Sunday, May 24, 2015

Lets Talk about Telcos, AIIB, Japan Investment...

Telcos: M1, Starhub, Singtel

Over the last week (18 to 24 May 2015), the 3 local Telco prices dropped drastically. One of my friend was asking if he should pick up some of M1 stocks that time.

I told him - 

M1 has been a local company all along (only serving the customer in SG). Therefore, with the 4th Telco coming in, it is very bad being a local player serving mainly HP and Fibre Boardband customers. 

In addition, M1 holds little cash (Similar to Starhub) and their high dividend yield is mainly feasible due to the recurring business. Despite being the first company serving the Fibre Broadband market, I believe Singtel is catching up.

Thus, M1 recently announced an investment in Oman. This middle east market to me is unproven. Unlike UAE, Oman is not as developed (Correct me if I am wrong).

In view of the above, the market may have react too by the selldown of the stocks. However, in my opinion, this sell down is too drastic as many facts are still unproven. Dividend Yield should continue remain 4% to 5% for at least 2015 & 2016 and price will also continue to rise back (but at a slower rate). 

(Vested)

In addition to M1, Singtel and Starhub has fell as well (4th Telco effect or maybe market reaction to all Telcos). In my view, this was an opportunity for people to accumulate more or collect some of the Telco shares rather than selling them.

AIIB: A rival of IMF, World Bank, Asian Development Bank

As per Wikipedia, The Asian Infrastructure Investment Bank (AIIB) is an international financial institution proposed by the government of China. The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia region. AIIB is regarded by some as a rival for the IMF, the World Bank and the Asian Development Bank (ADB), which are regarded as dominated by developed countries like the United States. The United Nations has addressed the launch of AIIB as "scaling up financing for sustainable development" for the concern of Global Economic Governance.

How I see it:

1. China is trying to overtake USA as the big brother of the World. This is another step in trying to spread their power to other countries.

2. This is definitely a political move. IMF has been helping Europe with their Crisis. AIIB should be setup with the similar purpose - to help Asia and be a "Big Brother" to Asia.

3. Unlike the past where countries attack and conquer to gain a foothold in another country, now countries "help" one another and "owe" favours to one another.

4. It is interesting to see how much cash China has. 

5. Targeted mainly at developing countries, note the word "infrastructure". Any companies which are in the developing countries should gain from it.

For us, investors, I feel that AIIB is not a bad thing. It will start investing in many of its member countries and help them develope. Whichever company that is in the country that AIIB invest in will have the first mover advantage. In my view,  Singapore's Technology, Construction, Infrastructure and Engineering companies that already has overseas establishment in developing countries should be able to gain from it in future.

Japan: Unveils $110 Billion to Fund Asian Infrastructure

What game is Japan playing? Read Article.

As usual to the above, this move is EXTREMELY POLITICAL (a way of helping USA to counter China).

However, this is weird as it meant that Japan will need to print more money to fund this investment overseas rather than locally. They seem to be still in a downturn right?

Conclusion on AIIB and Japan's Move

Investors like us should be VERY HAPPY to see such moves make by major countries. This meant that a lot of cash will be flowing into Asia. Shares should be shooting up for the next few years (Look at how quantitative easing has pushed up the US Market). As stated above, SGX-listed Technology, Construction, Infrastructure and Engineering companies that already has overseas establishment in developing countries should be able to gain from it in future.

However, please do not anyhow invest - DYODD.

Next up: I know I kept talking about this and yet to blog about it - A trilogy about my new portfolio...

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