.
UOB shares last changed hands at S$29.49 apiece on Thursday. This gives a PB ratio of 1.4 and a dividend yield of 2.7%, excluding special dividend.
$STI(^STI.IN) $CapitaLand(C31.SI) $OCBC Bank(O39.SI) $UOB(U11.SI)

Read more
3 Things You Need to Know About the Singapore Stock Market Today
- Original Post from The Motley Fool Sg

Hello, everyone. Here are three things about the local stock market and investing in general that you might be interested in today.
1. The Straits Times Index (SGX: ^STI) ended Tuesday at 3,543.2, inching down 0.1% or 5.1 points.
Venture Corporation Ltd (SGX: V03) lost the most ground in the 30-stock index as its shares tumbled 2.7% to S$21.17.
On the other hand, the biggest winner of the lot was Jardine Matheson Holdings Limited (SGX: J36); the conglomerate’s shares increased 3.1% to US$64.87.
2. The National Stock Exchange of India (NSE) has made an application in the Bombay High Court for an interim injunction on Singapore Exchange Limited’s (SGX: S68) new India equity derivative products. This was announced slightly after the stock market opened today.
The local bourse operator had earlier made public its plans to list the new derivative products in June 2018.
Singapore Exchange (SGX) said that it has full confidence in its legal position and “will vigorously defend this action”.
Michael Syn, the exchange’s head of derivatives, commented:
“SGX has a responsibility to provide risk management tools for our global clients and ensure there is no disruption to the marketplace. Our new India equity derivative products are essential to enable institutional investors to maintain their current portfolio risk exposure to the Indian capital markets. We have, from the onset, expressed to NSE that there is a need to maintain liquidity in the international India equity derivatives market, in order to connect international participants to GIFT IFSC. We remain open to working with NSE and other relevant stakeholders to develop a solution that meets the risk management needs of global market participants.”
For the day, SGX shares fell 2.1% to S$7.48.
3. The global rubber glove industry is expected to grow at a rate of 8% to 10% annually over the next few years. With several established rubber glove manufacturers listed in Singapore and Malaysia, what are some of the things to look out for when investing in such companies? Fellow Motley Fool contributor, Jeremy Chia, shares more here.
$STI(^STI.IN) $SGX(S68.SI)

Read more
3 Things You Need to Know About the Singapore Stock Market Today
- Original Post from The Motley Fool Sg

Welcome to a brand-new week, everyone. Here are three things about the local stock market and investing in general that you might be interested in today.
1. The Straits Times Index (SGX: ^STI) ended Monday up 0.5%, or around 19 points, to 3,548.23.
Hutchison Port Hldg Trust (SGX: NS8U) emerged as the biggest winner in the index after its units went up by 3.1% to US$0.33.
On the other end of the winner-loser spectrum, Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) saw its shares tumble 2.8% to S$1.03, coming in as the biggest loser of the lot.
2. Engro Corporation Limited (SGX: S44) said that its wholly-owned subsidiary, Top-Mix Concrete Pte Ltd, has secured a supply contract from Samsung C&T Corporation, an established contractor in South Korea, for one of the projects in the North-South Corridor.
Top-Mix Concrete will supply an estimated 800,000 m3 of ready-mix concrete over the project period of six years, up to 2024.
The contract is expected to improve the financial performance of the company over the next few years. However, “it is not expected to have any material impact on the consolidated net tangible assets and earnings per share of the Group for the financial year ending 31 December 2018”.
Engro shares ended the day at S$0.95 apiece, up 2.7%.
3. My Foolish colleague, Lawrence Nga, looked at Lippo Malls Indonesia Retail Trust’s (SGX: D5IU) materials that were released as part of its 2018 first-quarter earnings and picked out some interesting aspects about the REIT. Check out his article here to know more.
$STI(^STI.IN) $YZJ Shipbldg SGD(BS6.SI) $Lippo Malls Tr(D5IU.SI) $HPH Trust USD(NS8U.SI)

Read more

There are more for you ...

View more and participate in our discussion now. It's FREE.

Creating an account means you’re okay with InvestingNote's Terms and Conditions