Archives for category: PE10

STI Close: 3,529.82
PE10: 14.38x

The run-up in the STI has really caused valuations to jump quite a bit. With the PE10 at 14.38x, the earnings yield is now below 7%. Furthermore, a spike in the 10-yr bond means that difference in yield between the PE10 and 10-yr Singapore Bond has fallen significantly below 5% for the first time since August 2015.

Given the pullback in US and EU markets on Friday, I suspect we’ll see a much weaker STI on Monday. Anyway, at this level, things aren’t looking attractive. I’ll consider loading up on more equities if the STI goes down to 3,200 or less.

Meanwhile, sit tight and hang on for the ride!

It’s been a long time since I published this. A couple of data points missing so I had to fill the missing points.

Anyhow, not sure if the CAPE is so efficient any longer as we’ve been seeing pretty low 5-year CAGR returns for PE10’s less than 15x but it is what it is. CAPE is supposed to be more indicative of 10-year CAGR returns anyway so 5-year may be missing the point. Unfortunately, our markets don’t have enough data to provide any insight on 10-year returns.

So for what it’s worth, here goes:

STI Close (on 29 Dec 2017): 3402.92
PE10: 13.88x

STI close: 2846.37
PE10: 11.8x

So the big news affecting the markets was the Brexit (UK’s exit from the EU) and that really hit markets on Friday when the results of the referendum were released. I was overseas but had Wifi and saw  markets in Asia get hit with some huge downs like Japan down 7 or so percent. The pound also took a huge hit and European markets all felt the effects of the vote. No surprise that when US markets opened that night, they were hit as well.

What was surprising was the speed of the recovery. The STI wasn’t really down much and from Tuesday (28th June) began a modest recovery. I was really anticipating further hits to the market (or maybe they have yet to come) and added very small positions.

The main point is, if I was away till yesterday or today and didn’t have access to the market, the whole impact of the Brexit wouldn’t have been felt at all! Overall, my portfolios have been doing nicely despite the horrendous start to the year and much credit goes to my investment plan.

Half the year’s over. How’s your portfolio doing?

STI close:2,629.11
PE10: 10.97x

What a difference a month makes!

January was horrible to say the least. China, although already in a bear market, could have qualified for a bear based on January alone. By the way, the bloodletting in the region wasn’t any better. As far as I’m concerned, all markets off their recent highs by 20% or more are in bear markets too which means that Singapore qualifies.

Going by my previous post, there is still room for a further drop. However, this doesn’t mean that it will happen. Nor does it mean that you will be prescient enough to recognise the bottom.

If you’re like me, then just stick to your plan.

We’re coming to the end of the year and markets haven’t been nice to most investors this year. Anyhow, there’s still one more month till the end of the year and the PE10 says that markets are cheap.

Market Close: 2883.64
PE10: 12.05x

Notables include the fact that PE10 earnings have stopped trending upwards which means that actual earnings are coming in low and pulling the average down. Also notable is the fact that this is the longest streak (in months) that PE10s have remained low* since the GFC (in late ’08/early ’09). This latest streak has the PE10 at the lowest decile for 4 months (including this latest update) while the GFC streak was at 7 months.

Will this streak surpass the previous one? Only time will tell.

*On my spreadsheet, I have the monthly PE10s sorted into deciles.

I totally forgot to update the PE10 last month so this will be a double update.

1 Oct 2015 (STI, PE10): 2801.85, 11.73x
1 Nov 2015 (STI, PE10): 2998.35, 12.54x

October was definitely a cheaper time to buy than now but the STI isn’t expensive by a long stretch. The only (immediate) worry is whether the Feds will really raise rates in December. With global growth slowing and inflation hardly on the radar, they still may put it off despite Janet Yellen’s warning. Even in the event that they do, I don’t see rate hikes as a bad thing for the markets. As it is, there won’t be a change in plans.

My portfolio has recovered nicely in the last one month although it’s still below where it was in June. I’m not too concerned about the drop in value though. For my purpose, I’m more concerned with whether the portfolio can continue to throw off monies that would enable to live day-to-day without worrying about whether I have a job or not.

Of course, I’m not there yet but that’s the eventual goal. Two more months before I tally results and it looks like there will be interesting lessons that can be learnt this year.

STI close (31 July 2015): 3202.5
PE10: 13.45x

Local markets have been really quiet. Surge in volume in pennies, Noble getting whacked, oil-related counters also bearing the brunt. Lots of external news such as the financial market joke that is China and Greece’s debt problems (which, like the proverbial can, got kicked further down the road).

The STI has fallen quite a bit, especially in the last few days of July which makes it quite attractive, honestly. Getting close to valuation levels where I would start to get excited.

Totally forgot to update this so I’m using data as of 8 May 2015.

STI close: 3452.01
PE10: 14.5

As far as PE10 goes, it has been pretty range bound in the 14.0-14.9x range since July or August 2013. The STI PE10 only went below 14x in Feb, Mar 2014 and more recently, in Oct 2014. If you didn’t get in then, the next question you have to ask yourself is, “did you miss the boat?”

Happy Investing!

STI close: 3453.75
PE10: 14.57x

No commentary on the markets as I was mostly away the last two weeks. Also, I think activity on the markets was subdued mainly due to the overshadowing by more history-making events.

STI close: 3391.20
PE10: 14.4

HSI close: 24,507.05
PE10: 15.59

I’ve begun tracking the HSI PE10 as well because the question of the PE10 for the Hang Seng was brought up by a good friend. Also, recent thoughts are that I should diversify away from the SG market and well, the HK stock market frankly isn’t a bad choice- tax considerations wise as well as the economic hinterland of China should mean that HK businesses have lots of middle class people to cater to for some time to come.

The other aspect of it is to see if the PE10 works for other markets. After all, the SGX may be an anomaly. Good thing is that the HKex has monthly PE and dividend yield data on their site and it goes way back to 1973. Problem is that Yahoo! only has price data starting from december 1986 so my PE10 only starts from 1996.

Otherwise, I’m happy to say that the PE10 seems to work very well for the HSI as well. Take a look at this.

Strong negative correlation between PE10  and subsequent 5yr CAGR

Strong negative correlation between PE10 and subsequent 5yr CAGR

As you can see, the higher the PE10, the lower the subsequent annual returns over a five year period. Why five year? Because the short term returns doesn’t seem to matter with regards to the PE10. I tried calculating the 1 year, 3 year, 5 year and 7 year returns. 5 years seems to be the minimum for predictable returns to start to show up. Plus it gives me a lot more data points to work with.

As far as other markets are concerned, I’m not sure how well the PE10 works. I know for certain that it doesn’t work as well for the S&P 500 because of the crazy valuations that occurred during the dot-com boom. That skewed the entire valuation range upwards such that PE10 of 20-something was no longer considered expensive even though the inverse would show that implied yield based on the PE10 was less than 5%.

Having said all this, the PE10 isn’t the be all and end all but so far, it’s been a pretty good indicator of where the market will be five years on.