ASX market is the only undervalued market now?

Q&ACategory: QuestionsASX market is the only undervalued market now?
Chun Yan Koay asked 8 years ago

Looking at few webinars that hosted since Q2 this year, I observed all counters recommended are from Australia. Mostly are concentrated on business related to commodities. So, from my point of view, is there now only left with ASX listed companies for us to invest? The reason behind I ask this question is with my current TD account, i am not able to take advantage of those recommended counters unless I have to open IB which requires min USD10k as initial capital

8 Answers
pcwong Staff answered 8 years ago

Hi Koay,
The reason for the recommendation for some ASX stocks is for diversification purposes.
Commodities have been in a multi-year bear market but are slowly showing some signs of life.
Anyway your point is noted, and coming stock picks would be some stocks listed both in the Canada and US in the OTC markets.
We will soon be recommending some HK stocks as well.
Thank you for your feedback.

Simon Chieng replied 8 years ago

Below is what I gather from Yahoo Fin today, mainly focusing on commodities :
1) PAAS – close @ 15.74 ( -11.2%)
2) NUGT – close 12.63 (- 29.2%)
3) SLV – close 16.94 ( -5.2%)
4) CZICF – close 0.19 ( -13.8%)
5) WLDVF – close 1.75 ( -6.9%)
6) AG – close 8.94 ( – 10.3%)

Most commodities counters hit badly. Eg, NUGT down by -29% in one single day. Would you help me to understand what is driving the price sell down?

I already bot PAAS, NUGT, SLV earlier. Would like to seek your advice what is the best action to take – buy more to average dw cost, cut lose or ??
Am I right to assume that they are short term down trend, but mid term price should be moving up?

As for CZICF, WLDVF, AG, does the current pricing indicate good opportunity to buy?

Appreciate your valuable feedback. Thanks!

pcwong Staff answered 8 years ago

The take down on gold and silver had been a well planned effort by the bullion banks. It coincided with the options expiry period last week and this week’s Golden Week in China. This is because the Shanghai Gold Exchange has been a gold arbitrage all this while. Any sell down in gold and silver, the SGE will take up the slack and prevent heavy short selling. With the Chinese market closed for a week, the bullion banks acted in concert and hammered both gold and silver because there will be no arbitrage. A total of US$13B of gold or 1,000 tonnes of gold were dumped yesterday. But the surprising thing was that the main buyer was the PBOC (no one week off for them).

There was also a shortage of US$ in the EU so US$ was bid up, which saw the value of the US$ moving up and the algos kicked in and short sell precious metals, thus making the situation worse.

I think there could be a support on Friday when the jobs report comes out as the major indicators are showing a slowdown in hiring. So the report could miss expectations and thus the argument for interest rate hike in November and December will be thrown out. The Fed would like everyone think they can do so but any increase means higher interest for the US government, shale oil producers and major corporations.

Next week, the Chinese will be back and the support will continue. If you want to add I think PAAS and AG are good companies to add some in this sell off. As for CZIF, WLDF you can gradually accumulate. If you have made money on SLV, then perhaps it is best to exit when silver is once again trending up and use the funds to invest in either PAAS, AG or CZIF, WLDF as the return would likely to be higher. There is a lot of chaos in the financial system due to Deutsche bank’s potential to be a Lehman case, and it is sitting on top of derivatives that are 15x Germany’s GDP. And I just read a report that citizens in Italy and Spain are withdrawing cash en masse from their banks.

US and Russia could possibly be at war in Syria. In fact Russia is preparing for the worst as they begin a nuclear and emergency drill involving 40 million citizens in their cities. A group of ex-CIA directors wrote a pleading letter to Obama cautioning against a proxy war with Russia. Meanwhile Russia has moved its aircraft carrier closer to the Mideast.

There will be more uncertainties as there will be a US election on Nov 8, Italy referendum on Dec 2, Germany and France elections in Q1 2017. Italy and France are seeing rising popularity in the Exit EU parties. Any “No” vote could cause a global political and financial crisis  but likely the EU banking crisis would start first.

In these scenarios, gold and silver will still be the best hedge.

Many stocks have fallen recently and right now those in precious metals and miners are still good bets. Oil has gone up which could indicate the beginning of movement into commodities based stocks. If oil goes up other commodities will follow. That was the reason for CZIF, WLDF. But you may like to buy ETFs which are inverse to the indices which we have covered in the past. You can go for RWM, DOG or SH which shorts the Russel 2000, Dow30 and S&P500 respectively. Avoid those ultra shorts as any uptrend could result in heavy losses.

Meanwhile have some cash standby as any severe crisis could see the indices falling 30% – 50%. if this happens then a lot of HK and Singapore REITs and high dividend stocks could see their share price falling 10% – 20%. this is the time to invest in yields for the long term as you can likely see your dividend yield going into the 9% – 13% area.   Remember China Metal and Hopewell Infrastructure? Based on our buy price in 2015, they are now yielding 12% – 14% dividend.

Hope the above clarifies. I continue to hold MML, SLR, PAAS, ABX, AGQ, BRI, BTG and SLV in miners and RWM in inverse ETF.

Simon Chieng replied 8 years ago

Thank you very much for your prompt reply. Let me spend some time to digest the content:) Meanwhile, would you be able to share what is your average cost for PAAS and SLV? This reference will help me to determine what would be appropriate buy point with sufficient margin of safety. Thanks and regards.

pcwong Staff answered 8 years ago

I would also like to add that the bullion banks were shorting gold and silver heavily in support of REMAIN but BREXIT happened and gold went up US$60 er oz. So this take down during the options expiry period and China’s Golden Week was a means for them to recover their losses.

pcwong Staff answered 8 years ago

My entry price for PAAS is US$9.56 and SLV is US$13.18.
PAAS Q2 results were good. So it pays to hold onto this stock for a longer period unless it falls into US$14+  which I may exit. In this case I still leave with 50% profit.
It is important that you set a threshold as it is better to leave with a profit and look elsewhere for entry points if the share price continues to deteriorate lower.
Today there is a report that the US court allowed the class action suit to proceed against HSBC and Nova Scotia banks for silver price manipulation. So this caused silver to rise.
I have intention to exit SLV once it is back into the US$19+ range and move into either CZIF or WLDF. 
Hope this helps.

Chun Yan Koay replied 8 years ago

Hi PC, do you mind to comment on BTG? Its masbate project at the Philippines got letter from DOE of the Philippines, do you think it could be the cause coupled with recent selldown of gold made the share price gap down twice? Should we view it as golden opportunity to pick up this stock and avg down entry cost

Simon Chieng replied 8 years ago

Yes, your sharing on PAAS and SLV is very useful and greatly appreciated! 🙂
For the purpose of risk management, how best can we determine number of shares to buy for each selected stock? Would you be able to provide some guidelines? Thanks.

Simon Chieng replied 8 years ago

Yes, your sharing on PAAS and SLV is very useful and greatly appreciated! 🙂
For the purpose of risk management, how best can we determine number of shares to buy for each selected stock? Would you be able to provide some guidelines? Thanks.

pcwong Staff answered 8 years ago

The show cause letter is not on any environmental or social issue but just some administrative issues as clarified by the company.
Its Q2 results were good and the thing to look forward to its the start of production in Mali which will increase their production by 350K oz of gold in the first 7 years. That is like adding 60% – 70% more to their current production.
But I think it is best to see the price action on Friday and next week. Friday being the jobs report. If worse than expected, they gold will trend up. Next week China will be back form their holidays and may see some buying support.
Hope this helps